AVITA Medical Third Quarter Fiscal 2019 Quarterly Cash Flow Report and Company Update

Recent Highlights

  • Strong U.S. product sales of A$2.2 million for third quarter of
    Fiscal 2019 were double second quarter sales
  • Ten presentations highlighting RECELL® System additional clinical
    and economic benefits featured at American Burn Association (ABA) 51
    st
    Annual Meeting
  • Japan collaboration agreement with COSMOTEC
  • Application to market RECELL System filed in Japan
  • Equity placements completed for a total of A$15.5 million in
    proceeds

VALENCIA, Calif., USA & MELBOURNE, Australia–(BUSINESS WIRE)–AVITA Medical (ASX: AVH, OTCQX: AVMXY), a global regenerative medicine
company, announced that it filed today with the ASX its Appendix 4C –
Quarterly Cash Flow Report for the quarter ended 31 March 2019, the
third quarter of its fiscal 2019. Provided below is an update regarding
the substantial accomplishments achieved during the quarter, including
the ramp up of RECELL® System sales during the first three months of
promotion of the product.

U.S. Commercial Sales of RECELL System

Active sales and marketing of the RECELL System in the U.S. for the
treatment of acute thermal burns commenced with the January 2019
national market launch, therefore the third quarter of fiscal 2019
represents the first three months of promotion for the product. Product
sales and other revenues for the quarter and nine months ended 31 March
2019 were as follows (unaudited):

   

Three Months Ended

   

Nine Months Ended

(In thousands of AUD)

31 March

31 March

 

2019

 

 2018

2019

 

  2018

U.S. product

A$2,179

A$ –

A$3,281

A$ –

International product sales 189 238 900 845
Total product sales 2,368 238 4,181 845
Other revenue (including BARDA) 2,335 1,492 7,344 5,349

Total revenue         

A$4,703

A$1,730

A$11,525

 A$6,194

 
 

We are well ahead of our expectations for the U.S. launch of the RECELL
System and are delighted that sales doubled during this quarter compared
to the prior quarter,” said Dr. Mike Perry, Chief Executive Officer.
The third quarter represents the first three months of our market
launch, and we have been very pleased with the quick uptake of the
RECELL System by burn centers that have been the first movers in
adopting the product. To date, 26 of the 134 burn centers within the
U.S. have placed orders for the RECELL System.”

As we move beyond the early adopters, our collective experience tells
us that many of the remaining burn centers will follow a more standard
process for adopting the RECELL System, including an initial evaluation
of the product and advancement through their hospital’s Value Analysis
Committee (VAC), before making the formal decision to purchase for
regular use. This process can often take six months or more to
complete,” said Erin Liberto, Chief Commercial Officer. “The recent ABA
meeting added greatly to the awareness and credibility of the RECELL
System within the burn community, and we look forward to converting this
excitement into product evaluations and the Value Analysis Committee
approvals required for adoption by additional U.S. burn centers.”

RECELL System Featured in Ten Presentations at ABA Conference

Burn center professionals made ten presentations describing the RECELL
System at the American Burn Association (ABA) 51st Annual Meeting held
in Las Vegas April 2-5, 2019. Key results presented at the ABA meeting
included the following:

  • Pediatric Treatment Outcomes: Pediatric patients with mixed and
    full-thickness burns treated with the combination of Spray-On Skin™
    Cells prepared using the RECELL System and widely meshed autografts
    experienced excellent healing outcomes, with 98% of wounds healed four
    weeks after treatment. The presentation was selected as a “Best of the
    Best Abstract” out of more than 500 abstract submissions to the ABA
    meeting.
  • RECELL Projected to Reduce Cost of Treating Severe Burns:
    Health economic data projects that use of the RECELL System to treat
    patients with severe burns could save up to USD $28 million annually
    compared to treatment with the standard of care at the Arizona Burn
    Center, part of the Maricopa Integrated Health System (MIHS), a major
    public teaching hospital and safety net system of care based in
    Phoenix.
  • Long-Term Review by Co-Inventor: Professor Fiona Wood, AM,
    Burns Service of Western Australia, Fiona Stanley and Perth Children’s
    Hospitals, described her experience treating more than 3,500 patients
    with burns and other cutaneous injuries, including a reduction in the
    number of surgical procedures, earlier intervention, and reduction in
    time to healing and length of stay.
  • Donor Site Treatment Outcomes: Preliminary results demonstrated
    that donor sites treated with the Spray-On Skin Cells prepared using
    the RECELL System could be reharvested in as little as seven days
    after treatment. The presentation was awarded best in category at the
    ABA conference.
  • Treatment of Extensive Burns: Patients with extensive burns,
    greater than 50% total body surface area (TBSA), treated with Spray-On
    Skin Cells in combination with widely meshed autografts healed as
    quickly as patients with smaller burn injuries provided the same
    treatment combination, despite the far greater clinical challenges
    associated with treatment for burns over 50% TBSA.
  • Publication Recognition: The 2018 publication of the RECELL
    System pivotal trial in second-degree burns in the Journal of Burn
    Care & Research
    was recognized during the “The Year in Review:
    The Top Journal Publications” session of the ABA meeting.

