10-K
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d80602d10k.htm
10-K
10-K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
For the fiscal year ended June 30, 2020
or
For the transition period from
to
Commission File Number: 001-39059
AVITA THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
28159 Avenue Stanford
Suite 220
Valencia, CA
91355
(Address of principal executive offices and Zip Code)
Registrant’s telephone number, including area code: (661) 367-9170
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.0001 per share RCEL The NASDAQ Stock Market LLC
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated
filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☐
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has selected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☒
The aggregate market value of the voting and nonvoting
common equity held by non-affiliates of the registrant was approximately $963,450,796 on December 31, 2019, using the closing price on that day of $45.5
The number of shares of the registrant’s $0.0001 par value common stock outstanding as of August 20, 2020 was 21,468,494.
Table of Contents
TABLE OF CONTENTS
Page
FORWARD LOOKING STATEMENTS 2
Item 1. Business 3
Item 1A. Risk Factors 25
Item 1B. Unresolved Staff Comments 38
Item 2. Properties 38
Item 3. Legal Proceedings 38
Item 4. Mine Safety Disclosures 38
Item 6. Selected Financial Data 39
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 48
Item 8. Financial Statements and Supplementary Data 49
Item 9A. Controls and Procedures 49
Item 9B. Other Information 50
PART III 50
Item 10. Directors, Executive Officers and Corporate Governance 50
Item 11. Executive Compensation 57
Item 14. Principal Accounting Fees and Services 71
Item 15. Exhibits, Financial Statement and Schedules 72
SIGNATURES 75
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual Report”) and our other public filings contain
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. Forward-looking statements can sometimes, but not always, be
identified by words such as “believe,” “expect,” “anticipate,” “estimate,” “project,” “plan,” “should,” “intend,” “may,” “will,” “would,”
“potential” and similar expressions to future periods. Forward-looking statements are not based on historical facts but rather represent current expectations and assumptions. Forward-looking statements include statements we make about
matters such as: future revenues; solvency; future industry market conditions; future changes in our capacity and operations; future operating and overhead costs; intellectual property; regulatory and related approvals; the conduct or outcome of pre-clinical or clinical (human) studies; operational and management restructuring activities (including implementation of methodologies and changes in the board of directors); future employment and contributions of
personnel; effects on the global economy of the COVID-19 virus; tax and interest rates; productivity, business process, rationalization, investment, acquisition and acquisition integrations, consulting,
operational, tax, financial and capital projects and initiatives; changes in the legal or regulatory environment; and future working capital, costs, revenues, business opportunities, cash flows, margins, earnings and growth.
Forward-looking statements relate to the future and are subject to many risks, assumptions and uncertainties, including those risks set forth in this
Annual Report in Part I, Item IA Risk Factors and elsewhere. Although we believe the expectations reflected in the forward-looking statements are reasonable, actual results, developments and business decisions could differ materially from
those contemplated by such forward-looking statements. The environment in which we operate is highly competitive, highly regulated and rapidly changing and it is not possible for our management to predict all risks, as new risks emerge from time to
time.
All subsequent written and oral forward-looking statements by or attributable to us or persons acting on our behalf are expressly qualified
in their entirety by these factors. We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future developments or otherwise, except as may be required by law.
Currency
In this Annual Report, all references to
“dollars” or “$” are to the currency of the United States, and all references to “Australian dollars”, “A$” or “AUD$” are to the currency of Australia.
Redomicile Share Exchange
On June 29, 2020, we completed
a redomicile transaction (“Redomicle Transaction”), as a result of which the location of incorporation of the parent of the AVITA Group (as defined herein) was moved from Australia to the State of Delaware. On the effective date of
the Redomicile Transaction, all of the issued and outstanding ordinary shares of AVITA Medical Limited (AVITA Medical), the former parent of the AVITA Group and the predecessor entity of AVITA Therapeutics, Inc. (“AVITA
Therapeutics” or the “Company”), were exchanged for newly issued shares of common stock of the Company, on the basis of one share of the Company’s common stock for every 100 ordinary shares of AVITA Medical. Holders of
Avita Medical’s American Depository Shares (“ADSs”) (each of which represented 20 ordinary shares of AVITA Medical) received one share of the Company’s common stock for every five ADSs held. Pursuant to the Redomicile
Transaction, we are the successor issuer to AVITA Medical as provided by Rule 12g-3(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
All share and per share information in this Annual Report have been retroactively adjusted to reflect the effect of the Redomicile Transaction for all periods
presented, unless otherwise indicated.
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PART I
Item 1. BUSINESS
General
The AVITA group of companies (comprising AVITA Therapeutics, Inc. (“AVITATherapeutics” or the “Company”) and
its subsidiaries, including AVITA Medical Limited (“AVITA Medical”)) (collectively, “AVITA Group” or “we”, “us”, or “our”) is a regenerative medicine group with a technology platform
positioned to address unmet medical needs in burn injuries, trauma injuries, chronic wounds, and dermatological and aesthetics indications, including vitiligo. Our patented and proprietary platform technology provides innovative treatment solutions
derived from the regenerative properties of a patient’s own skin. Our medical device works by preparing Spray-On SkinTM Cells, an autologous
cellular suspension comprised of the patient’s skin cells, which is then sprayed on the patient in order to regenerate natural healthy epidermis.
Our first United States (“U.S.”) product, the RECELL® System, was approved by the
U.S. Food and Drug Administration (“FDA”) in September 2018 for the treatment of acute thermal burn injuries 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, and simultaneously significantly reducing the amount of donor skin required. The RECELL System is designed to be used at the point of care as a
standalone product, or in combination with “skin transplants”, known as split-thickness skin autografts, depending on the depth of the burn injury. The pivotal studies leading to the RECELL System’s FDA premarket approval
(“PMA”) for the treatment of acute thermal burns, demonstrated that the RECELL System treated burns using 97.5 percent less donor skin when used alone in second-degree burns, and 32 percent less donor skin when used with
autograft for third-degree burns compared to standard of care autografting. In these studies a statistically significant reduction in donor skin required to treat burn patients with the RECELL System was realized without any associated compromise to
healing or safety outcomes. Donor site outcomes from the clinical trial for second-degree burns also revealed a statistically significant reduction in patient-reported pain, increased patient satisfaction and improved scar outcomes.
Our compelling data from prospective, randomized, controlled clinical trials conducted at major United States burn centers, health economics modeling, and
real-world use globally, demonstrate 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.
Following receipt of our PMA, we commenced commercializing the RECELL System in January 2019 in the U.S., and we expect the dominant focus of our commercial
efforts to be directed towards the U.S. market going forward.
The RECELL System is Therapeutic Goods Administration (“TGA”)-registered
in Australia cleared for use in the treatment of burns, acute wounds, scars and repigmentation (vitiligo). In Europe, the RECELL System received CE-mark approval for the treatment of burns, chronic wounds,
scars and vitiligo.
Our website address is www.avitamedical.com. Information contained on our website is not part of or incorporated into this report. We
make our periodic reports, together with any amendments, available on our website, free of charge, as soon as reasonably practicable after we electronically file or furnish the reports with the Securities and Exchange Commission, or SEC or with the
Australian Securities Exchange, or ASX. The SEC maintains an internet site, www.sec.gov, which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Copies of announcements
made by the Company to the ASX are available on ASX’s website (www.asx.com.au).
