Good morning, and welcome to the last day of the conference. My name is Farhan Khan. I'm an associate at JP Morgan. It's my great pleasure today to introduce Jim Corbett, CEO of AVITA Medical. Please join me in welcoming Jim.
Thank you, Farhan, and thank to all of you who are here and who are listening. I'm excited to share with you the AVITA story. We've really evolved in the last year and really moved into unquestionably, a accelerated growth period of the company's life. We have a very seasoned management team with strong experience in the field and in healthcare, and in growing healthcare businesses rapidly. Let me give you the big picture of what AVITA is for those of you who might be listening for the first time. We're a commercial stage company, so we are actively building our business. We are not in the research mode. We have approved indications for our technology, which is called RECELL, which I'll describe in some detail in a moment.
But the indications are for thermal wounds and full-thickness skin defects, and also for the repigmentation for vitiligo patients, which is an autoimmune condition, if you are not familiar, where you lose pigment. Our current commercial organization, we expanded rather significantly in June last year to accompany the approval of full-thickness skin defects. So we have a full field force of about 70, which is 40 sales territories, 20 clinical specialists, 10 sales management. We've previously been approved to sell in burns, and burns has a very defined burn center market of about 140 centers across the United States. So moving into full-thickness skin defects, we're going to trauma centers, which is another nearly 700 hospitals.
So the expansion of the sales territory, which we did in June, is a big move for the company. We have in the moment, the last two quarters, we're in the early stages of launching into that full-thickness skin defect market. And to give you some perspective, the burn market had about 35,000 eligible RECELL-eligible patients who would get a skin grafting procedure with RECELL. With the addition of full-thickness skin defects, it's almost 400,000 TAM, and that's a TAM that we mined from the CPT code, so those are real skin grafts that you could use the RECELL technology on. If you look back across our last four quarters, two of which were in the burn area, we grew 40% and 42% respectively, Q1 and Q2.
In Q3 and Q4, it was 51% and 50%, and as you'll see when we share our guidance for 2024, we're expecting some real expansion, a growth expansion again this year. Now, when we care for these patients, our technology, there's also an extensive use of various dermal substitutes, dressings, scaffolds, and we just announced the signing of an agreement with a company called Stedical Medical, which has a [audio distortion] and active wound dressing called PermeaDerm. And PermeaDerm, I'll tell you more about as we go through. If you look at our platform, we have one technology right at the moment before PermeaDerm, RECELL, but it's in three very distinctly different market segments, so it's like having different products 'cause you sell them to different physician specialties.
So we have burns, full-thickness skin defects, and vitiligo. Let me take a minute and describe a little bit how the technology works. If you think skin grafting, and you think of severe wounds, let's just use your back as an example. If your whole back was needing a skin graft, you basically need enough material, autologous sample, to cover the whole back. When you're using RECELL, you need about the size of a biopsy, about the size of a credit card. What we do with that is we disaggregate it, and we suspend it in an enzyme suspension, and we spray it on. And by spraying it on, you get much more diverse and even coverage, and actually, it's been demonstrated to have improved healing.
For example, the American Burn Association did a study looking at patients with a common total body surface area, full-thickness burn, and those that were treated with RECELL and those treated without on traditional skin grafting, and they found that the patients got out of hospital 30% faster. So it's in the published literature. So it has some real tissue-sparing qualities in terms of when you use RECELL. It adheres because you're applying the cells in a suspension spray right to the wound. Heals faster, scars less. It's, in fact, a really extraordinary technology.
Now, when you think about how we deliver RECELL, historically, on the far left of this slide, is the manual device, and the tray you can see in the front on the left is a where you scrape the cells to, which a physician does manually. In the middle, you see a rendition of a durable, and the durable encompasses a cassette, which you can see in the right screen, where we have pending at FDA right now. We're answering some testing questions for them. But what we do is you put the biopsy into the cassette, load the enzyme, put the cassette in the RECELL GO durable, close the door, press a button, and the 25 minutes a physician normally uses to do the physical disaggregation can be used to care for the patient.
