Avita Medical, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Abita Medical, Inc., fourth quarter 2021 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star then one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your speaker for today. Caroline Corner, you may begin.

Thank you, Operator. Welcome to Aveda Medical's fiscal fourth quarter and full year 2021 earnings call. Joining me on today's call are Mike Perry, President and Chief Executive Officer, and Michael Holder, Chief Financial Officer. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding the markets in which Aveda operates, trends and expectations for Aveda's products and technology, trends and demand for Aveda's products, Aveda's expected financial performance, expenses, and position in the market, and the impact of COVID-19 on Aveda's operations and Aveda's customers' operations. These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results, performance, or achievements to differ materially from any results, performance, or achievements expressed or implied by the forward-looking statements. Please review AVIDA's most recent filings with the SEC, particularly the risk factors described in AVIDA's S3 and 10-K filings and in AVIDA's quarterly report on Form 10-Q for the fourth quarter ended June 30th, 2021 for additional information. Any forward-looking statements provided during this call, including projections for future performance, are based on management's expectations as of today. Avita undertakes no obligation to update these statements except as required by applicable law. Avita's press release with fourth quarter and full year 2021 results is available on Avita's website, www.avitamedical.com, under the Investors section, and includes additional tips about Avita's financial results. AVIDA's website also has the latest SEC filings, which you are encouraged to review. A recording of today's call will be available on AVIDA's website by 5 p.m. Pacific time today. Now I'd like to turn the call over to Mike for his comments on fourth quarter 2021 business highlights.

Thank you, Caroline, and thank you, everyone, for joining us today. We made strong progress on our growth objectives in the fourth quarter. As you know from our pre-release in June, commercial revenues decreased not including BARDA-related revenues, were strengthened substantially in the quarter, up 45% quarter over quarter, reflecting reopening of parts of the economy, which led to a corresponding increase in accidents, as well as continued penetration into our burn center accounts as we began to see some improved access to hospitals and increased procedures. While it would be premature to say that the pandemic is behind us, especially given recent developments with the Delta variant. We are encouraged by our recent commercial performance and remain extremely excited about the opportunities ahead with our pipeline indications. Here at Aveda, we are driven by our primary goal of commercializing our proprietary technology to enable healthcare providers to successfully address skin defects to save lives and improve quality of life for our patients. As we grow from treating burns to trauma to vitiligo to cell and gene therapy and to aesthetics and beyond, our focus is on delivering leading-edge therapeutic skin restoration solutions to our patients. While the company was founded with burn treatments in mind, our team is working to leverage our point-of-care autologous spray-on skin platform across many markets and indications and I'm very pleased to update you today on our latest developments. With that, I'd like to turn now to our burns business. As a quick update on the product development front here, at the end of June, we submitted to the FDA a PMA supplement for our new version of the resell device with enhanced ease of use. We anticipate FDA approval in the first half of calendar 2022, and commercial launch thereafter. In our fiscal fourth quarter, we saw COVID abating in many geographies which led to various degrees of economic and social recoveries, which in turn resulted in a corresponding increase in accidents. Our sales team was able to regain some momentum with our customers, which is reflected in our revenue results. I'm very proud to report that our resale commercial revenues were a record $6.7 million in the fiscal fourth quarter compared to $4.6 million in the previous quarter ended March 2021. We realized this significant revenue growth primarily from the increase in burn cases, but also from our commercial teams further penetration in burn center accounts. Our organization remains well positioned to respond and quickly pivot to changes in burn-related accidents. We have been building our burns-focused sales force for over two and a half years and believe we have the largest and most experienced burns-dedicated sales force in the market. In the quarter, we saw increased penetration into accounts and procedures spanning all burn sizes, including smaller burns, which has been our focus of late. Approximately 80% of our burn cases come from these smaller wounds or wounds comprising less than 30% TBSA or total body surface area. We ended fiscal 2021 with over 100 hospital accounts, with the ABA estimating that there are 136 burn centers in the United States, and as we've mentioned previously, we feel that we have established a solid footprint in burn center hospitals. Our focus is now on driving utilization and broadening penetration within this footprint. We believe our recent sales performance illustrates success with implementing this plan. Revenue from our top 20 accounts increased approximately 25% in fiscal Q4 over fiscal Q3, demonstrating strong growth. If we look back a year ago, our top 20 accounts were contributing 66% of our burn revenue. Today, with a much larger revenue base, Our top 20 accounts are delivering just over 40% of revenue, reflecting utilization across a broader base of burn centers. With over 50% of burn surgeons using Resell in the Quarter and over 80% of the approximately 