Avita Medical Half-Year Financial Report for Fiscal 2019

VALENCIA, Calif. & MELBOURNE, Australia–(BUSINESS WIRE)–AVITA Medical (ASX: AVH, OTCQX: AVMXY), a global regenerative medicine
company, announced that it filed today with the ASX its Appendix 4D –
Half-Year Report for the six months ended 31 December 2018.

Revenues for First Six Months and Update on U.S. National Market
Launch

AVITA Medical received U.S. Food and Drug Administration (FDA) approval
of the RECELL® Autologous Cell Harvesting Device (RECELL® System) for
the treatment of acute thermal burns in September 2018. As a result of
the FDA approval, the Company’s primary focus during the six months
ended 31 December 2018 was preparing for the January 2019 U.S. national
market launch of the RECELL System.

Prior to the January 2019 U.S. national market launch and in advance of
any direct promotional effort, the clinical and economic benefits of the
RECELL System generated strong interest from burn centers and the
Company recorded its first U.S. product sales. Product sales and other
revenues for the six months ended 31 December 2018 were as follows:

   
Six Months Ended
(In thousands of AUD)

31 December

2018   2017
U.S. Product Sales $ 1,102 $
International Product Sales 711 608
Total Product Sales 1,813 608
BARDA Revenue 5,009 3,857
Total Revenue $ 6,822 $ 4,465
 

The Company also provided an update on the early results from the
national U.S. launch of the RECELL System that commenced last month.

As expected, most burn centers are following a fairly standard process
for adopting a novel device which includes an initial evaluation of the
product as well as advancing it through their hospital’s Value Analysis
Committee (VAC) in order to receive formal approval to purchasing for
regular use. This process can often take six months or more to
complete,” said Erin Liberto, Chief Commercial Officer. “The emphasis of
our field sales force right now is to further increase awareness and
interest among burn surgeons and to train surgeons and their staff in
the use of the RECELL System. Our team is also assisting the sites with
product evaluation and providing the health economic and other data
required to successfully complete their VAC review. We are pleased that
through today, 41 of the 134 burn centers in the U.S. have been trained
and certified in the use of the RECELL System, and 19 of these centers
have already purchased the product. This is amazing progress for this
early stage of a product launch and is helped by the prior experience a
number of centers gained due to their participation in clinical trials
and the Compassionate Use program, and the broader market awareness
resulting from the large body of scientific meeting presentations and
publications through the past year.”

Progress During First Six Months of Fiscal 2019 Set the Stage for
Near-Term Milestones

A total of ten abstracts have now been accepted at the largest burn
conference, the American Burn Association (ABA) 51st Annual Meeting to
be held in Las Vegas April 2-5, 2019. The presentations of the RECELL
System at the ABA conference with include a Top-Five Abstract
presentation in plenary session covering the treatment of pediatric
patients. Other presentations will include the clinical outcomes that
burn surgeons have observed in a broad range of patients and burn types,
including the use of the RECELL System in the treatment of donor sites,
burns of the hand, and patients with large burn injuries.

The work undertaken by the Company’s clinical and regulatory teams will
also lead two additional milestones during this quarter, the filing of
approval to market the RECELL System in Japan, and the commencement of
the second trial pediatric burn patients in the U.S. This second U.S.
pediatric trial will test the RECELL System in the treatment of
superficial partial thickness burns, a population and type of burn that
is currently outside of the approved labeling for the product.

Funding and technical support for the development of the RECELL System
is provided by the Biomedical Advanced Research and Development
Authority (BARDA), under the Assistant Secretary for Preparedness and
Response, within the U.S. Department of Health and Human Services, under
ongoing USG Contract No. HHSO100201500028C. Programs were funded under
the BARDA contract include two randomized, controlled pivotal clinical
trials, the Compassionate Use and Continued Access programs, development
of the health economic model demonstrating the cost savings associated
with the RECELL System, and two randomized, controlled clinical trials
in pediatric burn patients.

