VCEL - Earnings call transcript Q2 2022

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Vericel's Second Quarter 2022 Conference Call. At this time, all participants are in listen-only mode. I would also like to remind you that this call is being recorded for replay. I will now turn the conference call over to Eric Burns, Vericel's Head of Financial Planning and Analysis and Investor Relations. ahead. go Please,

Eric Burns

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

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

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

Nick Colangelo

the of generated highlights revenue strong our flow Thank positive today's revenue MACI in call compared a compared guidance, was before approximately EBITDA of financial of had the total call high the XXXX and than the opening and million of I'll cash you, everyone. million, generated financial seasonally million the a for XX% performance highest second of flow, second revenue of since operating to marking and of detailed we adjusted as more company. quarter revenue quarterly Q&A. XXXX. quarter call expectations eighth our begin growth quarter financial sequential the quarter And Joe quarter MACI more and to $X in of quarter We and discussion of consecutive representing our review for first the quarter, second the $XX a the grew $XX.X Eric, MACI. revenue outside then to launch fourth sustained turn for with and Good business profitability remainder and year. the of cash X% the XXXX morning, the over very to of

to third Importantly, outperform and remain the the the adoption year high-growth Joe our our supported medical same strong mid XXXX. also the to translating we're continues for quarter XX% range overall MACI will repair Macy's a our versus procedure the fourth to MACI, resumes also trajectory. range it to revenue to MACI cartilage year, in surgeons as discuss MACI double-digit high expansion off mid period continued of third in the maintaining XX% growth to through the taking the its be on the time to continues patients we implantation high-grade lesions MACI guidance and sales as as year, full patients and to quarter this growth importance high to education defects in in Accordingly, featured in study and base. the market quarterly biopsies a half quarter, further on expected today, compared in cartilage through in publications. to orthopedics Data cartilage published highlighting a MACI formation was of MACI the knee a in see increases, generate progression new timely treating remainder manner. team journal track of MACI date our in as in the the customer MACI continued biopsy to from in start expand recently performance detail, between with showing we expect expect the and in in in growth to an revenue continued year the of XXXX. strong quarterly higher growth second significantly Macy's results momentum, inflection and periods and we in Based rates same of the accelerate

Finally, growth our ankle support arthroscopic ahead. discuss this year the meetings with to we on FDA believe later in planned MECA track will and years development for sustained programs, MACI the we remain initiatives that

We was burn of Epicel the for franchise. $X.X to most Turning revenue second quarterly our quarter, below reported rate. million our care run recent which

quarterly Epicel we've patient As quarterly of burn the treating to baseline revenue these though inherent even previously, discussed pre-XXXX volatility small significantly continue concentrated be the number and periods. patients. population for higher than is There'll given centers in revenue

underlying significantly quarter fundamentals last the penetration number burn Epicel volume of ever in half solid year, revenue We XXXX. was included center which first have and in seen year, consistent with the centers the Epicel the of QX as in treating higher biopsies patients for burn the period the seen taking with Epicel and same highest

we quarterly trends. pre-XXXX over However, for significantly $X biopsies Epicel is fewer in see a of million patients our quarterly in patients size clearly to the above recent This with run quarter and burn compared again, lower quarterly results second did although revenue treated rate. treated average impacted

results weight. posterior showed a bares treatment the with continue also posterior patients support of in from retrospective study the a for Burn the burns and Journal medical the journal recently posterior and for leading XX% These We important of expanded peer-reviewed publication of using Epicel challenge study the announced Centers of improved significant kind this portion of large utilization a in the burns of for Epicel. surface survival rate highlights a We Care presented Burn through with publications. body its And potential major education to outcomes conducted America, Reconstructive the & which burns. by first Epicel patients with treated that Research,

has pleased of accepted the with a resubmission morning NexoBrid. that FDA BLA this to very January PDUFA to for announce been NexoBrid XXXX. date by review the We're Xst, Turning

their worked for that FDA's feedback our patients for Our cross-functional time pleased quality burns approved, overall our colleagues target with have NexoBrid, very completed of if standard a believe has continue line. eschar the of removal become to severe meaningful resubmission, timely to we with part with diligently in which and and milestone, potential important care in business. teams conjunction address to a the a extremely MediWound to We're this high at met new

