AVITA Medical, Inc. (RCEL) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the AVITA Medical Fourth Quarter 2021 and Transition Period July 1, 2021 to December 31, 2021 conference call. [Operator Instructions]. Please be advised that today's call is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Caroline Corner, Investor Relations. Please go ahead.

Thank you, operator. Welcome to AVITA Medical's Fourth Quarter 2021 Earnings Call. Joining me on today's call are Mike Perry, Chief Executive Officer; and Michael Holder, Chief Financial Officer. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical facts should be considered forward-looking statements, including statements regarding the markets in which AVITA Medical operates, trends, demand and expectations for its products and technology its expected financial performance, expenses and position in the market; and the impact of COVID-19 on its operations and its customers' operations. These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially from any results, performance or achievements expressed or implied by the forward-looking statements. Please review AVITA Medical's most recent filings with the SEC, particularly the risk factors described in AVITA Medical's S3 and 10-K filings and an AVITA Medical's quarterly report on Form 10-Q for the fourth quarter ended December 31, 2021, for additional information. Any forward-looking statements provided during this call including projections for future performance, are based on management's expectations as of today. AVITA Medical undertakes no obligation to update these statements, except as required by applicable law. AVITA Medical's press release with fourth quarter and full year 2021 results is available on its website, www.avitamedical.com under the Investors section and includes additional details about its financial results. AVITA Medical's website also has the latest SEC filings, which you are encouraged to review. A recording of today's call will be available on AVITA Medical's website by 5:00 p.m. Pacific Time today. Now I'd like to turn the call over to Mike for his comments and fourth quarter 2021 business highlights.

