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Avita Medical share price on watch after being added to the ASX 200

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The Avita Medical Ltd (ASX: AVH) share price could push higher on Friday after it became the latest addition to the ASX 200 index.

Why is Avita Medical joining the ASX 200?

After the market close on Thursday, S&P Dow Jones Indices announced that it will remove Aveo Group (ASX: AOG) from the S&P/ASX 200 on November 14.

This is because earlier in the week the retirement communities company’s shareholders voted in favour of the scheme of arrangement that will see Brookfield Asset Management Inc acquire 100% of Aveo.

Brookfield Asset Management will pay a total consideration of $2.195 per share to Aveo shareholders. This is inclusive of the FY 2019 final distribution of 4.5 cents per security.

Whilst there were a good number of candidates to replace Aveo in the benchmark index, S&P Dow Jones Indices elected to choose Avita Medical.

This caps off a remarkable year for Avita Medical and its shareholders. On January 1 the medical technology company’s shares were largely under the radar of most investors and changing hands at just 8 cents. Now they are trading 719% higher at 65.5 cents, giving it a market capitalisation of ~$1.2 billion.

What is Avita Medical?

Avita Medical is a regenerative medicine company with a technology platform positioned to address unmet medical needs in therapeutic skin restoration.

The company’s FDA-approved 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. This provides a new way to treat severe burns, while significantly reducing the amount of donor skin required.

A series of clinical trials in major U.S. burn centres have shown that the system is a significant advancement over the current standard of care for burn patients and offers benefits in clinical outcomes and cost savings.

Unsurprisingly, this has led to the company recording very strong sales growth in FY 2020. Last month it reported first quarter sales of A$7.9 million, up 165% on the prior corresponding period.

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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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