How Will AVITA Medical Bounce Back After Medicare Delays Hit RECELL Demand?

• RECELL demand dropped 20% due to six-month Medicare claims backlog
• Q2 commercial revenue rose 21% year-over-year to $18.4 million
• Updated 2025 revenue guidance lowered to $76-$81 million reflecting H1 headwinds
• Clinical study shows RECELL reduces hospital stays by 36%, enhancing value proposition
• Strategic amendment with OrbiMed secures financial flexibility amid revised growth outlook

Medicare Reimbursement Delays Impact RECELL Demand

AVITA Medical’s second quarter 2025 financial update highlights a significant but temporary challenge, a six-month backlog in Medicare provider claims payments for RECELL procedures. This delay caused a roughly $10 million reduction in RECELL revenue and a 20% drop in demand during the first half of the year. The uncertainty around payment timing led providers to hesitate in using the product, directly impacting sales volume.

However, the company reports that resolution is underway. Starting in July, multiple Medicare Administrative Contractors began adjudicating payments, with national harmonization expected soon. AVITA anticipates that RECELL demand will recover in the second half of 2025 as providers regain confidence and claims are processed.

Strong Revenue Growth Despite Headwinds

Despite these reimbursement challenges, AVITA achieved a 21% increase in commercial revenue year-over-year, reaching $18.4 million in Q2. This growth underscores underlying market acceptance and the strength of AVITA’s portfolio beyond the temporary Medicare issue. The company has adjusted its full-year 2025 revenue guidance downward to $76 million to $81 million, reflecting the first-half headwinds, but remains optimistic about a return to growth in 2026.

Clinical Data Bolsters RECELL’s Value Proposition

Supporting its commercial narrative, AVITA presented compelling clinical data demonstrating that RECELL treatment reduces hospital length of stay by 36% for patients with deep second-degree burns covering less than 30% of total body surface area. This significant reduction translates into meaningful cost savings for hospitals, estimated at thousands of dollars per patient, and highlights RECELL’s potential to improve patient outcomes and healthcare system efficiency.

Additionally, AVITA’s Cohealyx product showed promising results by enabling autograft readiness in just five to ten days, compared to weeks with conventional treatments. This faster healing pathway complements RECELL and strengthens AVITA’s position in acute wound care.

Strategic Financial Moves and Market Expansion

AVITA also announced a strategic amendment to its OrbiMed agreement, securing long-term financial flexibility aligned with its updated growth outlook. This amendment revises trailing covenants to better match the company’s current trajectory, providing stability as it navigates near-term challenges.

On the market front, AVITA is expanding RECELL’s footprint beyond burns into trauma care, with new approvals such as the New Technology Add-on Payment for trauma wounds in hospital inpatient settings. Internationally, CE Mark approval is anticipated in Q4 2025, paving the way for launches in Europe and Australia through a lean distributor model. These developments position AVITA to scale its total addressable market well beyond the $3.5 billion U.S. burn and trauma sector.

Looking Ahead

While the Medicare reimbursement backlog has temporarily clouded RECELL’s momentum, AVITA’s robust clinical data, strategic financial positioning, and expanding market opportunities suggest a strong recovery and growth path ahead. Investors will be watching closely for confirmation of demand rebound and the impact of international launches in the coming quarters.

Bottom Line?

AVITA’s path to recovery hinges on Medicare payment resolution and successful market expansion, setting the stage for a pivotal second half of 2025.

Questions in the middle?

• How quickly will Medicare Administrative Contractors fully clear the RECELL claims backlog?
• What impact will international CE Mark approval have on AVITA’s revenue growth in 2026?
• Can AVITA sustain commercial momentum while expanding RECELL use into trauma care?