Avita Medical: Distribution Agreement for Third-Party Wound Care Product

No-moat Avita Medical has made a distribution agreement with Stedical Scientific to exclusively sell its PermeaDerm products in the United States for the next five years with the option to renew thereafter. Avita will share 50% of the revenue. We increase our gross profit forecasts by 3% on average over the next nine years, but we maintain our AUD 5.40 fair value estimate largely due to the weaker U.S. dollar. While there is an opportunity for Avita to cross-sell products, we expect additional marketing expenses are also required. PermeaDerm first received regulatory approval in 2016 and is a biosynthetic matrix that complements Avita’s RECELL product for the treatment of wounds.