Shares in Avita Thereapeutics Inc (ASX: AVH) surged nearly 15% higher following the company’s release of its annual report for FY20. The Avita share price soared to $7.10 at the opening bell before being sold down to a more modest gain of 9.34% at the time of writing.
What’s driving the Avita share price?
Investors have piled into the Avita share price this morning after the company released its FY20 results.
Avita’s report was headlined by a surge in revenue from its flagship Recell system. Avita reported that revenue from Recell increased 161% to $US14.3 million for FY20. The company highlighted that operations in the United States fuelled revenue growth, with sales for FY20 totalling $US13.8 million in comparison to $4.4 million the year prior. Avita also reported a slight increase in gross margin of 79% for the full year.
The Aussie biotech reported a 62% increase in operating costs for the full year of $US57.9 million. Avita attributed the increase to commercialisation activities for its Recell system and expansion of research and development. As a result, Avita reported a net loss after tax for FY20 of $US42 million, a 67% increase on the year prior.
In addition, Avita provided an update on its cash position. For FY20, the company noted $US73.8 million cash on hand and expects to utilise its cash reserves until sales in the US reach a sufficient level. The Avita share price has responded positively to the update despite the company not declaring a dividend for FY20.
What is the outlook for Avita?
Avita Therapeutics is a regenerative medicine company that aims to address unmet medical needs in burns, chronic wounds and aesthetics. The dual-listed company was co-founded by plastic surgeon and former Australian of the Year, Dr Fiona Wood AM.
The company has a collection of patented and application technologies that provide regenerative treatments. Avita’s flagship Recell system is used to prepare spray-on skin cells using a small amount of a patient’s own skin. The Recell system was approved by the US Food and Drug Administration (FDA) in September 2018 and is indicated for use in the treatment of acute thermal burns in patients 18 years and older.
Despite recording a widening loss for FY20, Avita remains optimistic on its long-term outlook. In a recent corporate update, Avita reported that July saw the highest monthly sales for its Recell system in the United States since launching in January 2019.
Foolish takeaway
At the time of writing, the Avita share price is trading more than 9% higher for the day at $6.77. The Avita share price has struggled in 2020, trading nearly 47% lower for the year.
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Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited. The Motley Fool Australia has recommended Avita Medical Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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