VCEL - Earnings call transcript Q3 2019

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Operator

Good day ladies and gentlemen and welcome to the Vericel Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is recorded.

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

You may begin.

Gerard Michel

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

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

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

any third be views only relied quarter release is financial addition a the date. as not difficulty] statements [technical that should subsequent results Relations website. any press and In our represent in section of upon Please available forward-looking our of Investor of our note today copy

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

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

Nick Colangelo

annual growth good Gerard ahead. growth, demonstrates believe and outstanding an quarter third only you, We generate had flow years morning we Thank ability to strong also generate cash top-tier which not but in to revenue the our everyone. profit and

million. for Total revenues of the over $XX.X reported XXXX trailing million, XXXX at net from these product guidance Based and revenues quarter million quarter rose $XXX record $XXX our approximately revenues raised $XXX full quarter $XXX million XX% guidance the marking consecutive third of increased to on million. with the four-quarter XXth our we've up to $XXX to to our year million to results, for previous

quarter approximately million of year. of for over $X.X gross cash million, also the increase last generated growth model, profit flow income our $X.X for an of exceptional in quarter. and of Highlighting an $X basis points last generated growth the XXX than over business XX%, with for the we net million margins of more quarter operating the year revenue Our increase strength

forces, an allows invest and of providing combination sales footprint fixed highly for largely productive significant while returns to growth. a Our revenue growth still cost innovative manufacturing product that on portfolio, us

our we margins few low the strong maintain and range MACI to in revenue growth mid-XX% to for business addressable the years. gross the margins the in large range our Given markets next years Epicel, the expect relatively operating and rate in ahead on double-digit to leverage of the based and operating generate XX%-plus penetration in

in and volume this and ensure cartilage territories capitalize from our we force burn audience who investments our six sports making XX adoption and approximately repair X,XXX XX surgeons from XXXX. Based MACI the target of -- targeted the on To perform territories that care medicine of high our expansion current plan on procedures, of commercial second by the by from additional both to sales quarter market the franchises. MACI expand opportunity, nine to regions to X,XXX a we're end we of to the strong

as to representatives XX project treat would of required salesforce growth to we an have forecasted of both likely that support salesforce as ZS current are the results the our on sizing expansion audience the is Associates, surgeons salesforce Based believe our itself by additional patients. target appropriate MACI the which with size target that well from the appropriate

of our our expansion. very in since the launch previous ability we're the salesforce of MACI, success the to upcoming successfully execute confident three Given expansion

at quarter training new target the our territory reps in on-boarding first prior the start quarter will in next XXXX new and fourth of the move with quarter expansions, the recruiting of second we'll new As and alignment hires the initiate the year. into

X,XXX target lies of four you sense ahead, the in surgeons the past that ending MACI the from with quarters up which XX% from opportunity previous we're approximately is seeing give and quarters, four biopsies years momentum significant the a treatment MACI the we've part This To received surgeons a of quarter adding providing algorithm. surgeons who the in a several by next their roughly opportunity as QX new double-digit of to represents adopt XXXX. X,XXX growth maintain for strong

Not to rate but only generate positioned increasing is expect the will of biopsy surgeons, and each biopsies our the that number the a surgeon growth key from indicator larger over of be leading of time. by number implant well long-term force conversion and increasing average growth, biopsy to we sales additional

the burn to care Turning franchise.

representatives Third record as up quarterly history, Epicel of quarter of over Under current new the highest six treated support from and expand sales burn users and the burn with $X.X to Epicel record million number was to revenue patients Epicel in of a number we team leadership, new represented sales nine specialists clinical in revenue Epicel expanded utilization and XX% last a Epicel graphs. year to has centers.

quarterly a not penetration, burn FDA of that expect investment remain but which care revenue this franchise. more basis generate see we confident will addressable to approval, franchise prepare market high for believe While four-quarter Epicel upon care will in only NexoBrid double than opportunity rolling a in burn for increase basis, our Epicel single low launch variability double-digit also for our the the to on growth revenue will We we on Epicel. continued

and the review Treatment XXXX. preparation product pending target to to the Expanded at BLA treat Access launch the Protocol submission the up NEXT expect in announced first patients the NexoBrid the recently approval, of continue We during initiation to in sites of the BLA. to half we'd QX XX and We or the NexoBrid XXXX for of U.S.

