On March 5, 2018 Vericel Corporation (NASDAQ:VCEL), a leader in advanced cell therapies for the sports medicine and severe burn care markets, reported financial results and business highlights for the fourth quarter and year ended December 31, 2017 and full year 2018 financial guidance (Press release, Vericel, MAR 5, 2018, View Source [SID1234524400]).
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Fourth Quarter 2017 Financial Highlights
Total net revenues increased 41% to $23.4 million compared to $16.5 million in the fourth quarter of 2016; excluding license revenue, net revenue increased 34% to $22.2 million;
Gross margins of 64% compared to gross margins of 54% in the fourth quarter of 2016;
Operating income of $1.2 million, compared to operating loss of $5.9 million in the fourth quarter of 2016;
Net income of $0.3 million, or $0.01 per share, compared to net loss of $6.2 million, or $0.34 per share, in the fourth quarter of 2016; and
•As of December 31, 2017, the company had $26.9 million in cash compared to $23.0 million in cash at December 31, 2016.
Full Year 2017 Financial Highlights
•Total net revenue increased 18% to $63.9 million compared to $54.4 million in 2016; excluding license revenue, net revenue increased 15% to $62.8 million;
•Gross margins of 53% compared to gross margins of 48% in 2016;
•Operating loss of $15.0 million, compared to operating loss of $19.2 million in 2016; and
•Net loss of $17.3 million, or $0.52 per share, compared to net loss of $19.6 million, or $1.18 per share, in 2016.
Recent Business Highlights
During and since the fourth quarter of 2017, the company:
•Achieved record fourth quarter revenues and the third straight quarter of 30% or greater revenue growth versus the same quarter of the prior year;
•Trained approximately 600 surgeons on the MACI (autologous cultured chondrocytes on porcine collage membrane) surgical procedure to date;
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Increased MACI biopsies 48% in the fourth quarter of 2017 compared to the same period in 2016, the second consecutive quarter with over 40% growth versus the same quarter of the prior year;
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Expanded the MACI sales force from 28 to 40 sales territories;
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Achieved significant growth in burn centers utilizing Epicel (cultured epidermal autografts), with 40 burn centers utilizing Epicel in 2017 compared to 20 centers in 2014 when the business was acquired;
•Launched the MACI "It’s Your Move" campaign with world champion swimmer, five-time Olympian, best-selling author and recent MACI patient Dara Torres to empower patients with knee pain to seek treatment;
•Entered into an expanded $25 million debt facility providing approximately $8 million of incremental capital; and
•Initiated collaboration with Innovative Cellular Therapeutics (ICT), receiving $5.1 million for the purchase of warrants and an upfront license fee.
"We had record fourth quarter revenues and achieved both positive operating income and net income for the quarter, an important milestone for the company," said Nick Colangelo, president and CEO of Vericel. "Our record fourth quarter revenues represent the third straight quarter of 30% or higher revenue growth compared to the same quarter of the prior year, and this strong growth and margin expansion were driven by both the accelerating uptake of MACI as well as substantial growth for Epicel in the quarter."
Fourth Quarter 2017 Results
Total net revenues for the quarter ended December 31, 2017 were $23.4 million, which included $16.1 million of MACI net revenue and $6.1 million of Epicel net revenue, compared to $12.8 million of Carticel (autologous cultured chondrocytes) net revenue and $3.8 million of Epicel net revenue, respectively, in the fourth quarter of 2016. Total net revenues for the quarter ended December 31, 2017 also included $1.2 million in license revenue related to the company’s collaboration agreement with ICT. Total net revenues increased 41% compared to the fourth quarter of 2016, with MACI revenue increasing 26% and Epicel revenue increasing 62%, respectively, compared to the same period in 2016. Excluding license revenue, net revenues increased 34% compared to the fourth quarter of 2016.
Gross profit for the quarter ended December 31, 2017 was $15.0 million, or 64% of net revenues, compared to $8.9 million, or 54% of net revenues, for the fourth quarter of 2016.
