My notes for the earnings call:

I’ll do a separate post in the analysis of the results and will redo my valuation then.

Highlights:

• They reiterated the contract with Stedical Scientific to sell PermeaDerm to Burns/Trauma centres in the US.
•  Launch is in March so expect an update in the next quarterly report.
• They are open to offering other complementary products needed for the same customer set as RECELL. Actively looking to find a dermal matrix product partner (Polynovo??)

• Partnering with PolyMedics as to be their 3^rd party reseller to start delivering to Germany, Austria, and Switzerland
• Expecting to sign more 3rd party resellers and have all countries in Europe covered in the next 6 to 12 months.
• Sales will be slow initially but should build throughout the year (I hope they start breaking out sales by region so we can see progress)
• Can’t recall any mention of the progress in Japan.

·        

• Manufacturing of the next gen machine, RECELL GO, to be done in house.
•  The machine will be offered free of charge to customers. Revenue to come from the high margin consumables.
•  Expecting RECELL GO US approval in May; Q3 for Europe.
• Additional product RECELL GO Mini to be used for small use cases, < 500 sq cm. Expect to apply for FDA approval at the end of the year

• Vitiligo – Expect TONE study to be complete at the end of 2024 and to start roll out by the end of 2025.

·        

• Financials and Guidance:
• Debt funding received $40m USD with $50m more available if they hit certain financial milestones.  
• Expecting profitability by Q3 2025 and not need any additional capital to get there.
• Expecting growth to accelerate with revenue up 55-70 % in 2024 over 2023. This comes from a backlog of over 100 hospitals in the VAC process. The increased indications (from burns to other wounds) have 4 times the use cases but increases the time to approval within hospitals.
• Sales team will expand from 70 to 108 people by the end of March – But the implication here was staff growth will slow from this point.
• They also implied R&D expenses should reduces as the TONE study finishes.

What I liked:

• Good growth in the quarter.
• Clear guidance to profitability, expansion strategy, and product road map. There is a lot to hold them accountable to in future earnings calls.

What I didn’t like:

• Taking on debt while being unprofitable. At this stage is seems like debt was the smart choice for shareholders – however it means they are more fragile than I would like; it only takes a speed bump, and then they must raise capital at a less favourable time.
• Giving the RECEL GO away for free – I’m sure they have done the commercials for this, and it makes sense – but I thought you’d at least sell it at cost.

I listened to the latest earnings call - my notes to self from the call:

Summary

• Exceeded and increased guidance
• Increased revenue was solely due to increased use by existing accounts (no new burns centers were added in the quarter).
• Received FDA PMA approval for for use of RECELL for full thickness skin defect and for a greater range of indications than expected.
• PMA approval means doctors can you the same reimbursement codes for full thickness skin defects as they do for burns (I think)
• Received FDA approval for use of RECELL for vitiligo
• aim to receive approval for reimbursement for vitiligo in 2025
• RECELL GO (V2 device) approval expected in December, with launch in 2024.
• Gross margin dropped (to 81%) but expected to be 85% for the year. GP margin of up to 90% is expected to be possible at scale.
• Peak Opex (as ratio of revenue) expected in Q3.
• RECELL GO, vitiligo and (I think), Japan expansion plans to be defined in Feb 2024 earnings.

What I liked

• "staying focused" approach to the increased indications - not rushing into the extra market opportunities offered. Will stick to the current plan for sales by expanding into trauma centers, and will take time to investigate the approach for additional indications. Expect updates on this Q3 or Q4.
• They had sales team ready for expansion when the approval for full thickness defects came through - they project a good level of forward planning

What I didn't like

• Mention of not adding new accounts - does this mean the burns market is largely covered in the US - only growth left (for burns specifically) is by increased use in existing burns centers?
• Vagary around use of capital, cost of expansion, and profitability - will be at least 2024 before we know if they need to raise more capital for the release of the RECELL GO device and expansion plans into vitiligo, or whether they can bootstrap their way forward.

Listened to earnings call with the new CEO - I was impressed, obviously that is what he is paid to do but thought he struck a good balance of giving the political answer where he didn't really want to (or basically could not) answer a question, but then being very direct and clear as to the focus and way forward for the company.

He also seemed honestly excited about being brought into the company at this stage of the product/sales ramp - this is obviously the part to most skeptical about though.

Key points:

• The focus on the near term is, in the US, continuing to push the burns application, then the soft tissue launch in July - coinciding with the expansion of sales team from 30-70 people.
• Vitiligo - FDA approval expected in June however sales ramp to start in 2024 and hit its stride more likely in 2025.
• International (i.e not US or Japan) - plan expected by the end of the year, so realistically probably not going to start until 2025.
• FDA approval of next gen machine (more automated device) expected early 2024
• Cosmetech (Japan) partnership has kicked-off with about $750k sales so far. They only have approval for burns so far, but James is working directly with them to establish plans for soft tissue and Vitiligo
• Expecting $50 m (USD) revenue for the year, and 50% CAGR over the next 3-5 years.
• Some patents expire next year (was not clear on what exactly, but sounds like it is the main formulation of recel, and not the devices involved) however any competition would need their own FDA approval before they could sell in the US, so still providing some moat.

Political answers:

• What will be the gross margin of the new device? Don't know, they have not settled on the business' model for it yet (could be purchase or lease...)
• When will they be EBITDA +ve? No commitment, sounds like he plans to grow as fast as they can with they cash they have. Basically he said they could be cashflow positive early 2025 by just going after burns and soft tissue, and be left with $30m in cash, however he'd rather spend that money getting international and vitiligo markets going (that is how I interpreted it at least)
• Could they expand into genetic alteration of cells? No, while some promising animal research was done in the area, there is no current plan to pursue it commercially at this stage.

Risks:

• Delays in approvals of soft tissue and the new device (delay in Vitiligo approval not so critical at this stage).
• Competition once patents expire
• Sales execution

DISC: Held

It looks like the shake up has begun.

I'm taking it as a positive that they have removed a middle manager (the COO) and have those teams now report to the CEO.

The fact that the CFO has left at short notice (perhaps as a protest, perhaps he was pushed) is unsettling...

In total I'm just gonna wait an see what happens from here (while still holding onto my bag)

DISC:HELD (for now)

New CEO announced, seems to be out of the blue (unless I missed something).

Wondering if it was Dr Perry wanting to step down or the board booting him for under performance...

The new guy seems to have the chops - lets hope he makes this happen!

DISC: Held

FY 2021 Results Highlights:

• Great (but slowing) revenue growth of 100% YoY.
• Expecting an impact from Covid Delta strain plus seasonal affects, so expecting a drop in revenue in Q1 2022 from Q4 2021
• Approval received for use on chilrden under 16 years in the US. However growth in this segment is expected to be slow in the near term. 
• Approval for vitiligo treament (with an estimated US SAM of 750 million) is expected in 2023 (going well). Currently there is no established treatment for vitiligo.
• Approval for Soft tissue repair (servicable market of 450 million) is aimed for 2024.
• Approval received for Japanese market.
• Medium term goal is to establish good FCF in US and Japan before expanding to other markets (EU, China etc)

There was no mention of when they will become profitable. However there were mentions of ramping sales and marketing activity (given the new markets approved and in the pipeline) so I'm expecting them to get to FCF neutral and staying there in the medium term.

Re-did my valuation based on these results but remains more-or-less the same so can't be fecked to update it here.

I won't be surprised if the share price drops with Q1 results.

DISC: I hold