Vericel Corporation

Ladies and gentlemen, thank you for standing by. Welcome to VeriCell's fourth quarter 2020 conference call. At this time, all participants are in a 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, VeriCell's Head of Financial Planning and Analysis and Investor Relations.

Thank you, Operator, and good morning, everyone. Welcome to Verisil's fourth quarter 2020 conference call to discuss our financial results and business highlights. Before we begin, let me remind you that on today's call, we will be making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995. These statements may involve risks and uncertainties that could cause actual results to differ materially from expectations and are described more fully in our filings with the SEC, which are available on our website. In addition, all forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Please note that a copy of our fourth quarter financial results press release is available on the investor relations section of our website. We also have a short presentation with highlights from today's call that can be viewed directly on the webcast or accessed on our website. I am joined on this call by VeriSell's President and Chief Executive Officer, Nick Colangelo, and our Chief Financial Officer, Joe Marra. I will now turn the call over to Nick.

Thank you, Eric, and good morning, everyone. I'd like to begin by welcoming Joe, who joined us in January from Biogen, where he held several finance leadership roles, including most recently Vice President of Finance and Head of Investor Relations. Previously, Joe served as Head of Global Financial Planning and Analysis and Strategic Corporate Finance, and also is divisional CFO for Biogen's U.S. business. We're excited to have Joe join the Veracel team, and he'll discuss our fourth quarter and full year 2020 financial results and our 2021 financial guidance later on this call. Turning to our financial and operational performance, we delivered strong fourth quarter and full year results in 2020, despite the challenges presented by COVID-19. For the full year, we achieved record total revenue and delivered record product volumes and revenue for both Macy and EpiCell. This strong revenue performance generated significant profitability and cash flow as we reported full year positive gap net income for the first time in the company's history and generated over $18 million in non-gap adjusted EBITDA and over $17 million in operating cash flow, ending the year with $100 million in cash and investments, and no debt. We also had a strong finish to the year, with quarterly records across several financial and commercial measures. From a financial perspective, we generated record quarterly MESI revenue and total revenue in the fourth quarter, record fourth quarter and the second highest quarterly EPICEL revenue in history, as well as record quarterly gross margin, net income, adjusted EBITDA, and operating cash flow, clearly demonstrating the strength of the company's financial profile. From a commercial perspective, we achieved record quarterly Macy implants and the second highest epicell graft volume in history in the fourth quarter. We also had a record quarterly high in the number of surgeons taking Macy biopsies and double-digit growth in Macy biopsies, achieving a record quarterly high in a record monthly high for biopsies in December. Despite the significant impact of COVID-19 on physician access and elective surgeries throughout 2020, we exited the year in a strong position. We believe that our results demonstrate the resiliency of our long-term growth profile and that our strong operational execution has positioned the company for a rapid return to top-tier revenue growth in 2021 and beyond. Our guidance for 2021 reflects a return to Macy's pre-COVID growth trajectory as the underlying growth drivers accelerate over the coming quarters, continued momentum for EpiCell, and additional Nexabrid procurement revenue as we prepare for a potential launch in the United States. As we announced this morning, we expect total revenue for 2021 to grow 30% to 32% to