Thank you, Caroline, and thank you, everyone, for joining us today. We are encouraged by our recent achievement of key corporate milestones, our corporate commercial performance as well as the exciting opportunities that lie ahead for AVITA Medical. Here at AVITA Medical, we are driven by our primary goal of enabling health care providers to restore skin, to save lives and to improve quality of life for patients. As we expand from treating burns into trauma to vitiligo to cell and gene therapy and to aesthetics and beyond, our focus is on delivering leading-edge therapeutic skin restoration solutions to our patients. While the company was founded with burn treatments in mind, our team is working to leverage our point of care autologous spray on skin platform across many markets and indications, and I'm very pleased to update you today on our latest developments. Total net revenue increased 37% to $14 million compared to $10.2 million in the corresponding period in the prior year. for the quarter ended December 31, 2021, our commercial revenues were consistent with our guidance at $6.9 million. With that, I'd like to highlight the recent progress that we've made with our clinical trials and the related commercial opportunities we have with soft tissue reconstruction and Vitiligo. In early January, we announced completion of enrollment in our pivotal trial evaluating the RECELL system for soft tissue reconstruction 2 quarters earlier than recent guidance. Enrollment in the soft tissue reconstruction clinical trial was led by a couple of prominent trauma centers and a few prominent burn centers who are currently high-volume accounts for AVITA. This mirrors our understanding of the market opportunity and the overlap between the burns and trauma opportunities, which bodes well for the future commercialization of these indications. Top line data are expected to be released for a soft tissue reconstruction trial during the second half of 2022 with FDA approval anticipated during the second half of 2023. As a reminder, based on our internal estimates, we foresee a total addressable U.S. market opportunity for trauma and soft tissue injury of $1 billion, which is approximately twice the size of the total addressable market for our burns business. Once approved, we anticipate leveraging our installed base of burn centers to treat traumatic wounds especially those that present to burn centers that are co-located with trauma centers. Furthermore, we plan to be selling the RECELL system to approximately 220 Level 1 and Level 2 trauma centers, where we will approach plastic and reconstructive surgeons as well as traditional trauma surgeons. We plan to incrementally expand our sales force to promptly address this opportunity post approval. We remain excited about our improved Ease of Use device, which was designed with considerable input from surgeons and users. The Ease of Use device allows for improved surgeon and staff handling by no longer requiring a second pair of hands outside the sterile field. and a reduction in device handling steps by 1/3, thereby providing significant time savings to surgeons and/or staff. We are pleased to share with you that the FDA has approved the premarket approval application, or PMA for our new RECELL system with improved ease of use. The U.S. launch is planned to commence in Q2 of this calendar year. Our improved Ease of Use device will also allow AVITA Medical to better address our burns outpatient market facilitated by the new transitional pass-through payment or TPT code issuance. As the TPT code is indication-agnostic it will also apply to our soft tissue repair indication once approved. This represents another meaningful step on our pathway to becoming the standard of care in acute wounds and provides further opportunity to extend our intellectual property estate. We are additionally continuing to fervently support development of our next-generation automated skin preparation device to produce spray-on skin cells. Turning to our pipeline vitiligo indication. In December, we completed enrollment of our pivotal trial for the use of the RECELL system for repigmentation of stable vitiligo. Top line data from our Vitiligo pivotal trial are expected to be released during the second half of 2022 with PMA approval in U.S. commercial introduction anticipated by the end of 2023. For those unfamiliar with the condition, Vitiligo is a skin disorder characterized by deep pigmented areas of skin that appear as white spots or patches and which are primarily attributed to an underlying autoimmune disorder in the patient. There are an estimated 100 million sufferers of Vitiligo worldwide including up to 6.5 million Americans. Of those in the U.S. we estimate approximately 1.3 million have stable vitiligo, our target population, meaning that their underlying autoimmune disease is being well managed and that their disease is not continuing to progress. Based upon our internal estimates, we foresee a total addressable U.S. market for resale in Vitiligo of $5.2 billion. Last month, for the first time, RECELL was presented on podium at the Annual Maui Derm 2022 Conference to 650 in-person participants and many others attending virtually. Dr. Pearl Grimes, Director of the Vitiligo and pigmentation Institute of Southern California and Dr. John Harris, Professor and Chair of the Department of Dermatology at the University of Massachusetts Medical School and UMass Memorial Medical Center discussed the latest approaches to treating vitiligo, melasma, and other disorders of pigmentation. Dr. Harris shared RECELL as a potential treatment for Vitiligo along with multiple cases from outside the United States and provided an overview of our vitiligo study design. Since this presentation took place, we have experienced a very nice uptick in interest from the dermatological community. Looking ahead to March, our team is excited to participate in 3 key annual meetings taking place in Boston, namely the Global Vitiligo Foundation or GBF, Annual Scientific Symposium, The Skin of Color society and the American Academy of Dermatology or AAD meeting. Of note, there are 10 sessions featuring Vitiligo, which is a marked increase from last year as JAK inhibitors from Pfizer, AbbVie and Insight and the RECELL system have stimulated substantial interest. As a reminder, JAK inhibitors are primarily focused on controlling the underlying autoimmune disease that causes the white patches. If effective, the JAK inhibitors will increase the total pool of stable vitiligo patients available for repigmentation with RECELL. In addition to completing our enrollment in our pivotal soft tissue and vitiligo trials AVITA Medical recently established proof of concept for novel treatments in skin rejuvenation and an epidermolysis bullosa. In partnership with researchers at the Houston Methodist Research Institute, or HMRI, preclinical data demonstrating successful proof of concept was achieved when pairing RECELL for harvesting and delivery of skin cells with HMRI's patented RNA technologies to reverse age the skin cells prior to delivery. Personalized cellular level skin rejuvenation is an area of significant interest for consumers with a total addressable market of over $15 billion. More than 3 million aesthetic procedures are performed annually in the United States with approximately 1 million people undergoing facelifts and various tightening procedures each year. In partnership with scientists, at the Gate Center for Regenerative Medicine at the University of Colorado