· Expecting continued increases to market penetration, surgeon adoption, and revenue growth
· Burn patients who have >30% TBSA are required to be treated at one of the 150 burn centres which Avita is currently selling to.
· Burn patients who have <30% TBSA (25% of the total burn market) are treated at level 1 & 2 trauma centres. Once FDA approval for the soft tissue indication is granted, the sales staff will have access to these centres (300 high volume centres).
U.S. Soft Tissue
· Increase in estimated opportunity guidance shown on a slide: “wounds with a high perceived RECELL benefit” - 95,000 patients/year vs previous guidance of 65,000 at high volume sites. ($450M/65,000 = $6,923/patient.New potential opportunity $6,923 x 95,000 =$650M SAM?)
· Unlike burns, majority of new trauma surgeons (50-63% depending on the size of the wound) would consider RECELL for small wounds <5% TBSA
· Breakthrough device designation granted – designed for unmet need to get a technology to market sooner, more efficiently, and achieve reimbursement
· FDA submission anticipated December 2023
· FDA approval anticipated in June 2023
· Reimbursement code for inpatient and outpatient hospitals already in place
· Commercial launch July 2023 – immediate access to half of the burn centres which are also trauma centres
· Start VAC approval process in the remaining trauma centres prior to approval – April 2023
· Preparing for commercial launch by expanding the sales force during Q2’23
· Breakeven for a sales rep is 5 cases per month. Burn reps are currently doing about 25 cases per month – proven formula which they plan to execute on for soft tissue
· Sales team will target >1,000 centres for burns and soft tissue (burn centres, level 1 & 2 trauma centres, Premier hospitals)
U.S. Vitiligo
· Breakthrough device designation granted – designed for unmet need to get a technology to market sooner, more efficiently, and achieve reimbursement
· FDA submission anticipated December 2023
· FDA approval anticipated in June 2023
· Pilot launch and further supporting studies to commence from July 2023
· Latest data indicates that 486,000 patients were seeking treatment for vitiligo in the year
· New drugs are coming to market whose primary purpose is to stabilise vitiligo, therefore increasing the potential market opportunity for RECELL
· Reimbursement is expected in 2024 prior to the full commercial launch in January 2025
· Reimbursement normally takes 3-5 years but with breakthrough device designation, reimbursement already in place for burns and soft tissue, proven safety profile of RECELL, (clinical results) – expecting to take only 18 months
· Vitiligo could become the dominant revenue source in 5+ years
Automated Devices
· Burn and soft tissue automated device (expansion ratio 1:80) – Q3’23 FDA submission, Q1’24 FDA approval
· Vitiligo automated device (expansion ratio 1:20) – FDA submission, FDA approval guidance to be provided in February call. (Will require approval prior to full commercial launch into physician offices in January 2025)
· New automated device will provide a further barrier into entry for potential competitors
Japan
· Favourable reimbursement (970,000 yen ~ $7000 USD/kit. Avita receive 40% of reimbursement price with minimal cost outlay)
· Encouraged by first order ($555K) from partner COSMOTEC and the numbers of patients treated in October
· Other growth generating drivers underway which will be communicated in the February call (Soft tissue and vitiligo PMDA submission plans?)
Rest of the World
· International plans currently in development – intend to share by the end of 2023. Current focus is on soft tissue and burn expansion
Financial
· ThirdQuarter Financial Results and Updates: +30% corresponding quarter last year / +9% consecutive quarter basis, $88M cash
· Quarterly and yearly revenue guidance will be provided in the February call, then both will be updated every quarter to increase transparency
· Forecast profitability crossover (excluding vitiligo) will be provided during the February call
· Revenue growth “will really accelerate” with soft tissue launch and the synergies created from soft tissue in burns (25% increased market opportunity through trauma centres, more sales reps, increased efficiency)
· Expectation for future revenue growth is “considerably more than 30% YoY” – more details in February call
· The investment in the upcoming sales force expansion is anticipated to result in becoming profitable sooner
· Expenses for R&D and commercial expansion expected to peak in Q3’23 and decline notably afterwards
· Significantly less cash use in 2024 than 2023
· Burns and soft tissue in the U.S., and expanding internationally, will grow the company to profitability and beyond
· Possible business development opportunities to gain additional investment into a broader portfolio
· May look at raising cash or other channel structures in 18-24 months for vitiligo launch
Strategies
· Reason for change of CEOs – the Board believes Jim (MeetJim Corbett) is better suited for Avita’s next phase of growth
· Build the company around the burns, soft tissue, and vitiligo indications
· Execute on their plan; "building the company into a thriving self-sustaining business that can continue to provide value to patients and shareholders"
· “We think that this is the inflection point for Avita” – J.C.
Q: What was it that you saw about Avita that was appealing to you?
A: Novel technology, approved in burns and doing well, expanding indications (soft tissue and vitiligo), strong balance sheet, U.S. reimbursement in place – “that’s a really big combo and it looked like I would have a great amount of fun doing it.”