Half-Year Fiscal 2019 Financial Results (Unaudited)

A copy of the Appendix 4D – Half-Year Report for the six months ended
2019 is attached. A summary of the financial results for the half year
are as follows:

 

Six Months Ended

(In thousands of AUD) 31 December

2018

 

2017

Sale of goods $ 1,813 $ 608
Cost of sales

(570)

(265)

Gross profit 1,243 343
BARDA Revenue 5,009 3,857
Other income 104 37
Operating Costs

(21,935)

(11,488)

Loss for the period (15,579) (7,251)
Foreign currency translation 1,374 (55)
Total other comprehensive loss

($14,205)

($7,306)

 

The majority of the current-year increase in sales of goods occurred in
the U.S. as a result of the September 2018 FDA approval. Gross margin
for the half-year ended 31 December 2018 was 69% compared to 56% for the
same period in 2017, and the Company expects gross margins to further
increase as sales ramp up within the U.S. As in prior periods, the
majority of other revenue consisted of funding from BARDA. As the result
of investments in commercial, manufacturing, and system capabilities for
the U.S. market launch of the RECELL System and related initiatives,
operating costs and net loss for the half-year ended 31 December 2018
increased compared to the same period in the prior year and were in line
with management expectations.

During the six months ended 31 December 2018, net proceeds provided by
institutional placements of shares to U.S., Australian and international
institutional and sophisticated investors was approximately $25.4
million. Including the net proceeds of approximately $13.8 million and
$1.8 million received in January 2019 from Tranche 2 of an institutional
placement and from a share purchase plan, respectively, the pro forma
cash and cash equivalents balance at 31 December 2018 was approximately
$45.9 million.

We appreciate the support provided by our shareholders, including those
investors that participated in our placements of shares,” said Dale
Sander, Chief Financial Officer. “The cash on hand at 31 December 2018
is expected to allow full funding of the U.S. launch and commercial
sales ramp up, as well as the product development programs currently
underway or planned.”

ABOUT AVITA MEDICAL LIMITED

AVITA Medical is a regenerative medicine company with a technology
platform positioned to address unmet medical needs in burns, chronic
wounds, and aesthetics indications. AVITA Medical’s patented and
proprietary collection and application technology provides innovative
treatment solutions derived from the regenerative properties of a
patient’s own skin. The medical devices work by preparing a REGENERATIVE
EPIDERMAL SUSPENSION(RES™), an autologous suspension
comprised of the patient’s skin cells necessary to regenerate natural
healthy epidermis. This autologous suspension is then sprayed onto the
areas of the patient requiring treatment.

AVITA Medical’s first U.S. product, the RECELL® System, was approved by
the U.S. Food and Drug Administration (FDA) in September 2018. The
RECELL System is indicated for use in the treatment of acute thermal
burns in patients 18 years and older. The RECELL System is used to
prepare Spray-On Skin™ Cells using a small amount of a patient’s own
skin, providing a new way to treat severe burns, while significantly
reducing the amount of donor skin required. The RECELL System is
designed to be used at the point of care alone or in combination with
autografts depending on the depth of the burn injury. Compelling data
from randomized, controlled clinical trials conducted at major U.S. burn
centers and real-world use in more than 7,000 patients globally,
reinforce that the RECELL System is a significant advancement over the
current standard of care for burn patients and offers benefits in
clinical outcomes and cost savings. Healthcare professionals should read
the INSTRUCTIONS FOR USE – RECELL® Autologous Cell Harvesting Device (https://recellsystem.com/)
for a full description of indications for use and important safety
information including contraindications, warnings and precautions.

In international markets outside of Europe, our products are marketed
under the RECELL System brand to promote skin healing in a wide range of
applications including burns, chronic wounds and aesthetics. The RECELL
System is TGA-registered in Australia, CFDA-cleared in China, and
received CE-mark approval in Europe.

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.

