Avita Medical, Inc.

Good day, and thank you for standing by, and welcome to Aveda Medical, Inc. first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jessica Eckenberg, Director of Investor Relations. Please go ahead.

Thank you, Operator. Welcome to Aveda Medical's first quarter 2024 earnings call. Joining me on today's call are Jim Corbett, Chief Executive Officer, and David O'Toole, Chief Financial Officer. Today's earnings release and presentation are available on our website, www.avedamedical.com, under the Investor Relations section. Before we begin, I'd like to remind you that this call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results to differ materially from any expectations expressed or implied by the forward-looking statements. Please review our most recent filings with the SEC for comprehensive descriptions of the risk factors. Any forward-looking statements provided during this call are based on management's expectations as of today. I will now turn the call over to Jim for his comments.

Thank you, Jessica. Good afternoon, and thank you for joining us today. I will begin today's call by discussing our financial and business results of the first quarter, followed by our priorities and outlook for 2024. Following this update, I will turn the call over to David, who will provide commentary on our financial performance for the quarter before opening the call to Q&A. This was a disappointing quarter for us. Our first quarter commercial revenue of $11.1 million not only felt short of our expectations, but it also marked the first time since my arrival that we did not achieve sequential quarterly growth. While we are encouraged by certain aspects of our business, such as our distribution agreement was statical in early January, it is important to address the challenges we encountered in meeting our revenue targets. Let me begin by providing more color on the revenue guidance announcement made on April 10th. At the time of this announcement, we were faced with several challenges that hindered our ability to provide comprehensive insights into our performance, and I understand the frustration this may have caused our investors. Not to justify or minimize our performance, it is important to note that under ASX rules, we had to promptly issue the market announcement despite not having financial statements completed for the quarter nor having analyzed external data. Accordingly, we believed it was prudent to release what we could and to refrain from speculations and instead gather more information to provide an accurate assessment, which I provide in this call. First, as previously announced, we experienced a slower than expected conversion rate of new accounts for our expanded level of full thickness skin defects. Since the launch of full thickness skin defects in June 2023 through March 31, 2024, we only added a total of 73 new accounts, of which 22 accounts were closed in the first quarter. However, we had expected an average of 15 new accounts per month for a total of 135 new accounts at the end of the first quarter. While the broadened scope of full-thickness skin defects presents the opportunity to pursue multiple indications for resell, navigating the value analysis committee, known as VAC, approval process across the various medical specialties including plastics, trauma, and general surgeons, and managing multiple reimbursement scenarios within a single facility have complicated the sales process beyond our initial expectations. Despite initially underestimating these complexities, we believe we will continue to become more efficient in closing new accounts. Looking at our current account standing on slide three, from launch to May 10, we have had a total of 178 submissions to VACs for full thickness skin defects. Of this, we have only had eight rejections. In the second quarter, we expect 46 accounts to be approved. We look forward to updating you on our progress on our next quarterly call. In addition to our account conversion rate, our Burns business was significantly below our historical expectations in the quarter. To determine whether this was due to a decline in burned wound admissions or device utilization, we rely on external claims data. However, as many of you are aware, a data breach at the largest U.S. clearinghouse for insurance billing and claims, a unit of UnitedHealth Group, disrupted the data feed to our claims data provider. Despite this disruption, which happened in February, our data provider was able to secure claims data for January. Burn admissions are typically predictable and flat. However, the January data revealed a 20% lower admission rate for burn wounds compared to the three previous Januaries. Although current estimates from our data providers suggest that we will not receive February and March data until September, if admissions for these two months were flat compared to prior years, the overall admissions rate would reflect a 7% quarterly decline. While we cannot accurately pinpoint the causes of our below expectation performance for the quarter, we have initiated an enhanced coverage strategy to supplement our understanding of burn accounts. Our team of 29 clinical training specialists will be physically present at our burn account sites, dedicating at least 60% of their time in burn centers. We believe that this approach will reinvigorate our burns business. Additionally, Resell Go is nearing the end of its 180-day interactive review by the FDA. The 180-day period will end on May 30, 2024. Assuming approval, our top 28 burn accounts will be prioritized for conversion to Resell Go in June. We are ready to go. See slide four. Now let's turn our attention to our growth trajectory. We remain dedicated to establishing RECELL as a standard of care for the treatment of burns, now extending its application to