School of Medicine, we achieved preclinical proof of concept for a novel therapeutic aimed to treat recessive dystrophic epidermolysis bullosa or RDEB. Patients with RDEB have a mutation in their COL7A1 gene, which leads to severe skin fragility resulting from their skin cells inability to produce the protein needed that normally secures the epidermis and Dermis to 1 another. Epidermolysis bullosa or EB cells have been successfully corrected and reverse differentiated into induced pluripotent stem cells or iPSCs. We have then forward differentiated iPSCs and applied them in a very clinical model as spray on skin cells successfully regenerating skin that is free of the COL7A1 defect. Recessive dystrophic epidermolysis bullosa is rare and currently incurable disease that leads to chronic wounds, and in some subtypes an increased risk of squamous cell carcinoma or death. This represents an orphan indication with 25,000 to 50,000 patients in the United States and a total addressable U.S. market or TAM estimated at $850 million. So while I've just provided you with updates on our pipeline indications, we have also continued our progress in burns. Our sales force, which we believe is the largest and most experienced burn dedicated sales force in the market. remains focused on driving utilization and broadening penetration within our footprint of over 100 hospitals and over 250 trained physicians. In the face of nursing and staffing shortages, we continue to prioritize training and education efforts with advanced practice providers who have a tremendous influence on the use of RECELL. Training includes local, regional and national events for both surgeons and their staff. In the last quarter, we held almost 600 hands-on trainings in the field and we are currently performing approximately 200 in-hospital training sessions per month. Moving to our recent progress with reimbursement. Our transitional pass-through payment or TPT, payment device category C code became effective January 1, 2022. As a reminder, the C code intended to facilitate the adoption of new technology for Medicare beneficiaries by offsetting the cost of the device to facilitate the facilities, provides separate payment for RECELL used in procedures that are performed in hospital outpatient facilities and in ambulatory surgical centers. The new code lays a reimbursement foundation for our soft tissue repair indication as well as expands RECELLs burn treatment to a new care setting with existing customers. We have commenced the initial steps of a pilot launch at key sites to ensure coverage with commercial carriers and will proceed with a broader nationwide launch in mid-2022. Interest in RECELL remains high. And despite the pandemic and staffing-driven pressures on procedure rates, we are completing cases and delivering on our mission to save and improve patients' lives. We continue to hear moving stories in the media regarding the use of RECELL for the treatment of burns. One recent story came out of Chicago, highlighting Dr. Josh Carson's patient. Dr. Carson recently treated a 7-year-old boy with RECELL following a house fire, which burned 18% of his total body surface area. Dr. Carson discussed using RECELL instead of a traditional skin graft to cover the boys burns and was impressed with the results. Since early February, this story has received a significant amount of coverage on the FOX Network and in Newsweek. Dr. Jeff Carter was also interviewed regarding his pregnant patient who was treated with RECELL following almost 40% of her total body surface area being burned when a propane grill exploded outside her apartment complex. This story was recently featured within the Louisiana State University Health Education Network and on Science acts. In these articles, Dr. Carter States, using spray on skin, we've been able to cut recovery times in half by accelerated healing. This means less suffering, less risk for complications and infections. And significant savings for both the patients and the state, at least $9 million of savings over 3 years. With that, I'd like to now walk you through the growth drivers we see ahead First, we continue to drive forward on provider engagement and education, whether in person or virtual. Our discussions have progressed from whether or not to use RECELL to a focus on optimizing the use of RECELL as well as training and refining the expertise of support staff. With the pandemic lifting, we are sensing a tangible excitement around live meetings and peer-to-peer trainings. We see face-to-face interaction as a robust driver for burn surgeon adoption and with the ABA Annual Meeting coming up in April -- we're very excited to engage in these conversations. Second, our commercial team will be continuing to drive penetration into our burn center accounts. We are back approved in what we believe is a critical mass of burn centers. And with that, we are focused on penetration within those accounts. We have shown that our strategy of driving into smaller burns results in overall broader RECELL usage. To underscore our approach today, over 1/3 of RECELL procedures involve burns that are less than 10% total body surface area or TBSA and these smaller burns represent about 3/4 of all burned emissions. In the outpatient setting with our C code in place, we have commenced our pilot launch, and we're gearing up for a broader nationwide launch mid this year, as explained earlier. We also anticipate growing our commercial presence in Japan. To that end, RECELL very recently received PMDA approval of the burns indication in Japan, and we will commercialize this indication in partnership with Cosmotec, an M3 company. As a next step, Cosmotec will be meeting with the Japanese Ministry of Health, Labor and Welfare, or MHLW, for reimbursement review, which we anticipate will occur in the June time frame. Cosmotec will launch to burn customers shortly thereafter. Once we have vitiligo and soft tissue data from our U.S. FDA trials, Cosmotec will seek regulatory approval and reimbursement for those indications in Japan. Our third growth driver is progress with our pipeline indications. As mentioned earlier, our soft issue reconstruction and vitiligo clinical trials have completed enrollment, and we expect top line data to be released in the second half of 2022. And with submission of PMA supplements by the end of the calendar year. We anticipate entering the market in the second half of 2023, with both indications. Looking further out. And again, as mentioned earlier, our skin rejuvenation and epidermolysis bullosa preclinical work has achieved proof of concept. Our next goal is to review the GLP data requirements to submit an IND application for our first in-human treatment. And once time lines are clear, I will update you accordingly. In summary, despite some continued pressure on burn procedures and pandemic interruptions, we have continued to execute effectively on our business objectives and have achieved several key milestones. While we anticipate some continued staffing headwinds in the near term, I'm pleased how our team has responded driving advanced practice training and keeping RECELL front and center in the minds of burn care practitioner. Finally, I'm looking further ahead, the substantial progress in our clinical trials for vitiligo and soft tissue trauma reflect a groundswell of interest in and the potential of these large market opportunities. With that, I'll now turn it over to Michael for details on our financial performance in the quarter. Michael?

