Ladies and gentlemen, thank you for standing by and welcome to the AVITA Therapeutics Fiscal First Quarter 2021 Earnings Conference Call. At this time, all participants’ lines are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I'd now like to turn the conference over to your speaker today, Caroline Corner, Managing Director. Thank you. Please go ahead, ma'am.

Thank you, operator. Welcome to AVITA Medical's fiscal first quarter 2021 earnings call. Joining me on today's call are Mike Perry, President and Chief Executive Officer; and Sean Ekins, Vice President of Finance. 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 fact should be considered forward-looking statements, including statements regarding the markets in which AVITA operates, trends and expectations for AVITA's products and technology, trends and demand for AVITA's products, AVITA's expected financial performance expenses and position in the market and the impact of COVID-19 on AVITA's operations and AVITA's 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's most recent filings with the SEC, particularly the risk factors described in AVITA's S-3 and 10-K filings, and AVITA's quarterly report on Form 10-Q for the first quarter ended September 30, 2020 for additional information. Any forward-looking statements provided during this call, including projections for future performance are based on management expectations as of today. AVITA undertakes no obligation to update these statements except those required by applicable law. AVITA's press release with the first quarter of 2020 results is available on AVITA's website, www.avitamedical.com under the Investor Section and includes additional details about AVITA's financial results. AVITA'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's website by 5:00 P.M. Pacific Time today. Now, I would like to turn the call over to Mike for his comments on first quarter 2021 business highlights.

