AVITA Medical Limited (ASX: AVH, NASDAQ: RCEL), a regenerative
medicine company with a technology platform positioned to address
unmet medical needs in therapeutic skin restoration, announced that
it filed today with the Australian Securities Exchange (ASX) its
Appendix 4D – Half-Year Report for the six month period ended 31
December 2019.
Revenues of RECELL® System for First Six Month Period
Ended 31 December 2019
Six Months Ended
(In thousands of Australian Dollars)
31 December
2019
2018
U.S. product sales
A$
9,274
A$
1,102
International product sales
410
711
Total product sales
9,684
1,813
Other income (including BARDA)
3,846
5,113
Total revenue
A$
13,530
A$
6,926
“We continue to be pleased with early RECELL System utilization
as we progress our ‘go deep’ strategy within the in-patient burn
setting. We are focused on driving incremental growth within
existing accounts, together with broadening our commercial
footprint via the addition of 25 burns centers throughout calendar
2020. Early 2020 sales performance has highlighted the commitment
of burn specialists to the RECELL System, particularly among our
group of super users,” said Dr. Mike Perry, AVITA Medical’s Chief
Executive Officer. “With our strong balance sheet, buoyed by our
successful financing in November, we are also exploring
opportunities to advance our existing clinical programs as well as
potentially commencing additional late-stage studies where we
believe we have achieved a significant level of de-risking via our
substantive body of clinical evidence and peer-reviewed
publications. As an example, we will be working with the FDA to
explore the possibility of using an adaptive pivotal study design
for vitiligo in place of, or adjunctive to, the currently approved
IDE in this indication. We plan to provide updates on these
opportunities over the next few months.”
U.S. RECELL System Update
2020 is off to a pleasing start with consistent demand for the
RECELL System, especially among our super users, and
notwithstanding the 43rd Annual Boswick Burn & Wound Symposium
being held in late January and our National Sales Meeting (“NSM”)
being held in early February. At our NSM, we spent a significant
amount of time consulting with our burns surgeons, including our
most experienced users, with a view to improving on best practices
for use of the RECELL System. These activities included a specific
focus around optimal usage and teaching methodology for the RECELL
System, with a particular focus on the use of the RECELL System
with smaller burns and as a standalone therapy.
These efforts, and our broader efforts to promote awareness of
the RECELL System, will extend into the forthcoming Annual Meeting
of the American Burn Association which will be held in Orlando,
Florida, 17-20 March. At this meeting, there will be 8+
presentations highlighting RECELL focused on decreased length of
stay, cost savings, use on small burns, and other potential
uses.
Looking ahead, we will also be attending financial conferences
to further educate investor and analyst audiences about RECELL and
the potential of the platform. To this end, we will be attending
the Cowen Annual Healthcare Conference in Boston, Massachusetts, 4
March. Our presentation will be webcast and a link to the audio
track and the presentation will be available on our website, at
https://avitamedical.com/investors.
Market Acceleration / Expansion Update
Our goal of expanding utilization of the RECELL System to 25 new
burns centers during the 2020 calendar year (CY 2020) is well
underway, with two new centers ordering as of the end of January.
While the rate of in-patient burn admissions is inherently
variable, we are confident that site expansion and our broader
RECELL System usage will result in incremental revenue growth
across the entirety of CY 2020. Consistent with this goal, we are
keenly focused on our “go deep” strategy of (1) broadening our burn
utilization from large, full thickness, wounds, or “big burns,” to
the much higher incidence of smaller or partial thickness burns
which is consistent with usage patterns demonstrated by our most
experienced burn specialists; and (2) educating and training other
burn surgeons within our customer base.
The nearest term opportunity we are advancing is in trauma and
soft tissue injuries where, similar to the burn market, surgeons
graft skin to repair defects from accidents (e.g. degloving,
lacerations, gun shots, etc.). In 2019 September, we secured an
investigational device exemption (IDE) to pursue FDA approval for
soft tissue reconstruction (i.e. trauma) and we presently have
three sites screening patients with our first patient expected
shortly. This study will assess the safety and effectiveness of the
RECELL System in a minimum of 65 trauma patients. In addition, we
are pursuing incremental reimbursement avenues within the
out-patient setting as we believe this will be important to support
adoption of the RECELL System.
Within the broader “burn market,” we are also seeking FDA
approval for a pediatric scald indication. We have FDA
investigational device exemptions for our two pediatric scalds
studies and plan to commence these studies soon, with enrollment
slated to start in mid-2020.
As previously disclosed, in late December 2019, we received FDA
IDE approval for a feasibility study with 10 vitiligo patients to
primarily determine the optimal concentration of the cell
suspension prepared using the RECELL System. While we remain
committed to the 10-patient, single-site pilot study, we are
presently considering adaptive trial designs that could lead to an
acceleration of the commencement of a full pivotal study for the
RECELL System in vitiligo. Our depth of clinical experience with
patients internationally makes us confident that such a strategy
would address this unmet need, have a high likelihood of success,
and could allow us to get our technology to patients more quickly
and efficiently.
We are also continuing to explore large opportunities for the
RECELL System as a delivery platform to help address cellular and
genetic disorders. As previously disclosed, we entered into a
sponsored research agreement with the Gates Center for Regenerative
Medicine at the University of Colorado in November 2019. This
relationship is focused on proof-of-concept and development of a
spray-on treatment of genetically modified cells for patients with
the genetic skin disease epidermolysis bullosa (EB), with potential
applicability to other genetic skin disorders. It is early days in
this program, but we are hopeful of first in-human studies
commencing in the middle or second half of 2021. In parallel, we
are well-advanced with discussions to secure a rejuvenation
application for the RECELL System and hope to have further details
available in the middle of this year.
Lastly, with our successful capital raising in November 2019, we
have additional resources that may allow us to advance into a
potential FDA registration study in an area where we have existing
strong, and deep, clinical evidence. These opportunities are all
presently under re-assessment, and we hope to provide more clarity,
including details regarding the potential commencement of an
additional registration study, on some of these opportunities over
the coming months.
Further information on AVITA’s current and future opportunities
may be found in our recent operating review contained in the ASX
Appendix 4C, dated 31 January 2020, together with the Company’s
revised corporate presentation which was lodged with the ASX
today.
Half-Year Fiscal 2020 Financial Results (Unaudited)
A copy of the Appendix 4D – Half-Year Report for the six months
ended 31 December 2019 is attached. A summary of the financial
results for the half year are as follows:
Six Months Ended
(In thousands of Australian Dollars)
31 December
2019
2018
Sale of goods
$
9,684
$
1,813
Cost of sales
(2,326
)
(570
)
Gross profit
7,358
1,243
BARDA income
3,549
5,009
Other income
297
104
Total other income
3,846
5,113
Operating costs
(32,185
)
(21,935
)
Loss for the period
(20,981
)
(15,579
)
Foreign currency translation
(2,775
)
1,374
Total other comprehensive loss
$
(23,756
)
$
(14,205
)
The increase in current-year sales occurred in the U.S. as a
result of the commencement of the U.S. national market launch of
the RECELL System in January 2019. Gross margin for the half-year
ended 31 December 2019 was 76% compared to 69% for the same period
in 2018, and the company expects gross margins to improve as sales
ramp up within the U.S. market. BARDA income declined as a result
of wind-down of certain activities associated with supporting the
U.S. FDA approval of the RECELL System as well as the compassionate
use and continued access programs. As the result of investments in
commercial, manufacturing, and system capabilities to support the
continued growth of the RECELL System in the U.S. market and
related initiatives, operating costs and net loss for the half-year
ended 31 December 2019 increased compared to the same period in the
prior year.
