Vericel Corporation

Once again, thank you for standing by and welcome to the Verisol's first quarter 2021 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 would now like to turn over the conference over to Eric Burns, Verisol's head of financial planning and analysis and investor relations. Sir, the floor is yours.

Thank you, Operator, and good morning, everyone. Welcome to Verasil Corporation's first quarter 2021 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 four 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 to describe 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 first quarter financial results plus 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 Verisol's President and Chief Executive Officer, Nick Colangelo, and our Chief Financial Officer, Joe Marra. I will now turn the call over to Nick.

Thanks, Eric, and good morning, everyone. We entered 2021 with a great deal of momentum based on the strong revenue, profitability, and cash flow that we generated last year and the strength of the underlying growth drivers across our business. That momentum continued through the first quarter as we had a very strong start to the year from both a financial and commercial perspective. This morning, we reported total revenue growth of 30% in the first quarter, achieving record first quarter revenue, gross margin, adjusted EBITDA, and operating cash flow. We reported positive adjusted EBITDA for the first time in what is historically our seasonally lowest revenue quarter of the year, and generated operating cash flow of more than $10 million for the second straight quarter, ending the quarter with $110 million in cash and investments and no debt. We believe that these results demonstrate the strength of the company's financial profile as we continue to generate strong revenue growth and increase profitability and cash flow, which was recognized by the addition of VeriCell to the S&P Small Cap 600 Index in March. Based on these results and our underlying business fundamentals, we're raising our revenue guidance and now expect total revenue for the year to be in the range of $165 to $168 million, or approximately 33% to 35% growth, with Macy revenue growth in the mid-30% range and EpiCell revenue growth in the high 20% range. Joe will provide further details regarding our updated financial guidance in a few moments. From a commercial perspective, both Macy and EpiCell had strong performances in the quarter. Macy implant and biopsy growth exceeded 20% for the quarter, with the growth in biopsies continuing to outpace the growth in implants which is important as biopsy growth remains a leading indicator for the Macy business. The growth in biopsies was driven by an increase in the number of surgeons taking biopsies in the quarter versus the first quarter of last year as we continue to focus on broadening our Macy surgeon base. While in most years we see a seasonal step down in the number of surgeons taking biopsies in the first quarter compared to the prior fourth quarter, This year, the number of surgeons taking biopsies in the first quarter was comparable to the fourth quarter of 2020, and we had the second highest number of surgeons taking biopsies in any quarter since we launched Macy. Given the lingering COVID-19 headwinds in the first half of the quarter, we're very pleased with this performance and believe that we're on track to deliver over 20% growth in surgeons taking biopsies for the full year. We also saw significantly higher approval rates for UnitedHealthcare Patella cases following the expansion of its Macy medical policy, which became effective on February 1st. We believe that the expanded coverage will not only improve access for UnitedHealthcare patients, but also reinforce with surgeons the broad access and favorable reimbursement profile for Macy and contribute to its continued growth in the years ahead. Overall, we believe that the underlying Macy business fundamentals remain very strong, positioning us to continue to drive sustainable penetration into Macy's addressable market. Turning to our burn care franchise, after a great close to 2020 for EpiCell, with fourth quarter revenue of nearly $10 million, we continued to deliver very strong results to start the year. First quarter revenue for EpiCell increased over 50% compared to the first quarter of 2020, as we achieved a new monthly volume record for EpiCell graphs in February and the second highest quarterly revenue in history. The average quarterly revenue for EpiCell over the past three quarters is now more than $8 million, and the underlying EpiCell business fundamentals remain very strong. EpiCell biopsies over the past two quarters were the highest in history, and the average number of graphs per patient also continue to outperform historical levels. Although EpiCell can be challenging to forecast due to the variability in the number of severe burn patients, we believe that these recent trends indicate a sustainably higher level of utilization of this important product, and we therefore have increased our growth expectations for EpiCell in 2021. To support the recent growth and increased demand for EpiCell and to prepare for the planned launch of Nexbrid, we're continuing our staged expansion of the burn care commercial team. Our increased commercial efforts on EpiCell, together with the structural changes to our sales force to include both sales and clinical support roles, have driven the increased demand for EpiCell. We believe that additional resources for the burn care team will drive continued increases in EpiCell utilization and support our preparation for the planned launch of Nexibrid. In terms of Nexabrid, we continue to make significant progress with respect to our commercial and medical affairs prelaunch activities. In addition to an ongoing disease state awareness campaign, our commercial team continues to advance multiple brand development and market access initiatives. Our clinical and medical affairs teams also are continuing to engage with burn centers in training and educational initiatives through the next expanded access study. which is enrolling new adult and pediatric patients at leading burn centers across the country. From a regulatory standpoint, the Nexabrid-Pedufa goal date remains due 29th. However, as is apparent from recent FDA actions across the industry, travel restrictions related to the COVID-19 pandemic are impacting the FDA's ability to complete manufacturing facility inspections, and the FDA has informed MediWound that due to these restrictions, the agency may not be able to conduct the required inspections of Nexabrid manufacturing facilities in Taiwan and Israel prior to the PDUFA date. The FDA has also requested additional CMC information from MediWound, and it has informed MediWound that it is unlikely that the additional CMC information provided will be reviewed during the current review cycle. Accordingly, we expect the timing of the potential approval and commercial wants of Nexabrid to be impacted. As we previously communicated, while we're not expecting any significant Nexabrid commercial revenue in 2021, we are expecting to recognize the remaining BARDA procurement revenue of approximately $3.8 million in 2021. Given its robust clinical data package, we believe that Nexibrid remains well-positioned to become a standard of care for removing eschar in patients with severe burns, and we look forward on approval to bringing Nexibrid to the U.S. market. I'll now turn the call over to Joe to provide more details on our first quarter financial performance and our updated 2021 financial guidance.