Appendix 4D
Half-Year Report
31 December 2018

AVITA MEDICAL LIMITED
ABN 28 058 466 523

Results for announcement to the market

                   
       

December
2018

  December

2017

Financial Results $ $
 
 

Sale of goods

Up 198% to 1,813,195 607,761

Other revenue

Up 31% to 5,112,763 3,894,311
Total comprehensive loss for the period   Up   94%   to   14,205,247   7,305,987
             
Dividends    

Amount per Ordinary
Security

   

Franked amount per
security

2017 interim dividend     Nil     Nil
2018 interim dividend     Nil     Nil
       
Record date for determining entitlements to the 2018 interim
dividends
    N/A
             
Net Tangible Asset Backing     December 2018     December 2017
       
Net tangible asset backing per ordinary security     $0.0189     $0.0138
 
Other explanatory notes

The information required by listing rule 4.2A is contained in both this
Appendix 4D and the attached half-year report. This half-yearly
reporting information should be read in conjunction with the most recent
annual financial report of the company.

AVITA MEDICAL LIMITED
A.B.N. 28 058 466 523

HALF-YEAR FINANCIAL REPORT
31 December 2018

Corporate Information
ABN 28 058 466 523

This half-year report covers the consolidated entity comprising Avita
Medical Limited (the Parent Company) and its controlled subsidiaries
(the Group or the Company). The Parent Company’s functional and
presentation currency is AUD ($). A description of the Group’s
operations and principal activities are included in the review of
operations and activities in the Directors’ Report on page 5. The
Directors’ Report does not form part of the financial report.

Directors
Mr Lou Panaccio (Non-Executive Chairman)
Dr
Michael Perry (Executive Director)
Mr Jeremy Curnock-Cook
(Non-Executive Director)
Mr Louis Drapeau (Non-Executive Director)
Mr
Damien McDonald (Non-Executive Director)
Professor Suzanne Crowe
(Non-Executive Director)

Company Secretary
Mr Mark Licciardo and Ms Kate Goland
of
Mertons Corporate Services Pty Ltd

Registered Office
c/o Mertons Corporate Services Pty Ltd
Level
7, 330 Collins Street
Melbourne VIC 3000, Australia

Principal Place of Business
28159 Avenue Stanford, Suite 220
Valencia,
CA 91355
USA

Share Register
Computershare Investor Services Pty Limited
Level
11, 172 St Georges Terrace
Perth, WA 6000 Australia

Solicitors
K&L Gates
Level 25 South Tower, 525
Collins Street
Melbourne VIC 3000, Australia

Auditor
Grant Thornton Audit Pty Ltd
Level 43 Central
Park, 152-158 St Georges Terrace
Perth, WA 6000 Australia

Principal Bankers
National Australia Bank Limited
1238
Hay Street
West Perth, Western Australia, 6005

Stock Exchange
Avita Medical Limited
Listed on the
Australian Securities Exchange
(ASX Code: AVH)
Listed on the
OTCQX International Marketplace in the US (OTCQX Code: AVMXY)

DIRECTORS’ REPORT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2018

Your Directors submit their report for the half-year ended 31 December
2018.

DIRECTORS

The names of the Company’s Directors in office during the half-year and
until the date of this report are as below. Directors were in office for
this entire period unless otherwise stated.

Mr Lou Panaccio (Non-Executive Chairman)
Dr Michael Perry
(Executive Director)
Mr Jeremy Curnock-Cook (Non-Executive Director)
Mr
Louis Drapeau (Non-Executive Director)
Mr Damien McDonald
(Non-Executive Director)
Professor Suzanne Crowe (Non-Executive
Director)

REVIEW AND RESULTS OF OPERATIONS

Avita Medical Limited and the Group is a regenerative medicine company
with a technology platform designed to address unmet medical needs in
patients with burns, chronic wounds, and aesthetics indications. The
Company’s patented and proprietary collection and application technology
provides innovative treatment solutions derived from the regenerative
properties of a patient’s own skin. The Company’s medical devices work
by preparing a Regenerative Epidermal Suspension (RES™), an autologous
suspension comprised of the patient’s own skin cells that are necessary
to regenerate natural healthy epidermis. This autologous suspension is
then sprayed onto the areas of the patient requiring treatment. The
first medical device based on the RES technology, the RECELL® System,
was approved for sale in the U.S. for the treatment of acute thermal
burns by the Food and Drug Administration (FDA) in September 2018. The
Company initiated its U.S. national market launch of the RECELL System
in January 2019, although it did commence commercial shipments in the
U.S. during the half-year ended 31 December 2018 in response to
pre-launch demand from burn centers. The RECELL System is also sold on a
limited basis in certain regions of the world in which the products are
approved for sale, including Australia, China and Europe.

