Madison Investments, an investment advisor, released its fourth-quarter 2025 investor letter for “Madison Small Cap Fund”. A copy of the letter can be downloaded here. The fourth quarter was challenging for the fund and continued to underperform its benchmark, the Russell 2000 Index. The fund (Class I) returned -0.4%, lagging the benchmark’s 2.2% return. Sector allocation negatively impacted the Fund's performance this quarter, with healthcare being the weakest sector. The Fund remains optimistic that the s ...

Vericel FY Conference Summary Company Overview - **Company**: Vericel (NasdaqGM:VCEL) - **Industry**: Advanced therapies for sports medicine and severe burn care - **Core Products**: - **MACI**: A cell therapy for cartilage repair, launched in 2017, leading in its category with a 24% compounded annual growth rate since launch - **NexoBrid**: An enzymatic debridement agent for burn treatment - **Epicel**: A graft product using a patient's own cells for burn wound coverage - **Market Position**: Unique combination of high revenue and profit growth, strong cash generation, and a competitive moat with no direct product competition [6][9][12] Financial Performance - **2025 Performance**: - MACI growth: 20%+ in Q4, 23% overall for the quarter - Burn care growth: 25% in Q4 - Gross margin: 79% in Q4, EBITDA at 40% - **Long-term Targets**: Expecting gross margins in the high 70% range and EBITDA to increase despite investments in growth [12][19][20] Product Insights - **MACI**: - Strong adoption due to less invasive procedures and superior clinical outcomes compared to predecessors - Surgeons trained on MACI Arthro showed higher biopsy and implant growth rates - Anticipated continued growth driven by increased surgeon training and market penetration [11][32][33][37] - **NexoBrid and Epicel**: - NexoBrid is gaining traction as a non-surgical option for burn treatment, with potential government support for stockpiling in mass casualty events - Epicel's growth is more variable due to the small patient base and unpredictability of severe burn cases [66][68][75] Manufacturing and Operational Updates - **New Manufacturing Facility**: Recently FDA approved, expected to enhance production capabilities and efficiency - **Transition Risks**: Mitigated through careful planning and operational execution, with a phased approach to moving production from the old facility [22][25][26] Market Opportunities - **Expansion Plans**: - MACI's potential expansion into ankle cartilage repair, targeting a billion-dollar market - Continued focus on training surgeons and expanding product use in other joints [58][64] - **Burn Care Market**: - Addressing the unpredictability of severe burn cases while leveraging government interest in NexoBrid for military applications [68][75] Conclusion - **Outlook**: Vericel is positioned for continued growth with strong product performance, a solid financial foundation, and strategic expansion plans in both sports medicine and burn care markets. The company is optimistic about achieving its growth targets for 2026 and beyond, particularly with the MACI franchise and new manufacturing capabilities [19][28][37][75]

Core Insights - Vericel Corporation has received FDA approval for MACI commercial manufacturing at its Burlington facility, enabling the company to begin production in Q2 2026 and expand capacity to meet demand [2][3] Company Overview - Vericel is a leader in advanced therapies for sports medicine and severe burn care, offering innovative cell therapies and specialty biologics [4] - The company markets three products in the U.S.: MACI, Epicel, and holds exclusive rights to NexoBrid [4] Product Details - MACI is indicated for the repair of symptomatic, full-thickness cartilage defects of the knee in adults [4] - Epicel serves as a permanent skin replacement for patients with significant burns [4] - NexoBrid is used for eschar removal in burn patients [4]

Core Insights - The company achieved record Q4 revenue growth of 23%, primarily driven by volume, with the highest number of MACI implants and implanting surgeons since the product's launch in 2017 [1] - The MACI Arthro technique has accelerated growth in the small condyle defect segment, which has become a top growth driver in 2025 [1] - Surgeons trained in MACI Arthro show higher biopsy and implant growth rates, with increased conversion rates after completing their first Arthro case [1] - Significant margin expansion was attributed to high-volume throughput, resulting in a record 40% adjusted EBITDA margin in Q4 [1] - The MACI sales force expansion was strategically accelerated in Q4 to capture year-end volume momentum without disrupting existing territory productivity [1] - Burn Care performance improved through cross-selling efforts, with a 17-territory team reactivating dormant Epicel accounts via NexoBrid engagement [1] - Operational efficiency remains high, with prior authorization approval rates for MACI exceeding 95%, reinforcing the product's clinical value proposition to payers [1]

Vericel Corporation (VCEL) came out with quarterly earnings of $0.45 per share, in line with the Zacks Consensus Estimate . This compares to earnings of $0.38 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of +0.74%. A quarter ago, it was expected that this company would post a loss of $0.02 per share when it actually produced earnings of $0.1, delivering a surprise of +600%.Over the last four quarters, the company has surpassed ...

