The AVITA Medical Inc (ASX: AVH) share price will be keenly watched when the ASX opens on Thursday after some big news overnight pushed its US shares up 7%.
The company provides regenerative medical technology, with its ReCell spray-on skin for burn patients its flagship product.
Overnight Avita revealed that US authority Centers for Medicare & Medicaid Services (CMS) approved ReCell for a transitional pass-through payment device category code that will provide payment for "procedures that are performed in hospital outpatient facilities and ambulatory surgical centres".
What does this mean?
A prominent fund manager told The Motley Fool that it's a huge boost for the adoption of ReCell in the US market.
"Doctors will get reimbursed for the cost of the device when they use it for burns treatments outside a hospital setting."
Avita shares on the NASDAQ rocketed overnight
The company, founded by 2005 Australian of The Year Dr Fiona Wood, is listed on both the ASX and the NASDAQ.
In what could be an omen for the Australian market, AVITA Medical Inc (NASDAQ: RCEL) shares shot up 7.12% in overnight trade.
The news will be some relief to shareholders, who have had their faith sorely tested in the past 18 months.
After reaching as high as $16.30 in February 2020 before the COVID-19 crash struck, Avita's ASX shares have sunk 73% since then.
Avita's ASX shares closed Wednesday at $4.43.
Avita chief executive Dr Mike Perry said the CMS approval could be a precursor for future subsidies.
"This device code lays the reimbursement foundation for the soft tissue repair indication we are working towards, which has a serviceable addressable market valuation of US$450 million."
Despite its recent struggles, Avita shares continue to be a favourite among analysts.
According to CMC Markets, 5 of 6 analysts rate it as a "strong buy".
Montgomery Fund portfolio manager Joseph Kim in July told The Motley Fool it's a stock he would hold on for 5 years.
"It's going to take time. And there's always going to be people that won't use it because they're just stuck in their ways," he said.
"But then, ultimately, as a doctor with the duty of care, you've got to provide the best outcome to your patients. I think from that perspective, I'm pretty optimistic now."
