Avita Medical (OTCQX: AVMXY) (ASX: AVH) today issued the
following CEO Shareholder Letter and Quarterly Report:
Dear Shareholder,
As we conclude another quarter, I would like to bring you, our
owners, up-to-date with some key events in recent months. Much of
our fundamental activity has been in the US, where our FDA approval
trial is nearing completion, and we remain on track for submitting
our Premarket Authorization dossier to the FDA. We are also
delivering on the key terms of our USD$61.9m contract with the US
Biomedical Advanced Research and Development Authority (BARDA), the
US Federal disaster preparedness agency. And while attending
scientific and medical forums, we have detected genuine excitement
amongst the various US burns surgeons who have used ReCell™ to
superb effect under clinical and Compassionate Use settings. There
is a sense within our team of a real anticipation at key US burns
centers about using the device should we get FDA approval. So all
these elements have informed our view that success in the US Market
will be a value catalyst for the Company. Achieving this is our key
strategic focus, and so that is where we are allocating resources,
quite sensibly given the support provided under the BARDA
contract.
Our US Team is Strengthened
Momentum has been maintained in our recruitment drive to build
our team in California. During the last quarter, we have been
delighted to recruit several more personnel in the fields of
finance, clinical education, regulatory, training and quality. All
this talent is needed to ensure we achieve our strategic goals in
the US in 2017. Financial support from BARDA has been crucial in
funding this increased headcount to execute on the necessary tasks,
and towards this, the agency is being invoiced monthly.
The natural outcome of having a larger team – now totaling 21 in
the US -- is that we outgrew our Northridge office. So Avita
Medical Americas has moved to Valencia, in the northerly adjacent
Santa Clarita Valley. The new facility has enough space to
accommodate additional staff as we keep building out the team. Good
work will be done in Valencia.
How we can save Lives, and Money
We know that our medical devices provide a powerful, safe and
effective approach to trigger the healing of burns, chronic wounds
and other skin conditions. But we have also come to understand that
our robust clinical dossier is not enough to convince all parties
involved in the sales process. We must also show how our approach
can deliver real savings to any medical institutions that adopt it.
In the last quarter, the team have been working intensively with
QuintilesIMS™, a global leader in Health Economics, to resolve a
strategy for the US burns sector. Within the project, they are
reviewing data generated at a US hospital, which showed a reduction
in length of stay by 42% amongst their Compassionate Use cohort
compared to age-matched averages from their database. This mirrors
similar data generated in the UK, and we are confident that at the
end of this process with QuintilesIMS™ we will have a very strong
narrative on how we can add great value to any US burns center that
deploys our devices.
In tandem, we have also recruited a Reimbursement Manager, who
will be focused on ensuring that we have the right structure in
place amongst payers when we come to launch in the US. And in the
last quarter we also pushed ahead with the implementation in the US
of a clinical education program, also funded by BARDA.
So we are gearing up for the US launch, and the more thorough
approach being implemented is based on the learnings and
experiences derived from other markets, in which the clinical and
safety aspects have all been well proven. By adding these other
necessary elements – Health Economics, Reimbursement and robust
training – we will have a strong platform for success in the
world’s largest healthcare market.
Diabetic Foot Ulcer Trial Commences
In the UK, we have started enrolling our first patients in a new
indication area for Diabetic Foot Ulcers (DFU). The commercial
rationale needs little explanation: it is estimated that 415
million people are living with diabetes in the world, which is
estimated to be 1 in 11 of the world's adult population. Some 46%
of people with diabetes are undiagnosed. The figure is expected to
rise to 642 million people living with diabetes worldwide by 20401.
Given that about 15% of this patient group can expect to develop
foot ulcers during their lifetimes, it is clear that this will be a
large addressable market.
The background to our interest emerged from early proof of
concept work in Italy, which showed that applying our suspension of
cells could support wound closure. This was further supported by
work conducted in China. The success of our randomised trial in the
UK on 52 Venous Leg Ulcer patients gave us assurance that applying
our skin cell suspension to other chronic wounds could be of
benefit.
