AVITA Medical (ASX: AVH, OTCQX: AVMXY), a global regenerative
medicine company, announced that it filed today with the ASX its
Appendix 4D – Half-Year Report for the six months ended 31 December
2018.
Revenues for First Six Months and Update on U.S. National
Market Launch
AVITA Medical received U.S. Food and Drug Administration (FDA)
approval of the RECELL® Autologous Cell Harvesting Device (RECELL®
System) for the treatment of acute thermal burns in September 2018.
As a result of the FDA approval, the Company’s primary focus during
the six months ended 31 December 2018 was preparing for the January
2019 U.S. national market launch of the RECELL System.
Prior to the January 2019 U.S. national market launch and in
advance of any direct promotional effort, the clinical and economic
benefits of the RECELL System generated strong interest from burn
centers and the Company recorded its first U.S. product sales.
Product sales and other revenues for the six months ended 31
December 2018 were as follows:
Six Months Ended (In thousands of AUD)
31 December
2018 2017 U.S. Product Sales $ 1,102 $ - International
Product Sales 711 608 Total Product Sales 1,813 608 BARDA Revenue
5,009 3,857 Total Revenue $ 6,822 $ 4,465
The Company also provided an update on the early results from
the national U.S. launch of the RECELL System that commenced last
month.
“As expected, most burn centers are following a fairly standard
process for adopting a novel device which includes an initial
evaluation of the product as well as advancing it through their
hospital’s Value Analysis Committee (VAC) in order to receive
formal approval to purchasing for regular use. This process can
often take six months or more to complete,” said Erin Liberto,
Chief Commercial Officer. “The emphasis of our field sales force
right now is to further increase awareness and interest among burn
surgeons and to train surgeons and their staff in the use of the
RECELL System. Our team is also assisting the sites with product
evaluation and providing the health economic and other data
required to successfully complete their VAC review. We are pleased
that through today, 41 of the 134 burn centers in the U.S. have
been trained and certified in the use of the RECELL System, and 19
of these centers have already purchased the product. This is
amazing progress for this early stage of a product launch and is
helped by the prior experience a number of centers gained due to
their participation in clinical trials and the Compassionate Use
program, and the broader market awareness resulting from the large
body of scientific meeting presentations and publications through
the past year.”
Progress During First Six Months of Fiscal 2019 Set the Stage
for Near-Term Milestones
A total of ten abstracts have now been accepted at the largest
burn conference, the American Burn Association (ABA) 51st Annual
Meeting to be held in Las Vegas April 2-5, 2019. The presentations
of the RECELL System at the ABA conference with include a Top-Five
Abstract presentation in plenary session covering the treatment of
pediatric patients. Other presentations will include the clinical
outcomes that burn surgeons have observed in a broad range of
patients and burn types, including the use of the RECELL System in
the treatment of donor sites, burns of the hand, and patients with
large burn injuries.
The work undertaken by the Company’s clinical and regulatory
teams will also lead two additional milestones during this quarter,
the filing of approval to market the RECELL System in Japan, and
the commencement of the second trial pediatric burn patients in the
U.S. This second U.S. pediatric trial will test the RECELL System
in the treatment of superficial partial thickness burns, a
population and type of burn that is currently outside of the
approved labeling for the product.
Funding and technical support for the development of the RECELL
System is provided by the Biomedical Advanced Research and
Development Authority (BARDA), under the Assistant Secretary for
Preparedness and Response, within the U.S. Department of Health and
Human Services, under ongoing USG Contract No. HHSO100201500028C.
Programs were funded under the BARDA contract include two
randomized, controlled pivotal clinical trials, the Compassionate
Use and Continued Access programs, development of the health
economic model demonstrating the cost savings associated with the
RECELL System, and two randomized, controlled clinical trials in
pediatric burn patients.
Half-Year Fiscal 2019 Financial Results (Unaudited)
A copy of the Appendix 4D – Half-Year Report for the six months
ended 2019 is attached. A summary of the financial results for the
half year are as follows:
Six Months Ended
(In thousands of AUD) 31 December
2018
2017
Sale of goods $ 1,813 $ 608 Cost of sales
(570)
(265)
Gross profit 1,243 343 BARDA Revenue 5,009 3,857 Other income 104
37 Operating Costs
(21,935)
(11,488)
Loss for the period (15,579) (7,251) Foreign currency translation
1,374 (55) Total other comprehensive loss
($14,205)
($7,306)
The majority of the current-year increase in sales of goods
occurred in the U.S. as a result of the September 2018 FDA
approval. Gross margin for the half-year ended 31 December 2018 was
69% compared to 56% for the same period in 2017, and the Company
expects gross margins to further increase as sales ramp up within
the U.S. As in prior periods, the majority of other revenue
consisted of funding from BARDA. As the result of investments in
commercial, manufacturing, and system capabilities for the U.S.
market launch of the RECELL System and related initiatives,
operating costs and net loss for the half-year ended 31 December
2018 increased compared to the same period in the prior year and
were in line with management expectations.
During the six months ended 31 December 2018, net proceeds
provided by institutional placements of shares to U.S., Australian
and international institutional and sophisticated investors was
approximately $25.4 million. Including the net proceeds of
approximately $13.8 million and $1.8 million received in January
2019 from Tranche 2 of an institutional placement and from a share
purchase plan, respectively, the pro forma cash and cash
equivalents balance at 31 December 2018 was approximately $45.9
million.
“We appreciate the support provided by our shareholders,
including those investors that participated in our placements of
shares,” said Dale Sander, Chief Financial Officer. “The cash on
hand at 31 December 2018 is expected to allow full funding of the
U.S. launch and commercial sales ramp up, as well as the product
development programs currently underway or planned.”