Finally, while second in MACI build guidance I'd recently for these across employees, serve We'll as In commercial the upon is adjusted customers, our opportunities EBITDA solid delivering focused full we we stakeholders, principles report, results details inaugural a quarter identify to strong of ahead, broaden reflects which in half we positive the to financial incorporating our impact business including of ESG continued continue summary, our revenue and and better remain ESG of regarding NexoBrid entire all launch of to Vericel year, in second start to year our our after the maintaining financial the provide to a preparing as in guidance. revenue, important years turn can our that team first the the potential our half Joe activities. operate. the XXXX. additional I'll to like we're we performance year, on on the issued results patients, how for and communities call over commitment the our total which investors now highlight and to focused and our all

Joe Mara

QX a quarter prior by NexoBrid X% versus comprised growth and growth for the BARDA revenue and response strong our of quarter million Thanks, Starting revenue, emergency was and $XX.X million with was revenue versus $X.X MACI to million sequentially Nick, related $X.X preparedness. of $XX of procurement morning, with Epicel Total MACI for revenue also results. revenue and everyone. good with net of the year the first of improved quarter. XX% had million the

represented the second volumes to For Epicel, there population Nick dynamics. and burn it the any for was prior net important is patient of quarter-to-date, quarterly inherent the $XX.X revenue, highest comparison. revenue volatility of note of resulting a due in that year-over-year treatment in And million Gross the as is XX% to $XX.X year difficult with quarter Epicel, million, of compared referenced on to profit XXXX. or XX% quarter the quarterly revenue

to from margin movement, Cambridge higher our geography and gross gross no XXX% costs. sold have lower margin, costs as facility, goods is current of is longer SG&A Epicel well than related absorbing manufacturing year to which BARDA Our revenue, due cost lower cost the moved P&L was cost as these prior as

our mix change. per unit cost last a also and that have we a of year significant growth, the overall supports Epicel, both of manufacturing the smaller year-over-year higher burns, also expanded factors higher headcount an to over For and which had product we these into translate contributed

compared in generated we quarter million loss Importantly, adjusted in million quarter the anticipated to was $X.X were of the a the the same with million share representing $XX.X and and consecutive period for cash increase fourth and million loss in share no for quarter for for EBITDA million $XX.X second our per cash and EBITDA flow, of $X the Net expenses debt. Non-GAAP quarter operating $X.X compared restricted approximately in adjusted ended per third and or second we $XXX flow. the of expect QX the with or for eighth typical XXXX. half $X.X quarters. XXXX. a to operating the cash, year growth operating net $X.XX positive Total $X.XX investments with cash revenue was of We quarter million million, the gross our margin

inorganic strategic of million organic increases with recently flexibility growth $XXX that In our by syndicate led addition, facility we entered using pursue JPMorgan banks non-dilutive credit opportunities a a and capital. into revolving significantly to

of million. of quarters into start revenue profile, our strong guidance return performance its two accelerating After to momentum growth MACI full-year high guidance. we financial the to to well QX, $XXX our to and is are positioned maintaining to million Turning MACI $XXX year and

XX% revenue with the QX orders revenue revenue high year-over-year step-up QX. expected as mid- the single-digits the strong year. last quarter we been terms anticipate of for second MACI phasing, imply versus In versus mid- the versus quarterly would QX growth higher Nick sequential our to typical be to a range than a MACI This start growth high have of quarter, and QX a in mentioned, in to for MACI

our year. now for Moving a After original second the to below Epicel quarter, expectations lower-than-anticipated is Epicel. trending

be to a the first step the to maintaining $XXX we with half saw million third are year $XXX a total revenue million revenue of quarter full for expect to we quarter. We in run Overall, rate at the up similar year. in the guidance fourth what of our

year guidance full expect the approximately slight margin gross For of XX%. prior a the full of reduction we XX%, from approximately year,

operating of million, now the offset prepared also adjusted million to $XXX our approximately expenses concludes $XXX approximately versus to which EBITDA year $XXX reduction remarks. still the our original gross $XXX Accordingly, This a million year full we XX%. million for slight full lower of we anticipate expect margin of However, to will guidance margin.

the to open now will We call questions. your

Operator

of from Our is line Ryan Thank of ahead. question the you. go [Operator first Instructions] Please Zimmerman BTIG.