U.S. trained should prior we'll we use in Centers U.S. to approval. number providers generate at health care and and to additional of of awareness, NexoBrid the product the the NexoBrid, of uptake Excellence of and enhance which advocacy physicians product overall Next, commercialization expand believe

since MACI costs. more fixed doubled than and years we've Epicel volume increase business this five material any acquiring Finally, in the without ago, of

demand a without with well years investment. that strong significant margins trend can leverage positioned that gross growth we're ahead. we sales increased us high for the operating expect meet generate confidence several profit given consistently resulting margin capital flow in that continue we gross combined The profit result, a to As and forecasted increase from in cash to years force the gives our productivity we

Gerard provide XXXX turn over the third on and more details on now quarter call to to guidance. update the I'll financial results an

Gerard Michel

quarter XXXX, of with the Thanks MACI Epicel XX% million. $X.X We the total performance million over nine of saw for revenues revenue reported growth We year-to-date Nick. first XX% sales of $XX.X of third in the quarter, $XX.X XXXX. quarter products for months $XX.X of revenue the in strong million and representing both across million and

revenue higher million product other any quarter quarter Epicel was more The was previous $X.X than third launched. than the since

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

$XX.X expenses Operating in the of the year. quarter $X.X increased million million over prior

we to in $X.X XXXX. by points stock-based As a expense XX%, force to expense, MACI increase $XXX,XXX X,XXX grows. of to in a $XXX,XXX dropped and in as operating expect percentage due approximately that force second operating increase billion continue in basis and quarter marketing to increase The primarily of revenue increase the expansion in driven the improve compensation sales revenue, expenses expenses was sales expenses,

was the helped income Net $X.X to $X.XX compared the and contribute or $X.XX loss the growth $X.X quarter our a $X.X XXXX. income million million was compared in per in quarter third per million to operating a of The million share Difficulty] of share strong significant loss XXXX. a to or in revenue improvement profitability $X.X in of [Technical

$XXX,XXX year. for to compared the quarter about EBITDA Adjusted last was $X.X million,

quarter should growth table outpace in resulting see the details a years non-GAAP growth since rapid in reconciling earnings QX ahead to versus increase in to trend significant The this expect in in please this measures, expense measures we revenue For continue press is release. continue growth. XXXX morning's the profit

our cash increased And the growth strong top now translating see $X.X by also cash balance into and We million. our short-term line quarter in flow. investment

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

for are of million Excluding cash investments up short-term net NexoBrid, and million payment the $X.X our beginning XXXX. $XX.X

XX% the for year. We revenue full quarter forward of in XXXX, up product fourth XXXX be full We the previous range growth [Technical MACI Epicel [Technical fourth versus remainder of now growth expect of to total growth we from expect between Looking be of for the project revenues for Difficulty] represents XX%, be guidance the which XXXX. to year XX% net our the quarter to XX% for and between XX% between and and XX% Difficulty]

in to approximately Gross margin million mid-XXs, approximately will quarter expenses NexoBrid in our for including year the XX%. the forecasted quarter margin second bringing gross Operating million. $XX the to is full year $XX.X be fourth be payment the

revenue income year, Difficulty] range income a $X operating payment, we expect to using margin million with million midpoint meaningful Difficulty] of and the adjusted [Technical our $XX.X the net NexoBrid in the for results adjusted the [Technical Difficulty] in significant full approximately Excluding one-time [Technical net expense guidance generate

our That prepared concludes remarks.

As presentation third website, a force results the available sales quarter call updated expansions, our including the reminder full highlights our provides guidance. of and on is year today's

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

Operator

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

Danielle Antalffy

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

difficult. sustainable of Just tailwinds gave headwinds to been you about need mean, strong. XXXX, look as consider? And different the rate Comps and for MACI the has I commentary what follow-up double-digit and wanted we on are company. are the very the we the some to to ahead obviously, momentum growth

a significant getting law expansion. into from also bit tailwind rep a the little of But You're you numbers. large of have perspective

maybe -- you're us forward? know how help guidance but you as think we XXXX, qualitatively can't of MACI you to ahead how help us growth give can going I about balance thinking So look

You growth four correctly a that bit number. about if over like a little I'm maybe thinking quarters us base help in that I'm the sure there. biopsies not mentioned physicians last the but seems good XX% submitting

Gerard Michel

to that start the growth new acting over indicator time that decent on think been [Technical board two like what to I’ll we one around over for a the expect Those we of more while start We a to best Yeah. out have we surgeons. legacy be If is guide say to come rate years. next Difficulty] biopsy biopsy, our leading two have earnings for assume years the one of doctors.

