When the press release landed in my inbox this morning, I had to read the title a few times to ensure I wasn't leaning on the power of positive thinking. But sometimes dreams really do come true.

AVITA Medical announced a new CEO today. To my knowledge, the business hadn't previously indicated Dr. Michael Perry was transitioning out of the role. A few details in the press release suggest the board of directors made the decision abruptly. As someone who recently left a job abruptly, there are almost always juicy details behind the scenes.

The good news is the company should benefit from a change in the key decision-making role. That's especially true considering the astoundingly poor communication of recent positive clinical trial results and the crucially important inflection point at which the business finds itself.

Time For a Change

Departing CEO Dr. Michael Perry had served in that role since June 2017. He led the company through the first U.S. regulatory approvals of the ReCell System, as well as its commercial launch and ramp in burns. I've never spoken with him, but I appreciated his intentional growth strategy and prior career experience. Dr. Perry previously served as the Chief Scientific Officer of Cell and Gene Therapy at Novartis, with additional technical and regulatory roles before that.

There were things investors might not have appreciated. For example, he lived in Colorado. AVITA Medical is headquartered in Valencia, California. The closest route between those two points is 700 miles. The business incurred over $100,000 in annual expenses related to the travel, flight, and accommodation of the CEO.

Now, I don't have all the details. I care for a disabled family member, so I'm anchored in Pittsburgh and would need special accommodations to work in another city. Maybe Dr. Perry has similar circumstances.

The more egregious offenses of the departing executive were his unenthusiastic conference calls with investors and analysts and poor communication of recent developmental de-risking events. AVITA Medical appears to have crushed its two most important clinical trials in soft tissue repair and stable vitiligo, but investors had a vague press release to accompany each. That's unacceptable.

Incoming CEO James Corbett was on the company's board of directors. The press release stated that the board of directors conducted a search for a new leader, but found Mr. Corbett to be the best option. It's tough to disagree. He wields over 40 years of experience leading private and public companies through regulatory submissions, commercial launches, and commercial ramps. Hopefully he's a better communicator than Dr. Perry and elevates the investor-facing role of Chief Commercial Officer Erin Liberto.

Price Targets & Allocation

(No change.)

AVITA Medical is considered a Growth (Quality) position. Current entry range price targets for the company are as follows:

• Current Price (market close September 28):  $5.64 per share
• Prioritize Below:                $8.47 per share
• Midpoint:                            $11.01 per share
• Caution Above:                 $13.55 per share
• Allocation Range:              Up to 10%

AVITA Medical reported 25.664 million shares outstanding as of August 2, 2022. The price targets above assume 29.514 million shares outstanding, which accounts for 15% dilution.

Ol' Maxxie's Position

AVITA Medical is my second-largest Growth position and second-largest overall position in my portfolio at 12.5%.

Further Reading

• September 2022 press release announcing James Corbett as CEO
• September 2022 article communicating why I increased my allocation in AVITA Medical
• September 2022 company update discussing positive clinical trial results in stable vitiligo
• August 2022 company update discussing positive clinical trial results in soft tissue repair

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