Vericel Corporation

05/07/2026 | Press release | Distributed by Public on 05/07/2026 06:54

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Vericel Corporation is a leading provider of advanced therapies for the sports medicine and severe burn care markets. We have a highly differentiated portfolio of cell therapy and specialty biologic products that combines innovations in biology with medical technologies. We were among the first companies to achieve commercial success in the complex field of cell therapies with treatments that use tissue engineering to regenerate skin and healthy knee cartilage. We currently market two U.S. Food and Drug Administration ("FDA") approved autologous cell therapy products and one FDA-approved specialty biologic product in the U.S. MACI® 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. Since MACI's commercial launch, the product's FDA-approved labeling has provided for a treating surgeon to use MACI to treat a patient through an open surgical procedure. In August 2024, the FDA approved a supplemental Biologics License Application ("sBLA") expanding the MACI indication to add instructions for the arthroscopic delivery of MACI to the product's approved labeling. MACI Arthro® allows surgeons to evaluate and prepare the cartilage defect site as well as deliver the MACI implant through small incisions using custom-designed arthroscopic instruments developed by the Company ("MACI Arthro instruments"). MACI Arthro became commercially available in the U.S. during the third quarter of 2024 and the Company began selling MACI Arthro instruments at that time.
Epicel® is a permanent skin replacement Humanitarian Use Device ("HUD") indicated for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent of a patient's total body surface area ("TBSA"). We also hold an exclusive license from MediWound Ltd. ("MediWound") for the North American rights to NexoBrid® (anacaulase-bcdb), a topically-administered biological orphan product containing proteolytic enzymes, which is indicated for the removal of eschar in adult and pediatric patients with deep partial-thickness and/or full-thickness thermal burns.
Manufacturing
We have a cell manufacturing facility in Cambridge, Massachusetts, which is currently used for U.S. manufacturing and distribution of MACI and Epicel. In January 2022, we entered into a lease agreement (as amended, the "Burlington Lease") to lease approximately 126,000 square feet of manufacturing, laboratory and office space in Burlington, Massachusetts. The Burlington facility is complete, and we are currently utilizing the facility's office space. In March 2026, we received FDA approval to begin MACI commercial manufacturing at the Burlington facility and the Company has begun transitioning the facility's manufacturing component into the primary manufacturing facility for MACI. We intend that the Burlington facility's manufacturing component will eventually also become the primary manufacturing facility for Epicel, upon FDA qualification for Epicel manufacturing.
The manufacturing process for NexoBrid is conducted by MediWound, primarily at manufacturing locations in Israel. Certain raw materials utilized in NexoBrid's manufacture, including the supply of the active ingredient bromelain, are sourced from Taiwan.
Product Portfolio
Our current marketed products include two FDA-approved autologous cell therapies and one FDA-approved specialty biologic product. MACI is a third-generation 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. In connection with our MACI product, we sell MACI biopsy kits, which are used by treating surgeons to obtain a sample of cartilage tissue, which is later sent to us. If a patient decides to move forward with MACI treatment, we subsequently use the cartilage sample to manufacture a MACI implant. When an orthopedic surgeon decides to treat a patient by implanting MACI through an arthroscopic approach the surgeon may choose to use our custom MACI Arthro instruments during the procedure, which we sell by way of a separate transaction.
Epicel is a permanent skin replacement indicated for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent of a patient's TBSA. Both autologous cell therapy products, MACI and Epicel, are currently manufactured and marketed in the U.S. NexoBrid is a topically-administered biological orphan product containing proteolytic enzymes that is indicated for eschar removal in adult and pediatric patients with deep partial-thickness and/or full-thickness thermal burns. We hold exclusive license and supply agreements with MediWound to commercialize NexoBrid in North America. The Company operates its business primarily in the U.S. in one reportable segment - the research, product development, manufacture and distribution of cellular therapies and specialty biologics for use in the treatment of specific conditions.
