VCEL - Earnings call transcript Q4 2019

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Operator

Hello, ladies and gentlemen, and welcome to the Vericel Fourth Quarter 2019 Earnings Conference 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. ahead. go Please

Gerard Michel

and Quarter operator, results. everyone. to Welcome Thank Conference good call Fourth XXXX financial to Vericel's you, morning, discuss our

Before fully projections forward-looking remind we we actual and Act of Private may me on website. all Reform statements today. risks begin, and available call, more of represent and today's cause judgment our Securities These you Litigation are will forward-looking could covered expectations statements from statements also that involve our making XXXX, under the and the results be let of with differ as that to are filings SEC, in described uncertainties which our on our

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

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

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

Dominick Colangelo

Gerard, and everyone. good morning, you, Thank

and revenues another fourth $XX.X and added which a XXXX. Our reflect finish year million of the new product significant the $XXX.X strong exciting quarter during for We an results the record for million profit portfolio. company, we to achieved deliver quarter to full and continued year great revenue growth our fourth in to for

for we year quarter. growth and net for Epicel a to increased income $X.X continued up of largely solid which year. revenue as third in by the Epicel. strong strong of quarter million of also profits XX% record uptake XX% year, This revenues marking XXXX, XX% XX% growth drove revenue the with generated MACI, fourth revenues double-digit quarterly year for had for compared consecutive driven full had Total of growth the full the the

adjusted of NexoBrid cash the of Moreover, license the million company income net upfront first XXXX. million and million the excluding generated our payment. $XX.X excluding full license balance marks increased investments year for the $X.X payment, for we profitability $XX.X Importantly, in onetime XXXX the year. as

year demonstrate, beyond we one profit which XXXX being and revenue was continued solely high-growth As growth the anticipated NexoBrid in double-digit ahead launch together a expected story, sustained XXXX, landmark growth has of few these for Epicel for in with are a flow Vericel, we of results revenue for companies advanced revenue also high growth MACI, and strong years that as cash entering the ahead. substantial believe deliver to in we that growth XXXX the positioned with

million range announced $X expect revenue we full million, of earlier revenues $XXX approximately be BARDA's million NexoBrid. to emergency stockpile $XXX for from of As purchases of today, in year XXXX we total including the to resulting

surgeons significant broad MACI Gerard increasingly will symptomatic X,XXX cartilage our represents treatment our due moment. in surgeon surgeons ahead a algorithm. the This new that we is customer maintain treatment as XXXX. double-digit of of expanded of by MACI in MACI's surgeons an fact opportunity X/X cartilage years providing received include for X,XXX their adopting growth group XX% who continuing an the provide to broad XXXX, base in This part roughly preferred was reflected details from further audience, of regarding expand focal XXXX adoption nearly large XXXX part our in as with increase large target guidance repair defects. for strong in a biopsies financial a over growth to by to

sales quarter, opportunity, XX force we the initiated this fourth from on capitalize territories. expansion To to MACI in the XX

new efforts a quarter. we're expected, remain the hired representatives recruiting deployed on-boarding and and of candidates, the field start have and second of the at high-quality attracting our the in to pool sizable we on As track

will much in to our current the MACI. representatives, of of development for the year second account delivering be to the half in the we years our business large in market revenue do and will efforts growth result the new strong and from we XXXX key the incremental continue ahead addressable representatives While drive growth uptake yield of as expect that underpenetrated

placing burn the of year another an number Care treated, in Turning of solid patients biopsies to numbers our centers orders increase number in of placed of all driven to and XXXX. franchise. and by had orders, growth, the sending the Epicel compared

our team care to significantly the to the market underpenetrated for severe the market. drive and large continue we'll add expand and addressable scale in burn to burn both uptake Upon will franchise, approval, care care for NexoBrid burn products