Corporate History
AVITA Therapeutics, a Delaware corporation, was originally formed in April 2020. The former parent company of the AVITA Group, AVITA Medical , was formed under
the laws of the Commonwealth of Australia in December of 1992, and has operated as AVITA Medical since 2008. AVITA Medical’s ordinary shares originally began trading in Australia on the Australian Securities Exchange (“ASX”) on
August 9, 1993. AVITA Medical’s ordinary shares, in the form of American Depositary Shares (“ADSs”), began trading on the NASDAQ Stock Market LLC (“NASDAQ”) on October 1, 2019 under the ticker symbol
“RCEL”.
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With effect from June 29, 2020, a statutory scheme of arrangement was implemented under Australian law
to change the domicile of the AVITA Group from Australia to the U.S.. Under the scheme of arrangement, AVITA Therapeutics, being a company incorporated in the State of Delaware in the U.S., became the new parent company of the AVITA Group, and all
ordinary shares in AVITA Medical (including ordinary shares represented by ADSs) held by securityholders were exchanged for shares of common stock or CHESS Depositary Interests (“CDIs”). As a result, the existing listing of AVITA
Medical on the ASX (as its primary listing) and on NASDAQ (as its secondary listing) was inverted and replaced with a new listing of AVITA Therapeutics on NASDAQ (as its primary listing) under the existing ticker symbol, “RCEL”, and on the
ASX (as its secondary listing) under the existing ticker symbol, “AVH”. AVITA Therapeutics’ shares of common stock trade on NASDAQ and its CDIs trade on ASX (with five CDIs trading on ASX representing one share of common stock on
NASDAQ).
Markets and Limitations of Standard of Care
Acute Thermal Burns
Acute thermal burns are
life-threatening and debilitating injuries that are among the most challenging and expensive traumatic injuries to manage. These injuries require complex surgical procedures, long and costly hospitalization, potential for clinical complications,
rehabilitation and scar treatment. In the U.S., the largest market for the treatment of burns, approximately 486,000 people, seek treatment for burns each year. Of these, at least 40,000 have burn injuries severe enough to require hospital
admission, and it is estimated that 3,300 die each year. The majority of patients treated on an in-patient basis in the U.S. are treated in specialized burn centers. Countries outside the U.S. are smaller,
disaggregated, markets for the treatment of burns and thus we do not devote significant commercial resources to those countries.
The severity of the burn
injury is generally assessed based on the area burned, and the depth of the injury. The area of the patient’s burn injury is typically described in terms of percent of total body surface area, or “TBSA.” For example, a burn covering
an average sized adult arm (circumferential) would be roughly 9% TBSA, while a burn covering an entire leg (circumferential) would be roughly 18% TBSA. The depth of the burn, referred to in terms of “degree” is generally classified into
four categories:
Burn treatment is determined in large by the area and depth of the injury. Deeper (e.g., deep partial-thickness) burns
are commonly treated with autologous split-thickness skin grafts (“STSGs”) to achieve definitive closure of the burn wound. In a STSG, or autograft, donor skin is harvested from a healthy area of the patient using a device called a
dermatome as detailed in the pictures below. The donor skin is then typically perforated into a mesh-like structure that can be expanded and transferred to the burn injury that has been prepared to remove all
pre-existing necrotic or infected tissue.
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Harvesting of Donor Skin for Use in Autografting
Treatment with STSG generates additional trauma for the patient due to the creation of a new wound via the harvesting of
healthy donor skin. Although the use of STSG has been a standard treatment for more than 50 years, autografting is associated with significant pain, itching, infection, dyschromia, dyspigmentation, delayed healing, and hypertrophic scarring of the
donor site.
The clinical benefits of earlier intervention for burn wounds are well recognized and include increased survival, reduced hospital length of
stay, decreased pain duration, and reduced infection-related complications. However, in large TBSA injuries, the patient may not have enough donor skin available to allow for immediate treatment of the entire area of burn injury with traditional
grafting techniques. The lack of available healthy donor skin in patients with high TBSA burn injuries is often the central problem impacting time to autografting and definitive closure of the wounds. In severely burned patients, doctors often must
wait until the donor sites have healed so that they can reharvest from the site, resulting in delays in treatment and healing, requiring multiple procedures and extended hospital time. While waiting for donor skin the burn wounds may be temporarily
covered by allogeneic skin graft, for example allograft (cadaver skin) or xenograft (typically pig skin). The overall cost of treatment with STSG is expensive, for example it would cost approximately $579,000 and require 59.4 days in hospital for a
patient with a 40% TBSA mixed or full-thickness burn.
To address the limitations associated with high TBSA injuries, notably lack of donor skin available
for harvest, researchers have developed alternatives such as cultured epidermal autografts (“CEA”) in which a full-thickness skin biopsy is taken from a patient and the cells are grown into sheets of skin in a laboratory and then
returned for autografting onto the patient. Limitations associated with CEAs, including Epicel® from Vericel Corporation, includes the time it takes to grow the sheets of skin (approximately
three weeks), the lack of melanocytes that provide pigmentation, and the high cost. As a result, CEAs have been lifesaving in patients hospitalized with very severe large surface area burns where there is often no other alternative for treatment.
Trauma Wounds (Soft Tissue Injuries)
Trauma wounds
or soft tissue injuries include abrasions, lacerations, punctures, gunshot wounds, crush wounds, and degloving. These injuries may be caused by trauma, infectious disease, or even surgery itself. Similar to burns, soft tissue repair is associated
with areas of skin loss. While minor skin defects may be primarily closed with standard wound care, larger open defects often require more complicated approaches including use of skin grafts, tissue flaps or dermal matrices. Open wounds associated
with traumatic injuries caused 4.5 million hospital visits in the United States in 2017 and are therefore the largest opportunity for the RECELL System.
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We believe that the RECELL System will have clinical applications beyond skin graft patients, particularly
for the treatment of open wounds greater than 5% TBSA. Relevantly, patients treated for open wounds are often treated in trauma centers in hospitals by plastic surgeons. Approximately half of the surgeons treating patients with severe burns
requiring autografting in the United States also treat trauma patients requiring autografting. Soft tissue injuries also utilize the same treatment protocol as burns and the RECELL System has already demonstrated positive outcomes in soft tissue
repair both in the United States, and internationally. We believe the soft tissue injury market is highly complementary to our existing commercialization efforts related to the United States burn market.
On October 30, 2019, the FDA approved the Company’s Investigational Device Exemption (“IDE”) application to conduct a pivotal trial
evaluating the safety and effectiveness of the RECELL System in combination with meshed autografting for the treatment of acute full-thickness skin defects, such as degloving (a type of injury where the skin is ripped from the underlying tissue),
crush wounds (a break in the external surface of the body), abrasions, lacerations, and surgical wounds.
On March 2, 2020 and, pursuant to the
abovementioned IDE, we initiated a prospective, multi-center, randomized controlled study to compare the clinical performance of conventional skin grafting with and without the use of the RECELL System on acute
non-burn full-thickness skin defects. Each patient will have a control wound treated with conventional skin grafting and a wound treated with expanded skin grafting in combination with the RECELL System. The
study’s two primary effectiveness endpoints are:
• Incidence of healing by eight weeks post treatment.
Healing will be evaluated by a qualified clinician blinded to the treatment allocation. Additional long-term safety and effectiveness
data collected over the course of the study will include blinded evaluation of scar outcomes and patient treatment preference.
Vitiligo and Other
Dermatological Indications
Vitiligo is a disease that causes the loss of skin pigmentation or color in patches which tend to increase in size over
time. The extent and rate of color loss from vitiligo is unpredictable, can affect the skin on any part of the body, and may also affect hair and the inside of the mouth. Non-segmental vitiligo is the most
common variant and impacts the majority of patients and is characterized by symmetrical patches that appear on both sides of the body, such as on hands and knees.
