VCEL - Earnings call transcript Q2 2019

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Operator

Good morning, ladies and gentlemen, and welcome to the Vericel Corporation’s Second Quarter 2019 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Gerard Michel, Chief Financial Officer.

Gerard Michel

Thank you, operator, and good morning everyone. quarter call second financial discuss Vericel’s results. to XXXX to conference our Welcome

let that judgment the remind we we forward-looking And me Before begin, projections our you today. Reform of making and statements all of Litigation represent will forward-looking on of covered Securities under our Private statements Act XXXX. as be call today’s

our SEC, that that to differ results are statements These are more on cause described could our may the involve risks actual filings fully available also in expectations which and and with uncertainties website. from

results statements addition, any upon the in our In at note second of as section press today Relations our Investors financial copy representing should forward-looking any our relied release represent be is a website. views date. Please our that only available not subsequent of views and of as quarter

highlights We today’s the or also accessed from on directly call that presentation a website. on short be viewed webcast have our with can

Chief Vericel’s turn now will I and the Nick over to Colangelo. President Executive call Officer,

Nick Colangelo

full previous revenue million. to our and up from momentum raised we’re million, the quarter Thank $XXX revenue the growth guidance of you, second consecutive significant $XXX revenue rose on the increased quarter quarter We over by million reported the to quarter, marking revenues of million over Epicel. XXXX driven and And for $XXX revenue to everyone. financial XX% results we’ve trailing million growth quarter quarter. outstanding fourth MACI net $XXX Based the product seeing for with the guidance our the and second Total revenues our the first $XXX strong good to time. third ninth for in record year for XXXX, for Gerard, morning, reported

And continues the positive the payment quarter EBITDA. growth. growth generate generated revenue the to flow last EBITDA adjusted margins Gross for upfront quarter. increased cash our positive for of year. adjusted second NexoBrid, significantly excluding we license compared profit And and strong Importantly, to

being driven average is both growth surgeons strong and increase of in new by MACI’s surgeon. an number per the implants

to indicator as growth half momentum through demand this leading the biopsy expect and are best year. rates this future We of continue remained very first strong of

of terms all And are new ever our XXXX growth XXXX. surgeons added in contributing surgeons, implanting new more before. in In of more new surgeons than already to we’ve than

these Nearly growth our CAR two-thirds used coming an balance one-third surgeons T-cell, of their never On volume. of approximately quarter growth increasing with driven customer the from surgeons. rolling MACI historical from and fourth base simplicity our implant clinical absolute is of utilization outcomes coming surgery. following speed surgeon T-cell surgical of basis, procedure, that increasing users implant of CAR from first came MACI The growing compelling half improved and rehab new is volume by patient the the

as with study years, MACI to the Sports that grow. Journal surgeons enhanced to of last year published being that product demonstrating XX-year study clinical the out the results believe positive benefit control of a clinical radiological body just Medicine. clinical further the To outcome five gained last from MACI of clinical Orthopedic to the sustained end, MACI and published addition of is randomized data experience additional use and week was We have data continues in in

well services MACI’s as expanded satisfaction continue an MACI Demand our study patient is further years, are clinical our patients efforts case best-in-class we provided MACI accelerated access following weight-bearing XX with medical as enhanced by levels as beyond providing policies to that tissue results a MACI’s ensure for study benefit. driven high being label. for of also that management long-term aligned XX-patient from comparing and MACI protocol demonstrated evidence These patient surgery versus rehab durability conservative of

launching that XX the sales Meaning the rep, available and of force each revenue representatives include is defects. physician sales force sports to MACI limited end MACI, a the top MACI target updated expanded alternatives the productivity, Anthem on exceptional we given XXXX, our demand even per medicine reflection team for Since patella treat This the significant From for early as surgeons. of by is force. is doubled overall the in policy medical performance cartilage which more now policy of and current year on for perspective, increased underlying size measured XXth approximately patient that June sales force times commercial our to X X,XXX a and as defects patella the its XX patella. To the MACI. of has of than sales plans promotional

strong broader set Given audience procedures. a volume acceptance perform who MACI, expanding include we’re of market and target of at cartilage-repair to the high relevant growth surgeons a orthopedic the

During we’re high treat analysis repair we project on MACI-appropriate orthopedic indentify target procedures. Based to a audience X,XXX general initiated level patients. of to are the perform from sizing approximately force perform sales third-party this cartilage second Associates, repair expanding cartilage utilizing X,XXX who quarter, volume and procedures to a data procedure likely ZS physician our who surgeons surgeons

commensurate expect expansion the audience the target end number sales which exercise, completion with the quarter. finish the Our force mapping the final a for XXXX to territory with will of of we third subject detailed of be expanded to around

