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CALL PARTICIPANTS
- Interim Chief Executive Officer — Carrie Vance
- Chief Financial Officer — David O’Toole
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RISKS
- Revenue declined to $17.1 million for Q3 2025, a 13% year-over-year decrease, due to “ongoing impact of reimbursement disruption” according to Carrie Vance and delayed hospital Value Analysis Committee reviews.
- Management lowered full-year 2025 revenue guidance to $70 million–$74 million, down from prior guidance of $76 million–$81 million, citing slower reimbursement normalization and measured expectations for ReCell demand.
- Gross margin was 81.3%, down from 83.7% in Q3 2024, attributed to increased contribution from lower-margin products Co Helix and Permeoderm, and inventory adjustments.
- The company secured a waiver for its Q3 revenue covenant and an amendment lowering its Q4 2025 revenue covenant under the OrbiMed credit agreement, highlighting ongoing covenant compliance risk.
TAKEAWAYS
- Revenue — $17.1 million in the third quarter, a 13% year-over-year decline, primarily reflecting “temporary reimbursement headwinds” according to David O’Toole and the timing of hospital VAC reviews.
- Full-Year Guidance — Management revised full-year 2025 revenue outlook to $70 million–$74 million, down from $76 million–$81 million, with the update driven by slower-than-anticipated reimbursement recovery and conservative ReCell utilization assumptions.
- Gross Margin — Reported gross margin was 81.3% for Q3 2025, down from 83.7% in Q3 2024, due to product mix shift and inventory-related adjustments; ReCell franchise margin remained at 83.6%.
- Operating Expenses — Total operating expenses decreased $7.2 million, or 24% year-over-year, to $23 million as a result of cost reduction initiatives and lower staffing costs.
- Operating Loss — Operating loss improved 34% year-over-year to $9.2 million, down from $13.8 million in Q3 2024.
- Net Loss — Net loss totaled $13.2 million or $0.46 per share, a 19% improvement from $16.2 million or $0.62 per share in Q3 2024.
- Cash Position — Quarter-end cash, cash equivalents, and marketable securities were $23.3 million, following a $13.8 million private placement in August 2025 and quarterly cash usage of $6.2 million, down from $10.1 million in Q2 2025 (nearly 40% reduction from Q2 2025 to Q3 2025).
- OrbiMed Facility — The company obtained a waiver for its Q3 2025 revenue covenant and amended the Q4 2025 revenue covenant to $70 million under its OrbiMed loan agreement.
- Reimbursement Resolution — Interim CEO Vance stated, “all seven MACs have now published or confirmed acceptance of provider reimbursement rates,” removing a major barrier to ReCell utilization.
- Market Focus — Approximately 90% of revenue originates from about 200 core U.S. burn and trauma hospitals as of the Q3 2025 earnings call, which represent a $1.3 billion segment of the broader $3.5 billion addressable U.S. market.
- Commercial Priorities — Management prioritized rebuilding ReCell order momentum, ensuring consistent product utilization, and completing commercial organization transition to enhance forecast accuracy.
- European Milestone — First patient outside the U.S. treated with ReCell Go in Germany following its CE Mark approval in September.
- Co Helix and Permeoderm — Co Helix is under Value Analysis Committee review in roughly one-third of target accounts as of Q3 2025, with full clinical study enrollment expected by year-end; Permeoderm also showing positive early results and data expected next year.
- Expense Controls — CFO O’Toole stated, “We don’t think there are any more additional reductions in expenses that need to happen,” indicating the current cost base is considered adequately lean.
SUMMARY
Management identified the quarter as an “inflection point” according to David O’Toole marked by revenue disruption from reimbursement uncertainty, but confirmed the resolution of all seven Medicare Administrative Contractors’ provider reimbursement rates for ReCell. Leadership emphasized an immediate focus on core U.S. accounts, now comprising roughly 90% of revenue as of Q3 2025, and outlined new commercial execution initiatives targeting order momentum and forecast reliability. ReCell Go achieved its first international use in Germany, while Co Helix and Permeoderm expanded clinical progress and addressable market opportunities. The team confirmed ongoing cost discipline, supported by a strengthened cash position and covenant relief actions under the OrbiMed facility.
- CFO O’Toole explained, “As revenue grows in 2026, we will methodically move toward cash flow breakeven,” highlighting a path that depends on improved commercial traction rather than further expense reduction.
- Interim CEO Vance described the focus on converting post-reimbursement “potential into consistent, reliable performance,” signaling strategic intent to restore revenue growth and predictability.
- The company reiterated its intention to provide 2026 revenue targets and updated guidance in early Q1, after reassessing traction post-reimbursement normalization.