Thank you, Mike. In our fourth quarter ending December 31, 2021, total revenue increased 35% to $6.9 million compared to $5.1 million in the corresponding period in the prior year. The increase was largely driven by broader utilization among our customer base as well as deeper penetration within individual customer accounts. Gross profit margin was 88% compared with 84% in the corresponding period in the prior year. Higher gross margin was driven by increased production at our Ventura facility, lower shipping costs and the extension of our shelf-life. Total operating expenses increased 42% and to $14.8 million compared to $10.4 million in the corresponding period in the prior year. The increase in operating expenses was primarily driven by higher noncash share-based compensation costs, higher costs with ongoing development of a next-generation automated skin preparation device, pre-commercialization planning for resale launches in soft tissue reconstruction in vitiligo as well as increased hands-on professional education and training events. Higher noncash share-based compensation costs in the current year were due to the reversal of a previously recognized expense for unvested awards related to the resignation of an executive officer in the prior year. Increased hands-on professional education and training events was driven by reduced COVID-19-related travel restrictions. Net loss increased 52% or $2.9 million to $8.5 million over the $5.6 million recognized in the corresponding period in the prior year. The increase in net loss was driven by higher operating expenses, as described earlier, partially offset by higher revenue during the year. Non-GAAP adjusted EBITDA loss increased by 13% or $0.7 million to $6.5 million over the $5.8 million recognized in the corresponding period in the prior year. In our transition period ended December 31, 2021, and which covers from July 1 through December 31. Total revenue increased 37% to $14 million compared to $10.2 million in the corresponding period in the prior year. RECELL commercial revenues were $13.8 million, while RECELL revenues associated with U.S. Department of Health and Human Services, Biomedical Advanced Research and Development Authority, within the office of the Assistant Secretary for Preparedness and Response, or BARDA, were $0.2 million. Revenues associated with BARDA were attributable to our services over the vendor-managed inventory for resale units purchased in the prior year. Gross profit margin was 86% compared with 83% in the corresponding period in the prior year, driven largely by the extension of our shelf-life and lower shipping costs. Total operating expenses increased 7% to $27 million compared to $25.3 million in the corresponding period in the prior year. The increase in operating expenses was primarily driven by ongoing development of a next-generation automated skin preparation device, pre-commercialization planning for resale watches and soft tissue reconstruction and Vitiligo as well as increased hands-on professional education and training events. These higher costs were partially offset by certain onetime professional services to establish the company as a domestic filer with the SEC following completion of the AVITA corporate group's redomiciliation to the United States and severance costs associated with the former executive employees incurred in the prior year. Net loss decreased 9% or $1.5 million to $14.4 million compared to the $15.9 million recognized in the corresponding period in the prior year. The decrease in net loss was driven by higher revenue during the year, partially offset by higher operating expenses as described above. Non-GAAP adjusted EBITDA loss decreased by 17% or $2.1 million to $10.4 million compared to $12.5 million recognized over the corresponding period in the prior year. Moving on to calendar year 2022 guidance. We project total commercial revenues of approximately $30 million, an approximate 20% increase year-over-year, excluding BARDA revenues as we emerge from COVID and increased adoption and use of the resale system. In calendar year 2022, we expect to realize approximately $300,000 of revenue related to BARDA. This places the company in a good position for realizing revenues from new indications in soft tissue reconstruction and vitiligo, which we anticipate will be approved in the second half of 2023. With that, we thank you for your attention. And now I will turn the call back over to the operator for your questions.