Turning to Epicel.

in the placing increased third only Epicel’s quarter. quarter increased year. up the quarter to second we of carrying Not see this by compared revenues second last increased XXXX. a an user centers and XXXX all second relative the It’s into largely revenue the driven history. and in the last the year, of was growth quarter represented in Epicel versus revenue And number orders second momentum biopsies, to for noteworthy over was X% base highest orders Second of quarter quarter sending burn but and biopsies that

entered that NexoBird in the burn North market. an current we agreement confident given had growth severe long-term supply addressable in variability inherent we modest America. market, into care the prospects quarter, license of in its to exclusive Despite we’re the penetration commercialize MediWound Last Epicel’s announced

expand our burn to and to sales care burn portfolio, centers highly technical biologic positioned and uniquely our the to access our excited this severe commercialize unparalleled force. we are expertise product of innovative orphan We’re given

working the in the with closely FDA participating that BLA anticipates quarter the NexoBird the currently to second in announced May, agreed submitting submission FDA the discussions. And had prepare to treatment access expanded burn and total and of MediWound for to for to NEXT of arm full NexoBird We’re patients which treatment we body fund burns NEXT thickness BLA XXX to BARDA In allows of area. surface actively with treatment an deep, single The up up thermal or is protocol XX% protocol. open-label, the protocol partial, XXXX.

and supporting well. burn patients sites NexoBird. protocol using number generate treat to patients, advocacy, study the Vericel the become familiar and employees participate NexoBird that with of use enable NexoBird be NEXT same be the world The will the XX at primary to in may, many in will physicians use burn Up used and and centers patients as purpose U.S. to awareness, centers commercialization of United also to of NEXT States NexoBird-trained with the providers in real additional NexoBird. in of are excellence Epicel Epicel some centers fact, to expand to healthcare prior Epicel, the will of using

the by of launch, least team of the the end burn the and sales should in knowledge of This to use our the preparation additional sales NexoBird the size care this of burn Epicel. NexoBird XXXX. since to for experience goal second approval. business, the are the intend clinical support growth of the drive force greatly force ramp the we In that at the regarding burn employees’ will overall half in and of positions upon we and up doubling and add we’re XXXX confident will use enhance sales care be starting believe with expansion significant uptake three care We and the of increased purchased first enhance

as will NexoBird a approval as in our create upon for strengthen driver well franchise, that beyond. believe also XXXX company burn growth the and third care We

financial now second quarter review Gerard over to our I’ll the turn results. call XXXX to

Gerard Michel

of $XX both in Epicel XX% We representing of and the the the Nick. second the revenue in XXXX, reported X%. revenues with performance quarter and across of growth strong We million growing revenue Thanks, XX% growing and quarter MACI for XXXX. of for half total first sales million $XX.X first XX% products half saw in the quarter

XX% Our XXXX. in quarter increase an was the quarter, XXX gross margin the of second of basis from points

second our basis, to MediWound GAAP more specifically, expenses included NexoBrid operating a expenses R&D our million $XX.X quarter the license agreement. On and, related payment the to

the that up million, prior year the quarter Excluding $X.X million. versus to $XX.X expenses operating payment, in were

As a as to to grow. points XX% payment expenses top-line of continue And that percentage excluding dropped one-time expect improve to XXX the to percent. basis we continues revenue, revenue operating

million noncash increased a sales and our quarter in appreciation last support which expenses operating year, in drivers million grew over which primary The last the years, was price MACI XXXX. $X.X the stock-based management result were compensation, for the and costs case up versus $X.X two as quarter over stock of the force increased the

a Our $XX.X on including the basis, payment, operating million was million. loss $XX.X license NexoBrid GAAP

million our The million of for or share. compared was $XX.X XXXX. per second million, loss expense, the loss license in was $X.XX $X.X the a the Excluding $X.X to quarter of loss GAAP quarter net

million compared $XX.X share was of $X.X EBITDA year. last share, per the loss the to quarter million last was million per of compared Adjusted excluding loss, net a or year. to expense, at loss $X.X Adjusted $X.XX $X.XX million one-time or million, a $X.X for $X.X positive

reconciling non-GAAP please this measures, morning’s release. press details For in tables the see

short-term at As to company $XX.X of the in compared $XX cash million June XXXX. December in XX, had investments, XX, XXXX, million

million for short-term half first $XX.X million net our about of the the were payment in cash Excluding up for $X.X NexoBrid, investments XXXX.

