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Vericel Corp (VCEL) Q1 2024 Earnings Call Transcript Highlights: Robust Revenue Growth and ...

GuruFocus Research
·4-min read

  • Total Revenue: Increased 25% to $51.3 million

  • MACI Revenue: Grew 18% to $40.2 million

  • Burn Care Revenue: Increased 63% to $11.1 million

  • Epicel Revenue: Up 56% to $10.7 million

  • NexoBrid Revenue: $0.4 million

  • Gross Margin: Increased over 400 basis points to 69%

  • Net Loss: Reduced to $3.9 million, or $0.08 per share

  • Adjusted EBITDA: Grew 325% to $7.2 million, or 14% of net revenue

  • Operating Cash Flow: $7.2 million

  • Cash and Investments: Ended the quarter with $148 million

  • Full Year Revenue Guidance: Increased to $238 million to $242 million

Release Date: May 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Vericel Corp reported a 25% increase in total revenue to $51 million, surpassing the top end of their guidance.

  • MACI revenue grew by 18% to over $40 million, indicating strong performance and market adoption.

  • First quarter gross margin improved by over 400 basis points, demonstrating enhanced profitability.

  • Adjusted EBITDA grew by more than 300%, with a significant increase in profit growth outpacing revenue growth.

  • Epicel revenue increased by 56% to $10.5 million, marking the second highest quarterly revenue ever for Epicel.

Negative Points

  • Net loss for the quarter was $3.9 million, indicating ongoing challenges in achieving net profitability.

  • The increase in operating expenses to $40.8 million, primarily due to development activities and increased headcount, could pressure future earnings.

  • The company's reliance on the successful launch and adoption of new products like NexoBrid to sustain growth.

  • Complexities in hospital onboarding processes for NexoBrid could delay its revenue contribution.

  • Potential variability in quarterly revenue due to specialty distributor and hospital ordering patterns, as seen with NexoBrid.

Q & A Highlights

Q: Can you provide an update on the guidance for NexoBrid sales this year? A: Joseph Mara, CFO of Vericel, explained that the company has raised its full-year revenue guidance to $238 million to $242 million. For NexoBrid, they are maintaining the guidance provided earlier, focusing on building the product's market presence in 2024. The company expects both Epicel and NexoBrid to contribute to the burn care segment's growth, with NexoBrid in a build year and Epicel operating at a higher run rate.

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Q: With the launch of MACI arthroscopic instruments, is there a plan to expand the sales force? A: Dominick Colangelo, CEO of Vericel, mentioned that the company plans to add territory development managers and arthroscopic specialists to support the MACI arthroscopic launch. This expansion is manageable within the current structure and should not require a significant increase in the sales force or realignment of territories.

Q: What are the expectations for second-quarter margins, and how do you view the potential for gross margin improvement throughout the year? A: Joseph Mara stated that they expect second-quarter margins to be similar to the first quarter, with a gross margin of about 70%. The company had a strong start in Q1 with significant profitability growth and margin expansion, and they see potential for margins to be on the higher side of their initial guidance as the year progresses.

Q: Can you discuss the impact of NexoBrid on the burn care market and any inventory or specialty distributor impacts? A: Joseph Mara addressed that NexoBrid's early launch dynamics included variations in hospital and distributor ordering patterns, which are expected in new product introductions. The focus for NexoBrid is on increasing hospital adoption and patient treatment, which will drive revenue more consistently as the product becomes more established in the market.

Q: How does the company plan to manage the commercialization process for NexoBrid, particularly regarding P&T committee approvals and subsequent product ordering? A: Dominick Colangelo explained that the process varies by hospital, with some able to order quickly after P&T approval and others taking longer due to internal procedures. Vericel is actively assisting centers in navigating these processes to expedite NexoBrid's availability for patient treatment.

Q: What are the expectations for operating leverage and investments in new markets, particularly with the upcoming launch of arthroscopic MACI and ankle cartilage repair initiatives? A: Joseph Mara highlighted that while there are necessary investments for development activities, the company expects to maintain strong operating leverage. The focus remains on driving top-line growth and improving profitability metrics, aiming for a 30% adjusted EBITDA target in the coming years.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.