[Operator Instructions]. Our first question comes from Josh Jennings with Cowen.

It's been great to see the flurry of positive updates over the last couple of months. I was wondering -- just wanted to ask a question on recent trends in 1Q, you talked a little -- touched a little bit on it on the call and just how that's impacting the 2022 revenue guidance and how we should be thinking about the kind of cadence of revenues throughout the course of now calendar 2022. And then just within that kind of implied 20% revenue -- product revenue growth, our assumption is that most of that is coming from just the core burn franchise and that outpatient burn and Japan are just going to be up and running in the back half. But -- any help there just thinking about contributions for outpatient and Japan that you have baked into your guidance?

Thanks, Josh. Nice to talk to you. I appreciate your questions. Recent trends and certainly have an impact on what we've projected as guidance relative to growth going forward. That said, we are anticipating much less impact from COVID. So this includes really an abatement of COVID. That said, also the nursing staff situation that is continuing to rotate rotating nursing staff due to a national shortage we anticipate will continue and that really has us continuing our training at a very high rate. So that's all baked in. Regarding outpatient and Japan. Your second part of your question, I would agree those are more intended to start kicking in, in the second half of the year. Also, just to remind you, regarding Japan, while we do have PMDA approval in -- around the June time frame Cosmotec, our partner in Japan, we'll be meeting with the MHLW to establish reimbursement and then they'll be able to kick off their sales. So we don't anticipate a whole lot of revenue from Japan in calendar '22.

And a follow-up question is just on a new RECELL device that was approved. And how is your internal team thinking about this new device driving stronger utilization rates at U.S. burn centers increasing or stronger early adoption rates and in the outpatient arena. Or should we be thinking about really some of the pipeline indications for this new device and the ease of use will really kick in, particularly in the state of vitiligo once that's approved.

Thanks again, Josh. Good question. We anticipate that -- well, number one, we're extraordinarily excited by the ease-of-use machine that is now approved. So from that perspective, generally, I would say we're getting a level of enthusiasm. It's something new that we can talk about, and it's a value there. Regarding really driving revenues. This is more of a longer-term value proposition for the company. It will certainly drive some in the outpatient setting in the second half of this calendar year. But where the real bang is going to come in is going to be when we achieve the soft tissue indication and reimbursement, there's going to be a lot of use there relative to the outpatient setting and this ease-of-use device will be very good because you won't need that second -- second pair of hands in outside of the sterile field.

Excellent. And last question, just on soft tissue indication and just the potential, I guess, priming of the pump with off-label utilization and then about the number of centers that you're planning on focusing on for the trauma centers and in those centers that also have burn units. How many -- what percentage do you think is currently using RECELL off-label in soft tissue cases and in front of approval, is there a chance, I know you're not -- is not marketing the indication, but it's being used off label. How much experience will the trauma surgeon community have with RECELL to kind of prime the farm for that launch?