of and leadership, be a key driver the Expanded of the physicians mid-XXXX. Access at FDA which commercialization health advocacy believe to to excellence from team NexoBrid new awareness, year of overall Treatment BLA, should will Epicel in of representatives in patients NexoBrid preparation Nexobrid we've sales review in specialists, to the treat U.S. will for prior enhance in quarter, Under U.S. experience NEXT, XX upon uptake the NEXT XX expanded sales of and or initiation the and the NexoBrid, clinical generate and growth the of expand and to the the XXXX. approval. States up In X Protocol we trained submit we this during burn plan NexoBrid we which Epicel at providers fourth believe sites care additional the the United to announced which of number to we Centers

more NexoBrid initiated the preparedness patients. I'll We public over burn to guidance. national involving provide also emergencies the for on call now financial and our emergency turn to XXXX Gerard details the announced quarter on to has procurement additional health for stockpile increase financial details of fourth that BARDA results

Gerard Michel

and to for for reported total million $XXX.X of of quarter XX% full Thanks, year the growth in quarter the and compared the million We $XX.X representing fourth Nick. revenues for the year, XX% XXXX.

year, and full point for quarter the XX% full basis improvement margin for a versus gross Our the year XXX XXXX. was XX% for the

income operating or was in the fourth growth. Our $X.X million quarter XX%

quarter $X.XX of $X.X income share or compared $X.XX delivered in share income the million of per for per XXXX. of net net We quarter million or to fourth the $X.X

$XX.X million for NexoBrid payment this upfront Excluding the license.

flow. compensation, grew NexoBrid XXXX. is $XX.X you Our which adjusted and compared or $X.XX a per depreciation loss Adjusted interest indicator by strong XXXX million or $X.X EBITDA for million a exclude This was was cash and payment, in if of share income our future net share year, of million to XXXX. investments cash in leading $XX per stock for And $X.XX the excludes noncash over $X.X million.

a to in call. GAAP release press measures and of slides supporting You reconciliation our non-GAAP today's can find

million Turning $XXX to $X net the million, approximately the year NexoBrid. from revenue of revenues financial emergency to including guidance for XXXX, we in of BARDAs stockpile of expect $XXX be range million total purchase to for

and growth of to the Epicel of full both XXXX for to quarter first is first quarter high quarter in year each for MACI XXXX. compared quarter We XX% same range be low in in XXXX. the the in expected of $X.X of the million revenue single approximately revenue expect versus revenue growth the to double-digit

the million of time stockpile the The of purchases, profit manufacturing XXXX. start X contributed second updated occur an the procurement low remaining BARDA quarter the our approximately has revenue line gross marginal $X EBITDA, we regarding contributed share will million occur from MediWound and expect in will of our in has now XX% launch and call costs, across XX% adjusted received quarters approximately which of MACI, given of balance marginal to of of for Since $X.X each and revenue of the XXXX. XXXX, equally NexoBrid we procurement revenue to of and products Finally, focused premium-priced revenue points.

margin beyond in XX% dollar gross of quarter revenue over XX% each due gross for being the marginal or gross contribution to approach margin to reach full profit. in or seasonality. prior translating We Accordingly, and into the a expect with XXXX for given higher to XXXX maintain the expect year marginal revenue lower we with increased year quarter to profit revenue gross

beyond, our and of into $XX million NexoBrid and to adjusted to increased rate for full to of In includes adjusted and year by $X price increase revenue largely EBITDA the approximately and million to of the $XX.X share marginal the compensation, each prior Epicel is share-based to are $XX increased related similar EBITDA. activities a or depreciation. increased in MACI we the and expenses to Excluding expected translating forces more a XXXX operating expect million as the since increase with driven dollar payment launch result million. $X XXXX increase approximately of expansion contribution year XX% revenue in XXXX, a MediWound to pre-launch quarter, This of MACI million over sales seen return expenses marginal of

remarks. prepared our concludes That

XXXX our results presentation our the provides fourth guidance. call including reminder, a As of available financial on highlights website quarter today's and