Our trial is being run at three leading UK diabetes centres;
Manchester Royal Infirmary, and two London hospitals; King’s
College and Northwick Park. We intend to enroll up to 24 patients,
each of whom will be monitored for 24 weeks post-treatment with
ReGenerCell™. The intent of the trial is to evaluate safety and
effectiveness of our novel approach. By applying a suspension of
cells to a DFU, we hope to determine if our treatment can be used
as an adjunct to standard of care treatments, such as debridement,
cleansing, dressings, and offloading. So, we will have primary
outcome measures of evaluating the incidence of healing and rate of
wound closure, but the study will also explore patient and
physician satisfaction, and inform us on Health Economic benefits
too. We hope to have this fully enrolled in coming months, and will
keep you all posted as we move ahead with this very promising new
trial.
Market and Financial Updates
While our strategic focus is on the US market, we are still
pushing ahead with selling our devices in various markets in which
we have presence, with good progress in the Asia-Pacific region. In
China, leading hospitals in main cities have now completed their
clinical evaluations in the field of burns, and we are pleased to
report that the medical professionals have seen positive results.
Ordering has now commenced, in modest initial quantities, as we
build up our collateral with key opinion leaders in the burns space
in this potentially lucrative market. Our activity resulted in a
year over year increase in China of 122%, and we fully intend to
build on this base. Sales also increased in Australia/NZ by
21%.
In Europe, the Middle East and Africa, there was a more mixed
story. New markets, such as South Africa, showed positive traction,
but we have had to review our distributors in some European markets
due to their sales performance. In Germany and the UK, we will
again deploy a direct sales model, which we anticipate will give us
greater clarity in the sales narrative and process.
Overall receipts from customers were $155,000 in the quarter,
which represents a decrease of $126,000 as compared with the
previous quarter, as we transitioned our sales model from
distributor to direct in some markets. This was offset by
receipts from BARDA of $1.645m as reimbursement for activities
stipulated under our USD$61.9m contract; a $301,000 (22.4%)
increase compared with the previous quarter ending 30 September
2016.
Total operating expenses in the quarter decreased by $257,000
from the previous quarter, a 6% decrease. The December quarter net
cash outflows of $2.26m were an improvement over last quarter by
10.5% ($2.53m) and 7.8% as compared to the same quarter previous
year ($2.45m) and are in-line with Company expectations for both
the quarter and YTD. Total cash and cash equivalents held by Avita
at the end of the December quarter were $8.4 million.
In all our interactions with various parties, we have been
explaining that 2017 will be a pivotal year for Avita. We have
significant value catalysts as declared milestones: the march
towards FDA approval and achieving BARDA’s first stockpile order
valued at USD$8m. My talented and growing team will be executing on
these strategic goals, which we are sure will bring value to our
shareholder base.
Yours faithfully
ADAM KELLIHERChief Executive Officer
ABOUT AVITA MEDICAL LIMITED
Avita Medical develops and distributes regenerative products for
the treatment of a broad range of wounds, scars and skin defects.
Avita’s patented and proprietary collection and application
technology provides innovative treatment solutions derived from a
patient’s own skin. The Company’s lead product, ReCell®, is used in
the treatment of a wide variety of burns, plastic, reconstructive
and cosmetic procedures. ReCell® is patented, CE-marked for Europe,
TGA-registered in Australia, and CFDA-cleared in China. In the
United States, ReCell® is an investigational device limited by
federal law to investigational use, and a pivotal U.S. approval
trial is underway. ReGenerCell™ is CE-marked for Europe and is not
available for sale in the United States. 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.
1 International Diabetes Federation, IDF Diabetes Atlas 7th
Edition http://www.diabetesatlas.org/across-the-globe.html
+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”)
28 058 466 523
31 December 2016
Consolidated statement of cash flows
Current quarter Year to date (6 months)
$A’000 $A’000
1.
Cash flows from operating activities 1.1
Receipts from customers
155 436
1.1a
Receipts from BARDA
1,645
2,989
1.2
Payments for
(a) research and development
(384)
(1,382)
(b) product manufacturing and operating costs
(691)
(1,040)
(c) advertising and marketing
(218)
(714)
(d) leased assets
(86)
(143)
(e) staff costs
(1,733)
(3,378)
(f) administration and corporate costs
(992)
(1,809)
1.3
Dividends received (see note 3)
1.4
Interest received
42
79
1.5
Interest and other costs of finance
paid
1.6
Income taxes paid
1.7
Government grants and tax incentives
1.8
Other (provide details if material)
1
175
1.9
Net cash from / (used in) operating activities
(2,261)
(4,787)
2.