approximately $161 million to $164 million. driven by Macy growth in the low to mid-30% range and mid-teens growth for EpiCell. Joe will provide further details on our financial guidance in a few moments. With respect to Macy performance and expectations, our leading indicators remained strong, and the commercial team continued to execute very well throughout 2020. Overall, we received biopsies from approximately 1,500 surgeons in 2020 and increased from approximately 1,400 surgeons in 2019. Our 2021 guidance assumes that we will grow the number of surgeons taking biopsies by more than 20%, which is more in line with the higher rate of growth that we generated in 2019. While the average number of biopsies per surgeon decreased in 2020 due to the impact of COVID-19, By the third quarter, biopsies per surgeon had recovered to 2019 levels, and we expect continued growth as we move through 2021. Finally, even with the expansion of our surgeon base, we expect the biopsy to implant conversion rate to remain within the historical range. We also expect to benefit from UnitedHealthcare's decision to expand coverage of Macy to include patients with full thickness cartilage defects in the patella and multiple defects in the knee. UnitedHealthcare is the largest commercial payer in the United States, covering more than 26 million lives, and more patients treated with Macy are covered by UnitedHealthcare than any other plan in the United States. Over 85% of covered commercial lives in the U.S. have access to Macy, and more than 90% of Macy cases submitted to payers are approved. We believe that the expanded coverage will not only improve access for UnitedHealthcare patients, but also will reinforce with surgeons the broad access and favorable reimbursement for Macy and contribute to its strong growth in the years ahead. With respect to EpiCell, we had a very strong finish to 2020 and achieved record fourth quarter and full year graph volumes and revenue. In fact, we generated two of the three highest EpiCell revenue quarters ever in the third and fourth quarters of 2020. We believe that the leadership and Salesforce structure changes that we previously implemented which were in place for a full year for the first time in 2020, have yielded positive operational results across a number of important measures. Despite significant hospital access restrictions in 2020, the EPICEL team generated orders from several burn centers that had never placed an EPICEL order or had not done so in several years. We've also seen an uptick in the number of treatments per patient and the resulting number of grafts per patient as our sales representatives and clinical support specialists work with surgeons to optimize treatment protocols for EpiCell patients with very large total body surface area burns. We're encouraged by these trends and we're optimistic that they can continue in 2021 and beyond. And accordingly, we've increased our growth expectations for EpiCell in 2021. In terms of Nexibrid, extensive pre-commercialization activities are underway to support the planned launch upon approval. In addition to the ongoing disease state awareness campaign that we launched last year, we continue to advance our commercial launch plans, including a number of brand development and market access initiatives. Our medical affairs team is engaged with burn centers in training and educational initiatives through the next expanded access protocol, which we believe will be critical for Nexabrid to potentially replace surgical excision as the standard of care for removing eschar in patients with severe burns. We expect to recognize the remaining revenue related to the BARDA procurement of Nexabrid in 2021 And based upon expected timelines required for P&T committees to review and ultimately approve inclusion of Nexabrid on hospital formularies following its potential approval, we'd expect a more meaningful update in commercial revenue for Nexabrid in 2022. I'll now turn the call over to Joe to provide more details on our fourth quarter financial performance and on our initial 2021 financial guidance. Thanks, Nick.

