- Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Vericel's Third 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.

Eric Burns

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

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

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

Nick Colangelo

made opening company with ahead. and the NexoBrid and Thank MACI performance operating highlight for initiatives, the years strong everyone. fourth believe financial and good revenue, financial profitability today's quarter revenue call our and flow, which third financial Joe operational review the growth the our The begin Q&A. for and growth, total position with another the and call company before perspective as discussion from year. to quarter for of I'll delivered in Macy Eric, and meaningful we to respect of generated quarter then will third and the lifecycle our solid progress further a over quarter continued we to regulatory cash record I'll remainder a expectations our financial detailed of you, call morning, business turn guidance more

revenue adjusted million product quarter was cash to million of revenue million company $X operating $X.X Third third quarter earnings adjusted flow. strong and revenue quarter The highest $XX.X growth seasonally XXXX. of as of the ninth and $XX we compared EBITDA our of which than total outside with was operating since flow, MACI of positive the generated XX% high more million had revenue generated with of the quarterly consecutive cash quarter quarter fourth launch the sequential another to due quarter of flat quarter the second MACI summer COVID-XX. growth X% MACI. by XXXX, and the which seasonality. which XX% the to compared the to of excluding was is of over second quarter to year-over-year also was is due growth grew revenue since highest XXXX, impacted comparison compared revenue typically third down to XX% was third that revenue given widespread shutdowns quarter the quarter, the MACI's growth the to XXXX noteworthy quarterly second of

strong through prior to to marketing we underlying MACI investments continue for taking Importantly, MACI significant surgeon biopsies that continue MACI. The time on in-person the fundamentals training consistent quarter. commercial and to extremely engaged value growth the surgeons customer as of third expect our focus clinical XXXX team in biopsy of adoption biopsies digit the base. sales in expand growth their to on will we MACI in to surgeon remain this The digital see to further taking MACI first and in surgeons generate first majority and taking marketing continue Overall, the well we drive year. double and were initiatives growth and business utilization high remained track executed

the cartilage has overall system disruption also are dynamics impacted in year. ongoing down the flow which challenges is procedure more a repair than the COVID-XX of conversion rate market last compared but Those by biopsy XX% the been MACI pandemic. in calls, to market, reflected healthcare result remains previous as dynamics on stabilized, decline mentioned we patient as to Finally, for in a

year seen While levels is year high XXXX. far dynamics, will MACI guidance improvement continues not rate to range for in expect resumes towards the and sustained on update. significantly the will mid-XX% as growth of Despite strong these our year revenue market we for track outperform the which second a MACI so as for overall biopsy half it this the year, MACI market a remains finish in pre-COVID to compared impact profile cover Joe the we've to stabilized, its and full the MACI, conversion growth

by repair market execution and further that the the Lifecycle the to for quarters rate programs have the physicians. December of continued MACI ankle the clinical MACI will which conversion in development to a delivery scheduled gradual Were team we utilization C delivery growth a improvement with represents we years plans forward, on track. expanded of MACI Moving patients the and and discuss respect and MACI With our MACI ahead. MACI sales FDA in MACI arthroscopic our cartilage arthroscopic Management, development meaningful believe in overall enhancement believe and for remain plan, meeting to Type support

year growth on interactions expect Development program. the that in agency regarding believe the these MACI the company with for based FDA, the initial ahead. opportunities the with position to in the additional quarter we significant meeting first pre-IND of We years MACI for addition, have In a programs next Ankle

reported levels. quarter, run revenue Turning to our Burn of quarterly below million Epicel recent our which XXXX for third in was $X.X Care rate the franchise, we

with Epicel detail. however, burns noting our year we're as Based As performance that total larger date, area burns. revising there call, XXXX and significant a on Epicel well for greater the patients, impacted in patient year Epicel while this year to and volumes of of at the to volume our patient these business the discussed for centers have on burn of line same revenue increase the worth revenue periods in to significant to a describe in using patient this centers. which expand XX% overall Epicel declined taking volumes had those external treating of highest number impact underlying lower are continuing of volumes incidence data shows market compared for year centers prior the incidents larger These It's guidance the dynamics as as burns levels, Epicel in more the was biopsies results and higher have at service will incidence in the Joe and including centers growth on drivers more fundamentals, and volumes driving all than biopsies large pre-XXXX last year-to-date revenue that has of significantly burn and of are graph than our body year-to-date greater XXXX.