MACI
MACI is a third-generation autologous chondrocyte implantation ("ACI") product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults.
Our target audiences are orthopedic surgeons who self-identify and/or have formal specialty training in sports medicine, and a subpopulation of general orthopedic surgeons who perform a high volume of cartilage repair procedures involving the knee. Our MACI commercial team consists of individual sales representatives that regularly engage with our target audience. The team is divided into geographic regions and is managed by a senior sales leadership team. A vast majority of the largest commercial payers in the U.S. have a formal medical policy that provides benefit coverage for treatment with MACI. With respect to private commercial payers that have not yet approved a medical policy for MACI, we often obtain approval on a case-by-case basis.
MACI consists of autologous cultured chondrocytes, which are human-derived cells that are obtained from the patient's own cartilage, and which are seeded onto resorbable Type I/III collagen membrane. Since MACI's commercial launch, the product's FDA-approved labeling has provided for a treating surgeon to use MACI to treat a patient through an open surgical procedure.
In August 2024, the FDA approved a supplemental Biologics License Application ("sBLA") expanding the MACI indication to add instructions for the arthroscopic delivery of MACI to the product's approved labeling, permitting the repair of single or multiple full-thickness cartilage defects of the knee up to 4 cm2 in size via an arthroscopic approach. MACI Arthro provides a less invasive technique compared to the open arthrotomy approach and allows surgeons to evaluate, prepare and treat the cartilage defect, and deliver the MACI implant, under direct arthroscopic visualization and, should the surgeon so choose, to use specialized and custom-designed instruments (the "MACI Arthro instruments") through small incisions or portals. The arthroscopic delivery of MACI may increase the ease of MACI's use for physicians and may reduce both the length of the procedure as well as procedure-induced trauma, which may result in a reduction of a patient's post-operative pain and accelerate a patient's recovery. MACI Arthro became commercially available in the U.S. during the third quarter of 2024 and we began selling MACI Arthro instruments at that time. We have experienced strong surgeon interest in the MACI Arthro technique since its launch. To date, more than 900 surgeons have participated in Company-sponsored education and training programs concerning the arthroscopic approach. We believe that the availability of MACI Arthro provides a significant growth opportunity for the overall MACI business, as we have already seen a significant increase in both MACI biopsies and implants from those surgeons who have engaged in MACI Arthro training and education programs. In conjunction with the launch of MACI Arthro, we have expanded our target surgeon base from 5,000 to 7,000 to include orthopedic surgeons that perform high volumes of knee cartilage repair surgeries, predominantly through arthroscopic procedures.
We also are focused on delivering MACI treatment to patients suffering from cartilage damage in the ankle. Following an application to the FDA, we received Investigational New Drug ("IND") clearance for MACI's use in the ankle during the second quarter of 2025, and during the fourth quarter of 2025 initiated a Study of MACI in Patients Aged 17 to 65 with Symptomatic Chondral or Osteochondral Defects of the Talus ("MASCOT"). MASCOT is a two-year prospective, multicenter, two-arm, parallel group open-label trial in which a total of 309 subjects, aged 17 to 65 will be randomized using a 2:1 ratio to receive a one-time treatment in the talus with MACI or arthroscopic bone marrow stimulation. MASCOT is the first randomized, controlled clinical trial evaluating MACI for the treatment of Osteochondral Lesion of the Talus ("OLT"). There are approximately 165,000 ankle resurfacing procedures conducted in the U.S. each year. Approximately 66,000 of those patients each year are considered clinically appropriate for MACI by surgeons. We estimate that approximately 18,000 of those patients suffer from larger ankle cartilage lesions, resulting in an increase of MACI's addressable market. If approved, we believe MACI's label expansion allowing its use to repair cartilage defects in the ankle will be a significant long-term growth driver for the product in the coming years.
