Interesting article in AFR on PolyNovo competitor Avita
https://www.afr.com/companies/healthcare-and-fitness/this-medtech-says-a-7-8b-opportunity-can-reverse-its-image-problem-20221206-p5c3yw
This medtech says a $7.8b opportunity can reverse its image problem
The new CEO of spray-on skin company Avita Medical says there is a “pot of gold” on the horizon for the biotech company, but admits the business has a lot of work to do to prove itself to investors.
The ASX and NASDAQ dual-listed company, once called Clinical Cell Culture was, made famous as the developer of former Australian of the Year Fiona Wood’s skin repair technology used to treat victims of the Bali bombings.
Listed on the ASX since 1993, Avita has had a bumpy ride, soaring in the dotcom bubble before crashing back to earth. It has had several strategy and management revamps, racking up decades of net losses, and even a strike against its remuneration report in 2013.
After its share price bounced back to more than $16 in early 2020, the business has been sold off heavily again, closing at only $1.94 on Tuesday, giving it a market capitalisation of less than $250 million.
New CEO James Corbett, an American with almost 40 years of experience in life sciences, took on the top job in September, having previously led listed companies Microtherapeutics, ev3 Inc and Alphatec Spine.
Speaking to The Australian Financial Review, Mr Corbett said the business was undervalued, but it was up to the company to turn around its own fortunes.
“I think the sell-off was a combination of us not executing adequately and us not communicating adequately,” he said.
‘It’s not a market problem’
“Those sound like my problems. It’s not a market problem. I always tell the management team, the stock market will take care of itself, but execution is up to us.
“I think shareholders will benefit from more transparency from Avita management, and they’ll get it.”
The company’s flagship product, Recell, is used to treat skin defects using a patient’s own cells.
Mr Corbett took on the job with eyes wide open, having served on the board for the last 18 months.
While the business reported a 30 per cent jump in revenue in the most recent quarter compared to the prior corresponding period, with $US9.1 million in revenue banked for the quarter, he said this wasn’t good enough considering the low revenue base.
To drive additional growth, the business is expanding Recell into areas including soft tissue repair and as a treatment for the autoimmune disease vitiligo, which causes loss of skin colour in patches.
The company has already been granted US Food and Drug Administration breakthrough device designation, meaning its pathway to market will be accelerated.
It plans to submit its FDA applications for the new indications in December, and is expecting approval in June. It intends to launch into the soft tissue repair market in July.
This market, which it estimates is worth $US1 billion (compared to its burns-treatment market, which it says is $US600 million), will be a new growth driver in the short term.
But, Mr Corbett said Avita’s “pot of gold at the end of the rainbow” would be its expansion into vitiligo – an estimated $US5.2 billion ($7.8 billion) market opportunity.
“The business challenge we have is that we have reimbursement in the hospital for burns, and... that [also] covers outpatient treatment of burns. That same reimbursement extends to soft tissue repair for in and outpatients,” he said.
The next opportunity
“When we come to market in July, we will have a broad indication with reimbursement and a proprietary unique technology, it’s a trifecta.
“Vitiligo on the other hand will get approval, but its anticipated primary treatment will occur in the physician office setting, so what we’ll be doing between the expected approval in June 2023, and January 2025... is collect in-office reimbursement approval data, work with government payers, conduct physician initiated studies and work to identify the best patients [those who will benefit most from treatment].”
Avita’s Recell product has been approved for burns treatment in the US for four years. But more than a decade earlier it was approved in numerous global markets including Australia and Europe.
Despite newer entrants to the burn treatment area growing their market share, including PolyNovo and Aroa Biosurgery, Mr Corbett didn’t believe Avita competed with these companies.
“[The market] isn’t more competitive in a way that’s negative for Avita,” he said.
“It’s possible patients would have both. There is no technology for autologous skin grafting that achieves the healing rate, speed of healing, in terms of time, and the tissue sparing... as Recell.”
Within three years, one of Mr Corbett’s goals is for Avita to be cashflow positive.
“That requires us to do the things I’ve discussed – execute on strategy and grow at a much faster rate,” he said.
“The broader international market also deserves our attention. It’s another growth driver for the company that I expect to communicate about in the third quarter of next year.”
