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Why the AVITA Medical share price is up 686% in 2019

James Mickleboro
share price higher

The best performer on the ASX 200 index this year has been the AVITA Medical Ltd (ASX: AVH) share price.

Since the start of the year the global regenerative medicine company’s shares have gained a remarkable 686%.

The next best performers on the index are Polynovo Ltd (ASX: PNV) and Jumbo Interactive Ltd (ASX: JIN) with gains of 205% and 184%.

Why is the AVITA share price rocketing higher this year?

Investors have been scrambling to buy AVITA’s shares this year due to the strong sales growth of its RECELL System.

This system is a regeneration platform which received U.S. FDA approval late last year as a Class III device for the treatment of acute thermal burns.

The treatment area of the RECELL System is a massive 80 times the donor area. This means that a skin sample the size of just a credit card can be used to treat a patient’s entire back.

In light of this, the company believes the system can provide significant savings to burn centres. In some cases, it estimates that it could reduce treatment costs by almost a third by using RECELL.

Strong sales growth.

During the first quarter of FY 2020, AVITA reported explosive sales growth.

Total revenue came in at A$7.9 million, up 165% on the prior corresponding period. Approximately A$4.6 million of this was generated in the U.S. market from product sales, which was up 60% on the fourth quarter of FY 2019.

This strong sales growth and its positive outlook allowed AVITA to raise $120 million through an institutional placement earlier this month.

The proceeds will be used to fund the pipeline development of new indications, including optimising support for clinical trials and development projects. They will also be put towards the company’s continued U.S. commercial growth strategy.

This certainly seems like a good idea for the funds. In a recent presentation, management estimates that the current RECELL platform addresses opportunities exceeding US$2 billion in the United States. It also has its eyes on other potentially lucrative markets.

Overall, whilst I feel its shares are probably fully valued now, it certainly is one to watch very closely in the coming years.

The post Why the AVITA Medical share price is up 686% in 2019 appeared first on Motley Fool Australia.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia has recommended Jumbo Interactive Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019