Finally, our Burlington facility, discussed more fully above, is designed to meet both U.S. and global manufacturing requirements, which provides strategic flexibility to potentially commercialize MACI outside the U.S., and we are currently evaluating introducing MACI in additional geographies. We are currently focused on obtaining regulatory and marketing approval for MACI in the United Kingdom through the Medicine and Healthcare products Regulatory Agency ("MHRA") and, if successful, anticipate commercializing MACI in the United Kingdom in 2027.
Epicel
Epicel is a permanent skin replacement for deep-dermal or full-thickness burns comprising greater than or equal to 30 percent TBSA. Epicel is regulated by the FDA's Center for Biologics Evaluation and Research ("CBER") under medical device authorities, and is the only FDA-approved cultured epidermal autograft product available for large total surface area burns in both adult and pediatric patients. Epicel was designated as a HUD in 1998 and a Humanitarian Device Exemption ("HDE") application for the product was submitted in 1999. HUDs are devices that are intended for diseases or conditions that affect fewer than 8,000 individuals annually in the U.S., and, for certain HUDs, the amount a manufacturer may charge for the product's use is restricted.
Epicel is not price-restricted in this manner because in 2016, the FDA approved our HDE supplement to revise the labeled indications of use for Epicel to specifically include pediatric patients, thus allowing Epicel to be sold for profit. The product label also specifies that the probable benefit of Epicel, mainly related to survival, was demonstrated in two Epicel clinical experience databases and a physician-sponsored study comparing outcomes in patients with large burns treated with Epicel relative to standard care.
NexoBrid
Our portfolio of commercial-stage products also includes NexoBrid (anacaulase-bcdb), a topically-administered biological orphan product containing proteolytic enzymes, for which the FDA approved a BLA in December 2022. NexoBrid is indicated for the removal of eschar in adults with deep partial-thickness and/or full-thickness thermal burns. Subsequently, in August 2024, the FDA approved an sBLA expanding NexoBrid's indication to include pediatric patients.
In addition to the U.S., NexoBrid is approved in the European Union ("EU") and other international markets and has been designated as an orphan biologic in the U.S., EU and other international markets. NexoBrid has the potential to change the standard of care for eschar removal with respect to hospitalized burn patients and treat a significant addressable market in the U.S. With respect to NexoBrid, of the approximately 40,000 people that are hospitalized in the U.S. each year for burn-related injuries, the majority, over 30,000, have thermal burns and will likely require some level of eschar removal. NexoBrid's FDA approval expands our burn care franchise's total addressable market, which permits us to treat a significantly larger segment of hospitalized burn patients than with Epicel alone. The expansion of our target addressable market supports a broader commercial footprint, and we believe that this may help drive both increased NexoBrid use as well as increased Epicel awareness throughout the burn care space. Both our Epicel and NexoBrid products are serviced by our burn care field force, which consists of individual sales and clinical representatives that regularly engage with our target audience. The team is divided into geographical regions and is managed by a senior sales leadership team.
In May 2019, we entered into exclusive license and supply agreements with MediWound to commercialize NexoBrid in North America. The manufacturing process for NexoBrid is conducted by MediWound, primarily at manufacturing locations in Israel. Certain raw materials utilized in NexoBrid's manufacture, including the supply of the active ingredient bromelain, are sourced from Taiwan.
