On March 14, 2016 Vericel Corporation (NASDAQ: VCEL), a leading developer of patient-specific expanded cellular therapies for the treatment of severe diseases and conditions, reported financial results and business highlights for the fourth quarter and year ended December 31, 2015 (Filing, Q4/Annual, Vericel, 2015, MAR 14, 2016, View Source [SID:1234510447]).
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Recent Business Highlights
During and since the fourth quarter of 2015, the company:
• Announced positive top-line results from the Phase 2b ixCELL-DCM clinical trial of ixmyelocel-T in patients with heart failure due to ischemic dilated cardiomyopathy;
• Received U.S. Food and Drug Administration (FDA) approval of the Epicel (cultured epidermal autografts) HDE supplement, which revised the Epicel product label to include pediatric patients and specify the probable survival benefit for adult and pediatric patients treated with Epicel, and allows the company to sell Epicel for profit on up to 360,400 grafts per year;
• Announced that the FDA has accepted for filing the BLA for MACI (matrix applied characterized autologous cultured chondrocytes), the company’s investigational third-generation autologous cultured chondrocyte implant intended for the treatment of symptomatic full-thickness cartilage defects of the knee in adult patients;
• Announced a long-term supply agreement with Matricel GmbH for the collagen membrane used in the production of MACI;
• Achieved 14% growth in total Carticel (autologous cultured chondrocytes) and Epicel net product revenues for 2015 over pro-forma Carticel and Epicel revenues for 2014, and 5% growth in total Carticel and Epicel net product revenues in the fourth quarter versus the fourth quarter of 2014;
• Achieved 60% and 24% growth in Epicel net product revenues for 2015 and the fourth quarter, respectively, versus the same periods in 2014; and
• Entered into a $10 million credit facility and $5 million term loan agreement with Silicon Valley Bank.
"2015 was an extremely productive year during which we completed our corporate transformation into a sustainable and growing commercial enterprise, substantially increased revenues and gross margins, and made significant progress on our clinical and regulatory objectives that we expect will drive current and long-term growth for the company," said Nick Colangelo, president and CEO of Vericel. "We believe that we have positioned the company as one of the leading cell therapy and regenerative medicine companies in the industry."
Financial Highlights
Total revenues for the fourth quarter and year ended 2015 were generated primarily from net sales of Carticel implants and surgical kits and Epicel, which were acquired on May 30, 2014 as part of the acquisition of Sanofi’s cell therapy and regenerative medicine business.
Total net revenues for the quarter ended December 31, 2015 were approximately $15.4 million and included approximately $11.3 million of net sales of Carticel implants and surgical kits and approximately $4.1 million of net sales of Epicel. Total Carticel and Epicel net product revenues in the fourth quarter increased approximately 5% over the same period in 2014.
Total net revenues for the year ended December 31, 2015 were approximately $51.2 million, including approximately $35.2 million of net sales of Carticel implants and surgical kits and approximately $15.2 million of net sales of Epicel. Total Carticel and Epicel net product revenues for 2015 increased approximately 14% over pro-forma Carticel and Epicel net product revenues for 2014. Total revenues for the quarter and year ended December 31, 2015 included approximately $0.1 million and $0.7 million of sales, respectively, from our Marrow Donation business which ceased operations in December, 2015.
Gross profit for the quarter and year ended December 31, 2015 was $8.2 million, or 53% of net product sales, and $24.7 million, or 48% of net product sales, respectively, compared to $8.0 million, or 54% of net product sales, and $11.5 million, or 40% of net product sales, for the quarter and year ended December 31, 2014, respectively.
Research and development expenses for the quarter and year ended December 31, 2015 were $7.4 million and $18.9 million, respectively, versus $5.8 million and $21.3 million for the same periods in 2014. The increase in research and development expenses in the fourth quarter is primarily due to additional research, development and regulatory costs incurred for the Biologics License Application (BLA) for MACI and Humanitarian Device Exemption (HDE) supplement submitted in December 2015 to revise the labeled indications for use of Epicel, which included $2.2 million in regulatory consulting expenses and a Prescription Drug User Fee Act (PDUFA) filing fee of $2.4 million paid in the fourth quarter of 2015.
The decrease in full-year research and development expenses is primarily due to a reduction in expenses associated with the ixCELL-DCM clinical trial, which completed enrollment in January 2015, and other clinical trial expenses, and a $3.2 million payment in 2014 to the former shareholders of Verigen pursuant to a settlement agreement that eliminated all future milestone payments related to the development and commercialization of MACI in the United States.
Selling, general and administrative expenses for the quarter and year ended December 31, 2015 were $5.7 million and $22.5 million, respectively, compared to $4.5 million and $13.8 million for the same periods in 2014. The increase in SG&A expenses is primarily due to Vericel being a commercial business for all of 2015 compared to only seven months in 2014, as well as an increase in sales and marketing expenses associated with Carticel and Epicel and strategic planning activities for MACI.
Loss from operations for the quarter and year ended December 31, 2015 was $5.0 million and $16.7 million, respectively, compared to $2.3 million and $23.5 million for the same periods a year ago. The operating loss for the quarter ended December 31, 2015 included $2.2 million for MACI BLA and Epicel HDE supplement regulatory consulting expenses and a $2.4 million PDUFA filing fee for MACI. Excluding these one-time expenses, the company would have had an adjusted operating loss of $0.4 million in the fourth quarter. Material non-cash items impacting the operating loss for the quarter and year included $0.6 million and $2.7 million, respectively, of stock-based compensation expense and $0.4 million and $1.6 million, respectively, in depreciation and amortization expense.
Other income (expense) for the quarter and year ended December 31, 2015 was less than $0.1 million and $0.3 million, respectively, compared to less than ($0.1) million and $3.6 million for the same periods in 2014. The change in other income for the quarter is primarily due to a decrease in the fair value of warrants in the fourth quarter of 2015 compared to the same period in 2014. The decrease in other income for the full year 2015 is primarily due to a bargain purchase gain of $3.5 million recognized in 2014 and a decrease in the fair value of warrants in 2015 compared to 2014.
Vericel reported a net loss for the quarter and year ended December 31, 2015 of $4.9 million, or $0.28 per share, and $16.3 million, or $0.97 per share, respectively, compared to a net loss of $2.4 million, or $0.17 per share, and $19.9 million, or $2.23 per share, for the same periods in 2014.
As of December 31, 2015, the company had $14.6 million in cash and cash equivalents compared to $30.3 million in cash and cash equivalents at December 31, 2014.