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spk04: 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.
spk02: 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.
spk09: 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.
spk03: Thanks, Nick. Starting with the income statement, Total net revenue for the first quarter increased 30% to $34.6 million, compared to $26.7 million in the first quarter of 2020. It included $23.8 million of Macy revenue and $9.8 million of EpiCell revenue, compared to $20.3 million and $6.4 million of Macy and EpiCell revenue, respectively, in the first quarter of 2020. Total revenue for the quarter also included approximately $0.9 million of revenue related to the procurement of Nexibrid by BARDA for emergency response preparedness. Macy revenue grew 17% compared to the first quarter of 2020. Note that Macy revenue in the first quarter of both 2020 and 2021 included favorable revenue adjustments related to prior period estimates, and if you exclude the net impact of those adjustments, revenue growth would have been over 20%, which is in line with our implant growth. EPICEL first quarter revenue grew 54% compared to Q1 2020, and our total burn care revenue of 10.8 million increased versus a strong fourth quarter of 2020. Gross profit for the quarter was 23 million, or 66% of net revenue, compared to 16.8 million, or 63% of net revenue, for the first quarter of 2020, representing an approximate 350 basis point improvement in our gross margin versus the prior year. Total operating expenses for the quarter were $26.3 million, compared to $21.8 million for the same period in 2020. The increase in operating expenses was primarily driven by higher non-cash stock compensation expenses related to our higher share price as well as incremental employee expenses related to the Macy's Salesforce expansion in 2020. Note that Q1 2021 results did not include a full quarter of stock compensation expense based on the increase in our share price, and we will see sequential growth in operating expenses into Q2 to account for a full quarter impact of this expense, which is already factored into our full-year operating expense guidance. Net loss for the quarter was $3.3 million, or $0.07 per share, compared to a net loss of $4.7 million, or $0.10 per share, for the first quarter of 2020. Non-GAAP adjusted EBITDA for the quarter was $4.6 million, or 13% of net revenue, compared to a loss of $0.7 million in the first quarter of 2020. Importantly, this is our third consecutive quarter with positive adjusted EBITDA and our first time reporting positive adjusted EBITDA for the first quarter, which is seasonally our lowest revenue quarter of the year. Finally, we generated $10.1 million of operating cash flow in the first quarter, and as of the end of Q1, the company had approximately $110 million in cash and investments compared to $100 million as of December 31, 2020, and no debt. Transitioning to our updated guidance for 2021. Based on the strength of both MACIE and EPICEL in Q1, both in terms of revenue and underlying growth drivers, we are increasing our full-year revenue guidance and now expect total revenue of $165 to $168 million, or approximately 33 to 35 percent growth. This compares with our previous full-year guidance of $161 to $164 million, or 30 to 32% growth. In terms of our franchises, we expect Macy to be at the upper end of our previous guidance with growth in the mid 30% range. The increase to our full year revenue guidance range for Macy is driven by higher expectations for the second half of the year based on our biopsy performance over the past few months, which typically would begin to convert to implants in the third quarter. Moving to our burn care franchise, after a strong start to the year, both in terms of revenue and underlying commercial trends, we now expect revenue growth to be in the high 20 percent range for the year, versus our previous guidance of mid-teens growth. Our overall burn care franchise, including next-grade barter revenue, is now expected to be approximately 30 percent for the year. Moving down the P&L, we continue to expect gross margin to be 70 to 71 percent for the full year, and operating expenses to be approximately $115 million for the full year, with a sequential increase of about $5 million in spend expected in the second quarter, and then approximately $30 million of operating expenses in each of the remaining quarters. And finally, based on our increased revenue expectations, we are increasing our non-GAAP adjusted EBITDA margin for the full year to be approximately 21.5% to 23.5%, compared to the prior guidance of 21 to 23%. This concludes our prepared remarks. I'd now ask the operator to open the call to your questions.