guidance our to of our raising total up are We $XXX million, to from $XXX million. to $XXX guidance million $XXX product million previous revenue

second the capture June occurring pharmacy model percentage with it in year, slightly in XXXX. last of the more third year. for the MACI higher as than the a mind than keep our in balance of in to is XXXX quarter, half increase in that full-year in change we When result and XX% in considering in MACI slight the We the that results XX% growth growth comparison revenue revenue expect will beginning the of between fourth of of prior-year XX% purposes, include of pricing for now important our distribution the quarter,

stated, forecasting Epicel we often difficult. As is have

severe we and position second long-term performance expect to million are confident $XXX in $XXX based the momentum patient prospects along highly clear Epicel’s the quarter million, Epicel’s remain segment with the third on leadership Based strong full in serve, for of into growth. quarter of market $XX.X margins we XX%, revenues to expenses in should in we increase we in marginal the the cost million However, million on for Operating for and seeing gross including up year line of $XX XXX payment be the our revenue. with basis to last marginal relative points previous XX% our stock $XX guidance million. full compensation to from the year of year about around NexoBrid increase be and goods for

NexoBrid range significant milestone is the Excluding resulting the million excluding be The expense the to million year, one-time million to expected million. payment, a $XX is $XX.X the forecasted $XX.X first for payment adjusted positive $XX.X the EPS for company. therefore

concludes our That remarks. prepared

like to questions. Now operator I’d open the call your to the

Operator

[Operator SVB Instructions] Leerink. Antalffy Your with Danielle first comes question from

Danielle Antalffy

question. guys. good Hey, much quarter. the a Congrats on really morning, so Thanks solid for taking

that curious and think how about changes that perspective. the it to now that ultimate really is a as target that? population? Or TAM what customer relates into few ramp to penetrate think Just as the that we TAM? guess go-forward how the about about you’re I really And change outlook we over surgeons years next so you targeting XX,XXX-patient Does orthopedic just question the think expanded from from it how here training the is, the

Nick Colangelo

Hey, Danielle, this Nick. is

think discussed into the to the way latter us that helps penetrate last is year. think that TAM I about we So proper this it, the

obviously And go what to moving and will we about and maintain frequency we it higher us so, is think reach have broader allow it forward. growth help as to rates as believe forward do we these

Danielle Antalffy

And follow-up one on other – just quick that. a

are efforts the drive that. been rate the that to so you curious on higher to see needle much. for just you have conversion biopsies. One of is stand doing trying starting the to where And at all, Thanks move direct-to-consumer things

Nick Colangelo

us. Yes, so that for we project believe in as a conversion about, rates increase we’ve talked is long-term

of six XX three anywhere sort days, early last year, launched months. to over XX and having know, you convert We’re mid this biopsies to from in to as

are being implants. that early cases there I that percentage for that activated, otherwise activated, weren’t obviously say higher we immediately so will little cases which signs higher or And a are leads about seeing to of

us. will focus So for we’re going still confident the a early days, in program forward but and remain

Danielle Antalffy

so Thanks guys. much, Okay.

Operator

Your comes Zimmerman with next BTIG. Ryan from question

Ryan Zimmerman

the on Congrats questions. the taking quarter. for you Thank

want Just time have it there’s And ask, submission? come left a submission key could XXXX that is we quarter the the BLA call NexoBrid know it second to some hope What sooner. come to little BLA than do the for chance I do quarter the of could BLA is slated that on anticipated? maybe there for for is the at submission second on Or any sooner NexoBrid? timeframe XXXX.

Nick Colangelo

Yes, thanks, Ryan.

XXXX of QX at the as if if the XX recall, announced that you the that data and had initial – package that the BLA July of requested fact of stated pre-BLA date. occurred the submission data like safety a in So And in the when months end deal FDA we be be part we fact we would that targeting FDA initial submission submission. meeting the part the would

our target to do so. it’s goal remains So our to timelines refine that that to sort pull our the in we date. extent Obviously, be as would possible of current

very it’s deal. we said we announced what with back much May when So in consistent the

Ryan Zimmerman

the in kind thinking or broadly do little about you relative way Okay, MACI XXXX anything bit that looking there’s drivers MACI of just years? MACI. just mean, sounds the penetration mean, then you of numerous of outer not asking that. durability about you opportunity what force. of sales lot of on be to think the for to a the is, And should sustainability at like the to to and talk But understood. what I growth just it believe rates in growth a I growth how right speaking, investors about things the going sustainability the guide you Can MACI, like