Thank you, Caroline, and thank you everyone for joining us today. As some of you know, this is our first earnings call following the redomiciliation of AVITA from Australia to the United States and the initiation of NASDAQ as AVITA's primary listing. I'm very pleased that we have now fully aligned our corporate structure with our U.S.-based operations. And we continue to focus on our core goal of driving RECELL in both the commercial setting and in our multiple pivotal clinical trials. I'm looking forward to updating you on our performance for our fiscal first quarter, which ended September 30. But first, since many of you who are listening today are relatively new to AVITA, I thought it would be helpful to initially provide a brief overview of our story and why we believe AVITA's established commitment to clinical research provides a unique growth opportunity across multiple markets. AVITA is a commercial stage regenerative medicine company, with proprietary technology that harnesses the body's own healing powers to provide skin restoration at the point-of-care. In simple terms, our offering, which is marketed as the RECELL System is best described as Spray-On Skin Cells. Clinicians take a postage stamp size sample of the patient's own skin and use the RECELL System to prepare an autologous cellular suspension, meaning a fluid like spray, and then apply this suspension on the wound or defect to regenerate natural, healthy epidermis or skin, including restored natural pigmentation. Before RECELL, burn patients received skin grafts from other parts of their bodies, which made for a large secondary wound, or if the graft was meshed or stretched out, they saw poor aesthetic outcomes once they healed. Our Spray-On Skin was the subject of two randomized controlled clinical studies in the United States. And these studies underpinned our FDA pre-market approval, or PMA, in late 2018. Importantly, these studies confirmed that the RECELL System delivers clear, well-defined clinical benefits by dramatically reducing the amount of donor skin required to treat second and third degree burns. Our clinical studies along with our published health economics model, collectively confirm other important benefits, including reduced donor site pain and scarring, a 30% to 35% reduction in both length of stay in hospital and number of procedures, plus a 35% reduction in total costs to the hospitals. With these attributes, the RECELL System truly provides win-win benefits to physicians, patients, hospitals, and payers. Notably the RECELL System PMA was the first in burn care in more than 20 years. And we began our commercialization efforts within the hospital inpatient setting in early 2019. With these milestones behind us, we are progressively realizing our mission of providing incredible life-changing outcomes for burn patients. And we're seeing consistent confirmation that the RECELL System is a transformative therapy within the burns community. While it's difficult to characterize the broad assortment of burns that the RECELL System is used to treat, an example that resonates with many people is a 12-year-old girl who had catastrophic burns to more than 60% of her body, including her face, following a car explosion during refueling at the gas station. Without RECELL, this patient would have been hospitalized for months with numerous painful repeat skin grafting procedures. However, with the RECELL System, as part of her treatment protocol, she was discharged from hospital in only 24 days. And importantly, she saw the return of her natural pigmentation and skin texture. With our recent experience, we are becoming increasingly confident that the RECELL System is rapidly evolving to become the standard-of-care within the inpatient burn setting, which we see as a $200 million market opportunity with little competitive headwinds. Today, we are very proud to have used the RECELL System to treat over 10,000 patients globally across various indications and our 186 peer-reviewed publications and podium presentations describing outcomes, and over 2,000 patients are a testament to our commitment to deepening our clinical experience. Additionally, our determination to seek and obtain the highest standard of regulatory approval via data supported PMA studies rather than five, 10-K approvals, and our proven ability to regenerate epidermis uniquely positions us to both grow within burns and pursue new market opportunities. In parallel with our commercialization efforts in burns, we initiated a series of pivotal clinical studies within the United States that seek to leverage our existing PMA via various label expansion opportunities. These indications involve potential applications of the RECELL System for patients who have lost their epidermis through injury or accident, or for those patients who have compromised epidermis due to skin defects or underlying abnormalities. I'm particularly excited about the opportunities in pediatrics, such as when a child knocks over a hot pot of water or coffee, and in vitiligo, which is a patchy skin disease where the natural skin color is lost, most famously associated with Michael Jackson. I have a few updates to share for these two examples a bit later. Beyond our near-term pipeline efforts, I will also mention that we are exploring applications for the use of the RECELL System within the cell and gene therapy arena. As many of you may be aware, there are a large number of skin disorders that present as skin fragility, skin blistering, or skin irritation, and can be life-threatening or incredibly debilitating. Some of these are incurable disorders caused by gene mutations and a number of groups are pursuing gene editing technologies to correct these mutations. In this context, we believe that Spray-On Skin Cells could be the ideal delivery vehicle for these offerings. In this way, we're looking to partner with cell and gene therapy companies to administer their therapeutic treatments using the RECELL System. We have entered collaborative research agreements with the University of Colorado to evaluate delivering genetically modified cells for epidermolysis bullosa and with the Houston Methodist Research Institute to leverage their reverse aging technology for skin rejuvenation. Our gene therapy delivery efforts are still in early stages of R&D. And I look forward to updating you as we continue our proof-of-concept efforts for those two opportunities. So, with that brief background on AVITA, I'd now like to turn to our performance in our fiscal first quarter. You may have seen it in our pre-release issued in September that we made solid progress, despite the macro challenges that reverberated across the broader market, due to the COVID-19 pandemic. While the treatment of burns patients is both an emergent and non-elective procedure, AVITA and the RECELL System are not impervious to the wave of disruption that has been generated by the recent outbreak of COVID. In short, the combination of dramatically reduced economic activity, social distancing, and restrictions on mobility have reduced the number of burn accidents. And this resulted in a dramatic reduction in procedural volumes in April. We saw some recovery in May and June to generate a flat fiscal fourth quarter ended in June, as compared to the March third quarter. This recovery trend continued into the September quarter, with the delivery of our highest month of revenue ever in July, our highest quarterly revenue figure of $5.1 million and our highest quarter ever for procedural volume. To summarize, revenue was up 31% in the September quarter versus the June quarter. And procedural volume also increased 27.2% to 496 sequentially. Importantly, we're seeing increasingly broad