Vitiligo occurs when melanocytes, the pigment-producing skin cells, die or stop producing melanin, the pigment that gives skin, hair and eyes color. Vitiligo
is believed to be an autoimmune disorder in which a patient’s immune system attacks and destroys the melanocytes in the skin. It may also be caused by heredity factors or a triggering event, such as sunburn, stress or exposure to industrial
chemicals. Vitiligo affects people of all skin types, but it may be more noticeable in people with darker skin. The condition is not life-threatening or physically painful but can significantly alter physical appearance, have negative emotional and
psychological consequences, and impair quality of life.
Vitiligo cannot be cured at present, and medical treatments generally fall into one of two
categories:
Survey results reveal a low level of patient satisfaction with current treatment options. The majority of vitiligo
patients in the United States are treated by dermatologists. It is estimated that worldwide vitiligo prevalence is between 0.5-2% of the population. China accounts for the highest population of vitiligo
patients with an estimated 12.5 million cases, followed by the United States with 6.5 million cases, the European Union (“EU”) with 5.3 million, and Japan with 2 million.
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On December 23, 2019, the FDA approved our IDE application to conduct a feasibility study
evaluating the safety and effectiveness of the RECELL System for repigmentation of depigmented lesions associated with stable vitiligo. The randomized controlled study’s primary effectiveness measure is the percent area of repigmented skin 24
weeks after treatment, as evaluated by a clinician blinded to the treatment assignment. Additional effectiveness data cofllected over the course of the 24-week study will include blinded evaluator
categorization of treatment success and patient rating of repigmentation. The Company expects to commence enrollment in the vitiligo feasibility study in the second half of the 2020 calendar year.
In addition, on July 1, 2020, the FDA separately approved our IDE application for a pivotal study in vitiligo which is titled “A Prospective Multi-Arm Blinded-Evaluator Within-Subject Randomized Controlled Clinical Study to Investigate the Safety and Effectiveness of RECELL for Repigmentation of Stable Vitiligo.” The Company expects to commence
enrollment in the vitiligo pivotal study in the second half of the 2020 calendar year.
The Company continues to have a high degree of confidence that the
RECELL System can be an effective therapeutic offering for patients with stable vitiligo. More than 1,000 patients have been treated with the RECELL System for vitiligo outside of the United States, and to date there are eight (8) publications
demonstrating the benefits of the RECELL System in vitiligo.
Sponsored Research
The RECELL System has been studied in a wide variety of indications and has been shown to enable patients to regenerate natural healthy skin in instances where
the patient’s outer skin covering, or epidermis, has been lost or damaged due to injury, defects or other flaws. In addition to these existing applications of the RECELL System, we are interested in pursuing related opportunities where the
RECELL System’s ability to harness the natural healing capabilities of the body could be supplemented with genetically modified cells in patients suffering from certain genetic skin disorders. In this way, the RECELL System could potentially be
used as a “delivery vehicle” for other therapeutic offerings.
In November 2019, we entered into a research collaboration with the Gates Center
for Regenerative Medicine at the University of Colorado School of Medicine (“Gates Center”) for the purposes of seeking to establish proof-of-concept
and explore further development of a spray-on treatment of genetically modified cells for patients with epidermolysis bullosa (“EB”). Pursuant to this collaboration, we will pair the RECELL
System Spray-On SkinTM Cells technology and expertise with the Gates Center’s innovative, patent pending combined reprogramming and gene editing
technology to allow cells to function properly. Under the arrangement with the Gates Center, we retain the option to exclusively license technologies emerging from the partnership for further development and commercialization. EB is a group of rare
and incurable skin disorders caused by mutations in genes encoding structural proteins resulting in skin fragility and blistering, leading to chronic wounds and, in some sub-types, an increased risk of
squamous cell carcinoma or death. There are no approved curative therapies, and current treatment is palliative—focused primarily on pain and nutritional management, itching relief, wound care, and bandaging.
Beyond EB, we are pursing an additional research collaboration for application of the RECELL System within the aesthetics markets, estimated to be a
$10 billion market in the United States alone in 2018.
Chronic Wounds
The chronic and other hard-to-heal wound market consists of a broad population
of more than 6 million patients in the United States suffering from conditions such as venous leg ulcers, diabetic foot ulcers, pressure ulcers and non-healing surgical wounds. Chronic and other hard-to-heal wounds represent a $25 billion burden to the U.S. healthcare system. Chronic and
hard-to-heal wounds are caused by impairment in the biochemical and cellular healing processes due to local or systemic (physciological) conditions and generally can
take weeks or months to heal, if not longer. Such wounds can lead to significant morbidity, including pain, infection, impaired mobility, hospitalization, reduced productivity, amputation and mortality.
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The RECELL System has been used to treat venous leg ulcers and diabetic foot ulcers outside of the United
States, and there are numerous peer-reviewed journals illustrating associated benefits to patients with those health challenges. The Company is considering, though has not sought FDA approval, commencing a pivotal study in one or both of the
indications mentioned above. The Company expects to make a determination to proceed with a pivotal study towards the end of the 2020 calendar year, or early in the 2021 calendar year.
Venous Leg Ulcers:
Venous leg ulcers (“VLUs”)
are associated with poor venous return (ischemia), primarily occurring as a result of age, obesity, previous leg injuries, deep venous thrombosis, and phlebitis. Venous ulcers are often recurrent, and an open ulcer can persist for weeks to many
years. Treatment options for venous ulcers include leg elevation, compression therapy, advanced wound dressings, pentoxifylline, and aspirin therapy. Surgical management, inclusive of skin grafting, is indicated for ulcers that are large, of
prolonged duration, or refractory to conservative measures. The refractory nature of these ulcers increases the risk of morbidity and mortality and they have a significant impact on patient quality of life. The financial burden of venous ulcers is
estimated to be $2 billion per year in the United States.
Diabetic Foot Ulcers:
A diabetic foot ulcer (“DFU”) is an open sore or wound and is commonly located on the bottom of the foot. Approximately 5% to 7% of people
with diabetes currently have or previously had a DFU, and approximately 25% will develop a DFU in their lifetime. Of those who develop a foot ulcer, 6% will be hospitalized due to infection or other ulcer-related complication. DFUs are the leading
cause of non-traumatic lower extremity amputations in the United States. In the United States, it is estimated that approximately 1.3 million people have a DFU, and over $15 billion was spent on the
care of this condition. Current standard of care for DFUs includes offloading therapy to help redistribute foot pressure away from the ulcer, and moist wound therapy. For DFUs non-responsive to standard of
care, surgical closureutilizing autografts, skin substitutes, or biologics is often required.
The RECELL System
The RECELL® Autologous Cell Harvesting System (“RECELL System”) allows for the
preparation of Spray-On SkinTM Cells, an autologous cellular suspension comprised of the patient’s own skin cells necessary to regenerate natural
healthy epidermis. These Spray-On Skin Cells are prepared at the point of care in as little as 30 minutes, providing a new way to treat thermal burns and other wounds, skin injuries or defects of the skin. The
regenerative skin cell suspension includes keratinocytes, fibroblasts, and melanocytes, all of which play critical roles in wound healing. The ability of the RECELL System to retain melanocytes in the cell suspension is notable as these cells are
critical for the restoration of natural pigmentation to the area treated.
The RECELL System is a single use (disposable), stand-alone, battery operated,
autologous cell harvesting device containing enzymatic and buffer solutions, sterile surgical instruments, and actuators to achieve the disaggregation and delivery of skin cells. A small skin sample from a patient is enzymatically and mechanically
processed in the RECELL System at the point of care to isolate skin cells and to produce a suspension of Spray-On Skin Cells for immediate delivery onto a prepared wound bed. The RECELL System can be used to
prepare enough suspension to treat a wound up to 80 times the size of the donor skin sample. For example, a skin sample approximately the size of a credit card can be used to treat a wound that covers an adult patient’s entire back.