Nick Colangelo

patients each year. you the we as Well, believe alluded market in significant there’s to, XX,XXX addressable up Ryan, a U.S. to of

Our from an rate current than is perspective penetration implant less X%.

there’s think at this three implementing will reach and longer expansions. time. lot for that, So period this room pike. frequency know, top times. sales we force we near our competition sales of On us team term like of To-date no I go coming the force, grow done of think And a we as create a product over you broader again, to increasing excellent forward. the of obviously there’s we’ve And a think down as is

growth this is sustainable. So we think very

Ryan Zimmerman

Thanks the right, great. guys. All for taking questions

Operator

question comes next Oppenheimer. from DeGeeter Your Kevin with

Kevin DeGeeter

Gerard, XX these take if the really bit with about sort a think of Hey, that thanks at I question, is kind the kind Nick you’ve just quarter. want can of that now a congratulations profile range you market identified? of a related time kind lot. surgeons, nice sizing give you least identifying? number over to of usage a right comment my add and of little high is somewhere incremental and kind are to And volume X,XXX prescribing XX on in the surgeons as perhaps regard surgeon right X,XXX reps the for or general X,XXX of to way this for orthopedic

Gerard Michel

Sure. Kevin, is Gerard. this

add we are orthopedic surgeons do about think we targets know way comfortable of that third-party that doing that And And to repair They’re these not are arthroscopic-only purchase you to we’re that. of are set data we these procedures. know there the variety docs think sources doctors. procedures. are the identify I cartilage the going also now to knee physician a of on open can

in should calling point docs even docs MACI. sports from fact, aren’t are that, who they description just been fit procedures of getting we’ve business do that medicine And I fit without of on interested where type docs they the them. that be right made us but So a that

there’s confident rich mine. a vein pretty we’re So to there

territory efficiencies travel you was in the kind that be to or simply In country, into of just drive one the if come we it deal et of like And numbers travel, a easy homogeneous terms to relationship would play, a it really have of can actual didn’t linear territory, number reps, another. do cetera, way In reality, said. mapping. do

out there to a throw So I now. hesitate I to – number want right

Kevin DeGeeter

just maybe And of great. area may, appreciate we Epicel. that’s to kind I Epicel. on trying the for sits and It get then an from question, number follow-up a core investors trend of just if sort Okay, of growth questions is firm one where where

here. seeing Epicel, as of we you’re trajectory? comment some reasonably of give So the of quarter move what kind MACI, here in of back into last question, second to Can the August of kind sense strong an to the applying to kind to just Epicel as kind it us sustainability market general kind trajectory you going of but

Nick Colangelo

is we’ve believe our years what is today, as low. well, saying addressable is been for Yes, into market now Epicel growth Obviously stated we still the the penetration relatively five that we variable. for

So period growth. sustainable we of think there’s a long

in in business mentioned remarks, as apparent prepared QX QX continuing this sending was And we the orders, of terms see the the third orders, number our of last centers cetera. of and the mentioned, the taking quarter. I that of versus biopsies, number year As into breadth we in year biopsies et

confident with little for So that just the a the at in Again we’re can growth caveat long-term be Epicel. times. very it variable

Kevin DeGeeter

taking for questions. Thanks Great. my

Operator

Your Company. with Messer next Needham Chad comes & from question

Chad Messer

believe it include $XX.X million the stock OpEx, $XX good to all sure on Thanks and OpEx you all congrats anywhere your and and Gerard, taking printed at some that my margins – morning. remarks right, guidance quarter. question, of and that? the want remarks, I rattled I I that end comp make but excluding got million I a $XX the for Great, stuff and in because and million, just don’t on solid slides. gross off extra does on the

Gerard Michel

Yes.

the stock million payment $XX and be $XX.X should expenses including comp million the million. So to $XX operating between

$XX.X between be million. to million range the forecast we’ll payment, NexoBrid and million $XX.X the $XX.X Excluding

Chad Messer

you. and Glad appreciate... and asked Okay, I thanks great. I Thank

Gerard Michel

I’m through it. running It’s a as lot to capture

Chad Messer

and Thank look. today. guys call extra all you provided no, – on all details you. I appreciate No, this the stuff Yes.

Operator

Jeffrey Your Thalmann. next question with comes from Cohen Ladenburg

Jeffrey Cohen

Hi, and How Gerard. are Nick you?