utilization of our product with 57 unique customer orders of the RECELL System in July alone. During the September quarter, we added nine new accounts to finish with 86 accounts with purchasing approval for the RECELL System, and we saw very broad use of RECELL across different wound sizes, injury types, and anatomic locations. While the resumption of sales growth has been extremely gratifying, the environment in which we operate continues to be challenging in the clinical setting. Please remember that burn patients and even patients that we are trying to enroll under our pediatric and soft tissue pivotal studies are often being treated in the same institutions that are our primary call points for the treatment of COVID patients. For this reason, as you've likely seen broadly across our peer group, access to the hospital setting is incredibly limited, with the expensive implementation of restrictive protective practices. In short, opportunities for business development and clinical study enrollment in the emergency and intensive care settings have been impaired with our personnel predominantly permitted onsite at physician requests for the exclusive purpose of attending RECELL procedures in surgery. While we are seeing some very limited live in-person training activities, our employees are infrequently permitted to engage directly in the aftercare setting once a patient is treated and therefore, live dialogue and access is transient at best, or has otherwise been transferred to a digital format. Unsurprisingly, regional in-person burn conferences have all been replaced with virtual meetings. COVID has also triggered a meaningful slowdown in many clinical trials, as you most likely know. Resourcing and budgeting constraints for participating hospitals, patient unwillingness to return for follow-up visits due to COVID fears, together with restrictive and protective COVID specific practices, such as limited access and visitation are all factors that infringe upon enrollment. More specifically, our pediatric scald and soft tissue studies are also confounded by the simple reality that these studies and their follow-up visits are performed largely in facilities, which are directly dealing with COVID patients. So, there is both a competitive tension for these resources and a fear factor among patients. The emergency room setting is also a non-traditional setting for conducting PMA studies and therefore, frequently lacks focus, investigational study resources, such as clinical trial support staff, which would commonly be available in institutions that are regularly engaging in PMA studies. Finally, there is no referral pipeline for patients in these sorts of studies, because they are emergent, random and accident driven. The by-product of these factors has made accelerating study enrollment challenging in this setting over the past six months. In our pediatric pivotal study, we are, however, pleased to now have enrolled eight patients, but notwithstanding the strong progress, it is important to note that we had near zero enrollment traction in this study during the period from March through August. In fact, the bolus in enrollment was nearly entirely generated in the September and October timeframe due mainly to our enrollment push in late summer and the addition of new sites within that window. This more recent enrollment trend is very encouraging and we are hopeful of generating a steady cadence in our pediatric scald pivotal study moving forward, particularly as we look to add new sites over the next few months. Our soft tissue reconstruction pivotal study has not, however, been able to generate momentum with only two patients enrolled thus far. This study has witnessed periods of enrollment cessation due to COVID and a loss of patients to off-label use of the RECELL System or simple screen failures due to patients being excluded due to contraction of COVID or other confounding, but unrelated medical conditions, such as cancer or mental health issues. For some perspective, we had four potential patients recently who were excluded due to having contracted COVID. To be blunt, we have been disappointed with our progress in this study, and we're taking this opportunity to take a closer look at this market to determine where the clinical utility lies. By contrast, many of the impediments that we see for enrollment in the intensive care setting are not evident or are more manageable within our vitiligo pivotal study. It has been a whirlwind start for our vitiligo study, beginning with the granting of our investigational device exemption in early July, followed by quickly navigating through both investigational review board, or IRB, approval and site contracting to enroll our first patient in late September. As of today's date, we have enrolled eight vitiligo patients, with six of those patients being enrolled in the pivotal study at one site, and two patients enrolled in the single site vitiligo feasibility study at UMass. We have seen a remarkable level of interest in our vitiligo study from physicians, sites and patients, and we have a strong pipeline of sites looking to participate in this trial. For this reason, we believe that vitiligo is likely to be our fastest enrolling study and therefore, our next approved indication for the RECELL System. We are seeing some very strong tailwinds in the broader vitiligo market, which we believe bode well for RECELL and the huge unmet need. Specifically, there are 4.5 million Americans suffering from vitiligo depigmentation with no FDA approved products presently available to provide repigmentation for these patients. In addition, we expect to see an increasing number of stable vitiligo patients available for RECELL treatment, courtesy of Incyte's new therapeutic topical ruxolitinib. Additionally, Cigna's recent determination of medical necessity and correspondingly strong reimbursement support of $38,000 over a 12-month period points to positive coverage trends for patients requiring vitiligo treatment. These are very strong signals for the RECELL System, as we seek to be the first curative therapy for repigmentation of stable vitiligo patients. Outside of our commercial growth and clinical studies with the RECELL System, we have also seen good progress elsewhere in our business. Together with our commercial partner COSMOTEC, we continue to focus on regulatory approval in Japan. I am pleased to confirm that we have completed the three required non-clinical benchtop studies in August as scheduled. Our efforts and interactions with COSMOTEC and the Japanese regulatory authority are ongoing, and we are hopeful of advancing our application for marketing approval of the RECELL System under Japan's Pharmaceuticals And Medical Devices Act, or PMDA. In terms of reimbursement, the company remains on track with its transitional pass-through payment application known as TPT, which will support separate additional Medicare payment for the RECELL System, specifically in the outpatient setting. The Centers for Medicare and Medicaid Services, or CMS, is expected to make its final decision in December with a C code to be implemented with effect on January 1, 2021, assuming no delays due to COVID. Looking ahead, we're hopeful that the inherent benefits of the RECELL System to patients and hospitals will continue to resonate and that we will see increasing and diversified use of the RECELL System in both our existing customer base and with new customers. Likewise, we're focusing on progressing our pivotal studies and have become very bullish on the vitiligo market opportunity, which we think is in excess of $750 million. With that, I'll turn it over to Sean for details on our financial performance in the quarter.