January launch announced accepted as XXXX. review call, Turning for plan and we our half turn last by with potential PDUFA BLA BLA to and the NexoBrid additional continue guidance. Joe NexoBrid, details our the to of the and is date the FDA's Taiwan on over NexoBrid in to manufacturing actively of XXXX. we for resubmission of a third I'll quarter now results review progressing, facility regarding provide in The a financial underway, Israel are X, was first inspections the call to FDA

Joe Mara

or period net for for to the $XX.X an a employee BARDA expense. morning, the to Total stock-based for XXXX. NexoBrid quarter increase commercialization expenses increase million growth million for XX% cash second had million net our MACI initiatives with loss growth well. million gross to generated of quarter investments expenses, MACI second operating investment the profit for year million after and EBITDA by $X.XX quarter were in in Thanks, was XXXX. third million everyone. as revenue flow. or compared XX% Gross cash sequential of for related of quarter compensation and same results. to per prior was growth of was revenue, ended in representing the Net Starting was compared adjusted response compared share with cash additional X% quarter the margin for for ninth operating QX last million revenue our quarter operating revenue, another also and expenses adjusted consecutive million quarter of and the $X.X $XX.X versus an the strong $X.X sequentially revenue $X.XX driven loss in operating The in in $X.X Nick, QX of year. the $X.X XX% QX million the $XXX increase with of debt. $XX.X EBITDA procurement quarter by with we Total We emergency or and positive per revenue million million Epicel the of flow, and $X.X no share $XX continued the Non-GAAP million approximately $X.X of $XX and quarter versus net and preparedness. good increased was quarterly quarter strong comprised of and with in was

Turning to our financial guidance.

our driving growth driven existing burn adding and biopsies additional For by be new Epicel, had assumed that centers. guidance within centers would

of Although lower our Based these range burn we and of year drive have $XX XXXX, above NexoBrid burn revenue X year total fourth which on over has approximately made quarters, impacted key over the to metrics it market the more for now incidence past Epicel this growth million. full $X the performance difficult expect and for results. revenue in the million Epicel including the care levels, remain dynamic pre-XXXX this quarter, revenue,

year. normalize and as begin in our patient conversion back on assumes initial flow of we calls, the MACI, discussed year would guidance earnings full prior For that half the to rates

half seen to overall we metrics, with improvement million Although overall full change those margin be still be million. half second expectations, adjusted gross another we In in second Based from expect and $XXX $XXX the conversion we yet growth revenue the in we questions. strong of expect concludes the approximately anticipate the for MACI's will EBITDA in open rate, year will sustained stabilization the impact to XXXX, range of of full mid-XX% our with revenue versus total, for mid-XX% percentage margin which year to on now for our million your have not in $XXX significant and remarks, million we the this full of This to range We prepared year. contribution the flow. market to seen have revenue positive and in range our in $XXX MACI call mid-teens year. now EBITDA the year approximately cash adjusted operating the to revenue

Operator

the [Operator Instructions] of BTIG. Zimmerman of Our question from comes first Ryan line

Ryan Zimmerman

new wrong But in quarter. mid- high on you about into coming surgeons. seen guess was double-digits to I talk We've maybe think, want guys the to third second MACI I quarter, me to I start XXs were the Joe, quarter back and first Epicel. and biopsies growth in I'm if fourth the And in guidance, on, the implied and Nick then the up I think both correct on that.

conversion the help for So rate relative to of that me elongating what because seen specifically are impacting would dynamics it understand what is period to historically? kind the [indiscernible] biopsy seem procedure

Joe Mara

Thanks, Ryan.

off So I'll start on MACI here.

half So ankle prepared first about a I talked market. our an as basis think had second on grow still Despite continued strong would the remarks, decline decline, in in year-over-year we mid-XX% we really that the double-digit importantly, the say is range. off, QX, a we in repair

So over X the last after we're and kind I as think important, about for single-digit XX% in that X the talked or being quarter range up you quarters. high it's of growth