decided Difficulty] that's we why [Technical to So get that

Danielle Antalffy

from Okay, might about okay. just how in guidance Because different curious then And much. specifically so be? performance down we would drivers about to strong the how step is? quarter? very saw just assume That's this QX And Thanks meaningful sustainable implied quarter, was this the And curious pretty how helpful. that? sustainable the that $X this think to a of so perspective, quarter Epicel

Nick Colangelo

mentioned Yes centers more and Nick. had grafting more Danielle, highest treated Obviously and number biopsies driven as in from as was of centers history the thanks, more patients by we that we in it's revenue coming well.

performance I strong we're So least. to think encouraged the very say

script and the product. this ever fourth high did sort in you commented is which strength year quarter, XX% was highest believe variability. of it's the see year. for rest quarter it's we of And early last XX% in guidance there's So prudent the -- the we the But to As right? the we quarter and until Epicel, in how shapes until give sort the Epicel again, know up, think growth the we as we the quarter was to there quarter for to

Danielle Antalffy

Thank very you much.

Operator

question your from comes BTIG. next Ryan Zimmerman with And

Ryan Zimmerman

Great. Congrats follow-up taking quarter. there. of just on I wanted the for Danielle's Thanks to the on questions. questions some

productivity reps. I at it would on FY the higher similarly XXXX, hiring suggest going a XXXX time. to plans, to just your But recognize rep rates number, FY guide you're based Turning with of not this

So, the thinking is as FY XXXX? into or getting? of just productivity next sales maybe And stay reps help in of me that has constant just big understand the continue year, grow can whether it before force you're given how how about to kind

Gerard Michel

Sure, Ryan.

I take think not start we why at the reason significantly reps the -- of second [Technical can't current Difficulty] you're the the quarter.

quarter. Difficulty] to grow. has the existing [Technical that's [Technical and turning with up docs think work to be to implants as they done that multiple support a I Difficulty]

support -- hire increasing just weren't business for if we are, of the we to the Difficulty] [Technical expanding So, have to they're reach and we expand amount docs even still doing. frequency, which

Ryan Zimmerman

Epicel. on up following just then, And helpful. That's right. All

So, is centers deeper in you. the could speak you this in And product awareness? broader existing you're versus additional And new much Thank said more centers, but you maybe centers? that and of market is getting existing new also you're patients, appreciate of the that kind centers, of of sales a at to are terms hires how penetration just force in? your as just what doing

Nick Colangelo

Yes.

So, this -- I Ryan, has taken place recently. for really the expansion, just think, is year

wouldn't I Epicel the So in sort that sales by is say of increase driven force the expansion.

centers of consistently Epicel. been number the we've to expand think, that I looking use

are that's there patient on Epicel what's And to able appropriate that has when product and are do to sure opportunity with an been We've focused the we times, it. driving certainly I that. be treated just every think really making

redesigning Going include who therapy demand both sales the be to or with provide really or generation, burn as clinical on forward, but folks clinical we're in restructuring, will script, those centers specialists the reps supporting I and principally burn also burn mentioned bringing and will support. really charged the who case specialists with new

that centers, deeper centers drive currently Epicel. continue that ill patients focus caring we'll right being the on to patients with for on -- So are and of demand, and a sort time demand critically from but time up be think takes in new lot that's think treated the specialists for uptake roles of dividing within Epicel. to we penetration something able that clinical the and And now the representatives sales drive generation will using the we burn these responsibilities, over both by

Ryan Zimmerman

Thank you.

Operator

Your with next DeGeeter Oppenheimer. Kevin comes question from

Kevin DeGeeter

All right. Thanks, guys.

of couple for me. a questions So

we just this trying Gerard, exercise the but trajectory, that reps and see a part think territories we term, next reconfigured or longer number of appreciate of on near kind see about First, portion to we growth months? kind will of maybe, as adjustments the to all potentially the six selling can you MACI? some term, mindful their are I or those as think, need of were comment perhaps be there XX of What dislocations

Nick Colangelo

there done adjustments including is territory are to MACI sales Kevin, expansion, we've alignment. Certainly that Yes. always any three launch, this since Nick. with force the

Gerard have given the business. going of business, reps reasonable to growth that time, a number we over As the of was just anyway add mentioned, were support there to the to

when disruption mentioned, playbook, to same focus points I the as commercial potential going the the of has in on in reps. minimize our any we we're, terms hire We which we sure time run making run team So successfully.

demand So we obviously generation. on focused to want stay fourth the quarter

and the we so their the the into the territories first through towards field-based the they of really and we'll reps, quarter then home-based and go hiring second new into end of focus quarter. on beginning And fourth roll training quarter at the extensive

the So involve playbook sort recommendations sales worked that's territory for We well and the alignment. it's us. of a for obviously leadership, directors the regional

So and be again, done team year in we expect next good of it as to the I past a our job think has successful doing that well.

