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.