On February 26, 2019 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, 2018 and provided full-year 2019 financial guidance (Press release, Vericel, FEB 26, 2019, View Source [SID1234533670]).
Fourth Quarter 2018 Financial Highlights

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Total net product revenues increased 41% to $31.3 million compared to $22.2 million in the fourth quarter of 2017;

Gross margins of 72% compared to gross margins of 64% in the fourth quarter of 2017;

Net income of $5.2 million, or $0.11 per share, compared to $0.3 million, or $0.01 per share, in the fourth quarter of 2017;

Non-GAAP adjusted EBITDA of $7.7 million compared to $2.2 million in the fourth quarter of 2017; and

As of December 31, 2018, after retiring all outstanding debt, the company had $82.9 million in cash and short-term investments compared to $26.9 million in cash at December 31, 2017.

Full-Year 2018 Financial Highlights

Total net product revenues increased 45% to $90.9 million compared to $62.8 million in 2017;

Gross margins of 65% compared to gross margins of 53% in 2017;
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Net loss of $8.1 million, or $0.20 per share, compared to a net loss of $17.3 million, or $0.52 per share, in 2017; and

Non-GAAP adjusted EBITDA of $4.7 million compared to a loss of $9.4 million in 2017.

Recent Business Highlights
During and since the fourth quarter of 2018, the company:

Reported record fourth quarter revenues, marking the seventh consecutive quarter with record revenues for the reported quarter;

Reported full-year positive adjusted EBITDA;

Expanded the MACI sales force from 40 to 48 territories; and

Reported publication of outcomes data from 954 burn patients treated with Epicel in the Journal of Burn Care and Research.

"We delivered record fourth quarter and full-year revenues and gross margins, and reported full-year positive adjusted EBITDA for the first time in the company’s history," said Nick Colangelo, president and CEO of Vericel. "Based on MACI’s performance in 2018 and the feedback that we are receiving from surgeons and patients, it is clear that MACI is filling what has been a large unmet need in the cartilage repair market, and we expect continued strong revenue and profit growth in 2019."

2019 Financial Guidance
The company expects total net product revenues for 2019 to be in the range of $108 million to $112 million. The company also expects margins to continue to increase, with approximately 80% of marginal revenue over 2018 to contribute to gross profit and approximately 50% of marginal revenue over 2018 to contribute to adjusted EBITDA. Quarterly seasonality, which impacts both revenues and margins, is expected to follow the same pattern as 2018.

Fourth Quarter 2018 Results
Total net product revenues for the quarter ended December 31, 2018 increased 41% to $31.3 million compared to $22.2 million in the fourth quarter of 2017. Total net product revenues for the quarter included $25.1 million of MACI (autologous cultured chondrocytes on porcine collage membrane) net revenue and $6.2 million of Epicel (cultured epidermal autografts) net revenue, compared to $16.1 million of MACI net revenue and $6.1 million of Epicel net revenue, respectively, in the fourth quarter of 2017. Total revenues for the fourth quarter of 2017 also included $1.2 million in license revenue related to the company’s license agreement with Innovative Cellular Therapeutics (ICT).
Gross profit for the quarter ended December 31, 2018 was $22.7 million, or 72% of net revenues, compared to $15.0 million, or 64% of net revenues, for the fourth quarter of 2017.
Total operating expenses for the quarter ended December 31, 2018 were $16.7 million compared to $13.8 million for the same period in 2017. The increase in operating expenses was primarily due to $1.4 million in service fees paid to MACI pharmacy distributors, an incremental $1.2 million in employee-related expenses associated with the expanded MACI sales force, and an incremental $0.5 million in stock-based compensation expense.
Vericel’s net income for the quarter ended December 31, 2018 was $5.2 million, or $0.11 per share, compared to a $0.3 million, or $0.01 per share, for the fourth quarter of 2017.
Non-GAAP adjusted EBITDA was $7.7 million for the quarter ended December 31, 2018 compared to $2.2 million in the fourth quarter of 2017. See table reconciling non-GAAP measures for more details.

As of December 31, 2018, the company had $82.9 million in cash and short-term investments compared to $26.9 million in cash at December 31, 2017.
Full-Year 2018 Results
Total net product revenues for the year ended December 31, 2018 increased 45% to $90.9 million compared to $62.8 million in 2017. Total net product revenues for the year included $67.7 million of MACI net revenue and $23.1 million of Epicel net revenue, compared to $43.9 million of MACI and Carticel (autologous cultured chondrocytes) net revenue and $18.9 million of Epicel net revenue, respectively, in 2017. Total revenues in 2017 also included $1.2 million in license revenue related to the company’s license agreement with ICT.
Gross profit for the year ended December 31, 2018 was $58.7 million, or 65% of net revenues, compared to $33.6 million, or 53% of net revenues, for 2017.
Total operating expenses for the year ended December 31, 2018 were $62.6 million compared to $48.6 million in 2017. The increase in operating expenses was primarily due to an incremental $4.5 million in employee-related expenses associated with the expanded MACI sales force, an incremental $2.7 million in stock-based compensation expense and an increase of $2.6 million in service fees paid to MACI pharmacy distributors.
Vericel’s net loss for the year ended December 31, 2018 was $8.1 million, or $0.20 per share, compared to a loss of $17.3 million, or $0.52 per share, in 2017.
Non-GAAP adjusted EBITDA was $4.7 million for the year ended December 31, 2018 compared to a loss of $9.4 million in 2017. See table reconciling non-GAAP measures for more details.
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 2018 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 View Source until February 26, 2020. A replay of the call will also be available until 11:15am (EDT) on March 3, 2019 by calling (855) 859-2056, or from outside the U.S. (404) 537-3406. The conference ID is 3485006.