ABOUT AVITA MEDICAL LIMITED
AVITA Medical is a regenerative medicine company with a
technology platform positioned to address unmet medical needs in
burns, chronic wounds, and aesthetics indications. AVITA Medical’s
patented and proprietary collection and application technology
provides innovative treatment solutions derived from the
regenerative properties of a patient’s own skin. The medical
devices work by preparing a REGENERATIVE EPIDERMAL SUSPENSION™
(RES™), an autologous suspension comprised of the patient’s skin
cells necessary to regenerate natural healthy epidermis. This
autologous suspension is then sprayed onto the areas of the patient
requiring treatment.
AVITA Medical’s first U.S. product, the RECELL® System, was
approved by the U.S. Food and Drug Administration (FDA) in
September 2018. The RECELL System is indicated for use in the
treatment of acute thermal burns in patients 18 years and older.
The RECELL System is used to prepare Spray-On Skin™ Cells using a
small amount of a patient’s own skin, providing a new way to treat
severe burns, while significantly reducing the amount of donor skin
required. The RECELL System is designed to be used at the point of
care alone or in combination with autografts depending on the depth
of the burn injury. Compelling data from randomized, controlled
clinical trials conducted at major U.S. burn centers and real-world
use in more than 7,000 patients globally, reinforce that the RECELL
System is a significant advancement over the current standard of
care for burn patients and offers benefits in clinical outcomes and
cost savings. Healthcare professionals should read the INSTRUCTIONS
FOR USE - RECELL® Autologous Cell Harvesting Device
(https://recellsystem.com/) for a full description of indications
for use and important safety information including
contraindications, warnings and precautions.
In international markets outside of Europe, our products are
marketed under the RECELL System brand to promote skin healing in a
wide range of applications including burns, chronic wounds and
aesthetics. The RECELL System is TGA-registered in Australia,
CFDA-cleared in China, and received CE-mark approval in Europe.
To learn more, visit www.avitamedical.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This letter includes forward-looking statements. These
forward-looking statements generally can be identified by the use
of words such as “anticipate,” “expect,” “intend,” “could,” “may,”
“will,” “believe,” “estimate,” “look forward,” “forecast,” “goal,”
“target,” “project,” “continue,” “outlook,” “guidance,” “future,”
other words of similar meaning and the use of future dates.
Forward-looking statements in this letter include, but are not
limited to, statements concerning, among other things, our ongoing
clinical trials and product development activities, regulatory
approval of our products, the potential for future growth in our
business, and our ability to achieve our key strategic, operational
and financial goal. Forward-looking statements by their nature
address matters that are, to different degrees, uncertain. Each
forward-looking statement contained in this letter is subject to
risks and uncertainties that could cause actual results to differ
materially from those expressed or implied by such statement.
Applicable risks and uncertainties include, among others, the
timing of regulatory approvals of our products; physician
acceptance, endorsement, and use of our products; failure to
achieve the anticipated benefits from approval of our products; the
effect of regulatory actions; product liability claims; risks
associated with international operations and expansion; and other
business effects, including the effects of industry, economic or
political conditions outside of the company’s control. Investors
should not place considerable reliance on the forward-looking
statements contained in this letter. Investors are encouraged to
read our publicly available filings for a discussion of these and
other risks and uncertainties. The forward-looking statements in
this letter speak only as of the date of this release, and we
undertake no obligation to update or revise any of these
statements.
Appendix 4DHalf-Year Report31
December 2018
AVITA MEDICAL LIMITEDABN 28
058 466 523
Results for announcement to the
market
December 2018
December
2017
Financial Results $ $
Sale of goods
Up 198% to 1,813,195 607,761
Other revenue
Up 31% to 5,112,763 3,894,311 Total comprehensive loss for the
period Up 94% to 14,205,247
7,305,987
Dividends
Amount per Ordinary
Security
Franked amount per
security
2017 interim dividend Nil Nil 2018
interim dividend Nil Nil
Record date for determining entitlements to the 2018
interim dividends N/A
Net Tangible Asset Backing
December 2018 December 2017
Net tangible asset backing per ordinary
security $0.0189 $0.0138
Other explanatory notes
The information required by listing rule 4.2A
is contained in both this Appendix 4D and the attached half-year
report. This half-yearly reporting information should be read in
conjunction with the most recent annual financial report of the
company.
AVITA MEDICAL LIMITEDA.B.N. 28 058
466 523
HALF-YEAR FINANCIAL REPORT31 December
2018
Corporate InformationABN 28 058 466 523
This half-year report covers the consolidated entity comprising
Avita Medical Limited (the Parent Company) and its controlled
subsidiaries (the Group or the Company). The Parent Company’s
functional and presentation currency is AUD ($). A description of
the Group’s operations and principal activities are included in the
review of operations and activities in the Directors’ Report on
page 5. The Directors’ Report does not form part of the financial
report.
DirectorsMr Lou Panaccio (Non-Executive Chairman)Dr
Michael Perry (Executive Director)Mr Jeremy Curnock-Cook
(Non-Executive Director)Mr Louis Drapeau (Non-Executive Director)Mr
Damien McDonald (Non-Executive Director)Professor Suzanne Crowe
(Non-Executive Director)
Company SecretaryMr Mark Licciardo and Ms Kate Golandof
Mertons Corporate Services Pty Ltd
Registered Officec/o Mertons Corporate Services Pty
LtdLevel 7, 330 Collins StreetMelbourne VIC 3000, Australia
Principal Place of Business28159 Avenue Stanford, Suite
220Valencia, CA 91355USA
Share RegisterComputershare Investor Services Pty
LimitedLevel 11, 172 St Georges TerracePerth, WA 6000 Australia
SolicitorsK&L GatesLevel 25 South Tower, 525 Collins
StreetMelbourne VIC 3000, Australia
AuditorGrant Thornton Audit Pty LtdLevel 43 Central Park,
152-158 St Georges TerracePerth, WA 6000 Australia
Principal BankersNational Australia Bank Limited1238 Hay
StreetWest Perth, Western Australia, 6005
Stock ExchangeAvita Medical LimitedListed on the
Australian Securities Exchange(ASX Code: AVH)Listed on the OTCQX
International Marketplace in the US (OTCQX Code: AVMXY)
DIRECTORS' REPORTFOR THE HALF-YEAR ENDED 31 DECEMBER
2018
Your Directors submit their report for the half-year ended 31
December 2018.
