Good day, and thank you for standing by. Welcome to the AVITA Medical Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to hand it over to your first speaker today, Ben Atkins, Vice President, Investor Relations. Please go ahead.

Thank you, operator. Welcome to AVITA Medical's Second Quarter 2025 Earnings Call. Before we begin, I would like to introduce myself. My name is Ben Atkins, and I started at AVITA in July, leading Investor Relations and Corporate Communications. With many years of working in life sciences, I am thrilled to be part of AVITA and this team, and I look forward to working with our investor community. Joining me on today's call are Jim Corbett, Chief Executive Officer; and David O'Toole, Chief Financial Officer. Today's earnings release and presentation are available on our website at www.avitamedical.com under the Investor Relations section. Before we begin, I would like to remind you that this call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results to differ materially from any expectations expressed or implied by the forward- looking statements. Please review our most recent filings with the SEC for comprehensive descriptions of the risk factors. Any forward-looking statements provided during this call are based on management's expectations as of today. I will now turn the call over to Jim for his comments.

Good afternoon to everyone joining us in the U.S., and good morning to our colleagues and investors in Australia. We have a lot to cover today. I want to begin by grounding us in what defined this quarter. starting with the 5 key developments shown on Slide 4. First, commercial revenue for the second quarter was $18.4 million, up 21% year-over-year. However, sequential revenue was flat and impacted by a temporary headwind that has become clearer to us since March. During the quarter, we gained a deeper understanding of a meaningful delay in how the centers for Medicare and Medicaid Services and the Medicare administrative contractors implemented the conversion to the new CPT 1 codes for the use of RECELL, which went into effect in January. This delay in turn, affected provider reimbursement and ultimately, demand. To be clear, this is not a product issue, it's a claims processing issue, specifically around how the procedure that utilizes RECELL is valued and how payment is determined. I'll explain this in more detail shortly. Third, as a result of this reimbursement disruption and its impact on revenue, we've lowered our 2025 financial forecast. That said, we remain confident in a second half rebound as resolution of these payment issues is already underway. More on that in a moment. Fourth, we work with OrbiMed to secure a waiver for our Q2 trailing 12-month revenue covenant and to revise the covenants for the next 4 quarters, giving us flexibility as we execute against this updated growth outlook. Finally, we shared what we believe is the most consequential clinical evidence in AVITA's history. A real-world analysis of the U.S. National Burn Registry presented in June at the British Burn Association Annual Meeting, including over 6,300 patients showed that RECELL reduced length of stay by 36%…

Thanks, David. Before we open the line for questions, I want to briefly bring us back to what matters most. First, with the resolution of the claims backlog now underway, we expect full demand for RECELL to return in the second half of the year. Second, our revised guidance reflects that recovery and our momentum going into 2026. Third, the amendment to our OrbiMed agreement reinforces long- term alignment around that path forward. And finally, the real-world data showing a 36% reduction in length of stay with RECELL isn't just a clinical insight, it's a value proposition that improves outcomes and strengthens hospital economics. Put simply, we're focused, executing and well positioned to accelerate. With that, operator, let's open it up for questions.

[Operator Instructions] Our first question will come from the line of Josh Jennings from TD Cowen.

Just in terms of the resolution and the backlog of claims. It sounds like it's in progress -- in process, I should say, in July. Maybe just take us through, if you would, just a couple of different scenario analysis. I mean, how quickly can all the MACs get on board? And maybe just give us an understanding of just how many claims, what percentage of claims were being denied in the first half of the year, if there is a percentage and where that stands now in July and any improvement pace that's been documented already and how you expect that to play out over the coming months?

