VCEL - Earnings call transcript Q2 2024

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Vericel's Second Quarter 2024 Conference Call. [Operator Instructions] 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 Vice President of Finance and Investor Relations.

Eric Burns

Thank you, operator, and good morning, everyone.

Joining me on today's call are Vericel's President and Chief Executive Officer, Nick Colangelo; and our Chief Financial Officer, Joe Mara.

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

any quarter with that In financial Nick. forward-looking statements representing of to copy section not should and turn are upon addition, represent as as note all be the views results our subsequent short second now press release over Relations of highlights available our of a and Investor as today of a presentation will call our views call our date. Please website. I from today's relied the in only

Dominick C. Colangelo

Eric, for then financial Joe results business the and company $XX highlights opening discussing NexoBrid. Q&A. The everyone. highlighted today's I'll Thank good the of well remainder for expectations year. more the morning, of and company's begin will nearly as to quarter the financial you, revenue provide high call and quarter a another continued for MACI our quarter progression XXXX growth solid in for detailed by demand strong second company's call we review had the as as million, second before quarter by of and generated guidance record second the for

of at MACI over together second of quarter strong of surgeon exceeded had the strength those high surgeons in foundation another by well increases any of the million, gross first MACI programs and as guidance Care for year. MACI profit adjusted more second company's we're growth year. company first year the of to our doubled quarter revenue revenue strength We the basis to also record margin and adjusted first guidance EBITDA revenue on total year, XXX another compared and EBITDA and expanded points Based full record the year, delivered Burn full for XX% reaffirming the to for XX% our generated of the by revenue, growth half in for quarter. drivers, the since long to another we profit MACI customer increased outpace peer-to-peer compared of XX% was raising in last last with performance, and of quarter significant and in gross growth biopsies MACI continues highest gross the our quarter profitability expansion high second the highest second growth margin the number month performance growth these strong revenue biopsies expand the launch more interest biopsies. build to term. as as of the during to growth sustained fundamentals quarter surgeon number of and key quarter. The demonstrates than $XX a since business MACI taking base guidance and for We XX% excellent of margin MACI over growth. Through adjusted again launch, MACI's continue our margin quarter we once significant of growth which and driven had EBITDA XX% biopsies as remains drive revenue, growth in the quarter programs and than with as half to XX% that percent XX-plus our with continue margin of any underlying attendees half

in in increase a biopsies experience surgeon biopsy an helped biopsy also Notably, significant As more quarter. the MACI, surgeon with drive during gains the in become quarter, expect rates saw per conversion significant we growth we further second per biopsies base our which expanded surgeon drivers. and acceleration growth to

than rates. prior increase rate a Typically, conversion few and per between correlation for significantly surgeon MACI perform growth on implant over direct MACI mid-XX% the in year uptick an become at average higher as conversion experience per to rate which more tends utilization year, with a year, their rate an saw the conversion higher, also implants versus higher into We the our is once potential customer average there's conversion clear as even above driver range to rate increases time our and surgeon important base. the volumes across and surgeons overall demonstrates conversion

We're ] MACI Turning to potential [ quarter. later our of launch the lifecycle this initiatives. management excited Arthro MACI about

in commercial Arthro innovative addition already of instruments arthroscopic been this include have launch innovation to and our place custom expand with are MACI's to portfolio MACI the FDA registered the to FDA label Our delivery. approval plans -- for upon

launch, of predominantly X,XXX the surgeries through of surgeons that surgeon to perform procedures. surgeons include to our base volumes target expanding cartilage repair arthroscopic we're planned part As from X,XXX high

the smaller largest defects instruments for that $X X/X the cartilage market, XX,XXX MACI on impact Arthro that significant market of provides the Given our of for brand believe MACI, addressable a representing target the MACI for opportunity will a growth addressable or the upside ahead. segment utilization comprise have and company patients Arthro year in we billion potential years a the approximately and meaningful that