Q: Burns adoption
A: Physicians are gaining confidence and are using RECELL more frequently, Avita is currently providing a lot of support and training, seeing more burns treated <15% TBSA which is the majority of the burn market
Q: Hospital access and care givers trained
A: No hospital access issues so continuing to train and support cases
Q: Q4 ’22 guidance
A: Continuation of the current adoption rate which lead to an uptick in annual guidance
Q: Japan Q4
A: Still a lot to learn about the adoption curve in Japan. What they know so far: Shipped first stocking order in September ($555K). Dozens of cases were treated with RECELL in October which is very encouraging because that adoption from the first stocking order is a bit uncommon in Japan.
Q: Japan burn market size in 3-4 years
A: Could be a $10M business, remembering that they receive 40% of the reimbursement price but don’t spend much getting that revenue
Q: Outside U.S. markets
A: Big international potential (20+ countries), plans on how to enter these markets will be decided in 2023. Priority in 2023 will be on U.S. soft tissue commercial launch which is really where the (near term) growth is going to come from.
Q: Vitiligo and Soft Tissue
A: File PMA submissions for both indications in December 2022, expect and planning for approvals in June 2023, expanding sales organisation for soft tissue during Q2 (details will be provided in February call). Vitiligo – need to establish reimbursement which is expected by January 2025. In the meantime: some cash pay, physician-initiated studies to prepare for market launch.
Q: Confidence around soft tissue approval
A: Already have approval in burns which has incredibly low customer complaints. Clinical data was exceptional – beat the p- value of 0.025 which is really a healing definition.
Q: Soft Tissue vs Burns market opportunity
A: Soft tissue is 3-4 times larger than burns (more than the corporate decks?). Half the burn centres are level 1 or 2 trauma centres so they will instantly get access to those centres on the day of approval which already has reimbursement. Other synergies once soft tissue is approved – 25% of the burns market is treated in the level 1 and level 2 trauma centres which only treat burns <30% TBSA. Currently, sales staff don’t have access to these centres so there’ll be an expansion of market opportunity for burns.
Q: How may reps are going to be added for trauma
A: Adding reps for soft tissue/trauma and burns combo – as much as doubling (guidance in February). 5x Recell kits pays for the contribution margin for a sales representative, and they know the number of months it takes to get to 5 in the burns (currently a burns rep is selling 25 kits/month) so they expect the expense to revenue ratio to peak in Q3 and steadily decline - quick return on investment. “I’m really optimistic about the year (2023).” – J.C.
Q: Do you get that return in Q124, is it that quick?
A: “My expectation is the average will be that quick on that 5”- J.C.
Q: What should we expect for soft tissue in H2’23?
A: Too early for revenue guidance. Once approval for soft tissue is granted, hospital staff are already trained in the 70 burn and trauma centres so will have immediate access to these centres. Planning to start the VAC approval process in April so momentum will increase in 2023 and really see it in 2024.
Q: Vitiligo strategy looks prudent, why not go cash pay?
A: They’ll be doing cash pay but they believe it’s an inefficient sales model. They are focussed on getting reimbursement to be a “fundamental market maker”.
Q: Size of vitiligo market
A: "What is most interesting to us is our most recent market research: 438,000 patients sought treatment for their vitiligo last year which is an enormous market because really none of those treatments are very effective. It happened in our trial that it was against a control and at 6 months where we had a responder group of about 80%, the control had a 0% responder to the standard of care today at 6 months. So, that is such a divergent outcome, we just know that if we get it right, we will have a big winner. Well, ultimately this is a couple of billion-dollar market. You take those 438,000 and you multiply them by $6,000, you get 2.5 billion." (Previous SAM - $750M ~ 30% of $2.5B TAM)
Q: Next steps of reimbursement for vitiligo
A: Meeting and submission in Q1’23, reimbursement process, reimbursement granted in October 2024 or January 2025.
Q: Any concerns regarding reimbursement or commercialisation for the new indications?
A: Don’t see many external threats in terms of what could happen to retard their growth, have a strong formula for growth.
Q: Potential future financial profile of Avita
A: Currently have an 83% gross margin - planning to “weaponize it” in H2’23. Use that strength along with the $88M on the balance sheet to grow aggressively and to establish Recell as the standard of care for the soft tissue indication. Along the way, going to develop the vitiligo market. “I think the potential for us to be a very strong growth, profitable business is very high”. “We have a very strong team; we need to build a stronger team that’s bigger”
Q: Capital deployment over the next year or two?
A: Current plan indicates that they’d exit 2024 with sufficient cash presuming they didn’t need to enter the vitiligo market, which they will. The cash burn in 2024 will be meaningfully less than 2023. By the end of 2024, they estimate the business will be very strong growing which should put them in a strong position to figure out what the best channel structure for vitiligo will be; and they’ll have the momentum of soft tissue repair for at least 2-3 years following.
