Vericel (VCEL) - 2023 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The company's financial statements show revenue growth, a narrowing net loss, and increased total assets Condensed Consolidated Balance Sheets Total assets grew to $318.1 million, driven by investments in a new facility and increased lease liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total current assets | $186,211 | $186,866 | | Property and equipment, net | $30,216 | $15,837 | | Right-of-use assets | $73,294 | $41,535 | | Total assets | $318,125 | $273,003 | | Total current liabilities | $35,946 | $37,463 | | Operating lease liabilities | $77,734 | $43,268 | | Total liabilities | $113,745 | $80,731 | | Total shareholders' equity | $204,380 | $192,272 | Condensed Consolidated Statements of Operations Revenue grew 18.2% in Q3 and 18.7% over nine months, leading to a significant reduction in net loss Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $45,581 | $38,551 | $132,520 | $111,671 | | Gross profit | $30,608 | $25,233 | $87,069 | $71,539 | | Loss from operations | $(5,057) | $(6,788) | $(19,195) | $(23,143) | | Net loss | $(3,660) | $(6,577) | $(16,175) | $(22,631) | | Net loss per share (basic & diluted) | $(0.08) | $(0.14) | $(0.34) | $(0.48) | Condensed Consolidated Statements of Cash Flows Net cash from operations increased significantly to $25.2 million, contributing to a $32.5 million rise in total cash Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $25,225 | $10,712 | | Net cash provided by (used in) investing activities | $4,958 | $(14,477) | | Net cash provided by financing activities | $2,311 | $440 | | Net increase (decrease) in cash | $32,494 | $(3,325) | | Cash, cash equivalents, and restricted cash at end of period | $83,561 | $65,216 | Notes to Condensed Consolidated Financial Statements Key notes detail the U.S. launch of NexoBrid, a new facility lease, and a milestone payment to MediWound - The company commercially launched NexoBrid in the U.S. on September 20, 2023, for the removal of eschar in adults with deep partial-thickness and/or full-thickness thermal burns[25][46] Revenue by Product - Nine Months Ended Sep 30 (in thousands) | Product | 2023 | 2022 | | :--- | :--- | :--- | | MACI | $108,114 | $85,617 | | Epicel | $23,808 | $25,387 | | NexoBrid | $598 | $667 | | Total revenue | $132,520 | $111,671 | - On June 1, 2023, the company gained control of a new 126,000 sq. ft. facility in Burlington, MA, recording a right-of-use asset and lease liability of $35.5 million[58][62] - In February 2023, the company paid MediWound a $7.5 million regulatory milestone following the FDA's BLA approval of NexoBrid, which was capitalized as an intangible asset[84] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses revenue growth driven by MACI, the strategic launch of NexoBrid, and increased operating expenses Results of Operations Revenue growth was driven by MACI, while higher SG&A and R&D costs increased operating expenses Revenue by Product - Change vs. Prior Year | Product | Q3 2023 vs Q3 2022 | 9 Months 2023 vs 9 Months 2022 | | :--- | :--- | :--- | | MACI | +21.2% | +26.3% | | Epicel | +1.1% | -6.2% | | NexoBrid | +165.8% | -10.3% | | Total Revenue | +18.2% | +18.7% | - The increase in SG&A expenses was primarily due to higher headcount and employee expenses, increased travel and in-person events, and lease expense for the new Burlington facility[115][116] - R&D expenses increased for the nine-month period due to increased costs for the MACI arthroscopic development program and lower reimbursement of expenses from MediWound compared to 2022[114] Product Portfolio and Pipeline The company is advancing its MACI pipeline and expanding its burn care market with the launch of NexoBrid - The company anticipates the commercial launch of the MACI arthroscopic delivery program during the first half of 2024[101] - The company is actively working on a clinical development plan for using MACI to treat cartilage injuries in the ankle, following pre-IND interactions with the FDA[102] - The FDA approval of NexoBrid expands the burn care franchise's total addressable market, allowing treatment of a significantly larger segment of hospitalized burn patients than with Epicel alone[106] Liquidity and Capital Resources The company maintains a strong liquidity position with sufficient cash and credit to fund operations and future commitments - The company believes its current cash, investments, and available borrowing capacity will be sufficient to support operations for at least 12 months from the report's issuance[128] - The company has a $150 million five-year senior secured revolving credit agreement, with no outstanding borrowings as of September 30, 2023[131] - Significant commitments include funding the remaining $28.3 million for Burlington facility improvements in early 2024 and a new supply agreement with Matricel requiring €12.5 million in minimum purchases over eight years[133][134] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposures have not materially changed since the previous fiscal year-end - There have been no material changes to the company's market risk exposures since the end of the previous fiscal year[139] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - The company's Certifying Officers concluded that disclosure controls and procedures were effective as of September 30, 2023[140] - No material changes were made to the company's internal control over financial reporting during the third quarter of 2023[142] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings - As of the filing date, the company is not involved in any material legal proceedings[143] Item 1A. Risk Factors New risks related to financial industry instability and geopolitical events have been identified - A new risk factor highlights that adverse developments affecting financial institutions could impair the company's access to cash and impact operations and liquidity[145][146] - A new risk factor was added concerning economic uncertainty and market disruption impacted by geopolitical instability, including the wars in Ukraine and between Israel and Hamas, and record inflation[147][148] Item 5. Other Information Several executives and directors adopted Rule 10b5-1 trading plans during the third quarter - Key executives and directors, including CEO Dominick Colangelo, COO Michael Halpin, and Chairman Robert Zerbe, entered into Rule 10b5-1 trading plans during the quarter[153][156] Item 6. Exhibits This section lists all exhibits filed with the quarterly report, including officer certifications and incentive plans