RCEL 10-K & 10-Q changes, risk factors and insider trading

Although we have begun full scale marketing and sales of our RECELL® Systemproducts in the United States and other jurisdictions, we have not yet achieved profitability. We had a total net loss of $61.8$48.6 million and $35.4$61.8 million for the year ended December 31, 20242025 and December 31, 2023,2024, respectively. We have incurred a cumulative deficit of $359.8$408.4 million through December 31, 2024.2025. We anticipate that we may continue to incur losses at least until sales of theour RECELL Systemproducts are adequate to fund operating expenses. We may not be able to successfully achieve or sustain profitability. Successful transition to profitable operations is dependent upon achieving a level of revenues adequate to support our cost structure, including in new markets where regulatory approval is in process or pending.

PursuantWe tohad the Credit Agreement that wepreviously entered into a credit agreement with OrbiMed Advisors, LLC (as amended, the “Previous Credit Agreement”) on October 18, 2023, most recently amended in the Previous Credit Agreement’s ThirdSixth Amendment, on November 7,5, 20242025 (the “ThirdSixth Amendment”), weand incurred $40.0 million of indebtedness secured by substantially all of our assets. This level of debt could have significant consequences on future operations, including increasing our vulnerability to adverse economic and industry conditions and limiting our flexibility in planning for, or reacting to, changes in our business and the markets in which we compete.

Our ability to make scheduled payments of interest depends on our future performance, which is subject to interest rate risk, as well as economic, financial, competitive, and other factors beyond our control. We are exposed to risks related to a potential rising interest rate environment for the debt, which could cause our borrowing costs to rise and impact our liquidity. Our business may not generate cash flow from operations in the future sufficient to service our debt in cash while simultaneously making necessary capital expenditures. In addition, if the Company’s net revenue does not equal or exceed a certain amount for upcoming fiscal periods as set forth in the Perceptive Credit Agreement, then the Company will be requiredin to repay 5%default of the outstandingPerceptive principalCredit amount of its indebtedness (along with interest accrued on that principal amount if not already paid) in equal quarterly installments, in addition to paying both a repayment fee and a prepayment fee with each quarterly installment.Agreement.

If we are unable to generate sufficient cash flow to satisfy payment obligations under the Perceptive Credit Agreement, we may be required to adopt one or more alternatives, such as obtaining additional equity capital on terms that may be onerous or highly dilutive. We may not be able to engage in any of these activities, or such activities may only be available to the Company on undesirable terms, which could result in a default on our debt obligations.

The restrictions and covenants in the Perceptive Credit Agreement may also prevent us from taking actions that we believe would be in the best interests of our business, and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted. Our ability to comply with these covenants in future periods will largely depend on the success of our products, and our ability to successfully implement our overall business strategy. We may be unsuccessful in obtaining waivers or amendments to restrictions and covenants in certain agreements with our customers or counterparties. And any breach by the Company of covenants and restrictions in such agreements could result in a default under the Perceptive Credit Agreement, which could result in an acceleration of the repayment of our indebtedness.

We may require additional financing in the future to continue the development and commercialization of our RECELLcurrent System or anyand future products, which may cause dilution to our existing stockholders. If additional financing is not available, we may have to postpone, reduce or cease operations.

If we are unable to achieve profitability sufficient to permit us to fund our operations, repay indebtedness in accordance with the Perceptive Credit Agreement, and take other planned actions, we may be required to raise additional capital. There can be no assurance that such capital would be available on favorable terms, or available at all. If we raise additional capital through the issuance of equity, the percentage ownership held by existing stockholders may be reduced, and the market price of our common stock or CDIs could fall due to an increased number of shares or CDIs available for sale in the market. If we are unable to secure additional capital as circumstances require, we may not be able to fund our planned activities or continue our operations.

We cannot guarantee that any pre-clinical testing or clinical trials will be conducted as planned or on schedule, or completed at all. As a result, we may not achieve the expected clinical milestones necessary for approval by the FDA, or other regulators, for the use of our RECELL Systemproducts for additional applications or indications in the United States or other countries.

adverse events, safety issues, product recalls, manufacturing or supply chain interruptions, or poor clinical outcomes where the RECELL System is being used commercially; and disagreements with regulatory agencies in the interpretation of the data from our clinical trials.

Delays, including delays caused by the above factors, can be costly and could negatively affect our ability to complete clinical trials for our product candidates. If we are not able to successfully complete clinical trials or are not able to do so in a timely and cost-effective manner, we will not be able to obtain regulatory approval for the use of our RECELL Systemproducts for additional applications,applications or indications, all of which could have a material adverse effect on our business, financial condition, or results of operations.