spk04: Thank you. As a reminder, if you wish to ask a question, simply press star then the number one on your telephone keypad. Once again, that is star one on your telephone keypad. Your first question is from the line of Ryan Zimmerman of BTIG. Your line is now open.
spk05: Thanks for taking the questions. So maybe to start on the Nexobrid delay here, and I know many of them are giving their call right now, too, so they may have some additional commentary. But can you talk about kind of how long you expect this delay to occur or what guidance you have in terms of the review cycle? Just any color there, I think, in terms of helping investors think about when Nexobrid will be approved. and then commercial activities to pick up on and proceed.
spk09: Yeah, thanks, Ryan. So at this point, Ryan, what we're trying to do is say with less than two months left to the PDUFA date and without an inspection being scheduled, it's likely that there is going to be an impact. Now, we certainly aren't in a position to speak for the FDA or predict what they're going to do or how the impact how the likely delay will play out. But what we're trying to do is bring the information that we have to investors' attention. There's a number of different scenarios that can happen. You can see it across the industry, right, where If there's a delay, it can either fall into the category of a major amendment when additional information is requested. It can be a deferral or it can be a complete response letter. And, you know, I think you see all of those happening, you know, in the recent history with the FDA around these kinds of issues.
spk05: Okay. We'll look to hear more about that as we proceed. Maybe turning to guidance for a moment to follow up. Epsil is clearly doing better, I think, than your expectations. Guidance up about 2.5% or so, I think, from the midpoint. You guys beat by 7%. Maybe just help us understand the underlying dynamics in terms of the composition of guidance for the year, or maybe just said differently, how to think about Macy growth in the mid-30s here with respect to the biopsy dynamics. you clearly have more surgeons sending you biopsies, but, you know, you exited last year, I think, with a bit of a backlog and, you know, really strong biopsy growth. And so, you know, how are you, maybe some more additional color, I think, around biopsy dynamics in terms of, you know, whether you're seeing maybe less biopsies per surgeon, but a broader surgeon base, any color there, I think, would be helpful.
spk09: Yeah, I'll start, Ryan, and then Joe can pick up the guidance. We mentioned on our fourth quarter call that we saw strong biopsy growth in the fourth quarter. Obviously, it wasn't the same growth we would have had without the COVID-19 impact. And then, of course, 20% biopsy growth plus in the first quarter. So we're seeing a strengthening in that biopsy growth and And, you know, we also mentioned that the biopsies per surgeon after taking a dip, you know, during the first half of the year related to COVID had sort of bounced back to 2019 levels. And we'd expect that to grow, you know, throughout 2021. And so the dynamic remains the same where we expect 20 plus percent growth in the biopsying surgeons. You're right to note, as we pointed out in the call, that that was a big driver for the strong biopsy performance. But when we then guide to sort of mid-30% revenue growth, it's because we expect additional or an increase in the average number of biopsies per surgeon. So that dynamic is pretty consistent with what we've been saying over the past couple of quarters.
spk03: Yeah, just to add as well. So, you know, again, I think the way to think about that, as Nick talked about in the call and just referenced again, is we are seeing underlying strength in both our surgeons and those biopsies over the last few months. So as we think about that increase on the Macy guidance, you know, basically from about low to mid-30% growth to now mid-30s, it really is the strength in those biopsies. And as we think about the cadence of that, our expectation is relative to our initial guidance, that's going to be more in the back half of the year.
spk05: Thank you.
spk04: Your next question is from the line of Kyla Crum from Trusting Securities. Your line is now open.
spk00: Great. Hi, guys. Thanks for taking our questions. So just to follow up to Ryan's earlier question on Nexabrid, can you just clarify the steps that have to be completed at this point before gaining approval in the U.S.? I mean, it sounds like the FDA hasn't officially scheduled the inspection for the MediWin facility, but have they given any sort of ballpark date for that yet? And then, I think you guys were still trying to determine the right price for the product a couple months back. Have you made any additional progress on that at this point?