Sale of goods totalled $1,813,195 for the half-year ended 31 December
2018, an increase of $1,205,434 or 198% over the $607,761 recognized
during the same period in 2017. The majority of the current-year
increase in sales occurred in the U.S. as a result of the September 2018
FDA approval. U.S. sales during the six months ended 31 December 2018
totalled $1,101,991 compared to zero in the prior year. Gross margin for
the half-year ended 31 December 2018 was 69% compared to 56% for the
same period in 2017, and management expects gross margins to further
increase as sales ramp up within the U.S.

Other revenue totalled $5,112,763 for the half-year ended 31 December
2018, an increase of $1,218,452 or 31% over the $3,894,311 recognized
during same period in 2017. As in prior periods, the majority of other
revenue consisted of funding from the Biomedical Advanced Research and
Development Authority (BARDA), under the Assistant Secretary for
Preparedness and Response, within the U.S. Department of Health and
Human Services, under ongoing USG Contract No. HHSO100201500028C. Under
the BARDA contract, income of $5,009,137 was recognized during the
half-year ended 31 December 2018 compared to income of $3,856,716 during
the same period in 2017. Funding provided by BARDA during the half-year
ended 31 December 2018 focused primarily on support of the regulatory
activities to support the U.S. approval of the RECELL System, the
Continued Access and Compassionate Use programs which provide access to
the RECELL System for U.S. patients prior to FDA approval, and two U.S.
clinical trials in pediatric burn patients.

Operations for the six months ended 31 December 2018 were focused
primarily on preparation for the January 2019 U.S. market launch of the
RECELL System, including the recruitment, hiring and training of 20
sales field force personnel. Additional activities included the
commencement of product shipments in the U.S. after the September 2018
FDA approval of the RECELL System for the treatment of acute thermal
burns, and the preparation for, or the conduct of, further development
of RECELL. As the result of investments in commercial, manufacturing,
and system capabilities for the U.S. market launch of the RECELL System
and related initiatives, operating costs for the half-year ended 31
December 2018 totalled $21,935,034, a $10,447,198 or 91% increase over
the $11,487,836 incurred during the same period in the prior year and
were in line with management expectations.

Net comprehensive loss after tax for the half-year ended 31 December
2018 was $14,205,247, a $6,899,260 or 94% increase compared to
$7,305,987 incurred in the same period in the prior half-year. The
increase in net loss was driven by the higher operating costs described
above, partially offset by the higher sale of goods and other revenue
achieved during the six months. As a result of the national launch of
the RECELL System in the U.S. in January 2019, and the expansion of
research and development, operating expenses will increase in future
periods. These expenses are expected to be partially offset by increased
sales of goods and revenues under the BARDA contract.

During the half year ended 31 December 2018, net cash provided by the
issuance of shares under institutional placements of shares to U.S.,
Australian and international institutional and sophisticated investors
was $25,364,339. Cash and cash equivalents held at 31 December 2018 was
$30,342,360. The institutional placement included a second tranche
contingent upon shareholder approval. Shareholder approval for Tranche 2
was received at an Extraordinary General Meeting held in January 2019,
and the net proceeds of $13,828,577 were received by the Group in
January 2019. Also, in January 2019 the Group received $1,764,900 in net
proceeds from a share purchase plan (SPP). Pro forma cash and cash
equivalents at 31 December 2018, including the proceeds received in
January 2019 from Tranche 2 of the institutional placement and the SPP,
was $45,935,837.

SUBSEQUENT EVENTS

During the six months ended 31 December 2018 the Group completed an
institutional placement of shares to institutional placements of shares
to U.S., Australian and international institutional and sophisticated
investors. The institutional placement included a second tranche
contingent upon shareholder approval. Shareholder approval for Tranche 2
was received at an Extraordinary General Meeting held in January 2019,
and the net proceeds of $13,828,577 were received by the Group in
January 2019. Also, in January 2019 the Group received $1,764,900 in net
proceeds from a share purchase plan.