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

Operator

Instructions]. [Operator

of comes line with from BTIG. Your the Ryan first question Zimmerman

Ryan Zimmerman

So I if with wanted could. the start guidance for to we XXXX

Just puts could the that the follow-up. increase assume I new board a guidance. guidance from assumptions the underlying are the kind the adoption? the or takes Does maybe of through have new Gerard, year? a coming are talk from What And and you on the contribution on reps about Nick implied maybe MACI of of price MACI? balance physician then And

Gerard Michel

Okay, Ryan, you. Sure. thank

back-end Then rely well send docs. assumptions behavior to the of the of docs, biopsies seen near in as on of terms built assumptions, into part year, date. of make well of set certain biopsying number we've biopsy Ryan, for the about increasing mid- as the in, of you number we the in know, the come So for we the existing as year, heavily

been of docs, is XX% had We now mentioned. that's metric Nick new have the leading giving biopsying number right what of the

stay that about forecast. biopsies same. important are, So we per factor. doc average they conversion And the the We the other for about maintain assume assumption a core assume rates that's where which number is the of

assume course, variety analysis that one same. Of but way maybe or Carlo we tweak a another, or can type roughly we of the you about Monte just have

we and several to quarters sales, get In the terms contribution take make significant running a from up of to really the difference. expect them new reps, the and

near of by be in term. the think already the development difference. year from year, this the this the going they to come put already think business reps and and have a efforts growth that end of in, existing making is they've will the But put I bulk the we'll I primarily

Ryan Zimmerman

the apologize then, could And there quarter, clarify fourth? does should the to second $X this, the million for $X.X if cadence the is Okay. $X BARDA, number just million. expect But stockpiling I in if And we the Gerard, million -- something. heard you is timing. a clarify imply Just there. I on that third that in you missed I maybe just

Gerard Michel

$X.X little say economics. going a be get I $X gotten -- the MediWound a It's under I'll by million. to quarters. piece timeline that. of it's roughly quarter. has roughly are The That's back on the X are give agreement, It's one that. million Yes. pushed bit for quarter little really according a a of ones the we color -- On to and that BARDA why

to delay which lot so, it to, into to need I put whenever all is to for quarter. procurement As pushed -- that's hasn't But spite logistical to need the that's out it, of be to is there starting overall the processes emergency. purchased and a available. use. going changed, an a needs rapidly be in have -- that needed a just sorted imported one of need amount of the stockpile label a ironed of out the products out set understand or commercial prior And emergency result be it's There country. be day details to the slight the It gotten within awful up they start a of together It special stockpile. get isn't to place, in the that you

Operator

comes question SVB Leerink. next Danielle from The with Antalffy

Danielle Antalffy

follow-up on a solid year. to on Gerard for guidance second Congrats here. wanted a just the

talked about XXXX. XX% grow biopsies seeing you So in

bit isn't growth I be from a there Just think so more why little in would the assuming conversion for down -- was a step changing? if rate clarity helpful. XXXX are it you that MACI

Gerard Michel

Yes.

number the of we we docs. XX% saw said biopsying a in So increase

indicator gave. that's we So leading the

MACI. So XX% -- to and growth guiding for we're about

going always crystal line. come But into little out a are So have We to things seen It's good turn we've a cushion one we're the year. again, to using that's know here and don't of perfect the date. biopsies there in bit maybe ball. get for because a doesn't where

rate board roughly on those into that look model. about given we've in we've that, to back date front new the of which certain the haven't on kind help have of of again, the number the heavily we end but year, assumptions we're come using of of to biopsying, rate at a and biopsying end our come conversion, constant biopsies held number year. We model seen In the make docs the the to of

Danielle Antalffy

on direct-to-patient Okay. then talked in Got rate, it. initiative. past have conversion And you the guys the about the

I bit trying of that. Just you with If what, Are to to now, sense the XX months little progressing of continued correctly, seeing the up initiative? rate. that's how think I that, I'm a where you we're conversion in a relates seeing you had that conversion stand thought XX a rate? it get into remembering as with success been tick to

Dominick Colangelo

Yes.