So this has actually really kind of wide-ranging impacts on how patients get cared for. So while the physician is building his RECELL GO, spray-on application, physician can be doing other things. So, for example, if they're applying it to a tumor excision and they're gonna apply a graft, they can take the biopsy, put the sample into RECELL GO, press the button go, leave the room, and go treat another patient while that 30 minutes is going on. Tremendously more efficient for the physician. In the case of something of a patient who's very severely injured, our burn, our burn patients regularly use more than one RECELL manual kit.
One kit covers about 10% total body surface area, so if they're having two or three, they can actually, instead of in sequence, doing three different RECELL kits and applying them, preparing the wound for receiving RECELL, they can actually take the biopsy three different times, and it controls for two things. One is, you can imagine we've had 400 or 500 physicians who've disaggregated cells with RECELL, and they do so very obviously with variable pressure based on the individual doing it. So the RECELL GO device standardizes that pressure. The second is you are directed in the IFU to soak it for 25 minutes, the biopsy, to prepare it for disaggregation, and that gets standardized with RECELL GO, so you get a much more consistent spray-on application of the RECELL solution.
Now, the enzyme that it's in, just to kind of, what does it do? It's to, i t is there to facilitate the spray on, for sure, but it also is there to survive and thrive, have the cells survive and thrive. So it changes the pH such that the cells live longer, and it provides metabolic support for the cells, so it keeps them alive long enough during the procedure. So you go back to that burn procedure, where they might do two or three at a time. You take an OR procedure, and you can shorten it by 30% because those burn procedures often take five, six, seven hours, and to knock a few hours off is a big idea.
So this is a big advancement that we have coming, and we'll be announcing in February when we think we start to clock on our remaining 90 days on our PMA supplement that we filed. If you think about what we did in last June period, we combined the sales force of burns with the full-thickness skin defect sales force, and there's a lot of synergy that existed between them, and that's why we did it. First and foremost is they use the same reimbursement DRG codes inpatient, and they use the same transitional pass-through code outpatient. So that's, like, an obvious, clear synergy and a barrier that is out of the way.
50% of the burn centers are Level I trauma centers, so when we got approval, we already had Value Analysis Committee approval in those centers, so we could start selling immediately. You can look backwards. Our Q3 was at the top end of our guidance, and that was because we could sell in those centers right away. The 30% of burn cases out of the 35,000 RECELL-eligible cases actually are in Level I trauma centers, which we have not been calling on historically, and we get to call on them now. And those physicians well know about RECELL. They just had no access to the company's resources to get trained and use the product. So the same sales force is just really a great crossover for how we've structured.
And you can see it here, the, a ll the elements I just described is that the burns market and the trauma market overlap in a really meaningful way, and we find physicians who were using RECELL just on burn patients, using it for other indications. We've got a significantly greater market opportunity, as I've described. In fact, let me describe it for you. This is one of those rare things that happens in the FDA. When we submitted our PMA supplement for what became the full-thickness skin defect indication, we submitted for soft tissue repair and reconstruction, which is the market defined on the left. Now, all these case numbers are all mined from the CPT code, so these are actual graft cases and actual indications, so a very reliable TAM in that respect.
But on the left, you can see we were expecting to add about 127,000 potential procedures to our market opportunity. What happened, though, in our data, we had about 20% of the patients had over nine months of where the wound was open, and they were treated with RECELL, and it closed, and they were healed. And so the FDA removed the acute language from the indication and opened up the labeling so that we ended up with a vastly expanded opportunity included chronic wounds, surgical wounds, traumatic wounds, like a gunshot, which added another nearly two tumor excisions, as I mentioned earlier before. So nearly 271,000 further procedures.
So now you're talking about really a huge market that is reachable for AVITA with our RECELL technology. Now, commercially, we're a U.S., 98% U.S. business at the moment. We've been selling internationally only in Japan and only for the burns indication in Japan up until recently. We've been working on an international strategy, and we applied a couple of strategy points to it. The first is a filter. Where do we go and why? So first, in the first instance, you can really, you really need a sophisticated healthcare system to use RECELL. So that became a filter. The second filter is they have to have a healthcare system that can pay for the use of it and the treating of the patients, 'cause often they'll be in the hospital for a month. So that's a second filter.
