UNITED STATES SECURITIES AND EXCHANGE COMMISSION

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: ~~September~~June 30, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Michigan						94-3096597
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (617) 588-5555

Securities registered pursuant to Section 12(b) of the Act:


Title of Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock (No par value)	VCEL	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of ~~October~~July 30, ~~2020, 45,428,794~~2021, 46,631,158 shares of Common Stock, no par value per share, were outstanding.

QUARTERLY REPORT ON FORM 10-Q

The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

(Unaudited, amounts in thousands)

The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.


	Common Stock			Accumulated Other Comprehensive Income		Accumulated Deficit		Total Shareholders' Equity
	Shares	Amount
BALANCE, DECEMBER 31, 2019	44,864	$	489,749	$	21	$	(378,679)	$	111,091
Net loss	—	—		—		(4,705)		(4,705)
Compensation expense related to stock options and restricted stock units granted, net of forfeitures	—	3,768		—		—		3,768

Stock option exercises	57	196		—		—		196
Shares issued under the Employee Stock Purchase Plan	20	224		—		—		224
Issuance of stock upon restricted stock unit vesting	36	—		—		—		0
Restricted stock withheld for employee tax remittance	(14)	(163)		—		—		(163)
Unrealized gain on investments	—	—		41		—		41
BALANCE, MARCH 31, 2020	44,963	$	493,774	$	62	$	(383,384)	$	110,452
Net loss	—	—		—		(8,269)		(8,269)
Compensation expense related to stock options and restricted stock units granted, net of forfeitures	—	4,376		—		—		4,376
Stock option exercises	188	696		—		—		696
Shares issued under the Employee Stock Purchase Plan	32	257		—		—		257
Issuance of stock upon restricted stock unit vesting	11	—		—		—		0
Unrealized gain on investments	—	—		84		—		84
BALANCE, JUNE 30, 2020	45,194	$	499,103	$	146	$	(391,653)	$	107,596

The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

~~VERICEL CORPORATION~~

Common Stock Warrants Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Shareholders' Equity
Shares Amount Amount
BALANCE, DECEMBER 31, 2018 43,578 $ 471,180 $ 104 $ (39) $ (369,014) $ 102,231
Net loss — — — — (2,844) (2,844)
Compensation expense related to stock options and restricted stock units granted, net of forfeitures — 2,628 — — — 2,628
Stock option exercises 228 780 — — — 780
Shares issued under the Employee Stock Purchase Plan 19 218 — — — 218
Unrealized gain on investments — — — 42 — 42
BALANCE, MARCH 31, 2019 43,825 $ 474,806 $ 104 $ 3 $ (371,858) $ 103,055
Net loss — — — — (19,792) (19,792)
Compensation expense related to stock options and restricted stock units granted, net of forfeitures — 4,183 — — — 4,183
Stock option exercises 227 850 — — — 850
Shares issued under the Employee Stock Purchase Plan 14 211 — — — 211
Unrealized gain on investments — — — 35 — 35
BALANCE, JUNE 30, 2019 44,066 $ 480,050 $ 104 $ 38 $ (391,650) $ 88,542
Net income — — — — 3,470 3,470
Compensation expense related to stock options and restricted stock units granted, net of forfeitures — 3,285 — — — 3,285
Stock option exercises 416 1,427 — — — 1,427
Shares issued under the Employee Stock Purchase Plan 18 275 — — — 275
Unrealized loss on investments — — — (9) — (9)
Exercise of warrants resulting in issuance of common stock 20 104 (104) — — 0
BALANCE, SEPTEMBER 30, 2019 44,520 $ 485,141 $ 0 $ 29 $ (388,180) $ 96,990

The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Vericel Corporation, a Michigan corporation (together with its consolidated subsidiaries referred to herein as the Company, ~~Vericel, we, us~~ or ~~our)~~Vericel), was incorporated in March 1989 and began employee-based operations in 1991. The Company is a fully-integrated, commercial-stage biopharmaceutical company and is a leader in advanced therapies for the sports medicine and severe burn care markets. Vericel currently markets 2 cell therapy products in the United States, MACI®(autologous cultured chondrocytes on porcine collagen membrane) and Epicel®~~. Vericel obtained both products in May 2014, as part of the acquisition of certain assets and the assumption of certain liabilities of Sanofi, a French~~ ~~société anonyme~~ ~~(Sanofi)~~(cultured epidermal autografts).

MACI® ~~(autologous cultured chondrocytes on porcine collagen membrane)~~ is an autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults. Epicel® ~~(cultured epidermal autografts)~~ is a permanent skin replacement for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent of total body surface area (TBSA). The Company also holds an exclusive license from MediWound Ltd. (MediWound) for North American rights to NexoBrid®(concentrate of proteolytic enzymes enriched in bromelain), a registration-stage biological orphan product for the debridement of severe thermal burns. The Company operates its business primarily in the U.S. in 1 reportable segment — the research, product development, manufacture and distribution of ~~biopharmaceuticals~~cellular therapies for use in the treatment of specific diseases.

The pandemic caused by the spread of a novel strain of coronavirus (COVID-19) began directly affecting the United States in March of 2020 and has continued since that point.The pandemic has created significant disruptions to the U.S. and global economy and has contributed, at times, to significant volatility ~~uncertainty, and economic disruption~~ in ~~both domestic and international~~financial markets. The ~~virus was first reported in China and rapidly spread globally. The World Health Organization (WHO) declared~~global impact of the outbreak ~~a pandemic on March 11, 2020,~~has fluctuated since early 2020.At times, many state, local and ~~the President of the United States declared a~~ national ~~health emergency immediately thereafter. Following the President’s declaration, state~~ governments – including those in Massachusetts and Michigan, where the Company’s operations are located ~~began~~– have responded by issuing, extending and supplementing orders requiring quarantines, restrictions on travel, and the mandatory closure of certain non-essential businesses, ~~that do not conduct essential services to temporarily close their physical workplaces to employees and customers. The~~among other actions. In the U.S., the status and application of ~~those~~these orders have varied on a state-by-state ~~basis.~~basis since the early days of the pandemic. Many of the restrictions have been periodically updated as infection rates in the U.S. have risen and fallen, as new virus variants have emerged, as vaccines have been distributed and administered, and as world health leaders learn more about the virus, its transmission pathway and who is most at risk. Because Vericel is deemed an essential business, the Company ~~continues to be exempt~~has been exempted from ~~such state~~government orders ~~in their current forms.~~requiring the closure of workplaces and the cessation of business operations.

Notwithstanding being an essential business, the Company’s business and operations ~~have been~~were, at times, adversely impacted by the effects of COVID-19. In mid-March, the American College of Surgeons and United States Surgeon General recommended that each hospital, health system, and surgeon minimize, postpone, or cancel electively scheduled surgeries. These recommendations were followed by numerous state level executive orders either restricting or partially restricting elective surgeries. Because MACI is an elective surgical procedure, asCOVID-19 during 2020. As a result of ~~these~~periodic restrictions ~~beginning in mid-March 2020,~~placed on the performance of elective surgical procedures, the Company ~~began to experience~~experienced a significant increase in cancellations of scheduled MACI procedures as well as a slowdown in new MACI ~~orders. By early~~orders during March and April ~~2020, 45 states, representing over 95%~~ of ~~total U.S. surgical capacity had issued either mandates or recommendations and guidelines suspending elective surgical procedures.~~2020. The widespread suspension of ~~elective~~surgical procedures impacted the Company’s business and operations during the first and second quarters of 2020. ~~These~~The level and degree of restriction on elective surgeries, on the ability of patients to seek treatment and on U.S. business operations generally fluctuated throughout 2020 as COVID-19 infection rates rose and fell during the summer months and into the autumn. By the first quarter of 2021, the pandemic’s effects on the Company’s MACI business had largely dissipated. Although hospitals are now better prepared for a subsequent surge in COVID-19 patients and COVID-19 vaccines have been approved and are being widely distributed in the United States, the risk remains that regional or local restrictions ~~began~~could again be placed on the performance of elective surgical procedures if the number of COVID-19 infections in the United States were to ~~ease in May and, by the end of September 2020, there were no state orders in place that directly impacted a surgeon's~~rise again, or ~~patient's ability to move forward with a MACI surgery.~~if new or existing COVID-19 variants render current vaccine treatments ineffective. Because Epicel is used almost exclusively in the emergent setting by burn centers and surgeons throughout the country, Epicel revenue and procedure volumes have been less affected by the pandemic. Although hospitals are now better prepared for a subsequent surge in COVID-19 patients, the risk remains that regional or local restrictions could again be placed on the performance of elective surgical procedures if the number of COVID-19 infections in the United States continues to rise.

~~In March 2020,~~At the outset of the pandemic, the Company put in place a comprehensive workplace protection plan, which ~~institutes~~instituted protective measures in response to COVID-19. ~~These measures~~The Company’s workplace protection plan closely followed guidance issued by the Centers for Disease Control and Prevention (CDC) and complied with applicable federal and state law.Because vaccines designed to protect against COVID-19 have become readily available and the rates of COVID-19 infections, hospitalizations and deaths in the majority of the U.S. have declined since the beginning of 2021, the CDC and the Occupational Safety and Health Administration (OSHA) have altered their guidance for Americans, and emergency orders and mandatory workplace protocols in Michigan and Massachusetts have either been rescinded or greatly reduced – to include ~~mandatory employee training on social distancing and hygiene protocols, conducting daily health screenings~~the lifting of all employees, vendors and visitors entering our facilities, canceling all international business travel, limiting domestic business travel to essential purposes, requesting that employees limit non-essential personal travel, enhancing our facilities’ janitorial and sanitary procedures, making certain physical modifications and enhancements to our facilities to enable effective social distancing among employees, providing certain personal protective equipment to employees working in our offices, encouraging employees to work from home to the extent their job function enables them to do so, limiting third-party access to our facilities, encouraging the use of virtual employee meetings, modifying the manner and schedule of on-site production activities, and providing guidance to our field-based commercial teams concerning theircapacity

~~communications~~limitations on businesses in both states.Accordingly, Vericel is planning for a return to more normal workplace operations, but will continue to modify its workplace protection plan, and ~~contact with customers and healthcare professionals.~~ will reinstitute protective measures for its workforce as necessary.

The Company is reviewing ~~these measures~~its policies and procedures regularly as the pandemic evolves and may take additional actions to the extent required.

The accompanying ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements have been prepared on a basis which assumes that the Company will continue as a going concern and contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. ~~For~~As of June 30, 2021, the ~~three and nine months ended~~ ~~September 30, 2020, the~~ Company ~~had~~ ~~net income of $3.6 million and a net loss of $9.4 million, respectively, and~~ had an accumulated deficit of ~~$388.0~~$382.9 million, as and had a net loss of ~~September~~$3.8 million and $7.1 million, respectively, during the three and six months ended June 30, ~~2020.~~2021. The Company had cash and cash equivalents of ~~$43.5~~$51.8 million and investments of ~~$42.0~~$64.0 million as of ~~September~~June 30, ~~2020.~~2021. The Company expects that cash from the sales of its products and existing cash, cash equivalents and investments will be sufficient to support the Company’scurrent operations through at least 12 months from the issuance of these ~~financial statements.~~However, the effects of the COVID-19 pandemic continue to evolve and may result in irrecoverable losses of customers and significantly impact long-term liquidity requiring the Company to engage in layoffs, furloughs and/or reductions in salaries.Condensed Consolidated Financial Statements. To the extent the United States experiences a resurgence in COVID-19 infections and elective surgery restrictions are reinstated on a widespread basis and significantly impact the Company’s business, the Company may need to a~~ccess~~access additional capital; however, the Company may not be able to obtain financing on acceptable terms or at all, particularly in light of the impact of COVID-19 on the global economy and financial markets. The terms of any financing may adversely affect the holdings or the rights of the Company’s shareholders.

The accompanying ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements as of ~~September~~June 30, ~~2020~~2021 and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 are unaudited and have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC). The preparation of ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates, judgments, and assumptions that may affect the reported amounts of assets, liabilities, equity, ~~revenues~~revenue and expenses. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. The financial statements reflect, in the opinion of management, all adjustments (consisting only of normal, recurring adjustments) necessary to state fairly the financial position and results of operations as of and for the periods indicated. ~~We base our~~The Company bases its estimates on historical experience and on various other assumptions that ~~we believe~~it believes are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of ~~revenues~~revenue and expenses. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact ~~our~~its business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to continue to contain or treat COVID-19, as well as the economic impact on ~~our~~its customers. ~~We have~~The Company has made estimates of the impact of COVID-19 within ~~our~~these financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates. As of ~~September~~June 30, ~~2020,~~2021, the Company has not recorded impairments to investments, inventory, other current assets or long-lived assets as a result of the COVID-19 ~~pandemic and does not expect material impairments in the future. The Company has assessed the impact of COVID-19 on accounts receivables (see note 4).~~pandemic.

These ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, as filed with the SEC on February ~~25, 2020~~24, 2021 (Annual Report).

Consolidated Statement of Cash Flows

The following table presents certain supplementary cash flows information for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:

Total cash, cash equivalents, and restricted cash of $43.7 million as of September 30, 2020, shown in the statement of cash flows is comprised of cash and cash equivalents of $43.5 million and restricted cash of $0.2 million which is included in other long-term assets on the consolidated balance sheet. As of September 30, 2019, cash and cash equivalents were $36.9 million and the Company did 0t have any restricted cash.


	Six Months Ended June 30,
(In thousands)	2021		2020
Reconciliation of cash, cash equivalents, and restricted cash reported in the statement of financial position:
Cash and cash equivalents	$	51,761	$	55,704
Restricted cash, included in other long-term assets	211		89
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	51,972	$	55,793

3. Recent Accounting Pronouncements

~~Measuring Credit Losses on Financial Instruments~~

The FASB issued updated guidance on measuring credit losses on financial instruments. The guidance removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Prior to the updated guidance, credit losses were recognized when it was probable that the loss had been incurred. The revised guidance removes all recognition thresholds and requires companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that a company expected to collect over the instrument’s contractual life. The Accounting Standard Update (ASU) 2016-13, ~~Financial Instruments-Credit Losses (Topic 326)~~,~~became effective for the Company January 1, 2020. See note 4 and note 8 for further discussion.~~

~~Fair Value Measurement Disclosure~~

~~The FASB issued updated guidance through ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.~~ The revised guidance created a more consistent disclosure framework that increased clarity and removed, modified and added certain fair value disclosures to improve the effectiveness of the Company’s disclosures in the notes of the financial statements. This guidance became effective for the Company January 1, 2020 and had no impact on its condensed consolidated financial statements.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (ASC 740). The ASU enhances and simplifies various aspects of the income tax accounting guidance in ASC 740, including requirements related to hybrid tax regimes, the tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of entities not subject to tax, the intra-period tax allocation exception to the incremental approach, ownership changes in investments, changes from a subsidiary to an equity method investment, interim-period accounting for enacted changes in tax law, and the year-to-date loss limitation in interim-period tax accounting. This guidance isbecame effective for the Company ~~for annual~~on January 1, 2021 and ~~interim periods beginning after December 31, 2020; however, early adoption is permitted. The Company is currently in the process of evaluating the~~had no material impact on its ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Revenue Recognition ofand Net Product Sales ~~and Other Revenue~~

The Company recognizes product revenue from sales of MACI biopsy kits, MACI implants, Epicel grafts and other ~~revenue~~sources following the five-step model in Accounting Standards Codification 606, Revenue Recognition~~(ASC 606)~~.