- Management stated that while European expansion is underway, primary resources and executional priority remain directed at U.S. market recovery.
INDUSTRY GLOSSARY
- MAC (Medicare Administrative Contractor): Regional private health insurers contracted by CMS to process Medicare claims and set coverage/payment policies for their jurisdictions.
- VAC (Value Analysis Committee): Hospital committee evaluating and approving new products or technologies for clinical use and purchase by the institution.
- CPT Codes: Current Procedural Terminology codes; numeric codes used to describe medical, surgical, and diagnostic services for billing purposes.
- CE Mark: Regulatory certification indicating conformity with health, safety, and environmental standards for products sold within the European Economic Area.
Full Conference Call Transcript
Carrie Vance: Good afternoon in the U.S. and good morning in Australia. It’s great to be with you today. As this is my first earnings call as Interim CEO, I want to begin by saying how much I appreciate the opportunity to speak directly with our investors, employees, and clinical partners who make AVITA’s mission to transform acute wound care possible. I’ve been with AVITA as a board member for the past two and a half years. And now, stepping into the Interim CEO role, I see the company with new eyes, but also with deep conviction. AVITA’s purpose is meaningful. Its people are talented, and its products are transformative.
My job and our collective focus is to turn that potential into consistent performance. Let’s be clear. This has been a challenging quarter. We reported approximately $17 million in revenue, below expectations and reflecting the ongoing impact of reimbursement disruption that began earlier in the year. We now expect full-year revenue in the range of $70 million to $74 million, down from our prior guidance of $76 million to $81 million. As a reminder, in January, new category one CPT codes for the use of ReCell took effect. Because CMS did not assign national clinical payment rates for these codes, responsibility for establishing payment fell to the regional Medicare Administrative Contractors, or MACs.
The time required for each MAC to set rates and begin adjudicating claims created uncertainty, and providers awaited confirmation of reimbursement for ReCell procedures. As a result, many providers were unsure when or how claims for ReCell procedures would be paid. The good news is that significant progress has been made. As of today, all seven MACs have now published or confirmed acceptance of provider reimbursement rates, providing clinicians with clarity and confidence of payment when using ReCell. We’re already seeing early signs of renewed demand, and we expect utilization to normalize progressively through the coming quarters. With provider reimbursement now largely resolved, ReCell’s value is increasingly recognized. Across data, adoption, payment, and policy.
At the foundation, there is powerful real-world evidence. Clinical and economic data show the ability of ReCell to optimize healing, reduce donor site burden, and shorten hospital stays. Inclusion of the CPT codes for the ReCell procedure within the CMS payment system establishes a clear pathway for clinician reimbursement. Predictable reimbursement now restores clinicians’ confidence in payment. Together, these layers help fuel adoption as clinicians and hospitals integrate ReCell into routine practice. For example, building on the strong clinical evidence, including data showing a 36% reduction in hospital length of stay, one of the nation’s leading burn centers has now incorporated ReCell into its treatment protocol for burns under 20% total body surface area.
This is a clear example of how strong data, clinical experience, and reimbursement clarity come together to make ReCell a standard point of care. I can also share that since ReCell Go received CE Mark approval in Europe in September, we saw the first patient outside of the U.S. treated with the device in Germany just last week. It’s an important milestone that broadens access to our ReCell technology and underscores its global relevance. While this quarter reflected the impact of reimbursement timing, it was also shaped by the pace of hospital Value Analysis Committee, or VAC, reviews, and the evolution of our commercial organization.
These factors collectively limited our near-term results, not the strength of our strategy or the quality of our products. In my first few weeks, I’ve spent time listening to our teams, clinicians, hospital partners, and shareholders. Their feedback has been candid and consistent. Our products are exceptional, but our performance hasn’t always matched their potential. ReCell, Co Helix, and Permeoderm make a real difference in acute wound care. And now it’s on us to ensure hospitals can put these products into the hands of their clinicians and, most importantly, onto their patients. That’s where my focus is. Turning potential into consistent, reliable performance.
Under my leadership, we’ve moved quickly to refine our commercial organization, aligning structure, territories, and accountability around our highest-value accounts. These adjustments are improving focus, visibility of customer behavior, and the coordination between our sales and clinical teams. To that end, we’ve taken a fresh look at our market opportunity to better align our go-to-market strategy with observed customer behavior. Historically, we’ve shared that across all U.S. burn and trauma hospitals, the total addressable market, or TAM, for AVITA’s portfolio is about $3.5 billion, and that long-term opportunity remains unchanged. What has evolved is our understanding of where meaningful, scalable use occurs. Roughly 90% of our revenue today comes from about 200 burn centers and trauma hospitals.
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