DIRECTORS
The names of the Company’s Directors in office during the
half-year and until the date of this report are as below. Directors
were in office for this entire period unless otherwise stated.
Mr Lou Panaccio (Non-Executive Chairman)Dr Michael Perry
(Executive Director)Mr Jeremy Curnock-Cook (Non-Executive
Director)Mr Louis Drapeau (Non-Executive Director)Mr Damien
McDonald (Non-Executive Director)Professor Suzanne Crowe
(Non-Executive Director)
REVIEW AND RESULTS OF OPERATIONS
Avita Medical Limited and the Group is a regenerative medicine
company with a technology platform designed to address unmet
medical needs in patients with burns, chronic wounds, and
aesthetics indications. The Company’s patented and proprietary
collection and application technology provides innovative treatment
solutions derived from the regenerative properties of a patient’s
own skin. The Company’s medical devices work by preparing a
Regenerative Epidermal Suspension (RES™), an autologous suspension
comprised of the patient’s own skin cells that are necessary to
regenerate natural healthy epidermis. This autologous suspension is
then sprayed onto the areas of the patient requiring treatment. The
first medical device based on the RES technology, the RECELL®
System, was approved for sale in the U.S. for the treatment of
acute thermal burns by the Food and Drug Administration (FDA) in
September 2018. The Company initiated its U.S. national market
launch of the RECELL System in January 2019, although it did
commence commercial shipments in the U.S. during the half-year
ended 31 December 2018 in response to pre-launch demand from burn
centers. The RECELL System is also sold on a limited basis in
certain regions of the world in which the products are approved for
sale, including Australia, China and Europe.
Sale of goods totalled $1,813,195 for the half-year ended 31
December 2018, an increase of $1,205,434 or 198% over the $607,761
recognized during the same period in 2017. The majority of the
current-year increase in sales occurred in the U.S. as a result of
the September 2018 FDA approval. U.S. sales during the six months
ended 31 December 2018 totalled $1,101,991 compared to zero in the
prior year. Gross margin for the half-year ended 31 December 2018
was 69% compared to 56% for the same period in 2017, and management
expects gross margins to further increase as sales ramp up within
the U.S.
Other revenue totalled $5,112,763 for the half-year ended 31
December 2018, an increase of $1,218,452 or 31% over the $3,894,311
recognized during same period in 2017. As in prior periods, the
majority of other revenue consisted of funding from the Biomedical
Advanced Research and Development Authority (BARDA), under the
Assistant Secretary for Preparedness and Response, within the U.S.
Department of Health and Human Services, under ongoing USG Contract
No. HHSO100201500028C. Under the BARDA contract, income of
$5,009,137 was recognized during the half-year ended 31 December
2018 compared to income of $3,856,716 during the same period in
2017. Funding provided by BARDA during the half-year ended 31
December 2018 focused primarily on support of the regulatory
activities to support the U.S. approval of the RECELL System, the
Continued Access and Compassionate Use programs which provide
access to the RECELL System for U.S. patients prior to FDA
approval, and two U.S. clinical trials in pediatric burn
patients.
Operations for the six months ended 31 December 2018 were
focused primarily on preparation for the January 2019 U.S. market
launch of the RECELL System, including the recruitment, hiring and
training of 20 sales field force personnel. Additional activities
included the commencement of product shipments in the U.S. after
the September 2018 FDA approval of the RECELL System for the
treatment of acute thermal burns, and the preparation for, or the
conduct of, further development of RECELL. As the result of
investments in commercial, manufacturing, and system capabilities
for the U.S. market launch of the RECELL System and related
initiatives, operating costs for the half-year ended 31 December
2018 totalled $21,935,034, a $10,447,198 or 91% increase over the
$11,487,836 incurred during the same period in the prior year and
were in line with management expectations.
Net comprehensive loss after tax for the half-year ended 31
December 2018 was $14,205,247, a $6,899,260 or 94% increase
compared to $7,305,987 incurred in the same period in the prior
half-year. The increase in net loss was driven by the higher
operating costs described above, partially offset by the higher
sale of goods and other revenue achieved during the six months. As
a result of the national launch of the RECELL System in the U.S. in
January 2019, and the expansion of research and development,
operating expenses will increase in future periods. These expenses
are expected to be partially offset by increased sales of goods and
revenues under the BARDA contract.
During the half year ended 31 December 2018, net cash provided
by the issuance of shares under institutional placements of shares
to U.S., Australian and international institutional and
sophisticated investors was $25,364,339. Cash and cash equivalents
held at 31 December 2018 was $30,342,360. The institutional
placement included a second tranche contingent upon shareholder
approval. Shareholder approval for Tranche 2 was received at an
Extraordinary General Meeting held in January 2019, and the net
proceeds of $13,828,577 were received by the Group in January 2019.
Also, in January 2019 the Group received $1,764,900 in net proceeds
from a share purchase plan (SPP). Pro forma cash and cash
equivalents at 31 December 2018, including the proceeds received in
January 2019 from Tranche 2 of the institutional placement and the
SPP, was $45,935,837.
SUBSEQUENT EVENTS
During the six months ended 31 December 2018 the Group completed
an institutional placement of shares to institutional placements of
shares to U.S., Australian and international institutional and
sophisticated investors. The institutional placement included a
second tranche contingent upon shareholder approval. Shareholder
approval for Tranche 2 was received at an Extraordinary General
Meeting held in January 2019, and the net proceeds of $13,828,577
were received by the Group in January 2019. Also, in January 2019
the Group received $1,764,900 in net proceeds from a share purchase
plan.