In the United States, as well as other jurisdictions, we have been and will be required to apply for and receive regulatory authorization before we can market our products. ForWe instance, the first generation of RECELL has been approved by regulatory authorities in Australia and the EU for use in the treatment of burns and acute wounds, and by regulatory authorities in Japan for use in certain treatments of burns. However, we willmay require additional clinical data or approvals from regulatory authorities within thesethe jurisdictions in which we operate to market improved versions of RECELL for the same or additional indications, and from any other jurisdictions in which we seek to market the product. This process can be time-consuming and complicated, and may result in unanticipated delays or fail altogether.

Our business is highly dependent on the PMA we received in September 2018 from the FDA, including subsequent PMA supplement approvals for acute wound indications. This PMA allows us to sell our RECELL and RECELL GO in the United States, our current primary market. While we intend to take every action and precaution to ensure that our PMA remains effective, it is possible that the FDA could take a position in the future that requires a modification, temporary suspension or revocation of our PMA. Any such action by the FDA would have a material adverse effect on our business.

Obtaining and maintaining regulatory approval for a product in one jurisdiction does not guarantee that we will be able to obtain or maintain similar approval in other jurisdictions; further, a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even though the FDA has granted marketing approval for use of our RECELL System forin the treatment of full-thickness skin defects and vitiligo, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing, and promotion of the product in those jurisdictions if not currently approved. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including the requirement in such jurisdictions of additional clinical studies due to clinical trials conducted in one jurisdiction not being accepted by regulatory authorities in other jurisdictions. In addition, in certain jurisdictions outside the United States, the reimbursement and/or intended price of a medical device must be approved before it can be approved for sale in that jurisdiction.

Our products are manufactured, stored, and distributed using technically complex processes requiring specialized facilities, highly specific raw materials and other production constraints. The complexity of these processes, as well as strict company and government standards for the manufacture, storage, and distribution of our product candidates, subject us to risks. In addition, process deviations or unanticipated effects of approved process changes may result in production runs of our RECELL Systemproducts not complying with stability requirements or specifications. The occurrence or suspected occurrence of production and distribution difficulties can lead to lost inventories and in some cases product recalls, with consequential reputational damage and the risk of product liability. The investigation and remediation of any identified problems can consume management resources and cause production delays, substantial expense, lost sales, and delays of new product launches. In the event our production efforts require a recall or result in an inventory loss, our operating results and financial condition may be adversely affected.

Our success depends, in part, on our ability to manufacture our current and future products in sufficient quantities and on a timely basis to meet demand, while managing manufacturing costs, while continuing to adhere to product quality standards and comply with regulatory quality system requirements. We have a manufacturing facility located in Ventura, California where we produce, package, and warehouse the RECELL System.and PermeaDerm. We also rely on global third-party manufacturers for production of some of the components used in the RECELL System.RECELL. If our facility or the facilities of our third-party contract manufacturers suffer damage or experience a force majeure event, this could materially impact our ability to operate.

We collect and store sensitive business and other information, includingsuch as sensitive intellectual property and trade secrets,property, on our networks.IT systems. Our business operations are dependent upon the secure maintenance of these IT systems and this information. Despite the implementation of security measures, our IT systems and those of our vendors and customers are vulnerable to attack and damage from computer viruses, malware, denial of service attacks, unauthorized access, or other harm, including from threat actors seeking to cause disruption to our business. We face risks related to the protectiondisruption of the confidentiality, integrity, and availability of our IT systems and the information that we maintain—or engage a third-party to maintain on our behalf—including unauthorized access, acquisition, use, disclosure, or modification of such information. Cyberattacks are increasing in their frequency, sophistication, and intensity and have become increasingly difficult to detect. Cyberattacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information. Beyond external criminal activity, systems that access or control access to our services and databases may be compromised as a result of human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure. A material cyberattack or security incident could cause interruptions in our operations and could also damage our reputation, financial condition, and results of operations.

We are subject to diverse laws and regulations relating to data privacy and security, such as federal and state data protection regulations, including the California Consumer Privacy Act, as amended, and European data privacy laws, including the General Data Protection Regulation. Complying with these numerous and complex regulations is expensive and difficult, and failure to comply with these regulations could result in regulatory scrutiny, civil liability and related fines, or damage to our reputation. In addition, any security breach or attempt thereof could result in liability for stolen assets or information, additional costs associated with repairing any system damage, incentives offered to clients or other business partners to maintain business relationships after a breach, and implementation of measures to prevent future breaches, including organizational changes, deployment of additional personnel and protection technologies, increased employee training, and engagement of third-party experts and consultants. The costs incurred to remediate any security incident could be substantial. We cannot guarantee that any costs and liabilities incurred in relation to an attack or incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all.