in this sort quarters around And that sort are you to over the now. into can it effective the process the of program. about research of long from we pleased as of consents term. Danielle, communicating we're Thanks growth how mentioned, implementing So, of doing we're optimizing we is seeing We're question. rate in capture and still most now the market X terms be patients Nick. for drive very and with And patients probably probably, of

As a is hand about take biopsy, we've number rate they their conversion a new until of and when X lot are do talked entering fold Obviously, first surgeons implant. first the when MACI. they a adopting who significant the you

here. a current at we of norms, increase we the able So that We believe, conversion the have expect to over bounced around time. kind increase moving the we'll It's bunch rates to that parts time. do time, over historical of certainly but be

Operator

Oppenheimer. from And your Kevin next with comes DeGeeter question

Kevin DeGeeter

here. Epicel Maybe Congratulations. guidance Staying here. to theme of turn a I'll bit on

What change? guess, How deeper accounts? Is As seeing? the I year. can of of incremental And we to about your regard burn you in or just about, growth kind there you expansion Epicel into or XX% for much take, of market? guide of, that competitive next landscape any with versus existing comment give burn centers kind think generally are is

Gerard Michel

Because the glad actually to thanks guidance we Epicel. we slip the for before. difficult investors. that because gave And a we bit and for haven't And little analysts done at us recognize for frankly, question, for times something asked transcript question is this how the Yes, Kevin, actually in I'm XX% model the of quarter, it. and first that you about we here

So we how the quarter of have some first out. turning is visibility

you So growth make say of to for to And products we're the since a of Epicel double we on guidance. we anything moving, into quarter. Epicel different single for on assumptions. probably erring for in We the do didn't baked But digits said are for full mid-high growth side you year mid- variety Granted, back X the mid-high if conservatism guidance. that low the get would can calculation, Epicel for first call. in you to the probably digits have our

in Now terms of...

Kevin DeGeeter

-- go then And Great. a maybe bit ahead, little Gerard.

Gerard Michel

of color will business little where from. bit A Well. on the come

expanded a just of out number with model where focused very in the salesforce field come from and have in other subset supporting using institutions think It's been increase the slow new selling. but steady a personnel I the we to it'll continue on product. cases steady subset there more of the institutions -- the

the these for I product confident sites think number -- see a it's will again, given we burn again, on where this side because, terribly like But it's an number time, are we the will conservative it small quarter-to-quarter that a of so see continue life-saving increase product. to to it difficult percent in small heading. to expansion is add over for But we'd the using patients. very of product,

Kevin DeGeeter

competitive landscape? just And on the then

Gerard Michel

Sure.

overlap, don't say you're a the see them. it's out treat, but the we're worst patients, Avita's, maybe don't worst a based the for burns, TBSA I That not from I not ample different in we strong lower docs don't pressure. there, is we competitive it product of likelihood. real the in think, XX% -- That's product which tools is the referring patients market to On which RECELL, we think to much treating all which or I XX% for very good good see any on is but competitive landscape, is really pressure

Kevin DeGeeter

in and a do some to training got should actually And -- how pertains Protocol, gets follow-up just remind your you Protocol? surgeon the incorporate probably with does Vericel NEXT NEXT And NexoBrid. to Can surgeons, think under it's into sort essentially separate of XXXX. you feedback more the regard that ability it. somewhat how experience pre-commercialization then the us about Got terms of of we to learning but maybe year, much this

Dominick Colangelo

great is question, the is subcontract this We Nick. we this through have and a certainly Yes. of hired, That's BARDA. actually do part Kevin, --

the One NEXT for Protocol. of the managers recruiting clinical

product. feedback up early shortly. sites fully of up sites by direct surgeon for to the probably have we will We now get quarter the clearly running dozen So end the a ramping on NEXT the XX the still in or Protocol. be with and experience It's and XX up XX

approval. so the opportunity we And the the involved see able we'll up in be on the patients, we'll a to of And very will sites be up XX very product. and feedback impact an at on running, to sites, with number running experience and upon We be have have pre-commercialization. getting obviously, treating that uptake believe meaningful getting much

Operator

And question line Jeffrey Thalmann. your with of Ladenburg comes from next Cohen the

Jeffrey Cohen

Just two questions.

just Gerard, that jump How a are receivables look kind look in of XXXX? for the it? So And on what firstly, does forward maybe now?