MACI biopsy kits are sold directly to hospitals and ambulatory surgical centers based on contracted rates in an approved contract or sales order. The Company recognizes MACI kit revenue upon delivery of the biopsy kit, at which time the customer (the facility) is in control of the kit. The kit is used by the doctor to provide a sample of cartilage tissue to the Company, which can later be used to manufacture a MACI implant. The ordering of the kit does not obligate the Company to manufacture an implant nor does the receipt of the cartilage tissue. The customer’s order of an implant is separate from the process of ordering the biopsy kit. Therefore, the sale of the biopsy kit and any subsequent sale of an implant are distinct contracts and are accounted for separately.

The Company contracts with 2 specialty pharmacies, Orsini Pharmaceutical Services, Inc. (Orsini) and AllCare Plus Pharmacy, Inc. (AllCare) to distribute MACI in a manner in which the Company retains the credit and collection risk from the end customer. The Company pays both specialty pharmacies a fee for each patient to whom MACI is dispensed. Both Orsini and AllCare perform collection activities to collect payment from customers. The Company ~~has engaged~~engages a third-party to provide services in connection with a patient support program to manage patient cases and to ensure complete and correct billing information is provided to the insurers and hospitals. In addition, the Company also sells MACI directly to DMS Pharmaceutical (DMS) for patients treated at military ~~patients.~~treatment facilities. The sales directly to DMS are made at a contracted rate.

Prior authorization and confirmation of coverage level by the patient’s private insurance plan, hospital or government payer is a prerequisite to the shipment of product to a patient. The Company recognizes product ~~revenues~~revenue from sales of all MACI implants upon delivery at which time the customer obtains control of the implant and the claim is billable. The total consideration which the Company expects to collect in exchange for MACI implants (the transaction price) may be fixed or variable. Direct sales to hospitals or distributors are recorded at a contracted price, and there are typically no forms of variable consideration.

When the Company sells MACI the patient is responsible for payment; however, the Company is typically reimbursed by a third-party insurer or government payer, subject to a patient co-pay amount. Reimbursements from third-party insurers and government payers vary by patient and payer and are based on either contracted rates, publicly available rates, fee schedules or ~~a fee schedule.~~past payer precedents. Net product revenue is recognized net of estimated contractual allowances, which considers historical collection experience from both the payer and patient, denial rates and the terms of the Company’s contractual arrangements. The Company estimates expected collections for these transactions using the portfolio approach. The Company records a reduction to revenue at the time of sale for its estimate of the amount of consideration that will not be collected. ~~In addition, potential credit risk exposure has been evaluated for the Company’s accounts receivable in accordance with~~ ~~ASC 326, Financial Instruments - Credit Losses.~~ The Company assesses risk and determines a loss percentage by pooling account receivables based on similar risk characteristics. The loss percentage is based on current and historical information as well as reasonable and supportable forecasts. This loss percentage was applied to the accounts receivables as of September 30, 2020. The total allowance for uncollectible consideration as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$4.6~~$7.1 million and ~~$3.9~~$5.3 million, respectively. ~~The allowance includes less than $0.1 million related to COVID-19 potential impacts on accounts receivable from third-party insurers, government payers, hospitals and patients.~~ Changes to the estimate of the amount of consideration that will not be collected could have a material impact to the revenue recognized. A 0.5% ~~increase~~change to the estimated uncollectible percentage could result in approximately a ~~$0.2~~$0.3 million increase or decrease in the revenue recognized ~~for~~as of the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

Changes in estimates of the transaction price are recorded through revenue in the period in which such change occurs. Changes in estimates related to prior period sales for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 resulted in a decrease to revenue of $0.4 million and $0.1 million, respectively, and a decrease to revenue of $0.2 million and an increase to revenue of ~~less than $0.01~~$1.1 million, ~~and $0.7 million, respectively. During~~respectively, for the same periods in ~~2019, the changes in estimates related to prior period sales resulted in an increase to revenue of $0.7 million and $0.4 million, respectively.~~2020. The changes in estimates recorded during the three and ~~nine~~six months ended ~~September~~June 30, 2021 and June 30, 2020, were primarily due to completion of the billing claims process for implants that occurred in ~~2019.~~2020 or prior. Upon completion of the billing claims process, the Company concluded that it was probable that a significant reversal in the amount of revenue recognized would not occur.

Additionally, potential credit risk exposure has been evaluated for the Company’s accounts receivable in accordance with

ASC 326, Financial Instruments - Credit Losses. The loss percentage is calculated by pooling account receivables containing similar risk characteristics and applying collectability forecasts which are derived from current and historical economic and financial information. The loss percentage calculated was applied to accounts receivables as of June 30, 2021 and December 31, 2020. The allowance related to the potential impacts of COVID-19 on accounts receivable from third-party insurers, government payers, hospitals and patients as of December 31, 2020 included approximately $0.1 million, and 0 additional allowance was recorded during the six months ended June 30, 2021.

The Company sells Epicel directly to hospitals and burn centers based on contracted rates stated in an approved contract or purchase order. Similar to MACI, there is no obligation to manufacture Epicel grafts upon receipt of a skin biopsy, and Vericel has no contractual right to receive payment until the product is delivered to the hospital. The Company recognizes product ~~revenues~~revenue from sales of Epicel upon delivery to the hospital, at which time the customer is in control of the Epicel grafts and the claim is billable to the hospital.

The Company entered into exclusive license and supply agreements with MediWound, under which MediWound will manufacture and supply NexoBrid on a unit price basis, which may be increased pursuant to the terms of the agreement. The U.S. Biomedical Advanced Research and Development Authority (BARDA) ~~has~~ committed to procure ~~NexoBrid.~~NexoBrid directly from MediWound, under an emergency use authorization. As ~~of September 30,~~a result, during 2020, BARDA accepted the ~~Company does not hold a direct contract or distribution~~first shipments of

NexoBrid, per the agreement ~~with~~between BARDA ~~or take title to the product.~~and MediWound. The Company recognizes ~~income from~~revenue based on a percentage of gross profits for sales of NexoBrid to BARDA upon delivery, at which time BARDA is in control of the product. As of June 30, 2021, the Company did not take title to the product or hold a direct contract or distribution agreement with BARDA. During the three and six months ended ~~September~~June 30, ~~2020, the first order of NexoBrid was delivered and~~2021, the Company recognized ~~$1.2~~$0.8 million and $1.8 million of ~~revenue.~~revenue, respectively. NaN revenue related to the procurement by BARDA was recognized for the three and six months ended June 30, 2020. See note 11 for further ~~discussion of the NexoBrid license and supply agreements.~~

Revenue by Product and Customer

The following table and description below shows the products from which the Company generated its revenue:

Concentration of Credit Risk

The Company's total Epicel revenue concentration from a customer for the three and six months ended ~~September~~June 30, ~~2019~~2021 was 11% and 12%, respectively, and 6% and 10%. for the same periods in 2020. For the Company's total ~~Epicel~~MACI revenue, and MACI ~~revenue~~ and Epicel accounts receivable balances, there were no ~~other~~ customers for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, and for~~2021 or the ~~nine months ended September 30, 2019,~~comparable periods in 2020, with a concentration greater than 10%.

Inventory as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

Property and Equipment

Property and Equipment, net as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

Depreciation expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was ~~$0.6~~$0.7 million and ~~$1.6~~$1.5 million, respectively, and ~~$0.4~~$0.5 million and ~~$1.2~~$1.1 million, respectively, for the same periods in ~~2019.~~2020.

Accrued Expenses as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 are as follows:

The Company leases facilities in Ann Arbor, Michigan and Cambridge, Massachusetts. The Ann Arbor facility includes office space, and the Cambridge facilities include clean rooms, laboratories for MACI and Epicel manufacturing and office space. The Company also leases offsite warehouse space, vehicles and computer equipment. Certain of the Company’s lease agreements include lease payments that are adjusted periodically for an index or rate. The leases are initially measured using the present value of the projected payments adjusted for the index or rate in effect at the commencement date. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. All operating lease commitments with a lease term greater than 12 months are recognized as ~~right to use~~right-of-use assets and liabilities, on a discounted basis on the balance sheet. Effective October 21, 2020 the Company entered into an agreement ~~for 1~~with one of its Cambridge, Massachusetts facility leases. ~~This~~The agreement extended the terms of the lease to expire on February 29, 2032, with monthly contractual lease payments ranging from $0.4 million to $0.6 million. The agreement also provides a tenant improvement allowance of approximately $4.3 million, available through December 31, 2023.

Leases with an initial term of 12 months or less are not recorded on the balance ~~sheet and for~~sheet. For both the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, lease expense of less than $0.1 million was recorded for each of short-term leases and financing leases. During the six months ended June 30, 2021, the Company recorded $~~0.1~~0.2 million ~~was recorded related to short-term leases.~~of leasehold improvements funded by tenant improvement allowances available under the lease agreements. The contribution toward the cost of tenant improvements is recorded as a reduction of the operating lease assets. For the three and ~~nine~~six months ended~~September~~June 30, ~~2020~~2021, the Company recognized ~~$1.6~~$1.8 million and ~~$4.5~~$3.7 million, respectively, of operating lease expense and $1.4 million and ~~$4.0~~$2.9 million, respectively for the same periods in ~~2019.~~

~~For both the~~ ~~three and nine months ended September 30, 2020 and 2019, the Company recognized~~ ~~less than $0.1 million of financing lease expense.~~2020. The Company’s leases contain non-lease components and activities that do not transfer a good or service to the Company. The Company elected not to combine lease and non-lease components and therefore non-lease costs were not included in the net lease assets or lease liabilities.

Total leased assets and liabilities classified on the balance sheet, as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 are as follows:

7. Stock-Based Compensation

Stock Option, Restricted Stock Units and Equity Incentive Plans

The Company has historically had various stock incentive plans and agreements that provide for the issuance of nonqualified and incentive stock options and restricted stock units as well as other equity awards. Such awards may be granted by the Company’s Board of Directors to certain of the Company’s employees, directors and consultants.

Options granted to employees and non-employees under these plans expire no later than ten years from the date of grant. Options and restricted stock units generally become exercisable or vest over a four-year period, under a graded-vesting methodology for stock options and annually on the anniversary grant date for restricted stock units, following the date of grant. The Company generally issues new shares upon the exercise of stock options or vesting of restricted stock units.

The Company's Amended and Restated 2019 Omnibus Incentive Plan (2019 Plan) was approved on ~~May 1, 2019~~April 29, 2020 and provides incentives through the grant of stock options, stock appreciation rights, restricted stock awards and restricted stock units. The exercise price of stock options granted under the 2019 Plan shall not be less than the fair market value of the Company’s common stock on the date of grant. The 2019 Plan replaced the 1992 Stock Option Plan, the 2001 Stock Option Plan, the Amended and Restated 2004 Equity Incentive Plan, the 2009 Second Amended and Restated Omnibus Incentive Plan and the 2017 Omnibus Incentive Plan (Prior Plans), and 0 new grants have been granted under the Prior Plans after ~~approval.~~approval of the 2019 Plan. However, the expiration or forfeiture of options previously granted under the Prior Plans will increase the number of shares available for issuance under the 2019 Plan.

The Amended and Restated 2019 Omnibus Incentive Plan (Amended and Restated 2019 Plan) was approved on April 29, 2020. The Amended and Restated 2019 Plan increased the total number of shares of the Company’s common stock reserved for issuance under the 2019 Plan by 2,400,000 shares, revised the ratio at which “full-value” awards are counted against the share reserve from 1.25 to 1.4, and extended the term of the plan to April 29, 2030.

As of ~~September~~June 30, ~~2020,~~2021, there were ~~4,553,487~~2,804,486 shares available for future grant under the ~~Amended and Restated~~ 2019 Plan.

Employee Stock Purchase Plan

Employees are able to purchase stock under the Vericel Corporation Employee Stock Purchase Plan (ESPP). The ESPP allows for the issuance of an aggregate of 1,000,000 shares of common stock of which ~~693,498~~729,273 shares have been issued since the inception of the plan in 2015. Participation in this plan is available to substantially all employees. The ESPP is a compensatory plan accounted for under the expense recognition provisions of the share-based payment accounting standards. Compensation expense is recorded based on the fair market value of the options at the grant date, which corresponds to the first day of each purchase period and is amortized over the purchase period. In ~~October 2020,~~July 2021, employees purchased ~~20,591~~9,045 shares resulting in proceeds from the sale of common stock of ~~$0.3~~$0.4 million under the ESPP for the ~~third~~second quarter of ~~2020.~~2021.

Service-Based Stock Options

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company granted service-based options to purchase common stock of ~~28,000~~136,117 and ~~1,324,890,~~1,474,072, respectively, and ~~111,600~~110,750 and ~~1,750,110,~~1,296,890, respectively, for the same periods in ~~2019.~~2020. The exercise price of the options is the fair market value per share of common stock on the grant date, and the options generally vest over four years (other than non-employee director options which may vest over one ~~year)~~ to three years from the grant date pursuant to the provisions of the Company's Amended and Restated Non-Employee Director Compensation Guidelines) and have a term of ten years. The Company issues new shares upon the exercise of stock options. The weighted average grant-date fair value of service-based options granted during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was ~~$10.81~~$39.31 and ~~$8.70,~~$32.69, respectively, and ~~$13.28~~$8.82 and ~~$12.77,~~$8.66, respectively, for the same periods in ~~2019.~~2020.

Restricted Stock Units

During the ~~nine~~three and six months ended ~~September~~June 30, ~~2020 and September 30, 2019,~~2021, the Company granted ~~196,836~~26,941 and ~~186,922~~241,054 service-based restricted stock units, ~~respectively.~~respectively, and 10,700 and 196,836, respectively, for the same periods in 2020. The restricted stock units vest annually over four years in equal installments commencing on the first anniversary of the grant date (other than non-employee director ~~options~~awards which may vest over one ~~year~~ to three years from the grant ~~date)~~date pursuant to the provisions of the Company's Amended and Restated Non-Employee Director Compensation Guidelines). The Company issues new shares upon the vesting of restricted stock units. Restricted stock ~~awards~~units are recorded at fair value at the date of grant, which is based on the closing share price on the grant date. Compensation expense is recorded for restricted stock units that are expected to vest based on their fair value at grant date and is amortized over the expected vesting period. The weighted average grant-date fair value of restricted stock units granted during the ~~nine~~three and six months ended

~~September~~ June 30, ~~2020~~2021 was $61.37 and $51.99, respectively, and $14.49 and $11.41, ~~and $17.71~~respectively, for the same ~~period~~periods in ~~2019.~~2020. The aggregate fair value of restricted stock units granted in the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~2021 was $1.7 million and $12.5 million, respectively, and $0.2 million and $2.2 million, ~~and $3.3 million~~respectively, for the same ~~period~~periods in ~~2019.~~2020.

During the ~~nine~~three and six months ended ~~September~~June 30, ~~2020, 32,840~~2021, 11,576 and 59,433 shares, respectively, of common stock were issued upon the vesting of restricted stock units. These amounts are net of ~~13,872~~1,174 and 29,414 shares, respectively, that were withheld for payment of taxes on the behalf of ~~employees,~~employees. During the three and six months ended June 30, 2020, 10,500 and 32,840 shares, respectively, of common stock were issued upon the vesting of restricted stock units. These amounts are net of 0 and 13,872 shares, respectively, withheld for payment of taxes, as no shares are withheld at vesting for shares awarded to the members of the Company's Board of Directors.