Ankle for billion We MACI be decade Cartilage for the and an another in XXXX. we a that market on ankle estimated defects could indication MACI study to also believe $X track driver next addressable the remain growth represent Ankle beyond. MACI, in the market largest potential opportunity initiate clinical the MACI significant second in with

approximately nearly than regular Turning second respect NexoBrid centers hospital made quarter submissions, initial as in meaningful the in approval doubled key centers order. There quarter, XX to momentum completed we of practices. gained placed performance patients nearly P&T an NexoBrid to indicators. XX our and and during our product burn centers with increase as the and second burn launch progress revenue incorporate had into treated was franchise, also burn committee a centers Burn their P&T had clinical orders more more XX the center committee Through further to Care had the build quarter, continued end

customer the treatment XX a NexoBrid option pediatric with will we would over burn are approximately following the important meaningful an There our approval, patients uptake a to expect pediatric thermal time. weeks, overall FDA burns. for approval have NexoBrid for base target also the which the U.S. added on severe We which pediatric impact will centers provide in indication that believe be coming of in

Turning to Epicel.

in a While biopsies number this those second Epicel similar in in timing in in with million in Epicel second quarter the last and we in of number both number issues $XX the strong of factors, revenue for year, quarter of the the June May of had of the year due treated was quarters, a million. range closer $X to treatments. year including the approximately to start patients and year patient rate quarterly of lower and its quarter After revenue of of this entering the quarter first run was which health quarter the of resulted to a as patient second the April,

variability in quarterly Epicel can the relatively be of small the there injuries, and While demand Epicel remains given for patient population nature strong. results their critical

first revenue and on the in year first year, Epicel to a very more strong good in the third quarter. Overall, half date rate has company the to product and new graft the the treated for XXXX from start well off with contributions volumes our of biopsies, expected for profitability that quarter, turn of based the versus million patients double-digit the NexoBrid company revenue for half quarter also on call strength half of MACI launches, Over quarterly quarter to demand in the half and delivered and Based in beyond. I'll than growth year Epicel over the solid We're in another growth and results, year. last growth portfolio the increased profit with to sustained of per the strength first Joe. year. run the in very the $X progression as expected excellent high the first is core continued growth, meaningful we for and in high now believe the Epicel of positioned

Joseph Mara

of while million. XX% increased versus NexoBrid $X.X the and and everyone. revenue total good In of of revenue with $XX.X year and second Care quarter. quarter, Starting prior MACI million our prior the revenue morning, the second Total versus for Nick, NexoBrid which of the was million, million of and net million, Epicel XX% XX% was MACI quarter, Burn quarter revenue quarter made revenue $X.X versus up results. prior with $XX.X the revenue grew Thanks, $X.X

million XX% activities quarter pre-launch employee was lease versus Arthro, In of the through addition, growth of $XX.X with share versus which under XXX gross new margin the for XX% is facility XXXX. both development company's delivered of prior of increase revenue expenses the that prior $XX.X in the half quarter was headcount for operating operating second period the construction. to compared to second $X.X quarter were associated year. Gross The $X and same share million or highest expense due and quarter first profit date. Total for quarter is franchises net primarily an our the for $X.XX Net in increased per of to increase million expenses compared million the year, the loss points or basis revenue, for $X.XX and XXXX. for expense million $XX.X per was or the company's to the related MACI the year,

the net net GAAP revenue our revenue $X.X growth. million basis, addition, XXXX, XX-month compared now quarter as growth million to profile. adjusted XX% Non-GAAP on strong we the enhance $X.X of XX% continued In net in company our profitability continue to positive income significantly or for of or EBITDA to EBITDA to generated has rolling as high a revenue outpace XX% increased adjusted

million, EBITDA strong margin our the year, P&L. $XX.X XXX For across half EBITDA demonstrating doubled the of points, adjusted more increased and leverage to than first approximately adjusted continued basis