Thank you, Mike. For the first quarter ended September 30, we reported revenues of $5.1 million compared to $3.3 million in the corresponding period last year and $3.9 million in the June quarter of 2020. Revenues for the first quarter include sales of the RECELL System in the United States at $5 million, an increase of $1.2 million or 31% over the $3.8 million reported for the June quarter. The gross profit for the September quarter was $4.1 million, representing a gross margin of 82%. This is an increase of $1.5 million from the gross profit of $2.6 million with a gross margin of 81% reported in September 2019. The total operating expenses for the September quarter were $14.9 million, which is an increase of $6.6 million compared to the same period in 2019. The increase in operating expenses was driven primarily by increases in personnel costs, clinical study costs associated with our four clinical studies, and the cost associated with establishing AVITA as a U.S. public company, including completion of our redomiciliation, the first U.S. GAAP audit for the three-year period ended in June, our first proxy statement, and our first 10-Q. Operating losses for the September quarter were $10.2 million as compared to operating losses of $3.6 million in the same period last year. Cash on the balance sheet was approximately $65.8 million as of September 30, 2020. And now, I'll turn the call back over to Mike.

Thank you, Sean. As you've just heard, we have made great progress during the September quarter, with 30% growth in RECELL System sales and strong progress towards our goal of making the use of the RECELL System the standard-of-care in the inpatient hospital burn setting. In addition, our other developments, especially our speedy transition from receipt of an IDE to an exciting early cadence of patients in our vitiligo pivotal study, together with our strong cash position bode well for an exciting 2021, and we look forward to providing you with updates over the coming months. This concludes our prepared remarks. And now, I'd like to turn to the operator to open the call to your questions.

Thank you. Our first question comes from Josh Jennings with Cowen. Your line is open.

Hi. Good afternoon. Thanks for taking the questions. Mike, I was hoping to just hear a little bit more about the trends you're experiencing since September, and just remind us if there's any seasonality you should be considering in this December quarter that we're currently in, in the burn market. I think the gist of my question is really getting at, could we see sequential revenue growth in the U.S., or should we be thinking about COVID headwinds, some seasonality where sequential revenue growth may not be implied.

So, thank you, Josh, for your question. Yes. There is a degree of seasonality that usually hits the October month. November and December are generally picking up to be normal relative to what we generally see. And as far as sequential quarter-over-quarter growth, we do anticipate that we'll continue to grow our business and not have a flat quarter, as we had in the quarter before last. Does that answer your question appropriately?

That does. No. Thank you for that. And if I could ask just about the outpatient RECELL kit development, the transitional payment is in process. Can you remind us, or provide just any color on how you're thinking about and your team's thinking about the launch in 2021, assuming that this transitional pass-through payment is granted at a reasonable level?

Yes. What we're thinking of is that if CMS is on time, so we would expect in December an answer from them relative to the transitional pass-through payment, then we would get a C code that would be effective in January of 2021. With that, we would proceed into the outpatient setting and begin with our high volume centers that are already really clicking along at a high speed and move to the outpatient setting where we see some smaller wounds, as well as less deep wounds. And that's our plan. As far as the initial rollout, then we'll start moving to the centers that are not as well entrenched and expand from there.