spk09: Yeah, so the words that we used was that they may be unable to conduct an inspection prior to the PDUFA date, and that's all we know at this time. So there's no sort of indication of when that would get scheduled, and I think that's kind of standard practice. In terms of the pricing study for Nexabrid, you know, that is wrapping up. You know, we expect to kind of get the final results here in pretty short order, and then, you know, we would sort of share that at the appropriate time.
spk00: Okay, that makes sense. And then just on EpiCell, I mean, you've now had two consecutive quarters of almost, you know, $10 million performance. So, First, was there anything specific that drove the record month in February? And then can you help us understand, you know, why sort of $9 million wouldn't be a baseline for quarterly performance going forward? Thank you.
spk09: Yeah, thanks, Kayla. So, you know, you can't really say that there's anything particularly unique about February. As we mentioned on the call, we did have over the past, you know, two quarters a record number of biopsies for that time period. And so, you know, obviously when the top of the funnel is filled with more patients, you know, you tend to get higher volumes, but nothing, you know, particularly unique. unique about February. I think it really just goes back to what we've talked about before where we are having, you know, seeing a higher number of grafts per patient and per order, which is important as our SALS reps who are doing a great job, you know, sort of engage earlier in the process on treatment plans with surgeons. I think that's a clear dynamic that we've seen and that we expect that to continue going forward. In terms of, you know, the baseline, Joe, I'll let you take that one.
spk03: Yeah, so, you know, thanks for the question. You know, I think as we think about EpiCell, of course, this is a difficult product to predict in terms of just given the variability and the type of product it is. But if you look back over the last three quarters, you know, as you talked about, there's two really strong quarters in Q4 and Q1. And if you look really over the last three quarters, our run rate is about 8 million. So, you know, as we think about guidance, you know, our initial guidance was in the teens, which was higher than single digits. Now we're up to the high 20s. So, you know, from a run rate perspective, you know, you're looking at something closer to 8.5 million as we think about the remaining quarters in the year. And certainly, as Nick said, the team is doing a great job and will continue to, you know, continue to push on the product. But, you know, I think it is an increase relative to where we were and still – above our run rate over the last three quarters.
spk00: Great. Thanks, guys.
spk04: Thank you. Thank you. Your next question is from the line of Danielle Antalfi of SVB Learing. Your line is now open.
spk01: Hey, good morning. Thanks so much for taking the question. Congrats on a really strong start to the year. Nick or maybe Joe, whoever wants to take this one, I'm just curious about what you're seeing from a productivity perspective with the Salesforce that you added. Granted, you added them right before COVID, but it sounds like you were able to at least onboard them. And so their productivity ramp likely delayed given that they started sort of, correct me if I'm wrong, but kind of in the April timeframe of last year. But what have you seen now as you're seeing restrictions start to ease? Is that part of what's driving this stronger biopsy growth you're seeing the productivity start to ramp there? Any color would be great.
spk09: Yeah, thanks, Danielle. And as we mentioned last year, we've always followed the same practice in terms of our Salesforce expansions, which have been pretty productive, I think, compared to industry norms as we scaled our Salesforce. We essentially were seeing increased productivity Rep productivity is measured by revenue per rep. And we expected that to take a bit of a step back when we added such a relatively larger number of reps. But the delay in getting into the field last year was about a month. But we talked about the fact that it really gave the teams a lot of time, the new reps, to build strong business plans and then get out there and hit the ground running. think in the third quarter last year, we mentioned that, you know, in terms of growth of new biopsying surgeons, the new territories were leading the way. And that often happens, right? Because we brought in really experienced reps. I think average, you know, on average, they were sort of large cap med tech, sports medicine reps with about 10 years of experience. So they bring relationships. And, you know, I think we saw a little bit of that. And then as you look into the first quarter of the year, you have to remember that at this point, we're kind of taking existing territories and basically realigning them, so it's not like the reps are walking into a greenfield situation. There's a book of business there. And I think we can say that from a biopsy perspective and even an implant perspective that the metrics for those 27 expansion territories are pretty much aligned with our legacy, the original territory growth rates. And so So we're feeling good. You know, we expect that they'll be, you know, have the same productivity profile as the prior cohorts of reps that we've added.