$XXX $XX.X and and Finally, and second ended flow debt. quarter operating million million no the cash the of in generated the investments quarter cash, in cash with company restricted

to financial Turning guidance. our

year, for year indicators, approximately revenue our to year. of expectations our strong of versus $XXX start prior XX% from continued reaffirming for the We the growth the our the with its of Burn key the high-teens are revenue to in of revenue our full total balance strength million XX% expect for very leading first or an now half franchise. we increased increase total the our half for MACI after revenue full and the full guidance million Within company have framework coming growth. Care MACI growth year, MACI year, the to strong For expectation $XXX first XX% of we on a results based guidance

addition, on guidance XX% increasing margin overall full In to and company's we guidance the of gross performance, adjusted margin compared the XX%, guidance the and strong to XX% respectively. are to previous for XX% EBITDA based financial year,

basis. Importantly, GAAP XXXX year be we also on profitable in a to expect full

year. growth $XX company revenue more expect growth the total with Care sequential XX% the both versus approximately quarter, For of third of and representing revenue prior in Burn we MACI million, than

with quarter the approximately similar range strong another X year revenue first expect and the year-over-year growth quarters we of million. in MACI, For a as of $XX.X

Care Burn expect total million. $XX.X we approximately Care, a also third strong with revenue For of Burn quarter

in expect gross be second concludes we third quarter and adjusted EBITDA margins the similar our quarter to Finally, prepared remarks. margins. This to

We up your questions. will open to the now call

Operator

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

Ryan Zimmerman

start I a question, first have want a Care question MACI. Burn and to X-part then on but on MACI I

to to cartilage user time, tenure in same the both fourth in that which may absolute you're you've about which, comments, second conversion, the little around the the the I conversion, quarter, back I So, acute would to value is defects, guidance, as year on less step-up clear Arthro increase, year. And some implied conversion kind the biopsy maybe you to happening for a is are procedure ratio seeing base half downward the sure given make expectations and noted, be then with convert of over the quarterly. it's Nick, just in appreciate so launch But pressure the and ratios. less which more question, want the Joe, move your has and pacing on of but the there's that likelihood injuries I increase smaller different, there of there. people part that coupled as may to at imagine of from will just conversion going be the

X would you X conversion have the those how so factors time the Care. of on over think treated in given have the Burn I nature launch? against injuries Arthro And And us about follow-up just then

Joseph Mara

Yes.

second. maybe So conversion and of start kind question Ryan, cadence I'll on your MACI address we'll then the

So I'd from as start extremely say strong leading to year, the a said, strong Nick X quarters indicators. perspective, MACI

We've range. on the have started call of So we do high expectations mid- basis. teens higher year the, to kind full around now a that in it, XX%

So MACI perform certainly, as continues increasing expectations it to well. on

first the point, average a so And over year, seasonality the think we've as growth for cadence that would our call X. out, to of QX, million the estimate of In terms up MACI. pretty seasonal of typical couple $XX.X about QX of seen of the say, probably the then I is the of on we And rest for your did similar follows that's about it step pattern. an the you and quarters kind generally around

of So kind which you the whether we growth, the range. at kind to of at QX, HX that XX% up in step HX look to look is

the, call around our at XX% HX, mix at if it, look HX you that which is XX% look You to guidance.

So I'd in seen very we've past. similar it's say to what the

we of and very that's is assumptions we've what MACI we've Arthro, much more line a of of MACI of the core see. of perform. the consistently seen really sort to driver. kind In and expectation terms of last the is I what around in within of our think mix again, and that's performance It's XXXX kind continued typically expectations year guidance said, And seasonality

Dominick C. Colangelo

higher your And that point to as adding to as continue are conversion they're what higher-volume that's that A and clearly those gain up surgeons experience have so talked have and we're to so, conversion about we years lower conversion speed, rates. conversion rates. new we've Ryan, lot of sort out to yes, sort of in surgeons as do of they dynamics rate, obviously, a balances the now, surgeons getting higher more rates we because for lot of our

relatively remained it's So stable.

on it's X of can how condyle the my you the knee, femoral we're is centimeter the look of X conversion your targeting of those centimeter To we MACI see average I'll big injury. terms tell a for to And that's a treated to piece significant our rate, we of at not if X now. In pretty surface for a product And at, there. defects. defect, a defect of And best when square Arthro go-to size in for patella cases. pretty the X just which instance, defects square are the that obviously those knowledge, patella, it's business higher sort least of the MACI

we of on able MACI So with rate Arthro I somehow be impact don't on that any instrument penetration and MACI size greater and just defect. getting have treated to into from the They're conversion anticipate kit. the think the those location defects a condyle will femoral

