VCEL - Earnings call transcript Q1 2022

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Vericel's First Quarter 2022 Conference Call. [Operator Instructions]. I will now turn the conference call over to Eric Burns, Vericel's Head of Financial Planning and Analysis and Investor Relations.

Eric Burns

Thank you, operator, and good morning, everyone. Quarter business Call highlights. First financial discuss Vericel's and results to XXXX to Conference our Welcome

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

views our am Executive this our only of addition, any all and results represent In Officer, with the Vericel's over and short President Dominick relied a joined Officer, Joe by representing statements turn should press and as subsequent call highlights our that Nick. a be financial today's presentation views website. as to not of on note forward-looking Mara. today are on of call our Chief Chief copy release call Colangelo, available date. "Nick" and upon on Please now Financial I'll I as our

Dominick Colangelo

year financial flow. of expansion revenue and The significant and margin such, particularly very you, continued remains year call for opening everyone. and financial COVID-XX, more for the today's operational call guidance rest financial detailed the start reaffirming of the before by impact discussing year quarter our our as turn pleased medicine then the for we're I'll half business Joe to we're deliver growth, operating track burn quarter guidance. the and year morning, the to company highlights our Thank call and expectations the with despite XXXX first our financial of full begin sports to over first Good quarter. first cash to Q&A. another the on for in both and Eric, franchises And and and of review the across a performance Overall, care performance our of

we planned Epicel on financial progress BLA. programs a key first for of And the remain net significant the and both franchises. X% make quarter, growth we to continue resubmission importantly, MACI compared for the of clinical $XX million NexoBrid regulatory also perspective, We approximately midyear and of for track From quarter total to generated product which for XXXX. first the total revenue represents revenue on

strong of operating $XX maintained first the of cash and as seventh also quarter XXXX. commercial We quarter. a the positive X% EBITDA our to above in From profitability adjusted came flow our quarter compared generated for guidance, first profile MACI consecutive perspective, we revenue million increasing

market, period. Importantly, overall outperformed based repair MACI market over the cartilage declined procedure significantly the digits double same on which data, we by estimate

March we In taking of MACI quarter the in MACI. double-digit highest generated addition, monthly and second since in biopsy first compared volume the of to generated launch XXXX surgeons biopsies growth the

even to more of for burn U.S. report Sales. our our million. of as increasing revenue such, Prior revenue morning, Epicel deeper the continue high-performing And run President Commercial join initiatives line team to the team biopsies on this a greater Roland higher had to Mike centers with conversion Prior we focus Epicel our Epicel Vice Operations, joining perspective, high we March. year Nephew, team From environment President Vericel the drivers the Biologics our $X.X remainder $XX outstanding to the in served I'm experience the of was years new Epicel expect in penetration these Mike and announced patient normalize with and year. represents and held and to rates. as National Sales med-tech our care approximately Vice brings and year, than biopsy Mike, to We're joins biopsies of Mike sales MACI recent we're we Stryker to to at Vericel, business acceleration XX% Nephew. reaffirming and record of and we Smith excited Vericel XX guidance confident growth practice during of as We expanded achieving overall experience monthly lead commercial revenue to appointment leadership as sixth leadership with full have as compared our adding DeAngelis, surgeons, leadership key for patients of will operational Mike the strong Gilligan MACI health commercial strong for over over the & medicine continue the he after at to play Head second the benefits and acumen than for pharmaceutical growth an MACI of drive who as fundamentals we as MACI MACI will patients the and taking Mike that The for very MACI & more remained extensive last and also MACI industries. years of growth continue strong drivers a career at treating commercial in bringing sales growth field, and half as marketing beginning his skills behavior of significant an trends ahead. the that Smith integral of to of quarter in strong in the roles surgeons million in consecutive growth role Pfizer. year. sports in rate

Turning to our pipeline.

BLA, of several potential care for exciting thermal we medical and with position approval by the launch we're a have the of year. has for balance for resubmission leadership the change XXXX. for this standard successful commercial potential NexoBrid which ahead execution Based of launch well to the on believe record teams, track product midyear first for of important the for removal of a commercial upon milestones burns. positioned the remain which patients the a the half on We would product, burn eschar of and in track We strong care our severe

MACI year indication development planned for FDA with strong arthroscopic remain years the this track to We advance that on we the our initiatives ankle management initiatives MACI continued support discussions also later for continue and ahead. both programs, in believe will review important lifecycle growth and to

new manufacturing company year. plans manufacturing and the demonstrates and Epicel quarter increase commercial first state-of-the-art XXXX, manufacturing facility. in announced for new trajectory to years our significantly in strong ahead. therapy a during and Finally, a The capacity the the facility, is confidence we're month last our MACI the cell to in expected and pleased ground corporate will to continued headquarters' begin start advanced In growth broke which summary, of the had have

programs our remain turn franchises. quarter year make and discuss to first our over the we to and I'll both Our another of expectations Joe on significant progress for for call for of results. track, now both important continue regulatory Epicel clinical MACI and growth financial to on

