AVITA Medical(RCEL) - 2022 Q2 - Quarterly Report

Forward-Looking Statements This report contains forward-looking statements regarding future revenues, market conditions, operations, and growth, subject to known and unknown risks and uncertainties - This report contains forward-looking statements regarding future revenues, market conditions, operations, and growth, which are subject to known and unknown risks and uncertainties[8][10] - The company qualifies all forward-looking statements with cautionary statements and does not plan to publicly update them except as required by law[11] PART I – FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements, management's discussion, market risk, and internal controls for the period ended June 30, 2022 Financial Statements This section presents the unaudited consolidated financial statements for the three and six months ended June 30, 2022, including detailed notes and reporting a net loss of $6.3 million for Q2 2022 Consolidated Balance Sheets The company's total assets decreased to $102.7 million as of June 30, 2022, from $116.0 million at December 31, 2021, mainly due to reduced cash and cash equivalents Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $91,806 | $92,132 | | Total Assets | $102,669 | $116,015 | | Total Current Liabilities | $7,886 | $9,146 | | Total Liabilities | $9,946 | $11,391 | | Total Shareholders' Equity | $92,560 | $104,624 | Consolidated Statements of Operations For Q2 2022, revenues decreased by 19% to $8.3 million, and the net loss increased to $6.3 million, with a six-month net loss of $15.7 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $8,335 | $10,304 | $15,874 | $19,069 | | Gross Profit | $6,949 | $8,251 | $12,710 | $14,870 | | Operating Loss | $(6,362) | $(4,704) | $(15,849) | $(10,695) | | Net Loss | $(6,261) | $(4,718) | $(15,724) | $(10,715) | | Net Loss per Share (Basic & Diluted) | $(0.25) | $(0.19) | $(0.63) | $(0.45) | Consolidated Statements of Cash Flows Net cash used in operating activities for the first six months of 2022 was $12.9 million, leading to a decrease in cash and cash equivalents to $34.9 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operations | $(12,877) | $(12,536) | | Net cash used in investing activities | $(7,845) | $(526) | | Net cash provided by financing activities | $1 | $64,058 | | Net (decrease)/increase in cash | $(20,773) | $50,981 | | Cash at end of period | $34,939 | $110,947 | Notes to Consolidated Financial Statements The notes detail accounting policies, revenue recognition, marketable securities, and share-based compensation, highlighting the RECELL® System and BARDA contract - AVITA is a commercial-stage regenerative medicine company whose lead product, the RECELL® System, is used for treating burns and other skin defects[34] - The company is pursuing expanded FDA approvals for soft tissue reconstruction and vitiligo[34] - Revenue is recognized from the sale of the RECELL System to hospitals and BARDA[47][49][106] - The BARDA contract includes two performance obligations: product procurement (revenue recognized at a point in time) and emergency preparedness services (revenue recognized over time)[47][49][106] - The company's marketable securities, consisting of corporate debt, U.S. government agency obligations, and U.S. treasury securities, are classified as available-for-sale and carried at fair value[63] - Share-based compensation expense for the three and six months ended June 30, 2022, was $1.4 million and $4.3 million, respectively, recognized under the 2020 Omnibus Incentive Plan[115][118] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 19% decrease in Q2 2022 total revenue due to lower BARDA revenue, offset by 23% commercial revenue growth, and confirms sufficient cash for the next 12 months Overview The company provides an overview of its RECELL® System, recent regulatory approvals, ongoing trials, and the continued business impact of the COVID-19 pandemic - The company's lead product is the RECELL® System, a device for producing Spray-On Skin™ Cells for treating burns, trauma, and other skin defects[147] - Recent regulatory milestones include FDA approval for pediatric burns (2021), an enhanced RECELL device (Feb 2022), and PMDA approval in Japan (Feb 2022)[147][151] - The COVID-19 pandemic continues to pose risks, impacting hospital access, clinical trial enrollment, and overall operations, prompting measures like hybrid work schedules and enhanced safety protocols[155][156] Results of Operations This section details the financial performance for Q2 2022, showing a 19% YoY revenue decline driven by non-recurring BARDA revenue, despite 23% commercial revenue growth Q2 2022 vs. Q2 2021 Financial Comparison (in millions) | Metric | Q2 2022 | Q2 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $8.3 | $10.3 | (19%) | | Commercial Revenue | $8.2 | $6.7 | 23% | | BARDA Revenue | $0.1 | $3.6 | (97%) | | Operating Loss | $(6.4) | $(4.7) | (35%) | - Sales and marketing expenses increased by 29% in Q2 2022 due to pre-commercialization costs for new indications (soft tissue, vitiligo), increased field personnel, and higher share-based compensation[163] - Research and development expenses decreased by 23% in Q2 2022, reflecting that certain clinical programs were in lower-cost phases during the quarter[165] Liquidity and Capital Resources The company confirms sufficient cash reserves of $34.9 million to fund operations for the next 12 months, with no significant external borrowing - The company has sufficient cash reserves to fund operations for the next 12 months[174] Cash Position and Flows (in thousands) | Metric | Six Months Ended June 30, 2022 | | :--- | :--- | | Cash and cash equivalents at end of period | $34,939 | | Net cash used in operations | $(12,877) | | Net cash used in investing activities | $(7,845) | | Net cash provided by financing activities | $1 | - The company has no significant external borrowing and is not subject to externally imposed capital requirements[180] Quantitative and Qualitative Disclosures About Market Risk The company is not required to provide market risk disclosures as it qualifies as a smaller reporting company - As a smaller reporting company, AVITA Medical is not required to provide quantitative and qualitative disclosures about market risk[183] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[184] - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[186] PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered sales of equity securities, and a list of exhibits filed with the report Legal Proceedings The company reports that there are no legal proceedings - None[187] Risk Factors This section directs readers to the 'COVID-19 Business Update and Risks Associated with COVID-19' discussion in Part I for risk factor information - The report refers to the COVID-19 risk discussion in Part I for risk factor information[188] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or use of proceeds - None[189] Exhibits This section lists the exhibits filed as part of the Form 10-Q, which include certifications from the Chief Executive Officer and Chief Financial Officer, as well as Inline XBRL data files - The exhibits filed with the report include Rule 13a-14(a) certifications by the CEO and CFO, Section 1350 certifications, and various Inline XBRL documents[193]