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Preparation and Application of Spray-On Skin Cells
Using the RECELL System
In the United States, the RECELL System is approved by the FDA for use in the treatment of acute thermal burn wounds in
patients 18 years of age and older. The RECELL System is approved for use by appropriately-licensed healthcare professionals at the patient’s point of care to prepare autologous Spray-On Skin Cells for
direct application to acute partial-thickness burns, or application in combination with meshed autografting for acute full-thickness burns. In the United States, the RECELL System is produced in a configuration that allows preparation of up to 24 ml
of cell suspension which can be used to cover an acute wound area up to 1,920 cm2, or approximately 10% of a patient’s body.
In Australia, the
RECELL System is TGA-registered for the treatment of burns, acute wounds, scars and vitiligo. The RECELL System is produced in a configuration that allows for treatment of up to 320 cm2 for the markets in
Australia. In the European Union, the RECELL System received CE-mark approval for the treatment of burns, chronic wounds, scars and vitiligo. Together with our local Japanese partner, Cosmotec Co. Ltd.
(COSMOTEC), we are also pursuing Pharmaceuticals and Medical Devices Act (“JPMDA”) application for approval to market the RECELL System in Japan for use in the treatment of burns and potentially other applications.
The RECELL System Clinical Results
The September 2018
FDA approval of the RECELL System for use in the treatment of acute thermal burns in patients 18 years and older was supported by two prospective, randomized, controlled pivotal clinical trials, one in deep partial-thickness (second-degree) burns
and one in mixed and full-thickness (third-degree) burns. The randomized, controlled trials demonstrated that treatment using the RECELL System requires substantially less donor skin than required with conventional split-thickness autografts to
achieve closure of burn wounds. Reduction in donor skin requirements provides key clinical benefits to patients and significant reductions in the cost of treatment. The results of these clinical studies have been published in peer-reviewed journals
and have been presented at burn focused meetings and other major medical conferences. Presentations by key opinion leaders on the clinical use of RECELL have been made at over 20 medical conferences in 2018 and 2019, many of which include
highlighting the pivotal clinical trial results as well as use of the RECELL System in the treatment of burns in specific subgroups of patients and types of burn injuries, including facial burns and large TBSA burns. Patients included in many of
these presentations were treated as part of the FDA-approved IDE Compassionate Use and Continued Access research programs made available prior to receipt of PMA from the FDA.
In addition to an extensive clinical trial program in acute thermal burns in adults, earlier-stage clinical studies have been conducted in pediatric burns,
scald injuries, treatment of donor sites, vitiligo, chronic wounds (venous leg ulcers and diabetic foot ulcers), scar hypopigmentation, and acute trauma.
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The RECELL System Clinical Results in Thermal Burns
RECELL Pivotal Clinical Trial in Second-Degree Acute Thermal Burns
One of the two randomized, controlled clinical trials of the RECELL System supporting the September 2018 FDA approval was a study of patients with partial
thickness (second-degree burns) conducted at 12 U.S. burn centers. The pivotal trial evaluated 101 adult patients with thermal, partial-thickness burns covering 1% to 20% of their total body surface area. Patients served as their own control, and
two comparable burn sites were selected for comparative testing on each patient. One burn site on each patient was treated with Spray-On-Skin Cells prepared using the
RECELL System, while the other burn site was treated with the standard treatment, consisting of meshed autograft expanded 2:1.
During the pivotal trial,
the patient donor skin required to be harvested to treat burn sites using the RECELL System was 97.5% less than the amount harvested to treat burn sites with the standard of care (p<0.001). Despite the statistically significant reduction in donor
skin required to treat with the RECELL System, burn sites treated using the RECELL System achieved definitive closure and long-term outcomes, including durability, comparable to the burn sites treated with standard of care.
Reduction in Donor Skin Requirements in Pivotal Trial in Second-Degree Burns
Secondary endpoints measured in the trial highlighted additional clinical benefits of the significant reduction in donor skin
harvested for treatment using the RECELL System, including:
• Significantly less donor-site pain up to Week 8 (p£0.0025)
• Significantly better donor-site scarring results (p£0.0025)
In the clinical trial, use of the RECELL System in the trial was safe and well tolerated with adverse experiences
typical for the type of burn injury sustained. The results of this trial were published in a peer-reviewed scientific publication, the Journal of Burn Care & Research, in September 2018.
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RECELL Pivotal Clinical Trial in Third-Degree Acute Thermal Burns
The second randomized, controlled clinical trial of the RECELL System supporting the September 2018 FDA approval was a study of patients with mixed and
full-thickness burn wounds (third-degree burns) conducted at seven U.S. burn centers. The pivotal trial evaluated 30 patients ranging in age from nine to 68 years old with thermal, mixed-thickness burns, including full-thickness burns, covering 5%
to 46% of their total body surface area. Patients served as their own control, and two comparable burn sites were selected for comparative testing on each patient. One burn site was treated with the standard treatment, meshed autograft, while the
other was treated with Spray-On-Skin Cells prepared using the RECELL System combined with more widely meshed autografts (for example, if a 2:1 meshed autograft was used
to treat the control burn site, then a 3:1 meshed autograft used in combination with Spray-On Skin Cells was used to treat the RECELL site). The co-primary endpoints of
the pivotal trial were reduction in donor skin requirements and non-inferiority for complete, definitive wound closure.
The pivotal clinical trial achieved its co-primary endpoints, demonstrating a statistically significant reduction in
donor skin requirements versus standard of care while achieving comparable definitive wound closure. Treatment using the RECELL System achieved comparable healing, long-term scar and patient satisfaction outcomes using significantly less donor skin
with no safety concerns. During the pivotal trial, the patient mean donor skin required to be harvested to treat burn sites with the RECELL System was 32% less than the amount harvested to treat burn sites with the standard of care (p<0.001).
Despite the statistically significant reduction in donor skin required to treat using the RECELL System, eight weeks post treatment 92% of the burn sites treated using the RECELL System achieved complete healing versus 85% for the sites treated with
the standard of care, demonstrating non-inferiority.
Reduction in Donor Skin Requirements in
Pivotal Trial in Second-Degree Burns
Use of the RECELL System was safe and well tolerated with no device-related adverse events. The results of this trial were
published online ahead of print in the peer-reviewed scientific publication, Burns, in December 2018, and appeared in print in June 2019.
BEACON Cost-Effectiveness Model Demonstrates Costs Savings Associated with use of RECELL System in Treatment of Severe Burns
To investigate the value proposition and potential transformative health economic impact of the RECELL System in burn care, a hospital-perspective
cost-effectiveness model was developed by IQVIATM, the Biomedical Advanced Research and Development Authority (“BARDA”), and AVITA Medical. The
Burn-MCM (Medical Counter Measure) Effectiveness Assessment Cost Outcomes Nexus (“BEACON”) model evaluates how practice patterns, interventions and patient characteristics interact across all
phases of care (wound assessment, debridement/excision, temporary coverage and permanent closure) to understand how patient and burn center outcomes change given the incorporation of a new burn care treatment, such as the RECELL System.
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As described in a peer-reviewed scientific publication in Advances in Therapy, published in May 2019,
the BEACON model uses sequential decision trees to depict the acute care pathway for burn patients, and then predicts how the RECELL System would modify treatment for patients with burns ranging from 10% to 40% TBSA. Clinical inputs were derived
from randomized controlled trials, burn surgeon surveys and interviews, and the American Burn Association National Burn Repository. An accompanying budget impact model builds on the cost-effectiveness calculations to evaluate overall cost impact to
a burn center or payor associated with incorporation of the RECELL System into patient care.