spk01: Understood. Thank you for that. And then just a question on the biopsy conversion rate. So biopsies are outpacing implants, it sounds like, which is great to see and certainly a positive leading indicator. But the other, you know, big needle mover here is on the conversion side of things. Are you guys seeing any progress on that front? And how should we be thinking about that contributing to the growth profile as we look ahead to 2021? But then also, obviously, more importantly, over the next few years. Thanks so much.
spk09: Yeah. Thanks, Danielle. And, you know, we've talked pretty consistently about the three growth drivers for the Macy business being the number of biopsying surgeons and the growth of those surgeons taking biopsies, the average number of biopsies per surgeon, and then the conversion rate. And certainly, you know, as we talked about earlier for this year and, you know, probably over the next couple of years, the primary growth drivers are going to be adding the new biopsying surgeons, and then getting more biopsies per surgeon. And the first driver being the breadth of penetration into our target customer base, and then the second being the depth of penetration into their practices. And we expect the conversion rate to remain stable as that dynamic is unfolding. And that has a lot to do with the fact when we're adding a large number of new surgeons they tend to convert at a lower rate as they first engage with the brand and then over time work up towards the average. And so once we saturate our target surgeon base of 5,000 surgeons over the next few years, then the number of biopsies per surgeon and the conversion rate will take the predominant role in terms of driving growth in the out years. So for this year, we expect the conversion rate to be stable and then increase over time.
spk01: Got it. Okay. Thanks so much.
spk09: Thanks, Danielle.
spk01: Thank you.
spk04: Your next question is from the line of Chris Cooley from Defense. Your line is now open.
spk07: Good morning, Nanette. Congratulations on a great start to the new year, and I appreciate you taking the questions. Just too quickly for me, if I may, Nick, could you maybe just talk a little bit about the operating model now? And what I really wanted to get at is, With the leverage that you're seeing in the Byrne franchise, how do we think going forward just about the margin profile of the business? Are you essentially at scale now, although with the existing group, and so we just think about incremental reps coming on top of that, or is the existing group still scaling? You still see increased productivity opportunities there. Just trying to get it. the margin contribution from EpiCell or the Byrne franchise more broadly, longer term, then I have a quick follow-up.
spk09: Yeah, so I'll just start with sort of, you know, the first part of that question and then turn it over to Joe to talk about sort of the operating margin impacts. You know, I do think that as we restructured the EPICEL sales force, as we talked about, into both sales rep and clinical support roles that we're seeing, you know, increased efficiencies there and this dynamic that's driving growth, because we really haven't added a meaningful number of sales reps over the over the past two quarters for sure. And it's really just the fact that they're continuing to scale and increase productivity. Now, we did mention earlier on the call, as you know, as we were planning for the Nexabrid launch, you know, that we're planning to go from seven reps and four clinical support specialists to 11 reps and seven clinical support specialists. And, you know, we are embarking on that expansion now. currently. So we're going to add another couple of clinical support people and one on the sales management side. And so, you know, we're continuing our staged expansion. And that's because, you know, we think there's a lot of room to grow still just in the EpiCell business alone. I think that's clear. And then, of course, to plan for the next hybrid launch and get up to full scale for that event. So that's kind of the kind of approach that we're taking. And I'll let Joe talk about, you know, sort of the operating margin impacts as those, our margins generally continue to improve with our increased performance.