For the three and six months ended June 30, 2021, the total fair value of restricted stock awards vested was $0.9 million and $5.0 million, respectively, and $0.2 million and $0.5 million, respectively, for the same periods in 2020. The total fair value of restricted stock units withheld for payment of taxes during the ~~nine~~three and six months ended ~~September~~June 30, 2021, was $0.1 million and $1.6 million, respectively. During the six months ended June 30, 2020, the total fair value of restricted stock units withheld for payment of taxes was $0.2 million. There were 0 restricted stock units withheld during the three months ended June 30, 2020.

Stock Compensation Expense

Non-cash stock-based compensation expense (employee stock purchase plan, service-based stock options and restricted stock units) included in cost of ~~goods sold,~~product sales, research and development expenses and selling, general and administrative expenses is summarized in the following table:

Marketable debt securities held by the Company are classified as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities, and carried at fair value in the accompanying ~~condensed consolidated balance sheets~~Condensed Consolidated Balance Sheets on a settlement date basis. The following tables summarize the gross unrealized gains and losses of the Company’s marketable securities as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

December 31, 2019
Gross Unrealized Estimated Fair Value
(In thousands) Amortized Cost Gains Losses
Money market funds $ 5,381 $ 0 $ 0 $ 5,381
Commercial paper 11,892 0 0 11,892
Corporate notes 18,369 11 0 18,380
U.S. government securities 11,291 4 0 11,295
U.S. asset-backed securities 10,503 6 0 10,509
$ 57,436 $ 21 $ 0 $ 57,457
Classified as:
Cash equivalents $ 5,381
Short-term investments 42,829
Long-term investments 9,247
$ 57,457


	December 31, 2020
			Gross Unrealized						Estimated Fair Value
(In thousands)	Amortized Cost		Gains		Losses		Credit Losses
Money market funds	$	3,698	$	0	$	0	$	0	$	3,698

Commercial paper	8,993		1		0		0		8,994
Corporate notes	35,917		0		0		(6)		35,911
U.S. government securities	12,828		14		0		0		12,842
U.S. government agency bonds	5,000		1		0		0		5,001
U.S. asset-backed securities	3,534		4		0		0		3,538
	$	69,970	$	20	$	0	$	(6)	$	69,984
Classified as:
Cash equivalents									$	3,698
Short-term investments									42,187
Long-term investments									24,099
									$	69,984

~~As of~~ ~~September 30, 2020~~ ~~we held short-term investments and as of December 31, 2019, we held both short-term and long-term investments.~~ Investments classified as short-term have maturities of less than one year. Investments classified as long-term are those ~~that:~~which: (i) have a maturity of greater than one year, and (ii) ~~we do~~the Company does not intend to liquidate within the next twelve months, although these funds are available for use and, therefore, are classified as ~~available-for-sale~~.available-for-sale. The ~~Company's~~ Company’s

investment strategy is to buy short-duration marketable securities with a high credit rating. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020, all marketable securities held by the Company had remaining contractual maturities of three years or less.

U~~nrealized~~Unrealized gains are included as a component of accumulated other comprehensive income in the ~~condensed consolidated balance sheets~~Condensed Consolidated Balance Sheets and ~~statements~~Statements of ~~stockholders’ equity~~Shareholders’ Equity and a component of total comprehensive ~~loss~~income (loss) in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~comprehensive loss,~~Comprehensive Loss, until realized. Unrealized losses are evaluated for impairment under ASC 326, Financial Instruments - Credit Losses, to determine if the impairment is credit-related or ~~non credit-related.~~non-credit-related. Credit-related impairment is recognized as an allowance on the ~~balance sheet~~Condensed Consolidated Balance Sheet with a corresponding adjustment to earnings, and ~~non credit-related~~non-credit-related impairment is recognized in other comprehensive income (loss), net of taxes. There were no material realized losses on marketable securities ~~for~~during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020 and 2019.~~

The Company evaluated its investments for impairment under ASC 326. Any allowance for credit losses are recorded at the lower of either the fair market value less book value or the difference between the present value of future cash flows and the book value. As of September 30, 2020, the analysis under ASU 2016-13 and the current macroeconomic impact of the COVID-19 pandemic did not result in material allowances for credit losses.2021. There have been 0 impairments of the Company’s assets measured and carried at fair value ~~as of September~~during the three and six months ended June 30, ~~2020.~~2021 or June 30, 2020, respectively.

The Company’s fair value measurements are classified and disclosed in one of the following three categories:

•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

•Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

There was no movement between Level 1 and Level 2 or between Level 2 and Level 3 from December 31, ~~2019~~2020 to ~~September~~June 30, ~~2020.~~2021. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The commercial paper, corporate notes, U.S. government securities, U.S. government agency bonds and U.S. asset-backed securities are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. The following table summarizes the valuation of the Company’s financial instruments that are measured at fair value on a recurring basis:

September 30, 2020 December 31, 2019
Fair value measurement category Fair value measurement category
(In thousands) Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Assets:
Money market funds $ 28,059 $ 28,059 $ 0 $ 0 $ 5,381 $ 5,381 $ 0 $ 0
Commercial paper 9,984 0 9,984 0 11,892 0 11,892 0
Corporate notes 11,186 0 11,186 0 18,380 0 18,380 0
U.S. government securities 13,804 0 13,804 0 11,295 0 11,295 0
U.S. government agency bonds 3,499 0 3,499 0 0 0 0 0
U.S. asset-backed securities 3,562 0 3,562 0 10,509 0 10,509 0
$ 70,094 $ 28,059 $ 42,035 $ 0 $ 57,457 $ 5,381 $ 52,076 $ 0

The fair values of the cash equivalents and marketable securities are based on observable market prices. ~~See note 8 for impact of ASU 2016-13 on the investment valuation.~~

10. Net ~~Income (Loss)~~Loss Per Common Share

The following reflects the net ~~income (loss)~~loss attributable to common shareholders and share data used in the basic and diluted earnings per share computations using the two class method:

Three Months Ended September 30, Nine Months Ended September 30,
(Amounts in thousands, except per share amounts) 2020 2019 2020 2019
Numerator:
Net income (loss) $ 3,618 $ 3,470 $ (9,356) $ (19,166)
Denominator:
Weighted-average common shares outstanding (basic) 45,272 44,251 45,112 43,979
Weighted-average common shares outstanding (diluted) 47,314 46,667 45,112 43,979
Net income (loss) per share attributable to common shareholders (basic) $ 0.08 $ 0.08 $ (0.21) $ (0.44)
Net income (loss) per share attributable to common shareholders (diluted) $ 0.08 $ 0.07 $ (0.21) $ (0.44)
Anti-dilutive shares excluded from the calculation of diluted earnings per share(a) (amounts in millions):
Stock options 2.4 1.6 5.7 5.1
Restricted stock unit awards 0 0 0.3 0.2
(a) Common equivalent shares are not included in the diluted per share calculation where the effect of their inclusion would be anti-dilutive.


	Three Months Ended June 30,				Six Months Ended June 30,
(Amounts in thousands, except per share amounts)	2021		2020		2021		2020
Numerator:
Net loss	$	(3,786)	$	(8,269)	$	(7,075)	$	(12,974)
Denominator:
Weighted-average common shares outstanding (basic and diluted)	46,403		45,137		46,195		45,031

Net loss per share attributable to common shareholders (basic and diluted)	$	(0.08)	$	(0.18)	$	(0.15)	$	(0.29)



Anti-dilutive shares excluded from the calculation of diluted earnings per share(a):
Stock options	5,960		6,018		5,960		6,018
Restricted stock units	413		301		413		301

(a) Common equivalent shares are not included in the diluted per share calculation where the effect of their inclusion would be anti-dilutive.

11. NexoBrid License and Supply Agreements

On May 6, 2019, the Company entered into exclusive license and supply agreements with MediWound to commercialize NexoBrid and any improvements to NexoBrid in North America. NexoBrid is a topically-administered biological product that enzymatically removes nonviable burn tissue, or eschar, in patients with deep partial and full-thickness thermal burns. On September 16, 2020, the Company announced MediWound's submission of a biologics license application (BLA) to the U.S. Food and Drug Administration (FDA) seeking marketing approval for NexoBrid in the United States for the treatment of severe burns, and the FDA's assignment of a Prescription Drug User Fee Act (PDUFA) target date for the product of June 29, 2021. Subsequently, on June 29, 2021, the Company announced that MediWound received a complete response letter (CRL) from the FDA regarding the BLA, through which the FDA communicated to MediWound that it had completed its review of the BLA, as amended, and had determined that it cannot approve the BLA in its present form. The Company announced further that it is ~~currently~~committed to working with MediWound and the FDA on the next steps to address the issues identified in ~~clinical development in North America,~~the CRL and ~~pursuant~~to seek the potential approval of NexoBrid.

Pursuant to the terms of the license agreement, if the BLA is approved, MediWound will ~~continue~~transfer the BLA to ~~conduct all clinical activities described~~the Company and the Company will market NexoBrid in the ~~development plan to support~~U.S. Both MediWound and the ~~Biologics License Application (BLA) filing with the United States Food and Drug Administration (FDA)~~Company, under the supervision of a Central Steering Committee comprised of members of ~~each party. On June 30, 2020,~~both companies will continue to guide the ~~Company announced the submission~~development of the BLA to the FDA seeking the approval of NexoBrid. On September 16, 2020, the Company announced that the FDA has accepted the BLA for review and has assigned a Prescription Drug User Fee Act (PDUFA) goal date of June 29, 2021.NexoBrid in North America. NexoBrid is approved in the European Union and other international markets and has been designated as an orphan biologic in the United States, European Union and other international markets.

In May 2019, the Company paid MediWound $17.5 million in consideration for the license. The $17.5 million upfront payment was recorded to research and development expense during 2019, as the license was considered in process research and development. The Company is also obligated to pay MediWound $7.5 million, which is contingent upon U.S. regulatory approval of the BLA for NexoBrid and up to $125 million contingent upon meeting certain sales ~~milestones.~~milestones, subsequent to approval. The first sales milestone of $7.5 million would be triggered when annual net sales of NexoBrid or improvements to it in North America exceed $75 million. As of ~~September~~June 30, ~~2020,~~2021, the milestone payments ~~are~~were not yet probable and therefore, not considered a liability. The Company also will pay MediWound tiered royalties on net sales ranging from mid-high single-digit to mid-teen percentages, subject to customary ~~reductions.~~reductions, following approval. The Company also entered into a supply agreement with MediWound under which MediWound will manufacture NexoBrid for the Company on a unit price basis which may be increased based on a published index. MediWound is obligated to supply the Company with NexoBrid for sale in North

America on an exclusive basis for the first five years of the term of the supply agreement. After the exclusivity period or upon supply failure, the Company will be permitted to establish an alternate source of supply.

BARDA has committed to procure NexoBrid directly from MediWound under an emergency use authorization, and under such commitment the Company will receive a percentage of gross profit for sales directly to BARDA. If BARDA procures NexoBrid directly from ~~Vericel,~~the Company, the Company will pay a percentage of gross profits to MediWound on initial committed amounts and a royalty on any additional BARDA purchases of NexoBrid beyond the initial committed amount. As of ~~September~~June 30, ~~2020,~~2021, the Company ~~does~~did not hold a direct contract or distribution agreement with BARDA. ~~On August 25,~~During 2020, BARDA accepted the first ~~shipment~~shipments of NexoBrid for emergency use preparedness per the agreement between BARDA and MediWound. ~~As a result,~~During the three and six months ended June 30, 2021, the Company recognized ~~$1.2~~$0.8 million and $1.8 million, respectively, of revenue. NaN revenue ~~during~~related to the procurement by BARDA was recognized for the three and six months ended ~~September~~June 30, ~~2020; see note 4 for further information.~~

2020.

12. Commitments and Contingencies

The Company's purchase commitments consist of minimum purchase amounts of materials used in the Company's cell manufacturing process to manufacture its marketed cell therapy products. In addition, the Company also pays for usage of an offsite warehouse space. In February 2021, the terms of the operating agreement were extended through March 31, 2027. The Company records rent expense related to this agreement on a straight-line basis over the remaining term.

Future minimum payments related to the Company's contractual obligations are as follows:


			Payments Due by Period
Contractual Obligations (in thousands)	Total		July 1, 2021 - December 31, 2021		2022		2023		2024		2025		More than 5 Years

Purchase commitments	$	19,390	$	18,729	$	661	$	0	$	0	$	0	$	0
Warehouse operating agreement	4,954		541		1,046		792		792		792		991
Total	$	24,344	$	19,270	$	1,707	$	792	$	792	$	792	$	991

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Vericel Corporation is a leader in advanced cell therapies and specialty biologics for the sports medicine and severe burn care markets. We currently market two ~~FDA approved~~U.S. Food and Drug Administration (FDA)-approved autologous cell therapy products in the United States. MACI® ~~(autologous cultured chondrocytes on porcine collagen membrane)~~ is an autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults. Epicel® ~~(cultured epidermal autografts)~~ is a permanent skin replacement Humanitarian Use Device (HUD) for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent of total body surface area (TBSA). We also hold an exclusive license from MediWound ~~Ltd.~~ for North American rights to NexoBrid®, a registration-stage biological orphan ~~product~~product. In 2020, MediWound submitted to the FDA a biologics license application (BLA) seeking the approval of NexoBrid for ~~debridement~~eschar removal (debridement) in adults with deep partial-thickness and/or full-thickness thermal burns. The FDA subsequently accepted the BLA for filing and assigned a Prescription Drug User Fee Act (PDUFA) target date of June 29, 2021.

Subsequently, on June 29, 2021, we announced that MediWound received a complete response letter (CRL) from the FDA regarding the BLA for NexoBrid. The FDA communicated to MediWound that it had completed its review of the BLA, as amended, and had determined that it cannot approve the BLA in its present form. The FDA had identified issues related to the Chemistry, Manufacturing and Controls (CMC) section of the BLA and had requested that MediWound provide additional CMC information. The FDA stated that it had not reviewed several amendments submitted by MediWound in response to the CMC information requests related to the BLA. The FDA also stated that inspections of manufacturing facilities in Israel and Taiwan are required before the BLA can be approved, but that it was unable to conduct the required inspections during the original review cycle due to COVID-19-related travel restrictions. In addition, the CRL referenced observations that were made during good clinical practice (GCP) inspections related to the DETECT study and requested that MediWound address questions regarding the impact of the observations on the study’s efficacy findings. The FDA also requested that MediWound provide a safety update as part of its BLA resubmission. The Company announced further that it is committed to working with MediWound and the FDA on the next steps to address the issues identified in the CRL to seek the potential approval of NexoBrid.

See "Risk Factors - NexoBrid’s approval in the United States for the treatment of severe ~~thermal burns.~~burns may be further delayed, and it may not be approved for use in the United States and other North American markets at all."

For patents related to MACI, we have one issued patent in the United States directed to a device related to MACI that is set to expire in November 2033, and one issued patent in the European Union set to expire in November 2034.

COVID-19

The pandemic caused by the spread of a novel strain of coronavirus (COVID-19) has created significant disruptions to the U.S. and global economy and has contributed to significant volatility ~~uncertainty and economic disruption~~ in ~~both domestic and international~~financial markets. ~~After the virus was first reported in China and rapidly spread globally, the World Health Organization (WHO) declared~~The global impact of the outbreak ~~a pandemic on March 11, 2020,~~has fluctuated since early 2020. At times, many state, local and ~~the President of the United States declared a~~ national ~~health emergency immediately thereafter. Following the President’s declaration, state~~ governments – including those in Massachusetts and Michigan, where our operations are located ~~began~~– have responded by issuing, extending and supplementing orders requiring quarantines, restrictions on travel, and the mandatory closure of certain non-essential businesses, ~~that do not conduct essential services to temporarily close their physical workplaces to employees and customers. The~~among other actions. In the U.S., the status and application of ~~those~~these orders have varied on a state-by-state basis since the early days of the pandemic. Many of the restrictions have been periodically updated as infection rates in the U.S. have risen and fallen, as new virus “variants” have emerged, as vaccines have been distributed and administered, and as world health leaders learn more about the virus, its transmission pathway and who is most at risk. Because Vericel is deemed an essential business, ~~we continue to be exempt~~the Company has been exempted from ~~such state~~government orders ~~in their current forms.~~requiring the closure of workplaces and the cessation of business operations.