Nick Colangelo

thanks. Great,

Jeffrey Cohen

I questions circle of a Epicel. wanted to couple on around Kevin’s on

any that case as If number from of far quarter? volumes great. as trends you could seeing or you’re That’d be out physician kind of call volumes the prescribers, et or previous maybe sheet cetera,

Gerard Michel

Sure, Jeff.

broader most the probably a trailing is think sites to think we product. the hard number using of consistent I see basis, on we it’s want product. numbers need comfortable It’s just always patient trend it is expanded hard But product. seeing quarter But I trend. be use, you to before, using product have It’s a we variable. as the small get the look and get not more specific trend because we’re at see basis that volumes see for to important so of trained, sites four to usage with the Again, with you it.

long a site to up ramp is a to there So get running. try and

So we We to happy see are usage. see encroachment. no expanded

is underlying hasn’t see in but been I we the encroachment severe no treat. competitors this think this very that yet, question asked we segment from that

Jeffrey Cohen

utilization. a continue it. on bit assuming am of got which then higher higher And the space you could to little growing? your manufactured second facility the elsewhere. Is talk Okay, expand upcoming I enough market seemed facility? are you question, me there that to to far and that about kind the It my the as at being at rates throughput would capacity NexoBird be as was

Gerard Michel

projected facility, QC will it for labs At out between we thing. points office growth our of be Yes, our of at three that opportunities current and or manufactured any feeling yes, as current we to would pinch – facility five move growth sort before I thinking through sort start our just rates a But leverage three we think working we be a prudent through, this employees have years of at us initiative to NexoBird elsewhere. through not from exercise. good And is rate, capacity estimate or it’s are now it’s feel to we purposes. for But another years, that purposes to it’s But do a five whether think, redundancy near it. right pinch. certainly before term aside need for thinking we

Jeffrey Cohen

have lastly, any for And price on increases it. MACI do XXXX? expect you got to Okay, then

Gerard Michel

in normal pharmaceutical of terms – annual nothing this puts timing in level. I extraordinary – usually price Nick but no, we’ll For particular as whether increases do or this level it, – mean

Jeffrey Cohen

me. for Thanks taking Okay. for Perfect. That does the questions. it

Operator

next from H.C. comes [Operator Ramakanth Swayampakula instructions] Wainwright. question Your with

Swayampakula Ramakanth

is want Thank RK ask have my I taking Wainwright. a just This strategy. been H.C. you. but Thanks from for to answered, my on Most questions quick question. question of

the you come So type right mid-XXXX, can other as also market how – growth severe is in for for the a burn – bigger since serve, prepare it for market strategy because the Epicel it what in such probably NexoBird get or to the that but market only you it’s such the since you agent? NexoBird has to debridement MediWound’s so a of interim burn, do not any

Nick Colangelo

comments. Yes, I’ll so so this can is you Gerard, Nick, any add and, and start,

terms market, So But as think patients market the – you on presentation. focused a can is we our Epicel corporate described about target we as it addressable hospitalized of as in larger like burn obviously have NexoBird in patients. addressable

about hospitalized year. patients the about treated the whereas is to XX,XXX XXX-patient each NexoBird So burn all there patients to range debridement. addressable the those XX,XXX virtually of require they eligible your And be in defined Epicel point for are to extent market have per with we year,

we think revenue a patient there market perspective, is and So quite addressable from well. frankly larger as a a

the of to U.S. In is to there preparing in that, XXX capture burn about centers we’re terms XXX again how

specialists Epicel add we commercial in now. right to plan remarks, more. and As medical clinical we about our six mentioned support three currently prepared have We supporting

into are to by launch XXXX head our three year with launch NexoBird. this time doubling in next goal the – more a We the going least we at of well, add for size potential current

think if to XXX in we cover we’re need we do to roughly certainly add going a little But to to So be adequate burn U.S. that that, the the that. then centers will

Swayampakula Ramakanth

question. my taking for Thanks you. Thank

Nick Colangelo

you. Thank Okay.

Operator

no turn time now this like remarks. for I questions. would the instructions] to closing back conference [Operator I’m further At showing

Nick Colangelo

of trajectory your our for quarter. your continued Okay. for Well, as had I’d a interest questions We great year. reflected about in our like the Vericel. of excited to remainder in thank everyone the guidance, the And updated business and we’re

day. great have a and again thanks So

Operator

have gentlemen, day. for and wonderful Thank you today’s and your this participating concludes Ladies a conference.

all may disconnect. You

Vericel (VCEL) 6 Aug 192019 Q2 Earnings call transcript