First, I wanted to start by saying that I'm very excited to be part of the VeriCell team, and I look forward to getting to know many of you over the coming weeks and months. Turning to the income statement, total net revenue for the fourth quarter increased 15% to $45.2 million compared to $39.4 million in the fourth quarter of 2019, and included $34.7 million of Macy revenue and $9.6 million of EpiCell revenue compared to $33.6 million, and $5.8 million of Macy and EpiCell revenue, respectively, in the fourth quarter of 2019. Macy revenue grew 3% and EpiCell revenue grew 65% compared to the fourth quarter of 2019. Total revenue for the quarter also included approximately $1 million of revenue related to the procurement of Nexibrid by BARDA for emergency response preparedness. Gross profit for the quarter was $33.6 million or 74 percent of net revenue compared to $28.8 million or 73 percent of net revenue for the fourth quarter of 2019. Total operating expenses for the quarter were $21.4 million compared to $19.6 million for the same period in 2019. The increase in operating expenses was primarily driven by incremental employee expenses related to the Macy's Salesforce expansion Expansion in 2020. Net income for the quarter was $12.2 million or $0.25 per share compared to $9.5 million or $0.20 per share for the fourth quarter of 2019. Non-GAAP adjusted EBITDA for the quarter was $16 million or 35% of net revenue compared to $12.8 million or 33% of net revenue in the fourth quarter of 2019. our non-GAAP adjusted EBITDA of $16 million in the fourth quarter increased approximately 25% versus the fourth quarter of 2019. On a full-year basis, total revenue increased 5% over 2019 to $124.2 million, driven by the growth in both Macy and EpiCell revenue, as well as revenue from the barter procurement of Nexabrid. Net income for the year was $2.8 million, or $0.06 per share, while non-GAAP adjusted EBITDA was $18.6 million, or 15% of net revenue. Finally, we generated $11.3 million of operating cash flow in the fourth quarter and $17.6 million for the full year. As of the end of the year, the company had approximately $100 million in cash and investments, compared to $79 million as of December 31, 2019, and no debt. Transitioning to our full-year guidance for 2021, we expect total revenue to grow 30% to 32%, which represents full-year total revenue of approximately $161 million to $164 million. Macy revenue is expected to grow in the low to mid-30% range over 2020. This guidance assumes that surgeons taking biopsies will grow approximately 20% over 2020 and that biopsies per surgeon will increase above 2019 levels, and a stable conversion rate. Importantly, our full-year expectations for Macy assume that the current overall COVID-19 trends do not materially worsen and that we continue to see steady improvements in COVID-19 cases and hospitalization rates throughout the year. In terms of the mix of Macy revenue across the quarters, we expect that Macy quarterly revenue generally will follow the seasonality pattern that we saw in 2019. As mentioned earlier, EPICEL had a very strong finish to 2020, and we are optimistic that the positive trends described earlier will continue into 2021. As a result, we are increasing our expected EPICEL growth rate from high single digits to mid-teens growth for the full year. For Nexabrid, we anticipate the remaining $3.8 million in barter revenue to be recognized evenly across each quarter in 2021 and meaningful commercial revenue for Nexabrid beginning in 2022. Moving down the P&L, we expect gross margin to be 70% to 71% up from 68% in 2020. Full-year operating expenses are expected to be approximately $115 million. Overall, approximately 50% of the operating expense growth is driven by our non-cash stock compensation expenses due primarily to the share price appreciation over the last 12 months. Our operating expenses, excluding stock compensation, are expected to grow by approximately 20%, driven by a full year of our larger Macy's sales force, an increase in Nexabrid sales and marketing investments, and normalization of other discretionary commercial spends. Non-GAAP adjusted EBITDA margin for the full year is expected to be 21% to 23%, up from 15% in 2020. This guidance is consistent with our expectation to convert approximately 80% and 50% of marginal revenue to gross margin and adjusted EBITDA, respectively. For the full year, adjusted EBITDA is expected to increase from approximately $18.5 million in 2020 to to approximately $35 million in 2021, or roughly twice the adjusted EBITDA versus 2020, which also points to continued meaningful growth in operating cash flow. I will now turn it back over to Nick for some closing remarks.