Joseph Mara

the $X.X Total Epicel million Thanks, and $XX.X net income Nick, revenue million for revenue related million quarter of was response revenue of comprised MACI BARDA was everyone. Good the $X.X with emergency of for of procurement and of morning, and $XX and the by to statement. Starting preparedness. revenue million NexoBrid

or similar primarily due Net of a the in $X.X $X.XX for was for million net to share that compensation million X% of the $X.XX first or the $X.X million XXXX. net expenses EBITDA million XXXX. quarter now the period loss per the to was quarter a the $XX.X or initial of in BARDA-related for the operating expense. stock expect of net expenses The have $X.X $XX.X of final share we profit adjusted quarter compared noncash the represent margin compared for per to to similar quarter in quarter order of or higher loss revenue We were was same for million operating quarter XXXX. for consecutive increase gross positive which $XX.X first importantly, quarter this quarter, the EBITDA. second is of was seventh generated adjusted amount BARDA's revenue, procurement. XX% Non-GAAP revenue. And the the for for Gross million XX% Total

flow we and generated the operating quarter approximately $XXX restricted approximately of cash, $X.X Finally, no cash and cash investments QX debt. with ended million million and in we in

financial our to guidance. Turning

gross financial for full adjusted We are for EBITDA our guidance operating expenses XXXX maintaining margin. and year revenue, margin,

million to million gross of We in million, $XXX operating of be approximately $XXX margin to $XXX expect XX% of expenses the to range full and total revenue year $XXX million.

approximately full represent in XXXX. $XX be margin approximately million the non-GAAP which We in to for adjusted would expect EBITDA EBITDA adjusted year XX%,

of continue For full to million anticipate we MACI, revenue $XXX year $XXX million. to

concludes XX% In approximately more full terms second our of quarter, QX XXXX will winter we QX recent the COVID-related remarks. growth run of MACI versus QX significantly remain from per revenue this our quarterly that approximately And comparison we difficult as the last in million despite revenue, of trends a and coming expect MACI's in Epicel, revenues with out the QX QX of year-over-year rates year now year seasonality anticipate imply surge. growth This would our sequential of and quarter. $XX for line continued to volumes year in prepared which increased

to questions. call the open your will We

Operator

Instructions]. [Operator

Zimmerman question comes first BTIG. Our Ryan from with

Ryan Zimmerman

A me. couple for

Just entered remaining do million how quarter. to kind think impacted on is of the -- year? with what talk I'm estimate about Nick How backlog. want and much of you recaptured about $XX Joe, could And in comment the the year, think if this for in wondering of you I you results? much you And that you first balance

Joseph Mara

question. for the Thanks This Joe. is

the impacts. particular start I first year, certainly cetera. would We of with the Omicron et backlog, year the the quarter COVID the in reminder, at continued just the of a as we On really the say, half had started variants,

I say first again, perspective a QX, cetera, full remains would of from but did the changed I of the the backlog. from backlog expectations come kind perspective, hasn't kind track. And quarter. in HX, bit et on So, HX, point ahead meaningfully We in of to in in really wouldn't our a year

Ryan Zimmerman

guidance me $XX And but in I the about in that roughly, it the implies I'm second comment quarter. if math million right, change for if for for think doing about on MACI XX% MACI and correct the the and year wrong, I'm Okay. Joe,

this help kind $X you so so unchanged. of beat me by or quarter understand million MACI. on Guidance is And

is what rest MACI. back quarter thinking And about back into of below us You're think, half you're couple of the for the in on year, particularly you're or of seeing implying, we understand the consensus for to help of how year move I second half. million as the guidance a what the kind

Joseph Mara

chime and can if I'll as in like. Nick well Yes, start he

So, first I off, you're think right.

