Avita Medical (ASX:AVH) share price sinks 11% on Q1 earnings

Investors are punishing Avita Medical despite a robust quarter of growth

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The Avita Medical Inc (ASX: AVH) share price is sliding well into the red in afternoon trading and is now down 10.98% at $4.54.

It comes following the release of the company’s earnings report for the three months ended 30 September 2021.

Despite a period of robust growth from top to bottom for the regenerative medicine group, investors are sinking the Avita Medical share price at a rapid pace.

Read on for the key takeouts from Avita’s first quarter in FY22.

Avita share price slides despite 39% sales growth

Investment highlights from the quarter include:

  • Total revenue increased by 39% to $7.0 million compared to $5.1 million the same time last year;
  • Gross profit margin improved by 300 basis points to 85% compared to Q1 FY21;
  • Total operating expenses decreased by 18% to $12.3 million compared to $14.9 million in the first fiscal quarter of 2021;
  • Net loss of $5.9 million compared to a net loss of $10.2 million the year prior, a 42% improvement; and
  • $60.4 million in cash and cash equivalents and $49.5 million in marketable securities, and no debt.

What happened in Q1 for Avita Medical?

Revenue for the quarter came in line with previously outlined guidance, reaching $7 million. This is an approximate 40% year-on-year gain in sales compared to the same time last year.

Avita attributes the sales growth to a broader utilisation among its customer base, alongside greater penetration of individual accounts.

Lower shipping costs and increased production at its Ventura facility also helped gross margins lift to 85%, up from 83% this quarter.

Additional cost savings helped operating expenses decrease by almost $3 million or 18% compared to the same period in 2020.

This was underscored by lower executive compensation and coming off a higher cost base last year – including severance costs associated with a former executive.

From these results, Avita recognised a net loss just shy of $6 million, a 42% improvement over the year. The reduced loss can be attributed to lower operating expenses, the company said.

However, these seemingly positive results weren’t enough to stop the Avita Medical share price from sinking today.

What did management say?

Speaking on the announcement, Avita’s CEO Dr Mike Perry said:

I am pleased with the progress we made in the overall business this quarter, despite the hospital staffing shortages that impeded RECELL usage in burn procedures.

We saw continued acceleration of enrollment into our soft tissue reconstruction trial, which is now close to completion with 58 of 65 subjects. We look forward to expanding into this $450 million serviceable addressable market upon approval, beginning with our existing burn centre accounts and leveraging our new TPT code in the outpatient setting.

What about guidance?

Total revenue for the second quarter is expected to be approximately $7 million according to the company. That’s flat with the current quarter’s result.

It notes the guidance figure is reflective of the “anticipated impact of hospital staffing challenges as well as uncertainty with the pandemic”.

Avita Medical share price snapshot

The last 12 months haven’t been the most impressive for the Avita Medical share price.

It has fallen around 27% over the past 12 months and is also down 8% this year to date.

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The author Zach Bristow has no positions in any of the stocks mentioned. 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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