Vericel (VCEL) - 2022 Q4 - Annual Report

Financial Performance - Total revenue for 2022 was $164.365 million, representing a 5.2% increase from $156.184 million in 2021[342] - Gross profit for 2022 was $109.788 million, up 3.5% from $106.025 million in 2021[342] - The net loss for 2022 was $16.709 million, a 123.7% increase from a net loss of $7.471 million in 2021[342] - Total revenue for the year ended December 31, 2022, was $164.4 million, an increase of 5.2% compared to $156.2 million in 2021, primarily driven by MACI volume and price growth[343] - MACI revenue increased by 18.3% to $132.0 million in 2022 from $111.6 million in 2021, while Epicel revenue decreased by 23.6% to $31.7 million[343] - The company reported a comprehensive loss of $17,533,000 for 2022, compared to a comprehensive loss of $7,639,000 in 2021[411] - For the year ended December 31, 2022, the company reported a net loss of $16.7 million, compared to a net loss of $7.5 million in 2021[416] - The basic loss per common share for 2022 was $(0.35), compared to $(0.16) in 2021[508] Research and Development - Research and development expenses increased by 22.4% to $19.943 million in 2022, compared to $16.287 million in 2021[342] - Research and development expenses rose by 22.4% to $19.9 million in 2022, up from $16.3 million in 2021, mainly due to increased stock-based compensation and additional spending on product design[346] - Research and development expenses are expensed as incurred, focusing on new product development and compliance with regulations[447] Regulatory Approvals - The FDA approved the Biologics License Application for NexoBrid on December 28, 2022, with commercial sales expected to begin in Q2 2023[331] - NexoBrid received FDA approval for commercial use in the U.S. on December 28, 2022, indicating a significant advancement in the Company's product offerings[466] - The FDA approved NexoBrid for commercial use in the U.S. on December 28, 2022, with a $7.5 million milestone payment recorded as an intangible asset[518][521] Cash Flow and Investments - Net cash provided by operating activities was $17.7 million in 2022, down from $29.0 million in 2021, influenced by a net loss of $16.7 million and working capital changes[354][355] - Net cash used in investing activities was $36.2 million in 2022, primarily due to $69.6 million in investment purchases and $7.6 million in property and equipment purchases[357] - The company had cash and cash equivalents totaling $51.1 million, short-term investments of $68.5 million, and long-term investments of $20.0 million as of December 31, 2022[355] - The company reported a decrease in cash, cash equivalents, and restricted cash by $17.5 million in 2022, compared to an increase of $34.7 million in 2021[416] - The company purchased investments totaling $69.6 million in 2022, compared to $60.0 million in 2021[416] Liabilities and Obligations - Total remaining obligations related to operating and finance leases were $61.1 million as of December 31, 2022, with additional obligations of $98.9 million for a new lease in Burlington, Massachusetts[365][366] - The company has future minimum lease payments under non-cancellable leases totaling approximately $61.1 million, with a significant portion related to the Burlington Lease[486] - The Burlington Lease, expected to commence in 2023, involves annual base rent starting at $57 per square foot, with a tenant improvement allowance of $25.1 million[480][482] Inventory and Assets - Total inventory increased to $15.986 million in 2022 from $13.381 million in 2021, reflecting a rise in raw materials and work-in-process[473] - Total assets as of December 31, 2022, were $273,003,000, up from $243,705,000 in 2021, representing an increase of 12.0%[406] - Total liabilities increased to $80,731,000 in 2022 from $73,243,000 in 2021, a rise of 10.1%[406] - Shareholders' equity as of December 31, 2022, was $192,272,000, compared to $170,462,000 in 2021, reflecting an increase of 12.8%[406] Stock-Based Compensation - The company incurred stock-based compensation expense of $37.2 million in 2022, an increase from $34.3 million in 2021[416] - The total non-cash stock-based compensation expense for the year ended December 31, 2022, was $37,183,000, an increase from $34,322,000 in 2021[494] - The company has approximately $31.6 million of total unrecognized compensation cost related to non-vested service-based stock options as of December 31, 2022[497] - The company granted 1,348,824 service-based stock options in 2022, with a weighted-average exercise price of $33.37[497] Revenue Recognition - The company recognizes product revenue from MACI implants upon delivery, at which point the customer obtains control of the implant[373] - Revenue is recognized net of estimated contractual allowances, which considers historical collection experience, denial rates, and contractual terms[374] - The Company recognizes revenue from Epicel upon delivery to hospitals, similar to the process for MACI implants[463] Market and Customer Concentration - NexoBrid is indicated for the removal of eschar in adults with deep partial-thickness and/or full thickness thermal burns, addressing a market of over 30,000 hospitalized burn patients annually in the U.S.[340] - The target addressable market for NexoBrid expands the burn care franchise significantly beyond what Epicel alone can treat[340] - The company reported a concentration of credit risk with 12% of total revenue and 10% of accounts receivable coming from a single MACI customer in 2022[472] Financial Instruments and Risks - The company primarily operates in the U.S. and is exposed to foreign exchange risk due to transactions with vendors outside the U.S.[389] - The company has no off-balance sheet arrangements that are likely to materially affect its financial condition[368] - The company estimates that a 100 basis point unfavorable change in interest rates would have resulted in approximately a $0.5 million decrease in the fair value of its investment portfolio as of December 31, 2022[386] - The total estimated fair value of marketable securities held by the company was $88,433,000, with gross unrealized losses of $978,000[488] Tax and Deferred Tax Assets - The Company has U.S. federal net operating loss carryforwards of $23.1 million, with $11.2 million beginning to expire in 2033[513] - The Company recorded a change in the valuation allowance for deferred tax assets, increasing by $3.3 million for the year ended December 31, 2022[514] - The total net deferred tax assets as of December 31, 2022, were $12.839 million, after accounting for a valuation allowance of $47.290 million[512] - The Company has not recorded any uncertain tax positions and does not anticipate significant changes in unrecognized tax benefits within the next twelve months[515]