During the six months ended 31 December 2019, the Company
completed an institutional placement in which it issued 203,389,831
shares at a price of A$0.059 per share and received gross proceeds
of A$120,000,000. The cash and cash equivalents balance at 31
December 2019 was approximately $124.7 million.
Authorized for release by the Chief Executive Officer of Avita
Medical Limited.
ABOUT AVITA MEDICAL LIMITED
AVITA Medical is a regenerative medicine company with a
technology platform positioned to address unmet medical needs in
burns, chronic wounds, and aesthetics indications. AVITA Medical’s
patented and proprietary collection and application technology
provides innovative treatment solutions derived from the
regenerative properties of a patient’s own skin. The medical
devices work by preparing a REGENERATIVE EPIDERMAL SUSPENSION™
(RES™), an autologous suspension comprised of the patient’s skin
cells necessary to regenerate natural healthy epidermis. This
autologous suspension is then sprayed onto the areas of the patient
requiring treatment.
AVITA Medical’s first U.S. product, the RECELL® System, was
approved by the U.S. Food and Drug Administration (FDA) in
September 2018. The RECELL System is indicated for use in the
treatment of acute thermal burns in patients 18 years and older.
The RECELL System is used to prepare Spray-On Skin™ Cells using a
small amount of a patient’s own skin, providing a new way to treat
severe burns, while significantly reducing the amount of donor skin
required. The RECELL System is designed to be used at the point of
care alone or in combination with autografts depending on the depth
of the burn injury. Compelling data from randomized, controlled
clinical trials conducted at major U.S. burn centers and real-world
use in more than 8,000 patients globally, reinforce that the RECELL
System is a significant advancement over the current standard of
care for burn patients and offers benefits in clinical outcomes and
cost savings. Healthcare professionals should read the INSTRUCTIONS
FOR USE - RECELL® Autologous Cell Harvesting Device
(https://recellsystem.com/) for a full description of indications
for use and important safety information including
contraindications, warnings and precautions.
In international markets, our products are marketed under the
RECELL System brand to promote skin healing in a wide range of
applications including burns, chronic wounds and aesthetics. The
RECELL System is TGA-registered in Australia and received CE-mark
approval in Europe.
To learn more, visit www.avitamedical.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This letter includes forward-looking statements. These
forward-looking statements generally can be identified by the use
of words such as “anticipate,” “expect,” “intend,” “could,” “may,”
“will,” “believe,” “estimate,” “look forward,” “forecast,” “goal,”
“target,” “project,” “continue,” “outlook,” “guidance,” “future,”
other words of similar meaning and the use of future dates.
Forward-looking statements in this letter include, but are not
limited to, statements concerning, among other things, our ongoing
clinical trials and product development activities, regulatory
approval of our products, the potential for future growth in our
business, and our ability to achieve our key strategic, operational
and financial goal. Forward-looking statements by their nature
address matters that are, to different degrees, uncertain. Each
forward- looking statement contained in this letter is subject to
risks and uncertainties that could cause actual results to differ
materially from those expressed or implied by such statement.
Applicable risks and uncertainties include, among others, the
timing of regulatory approvals of our products; physician
acceptance, endorsement, and use of our products; failure to
achieve the anticipated benefits from approval of our products; the
effect of regulatory actions; product liability claims; risks
associated with international operations and expansion; and other
business effects, including the effects of industry, economic or
political conditions outside of the company’s control. Investors
should not place considerable reliance on the forward-looking
statements contained in this letter. Investors are encouraged to
read our publicly available filings for a discussion of these and
other risks and uncertainties. The forward-looking statements in
this letter speak only as of the date of this release, and we
undertake no obligation to update or revise any of these
statements.
Appendix 4D Half-Year Report
31 December 2019 AVITA MEDICAL LIMITED ABN 28 058
466 523
Results for announcement to the market
Financial Results
December
2019
December
2018
Sale of goods
Up
434%
to
A$
9,684,214
A$
1,813,195
Other income
Down
25%
to
3,845,573
5,112,763
Total other comprehensive loss
for the period
Up
67%
to
23,755,659
14,205,247
Dividends
Amount per Ordinary
Security
Franked amount per
security
2018 interim dividend
Nil
Nil
2019 interim dividend
Nil
Nil
Record date for determining
entitlements to the 2019 interim dividends
N/A
Net Tangible Asset
Backing
December 2019
December 2018
Net tangible asset backing per
ordinary security
A$ 0.0566
A$ 0.0189
Other explanatory notes
The Australian Securities and Investments
Commission has stated that it considers the right of use assets
arising from the application of IFRS 16 Leases as a ‘intangible
assets’, requiring to exclude such assets from Net Tangible Asset
calculations. The following table shows the calculation for net
tangible asset backing per ordinary security.
December
2019
December
2018
Net Tangible Assets:
Net assets
A$
123,870,042
A$
31,247,284
Plant and equipment – Right of use
assets
(3,449,611
)
-
Patents-in-progress
(507,496
)
(93,775
)
Total net tangible assets
A$
119,912,935
A$
31,153,509
Number of ordinary shares on issue
2,117,474,277
1,652,425,340
Net tangible asset backing per ordinary
security
A$
0.0566
A$
0.0189
The information required by listing rule 4.2A is contained in
both this Appendix 4D and the attached half-year report. This
half-yearly reporting information should be read in conjunction
with the most recent annual financial report of the company.
AVITA MEDICAL LIMITED A.B.N. 28 058
466 523
HALF-YEAR FINANCIAL REPORT 31
December 2019
Corporate Information ABN 28 058 466 523
This half-year report covers the consolidated entity comprising
Avita Medical Limited (“the Parent Company” or “the Company”) and
its controlled subsidiaries (collectively, “the Group”). The Parent
Company’s functional and presentation currency is Australian
dollars (A$). A description of the Group’s operations and principal
activities are included in the Review and Results of Operations in
the Directors’ Report on page 4. The Directors’ Report does not
form part of the financial report.
Directors Mr Lou Panaccio (Non-Executive Chairman) Dr
Michael Perry (Executive Director) Mr Jeremy Curnock-Cook
(Non-Executive Director) Mr Louis Drapeau (Non-Executive Director)
Mr Damien McDonald (Non-Executive Director) Professor Suzanne Crowe
(Non-Executive Director)
Company Secretary Mr Mark Licciardo of Mertons Corporate
Services Pty Ltd
Registered Office c/o Mertons Corporate Services Pty Ltd
Level 7, 330 Collins Street Melbourne VIC 3000, Australia
Principal Place of Business 28159 Avenue Stanford, Suite
220 Valencia, CA 91355 USA
Share Register Computershare Investor Services Pty
Limited Level 11, 172 St Georges Terrace Perth, WA 6000
Australia
Solicitors K&L Gates Level 25 South Tower, 525
Collins Street Melbourne VIC 3000, Australia
Auditor Grant Thornton Audit Pty Ltd Level 17, 383 Kent
Street Sydney, NSW 2000 Australia
Principal Bankers National Australia Bank Limited 1238
Hay Street West Perth, WA 6000 Australia
Stock Exchange Avita Medical Limited’s ordinary shares
are listed for quotation on the Australian Securities Exchange
(ASX:AVH). In addition, the Company’s American Depositary Shares
are listed for quotation on the Nasdaq Capital Market in the U.S.
(NASDAQ: RCEL)
DIRECTORS' REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER
2019
Your Directors submit their report for the half-year ended 31
December 2019.
DIRECTORS
The names of the Company’s Directors in office during the
half-year and until the date of this report are as below. Directors
were in office for the entire period.