Ryan Zimmerman

is from structural just The covered on to Nick in just I've that of enough burn helpful. episodic... you that. saw? you Epicel there you nature sounds patient the And guys Very then Joe. Okay. and to loan the I know just that change around make again, Burn population May want Care. early and I not later saw June. business market the volatile. what It sure and you're May clear to change any there's then you seeing with no the in like in want structural be But volatility guided some

Dominick C. Colangelo

of I biopsies, the of the right? -- saw -- you that, you expect place the the of one, see point my funnel. top I it. Ryan, mean and had sort market, the some if our in That's we it's Yes. structural fair change a appreciate question, you would burn but that's similar

of also we their months July. patient the July, We April. in variability to the of sort see and strong very you strong again, then health mentioned of injuries. And in a critical biopsies start year nature in can just we on And back certain the of start had that issues the right in month based a that highest had

the pretty first we Epicel continued year, about half feel growth XX%. the up So of good and

again, we're pretty feeling good think I So that. about

sales few optimization force. we've implemented a for added have territories Burn our sales kind the where also additional force plan, of Care We

to up So we're XX%.

will third pull-through we've on promoting accounts all be of called And both NexoBrid. that reps dormant As Epicel Epicel formerly now seen a and pretty the the strong for quarter, for being NexoBrid. from were

year. range we're And think we've up on the Burn growth. it's we Care strong for guidance So XX% for set the nicely based in the given,

So pretty robust growth.

Operator

Our Kratky Partners. from from next Mike question Leerink comes

Michael Kratky

came month during any the in the and So bit number seeing sales a launch. highest it you biopsies since like the higher than also in MACI Street of looks started quarter

just your in? is of you you what can the that And to that mentioned? record to number some of pre-arthroscopic launch ongoing extent what So came confirm that activities of biopsies month tied quarter

Dominick C. Colangelo

-- in I Well, just for May what yes, mean, it worth. was that's

you very approved not Obviously, prep. is delivery particularly continuing see the That's to think in we're more more engagement surgeons of taking to translates important at biopsies yet. number obviously, part with to arthroscopic the arthroscopic the per uptick high I of of biopsies, terms very really of is when the surgeon, an see is surgeons which independent sort continuing be strong in levels that biopsies, great.

really of time the now. core just that kind independent. seeing really some MACI it's of It's So been quite for business the we've strength

Michael Kratky

maybe at sense as target the you can ticking basically up? surgeons you'd to regarding reaching the give targeting a what how out point And And them? Understood. that can a those just you to efficiency follow-up, us of, just expect really a, surgeons, you start force quickly start X,XXX cited, sales new

Dominick C. Colangelo

-- Well, obviously, have mean, to target I there's we go. list really and the set ready

reps those So on start FDA sales approval, immediately can surgeons. upon calling

limitation So there's no really that. on

a I'd are majority we surgeons, cartilage MACI we'll familiar with immediate procedures that. vast who potentially are procedures and folks excited of They as feel anytime both we they're done more uptake chondroplasty, microfractures, to remind obviously So lot probably product. the from always of see also arthroscopically. like do doing arthroscopic repair have say the

to used So way. treating they're cartilage injuries that

know, you were really X,XXX to procedures. injuries defects of with through like doing repair doing transition pretty and predominantly will cartilage to of think with though, arthroscopic patients things who delivery. see microfracture adding for treating flip of that. augmentation, for it's -- experienced used arthroscopic kind to be too also as are me surgeons as easy surgeons their cartilage appropriate do instruments So they're where volumes They there's I implants Similarly, part a card high arthroscopic those

pretty think for in give we transition and us a runway, So as that time long move we a think, years will seamless will MACI over -- it's it the ahead. we forward occur continue pretty growth

