GlobeNewswire Inc | Aug 5, 2020 08:00AM EDT

August 05, 2020

Product Revenues of $20.0 Million Reported for the Second Quarter

Conference Call Today at 8:30am Eastern Time

CAMBRIDGE, Mass., Aug. 05, 2020 (GLOBE NEWSWIRE) -- Vericel Corporation (NASDAQ:VCEL), a leader in advanced therapies for the sports medicine and severe burn care markets, today reported financial results and business highlights for the second quarter ended June 30, 2020.

Second Quarter 2020 Financial Highlights

-- Total net product revenues of $20.0 million, compared to $26.2 million in the second quarter of 2019; -- MACI net revenue of $15.1 million and Epicel net revenue of $4.9 million; -- Gross margin of 57%, compared to gross margin of 66% in the second quarter of 2019; -- Net loss of $8.3 million, or $0.18 per share, compared to $19.8 million, or $0.45 per share, in the second quarter of 2019, which included the $17.5 million upfront license payment to MediWound Ltd. for North American rights to NexoBrid; -- Non-GAAP adjusted EBITDA loss of $3.5 million, compared to positive adjusted EBITDA of $1.8 million in the second quarter of 2019; and -- As of June 30, 2020, the company had $80.9 million in cash and investments, compared to $79.0 million as of December 31, 2019, and no debt.

Business Highlights and Updates

-- Total net product revenues, which decreased approximately 23% for the quarter, declined approximately 78% in April and 32% in May compared to the same periods in 2019, and increased approximately 29% in June compared to June 2019; -- MACI implants, which declined approximately 84% in April and 37% in May compared to the same periods in 2019, increased approximately 21% in June compared June 2019; -- MACI biopsies declined approximately 79% in April and 22% in May compared to the same periods in 2019, and increased approximately 23% in June compared June 2019; -- Epicel graft volume, which declined 70% in April, increased approximately 20% in the May through June period compared to the same period in 2019; -- Epicel biopsies increased approximately 6% in the second quarter compared to the second quarter of 2019; and -- The company announced the submission of a Biologics License Application to the FDA for NexoBrid for the treatment of severe thermal burns.

In light of the ongoing pandemic, we are very pleased with our second quarter results as we saw a strong recovery as the quarter progressed and COVID-19 restrictions on elective surgeries were lifted across the country, said Nick Colangelo, President and CEO of Vericel. Looking ahead, while uncertainties remain, we are confident in the fundamental prospects of our business and for the third quarter we expect MACI revenue growth over the third quarter of 2019, Epicel revenue to increase sequentially over the second quarter of 2020 and return to recent historical levels, and to recognize revenue in connection with the first delivery of NexoBrid under the BARDA procurement contract, which is scheduled to take place later this quarter.

Second Quarter 2020 ResultsTotal net product revenues for the quarter ended June 30, 2020 decreased 23% to $20.0 million, compared to $26.2 million in the second quarter of 2019. Total net product revenues for the quarter included $15.1 million of MACI (autologous cultured chondrocytes on porcine collagen membrane) net revenue and $4.9 million of Epicel (cultured epidermal autografts) net revenue, compared to $20.8 million of MACI net revenue and $5.3 million of Epicel net revenue, respectively, in the second quarter of 2019.

Gross profit for the quarter ended June 30, 2020 was $11.4 million, or 57% of net revenues, compared to $17.1 million, or 66% of net revenues, for the second quarter of 2019.

Total operating expenses for the quarter ended June 30, 2020 were $19.7 million, compared to $37.3 million for the same period in 2019, which included the $17.5 million upfront license payment to MediWound Ltd. for North American rights to NexoBrid. Excluding the $17.5 million license payment, operating expenses remained essentially flat as reductions to discretionary spend and variable cost reductions offset the cost increases associated with the expanded MACI sales force.

Vericels net loss for the quarter ended June 30, 2020 was $8.3 million, or $0.18 per share, compared to $19.8 million, or $0.45 per share, for the second quarter of 2019, which included the $17.5 million license payment for NexoBrid.

Non-GAAP adjusted EBITDA loss was $3.5 million for the quarter ended June 30, 2020, compared to positive adjusted EBITDA of $1.8 million in the second quarter of 2019. A table reconciling non-GAAP measures is included in this press release for reference.