The BEACON model shows that treatment using the RECELL
System for deep partial-thickness burns reduces total treatment costs by an average of 26%, or approximately $37,000, for patients with 10% TBSA and approximately $150,000, for patients with 40% TBSA. For full-thickness burns, treatment using the
RECELL System reduced total treatment cost by 3%, or approximately $6,000 for patients with 10% TBSA, and by 42% or approximately $243,000, for patients with 40% TBSA. The cost reductions are attributed to decreasing the length of hospital stay, the
number of procedures required to close the burn wound, the donor site size and associated wound care, and number of downstream contracture release procedures. All cost savings estimates are net of the cost of the RECELL System.
The budget impact model was also used to calculate the annual budget impact of current standard of care for the treatment of burns versus treatment using the
RECELL System for a burn center with 200 patients. The model determined that treatment using the RECELL System would reduce annual total treatment costs from approximately $39.4 million to $32.6 million, saving 17% or approximately
$6.8 million.
The BEACON model may be run for the specific demographics of an individual burn center or territory, allowing the burn institution or
region to evaluate the potential benefits of the RECELL System within their specific population of burn patients. As described by researchers at a presentation at the American Burn Association
51st Annual Meeting in April 2019, the patient characteristics for the Arizona Burn Center (for example, age, burn depth, TBSA) were input into the BEACON model based on the 800 patients with 10%
TBSA and greater burns treated in 2018 at the institution, and demonstrated the following:
A similar presentation was made by researchers
at the 31st Annual Southern Region Burn Conference in November 2018 which described the application of the BEACON model to the patient characteristics for the Firefighter Burn Center, Memphis, Tennessee, and University of Tennessee Health Science
Center. The model determined that treating patients with the RECELL System alone, or in combination with widely spaced skin grafts, could reduce the burn center’s costs by up to $21 million per year compared to conventional treatment.
Major drivers of the cost savings included a decrease in length of hospital stay and a reduction in the number of surgeries and related resources (blood
transfusions and dressings).
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Additional RECELL Clinical Results Outside of Pivotal Data
A series of clinical outcomes have been presented at medical conferences and evaluated multiple patient categories and burn types in more than 150 burn
patients that were treated under FDA-approved IDE Compassionate Use and Continued Access programs made available to patients prior to receipt of PMA from the FDA.
RECELL in Treatment of Facial Burns (interim review of Compassionate Use)
Deep partial-thickness facial burns present a challenge in reconstructive surgery. Standard of care typically includes excision and allograft followed by
split-thickness autografting. Limitations of the current treatment regimen includes dyspigmentation at the sites of the skin grafts and hypertrophic scarring at the seams of the grafts, resulting in substantial patient dissatisfaction with the
outcome.
As described in a peer-reviewed scientific publication in Journal of Burn Care and Research, published in March 2020, researchers
provided a retrospective review of clinical outcomes obtained in the treatment with the RECELL System of five patients with acute deep partial-thickness facial burn injuries under the Compassionate Use IDE program. Patients in the facial burn case
studies ranged from 2.1 to 40.7 years of age and had burns covering 35% to 62% TBSA. Researchers reported that in this small study, treatment using the RECELL System provided equivalent or superior results to current treatments in facial burn care
in terms of wound healing, and excellent cosmetic outcomes.
A representative patient in the study was a 12-year-old girl with 2nd-degree facial burn and widespread 3rd-degree burns, with total injuries encompassing a 62% TBSA. The
patient had insufficient donor skin available for standard autografts. The healing of the patient’s facial burns is highlighted in the progressions of photographs included
Facial Burn Case Study
Researchers observed that the reintroduction of melanocytes as part of the cellular suspension prepared using the RECELL
System resulted in an excellent cosmetic outcome. The patient did not require surgical revisions for facial contractures and was discharged from the hospital in 24 days.
RECELL in Treatment of Pediatric Patients (interim review of Continued Access and Compassionate Use)
In patients with extensive burn injuries, lack of available donor skin is a major limitation achieving permanent closure, and the longer a wound remains open
the more susceptible a patient is to infection. In the United States, one-third of burn injuries occur in children, and the availability of donor skin for traditional meshed autografts is even more limited in
pediatric patients with extensive injuries. The use of the RECELL System, a donor skin sparing technology that enables rapid definitive closure of burn wounds, has the potential to improve patient outcomes.
Interim results describing clinical outcomes for pediatric patients treated using the RECELL System were presented at the American Burn Association
(“ABA”) 51st Annual Meeting in April 2019. Under the FDA IDE Compassionate Use and Continued Access Program, 33 pediatric patients with mixed-depth and full-thickness (third-degree) were treated with
Spray-On Skin Cells. The age range of patients was from 0.8 to 14.2 years and mean TBSA was 46% (range 20-90%). The presentation was selected as a “Best of the Best
Abstract” out of more than 500 abstract submissions to the ABA meeting.
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In this review of pediatric patients which included those with life-threatening thermal burn injuries, Spray-On Skin Cells prepared using the RECELL System were applied in combination with widely meshed split-thickness autografts to achieve definitive closure using minimal donor skin. Healing data at 4 weeks
post-treatment showed that 88.1% of the wounds were healed and at 8 weeks 92.4% of the wounds were healed. Researchers discussed the use of RECELL as a promising treatment option for pediatric burn patients.
A randomized, controlled clinical trial using the RECELL System in the treatment of pediatric patients with
2nd-degree (partial-thickness) burn wounds is currently underway.
RECELL Treatment of Donor Sites
(interim review of Compassionate Use)
In large TBSA injuries a patient may not have enough donor skin available to allow for immediate treatment of
the entire area of burn injuries with traditional autografting techniques. In severely burned patients with extensive injuries, surgeons often must wait until the donor sites have healed so that they can reharvest from the site, resulting in delays
in treatment and healing and the need for multiple procedures and extended hospital time.
Interim results describing clinical outcomes associated with
the treatment of donor sites using the RECELL System in patients with large TBSA burn were presented at the American Burn Association 51st Annual Meeting in April 2019 (the presentation was awarded Best in Category at the meeting). In the
prospective observational study of 73 subjects with life-threatening thermal burn injuries treated under the Compassionate Use program, 430 donor sites wounds were treated with Spray-On Skin Cells prepared
using the RECELL System. The mean TBSA of the patients in the study was 54.1% with 32% of subjects having a Baux score greater than 100. Two weeks after treatment, 91% of the donor sites had healed in this vulnerable patient population. No infection
or delayed healing were reported for donor sites treated with Spray-On Skin Cells. Researchers noted that the ability to reharvest additional donor skin from a site treated using the RECELL System is extremely
beneficial in this population of patients with extensive life-threatening injuries and limited available donor skin.
A representative patient in the
study was a 16-month-old female with a 30% TBSA mixed depth thermal burn with donor sites taken from her back. Spray-On Skin
Cells were applied to her donor site wound. The donor sites were 100% re-epithelialized by within two weeks of treatment. At one-yearfollow-up the donor site wound had matching color, pigment, and texture to the surrounding skin. Treatment and healing of the patient’s donor site is highlighted in the photographs included below.