Patients from the pediatric, donor site and large TBSA presentations
were treated under Investigational Device Exemption (IDE) programs which
allowed the use of the RECELL System to treat patients in advance of the
September 2018 market approval in the U.S. The pediatric, treatment of
donor sites, and extensive burns presentations include classes of
patients that fall outside of the currently approved U.S. product
labeling. Healthcare professionals should read the INSTRUCTIONS FOR USE
– RECELL® Autologous Cell Harvesting Device (https://recellsystem.com/)
for a full description of indications for use and important safety
information including contraindications, warnings and precautions.

Funding and technical support for the development of the RECELL System
is provided by the Biomedical Advanced Research and Development
Authority (BARDA), under the Assistant Secretary for Preparedness and
Response, within the U.S. Department of Health and Human Services, under
ongoing USG Contract No. HHSO100201500028C. Programs funded under the
BARDA contract include two randomized, controlled pivotal clinical
trials, the Compassionate Use and Continued Access programs, development
of the health economic model demonstrating the cost savings associated
with the RECELL System, and two randomized, controlled clinical trials
in pediatric burn patients.

Japan Collaboration and Application for Approval

In February AVITA Medical entered into a collaboration with COSMOTEC, an
M3 Group company, to market and distribute the RECELL System for the
treatment of burns and other wounds in Japan. In addition, COSMOTEC
filed on 25 February 2019 a Japan’s Pharmaceuticals and Medical Devices
Act (“JPMDA”) application for approval to market the RECELL System in
Japan. The JPMDA has accepted the application and review is expected to
take nine months to a year.

COSMOTEC has extensive experience marketing medical devices and other
products into hospitals and surgical suites throughout Japan, including
specialties requiring a high level of training such as cardiovascular
treatment, making them an ideal partner for AVITA Medical. COSMOTEC is
wholly owned by the M3 Group, a major healthcare company with great
physician access in Japan and other markets. The filing of the JPMDA
application is a major milestone, and AVITA Medical looks forward to
making the RECELL System available to patients in Japan.

Third Quarter Fiscal 2019 Financial Results (Unaudited)

(All amounts are in thousands of AUD except where noted)

A copy of the Appendix 4C – Quarterly Cash Flow Report for the third
quarter of fiscal 2019, the quarter ended 31 March 2019, is attached.
Operations for the quarter were focused primarily on the U.S. national
market launch of the RECELL System for the treatment of acute thermal
burns, and the preparation and conduct of further clinical development
of the RECELL System.

During the quarter ended 31 March 2019, total cash receipts were
A$4,848, an increase of A$2,015 or 71% compared to the prior quarter
ended 31 December 2018. Cash receipts from customers for the quarter
ended 31 March 2019 were A$2,513, an increase of A$1,655 or 193%
compared to the prior quarter due to the commencement of the U.S.
national market launch of the RECELL System. Cash received from BARDA
during the current quarter totalled A$1,724, a decrease of A$251 or 13%
compared to the prior quarter. The decrease was the result of wind-down
of certain activities associated with supporting the U.S. FDA approval
of RECELL System as well as Compassionate Use and Continued Access
programs. Through 31 March 2019, cumulative payments of A$24.36 million
have been received under the BARDA contract.