Gerard Michel

given In fourth valuing terms of a that highest kind quarter, quarter cadence. natural is of receivables, our well,

fourth last quarter for So you'll several the see every a similar years. pop

Jeffrey Cohen

Yes.

facilities, also XX as into the And you they utilization thinking is could docs of centers? about about you're per into how you as Are facilities? sales and XXXX? And talk MACI rolling then that or XX force? out trends covering And kind how per the secondly, far reach Okay. sales organization

Gerard Michel

Yes.

two sales the of terms in MACI, X,XXX cover going sales of of docs with with procedures. expansion in So we're -- the force, the to our in the forces terms the XX, our highest of coverage cartilage

sales field with subset We the XX selling hard. doing there out based full personnel, subset, we have supporting actually care cover burns a Epicel, of In probably again, terms the the and can our force, other now XXX.

I but in to expanded higher much force. ones, burn the target think pretty with volume country we've XX every cover probably sales that can the center we are XX

Jeffrey Cohen

insight MACI And utilization the into trends from Okay. side? Any

Gerard Michel

Yes, we -- dramatically by physician. it varies

try who defects year. do some do physicians some a saw patient will have high at few type, year of a by a and location level, We a a say, basis. we track and such. I'd dozens biopsy and on And penetration dozens do we to

XX%, under implant have the We if X%, still I overall math TAM. correctly probably, XX% basis on an roughly penetration into do under my

way So go long for which to terms there of penetration, a long, a in surrogate is is utilization.

Dominick Colangelo

add Jeff, defined obviously penetration is what I'll And -- we've Yes. addressable biopsies referring patients that's Gerard implants. just target some was in year, a XX,XXX terms market to and of and of our

at about look that surge was mentioned X,XXX our to received we biopsies target we you audience expansion, X,XXX what If in surgeons. had this prior from

in So short that's time. of period a a good penetration relatively number pretty

the side, us as whole moving a of forward. lot On X,XXX target to expand surgeons, gives headroom flip it we

Jeffrey Cohen

it. focuses very spaces there, any That's on there? to activities Got be? Any helpful. like And you'd out M&A? then Any lastly, commentary out that

Dominick Colangelo

products commercial are in That's we burn medicine about areas talked before, franchises focus principal existing we've as and adding care Well, that sports X there the to markets. our on.

position those one be pretty are Financial And of We assets. to technically So as talked areas. the spaces. to in maintain highly and need having products de-risked the highly look innovative portfolios about, also at most in hurdles innovative met we've our then high. we as hurdles continue our to want

sense also it have we complement already. high-growth it to but to when to we're So if portfolio and do so. will fortunate a That continue makes look,

company to we deals X with we as therapies the and that will we And often cell make sense therapy high make the if again, verticals products. area only at, we say, for in establish third The they opportunities standards. approved sure obviously, But our cell advanced when want at new country. again, meet And look do look with us. do we we're to other those

Operator

of Sean comes And the H.C. question Lee your Wainwright. from line with next

Sean Lee

I year. ones. on the just Congratulations two most my of have have questions answered. been of just end -- a great I quick

the we need So for couple that of the can you to NexoBrid, which months. What BLA, in expect the complete then? still before steps are next

Dominick Colangelo

of in it's each modules, and modules. extensive QC-ing pretty There Well, those and offer of of straightforward then a the sections process. is BLA an amount

do. And essentially to what's left so that's

As we into report, included XX-month earlier, to the we need obviously, is BLA. did -- for we've then study and also safety that mentioned into incorporated follow-up is clinical the wait data a which

So it's high-quality to you make just the been approach straightforward a tasks. the really probability complex on that's who's end process. the with you And relatively approval. at And partner, day, with a this that pretty focused the a anyone through set it's now, sure are want we're MediWound. It's taking of our of highest for submission

Sean Lee

And far second think, of your is, in I prepared question Great. you XX% approximately send in so mentioned the biopsies. remarks, my that has audience target

programs So place, rest to have specific out reach you help for in market? of the do any the

Dominick Colangelo

Yes.