Ryan Zimmerman

But the – for you guidance XX.X% million the up to with the I the the with unchanged Thanks suggest BARDA comfort taking Nick guidance Epicel expected around about is terms of a for – thinking though, I for the for Good $X morning. around third obviously, you. implies, not it Epicel, that XX Maybe previously start of commentary the Thank few questions. questions revenue first pacing on year. think in are is XX.X% color Appreciate quarter. there's guidance kind your implied step A if about to this pacing. of mean, would fourth and I Joe. that MACI little our saw quarter? dynamics we the in of it the level same, year much guess in bit, the to that how and assuming half the Because

you to step you. a the maybe have of your number fourth up And why follow-ups. and hit in thoughts couple can Thank that I then So, around get quarter?

Joe Mara

maybe start. and Good chime Thanks for I'll well. the Ryan. Yeah. question, morning, in Nick is as This Joe. will

year start just So hit Epicel. to – the then full of maybe guidance kind about broad and talk kind of and

of year total first off, million million. $XXX to $XXX our are full we So maintaining guidance in

talked we MACI revenue well. about, also as As full our for we're maintaining the year range

probably from how thinking still I kind And MACI of of the year we're So would of a think the about perspective. about on full is point, your year. MACI a to in terms track good midpoint as the mean, estimate kind think I full say, we for is product, I

be we're Epicel, of start original or thinking think what your in likely Epicel kind think will point, is I the to the I on think low it's year of $XX given more million not last to we're the versus now year, of kind flattish guidance. our – I

of kind the of well BARDA the estimate add that lower when Epicel points So you of range. it MACI, as revenue, the you the as more midpoint really lower on to end

that, over it that, based rate QX hit step of up in the of So $XX and of us kind more a then turn get plus, fourth $XX kind in million low terms I'll which quarter our kind quarter, million but Nick. We into called changing it, similar million to in to would of expect in and the Epicel, range, a $X XXs. on call run do

Nick Colangelo

I Yeah, it, think that Joe. captures

Ryan, the of just appreciate maybe little market Epicel in we've seen dynamics on a as that. And I So sort bit performance.

I mentioned from terms measured of was a penetration XX% what clear first burns, in up-sell fundamentals in that, of step-up plus we're my the center quarter diagnosis big there years. centers, we and we the biopsies half as as decline least compared strong year, codes underlying receive first particularly and and to centers last in of So in then in lesser then treating to remained patients was or and to that the which the there saw It's comparable so – during that remarks, for year pretty that access those prior a That the on larger in second burns on. at were the quarter. said able based being burn sort

the even at the the that, level is first operating in population the again, one inherent obviously does saw volatility always just year. that of patient -- there's given as baseline it higher revenue, small we of half said and So we've thing, a

Ryan Zimmerman

this Okay. of XX% very XX% take year. follow-ups And two me. That's a a low swing range guys. growth have then you just little And kind MACI for just that I bit. for to the in want helpful, at

saw growth and about X-K your some about million. given Appreciate I about ask You'll life question. think kind that But think the taking this second the you line question Has the as on XX% Thanks context pacing. as $XXX night as that comfortable in MACI, of the we that? about strategy comments. are M&A? maybe mentioned how inorganic then around the off durability last the thinking beyond credit just, longer-term with almost And of you today I or X-K credit product cycle for that and of line rate others all MACI, for let at changed think 'XX saw is both of and the the you well your of

Joe Mara

Thanks, Ryan.

So maybe one chime this in well. Nick start again, as can and I'll

profile as on about the to thinking But So and on overall I healthcare environment better, the talking of the first and range. kind we We to early long-term about think to question, kind MACI just in XXXX, do that specifically think continuing still it's improve hopefully of be pretty of is in up. kind of open growth MACI. and broad see MACI question, is kind that

we're talked the that about term, think over specifically. it I XXXX of is haven't long kind So how again, we seeing

lower the I I'll In start. of -- cost an terms cost the of of kind of than of credit, equity, say is kind would tool lower I think important for line etcetera. nondilutive this the capital, company,

this have a kind pleased tool certainly to of So, as us. we're for

be long-term how of mindful whether kind potentially additional about management other growth, kind a next in -- degree particularly it's We building. we're to strategically, organic or we're over just as the few opportunities, that's a flexibility, cycle business I of think of of gives some us kind strategically also it. development so it and life the of thinking new nice investing think years, that's I maintaining want

Nick Colangelo

in I MACI's And comments. ahead. echo Yes. remain guess performance just years I We the certainly would the confident in

cash we these to to of a position have I us. $XXX-plus debt. tools strong available million start with no We'd think, Ryan, from -- position like

ATM, line us credit business of an if although opportunity for that same falls that development haven't if based find category. The there we on used We the deals. into we have presents It's it. ourselves,

our And perspective hasn't that changed. so, on

down we've that our these to in the company. always through strong place. I given of things the larger we profile tools think and existing line, do the potentially our as fund to and think cycle we operating cash have the certainly great just said can life management But profile about flow, initiatives cash profitability

Ryan Zimmerman

my taking for Thanks question.