Financial Data and Key Metrics Changes - The company reported record Q4 total revenue of $92.9 million, representing a 23% increase year-over-year, exceeding guidance for the quarter [4][15] - Full-year total revenue increased to $276.3 million, surpassing the high end of guidance [15] - Gross margin for Q4 was nearly 80%, with adjusted EBITDA margin at 40%, marking the highest quarterly margins to date [4][15] - Full-year GAAP net income grew nearly 60% to $16.5 million, with a gross margin of 74%, an increase of nearly 200 basis points compared to the prior year [16] Business Line Data and Key Metrics Changes - MACI generated record Q4 revenue of $84.1 million, reflecting a 23% increase year-over-year and 51% sequential growth from Q3 [15] - Full-year MACI revenue increased by 21% to $239.5 million [15] - Burn care Q4 revenue was $8.8 million, exceeding guidance, with full-year burn care revenue at $36.8 million [15] Market Data and Key Metrics Changes - MACI's performance showed strong growth with over 20,000 patients treated since launch, achieving a compound annual revenue growth of 24% over the past nine years [6][7] - The company noted that MACI's pricing and reimbursement profile remained strong, with prior authorization approval rates over 95% for commercial patients in 2025 [8] Company Strategy and Development Direction - The company aims to capitalize on a larger MACI sales force to increase reach and penetration within the existing surgeon base [8][9] - Strategic initiatives include enhancing commercial analytics and standardizing best practices across the sales team to drive deeper penetration [9] - The company plans to leverage MACI Arthro to drive growth in smaller cartilage defects, which represent a significant segment of MACI's addressable market [10] - The initiation of the phase III MACI Ankle MASCOT clinical study represents a substantial growth opportunity with an estimated addressable market of over $1 billion [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in entering 2026 with strong momentum, expecting total company revenue of approximately $316-$326 million [17][18] - For MACI, revenue guidance is set at approximately $280-$286 million for the full year, reflecting continued growth trends [18] - The company anticipates a similar quarterly mix of MACI revenue as last year, with expectations for continued strong performance in Q1 [19] Other Important Information - The company ended the year with approximately $200 million in cash and investments, with no debt [4][16] - Management highlighted the importance of the BARDA award for NexoBrid, which could provide additional revenue opportunities [65][86] Q&A Session Summary Question: Can you discuss the balance of price versus volume for MACI? - Management indicated that both price and volume are key growth drivers, with recent performance being volume-driven, although pricing remains an important factor [24][26] Question: How does new doctor growth compare to existing customer dynamics? - Management noted that about two-thirds of trained surgeons are existing MACI users, with the remaining one-third being new adopters, and emphasized the positive growth rates among trained surgeons [27][28] Question: Can you clarify the guidance for MACI growth in 2026? - Management explained that the guidance reflects a prudent approach, with expectations for continued growth in MACI, while not baking in any significant inflection in trends [34][36] Question: What are the expectations for the sales force expansion? - Management expressed excitement about the sales force expansion, which is expected to enhance reach and performance, with productivity returning to previous levels quickly [46][47] Question: What is the outlook for NexoBrid and its adoption? - Management confirmed ongoing progress with NexoBrid, noting that they are seeing reactivation of dormant accounts and optimistic about future adoption [64][65]

