AVITA Medical, Inc. Q2 FY2025 earnings call

• Key Developments: Commercial revenue up 21% YOY but flat sequentially due to CMS/Medicare administrative contractor delay in CPT 1 code implementation. Lowered 2025 financial forecast but confident in second half rebound. Secured waiver for Q2 trailing 12-month revenue covenant and revised covenants. Shared real-world analysis of RECELL showing 36% reduction in length of stay for deep second-degree burns.
• Claims Headwind: Delay in CMS/MACs implementing new CPT 1 codes affected provider reimbursement and demand. Efforts underway to resolve, expect resolution in Q3.
• Products and Portfolio:
  • RECELL: Real-world analysis shows 36% reduction in length of stay. CMS approved NTAP for RECELL on trauma wounds. Outcomes-based partnership agreements with hospitals.
  • Cohealyx: Published in Journal of Surgery, shows graft readiness in 5-10 days. Cohealyx-1 study enrolling.
  • PermeaDerm: In-sourced manufacturing, featured in burn conferences, PermeaDerm-1 study enrolling.
  • International: Expected CE Mark approval delayed to Q4, but prepared for distributor-led model.

Commercial revenue for the second quarter was $18.4 million, up 21% year-over-year. Gross profit margin for the second quarter was 81.2%, down from 86.1% in the same period of 2024. The gross margin for RECELL products alone was 84.3% for the quarter. Total operating expenses for the quarter were $26.1 million, down from $28.7 million in the same period of 2024. The net loss for Q2 was $9.9 million or $0.38 per basic and diluted share.

• Revised full-year 2025 commercial revenue guidance to $76 million to $81 million from prior $100 million to $106 million.
• Expect to start generating free cash flow in Q2 2026 and reach GAAP profitability in Q3 2026.

• Claims Processing Delays: Uncertainty in provider reimbursement due to CMS/MACs delay in adjudicating new CPT 1 codes affected demand.
• Regulatory Delays: Delayed CE Mark approval for international launch due to bureaucratic issues.

Q: Resolution of claims backlog and scenario analysis A: Multilevel approach to resolve MACs' adjudication, steady increase in claims processing since June, notable premium in reimbursement for RECELL utilization.

Q: Cohealyx VAC approvals and enrollment A: Over 25% of U.S. burn centers have VAC approvals pending, Cohealyx-1 study enrolling 40 patients, expected to enroll by year-end.

Q: Cash balance and expense levers A: OrbiMed hasn't waived minimum cash balance requirement, $10 million annual savings from sales force restructuring, ATM still in place with ~$3.8 million worth of shares available.