Well, without -- thanks, Josh. It's good to hear from you. And I'm going to answer this question carefully because there are some things underway and there's some confidential communications going on. But let me say -- let me answer your question in a few different ways. First of all, there is a multilevel approach to resolve the MACs' speed to adjudicate. So on one level, there's been communication between the MACs and central Medicare because some MACs did not have a clear understanding of their responsibility and role. So that is largely being taken care of. Second, where you get proof about the adjudication is from the MACs themselves to physicians. So that we have seen now in multiple MACs. The third thing you can also see is that among the claims data, which we do not have full access to, there is a perfectly adjudicated case, there's a nonadjudicated case and a poorly paid adjudicated case, right? Meaning there's like 3 categories of kind of resolution underway. So where we are now, we've had a very large change in the activity related to the MAC since about June 1. And during June and July, we've seen a steady increase in their interactions, the stakeholders' interactions with the MACs, the processing of claims. So it's happening. This is a Category 1 code, not a Category 3 code. And there's -- we have never -- I don't think we could document a claim that was turned down or failed to be paid before January 1 when Medicare was reimbursing for the Medicaid and Medicare patients where RECELL was used. So this came as a rather surprise because they rather easily could have just followed the payment practices that were in existence, although they were attached to other codes. So anyway, does that help? Am I getting to the answer for you?

Yes, that does help. And I'm just -- just with this recovery that you've described and the breakthrough in Q3 with multiple MACs adjudicating payments, and it sounds -- and you highlighted that the value that these multiple MACs are signing, the split thickness skin grafts being higher than split thickness skin grafts alone. Can you talk about the premium that's involved there and how strong of a signal that is for you that help you kind of forecast this recovery in the coming months?

Well, you see the analysis that's being used in the crosswalk, depending on the size of the wound, the RVUs basically continue to separate, if you can visualize this, left end of the graph, right end of the graph, I mean, the graph, not the graph, but the graph comparing the 2, where you have our views on the vertical axis and you have percent TBSA across the horizontal. As you go from 1,000 to 4,000 square centimeters, by -- there's a steady divergence in favor of RECELL utilization and payment versus split the skin graft only to the point where it's 40% more by the time you get to 40% -- 4,000 square centimeters. It's kind of hard to visual -- I hope I can visualize that for you. But there is a notable premium.

And then maybe just lastly, sort to tack on a list here of questions, but just noticed the update on Cohealyx and some launch metrics, particularly just the interactions with VACs, 25% of the 130 U.S. burn centers. Did you share or can you share the number of VAC approvals so far? And can we -- what percentage -- I mean, it's impossible to predict, but how would you have us think about the percentage of the 130 U.S. burn centers that have -- where you get through VAC approval and Cohealyx is, I guess, on the formulary, if you will, and you guys are rocking and rolling.

Thanks, Josh. We're going to keep the number of VAC approvals at a very high level. And one reason is our experience is, with VAC approvals of other products, is they're not all equal. And so what happens when we start disclosing them, the next logical question, are they all equal? And of course, they're not. And it really turns in a little bit of a morass. So let me answer in the following way. First principle, we don't get to choose to submit a VAC to a VAC. It actually has to be sponsored by a physician and/or a department in the hospital. So we can propose to them our value proposition, our clinical data, our preclinical data, case studies, they choose to be interested or not. So the idea that there's more than 25% of the burn centers that have VAC approvals pending and submitted is a substantial number to happen in the first 60 days of a launch of a new product. So that's just good news like that. The second is I can say that during April we trained and we're introducing the product. So we really started our active selling in May. Having multiple accounts that are ordering here in early July is terrifically quick by our experience and in terms of timing from -- for getting approvals. So obviously we have several approved. And the third is the, there's a little bit of time. If the doctors are experiencing 14 to 21 days ready to graft, and we're doing it in 7, it still means they don't really know how it's working for 7 days. So they find a patient, they do their first patient, and they have to wait until it's ready to graft. And then typically, they want to see that the graft takes because ready to graft is an assessment, but the graft take is actually the real deal. That's the success of the procedure where you get through closure. So an evaluation, really, therefore, if you think about all that, even with our shortened graft time and graft take time, it's still a 3- to 4-week process. So I think the hospital that I mentioned in my comments continues to order. They may have ordered 300,000 during their first month of usage. They're on path to do that again in their second month of usage. So it is really a great market for this product because it performs better. So we do think it just fits our portfolio great, and it's going to yield great results for us.