Financial Data and Key Metrics Changes - The company reported record fourth quarter total revenue of $92.9 million, representing a 23% increase year-over-year, exceeding guidance for the quarter [5][16] - Full year total revenue increased to $276.3 million, above the high end of guidance [16] - Gross margin for the fourth quarter was nearly 80%, with an adjusted EBITDA margin of 40% [5][17] - Full year GAAP net income grew nearly 60% to $16.5 million, with significant profit growth outpacing revenue growth [18] Business Line Data and Key Metrics Changes - MACI generated record fourth quarter revenue of $84.1 million, a 23% increase year-over-year and 51% sequential growth from the third quarter [16] - Full year MACI revenue increased 21% to $239.5 million [16] - Burn care revenue for the fourth quarter was $8.8 million, above guidance, with full year burn care revenue at $36.8 million [16][18] Market Data and Key Metrics Changes - MACI's leadership position in the cartilage repair market strengthened, with over 20,000 patients treated since its U.S. launch in 2017 [7] - The company achieved a prior authorization approval rate of over 95% for commercial patients in 2025 [8] Company Strategy and Development Direction - The company is focused on three strategic imperatives for sustained growth: expanding the MACI sales force, implementing commercial excellence initiatives, and leveraging lifecycle management for long-term growth [8][9][12] - Plans to initiate commercial manufacturing of MACI in a new facility and potentially launch MACI outside the U.S. in 2027, starting with the U.K. [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in entering 2026 with strong momentum, expecting total company revenue of approximately $316 million to $326 million [19][20] - The company anticipates continued strong growth in MACI revenue, with guidance of approximately $280 million to $286 million for the full year [20] Other Important Information - The company ended the year with approximately $200 million in cash and investments and no debt [5][19] - The company is optimistic about potential BARDA revenue from NexoBrid, although it is not included in initial guidance [21][69] Q&A Session Summary Question: Can you discuss the balance of price versus volume for MACI? - Management indicated that both price and volume are key growth drivers, with recent performance being volume-driven [28] Question: How does new doctor growth impact MACI? - Approximately two-thirds of new surgeons trained were existing MACI users, with the remaining one-third being new adopters [32] Question: What are the expectations for the sales force expansion? - The sales force expansion is expected to enhance reach and productivity, with a return to previous productivity levels anticipated [51] Question: Can you provide insights on operating expenses for 2026? - Total operating expenses are expected to be approximately $220 million for the year, with significant increases due to sales force expansion and R&D [62] Question: What is the outlook for NexoBrid adoption? - The company is seeing progress in reactivating dormant Epicel accounts and anticipates continued growth in NexoBrid adoption [68]

Financial Data and Key Metrics Changes - The company reported record fourth quarter total revenue of $92.9 million, representing a 23% increase year-over-year, exceeding guidance for the quarter [4][15] - Full year total revenue increased to $276.3 million, above the high end of guidance [15] - Gross margin for the fourth quarter was nearly 80%, with adjusted EBITDA margin at 40%, marking the highest quarterly margins to date [4][17] - Full year GAAP net income grew nearly 60% to $16.5 million, significantly outpacing revenue growth [18] Business Line Data and Key Metrics Changes - MACI generated record fourth quarter revenue of $84.1 million, a 23% increase year-over-year and 51% sequential growth from the third quarter [15][16] - Full year MACI revenue increased 21% to $239.5 million [15] - Burn care revenue for the fourth quarter was $8.8 million, exceeding guidance, with full year burn care revenue at $36.8 million [16][18] Market Data and Key Metrics Changes - MACI's leadership in the cartilage repair market has strengthened, with over 20,000 patients treated since its U.S. launch in 2017 [6] - The company achieved a prior authorization approval rate of over 95% for commercial patients in 2025, indicating strong market acceptance [7] Company Strategy and Development Direction - The company aims to capitalize on a larger MACI sales force to increase reach and penetration among existing surgeons [7][9] - Strategic initiatives include enhancing commercial analytics and standardizing best practices to drive deeper penetration within the surgeon user base [9] - The company initiated the phase 3 MACI Ankle MASCOT clinical study, targeting a market opportunity exceeding $1 billion [12] - Plans for U.K. expansion include submitting a marketing authorization application in mid-2026, with a potential launch in 2027 [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in entering 2026 with strong momentum, expecting total company revenue of approximately $316 million to $326 million [19][20] - MACI revenue guidance for 2026 is projected at $280 million to $286 million, reflecting continued growth trends [20] - The company anticipates a similar quarterly revenue mix for MACI as in the previous year, with expectations for sustained growth [20] Other Important Information - The company ended the year with approximately $200 million in cash and investments and no debt, enhancing its financial profile [4][19] - Operating cash flow for the full year was $52 million, indicating a positive cash generation trend [19] Q&A Session Summary Question: How do you think about the mix of price versus volume for MACI? - Management indicated that both price and volume are key growth drivers, with a significant improvement in MACI performance being volume-driven in the second half of the year [29] Question: Can you reflect on new doctor growth and existing sales dynamics? - Approximately two-thirds of trained surgeons are existing MACI users, with the remaining one-third being new or previously untrained surgeons [32] Question: Why is the 2026 MACI growth guidance slightly below previous expectations? - Management stated that the guidance reflects a prudent approach, with no material changes in expectations, and is consistent with prior commentary [38] Question: What are the expectations for the sales force expansion and free cash flow? - The sales force expansion is expected to enhance reach and productivity, while cash flow is anticipated to improve as the company enters a new phase of cash generation [53] Question: How is the company planning for the U.K. expansion? - The company plans to commercialize MACI in the U.K. independently, leveraging established approval and reimbursement pathways [79]