In addition, we cannot assure you that any of our third-party service providers with access to our sensitive or confidential information, or to that of our customers and/or employees, will not experience security breaches or attempts thereof, which could have a corresponding effect on our business.

The medical device, biotechnology and pharmaceutical industries, specifically relating to the areas where we currently or intend to market our RECELL System,products, are intensely competitive and subject to significant changes due to technology and medical practice standards. We may face competition from any number of different sources with respect to any products we develop and commercialize.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products, treatments or procedures that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than our RECELLcurrent Systemproducts or any future products we develop. Many of our current or future competitors may have significantly greater financial resources and experience in research and development, manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we may have. Mergers and acquisitions in the medical device, pharmaceutical, and biotechnology industries, or specifically in the wound care markets, may result in increased concentration of resources among a smaller number of our competitors. Other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These companies compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies necessary for, or complementary to, our programs.products.

Our success will be heavily dependent on our ability to obtain and maintain meaningful patent protection for our technologies and products throughout the world. Patent law relating to the technology fields in which we operate continues to evolve. The amount of protection to maintain over our proprietary rights, therefore, is uncertain. Further, the validity and enforceability of our patent portfolio cannot be predicatedpredicted with certainty. We will rely on patents to protect a significant part of our intellectual property and to enhance our competitive position. However, our presently pending or future patent applications may be denied, and any patent previously issued to us may be challenged, invalidated, held unenforceable or circumvented. Our patents have expected expiration dates ranging from 2032 to 2033, while our pending patent applications, if granted, would have expiration dates ranging from 2034 to 2043. Furthermore, theour patentissued protections we have been grantedpatents may not be broad enough to prevent competitors from producing products similar to ours.ours, and we have products that we continue to commercialize that were covered by patents that are now expired.

Filing, prosecuting and defendingenforcing patents on all of our technologies and products in every jurisdiction is expensive. Competitors could reverse engineer our technologies in jurisdictions where we have not obtained patent protection to develop their own products. These products may compete with our products and may not be covered by any of our patent claims or other intellectual property rights.

The laws of some countries do not protect intellectual property rights to the same extent as the laws of the United States and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions. This lack of protection could make it difficult for us to stop thethird infringementparties offrom infringing our patents. Proceedings to enforce our patent rights in the U.S. or foreign jurisdictions could result in substantial cost and divert the efforts and attention of key personnel from other aspects of our business. If we fail to obtain adequate patent protection for our proprietary technology, our ability to be commercially competitive internationally will be materially impaired.

While we currently do not believe it to be the case, third parties may claim that we are employing their proprietary technology without authorization or that we are infringing their patents. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of their patents.merit. If such claims were made, we could incur substantial costs coupled with diversion of key technical personnel in defending against these claims.claims Furthermore,and/or challenging the validity of any asserted patent before a court or administrative agency. Even if we believe such claims are without merit, parties making claims against us may be able to obtain injunctive or other equitable relief whichthat could effectively halt our ability to further develop, commercialize, and sell products. In the event of a successful claim of infringement, courts may order us to pay damages and obtain one or more licenses from third parties. We may not be able to obtain these licenses at a reasonable cost, if at all. Defense of any lawsuit or failure to obtain any of these licenses could prevent us from commercializing available products and have a material negativeadverse effect on our financial condition and business prospects.

If we choose to go to court to stop someone else from using the intellectual property claimed in our patents or our licensed patents, that individual or company has the right to ask thea patent office or a court to rule that these patents are invalid and/or should not be enforced against that third party. These lawsuits or proceedings are expensive and would distract our key personnel and consume time and other resources, even if we were successful in stopping the infringement of these patents. In addition, there is a risk that a patent office or a court will decide that our patents are invalid or unenforceable and that we do not have the right to stop the other party from using the inventions or, even if the validity or enforceability of these patents is upheld, the court may refuse to stop the other party because the competitors’ activities do not infringe our rights. Furthermore, even if our patents are found to be valid and infringed, a court may refuse to grant injunctive relief against the infringer and instead grant us monetary damages and/or ongoing royalties. Such monetary compensation may be insufficient to adequately offset the damage to our business caused by the infringer’s competition in the market.

The development of medical device products,products such as our RECELL System, involves an inherent risk of product liability claims and associated financial liability and adverse publicity. Any products we may develop could be found to be harmful or to contain harmful substances and expose us to substantial liability and risk of litigation or may force us to discontinue production. We may be unable to obtain or maintain insurance on reasonable terms or otherwise protect ourselves against potential product liability claims that could impede or prevent further business development of any products we may create and commercialize. Furthermore, a product liability claim could damage our reputation, regardless of the claim’s merit or whether liability for such claims is covered by insurance. A product liability claim against us or the withdrawal of a product from the market could have a material adverse effect on our financial condition or business operations. Furthermore, product liability lawsuits, regardless of their success, would likely be time-consuming and expensive to resolve and would divert management’s time and attention, which could seriously harm our business.