So in QX. [indiscernible] performed certainly has well

year. I think QX and full kind question on of your around the

market So of assumes some happen $XXX range to is $XXX and not rates which range improvement a this in in improved. initial million hasn't just of our patient corresponding of million conversion I kind the a to point, at increase -- outside of flow, then million have seen stabilized which both again, $XXX which, is but question, and and $XXX we we your importantly, range expect initial think to our million,

impact our have you a challenges of back biopsies as you our on kind are, we're the where market, as kind year. think year So adds double-digit generally of of second about, and see think kind the particularly have in will largest near the half is if that in that play of of guidance metrics which I of out, continued, but rate, range, in despite tracked have kind take kind surgeon we're you about an talked the initial and new step quarter we QX our these that conversion other

Ryan Zimmerman

from the patient specifically is with just because in conversions Just trying are it to precedent. you seeing clear, lower I'm to somewhat docs? maybe these newer of lower docs push be Or up, seems change back, Joe, just the volumes like that historical to door? understand with a new

Nick Colangelo

is Ryan, Yes. this Nick.

So difference the seen I sort of in don't surgeons. any think for uptake we've biopsying

biopsies I'm volume. are wrong, As tracking double-digit double were we said, growth line said double the digits. more And track sort said, me with we just we if in not on of just -- correct implant We that they had you year. for for were said up

team. it's data really think over sort range generally as really Joe the of your the and of -- patient just we point guidance point, continuing the overall, improvement mentioned, about visits, patient down flow, with flow the the patient end the obviously, When especially And we're around lot to XXXX of in XXXX. of flow. some assumed or there's said, point. that's product the some normalize, year The right? And strong. market give execution as as And which year So into those the assume basically we specialty should half good hearing kind assumed end more the issues And of market physician and guidance, year look patient we again a haven't lower MACI, market all by or either visits data, normalize, is as you and for that versus last our et line normalization. Joe The despite digits momentum flow we attributes those. That's end in should the of guidance gradual about procedures lower remain so higher of cetera. what you're beyond seen forward double that's to to improvement. of second

Ryan Zimmerman

quarter. you Okay. quarter just to I the minute. And similar for to guide a second of then Epicel midway turning through Epicel mean, third kind the did

did mean in you of kind kind quarter then both as similar on drastic change a your -- point what question to So Epicel here. ahead? burn third such I a see in of at forced that change a expectations we and look the

Nick Colangelo

Yes.

started which And burns. mentioned recently lags, large our July we've early been first And or we quarter really a as body ahead total it quarter. data, on call, surface kind of strong don't month earnings August, the relatively data area our the quarter. able until showed this decline similar right market some Ryan, a on see ends. these XX%-plus into of a have and second call, to access you We terms last our you're to last of in get X in So quarter obviously, third in so call

because So little we expected in as one early the this talked forward. a weren't always trend quarter, were Epicel never down for had upside. about, second we're burns and on call quarter, is to we be we the an a we say where going on And going it's to what to see

burns sort down. these we clearly, in the saw in these We're up lines sales the So larger QX, are feedback. burn the and just admissions consistently larger that across that force of a center for getting continued with decline anecdotal burns

it to that's QX kind so QX kind in we little. And saw the of expectations why similar level sort until of maintain we how out of a played

lower sort lower patient of more these in out these levels, a despite XXXX line the on the obviously we're that the to increase in see once data we which pre-XXXX third did get the overall able volumes, with we burns. played in larger big that in would I So mentioned say, call as quarter. are

of We Epicel. of broader that, biopsies same of quarter, have, as centers centers have happens, though, continue episode. that pre-XXXX broader are in to challenges, have of the Once sales and have then the to And continue that the you're you a Epicel once did terms kind despite the for is to the forces subject XXXX. variability in all issue The expand even that number fact the customer the the presence did reflects we base third using in essentially up and a we burn these versus even much we levels. metrics as

but in for an when treatment, the impact can't So the to depending you are for those the are biopsies the quarter when the like stabilized in patients we can have same quarter did, had that on you and ready call exactly going really third depending timing, treatments occur us. just and

Ryan Zimmerman

is in at variability And a accounts at guidance for your point sufficiently level fourth the Epicel quarter view? that this the

Nick Colangelo

Yes.