Notwithstanding being an essential business, ~~Vericel’s~~the Company’s business and operations ~~have been~~were, at times, adversely impacted by the effects of COVID-19. In mid-March, the American College of Surgeons and United States Surgeon General recommended that each hospital, health system, and surgeon minimize, postpone, or cancel electively scheduled surgeries. These recommendations were followed by numerous state level executive orders either restricting or partially restricting elective surgeries. Because MACI is an elective surgical procedure, asCOVID-19 during 2020. As a result of ~~these~~periodic restrictions ~~beginning in mid-March 2020, we began to experience~~placed on the performance of elective surgical procedures, the Company experienced a significant increase in cancellations of scheduled MACI procedures as well as a slowdown in new MACI ~~orders. By early~~orders during March and April ~~2020, 45 states, representing over 95%~~ of ~~total U.S. surgical capacity had issued either mandates or recommendations and guidelines suspending elective surgical procedures.~~2020. The widespread suspension of ~~elective~~surgical procedures impacted ~~our~~the Company’s business and operations during the first and second quarters of 2020. ~~These restrictions began~~The level and degree of restriction on elective surgeries, on the ability of patients to ease in May and, by the end of September 2020, there were no state orders in place that directly impacted a surgeon’s or patient’s ability to move forward with a MACI surgery. Consequently, MACI procedure and order volumes have recovered in recent months. In late September and October 2020, the number of COVID-19 infections began to increase markedly in various geographies,seek treatment and on ~~November 1,~~U.S. business operations generally fluctuated throughout 2020 ~~the rolling seven-day average of new daily coronavirus cases in the United States reached the highest level at any point~~as COVID-19 infection rates rose and fell during the ~~pandemic.~~summer months and into the autumn. By the first quarter of 2021, the pandemic’s effects on the Company’s MACI business had largely dissipated. Although hospitals are now better prepared for a subsequent surge in COVID-19 patients and COVID-19 vaccines have been approved and are being widely distributed in the

United States, the risk remains that regional or local restrictions could again be placed on the performance of elective surgical procedures if the number of COVID-19 infections in the United States ~~continues~~were to ~~rise.~~ rise again, or if new or existing COVID-19 variants render current vaccine treatments ineffective.

Because Epicel is used almost exclusively in ~~the~~an emergent setting by burn centers and surgeons throughout the country, Epicel revenue and procedure volumes have been less ~~effected~~affected by the pandemic. Nevertheless, large burns and burn admissions can be affected by restrictions on human activity resulting from more severe government lockdown orders. Epicel procedure volumes did experience a slow-down during the second quarter of 2020, however, the reduction was less pronounced than that observed with MACI. Further reductions could be observed in the future, based on the degree of restrictions imposed.

~~In March 2020, Vericel~~At the outset of the pandemic, the Company put in place a comprehensive workplace protection plan, which ~~institutes~~instituted protective measures in response to COVID-19. ~~These measures~~The Company's workplace protection plan closely followed the guidance issued by the Centers for Disease Control and Prevention (CDC) and complied with applicable federal and state law. Because vaccines designed to protect against COVID-19 have become readily available and the rates of COVID-19 infections, hospitalizations and deaths in the majority of the U.S. have declined since the beginning of 2021, the CDC and the Occupational Safety and Health Administration (OSHA) have altered their guidance for Americans, and emergency orders and mandatory workplace protocols in Michigan and Massachusetts have either been rescinded or greatly reduced - to include ~~mandatory employee training on social distancing and hygiene protocols, conducting daily health screenings~~the lifting of all ~~employees, vendors~~capacity limitations on businesses in both states. Accordingly, Vericel is planning for a return to more normal workplace operations, but will continue to modify its workplace protection plan, and visitors entering our facilities, canceling all international business travel, limiting domestic business travel to essential purpose travel only, requesting that employees limit non-essential personal travel, enhancing our facilities’ janitorialwill reinstitute protective measures for its workforce as necessary. The Company is reviewing its policies and ~~sanitary~~ procedures making certain physical modifications and enhancements to our facilities to enable effective social distancing among employees, providing certain personal protective equipment to employees working in our offices, encouraging employees to work from home to the extent their job function enables them to do so, limiting third-party access to our facilities, encouraging the use of virtual employee meetings, modifying the manner and schedule of on-site production activities, and providing guidance to our field-based commercial teams concerning their communications and contact with customers and healthcare professionals. In addition, we put certain expense reduction measures in place including a reduction of discretionary spending. We are reviewing these measures regularly as the pandemic evolves and may take additional actions to the extent required.

We continue to manufacture MACI and Epicel and are maintaining a significant safety stock of all key raw materials. We do not expect current supply chain interruptions will impact our ongoing manufacturing operations. With respect to customer delivery, MACI final product has an established shelf life of 6six (6) days and established shipping shelf life of 3three (3) days. Currently, MACI is picked up by courier and shipped by commercial air or ground transportation to customer surgical sites. Epicel final product has an established shelf life of 2448 hours and is hand carried to customer hospitals by courier. Transportation is primarily by commercial or charter airline. Although we have not experienced material shipping delays or materially increased costs to date, significant disruption of air travel could result in the inability to deliver MACI or Epicel final products to customer sites within appropriate timeframes, which could further adversely impact our business. ~~There~~At this time, there is no expected impact of COVID-19 on our distributors, operations or third-party service ~~providers'~~providers’ ability to manage patient cases.

The COVID-19 pandemic remains fluid and continues to evolve differently across various geographies. Although state, local and hospital facility restrictions were largely lifted by the end of September 2020, the location, extent, and timing of those restrictions varied greatly as the virus spread across the United States, beginning in March.~~In some specific areas of the country, restrictions on elective surgical procedures were lifted and re-imposed multiple times.~~ We believe it is ~~likely~~possible that we ~~will continue to~~could experience variable impacts on our business, ~~based on the~~should there be a resurgence of COVID-19 in various areas of the United States.Measures taken to limit the impact of COVID-19 at the international, national and local ~~level,~~levels, including the availability of COVID-19 vaccines, shelter-in-place orders, social distancing measures, travel bans and restrictions, and business and government shutdowns, may ~~continue to~~again create significant negative economic impacts on a global basis.Given that uncertainty, we cannot reliably estimate the extent to which the COVID-19 pandemic may continue to impact utilization and ~~revenues~~revenue of our products in ~~the fourth quarter of 2020~~2021 and beyond.

For a discussion of additional risks associated with COVID-19, please see Item 1A. Risk Factors.

Manufacturing

We have a cell-manufacturing facility in Cambridge, Massachusetts which is used for U.S. manufacturing and distribution of MACI and Epicel.

Product Portfolio

Our marketed products include two ~~FDA approved~~FDA-approved autologous cell therapies. MACI, a third-generation autologous implant for the repair of symptomatic, full-thickness cartilage defects of the knee in adult patients and Epicel, a permanent skin replacement for adult and pediatric patients with deep dermal or full thickness burns greater than or equal to 30% of TBSA. Both products are currently marketed in the U.S. In addition, we have entered into exclusive license and supply agreements with MediWound to commercialize NexoBrid in North ~~America. NexoBrid is currently in clinical development in North~~ America, ~~and on September 16, 2020~~following regulatory approval. As previously mentioned, MediWound has submitted a BLA to the FDA seeking commercial approval of NexoBrid. On June 29, 2021, we announced that MediWound had received a CRL in response to the BLA and that the Company is committed to working with MediWound and the FDA ~~accepted~~to respond to the ~~BLA for review and has assigned a PDUFA goal date~~CRL to seek the potential approval of June 29, 2021. Until 2017, our active product candidate portfolio included ixmyelocel-T, a patient-specific multicellular therapy for the treatment of advanced heart failure due to dilated cardiomyopathy, or DCM. We have no current plans to continue the development of ixmyelocel-T.NexoBrid.

MACI

MACI is a third-generation autologous chondrocyte implantation (ACI) product for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults.

Our target audience of U.S. physicians is approximately 5,000 orthopedic surgeons and is divided into two segments - a group of orthopedic surgeons who self-identify and/or have a formal specialty as sports medicine physicians, and a sub-population of general orthopedic surgeons who perform a high volume of cartilage repair procedures. As of ~~September 30, 2020,~~the date of this report, we currently have ~~expanded the number of~~76 MACI sales representatives ~~to 76~~ to enable the sales force to ~~call on 2,000 of the general orthopedic surgeons.~~reach our target audience. Most private payers have a medical policy that covers treatment with MACI with the top 30 largest commercial payers having a formal medical policy for MACI or ACI in general. Even for private payers ~~which~~that have not yet approved a medical policy for MACI, for medically appropriate cases, we often obtain approval on a case-by-case basis. For the three and ~~nine~~six months ended, ~~September~~June 30, ~~2020,~~2021, net ~~revenues~~revenue for MACI ~~were $24.4~~was $26.5 million and ~~$59.7~~$50.3 million, respectively, and ~~$20.6~~$15.1 million and ~~$58.0~~$35.4 million, respectively, for the same periods in ~~2019.~~2020.

Epicel

Epicel is a permanent skin replacement for deep dermal or full-thickness burns greater than or equal to 30% of ~~total body surface area (TBSA).~~TBSA. Epicel is regulated by the Center for Biologics Evaluation and Research, or CBER of the U.S. Food and Drug Administration under medical device authorities, and is the only FDA-approved cultured epidermal autograft product available for large total surface area burns. Epicel was designated as a ~~Humanitarian Use Device (HUD)~~HUD in 1998 and a Humanitarian Device Exception (HDE) application for the product was submitted in 1999. HUDs are devices that are intended for diseases or conditions that affect fewer than 8,000 individuals annually in the U.S. Under an HDE approval, a HUD cannot be sold for an amount that exceeds the cost of research and development, fabrication and distribution unless certain conditions are met. A HUD is eligible to be sold for profit after receiving HDE approval if the device meets certain eligibility criteria, including where the device is intended for the treatment of a disease or condition that occurs in pediatric patients and such device is labeled for use in pediatric patients. If the FDA determines that a HUD meets the eligibility criteria, the HUD is permitted to be sold for profit so long as the number of devices distributed in any calendar year does not exceed the Annual Distribution Number (ADN). The ADN is defined as the number of devices reasonably needed to treat a population of 8,000 individuals per year in the U.S.

On February 18, 2016, the FDA approved our HDE supplement to revise the labeled indications of use for Epicel to specifically include pediatric patients. The revised product label also now specifies that the probable benefit of Epicel, mainly related to survival, was demonstrated in two Epicel clinical experience databases and a physician-sponsored study comparing outcomes in patients with massive burns treated with Epicel relative to standard care. Because of the change in the label to specifically include use in pediatric patients, Epicel is no longer subject to the HDE profit restrictions. In conjunction with adding the pediatric labeling and meeting the pediatric eligibility criteria, the FDA has determined the ADN number for Epicel is 360,400 which is approximately 45 times larger than the volume of grafts sold in 2019. We currently have ~~an eleven-person~~a thirteen-person field force comprised of 7seven (7) account managers and six (6) burn clinical specialists, led by a regional and a national sales ~~representatives and 4 clinical support specialists.~~director. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, net ~~revenues~~revenue for Epicel ~~were $6.7~~was $12.2 million and ~~$18.0~~$22.0 million, respectively, and ~~$9.9~~$4.9 million and ~~$20.4~~$11.3 million, respectively, for the same periods in ~~2019.~~2020.

NexoBrid

Our portfolio also includes NexoBrid, a registration-stage, topically-administered biological product that enzymatically removes nonviable burn tissue, or eschar, in patients with deep partial and full-thickness thermal burns. ~~NexoBrid is currently in clinical development in North America, and on~~On June 30, 2020, we announced ~~the~~MediWound's submission of a BLA to the FDA seeking the approval of NexoBrid. On ~~September 16, 2020, Vericel~~June 29, 2021, the Company announced that MediWound received a CRL from the FDA ~~has accepted~~regarding the BLA, through which the FDA communicated to MediWound that it had completed its review of the BLA, as amended, and had determined that it cannot approve the BLA in its present form. The Company announced further that it is committed to working with MediWound and the FDA on the next steps to address the issues identified in the CRL to seek the potential approval of NexoBrid. See "Risk Factors - NexoBrid’s approval in the United States for ~~review~~the treatment of severe burns may be further delayed, and ~~has assigned a PDUFA goal date of June 29, 2021.~~ it may not be approved for use in the United States and other North American markets at all."

NexoBrid is approved in the European Union and other international markets and has been designated as an orphan biologic in the United States, European Union and other international markets. Pursuant to the terms of our existing license agreement, if the BLA is approved, MediWound will ~~continue~~transfer the BLA to ~~conduct all clinical activities described~~Vericel and Vericel will market NexoBrid in the ~~development plan to support the BLA with the FDA~~U.S. Both MediWound and Vericel, under the supervision of a Central Steering Committee comprised of members of ~~each party.~~both companies will continue to guide development of NexoBrid in North America. Under our license agreement with MediWound, NexoBrid is being manufactured for BARDA prior to approval by the FDA under an emergency use authorization. ~~Vericel recorded revenue of $1.2 million associated with the first delivery of NexoBrid to BARDA during~~For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021, $0.8 million and $1.8 million, respectively, of net revenue associated with delivery of NexoBrid

~~Ixmyelocel-T~~

Our preapproval stage portfolio also includes ixmyelocel-T, a unique multicellular therapy derived from an adult patient’s own bone marrow which utilizes our proprietary, highly automated and scalable manufacturing system. This multicellular therapyto BARDA was ~~developed for~~recorded. NaN revenue related to the ~~treatment~~procurement by BARDA was recognized in the comparable periods of advanced heart failure due to DCM. On September 29, 2017, the FDA indicated we would be required to conduct at least one additional Phase 3 clinical study to support a BLA for ixmyelocel-T. Given the expense required to conduct further development and our focus on growing our existing commercial products, at this time we have no current plans to initiate or fund a Phase 3 trial on our own.2020.

Results of Operations

Net ~~Income~~Loss

Our net ~~income and~~ loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 totaled ~~$3.6~~$3.8 million and ~~$9.4~~$7.1 million, respectively, and ~~$3.5~~$8.3 million and ~~$19.2~~$13.0 million, respectively, for the same periods in ~~2019.~~2020.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)	2021		2020		2021		2020
Net revenues		$	32,258	$	30,499	$	78,950	$	78,460
Net revenue										Net revenue	$	39,519	$	20,014	$	74,087	$	46,692
Cost of product sales	Cost of product sales	9,787		9,324		28,369		26,986		Cost of product sales	12,609		8,660		24,192		18,582
Gross profit	Gross profit	22,471		21,175		50,581		51,474		Gross profit	26,910		11,354		49,895		28,110
Total operating expenses	Total operating expenses	18,954		18,078		60,498		71,935		Total operating expenses	30,639		19,712		56,929		41,544
Income (loss) from operations		3,517		3,097		(9,917)		(20,461)
Loss from operations										Loss from operations	(3,729)		(8,358)		(7,034)		(13,434)
Other income	Other income	101		373		561		1,295		Other income	15		89		174		460

Net income (loss)		$	3,618	$	3,470	$	(9,356)	$	(19,166)
Tax provision										Tax provision	(72)		—		(215)		—
Net loss										Net loss	$	(3,786)	$	(8,269)	$	(7,075)	$	(12,974)

Net ~~Revenues~~Revenue

Net ~~revenues~~revenue increased for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to the same periods in ~~2019, primarily~~2020, driven by ~~a recovery in MACI~~ volume growth ~~as a result of~~for both MACI and Epicel. Additionally, for the ~~lifting of state~~three and local restrictions on elective surgeries in the second quarter, which impacted surgical capacity. The increase in MACI net revenue was partially offset by a decrease of $2.5 million related to Epicel due to the variable occurrence of severe burns. Additionally,six months ended June 30, 2021, we recorded $0.8 million and $1.8 million, respectively, of revenue associated with ~~the first~~ delivery of NexoBrid to BARDA for emergency response preparedness.