The continued successful commercialization of theour RECELL Systemproducts for FDA approved and pending indications, will depend in part on the extent to which government authorities and healthcare insurers establish adequate reimbursement levels and pricing policies.

Continued sales of theour RECELL Systemproducts depend in part on the availability of coverage and reimbursement from third-party payers such as government insurance programs, including Medicare and Medicaid, private health insurers, health maintenance organizations and other healthcare-related organizations, who are increasingly challenging the price of medical device products and services.

Both the federal and state governments in the United States continue to propose and pass new legislation, regulations, and policies affecting coverage and reimbursement rates, which are designed to contain or reduce the cost of health care. Continued federal and state proposals and healthcare reforms are likely, which could limit the prices that can be charged for theour RECELL Systemproducts and may further limit our commercial opportunity. For example, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or the IRA, into law which, among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in Affordable Care Act marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost through a newly-established manufacturer discount program. It is possible that the Affordable Care Act will be subject to judicial or Congressional challenges in the future. Accordingly, we continue to evaluate the effect that the Affordable Care Act has on our business.

There also may be future changes unrelated to the IRA that result in reductions in potential coverage and reimbursement levels for our products, and we cannot predict the scope of any future changes or the impact that those changes would have on our operations. For example, the Trump administration is aggressively pursuing a pharmaceutical pricing policy that would tie prices in the U.S. to prices in other countries. Adoption of such a mechanism in one part of the healthcare sector lowers the barrier to imposing similar approaches in other sectors of our industry. Cost control initiatives may decrease coverage and payment levels and, in turn, impact the prices that we will be able to charge and/or the volume of our sales. We are unable to predict all changes to the coverage or reimbursement methodologies that will be applied by private or government payers. Any denial of private or government payer coverage, such as the Affordable Care Act or the IRA, as well as other federal, state, and foreign healthcare reform measures that have been and may be adopted in the future, or inadequate reimbursement, could reduce our revenue and business prospects. Additionally, if associated rebate obligations are substantially greater than we expect, our future net revenue and profitability could be materially diminished.

Anti-Corruption Laws: Our operations are subject to anti-corruption laws, including laws combating foreign bribery in Australia and the FCPA in the U.S.,U.S. and in other anti-corruption laws that apply in countries where we do business. Anti-corruption lawsbusiness generally prohibit us and our employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. We participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under these anti-corruption laws. In addition, we cannot predict the nature, scope, or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered, interpreted or changed.

Defending against any allegations that we have violated any such actionslaws can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actionsallegations that may be brought against us, our financial condition and operations, as well as business prospects, may be impaired.

We do not anticipate paying cash dividends on our common stock and CDIs in the foreseeable future and intend to retain all earnings, if any, to fund our operations. Even if funds are legally available for distribution, we may be unable to pay any dividends to our stockholders because of limitations imposed by a lack of liquidity. Accordingly, our stockholders may have to sell some or all of their common stock or CDIs (as applicable) in order to generate cash flow from their investment. Our stockholders may not receive a gain on their investment when they sell their common stock or CDIs and may lose some or all of their investment. Any determination to pay dividends in the future on our common stock and CDIs will be made at the discretion of our board of directors (the “Board of Directors” or the “Board” and each director, a “Director”) and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law, capital requirements, and other factors that our Board of Directors deems relevant.

In addition to ASX Listing Rule 7.1, we are also subject to Nasdaq Listing Rule 5635(d), commonly referred to as the “Nasdaq 20% Rule,Rule”, which requires stockholder approval of a transaction other than a public offering involving the sale, issuance, or potential issuance by a company of common stock (or securities convertible into or exercisable for common stock) equal to 20% or more of the common stock, or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the shares. While less restrictive than ASX Listing Rule 7.1, the operation of the Nasdaq 20% ruleRule could limit our ability to raise capital through issuance of common stock or convertible securities without jeopardizing our listing status. If we were to violate the “Nasdaq 20% rule,Rule”, the Company would be subject to delisting from Nasdaq and share prices and trading volumes would likely suffer.

We are ana emerging“smaller growthreporting company,company”, under federal securities laws, and the reduced disclosure requirements applicable to emerging growthsuch companies may make our common stock less attractive to investors.

