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The company's recent guidance suggests it will grow twice as fast as it did last year.
AVITA Medical is continuing to show signs of progress.
Its recently-reported fourth quarter 2024 results were, in my opinion a bit of a step back. Revenue grew only 30% — as compared to 44% in the previous quarter — and was much lower than the 40-50% growth rates in 2023.
Inventory similarly grew by 30% year-over-year. The company mentioned in Q3 that they had “an adjustment of $5 million based on hospitals working through year-end inventory.” This is still a small company, and even a $5 million order delay is a big deal and caused the stock to sell off (40%) in January. The balance sheet revealed that AVITA is still sitting on that inventory and even added more finished goods inventory in 4Q. These year-end adjustment orders still haven’t come through. It’s worth keeping an eye on whether they fall within the upcoming Q1.
Still, I don’t want to be too short-term focused here.
Looking farther out, AVITA reaffirmed very strong Fiscal 2025 guidance of $103 million in revenue. That would represent 60% year-over-year growth; double what they just reported this last quarter.
The primarily reason could be because AVITA is looking to build upon its RECELL technology into deeper layers of the skin, in order to improve the healing time and ultimate outcomes of wounds and burns even further.
They just got FDA approved for Cohealyx in December, which goes beyond the surface-level of the wound to improve tissue integration. They just used Cohealyx on the first patient at an Ohio hospital and it was a success.
From what I can discern Cohealyx’s price is at least 3X that of RECELL (at least $20,000 per treatment, as compared to $4,000 -$6,000 for RECELL). So if burn centers embrace Cohealyx, this could be a significant growth driver in 2025.
One other risk worth watching. The company does pay out significant amounts of stock-based compensation, which are ~20% of revenue. That’s high for a small company like this; and it’s been diluting shareholders for several years.
AVITA’s market cap is less than $300 million. So buyer-beware; we’re talking about a very-high-risk micro-cap here.
Yet 2025 will likely be the year that they become cash flow positive and even GAAP earnings positive. This is a big step in the right direction, and I’m upgrading AVITA from Hold back to Buy.