bit question, guidance a of $X Again, into guidance. our first for million little and over your MACI, in quarters was think kind each $XX question. a is of the back what the little was it and about plays year second which really of a where we're strong midpoint million over the the seeing about ahead to the the bit anticipated, to So, half of just we QX change quarter, and bit midpoint, in at

full the year in So, our the that I would anticipated. did changed. come view a higher of by and not than has of But our saying half bit start first view

just you to QX for early XX%, ended that a, And under a a and percentage reiterate, the that you year-over-year came last at the about of we kind first QX you as the year, QX, XX% of of again, that of to did ahead which the XX% comparison. on in winter just have particularly about QX, add expectations, out XX% XX% strong get half for If think of in we coming year, in up QX, based part that comment. pull-through, at of revenue impacts as the bit surge some

majority even kind of in the see year. about of last basis. half, some will year, looking impacted revenue the kind But you at certainly be COVID kind the similar look you where second we due comps expect of if at we to we talked the of of as that the is MACI the balance quarter to acceleration by what of the halves on So, you're just to or continue an year-over-year quarters a as of

really of it you helpful I over guidance years it's is our without in all really remains still the the of do XX% kind noise COVID though what XXXX, if at second you a the quarter-to-quarter the HX back, cleanest the think which couple versus growth HX actually or in even look half, more is we're the from half ahead XX%. And there if in half. you half, kind kind first math, see whereas of roughly like XXXX; of by it's of comp

of of et kind system, market, in bit look you a care but XXXX, health are kind improvements the is when assuming there some it at step-up we are procedures, cetera. the So, of a

would at So, in guidance certainly where year. but the QX say we're early I still year, is perspective, in point I this the relatively think pleased a from is, it

market. [indiscernible] broader impacts and in We the want seen we to health have kind the what's happening eye of COVID some keep and also system care an on

Operator

Our is Securities. from Antalffy next question Danielle with SVB

Danielle Antalffy

on ongoing a the good despite Congrats here. quarter headwinds

guess comment you with momentum saw. even QX, that we assuming you still what's built you look Maybe the follow-up be seeing at in I COVID why year-over-year we are get the refill look a more some is COVID wouldn't meaningful another comparable, have, we are gating Just guys about I I Or actually as March into feels hopefully, you as the QX It the little still factor it impact? guess bit -- but have backlog guess question. incrementally like a can don't stronger? trends and that on I April. funnel? Ryan's on QX referral where, of surge? the you

Dominick Colangelo

see by biopsies was then And launch MACI through improvement, quarter, I'll was Joe But obviously, the we mentioned implants March. had start is of and sequential highest the that that first we first biopsies in Nick. impacted did we aware half throughout is add or certainly, this it and everybody Danielle, well. can as Omicron whether second comments the quarter. since

So, move through as clearly, improvements we the saw we quarter.

below As and into second everything we and was improvements still see on commented you market we we quarter, end move double it as I prior continue. But digits the we at the read to of expect the think day, was the the year. that those where

not the year. for still to just we that continue of outperforming second we're but market quarter, So, the expect and remainder the the

look throughout the sort and disruption QX. to to the you to XXXX see our this can alluded we showed comparisons strong of think very presentation trying you when year-over-year do QX that the where to, I quarterly back earnings point winter COVID, you wave recovery there was your Joe of as that have kind occurred in of

for revenues XX% second MACI think up I quarter. So, in were

So, to dynamics necessarily way look you quarter-over-quarter at just have aren't it. those the where comparisons

right XX% the we've Joe I think of in historically on around second half. half or what said XX% revenue the to, so we're alluded of year, with track sort in first as the

where tracking it's to. so And we it expect

Danielle Antalffy

of year, helpful. Okay. as the has conversion and COVID. the MACI look guess trending what we about a seeing we think I anything the suppressed from QX the that at from just That's perspective, How been back ahead been is the half how things has of the as during And year? to funnel, and referral into rate one look of that that you're to rest

Dominick Colangelo

Yes.

and you So, really how were highlighted XX%, and revenues we've at sort biopsy we growth as is look are XX% you had it of up and mentioned, the when is there converting. last year difference the biopsies

to on amount And that one say, expect that's see mentioned, year. the the where to so of Joe there of things a coming of quarter out improvement first throughout we was fair you're the I'd continue as disruption.

about expect that first see you that believe through to but we talked something improve, So, expect the move that's in necessarily we we've year quarter, but that normalize as the as before. wouldn't we will

Operator

Our be next Cooley question Stephens. is going with from to Chris

Christopher Cooley

one to there MACI, originally set But the then can for year. basically talked solid about resolve more the just bit clearly and of I'm correctly you start disruption assumed variabilities that we've franchise. a themselves. kind assumptions both any other from make the of the some me to a in or Maybe of high high same the range established thinking to to change essentially seen in make the the are the I changed the low things little now gears we end level and is and end to manner, if here. maybe sure what get COVID get want that this guidance, you just as of burn they've further into When want new underlying your year, the just on Congratulations sure kind the year, to to kind XQ. I of to for you modest we're new on range