Net ~~revenues~~revenue by product for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 are shown below.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
Revenue by product (In thousands)	Revenue by product (In thousands)	2020		2019		2020		2019		Revenue by product (In thousands)	2021		2020		2021		2020
MACI	MACI	$	24,357	$	20,610	$	59,747	$	58,015	MACI	$	26,526	$	15,104	$	50,322	$	35,391
Epicel	Epicel	6,663		9,889		17,965		20,445		Epicel	12,154		4,910		21,985		11,301

NexoBrid	NexoBrid	1,238		—		1,238		—		NexoBrid	839		—		1,780		—
Total Revenue	Total Revenue	$	32,258	$	30,499	$	78,950	$	78,460	Total Revenue	$	39,519	$	20,014	$	74,087	$	46,692

Seasonality. ~~Over~~The effects of the ~~last~~COVID-19 pandemic disrupted the normal seasonality of our MACI business at times over the past sixteen months. These effects included, among others, the temporary limitation of elective surgical procedures throughout the country, the inability of our Clinical Account Specialists to call on surgeon customers and, we believe, a reduction in the number of patients seeking treatment for cartilage damage. In the four years preceding 2020, ACI sales volumes from the first through the fourth quarter ~~have~~ on average represented 19% (16%-24% range), 23% (21%-25% range), 22% (20%-23% range) and 36% (32%-38% range) respectively, of total annual volumes. MACI orders are consistently stronger in the fourth quarter due to several factors including insurance deductible limits and the time of year patients prefer to start rehabilitation. Due to COVID-19, the seasonality in 2020 did not follow our historical patterns, and seasonality in 2021 could be impacted by COVID-19 related factors, as well. Due to the low incidence and variable occurrence of severe burns, Epicel revenue has inherent variability from ~~quarter to quarter~~quarter-to-quarter and does not exhibit significant seasonality. Over the past four years, Epicel revenue in a single quarter has ranged from as high as ~~34%~~38% to as low as ~~17%~~18% of annual revenue.

Gross Profit and Gross Profit Ratio


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	(In thousands)	2020			2019			2020			2019			(In thousands)	2021			2020			2021			2020
Gross profit	Gross profit	$	22,471		$	21,175		$	50,581		$	51,474		Gross profit	$	26,910		$	11,354		$	49,895		$	28,110
Gross profit %	Gross profit %	70		%	69		%	64		%	66		%	Gross profit %	68		%	57		%	67		%	60		%

Gross profit increased for the three and six months ended ~~September~~June 30, ~~2020~~2021 compared to the same ~~period~~periods in ~~2019~~2020 primarily due to continued growth of both products, the ~~increase~~impacts of the COVID-19 pandemic in ~~MACI volume~~the prior year, and other revenue related to NexoBrid.

~~Gross profit decreased for the nine months ended September 30, 2020 compared to the same period in 2019 due to the revenue impact from COVID-19 earlier in the year.~~

Research and Development Costs


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)	2021		2020		2021		2020
Research and development costs	Research and development costs	$	2,913	$	3,096	$	9,902	$	27,174	Research and development costs	$	4,449	$	3,226	$	8,079	$	6,989

The following table summarizes research and development expenses which include license fees, materials, professional fees and the approximate allocation of ~~cost~~employee-related salary and fringe benefit costs for our research and development projects:

Research and development expenses for the three months ended ~~September~~June 30, ~~2020~~2021 were ~~$2.9~~$4.4 million, compared to ~~$3.1~~$3.2 million for the same period in ~~2019.~~2020. Research and development costs continue to be centered around process development and regulatory and medical affairs for MACI and Epicel. The increase is primarily due to an increase of $0.7 million in stock-based compensation expense compared to the same period a year ago.

Research and development expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 were ~~$9.9~~$8.1 million, compared to ~~$27.2~~$7.0 million for the same period in ~~2019.~~2020. The ~~prior~~increase is primarily due to an increase of $1.1 million in stock-based compensation expense compared to the same period ~~included $17.5 million for the upfront payment to MediWound for the North American rights to NexoBrid.~~a year ago.

Selling, General and Administrative Costs

Selling, general and administrative expenses for the three months ended ~~September~~June 30, ~~2020~~2021 were ~~$16.0~~$26.2 million compared to ~~$15.0~~$16.5 million for the same period in ~~2019.~~2020. The increase in selling, general and administrative expenses during the three months ended ~~September~~June 30, 2021, compared to the same period in 2020, is primarily due ~~primarily~~ to ~~an incremental $1.5~~a $5.0 million increase in ~~MACI~~stock-based compensation expenses, a $0.8 million increase in sales force ~~expenses due to the sales force expansion~~travel and conference spend, a $0.7 million increase in ~~the second quarter of 2020 and $0.3 million of~~ patient reimbursement support services ~~which were partially offset by a reduction in discretionary spend~~ as a result of ~~the COVID-19 pandemic.~~higher MACI volumes, and a recovery of marketing activities that were partially reduced during 2020, because of COVID-19.

Selling, general and administrative expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2020 increased~~2021 were $48.9 million, compared to ~~$50.6 million from $44.8~~$34.6 million for the same period in ~~2019.~~2020. The increase in selling, general and administrative expenses during the ~~nine~~six months ended ~~September~~June 30, 2021, compared to the same period in 2020, is primarily due ~~primarily~~ to ~~an incremental $3.2~~a $7.5 million increase in stock-based compensation expenses, a $1.6 million increase in MACI ~~sales force~~ expenses ~~driven by~~as a result of the sales force expansion in ~~the second quarter of~~ 2020, a ~~$1.2~~$0.9 million increase in ~~stock compensation expense, $1.0 million of~~ patient reimbursement support services and $0.7 million in Epicel sales force expenses due to the team's growth over the past several quarters. Other areas of fixed expense growth such as facilities, depreciation, and insurance were offset by reductions to discretionary marketing programs as a result of ~~the COVID-19 pandemic.~~higher MACI volume, and a recovery of marketing activities that were partially reduced during 2020, because of COVID-19.

Other Income (Expense)

The decrease in ~~interest~~other income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, compared to the same ~~period~~periods in ~~2019~~2020 is due primarily to the ~~lowering of our investment balance and~~ decreasing rates of ~~returns~~return on our investments in various marketable debt securities compared to the prior period.

Non-cash stock-based compensation expense included in cost of ~~goods sold,~~product sales, research and development expenses and selling, general and administrative expenses is summarized in the following table:

The ~~decrease~~increase in stock-based compensation expense for the three and six months ended ~~September~~June 30, ~~2020, and~~2021 compared to the ~~increase~~same periods in ~~the nine months ended September 30,~~ 2020, is due primarily to ~~fluctuations~~increases in stock prices which ~~impacts~~impact the fair value of the options and restricted stock units awarded and the expense recognized in the period.

As of June 30, 2021, there was approximately $45.8 million of total unrecognized compensation cost related to non-vested service-based stock options granted under the 2019 Plan and the Prior Plans, compared to $13.1 million as of December 31, 2020. That cost is expected to be recognized over a weighted-average period of 3.3 years.

As of June 30, 2021, there was approximately $11.6 million of total unrecognized compensation cost related to non-vested restricted stock units granted under the 2019 Plan and Prior Plans, compared to $2.1 million as of December 31, 2020. That cost is expected to be recognized over a weighted-average period of 3.2 years. The estimated unrecognized compensation cost is not reduced by expected forfeitures.

~~Our~~Since our acquisition of MACI and Epicel in 2014, our primary focus has been to invest in our existing commercial business with the goal of growing revenue. We have raised significant funds in order to complete our product development programs and to market and commercialize our ~~products.~~products, and product candidates. To date, we have financed our operations primarily through cash received through Epicel and MACI sales, debt and public and private sales of our equity securities. We generated $14.9 million in operating cash flows during the six months ended June 30, 2021, and we may continue to finance our operations through the sales of equity securities.


	Six Months Ended June 30,
(In thousands)	2021		2020
Cash provided by operating activities	$	14,855	$	1,665
Cash provided by (used for) investing activities	(2,757)		25,954
Cash provided by financing activities	6,043		1,196
Net increase in cash, cash equivalents and restricted cash	$	18,141	$	28,815

Our cash and cash equivalents totaled ~~$43.5~~$51.8 million, ~~and~~ short-term investments totaled ~~$42.0~~$39.2 million and long-term investments totaled $24.8 million as of ~~September~~June 30, ~~2020.~~2021. The ~~$6.2~~$14.9 million of cash provided by operations during the ~~nine~~six months ended ~~September~~June 30, 2021 was the result of cash collections, a decrease in accounts receivable of $2.8 million, an increase in inventory of $3.6 million primarily to meet increased production needs and safety stock goals, and an increase in operating lease liabilities of $1.6 million. This includes non-cash charges of $17.9 million related to stock compensation expense, $2.3 million of operating lease amortization and $1.5 million in depreciation and amortization expense and a $7.1 million net loss.

Our cash and cash equivalents totaled $55.7 million and short-term investments totaled $25.1 million as of June 30, 2020. The $1.7 million of cash provided by operations during the six months ended June 30, 2020 was the result of cash collections and a decrease in accounts receivable of ~~$6.0~~$8.5 million from a decrease in sales volume from the prior quarter and collections on prior period sales, including ~~noncash~~non-cash charges of ~~$10.8~~$8.1 million in stock compensation expense ~~$3.3 million of operating lease amortization~~ and ~~$1.6~~$1.1 million in depreciation and amortization expense offset by a ~~$9.4~~$13.0 million net loss.

Our cash and cash equivalents totaled $36.9 million and short-term investments totaled $37.8 million at September 30, 2019. The $10.3 million of cash used by operations during the nine months ended September 30, 2019 was largely the result of our net loss of $19.2 million which included a cash outflow of $17.5 million for the upfront payment for the NexoBrid license. The net loss was offset by noncash charges including $10.1 million in stock compensation expense, and $1.2 million in depreciation and amortization expense.

The change in cash provided by investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020 is~~2021 was the result of ~~$39.1~~$32.7 million of investment sales and maturities offset by ~~$29.0~~$31.0 million in ~~short-term~~ investment purchases and property plant and equipment purchases of ~~$1.6~~$4.5 million primarily for manufacturing upgrades through ~~September~~June 30, ~~2020.~~2021. The cash provided by investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019 is~~2020 was the result of ~~$46.3~~$32.8 million of investment sales and maturities offset by $5.7 million in ~~short-term investments~~short term investment purchases, ~~offset by $73.8 million of maturities~~ and property plant and equipment purchases of ~~$2.3~~$1.2 million primarily for manufacturing upgrades and leasehold improvements.

The change in cash provided ~~from~~by financing activities iswas the result of net proceeds from the exercise of stock options of ~~$2.2~~$7.6 million, partially offset by the payment of employee withholding taxes related to the vesting of restricted stock units of $1.6 million during the six months ended June 30, 2021. The change in cash provided from financing activities during the six months ended June 30, 2020 was the result of proceeds from the exercise of stock options of $1.4 million, slightly offset by the payment of employee withholding taxes related to the vesting of restricted stock units of $0.2 million during the nine months ended September 30, 2020. The change in cash provided from financing activities during the nine months ended September 30, 2019 is the result of proceeds from the exercise of stock options of $3.8 million.

We believe that our current cash on hand, cash equivalents and investments will be sufficient to support our current operations through at least 12 months from the issuance of these ~~financial statements.~~Condensed Consolidated Financial Statements. However, the continuing effects of the COVID-19 pandemic continue to evolve and may result in irrecoverable losses from customers and significantly impact long-term liquidity requiring us to engage in layoffs, furloughs, and/or reductions in salaries. We have implemented a number of initiatives to maintain our near-term and future growth opportunities while supporting patients and reducing non-essential discretionary spending.customers.

If ~~revenues decline~~revenue declines for a sustained period, we may need to access additional capital; however, we may not be able to obtain financing on acceptable terms or at all. Market volatility ~~resulting from the COVID-19 pandemic or other factors~~ could also adversely impact our ability to access financing ~~as and~~ when needed. The terms of any financing may adversely affect the holdings or the rights of our shareholders. Actual cash requirements may differ from projections and will depend on many factors, including ~~the ultimate duration of the effects~~any future impacts of the COVID-19 pandemic, the level of future research and development, the scope and results of ongoing and potential clinical trials, the costs involved in filing, prosecuting and enforcing patents, the need for additional manufacturing capacity, competing technological and market developments, costs of possible acquisition or development of complementary business activities, and the cost to market our products.

At ~~September~~June 30, ~~2020,~~2021, we were not party to any off-balance sheet arrangements.

Our ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United ~~States of America.~~States. The preparation of these ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements requires the application of appropriate technical accounting rules and guidance, as well as the use of estimates. The application of these policies necessarily involves judgments regarding future events. These estimates and judgments, in and of themselves, could materially impact the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and disclosures based on varying assumptions. The accounting policies

discussed in our ~~Form 10-K, filed with the SEC on February 25, 2020 (Annual Report), for the fiscal year ended December 31, 2019~~Annual Report are considered by management to be the most important to an understanding of the consolidated financial statements because of their significance to the portrayal of our financial condition and results of operations. There have been no material changes to that information disclosed in our Annual Report during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

This report, including the documents ~~that we incorporate~~incorporated by reference ~~contains forward-looking~~herein, contain certain statements that describe our management’s beliefs concerning future business conditions, plans and prospects, growth opportunities and the outlook for our business based upon information currently available. Such statements are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ~~(the Exchange~~(Exchange Act). ~~Any~~Wherever possible, we have identified these forward-looking statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but are not always, made through the use ofby words ~~or phrases~~ such as “will,” “may,” “anticipates,” “believes,” “intends,” “estimates,” “expects,” “plans,” “projects,” “trends,” “opportunity,” “current,” “intention,” “position,” “assume,” “potential,” “outlook,” “remain,” “continue,” “maintain,” “sustain,” “seek,” “target,” “achieve,” “continuing,” “ongoing,” ~~“expects,” “management believes,” “we believe,” “we intend”~~ and similar words or phrases, or future or conditional verbs such as ~~“will,”~~ “would,” “should,” “could,” “may,” or similar expressions. ~~Accordingly, these~~These forward-looking statements ~~involve estimates,~~are based upon assumptions our management believes are reasonable. Such forward-looking statements are subject to risks and uncertainties which could cause our actual results, performance and achievements to differ materially from those expressed in, ~~them. The factors described~~or implied by, these statements, including, among others, the risks and uncertainties listed in our Annual Report ~~among others, could have a material adverse effect upon our business, results of operations and financial conditions.~~under “Part I, Item 1A Risk Factors.”