Thanks, again, Josh. Relative to priming the pump and having off-label use. I would say that our KOLs, especially those who are further advanced in the use of RECELL. And I'd estimate that's probably 10% to 15% have been using it in an off-label situation. to treat soft tissue traumatic wounds. And this is primarily in the context of those centers, and that's about half of the ABA approved burn centers which -- 136 or so, half of them are co-located with Level 1, Level 2 trauma centers. we will be adding an additional 220 level 1, level 2 trauma centers when we launch soft tissue. But of course, those centers aren't utilizing the product currently. It's really those burn centers that are co-located with the trauma centers.

Our next question comes from Ryan Zimmerman with BTIG.

All right. Congrats. Let me echo Josh's sentiment. A lot of progress has been made recently, and it's nice to see I guess a follow-up to Josh's question. And Mike, it's clear there's trauma cases and there's burn cases the 2 are different. But I guess, where is the line kind of end and begin there because are all burn cases considered part of trauma? And maybe just help us kind of think about those types of cases a little bit more. I appreciate the color on the physician base. That's my first question. And I would just ask the second question upfront, which is the gross margins were fantastic this quarter. And I'm curious kind of from you, Michael, kind of what your expectations are around gross margin durability as we move into this year?

Thanks, Ryan. I'll take your first question. On trauma and -- it really trauma and burns, when we think about it. We can group them into acute wounds. And from that perspective, the burns are being treated now with RECELL, and there are some that are being treated some trauma cases that are being treated. But again, as I answered Josh's question, if I understood your question, there is going to be a nice overlap when we do get the indication, and we can actually promote to trauma in the burn units as well as in the additional 220 Level 1, Level 2 trauma centers. But yes, broadly group those into acute wounds. And it's really an artificial regulatory concern where burns is carved out as a special acute wound indication, mostly because of the complications of inhalation injury and the like. So that's the situation there. I'll pass it over to Michael to talk about gross margins.

Thank you, Mike. So we were, in fact, very pleased with our gross margins, which we received -- achieved rather this past quarter at 88% and then for the 6-month period at 86%. We've been working really hard. The team has on lowering our shipping costs, and they've done a great job doing that. Going forward, we would look for those costs to more stabilize in the lower 80% range as we roll out our Ease of Use device, it will initially have a shorter shelf-life, which we will improve over time. So again, we're looking for that to stabilize in the lower 80% range.

That's helpful. And then if I can just sneak 1 in. You're switching to the RECELL 2.0, if you want to call it, or the next-generation device kind of midway through this year. Is there any type of pacing or dynamic when you think about potentially inventory in the field that may actually get burned down a little bit, no pun intended, as you transition that new product in the field and considerations for kind of the pacing within your guidance there?

Yes. That's also taken into consideration on the gross margin guidance that I just gave. We've also been focused in addition to shipping costs on working on burning down the 1.0 inventory, along with the commercial team's thoughtful rolling out of the 2.0. So that's something that we're very much looking to optimize and be efficient towards, and that again falls into the guidance that I gave you.

Our next question comes from Lyanne Harrison, Bank of America.

Can I start with, I guess, the transition as you go from the original RECELL to RECELL 2.0. What's the -- in terms of the induced and the results from the resale, is it the same irrespective of which device is used?

Yes. The end result is exactly the same. What we've done is, yes, decrease the steps, as I mentioned, by 1/3 and increase -- enhanced the user experience.

Okay. So is the expectation as you launch RECELL 2.0, that eventually your entire surgeon population will move towards that -- using that product, given that it's an easier to use product?

Yes -- that is our intention.

Okay. And with all of the training that's been conducted at the moment, is that being -- are the nurses being trained for RECELL 2.0?