Cash flows from investing
activities
2.1
Payments to acquire:
(a) property, plant and equipment
(46)
(81)
(b) businesses (see item 10)
(c) investments
Consolidated statement of cash flows
Current quarter Year to date (6 months)
$A’000 $A’000 (d) intellectual
property (e) other non-current assets 2.2 Proceeds from disposal
of: (a) property, plant and equipment (b) businesses (see item 10)
(c) investments 628 (d) intellectual property (e) other non-current
assets 2.3 Cash flows from loans to other entities 26 5 2.4
Dividends received (see note 3) 2.5 Other (provide details if
material)
2.6
Net cash from / (used in) investing
activities
(20)
552
3.
Cash flows from financing activities 3.1 Proceeds from
issues of shares 8,508 3.2 Proceeds from issue of convertible notes
3.3 Proceeds from exercise of share options 3.4
Transaction costs related to issues of
shares, convertible notes or options
3.5 Proceeds from borrowings 3.6 Repayment of borrowings 3.7
Transaction costs related to loans and
borrowings
3.8 Dividends paid 3.9 Other (provide details if material)
3.10
Net cash from / (used in) financing
activities
- 8,508
4.
Net increase / (decrease) in cash and
cash equivalents for the period
4.1
Cash and cash equivalents at beginning of
quarter/year to date
10,642
4,172
4.2
Net cash from / (used in) operating
activities (item 1.9 above)
(2,261)
(4,787)
4.3
Net cash from / (used in) investing
activities (item 2.6 above)
(20)
552 4.4
Net cash from / (used in) financing
activities (item 3.10 above)
- 8,508
Consolidated statement of cash
flows
Current quarter$A’000
Year to date (6
months)$A’000
4.5
Effect of movement in exchange rates on
cash held
28
(56)
4.6
Cash and cash equivalents at end of
quarter
8,389
8,389
5.
Reconciliation of cash and cash
equivalentsat the end of the quarter (as shown in the
consolidated statement of cash flows) to the related items in the
accounts
Current quarter$A’000
Previous quarter$A’000
5.1 Bank balances 743 390 5.2 Call deposits 7,646 10,252 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)
8,389 10,642
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
(126)
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 Directors fees (95k), Clinical
Advisory Board fees (10k) and Bioscience Consultancy (21k)
7.
Payments to related entities of the
entity and their associates
Current quarter
$A'000
7.1
Aggregate amount of payments to these
parties included in item 1.2
7.2
Aggregate amount of cash flow from loans
to these parties included in item 2.3
7.3
Include below any explanation necessary to
understand the transactions included in items 7.1 and 7.2
8.
Financing facilities availableAdd
notes as necessary for an understanding of the position
Total facility amountat quarter
end$A’000
Amount drawn atquarter
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 575 9.2 Product
manufacturing and operating costs 857 9.3 Advertising and marketing
298 9.4 Leased assets 168
9.5 Staff costs 2,042 9.6 Administration and corporate costs 499
9.7 Other (provide details if material)
9.8
Total estimated cash outflows 4,439
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
+ See chapter 19 for defined terms1 September 2016
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.
Gabriel Chiappini, Company Secretary30 January 2017
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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170130006023/en/
Avita Medical LtdAdam KelliherChief Executive
OfficerPhone: +44 020 8947 9804akelliher@avitamedical.comorAvita
Medical LtdTim RooneyChief Financial OfficerPhone: + 1 (818)
356-9400trooney@avitamedical.comorAvita Medical LtdGabriel
ChiappiniCompany SecretaryPhone +61 (0)8 9474
7738gabriel@laurus.net.auorAustraliaMonsoon
CommunicationsSarah KemterPhone: +61 (0)3 9620 3333Mobile: +61
(0)407 162 530sarahk@monsoon.com.auorUSAWestwicke
PartnersJamar IsmailPhone +1 (415)
513-1282jamar.ismail@westwicke.com
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