Thank you for the information. I have one final question regarding the pipeline and I want to congratulate you on the enthusiasm and enrollment pace in the vitiligo trials. I'm curious about the skin rejuvenation collaboration with Houston Methodist. Can you provide more details on any potential milestones in the next 12 to 24 months regarding that proof-of-concept work? Additionally, how should we view the overall timelines for a potential cell therapy for skin rejuvenation at a high level? Could we see a product in three years, or is it likely to take longer? Any insights you can share would be appreciated. Thank you for addressing my questions, Mike.

Sure, Josh. Yeah, Methodist has developed RNA technology to deliver telomerase and has already demonstrated reversal of aging and return of functionality in the cells from progeria patients. And progeria is a genetic disorder leading to accelerated aging. So, the proof-of-concept is there. The focus, so far as our first milestone will be on telomerase in rejuvenating aged skin cells in mouse models and that will be taking about 18 months. But during that time, I'm not sure that we'll wait to the end of the sponsored research agreement. We'll be talking with the FDA to make sure that we have all of the safety data required to enable an IND package, and then move forward into the clinic. This could be within the two to three-year timeframe or it could be accelerated depending upon how the initial early research goes.

Great. Thanks for that as well. Appreciate it.

Pleasure.

Thank you. Our next question comes from Ryan Zimmerman with BTIG. Your line is open.

Good evening. Thanks for taking the questions. Mike, maybe on the procedural dynamics you saw in the quarter, certainly encouraging. Wonder if you could speak anecdotally to the adoption and whether you're seeing new physician adoption or incrementally higher usage among existing customers? And maybe how that splits out a little bit, any color there, I think would be helpful for people to understand.

Yes, thanks, Ryan. We're observing both new physician adoption and an increase in utilization among those regularly using the product. In terms of the impact, I would say that new physician adoption has a lesser effect compared to the existing physicians increasing their usage. This is mainly due to reduced business development caused by COVID. As I mentioned earlier, our sales representatives can enter the surgical suite when requested by physicians, but gaining access to hospitals to onboard new accounts and physicians is more challenging. This is especially true because patients receiving treatment are often at the same centers as COVID patients. Therefore, we experience some fluctuation depending on whether COVID cases are rising or not. Overall, that captures the current situation.

Okay. I appreciate that color. Maybe turning to the vitiligo trial. I think if I recall there's an interim analysis of 33 patients. And so with the eight patients enrolled thus far, is it fair to assume that that could be just on a similar cadence, around kind of the first quarter calendar year next year. Just maybe help us think about kind of when we could get our first peek at some of the data coming out of the vitiligo trial. Thank you.

Yeah. More likely, Ryan, this is going to be next summer when we'd actually hit the 11 patients per group. The six months follow-up is going to be required. And for a split of those eight patients, we've got six in the pivotal trial and two in the feasibility trial. So, we're motoring along. We hope to beat our internal targets, but that's where we sit right now as of today.

Okay. Very helpful. Thank you for taking the question.

Sure.

Thank you. Our next question comes from Kevin DeGeeter with Oppenheimer. Your line is open.

Thank you for taking my questions. I have two. Mike, I appreciate the detailed discussions regarding the business. Could you explain what initiatives you are implementing for the U.S. burn centers that could drive demand? You mentioned several headwinds, but could you elaborate on what adaptations you are making, particularly in the digital space, that may be effective? Additionally, I'd like to discuss the clinical trial aspect. I appreciate your comments on the challenges in enrolling for soft tissue trials. Can you walk us through what factors you are considering to decide whether to continue the current study or explore other options to generate demand in that area?