Because ~~the factors referred~~our forward-looking statements are based on estimates and assumptions that are subject to ~~in the preceding paragraph could cause~~significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different and any or ~~outcomes to differ materially from those expressed in any~~all of our forward-looking statements ~~we make, you should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks~~may turn out to be wrong. Forward-looking statements speak only as of the date ~~on which it is~~ made and can be affected by assumptions we ~~undertake no obligation to update any forward-looking statement~~might make or ~~statements to reflect events~~by known or ~~circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.~~unknown risks and uncertainties. Many factors mentioned in our discussion in our Annual Report will be important in determining future results. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. ~~In addition,~~Consequently, we cannot ~~assess the impact~~assure you that our expectations or forecasts expressed in such forward-looking statements will be achieved. Except as required by law, we undertake no obligation to publicly update any of ~~each factor on~~ our ~~business~~forward-looking or ~~the extent to which any factor,~~other statements, whether as a result of new information, future events, or ~~combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.~~otherwise. These forward-looking statements include statements regarding:

•manufacturing and facility capabilities;

•potential strategic collaborations with others;

•future capital needs and financing sources;

•adequacy of existing capital to support operations for a specified time;

•reimbursement for our products;

•the timing of a response to the FDA’s CRL regarding the NexoBrid BLA;

•the timing of the FDA’s review of any resubmission of the ~~BLA for NexoBrid;~~NexoBrid BLA;

•expectations regarding approval by the FDA of the ~~BLA for NexoBrid;~~NexoBrid BLA;

•product development and marketing plans;

•features and successes of our therapies;

•clinical trial plans, including publication thereof;

•the effects of the COVID-19 pandemic on our business, including economic slowdowns or recessions, impact to our operations or to the healthcare industry generally, which could reduce demand for our products;

•anticipation of future losses;

•replacement of manufacturing sources;

•commercialization plans; or

•revenue expectations and operating results.

As of ~~September~~June 30, ~~2020,~~2021, we held marketable debt securities, which are classified as available-for-sale and carried at fair value in the accompanying ~~condensed consolidated balance sheet~~Condensed Consolidated Balance Sheet included in this Form 10-Q. The fair value of our cash equivalents and marketable securities is subject to changes in market interest rates. Our earnings and cash flows are subject to fluctuations due to changes in interest rates, principally in connection with our investments in marketable debt securities. We do not believe we are materially exposed to changes in interest rates related to our investments, and we do not currently use interest rate derivative instruments or hedging transactions to manage exposure to interest rate changes of our investments. We estimate that a 100 basis point, or 1%, unfavorable change in interest rates would have resulted in approximately a ~~$0.2~~$0.4 million and ~~$0.3~~$0.5 million decrease in the fair value of our investment portfolio as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

We have evaluated the potential credit risk exposure for our accounts receivable and available-for sale investment securities in accordance with ASC 326, Financial Instruments - Credit Losses. See note 4 and note 8, for further discussion.

We operate in the United States only. We are primarily exposed to foreign exchange risk with respect to recognized assets and liabilities due to vendors in countries outside the United States, which are typically paid in Euro. We do not enter into hedging transactions and do not purchase derivative instruments.

Management of the Company, with the participation of its ~~certifying officers,~~Chief Executive Officer and Chief Financial Officer (its Certifying Officers), evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the evaluation as of ~~September~~June 30, ~~2020,~~2021, the Company’s ~~certifying officers~~Certifying Officers concluded that the Company’s disclosure controls and procedures were effective.

The Company has established disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended (the ~~“Exchange Act”)~~Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management of the Company, with the participation of its ~~Chief Executive Officer and Principal Financial Officer (its “Certifying Officers”),~~Certifying Officers, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the three months ended ~~September~~June 30, ~~2020,~~2021, there were no material changes made in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). ~~The effects of the COVID-19 pandemic did not have a material impact on our internal control over financial reporting.~~

We are currently not party to any material legal proceedings, although from time to time we may become involved in disputes in connection with the operation of our business.

Item 1A. Risk Factors

Certain risks described below update the risk factors discussed in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, as well as the Risk Factors discussed in Part II, Item 1A, “Risk Factors,” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, and expound upon and amend the specific risks resulting from the COVID-19 pandemic, ~~which were first discussed in our Form 8-K filed on April 2, 2020, and which were updated in our Quarterly Reports on Form 10-Q~~as well as the specific risks related to the U.S. Food & Drug Administration’s review of any resubmission of the NexoBrid BLA for the ~~fiscal quarters ended March 31, 2020 and June 30, 2020.~~approval of NexoBrid in the United States. Each of these risks, as well as those discussed in our previous filings could materially affect our business, financial condition, results of operations, or cash flows. The risks described below and in our previous filings are not the only risks we face. Additional risks and uncertainties not currently known or currently deemed to be immaterial also may materially and adversely affect our business, financial condition, results of operations or cash flows.

The current and ongoing pandemic of COVID-19 and the future outbreak of other highly infectious or contagious diseases, could seriously harm our research, development and commercialization efforts, increase our costs and expenses and have a material adverse effect on our business, financial condition and results of operations.

Broad-based business or economic disruptions could adversely affect our ongoing or planned research, development and commercialization activities. For example, ~~in December 2019, an outbreak of a novel strain of coronavirus originated in Wuhan, China, and has since spread globally. To date,~~ the COVID-19 pandemic has ~~caused~~created significant disruptions to the U.S. and global economy and has contributed, at times, to significant volatility in financial markets. The global impact of the outbreak ~~is continually evolving~~has fluctuated since early 2020.At times, many state, local and asnational governments – including those in Massachusetts and Michigan, where the ~~virus spreads~~Company’s operations are located – have responded by issuing, extending and ~~additional cases are identified, many countries, including the U.S., have reacted by instituting~~supplementing orders requiring quarantines, restrictions on travel, and the mandatory ~~closures~~closure of ~~businesses. Since March 2020,~~ certain ~~states~~non-essential businesses, among other actions. In the U.S., the status and ~~cities, including where we or~~application of these orders have varied on a state-by-state basis since the ~~third parties with whom we engage operate,~~early days of the pandemic. Many of the restrictions have ~~reacted by instituting quarantines, restrictions on travel, “shelter~~been periodically updated as infection rates in ~~place” rules, restrictions on types~~the U.S. have risen and fallen, as new virus variants have emerged, as vaccines have been distributed and administered, and as world health leaders learn more about the virus, its transmission pathway and who is most at risk. Because Vericel is deemed an essential business, the Company has been exempted from government orders requiring the closure of workplaces and the cessation of business ~~that may continue~~operations as they have existed from time-to-time during the pandemic.

Even though widespread distribution of vaccines designed to operate, and/or restrictions on the types of construction projects that may continue. Companies and organizations conducting biopharmaceutical research and development have been largely exempted from closure orders as the sector has been deemed essential to maintaining continuity of operations of the critical infrastructure as determined by the federal government. Since March, the steps taken by many state and local officials, which have included requiring businesses to implement mandatory training and protection measures for their workforce, have helped to slow the spread of the virusprotect against COVID-19 infection began in ~~certain regions of~~ the United ~~States. As a result, some states – including Massachusetts~~States and ~~Michigan – have eased restrictions on workplaces and individuals~~other countries throughout the world in ~~an effort to reopen~~early 2021, the ~~economies of those regions. The~~ pandemic remains ~~highly fluid throughout the country and around the world, however,~~unpredictable and the number of COVID-19 infections has fluctuated significantly in various geographies ~~over the course~~during 2020 and throughout 2021 and could continue to do so, particularly in light of ~~the past seven months.~~emerging variant strains. As such, ~~many~~some state and local governments have re-instituted restrictions on businesses, travel, and personal activities from time-to-time and ~~it is expected that~~ additional such measures may occur in the future as the pandemic evolves.

~~In March 2020, we~~At the outset of the pandemic, the Company put in place a comprehensive workplace protection plan, which ~~institutes~~instituted protective measures in response to COVID-19.The Company’s workplace protection plan closely followed guidance issued by the CDC and complied with applicable federal and state law.Because vaccines designed to protect against COVID-19 ~~pandemic. These measures~~have become readily available in the United States and the rates of COVID-19 infections, hospitalizations and deaths in the majority of the U.S. have declined since the beginning of 2021, the CDC and the OSHA have altered their guidance for Americans, and emergency orders and mandatory workplace protocols in Michigan and Massachusetts have either been rescinded or greatly reduced – to include ~~mandatory employee training on social distancing and hygiene protocols, conducting daily health screenings~~the lifting of all ~~employees, vendors~~capacity limitations on businesses in both states.Accordingly, Vericel is planning for a return to more normal workplace operations, but will continue to modify its workplace protection plan and visitors entering our facilities, canceling all international business travel, limiting domestic business travel to essential purposes, requesting that employees limit non-essential personal travel, enhancing our facilities’ janitorialwill reinstitute protective measures for its workforce as necessary. The Company is reviewing its policies and ~~sanitary~~ procedures ~~making certain physical modifications~~regularly as the pandemic evolves and enhancements to our facilities to enable effective social distancing among employees, providing certain personal protective equipment to employees working in our offices, encouraging employees to work from homemay take additional actions to the extent their job function enables them to do so, limiting third-party access to our facilities, encouraging the use of virtual employee meetings, modifying the manner and schedule of on-site production activities, and providing guidance to our field-based commercial teams concerning their communications and contact with customers and healthcare professionals. We are reviewing these measures regularly as the situation evolves, and we are likely to take additional actions as we learn more and as instruction is provided by national, state and local governmental agencies. required.Both these ~~existing measures~~ and any future actions we take may result in ~~continued~~ disruption to our business.

The extent to which the COVID-19 pandemic, or the future outbreak of any other highly infectious or contagious disease, impacts our preclinical studies, clinical trial operations and current or future commercialization efforts will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects

of the pandemic and containment measures, among others. The rapid development and ~~fluidity~~uncertainty of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic. Nevertheless, the COVID-19 pandemic ~~may~~has and could continue to adversely affect our business, financial condition and results of operations, and it may have the effect of heightening many of the risks described herein, including the below.

•~~The implantation of MACI is an elective surgical procedure. On March 13, 2020~~Hospitals, health systems and ~~March 14, 2020, the American College of Surgeons and United States Surgeon General, respectively, recommended that each hospital, health system, and surgeon minimize, postpone,~~surgeons minimized, postponed, or ~~cancel~~canceled electively scheduled surgeries ~~which resulted in a reduction in MACI sales~~ during the ~~first and second quarters~~initial wave of the pandemic in the spring of 2020. These ~~recommendations~~actions were followed by numerous state-level executive orders either ~~banning~~restricting or partially ~~banning~~restricting elective surgeries. ~~By April 3, 2020, 31 U.S. states had issued executive mandates calling for the suspension of~~Because MACI is an elective ~~or non-essential surgeries.~~

•Assurgical procedure, as a result of these restrictions ~~beginning in mid-March 2020, we started to experience~~the Company experienced a significant increase in cancellations of scheduled MACI procedures as well as a slowdown in new MACI ~~orders. Those cancellations~~orders during March and April of 2020, which negatively impacted ~~our~~the Company’s business and results of operations ~~for~~during the first and second quarters of 2020. ~~These restrictions began~~The level and degree of restriction on elective surgeries, on the ability of patients to ~~ease in May~~seek treatment and ~~by the end of September~~on U.S. business operations generally fluctuated throughout 2020 ~~there were no state orders in place that directly impacted a surgeon's or patient's ability to move forward with a MACI surgery. However, the~~as COVID-19 ~~pandemic remains unpredictable~~infection rates rose and ~~many areas of the United States, and the world, have experienced a resurgence of COVID-19 infections in recent weeks. Indeed, on November 1, 2020, the rolling seven-day average of new daily coronavirus cases in the United States reached the highest level at any point~~fell during the ~~pandemic.~~summer months and into the autumn. By the first quarter of 2021, the pandemic’s effects on the Company’s MACI business had largely dissipated. Although hospitals are now better prepared for a subsequent surge in COVID-19 patients and COVID-19 vaccines have been made available and are being widely distributed in the United States, the risk remains that regional or local restrictions could again be placed on the performance of elective surgical procedures if the number of COVID-19 infections in the United States ~~continues~~were to ~~rise.~~rise again, or if new or existing COVID-19 variants render current vaccine treatments ineffective. We believe our MACI business ~~may~~will be negatively impacted if elective surgical procedures are again restricted. Further, ~~continued,~~renewed and ~~prolonged~~ material disruption to the operations of our employees, distributors, suppliers or customers will impact our sales and operating results ~~that~~and could lead to potential impairments to inventory and accounts receivable. ~~We believe~~Although Epicel has been less directly impacted by the pandemic given the critical nature of severe burn ~~injuries; however, trauma injury admissions have been reported to have declined due to various COVID-19 related restrictions. Given the variable occurrence of the severe burns Epicel is used to treat,~~injuries, it is difficult to ascertain ~~whether a similar decline is occurring with~~the current or future impact of COVID-19 on the treatment of severe burns.

•We are currently conducting the PEAK (A Study of MACI in Patients Aged 10 to 17 Years with Symptomatic Chondral or Osteochondral Defects of the Knee) Study at ten (10) sites throughout the United States. ~~Although two~~Two (2) such sites have currently paused enrollment of new PEAK patients as a result of the effects of the pandemic, and the PEAK Study ~~has not~~ experienced a slow-down in its traditional rate of patient ~~enrollment. However,~~enrollment during 2020 and throughout 2021. Furthermore, the PEAK Study or another of our clinical trials may in the future experience difficulties associated with patient visits and study monitoring, which may be paused or delayed due to changes in policies at various clinical sites, federal, state, local or foreign laws, rules and regulations, including closure of site access to outside medical monitors, quarantines or other travel restrictions, prioritization of healthcare resources toward pandemic efforts, including diminished attention of physicians serving as our clinical trial investigators and reduced availability of site staff supporting the conduct of our clinical trials, interruption or delays in the operations of the FDA, heightened exposure of patients, principal investigators and site staff to COVID-19 if an outbreak occurs in their geography, or other reasons related to the COVID-19 pandemic. Further, patients who are already recruited into our clinical trials may be unable or unwilling to attend follow-up visits within the timelines specified in our trial protocols, potentially impacting our ability to meet our clinical trial endpoints. AnA future outbreak may also affect employees of third-party contract research organizations located in affected geographies that we rely upon to carry out our clinical trials.