Donor Site Case Study
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RECELL in Treatment of Patients with Extensive Burns (Large TBSA Patients, interim review of
Compassionate Use)
In patients with extensive burn injuries, lack of available donor skin is a major limitation in achieving permanent closure, and
the longer a wound remains open the more susceptible a patient is to infection. At the American Burn Association 51st Annual Meeting in April 2019 researchers presented data showing that the use of the RECELL System in combination with meshed
autografts achieves definitive closure for patients with burn injuries greater than 50% TBSA and achieved comparable outcomes to patients with less severe injuries.
In this review of 22 patients with life-threatening thermal burn injuries, Spray-On Skin Cells was applied in
combination with widely meshed split-thickness autografts to achieve definitive closure using minimal donor skin. For patients with greater than 50% TBSA burns, 150 burn wounds were treated with the combination of
Spray-On Skin Cells and widely meshed split-thickness autografts, with 96% of the wounds achieving complete wound closure two months after treatment. Data was compared to pivotal RCT data in which patients
with equal to or less than 50% TBSA burns, were treated with the same combination (n=53 burn wounds) and the rate of healing was similar to the large TBSA patients, with 87.2% of wounds achieving full healing two months after treatment. Researchers
reported that there were no device-related adverse events.
The RECELL System Clinical Results in Vitiligo
Small pilot studies investigating the use of the RECELL System in the treatment of vitiligo have been the subject of multiple peer-reviewed scientific
publications and presentations at medical conferences. A representative pilot study was published in the Journal of the American Academy of Dermatology in July 2015. A total of ten patients with hypopigmentation were included in the study,
five with stable segmental vitiligo, and five with piebaldism (a disorder of melanocyte development). The study was a randomized, intra-patient-controlled pilot study in which three depigmented sites were randomly allocated to be treated with the
combination of CO2 laser ablation followed by the application of Spray-On Skin Cells, CO2 laser
ablation alone, or no treatment.
The median repigmentation six months after treatment was 78% in the sites treated with the combination of CO2 laser ablation followed by the application of Spray-On Skin Cells, compared to zero median repigmentation in the control groups consisting of treatment with
CO2 laser ablation alone or no treatment. The repigmentation for the sites treated with the combination of CO2 laser ablation followed by
the application of Spray-On Skin Cells was assessed as good or excellent by 70% of the patients. No adverse effects or long-term side effects were seen in the recipient sites. Researchers concluded that
treatment with the combination of CO2 laser ablation followed by the application of Spray-On Skin Cells resulted in a high percentage of repigmentation
and was well tolerated in both stable segmental vitiligo and piebaldism patients. Photographs before and after treatment for a patient participating in the study are included below.
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Vitiligo Patient Pre- and Six-Months Post Treatment
Similar results were described by researchers in a publication in the British Journal of Dermatology in November
2017. In addition to studies which have already been the subject of peer-reviewed publication, the RECELL System has been used extensively in the treatment of vitiligo patients in countries in which the product is approved for treatment. In May 2019
use of the RECELL System in the treatment of vitiligo patients in China was the subject of two presentations at a European medical conference.
U.S.
Stable Vitiligo Pivotal Study:
On June 2, 2020 the Company announced that it had submitted an IDE supplement to the FDA to support the
initiation of a pivotal clinical trial to investigate the RECELL System for the treatment of stable vitiligo. On July 1, 2020, the FDA approved the IDE application for the pivotal study which is titled “A Prospective Multi-Arm Blinded-Evaluator Within-Subject Randomized Controlled Clinical Study to Investigate the Safety and Effectiveness of RECELL for Repigmentation of Stable Vitiligo.” The Company expects to initiate this
study in the second half of the 2020 calendar year, and has already commenced interactions with potential study sites and associated investigational review boards.
U.S. Stable Vitiligo Feasibility Study:
Separate
to the abovementioned pivotal study, we confirmed on December 30, 2019 that the FDA approved the Company’s IDE application to conduct a feasibility study evaluating the safety and effectiveness of the RECELL System for repigmentation of
depigmented lesions associated with stable vitiligo.
This study is a single site study being conducted at the University of Massachusetts Medical School
in ten (10) patients that have had stable vitiligo for at least one year. Areas of the vitiligo lesion will be randomly treated with slightly varying cell suspensions prepared using RECELL to confirm response rates and optimal suspension
parameters. The randomized controlled study’s primary effectiveness measure is the percent area of repigmented skin 24 weeks after treatment, as evaluated by a clinician blinded to the treatment assignment. Additional effectiveness data
collected over the course of the 24-week study will include blinded evaluator categorization of treatment success and patient rating of repigmentation. This study is expected to deliver additional clinical and
investigative data, in addition to that derived in relation to the pivotal study.
The RECELL System Clinical Results in Chronic Wounds
Small pilot studies using the RECELL System in the treatment of chronic wounds, particularly venous leg ulcers and diabetic foot ulcers, have been the subject
of multiple peer-reviewed scientific publications and presentations at medical conferences. In addition to studies which have already been the subject of peer-reviewed publication, the RECELL System has been used in the treatment of chronic wound
patients in countries in which the product is approved for treatment.
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A study published in the Acta Vulnologica in September 2012 included seven patients with 12 vascular ulcers which had remained open for more than 12 months. Each wound was prepared and
then treated with Spray-On Skin Cells prepared using the RECELL System. Ulcer volume and depth decreased 50% to 80% within four weeks of treatment, and six of the wounds that had remained unhealed for more
than one year were completely closed within 24 weeks of treatment. Researchers concluded that treatment with the RECELL System allowed the repair process to restart in all 12 wounds, and that patients reported reduced pain within days of treatment.
In a study published in the British Journal of Surgery in January 2015, 88 patients with chronic wounds that had not healed for at least four
weeks were evaluated. Patients were randomized to receive treatment with the combination of Spray-On Skin Cells and split-thickness autografts, or autografts alone. Results of the randomized, controlled study
were as follows:
Researchers concluded that the combination of Spray-On Skin Cell and autografts is more effective and safer than
autografts alone. Although the study involved treatment of a mix of chronic wounds, many were diabetic foot ulcers. The researchers suggest that the results show a broad range of potential applicability for the use of the RECELL System.
In a study published in the International Wound Journal (Hayes PD, Harding KG, Johnson SM, McCollum C, Téot L, Mercer K, Russell D. A pilot multi-centre prospective randomised controlled trial of RECELL for the treatment of venous leg ulcers. International Wound Journal. 2020 Jun;17(3):742-52.), 52 patients with
venous leg ulcers were evaluated as part of a prospective, randomized, controlled trial. Patients enrolled in the study had a venous leg ulcer for longer than 4 weeks and were randomized to a Treatment group that received RECELL and compression
therapy or a Control group that received compression therapy alone. At Week 14, patients treated with RECELL had a statistically greater decrease in their ulcer area compared to the Control (p<0.05). When ulcers were broken out into groups by
size, ulcers >10-80 cm2 achieved a significantly higher mean percentage of re-epithelialization over Control
(p<0.05), whereas ulcers 2-10 cm2 showed no significant difference (both at Week 14). Overall, patients reported significant improvements in pain and
consistent improvements in quality of life for the RECELL group compared to the Control. There were no differences in the safety-related events between the RECELL and Control groups aligning with the already-established favorable safety profile
associated with the device.
