Why the AVITA Medical share price is up 575% in 2019

The AVITA Medical Ltd (ASX:AVH) share price stormed to a multi-year high today and stretched its year to date gain to a staggering 575%…

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The AVITA Medical Ltd (ASX: AVH) share price continued its incredible run on Tuesday.

In fact, at one stage today the Avita Medical share price was up almost 29% to a multi-year high of 54 cents.

When its shares reached this level it stretched their year to date gain to a remarkable 575%.

What is AVITA Medical?

AVITA Medical is a global regenerative medicine company that provides a novel approach to skin regeneration.

Its products provide innovative treatment solutions which are derived from the regenerative properties of a patient's own skin.

In addition to this, the company's proprietary technology has evidence for other skin applications beyond treating burns, such as chronic and traumatic wounds, scar revision, and vitiligo.

Why is the AVITA Medical share price on fire this year?

Investors have been fighting to get hold of the company's shares due to the potential of its RECELL System, which is a regeneration platform which was approved by the U.S. FDA late last year as a Class III device for the treatment of acute thermal burns.

RECELL was designed by surgeons and is described as being an elegant means to deliver skin regeneration to patients at point of care.

It has proven safety and effectiveness. The system has over 8,000 uses to date in multiple world markets and no observed safety signals. And in respect to effectiveness, the treatment area is a whopping 80x the donor area. This means that a skin sample the size of credit card can be used to treat a patient's entire back.

Another positive is that RECELL provides significant savings to burn centres. According to a recent presentation, a burn centre with 200 patients could reduce treatment costs by almost a third if they used RECELL.

This appears to have many investors believing the company is well-positioned to generate significant revenue in a U.S. market estimated to be worth US$5.7 billion per year at present.

In addition to this, the company has its eyes on a Vitiligo market estimated to be worth US$2 billion per year and the Skin Aesthetics market which is estimated to be worth US$22 billion per year.

Should you invest?

I think AVITA Medical is an exciting company and well worth keeping a close eye on. But with its market capitalisation nearing $900 million and revenue still reasonably limited, I'm going to sit this one out for now.

Instead, I think CSL Limited (ASX: CSL) and even Mayne Pharma Group Ltd (ASX: MYX) shares could be good alternatives.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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