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Why the AVITA Medical share price is up 12.5% today and 625% in 2019

The AVITA Medical Ltd (ASX: AVH) share price has been on fire again on Wednesday and has carved out another sizeable gain.

In afternoon trade the regenerative medicine company’s shares are up 12.5% to 58.5 cents.

This latest gain means that AVITA Medical’s shares have now risen by an astonishing 625% since the start of the year. This makes it the best-performer on the All Ordinaries index in 2019 ahead of Opthea Ltd (ASX: OPT) and iSignthis Ltd (ASX: ISX).

Why is the AVITA share price rocketing higher today?

Today’s gain appears to be a delayed reaction to an announcement out of the company on Tuesday.

That announcement revealed that the U.S. FDA has approved the company’s Investigational Device Exemption (IDE) application to conduct a pivotal trial evaluating the safety and effectiveness of the RECELL Autologous Cell Harvesting Device in combination with meshed autografting for the treatment of acute full-thickness skin defect. These include degloving (a type of injury where the skin is ripped from the underlying tissue), crush wounds (a break in the external surface of the body), abrasions, lacerations, and surgical wounds.

At present the RECELL System is indicated for use in the treatment of acute thermal burns in patients 18 years and older. It is used to prepare Spray-On Skin Cells using a small amount of a patient’s own skin, which provides a new way to treat severe burns, while significantly reducing the amount of donor skin required.

The company’s chief executive officer, Dr. Michael Perry, believes this development is a major step forward for the system.

He said: “FDA approval of our IDE for a soft tissue reconstruction pivotal clinical trial is an important next step in expanding the potential indications of our RECELL System technology platform. We are pleased with the strong interest expressed by the clinical community in participating in this study and we look forward to working with physicians and their patients upon study commencement.”

“Many burn specialists who have experience treating burn patients with the RECELL System also treat patients with trauma injuries in their clinics. The treatment protocols for burns and trauma are well-aligned and as such, we anticipate a positive transfer of clinical experience to benefit this patient population during the clinical trial,” he added.

This would be a big positive for the company and open the door to a very lucrative market. According to the release, in 2017 approximately 80% of acute wounds that required skin grafting were non-burn related injuries accounting for more than 200,000 procedures in the United States.

In light of this, I can’t say I’m overly surprised that its shares have charged higher today. Though, it may be worth waiting for the results of the 52-week study before getting too excited.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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