Not yet. Primarily, they're being trained on what is currently available, and that will be transitioning though. And there's just a ton of training due to the nursing staff continuing to turn over. As they turn over, they're also -- it's not like you get a turnover and they're there for 2, 3 months. This is really -- it's a number of weeks and then they turn over again. So it's constant training.

Okay. If I can just -- if you could provide some color, obviously, with RECELL that was approved for pediatric burns. Can you give us some color on the trend or what you're seeing in terms of the split of procedures between pediatrics and adults at the moment?

Sure. Pediatrics, well, we have the indication now and we can promote to pediatric centers. The centers that -- which is, by and large, the majority of them, which treat both adults and children initially did not differentiate at all between adults and pediatrics. So we've really already taken that into account in current revenues. So there may be a small bump on the pediatric-only hospitals where previously we couldn't promote but most of that is already baked in.

Okay, and just one last question for me. Can you give us some guidance on operating cost for 2022 calendar year?

Michael?

Yes. You bet. So as you know from our earnings release and the script, if you exclude BARDA revenues year-over-year, we're expecting roughly a 20% increase. And as I look at operating expenses, I would say that the increase in operating expenses would be roughly commensurate with that. And as you might imagine, that's largely driven by research and development, given the clinical trial that we'll be intensifying with vitiligo and soft tissue as well as continued other pipeline work with our next-generation device. So that will be the larger of our 3 main expense categories. The second category that would increase would be sales and marketing. As you would imagine, we're continuing to grow in burns as well as beginning to prepare for additional commercialization activities down the road with vitiligo and with soft tissue. And then lastly, you have G&A expenses, which would increase in a more minor way.

Our next question comes from Matthew O'Brien with Sandler.

May be just to follow up a little bit on Josh's first question on. '22 RECELL revenue is basically a little bit of growth out of your exit rate for '21. So Mike, I'm wondering if you're just assuming the headwind on the nursing side is just -- you face it all year? Or are you assuming that it starts to abate a little bit in the back half of the year because, again, there's not a lot of growth up of that exit rate in Q4.

Yes. I realize that, that growth rate of 20% is modest. And while it does not assume any major new headwinds from COVID, it does assume that the nursing shortage will not be fixed in this calendar year. And I think that's pretty much the consensus in the medical community.

Okay. Turning to trauma. Can you just -- is there a specific trade show or something like that where we should expect that top line data? And then can you just talk maybe a little bit more about the next steps after we see the data in terms of getting the approval kind of middle of next year? And then how reimbursement ties into all of that?

Sure. Yes. For soft tissue, we are anticipating that top line data in the second half of this calendar year, there is no specific meeting that we're targeting for the announcement, but we will announce it as soon as it's available. And then we'll be submitting in so far as process, there'll be the submission of the PMA for soft tissue. And then it goes into a panel track 180-day review cycle. And that's 180 FDA day So whenever they ask us a question, the clock goes on hold. So generally, big about 9 months into their with the back and forth, and that allows us the second half of 2023 for approval and launch. And we do anticipate that the launch is going to be, let's say, relatively smooth, and we anticipate vitiligo is going to be smooth as well. But the point of call is completely different for Vitiligo, whereas in soft tissue trauma. It's acute wounds. They're basket basically in the same area, and we've got a lot of physicians that are already in those burn centers that are co-located with Level 1, Level 2 trauma centers relative to the rollout. So hopefully, that gives you a little bit of color. Did that answer your question?

Yes, that's really helpful. Last 1 is for Michael Holder. Just to follow up on the last question on OpEx. You're in a pretty good cash position, but there's just a lot going on at the company. Can you talk about cash needs? Obviously, you're not going to do anything this year, but just to the position of the company as we head into all of these launches in the second half of next year and then into '24 as well.