•We continue to manufacture MACI and Epicel and we maintain a significant safety back-up of all key raw materials. We do not currently expect that ~~current~~ supply chain interruptions will impact our ongoing manufacturing operations. However, we currently rely on both domestic and international third parties to, among other things, manufacture and supply raw materials, which are used to produce our products, and supply other goods and services to run our business. If any such third parties in our supply chain are adversely impacted by current or future restrictions or executive orders resulting from the COVID-19 pandemic for an extended period of time, including staffing shortages, production slowdowns, ~~and~~ disruptions in delivery systems, or federal, state or foreign orders requiring the diversion of key supplies for use in the production or manufacturing of vaccines designed to inoculate individuals against COVID-19, our supply chain may be disrupted, limiting our ability to manufacture our products and product candidates and conduct our research and development operations, or commercially launch any of our product candidates, if approved. With respect to customer delivery, MACI final product has an established shelf life of 6six (6) days and established shipping shelf life of 3three (3) days. Currently, MACI is picked-up by courier and shipped by commercial air or ground transportation to our customers’ locations. Epicel final product has an established shelf life of 24 hours and is hand carried to customer hospital sites by courier. Transportation is primarily by commercial or charter airline. Although we have not experienced material shipping delays or increased costs to date, significant disruption of air travel in the future could result in the

•~~We have largely~~Throughout much of the pandemic, we generally restricted on-site staff in our facilities to only those personnel and contractors who ~~must~~are required to perform essential activities related to the manufacture, production and delivery of our products. We ~~have~~ encouraged the majority of our remaining employees to work remotely. ~~Our continued reliance~~Since early 2021, vaccines designed to protect against COVID-19 infection have become readily available in the United States and the rates of COVID-19 infections, hospitalizations and deaths in the U.S. have generally declined. The CDC and OSHA have altered their guidance for Americans, and emergency orders and mandatory workplace protocols in Michigan and Massachusetts have either been rescinded or greatly reduced – to include the lifting of all capacity limitations on ~~personnel working~~businesses in both states. Accordingly, Vericel is planning for a return to more normal workplace operations but will continue to modify its workplace protection plan and will reinstitute protective measures for its workforce as necessary. We expect that some of our employees will continue to work remotely from ~~home may negatively impact productivity, or disrupt, delay, or otherwise adversely impact our business. Additionally, the continued spread or~~time to time. A resurgence of COVID-19, COVID-19 variants, or similar infectious diseases in the U.S., however, may lead to ~~further~~future government-imposed quarantines and restrictions, which may result in the closure of our administrative offices, with our employees working outside of our offices for an extended period of time. These actions may also result in the disruption of our manufacturing operations, which are currently accomplished within our administrative offices. Additionally, such quarantines and restrictions may adversely affect our ability to conduct certain product enhancement and business development activities.

•Our ~~continued~~ reliance on certain personnel working from home may also increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations or delay necessary interactions with local and federal regulators, institutional review boards and ethics committees, ~~third party~~third-party contractors and suppliers, clinical trial sites and other important agencies and contractors. Our business operations may be further disrupted if any of our employees, officers or ~~board of~~ directors contract an illness related to COVID-19 and are unable to perform their duties. For example, COVID-19 illness could impact members of management or our board of directors resulting in absenteeism from management meetings or meetings of the directors or committees of directors, and making it more difficult for management to effectively oversee our daily operations, or to convene the quorums of the full board of directors or its committees needed to conduct meetings for the management of our affairs.

•~~Continued spread or~~ A resurgence of ~~the~~ COVID-19 ~~virus,~~or COVID-19 variants may cause our employees, and employees of third-party contractors and licensees, including MediWound, responsible for conducting research and development activities to be unable to access laboratories and places of business for an extended period of time as a result of the temporary closure of such ~~workspaces and the possibility that governmental authorities further modify current restrictions.~~workspaces. As a result, this could delay timely completion of ongoing clinical trials or preclinical activities, and our ability to select future development candidates.

•NexoBrid is currently a pre-commercial product in North America. On ~~September 16, 2020,~~ June 29, 2021, we announced that MediWound had received a CRL regarding the BLA and that the FDA ~~has accepted for~~communicated to MediWound that it had completed its review aof the BLA, ~~seeking marketing approval for NexoBrid~~as amended, and had determined that it cannot approve the BLA in its present form.We announced further that we are working with MediWound and the FDA to address the issues identified in the ~~United States. However, health~~CRL to seek potential approval of NexoBrid. Health regulatory agencies, ~~globally,~~ including the FDA, have experienced and may continue to experience disruptions in their operations as a result of the continued spread or resurgence of the COVID-19 pandemic. For instance, the COVID-19 pandemic may impact the FDA’s response times to regulatory submissions, like a BLA resubmission in response to the CRL, and its ability to monitor our clinical ~~trials, and/~~trials. Additionally, in many instances across the industry, the FDA has postponed, or has been unable to conduct certain inspections of domestic and international manufacturing facilities in connection with its regulatory review of product applications as a result of travel and other restrictions caused by the pandemic. As part of its review of the BLA, and any BLA resubmission, the FDA has communicated to MediWound that physical Current Good Manufacturing Practice (cGMP) inspections of manufacturing facilities in Israel and Taiwan are required before the BLA can be approved, as the FDA must assess the ability of those facilities to conduct certain manufacturing operations in compliance with cGMP. The FDA indicated that because of restrictions on travel caused by the COVID-19 pandemic, the agency was unable to conduct the required inspections of those facilities during the original BLA review cycle. Should continued restrictions prevent or delay the FDA in conducting necessary reviews or physical inspections ~~any~~of the manufacturing facilities involved in the production of NexoBrid, or ~~all~~should other events impact the FDA’s response times, the timeline for approval of ~~which may result in timelines being~~NexoBrid could be materially and further delayed, which could materially affect the development, study and ultimate commercialization of ~~our product candidates. It is unknown how long these disruptions could continue, were they to occur.~~the product.

•The trading prices ~~for~~of our common stock and that of other biopharmaceutical companies have been highly volatile ~~as a result of~~during the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the continued spread or a resurgence of the COVID-19 pandemic could materially and adversely affect our business and the value of our common stock.

•~~Given~~The negative economic effects of the ~~economic downturn and~~pandemic have, at times, caused increased unemployment in the U.S. ~~related to COVID-19, millions of~~resulting in many individuals ~~have lost and may lose~~losing their employer-based insurance ~~coverage, which~~coverage. Although the economy has begun to recover from the pandemic’s initial effects, the continued or future unemployment of our potential patients may adversely affect our ability to commercialize our products. In addition, market disruption ~~and~~or rising unemployment caused by a resurgence of the COVID-19 pandemic or a variant strain thereof may lead to delays in obtaining insurance coverage and reimbursement of newly approved products as well as an increase in the numbers of uninsured patients and patients who may no longer be able to afford their co-insurance or co-pay obligations. These factors may lead to decreased utilization of our products, which could reduce revenue. The continued outbreak or a worsening of COVID-19 may also negatively impact our commercialization strategy for our products and product candidates, if approved. ~~Hospitals~~At times during the pandemic, hospitals and other medical institutions have reduced and diverted staffing, diverted resources to patients suffering from COVID-19 and limited hospital access for non-patients, which ~~may include~~has included our sales personnel. Hospitals may continue ~~and~~or increase these and similar measures in the future should the COVID-19 virus continue to spread or surge in certain areas. In addition, ~~a resurgence~~COVID-19 levels in the United States and/or specific regions of ~~COVID-19 in~~ the United States may cause customers or patients to postpone or cancel previously scheduled surgeries or to decline to schedule surgeries utilizing our products, which would negatively impact our operations and financial results. ~~In addition, continued travel~~

If any of these risks related to the impact of the COVID-19 pandemic were to occur, our preclinical activities, clinical development progress, data and timelines, commercialization efforts including any potential revenue from sales, supply chain continuity, and general business operations could be delayed and/or materially harmed and our business, prospects, financial condition, and results of operations would suffer as a result. The extent to which the current pandemic, or a future pandemic, impacts our business and operations will depend on future developments, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and governmental actions to contain the outbreak or treat its impact, which are highly uncertain and cannot be predicted with confidence.

NexoBrid’s approval in the United States for the treatment of severe burns may be further delayed, or it may not be approved for use in the United States and other North American markets at all.

On September 16, 2020, we announced that the FDA had accepted for review MediWound’s BLA seeking marketing approval for NexoBrid in the United States for the treatment of severe burns, and had assigned a PDUFA target date for the product of June 29, 2021. The BLA submission is based in large part on data derived from a U.S. Phase 3 pivotal study. MediWound is conducting twelve and twenty-four month safety follow-ups for cosmesis, function, quality of life and other safety measurements. Data from MediWound’s twelve-month follow-up has been compiled and is being evaluated by the FDA, while data from the twenty-four month follow-up will be submitted to the agency as a safety update - either in connection with a BLA resubmission or as part of a post-approval commitment, if the BLA is approved. While this and previous studies evaluating NexoBrid have met their primary endpoints, we cannot predict the outcome of the planned safety follow-ups or whether the FDA will approve the BLA based on the available preclinical and clinical data and the submitted manufacturing processes, and the cGMP data.

Subsequently, on June 29, 2021, we announced that MediWound received a CRL from the FDA regarding the BLA for NexoBrid.The FDA communicated to MediWound that it had completed its review of the BLA, as amended, and had determined that it cannot approve the BLA in its present form. The FDA identified issues related to the CMC section of the BLA and had requested that MediWound provide additional CMC information. The FDA stated that it had not reviewed several amendments submitted by MediWound in response to the CMC information requests related to the BLA. The FDA also stated that inspections of manufacturing facilities in Israel and Taiwan are required before the BLA can be approved, but that it was unable to conduct the required inspections during the original review cycle due to COVID-19-related travel restrictions. In addition, the CRL referenced observations that were made during GCP inspections related to the DETECT study and requested that MediWound address questions regarding the impact of the observations on the study’s efficacy findings. The FDA also requested that MediWound provide a safety update as part of a BLA resubmission.

While we intend to work with MediWound and the FDA to address the issues identified in the CRL to seek the potential approval of NexoBrid, we cannot predict how long it will take for MediWound and/or the Company to respond to the CRL. We also cannot predict whether the FDA will accept any such resubmission for review, and, if such resubmission is accepted for review, the length of time of any subsequent FDA review.We also cannot predict whether FDA will ultimately approve the

NexoBrid BLA.In addition, if approval to market NexoBrid is sought in Mexico or Canada, we cannot predict how long regulatory authorities in those countries will take to provide NexoBrid with marketing authorization in their jurisdictions or whether such authorizations will be granted at all. A significant delay or a failure to receive regulatory approval for NexoBrid in the United States may have a material adverse impact on our business prospects.

Item 1B. Unresolved Staff Comments

~~Purchases of Equity Securities by the Issuer~~

~~We repurchased the following shares of our common stock in the periods set forth in the table below:~~

The Exhibits listed in the Exhibit Index are filed as a part of this Quarterly Report on Form 10-Q.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~November 5, 2020~~August 4, 2021


			VERICEL CORPORATION


			/s/ DOMINICK C. COLANGELO
			Dominick C. Colangelo
			President and Chief Executive Officer
			(Principal Executive Officer)


			/s/ ~~SANDRA L. PENNELL~~JOSEPH A. MARA
			~~Sandra L. Pennell~~Joseph A. Mara
			~~Vice President and Corporate Controller~~Chief Financial Officer
			(Principal Financial ~~and Accounting~~ Officer)


		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):	3

	Condensed Consolidated Balance Sheets as of ~~September~~June 30 ~~2020~~, 2021 and December 31, ~~2019~~2020	3

	Condensed Consolidated Statements of Operations for the three and n ~~ine~~ six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	4

	Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	5

	Condensed Consolidated Statements of Shareholders' Equity from December 31, ~~2019~~2020 to ~~September~~June 30 ~~30, 2020~~, 2021 and from December 31, ~~2018~~2019 to ~~September~~June 30 ~~30, 2019~~, 2020	6

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~ six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	87

	Notes to Condensed Consolidated Financial Statements	98

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2423

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2928

Item 4.	Controls and Procedures	3028

	PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	3129

Item 1A.	Risk Factors	3129

Item 1B.	Unresolved Staff Comments	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3433

Item 3.	Defaults Upon Senior Securities	3433

Item 4.	Mine Safety Disclosures	3433

Item 5.	Other Information	3433

Item 6.	Exhibits	3534

Exhibit Index		3534

~~Signature~~ Signatures		3635


		September 30,		December 31,			June 30,		December 31,
		2020		2019			2021		2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	43,507	$	26,889	Cash and cash equivalents	$	51,761	$	33,620
Short-term investments	Short-term investments	42,035		42,829		Short-term investments	39,214		42,187
Accounts receivable (net of allowance for doubtful accounts of $187 and $306, respectively)		26,174		32,168
Accounts receivable (net of allowance for doubtful accounts of $3 and $143, respectively)						Accounts receivable (net of allowance for doubtful accounts of $3 and $143, respectively)	31,732		34,504
Inventory	Inventory	10,080		6,816		Inventory	12,959		9,356
Other current assets	Other current assets	3,586		2,953		Other current assets	2,854		3,893
Total current assets	Total current assets	125,382		111,655		Total current assets	138,520		123,560
Property and equipment, net	Property and equipment, net	7,115		7,144		Property and equipment, net	10,590		7,633
Restricted cash	Restricted cash	211		89		Restricted cash	211		211
Right-of-use leased assets		24,796		25,103
Right-of-use assets						Right-of-use assets	47,798		50,105
Long-term investments	Long-term investments	0		9,247		Long-term investments	24,826		24,099
Total assets	Total assets	$	157,504	$	153,238	Total assets	$	221,945	$	205,608
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	6,475	$	6,345	Accounts payable	$	8,134	$	6,755
Accrued expenses	Accrued expenses	8,695		7,948		Accrued expenses	11,077		11,293
Current portion of operating lease liabilities	Current portion of operating lease liabilities	6,102		5,461		Current portion of operating lease liabilities	4,611		4,394
Other liabilities	Other liabilities	41		41		Other liabilities	41		41
Total current liabilities	Total current liabilities	21,313		19,795		Total current liabilities	23,863		22,483
Operating lease liabilities	Operating lease liabilities	21,487		22,242		Operating lease liabilities	46,928		48,789
Other long-term liabilities	Other long-term liabilities	74		110		Other long-term liabilities	62		76
Total liabilities	Total liabilities	$	42,874	$	42,147	Total liabilities	$	70,853	$	71,348
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES					COMMITMENTS AND CONTINGENCIES	0		0
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common stock, no par value; shares authorized — 75,000; shares issued and outstanding — 45,315 and 44,864, respectively		$	502,587	$	489,749
Other comprehensive gain		78		21
Common stock, no par value; shares authorized — 75,000; shares issued and outstanding 46,579 and 45,804, respectively						Common stock, no par value; shares authorized — 75,000; shares issued and outstanding 46,579 and 45,804, respectively	534,005		510,061
Accumulated other comprehensive income (loss)						Accumulated other comprehensive income (loss)	(23)		14
Accumulated deficit	Accumulated deficit	(388,035)		(378,679)		Accumulated deficit	(382,890)		(375,815)
Total shareholders’ equity	Total shareholders’ equity	114,630		111,091		Total shareholders’ equity	151,092		134,260
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	157,504	$	153,238	Total liabilities and shareholders’ equity	$	221,945	$	205,608


		Nine Months Ended September 30,					Six Months Ended June 30,
		2020		2019			2021		2020
Operating activities:	Operating activities:					Operating activities:
Net loss	Net loss	$	(9,356)	$	(19,166)	Net loss	$	(7,075)	$	(12,974)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Adjustments to reconcile net loss to net cash provided by operating activities:						Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense	Depreciation and amortization expense	1,649		1,174		Depreciation and amortization expense	1,506		1,079

Stock compensation expense	Stock compensation expense	10,819		10,095		Stock compensation expense	17,885		8,144

Foreign currency translation loss	Foreign currency translation loss	59		21		Foreign currency translation loss	27		45
Loss on sale of fixed assets		30		0
Loss (gain) on sale of fixed assets						Loss (gain) on sale of fixed assets	(22)		30

Amortization of premiums and discounts on marketable securities	Amortization of premiums and discounts on marketable securities	24		(529)		Amortization of premiums and discounts on marketable securities	505		(25)
Amortization and interest accretion related to operating leases		3,312		2,011
Non-cash lease cost						Non-cash lease cost	2,325		1,603
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Inventory	Inventory	(3,264)		(3,265)		Inventory	(3,603)		(1,601)
Accounts receivable	Accounts receivable	5,994		3,496		Accounts receivable	2,772		8,513
Other current assets	Other current assets	(633)		(425)		Other current assets	1,039		53
Accounts payable	Accounts payable	(52)		(1,895)		Accounts payable	1,356		(1,692)
Accrued expenses	Accrued expenses	747		30		Accrued expenses	(216)		27
Operating lease liabilities	Operating lease liabilities	(3,110)		(1,804)		Operating lease liabilities	(1,644)		(1,537)
Other non-current assets and liabilities, net		16		(76)
Net cash provided by (used for) operating activities		6,235		(10,333)