Financial Performance - Total revenue for 2025 reached $276,259,000, representing a 16.5% increase from $237,224,000 in 2024, driven primarily by MACI volume and price growth [346]. - MACI revenue increased to $239,506,000 in 2025, up 21.4% from $197,309,000 in 2024, while Epicel revenue decreased by 12.4% to $32,066,000 [347]. - Gross profit for 2025 was $205,599,000, a 19.5% increase from $172,107,000 in 2024 [346]. - The company experienced a significant increase in net income, reaching $16,518,000 in 2025, a 59.4% increase from $10,362,000 in 2024 [346]. Regulatory Approvals and Product Development - The FDA approved MACI's supplemental Biologics License Application in August 2024, allowing for arthroscopic delivery, which became commercially available in Q3 2024 [337]. - The MACI Arthro technique has generated strong interest, with over 900 surgeons participating in training programs, expanding the target surgeon base from 5,000 to 7,000 [337]. - The company received Investigational New Drug clearance for MACI's use in the ankle in Q2 2025, with a clinical trial (MASCOT) involving 309 subjects planned [338]. - NexoBrid revenue grew by 42.4% to $4,687,000 in 2025, up from $3,292,000 in 2024, following its FDA approval for pediatric patients in August 2024 [347]. - The company is pursuing regulatory approval for MACI in the UK, with plans to commercialize in 2027 if successful [339]. Manufacturing and Operational Changes - The Burlington manufacturing facility is expected to become the primary manufacturing site for MACI and Epicel, enhancing strategic flexibility for global commercialization [331]. - Gross profit for the year ended December 31, 2025, increased due to MACI revenue growth, with a primarily fixed manufacturing cost structure [349]. Expenses and Cash Flow - Research and development expenses rose to $27.6 million in 2025 from $24.8 million in 2024, mainly due to increased headcount and technical transfer costs [350]. - Selling, general and administrative expenses increased to $167.0 million in 2025 from $142.8 million in 2024, driven by higher employee expenses and marketing activities [351]. - Net cash provided by operating activities was $51.9 million in 2025, down from $58.2 million in 2024, primarily due to a net decrease in working capital accounts [356][357]. - Net cash used in investing activities was $43.9 million in 2025, compared to $79.0 million in 2024, reflecting investment purchases and property and equipment expenditures [360][361]. - Net cash provided by financing activities was $7.1 million in 2025, down from $19.1 million in 2024, due to lower proceeds from stock options [362][363]. Financial Obligations and Investments - The company has total remaining obligations related to operating and finance leases of $132.3 million as of December 31, 2025 [367]. - The company entered into a $150.0 million revolving credit agreement in July 2022, with no outstanding borrowings as of December 31, 2025 [366]. - Total purchase commitments related to raw materials and finished goods amounted to $15.8 million as of December 31, 2025 [369]. - The company recorded a full valuation allowance against its net deferred tax assets due to a three-year cumulative loss position and history of operating losses [384]. Risk Management - As of December 31, 2025, a 100 basis point unfavorable change in interest rates would have resulted in approximately a $0.9 million decrease in the fair value of the investment portfolio [387]. - The company had no borrowings outstanding under the Revolving Credit Agreement as of December 31, 2025, reducing exposure to interest rate fluctuations [388]. - The company is primarily exposed to foreign exchange risk with respect to recognized assets and liabilities due to vendors in countries outside the U.S., typically paid in Euros [390]. - The company does not currently use interest rate derivative instruments or hedging transactions to manage exposure to interest rate changes of its investments [387]. Accounting and Valuation - Stock-based compensation expense is estimated based on the fair value of common stock at the date of grant, with key assumptions including volatility and risk-free interest rate [383]. - The company evaluates potential credit risk exposure for accounts receivable and available-for-sale investment securities in accordance with ASC 326 [389]. - Lease payments included in the measurement of lease liability are comprised of fixed payments, excluding non-lease components [381]. - The lease term includes the non-cancellable period plus any additional periods covered by options that are reasonably certain to exercise [382]. - Recent accounting standards may have a significant impact on the company's business, as noted in the summary of significant accounting policies [386].

VERICEL Q4 2025 RESULTS FEBRUARY 26, 2026 Safe Harbor Vericel cautions you that all statements other than statements of historical fact included in this presentation that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. Although we believe that we have a reasonable basis for the forward-looking statements contained herein, they are based on current expectations about future events affecting us and are subject to ...