AVITA Medical, Inc. (“we”, “our”, “us”) is a leading therapeutic acute wound care company delivering transformative solutions. Our technologies are designed to optimize skin restoration procedures, effectively accelerating patient healing and recovery. Our solutions improve the healing outcomes for patients with traumatic injuries and surgical repairs, addressing critical healing needs that arise from unpredictable and life-changing events. At the forefront of our portfolio is our patented and proprietary RECELL® System (“RECELL System” or “RECELL”), approved by the U.S. Food & Drug Administration (the “FDA”) for the treatment of thermal burn wounds and full-thickness skin defects, and for repigmentation of stable depigmented vitiligo lesions.defects. RECELL harnesses the regenerativehealing properties of a patient’s own skin to create an autologous skin cell suspension, Spray-On Skin™ Cells, deliveringoffering aan transformativeinnovative solution for improved clinical outcomes at the point of care. ThisIn breakthroughaddition, technology serves as the catalyst for a new treatment paradigm enabling improved clinical outcomes. Inin the United States, we also hold the rights to manufacture and exclusively market, sell, and distribute PermeaDerm®, a biosynthetic wound matrix, under the terms of an exclusive multi-year distribution agreementand (thecontract “Stedicalmanufacturing Agreement”)agreements with Stedical Scientific, Inc. (“Stedical”). We also entered into an exclusive multi-year development and distribution agreement with Collagen Matrix, Inc. dba Regenity Biosciences (“Regenity”). Regenity will manufacturemanufactures and supplysupplies Cohealyx™, an AVITA Medical-branded, FDA-cleared, collagen-based dermal matrix. Under the agreement,agreement with Regenity, we will hold the exclusive rights to market, sell, and distribute Cohealyx in the U.S., with the potential expansionto expand such commercialization into the European Union, Australia, and Japan.

The single-use RECELL Autologous Cell Harvesting Device (“RECELL Ease-of-Use” or “RECELL EOU”) is approved by the FDA for the treatment of thermal burn wounds and full-thickness skin defects, and repigmentation of stable depigmented vitiligo lesions.defects. Our next-generation device, RECELL GO™® Autologous Cell Harvesting Device (“RECELL GO”), is FDA-approved to treat thermal burn wounds and full-thickness skin defects. RECELL GO introduces enhanced features that streamlineimprove the preparation of Spray-On Skin Cellsconsistency and improvesstandardization workflowacross efficiencyclinical in the operating room.settings. It consists of two components: the RECELL GO Processing Device (the “RPD”) and the RECELL GO Preparation Kit (the “RPK”). The RPD is a multi-use, AC-powered device that controls the RPK. The RPK iscontains a single-use cartridge that containsand the RECELL Enzyme™. The RPD regulates the pressure applied to disaggregate the cells and precisely controls the incubation time of the RECELL Enzyme to optimize cell yield and promote cell viability. RECELL GO mini™ Autologous Cell Harvesting Device (“RECELL GO mini”), which was approved by the FDA in December 2024, is a line extension of RECELL GO, designed specifically to treat smaller wounds up to 480 cm2. It utilizes the same RPD but features a RECELL GO mini Preparation Kit, which includes a single-use RECELL GO mini cartridge optimized for smaller skin samples. These modifications are intended to align with the needs of clinicians treating smaller wounds, and to support broader adoption of the RECELL GO platform in trauma centers.

The macroeconomic environment may have unexpected adverse effects on businesses and healthcare institutions globally that may negatively impact our consolidated operating results. There remains significant uncertainty in the current macroeconomic environment due to factors including supply chain shortages, increased cost of healthcare, changes to inflation rates, a competitive labor market, tariffs, and other related global economic conditions and geopolitical conditions. If these conditions continue or worsen, they could adversely impact our future operating results.

Changes in reimbursement rates by third party payors may place additional financial pressure on hospitals and the broader healthcare system. Healthcare institutions may take actions to mitigate any persistent pressures on their budgets and such actions could impact the future demand for our products. Geopolitical conditions may also impact our operations. Although we do not have operations in Russia, Ukraine or inUkraine, the Middle East, or Asia, the continuation or threat of the military conflicts in these regions and/or anany escalation of the conflicts beyond their current scope may further weaken the global economy that could resultresulting in additional inflationary pressures or supply chain constraints.

Interest expense increased approximately $4.2 million in comparison to the prior year due to the interest expense related to the long-term debt as part of the OrbiMed Credit Agreement for the full year, for an aggregate principal amount owed of $40.0$40 million.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed under Part I, Item 1A, “Risk Factors,” in the 2025 Annual ReportReport, and as updated from time to time in the Company’s subsequent Quarterly Reports on Form 10-Q.10-Q (the “Risk Factors”). These factorsRisk Factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this Quarterly Report on Form 10-Q. There have been no material changes to the risk factors described in Part I, Item 1A, “Risk Factors,”Factors includedas inof the 2025filing Annualof Report.this Quarterly Report on Form 10-Q.