Operator

Jennings comes TD Cowen. Our question from next Josh from

Joshua Jennings

Wanted MACI in up around, follow to on nice to here. question, the the but see just momentum last angle. a different It's just

I had from momentum, getting in XX-year I hear experiencing about you're -- just out but success in in peer-to-peer that? to just getting clearly, more you've the thinking do trained. earlier what's it's wanted terms Just driving you surgeons mean of events there data you, the year. have

on TAP ]. trying of guess You first indicator. year? the to on figure MACI that Any that have Arthro is I for of [ half, leading some whether drivers approval out And question, the and interest comments that driving increased just of Arthro high-level gist just the this the this

Dominick C. Colangelo

MACI in care of No, just the the response again, time, high X-year MACI of of sort its exited total, more high-growth its cartilage sure just number pretty aware for business core volumes Arthro, broadening we that I'd the from and base profile and mean, customer the published in mentioned, momentum for you them. not data sort more prior continued as has you cartilage they're of as say COVID as to think of lot -- But data for perspective. on, MACI they're earlier we XX-year already. in then seen efficacy study, we've launched this back X-year the year, becomes pivotal of years just clinical only of those standard I'm the prior the study, sort rebound I option now. And be new see of that seen in of targets, the of a will a that MACI it impacted MACI repair as this sort profile extension those since and kind doing to the repair I that And years. a data was based we've of those just new

Joshua Jennings

get wanted just also update initiatives. And development an Understood. on to I business

more on M&A under there hunt, about to I How is inflecting. efforts into those the out the there Vericel have and opportunities think roof? the portfolios think profitability out you your -- would investors the team even bring profile

Dominick C. Colangelo

Yes.

relatively the us with strategy development have the been corporate of and high. years. expertise to high dedicated a new synergistic hurdles space as come Our our also are lot us over consistent be less us, sports looking as product with growth would has development But have at launches base advanced in with lot the ahead Burn well. I'd commercialization, relatively and business our in Care front, a the cell our opportunities MACI quite that but number obviously, core And with probably of space a different therapy for effort of always medicine you and customer we manufacture opportunities folks business. development, we the said, in continued for so, on then say given

all our of You even have go of sort sort seen awry space. deals BD in know

the so innovation very And we're of our portfolio. profile focused maintaining on

I space. think are their products our we're in in a relatively the unique position kind of products where approved only our

And a financial so we profile. that's also unique all then where it And starts. have

sure making high on. on focused profitability very so we're and so growth revenue our rate, we maintain And our

fit So if big transaction as bar be and a comfortable at I we sort firepower us. that to do sure probably of add that you're just say right, always certainly right but we looked be should portfolios we'll the about financial products high sense a making it's it, on and in able pretty us. a to pretty we for have But all something for it's

Operator

Jeffrey from next Co. Ladenburg question Cohen from Our Thalmann & comes

Jeffrey Cohen

end. our from questions Couple

about as XX trying could that far current [indiscernible] pediatric talk commercial firstly, in to you So and indication as [indiscernible] folks on are well on to and addition how go that? NexoBrid focus as may we the

Dominick C. Colangelo

Yes.

I I the of but a I time you, the gist think think have question. I a of had hearing hard Jeff, bit little

approval, Burn as optimization we of force our territories Care the that kind the for upon sales yes, franchise. have XX mentioned I implemented obviously, So we've

average, it's So X center territory. on per about

do until -- these day a of few using the seen pediatric in the reps. we've certainly free they're burn approval it, NexoBrid. We to And so not certainly there sort in But use have of these playbook centers. go sort for cetera. process, a approval go out there'll NexoBrid. right? we -- have But think we'll the to of pretty be pediatric meaningful protocols roughly hospitalized and it establishing and comes, will X, centers through XX% just obviously it's et ordering impact the the to They're promote patient promote P&T But promoting for it. do And be can't committee of on burn patients that. already We reps to protocols, target they're time, base XX% over same are patients. got and

as we I the in mentioned will so time. over certainly And on uptake call, NexoBrid think aid this