DIRECTORS' REPORTFOR THE HALF-YEAR ENDED 31 DECEMBER
2018
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required
under s307C of the Corporations Act 2001 is included on the
following page.
Signed in accordance with a resolution of the Directors.
Dr Michael PerryExecutive DirectorDated: 28
February 2019Valencia, California, United States
AUDITOR’S INDEPENDENCE DECLARATION
To the Directors of Avita Medical Limited
In accordance with the requirements of section 307C of the
Corporations Act 2001, as lead auditor for the review of Avita
Medical Limited for the year ended 31 December 2018, I declare
that, to the best of my knowledge and belief, there have been:
a no contraventions of the auditor
independence requirements of the Corporations Act 2001 in relation
to the review; and b no contraventions of any applicable code of
professional conduct in relation to the review.
GRANT THORNTON AUDIT PTY LTDChartered Accountants
C A BeckerPartner – Audit & Assurance
Perth, 28 February 2019
CONSOLIDATED STATEMENT OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE LOSS
FOR THE HALF-YEAR ENDED 31 DECEMBER
2018
Note Consolidated
Continuing operations
Continuing operations
31 Dec 2018
$
31 Dec 2017
$
Sale of goods 2 1,813,195 607,761 Cost of sales (570,315 )
(264,833 )
Gross profit 1,242,880 342,928
BARDA income 2 5,009,137 3,856,716 Other income 2 103,626
37,595
Operating costs
Sales and marketing expenses (6,931,241 ) (2,815,698 ) Product
development expenses (7,080,042 ) (5,058,518 ) Corporate and
administrative expenses (6,865,250 ) (2,873,511 ) Share based
payment expense (1,043,694 ) (726,856 ) Finance costs (14,807 )
(13,253 ) Total operating costs (21,935,034 )
(11,487,836 ) Loss from continuing operations before income
tax expense
(15,579,391 ) (7,250,597 )
Income tax expense - -
Loss for the
period (15,579,391 ) (7,250,597 )
Other comprehensive income (loss) Items that may be
reclassified subsequently to profit or loss: Foreign currency
translation 1,374,144 (55,390 )
Other
comprehensive loss for the period, net of tax 1,374,144
(55,390 )
Total other comprehensive loss for the
period
(14,205,247 ) (7,305,987 )
Loss for the period attributable to owners
of the parent
(15,579,391 ) (7,250,597 )
Total comprehensive loss
attributable to owners of the parent (14,205,247
) (7,305,987 )
Earnings Per Share
Basic and diluted loss per share from
continuing operations
(1.59) cents
(0.91) cents
The accompanying notes form part of the financial
statements.
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 31 DECEMBER 2018
Note Consolidated 31 Dec 2018
$
30 Jun 2018
$
ASSETS Current assets Cash and cash
equivalents 30,342,360 14,825,532 Trade and other receivables
2,536,923 5,437,357 Prepayments and other assets 931,431 855,716
Inventories 1,143,062 1,155,826
Total
current assets 34,953,776
22,274,431 Non-current assets Plant and
equipment 1,299,831 742,583 Intangible assets 93,775
-
Total non-current assets 1,393,606
742,583 TOTAL ASSETS
36,347,382 23,017,014
LIABILITIES Current liabilities Trade and other
payables 4,483,406 3,487,582 Provisions 533,660
395,535
Total current liabilities 5,017,066
3,883,117 Finance lease 83,032
134,338
Total non-current liabilities
83,032 134,338
TOTAL LIABILITIES
5,100,098 4,017,455
NET ASSETS 31,247,284 18,999,559
EQUITY Equity attributable to equity holders
of the parent: Contributed equity 6 188,210,306 162,801,028
Accumulated losses (164,172,270 ) (148,592,879 ) Reserves 7,209,248
4,791,410
TOTAL EQUITY
31,247,284 18,999,559
The accompanying notes form part of the financial
statements.
CONSOLIDATED STATEMENT OF CASH
FLOWS
FOR THE HALF-YEAR ENDED 31 DECEMBER
2018
Consolidated
31 Dec 2018
$
31 Dec 2017
$
Cash flows from operating activities Receipts from
customers 1,204,802 367,933 BARDA receipts and other income
received 6,104,306 3,676,182 Payments to suppliers and employees
(20,305,643 ) (11,943,480 ) Interest received 97,253 37,593 R&D
tax refunds received 2,440,803 - Interest paid - (13,253 )
Net cash flows used in operating
activities
(10,458,479 ) (7,875,025 )
Cash flows from investing activities Payments for
plant & equipment (722,472 ) (63,672 )
Net cash flows used in investing
activities
(722,472 ) (63,672 ) Cash
flows from financing activities Proceeds from issuance
of shares 28,053,762 17,028,964 Capital raising expenses (2,689,423
) (1,048,359 )
Net cash flows provided by financing
activities 25,364,339 15,980,605
Net increase in cash and cash equivalents
14,183,388 8,041,908 Cash and cash equivalents
at beginning of period 14,825,532 3,790,491 Impact of
foreign exchange 1,333,440 (55,390 )
Cash and cash
equivalents at end of period 30,342,360
11,777,009
For the purpose of the half-year Statement of Cash Flows, cash
and cash equivalents are comprised of the following:
Consolidated
31 Dec 2018
$
31 Dec 2017
$
Cash at bank and in hand 29,084,452 1,403,330 Short-term deposits
1,257,908 10,373,679
Total Cash and Cash Equivalents
30,342,360 11,777,009
The accompanying notes form part of the financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
FOR THE HALF-YEAR ENDED 31 DECEMBER
2018
Consolidated
Note
Contributed equity
$
Accumulated losses
$
Share based payment
reserve
$
Foreign currency
translation Reserve
$
Total
$
At 1 July 2018 162,801,028 (148,592,879
) 4,505,148 286,262 18,999,559
Loss for the period - (15,579,391 ) - - (15,579,391 ) Other
comprehensive income - - - 1,374,144 1,374,144
Total comprehensive loss for the period
-
(15,579,391 )
-
1,374,144 (14,205,247 ) Transactions with
owners in their capacity as owners Share based payments - -
1,043,694 - 1,043,694 New shares 6 28,098,701 - - - 28,098,701 Cost
of share placement 6 (2,689,423 ) - - - (2,689,423 )
Balance at 31 December 2018 188,210,306
(164,172,270 ) 5,548,842 1,660,406
31,247,284 Consolidated
Contributed equity
$
Accumulated losses
$
Share based payment
reserve
$
Foreign currency
translation Reserve
$
Total
$
At 1 July 2017 134,806,022 (132,218,352
) 2,811,179 (277,017 ) 5,121,832
Loss for the period - (7,250,597 ) - - (7,250,597 ) Other
comprehensive income - - - (55,390 ) (55,390 )
Total comprehensive loss for the period
-
(7,250,597 )
-
(55,390 ) (7,305,987 )
Transactions with owners in their capacity as owners Share based
payments - - 726,855 - 726,855 New shares 17,028,964 - - -
17,028,964 Cost of share placement (1,048,359 ) - - - (1,048,359 )
Transfer of expired options - 141,188 (141,188 ) -
-
Balance at 31 December 2017
150,786,627 (139,327,761 )
3,396,846 (332,407 ) 14,523,305
The accompanying notes form part of the financial
statements.
