Medical research firm Avita Medical has announced a proposal to raise up to $10 million, with Octa Phillip Bioscience Managers committing to tip in $3 million.

Avita today announced a $10 million placement and share purchase plan for existing shareholders, priced at 12 cents per share.

The placement will comprise two tranches, one at $4 million and the other for a minimum of $2.3 million.

The $3.7 million balance will be raised through the purchase plan, Avita said.

Avita also said significant investor Australian Ethical Investment had committed to take a further $1.5 million stake through the share placement.

The company said the proceeds would be used to fund the completion of US trials of its ReCell Spray-On Skin technology.

"This investment proposition will distinguish Avita from other smaller companies by presenting the full funding plan and operational outlook through to 2014," chief executive William Dolphin said.

"Securing a new cornerstone investor of the calibre of Octa Phillip Bioscience Manager, plus reconfirmation of Australian Ethical Investment support, is a validation of management's strategic approach in the building of a strong market base for the ReCell technology and testament to the clinical and revenue-generating prospects of the company over the coming years."

At close of trade today, Avita stocks were down 7.1 per cent to 13 cents.