Operator

Brodovsky Securities. Our question line Truist the comes Instructions] Sam next of of from [Operator

Samuel Brodovsky

first then you can -- mix thinking or MACI the it's rate, Just the or that you confidence year that reaccelerate next driving drivers, mix items with year. growth sort of XX% just growth? ask we should think expansion how we when surgeons delivery? through biopsies product of into whether about ankle Can just conversion the and ankle think and the gives And the about what next arthroscopic market one, to about

Nick Colangelo

Yes, start with Sam. I'll that,

for just mid-XX% a beyond So year we I'd plus I kind of of right? quarter overall. And in what percent to certainly high mentioned of growth, I'd you second growth say math, declining for normalize, think for do so say market, in will would driver a expect the I half next we sort to XX% next In reaccelerating in it -- if reasons and for teens the growth the about terms in on. think of year. XX% be that's be this of as the year. continued surge obviously, XX-plus flow So and patient light year And earlier, we the the posted

be growth surgeon we'd continued the And expect in things But expect normalize, we'd to as market grow growth change, if certainly the strengthen So and able to range. same to doesn't reaccelerate. primarily.

Samuel Brodovsky

you're assuming And that about, 'XX? -- when second talking you say half

Nick Colangelo

market of to that for expect just grow I of we'd the coming No, we'd for years more a the be sort But right? year. a and quarters beyond. able change, that will this at If in the similar for be the XXXX rate expect we year, year, improvement mean, doesn't to and just market tailwind

Samuel Brodovsky

we you the a full of any PDUFA the may should timing NexoBrid, launch thinking on about date be the there any be items the -- there to year? then And would helpful. into towards believe market next and That's lead it. delays how Got that

Nick Colangelo

Yes.

sit PDUFA inspections we for half The out ongoing, the first launch in obviously, can't great the we say manufacturing less So a XX the on comment date. and I'd but XXXX. are is interactions, days now we to from of plan actively continue than which

PDUFA the date. X January So we're

As process P&T we've approval talked do about centers. committee the to we burn have for the before, go through

kind -- and when process. of be your product QX make called way that through you a more set it so will available And of we've launch

second little fully half revenue So year -- maybe to really of half sort is be back expect year of of QX, of bit but ramping on that. the the when a in we'd the

that don't we FDA on we track. So decisions, said, at with the control all but point, this remain

Samuel Brodovsky

it. Got

back one more Just on do in. think see half you going second about if you in think market be that is weighted? that for MACI 'XX? one the first more likely can you sneak as early as I of Or improvement, the half to the When potential

Nick Colangelo

really start feels we the quarter to exact second that, but call opine can't think a hard I it's exactly that, pre-COVID right? I for will when levels approaching say timing XXXX, in patient of like little the is. for Well, up instance, set on I we're mean, flow to hard it's what like saw, certainly

Operator

question Our Cohen from [Operator Ladenburg next the comes Instructions] Thalmann. line of Jeffrey of

Jeffrey Cohen

how Nick and Joe, are you?

Nick Colangelo

Jeff. Good, Thanks.

Jeffrey Cohen

side. like general to perhaps months implementations the biopsy? could economy? a or I there's with one on circle after after seem a be guess, little wanted some more that biopsies of about MACI period it Does and that certain quarters of questions a Ryan's and off correlated I on talk amount bit drop a to pronounced Or the firstly, of

Nick Colangelo

soon it's we for At No, should into I for employees of really sort think been office, going delay. after that they economics is market patient. proxy is point, in think of pronounced a pretty employment not data sort it's insurance MACI. biopsy as use initial about a go patients we there's there's whether or around visits that. this that Again, I I of the really hear Obviously, don't sort after of anything how just sort strong. strong, a taken, remain mean, for

been -- hasn't really issue we point. an So at that haven't this

Jeffrey Cohen

for historic would not color to And few the on have biopsy What And discuss. fourth years? something us want quarter? on you in what you past necessarily any the could Okay. anticipate found give break It's you or the you QX side out box levels?

