Why did the Avita Medical share price just crash 25%?

This healthcare share has been hit hard this morning. But why?

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The Avita Medical Inc (ASX: AVH) share price is crashing down to earth on Tuesday.

In morning trade, the medical device company's shares are down 25% to $3.33.

Why is the Avita Medical share price crashing?

Investors have been hitting the sell button this morning in response to a disappointing update released just before the market close on Monday.

According to the release, the U.S. Food and Drug Administration (FDA) is requesting additional information on its premarket approval (PMA) supplement application for the company's latest device, Recell Go.

Recell Go aims to revolutionise the current, manually operated Recell device by eliminating the need for manual management of skin samples. It will utilise single-use processing cartridges integrated into a durable AC-powered processing device. The company notes that the automated workflow streamlines the critical steps of enzyme incubation, buffer rinse, mechanical disaggregation, and filtering, transforming the production process of Spray-On Skin Cells.

Unfortunately for the company, this request places the application file on hold for approximately 4 to 6 months while it addresses the FDA's questions. Management explained:

At the halfway point of the process, the Company received notice from the FDA that additional information regarding the PMA is required for the continuation of a substantive review. This request, which is not unique to the Breakthrough Device Program, places the application file on hold for approximately 4 to 6 months while the Company addresses the FDA's questions.

No details were provided with respect to what questions the FDA has asked about Recell Go. However, if it is able to successfully address the questions and everything else goes to plan, then the company expects the product to launch between May 1 and July 1, 2024.

While today's decline is disappointing, the Avita Medical share price remains up more than 100% over the past 12 months.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Avita Medical. The Motley Fool Australia has recommended Avita Medical. 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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