On November 7, 2017 Vericel Corporation (NASDAQ:VCEL), a leading developer of expanded autologous cell therapies for the treatment of patients with serious diseases and conditions, reported financial results for the third quarter ended September 30, 2017 (Press release, Vericel, NOV 7, 2017, View Source [SID1234521634]).

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Total net revenues for the quarter ended September 30, 2017 were $14.3 million, which included $9.9 million of MACI (autologous cultured chondrocytes on porcine collage membrane) net revenues and $4.4 million of Epicel (cultured epidermal autografts) net revenues, compared to $8.3 million of Carticel (autologous cultured chondrocytes) net revenues and $2.6 million of Epicel net revenues, respectively, in the third quarter of 2016. Total net revenues increased 30% compared to the third quarter of 2016, with MACI revenues increasing 19% and Epicel revenues increasing 67%, respectively, compared to the same period in 2016.

Gross profit for the quarter ended September 30, 2017 was $7.1 million, or 50% of net revenues, compared to $4.1 million, or 37% of net revenues, for the third quarter of 2016.

Research and development expenses for the quarter ended September 30, 2017 were $2.9 million compared to $3.4 million in the third quarter of 2016. The reduction in third-quarter research and development expenses is primarily due to a reduction in clinical trial expenses.

Selling, general and administrative expenses for the quarter ended September 30, 2017 were $8.2 million compared to $7.0 million for the same period in 2016. The increase in selling, general and administrative expenses is primarily due to an increase in expenses for marketing initiatives related to the launch of MACI and an increase in personnel costs primarily related to an increase in the MACI sales force.

Loss from operations for the quarter ended September 30, 2017 was $4.0 million, compared to $6.4 million for the third quarter of 2016. Material non-cash items impacting the operating loss for the quarter included $0.8 million of stock-based compensation expense and $0.4 million in depreciation expense.

Other expense for the quarter ended September 30, 2017 was $1.4 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 change in the fair value of warrants in the third quarter of 2017 compared to the same period in 2016 and interest expense on the company’s outstanding revolving credit agreement and term loans.

Vericel’s net loss for the quarter ended September 30, 2017 was $5.4 million, or $0.16 per share, compared to a net loss of $6.7 million, or $0.38 per share, for the same period in 2016.

As of September 30, 2017, the company had $15.5 million in cash compared to $23.0 million in cash at December 31, 2016.

"We had a very strong third quarter in which we achieved record third quarter revenues and the second straight quarter of 30% or higher revenue growth compared to the same quarter of the prior year," said Nick Colangelo, president and CEO of Vericel. "Our significant revenue growth and gross margin expansion were driven by both the accelerating uptake of MACI as well as substantial growth for Epicel in the quarter."

Recent Business Highlights
During and since the third quarter of 2017, the company:

Achieved record third quarter revenues and the second straight quarter of 30% or greater revenue growth versus same quarter of the prior year;
Achieved 19% growth in MACI net revenues for the third quarter of 2017 compared to Carticel revenues for the same period in 2016;
Achieved 67% growth in Epicel net revenues for the third quarter of 2017 compared to the same period in 2016;
Achieved gross margins of 50% of net revenues in the third quarter of 2017 versus 37% of net revenues in the same period in 2016;
Trained more than 440 surgeons on the MACI surgical procedures to date, with approximately 50% of trained surgeons coming from former Carticel user and non-Carticel user segments;
Increased MACI biopsies 44% in the third quarter of 2017 compared to the same period in 2016;
Announced that medical benefit policies have been updated to include MACI at multiple commercial plans including UnitedHealthcare; at this time, the number of covered lives for commercial plans providing access to MACI is approximately equivalent to the number of covered lives for commercial plans that previously covered Carticel; and
Announced plans to expand the MACI sales force from 28 to 40 sales representatives.
"Based on the expanding surgeon customer base and the increasing volume of MACI biopsies and implants, we believe that demand for MACI will far exceed that for Carticel," added Mr. Colangelo. "Given the MACI launch momentum and expanded patient access, we have initiated another sales force expansion in order to drive continued strong revenue growth in 2018 and beyond."

Conference Call Information
Today’s conference call will be available live at 8:00am Eastern time in the Investors 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 third-quarter 2017 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 November 7, 2018. A replay of the call will also be available until 11:00am (EST) on November 11, 2017 by calling (855) 859-2056, or from outside the U.S. (404) 537-3406. The conference ID is 7097908.