Results of Operations
The following is a summary of our condensed consolidated results of operations:
Three Months Ended March 31,
(In thousands) 2026 2025 Change $ Change %
Total revenue $ 68,425 $ 52,598 $ 15,827 30.1 %
Cost of product sales 19,159 16,325 2,834 17.4 %
Gross profit 49,266 36,273 12,993 35.8 %
Research and development 8,104 7,261 843 11.6 %
Selling, general and administrative 49,226 41,804 7,422 17.8 %
Total operating expenses 57,330 49,065 8,265 16.8 %
Loss from operations (8,064) (12,792) 4,728 (37.0) %
Total other income 1,762 1,546 216 14.0 %
Net loss $ (6,302) $ (11,246) $ 4,944 (44.0) %
Comparison of the Periods Ended March 31, 2026 and 2025
Total Revenue
Revenue by product is as follows:
Three Months Ended March 31,
(In thousands) 2026 2025 Change $ Change %
MACI $ 56,398 $ 46,297 $ 10,101 21.8 %
Epicel 10,885 4,964 5,921 119.3 %
NexoBrid 1,142 1,337 (195) (14.6) %
Total revenue $ 68,425 $ 52,598 $ 15,827 30.1 %
Total revenue increase for the three months ended March 31, 2026, compared to the same period in 2025, was driven primarily by MACI and Epicel volume and price growth, partially offset by lower NexoBrid volume.
Seasonality
Sales of MACI implants have historically experienced a level of seasonality throughout the year. In the last five years through 2025, MACI sales volumes from the first through the fourth quarter on average represented 21% (20%-22% range), 23% (22%-24% range), 22% (21%-24% range) and 34% (33%-34% range) respectively, of total annual volumes. Historically,
MACI orders are normally stronger in the fourth quarter due to several factors including the satisfaction by patients of insurance deductible limits and the time of year patients prefer to start rehabilitation. Due to the low incidence and variable occurrence of severe burns, Epicel has inherent variability from quarter-to-quarter and does not exhibit significant seasonality.
Gross Profit
Gross profit increased for the three months ended March 31, 2026, compared to the same period in 2025, primarily driven by MACI and Epicel revenue growth combined with our primarily fixed manufacturing cost structure, which consists mainly of labor and facility costs.
Research and Development Expenses
Research and development expenses for the three months ended March 31, 2026 were $8.1 million, compared to $7.3 million for the same period in 2025. The increase is primarily due to higher headcount and employee expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended March 31, 2026 were $49.2 million, compared to $41.8 million for the same period in 2025. The increase in selling, general and administrative expenses is primarily due to higher headcount and employee expenses, including the MACI sales force expansion, and facility costs for the new facility in Burlington, Massachusetts.
Total Other Income
The increase in total other income for the three months ended March 31, 2026, compared to the same period in 2025 was due to an increase in interest income, which was primarily due to fluctuations in the rates of return on our investments in various marketable debt securities and money market funds.
Stock-based Compensation Expense
Non-cash stock-based compensation expense is summarized in the following table:
Three Months Ended March 31,
(In thousands) 2026 2025 Change $ Change %
Cost of product sales $ 1,424 $ 1,141 $ 283 24.8 %
Research and development 1,335 1,487 (152) (10.2) %
Selling, general and administrative 8,535 8,877 (342) (3.9) %
Total non-cash stock-based compensation expense $ 11,294 $ 11,505 $ (211) (1.8) %
The decrease in stock-based compensation expense for the three months ended March 31, 2026, compared to the same period in 2025, was due primarily to fluctuations in stock prices and the mix of service-based options and restricted stock units, which impacts the fair value of the options and restricted stock units awarded and the expense recognized in the period.
Liquidity and Capital Resources
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
Three Months Ended March 31,
(In thousands) 2026 2025
Net cash provided by operating activities $ 16,383 $ 6,600
Net cash used in investing activities (4,201) (15,142)
Net cash (used in) provided by financing activities (2,979) 3,198
Net increase (decrease) in cash, cash equivalents, and restricted cash $ 9,203 $ (5,344)
Net Cash Provided by Operating Activities
Our cash and cash equivalents totaled $109.3 million, short-term investments totaled $36.0 million and long-term investments totaled $65.3 million as of March 31, 2026. The $16.4 million of cash provided by operations during the three months ended March 31, 2026 was primarily the result of non-cash charges of $11.3 million related to stock-based compensation expense, $3.3 million in depreciation and amortization expense, $1.4 million of operating lease amortization and a net increase of $6.5 million related to movements in our working capital accounts, partially offset by a net loss of $6.3 million. The overall increase in cash from our working capital accounts was primarily driven by a decrease in accounts receivable due to cash collections, partially offset by a decrease in accrued expenses due to timing of payments.