encompass full thickness skin defects. Furthermore, we are equally committed to transforming Aveda Medical from the single product focus of RECELL to a broad wound care management company. As part of this commitment, we're actively exploring wound bed preparation and dermal replacement products to identify the ideal partners and products. By expanding our portfolio to address the full spectrum of clinical needs, we believe we can improve accessibility and reach more patients. To better understand this strategic transformation, let's turn to slide five. Referring to the slide, there's a broad continuum of clinical needs in burn, surgical, traumatic, and chronic wound care. Today, our portfolio includes resell for epidermal replacement, and our co-branded dressing, Permioderm, which we launched in the U.S. on March 23. Permioderm and the additional products we are exploring are all compatible with Resell and each other and all can be used alongside the treatment of many of our burn and full thickness skin defect cases to further aid in healing. Collectively, these products align with our vision to build a broad-based wound care company See slide six of our presentation, which illustrates the complementary nature of resell and Permiderm and the other potential additions to our portfolio. Here is an example of a full thickness skin defect with concern for infection. In this instance, the dark blue layer represents dressings for wound bed preparation, a current focus. This product serves as a protective antimicrobial layer in the base of the wound bed to maintain an optimal healing environment. This layer can be used in every single patient. The green layer represents dermal scaffolds, our other focus area. Scaffolds aim to generate vascularized tissue, further supporting definitive closure. The light blue layer represents resell plus a meshed split thickness skin graft. As you are aware, this procedure provides definitive closure using significantly less skin compared to traditional autografting. Lastly is the purple layer, which is the transparent hermoderm dressing optimized for protection and moisture management. By looking at the broader landscape of wound care management and focusing on the ability to provide this continuum of wound care products, we strengthen our core business while addressing multiple needs of our customers and patients. Additionally, integrating these products into a cohesive and comprehensive portfolio allows us to leverage our large resale-oriented sales organization effectively, ensuring widespread coverage across major cases. Moving on to our international expansion strategy, we're making progress in our efforts to expand into Australia and most of the European Union through third-party distribution partnerships we expect to execute distributor agreements in major EU countries and Australia during the remaining part of the year. As part of our European Union efforts, we have been working with an EU-notified body to obtain a CE mark for Resell Go under the new medical device regulation, also known as MDR. During the quarter, we passed two major MDR conformity assessment audits and subsequently submitted the ResoGO technical document for review. I'm pleased to report that on April 22nd, 2024, the notified body confirmed that the technical document completeness check identified that all required information has been provided and they are proceeding with a dedicated review of the submission. With this timeline, we expect to receive seat mark for ResoGO between September and December. Additionally, we are in the validation testing stage of ResellGo Mini. As a reminder, ResellGo Mini is designed to address small wounds of 480 square centimeters or less, which represents approximately 2.5% or less total body surface area. This device will have the same reusable durable as ResellGo, but will have a different cartridge that accommodates smaller donor skin samples. Following the completion of validation testing, we're preparing to submit a PMA supplement for Resell Go Mini in June. This submission will receive the same breakthrough device designation that the current Resell device was granted. Now, turning to the Vitiligo initiative. Our initial six-month follow-up assessments of our patients in tone, which is our post-market study evaluating repigmentation and its impact on quality of life for vitiligo patients are scheduled to begin in June and conclude by the end of July. With this timing, we expect we will be able to provide preliminary insights from the data during our second quarter earnings call in August. By this time, we will also have submitted the PMI supplement for Resilgo Mini, which will be the cartridge for treatment with vitiligo patients. As I have indicated, we plan to submit the tone study and our separate health economic study for publication by the end of 2024, positioning us to begin commercial payer coverage discussions during the second quarter of 2025. As previously discussed, we anticipate a phased rollout of commercial coverage on a regional basis with the initial phase likely to begin in the fourth quarter of 2025. Our commitment to innovation and growth continues. We're steadfast in our efforts to expand our reach, drive increased adoption, and sustained growth within our indications, as well as expanding our portfolio, all with the goal of delivering value to our shareholders. Before turning the call over to David, I have an organizational update. We have retained an executive search firm to find a replacement for our Senior Vice President of Global Sales, who's no longer with the company. During this interim period, our two VPs of sales for the East and the West will report directly to me. In addition, I will be directly engaged daily with the entire commercial sales team. With that, I'd like to turn the call over to David.