Nick Colangelo

Ryan. Thanks, Okay.

Operator

question Sam Truist. line next Bedovsky is Our from of the of

please. question Your

Sam Bedovsky

taking Hi, thanks my for question.

terms me the growth of one for XQ looking in for at sequential MACI. on in me First

you of a from could little is -- you're that companies, what kind and July confidence a heard elective sequential June bit little a procedures, you that in you bit we about in just If into could slower And seeing? environment of what other slower then talk on persisting let know us if gives XQ? growth

Nick Colangelo

question. Yes. I'll and the thanks Sam, start, for

continued both our to-date quarter. our growth gives for third the in that referenced and remarks and us obviously, lot So, a performance MACI fourth and of we about in confidence momentum accelerating

itself. speaks So, for that I think

Joe Mara

that -- Echo go ahead. Yes.

Sam Brodovsky

put of seeing higher in you're a seeing to conversion more starting are you're that confidence procedures, that to point. of we maybe is different more how final Just of and biopsies it? terms biopsies, actual Is or a see

Nick Colangelo

the the Well, that on, of end around implants, are Joe right? of half expand this, the can rest meaningful sort the a guidance see in conversion but an at year, seeing at incorporate the the confidence metric implants we're for and the it's basically first that change And we on improvement of us, say, and of material day, implant -- range, or end our a sort so the and what a revenue-generating year, but in bit didn't on so of we there, for the In change does moving scheduling, little high of certainly, I'd the particularly forward. rates. gives of focus us

Joe Mara

It's the Thanks. growth, hit so, drivers. to the was terms for single-digit Again, in think, leave quarter. that what about add, mid year-over-year that of think $XX And the just million in I high high XXs mid in Nick the No, of, talked we to it there. I quarter-over-quarter Yes. kind talked I Nick, kind kind the I basis. into of would key drivers range think of about you gets which plus a on points

Sam Brodovsky

to just way like And and to back similar that sequential that that kind probably think looks it? XXXX. right helpful. Is in saw that's to the just Yes, extrapolate growth off that XQ the XQ in should to we be from of XQ, assumption about

Joe Mara

see kind MACI, Yes. think this as think we of I of of where half or speaking, you we then in et think we still mix as second a XQ, seasonality talked really or in of of is HX of been you you in revenue from strong broadly about on -- trending at even of back QX XX%. which to consistent, about average it with year that's the half. about kind think on the mean, we've the toward. actually last if think we'll cetera, XX% about the XX-XX that terms of, think typical years, an the and And kind of really kind kind the points QX the -- years, around throughout consistent still year And pre-COVID you been I varied in COVID, obviously typically HX. couple split And you of based factor have roughly

QX range. that million of I general, low staying, pretty $XX So, in also kind, think, in is consistent

comp to you similar to of do some kind good midpoint XXs years XXXX earlier the If of the is math a in step-up kind that the we the in point and do. of kind of on

fair think So, comp. that's a -- that's I

Sam Brodovsky

Thanks taking Okay. the for questions.

Operator

you. Thank

next Our ahead Ladenburg Jeffrey from Go the is Cohen question Thalmann. please. line of

Jeffrey Cohen

are you? Joe, Nick Hi how and

Nick Colangelo

morning. Good

Joe Mara

Jeff. Hey

Jeffrey Cohen

in you modest confidence talk back least your end. the a could reduction things? it firstly, So, million, little gross relates margin I the OpEx the and at commentary have margin our to a guess, and as $XXX the that down on million, from half questions about bit to of you your $XXX couple

Joe Mara

Yeah.

for the thanks So question.