The following discussion and analysis of AVITA Medical, Inc.’s (“AVITA Medical”, the “Company”), “we”, “our”, or “us”) financial condition and results of operations should be read in conjunction with our unaudited Consolidated Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q as well as the “Note Regarding Forward-Looking Statements” on page 3.

We are a leading therapeutic acute wound care company delivering transformative solutions. Our solutions improve the healing outcomes for patients with traumatic injuries and surgical repairs, addressing critical healing needs that arise from unpredictable and life-changing events. At the forefront of our portfolio is RECELL® (“RECELL”), approved by the U.S. Food & Drug Administration (the “FDA”) for the treatment of thermal burn wounds and full-thickness skin defects. RECELL harnesses the healing properties of a patient’s own skin to create an autologous skin cell suspension, Spray-On Skin™, offering an innovative solution for improved clinical outcomes at the point of care. We entered into an exclusive multi-year development and distribution agreement with Collagen Matrix, Inc. dba Regenity Biosciences (“Regenity”). Regenity manufactures and supplies Cohealyx™, an AVITA Medical-branded, FDA-cleared, collagen-based dermal matrix. Under the agreement with Regenity, we hold the exclusive rights to market, sell, and distribute Cohealyx in the U.S., with the potential to expand such commercialization into the European Union, Australia, and Japan. In addition, in the United States, we hold the rights to manufacture and exclusively market, sell, and distribute PermeaDerm®, a biosynthetic wound matrix, under the terms of exclusive multi-year distribution and contract manufacturing agreements with Stedical Scientific, Inc. (“Stedical”).

Commercializing and expandingExpanding adoption of Cohealyx as a dermal matrix that supports wound bed preparation and meaningfully reduces mean time to skin grafting;

AdvancingComplete post-marketanalysis of the results of the clinical studies for Cohealyx and PermeaDerm to generate additional clinical and healthprepare economicfor evidencesubmission supportingof adoptionthe data for publication;

Expanding RECELL internationally through distributor-led commercialization upon receipt of regulatory approvals;

Changes in reimbursement rates and coverage policy by third party payors may place additional financial pressure on hospitals and the broader healthcare system. These changes could reduce demand for our products, particularly if healthcare providers face lower margins or additional administrative burdens. For example, in 2025 the Centers for Medicare & Medicaid Services (“CMS”) designated pricing responsibility for the Current Procedural Terminology (“CPT”) code used with RECELL to the seven regional Medicare Administrative Contractors (“MACs”). Delay by the MACs in establishing and publishing reimbursement rates temporarily slowed clinician use of RECELL. As of March 2026, all seven MACs havehad published rates, restoring reimbursement clarity and supporting a return toward normalized utilization.

Geopolitical conditions may also impact our operations. Although we do not have operations in Russia, Ukraine, the Middle East, or Asia,Asia (outside of Japan), the continuation or threat of military conflicts in these regions or any escalation of conflicts beyond their current scope may further weaken the global economy resulting in additional inflationary pressures or supply chain constraints.

On January 13, 2026, we entered into a five-year credit facility with Perceptive Advisors LLC providing up to $60 million in totalavailable borrowings.capital. At closing, we drew $50 million and used a portion of the proceeds to repay our existing debt, resulting in net proceeds of approximately $6.0 million after repayment of our prior debt and certain related transaction fees. This credit facility includes an option to access an additional $10.0 million through the first quarter of 2027, subject to the achievement of a certain revenue milestone. This facility also establishes trailing twelve-month (“TTM”) revenue covenants aligned with our current operating trajectory, including $68.5 million for the quarter ended March 31, 2026, $69.0 million for the quarter endingended June 30, 2026, and $73.0 million for the year ending December 31, 2026. TheAs TTM revenue covenant is $69.0 million for the second quarter endingof June 30, 2026, and $73 million for the full year 2026. As of March 31, 2026, we were in compliance with these covenants. For additional information, see Liquidity and Capital Resources below.

On April 8,6, 2026, we entered into a ten-year agreement with the Biomedical Advanced Research and Development Authority (“BARDA”), part of the U.S. Department of Health and Human Services, with a total potential value of up to $25.5 million. Under the agreement, we will maintain a supply of RECELL for deployment in burn mass casualty incidents and provide associated readiness and support services. The agreement includesprovides approximately $4.0 million in expected revenue from access and maintenance fees over the ten-year term, with additional potential revenue tied to procurement options exercised by BARDA. Costs to fulfill the BARDA emergency preparedness performance obligation, which consist of billed costs to BARDA incurred in connection with emergency deployment services, are incremental and expected to be recovered.

Results of Operations for the three-months ended MarchJune 31,30, 2026 compared to the three-months ended MarchJune 31,30, 2025.