Thanks, Joe. I wanted to take a moment to thank all of our dedicated employees for their contributions in 2020. Despite the challenges resulted from COVID-19, Our manufacturing and quality teams continued to manufacture and deliver our products without interruption, and our commercial and clinical support teams continued to partner with surgeons to ensure that patients in need had access to our important products. The entire VeriCell team looks forward to continuing to execute on our long-term growth strategy, provide our therapies to even more patients in need, and in the process, create significant value for both patients and our shareholders. Thank you, and now I'd like the operator to open the call to your questions.

As a reminder, to ask a question, please press star then the number one on your telephone keypad. Please hold for your first question.

Ryan Zimmerman with BTIG.

Great. Thanks for taking the questions. Nick and Joe, I want to start with NexoBrid for a minute and just get your sense around timing of that launch. Previously, the PDUFA date was – or it is, I assume, still January 2021. So maybe why start expecting sales in 2022 and not maybe first half – or excuse me, second half 2021?

Yeah, hey, Ryan, it's Nick. So just to be clear, the PDUF date, which remains the same, is June 29th, 2021, not January. And so, you know, that remains the case. Obviously, we're excited to have an opportunity to launch Nexabrid in the U.S. MediWound, of course, who submitted the BLA, is working with the FDA during the review process, and that process is moving forward. As we had talked about, with a mid-year approval, you still go through a quarter or so of P&T committee reviews at the individual burn centers and then go through the approval process. And so we've been very consistent in saying we expect a more meaningful uptake and revenue from Nexabrid in 2022. Okay.

Yeah, thank you for correcting me. I meant June 2021. The second question is just around Macy. You know, you expect to get back to that kind of pre-COVID growth rate of, you know, above 30%. Are we to assume that that's a sustainable growth rate, you know, maybe looking out longer term on the Macy business over time? And I think if I do the math correct, and correct me if I'm wrong, Joe, but the implied growth in Macy in at least the first quarter is something in the mid-teens based on that seasonality cadence. So just comments around that business would be appreciated.

Yeah, I'll start, Ryan. So, just in terms of the long-term growth rate, I think, you know, we've said pretty consistently that the increase in biopsying surgeons is kind of a good floor for sort of the longer-term growth rate, obviously, to the extent, as we've talked about previously, that We get more biopsies per surgeon, and we take a little bit of a price increase. That is what sort of gets you from growth in biopsying surgeons to sort of the revenue growth. An example of that was 2019, where we had 25% growth in biopsying surgeons, but because we got more biopsies per surgeon, and then obviously a little bit low single-digit price increase, we ended up with closer to 35% growth. So that's how we look at the business going forward. We think those growth drivers remain pretty strong, as we talked about. But again, baseline over years, yeah, I mean, we expect strong double-digit growth.

Yeah, Ryan, so in terms of kind of the quarterly question, you know, I think going back to the guidance, you know, we talked about kind of low to mid-30s range for the full year in Macy. In the prepared remarks, we talked about kind of 2019, you know, being a good kind of estimate. You know, I think at this point, you know, there certainly can still be some variability, but that's kind of our best estimate. And I think if you kind of get into the math, you know, you do get, you know, and you apply that mix, you know, you do get into the double digits in terms of Macy and Q1. Okay.

Congrats again, guys. Thank you. Thanks, Ryan.

Your next question is from Danielle with SVP Lyric.

Hi, good morning, guys. This is actually Rebecca Long for Danielle. Thank you for taking the question. I guess I'll start with the adoption ramp in May's day. Once you get a sense of the same cells in early adopters versus new physician growth for May's day, how many new physicians sending biopsies over the last 12 months? How does that compare with historical trends?

Yeah, so, Rebecca, as we've mentioned, in 2019, the number of biopsying surgeons increased 25% over 2018. In 2020, which obviously was a disrupted year, we still were able to grow those surgeons, obviously not at the rate we had anticipated prior to COVID-19, but we were up about 7% or 8% to about 1,500 surgeons. We've mentioned biopsying. and did so again today that we expect biopsying surgeons in 2021 to grow, you know, more than 20% over 2020. So you can kind of do the math and see that we'll end up somewhere around 1,800 biopsying surgeons for 2021 would be our expectation. All right, got it.

Thank you. That's very helpful. Another question is sales reps. I remember you guys normally hire new reps and train reps in Q1. Can you give us an update on that from?

Yeah, well, obviously in 2020 we did a relatively meaningful sales force expansion from 49 to 76 territories, and our perspective is that that was – where we would be for a couple of years, so we're not planning to expand the sales force again this year. We'll look at it at the end of the year, but this was intended to be sort of an expansion for a two to three year time period at least.

All right, thank you. The next question is from Taylor Crump with Truist Securities.

Hi, guys. Thanks for taking our questions. So first, has there been any update on Nexibrid pricing that you can provide? I think historically you've said maybe something in the range of $5,000 to $7,000. Does that range still seem reasonable at this point? Are you more comfortable at the high or low end of that per patient rate? Just any additional color there would be helpful.