spk03: Yeah, so thanks for the question. I mean, just to add to what Nick talked about, I mean, I think broadly speaking, you know, we're certainly looking to continue the leverage we have in both franchises. But as we think about the burn franchise, you know, where it is right now, you know, we still think this kind of fits into our gross margin profile of around 70% plus gross margins. We think about the operating income line potentially being around 20%. And, you know, I think as we're thinking about this increase on the epi-cell or on the burn care side, I mean, these are really modest investments from an operating expense perspective. So, you know, I don't think it will have a material impact as we think about the burn care both this year and beyond. We'll continue to look to actually ad leverage and increase margins. And I would point you back to kind of the bigger picture for the company, which is if you look at EBITDA, for example, last year, which is a great proxy for operating cash flow, we're at around 18 million in 2020. And if you look at our guidance this year, you're at 2x that number of around 36, 38 million. So this is certainly something we pay attention to from a margin perspective, but we think from an investment perspective, you know, this will certainly help on the burn care side, but not impact our margins, and that's something we're going to continue to look to grow over time. Thank you.
spk07: Appreciate that, Collar. And then I apologize if we took over this earlier in the call, but just curious, I think in your prepared remarks, you stated that you were seeing increased acceptances from UnitedHealth. I'm just curious, when you look at the increase in biopsies taken on the Macy's side of the equation, Are those surgeons that are skewed more towards a united health type market? I'm just trying to parse that a little bit more finely there. Are you seeing basically a benefit from the growth in surgeons as a result of the change in the coverage from UNH? Thanks so much.
spk09: Yep. So, yeah, as we mentioned on the call, you know, and obviously previously on our first quarter earnings call, we believe that this is a very important win for us, right? Not only because, you know, we'll be able to treat these UnitedHealthcare Patella patients more frequently, but just sort of the overall sort of halo effect of reinforcing really strong reimbursement for Macy's. So, yeah, we saw an almost immediate uptick. Remember, the policy update just became effective on February 1st, so sort of middle of the first quarter. Immediate uptick in terms of approval rates for those cases that are at or maybe even slightly above non-Patella cases and right in line or maybe slightly above the overall national average. So really accelerated sort of increase in the approval rates. I'd say it's a little early to sort of take the fine cut of saying of the new surgeons that you've added, you know, are they principally United sort of focused or dominant physicians? I don't think we know that information yet. You know, United is the largest commercial insurance plan in the country, but even then it only represents about 15% of covered lives, right? So, you know, I'd be... I'd be a little surprised if there's someone who jumped on board just because they happen to have a skewed United practice. I just think it's sort of the overall effect of, you know, a great product and people having, you know, good success with it with their patients. Thank you.
spk04: Your next question is from the line of Jeffrey Cohen from Leidenberg Thalmann. Your line is now open.
spk08: Hi, Nick and Joe. How are you? We're doing well. Thanks, Jeff.
spk09: Great, thanks.
spk08: So, Joe, if I could start with you on the OPEX guide that you gave of 115. You had some additional commentary. Was there some additional composition of the OPEX that we should be thinking about throughout the cadence of the year?
spk03: Yeah, so what we talked about on OPEX was, you know, we did about 26. I think our OPEX was $26 million in Q1. And what we said, our previous guidance for the full year was $115 million, and that full year guidance of $115 million has not changed. So that's still our latest outlook on operating expenses. What we talked about in terms of the quarters was we expect a sequential increase in Q2 of about $5 million, and then approximately $30 million in the remaining two quarters. And really what you're seeing there is that we talked about is just kind of the timing and the way that the higher share price, which is impacting our non-cash stock compensation expense, which is part of operating expenses, how that's flowing through the P&L. So said differently, there was a portion of that in Q1, and that will step up in Q2 and then also in the remaining couple quarters.
spk08: Okay, that's super helpful. And Could you talk about surgeon training throughout the first quarter, maybe how that's looking so far in the second quarter? I didn't hear any previous commentary, but is there anything to call out there?
spk09: Yeah, you know, Jeff, we kind of focus on sort of the number of biopsying surgeons, right? The training element for Macy, because it's such a simple procedure, you know, can be done online. So that is not sort of a gating item for us, right? It's really about what the growth in the biopsying surgeons is. And as we mentioned, the strength in the biopsies that we saw in the first quarter was really driven by the biopsying surgeon growth. So I think that kind of tells you that the brain continues to be adopted broadly by an increasing surgeon base.