margin. So gross I starting with think

last kind et year the certainly the in longer variability full to think some, we the high about talked et run XX% where There But year see are the we look think think about and I general, across try drivers. year, of, still quarters, over basis, trending cetera. a as is be for XXs, full this see I can on it's term. in And this at year-to-date We quarter I cetera. of our guidance. anticipated. they per a tracking largely versus can few rate

some some revenue, higher, FFO You do of were kind to burns. lot P&L the lower because we talked about those here. related a manufacturing of smaller -- facility geography bit of you a costs BARDA have

largely are We et anticipated. as anticipated cost seeing those increases, as although again, are cetera, some, material

a Some our of bit is little higher. vendor outside spend

as HX. mix I year we kind the you think cadence and as of revenue to of more of the an important about significant think typically point from growth well see is significant our though, revenue HX

aside on So, see And you at look all the those progression that typically see gross you margin. if a across throughout years. you those from year also years, XXXX,

So we're what again and that's year what seen we've anticipating this historically.

think the is So pretty year helping on a basis, I I year, expenses anticipated what's a P&L where we year well. managing side, little to to a on lower. bit your think but perspective And OpEx the to bit, full start on close we're think a point, full I our

lowered We guidance by the have a there. few million

of I year. being initiatives that between business just we there feel Having overall on mindful so the key P&L offset total the two said total as is the more think in and there for we're line think still like an items, our we're our across P&L about are efficient track, spend. the

Jeffrey Cohen

can into and you. how as you're NexoBrid next commercial clinical little Thank from some preparations about end, Okay, the as year US? organization making got sales then a it. year from a standpoint secondly, perhaps in And launch your talk early a you first, bit far commercial

Nick Colangelo

our Thanks, of activities, pre-launch the next I'll in medical that now, take date protocol, resumed PDUFA includes terms have continued on. an that expanded Yeah. protocol so commercial one. also Jeff. we Obviously, with access and and established affairs education,

assuming we'll launch, by I'd schedules. at our resubmission questions the certainly thing, So that one we Again, ongoing stayed activities FDA. expect on, and the are like the and we inspection certainly first all we have, feel half submitted a point, a this track. based on high-quality say things information raise our those addressed on keep commercial we timely eyes

a out and it to piece our for commercial half and that P&T the planning we're process previously, again, talked expect quarter point, schedule so one control. to in we Taiwan and the in the launch. we'd we As begin mentioned want previously, sites about second of Israel, at as commercial FDA that's this next the of will And the expect first year. revenues that But given we've that's sometime inspect certainly on,

Jeffrey Cohen

Thanks Perfect. taking the for questions. us. That's it for

Nick Colangelo

Thanks, Okay. Jeff.

Operator

line is with question He the Arthur from HCW. of next Our

Your question, please.

Arthur He

Good Hi. morning, metrics us and question Arthur the just for Joe. biopsy color growth on Nick in during is quick MACI. a regarding you give This the for had MACI I some Could guys on RK. the quarter?

Nick Colangelo

Yes.

We kind haven't of would year, been kind had of in biopsy growth, range, I is, I as say of were Broadly instinct. I the about talked say, think the I about would general, this biopsies between guess specifically they're significant more et would delta cetera. what and generally we kind of specifically. I kind last year, of we speaking, how think revenue say, growing kind

of So in kind you look the if where grows good as general sense you revenue kind at kind biopsies of of a are gives well. of at the where trending

Arthur He

backlog the the regarding is how half like what's And the year. expectation And Thanks. you. of the the of MACI, quarter? for second Got your for that looking

Nick Colangelo

Yes.

significant it's significant a that on of But again, the to terms cetera. about not seen backlog contributor we're the contributor say, results of to our the wouldn't something kind due rate to improves, would to assuming date back on example, we're the Or in still kind meaningfully half, really back say half a potentially first this kind the would – think year in results of that MACI, I be half, a say, from of think et we're not commercial I'd So results point, If, to as even when backlog. contributor about -- either. that's is meaningful But kind could of I cetera, perspective, of, contributor. in focused as date. the the certainly we conversion that I the seeing et a half and say, for this the back you at we the haven't

Arthur He

you question. that. Really Thanks. for appreciate my Thank taking you. Got

Operator

now And I closing would to you. the to Nick turn Thank like Colangelo back remarks. conference for

Nick Colangelo

joining for Okay. your Well, and We us you thank everyone. you, appreciate questions. today

deliver -- and company next on call. strong we think look remains and certainly to results, I of believe forward our year our progress operating another we track on updating the you on to financial

have So a great thanks again, day. and

Operator

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

You may now disconnect.

Vericel (VCEL) 3 Aug 222022 Q2 Earnings call transcript