In a study presented to the European Wound Management Association, (P Hayes, K Harding, S Johnson, C McCollum, K
Mercer, D Russell, L Teot. The effectiveness of autologous cell suspensions to elicit positive changes in quality of life in patients with venous leg ulcers. European Wound Management Association; 2016 May
11-13; Bremen, Germany), 52 patients with venous leg ulcers were evaluated as part of a prospective, randomized, controlled trial. Patients enrolled in the study had a venous leg ulcer for longer than 4 weeks
and were randomized to a Treatment group that received
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RECELL and compression therapy or a Control group that received compression therapy alone. At Week 14, patients treated with RECELL had a statistically greater decrease in their ulcer area
compared to the Control group. When ulcers were broken out into groups by size, ulcers >10-80 cm2 achieved a significantly higher incidence of healing,
whereas ulcers 2-10 cm2 showed no significant difference from the Control group. Overall, patients reported significant improvements in pain and consistent
improvements in quality of life for the RECELL group compared to the Control group. There were no differences in the safety-related events between the RECELL and Control groups aligning with the already-established favorable safety profile
associated with the device.
In a feasibility study accepted for publication in Wound Repair and Regeneration (Rashid ST, Cavale N, Bowling FL. A
pilot feasibility study of non-cultured autologous skin cell suspension for healing diabetic foot ulcers. Wound Repair and Regeneration. 2020 Jul), 16 patients with diabetic foot ulcers greater than 3 weeks
duration were enrolled in the prospective case series. Their ulcers, ranging in severity, were treated with Spray-On Skin Cells prepared using the RECELL System. The ulcers ranged in size from 3.0 cm2 to 29.5 cm2, included a range of depths, including those with exposed tendon, and had a mean duration of 60.4 weeks. Comparable healing outcomes
were obtained independent of ulcer duration, depth, or presence of infection. All ulcers reduced in size after RECELL System treatment and 46% of ulcers with complete healing data (n=13) were fully healed in 26 weeks. Adverse events observed were
typical for the diabetic foot ulcer patient population.
We are not presently pursuing an IDE application to commence additional clinical investigations
in the United States, but may elect to do so in the near future subject to resources, capital and broader economic factors, including the impact of the COVID-19 pandemic.
U.S. Pediatric Early Intervention Pediatric Study:
In
March 2020, we initiated a randomized, controlled clinical study to investigate the safety and effectiveness of Spray-On Skin Cells, prepared with the RECELL System, compared to standard of care dressings for
treatment of partial-thickness burns in pediatric patients (infants, children and adolescents aged one to 16 years). The study will evaluate 160 patients in up to 18 U.S. burn centers with burns of 5% to 30% TBSA. Half of the patients will be
randomized to be treated using Spray-On Skin Cells. The other half will be randomized to serve in the control group and will be treated using standard dressings. Enrollment of this study is ongoing, with the
first patient being treated in March 2020.
The primary measure of effectiveness is healing ten days after treatment, as assessed by a blinded evaluator.
Secondary endpoints include:
• Incidence of healing on or before Day 21
• Percent area requiring autografting
• Incidence of conventional autografting to achieve healing
Patients will be followed for one year after treatment. The pediatric early intervention study is being funded by BARDA under the ongoing program. This study
is intended to support U.S. regulatory approval for marketing of the RECELL System for patients ages 1–16 with partial-thickness thermal burn injuries.
The RECELL System in Trauma Injuries (Soft-Tissue Reconstruction)
Case reports of the use of the RECELL System in the treatment of trauma injuries (soft-tissue reconstruction) have been the subject of peer-reviewed scientific
publications and presentations at medical conferences that cover a wider range of injuries or wounds of the skin. Patients with trauma injuries have also been treated using the RECELL System under the U.S. Compassionate Use program and in countries
in which the product is approved for treatment.
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U.S. Trauma (Soft-Tissue Reconstruction) Study:
We announced on September 17, 2019 that the FDA approved an IDE application to conduct a trauma (soft-tissue reconstruction) pivotal clinical trial.
Subsequently, in March 2020, we initiated the pivotal study for soft tissue reconstruction with the enrollment of the first patient at the Arizona Burn Center at Valleywise Medical Health Center in Phoenix, AZ. This study will evaluate the safety
and effectiveness of the RECELL System when used as an adjunct to meshed autografts in patients undergoing reconstruction of skin defects not associated with a burn injury. The primary measure of effectiveness is
non-inferior healing at (or prior to) 8 weeks following treatment, with healing defined as complete closure characterized by 100% skin re-epithelialization without
drainage confirmed at two consecutive visits at least two weeks apart, thickness thermal burn injuries. Enrollment of this pivotal study is ongoing.
BARDA Contract
We have a contract with BARDA, under the
Assistant Secretary for Preparedness and Response, within the U.S. Department of Health and Human Services, valued at least $53.4 million. The contract provides funding for the development of the RECELL System and future use of the product as a
medical countermeasure to assist disaster preparedness and response in the United States for mass casualties involving burn injuries. We entered into the contract on September 29, 2015, and the scope was expanded as a result of amendments
entered into as of June 24, 2016, September 18, 2017 and June 30, 2020. The options to the contract terminate between September 28, 2022 and December 31, 2023, and may be terminated earlier at the option of BARDA.
Under the contract, BARDA has provided funding and technical support for the development of the RECELL System. BARDA funded the completion of two randomized,
controlled pivotal clinical trials, as well as Compassionate Use and Continued Access programs, and development of the health economic model demonstrating the cost savings associated with the RECELL System. BARDA has exercised a contract option to
fund a randomized, controlled clinical trial for a pediatric early intervention study which commenced enrollment in March 2020. Also included in the BARDA contract is provision for the future procurement of the RECELL System by BARDA under a vendor
managed inventory system to bolster, at BARDA’s option, disaster preparedness in the amount of $7.6 million, although BARDA also has the option of increasing the amount of the procurement. On July 13, 2020, we announced that BARDA
will procure the RECELL System and agreed to the purchase, storage and delivery of RECELL Systems utilizing a vendor-managed inventory (“VMI”) plan valued at $7.6 million. Further, BARDA has expanded the awarded contract to
provide supplemental funding of $1.6 million to support emergency deployment of RECELL Systems for use in mass casualty or other emergency situations. Delivery of RECELL Systems under the VMI plan is expected to commence in the second half of
the 2020 calendar year. As of June 30, 2020, we had received cumulative payments of $24.4 million under the BARDA contract.
Research and
Development
Our research and development efforts are focused on:
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Manufacturing, Supply and Production
We operate a production plant in Ventura, California, in a 23,040 square foot facility that we have leased through September 30, 2021. We have the right
to extend the lease, at our sole option, as a result of three, three-year, options that allow us to extend the lease up to an additional nine years in total. We produce the RECELL System in this facility under the current Good Manufacturing
Practices (cGMP) requirements of the FDA and the regulatory agencies of other jurisdictions in which we sell the RECELL System. As we seek regulatory approval in Japan for the RECELL System or endeavor to maintain our existing foreign regulatory
approvals, foreign regulatory authorities of these counties are likely to review our manufacturing process, inspect our plant, and confirm that we meet all regulatory requirements. Any material future changes to our production processes for the
RECELL System will have to be approved by the FDA and regulatory authorities in other jurisdictions.
All production requirements for the RECELL System,
including devices required for U.S. and international sales and clinical trial requirements, have been manufactured at the Ventura facility since 2009. Up until June 30, 2018, the RECELL System was produced in the Ventura facility on our behalf
by a Fortune 500 contract manufacturer who produced multiple GMP products for third parties. Due to a consolidation of facilities by the contract manufacturer, effective July 1, 2018 we entered into a series of agreements to take control of the
Ventura plant and leased the facility.
Within the Ventura facility we perform the final manufacturing, assembly, packaging and warehousing of the RECELL
System. Also included within the Ventura facility is a controlled warehouse that will need to meet the vendor-managed inventory requirements of the BARDA program. We source multiple components, sub-assemblies
and materials from third-party suppliers, who are required to meet our quality specifications. Included among the items procured from suppliers is porcine-derived trypsin, which is the enzyme key to the skin cell disaggregation performed using the
RECELL System. Although we endeavor to have multiple sources of supply for key components, subassemblies and materials, some critical raw materials are procured from single source suppliers. We continue to evaluate methods of removing risk from the
supply chain for the RECELL System.