Yeah, hey, Kayla, thanks for your question. And, yeah, that was, you know, our perspective when we sort of introduced the addressable market for Nexabrid, and it was really based on a benchmark product that's out there. We're in the midst of a pricing study right now. I think when we laid out sort of our pre-commercial launch activities, you know, this was something that was going to be going on through the first quarter. So we haven't made any final determinations. I'd say, you know, we're certainly comfortable with that entire range. And really the question is, you know, what kind of premium will we end up taking given the compelling clinical data for Nexibrid?

Great. That makes sense. Thanks, Nick. And then I think you guys have had a month under your belt now with the UnitedHealthcare positive coverage decision. I'm just curious if you've seen any benefit or, you know, it sounds like you guys are pretty excited about it. How would you help us sort of frame up the opportunity there in 2021? Thanks.

Yeah, so we actually are under a month because, you know, we announced it in January, but the policy went into effect on February 1st, so it's very early days. But, you know, the way we look at the opportunity is, first of all, you can kind of look at our TAM and say that, you know, about 15% of our business is UnitedHealthcare business, about 20% of cartilage defects are patella defects. And so you can do the math and say, if I want to look at it, you know, in terms of the TAM, you know, it's probably a $60, $70 million piece of the TAM. And obviously we have some of that already because patella cases were approved, but just on a case-by-case basis for United. So that's kind of the market opportunity. We can then obviously look at, you know, as we mentioned before, UnitedHealthcare Patella cases were approved at a much lower rate than our average rate. As I mentioned in my prepared remarks, the approval rates generally for Macy are over 90%, and it was much less for UnitedHealthcare Patella cases. So you can look at that and say, well, that's business that you can expect to capture. I think the bigger picture issue is that surgeons knew that UnitedHealthcare didn't cover patella cases, and so the real question is sort of how many patients that they saw who were UnitedHealthcare patients with patella defects that they otherwise would have treated did they not even bother taking biopsies for, and that's the bigger piece of it. That relates more to the TAM portion, obviously. But, yeah, we're excited about it. We think it will allow us to not only, you know, capture more UnitedHealthcare patients, but there's kind of a halo effect of just continuing strong reimbursement and access for Macy.

Great. Thank you.

The next question is from Chris Cooley with Stevens.

Good morning and thanks for taking the questions and congratulations on the litany of records there. I think I lost track of the number there in the fourth quarter. If I could just follow on Kayla's question for my first, when you think about the change in the UnitedHealth coverage policy, do you think that will be more impactful going forward within sports med or the general orthopedic surgeon community? I'm just curious if One was a little bit more skewed, and as a result, that could be maybe more beneficial from an uptake standpoint. And then I have one quick follow-on.

Yeah, I don't think we feel like there's a particular segmentation. I think the benefit will apply across the board to our 5,000 surgeon targets. And again, that's almost a 60-40, roughly 50-50 split of sort of designated sports medicine surgeons versus general orthopedic surgeons. So I wouldn't say it skews one way or the other. I think it's a benefit that we can realize across the board.

Understood. And then just looking back at the epi-cell growth in the back half of last year, which was obviously very impressive, I'm just curious if you feel like this is now kind of the overall level of productivity that we should think about on a per rep basis, or is there still leverage there or opportunity to improve that going forward here in calendar 21 independent of the next hybrid launch? I mean, are they hitting stride now, or is there still some room to go there, I guess, in short?

Well, I would say we're always careful about calling trends with EpiCell just because of the small numbers and variable nature of severe burns. But I do think we've pointed folks to look at in 2019, we had three quarters that were below $6 million and then the record quarter of $9.9 million in the third quarter. And that was in an uninterrupted year. When you look at 2020, where clearly there were access issues and things sort of ground to a halt in Q2, each of the quarters was above $6 million other than the second quarter. And so, you know, we do think that there's probably a stronger baseline there, but we by no means feel like we're done or we're capped out. You know, our goal obviously would be to continue growing EpiCell on its own, and we think with an expanded sales force ahead of a Nexabrid launch that, you know, we'll get further uptake for EpiCell as well.

