ReCell opportunity
Avita Medical Inc (ASX:AVH) focuses on the clinical development and commercialisation of ReCell, an autologous ‘spray-on-skin’ medical device to treat burns, wounds, scars and skin defects. It is approved as a device for marketing in Europe, Canada, Australia and China. So far, Recell has been a clinical-stage device with limited sales but an active marketing effort is now starting, using the UK as a test market. Payer reimbursement agreements (UK NICE opinion expected September 2014) and new clinical data are potential drivers for ReCell growth and may be share price catalysts.
Beauty in simplicity
ReCell is a single use, disposable wound treatment kit (that can now be stored at ambient temperature). It gives quick processing (30 minutes, no laboratory needed) of a small two-layer skin sample into a cell suspension (keratinocytes, melanocytes, Langerhans cells). This is immediately sprayed on to the damaged skin. With ReCell; a 1cm2 sample treats a 80cm2 wound, giving a good match to existing skin tone. Recell is targeted at three uses: treating acute burns and wounds; healing chronic wounds; and in plastic surgery and cosmetic uses like skin repigmentation.
Further supporting clinical data required in the US
Avita has published data on all three possible uses and ReCell has widespread approval as a medical device. However, in the US, further data is required. A 106-patient clinical study started in mid-2010, comparing ReCell with standard skin grafts to treat second-degree burns. Non-inferiority in wound closure (week 4) and superiority in healing (week 1) are the primary end points. The FDA has given an investigational exemption on up to 12 life-threatening cases based on physician assessment of need; this is normally case by case. A Ph III-type trial in venous leg ulcers (n=65) is underway in the EU. A pilot vitiligo study (n=10) is being published.
Reimbursement and commercial support is key
Reimbursement in several EU countries is being sought, mainly to use ReCell for burns/acute wounds, such as the UK (NICE opinion Sept. 2014) and Germany (eight hospitals/14 clinics endorsed ReCell). A listing application in Australia is considered. Avita is building a commercial team in Europe in 2014, with the UK as a test market.
Valuation: US$30m EV
Avita ended fiscal H114 (31 Dec 2013) with A$6.8m in cash, sufficient to end-2014. A modest US$30m EV reflects the need to prove and enhance ReCell’s commercial potential; this could be boosted by clinical data, marketing and reimbursement.
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