Mr Lou Panaccio (Non-Executive Chairman) Dr Michael Perry
(Executive Director) Mr Jeremy Curnock-Cook (Non-Executive
Director) Mr Louis Drapeau (Non-Executive Director) Mr Damien
McDonald (Non-Executive Director) Professor Suzanne Crowe
(Non-Executive Director)
REVIEW AND RESULTS OF OPERATIONS
Avita Medical Limited (“the Company”), together with our
subsidiaries Avita Medical Americas, LLC, Avita Medical Europe
Limited, Visiomed Group Pty Ltd, C3 Operations Pty Ltd and Infamed
Pty Ltd (collectively “the Group”), is a regenerative medicine
company with a technology platform designed to address unmet
medical needs in patients with burns, chronic wounds, and
aesthetics indications. Our patented and proprietary collection and
application technology provides innovative treatment solutions
derived from the regenerative properties of a patient’s own skin.
Our lead product, the RECELL® System, uses a small amount of a
patient’s own skin to prepare Spray-On Skin Cells at the point of
care in as little as 30 minutes. This autologous suspension of skin
cells is then sprayed onto the areas requiring treatment.
The RECELL System, was approved for sale in the U.S. for the
treatment of acute thermal burns in patients 18 years and older by
the Food and Drug Administration (FDA) in September 2018. We
initiated our U.S. national market launch of the RECELL System in
January 2019, although the Company did commence commercial
shipments in the U.S. during the half-year ended 31 December 2018
in response to pre-launch demand from certain burn centres. During
the half-year ended 31 December 2019, the RECELL System was also
sold on a limited basis in certain regions of the world in which
the products were approved for sale, including Australia, China and
Europe.
Sale of goods of the RECELL System totalled A$9,684,214 for the
half-year ended 31 December 2019, an increase of A$7,871,019 or
434% over the A$1,813,195 recognized during the same period in
2018. The increase in current-year sales occurred in the U.S. as a
result of the commencement of the U.S. national market launch of
the RECELL System in January 2019. U.S. sales during the six months
ended 31 December 2019 totalled A$9,274,060 compared to A$1,101,991
in the prior year. Gross margin for the half-year ended 31 December
2019 was 76% compared to 69% for the same period in 2018, and
management expects gross margins to improve as sales ramp up within
the U.S.
Other revenue totalled A$3,845,573 for the half-year ended 31
December 2019, a decrease of A$1,267,190 or 25% over the
A$5,112,763 recognized during same period in 2018. As in prior
periods, the majority of other revenue consisted of funding from
the Biomedical Advanced Research and Development Authority (BARDA),
under the Assistant Secretary for Preparedness and Response, within
the U.S. Department of Health and Human Services, under ongoing USG
Contract No. HHSO100201500028C. Under the BARDA contract, income of
A$3,549,020 was recognized during the half-year ended 31 December
2019 compared to income of A$5,009,137 during the same period in
2018. The decrease was the result of wind-down of certain
activities associated with supporting the U.S. FDA approval of the
RECELL System as well as the compassionate use and continued access
programs.
DIRECTORS' REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER
2019
REVIEW AND RESULTS OF OPERATIONS (CONTINUED)
As the result of investments in commercial, manufacturing,
research and development and related initiatives, operating costs
increased during the half-year ended 31 December 2019. Sales and
marketing expenses totalled A$10,338,441, an increase of
A$3,407,200 or 49% over the A$6,931,241 recognized during same
period in 2018. The increase was primarily attributed to the
recruitment, hiring and training of U.S. sales force and the
associated product launch, sales and marketing materials and
activities. Product development expenses totalled A$7,039,601 a
decrease of A$40,441 or 1% over the A$7,080,042 recognized during
same period in 2018. Corporate and administrative expenses totalled
A$9,298,049 an increase of A$2,432,799 or 35% over the A$6,865,250
recognized during same period in 2018. The increase was primarily
due to higher legal and staffing costs. Total operating costs for
the half-year ended 31 December 2019 totalled A$32,184,528, a
A$10,249,494 or 47% increase over the A$21,935,034 recognized
during same period in the prior year and were in line with
management expectations.
Net comprehensive loss after tax for the half-year ended 31
December 2019 was A$23,755,659, a $9,550,412 or 67% increase
compared to A$14,205,247 incurred in the same period in the prior
half-year. The increase in net loss was driven by the higher
operating costs described above, partially offset by the higher
sale of goods during the six months. As a result of the national
launch of the RECELL System in the U.S. in January 2019, and the
expansion of research and development, operating costs will
increase in future periods. These expenses are expected to be
partially offset by increased commercial sales of goods as well as
income under the BARDA contract.
During the half year ended 31 December 2019, net cash provided
by the issuance of shares under institutional placements of shares
to Australian and international institutional and sophisticated
investors was $111,938,578. Cash and cash equivalents held at 31
December 2019 was $124,658,116.
SUBSEQUENT EVENTS
From the end of the reporting period to the date of this report,
no matter or circumstance has arisen which has significantly
affected, or may significantly affect, the operations of the Group,
the results of those operations or the state of affairs of the
Group.
DIRECTORS' REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER
2019
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required
under s307C of the Corporations Act 2001 is included on the
following page.
Signed in accordance with a resolution of the Directors.
Dr Michael Perry Chief Executive Officer and Executive
Director Dated: 19 February 2020 Valencia, California, United
States
Grant Thornton
Level 17, 383 Kent Street Sydney NSW 2000
Correspondence to: Locked Bag Q800 QVB Post
Office Sydney NSW 1230
T +61 2 8297 2400 F +61 2 9299
4445 E info.nsw@au.gt.com W
www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of Avita Medical
Limited
In accordance with the requirements of section 307C of the
Corporations Act 2001, as lead auditor for the review of Avita
Medical Limited for the period ended 31 December 2019, I declare
that, to the best of my knowledge and belief, there have been:
a no contraventions of the auditor independence requirements of
the Corporations Act 2001 in relation to the review; and
b no contraventions of any applicable code of professional
conduct in relation to the review.