As the result of the U.S. national market launch of the RECELL System
and related initiatives, overall payments for operating expenses
increased during the third quarter of fiscal 2019. During the quarter
ended 31 March 2019, payments related to sales and marketing, staffing,
administrative and corporate costs for the current quarter totalled
A$9,578, a A$611 or 7% increase compared to the quarter ended 31
December 2018. The increase was in a large part due to the November 2018
hiring of the U.S. sales force for commercialization of the RECELL
System, a team that was in place for the entire quarter ended 31 March
2019. During the quarter ended 31 March 2019, payments related to
product manufacturing and operating costs totalled A$919, a A$565 or
160% increase compared to the quarter ended 31 December 2018. The
increase was directly related to the increase in sales during the
current quarter. These increases were partially offset by payments for
research and development, which during the current quarter totalled
A$925, a A$644 or 41% decrease compared to the quarter ended 31 December
2018. The decrease was the result of the wind-down of certain activities
associated with supporting the U.S. FDA approval of the RECELL System as
well as the Compassionate Use and Continued Access programs. As a result
of the national launch of the RECELL System in the U.S. in January 2019,
and the expansion of research and development, payments for operating
expenses will increase in future quarters. These expense payments will
be partially offset by receipts from customers and receipts under the
BARDA contract.

Total net cash used in operating activities during the quarter ended 31
March 2019 was A$6,481, a A$102 or 2% decrease compared to the quarter
ended 31 December 2018. The current quarter decrease in net cash used in
operating activities resulted from the increase in total cash receipts
partially offset by the increase in payments for operating expenses.

During the quarter ended 31 March 2019, net proceeds provided by Tranche
2 of an institutional placement of shares to U.S., Australian and
international institutional and sophisticated investors, and under a
Share Purchase Plan, was A$15,536. Cash and cash equivalents held at 31
March 2019 was A$38,902.

Future cash requirement will be dependent upon the success of AVITA
Medical’s efforts to commercialize the RECELL System, particularly in
the U.S., and the timing and magnitude of clinical and other research
and development programs the Company elects to undertake to expand its
product pipeline. Until such time that the Company generates sufficient
cash flow from operations, it expects to fund its future cash
requirements through a combination of current cash resources, and
potentially the issuance of shares and debt financing.

ABOUT AVITA MEDICAL LIMITED

AVITA Medical is a regenerative medicine company with a technology
platform positioned to address unmet medical needs in burns, chronic
wounds, and aesthetics indications. AVITA Medical’s patented and
proprietary collection and application technology provides innovative
treatment solutions derived from the regenerative properties of a
patient’s own skin. The medical devices work by preparing a REGENERATIVE
EPIDERMAL SUSPENSION(RES™), an autologous suspension
comprised of the patient’s skin cells necessary to regenerate natural
healthy epidermis. This autologous suspension is then sprayed onto the
areas of the patient requiring treatment.

AVITA Medical’s first U.S. product, the RECELL® System, was approved by
the U.S. Food and Drug Administration (FDA) in September 2018. The
RECELL System is indicated for use in the treatment of acute thermal
burns in patients 18 years and older. The RECELL System is used to
prepare Spray-On Skin™ Cells using a small amount of a patient’s own
skin, providing a new way to treat severe burns, while significantly
reducing the amount of donor skin required. The RECELL System is
designed to be used at the point of care alone or in combination with
autografts depending on the depth of the burn injury. Compelling data
from randomized, controlled clinical trials conducted at major U.S. burn
centers and real-world use in more than 7,000 patients globally,
reinforce that the RECELL System is a significant advancement over the
current standard of care for burn patients and offers benefits in
clinical outcomes and cost savings. Healthcare professionals should read
the INSTRUCTIONS FOR USE – RECELL® Autologous Cell Harvesting Device (https://recellsystem.com/)
for a full description of indications for use and important safety
information including contraindications, warnings and precautions.

In international markets, AVITA Medical’s products are marketed under
the RECELL System brand to promote skin healing in a wide range of
applications including burns, acute wounds, scars and vitiligo. The
RECELL System is TGA-registered in Australia and CFDA-cleared in China.