So target that's expansion. part of our

through XXXX fall. X,XXX X,XXX have we surgeon as from about population talked expanded We've target our and into to So surgeons. the

So frequency reps X,XXX reach target sure is each X,XXX and The force XX that sales whole is increasing have the make on of about appropriate XX%. for we XX our to from reps surgeons. purpose to of out

deeper that that's into penetration surgeon plan for target So the audience.

Sean Lee

is, and on I trend cost of my provide lines year? question little could you see. And bit this color a expectations for final

Gerard Michel

Sure.

assuming trend to XX% cost profit the I of every gross marginal fall keep dollar the cost line. that the terms we marginal of the on said other lines, In revenue should think manufacturing in XX%, dollar before, or just words, I cost on is revenue basis, as

of MediWound XXXX, price items. driven before, increased that's XXXX prelaunch to that NexoBrid to and by full expected to result This a XXXX you note related important sales excluding $XX In the our mentioned million. of are $X I $XX.X share comp, to the It's year noncash operating million million share-based would depreciation. in $XX as our for that, terms Epicel over expenses by include increase increase what is, margin, largely expansion of approximately operating $X increase, of I activities point in the increase as some to to payment expenses forces in and million and important a and million MACI

So to a expenses, a of that rate MACI. marginal fashion of kind obviously, in to year. are expect operating In we return contribution revenue adjusted similar step we've XXXX, the cost of seen growing since launch do -- to EBITDA's next the

So of that's or of dollar marginal hitting XX% more EBITDA XXXX each that that line, about will in to and -- beyond. revenue return and the

Operator

Instructions]. Zimmerman [Operator And we with have a follow-up BTIG. Ryan question from

Ryan Zimmerman

a for Just more few me.

You commented on XX%. the being MACI guidance

about It's been a didn't the talk Epicel and business. topic and MACI for for You overall before seasonality. both

And so in a I seasonality saw essentially have guidance? what I follow-ups. of want result line MACI is a the that as couple are in then to just understand, And of you with other to assume 'XX we the

Gerard Michel

Yes. Yes, Ryan.

increase right each So the now, see expect guiding I seasonality said to we're another over year prior think, of we for the XX% the in for way, that in we in to MACI, XXXX. Or quarter -- see expect should quarter we year. -- approximately same saw same the this

Ryan Zimmerman

standpoint? of the trends potentially Okay. X,XXX, there so with you're comment physician you population been just kind on targeting And you Nick, surgeons out to But the training in training surgeons, if underlying overall wondering MACI from a asked, was you do training. the of then, that it's is I a of go touched there X,XXX on could lot

Dominick Colangelo

Yes.

trained a more indicator. ahead is really, the lagging of times training an mentioned online, ease number a given of a we've think kind on I Essentially procedure, the surgeons surgery. of that right iPad, of of can Ryan, So, be

of point from decided and biopsies make view I view take -- treatment with have we surgeons and algorithm. really the it's at So patients where engagement part to MACI the brand their

on really reasons. number focus biopsying less the So for of number the on a lot and trained we surgeons surgeons of those

Gerard Michel

of if would track the you the look docs to come they less I kind metrics at new board. on more or training say

Operator

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

Dominick Colangelo

your profit day, in very our another continued flow great in a and years just Well, interest say, in with for the about Have questions thank wanted excited Vericel. your business for opportunities thanks and obviously cash to you. XXXX We're Okay. and and strong our growth I revenue, ahead. pleased year

Operator

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

may You all disconnect.

Vericel (VCEL) 25 Feb 202019 Q4 Earnings call transcript