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTSFOR THE
HALF-YEAR ENDED 31 DECEMBER 2018
1. BASIS OF PREPARATION AND ACCOUNTING
POLICIES
a) Basis of Preparation
This general purpose condensed financial report for the
half-year ended 31 December 2018 has been prepared in accordance
with AASB 134 Interim Financial Reporting and the Corporations Act
2001. The Group is a for-profit entity for financial reporting
purposes under Australian Accounting Standards. The Parent
Company’s functional and presentation currency is AUD ($).
This half-year financial report does not include all notes of
the type normally included within the annual financial report and
therefore cannot be expected to provide as full an understanding of
the financial performance, financial position and financing and
investing activities of the consolidated entity as the full
financial report.
It is recommended that the half-year financial report be read in
conjunction with the annual report for the year ended 30 June 2018
and considered together with any subsequent public announcements
made by Avita Medical Limited in accordance with the continuous
disclosure obligations of the ASX listing rules.
This financial report has been prepared on the going concern
basis. The accounting policies have been applied consistently
throughout the Group for the purposes of preparation of these
interim financial statements. Certain items on the Consolidated
Financial Statements and notes for the prior periods have been
reclassified to conform to the current period presentation.
b) Changes in Accounting Policy
The interim financial statements have been prepared in
accordance with the same accounting policies adopted in the Group’s
last annual financial statements for the year ended 30 June 2018,
except as described below. Note that the changes in accounting
policies specified below only apply to the current period. The
accounting policies included in the Group’s last annual financial
statements for the year ended 30 June 2018 are the relevant
policies for the purposes of comparatives.
AASB 15 Revenue from Contracts with Customers and AASB 9
Financial Instruments (2014) became effective for periods beginning
on or after 1 January 2018. Accordingly, the Group applied AASB 15
and AASB 9 for the interim period ended 31 December 2018. Changes
to the Group’s accounting policies arising from these standards are
summarised below:
AASB 9 Financial InstrumentsAASB 9 Financial Instruments
replaces AASB 139 Financial Instruments: Recognition and
Measurement requirements. It makes major changes to the previous
guidance on the classification and measurement of financial assets
and introduces an ‘expected credit loss’ model for impairment of
financial assets.
The adoption of this standard has no impact on the current or
previous reporting period and as such there have been no
adjustments to the opening balance of retained earnings.
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTSFOR THE
HALF-YEAR ENDED 31 DECEMBER 2018
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
(continued)
b) Changes in Accounting Policy (continued)
RevenueRevenue is comprised mainly from funding from
BARDA and from the sale of goods. To determine whether to recognise
revenue, the Group follows a five-step process:
- Identifying the contract with a
customer,
- Identifying the performance
obligations,
- Determining the transaction price,
- Allocating the transaction price to the
performance obligation,
- Recognising revenue when performance
obligation is satisfied.
Revenue from the sales of goods is recognised at a point in
time, when the Group satisfies performance obligations by
transferring the promised goods to its customers. The Group
recognises contract liabilities for consideration received in
respect of unsatisfied performance obligations and reports these
amounts as other liabilities in the statement of financial
position. Similarly, if the Group satisfies a performance
obligation before it receives the consideration, the Group
recognises either a contract asset or a receivable in its statement
of financial position, depending on whether something other than
the passage of time is required before the consideration is
due.
Accounting Standards issued but not yet effective and not
been adopted early by the Group
AASB 16 Leases
AASB 16:
• replaces AASB 117 Leases and some lease-related
Interpretations,
• requires all leases to be accounted for ‘on-balance sheet’ by
lessees, other than short-term and low value asset leases,
• provides new guidance on the application of the definition of
lease and on sale and lease back accounting,
• largely retains the existing lessor accounting requirements in
AASB 117,
• requires new and different disclosures about leases.
A number of new and revised standards became effective for the
first time to annual periods beginning on or after 1 January 2017.
Information on the more significant standard is presented
below.
Based on the entity’s assessment, it is expected that the
first-time adoption of AASB 16 for the year ending 30 June 2020
will have a material impact on the transactions and balances
recognised in the financial statements, in particular:
- lease assets and financial liabilities
on the balance sheet will increase by $1,108,610 and $1,195,801
respectively (based on the facts at the date of the
assessment),
- there will be a reduction in the
reported equity as the carrying amount of lease assets will reduce
more quickly than the carrying amount of lease liabilities,
- EBIT in the statement of profit or loss
and other comprehensive income will be higher as the implicit
interest in lease payments for former off-balance sheet leases will
be presented as part of finance costs rather than being included in
operating expenses,
- operating cash outflows will be lower
and financing cash flows will be higher in the statement of cash
flows as principal repayments on all lease liabilities will now be
included in financing activities rather than operating activities.