Kevin DeGeeter

question comment or on And one further Epicel.

traditionally lines focused MACI is One product both of Epicel. the seasonality the things for we've and on of

out of being for think XQ have to I some tended That us about historically. didn't think Epicel is quarter quarter. this play a relatively clearly in weaker

with in lumpy fundamental is number differently always about using a it the a random somewhat that than you simple a there that Is Epicel past? as to seasonality, should that Or difference reflect as it's are current bit regard quarter that lumpiness? strong been think burn of centers as business increase we and results just the the the

Gerard Michel

trend seasonality can pay think given you think window Kevin, variability. should the seasonality attention -- to decided seasonality. is multiple I throw we've average for MACI. you out of multiple, we the you and of some Epicel, can see think for through if projecting out years, Epicel, to The that I really But

seasonality I -- product. washed the so don't in And if the noise out variability think really – that's of

Kevin DeGeeter

just you for Gerard, this queue. Great. And last build think to SG&A about of some get related What maybe bottoms-up of force the back going terms – of related we metrics to the is Gerard. sales to one reps? me be fully-loaded might force kind kind as some OpEx then to give MACI can then maybe terms the the both about helpful ad I'll And level? obviously, in to think the and sales in expanded in one expense kind about then by think just increase contemporary and in of a on multiply not percentage we're metrics more but of Epicel us

Gerard Michel

Yes.

that's to by the rep. and the incremental too besides do and believe really just their isn't and think reps best if of and fully-loaded take sales you cost T&E increase for probably multiply And I marketing is salaries, to it number going there is thing expense. much our else the there cars whatever

that's do. thing the So best probably to

Kevin DeGeeter

my questions. for Thanks taking

Operator

from question your Needham And Messer with next comes Chad Company.

Chad Messer

let it on how Great. On add quarter? a by you congratulations me increase Or a small just can Thanks. the this another comment on broad Good driven morning growth truly centers? of sales? was solid my Epicel, and this quarter. Is sort of number in was nationwide

Gerard Michel

trailing this product. at on a look frequently It's term period, confident the your I I here. going it's coffee, double-digit don't Long best two we're say, cry for over growth think if – quarter bounce way we're up. to to and champagne there any pop the going the to single-digit over four way don't bottles, low it's map to quarter, all down factors if

over that takes because will terribly going use to the we to trend know plenty not market confident And time surgeons and changing but line very steep [Technical We're as to any the time product Difficulty] train you addressable you have still is practice penetrate. this. how surgeon's to have of be

years, any confidently at multiple patients the going the I drive you see line [Technical driver continued mentioned. for all guys to over I particular growth centers, this say to But levels can't it's and more anything. more we and quarter bounce So Difficulty] going it's

Chad Messer

is that it bit rounding your looks than margins a about? quarter? just error? about but XX% just you've historical margins, another a right. that a Or rate guess kind faster with. costs headache in for past margin of one gross incremental gross your this incremental approximately even All high-quality the improving dealing I know in it's an talked that at to Are by like gross we'll you on keep I sales good a talked problem have Maybe beat XX% you've

Gerard Michel

than we're team But perhaps manufacturing little in we've our realm for guided a to we where here I want got bit confident could to guide achieve. better I think and They've a that.

going marginal cost revenue XX% dollar. I'm So, and the marginal -- to

Chad Messer

And right. All Great. congratulations again.

Operator

Your Jeffrey line Cohen next Landenburg question comes of Thalmann. the from with

Jeffrey Cohen

Hi, Nick are and Gerard. you? How

Nick Colangelo

you Hey, going bit sales to that you the going expanded the – sticks I around the force to Good. again. Is like But territories? and a to more going number are Or wanted am million-plus you thinking I talk done quarters? out – versus in cases Thanks. of few coming which over the Or re-trigger do the kind seems quarters, population realigning? you circle be about to it little on about it MACI get are you're a territories? grows I how you're that? could of for if mean the where marketplace? one what What And more you a how you'll doing now you're change? how does there And think about having after being rep in are of that know out doing you a

Gerard Michel

Yes.