Total revenues increased by 4%,18%, or $0.7$3.3 million, to approximately $19.3$21.7 million, compared to $18.5$18.4 million in the same period in the prior year. Our commercial revenue was approximately $19.3 million in the three-months ended March 31, 2026, an increase of $0.7 million, or 4%, compared to $18.5 million in the corresponding period in the prior year. The growth in commercial revenues was largely driven by increased contributions from Cohealyx, RECELL GO mini in trauma and smaller wounds, and continued normalization in RECELL utilization following the resolution of MAC-related reimbursement headwinds.

Gross profit margin was 81.7%81.9% compared to 84.7%81.2% in the corresponding period in the prior year. Note that the gross margin for RECELL products only was 85.0%86.0% for the quarter, which we believe will remain in this range for future quarters. The decreaseincrease in the overall gross margin percentage from the prior year was primarily caused by certainlower inventoryvolume adjustmentsdiscounts andoffset by product mix. The Company shares the average sales price for Cohealyx at 50% and for PermeaDerm at 60%. Although these arrangements are highly beneficial, they inevitably result in an overall decrease in gross margin percentage. Therefore, the product mix is expected to continue to impact the overall gross margin percentage while increasing the gross profit and, given that expenses associated with this revenue do not increase significantly, the operating profit on a quarterly basis.

Sales and marketing expenses decreased by 13%,5%, or $2.0$0.7 million, to $12.8$13.6 million, compared to $14.8$14.3 million in the corresponding period in the prior year. Lower costs in the current year are due to decreases in salariesselling and benefitsexpenses of approximately $0.9 million, offset by higher other selling expenses of $0.6 million, and professional fees of $0.5$0.2 million. The decrease in salaries and benefits is due to the reduction of our sales force as part of cost savings initiatives which began in the second quarter of the prior year. The decrease in selling expenses is due to lower commissions.commissions Theand decreasemarketing in professional fees is due to lower consulting costs.spend.

ResearchGeneral and developmentadministrative expenses decreased by 10%, or $0.7 million, to $5.6$6.0 million, compared to $6.3$6.7 million in the same period in the prior year. Lower costs in the current year are due to decreases in salaries and benefits of approximately $0.3 million, stock-based compensation expenseof $0.5 million and professional fees of $0.2$0.4 million, andoffset $0.2by millionan in lower research and development expenses. The decreasesincrease in salaries and benefits andof stock-based$0.2 compensation expense are due to lower headcount.million. The decrease in researchstock-based and development expensescompensation is due to lowerreduced productgrant testing costs.activity.

Other expense,income, net decreased by $0.4$1.8 million to $0.4$0.7 million from $0.8$2.5 million in the prior period. In the current period, other expense,income, net consists of $0.5 million in income related to our investments and a non-cash chargegain of $0.3$0.2 million related to the change in fair value of the loan facility,facility. offsetThe byprior aperiod income consisted of non-cash chargegains of $0.6$1.2 million related to the change in fair value of warrantswarrants, and $0.1 million in other expense, net. The prior period expense consisted of a non-cash charge of $0.8$0.9 million related to the change in fair value of debtloan facility, and $0.8 million in debt issuance costs, offset by a non-cash gain of $0.4 million related to the change in fair value of the warrants and $0.3 million in income related to our investments and $0.1 million in other gains, net.investments.

Our Consolidated Financial Statements have been prepared on the basis that we will continue as a going concern for the next 12 months. We had approximately $8.3$9.1 million in cash and cash equivalents and $6.0$2.0 million in marketable securities as of MarchJune 31,30, 2026. We have funded our research and development activities, and more recently our substantial investment in sales and marketing activities, through the salesales of our products, the issuance of equity securities, and debt financing. If capital is not available to us when amounts are needed, we could be required to delay, scale backback, or abandon commercial activities and development programs and other operations, which could adversely impact our business, financial condition, and operating results.

On January 13, 2026 (the “Closing Date”), we entered into a Credit Agreement and Guaranty (the “Credit Agreement”), and Security Agreement (the “Security Agreement”), by and among us, as borrower, Avita Medical Americas, LLC, a wholly-owned subsidiary of the Company, as guarantor (the “Guarantor,” taken together with the Company, the “Obligors”) and Perceptive Credit Holdings V, LP as a lender and the administrative agent (the “Lender,” and the “Administrative Agent,” as applicable). The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $60 million (the “Loan Facility”), of which (i) $50 million was funded on the Closing Date (the “Initial Commitment Amount”), and (ii) $10 million will be made available, at our discretion by notice to the Administrative Agent on or before March 31, 2027, subject to satisfaction of a certain net revenue requirement (the “Additional Commitment Amount”). On the Closing Date, we closed on the Initial Commitment Amount, less certain fees and expenses payable to or on behalf of the Lender. Simultaneously with the closing of the Initial Commitment Amount, we repaid in full and terminated all of our obligations and commitments under our previous credit agreement (the “Refinancing Transaction”).