Our cash, cash equivalents and restricted cash totaled $79.7 million, short-term investments totaled $39.4 million and long-term investments totaled $43.3 million as of March 31, 2025. The $6.6 million of cash provided by operations during the three months ended March 31, 2025 was primarily the result of non-cash charges of $11.5 million related to stock-based compensation expense, $2.7 million in depreciation and amortization expense and $1.4 million of operating lease amortization, partially offset by a net loss of $11.2 million and a net increase of $1.4 million related to movements in our working capital accounts. The overall increase in cash from our working capital accounts was primarily driven by a decrease in accounts receivable due to cash collections and receipts of tenant improvement allowances which exceeded payments on operating leases amortization, offset by a decrease in accounts payable and accrued expenses due to timing of payments.
Net Cash Used In Investing Activities
Net cash used in investing activities during the three months ended March 31, 2026 was the result of $17.2 million in investment purchases and $1.3 million of property and equipment purchases primarily for construction in process, partially offset by $14.2 million of investment sales and maturities.
Net cash used in investing activities during the three months ended March 31, 2025 was the result of $14.2 million of property and equipment purchases primarily for construction in process related to the Burlington Lease and $13.4 million in investment purchases, partially offset by $12.5 million of investment sales and maturities.
Net Cash Used in (Provided by) Financing Activities
Net cash used in financing activities during the three months ended March 31, 2026 was the result of payment of employee withholding taxes related to the vesting of restricted stock units of $4.5 million, partially offset by the net proceeds from the exercise of stock options and the employee stock purchase plan of $1.6 million.
Net cash provided by financing activities during the three months ended March 31, 2025 was the result of net proceeds from the exercise of stock options and the employee stock purchase plan of $9.4 million, partially offset by the payment of employee withholding taxes related to the vesting of restricted stock units of $6.2 million.
Liquidity
Since our acquisition of MACI and Epicel in 2014, our primary focus has been to invest in our existing commercial business with the goal of growing revenue. We have raised significant funds in order to advance and complete our product development and product life-cycle management programs and to market and commercialize our products. To date, we have financed our operations primarily through cash received through MACI, Epicel and NexoBrid sales, debt, and public and private sales of our equity securities. In the future, we may finance our operations through sales of equity securities, revolver borrowings or other debt financings, in addition to cash generated from operations.
We believe that our current cash on hand, cash equivalents, investments, and available borrowing capacity will be sufficient to support our current operations through at least 12 months from the issuance of the condensed consolidated financial statements included in this report. Our actual cash requirements may differ from projections and will depend on many factors, including the level and pace of future research and development efforts, the scope and results of ongoing and potential clinical trials, the costs involved in filing, prosecuting and enforcing patents, the need for additional manufacturing capacity, competing technological and market developments, global macroeconomic conditions, costs associated with possible acquisitions or development of complementary business activities, and the cost to market our products.
As of March 31, 2026, we were not party to any off-balance sheet arrangements.
Sources of Capital
On July 29, 2022, we entered into a $150.0 million five-year senior secured revolving credit agreement by and among the Company, the other loan parties thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as the administrative agent (the "Revolving Credit Agreement"). We have no immediate plans to borrow under the Revolving Credit Agreement, but we may use the facility for working capital needs and other general corporate purposes. As of March 31, 2026, there are no outstanding borrowings under the Revolving Credit Agreement, and we are in compliance with all applicable covenant requirements. See Note 8, "Revolving Credit Agreement" in the accompanying condensed consolidated financial statements for further details.