Grant Thornton Audit Pty Ltd Chartered Accountants
M R Leivesley Partner – Audit & Assurance
Sydney, 19 February 2020
_____________________________________
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related entity of Grant Thornton Australia Ltd ABN 41 127 556
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CONSOLIDATED STATEMENT OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE LOSS
FOR THE HALF-YEAR ENDED 31 DECEMBER
2019
Note
Consolidated
Continuing operations
31 Dec 2019
31 Dec 2018
Sale of goods
2
A$
9,684,214
A$
1,813,195
Cost of sales
(2,326,046
)
(570,315
)
Gross profit
7,358,168
1,242,880
BARDA income
2
3,549,020
5,009,137
Other income
2
296,553
103,626
Total other income
3,845,573
5,112,763
Operating costs
Sales and marketing expenses
(10,338,441
)
(6,931,241
)
Product development expenses
(7,039,601
)
(7,080,042
)
Corporate and administrative expenses
(9,298,049
)
(6,865,250
)
Share based payment expense
8
(5,326,289
)
(1,043,694
)
Finance costs
(182,148
)
(14,807
)
Total operating costs
(32,184,528
)
(21,935,034
)
Loss from continuing operations before income
tax expense
(20,980,787
)
(15,579,391
)
Income tax expense
-
-
Loss for the period
(20,980,787
)
(15,579,391
)
Other comprehensive income
(loss)
Items that may be reclassified
subsequently to profit or loss:
Foreign currency translation
(2,774,872
)
1,374,144
Other comprehensive loss for the
period, net of tax
(2,774,872
)
1,374,144
Total other comprehensive loss for the
period
(23,755,659
)
(14,205,247
)
Loss for the period attributable to owners
of the parent
(20,980,787
)
(15,579,391
)
Total comprehensive loss attributable
to owners of the parent
A$
(23,755,659
)
A$
(14,205,247
)
Earnings Per Share
Basic and diluted loss per share from
continuing operations
A$
(1.62
)
A$
(1.59
)
The accompanying notes form
part of the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 31 DECEMBER 2019
Note
Consolidated
31 Dec 2019
30 Jun 2019
ASSETS
Current assets
Cash and cash equivalents
A$
124,658,116
A$
28,983,491
Trade and other receivables
2,971,655
2,980,102
Prepayments and other assets
1,344,484
1,557,525
Inventories
1,269,333
1,057,764
Total current assets
130,243,588
34,578,882
Non-current assets
Plant
and equipment
6
1,880,162
1,838,515
Plant
and equipment – Right-of-use assets
6
3,449,611
-
Patents-in-progress
507,496
320,676
Total non-current assets
5,837,269
2,159,191
TOTAL ASSETS
A$
136,080,857
A$
36,738,073
LIABILITIES
Current liabilities
Trade and other payables
3,716,048
5,633,562
Provisions
4,041,709
650,359
Lease liabilities
7
718,756
-
Total current liabilities
8,476,513
6,283,921
Contract
liability
611,795
610,674
Finance
lease
4,716
54,057
Lease
liabilities
7
3,117,791
-
Total non-current liabilities
3,734,302
664,731
TOTAL LIABILITIES
A$
12,210,815
A$
6,948,652
NET ASSETS
A$
123,870,042
A$
29,789,421
EQUITY
Equity
attributable to equity holders of the parent:
Contributed equity
8
317,116,290
204,279,078
Accumulated losses
(205,061,114
)
(183,753,106
)
Reserves
11,814,866
9,263,449
TOTAL EQUITY
A$
123,870,042
A$
29,789,421
The accompanying notes form
part of the financial statements.
CONSOLIDATED STATEMENT OF CASH
FLOWS
FOR THE HALF-YEAR ENDED 31 DECEMBER
2019
Consolidated
31 Dec 2019
31 Dec 2018
Cash flows from operating
activities
Receipts from customers
A$
8,998,727
A$
1,204,802
BARDA receipts and other income
received
3,927,363
6,104,306
Payments to suppliers and employees
(26,595,190
)
(20,305,643
)
Interest received
296,553
97,253
R&D tax refunds received
-
2,440,803
Net cash flows used in operating
activities
(13,372,547
)
(10,458,479
)
Cash flows from investing
activities
Payments for plant and equipment
(266,637
)
(722,472
)
Payments for intellectual property
(222,588
)
-
Net cash flows used in investing
activities
(489,225
)
(722,472
)
Cash flows from financing
activities
Proceeds from issuance of shares
120,000,000
28,053,762
Proceeds from exercise of share
options
362,929
-
Capital raising expenses
(8,061,422
)
(2,689,423
)
Net cash flows provided by
financing activities
112,301,507
25,364,339
Net increase in cash and cash
equivalents
98,439,735
14,183,388
Cash and cash equivalents at beginning of
period
28,983,491
14,825,532
Impact of foreign exchange
(2,765,110
)
1,333,440
Cash and cash equivalents at end of
period
A$
124,658,116
A$
30,342,360
For the purpose of the half-year Statement of Cash Flows, cash
and cash equivalents are comprised of the following:
Consolidated
31 Dec 2019
31 Dec 2018
Cash at bank and in hand
A$
124,658,116
A$
30,342,360
Total cash and cash
equivalents
A$
124,658,116
A$
30,342,360
The accompanying notes form
part of the financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
FOR THE HALF-YEAR ENDED 31 DECEMBER
2019
Note
Contributed
equity
Accumulated
losses
Share-based
payment
reserve
Foreign
currency
translation
reserve
Total
At 1 July 2019
A$
204,279,078
A$
(183,753,106
)
A$
7,193,965
A$
2,069,484
A$
29,789,421
Adjustment from adoption of IFRS
16
-
(327,221
)
-
-
(327,221
)
Adjusted balance at 1 July
2019
204,279,078
(184,080,327
)
7,193,965
2,069,484
29,462,200
Loss for the period
-
(20,980,787
)
-
-
(20,980,787
)
Other comprehensive income
-
-
-
(2,774,872
)
(2,774,872
)
Total comprehensive loss for
the period
-
(20,980,787
)
-
(2,774,872
)
(23,755,659
)
Transactions with owners in their capacity as
owners
Share based payments
-
-
5,326,289
-
5,326,289
New shares
8
120,402,440
-
-
-
120,402,440
Cost of share placement
8
(7,565,228
)
-
-
-
(7,565,228
)
Balance at 31 December
2019
A$
317,116,290
A$
(205,061,114
)
A$
12,520,254
A$
(705,388
)
A$
123,870,042
Contributed
equity
Accumulated
losses
Share-based
payment
reserve
Foreign
currency
translation
reserve
Total
At 1 July 2018
A$
162,801,028
A$
(148,592,879
)
A$
4,505,148
A$
286,262
A$
18,999,559
Loss for the period
-
(15,579,391
)
-
-
(15,579,391
)
Other comprehensive income
-
-
-
1,374,144
1,374,144
Total comprehensive loss for
the period
-
(15,579,391
)
-
1,374,144
(14,205,247
)
Transactions with owners in their capacity as
owners
Share based payments
-
-
1,043,694
-
1,043,694
New shares
28,098,701
-
-
-
28,098,701
Cost of share placement
(2,689,423
)
-
-
-
(2,689,423
)
Balance at 31 December
2018
A$
188,210,306
A$
(164,172,270
)
A$
5,548,842
A$
1,660,406
A$
31,247,284
The accompanying notes form
part of the financial statements.
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE
HALF-YEAR ENDED 31 DECEMBER 2019
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
a) Basis of Preparation
This general purpose condensed financial report for the
half-year ended 31 December 2019 has been prepared in accordance
with IAS 34 Interim Financial Reporting and the Corporations Act
2001. The Group is a for-profit entity for financial reporting
purposes under Australian Accounting Standards. The Parent
Company’s functional and presentation currency is Australian
dollars (A$).
This half-year financial report does not include all notes of
the type normally included within the annual financial report and
therefore cannot be expected to provide as full an understanding of
the financial performance, financial position and financing and
investing activities of the consolidated entity as the full
financial report.
It is recommended that this half-year financial report be read
in conjunction with the Annual Report for the year ended 30 June
2019 and considered together with all public announcements made by
Avita Medical Limited in accordance with the continuous disclosure
obligations of the ASX listing rules.
This half-year financial report has been prepared on the going
concern basis. The accounting policies have been applied
consistently throughout the Group for the purposes of preparation
of these interim financial statements. Certain items on the
Consolidated Financial Statements and notes for the prior periods
have been reclassified to conform to the current period
presentation.
b) New standards adopted as at 1 July 2019
The Group has adopted the new accounting pronouncements which
have become effective this year, and are as follows:
IFRS 16 Leases
IFRS 16 Leases replaces IAS 17 Leases along with three
Interpretations (IFRIC 4 Determining whether an Arrangement
contains a Lease, SIC 15 Operating Leases-Incentives and SIC 27
Evaluating the Substance of Transactions Involving the Legal Form
of a Lease). IFRS 16 has been applied using the modified
retrospective approach, with the cumulative effect of adopting IFRS
16 being recognised in equity as an adjustment to the opening
balance of retained earnings for the current period. Prior periods
have not been restated.
For contracts in place at the date of initial application of
IFRS 16, the Group has elected to apply the definition of a lease
from IAS 17 and IFRIC 4 and has not applied IFRS 16 to arrangements
that were previously not identified as lease under IAS 17 and IFRIC
4.