As of June 30, 2020, the company had $80.9 million in cash and investments, compared to $79.0 million as of December 31, 2019, and no debt.Conference Call Information Todays conference call will be available live at 8:30am Eastern Time and can be accessed through the Investor Relations section of the Vericel website at http://investors.vcel.com/events-presentations.A slide presentation with highlights from todays conference call will be available on the webcast and in the Investor Relations section of the Vericel website. Please access the site at least 15 minutes prior to the scheduled start time in order to download the required audio software, if necessary. To participate in the live call by telephone, please call (877) 312-5881 and reference Vericel Corporations second-quarter 2020 investor conference call. If calling from outside the U.S., please use the international phone number (253) 237-1173.

If you are unable to participate in the live call, the webcast will be available at http://investors.vcel.com/events-presentations until August 4, 2021. A replay of the call will also be available until 11:00am (EDT) on August 12, 2020 by calling (855) 859-2056, or from outside the U.S. by calling (404) 537-3406. The conference ID is 5851304.

About Vericel CorporationVericel is a leader in advanced therapies for the sports medicine and severe burn care markets. The company markets two cell therapy products in the United States. MACI (autologous cultured chondrocytes on porcine collagen membrane) is an autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults. Epicel (cultured epidermal autografts) is a permanent skin replacement for the treatment of patients with deep dermal or full-thickness burns greater than or equal to 30% of total body surface area. The company also holds an exclusive license for North American rights to NexoBrid, a registration-stage biological orphan product for debridement of severe thermal burns. For more information, please visit the companys website at www.vcel.com.

GAAP v. NonGAAP MeasuresVericels reported earnings are prepared in accordance with generally accepted accounting principles in the United States, or GAAP, and represent earnings as reported to the Securities and Exchange Commission. Vericel has provided in this release certain financial information that has not been prepared in accordance with GAAP. Vericels management believes that the non-GAAP adjusted EBITDA described in the release, which includes adjustments for specific items that are generally not indicative of our core operations, provides additional information that is useful to investors in understanding Vericels underlying performance, business and performance trends, and helps facilitate period-to-period comparisons and comparisons of its financial measures with other companies in Vericels industry. However, the non-GAAP financial measures that Vericel uses may differ from measures that other companies may use. Non-GAAP financial measures are not required to be uniformly applied, are not audited and should not be considered in isolation or as substitutes for results prepared in accordance with GAAP.

Epicel and MACI are registered trademarks of Vericel Corporation. NexoBrid is a registered trademark of MediWound Ltd. and is used under license to Vericel Corporation. 2020 Vericel Corporation. All rights reserved.

Vericel cautions you that all statements other than statements of historical fact included in this press release 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 risks, assumptions, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Our actual results may differ materially from those expressed or implied by the forward-looking statements in this press release. These statements are often, but are not always, made through the use of words or phrases such as anticipates, intends, estimates, plans, expects, continues, believe, guidance, outlook, target, future, potential, goals and similar words or phrases, or future or conditional verbs such as will, would, should, could, may, or similar expressions.

Among the factors that could cause actual results to differ materially from those set forth in the forward-looking statements include, but are not limited to uncertainties associated with the scope, scale and duration of the impact of the COVID-19 pandemic, growth in revenues for MACI and Epicel, the expected target surgeon audience, the estimate of the commercial growth potential of our products and product candidates, availability of funding from the Biomedical Research and Development Authority under its agreement with MediWound Ltd. for use in connection with NexoBrid development activities, potential fluctuations in sales and volumes and our results of operations over the course of the year, competitive developments, timing and conduct of clinical trial and product development activities, timing or likelihood of regulatory approvals, market demand for our products, changes in third party coverage and reimbursement, and our ability to supply or meet customer demand for our products.With respect to COVID-19, we are currently unable to reasonably estimate the specific extent, or duration, of the impact of the COVID-19 outbreak on our business, financial and operating results. We are also unable to predict how the outbreak will affect the pace with which state and local governments lift restrictions on the performance of elective surgical procedures or whether additional such restrictions may be imposed by states in the future, the availability of physicians and/or their treatment prioritizations or the impact of the outbreak on the overall healthcare infrastructure. In addition, patients who have cancelled or postponed surgeries may not reschedule cases in a timely fashion, or at all. Other disruptions or potential disruptions include restrictions on the ability of Company personnel to travel and access customers for training, promotion and case support, delays in approvals by regulatory bodies, delays in product development efforts, and additional government-imposed quarantines and requirements to shelter at home or other incremental mitigation efforts that may impact our ability to source supplies for our operations or our ability or capacity to manufacture, sell and support the use of our products. The total impact of these disruptions could have a material impact on the Companys financial condition, cash flows and results of operations.These and other significant factors are discussed in greater detail in Vericels Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (SEC) on February 25, 2020, Vericels Quarterly Report on Form 10-Q for the quarter ended June, 30, 2020, filed with the SEC on August 5, 2020, and in other filings with the SEC.These forward-looking statements reflect our views as of the date hereof and Vericel does not assume and specifically disclaims any obligation to update any of these forward-looking statements to reflect a change in its views or events or circumstances that occur after the date of this release except as required by law.

