Brooks O’Neil: So second question I have is, as you have thought about the significantly larger indication in the full thickness skin graft area that goes beyond acute injuries that I think are generally treated in the trauma centers and the burn centers and whatnot, two include the chronic wounds or chronic full thickness skin defect. Have you given a lot of thought to what it’s going to take to penetrate the kinds of facilities and get to the kind of doctors who treat chronic wounds?
Jim Corbett: We have done a fair bit of work with that in mind. What we’re thinking about though first, because their patients are getting treated now, we’re getting case reports of RECELL with a chronic wound, for example, a venous leg ulcer or such. What we note is clinical data is what we’re thinking about first as opposed to access. And so we’re in the process of assembling case studies where we can. We have a couple of early stage planning for some specific indication clinical studies, like tumor excisions come to mind as another one that is quite large. And so I think, we’re going to lead being the company that AVITA is, which is we’re going to focus on the consultive care that the physician is attempting to provide for their patient, we’re going to bring to them case examples, clinical data examples, small case series.
In some cases, we’re planning some bigger studies and that’s really how our sales team operates and that is in a very technical, scientific and consultative manner. So that’s what we’re thinking about right now and it will certainly mean that we’ll learn some new things.
Operator: Our next question comes from John Hester of Bell Potter.
John Hester: Just a couple of questions from me. Jim, you just talked about some price strategies and places in venous leg ulcers, tumor excision, that’s encouraging. Have you seen a trend emerging now for the sorts of labels, the sorts of wounds that surgeons are initially using the expanded label indication?
Jim Corbett: Well, by the way, you’re up early, John.
John Hester: Well, I’m a lot closer to the weekend than what you are, Jim.
Jim Corbett: I appreciate that. John, I think trend is a little bit too strong of a word, but they’re coming to us with the cases. And in many cases, we’ve got some historical experiences from other parts of the world where RECELL was used in earlier years, and we share with them what we know and what we don’t know. And there has been a number of cases that are quite unusual. For example, there’s some sacral skin grafts that are essentially bed source, so we’ve had a number of those get treated. The trend is too strong but it’s certainly more than one, it’s happening. And so we’re trying to get ourselves out ahead of that, so we can act as a resource to our customer. Because it’s clearly, they are having trouble treating some of these chronic wounds and RECELL does appear to provide quite benefit to many of those patients.
John Hester: Well, it sounds like it’s still early days there. Just switching to Europe. Obviously, average selling prices are going to be a lot lower in Europe. Can you sort of give us any guidance there on what you are expecting for average selling price relative to the US market? And of course, you know even you’ve got a distribute a margin there as well.
Jim Corbett: That’s right. We will have a lower realized sell price, because, of course, distributor, we have an average selling price sharing model with them. However, you may also recall that our cost of manufacturing is very heavily fixed cost. And at the rate of our volume growth, we’re talking still an accelerated growth line as we go into Q4, which has been happening all year, 40%, 42%, 46%, going to be 64% or better in Q4. That is eating up the cost of goods problem. So we’re still going to get a nice contribution margin. We will get a lower ASP. That said, it will contribute to our march towards profitability. So some volume won’t hurt us and we won’t spend as much.
John Hester: And just finally, very last question for David. I noticed the R&D expense dropped in the quarter, David, relative to the June quarter. Can you just give us some insight as to why that was the case?
David O’Toole: Really what that comes down to is we had a slower enrollment for our TONE study, which as in this quarter is accelerating, because we are still planning to have that TONE study fully enrolled by February. But sequentially, it really comes down to the fact that we didn’t have as much of enrollment in the TONE study.
Operator: The next question comes from Ryan Zimmerman with BTIG.
Unidentified Analyst: This is Izzy on for Ryan. Congrats on the quarter and thanks for taking the question. So last quarter, you guys noted that uptake of RECELL in key burn — you were seeing strong uptake of RECELL in key burn accounts without adding new burn centers. I was just wondering if this was a similar trend that you’re seeing this quarter or if you’re starting to see increased penetration within new accounts?
Jim Corbett: Well, yes. The point I was making actually during last quarter was that we had not added burn centers in over a year, because we’re in all of them virtually. And so what we’re seeing is penetration in the burn centers that’s related to the full thickness launch. Half of those burn centers are trauma centers and with a smaller sales territory, because we expanded the sales team a lot. We are seeing both of those phenomena. We’re seeing penetration in burn centers is going up as a consequence of a smaller sales territory but we’re also seeing an uptake in utilization of RECELL in the various and many full thickness skin defect indications. So it’s a — where there’s a burn center, there’s a double opportunity for us.
Unidentified Analyst: And then just a follow-up on that. So who are the early adopters that you guys are seeing for the full thickness indication? Is it mostly burn surgeons, are you seeing trauma uptake or is it kind of a combination of everyone?
Jim Corbett: Well, for certain. In terms of new users heavily dominated by trauma surgeons. Now, of course, by definition burn surgeons are trauma surgeons, but not all trauma surgeons are burn surgeons, if you then can put that then diagram together. So the new surgeons we’re adding principally are trauma surgeons but we’re getting new indication utilization by burn surgeons who now have a more open label. So there’s a lot of opportunity out there for us right now. That’s why we really expect this rate of growth issue to dominate the headline here for our company on the boundaries of the coming quarter, right. We’re looking at 64% type growth, which will be our 4th consecutive acceleration into another decile. So we’re really quite bullish at the moment.