We believe that our current manufacturing capacity at the Ventura facility is sufficient to meet the expected
commercial demand for the RECELL System for burns and other indications currently under development.
Marketing Sales and Distribution
We sell the RECELL System in the United States through our own commercial organization consisting of 21 field sales personnel (consisting of Regenerative
Tissue Specialists, Clinical Training specialists and regional directors) and the field sales team is supported by centralized marketing, reimbursement, sales operations and leadership personnel, and also receives clinical and scientific support
from our Medical Affairs team. The field sales team was recruited and hired subsequent to the September 2018 FDA premarket approval and were trained prior to our U.S. market launch of the RECELL System in January 2019. Each of the clinical training
specialists responsible for training the surgeons and other medical personnel within the burn centers are experienced burn nurses.
The market for the
treatment of burns in the United States is highly concentrated, with approximately 134 burn centers and approximately 300 burn surgeons. Accordingly, we believe that our sales organization is generally of an appropriate size to reach the burn
surgeons and other key decision makers associated with our current target market of patients treated on an in-patient basis within U.S. burn centers. As a result of the concentrated nature of the U.S. burn
market, we do not have an external (permanent) distribution or warehousing structure and ship the RECELL System directly from our Ventura facility to U.S. burn centers. From
time-to-time we also store small quantities of the RECELL System at satellite distribution sites on the east or west coast of the United States so as to support access
of the RECELL System to our customers.
The objective of our field sales team is to build upon burn community awareness resulting from the extensive
series of burn conference presentations and scientific publications to further expand the interest in clinical and economic benefits of the RECELL System among burn surgeons and other professionals who are not already experienced with the product.
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In addition, we have generally set a policy of not providing the RECELL System to a burn center or other institution until their site has been certified by us, which includes training in the use
of the product and in the proper aftercare of the patient. In general, we expect most U.S. burn centers will follow the industry standard process of evaluating the RECELL System and then taking it through their hospital’s Value Analysis
Committees (“VAC”) prior to purchasing the product. This process can sometimes be a lengthy one taking six months or more to complete. As a result of the training requirements and the VAC process, we expect that the adoption of the
RECELL System among U.S. burn centers will occur on a gradual basis over multiple years.
In the United States, hospital and physician reimbursement
associated with in-patient treatment using the RECELL System was in place prior to the commencement of commercial sales. For in-patient treatment of burn patients, U.S.
hospitals are reimbursed under DRG (Diagnosis Related Group) Codes based on diagnosis of a patient’s injuries. For physicians, CPT (Current Procedural Terminology) codes for use in procedures using the RECELL System were recommended by the
American Burn Association within one week of FDA approval. Future expansion of the use of the RECELL System for the treatment of burns in the outpatient setting will require us to successfully obtain incremental reimbursement coverage for use of the
RECELL System in that setting. In August 2020, we filed a Transitional Pass-through Payment Application (“TPT”) with The Centers for Medicare & Medicaid Services (“CMS”) to support separate additional
Medicare payment for the RECELL System. If approved CMS would create a new “C code” and would allow the RECELL System to be billed and paid separately in hospital outpatient facilities and ambulatory surgical centers. The Company presently
expects to be informed of CMS’s decision on our TPT submission during December 2020, or early 2021.
In February 2019 we entered into a collaboration
with COSMOTEC, an M3 Group company, to market and distribute the RECELL System for the treatment of burns and other wounds in Japan. We continue to work with COSMOTEC to advance our application for approval to market the RECELL System in Japan
pursuant to Japan’s Pharmaceuticals and Medical Devices Act.
Given the size and concentration of the U.S. Market, our commercialization efforts are
almost exclusively focused on that market. Our highly limited commercialization efforts in other regions in which the RECELL System is approved for sale is based on our assessment that the acute burn market in many countries is proportionately less
than the market in the United States, and the investments in a full marketing and sales resources and the effort to obtain reimbursement are not justified until we have obtained pivotal clinical results in additional indications. In Australia and
Europe we no longer actively promote the RECELL System and have limited our commercialization efforts to filling sales orders as received from a small group of customers who have already been trained to use the product. As additional pivotal trial
data for the RECELL System is generated in additional indications, we may seek to commercialize the RECELL System in countries outside the United States through a combination of collaborations and direct efforts, depending upon the territory and the
indication.
Intellectual Property
We seek to
protect our intellectual property, core technologies and other know-how through a combination of patents, trademarks, trade secrets, non-disclosure and confidentiality
agreements, licenses, assignments of invention and other contractual arrangements with our employees, consultants, partners, suppliers, customers and others. Additionally, we rely on our research and development program, clinical trials, know-how and marketing and distribution programs to advance our products and product candidates, and to expand our intellectual property rights. As of June 30, 2020, we have been granted a total of 50 patents
and have 17 pending patent applications worldwide.
The U.S. patents and patent applications provide coverage with expected expiration dates ranging from
2022 to 2034. U.S. patents covering the composition of matter related to the current RECELL® System expire in 2022. We have filed a Patent Term Extension (PTE) application with the U.S. Patent
and Trademark Office requesting an extension of the patent term of U.S. Patent No. 9,029,140, “Cell suspension preparation technique and device” as a result of the time required for the FDA regulatory process. If the term extension
requested in the PTE application is approved, the patent term of U.S. Patent No. 9,029,140 will be extended to April 9, 2024. We expect that further research and characterization of the characteristics of the RECELL System, the composition
and activity of the Spray-On SkinTM Cells solution, and the design of the device currently underway may provide additional claims, including composition
of matter, for which we will be able to pursue additional U.S. and international patent applications in key international markets, parallel to those in the U.S.
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In addition to patent protection, we also rely on trade secrets, including unpatented know-how, technology innovation, drawings, technical specifications and other proprietary information in attempting to develop and maintain our competitive position. We also rely on protection available under
trademark laws, and we currently hold various registered trademarks and pending trademark applications, including the “RECELL,” “Spray-On Skin” Cells, “REGENERATIVE EPITHELIAL
SUSPENSION,” and “RES,” in the U.S. and international markets.
While our policy is to obtain patents by application, license or otherwise,
to maintain trade secrets and to seek to operate without infringing on the intellectual property rights of third parties, technologies related to our business have been rapidly developing in recent years. Additionally, patent applications that we
may file or license from third parties may not result in the issuance of patents, and our issued patents and any issued patents that we may receive in the future may be challenged, invalidated or circumvented. For example, we cannot predict the
extent of claims that may be allowed or enforced in our patents nor be certain of the priority of inventions covered by pending third-party patent applications. If third parties prepare and file patent applications that also claim technology or
therapeutics to which we have rights, we may have to participate in proceedings to determine priority of invention, which could result in substantial costs to us, even if the eventual outcome is favorable to us. Moreover, because of the extensive
time required for clinical development and regulatory review of a product we may develop, it is possible that, before the RECELL System can be commercialized in additional indications or jurisdictions and/or before any of our future products can be
commercialized, related patents will have expired or will expire a short period following commercialization, thereby reducing the advantage of such patent. Loss or invalidation of certain of our patents, or a finding of unenforceability or limited
scope of certain of our intellectual property, could have a material adverse effect on us. See “ITEM 1A. Risk Factors – If we are unable to effectively protect our intellectual property, we may not be able to operate our business and
third parties may be able to use and profit from our technology, both of which would impair our ability to be competitive.”
Competition