The Group has elected not to include initial direct costs in the
measurement of the right-of-use asset for operating leases in
existence at the date of initial application of IFRS 16, being 1
July 2019. At this date, the Group has also elected to measure the
right-of-use assets at an amount equal to the lease liability
adjusted for any prepaid or accrued lease payments that existed at
the date of transition.
On transition, for leases previously accounted for as operating
leases with a remaining lease term of less than 12 months and for
leases of low-value assets the Group has applied the optional
exemptions to not recognise right-of-use assets but to account for
the lease expense on a straight line basis over the remaining lease
term.
For those leases previously classified as finance leases, the
right-of-use asset and lease liability are measured at the date of
initial application at the same amounts as under IAS 17 immediately
before the date of initial application.
On transition to IFRS 16 the weighted average incremental
borrowing rate applied to lease liabilities recognised under IFRS
16 was 6.3% (which is the prime rate plus 2%).
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE
HALF-YEAR ENDED 31 DECEMBER 2019
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
(CONTINUED)
b) New standards adopted as at 1 July 2019
(continued)
The following is a reconciliation of total operating lease
commitments at 30 June 2019 to the lease liabilities recognised at
1 July 2019:
Operating lease commitments disclosed as
at 30 June 2019
A$
1,585,366
Discounted using the lessee’s weighted
average incremental borrowing rate at the date of initial
application
A$
1,362,065
Add: adjustments as a result of a
different treatment of extension and termination of options
2,877,034
Lease liabilities recognised
as at 1 July 2019
A$
4,239,099
Of which are:
Current lease liabilities
A$
691,119
Non-current lease liabilities
3,547,980
A$
4,239,099
IFRIC 23 Uncertainty over Income Tax Treatment
IASB Interpretation 23 (Interpretation 23) Uncertainty over
Income Tax Treatment Interpretation 23 clarified the application of
the recognition and measurement criteria in IAS 112 Income Taxes
where there is uncertainty over income tax treatments and requires
an assessment of each uncertain tax position as to whether it is
probable that a taxation authority will accept the position. Where
it is not probable, the effect of the uncertainty is reflected in
determining the relevant taxable profit or loss, tax bases, unused
tax losses and unused tax credits or tax rates. The amount is
determined as either the single most likely amount or the sum of
the probability weighted amounts in a range of possible outcomes,
whichever better predicts the resolution of the uncertainty.
Judgements are reassessed as and when new facts and circumstances
are presented.
Interpretation 23 is effective for the Company’s annual
financial reporting period beginning on 1 July 2019. The Company’s
existing recognition and measurement accounting policies, together
with accounting related judgements, were in alignment with those
required by Interpretation 23 and hence no transition adjustment to
retained earnings was required. The adoption this standard did not
have any impact in the disclosure, or the amounts recognized in the
company’s condensed consolidated financial statements.
Other pronouncements
Other accounting pronouncements which have become effective from
1 July 2019 and have therefore been adopted do not have a
significant impact on the Group’s financial results or
position.
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE
HALF-YEAR ENDED 31 DECEMBER 2019
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
(CONTINUED)
c) Significant accounting policies
The Interim Financial Statements have been prepared in
accordance with the accounting policies adopted in the Group’s most
recent Annual Report for the year ended 30 June 2019, except for
the effects of applying IFRS 16.
Leases
As described in Note 1b, the Group has applied IFRS 16 using the
modified retrospective approach and therefore comparative
information has not been restated. This means comparative
information is still reported under IAS 17 and IFRIC 4.
Accounting policy applicable from 1 July 2019
For any new contracts entered into on or after 1 January 2019,
the Group considers whether a contract is, or contains a lease. A
lease is defined as “a contract, or part of a contract, that
conveys the right to use an asset (the underlying asset) for a
period of time in exchange for consideration”. To apply this
definition the Group assesses whether the contract meets three key
evaluations which are whether:
- the contract contains an identified asset, which is either
explicitly identified in the contract or implicitly specified by
being identified at the time the asset is made available to the
Group
- the Group has the right to obtain substantially all of the
economic benefits from use of the identified asset throughout the
period of use, considering its rights within the defined scope of
the contract
- the Group has the right to direct the use of the identified
asset throughout the period of use. The Group assess whether it has
the right to direct ‘how and for what purpose’ the asset is used
throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use
asset and a lease liability on the balance sheet. The right-of-use
asset is measured at cost, which is made up of the initial
measurement of the lease liability, any initial direct costs
incurred by the Group, an estimate of any costs to dismantle and
remove the asset at the end of the lease, and any lease payments
made in advance of the lease commencement date (net of any
incentives received).
The Group depreciates the right-of-use assets on a straight-line
basis from the lease commencement date to the earlier of the end of
the useful life of the right-of-use asset or the end of the lease
term. The Group also assesses the right-of-use asset for impairment
when such indicators exist.
At the commencement date, the Group measures the lease liability
at the present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease if that
rate is readily available or the Group’s incremental borrowing
rate.
Lease payments included in the measurement of the lease
liability are made up of fixed payments (including in substance
fixed), variable payments based on an index or rate, amounts
expected to be payable under a residual value guarantee and
payments arising from options reasonably certain to be
exercised.
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE
HALF-YEAR ENDED 31 DECEMBER 2019
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
(CONTINUED)
c) Significant accounting policies (continued)
Subsequent to initial measurement, the liability will be reduced
for payments made and increased for interest. It is remeasured to
reflect any reassessment or modification, or if there are changes
in in-substance fixed payments. When the lease liability is
remeasured, the corresponding adjustment is reflected in the
right-of-use asset, or profit and loss if the right-of-use asset is
already reduced to zero.
The Group has elected to account for short-term leases and
leases of low-value assets using the practical expedients. Instead
of recognising a right-of-use asset and lease liability, the
payments in relation to these are recognised as an expense in
profit or loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets have
been included in property, plant and equipment and lease
liabilities have been included in trade and other payables.
Accounting policy applicable before 1 July 2019
Finance leases
Management applies judgment in considering the substance of a
lease agreement and whether it transfers substantially all the
risks and rewards incidental to ownership of the leased asset. Key
factors considered include the length of the lease term in relation
to the economic life of the asset, the present value of the minimum
lease payments in relation to the asset’s fair value, and whether
the Group obtains ownership of the asset at the end of the lease
term.
For leases of land and buildings, the minimum lease payments are
first allocated to each component based on the relative fair values
of the respective lease interests. Each component is then evaluated
separately for possible treatment as a finance lease, taking into
consideration the fact that land normally has an indefinite
economic life.
See the accounting policy note in the year-end financial
statements for the depreciation methods and useful lives for assets
held under finance leases. The interest element of lease payments
is charged to profit or loss, as finance costs over the period of
the lease.
Operating leases
All other leases are treated as operating leases. Where the
Group is a lessee, payments on operating lease agreements are
recognised as an expense on a straight-line basis over the lease
term. Associated costs, such as maintenance and insurance, are
expensed as incurred.
d) Significant accounting judgments, estimates and
assumptions
When preparing the Half-year Report, management undertakes a
number of judgements, estimates and assumptions about recognition
and measurement of assets, liabilities, income and expenses. The
actual results may differ from the judgements, estimates and
assumptions made by management, and will seldom equal the estimated
results.
The judgements, estimates and assumptions applied in the
Half-Year Report, including the key sources of estimation
uncertainty, were the same as those applied in the Group’s Annual
Report for the year ended 30 June 2019.