Nick Colangelo

terms with Well, just biopsies, of yes, I biopsies, quarterly the across mean the I would and MACI is across generally, quarter of say, we of don't fourth implants, obviously medtech cetera. quarter the sort board strongest et kind as but well give in

a every strong just expect quarter. like we'd quarter fourth So biopsy

Jeffrey Cohen

adding there there Got update it. there facility then had -- the manufacturing about facility, previously spoken update quarter? is any Is And on a you -- from space. moving any

Nick Colangelo

is nothing Well, particular the construction -- than in underway. other

so in before we as expecting a go about track through for early approval we've commercial facility on of once production you remain the XXXX. And talked new FDA

Jeffrey Cohen

be be in as lastly, anything then for one you half And far factoring of purposes. Joe in the that BARDA for it. just quick we first for modeling? there Would What modeling we a QX Got 'XX? for would as be should anticipate should

Joe Mara

No.

this the point, we at kind this through we're of that think I and kind kind our of of initial through year. third recognized agreements, quarter

And certainly, So point, certainly in potential XXXX, QX. more we're the this side. point, I wouldn't anticipating NexoBrid launch in would say commercial be at on this anymore at either not

Jeffrey Cohen

it. Got

a So I half for little of launch back expect 'XX by the commercial half? followed it the in front to

Joe Mara

Yes, exactly.

Operator

George of Our Stephens Inc. the next Instructions] Sellers comes line from [Operator question of

George Sellers

sort higher about year, guess, adoption biopsy to into drivers sort -- due takes, with next How growth Thinking and puts of of that much about conversions? how is drive physician the greater expectations your should for I the there? think ability we to of MACI and versus

Nick Colangelo

Yes.

for growth So certainly year. kind growth And consistently surgeons. next for double-digit drivers, biopsy biopsy said, growth as surgeons this And X we which and the is we spoken in biopsy on in adding we're about of first of expect surgeons the year. and track

Patient the -- in -- year, that's or of the per force so that about expect efforts, right, be to rate, driver. increases, the grow as impacts So will progression, lesion talk medical contributor a surgeon, the focused be that list given and would typically we're always conversion sales having So defects biopsy then marketing biopsies right? efforts a flow a so it's surgeons And address been well. patient around significant coverage flow will you whether quickly. with the of more the that, affairs patients sort on as

continue levels, we'll get to which would try to first to to that we And efforts take drive back expect So time. to rate. job conversion is pre-COVID over

Operator

next line from He Wainwright. the of H.C. comes of question Our Arthur Instructions] [Operator

Unidentified Analyst

and this Nick is patient [indiscernible]. MACI Joe, follow-up -- had certain had I a the into flow regarding growth I office. the the on

more view, in impacted intention patient's this into So your by or it's side more surgeons impacted is capacity office? your the the by or willingness to get

Nick Colangelo

don't Yes. continue They're with a This commercial surgeons. the they dynamics No, cetera. sort for go I surgeries, enthusiastic of think the flow sort consistently any patient when Obviously, back of we've capacity. been always et add stating we've around our in different just team discussions had surgeon to product. is we very about

And the -- been couple so throughout of past consistent years. that's

Unidentified Analyst

right. All

so cycle part. question [indiscernible] is second And my regarding management the the life MACI for

arthroscopic with meeting more could FDA next C for -- see Type just the the step? soon to the of So system? color how us coming can the these give So the delivery market? what's And we you how

Nick Colangelo

Yes.

deliver the product, human be So depending development factor will a like on and instruments, the clinical the proposed surgeons And the to can or more dictate FDA that that's agreement our there just something are FDA sort demonstrates et presenting of study the that really what whether will development cetera. use gaining do the able there. timing to we plan requires issue

a the be factor later about that have for clarity that of with of and -- program. the of kind line. a arthroscopic, development sort it's much more opportunity on more a if be study, safety could little mid-decade We've discussion once could MACI we'll so earlier little And a with FDA, we talked a human time clinical have

the nature that's discussion of the with the FDA. So

Operator

I'm back At Colangelo, closing no Nick this I to to turn like questions. CEO, further showing time, now remarks. for would it

Nick Colangelo

XXXX to look here a and for quarter the final delivering interest financial updating half first the for to for next team Obviously, continued continue and on our results preparing everyone, on of the potential of focus in company. the progress and you the NexoBrid thanks, XXXX, is call. strong launch your Well, Okay. we questions operational and Vericel on in forward your

thanks So day. a great again, and have

Operator

today's your conference. participation in does you Thank This for the conclude program.

now may disconnect. You

Vericel (VCEL) 9 Nov 222022 Q3 Earnings call transcript