So, follow-up. got make a then, I and understood I've low to to range, the quick wanted sure underlying assumptions just end that the high of the I

Joseph Mara

of as of anything changed. kind the a side really full changed kind mix year, came Yes. I of has about we the broadly mean fundamentally But think range year say Obviously, as scenarios I in as we bit that on expectations. talked I as has nothing think to on really MACI. of relative ahead well about we would kind of the speaking, don't QX

Christopher Cooley

was And drive accounts? additional Perfect. into with Could Level to that the we I many impressed U.S. growth maybe the if you gears not here then aren't Epicel, There and in there biopsies. helping to, in only really could what's switch the you burn centers just X these increase speak

what's looks accelerate the to trying within just patient? helping at $XX Just that of which existing I'm run more first it's envelope of of what here So, those greater supporting back broader math what's looks graphs better adoption utilization Maybe understanding and accounts. curious rate. kind million get like a per half,

Dominick Colangelo

It's Chris. Thanks, Yes. Nick.

Just particular from mentioned, any burn you treating a kind as Epicel, getting XX X- taking period, higher a of XX or are and burn at at those kind graftings as of talked really And any in we've XXX year, centers those consistently that's of the half about U.S. be the centers. step back And X-year or in often same and particular level centers, XX it's may patients. there's centers about accredited because biopsies we XX, centers not critical like to probably more probably are or in all patients on

performance, step-up couple about first to are drivers growth the think stepped into the per of take aligned sort year, forward of the on talked kind run will a and the would the in last in sort quarters we which We we then the And kind significant and kind would penetration up which and that of we've call increasing saw the commentary background. centers. year, into drivers last average expect continue last grafts hold. deeper was, especially new to again, right, in first expect So, much a of the quarter that's gave this going continue driver very that's kind a where quarter the growth We of just the of growth of very of around of then Joe a you that had as biopsies, rates year, of the increase we we into similar which level first of number where with had market sort of strong year those continued in patient. it going number be increasing to really number give seen centers, to we've of sort

are compared to those growth pointed drivers the that mentioned exact and the and of we're sort half we other to commercial factor seeing sales' to using that start And the centers sales year that Epicel around historical. that's that teams for medical So, last the of year. that the the of are back in goes back of the responsible the we to execution leadership number increasing and and what

Operator

from Our Ladenburg Cohen next question comes Thalmann. Jeffrey with

Jeffrey Cohen

both of throughout found Kind your they're rates to expectations? get as and So, two, and asked. they of quarter, you've sense Danielle guess conversion a first how what holding I for how well April I versus look again, on Ryan know, any I and wanted commentary maybe

Dominick Colangelo

rates you've said just injuries got earlier, what Yes. you these heal sort of so know, don't I themselves. been cartilage guess I as biopsies taken, I'll have -- where patients where right, repeat conversion

was will by system some of of disrupted of kind we the towards any progress in conversion norms. direction Omicron at So, back year or wouldn't through those point, as moves to the And expect treatment. sort those But in the substantial rates. seek we we quarter, move and in conversion normalization, and improves expect the variant, to which, we historical care patients health see the expect first these improvement improvement again, the rates

Jeffrey Cohen

Okay. And secondly for kind bit as the with side? Got to development guess, as little what commercial it. delivery in expect discuss? you of And the what FDA far you'd for franchise I anticipate ankle could the us, and arthroscopic a then, could the talk as we about also timing well

Dominick Colangelo

Yes.

the for at FDA always is and in we work Obviously, with to second remains would meetings FDA. it we the meet year. programs of to on So, about what There's the first half step clinical with perspective what last to go and get both this very with programs, to that's prep and share talked meet of in end year. much expect development line the prepared our the do request

here great teams to front. our on make so continuing progress And that are

perspective, we remain in the and articulated provide of on discussions. of that so half the on of And to then the would and characterized early of a XXXX an investors outcome second the to arthroscopic that FDA we half meet to as commercial delivery based we second plus. MACI update plan the year earlier decade, a those the sort From of schedule the we with analysts mid

so point. and half And study-clinical at ankle MACI study, knee require more hasn't therefore, summit that a that this program MACI indication. decade the of of of ankle the And looking would the sort study changed of for at kind potential MACI back you'd be

in line sort is of on track and everything with we have discussed previously. what So,

Jeffrey Cohen

then quick may. $XXX [indiscernible] for Perfect. And on guide that XXXX? Joe, X $XXX was if to for an OpEx range the million, I million Okay. ones

Joseph Mara

That's consistent where Yes, we the started year. correct.

has that not changed. So,

Jeffrey Cohen

looked always cadence fairly assessment? year any sequential. [indiscernible] like Is XXXX, the typically the Okay. secondly, margins throughout it And were then a commentary good you of on that

