Why Shares of Avita Medical Are Down

 Shares of regenerative medicines maker Avita Medical (RCEL -25.80%) were down more than 27% as of 1 p.m. ET on Monday. The healthcare company released a Securities and Exchange Commission (SEC) filing on Monday detailing that the Food and Drug Administration (FDA) was asking for more information before granting the company's pre-market approval (PMA) supplement application to give Breakthrough Therapy designation to its Recell Go automated cell disaggregation device. 

Avita Medical submitted its PMA for Recell Go on June 30, and that set up the typical 180-day review cycle for the product. It's important to note the FDA is asking for more information, and its letter is not the same as a critical response letter, which can be the death knell for a prospective product. The Recell Go is more automated version of an already cleared device, the Recell. The new device, according to Avita, will end the need for manual management of skin samples and, through single-use cartridges, streamline enzyme incubation, buffer rinse, mechanical disaggregation, and filtering used for the company's Spray-On Skin Cells. The Recell and Recell Go are used to treat thermal burn wounds and full-thickness skin defects, and to re-pigment  stable de-pigmented vitiligo lesions.

The FDA's letter slows down the clearance process. Initially, Avita had expected an approval from the FDA by Dec. 27. The FDA letter puts the application on hold for four to six months months until Avita can answer the FDA's concerns regarding the device. Once the company's response is complete, the application will begin anew the 180-day window, which could still mean a new product launch between May 1 and July 1.

Avita is in a relatively strong position to be able to wait. Though it had only $68.8 million in cash at the end of the second quarter, it reported that it had $11.7 million in quarterly revenue, up 42% year over year, and no debt. However, it also lost $10.6 million in the quarter, compared to a $6.3 million loss in the same period a year ago.

https://www.fool.com/investing/2023/10/02/why-shares-of-avita-medical-are-down-monday/