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Saturday, Mar 2, 2024

Skin in the Game

Valencia-based skin cell-regeneration company Avita Medical Inc. has signed a deal with a unit of a Chinese regenerative medicine company to commercialize that company’s wound-treatment product in the United States.

Financial terms of the transaction, which was announced earlier this month, were not disclosed.

Separately, Avita gave a preview of fourth-quarter and full-year 2023 earnings that came in below earlier guidance estimates.

But investors took both announcements in stride, sending shares of Avita up 7% in the three following trading sessions to close at $14.57 on Jan. 12. Shares closed at $15.06 on Jan. 23.

Commercialization deal

Avita Medical’s distribution deal for the wound-treatment product was inked with Stedical Scientific Inc., the United States subsidiary – located in Carlsbad – of Shanghai-based tissue engineering and regenerative medicine company Stedical Scientific Ltd.

Specifically, the deal grants Avita Medical exclusive distribution rights within the United States for Stedical’s wound-care product known as PermeaDerm. This product is a biosynthetic compound that facilitates wound healing while also providing a high level of permeability and biocompatibility.

According to the announcement, Avita intends to market PermeaDerm as an add-on treatment to its own wound-healing product. That product, which Avita calls “Spray-on Skin,” is derived from its skin-cell regeneration platform known as Recell that uses the patient’s own skin cells to create new cells.

Jim Corbett

“For burn or wound procedures treated with Spray-on Skin cells from the Recell system, PermeaDerm can be applied to further aid in healing,” the release stated.

The announcement also noted that PermeaDerm is already eligible for insurer reimbursement for use in outpatient and inpatient settings.

“Avita Medical and Stedical Scientific are ideal partners given the complementary nature of our products, the overlap of call points, and the strength of our footprint and sales force,” Jim Corbett, Avita Medical’s chief executive, said in the announcement.

“We anticipate these synergies will allow us to effectively leverage our established commercial presence, enhancing the integration of PermeaDerm into our portfolio,” Corbett added.

For Stedical Scientific, the deal with Avita allows it to further penetrate the United States consumer and medical market.

“We are thrilled to mark this important growth milestone with Avita Medical, who shares our goal of treating millions of patients suffering from a broad spectrum of wounds,” Lin Sun, chairman of Stedical Scientific, said in the announcement.

“This collaboration will expand our reach to more patients, physicians, and hospitals with a compelling portfolio of solutions that improve care and surgical performance,” Sun added.

Earnings preview

Avita Medical was originally founded in Melbourne, Australia, in 1992. About five years ago, to better access the lucrative United States marketplace and equity markets, the company made a strategic decision to pursue a complex series of maneuvers to realign its corporate structure to make it more compatible with regulatory and market structures in this country.

Avita already had a United States headquarters in Northridge; around 2018, the company moved that headquarters operation to its current location in Valencia, a community within Santa Clarita.

As part of this process, the company’s stock had to undergo a reverse split, whereby holders of Avita Medical shares that had traded on the Australian Securities Exchange received one share of common stock in the new United States company as traded on the Nasdaq exchange for every 100 shares held in Avita Medical. The stock began trading on the Nasdaq in late 2019.

Meanwhile, the Food and Drug Administration gave its first approval for Avita’s regenerative skin cell technology in late 2018 to treat certain types of burns. The agency has since approved several additional applications of the technology.

Earlier on the same day as the commercialization announcement, Avita gave a preview of its fourth-quarter and full-year earnings for 2023, as well as first-quarter (2024) guidance.

According to the announcement, Avita is estimating fourth-quarter commercial revenue of about $14.1 million, an increase of approximately 50% from the same period in 2022. That is below the initial guidance for the fourth quarter of $15.3 million to $16.3 million issued with its third-quarter earnings report.

Avita offered no explanation for the slight lowering of its fourth-quarter revenue estimate.

Commercial revenue for full-year 2023 is anticipated at around $49.8 million, an increase of 46% compared to the previous year.

A major reason for the sharp increases in revenue last year was some key Food and Drug Administration approvals in 2022 and last year for Avita’s Recell system that allowed the company to expand the applications to different types of wounds and new pools of patients.

“This was a transformative year for Avita Medical as we focused on accelerating our growth profile,” Corbett said. “We have made tremendous progress over the last four quarters, with consecutive commercial revenue growth rates of 40%, 42%, 51%, and 50%, respectively, over the same periods in 2022. We remain committed to sustaining growth and building our business in 2024.”

Avita Medical is expected to issue its formal earnings report late next month.

The announcement also gave an update on a key study for Avita Medical. That study, known as TONE, aims at treating patients with a disease known as stable vitiligo, a type of autoimmune disorder that causes patches of skin to lose pigmentation. The study of a repigmentation treatment, which Avita initiated last summer, is looking at skin repigmentation and its impact on patient quality of life.

Avita Medical said in its study update that patient enrollment has been completed earlier than expected. Patients will be followed for a 12-month period, with the primary follow-up period being six months after treatment.

Hannah Madans Welk
Hannah Madans Welk
Hannah Madans Welk is Interim Editor at the Los Angeles Business Journal and the Inside The Valley. She previously covered real estate for the Los Angeles Business Journal. She has done work with publications including The Orange County Register, The Real Deal and doityourself.com.

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