Yes, you bet. Great question. So fortunately, we do have a very strong cash position in excess of $100 million. If you look at the costs that we plan to expand leading to commercialization of vitiligo and soft tissue reconstruction, and you exclude costs associated with our cell and gene therapy programs, we have ample amount of cash, and we would not need to do additional fundraising prior to reaching cash flow breakeven according to our plans. But having said that, as a best practice, we would always like to keep at least, say, 1.5x our cash burn on hand is a good business practice. So we do anticipate that we'll need to and we'll want to fundraise at some point in the future. But we're not pressed to do that anytime soon that could occur anytime between the now and the next couple of years.

One sec, Matt, I just wanted to add 1 additional comment that came to my mind while Michael was speaking, and that is for the soft tissue reconstruction, it's the same reimbursement process and basically the same codes that would be utilized there. So that's another advantage that the soft tissue reconstruction indication has.

[Operator Instructions] Our next question comes from Shane Ponraj with Morningstar.

Just thinking about the sales trajectory for burns with commercial revenue in the last 3 quarters, it's been roughly flat at around $7 million and your guidance sort of suggests a similar rate for the next 4 quarters. When I think about approval for pediatric only centers, reimbursement for outpatients, RECELL 2.0, Japan launch. They are all great updates, but -- it doesn't seem like you think this will significantly contribute to the top line. Is that fair to say? And if so, do you think this will become meaningful down the track?

I think that they -- I'm going to start with the response, Shane, and then I'll pass it over to Michael Holder. But from my perspective, the answer is yes, that these are going to have a small impact in 2022, down the line, they're definitely going to have a substantially material impact as we move forward. Michael, is there anything you'd like to add to that?

Yes. Basically, I would just wholeheartedly agree with that. And just to be clear, whereas commercial revenues have been relatively flat the last 3 quarters, -- we are projecting as we come out of COVID, 20% growth. As Mike said, we are expecting a small impact from the various factors you mentioned. -- in '22. But in '23, we're expecting those to really help us with our revenue growth rate. And so we would look -- although we haven't provided guidance, we would look for our revenue growth rates to increase materially in '23.

Yes. But for calendar '22, if you're guiding $30 million, it's sort of just over $7 million per quarter. You've talked about like the staffing shortage limiting sales, but is there anything else that you can maybe point to, which is weighing on sales at the moment?

It's really the reopening of the hospitals. And while we're seeing that occur, it's happening at a, I would say, at a slower pace than we would generally like to see, of course. But there -- the hospitals are really being I would say, slow at changing their procedures, and they're lagging behind the various how the various regions in the United States are stopping their masking rules and for the vaccinated that is and changing their restrictions. Yes. I guess, yes, that's really all that I see there.

Okay. No worries. And it just sounds like you're a lot more positive about soft tissue reconstruction sort of sounds like that's really overtaken vitiligo is your big break and where you're most confident in. Is that fair? And would you characterize that, like what would you characterize that to when you compare the 2? And mainly because it's more adjacent to the bands area you operate in and...

Yes, it's just going to be, sorry. Keep going.

No you go.

Okay, Shane. Yes, it's really because of the adjacency to burns and the reimbursement that's basically in place and a number of surgeons that do both burns as well as soft tissue reconstruction, we do anticipate an easier transition to staffing up where we currently have field salespeople and just really increasing that, whereas vitiligo is substantially larger business opportunity and top line revenue growth opportunity for us, but we don't have established reimbursement there. We're very positively inclined and excited about the indication, but it will be the usual new indication, new reimbursement new point of call going through and getting that done. We're doing as much as we can, preapproval to be ready but it takes time to actually get launched and get rolling and getting the hockey stick on that.

Our next question comes from John Hester with Bell.

Earlier in the call, you talked about Josh Carson and I just quick Google search and he's with Loyola Burn Center. Can you tell us a little bit about bit more about that center. Are they 1 of your top users? Or would you classify them as a new user, Mike? And -- what sort of growth are they sort of -- how many kits are they using these guys versus more a one-off?

Yes. This was -- number 1, Loyola is a center that does use RECELL on a regular basis. They're not our top center, but they do a reasonable volume relative to projections, we have not given any guidance relative to center-by-center projections. So really can't answer that. Probably could follow up with a bit more detail offline.

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