What happened
Shares of Avita Medical (RCEL 2.89%) were up more than 16% early Thursday afternoon after the healthcare company got Food and Drug Administration (FDA) approval for a therapy to treat a skin disease. The stock is up more than 155% so far this year.
So what
Avita specializes in devices and therapies to restore skin growth. On Wednesday, after the markets closed, the company announced that the FDA approved Avita's supplement to use its Recell System to treat full-thickness skin defects, including wounds that stem from surgery or trauma. The approval was based on a clinical trial that the company completed in March.
The expanded indication broadens the system's use to treat wounds from surgical excision, or resection -- for example, in skin cancer, as well as injuries from traumatic avulsion, when a deep layer of skin is torn away by an injury. CEO Jim Corbett said the company had more than doubled its sales force in preparation for the approval and expects to launch the product in its new indication by July 1.
The Recell system was first approved to treat burn patients in 2018. It works as a cell harvesting device that delivers a regenerative cell suspension, called Spray-On Skin cells. They are made from single living cells, using a small amount of a patient's own skin, as opposed to skin grafting, which requires larger amounts of a person's skin and can add another wound.
Now what
The new indication could boost the company's already rising sales by as much as five times. In the first quarter, it reported revenue of $10.6 million, up 40% year over year, and a net loss of $9.3 million, an improvement of 3% over the same period last year. The company will obviously have to increase spending to help the launch of the new indication, but the approval is a likely inflection point.