Sure. Thanks, Kevin. Our digital initiatives are quite strong. We are conducting peer-to-peer video and teleconferences, along with training sessions in a digital format. We are effectively replicating all the face-to-face interactions online, and we are very engaged in this approach. However, I must acknowledge that the impact of video and audio communication isn't the same as in-person meetings, and there's no way around that. We're maximizing our efforts in digital formats. Regarding your second question about the soft tissue trauma trial, I want to provide some clarity. Looking back, I believe we made an early misstep by selecting our first two study sites, which turned out not to be ideal for trauma. The three patients enrolled were from a site that was started more recently. The burns market is much more concentrated than soft tissue, with over 130 burn centers available. Consequently, when we examine trauma centers, the number of patients at any one site is reduced. To address this, we are re-evaluating our strategy with the study steering committee, but I want to emphasize that we remain confident in the market opportunity. Our market research indicates we could see approximately four times the number of RECELL procedures for soft tissue trauma compared to burns, although it tends to focus on smaller wounds. This conclusion is based on both our own market research and DRG data. We are optimistic about this indication as we look to grow our business in the future.

No, that all makes sense. And then maybe just one follow-on question. I appreciate that you continue to suspend financial guidance here in the near term. But regarding potentially reinstating guidance, is the bigger challenge limited visibility on the size of the current inpatient burn market due to COVID impacts, or is it more about understanding specific customer behavior given the difficulties in accessing burn centers and the pace at which new sites ramp up? Help us understand the dynamics that would need to change for you to feel comfortable reinstating some form of forward guidance.

Yeah. I would say it really is primarily COVID that is preventing us from giving firm guidance going forward. As various regions spike, we end up with our reps not being able to get access to the centers and that leads to a slowdown. Also, because we're still relatively early in the launch period, we have a concentrated number of sites that are providing the majority of revenues. So, if we have one of those sites impacted by COVID, because they happen to be in the wrong region, that can really move the needle substantially. As we grow the business and hopefully as we continue to see not only us specifically, but as COVID gets under control more broadly, we will start providing guidance going forward on revenues.

Great. Thank you for taking my questions.

Pleasure.

Thank you. Our next question comes from Brooks O'Neil with Lake Street Capital. Your line is up.

Good afternoon, Mike. I wanted to ask you a couple of quick questions. One, I was curious if the challenging environment had caused either internal or any changes in your sales and distribution organization. And then I was hoping you might provide us with a sense for the process you're going through to complete the CFO search.

So, I'll take your second question first. We've already started the CFO search, and so that is underway. The process is a traditional one; it's a retained search and we're, of course, looking for the best candidate. But importantly, we're going to assure this time that the candidate is located in Southern California and very close to Valencia, so we're not going to have a repeat of what has happened to us in the past. And so far as our challenges for our manufacturing, I think is where you were going there. We have had employees in our manufacturing facility exposed to COVID, and this has resulted in a couple of instances of temporary shutdown of our manufacturing facility in Ventura, California. But for mitigation, we actually have several months of finished goods inventory stocked on both the West Coast and the East Coast, remote from our manufacturing facility. So, we're well prepared to withstand even an extended shutdown should that happen. Hopefully not, but we do not anticipate any interruption to our commercial supply.

Great. Thank you very much.

Sure.

Thank you. Our next question comes from John Hester with Bell Potter. Your line is open.

Good afternoon, Mike. It's good to speak to you again. Mike, just in relation to your mix of clients, hospital clients in the U.S., you've talked previously that super users are accounting for a certain percentage of your overall solid product sales. Can you enlighten us on how that progressed in the September quarter, please?

Sure. In the September quarter, we continued with our super users; we have not lost anybody that we haven't had any dropouts, if you will. So, the super users have continued relative to bringing on more of what we call the super users. And those are the ones that are really utilizing the product on a consistent and regular basis for almost all patients that present with second or third-degree burns that require skin grafting. We're coming close to adding some additional ones as we progress. And as we continue on that progression curve, our sales will become more regular and more predictable. And that's the trend so far.

Is it possible to estimate what proportion of total procedures they would handle? What I'm getting at is, if a patient gets a COVID infection while in the hospital, what issues arise from that? What are the potential downsides?

Well, the downside, of course, is if there is COVID infection in the hospital, there's direct competition for both burned beds and ICU beds. And that can affect our sales as well as our business development, of course. And so far we haven't had any of our super users go down completely. Variability has definitely been there, but so far touchwood we've not lost any of our super users and our high quantity users of the RECELL System. That doesn't preclude that from happening in the future, but so far so good and fingers crossed going forward.