300 U.S. burn surgeons trained to use the Resell system, we have indeed established a broad user base. As we look ahead, our sales force will be focusing primarily on driving and expanding usage and adding surgeon users within our existing accounts. As the Delta variant spreads, we are seeing increased access restrictions and we anticipate a potential impact on the availability of burn beds, particularly in the south. Of note, data from an ABA-sponsored series of surveys between April through August of 2020 showed that of 2,082 burn beds identified in the United States, only 845 beds or 40% were available in April of 2020, and a mere 572 burn beds or 27% were available in August of 2020. The impact we saw last year during the COVID peak did influence our sales, and while we don't currently think The Delta variant will be nearly as disruptive and we are not currently seeing an impact on burn bed availability. We are prepared to pivot and deploy our learnings from the prior waves of COVID. Moving forward, We continue to leverage our sales force's deep relationships and experience, our training capabilities, physician engagement programs, and new outreach efforts to educate and engage burn care providers. Today, our sales force is able to access most accounts to support cases and aftercare and to perform training. During the fourth quarter, we saw substantial traction in small off-site Aveda events, and these live sessions drove physician understanding of incorporation of resale into their daily practice and correspondingly our revenue increase. This summer has been slow in terms of professional meetings due to the pandemic status and the impassioned restart of vacations, yet we expect resumption of regional meetings in the fall. While meetings and conferences are currently planned to be in person, they may change to virtual as a result of the spreading Delta variant. Fortunately, enthusiasm from physicians has been very high, and we have been successful in the past at adeptly pivoting to virtual meetings. So we will continue to be flexible as necessary with our participation at meetings and with our physician interactions. With our recent label expansion to treat full thickness thermal burns in patients one month of age and older, in July we rolled out a campaign targeting pediatric burn treatment. As you may know, unfortunately, nearly a quarter of all burn cases in the United States occur in children under 16 years of age. One of the main goals within the burn community and here at Aveda is to avoid painful surgeries, scarring, and multiple grafting procedures. From analysis of our continued access and compassionate use data, resell significantly reduced the mean number of pediatric grafting procedures compared to national burn repository data. Our results showed 1.6 grafting procedures using resell in combination with grafts versus 3.6 procedures using conventional split thickness skin grafts, which is a very compelling improvement given the pain and scars that patients endure. While we do not expect the pediatric label expansion to move the needle significantly on our top line revenue in the near term, we can now engage burn centers that are pediatric only facilities and we are now providing a comprehensive commercial effort that is able to address the vast majority of burn patients. Our commercial team is finding that our new label is reinvigorating conversations. For example, after an extended sales effort, UC Davis, one of the largest U.S. burn centers, recently added resale to their formulary, driven in part by the new expanded label. You may have seen a recent news report in late July in Yonkers, New York, of a mother and child being hit by an alleged drunk driver. The child was pinned under a car and was severely burned. I'm very pleased to tell you that Resell was used successfully to help that child. In seeing these heartbreaking cases, it is truly a privilege to be in a position to make a meaningful difference in the lives of these children and their families. Another area of important impact for us is the subject of injuries not originating from burns. The reopening of the economy and the corresponding increase in accidents meant that in the fourth quarter, enrollment in our soft tissue reconstruction trial accelerated. As a reminder, this trial involves non-burned wounds, such as those with necrotizing soft tissue infections and degloving injuries, which are wounds that commonly present at the same trauma centers where we are currently serving our burn patients. If you recall, we had our first patient in this pivotal trial enroll in March 2020, and we saw slow enrollment for the first year due to the pandemic. We have 17 participating sites with 32 subjects enrolled and treated as of June 30th. Over the last two quarters, we have seen patient enrollment ticking upwards. For instance, during July, eight additional patients were enrolled. Three patients have been recruited so far in August, and our goal is to complete recruitment of all 65 patients by late 2022. With a six-month follow-up for patients in this trial, we are aiming for an approval in calendar year 2024. We will be leveraging our existing trauma and burn center sales point and incrementally growing our sales force to address this opportunity. Patients presenting with a requirement for skin grafting and resell, whether for burns, trauma, or other skin repair, are routinely treated by the same surgeons within an institution. We already know some of our top accounts are using resell for trauma as they seek to find the best outcomes for their patients. As an example, a top surgeon at University Medical Center in New Orleans, which is one of our top 10 accounts, has told us that approximately 10% of their resell procedures are currently performed on trauma patients. Based on our internal calculations, we foresee a serviceable addressable market, or SAM, for trauma and soft injury of $450 million. Moving on now from burns and trauma to our continued progress in vitiligo. For those unfamiliar