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE
HALF-YEAR ENDED 31 DECEMBER 2019
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
(CONTINUED)
e) Going Concern
These financial statements have been prepared on the basis of
going concern, which contemplates the continuity of normal business
activities and the realization of assets and settlement of
liabilities in the ordinary course of business. During the
half-year ended 31 December 2019, the Group has generated a loss
for the period of A$20,980,787 (2018: A$15,579,391) and the Group
has used cash in operations of A$13,372,547 (2018:
A$10,458,479).
On 13 November 2019, the Group completed an institutional
placement in which it issued 203,389,831 shares at a price of
A$0.059 per share and received gross proceeds of A$120,000,000.
The Group benefits from cash inflows from the U.S. Biomedical
Advanced Research and Development Authority (BARDA) contracts, the
first of which was awarded to the Group in September 2015. These
payments from BARDA offset costs from various activities undertaken
to support the FDA regulatory approval process for RECELL in the
U.S., preparation for the planned commercial launch of RECELL in
the U.S., and RECELL clinical programs in the U.S. With the U.S.
FDA approval of RECELL for the treatment of acute thermal burns in
September 2018, and the subsequent U.S. market launch of the
product in January 2019, sales of goods are expected to be an
increasing source of revenue in the future. Another potential
source of revenue is the BARDA contract line item covering the
initial purchase, delivery and storage of the RECELL System in the
amount of US$7,594,620 (approximately A$10,300,000).
The Group expects to be utilizing cash reserves until U.S. and
international sales of its products in existing and expansion
markets eventually reach the level to fund ongoing operations. The
Group has historically funded its research and development
activities, and more recently its substantial investment in sales
and marketing activities, through raising capital by issuing
securities in the Company, and it is expected that similar funding
will be obtained to provide working capital if and when required.
If the Group is unable to raise capital in the future, the Group
may need to curtail expenditures by scaling back certain research
and development or other programs.
As a result of the above, the directors are satisfied that there
is sufficient working capital to support the committed research and
development programs and other activities over the next 12 months
and the Group has the ability to realize its assets and pay its
liabilities and commitments in the normal course of business.
Accordingly, the directors have prepared the half-year report on a
going concern basis.
2. REVENUE
CONSOLIDATED
31 Dec 2019
31 Dec 2018
Revenue
Sale of goods – Goods transferred at a
point in time
A$
9,684,214
A$
1,813,195
Total revenue
A$
9,684,214
A$
1,813,195
Other income
BARDA income
A$
3,549,020
A$
5,009,137
Bank interest income
296,553
103,626
A$
3,845,573
A$
5,112,763
3. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES
The Company has never made a profit and thus no amounts have
been paid, declared or recommended by way of dividend since the
commencement of operations, including up to the date of this
report.
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE
HALF-YEAR ENDED 31 DECEMBER 2019
4. OPERATING SEGMENTS
The Group’s chief operating decision maker has been identified
as the Chief Executive Officer.
The Chief Executive Officer reviews the financial and operating
performance of the business primarily from a geographic
perspective. On this basis, management have identified three
reportable segments being the Asia Pacific, Europe and Americas
including Canada. The Chief Executive Officer monitors the
performance of all these segments separately. The Group does not
operate in any other geographic segment.
The Chief Executive Officer assesses the performance of the
operating segments based on a measure of gross margin and net
profit before tax. During the six-month period to 31 December 2019,
there have been no changes from prior periods in the measurement
methods used to determine operating segments and reported segment
profit or loss.
Unallocated
The following items of income and expense and associated assets
are not allocated to operating segments as they are not considered
part of the core operations of any segment:
- Corporate revenue
- Corporate charges
The segment information provided to the Chief Executive Officer
for the reportable segments for the half-year ended 31 December
2019 is as follows:
Continuing Operations
Asia Pacific
Europe
Americas
Total
Half-year ended 31 December
2019
Revenue
Sales to external customers
A$
251,090
A$
159,064
A$
9,274,060
A$
9,684,214
Total revenue per statement of
profit or loss and other comprehensive income
251,090
159,064
9,274,060
9,684,214
BARDA and other income
256
173
3,845,144
3,845,573
Segment net loss before tax
A$
(573,602
)
A$
(142,869
)
A$
(12,608,918
)
A$
(13,325,389
)
Reconciliation of segment net result
before tax to loss before income tax
Corporate charges
(7,655,398
)
Loss before income tax
A$
(20,980,787
)
Segment assets
Segment operating assets
A$
1,197,532
A$
234,577
A$
133,824,008
A$
135,256,117
Unallocated assets
824,740
Total assets per statement of financial
position
A$
136,080,857
Segment liabilities
Segment operating liabilities
A$
200,820
A$
99,275
A$
11,835,834
A$
12,135,929
Unallocated liabilities
74,886
Total liabilities per statement of
financial position
A$
12,210,815
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE
HALF-YEAR ENDED 31 DECEMBER 2019
4. OPERATING SEGMENTS (CONTINUED)
Continuing Operations
Asia Pacific
Europe
Americas
Total
Half-year ended 31 December
2018
Revenue
Sales to external customers
A$
457,571
A$
253,633
A$
1,101,991
A$
1,813,195
Total revenue per statement of
profit or loss and other comprehensive income
457,571
253,633
1,101,991
1,813,195
BARDA and other income
9,552
269
5,102,942
5,112,763
Segment net loss before tax
A$
(626,901
)
A$
(593,225
)
A$
(11,948,943
)
A$
(13,169,069
)
Reconciliation of segment net result
before tax to loss before income tax
Corporate charges
(2,410,322
)
Loss before income tax
A$
(15,579,391
)
Segment assets
Segment operating assets
A$
568,571
A$
401,546
A$
31,802,314
A$
32,772,431
Unallocated assets
3,574,951
Total assets per statement of financial
position
A$
36,347,382
Segment liabilities
Segment operating liabilities
A$
169,516
A$
151,248
A$
4,591,266
A$
4,912,030
Unallocated liabilities
188,068
Total liabilities per statement of
financial position
A$
5,100,098
There was no material difference between the basis of
segmentation and the measurement of segment result compared to the
30 June 2019 annual report.
5. COMMITMENTS AND CONTINGENCIES
There are no significant changes to the commitments and
contingencies disclosed in the most recent Annual Report.
