AVITA Medical Raises 2026 Revenue Guidance and Targets Q4 Cash Flow Breakeven

Revenue Growth Accelerates on RECELL Momentum

AVITA Medical (ASX:AVH) reported a record $21.7 million in revenue for the second quarter of 2026, marking an 18% increase year-over-year and a 13% sequential rise. This growth was primarily driven by the continued uptake of the RECELL platform, which contributed $18.5 million in sales, up approximately 11% from the previous quarter. The company’s next-generation RECELL GO mini device helped expand usage into smaller wound treatments, complementing the core RECELL offering.

Supporting the top line were also the collagen-based dermal matrix Cohealyx and the biosynthetic wound matrix PermeaDerm, which posted sequential revenue growth of 16% and 40%, respectively. Cohealyx’s momentum was bolstered by positive interim clinical data demonstrating a significantly faster time to skin grafting readiness, while PermeaDerm is positioned as a lower-cost alternative to allograft with clinical study data expected imminently. International sales contributed $0.9 million, growing 26% quarter-over-quarter, reflecting steady progress in established overseas markets.

Improved Profitability and Cash Flow Discipline

The company’s gross profit margin improved modestly to 81.9%, from 81.2% in the prior year, despite the expanded product mix which includes lower-margin items like Cohealyx and PermeaDerm. Notably, RECELL-only gross margin stood at a robust 86.0% for the quarter. Operating expenses were tightly managed, falling 6% year-over-year to $24.6 million, reflecting cost optimisation and a leaner commercial structure implemented in 2025. Sales and marketing expenses decreased by $0.7 million, while general and administrative costs also fell by $0.7 million, helped by lower stock-based compensation expenses.

Cash flow usage improved markedly, with net cash outflow dropping to approximately $3.2 million in Q2 from $9.9 million in Q1, supported by better operating leverage and improved cash collections. The company ended the quarter with $11.1 million in cash, cash equivalents, and marketable securities, down from $14.3 million at the start of the quarter but with a more efficient cash burn trajectory.

BARDA Contract and Credit Facility Bolster Financial Flexibility

In April 2026, AVITA Medical secured a 10-year contract with the U.S. Biomedical Advanced Research and Development Authority (BARDA) valued at up to $25.5 million. This agreement establishes an Access-Maintenance Vendor Managed Inventory (AM-VMI) for autograft sparing devices, ensuring rapid availability for national emergency burn care. The contract includes approximately $4 million in access and maintenance fees over the term, with additional procurement options. The company has committed to maintaining inventory and conducting mock deployments to ensure readiness.

Earlier in the year, AVITA refinanced its debt with a $60 million senior secured credit facility from Perceptive Advisors LLC, drawing $50 million initially and retaining an option for an additional $10 million subject to revenue milestones. The credit facility features covenants aligned with the company’s growth trajectory, including a minimum cash balance of $5 million and trailing twelve-month revenue targets. As of June 30, 2026, AVITA was in compliance with all covenants.

Regulatory and Reimbursement Developments Support Adoption

AVITA Medical is poised to benefit from favorable regulatory and reimbursement changes. The Centers for Medicare & Medicaid Services (CMS) proposed 2027 Medicare payment rules that would establish a nationally published physician payment schedule for RECELL procedures, replacing the current regional contractor pricing system. The proposed rules also include increases in hospital outpatient and ambulatory surgical center facility payments, potentially improving physician reimbursement clarity and predictability. CMS is expected to finalise these rules later in 2026 with implementation effective January 1, 2027.

Internationally, RECELL GO gained Therapeutic Goods Administration certification in Australia and was listed by New Zealand’s Medsafe, enabling broader commercialisation in these markets. Clinical data from the UK and other regions continue to support RECELL’s clinical utility and adoption.

Outlook: Raised Guidance and Cash Flow Breakeven in Sight

Reflecting strong commercial execution and operational discipline, AVITA Medical raised its full-year 2026 revenue guidance to $86 million to $89 million, up from prior guidance of $80 million to $85 million. This represents expected year-over-year growth of 20% to 24% against 2025 revenue of $71.6 million. The company now anticipates reaching cash flow breakeven in the fourth quarter of 2026, a significant milestone on its path to sustained profitability.

CEO Cary Vance emphasised the company’s evolution into a business capable of durable growth, highlighting the combination of revenue expansion, high gross margins, and disciplined expense management. CFO David O’Toole noted the improved cash flow dynamics and the expectation to generate positive cash flow as scale increases.

Investors will be watching the upcoming PermeaDerm I clinical study data expected in August, as well as the finalisation of CMS reimbursement rules, both of which could materially influence adoption trends and financial performance in 2027 and beyond.