Total operating expenses for the quarter ended December 31, 2017 were $13.8 million compared to $14.8 million for the same period in 2016. Operating expenses for the quarter
December 31, 2016 included $2.6 million from the write-off of commercial use rights related to Carticel. Given the approval of MACI in December 2016 and the replacement of Carticel with MACI, it was determined that the Carticel-related intangible asset was fully impaired as of December 31, 2016. Excluding the impairment, the increase in fourth quarter operating expenses is primarily due to an increase in the MACI sales force during 2017 as well as case management services to support MACI.
Income from operations for the quarter ended December 31, 2017 was $1.2 million, compared to a loss of $5.9 million for the fourth quarter of 2016. Material non-cash items impacting the operating income for the quarter included $0.7 million of stock-based compensation expense and $0.4 million in depreciation expense.
Other expense for the quarter ended December 31, 2017 was $0.9 million compared to $0.3 million for the same period in 2016. The change in other expense for the quarter is primarily due to the loss on extinguishment of debt associated with the expanded long-term debt facility which closed in December 2017.
Vericel’s net income for the quarter ended December 31, 2017 was $0.3 million, or $0.01 per share, compared to a net loss of $6.2 million, or $0.34 per share, for the same period in 2016.
Full Year 2017 Results
Total net revenues for the year ended December 31, 2017 were $63.9 million, including $43.9 million of Carticel and MACI net revenues, $18.9 million of Epicel net revenue and $1.2 million in license revenue. Total net revenues for the year ended December 31, 2017 increased 18% over 2016.
Gross profit for the year ended December 31, 2017 was $33.6 million, or 53% of net revenues, compared to $26.1 million, or 48% of net revenues, for the year ended December 31, 2016.
Total operating expenses for the year ended December 31, 2017 were $48.6 million compared to $45.3 million in 2016. Operating expenses for the year ended December 31, 2016 included $2.6 million from the write-off of commercial use rights related to Carticel. The increase in operating expenses during 2017 is primarily due to an increase in the MACI sales force, expenses for marketing initiatives related to the launch of MACI, and an increase in case management services to support MACI.
Loss from operations for the year ended December 31, 2017 was $15.0 million, compared to a loss of $19.2 million in 2016. Material non-cash items impacting the operating loss for the year included $2.7 million of stock-based compensation expense and $1.6 million in depreciation expense.
Other expense for the year ended December 31, 2017 was $2.3 million compared to $0.3 million in 2016. The change in other expense is primarily due to the loss on extinguishment of debt associated with the expanded long-term debt facility which closed in December 2017 and the interest expense related to the outstanding revolver and credit term loans.
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Vericel’s net loss for the year ended December 31, 2017 was $17.3 million, or $0.52 per share, compared to a net loss of $19.6 million, or $1.18 per share, in 2016.
As of December 31, 2017, the company had $26.9 million in cash compared to $23.0 million in cash at December 31, 2016.
Full Year 2018 Financial Guidance
The company expects total net product revenues for the full year 2018, excluding additional license revenue, to be in the range of $73 million to $78 million compared to total net product revenue, excluding license revenue, of $62.8 million in 2017. The company also expects the seasonality of MACI and Epicel revenues for 2018 to be in line with prior years, wherein total product quarterly revenues were, on average, 21%, 25%, 21%, and 33% in the first through the fourth quarters.
"We successfully executed the launch of MACI and expanded Epicel utilization in 2017," added Mr. Colangelo. "These successes, combined with a strong balance sheet and an expanded sales force in 2018, have positioned the company for continued strong revenue growth in the years ahead."
Conference Call Information
Today’s conference call will be available live at 8:30am Eastern time in the Investor Relations section of the Vericel website at View Source." target="_blank" title="View Source." rel="nofollow">View Source 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 Corporation’s fourth-quarter 2017 earnings 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 View Source until March 5, 2019. A replay of the call will also be available until 11:30am (EST) on March 10, 2018 by calling (855) 859-2056, or from outside the U.S. (404) 537-3406. The conference ID is 4899311.