Thank you. Appreciate it.

All right. Thanks, Chris. Cool.

Your next question is from Jeffrey Cohen with Lattenberg Bellman.

Hi, Nick and Joe. How are you? Good, Jeff.

Great, thanks.

So a few questions from our side. Very strong margins for Q4. And what's the pull through on the margin potential? Should we still be thinking about, you know, low 70s as per your guidance two or three years out? Or... does barter drive those revenues higher or keep them kind of in the same range?

So I can repeat the second part. I've got the gross margin.

Sorry. How that looks in 22 and 23 and the ramifications from Nexabrit on those, call it low to mid-70s.

Yeah, so I would say, you know, if you kind of go back to our guidance, we talked about from a gross margin perspective being in that 70% to 71% range for the full year. You know, obviously it was kind of strong in the fourth quarter of 2020 when we typically see higher revenues. You know, more broadly, I would say, you know, we talked about this in the prepared remarks. So as we move forward, you know, we're still kind of focused on as marginal revenue comes in, you know, I'd say approximately kind of 80% of that converting the gross profit line and also about 50% on the adjusted EBITDA. So those, you know, remain kind of the longer term goals, both in 21 and certainly beyond. You know, in terms of Nexabrid, there's kind of two components there in the margin. There's a royalty, which is kind of in the high single digits, and then there's a fixed cost component. So, you know, I think, you know, from a P&L perspective, you know, that kind of fits in with our current portfolio, so we expect that to be consistent from a margin perspective relative to where we are now.

Okay, got it. And just to review your commentary on the OpEx, what you said was – 115, and that's a gap number, and that's inclusive of approximately 15% stock comp. Is that correct for 21?

I think what we said was, so year over year, about 50% of the increase when you kind of look back at 2020 versus the guidance on 2021 is related to stock comp, and that kind of if you exclude that stock comp component, the underlying growth rate is more like 20%.

Okay, got it. And then any read into conversions over the past few quarters, Nick? It sounds like, you know, there's some strong trends, but any read recently into uptake or downtake or throughputs or, you know, time from biopsies through manufacturing?

No, I think, you know, we've said, and this underlies our assumptions for 2021, that the biopsy to implant conversion rate has remained relatively stable within historical ranges, even though we're adding obviously a large number of new surgeons who typically have lower conversion rates as they engage with the brand and then sort of move up as they become more experienced and higher volume users. So, you know, I'd say to be remaining stable is good now, but of our three drivers of adding new surgeons, getting more biopsies per surgeon, and then increasing the conversion rate over time, right now growth is clearly being driven by adding new surgeons and getting more biopsies per surgeon. Over time, as we saturate our current 5,000 surgeon target universe, you'd expect those latter two drivers to really start to take prominence in the outer years.

Okay, perfect. Thanks again for putting out 2021 guidance. It's appreciated, and for taking our questions. Okay, thanks, Jeff.

Thank you.

Our next question is from Kevin DeGito with Oppenheimer.

Hey, guys, thanks for taking my questions. Maybe the first one on Macy, I appreciate the guidance, very strong. Nick, can you provide an update as to how you're thinking about the Percentage of the sports medicine, you have that portion of the TAM that you think you've penetrated. And as we think about that, you know, 20% year-over-year growth in ordering surgeons, you know, do those increasingly look to make shift a little bit more towards general orthopedic surgeons? Or do you think sort of the historical mix of new surgeon ads, which, you know, skew sports medicine is still the right way to think about the business? I'm just trying to get to you. kind of ordering patterns and whether there might be some differences in those new docs as opposed to the longer-term sports medicine docs.