Investor Contacts:Lee SternSolebury Troutlstern@troutgroup.com+1 (646) 378-2922

VERICEL CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited, amounts in thousands)

June 30, December 31, 2020 2019ASSETS Current assets: Cash and cash equivalents $ 55,704 $ 26,889 Short term investments 25,086 42,829 Accounts receivable (net of allowance fordoubtful accounts of $207 and $306, 23,655 32,168 respectively)Inventory 8,417 6,816 Other current assets 2,900 2,953 Total current assets 115,762 111,655 Property and equipment, net 7,040 7,144 Restricted cash 89 89 Right-of-use leased assets 23,800 25,103 Long term investments ? 9,247 Total assets $ 146,691 $ 153,238 LIABILITIES AND SHAREHOLDERS? EQUITY Current liabilities: Accounts payable $ 4,535 $ 6,345 Accrued expenses 7,975 7,948 Current portion of operating lease liabilities 5,570 5,461 Other liabilities 41 41 Total current liabilities 18,121 19,795 Operating lease liabilities 20,881 22,242 Other long-term liabilities 93 110 Total liabilities $ 39,095 $ 42,147 COMMITMENTS AND CONTINGENCIES Shareholders? equity: Common stock, no par value; shares authorized ?75,000; shares issued andoutstanding ? 45,194 $ 499,103 $ 489,749 and 44,864, respectivelyOther comprehensive gain 146 21 Accumulated deficit (391,653 ) (378,679 ) Total shareholders? equity 107,596 111,091 Total liabilities and shareholders? equity $ 146,691 $ 153,238

VERICEL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited, amounts in thousands, except per share amounts)

Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019Product sales, $ 20,014 $ 26,151 $ 46,692 $ 47,961 netCost of 8,660 9,022 18,582 17,662 product salesGross profit 11,354 17,129 28,110 30,299 Research and 3,226 21,070 6,989 24,078 developmentSelling,general and 16,486 16,259 34,555 29,779 administrativeTotaloperating 19,712 37,329 41,544 53,857 expensesLoss from (8,358 ) (20,200 ) (13,434 ) (23,558 ) operationsOther income (expense):Interest 147 428 453 908 incomeInterest (1 ) (2 ) (3 ) (4 ) expenseOther income (57 ) (18 ) 10 18 (expense)Total otherincome 89 408 460 922 (expense)Net loss $ (8,269 ) $ (19,792 ) $ (12,974 ) $ (22,636 ) Net loss pershareattributableto common $ (0.18 ) $ (0.45 ) $ (0.29 ) $ (0.52 ) shareholders(Basic andDiluted)Weightedaverage numberof commonshares 45,137 43,956 45,031 43,841 outstanding(Basic andDiluted)

RECONCILIATION OF REPORTED NET LOSS (GAAP)TO ADJUSTED EBITDA (NON-GAAP MEASURE) ? UNAUDITED

Three Months Ended June 30, Six Months Ended June 30,(In thousands) 2020 2019 2020 2019 Net loss $ (8,269 ) $ (19,792 ) $ (12,974 ) $ (22,636 )Non-recurringlicense agreement ? 17,500 ? 17,500 purchaseStock compensation 4,376 4,182 8,144 6,810 expenseDepreciation and 546 376 1,079 700 amortizationNet interest (146 ) (426 ) (450 ) (904 )incomeAdjusted EBITDA $ (3,493 ) $ 1,840 $ (4,201 ) $ 1,470 (Non-GAAP)