Why the Avita Medical (ASX:AVH) share price is soaring 14%

Investors have reacted favourably to some positive news from the medical technology business.

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The Avita Medical Inc (ASX: AVH) share price is flying high on Friday. At the time of writing, shares in the medical technology business are swapping hands for $5.11 – up 13.56%.

This comes after the company announced it had received approval from the US Food and Drug Administration (FDA) to expand the use of its skin-grafting technology.

Let’s take a closer look at today’s news.

FDA approval

Avita shares are having a bumper day after the dual-listed company provided a statement to the ASX this morning. Avita advised the FDA has provided approval for the “expanded use of the RECELL System, in combination with meshed autografting,” for children over 1 month of age. Until now, the system had only be approved for use on adults.

On top of this, the US Government agency says the treatment can be used for full-thickness thermal wounds that cover more than half the body.

According to Avita, RECELL is used to prepare spray-on skin cells for application on the patient while requiring “significantly” less donor skin. In addition, the company claims a skin sample as small as a credit card can be used to treat an adult’s entire back.

Today’s release quoted Dr Anjay Khandelwal of Akron Children’s Hospital Burn Center, Ohio as saying:

Skin grafting, which is currently the standard of care used to treat many paediatric burns, is painful, results in an additional wound, can be disfiguring, and may result in additional complications as a child grows.

… I am pleased that the RECELL System, with its proven efficacy to accelerate the burn-healing process with less donor skin requirements, is now available as an FDA-approved treatment option for my younger burn patients.

As well, Avita stated that “nearly a quarter of the burn cases in the United States occur in children under the age of 16 years old.”

Investors appear to believe this is good news for the company, judging by the performance of the Avita share price so far today.

The product is registered with the Therapeutics Good Administration in Australia and received CE-mark approval in Europe.

Management commentary

Avita Medical CEO Dr Mike Perry said of today’s news:

We are pleased that the RECELL System, with both its clinical and health economic benefits, can now more broadly support surgeons in treating full-thickness burns of all sizes, including treatment of patients over 1 month of age.

… the RECELL System is rapidly becoming the standard of care in burn treatment, and we are committed to pursuing and realising the full potential of this innovative regenerative technology platform to address other clinical indications where significant unmet need exists.

Avita share price snapshot

Over the past 12 months, Avita shares have fallen by more than 40%. This stands in stark contrast to many ASX businesses, which have seen their value grow significantly since the COVID-19 market crash of March 2020.

However, in more positive news, today’s rally now sees the Avita share price up by 3.44% in 2021.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Avita Medical Limited. The Motley Fool Australia has recommended Avita Medical Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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