Shares in the spray-on skin company Avita Medical Inc (ASX: AVH) closed 2.6% higher on Friday at $1.96.
The ASX healthcare share may be down 42% over the year to date, but it appears to be making a comeback.
The Avita share price is up almost 20% over the past six months.
CEO confident about new skin treatment
According to reporting in the Australian Financial Review (AFR), new CEO James Corbett says there is a âpot of gold at the end of the rainbowâ with Avita’s expansion into vitiligo.
In market terms, treatment for the autoimmune disease that causes a loss of skin pigmentation has an estimated value of $US5.2 billion (A$7.8 billion).
It would be a welcome turnaround. To say Avita shareholders have been suffering of late is an understatement. Just ask those investors who bought in when the ASX healthcare share was trading above $16 in early 2020.
Corbett said:
I think the sell-off was a combination of us not executing adequately and us not communicating adequately.
Those sound like my problems. Itâs not a market problem. I always tell the management team, the stock market will take care of itself, but execution is up to us.
I think shareholders will benefit from more transparency from Avita management, and theyâll get it.
What’s the latest news from Avita?
The companyâs flagship product is Recell, which uses a patientâs own cells to treat skin defects. The company intends to expand Recell into a treatment for vitiligo.
According to the AFR, Avita is working with the United States Food and Drug Administration to gain approval for the use of Recell in various soft tissue repair treatments.
It plans to submit applications for Recell’s use in the US$1 billion soft tissue repair market this month. It expects approval in June 2023 and hopes to launch the treatment in July.
Recell as a treatment for vitiligo will take a while longer.
Corbett said:
Vitiligo on the other hand will get approval, but its anticipated primary treatment will occur in the physician office setting, so what weâll be doing between the expected approval in June 2023, and January 2025… is collect in-office reimbursement approval data, work with government payers, conduct physician initiated studies and work to identify the best patients [those who will benefit most from treatment].
Broker tips $3 target for ASX healthcare share
Bell Potter has a 12-month share price target of $3 on this ASX healthcare share.
Bell Direct market analyst Grady Wulff last week told my colleague, Tony, he rates Avita a speculative buy.
He tips the ASX healthcare share “really takes off” when those approvals come through in mid-2023.
Wulff said:
They are well capitalised while expecting to release major clinical trial results in the near future.
The company is making waves and theyâve got really strong revenues up 29% year on year to US$9.1 million for the commercial product sales, but they are burning a lot of cash.
The revenues were 7% above what Bell Potter expected for the September quarter.
The post Is there an $8 billion ‘pot of gold at the end of the rainbow’ for investors in this ASX healthcare share? appeared first on The Motley Fool Australia.
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Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Avita Medical. The Motley Fool Australia has recommended Avita Medical. 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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