The third filter is they have to have the economic ability to pay for it. That sounds very capitalistic, but in fact, pragmatic, I think, on our part. That turned our market focus for our international strategy to Australia, obviously U.S., but Australia, most of the European Union, and Japan. We recently signed our first international distribution agreement with PolyMedics, a company in Germany for the markets of Germany, Austria, and Switzerland. Now, what do they bring, and why are we choosing third-party distribution? 'Cause we're starting from zero, so we either have to build the know-how and infrastructure in each country to understand the market, the customers, the reimbursement system, and start to build a business, or we can partner with a company that has those things and begin building the RECELL business internationally over the next few years with third-party partners.
The first, we can do. Having said that, it would cost a lot of capital. We would easily burn $25 million-$30 million over the next few years doing that, and we didn't think that was the best investment of our capital. And it would take a lot of management attention. So by doing it this way, it turns our international strategy into a contribution margin positive result almost immediately, because we will spend very little resources selling to those markets and training them, because we'll be training our partner, and they'll be bringing RECELL to market in those individual markets. Let me spend a minute on PermeaDerm. So it's a biosynthetic wound dressing, and it is usable on virtually every one of our cases that I've just been describing.
It's a technology that facilitates healing and provides a high level of permeability. It's porous, and you can adjust the porosity and the breathability 'cause wounds need air to heal, but they also need to be able to, so to speak, weep out the fluids that are accumulated in the wound. And so when you're applying the PermeaDerm, you can stretch it to make the pores greater or not stretch it and keep them smaller. So it's a very sophisticated dressing, and we will have our plans to launch it ready by the time we join the February earnings call from the company. So it'll be sold by the same sales force as that's selling the burns and full-thickness skin defects.
It's a five-year agreement, and it has a five-year renewable clause that we, we can enact. So, really quite excited about this addition to our portfolio. We are looking at continuing to invest in our portfolio expansion to surround the treatment of these, these severe wounds with, with RECELL and other technologies that apply to treating these patients. A minute on the vitiligo opportunity. So we had received FDA clearance through a PMA supplement last June as well. Now, that study was a relatively small in number of patients treated, but also used the patient as their own control. So we didn't actually cure vitiligo. We demonstrated that we could transplant pigment and that it was safe and effective at doing so. That said, that is not what's needed for reimbursement. So vitiligo is a big market.
It's about 1.5% of the population, and it's neither transmittable, it's not infectious, and it doesn't kill you. So the phenomena that goes along with vitiligo is these patients suffer from a mental health condition, depression, et cetera, that's a dysphoria related to their disfigurement because they have these spots of lost pigment on there that are visible for others to see. And it turns out, in some recent studies, these patients use more healthcare resources than the general population. So we initiate a study post-market last July called TONE, and TONE is to look at the complete treatment of these patients for their vitiligo lesion, and secondly, capturing three different quality-of-life measures that helps define the improvement in their mental health.
And there's three different what we, types of tools that we're using. But in the substance, it is there to support a healthcare economic study, which we're also doing from real claims data, that demonstrate the cost of treating vitiligo patients and their consequent mental health issues and their consequent other healthcare issues. So the case for coverage for the private payer is the TONE data demonstrating the treatment of vitiligo and the permanent repigmentation of their lesion, but also the improvement in their quality of life, and therefore, the reduction in their mental health and other healthcare costs. So the case for coverage for the medical director of a private payer is that this is good for them, and 1.5% of their patients have it, and they can save money by covering it.
Now, this is gonna take some time for us to execute. We have the healthcare economic study and the TONE study we expect to be published by the end of this year, at least submitted in the case of TONE, and that early next year, we'll be starting to have the meetings. Next year, meaning 2025, we'll be starting to have the meetings with the healthcare providers of private commercial payers to establish payer policy. So this is really a 2026 revenue opportunity for us, but it is a substantial market opportunity and one in which we are really investing in the upfront preparation of the evidence that will support payment. I get asked a couple different questions, and I'd just like to answer them rather in advance. What do we sell the RECELL disposable for?
We sell it for $6,500, and it's on average. On the RECELL GO, there's a durable, and there's a new disposable. The durable will be a no-cost item, and the cartridge will also be about $6,500. And we expect to maintain our mid-80s, 85% range gross profit on the disposables that we sell. And the durable is good for 200 cases, so it doesn't add materially to the cost of goods. So that's kind of one element of economics that for you. In terms of a financial update, we did release some highlights in preparation for this conference. So we had commercial revenue of $14.1 million in the Q4 2023, which was up 50% over the same period in 2022.