DIRECTORS’ REPORT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2018

AUDITOR’S INDEPENDENCE DECLARATION

A copy of the auditor’s independence declaration as required under s307C
of the Corporations Act 2001 is included on the following page.

Signed in accordance with a resolution of the Directors.

Dr Michael Perry
Executive Director
Dated: 28
February 2019
Valencia, California, United States

AUDITOR’S INDEPENDENCE DECLARATION

To the Directors of Avita Medical Limited

In accordance with the requirements of section 307C of the Corporations
Act 2001
, as lead auditor for the review of Avita Medical Limited
for the year ended 31 December 2018, I declare that, to the best of my
knowledge and belief, there have been:

a         no contraventions of the auditor independence requirements of the
Corporations Act 2001 in relation to the review; and
b no contraventions of any applicable code of professional conduct in
relation to the review.

GRANT THORNTON AUDIT PTY LTD
Chartered Accountants

C A Becker
Partner – Audit & Assurance

Perth, 28 February 2019

 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE LOSS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2018

 
    Note   Consolidated  

Continuing operations

 

Continuing operations

31 Dec 2018

$

31 Dec 2017

$

Sale of goods 2 1,813,195 607,761
Cost of sales (570,315 )   (264,833 )
Gross profit 1,242,880 342,928
 
BARDA income 2 5,009,137 3,856,716
Other income 2 103,626 37,595
 

Operating costs

Sales and marketing expenses (6,931,241 ) (2,815,698 )
Product development expenses (7,080,042 ) (5,058,518 )
Corporate and administrative expenses (6,865,250 ) (2,873,511 )
Share based payment expense (1,043,694 ) (726,856 )
Finance costs (14,807 )   (13,253 )
Total operating costs (21,935,034 )   (11,487,836 )
 
Loss from continuing operations before income tax expense (15,579,391 ) (7,250,597 )
 
Income tax expense
     
Loss for the period (15,579,391 ) (7,250,597 )
 
Other comprehensive income (loss)
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation 1,374,144     (55,390 )
Other comprehensive loss for the period, net of tax 1,374,144     (55,390 )

Total other comprehensive loss for the period

(14,205,247 )   (7,305,987 )

Loss for the period attributable to owners of the parent

(15,579,391 )   (7,250,597 )
Total comprehensive loss attributable to owners of the parent (14,205,247 )   (7,305,987 )

Earnings Per Share

Basic and diluted loss per share from continuing operations

(1.59) cents

(0.91) cents

 

The accompanying notes form part of the financial statements.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2018

 
Note   Consolidated
31 Dec 2018

$

  30 Jun 2018

$

ASSETS  
Current assets
Cash and cash equivalents 30,342,360 14,825,532
Trade and other receivables 2,536,923 5,437,357
Prepayments and other assets 931,431 855,716
Inventories 1,143,062     1,155,826  
Total current assets 34,953,776     22,274,431  
 
Non-current assets
Plant and equipment 1,299,831 742,583
Intangible assets 93,775      
Total non-current assets 1,393,606     742,583  
 
TOTAL ASSETS 36,347,382     23,017,014  
 
LIABILITIES
Current liabilities
Trade and other payables 4,483,406 3,487,582
Provisions 533,660     395,535  
Total current liabilities 5,017,066     3,883,117  
 
Finance lease 83,032     134,338  
Total non-current liabilities 83,032     134,338  
 

TOTAL LIABILITIES

5,100,098     4,017,455  
 
NET ASSETS 31,247,284     18,999,559  
 
EQUITY
Equity attributable to equity holders of the parent:
Contributed equity 6 188,210,306 162,801,028
Accumulated losses (164,172,270 ) (148,592,879 )
Reserves 7,209,248     4,791,410  
 
TOTAL EQUITY 31,247,284     18,999,559  
 

Contacts

OUS Media
Monsoon Communications
Sarah Kemter
Phone
+61 (0)3 9620 3333
Mobile +61 (0)407 162 530
[email protected]

Investors:
Westwicke Partners
Caroline Corner
Phone
+1-415-202-5678
[email protected]

AVITA Medical Ltd
Dale A. Sander
Chief Financial Officer
Phone
+1-661-367-9178
[email protected]

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