Okay. Just a couple of following questions and just two ones. First of all, there was discussion of a wound trial in the U.K. I wonder if you could update us on that? And also with BARDA, is there any prospective dates when they might be placing an order? Clearly, it wasn't in the September quarter. Can you update us on those two issues?

Certainly. Regarding the U.K., the wound trial focused on chronic wounds has been completed and is currently being finalized. We are waiting for some final data to complete the study report from that site. However, our main focus is on our pivotal studies in vitiligo, pediatrics, and soft tissue, so chronic wounds are not a priority for us at the moment. In response to your second question about BARDA, we will begin stocking the vendor managed inventory for the Federal government in December, after which we will start booking revenues. I’ll hand it over to Sean to explain how those revenues will be recorded for BARDA. I anticipate that it will involve deferred revenues, as it will be recognized over the length of the BARDA contract. We expect it will take us about four to six months to fully stock the inventory and reach steady state with BARDA.

Yes, that’s certainly.

Thanks, Sean. Does that answer your question, John?

Thank you. Yes, I'm done.

Thanks.

Thank you. Our next question comes from Lyanne Harrison with Bank of America. Your line is open.

Hi. Good morning. Good afternoon over there. Thank you for taking my questions. I'm interested if we could come back to the revenue momentum. You mentioned earlier that July was the highest revenue month that AVITA had reported with 57 unique orders there. Can you give us a sense of whether you think some of those orders were restocking, or is it really reordering for use and is it aligned with the procedures that were reported in that month?

Sure, Lyanne. We generally do not see a lot of revenue from stocking. Some of our accounts do stock a few RECELL kits to have them on hand, but we're not seeing any of our customers that are really grabbing a lot of stock that would really interrupt our revenue flow.

Okay. Thank you. And then if I think about the trend you're saying from August to today in November, are you seeing consistent increase in revenue growth sequentially month-on-month, despite the increase in COVID cases across the United States?

Generally, I would say yes. We are seeing sequential revenue growth month-on-month. That said, there is, of course, variability how many days of sales we have in any one month will affect monthly sales. For example, in November, we have Thanksgiving coming. So, there are a number of days off, those types of issues. But generally the trend continues and we're going in the positive direction.

Okay. Thank you. And if I could just have one follow-up, and this is probably a question for Sean. If I think about your cost structure, obviously this quarter, it was a fairly high cost structure. You mentioned that there were a few items in there as a result of redomiciliation, etc. Sean, are you able to highlight what you think in this quarter's OpEx might be non-recurring if we think about the remainder of financial year 2021?

Yeah. Thanks, Lyanne for your question. As you noted in our OpEx, we did have in the current quarter a lot of one-off costs and this really related to redomiciling the company from Australia to the U.S., along with having our first audit, which was for a three-year period. We also had our first proxy statement and our first registration for our shelf. A lot of that will be non-recurring. Did I answer your question Lyanne?

Yeah. I'm just trying to understand the quantum. So, if I think about your general admin expenses of $5.5 million, what proportion of that do you think might not recur in subsequent quarters?

Right. My anticipation moving forward is that G&A will come down. I think it would be come down more in the range of $4 million to $4.5 million. Like I mentioned, the amount of cost that we did have in there for Q1 was rather significant. But again, that was the charges incurred for redomiciling the company, the first U.S. GAAP audit, which we won't have going forward. We will have the cost for having an audit, but it will be a three-year period, which is quite substantial.

You're estimating costs around $4 million to $4.5 million. Additionally, it appears that research and development expenses have essentially doubled compared to the previous period. Should we anticipate that research and development will continue to be roughly $3 million each quarter, considering all the pivotal trials currently underway?

Yeah. Yeah. And I think you hit it right on the head. I mean, in the sense that our R&D did jump up in the current quarter. And this is just like you mentioned, it relates to our pivotal trials that we had got undergoing. My thought process moving forward and I think it'd be in the range of $3 million to $4 million, but this will be in line with the expansion of our pivotal studies.

Okay. Thank you very much.

You're welcome.

Thank you. And I'm currently showing no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.