with the condition, vitiligo is a skin disorder characterized by depigmented areas of skin that appear as white spots or patches and which are primarily attributed to an underlying autoimmune disorder in the patient. There are an estimated 100 million sufferers of vitiligo worldwide, including up to 6.5 million Americans. Of those in the US, we estimate approximately 1.3 million have stable vitiligo, meaning that their underlying autoimmune disease is being well managed and that their disease is not continuing to spread. we estimate the opportunity for resale to repigment stable vitiligo patients in the U.S. is at least $5 billion, and there is no FDA-approved product presently available to enable repigmentation for these patients. Recently, FDA approved our proposal for a single-arm vitiligo trial powered with 23 subjects with each site required to complete treatment of a run-in subject for purposes of training. As a reminder, our original trial was a three-arm trial with 84 patients. While this means we will restart enrollment, we already have 15 centers up and running, a robust recruitment program, and we continue to expect that enrollment will be completed by the end of calendar 2021, and we continue to plan for approval in 2023. To further support this opportunity, our products team is developing a new, fully automated version of the resale system tailored for the dermatology setting. This is being designed to support our commercial plan for Abitiligo, and I look forward to updating you as we progress. Work advances in our collaborations with the University of Colorado, Gates Center for Regenerative Medicine in Epidermolysis Bullosa, or EB, and with the Houston Methodist Research Institute in rejuvenation. In both cases, we are successfully demonstrating the intended molecular and cellular changes in the laboratory setting, and we are now shifting to toward demonstrating that these modified cells will form new skin in animal models. These programs both aim to show preliminary proof of concept by the end of this calendar year. I'd now like to walk you through the growth drivers we see ahead. We continue to drive forward on physician engagement and education, whether in person or virtual. Notably, our discussions with burn surgeons have largely shifted from whether or not to use resell to a focus on optimizing the use of resell, as well as training and refining the expertise of supporting staff. Our commercial team will be continuing to drive penetration into our burn center accounts. We are VAC approved in what we believe is a critical mass of burn centers, and with that, we are focused on penetration within those accounts. We have shown that our strategy of driving it to smaller burns results in overall broader resell usage. And looking ahead, we are leveraging our educational efforts and our expanded label and pediatric campaign to drive more engagement. In late July, CMS released the 2022 Medicare outpatient prospective payment system proposed rule, which contains a review of resales transitional pass-through or TPT payment application. We anticipate the final rule will be published before calendar year end with payment going into effect in January of 2022. Assuming a successful outcome, A C code will be assigned to resell, which we anticipate will cover the cost of the device for all Medicare and Medicaid patients. We would then commence a pilot launch at key sites to ensure coverage with commercial carriers before initiating a broader nationwide launch, likely in mid-2022. Our pipeline initiatives are moving forward. Specifically, our trauma and vitiligo clinical trials continue to make gains toward completion. We are especially excited about both our new single-arm vitiligo trial as well as our soft tissue trial enrollment, which has 43 of 65 patients enrolled and appears to have benefit from the recent increase in trauma-related accidents. We continue to be optimistic about our preclinical pipeline work in epidermolysis bullosa and rejuvenation and expect to have demonstrated proof of concept by the end of the calendar year. I look forward to sharing our progress there. Today, we are much more than a burns business. Moving to our last growth driver, we anticipate broadening our geographic footprint over the coming years. Together with our commercial partner, Cosmotech, we continue to seek approval in Japan. As previously reported, we completed the three required non-clinical benchtop studies in August of 2020 as scheduled. The Japanese Health Authority has recently undertaken their good clinical practice or GCP audit related to Evita Medical with no exceptions noted to date. COSMETEC will meet with the Japanese Reimbursement, MHLW, or Ministry of Health, Labor, and Welfare to present RECEL for reimbursement review in the near future. Our efforts and interactions with COSMETEC and the Japanese Regulatory Authority are ongoing. and we continue to expect approval by calendar year-end 2021 of our application for marketing approval of the resale system under Japan's Pharmaceuticals and Medical Device Act, or PMDA. We are also planning reentry into other U.S. markets following U.S. approval of new clinical indications for the resale system. At that time, We expect to have sufficient economies of scale provided through multiple resell indications to provide adequate ROI to justify the significant investment required in sales force, infrastructure, training, and reimbursement activities so that we can leverage our existing resell CE mark and TGA registration. In summary, We accomplished a lot over this past quarter. Our legacy burns business showed strong growth. We received approvals for expanded burn indication covering pediatrics and extensive burns. We submitted a PMA supplement for a new resell device. We made significant strides with our two lead clinical trials, and we've made strong progress on our pipeline and product development front. With that, I'll now turn it over to Michael for details on our financial performance in the quarter. Michael?