spk08: Okay, got it. And then lastly for me, you've probably done some work on this front, but Do you have a feeling about the additional or extra TAM with regard to patella and some of the cartilage defects that are out there?
spk09: Yeah, you know, we talked about that, you know, around the United, obviously, medical policy expansion. And, you know, the way to think about it is of the 60,000 patients that make up our addressable market, You know, about 20% of cartilage injuries or defects involve the patella. And then, you know, United covers about 15% of patients, commercial patients, in the U.S. So you can kind of do the math and say, you know, that gets you to about, I think, 1,800 patients times, you know, our price point gets you to, you know, of the patients. $2 billion TAM, you could say, you know, 70-ish million of it relates to United Patella cases. Now, we were already getting that business. You know, the issue was not all of the business. Obviously, the approval rates were much lower than sort of the overall approval rates. But the issue is, you know, surgeons really don't want to spend a lot of time trying to, you know, kind of go through the whole process on a one-off basis to get these cases covered. So, So really it just helps. You know, there's a portion of the addressable market that's attributable to these patients. There's a number of patients each year that were denied because it was Patel and it wasn't on the medical policy. So you pick up that piece, and then, you know, there's incremental business out there for the years ahead.
spk08: Okay, and then lastly for me, you had mentioned – 3.8 remaining on the BARDA contract for 2021. I think we had estimate around three where we would see the Q1 rate continue for the balance of three quarters. And what does that look like for any commentary on this year and also 2022 with regard to BARDA unto itself?
spk09: Yeah, so for the year, and obviously we recognized $900,000 of this revenue already, but the remainder of the contract was $3.8 million in total. So there's a little bit less than three to be recognized over the remaining three quarters. So that remains the same. And so no commentary beyond that. So at least for this year, you can kind of keep that in the model. Perfect. Okay, that does it for me.
spk08: Thanks for taking the questions. All right, thank you.
spk04: Thank you. Your next question is from the line of Kevin DeGieter of Oppenheimer. Your line is now open.
spk06: Hey, great. Thanks for taking my questions, guys. With regard to Nexavirid, appreciate the comments with regard to the site inspection. Probably not a big surprise there, but did I hear you correctly that you stated the FDA has been request additional CMC information for MediWound, and if that's correct, can you provide some context around that statement?
spk09: Yeah, we did mention that, right? So there's the inspection issue, and then, you know, any time you go through an FDA review, there's requests for information and so on. And so, yeah, we did say that the FDA has communicated to MediWound that it's unlikely they'll be able to review that additional information during the current review cycle.
spk06: Got it. And then with regard to commercial preparation, just kind of, you know, given this uncertainty and with regard to timing, you know, what portions of the pre-launch, you know, investment and scale up, you know, do you feel comfortable, you know, kind of continue more or less, you know, according to plan and what sort of elements do you at least need a little more clarity on our reduction in uncertainty before moving forward with investments. I'm just trying to put some of the, particularly some of the OPEX guidance in context.
spk09: Yeah, well, I'll just start sort of with our philosophical approach, and Joe can kind of chime in on what that might be. the impact that might have on OpEx. So number one, as I mentioned from kind of the medical affairs and clinical side, we continue to enroll patients in the expanded access study. That will continue during this period. From a commercial prep standpoint, really the activities fall into three buckets, right? We developed a disease state awareness campaign that is still being implemented at the various conferences and so on. And then there's brand development and market access activities. And those continue to move forward. You know, there's some things you can kind of slow down if you want. But, you know, it's still important that we're looking at completing our pricing study, putting P&T kits together, and all of those training materials. All of that stuff is ongoing because we don't want to be caught flat-footed upon approval. And so that's moving forward. And same thing, so the market access activities, once they began, we're going to see them through to completion. And then brain development, again, that's moving forward. There's some small pieces you can, you know, potentially just gate the timing a little bit. But, you know, we expect that these are just timing issues. And so we're going to move forward, you know, with the majority of the initiatives that were already underway.
