Why is the Avita Medical share price crashing 14% today?

This healthcare share is falling heavily on Tuesday. But why?

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The Avita Medical Inc (ASX: AVH) share price is having a tough morning.

At the time of writing, the regenerative medicine company's shares are down 14% to $3.29.

Why is the Avita Medical share price sinking?

Investors have been heading to the exits this morning after the company released an update on its guidance for FY 2023.

According to the release, the company has experienced a slower-than-anticipated progression through the Value Analysis Committee (VAC) processes. This has been driven by the expanded label applications of its newest indication, full-thickness skin defects.

As a result, the company is downgrading its full-year 2023 commercial revenue guidance from the previously disclosed range of US$51 million to US$53 million to a new range of approximately US$49.5 million to US$50.5 million.

Investors appear disappointed given that it was less than two weeks ago that this guidance was given to the market.

Though, it is worth highlighting that this still reflects growth rates of approximately 45% and 48%, respectively, over the same period in 2022.

Avita Medical's CEO, Jim Corbett, remains positive despite this speed bump. He commented:

Our expanded label for full-thickness skin defects opens up an abundance of exciting applications. With a wider range of potential uses, more clinicians within the hospital are engaged in the VAC process, leading to longer hospital approval timelines.

Although the VAC processes are taking longer than anticipated, we expect that once completed, the process will yield positive approvals and an expanded market opportunity. The broader clinical involvement validates the substantial market opportunity this expanded label represents, which is greater than 10 times the size of the burn market.

The Avita Medical share price remains up approximately 48% over the last 12 months despite today's weakness.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Avita Medical. The Motley Fool Australia has recommended Avita Medical. 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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