Interest can also be included within financing activities.
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTSFOR THE
HALF-YEAR ENDED 31 DECEMBER 2018
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
(continued)
c) Going Concern
These financial statements have been prepared on the basis of
going concern, which contemplates the continuity of normal business
activities and the realization of assets and settlement of
liabilities in the ordinary course of business. During the
half-year ended 31 December 2018, the Group has generated a loss
for the period of $15,579,391 (2017: $7,250,597) and the Group has
used cash in operations of $10,458,479 (2017: $7,875,025).
The Group benefits from cash inflows from the series of BARDA
contracts, the first of which was awarded to the Company in
September 2015. These payments from BARDA offset costs from various
activities undertaken to support the FDA regulatory approval
process for RECELL in the U.S., preparation for the planned
commercial launch of RECELL in the U.S., and RECELL clinical
programs in the U.S. With the U.S. FDA approval of RECELL for the
treatment of burns in September 2019, and the U.S. market launch of
the product in January 2019, sales of goods are expected to be an
increasing source of revenue in the future. Another anticipated
source of revenue for the Company is the BARDA contract line item
covering the initial purchase, delivery and storage of RECELL
devices in the amount of US$7,594,620 (~A$10m).
The Group expects to be utilizing cash reserves until U.S. and
international sales of its products reach the level to fund ongoing
operations. The Group has historically funded its research and
development activities, and more recently its substantial
investment in sales and marketing activities, through raising
capital by issuing securities in the Company, and it is expected
that similar funding will be obtained to provide working capital if
and when required. If the Group is unable to raise capital in the
future, the Group may need to curtail expenditures by scaling back
certain research and development or other programs.
As a result of the above, the directors are satisfied that there
is sufficient working capital to support the committed research and
development programs and other activities over the next 12 months
and the Group has the ability to realize its assets and pay its
liabilities and commitments in the normal course of business.
Accordingly, the directors have prepared the financial report on a
going concern basis.
2. REVENUE
CONSOLIDATED 31 Dec 2018
$
31 Dec 2017
$
Revenue
Sale of goods
1,813,195 607,761
1,813,195
607,761 Other Income BARDA income
5,009,137 3,856,716 Bank interest income 103,626
37,595
5,112,763 3,894,311
3. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY
SHARES
No amounts have been paid, declared or recommended by Avita
Medical Limited by way of dividend since the commencement of the
half-year, and up to the date of this report.
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTSFOR THE
HALF-YEAR ENDED 31 DECEMBER 2018
4. OPERATING SEGMENTS
The Group’s chief operating decision maker has been identified
as the Chief Executive Officer.
The Chief Executive Officer reviews the financial and operating
performance of the business primarily from a geographic
perspective. On this basis, management have identified three
reportable segments being the Asia Pacific, Europe and Americas
including Canada. The Chief Executive Officer monitors the
performance of all these segments separately. The Group does not
operate in any other geographic segment.
The Chief Executive Officer assesses the performance of the
operating segments based on a measure of gross margin and net
profit before tax.
Unallocated
The following items of income and expense and associated assets
are not allocated to operating segments as they are not considered
part of the core operations of any segment:
- Corporate revenue
- Corporate charges
The segment information provided to the Chief Executive Officer
for the reportable segments for the half-year ended 31 December
2018 is as follows:
Continuing Operations Asia Pacific
$
Europe
$
Americas
$
Total
$
Half-year ended 31 December 2018 Revenue Sales
to external customers 457,571 253,633
1,101,991 1,813,195
Total revenue per
statement of profit of loss and other comprehensive income
457,571 253,633
1,101,991 1,813,195 Other
Income 9,552 269 5,102,941 5,112,762
Segment net loss before tax (626,901 ) (593,225 )
(11,948,943 ) (13,169,069 )
Reconciliation of
segment net result before tax to loss before income tax
Corporate charges (2,410,322 )
Loss before income tax
(15,579,391 ) Segment assets Segment
operating assets 568,571 401,546
31,802,314 32,772,431 Unallocated assets 3,574,951
Total assets per the statement of financial position
36,347,382 Segment liabilities Segment
operating liabilities 169,516
151,248
4,591,266
4,912,030 Unallocated liabilities 188,068
Total
liabilities per the statement of financial position
5,100,098
NOTES TO THE HALF-YEAR FINANCIAL
STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER
2018
4. OPERATING SEGMENTS
(CONTINUED)
Continuing Operations Asia Pacific
$
Europe
$
Americas
$
Total
$
Half-year ended 31 December 2017 Revenue Sales
to external customers 344,367 263,394 -
607,761
Total revenue per statement of
comprehensive income 344,367
263,394 - 607,761
Other Income 34,151 3,224 3,856,936 3,894,311
Segment net loss before tax (688,840 ) (1,325,927 )
(3,098,175 ) (5,112,942 )
Reconciliation of segment net
result before tax to loss before income tax Corporate charges
(2,137,655 )
Loss before income tax (7,250,597
) Segment assets Segment operating assets
327,350 692,388 4,077,021
5,096,759 Unallocated assets 11,419,478
Total assets per
the statement of financial position 16,516,237
Segment liabilities Segment operating liabilities 119,882
192,630
1,526,727
1,839,239 Unallocated liabilities 153,693
Total
liabilities per the statement of financial position
1,992,932
There was no material difference between the basis of
segmentation and the measurement of segment result compared to the
30 June 2018 annual report.
5. COMMITMENTS AND CONTINGENCIES
There are no significant changes to the commitments and
contingencies disclosed in the most recent annual financial
report.
