Vericel Corporation

Ladies and gentlemen, thank you for standing by and welcome to VeriSell's fourth 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 will now turn the conference call over to Eric Burns, VeriSell's Head of Financial Planning and Analysis and Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to VeriSell's fourth 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 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 four 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 in 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 Verasol'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'll begin today's call by discussing financial and operational highlights for the fourth quarter and full year, as well as current trends and our expectations for 2022. Joe will then provide a more detailed update on our financial performance and financial guidance before opening the call to Q&A. The company delivered another year of strong revenue and profit growth in 2021, despite the continued impacts of COVID-19 throughout the year. Total revenue for the year increased 26% to approximately $156 million. Our top-line growth, which was at the higher end of the range that we preannounced last month, was also in line with our compounded annual revenue growth rate since we launched Macy in 2017. We also generated nearly $30 million of adjusted EBITDA and operating cash flow in 2021, ending the year with $129 million in cash and investments and no debt, as we once again demonstrated the strong P&L and cash flow leverage in our business as revenue continues to grow. With respect to our fourth quarter results, Despite the unexpected emergence of the Omicron variant in late November and the resulting impact on Macy performance in December, Macy quarterly growth increased compared to the prior quarter in the same period in 2020, achieving record quarterly revenue in the fourth quarter. We also finished the year with another strong quarter for EpiCell as we generated revenue of over $9.5 million for the fifth consecutive quarter. From a commercial perspective, we continued to see strength across the underlying growth drivers for Macy and a high level of brand engagement from surgeons and patients. Importantly, we met our goal of increasing the number of surgeons taking Macy biopsies by 20% and generated biopsy growth of 30% for the year, with a record quarterly high in the number of biopsies and the number of surgeons taking biopsies in the fourth quarter. This strong biopsy growth was also driven by an increase in the biopsies per surgeon of approximately 10%. Another key performance indicator for Macy as our penetration rate in individual practices is now higher than it was prior to the pandemic. We also continued to see strength across the key growth drivers for EpiCell. EpiCell's growth of over 50% for the year was driven in large part by a significant increase in the average number of EpiCell graphs per patient, which we believe was due to the outstanding commercial execution by our burn care sales team. This strong performance was also driven by over 30% growth in both the number of EpiCell biopsies and the number of burn centers treating patients with EpiCell in 2021. We believe that these key performance indicators will continue to help drive further penetration into EpiCell's $200 million-plus addressable market over the coming years. As we announced this morning, we expect total revenue in 2022 to increase to approximately $178 to $189 million with continued margin expansion and strong profit and cash flow growth. Joe will provide further details regarding our financial guidance in a moment, but I wanted to take a minute to discuss the current operating environment and the framework underlying our guidance. As we discussed throughout 2021 and in connection with our pre-announcement in January, we generated strong growth in both Macy biopsy surgeons and biopsies in 2021. However, due to a variety of COVID-19 related factors throughout the year, we saw a much more pronounced impact on Macy implant growth as historical biopsy to implant conversion patterns were disrupted. This was the case again in December as the emergence of the Omicron variant resulted in patients deferring cases and scheduled cases being canceled because patients tested positive for COVID-19 during their pre-op screening. While these patient-related dynamics created a biopsy backlog that we believe should contribute to Macy growth this year, the timing related to the recapture of this backlog and the normalization of conversion rates remains uncertain at this point given the carryover of the Omicron wave into the first quarter. We've started to see general COVID-19 conditions begin to improve in February, and moving forward, we expect continuous improvement throughout the year. However, because the timing and impact of COVID-19 dynamics this year remain difficult to predict, we've assumed a wider range of revenue scenarios in our initial financial guidance for the year. The lower end of our revenue range assumes additional significant COVID-related headwinds and continued disruption within the healthcare environment, which would represent a more modest improvement over 2021. The higher end of our range assumes some disruption beyond the first quarter, but gradual improvements in patient flow and conversion rates during the year. Importantly, we expect the year-over-year quarterly growth rate for MESI to increase each quarter throughout the year, and the midpoint of our revenue growth range for total MESI and FSL product revenue is in line with our 20-plus percent compounded annual growth rate that we expect to maintain over the next several years. We also expect to generate additional margin expansion and increases in adjusted EBITDA and operating cash flow this year as we further enhance our strong profitability profile. Turning to our pipeline, we remain on track for a mid-year resubmission of the Nexibrid BLA, which would position Nexibrid for a potential commercial launch in the U.S. in the first half of 2023. We also continue to advance important lifecycle management initiatives for MACEI. We expect to meet with the FDA later this year to discuss the clinical development program for our custom arthroscopic delivery system, which we believe offers the potential to make MACI an even simpler and less invasive procedure and to expand the use of MACI for the treatment of cartilage defects in the knee. We also continue to advance our MACI ankle program, which we believe could increase our overall MACI addressable market to approximately $3 billion. We're very pleased to have announced plans earlier this month for a new state-of-the-art advanced cell therapy manufacturing and corporate headquarters facility in the Boston area. The new facility, which is expected to begin commercial manufacturing in 2025, will significantly increase our manufacturing capacity and demonstrates our confidence in the continued growth trajectory for Macy and EpiCell in the years ahead. I'll now turn the call over to Joe to discuss our fourth quarter and full year financial results, as well as our financial guidance for 2022.