Vericel Corporation

Thank you for standing by. My name is Roselle and I will be your conference operator today. At this time, I would like to welcome everyone to the Vericell Corporation first quarter 2025 earnings call. All lines have been placed in mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone K-pod. If you would like to withdraw your question, press star one again. I will now turn the conference call over to Eric Burns, Verasol's Vice President of Finance and Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Joining me on today's call are Verasol's President and Chief Executive Officer, Nick Colangelo, and our Chief Finance Officer, Joe Marra. Before we begin, Let me remind you that on today's call, we will be making forward-looking statements covered under the Private Security Litigation Reform Act of 1995. These statements may involve risks and uncertainties that could cause actual results to defer matriarchal expectations and are described more fully in our findings 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 first quarter financial results press release, and a short presentation with highlights from today's call are available in the investor relations section of our website. I will now turn the call over to Nick.

Thank you, Eric, and good morning, everyone. The company's off to a solid start to the year with record first quarter Macy and total company revenue, as well as continued strength in the Macy growth drivers and key performance indicators for the Macy Arthro launch. Nexibrid revenue also continued to progress, and although EpiCell revenue in the first quarter was lower than recent trends, biopsies were the highest in any quarter since 2023, and there's been a significant uptake in EpiCell performance to start the second quarter, with graphs from cases completed or scheduled to date this quarter exceeding total graph volume in the first quarter. Based on the positive trends across the business to start the quarter, We expect strong second quarter performance with total company revenue growth of 22 to 25%. Given this momentum and the fact that we expect tariffs to have a negligible impact on the company's business and margins, we're also reaffirming full year revenue guidance of 20 to 23% revenue growth in raising profitability guidance for the year. Macy had a strong quarter with record first quarter revenue of more than $46 million, which was in line with our expectations and represented a similar growth rate as the first quarter of last year. Macy's performance was driven by strong underlying fundamentals as we continue to expand the Macy Surgeon customer base and drive growth and biopsies. While the first quarter typically is the seasonally lowest quarter of the year, We had double-digit biopsy surge in growth over last year and the second highest number of biopsies in surgeons taking biopsies in any quarter since launch. We also had the second highest number of biopsies in any month in March, which we then surpassed in April. Based on cases completed and scheduled for this quarter, as well as the momentum in Macy growth drivers, which we believe is attributable in part to the recent launch of Macy-Arthro, We expect a very strong second quarter for Macy, with revenue growth of 22% to 24% for the quarter. While we're still early in the Macy Arthro launch, we continue to see significant strength in several leading performance indicators. We've trained approximately 400 Macy Arthro surgeons through the end of April, which is ahead of the pace of surgeon training when we launched Macy in 2017. And both the biopsy and implant growth rates for Macy Arthro trained surgeons are substantially higher than the growth rates for surgeons that have not yet been trained, with year-to-date biopsy growth over 30% for trained surgeons. Notably, the surgeons that historically used Macy predominantly for patella cases continue to make up a meaningful portion of the Macy Arthro trained surgeons. This cohort of surgeons has the highest biopsy growth rate among trained surgeons so far this year. Biopsies for patients with femoral condyle defects are driving much of the outsized biopsy growth for this Macy user cohort, suggesting that these surgeons may be considering Macy for a broader patient population that encompasses the largest segment of the addressable market for approximately 20,000 patients per year. We're also encouraged by the fact that a significant percentage of Macy Arthro cases have been for patients with smaller defects outside the femoral condyles, which is the defect location that the Macy Arthro instruments were designed to treat. In particular, Macy Arthro is being used in a meaningful number of cases for patients with trochlea defects, an area of the knee behind the kneecap where Macy historically had low single-digit penetration. Surgeon feedback suggests that Macy Arthro could become an attractive cartilage repair option for trochlea defects for many surgeons, similar to Macy's use in the patella, given the enhanced access and procedural advantages provided by Macy Arthro compared to alternative treatments. The trochlea defect segment of Macy's addressable market is similar in size to the patella segment at approximately 10,000 patients per year. and has the potential to be a significant source of business and a meaningful driver of upside Macy growth beyond the treatment of femoral condyle defects. We expect that the positive biopsy trends that we've seen to start the year will continue over multiple quarters as we train a significant number of additional surgeons, and that Macy Arthro trained surgeons will drive hundreds of incremental biopsies this year. While it's still too early to see a similar inflection in implant growth, given the median time from biopsy to implant, we expect the incremental impact of Macy-Arthro on overall Macy implant volumes to accelerate as we move through the year and to provide a strong foundation for continued significant implant growth in 2026, similar to the dynamics we saw with the launch of Macy in 2017. Based on the strong Macy-Arthur launch indicators to date and our expectation for Macy implant volume growth this year and over the next few years, we plan to begin our Macy Salesforce expansion in the second half of this year. Turning to burn care, Nexabrid first quarter revenue increased over 200% compared to last year and over 30% sequentially compared to the prior quarter. A key priority for Nexabrid remains driving deeper penetration and more consistent use across our nearly 60 ordering centers. To that end, we generated a higher proportion of our business from consistent ordering centers in the first quarter, and that segment also had a higher average number of units per order in the quarter. In addition, we continue to see strong surge in interest in Nexibrid, as was demonstrated by the high level of engagement and attendance at Nexibrid symposia and other events at the recent American Burn Association annual meeting. For EpiCell, despite having the highest number of biopsies in the first quarter since 2023, first quarter revenue was lower than anticipated. primarily due to significantly higher ratio of canceled cases to patient treatments in the quarter as a result of patient health issues. However, we're seeing much stronger epicell performance to start the second quarter, with graphs from cases completed or scheduled so far this quarter exceeding total graph volume in the first quarter. The strong start to the second quarter is being driven by biopsies received in the first quarter, indicating that the first quarter shortfall was also due in part to timing of patient treatments. With EpiCell graph volume increasing each month this year, we believe that the burn care franchise is positioned for much stronger performance in the second quarter. I'll now turn the call over to Joe to provide a more detailed review of our financial results and guidance for 2025.