Jeffrey Cohen

getting net Perfect. up And brand us a then your to be of some for you proposition franchise last to give Could is or follow to on the XX.X. [indiscernible]? guide flavor QX

Joseph Mara

we're Jeff, revenue QX the guidance? This of asking time. about are composition you And within Joe. a is having hard kind

Jeffrey Cohen

thank We did. you. Yes,

Joseph Mara

Yes.

half that. saw obviously year-over-year encouraging look by was I'd it a of over think So year, the also grew mark, digits perspective, at the we for talked Epicel. a a from but the bit pretty first quarter vary run rate kind about on total bit, Care in Burn $X and that Epicel kind million the from perspective say, revenue But you in framework this and of there, double kind of if can of you about the Nick a

but think it's don't of prepared that's a we look it certainly like reasonable I that in in we of strong going $XX to in terms progression QX kind that part back So some range. quarters, assumption. And half, million I'd I across QX as what think is to remarks, of I to expect rate, to from NexoBrid, know higher we $X about QX. Epicel equation, the the say, call be as million about then talked run that and think exactly at

about second of the of certainly quarter, think continue the half third year. that that about think throughout and the the kind progression we As year should

strong remain NexoBrid what difficult We're and year. the we a as direction Epicel of higher and of to but these mix half strong there run seeing rates is well. exactly the will right to moving it's at in have So expect say certainly second indicators kind the be,

how So it back I'd we're say those of of the part half. QX about that's and both are and thinking

Operator

Swayampakula Our from next HCW. question from Ramakanth comes

Swayampakula Ramakanth

if you're burn the on Nick, I some question were when rates ] into you about quick had about and third second spill talking And over because into timing. correctly, there. you Epicel trying over something are spilt of Did expected A just everything the talking, third? conversion idea have franchise, [ I'm of revenue you any the saying heard in that conversion biopsy the if quarter quarter the to an also some that about

Dominick C. Colangelo

surgeries of into particularly Again, the mentioned, did quarters. infections And And quarter, pushed into we place. a So pretty from late that the timing rescheduled prevent always was just certainly cases of of prior because yes, with injuries funnel, or were did top treatments. the see yes, of as I lot that that consistent again, impact or variables to other taking in QX. mention I that happens health these kind patient that there's have going be patients

So answer is common. that but yes, is the short relatively

Swayampakula Ramakanth

on indication the a pediatric of Okay. question then And quick NexoBrid.

XX under have P&T centers, You said that centers you and approval. burn already

these board the If [Technical for only many add Difficulty]... you and how pediatric of periodic are centers outside of would centers also also is I'm the on you which do pediatric? get just not indication very XX,

Dominick C. Colangelo

So yes, so kind let of quick a just me overview. give

centers Tier the So and them centers X in really launch, the accredited the We by on into tiers we of X U.S. terms to. ABA. that the there's target XX XX reporting now pediatric been that's XX what initial in our XX with on about promote will that -- submissions, And kind we launch. of the the approvals, will we've centers et burn about XXX Tier focused we and -- X There's as are actively up in cetera. burn break

there centers, in don't So centers. can certainly, all existing treated. in pediatric be But we at again, patients can't get of treated promoting. some the pediatric be our They

used you'll pediatric product, have waiting So were the indication. centers some a of many that them few, of but pediatric that the sort for

centers we through uptake pediatric call, meaningful we that we mentioned start on get there have and population. treating as impact on the get they so a burn this I as out these And think, NexoBrid the and process

Swayampakula Ramakanth

exiting forward this the with introductions. new second Looking to half

Operator

showing no further for time. remarks. questions would at I Thank turn back to you. I'm it closing to this Nick like Colangelo now

Dominick C. Colangelo

you, questions and everyone, continued for Vericel. Well, thank Okay. your interest in

As the the of had strong year. first half we mentioned, very company a

revenue continue the look the We and our year expect providing remainder of next on beyond sustained deliver on to forward high profit further our to we for progress and growth and call. updates to

again, great have and thanks So a day.

Operator

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

now disconnect. may You

Vericel (VCEL) 1 Aug 242024 Q2 Earnings call transcript