Yeah, well, I'll just go back and sort of give you the historical background as I get to the answer of your question, which is we started with 3,000 target surgeons when we launched in 2017. And those were principally, you know, those were folks who were, you know, who had used Carticel in years gone by. And then, you know, you can go to the sports medicine societies and sort of get the lists of surgeons and cull through them and so on. And so it was probably, you know, obviously more heavily focused towards sports medicine surgeons when we launched. But I wouldn't say it was exclusively so. You know, we penetrated, call it roughly 50% of that initial 3,000 targets by 2019 when we said we had, you know, gotten biopsies from about 1,400 surgeons. And now, you know, we've expanded to 5,000 surgeons. So I guess if you just look at it proportionately, there were still 1,500 of those original targets we hadn't penetrated yet, plus 2,000 new general orthopedic surgeons, so roughly 1,000. evenly split in terms of potential new customers. And I think that's probably the best way to look at it.

Super helpful. And maybe a follow-up on that, and then I'll just ask my second question. The follow-up is just, you know, have you seen any differences historically in terms of kind of, you know, you know, conversion rates or other features, you know, between, you know, the two poles, you know, sports medicine and, you and general orthopedic surgeons. And my separate question is really on EpiCell. I mean, tremendous results, particularly against some of the industry commentary towards, you know, decrease in overall sort of burn volumes related to, you know, COVID restrictions in portions of 2020. And I guess my question on EpiCell is, does your guidance imply, you know, from a, you know, rate of severe burn standpoint or return to kind of pre-COVID conditions you know, dynamics in terms of the macro market or just how do I think about, you know, any feed through from new real behaviors and the size of the overall addressable market in your guidance?

Right. Well, I'll start with Macy and just, you know, the conversion rate historically versus new customers. I mean, you know, you started with a bit of an enriched pool with the original Macy users, right, because they were car to sell users. typically sports medicine surgeons, had pretty high volumes, obviously more so than the new users in either case. So that skewed it a little towards heavier volumes with sports medicine surgeons. But when we did our Salesforce sizing test, exercise with ZS Associates, we were really looking, we had the claims data and, you know, the new surgeons we added were really high volume cartilage repair surgeons that did open knee procedures. And when you think about sort of the lower levels of utilization for Macy generally, it doesn't take many patients to become a pretty important volume user. So, you know, I think there's potential across the board with the surgeons that we're calling on. In terms of EPICEL, just sort of the dynamics, you know, we had a lot of discussion sort of when in the early days of COVID-19 about what the impact would be when you had reduced industrial activity and maybe reduced sort of activity generally. And then, you know, folks who were going to be at home more often. And what we said back in sort of the midst of all that was we really didn't see a change in the top of our funnel. The mix might have changed. We'd I think a couple of our burn centers who typically treat a lot of industrial accidents, their activity went down a little, but obviously it was made up in other areas, and that's because these unfortunate accidents happen often. you know, for many reasons at home or at work. And so we really didn't see a meaningful change in the top of the funnel. I think what's driven EpiCell, as we said, was, you know, getting business from some new centers, the way, you know, our new Salesforce structure and leadership is approaching the treatment protocols for how you treat these patients with severe burns. So we're seeing some more treatments and then more graphs per patient. And I think that's a pretty focused effort on our behalf.

Listen, congrats. Great drive-bys. Thank you. Thanks, Kevin. Thank you.

Our next question is from Swayampakala Rumpkin with HC Wainwright.

Your line is open.

Sorry about that. Good morning, Nick and Joe. A couple of quick questions. Based on your guidance, you know, it looks like you're looking for like 2019 like growth. So can you highlight for us some of the things that you're looking at which is kind of giving you the confidence that you're pretty much, you know, are quite close to pre-pandemic situation?