NOTES TO THE HALF-YEAR FINANCIAL
STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER
2018
6. CONTRIBUTED EQUITY
CONSOLIDATED 31 Dec 2018
$
30 Jun 2018
$
Ordinary shares Issued and fully paid 188,210,306
162,801,028 Movement in ordinary shares on
issue:
Number
$
At 1 July 2018 1,277,378,325 $ 162,801,028
Issue of shares 375,047,015 28,098,701 Capital raising costs -
(2,689,423 )
At 31 December 2018
1,652,425,340 $ 188,210,306
(a) Recognised share-based payment expenses
The expense recognised for employee services received during the
half-year is shown in the table below:
2018
$
2017
$
Expenses arising from equity-settled share-based payment
transactions 1,043,694 726,855
Total expense arising from
share-based payment transactions 1,043,694
726,855
(b) Option pricing model: ESOP and Investor
Equity-settled transactions
The fair value of the equity-settled share options granted under
the ESOP is estimated at the date of grant using a Binomial Model
taking into account the terms and conditions upon which the options
were granted.
The options issued in the period have vesting criteria based on
the following performance conditions:
- Tenure with the Group
- Revenue target
- FDA PMA approval of RECELL for
burns
- Initial BARDA procurement under CLIN2
of the BARDA Contract
- US Quotation
i) On 1 November 2018, 2,000,000 options were granted to
employee at an exercise price of $0.056 expiring on 1 November
2028.
The following table lists the inputs to the models used for the
options granted to employee each year:
Grant date 1/11/2018 Share price at
date of grant $0.093 Dividend yield (%) 0% Expected volatility (%)
90% Risk-free interest rate (%) 2.65% Expected life of option
(days) 3,650 Option exercise price ($) $0.056
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTSFOR THE
HALF-YEAR ENDED 31 DECEMBER 2018
6. CONTRIBUTED EQUITY (CONTINUED)
(b) Option pricing model: ESOP and Investor
(continued)
This represents tranches 2, 12-15, the fair value at date of
grant for each tranche is as follows:
Tranche 2 $0.0834 Tranche 12 $0.0607
Tranche 13 $0.0673 Tranche 14 $0.0715 Tranche 15 $0.0748
ii) On 1 November 2018, 12,700,000 options were granted to
employees at an exercise price of $0.057 expiring on 1 November
2028.
The following table lists the inputs to the models used for the
options granted to employees:
Grant date 1/11/2018 Share price
at date of grant $0.093 Dividend yield (%) 0% Expected volatility
(%) 90% Risk-free interest rate (%) 2.65% Expected life of option
(days) 3,650
Option exercise price ($)
$0.057
This represents tranches 1, 4-11, 16-19, the fair value at date
of grant for each tranche is as follows:
Tranche 1 $0.0834
Tranche 10 $0.0709 Tranche 4 $0.0593 Tranche
11 $0.0742 Tranche 5 $0.0662 Tranche 16 $0.0607 Tranche 6 $0.0709
Tranche 17 $0.0671 Tranche 7 $0.0742 Tranche 18 $0.0714 Tranche 8
$0.0593 Tranche 19 $0.0747 Tranche 9 $0.0662
iii) On 1 November 2018, 3,000,000 options were granted to
employees at an exercise price of $0.059 expiring on 1 November
2028.
The following table lists the inputs to the models used for the
options granted to employees:
Grant date 1/11/2018 Share price
at date of grant $0.093 Dividend yield (%) 0% Expected volatility
(%) 90% Risk-free interest rate (%) 2.65% Expected life of option
(days) 3,650
Option exercise price ($)
$0.059
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTSFOR THE
HALF-YEAR ENDED 31 DECEMBER 2018
6. CONTRIBUTED EQUITY (CONTINUED)
(b) Option pricing model: ESOP and Investor
(continued)
This represents tranches 3, 20-23, the fair value at date of
grant for each tranche is as follows:
Tranche 3 $0.0831 Tranche 20
$0.0604 Tranche 21 $0.0669 Tranche 22 $0.0712 Tranche 23 $0.0744
iv) On 1 November 2018, 17,200,000 options were granted to
employees at an exercise price of $0.089 expiring on 1 November
2028.
The following table lists the inputs to the models used for the
options granted to employees each year:
Tranche 1 Tranche
2 Tranche 3 Tranche 4
Grant date 1/11/2018 1/11/2018
1/11/2018 1/11/2018 Share price at date of grant
$0.093 $0.093 $0.093 $0.093 Dividend yield (%) 0% 0% 0% 0% Expected
volatility (%) 90% 90% 90% 90% Risk-free interest rate (%) 2.65%
2.65% 2.65% 2.65% Expected life of option (days) 3,650 3,650 3,650
3,650 Fair value at date of grant $0.0587 $0.0641 $0683 $0.0716
Option exercise price ($) $0.089 $0.089 $0.089 $0.089
v) On 30 November 2018, 24,851,250 options were granted to
employees at an exercise price of $0.082 expiring on 30 November
2028.
The following table lists the inputs to the models used for the
options granted to employees each year:
Tranche 1 Tranche
2 Tranche 3 Tranche 4
Grant date 1/11/2018 1/11/2018
1/11/2018 1/11/2018 Share price at date of grant
$0.082 $0.082 $0.082 $0.082 Dividend yield (%) 0% 0% 0% 0% Expected
volatility (%) 90% 90% 90% 90% Risk-free interest rate (%) 2.65%
2.65% 2.65% 2.65% Expected life of option (days) 3,650 3,650 3,650
3,650 Fair value at date of grant $0.0514 $0.0561 $0.0599 $0.0628
Option exercise price ($) $0.082 $0.082 $0.082 $0.082
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTSFOR THE
HALF-YEAR ENDED 31 DECEMBER 2018
7. CONTRIBUTED EQUITY (CONTINUED)
(b) Option pricing model: ESOP and Investor
(continued)
vi) On the 30 November 2018, 15,000,000 options were granted to
Dr Michael Perry at an exercise price of $0.082 expiring on 20
November 2028 based on the following milestones:
- Tenure – total of 7,499,999 options
issued for immediate vesting and over the two-year period
commencing 1 July 2017;
- Company Share Price – total of
5,000,001 options issued but to vest in three equal tranches
subject to the Volume Weighted Average Price (VWAP) of Company
share price (as at close of trade on the ASX on relevant date)
achieving multiples of 2x, 3x and 4x the Company’s share price as
at shareholder approval; and
- Milestone performance – total of
2,500,000 options issued, but to vest upon the achievement of
initial BARDA procurement under CLIN2 of the BARDA Contract.