On the Closing Date, we agreed to issue,issue to the Lender, subject to shareholder approval, warrants to purchase up to 650,000 shares of Common Stock, par value $0.0001 per share, at an exercise price set at the lower of two 10-day VWAPs: (i) the 10-day VWAP ending on the business day immediately prior to the Closing Date (i.e., 12 January 2026),Date, which VWAP is $3.4019; or (ii) the 10-day VWAP ending on the business day immediately prior to the issuance date of the warrantswarrants. (On June 3, 2026, our shareholders approved the “Perceptiveissuance Warrants”).of such warrants. On June 8, 2026, we issued a warrant covering up to 650,000 shares of Common Stock at an exercise price of $3.4019 per share, of which 500,000 shares are immediately exercisable, with an additional 150,000 shares that will vest and become exercisable if we close on the Additional Commitment Amount.

Under the terms of the Credit Agreement, and as set forth in a fee letter between us, and the Lender and the Administrative Agent (the “Fee Letter”), we will pay certain fees with respect to the Loan Facility, including (a) an exit fee equal to 5% of the aggregate principal amount borrowed by us under the Credit Agreement in the event that we fail to secure shareholder approval of the issuance of the Perceptive Warrants in accordance with the rules of the ASX (the “Warrant Shareholder Approval”) on or prior to September 30, 2026, and (b) a prepayment premium ranging from 1% to 10% of the amount of the Loan Facility that is prepaid upon any voluntary or mandatory prepayment (including as a result of an acceleration), together with certain other fees and expenses of the Lender.

The Credit Agreement contains certain customary events of default, including with respect to nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty; failure to perform or observe covenants; material defaults on other indebtedness; insolvency; loss of certain key permits, persons and contracts; material adverse effects; certain regulatory matters; and change of control. Additionally, our failure to obtain Warrant Shareholder Approval on or prior to November 30, 2026 shall constitute an event of default under the Credit Agreement.

The Credit Agreement contains a number of customary representations, warrantieswarranties, and covenants that, among other things, will limit or restrict our ability to (subject to certain qualifications and exceptions): create liens and encumbrances; incur additional indebtedness; merge, dissolve, liquidate or consolidate; make acquisitions, investments, advances or loans; dispose of or transfer assets; pay dividends or make other payments in respect of their capital stock; redeem or repurchase certain debt; engage in certain transactions with affiliates; and enter into certain restrictive agreements. Among such covenants, the Credit Agreement includes a financial maintenance test that requires us to maintain a specified minimum net revenue for each trailing twelve-month period ending on the last day of a fiscal quarter occurring prior to the maturity date of the Loan FacilityFacility, with the first such test occurring as of the fiscal quarter ended March 31, 2026. In addition, the Credit Agreement requires us to maintainmaintain, in the aggregateaggregate, at least $5 million of unrestricted cash at all times. Pursuant to the Security Agreement, all obligations under the Credit Agreement are guaranteed and secured by substantially all of our assets.

Net cash used in operating activities was $10.1$13.6 million and $10.3$20.5 million during the three-monthssix-months ended MarchJune 31,30, 2026 and 2025, respectively. The decrease in net cash used in operations was primarily due to increased gross profit, decreased operating expensesexpenses, offset byand the timing of working capital outlays.

Net cash provided by investing activities was $2.0$5.9 million and $10.8$17.8 million during the three-monthssix-months ended MarchJune 31,30, 2026 and 2025, respectively. The decrease in cash provided by investing activities is primarily attributable to lower cash inflows from maturities of marketable securities and higher cash outflows from purchases of marketable securities in the current year.

Net cash provided by financing activities was $6.1$6.5 million and $0.4$0.9 million during the three-monthssix-months ended MarchJune 31,30, 2026 and 2025, respectively. The increase in cash provided by financing activities is primarily due to the Loan Facility entered into on January 13, 2026.

For the three-monthssix-months ended MarchJune 31,30, 2026, there were no dividends paid and we have no plans to commence the payment of dividends.

Under the terms of the Regenity Agreement, we have an obligation to make an additional $3.0 million payment on or before January 4, 2027 to guarantee development and manufacturing capacity (and related resources), contingent on positive results of certain clinical studies. With the exception of the milestone payments relatedunder tothe ourRegenity exclusive development and distribution agreement with Regenity,Agreement, we do not have any other purchase commitments or long-term contractual obligations, except for lease obligations as of MarchJune 31,30, 2026.