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE
HALF-YEAR ENDED 31 DECEMBER 2019
6. PLANT AND EQUIPMENT
The following tables show the movements in plant and
equipment:
Buildings
IT equipment
and software
Other
equipment
Total
Gross carrying amount
Balance at 1 July 2019
A$
220,835
A$
958,363
A$
1,608,563
A$
2,787,761
Adjustment on transition to IFRS 16
5,207,064
-
-
5,207,064
Additions
-
-
270,059
270,059
Net exchange difference
(88,655
)
(16,262
)
7,357
(97,560
)
Balance at 31 December
2019
A$
5,339,244
A$
942,101
A$
1,885,979
A$
8,167,324
Depreciation
Balance at 1 July 2019
A$
(89,241
)
A$
(405,059
)
A$
(454,946
)
A$
(949,246
)
Adjustment on transition to IFRS 16
(1,757,453
)
-
-
(1,757,453
)
Net exchange difference
92,263
635
1,238
94,136
Depreciation charge for the half-year
(36,916
)
(92,030
)
(96,042
)
(224,988
)
Balance at 31 December
2019
A$
(1,791,347
)
A$
(496,454
)
A$
(549,750
)
A$
(2,837,551
)
Carrying amount at 31 December
2019
A$
3,547,897
A$
445,647
A$
1,336,229
A$
5,329,773
Buildings
IT equipment
and software
Other
equipment
Total
Gross carrying amount
Balance at 1 July 2018
A$
143,436
A$
635,228
A$
669,478
A$
1,448,142
Additions
49,869
238,270
837,983
1,126,122
Net exchange difference
27,530
84,865
101,102
213,497
Balance at 30 June
2019
A$
220,835
A$
958,363
A$
1,608,563
A$
2,787,761
Depreciation
Balance at 1 July 2018
A$
(46,580
)
A$
(287,990
)
A$
(370,990
)
A$
(705,560
)
Net exchange difference
(11,411
)
(46,937
)
(62,404
)
(120,752
)
Depreciation charge for the fiscal
year
(31,250
)
(70,132
)
(21,552
)
(122,934
)
Balance at 30 June
2019
A$
(89,241
)
A$
(405,059
)
A$
(454,946
)
A$
(949,246
)
Carrying amount at 30 June
2019
A$
131,594
A$
553,304
A$
1,153,617
A$
1,838,515
Included in the net carrying amount of plant and equipment are
right-of-use assets at 31 December 2019 as follows:
Buildings
A$
3,449,611
Total right-of-use assets
A$
3,449,611
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE
HALF-YEAR ENDED 31 DECEMBER 2019
7. LEASE LIABILITIES
Lease liabilities are presented in the statement of financial
position within borrowings as follows:
31 December 2019
Lease liabilities (current)
A$
718,756
Lease liabilities (non-current)
3,117,791
Total
A$
3,836,547
The Group has leases for the corporate office and manufacturing
facility. The lease liabilities are secured by the related
underlying assets. Future minimum lease payments at 31 December
2019 were as follows:
Minimum lease payments
due
Within one year
One to five years
After five years
Total
31 December 2019
Lease payments
A$
976,119
A$
3,528,375
A$
-
A$
4,504,494
Finance charges
(257,363
)
(410,584
)
-
(667,947
)
Net present values
A$
718,756
A$
3,117,791
A$
-
A$
3,836,547
8. CONTRIBUTED EQUITY
CONSOLIDATED
31 Dec 2019
30 Jun 2019
Ordinary shares
Issued and fully paid
A$
317,116,290
A$
204,279,078
Movement in ordinary shares on issue:
Number
Amount
At 1 July 2019
A$
1,871,299,575
A$
204,279,078
Issue of shares
246,174,702
120,402,440
Capital raising costs
-
(7,565,228
)
At 31 December 2019
A$
2,117,474,277
A$
317,116,290
(a) Recognised share-based payment expenses
The expense recognised for employee services received during the
half-year is shown in the table below:
2019
2018
Expenses arising from equity-settled
share-based payment transactions
A$
5,326,289
A$
1,043,694
Total expense arising from share-based
payment transactions
A$
5,326,289
A$
1,043,694
(b) Option pricing model: Employee Share Option Plan (“ESOP”)
and Investor
Equity-settled transactions
The fair value of the equity-settled share options granted under
the ESOP is estimated at the date of grant using a Binomial Model
taking into account the terms and conditions upon which the options
were granted.
The options issued in the period have vesting criteria based on
the following performance conditions:
- Tenure with the Company
- Revenue target
- Initial BARDA procurement under CLIN2 of the BARDA
contract
- Initial public offering of the Company in the US Stock
Exchange
- Establishing a Sarbanes-Oxley Act Section 404 compliant
program
- US domiciliation of the Company
- Two new analysts to follow the Company stocks
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE
HALF-YEAR ENDED 31 DECEMBER 2019
8. CONTRIBUTED EQUITY (CONTINUED)
(b) Option pricing model: ESOP and Investor
(continued)
i) On 1 July 2019, 1,000,000 options were granted to employees
at an exercise price of A$0.440 expiring on 1 July 2029.
The following table lists the inputs to the models used for the
options granted to employees each year:
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Grant date
1/7/2019
1/7/2019
1/7/2019
1/7/2019
Share price at date of grant
A$0.420
A$0.420
A$0.420
A$0.420
Dividend yield (%)
0%
0%
0%
0%
Expected volatility (%)
80%
80%
80%
80%
Risk-free interest rate (%)
1.36%
1.36%
1.36%
1.36%
Expected life of option (days)
3,650
3,650
3,650
3,650
Expected vesting period (days)
365
730
1,095
1,460
Fair value at date of grant
A$0.2518
A$0.2703
A$0.2862
A$0.2994
Option exercise price (A$)
A$0.440
A$0.440
A$0.440
A$0.440
ii) On 1 October 2019, 1,230,000 options were granted to
employees at an exercise price of A$0.590 expiring on 1 October
2029.
The following table lists the inputs to the models used for the
options granted to employees each year:
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Grant date
1/10/2019
1/10/2019
1/10/2019
1/10/2019
Share price at date of grant
A$0.590
A$0.590
A$0.590
A$0.590
Dividend yield (%)
0%
0%
0%
0%
Expected volatility (%)
75%
75%
75%
75%
Risk-free interest rate (%)
0.97%
0.97%
0.97%
0.97%
Expected life of option (days)
3,650
3,650
3,650
3,650
Expected vesting period (days)
365
730
1,095
1,460
Fair value at date of grant
A$0.3476
A$0.3705
A$0.3914
A$0.4081
Option exercise price (A$)
A$0.590
A$0.590
A$0.590
A$0.590
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE
HALF-YEAR ENDED 31 DECEMBER 2019
8. CONTRIBUTED EQUITY (CONTINUED)
(b) Option pricing model: ESOP and Investor
(continued)
iii) On 22 November 2019, 13,500,000 options were granted to an
employee at an exercise price of A$0.560 expiring on 22 November
2029.
- Tenure – total of 6,750,000 options issued but to vest over the
three-year period commencing 22 November 2020;
- Milestone performance – total of 6,750,000 options issued, but
to vest upon the achievement of establishing a Sarbanes-Oxley Act
Section 404 compliant program, U.S. domiciliation of the Company
and initiation of two new analysts to follow the Company
stocks.
The following table lists the inputs to the models used for the
options granted to employees each year:
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Grant date
22/11/2019
22/11/2019
22/11/2019
22/11/2019
Share price at date of grant
A$0.590
A$0.590
A$0.590
A$0.590
Dividend yield (%)
0%
0%
0%
0%
Expected volatility (%)
80%
80%
80%
80%
Risk-free interest rate (%)
1.16%
1.16%
1.16%
1.16%
Expected life of option (days)
3,650
3,650
3,650
3,650
Expected vesting period (days)
365
365
730
730
Fair value at date of grant
A$0.4083
A$0.3585
A$0.4264
A$0.4785
Option exercise price (A$)
A$0.560
A$0.560
A$0.560
A$0.560
Tranche 5
Tranche 6
Tranche 7
Grant date
22/11/2019
22/11/2019
22/11/2019
Share price at date of grant
A$0.590
A$0.590
A$0.590
Dividend yield (%)
0%
0%
0%
Expected volatility (%)
80%
80%
80%
Risk-free interest rate (%)
1.16%
1.16%
1.16%
Expected life of option (days)
3,650
3,650
3,650
Expected vesting period (days)
730
1,095
1,460
Fair value at date of grant
A$0.3853
A$0.4083
A$0.4264
Option exercise price (A$)
A$0.560
A$0.560
A$0.560
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE
HALF-YEAR ENDED 31 DECEMBER 2019
8. CONTRIBUTED EQUITY (CONTINUED)
(c) Long-term incentive (LTI) rights
i) On 26 November 2019 (and following shareholder approval),
39,554,252 LTIs were issued to the Company’s Chief Executive
Officer, Dr Michael Perry based on the following milestones:
- Tenure – total of 14,252,100 LTIs issued but to vest over the
three-year period commencing 1 June 2020;
- Milestone performance – total of 25,302,152 LTIs issued, but to
vest upon the achievement of the following milestones:
- First patient first visit for treatment in an FDA approved U.S.
soft tissue and trauma trial by the Company prior to 31 March
2020.