We finished the year with $49.8 million, an increase of 46% compared to the full year of 2022. Gross profit margin was approximately 84.5%, and we finished the year with about $89 million in cash. In terms of financial guidance for the year of 2024, we did Q1, which has a range of $14.8 million-$15.6 million. Now, the lower bound of that is a 42% growth, and the upper bound is 50% over prior year. For the year, our guidance is $78.5 million-$84.5 million for the year, which has a lower bound of growth for the year of 57% and an upper of 69% growth year-over-year.
So we're expecting a very strong year of growth, again, stronger than yet last year. So it's actually, on an absolute value basis, accelerating growth. We did do debt financing in the third quarter, and we did that to keep enough cash to actually support on hand, to support our drive for profitability in 2025. So we have, as I mentioned, $89 million in cash at the moment. We expect to name the quarter that we expect cash flow crossover in 2025 in our February call. So the $90 million facility that we took down from OrbiMed had 40 taken down to close, so 40 of the 89 is from that, and two tranches of $25 million that are callable by us at our option.
We currently don't have a plan to call them and therefore may not do so, and be able to get to profitability on the current cash that we have. So a strengthening of our balance sheet to be able to concentrate on our growth. Now, you can see this is three quarters ended in the year and really meant to highlight the year-over-year continued expansion of the company, and you can see the progression of our gross profit and our revenue here. So it's really been a year of inflection for the company. Burns continues to grow, and notwithstanding, we've been in that market now for three years. The full-thickness skin defects expands our market opportunity by nearly 10x.
RECELL GO, which we'll launch here in the second half of this year, will really enable the broader use of RECELL without the burden on our part of training and on the hospital's part of training how to do the procedure by hospital staff. So it will really simplify the execution of utilizing RECELL. Over the next three to five years, our growth is clearly driven by burns and full-thickness skin defects and the international growth that we add on to it during 2024. And of course, the product expansion that we already have started with PermeaDerm, where we expect to extend to some other technologies that will facilitate the treatment of wound care. Vitiligo becomes a pipeline for us, one that we're investing in.
We'll be able to update you very regularly on the progress of TONE, the data from TONE, the data from the healthcare economic study. So really, for us, we're really moving into a place where profitability is in our sights, 50% growth is in our extended forecast. So a real, real year of inflection for the company. So with that said, I will take some questions.
Thanks, Jim. I really appreciate it. So I've got a few questions here on the full-thickness skin defects. You know, a really amazing, this was a significant FDA approval with a much broader label. Can you expand on what this approval means for AVITA?
Well, what it means for us actually is just a tremendously greater opportunity. We had thought that we were gonna be running further PMA supplement expansion studies to achieve those same indications, and we thought that they were someplace in the future. And what they are is now. And now, it's caused us to have to adjust quite a bit how we go to market. So, for example, when you go to a Value Analysis Committee, which is probably the most critical element of our selling process, because one of the things they do is they validate that you get reimbursed and that if it's not duplicating a product that they already have on the shelf, et cetera, and there's physician support to use it.
Well, we've gone from targeting a burn center and the chief burn center surgeon to going to trauma centers and seeing the trauma surgeon, a plastic surgeon, a general surgeon, you know, all these multiple specialties, and getting VAC approval on as many as 10 other indications. So for us, it's caused us to have to reset our training of our sales team and really think about our sales coverage model in a more detailed way because it requires more in-hospital selling to the physician and to different physician specialties. Consequently, we will be expanding our sales organization again, and we'll have details on that at our February call.
And maybe just a follow-up.
Just a quick question. How are you incentivizing the physicians, in particular, as you move to vitiligo and move into dermatologists?
Well, so the question is, how are we incentivizing the physicians as we move into dermatology? So it's a good question. Very simply, the incentive we're gonna be providing is we're gonna be providing them with the data they need to share with their patients, so they, t hey have these patients, but they're not able to help them very well at this time. Getting reimbursement for the treatment is an important element of their incentive, so to speak, because if they don't get paid for it, they should do something. They're like any other person, they have to get paid for what they do. So we're really leading the data and the publication strategy to make sure that the evidence is in place to support reimbursement.