Net cash provided by operating activities						Net cash provided by operating activities	14,855		1,665
Investing activities:	Investing activities:					Investing activities:
Purchases of short-term investments		(29,049)		(46,303)
Maturities of short-term investments		39,123		73,777
Purchases of investments						Purchases of investments	(30,951)		(5,657)
Sales and maturities of investments						Sales and maturities of investments	32,655		32,797

Expenditures for property, plant and equipment	Expenditures for property, plant and equipment	(1,556)		(2,255)		Expenditures for property, plant and equipment	(4,461)		(1,186)

Net cash provided by investing activities		8,518		25,219
Net cash provided by (used for) investing activities						Net cash provided by (used for) investing activities	(2,757)		25,954
Financing activities:	Financing activities:					Financing activities:

Net proceeds from common stock issuance due to stock option exercises	Net proceeds from common stock issuance due to stock option exercises	2,182		3,762		Net proceeds from common stock issuance due to stock option exercises	7,621		1,373
Payments on employee's behalf for taxes related to vesting of restricted stock unit awards		(163)		0
Payments on employee's behalf for taxes related to vesting of restricted stock units						Payments on employee's behalf for taxes related to vesting of restricted stock units	(1,562)		(163)

Other	Other	(32)		(29)		Other	(16)		(14)
Net cash provided by financing activities	Net cash provided by financing activities	1,987		3,733		Net cash provided by financing activities	6,043		1,196

Net increase in cash, cash equivalents, and restricted cash	Net increase in cash, cash equivalents, and restricted cash	16,740		18,619		Net increase in cash, cash equivalents, and restricted cash	18,141		28,815
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	26,978		18,286		Cash, cash equivalents, and restricted cash at beginning of period	33,831		26,978
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	43,718	$	36,905	Cash, cash equivalents, and restricted cash at end of period	$	51,972	$	55,793


		Nine Months Ended September 30,					Six Months Ended June 30,
(In thousands)	(In thousands)	2020		2019		(In thousands)	2021		2020
Supplementary Cash Flows information:	Supplementary Cash Flows information:					Supplementary Cash Flows information:
Non-cash information:	Non-cash information:					Non-cash information:

Right-of-use asset and lease liability recognized	Right-of-use asset and lease liability recognized	$	3,140	$	2,338	Right-of-use asset and lease liability recognized	$	0	$	429
Additions to property, plant and equipment included in accounts payable		340		46
Additions to property and equipment included in accounts payable						Additions to property and equipment included in accounts payable	630		55
Restricted shares held for employee tax remittance included in accounts payable						Restricted shares held for employee tax remittance included in accounts payable	61		66

Warrants exercised for common stock		0		104
Cash information:	Cash information:					Cash information:
Interest paid (net of interest capitalized)		$	5	$	6
Interest paid						Interest paid	$	2	$	3


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
Revenue by product (in thousands)	Revenue by product (in thousands)	2020		2019		2020		2019		Revenue by product (in thousands)	2021		2020		2021		2020
MACI implants and kits	MACI implants and kits									MACI implants and kits
Implants based on contracted rate sold through a specialty pharmacy (a)		$	14,897	$	11,779	$	36,084	$	34,555
Implants based on contracted rates sold through a specialty pharmacy (a)										Implants based on contracted rates sold through a specialty pharmacy (a)	$	17,972	$	9,790	$	31,200	$	21,218
Implants subject to third party reimbursement sold through a specialty pharmacy (b)	Implants subject to third party reimbursement sold through a specialty pharmacy (b)	3,529		4,030		10,299		10,584		Implants subject to third party reimbursement sold through a specialty pharmacy (b)	3,502		2,819		7,917		6,335
Implants sold direct based on contracted rates (c)	Implants sold direct based on contracted rates (c)	4,602		3,039		9,528		9,715		Implants sold direct based on contracted rates (c)	4,487		1,806		8,954		4,916
Implants sold direct subject to third party reimbursement (d)	Implants sold direct subject to third party reimbursement (d)	782		573		1,793		1,176		Implants sold direct subject to third party reimbursement (d)	405		589		1,255		1,016
Biopsy kits - direct bill	Biopsy kits - direct bill	539		533		1,348		1,632		Biopsy kits - direct bill	551		348		1,070		811
Change in estimates related to prior periods (e)	Change in estimates related to prior periods (e)	8		656		695		353		Change in estimates related to prior periods (e)	(392)		(248)		(74)		1,095
Epicel	Epicel									Epicel
Direct bill (hospital)	Direct bill (hospital)	6,663		9,889		17,965		20,445		Direct bill (hospital)	12,155		4,910		21,985		11,301

Total product revenue	Total product revenue	$	31,020	$	30,499	$	77,712	$	78,460	Total product revenue	$	38,680	$	20,014	$	72,307	$	46,692
Other revenue (f)		1,238		0		1,238		0
NexoBrid revenue (f)										NexoBrid revenue (f)	839		0		1,780		0
Total net revenue	Total net revenue	$	32,258	$	30,499	$	78,950	$	78,460	Total net revenue	$	39,519	$	20,014	$	74,087	$	46,692

(a) Represents implants sold through Orsini and AllCare in both 2020 and 2019 whereby such specialty pharmacies have a direct contract with the underlying insurance provider. The amount of reimbursement is based on contracted rates at the time of sale supported by the pharmacy's direct contracts.
(a) Represents implants sold through Orsini and AllCare whereby such specialty pharmacies have a direct contract with the underlying insurance provider. The amount of reimbursement is based on contracted rates at the time of sale supported by the pharmacy's direct contracts.										(a) Represents implants sold through Orsini and AllCare whereby such specialty pharmacies have a direct contract with the underlying insurance provider. The amount of reimbursement is based on contracted rates at the time of sale supported by the pharmacy's direct contracts.

(b) Represents implants sold through Orsini or AllCare whereby such specialty pharmacy does not have a direct contract with the underlying payer. The amount of reimbursement is established based on a payer or state fee schedule and/or payer history.
(b) Represents implants sold through Orsini and AllCare whereby such specialty pharmacies do not have a direct contract with the underlying payer. The amount of reimbursement is established based on a payer or state fee schedule and/or payer history.										(b) Represents implants sold through Orsini and AllCare whereby such specialty pharmacies do not have a direct contract with the underlying payer. The amount of reimbursement is established based on a payer or state fee schedule and/or payer history.

(c) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. Also represents direct sales under a contract to the specialty distributor DMS.	(c) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. Also represents direct sales under a contract to the specialty distributor DMS.							(c) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. Also represents direct sales under a contract to the specialty distributor DMS.

(d) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. The payment terms are subject to third-party reimbursement from an underlying insurance provider.	(d) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. The payment terms are subject to third-party reimbursement from an underlying insurance provider.							(d) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. The payment terms are subject to third-party reimbursement from an underlying insurance provider.

(e) Primarily represents changes in estimates related to implants sold through Orsini or AllCare in which such specialty pharmacy does not have a direct contract with the underlying payer. The initial estimate of the amount of reimbursement is established based on a payer or state fee schedule and/or payer history. The change in estimates is a result of additional information or actual cash collections received in the current period.	(e) Primarily represents changes in estimates related to implants sold through Orsini or AllCare in which such specialty pharmacy does not have a direct contract with the underlying payer. The initial estimate of the amount of reimbursement is established based on a payer or state fee schedule and/or payer history. The change in estimates is a result of additional information or actual cash collections received in the current period.							(e) Primarily represents changes in estimates related to implants sold through Orsini or AllCare in which such specialty pharmacy does not have a direct contract with the underlying payer. The initial estimate of the amount of reimbursement is established based on a payer or state fee schedule and/or payer history. The change in estimates is a result of additional information or actual cash collections received in the current period.

(f) Represents income from sales of NexoBrid to BARDA, pursuant to the license agreement between the Company and MediWound.
(f) Represents revenue based on a percentage of gross profits for sales of NexoBrid to BARDA, pursuant to the license agreement between the Company and MediWound.										(f) Represents revenue based on a percentage of gross profits for sales of NexoBrid to BARDA, pursuant to the license agreement between the Company and MediWound.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


		Common Stock			Warrants		Accumulated Other Comprehensive Income				Accumulated Deficit					Total Shareholders' Equity			Common Stock				Accumulated Other Comprehensive Income (loss)			Accumulated Deficit			Total Shareholders' Equity
		Shares	Amount		Amount										Shares					Amount
BALANCE, DECEMBER 31, 2019		44,864	$	489,749	0				$	21			$	(378,679)					$	111,091
BALANCE, DECEMBER 31, 2020																		BALANCE, DECEMBER 31, 2020	45,804		$	510,061		$	14		$	(375,815)		$	134,260
Net loss																		Net loss	—		—		—			(3,289)			(3,289)
Compensation expense related to stock options and restricted stock units granted, net of forfeitures																		Compensation expense related to stock options and restricted stock units granted, net of forfeitures	—		7,019		—			—			7,019
Stock option exercises																		Stock option exercises	359		3,532		—			—			3,532
Shares issued under the Employee Stock Purchase Plan																		Shares issued under the Employee Stock Purchase Plan	14		249		—			—			249
Issuance of stock upon restricted stock unit vesting																		Issuance of stock upon restricted stock unit vesting	76		—		—			—			0
Restricted stock withheld for employee tax remittance																		Restricted stock withheld for employee tax remittance	(28)		(1,501)		—			—			(1,501)
Unrealized loss on investments																		Unrealized loss on investments	—		—		(61)			—			(61)
BALANCE, MARCH 31, 2021																		BALANCE, MARCH 31, 2021	46,225		$	519,360	$	(47)		$	(379,104)		$	140,209
Net loss	Net loss	—	—		—		—				(4,705)					(4,705)		Net loss	—		—		—			(3,786)			(3,786)
Compensation expense related to stock options and restricted stock units granted, net of forfeitures	Compensation expense related to stock options and restricted stock units granted, net of forfeitures	—	3,768		—		—				—					3,768		Compensation expense related to stock options and restricted stock units granted, net of forfeitures	—		10,866		—			—			10,866
Stock option exercises	Stock option exercises	57	196		—		—				—					196		Stock option exercises	330		3,531		—			—			3,531
Shares issued under the Employee Stock Purchase Plan	Shares issued under the Employee Stock Purchase Plan	20	224		—		—				—					224		Shares issued under the Employee Stock Purchase Plan	13		309		—			—			309
Issuance of stock upon restricted stock unit vesting	Issuance of stock upon restricted stock unit vesting	36	—		—		—				—					0		Issuance of stock upon restricted stock unit vesting	12		—		—			—			0
Restricted stock withheld for employee tax remittance	Restricted stock withheld for employee tax remittance	(14)	(163)		—		—				—					(163)		Restricted stock withheld for employee tax remittance	(1)		(61)		—			—			(61)
Unrealized gain on investments	Unrealized gain on investments	—	—		—		41				—					41		Unrealized gain on investments	—		—		24			—			24
BALANCE, MARCH 31, 2020		44,963	$	493,774	$	0	$	62			$	(383,384)				$	110,452
Net loss		—	—		—		—				(8,269)					(8,269)
Compensation expense related to stock options and restricted stock units granted, net of forfeitures		—	4,376		—		—				—					4,376
Stock option exercises		188	696		—		—				—					696
Shares issued under the Employee Stock Purchase Plan		32	257		—		—				—					257
Issuance of stock for restricted stock unit vesting		11	—		—		—				—					0
Unrealized gain on investments		—	—		—		84				—					84
BALANCE, JUNE 30, 2020		45,194	$	499,103	$	0	$	146			$	(391,653)				$	107,596
Net income		—	—		—		—				3,618					3,618
Compensation expense related to stock options and restricted stock units granted, net of forfeitures		—	2,675		—		—				—					2,675
Stock option exercises		77	500		—		—				—					500
Shares issued under the Employee Stock Purchase Plan		44	309		—		—				—					309
BALANCE, JUNE 30, 2021																		BALANCE, JUNE 30, 2021	46,579		$	534,005	$	(23)		$	(382,890)		$	151,092

Unrealized loss on investments		—	—		—		(68)				—					(68)
BALANCE, SEPTEMBER 30, 2020		45,315	$	502,587	$	0	$	78			$	(388,035)				$	114,630


(In thousands)	(In thousands)	September 30, 2020		December 31, 2019		(In thousands)	June 30, 2021		December 31, 2020
Raw materials	Raw materials	$	9,265	$	6,085	Raw materials	$	12,266	$	8,775
Work-in-process	Work-in-process	771		541		Work-in-process	625		537
Finished goods	Finished goods	44		190		Finished goods	68		44
Inventory	Inventory	$	10,080	$	6,816	Inventory	$	12,959	$	9,356


(In thousands)	(In thousands)	Classification	September 30, 2020		December 31, 2019		(In thousands)	Classification	June 30, 2021		December 31, 2020
Assets	Assets						Assets
Operating	Operating	Right-of-use assets	$	24,796	$	25,103	Operating	Right-of-use assets	$	47,798	$	50,105
Finance	Finance	Property and equipment, net	120		148		Finance	Property and equipment, net	92		111
			$	24,916	$	25,251			$	47,890	$	50,216
Liabilities	Liabilities						Liabilities
Current	Current						Current
Operating	Operating	Current portion of operating lease liabilities	$	6,102	$	5,461	Operating	Current portion of operating lease liabilities	$	4,611	$	4,394
Finance	Finance	Other liabilities	41		41		Finance	Other liabilities	41		41
			$	6,143	$	5,502			$	4,652	$	4,435
Non-current	Non-current						Non-current
Operating	Operating	Operating lease liabilities	$	21,487	$	22,242	Operating	Operating lease liabilities	$	46,928	$	48,789
Finance	Finance	Other long-term liabilities	74		110		Finance	Other long-term liabilities	62		76
			$	21,561	$	22,352			$	46,990	$	48,865


	September 30, 2020								December 31, 2019
			Fair value measurement category								Fair value measurement category
(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	28,059	$	28,059	$	0	$	0	$	5,381	$	5,381	$	0	$	0

Commercial paper	9,984		0		9,984		0		11,892		0		11,892		0
Corporate notes	11,186		0		11,186		0		18,380		0		18,380		0
U.S. government securities	13,804		0		13,804		0		11,295		0		11,295		0
U.S. government agency bonds	3,499		0		3,499		0		0		0		0		0
U.S. asset-backed securities	3,562		0		3,562		0		10,509		0		10,509		0
	$	70,094	$	28,059	$	42,035	$	0	$	57,457	$	5,381	$	52,076	$	0


Period	Total Number of Shares Repurchased	Average Price Paid per Share
July 1 - 31, 2020 (a)	661	$	15.11
August 1 - 31, 2020	—	—
September 1 - 30, 2020	—	—
Total	661	$	15.11


Exhibit No.						Description

31.1**						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2**						Certification of ~~Principal~~Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**						Certification of ~~Principal~~Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.3**						Amended and Restated Non-Employee Director Compensation Guidelines (Revised April 28, 2021).

32.4**						Consulting Agreement, dated July 2, 2021, by and between the Company and Sandra Pennell.

101.INS**						Inline XBRL Instance Document

101.SCH**						Inline XBRL Taxonomy Extension Schema Document

101.CAL**						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB**						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE**						Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF**						Inline XBRL Taxonomy Extension Definition Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).