Our next question will come from the line of Ross Osborn from Cantor Fitzgerald.

Starting off, and apologies if I missed this, but would you provide an update on how the mini rollout is going in terms of feedback, adoption and where you stand in the VAC approval process there?

Yes, I can. It's generally qualitative. The product itself is performing very well. That's A. The physicians who use it tend to be trauma or surgical physicians versus burn. So we're finding it to be a product for that Level 1 and Level 2 trauma center location. The wounds where RECELL is used in burns are actually bigger. The 2,000 square centimeters, we actually average more than 1 per case, where in the level 1 and 2 trauma, you may recall from our PMA, the average patient was 400 square centimeters, which is 2.5% TBSA. So we're getting good traction. One thing we note though is that in trauma and surgery, RECELL is really a year old, meaning a lot of physicians had never even heard of spray-on skin of RECELL, where the burn physicians have been added for a year, I mean for 5 years rather. And that's since approval. So more than that if you include the PMA time. So I think we're getting good traction on the mini. But that said, it's a process to get adoption and change the behavior of the physician. They get good results. By the way, this burn data applies to all uses of RECELL. It just happens to be on -- if you think what a burn is, you excise a big area, it's still a wound, just like a trauma wound is a wound. So I think we'll see a lot more from mini because the dermal matrix and PermeaDerm allow us to approach the use of more patients. So I think we're looking for a strong second half from it.

Great. And then last one on Cohealyx. How should we think about the enrollment period in terms of the duration?

The enrollment of the Cohealyx-1 study, you're asking, right?

Yes.

Yes. Well, first of all, it's a 40-patient protocol, okay? And it's done using what's called OPC, objective performance criteria. So what we did is we built a protocol around the time to graft and time to -- for graft take and close as the principal outcomes. And since we're proving nearly a 50% to 100% reduction over the OPC, it takes a very small number to statistically prove when you are that much different. And so we only have to enroll 40 patients. The hard part is over, where almost all our IRBs are open to enrollment at this moment. We have a few still left to go. So I think we get enrolled by year-end. That's what we expect. That's 40 patients.

Next question come from the line of Ryan Zimmerman from BTIG.

This is actually Izzy on for Ryan. So just to start out, given your current cash balance and your burn rate, I was wondering if OrbiMed has waived any of the minimum cash balance requirement. I believe it's about $10 million. And if not, how much do you still have available today?

I'm going to have David answer that so we get the right CFO answer here. David O’Toole: Yes. So thanks for the question. The OrbiMed has not waived that provision in the amendment. And just to clarify, that provision of $10 million is measured at the end of a quarter, not during the quarter. We don't expect to go below $10 million at any time. And so we don't -- we didn't ask them to waive that amendment during the current process.

Understood. And with the restructuring to the sales force you guys completed or began in first quarter, I was curious what other expense levers you have contemplated that will help manage your cash burn? David O’Toole: So during the second quarter, as Jim mentioned, and so did I, we did a commercial transformation of our sales force, and we took a look at our entire organization, and we took out $2.5 million per quarter. And we see that continuing. So it's $10 million annually. We are going to let that play out. We don't see any other levers at this point that need to be pulled.

Okay. Helpful. And then last one for me. I was just curious if the 2023 ATM is still in place? And if so, how many shares are available in this? And if there are any restrictions on how many shares you can sell? David O’Toole: Yes. The ATM is still in place, and it has -- and this is public information, it has about 3.8 million worth of shares that can be sold under the ATM.

This concludes the question-and-answer session. I would now like to turn it back over to Jim, our CEO, for closing remarks.

Well, thank you very much for the questions, and thank you for the time with us today. We have a lot of exciting activities that we're doing that are going to lead to really a great second half. So we're really looking forward to that and updating you in the coming quarter on how that goes. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.