Contractual Obligations and Commitments
The disclosure of our contractual obligations and commitments is set forth in the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations - Contractual Obligations" in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no other material changes, outside of the ordinary course of business, to our contractual obligations and commitments since December 31, 2025.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, expenses, and related disclosures. Actual results may differ materially from these estimates under different assumptions and conditions.
There have been no material changes to our critical accounting policies and estimates in the three months ended March 31, 2026. For further information, refer to our summary of significant accounting policies and estimates in our Annual Report on Form 10-K filed for the year ended December 31, 2025.
Cautionary Note Regarding Forward-Looking Statements
This report, including the documents incorporated by reference herein, contains certain statements that describe our management's beliefs concerning future business conditions, plans and prospects, growth opportunities and the outlook for our business based upon information currently available. Such statements are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). Wherever possible, we have identified these forward-looking statements by words such as "will," "may," "anticipates," "believes," "intends," "estimates," "expects," "plans," "projects," "trends," "opportunity," "current," "intention," "position," "assume," "potential," "outlook," "remain," "continue," "maintain," "sustain," "seek," "target," "achieve," "continuing," "ongoing," and similar words or phrases, or future or conditional verbs such as "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 our expectations regarding future revenue, growth in revenue, market penetration for MACI®, MACI Arthro®, Epicel®, and NexoBrid®, growth in profit, gross margins and operating margins, the ability to continue to scale our manufacturing operations to meet the demand for our cell therapy products, the ability to sustain profitability, contributions to adjusted EBITDA, the expected target surgeon audience, potential fluctuations in sales and volumes and our results of operations over the course of the year, timing and conduct of clinical trial and product development activities, timing and likelihood of the FDA's potential approval of the use of MACI to treat cartilage defects in the ankle, the timing and likelihood of obtaining market approval for MACI in the United Kingdom, the estimate of the commercial growth potential of our products and product candidates, competitive developments, changes in third-party coverage and reimbursement, including recent and future healthcare reform measures and private payor initiatives, surgeon adoption of MACI Arthro, physician and burn center adoption of NexoBrid, labor strikes, supply chain disruptions or other events or factors that might affect our ability to manufacture MACI or Epicel or affect MediWound's ability to manufacture and supply sufficient quantities of NexoBrid to meet customer demand, including but not limited to conflicts in the Middle East region involving Israel or those related to disruptions of land or sea transportation routes or distribution or shipping channels, uncertainties associated with the potential benefits of the Company's agreement with BARDA for the procurement and development of NexoBrid and the availability of funding from BARDA under that agreement, negative impacts on the global economy and capital markets resulting from the conflicts in Ukraine and Iran and a potential regime change in Iran, as well as other hostilities in the Middle East, changes in trade policies and regulations, including the potential for increases or changes in duties, current and potentially new tariffs or quotas, lingering effects of adverse developments affecting financial institutions, companies in the financial services industry or
the financial services industry generally, changes in governmental monetary and fiscal policies, including, but not limited to, Federal Reserve policies in connection with continued inflationary pressures, the impact from future regulatory, judicial and legislative changes affecting our industry or to the broader market, including those included in the One Big Beautiful Bill Act (the "OBBBA"), and a U.S. government shutdown. These forward-looking statements are based upon assumptions our management believes are reasonable. Such forward-looking statements are subject to risks and uncertainties, which could cause our actual results, performance and achievements to differ materially from those expressed in, or implied by, these statements, including, among others, the risks and uncertainties listed in our Annual Report on Form 10-K under "Part I, Item 1A. Risk Factors" and in our subsequent reports filed with the SEC.
Because our forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different and any or all of our forward-looking statements may turn out to be wrong. Forward-looking statements speak only as of the date made and can be affected by assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in our Annual Report on Form 10-K will be important in determining future results. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. Consequently, we cannot assure you that our expectations or forecasts expressed in such forward-looking statements will be achieved. Except as required by law, we undertake no obligation to publicly update any of our forward-looking or other statements, whether as a result of new information, future events, or otherwise.
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