To learn more, visit www.avitamedical.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This letter includes forward-looking statements. These
forward-looking statements generally can be identified by the use of
words such as “anticipate,” “expect,” “intend,” “could,” “may,” “will,”
“believe,” “estimate,” “look forward,” “forecast,” “goal,” “target,”
“project,” “continue,” “outlook,” “guidance,” “future,” other words of
similar meaning and the use of future dates. Forward-looking statements
in this letter include, but are not limited to, statements concerning,
among other things, our ongoing clinical trials and product development
activities, regulatory approval of our products, the potential for
future growth in our business, and our ability to achieve our key
strategic, operational and financial goal. Forward-looking statements by
their nature address matters that are, to different degrees, uncertain.
Each forward- looking statement contained in this letter is subject to
risks and uncertainties that could cause actual results to differ
materially from those expressed or implied by such statement. Applicable
risks and uncertainties include, among others, the timing of regulatory
approvals of our products; physician acceptance, endorsement, and use of
our products; failure to achieve the anticipated benefits from approval
of our products; the effect of regulatory actions; product liability
claims; risks associated with international operations and expansion;
and other business effects, including the effects of industry, economic
or political conditions outside of the company’s control. Investors
should not place considerable reliance on the forward-looking statements
contained in this letter. Investors are encouraged to read our publicly
available filings for a discussion of these and other risks and
uncertainties. The forward-looking statements in this letter speak only
as of the date of this release, and we undertake no obligation to update
or revise any of these statements.

+Rule 4.7B

Appendix 4C

 

Quarterly report for entities subject to Listing Rule 4.7B

Introduced 31/03/00 Amended 30/09/01, 24/10/05, 17/12/10, 01/09/16
 

Name of entity

AVITA Medical Limited
 

ABN

   

Quarter ended (“current quarter”)

28 058 466 52331 March 2019

 

Consolidated statement of cash flows    

Current quarter
$A’000

   

Year to date
(9 months)
$A’000

1.   Cash flows from operating activities
1.1 Receipts from customers 2,513 3,718
1.1a Receipts from government contract (BARDA) 1,724 7,828
1.2 Payments for
(a) research and development (925 ) (4,020 )
(b) product manufacturing and operating costs (919 ) (2,298 )
(c) advertising and marketing (2,265 ) (6,262 )
(d) leased assets (263 ) (777 )
(e) staff costs (4,593 ) (11,948 )

(f) administration and corporate costs

(2,457 ) (6,367 )
1.3 Dividends received
1.4 Interest received 93 190
1.5 Interest and other costs of finance paid
1.6 Income taxes paid
1.7 Government grants and tax incentives 2,441
1.8 Other (provide details if material) 611   611  
1.9   Net cash used in operating activities     (6,481 )     (16,884 )
 
 
             
Consolidated statement of cash flows    

Current quarter
$A’000

   

Year to date
(9 months)
$A’000

2.   Cash flows from investing activities
2.1 Payments to acquire:
(a) property, plant and equipment (501 ) (1,223 )
(b) businesses (see item 10)
(c) investments
(d) intellectual property
(e) other non-current assets
2.2 Proceeds from disposal of:
(a) property, plant and equipment
(b) businesses (see item 10)
(c) investments
(d) intellectual property
(e) other non-current assets
2.3 Cash flows from loans to other entities
2.4 Dividends received (see note 3)
2.5 Other (provide details if material)    
2.6   Net cash used in investing activities     (501 )     (1,223 )
 
3. Cash flows from financing activities
3.1 Proceeds from issues of shares 16,983 45,037
3.2 Proceeds from issue of convertible notes
3.3 Proceeds from exercise of share options
3.4 Transaction costs related to issues of shares, convertible notes or
options
(1,447 ) (4,192 )
3.5 Proceeds from borrowings
3.6 Repayment of borrowings
3.7 Transaction costs related to loans and borrowings
3.8 Dividends paid
3.9 Other (provide details if material)    
3.10   Net cash from financing activities     15,536       40,845  
 
 
             
Consolidated statement of cash flows    

Current quarter
$A’000

   

Year to date
(9 months)
$A’000

4.  

Net increase in cash and cash equivalents for the period

4.1 Cash and cash equivalents at beginning of quarter/year to date

30,342

14,825

4.2 Net cash used in operating activities (item 1.9 above) (6,481 ) (16,884 )
4.3 Net cash from used in investing activities (item 2.6 above) (501 ) (1,223 )
4.4 Net cash from financing activities (item 3.10 above) 15,536 40,845
4.5 Effect of movement in exchange rates on cash held 6   1,339  
4.6   Cash and cash equivalents at end of quarter     38,902       38,902  
 
 
                 
5.  