spk03: Yeah, just to add to that, you know, as we talked about in the call, you know, we're going forward with the expansion of the burn care team course, which will support the EpiCell growth as well as the potential launch of Nexabrid. And then, you know, really, you know, as Nick said, you know, a number of launch preparations are still ongoing, so certainly there could be some pieces of that to move around on the sales and marketing side, but I wouldn't expect that to materially impact our operating expenses for the year.
spk06: Great. And lastly for me, can you just provide an update with regard to the expanded access study, the next study, you know, number of surgeons you've been able to bring in and gain access to Nexabrid or patient procedures or, you know, whatever metric you think is most relevant here?
spk09: Yeah, so, you know, we talked previously about sort of the program itself, right, which initially was, you know, treating up to 150 patients at up to 30 sites in the U.S. The pediatric Nexabrid study was ongoing at that time, and now the Enrollment is closed in that study, and pediatric patients can be treated in the next study. So the protocol was actually amended to increase the number of sites up to 35 and then up to 200 patients. And so, you know, we're probably somewhere in the low to mid-20s in terms of the number of sites that are currently engaged in that study. You know, there have been COVID impacts, right, where sites weren't starting new studies and so on. But, you know, we hope to continue to increase that over the balance of this time ahead of approval. And so, you know, we continue to enroll patients. We have plenty of room to continue to enroll more patients, which is really important, right? sort of the steady execution of the study up to approval so that we have the maximum number of centers and surgeons experienced with the product.
spk06: That's great. Listen, congratulations on a really terrific quarter and all the progress.
spk04: Thanks, Kevin.
spk06: Thank you.
spk04: Once again, if you wish to ask a question, simply press star, then the number one on your telephone keypad. Your next question is from the line of Ryan Zimmerman of BTIG. Your line is now open.
spk05: It's one follow-up for me. The next separate approval, the PDUFA day, excuse me, I believe there's a milestone payment of $7.5 million. So, Joe, the $115 million OPEX guidance, I assume, doesn't contemplate that milestone payment? And then, you know, second to that is, you know, what provisions do you have in the agreement with MediWUN to potentially modify that payment, if at all, given the, you know, open-ended question on timing? Thank you.
spk03: Yeah, I'll take the first part. So, again, the $115 million of OPEX is unchanged, and actually that milestone was not part of the $115 million, so there's some different accounting where it certainly would impact our cash flow, but not the P&L this year. And then maybe you can repeat the second part of the question, Ryan.
spk05: Yeah, well, just any provisions in the contract that dictate that milestone payment and the amount that you may pay to MediWound, based on whether it's a timing delay or something. At a certain point, you know, does the $7.5 million have the potential to become $6.5 or $5.5 based on whatever provisions you may have struck with the company?
spk09: Yeah, Ryan, there are no provisions like that, and I don't think that's really typical to kind of scale those payments with timing. So, you know, as Joe mentioned, number one, that was never included in OPEX just because it has different accounting treatment, so no change there. And when the product is approved, we'll make the $7.5 million payment.
spk05: Okay. Thanks for taking the thought. Great. Thanks, Ryan. Thanks.
spk04: Seeing no additional questions, I will now turn over the call back to Nick Colangelo for closing remarks.
spk09: Okay, thank you, Operator, and thanks to everyone for your questions and your continued interest in Veracel. I also wanted to thank all of our employees for their continued hard work and dedication to the patients we serve. The company executed extremely well in the first quarter, and we remain focused on continuing to execute on our long-term growth strategy, providing our therapies to even more patients in need, and in the process, creating significant value for all of our stakeholders, including patients and shareholders. So thanks again, and have a great day.
spk04: And with that, this concludes today's conference call. Thank you for attending. You may now disconnect.
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