Vericel Corporation

Ladies and gentlemen, thank you for standing by. Welcome to Veracell's first quarter 2023 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 the conference call over to Eric Burns, Veracell's Vice President of Finance and Investor Relations.

Thank you, Operator, and good morning, everyone. Welcome to Veracell's first quarter 2023 2023 conference call to discuss our financial results and business highlights. Before we begin, let me remind you 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 findings with the SEC, which are available on our website. In addition, all forward-looking statements represent our views only as of today It 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 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 Verisil's 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 by discussing our financial and business highlights for the first quarter, as well as our expectations for the remainder of the year. Joe will then provide a more detailed review of our first quarter financial performance and our updated guidance for 2023 before opening the call to Q&A. We entered 2023 with a great deal of momentum as we generated strong MESI growth in the second half of last year, and achieved significant regulatory milestones, including an accelerated regulatory pathway for the arthroscopic Macy program and the FDA approval of Nexibrid. That momentum continued through the first quarter as we had a very strong start to the year from both a financial and overall business perspective, delivering record Macy and total revenue for the first quarter and making significant progress on our Macy lifecycle management programs and Nexibrid commercial launch activities. From a financial perspective, we generated total revenue of $41 million for the quarter, with both Macy and EpiCell ahead of our first quarter guidance. We also continued to generate strong profitability as we delivered our 11th straight quarter of positive adjusted EBITDA and operating cash flow, ending the quarter with nearly $140 million in cash and investments and no debt. Based on our positive first quarter results and underlying business fundamentals, We're increasing our 2023 full-year revenue guidance to $184 to $192 million. Our financial results for the quarter were driven by record first quarter Macy revenue of $34.2 million, representing growth of 32% compared to the prior year. This strong revenue growth was driven by continued significant increases in surge in engagement and utilization of Macy. In addition to generating record first quarter revenue in implants, we had the highest number of surgeons taking biopsies in any quarter since we launched Macy and a record number of first quarter biopsies. The last two quarters were our highest biopsy quarters ever, with first quarter biopsies nearly matching the record number of Macy biopsies taken in the fourth quarter of last year. This is a noteworthy performance in that we typically see a seasonal step down in biopsy surgeons and biopsies in the first quarter. It's also a reflection of the fact that our sales and marketing teams continue to execute at a high level and that the operating environment continues to improve. Macy clearly has resumed its high growth profile as we've had year-over-year growth of 30%, 24%, and 32% over the last three quarters. representing a trailing nine-month growth rate of 28%. Based on the continued momentum that we've seen to start this quarter, we also expect strong MESI growth in the second quarter, and we're increasing our full-year MESI revenue guidance to $156 to $160 million. This updated guidance implies 20% full-year MESI growth at the midpoint, and reflects strong sales rep productivity that surpasses our historical high of $2 million per rep achieved prior to our last sales force expansion. With respect to our MESI lifecycle management initiatives, the MESI arthroscopic delivery program remains on track as we continue to progress with our plans to conduct the human factors validation study this year with an anticipated potential launch in 2024. We believe that the arthroscopic delivery of MACI will be a very attractive potential option for many patients and surgeons. And importantly, the MACI arthroscopic instrument kit is designed to treat the most common defects in the MACI addressable market, which are two to four square centimeter defects on the femoral condyles, a segment which represents approximately one-third of the overall MACI addressable market, or 20,000 patients per year. If approved, Macy would be the only arthroscopic restorative cartilage repair product on the market to treat these defects. We believe that this would allow Macy to take a greater share of these procedures and provide a significant upside growth opportunity for Macy and the company in the years ahead. We also continue to advance the Macy clinical development program for the treatment of cartilage defects in the ankle and recently conducted an initial pre-IND meeting with the FDA. We believe that a potential ankle indication with an estimated $1 billion addressable market could be a significant growth driver for Macy over the long term. Turning to our burn care franchise, we reported first quarter EpiCell revenue of approximately $7 million, which was an increase over the prior quarter and ahead of our guidance for the first quarter. Importantly, as compared to the fourth quarter, we saw a higher proportion of biopsied patients moving on to treatment with EpiCell, as well as an increase towards previous levels in the average number of grafts per patient. With respect to Nexibrid, our commercial launch activities remain on track, and interest from burn surgeons and healthcare providers remains very high. From an access perspective, P&T committee packages have been submitted at about one-third of the 90 centers we are targeting this year, and we're tracking ahead of our initial goals for both P&T committee submissions and approvals. strong surgeon interest is also reflected by the fact that Nexibrid was selected for inclusion in the pre-conference healthcare professional education sessions at the upcoming American Bird Association annual meeting next week with hands-on lab demonstrations by leading burn surgeons. In terms of Nexibrid product availability, our initial expectation was that we would receive commercial product from Mediwoon and generate some initial stocking revenue towards the end of the second quarter based on the projected timelines to complete the additional manufacturing updates required by the FDA in connection with the next BLA approval. We now believe that assuming timely successful completion of these manufacturing updates, commercial product availability is more likely to occur early in the third quarter, which does not impact our full year burn care revenue guidance of 28 to 32 million for the year. I'll now turn the call over to Joe to discuss our first quarter financial results.