Tranche 1 Tranche
2 Tranche 3 Tranche 4
Grant date 30/11/2018 30/11/2018
30/11/2018 30/11/2018 Share price at date of grant
$0.082 $0.082 $0.082 $0.082 Dividend yield (%) 0% 0% 0% 0% Expected
volatility (%) 90% 90% 90% 90% Risk-free interest rate (%) 2.59%
2.59% 2.59% 2.59% Expected life of option (days) 3,650 3,650 3,650
3,650 Fair value at date of grant $0.049 $0.054 $0.048 $0.052
Option exercise price ($) $0.082 $0.082 $0.082 $0.082
Tranche 5 Tranche 6
Tranche 7 Grant date 30/11/2018
30/11/2018 30/11/2018 Share price at date of grant
$0.082 $0.082 $0.082 Dividend yield (%) 0% 0% 0% Expected
volatility (%) 90% 90% 90% Risk-free interest rate (%) 2.59% 2.59%
2.59% Expected life of option (days) 3,650 3,650 3,650 Fair value
at date of grant $0.058 $0.071 $0.048 Option exercise price ($)
$0.082 $0.082 $0.082
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTSFOR THE
HALF-YEAR ENDED 31 DECEMBER 2018
7. RELATED PARTY DISCLOSURES
The total amount of transactions entered into with Key
Management Personnel for the half-year ended 31 December 2018 were
$51,802 Consultancy fees (2017: $124,156) paid under normal terms
and conditions to Bioscience Managers Pty Ltd of which J
Curnock-Cook is a Director.
Details of all related party transactions have been disclosed in
the annual report for the year ended 30 June 2018. There have been
no new significant related party transactions during the interim
period.
8. SUBSEQUENT EVENTS
During the six months ended 31 December 2018 the Group completed
an institutional placement of shares to institutional placements of
shares to U.S., Australian and international institutional and
sophisticated investors. The institutional placement included a
second tranche contingent upon shareholder approval. Shareholder
approval for Tranche 2 was received at an Extraordinary General
Meeting held in January 2019, and the net proceeds of $13,828,577
were received by the Group in January 2019. Also, in January 2019
the Group received $1,764,900 in net proceeds from a share purchase
plan.
DIRECTORS’ DECLARATIONFOR THE HALF-YEAR ENDED 31
DECEMBER 2018
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of Avita
Medical Limited, I state that:
In the opinion of the Directors:
a)
the financial statements and notes of the
consolidated entity are in accordance with the Corporations Act
2001, including:
(i) Giving a true and fair view of the financial position at
31 December 2018 and the performance for the half-year ended on
that date of the consolidated entity; and (ii) Complying with
Accounting Standard AASB 134 Interim Financial Reporting and the
Corporations Regulations 2001; and b)
there are reasonable grounds to believe
that the company will be able to pay its debts as and when they
become due and payable.
On behalf of the Board
Dr Michael PerryExecutive DirectorDated: 28
February 2019Valencia, California, United States
INDEPENDENT AUDITOR’S REVIEW REPORT
To the Members of Avita Medical Limited
Report on the review of the half year financial
report
Conclusion
We have reviewed the accompanying half year financial report of
Avita Medical Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial
position as at 31 December 2018, and the consolidated statement of
profit or loss and other comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash
flows for the half year ended on that date, a description of
accounting policies, other selected explanatory notes, and the
directors’ declaration.
Based on our review, which is not an audit, nothing has come to
our attention that causes us to believe that the half year
financial report of Avita Medical Limited does not give a true and
fair view of the financial position of the Group as at 31 December
2018, and of its financial performance and its cash flows for the
half year ended on that date, in accordance with the Corporations
Act 2001, including complying with Accounting Standard AASB 134
Interim Financial Reporting.
Directors’ responsibility for the half year financial
report
The Directors of the Company are responsible for the preparation
of the half year financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the
Directors determine is necessary to enable the preparation of the
half year financial report that gives a true and fair view and is
free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express a conclusion on the half year
financial report based on our review. We conducted our review in
accordance with Auditing Standard on Review Engagements ASRE 2410
Review of a Financial Report Performed by the Independent Auditor
of the Entity, in order to state whether, on the basis of the
procedures described, we have become aware of any matter that makes
us believe that the half year financial report is not in accordance
with the Corporations Act 2001 including giving a true and fair
view of the Group’s financial position as at 31 December 2018 and
its performance for the half year ended on that date, and complying
with Accounting Standard AASB 134 Interim Financial Reporting and
the Corporations Regulations 2001. As the auditor of Avita Medical
Limited, ASRE 2410 requires that we comply with the ethical
requirements relevant to the audit of the annual financial
report.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190227006072/en/
OUS MediaMonsoon CommunicationsSarah KemterPhone
+61 (0)3 9620 3333Mobile +61 (0)407 162
530sarahk@monsoon.com.au
Investors:Westwicke PartnersCaroline CornerPhone
+1-415-202-5678caroline.corner@westwicke.com
AVITA Medical LtdDale A. SanderChief Financial
OfficerPhone +1-661-367-9178dsander@avitamedical.com
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