Highlights:

AVH shares fall as much as 23% on Friday

AVH's net loss improves year-on-year in second quarter but remains below analyst consensus for the quarter

AVH Temporary Medicare payment gap impacts demand for RECELL System in Q2 2025

Shares in Avita Medical Inc (ASX:AVH) came under significant selling pressure on Friday following the release of its second-quarter results for the three months ended 30 June 2025. The regenerative medicine company’s stock opened sharply lower, dropping as much as 22.9% to an intraday low of AUD 1.330. Some buying interest helped trim the losses, with shares trading at AUD 1.480 at the time of writing, down 14.2% for the session. Avita Medical is a commercial-stage regenerative medicine company headquartered in the United States. The company focuses on the development and commercialisation of its proprietary RECELL System, used in the treatment of thermal burns, trauma wounds, and aesthetic procedures. The system is approved for use in the US, and the company is listed on both the ASX and Nasdaq.

Avita Medical reported commercial revenue of AUD 18.4 million for Q2 2025, representing a 21% increase year-on-year from the AUD 15.2 million reported in the prior corresponding period. Despite the top-line growth, revenue came in below analyst forecasts of approximately AUD 22.5 million. The company posted a net loss of AUD 9.9 million for the quarter, or 38 cents per share (basic and diluted), an improvement on the AUD 15.4 million loss (60 cents per share) reported in Q2 2024. However, this also missed consensus expectations, which had forecast a reduced net loss of 25 cents per share. Operating expenses were down to AUD 26.1 million from AUD 28.7 million a year earlier.

Management cited a temporary disruption in Medicare Administrative Contractor (MAC) payments as a key factor behind the softer-than-expected revenue performance. The payment gap impacted providers' ability to claim reimbursements for the use of the RECELL System during the quarter, leading to a drop in demand. Avita noted that multiple MACs resumed payments in July, and the company anticipates the situation will be fully resolved in the third quarter of the year. However, the interruption in Q2 left a notable impact on sales and investor sentiment.

Avita Medical CEO Jim Corbett acknowledged the challenges faced during the first half of 2025, stating that while the period tested the company's resilience and slowed momentum, progress toward resolution is now underway. Corbett reaffirmed the company’s ongoing focus on its core medical technologies. Despite the commentary, investors appear concerned by the combination of missed revenue and earnings expectations, ongoing reimbursement issues, and the broader performance trend. With today’s intraday decline factored in, Avita shares are now down approximately 65% year-to-date.