Reconciliation of cash and cash equivalents
at the end
of the quarter (as shown in the consolidated statement of cash
flows) to the related items in the accounts

   

Current quarter
$A’000

   

Previous quarter
$A’000

5.1   Bank balances     38,902     30,342
5.2 Call deposits
5.3 Bank overdrafts
5.4 Other (provide details)
5.5   Cash and cash equivalents at end of quarter (should equal item
4.6 above)
    38,902     30,342
 
 
           
6.  

Payments to directors of the entity and their associates

   

Current quarter
$A’000

6.1 Aggregate amount of payments to these parties included in item 1.2 (258 )
6.2 Aggregate amount of cash flow from loans to these parties included
in item 2.3
 
6.3   Include below any explanation necessary to understand the
transactions included in items 6.1 and 6.2
6.1 Executive Director remuneration (166k), Directors fees (64k),
Clinical Advisory Board fees (11k), and Bioscience Consultancy (17k)
 
 
       
7.  

Payments to related entities of the entity and their associates

Current quarter
$A’000

7.1 Aggregate amount of payments to these parties included in item 1.2
7.2 Aggregate amount of cash flow from loans to these parties included
in item 2.3
7.3   Include below any explanation necessary to understand the
transactions included in items 7.1 and 7.2
 
 
                 
8.  

Financing facilities available
Add notes as
necessary for an understanding of the position

   

Total facility amount
at quarter end
$A’000

   

Amount drawn at
quarter end
$A’000

8.1 Loan facilities    
8.2 Credit standby arrangements    
8.3 Other (please specify)    
8.4   Include below a description of each facility above, including the
lender, interest rate and whether it is secured or unsecured. If any
additional facilities have been entered into or are proposed to be
entered into after quarter end, include details of those facilities
as well.
           
9.   Estimated cash outflows for next quarter     $A’000
9.1   Research and development     1,000
9.2 Product manufacturing and operating costs 1,000
9.3 Advertising and marketing 1,500
9.4 Leased assets 250
9.5 Staff costs 5,000
9.6 Administration and corporate costs 1,500
9.7 Other (provide details if material)  
9.8   Total estimated cash outflows*     10,250
*   Pertains to outflows only, inflows from customer receipts and
government contracts, which totalled $4,848 for the quarter ended 31
March 2019 and are expected to increase in future quarters, are not
included.
 
 
                 
10.  

Acquisitions and disposals of
business entities
(items
2.1(b) and 2.2(b) above)

    Acquisitions     Disposals
10.1   Name of entity            
10.2   Place of incorporation or registration            
10.3   Consideration for acquisition or disposal            
10.4   Total net assets            
10.5   Nature of business            
         
 
Compliance statement
 
1   This statement has been prepared in accordance with accounting
standards and policies which comply with Listing Rule 19.11A.
2 This statement gives a true and fair view of the matters disclosed.
 
 

Dale Sander

Chief Financial Officer

30 April 2019

 
 
Notes
1.   The quarterly report provides a basis for informing the market how
the entity’s activities have been financed for the past quarter and
the effect on its cash position. An entity that wishes to disclose
additional information is encouraged to do so, in a note or notes
included in or attached to this report.
2. If this quarterly report has been prepared in accordance with
Australian Accounting Standards, the definitions in, and provisions
of, AASB 107: Statement of Cash Flows apply to this report. If this
quarterly report has been prepared in accordance with other
accounting standards agreed by ASX pursuant to Listing Rule 19.11A,
the corresponding equivalent standard applies to this report.
3. Dividends received may be classified either as cash flows from
operating activities or cash flows from investing activities,
depending on the accounting policy of the entity.
 
 
+   See chapter 19 for defined terms
1 September 2016

Contacts

U.S. Media
Sam Brown, Inc.
Christy Curran
Phone
+1-615.414.8668
christycurran@sambrown.com

O.U.S Media
Monsoon Communications
Sarah Kemter
Phone
+61 (0)3 9620 3333
Mobile +61 (0)407 162 530
sarahk@monsoon.com.au

Investors:
Westwicke Partners
Caroline Corner
Phone
+1-415-202-5678
caroline.corner@westwicke.com

AVITA Medical Ltd
Dale A. Sander
Chief Financial Officer
Phone
+1-661-367-9178
dsander@avitamedical.com

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