Joseph Mara

talk the mean, tend of in higher broadly with point mean the year. MACI you higher Yes. a year, on later kind basis, that margins more kind we do at I see I in to I kind full year particularly but of quarter think, speaking, the of

So, I kind of holds that in up. think general,

Operator

Truist. question next Brodovsky with Samuel Our from is

Samuel Brodovsky

quarter? the get more thinking to that see in one happen level? saw April we any [indiscernible]. a how what to When we market are versus of that for kind one, what progress XQ? And the did about in cartilage better then normalized Maybe more market First to repair through broadly, needs

Dominick Colangelo

question. the thanks for Sam, Yes,

of LexisNexis we've can as at So, and able so market form our market when market that market, kind we chondroplasty, of that's make of and February. microfracture, basis the view January before, we it obviously, look in commentaries comment talked or the was we're osteochondral dynamics, purchase data, allografts, about kind to on the and And of impacted MACI, significantly addressable basket. codes procedural sort

data the this the data in So right? March Now, lags, comes week. probably

the and January while and February for yet improvement So, April won't data comment we on where a now. in presumed have we on sort trends and is the estimate March, we in right based but a of market don't

do So, to I and to important we what to And that's I pre-COVID, for kind you outperformed of think backdrop COVID, market on call, the need is very broadly a during MACI market what see repeat the just last said the expect get it will market post-COVID. back sort significant Delta of was the sort last again. as activity declines normalization activity. and Omicron and to we that then of in market saw patient of waves QX, a and had and And approach levels, pre-COVID abated starting you variants, flow year. from saw COVID you perspective, to

yet, are the environment markets I the see health XX% patient double-digit, back quite as you down, you'll really gap. in starting activity care think close probably industry pre-COVID So, other volumes to return. levels think any see that And market that I just where to different almost- than not starts that not probably normalize, to it's maybe

Samuel Brodovsky

in terms of seeing just and cartilage Got terms be of helpful. Any market. more keeping repair in more reps? difficulty interest whether other the or maybe activity you're anything one, and docs competitive That's another it in from then it. updates And on there, products the

Dominick Colangelo

laid option of launch its has and the was year, Agili-C, acquire of plans Agili-C out kind then year this Bioventus exercised to company and recently approved more according Obviously, sort to Yes. for launch and commentary. soft their next fulsome a their launching

perspective, that a of company that you segment that's not patients. market we've osteoarthritic that to full bridge a of kind for thought instance, And patients, for about alternatives That's no think right, have number product, kind but the a is in different for really to of typically, replacements. a line as market, there very partial KOLs of years. JPMorgan commented a I really with from MACI of sort cartilage this, a on the our typically for talked about other intended has those presentation how of the our others much older are addressing knee or repair product and So, that's part where and the competitor,

nothing really organization. product. different attract for top from that And marketplace terms talent the across sort retain on, continue to on think perspective commercial reps and in So, we competitive of our our I and so of

evidenced joining think Mike as morning Gilligan & I by from our National Nephew. announcement Sales this that's Director of our Smith

I think product, us MACI's retain market of aware in around enthusiasm everybody allows pretty great talent. the attract place of to and that is and kind and the the

Operator

H.C. Arthur He next Our question comes from with Wainwright.

Arthur He

second biopsy Most of been quarter you our of Could average have guys the into the quarter? dynamics. surgeon per just questions more answered. on biopsy I follow-up taking number the [indiscernible] MACI want regarding us to give color during the and getting

Joseph Mara

Yes.

take back to see way into that a in and and we procedures coming the we recovery quarter should March. I We're say. were February, And hard, first best address the to in biopsy had growth then and to say, double-digit in commented is step the that we quarter. given board think year, the I expected we saw probably January obviously, a in strong little a first disruption. across the Obviously, and in the surgeons. And down

biopsies So, But in again, back have in the March. continue quarter, at not we bounce would to grow rate big saw a the we just expected.

to We then expect of the year. the throughout rest continue that in and QX

Arthur He

Congratulations on the strong quarter.

Operator

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

Dominick Colangelo

questions. thanks you you, of thank to your Okay. for all and operator, Well,

executed strong financial Just operational in first summary, quarter to and in overall, and results. another company year the well the of remains deliver on track

the Given positioned for in company we profile, believe ahead. market very growth the years and for the strong growth significant sustained opportunities well products long-term our is

So, a great thanks again, and day. have

Operator

Thank for This conference you concludes today's participating. call.

disconnect may now. You

Vericel (VCEL) 4 May 222022 Q1 Earnings call transcript