Yeah, well, I think RK will – good morning and thanks for the question. We'll kind of take a look at both products. So for EpiCell, you know, obviously, as we mentioned on the call, we've had two of our three highest revenue quarters ever in the back half of 2020. So I think, you know, bumping our expectations from, you know, high single to low double digits to sort of mid-teens – kind of how the product has been performing through the, you know, pandemic year. So that one's pretty straightforward. You know, with respect to Macy, obviously we have a view into part of the business through the biopsies and sort of the conversion rates, you know, in light of sort of how that performed in 2020. So using models that have served us pretty well, we're able to have a pretty good feel for where things are going. I would say, obviously, in terms of reasonableness of assuming 30% plus growth for Macy's, You know, it's a very large market. Obviously, as I mentioned, early innings, you know, relatively low penetration. So there's a lot of room to grow both on surgeon penetration, patient penetration. We've got a larger sales force now that will be in place and is experienced. They'll be in place for the full year. And then, you know, obviously more surgeons to call on as well. So we think it's pretty reasonable now. And I'd say if you looked back at sort of our initial guidance last year, which was in the $141 to $146 million range and how we sort of characterized that, you know, you would have expected, you know, Macy in the mid-100 teens, right, 115 or so. So to say, you know, applying 30% to the $94 million from this past year, you know, you end up kind of in the mid-20s. So, you know, a $10 million uptick, you know, with all those dynamics at play, you know, we're pretty comfortable with that.

Yeah, no, this is great. So a couple of things which you just said, and so let's kind of tease them up a little bit. So on EPICEL, congratulations on, you know, two quarters. I'm not sure two quarters makes a trend, but certainly, you know, it's very, very promising, right? What were the drivers, you know, for some of those clinics that never had ordered EpiCell for them to opt now? And part B is in terms of Salesforce expansion for the burn franchise in 2021, Should we expect some, or will this merge along with what you're expecting for next subreddit as well?

Yeah, so just in terms of the dynamic of new centers, I mean, first of all, as I mentioned, we brought in new leadership in 2019. We restructured the sales force into sales representatives and then clinical support specialists, so it's always about having the right people in the right roles. We brought on a few new representatives. They obviously come to the business with existing relationships. So I think it's just, you know, very strong sales execution and, you know, obviously good work in explaining the profound benefits with EpiCell to these centers who may not, you know, have been using it previously. So that's, I think, really the explanation for why we're seeing that. Perfect.

And then any specifics on the Salesforce expansion for the Bone franchise specifically?

Yeah, we're planning to follow the same playbook that we've done when we expand Macy, that when we get closer to a potential launch, we'll end up bringing the reps on ahead of that so they obviously can get trained up, do their home study, their office study and then field training. So we would expect to do that, you know, a quarter ahead of launch. So we're kind of entering that zone, hopefully.

Okay, one last quick question. Congratulations on the UnitedHealthcare coverage. So should we expect additional payers also to jump in, you know, now that you have UnitedHealthcare in 2021, or you are having discussions with the other folks?

Yeah, well, as I mentioned, you know, we have outstanding access for Macy's, so more than 85% of covered lives in the U.S. have access to Macy's, all the major plans. You know, the nuance here was that when Macy's was approved, all these plans had existing medical policies that were really based around the Carter Cell label, which was more limited in that it was only for Defects on the femoral condyle or part of the knee was a second-line therapy. So Macy, as a first-line therapy labeled to cover defects anywhere in the knee, had a much broader label. And plans just took different time periods, time frames, or time to get there. Some of them reviewed the Macy label and updated their policy immediately. Some just took it off the investigational list but didn't update other parts of the policy. And so this was really just an update. We had mentioned a couple years ago that Aetna and Cigna had done the same, and United was really the last of the major plans to kind of just mirror the policy to the current Macy label. So we'll continue to focus on any incremental enhancements, but there's no sort of big one left out there that we're waiting on.

Great. Thank you very much for taking all my questions, Nick.

Okay. Thank you.

At this time, there are no questions.

Great. Well, I just wanted to thank everybody for joining us on the call today. We appreciate your continued interest and support, and so have a great day and look forward to talking to you again soon. Thank you.