RECELL GO was originally conceived to be an in-office or an office-based lab type device. That was originally why it was conceived, and because it can be the dermatologist, in this case, would be able to take the biopsy, put it in RECELL GO, leave the room for 30 minutes, and treat two other patients, come back, and spray on, spray on the pigment. So we're doing all the things that we're doing are enabling and to create an opportunity for them to be able to treat a patient population, which frankly, they don't have as many tools for today. So that's how we're thinking about that, and it's gonna take us two years to do that from now, you know, but that's how we're thinking about it.
So, Jim, maybe just one more question here. Previously, you had mentioned building your product portfolio, and obviously, just yesterday, you announced your new partnership with Stedical. Can you speak to your overall vision for AVITA?
Well, yes, I can. So the question is, what is our overall vision for AVITA? And in the big picture, we want to create a company that broadly has the technology and capability to treat acute and severe wounds, broadly speaking. Vitiligo is a bit of an exception to that. It'll require a different commercial organization. But broadly speaking, the bigger part of our business now is treating these severe wounds, whether they be degloving and necrotizing bacteria, excision, tumor excision, burns, all these different, really tough to treat wounds, is to have the portfolio of technologies that allows the physician to treat those patients optimally. And so that's our vision, and we're step by step working our way there.
Just had a question here on your financials as well. You know, you just released the 2024 guidance, recently. What do you think is gonna be the, kind of, the key drivers of your projected growth?
The key drivers? For sure, one of the things we learned in the first two quarters of launch is how to manage the pipeline of Value Analysis Committee approvals, getting hospitals on board. You know, we have over 100 that are in some stage of approval right this minute, and that'll just continue to rotate in and out. And we've learned how to do that, and that's a very pivotal skill for an organization to learn. That's one. The work we're doing in terms of growing our international business is gonna matter to us in the long run, so we're investing there. We think the portfolio expansion is going to end up driving revenue growth, perhaps farther than we are currently guiding to. And so we have a.
It's a very pure execution play for us, if you step away from it. We have the approvals, we have reimbursement, we have the organization, and we have the know-how. Now, it's a matter of executing in a disciplined and predictable manner.
Okay, and maybe just one more question here, Jim. You touched a little bit on this already. How should we think about the company's intellectual property strength and, you know, the threat of competition?
Yeah, it's really a great question. First of all, one way you should think about it is the pathway to get to a competitive product, of which there is no one on the pathway at the moment. If we handed them the formula for our RECELL Enzyme material, if we handed it to them, it would take them five to seven years to get to market. So that in itself, it's not an IP barrier, but it is a regulatory barrier and enablement. When they get there, they will have to overcome the IP of RECELL GO.
So the way we process the biopsy, the way we disaggregate what we know about the proper pressure to disaggregate those cells and the right, proper soak time in that Enzyme, those are all in the category of a combination of trade secret, but also IP. So they can't even get to that spot before five to seven years, and then they'll have to overcome the way we've transformed the market into using RECELL with the RECELL GO durable. So it, it's a hard road for someone to go down, and so we feel very confident about our long-term protectability, so to speak, of our franchise.
Excellent. We've just got another question here, coming in. How large is the surface area could one RECELL cartridge cover, for vitiligo patients, who have larger affected areas? Do they need to use multiple cartridges?
So stepping away from vitiligo for the moment, the cartridge, as it will come to market, will cover approximately 10% total body surface area. Now, with respect to vitiligo, it is unlikely. The answer to the question is, if they have larger treatment areas, will they use more than one cartridge? The answer is technically yes, but pragmatically unlikely. What the patients really want to get treated for is the visible vitiligo. So that tends to be on the hands and arms and neck and face, visible to, in their daily life. And it's very unlikely we would do a skin biopsy and treat more than 10% of the total body surface area in a physician office space lab, for example. It's just a very unlikely event.
It might require, if they want to treat more, a multiple-stage treatment, not the same day.
I think that's it for today, Jim. Really appreciate it. Thanks again.
Thank you very much for having us.