Cantor starts AVITA Medical at OW; PT $23

Cantor Fitzgerald launched coverage of AVITA Medical (NASDAQ:RCEL) with an “overweight” rating and $23 target price. The stock closed at $15.71 on June 26.

Avita is a regenerative medicine company commercializing its cellular technology platform, RECELL system, initially for the treatment of acute thermal burns, and newly approved for expanded indications in soft tissue repair and vitiligo.

“Our overweight rating is based on three key points: the RECELL system is a disruptive technology, in our eyes; we believe Avita is at an inflection point given that the two new expanded indications significantly increase the company’s total addressable market; and we view the company’s shares as attractively valued,” writes analyst Ross Osborn.

He suggests the RECELL system will disrupt traditional split-thickness skin grafts as it requires 97.5% less donor skin when used alone in second-degree burns and 32.0% less donor skin when used with autograft for third-degree burns; 56% and 60% fewer autograft procedures for pediatric patients and adult patients with more than 60% total body surface area, respectively; shorter length of hospital stay; and results in reduced scarring and pain at the donor site.

Mr. Osborn estimates 2023 and 2024 revenue of $49.8-million and $62.5-million, respectively, versus 2023 revenue guidance in the range of $49-million to $51- million in conjunction with the company’s first quarter earnings release.

In addition, AVITA established revenue guidance for the second quarter in the range of $10.7-million to $11.7-million versus his estimate of $11.6-million.