- First patient first visit for treatment in an FDA approved U.S.
paediatric trial by the Company prior to 30 June 2020.
- First patient first visit for treatment in an FDA approved U.S.
pilot vitiligo trial by the Company prior to 30 September
2020.
- FDA application submission for approval of the next generation
RECELL device prior to 30 June 2021.
- FDA approval of the next generation RECELL device prior to 30
June 2022.
The following table lists the inputs to the models used for the
options granted to employee each year:
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Grant date
26/11/2019
26/11/2019
26/11/2019
26/11/2019
Share price at date of grant
A$0.575
A$0.575
A$0.575
A$0.575
Exercised price
A$ nil
A$ nil
A$ nil
A$ nil
Expected life of LTIs (days)
3,650
3,650
3,650
3,650
Expected vesting period (days)
188
553
918
126
Dividend yield (%)
0%
0%
0%
0%
Expected volatility (%)
80%
80%
80%
80%
Risk-free interest rate (%)
1.08%
1.08%
1.08%
1.08%
Tranche 5
Tranche 6
Tranche 7
Tranche 8
Grant date
26/11/2019
26/11/2019
26/11/2019
26/11/2019
Share price at date of grant
A$0.575
A$0.575
A$0.575
A$0.575
Exercised price
A$ nil
A$ nil
A$ nil
A$ nil
Expected life of LTIs (days)
3,650
3,650
3,650
3,650
Expected vesting period (days)
282
217
Not probable
Not probable
Dividend yield (%)
0%
0%
0%
0%
Expected volatility (%)
80%
80%
80%
80%
Risk-free interest rate (%)
1.08%
1.08%
1.08%
1.08%
NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS FOR THE
HALF-YEAR ENDED 31 DECEMBER 2019
8. CONTRIBUTED EQUITY (CONTINUED)
(c) Long-term incentive (LTI) rights (continued)
ii) On 22 November 2019, 4,500,000 LTIs were issued to an
employee and will vest pending relocation within two years of the
effective date.
The following table list the inputs to the model used for the
LTIs granted:
Grant date
22/11/2019
Share price at date of grant
A$0.590
Exercised price
A$ nil
Expected life of LTIs (days)
3,650
Expected vesting period (days)
730
Dividend yield (%)
0%
Expected volatility (%)
80%
Risk-free interest rate (%)
1.16%
iii) On 15 November 2019, 400,000 LTIs were issued to employees
and will vest immediately.
The following table list the inputs to the model used for the
LTIs granted:
Grant date
15/11/2019
Share price at date of grant
A$0.590
Exercised price
A$ nil
Expected life of LTIs (days)
3,650
Expected vesting period (days)
Immediately
Dividend yield (%)
0%
Expected volatility (%)
80%
Risk-free interest rate (%)
1.16%
9. RELATED PARTY DISCLOSURES
Other than employment matters and indemnification agreements
between our directors and executive officers, related party
transactions were limited to director fees, consultancy fees and
travel reimbursements paid under normal terms and conditions to
Bioscience Managers Pty Ltd of which Mr. Jeremy Curnock-Cook is an
officer and Dr. Michael Perry is a Director. Total fees paid to
Bioscience Managers Pty Ltd were A$50,926 and A$51,802 for the
half-years ended 31 December 2019 and 2018, respectively (and are
directors’ fees paid to Mr. Jeremy Curnock-Cook).
Details of all related party transactions have been disclosed in
the annual report for the year ended 30 June 2019. There have been
no new significant related party transactions during the interim
period.
10. SUBSEQUENT EVENTS
From the end of the reporting period to the date of this report,
no matter or circumstance has arisen which has significantly
affected, or may significantly affect, the operations of the Group,
the results of those operations or the state of affairs of the
Group.
DIRECTORS’ DECLARATION FOR THE HALF-YEAR ENDED 31
DECEMBER 2019
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of Avita
Medical Limited, I state that:
In the opinion of the Directors:
a)
the financial statements and notes of the consolidated entity are
in accordance with the Corporations Act 2001, including:
(i)
Giving a true and fair view of the
financial position at 31 December 2019 and the performance for the
half-year ended on that date of the consolidated entity; and
(ii)
Complying with Accounting Standard IAS 134
Interim Financial Reporting and the Corporations Regulations 2001;
and
b)
there are reasonable grounds to believe that the company will be
able to pay its debts as and when they become due and payable.
On behalf of the Board
Dr Michael Perry Chief Executive Officer and Executive
Director Dated: 19 February 2020 Valencia, California, United
States
Grant Thornton
Level 17, 383 Kent Street Sydney NSW 2000
Correspondence to: Locked Bag Q800 QVB Post
Office Sydney NSW 1230
T +61 2 8297 2400 F +61 2 9299
4445 E info.nsw@au.gt.com W
www.grantthornton.com.au
Independent Auditor’s Report
To the Members of Avita Medical
Limited
Report on the review of the half year financial
report
Conclusion
We have reviewed the accompanying half year financial report of
Avita Medical Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated condensed statement of
financial position as at 31 December 2019, and the consolidated
condensed statement of profit or loss and other comprehensive
income, consolidated condensed statement of changes in equity and
consolidated condensed statement of cash flows for the half year
ended on that date, a description of accounting policies, other
selected explanatory notes, and the directors’ declaration.
Based on our review, which is not an audit, nothing has come to
our attention that causes us to believe that the half year
financial report of Avita Medical Limited does not give a true and
fair view of the financial position of the Group as at 31 December
2019, and of its financial performance and its cash flows for the
half year ended on that date, in accordance with the Corporations
Act 2001, including complying with Accounting Standard AASB 134
Interim Financial Reporting.
Directors’ responsibility for the half year financial
report
The Directors of the Company are responsible for the preparation
of the half year financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the
Directors determine is necessary to enable the preparation of the
half year financial report that gives a true and fair view and is
free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express a conclusion on the half year
financial report based on our review. We conducted our review in
accordance with Auditing Standard on Review Engagements ASRE 2410
Review of a Financial Report Performed by the Independent Auditor
of the Entity, in order to state whether, on the basis of the
procedures described, we have become aware of any matter that makes
us believe that the half year financial report is not in accordance
with the Corporations Act 2001 including giving a true and fair
view of the Group’s financial position as at 31 December 2019 and
its performance for the half year ended on that date, and complying
with Accounting Standard AASB 134 Interim Financial Reporting and
the Corporations Regulations 2001. As the auditor of Avita Medical
Limited, ASRE 2410 requires that we comply with the ethical
requirements relevant to the audit of the annual financial
report.
A review of a half year financial report consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with Australian Auditing Standards and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Independence
In conducting our review, we have complied with the independence
requirements of the Corporations Act 2001.
Grant Thornton Audit Pty Ltd Chartered Accountants
M R Leivesley Partner – Audit & Assurance
19 February 2020
_____________________________________
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version on businesswire.com: https://www.businesswire.com/news/home/20200218006215/en/
U.S. Media: Sam Brown, Inc. Christy Curran Phone
+1 615 414 8668 christycurran@sambrown.com
O.U.S. Media: Monsoon Communications Rudi
Michelson Phone +61 (0)3 9620 3333 Mobile +61 (0)411 402 737
rudim@monsoon.com.au
Investors: Westwicke Partners Caroline Corner
Phone +1 415 202 5678 caroline.corner@westwicke.com
AVITA Medical Ltd David McIntyre Chief Financial Officer
Phone +1 661 367 9178 dmcintyre@avitamedical.com
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