above, thanks. Jeff a It's all right. bit the So, of of little

mentioned what's things. you it earlier sales years the there's I certainly involves some three done the As the as a really to when Number one workload previous this increase driving support is cases. two always activity force we've realignment,

target the audience up to current reaching that the within we target of were the additional goes as the for volume need sales equation, keep audience with which other frequency. even is and part up appropriate focus your And add on our going to to representatives to business

our audience. And going our increase to to do able for be up to just current we to force end so sales target having that were

identified additional did surgeons after. do repair, of an we open productive think a know you of year procedures targets past group cartilage we our large project that high-volume the a and go do to As and over

think on and we driving the the really number reach forecasted plus different that's volumes productive. ultimate So what's the are that segments frequency

years. we've done And straightforward the in pretty so past few it's like much

Jeffrey Cohen

Okay.

up as progresses? So it it you'll step continue to

Gerard Michel

Yeah.

to I for one last think us was a this intended while.

anticipate year. increased We certainly to next year. we've every having do So that don't

Jeffrey Cohen

it Perfect. me. then And Okay. for -- that does

answer questions. Thanks much. very You my other

Operator

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

Swayampakula Ramakanth

increase to from to were the for you biopsies four This quarters the RK A future. XX% the that trying of questions. in in through I'm quick understand last increase couple think like Wainwright. in and stating how H.C. is the about biopsies just

this that's is sports docs? the increase As you medicine coming increase indicator, like said that a but from leading

Because surgeons quarters. I'm the you your you're to just well medicine were target to of the as that increase the sports docs orthopedic let that last as couple in to audience trying talking trying about from

MACI? audience anticipating So how And is this? how Or orthopedic you – surgeons? are for of acceptable about how think as move you sort an what easily are to to we increase should you increase when they target the this --

Nick Colangelo

Yes. RK, is This Nick. let just clarify. me

we quarters number have said compared So four the saw to increase biopsies over that in period. the what a past the sent prior in of XX% we surgeons was,

So those biopsying are surgeons, biopsies. not

engage indicator And think leading with as we Gerard mentioned, as these brand. the a good surgeons that's

lag As between biopsies there's a often time implants. time and you know between meaningful biopsies and lag

metric the it's engaging with to and their in it making So say, we how best part MACI and many algorithm. are MACI treatment think surgeons of

you that so And gave metric. that's why we

the In open not, audience using medicine surgeons a on themselves do who of terms sports or are as and really call larger amount they surgeons focused of of MACI. capable repair whether cartilage who perfectly large procedures we mentioned, we do

we years -- target so in with of surgeons the to in have X,XXX room of point there's audience we a ahead. lot grow is who a of the a think And sent X,XXX out biopsy that

Swayampakula Ramakanth

you. Thank

also still I'm has the it point waiting as -- the and the any about started you EAP the Epicel on NexoBrid thinking you with it brought has quarter and to in are is actually Or this at at preparation all? for initiate your on Regarding this therapy patients that, patient? been growth EAP paper

that -- I'm of same about centers then your at potential as with some Epicel? NexoBrid use coming And well conversations the time, from growth as Epicel is could the also thinking

Gerard Michel

Yes.

to study NexoBrid educate study BLA the for with with on the [Technical next engaging will MediWound are which is quarter Difficulty] next as partners we're on how setting. So by our which a in we're Difficulty] -- of planning know year you docs second [Technical the use centers product

perspective conversations believe a we We to burn not in but centers. longer-term will the more a in synergistically just there involved in with promoting you can't not fashion. burn are individuals Epicel revenue primarily, do a that engage clinical have center presence do increased from those tight that of perspective as actively from Obviously NexoBrid NexoBrid opportunities

They there. who the next will be that very who be Epicel, go will occasionally growth primary to severe will patients are for but driver

more it for what will think in more will be having larger that I conversation a opportunities be business drives our and just force Epicel having sales from NexoBrid bag.

Swayampakula Ramakanth

Thank you taking the for question.

Operator

at And no questions time. the to would to Nick conference showing I'm like I further this Colangelo. turn back

Nick Colangelo

for thank interest Well and that Vericel. lies years Obviously we about in questions the ahead excited continued another really to Okay. had you business the your outstanding for quarter our we're and opportunities come. in growth

a and again thanks So have great day.

Operator

Ladies this have wonderful concludes and a participation day. conference. gentlemen today's you for Thank and

may all disconnect. You

Vericel (VCEL) 5 Nov 192019 Q3 Earnings call transcript