Vericel Corporation

Ladies and gentlemen, thank you for standing by. Welcome to VeriCell's third quarter 2022 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. We'll 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 VeriCell's third quarter 2022 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 covering 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. 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 financial results press release and a short presentation with highlights from today's call are available on the investor relations section of our website. I am joined on this call by Veris, our president and chief executive officer, Nick Colangelo, and our chief financial officer, Joe Mara. I will now turn the call over to Nick.

Thank you, Eric, and good morning, everyone. I'll begin today's call with a discussion of our third quarter financial and business highlights and our expectations for the remainder of the year. I'll then turn the call over to Joe for more detailed review of our financial performance and fourth quarter financial guidance before opening the call to Q&A. The company delivered another solid quarter from a financial and operational perspective as we generated strong Macy revenue growth, record third quarter total revenue, continued profitability and operating cash flow, and made meaningful regulatory progress with respect to Nexabrit and our Macy life cycle initiatives, which we believe will position the company for further growth in the years ahead. Third quarter total revenue was $38.6 million, with product revenue growth of 14% compared to the third quarter of 2021. The company generated more than $3 million of adjusted EBITDA and $4.1 million of operating cash flow, which was our ninth consecutive quarter of positive adjusted earnings and operating cash flow. Macy had another strong quarter with revenue of $31 million as we generated the highest quarterly revenue outside of the seasonally high fourth quarter since the launch of Macy. Macy revenue grew 30% compared to the third quarter of 2021, and sequential revenue growth was 8% over the second quarter, which is noteworthy given that third quarter revenue typically is flat to down compared to the second quarter due to summer seasonality. Macy's 30% growth also was the highest year-over-year quarterly growth rate since 2019, excluding the comparison to the second quarter of 2020, which was impacted by the widespread shutdowns due to COVID-19. Importantly, we continue to see significant growth in surgeon adoption and remain on track to generate double-digit growth in surgeons taking Macy biopsies this year. The majority of surgeons taking biopsies for the first time in 2022 were engaged through our digital and in-person marketing and training initiatives prior to taking their first biopsy as we continue to focus on high-value commercial investments to expand the Macy customer base. Overall, the Macy sales and marketing team executed extremely well in the third quarter. The underlying Macy business fundamentals remained strong. And we expect that consistent surgeon growth will continue to drive further clinical utilization of MACI. Finally, as we've mentioned on previous calls, the biopsy conversion rate for MACI has been impacted by the disruption to patient flow dynamics in ongoing healthcare system challenges as a result of the COVID-19 pandemic. Those market dynamics are also reflected in a decline in the overall cartilage repair procedure market, which is stabilized but remains down more than 10% compared to last year. While Macy continues to significantly outperform the overall market, and the biopsy conversion rate is stabilized, we've not seen a sustained improvement towards pre-COVID levels so far this year, which will impact full-year revenue for Macy, as Joe will cover in our guidance update. Despite these market dynamics, Macy remains on track for a strong finish to the year as it resumes its high-growth profile And we expect Macy growth in the mid-20% range for the second half of the year compared to 2021. Moving forward, we believe that continued execution by our Macy sales team and the gradual improvement of the overall cartilage repair market and Macy conversion rate will support further growth and expanded utilization of Macy in the quarters and years ahead. With respect to Macy lifecycle management, Our plans for the Macy arthroscopic delivery and Macy ankle development programs remain on track. We're scheduled to have a Type C meeting with the FDA in December to discuss the Macy arthroscopic delivery development plan, which we believe represents a meaningful clinical enhancement for patients and physicians. In addition, based on initial interactions with the FDA, we expect to have a pre-IND meeting with the agency in the first quarter of next year regarding the Macy ankle development program. We believe that these programs position the company for significant additional growth opportunities for Macy in the years ahead. Turning to our burn care franchise, we reported epi-cell revenue of $7.3 million for the third quarter, which was below our recent quarterly run rate in 2021 levels. As discussed on our last call, external market data shows that the incidence of large burns greater than 30% of total body surface area has declined this year compared to 2021, in which there was a significant increase in the incidence of larger burns. These lower patient volumes this year have had a significant impact on results at our highest volume centers and have impacted the growth drivers for EpiCell of continuing to expand the number of burn centers using EpiCell and driving greater patient volumes at those centers. Based on these dynamics and EPICEL revenue performance year to date, we're revising our EPICEL revenue guidance for the year, as Joe will describe in more detail. It's worth noting, however, that while the incidence of larger burns and patient volumes are more in line with pre-2021 levels, year-to-date revenue for EPICEL in all of the underlying business fundamentals, including burn centers taking biopsies and treating patients, as well as overall biopsies and graft volumes are significantly higher than the same year-to-date periods prior to 2021. Turning to Nexibrid, as we announced on our last call, the Nexibrid BLA resubmission was accepted for review by the FDA with a PDUFA date of January 1, 2020-23. The FDA's review of the BLA is progressing. Manufacturing facility inspections in Taiwan and Israel are underway, and we continue to actively plan for a potential next launch in the first half of 2023. I'll now turn the call over to Joe to provide additional details regarding our third quarter results and financial guidance.