Vericel at BofA Securities Conference: Growth and Innovation in Healthcare

On Wednesday, 14 May 2025, Vericel Corp (NASDAQ:VCEL) presented at the BofA Securities 2025 Healthcare Conference, unveiling a strategic overview that underscores its leadership in advanced therapies for sports medicine and severe burn care. While highlighting robust financial performance and growth opportunities, Vericel also faces challenges, including competitive market dynamics.

Key Takeaways

• Vericel’s innovative portfolio includes MACI for cartilage repair and NexoBrid and Epicel for burn care.
• The company achieved a compounded annual revenue growth rate of approximately 20% since MACI’s 2017 launch.
• Vericel maintains a strong financial position with over $160 million in cash and no debt.
• The total addressable market is projected to grow from $4 billion to over $5 billion with new indications.
• A new manufacturing facility supports potential international expansion.

Financial Results

• Vericel has over $160 million in cash and no debt, reflecting a strong balance sheet.
• The company achieved GAAP net income positive last year.
• Cash generation is expected to increase significantly starting in the second quarter.
• Adjusted EBITDA profit grew 58% last year.
• Revenue growth is projected at 20% to 23% this year, driven by MACI Arthro and NexoBrid.

Operational Updates

• MACI, a cell therapy product for cartilage repair, has an addressable market of over $3 billion.
• MACI Arthro, a new advancement for arthroscopic delivery, has trained over 400 surgeons.
• NexoBrid is gaining traction in 60 burn centers, offering a less traumatic eschar removal method.
• Epicel remains the sole FDA-approved permanent skin replacement for extensive burns.
• The burn care franchise grew 22% last year.
• A new manufacturing facility in Burlington, Massachusetts, supports future expansion plans.

Future Outlook

• Vericel aims to sustain growth through its unique portfolio and significant barriers to entry.
• The company plans to enhance its position in cartilage repair with MACI Arthro.
• Expansion of the burn care business is a priority, alongside the MACI ankle indication.
• Vericel is exploring potential launches of MACI outside the United States.
• The core portfolio’s total addressable market could increase to over $5 billion with the MACI ankle indication.

Conclusion

For a comprehensive understanding, readers are encouraged to refer to the full transcript below.

Full transcript - BofA Securities 2025 Healthcare Conference:

Gracia, Bank of America, Bank of America: Bank of America. Today, I’m here to introduce Vericel, a per a leading provider of advanced therapies for the sports medicine and severe burn care markets. Welcome to the stage Nick Colangelo, Executive Officer and Joe Mott, Chief Financial Officer.

Nick Colangelo, Executive Officer, Vericel: Gracia, it’s great to be here. And before I begin, I just want to remind folks that this presentation contains forward looking statements, so you should refer to our documents on file with the SEC for further information. And as Grisha mentioned, Vericel is the leader in advanced therapies for the sports medicine and the severe burn care market. We have a highly innovative portfolio of specialty biologics and advanced cell therapies that repair tissue and restore function. Our lead product is MACI, which is a cell therapy product that uses the patient’s own cells to repair damaged cartilage tissue, which we launched in 2017 for the repair of cartilage defects of the knee.

And it’s become the leading restorative cartilage repair product on the market and the only FDA product approved in its class. So we recently received FDA approval for AC Arthro, which we believe will drive greater penetration into our addressable patient market. On the burn care side, we’re focused on hospitalized burn patients, severe burn patients. And for those patients, the treatment pathway basically entails removing the burn tissue or the eschar, and then grafting the wound to promote healing. We actually have products that cover both aspects of the treatment pathway.

NexoBrid is an orphan biologic product in The U. S. That we launched a little over a year ago that’s indicated for the removal of eschar. And Epicel is the only FDA approved permanent skin replacement for large, full thickness burns. And so having products that address both aspects of the treatment pathway, we believe, positions us to have the premier portfolio in this space.

And our portfolio is very unique in that we have significant barriers to entry. MACI and Epicel are regulated as combination device biologic products in The U. S. And so there’s really no generic pathway for other products to enter the market, and there’s no near term like competitors either on the market now or in development. So we think we have great position there.

And then again, experts in orphan biologics, so it is orphan exclusivities, biologic data exclusivities. And so we think it’s an exceptional portfolio to continue to drive sustained growth as we move forward. And we think the company is very well positioned to do so. So it starts with our financial position. So as I’ll talk about in a moment, we’ve generated several years of high revenue growth, and we continue to do so.

Significant profit growth as we’ve delivered positive adjusted EBITDA and operating cash flow each year. We were GAAP positive, net income positive last year. And have a very strong balance sheet with over $160,000,000 in cash and no debt. So very well positioned from a financial perspective. We’ve developed one of the premier sports medicine businesses and obviously are a leader in cartilage repair, and we expect to be able to enhance and reinforce our leadership position there with the launch of MACI Arthro.

We’ve developed the burn care business into a second high growth franchise. The burn care franchise grew 22% last year, so we’re excited about having both NexoBrid and Epicel as we move forward. And then we continue to expand our core portfolio. So we expect to initiate a MACI ankle study for the treatment of cartilage defects in the ankle. And we just completed our new manufacturing facility and world headquarters in Burlington, Massachusetts, which will allow us to potentially launch MACI outside The United States in the years to come.

So we think there’s a great growth pathway for the company as we continue to move forward. We operate in large underserved markets that we think will support the growth. The current TAM for our core portfolio is about $4,000,000,000 and with the potential addition of a MACI ankle indication, would bring that to over $5,000,000,000 So it’s clearly significant markets to support our expected near term and long term growth. And we do have a strong track record of revenue growth, as I mentioned, since we launched MACI in 2017. Our compounded annual revenue growth rate is about 20%.

Last two years was 20% growth. And we expect 20% to 23% growth this year based on the momentum of our core portfolio, the launch of MACI Arthro and then continued uptake for NexoBrid. And then as we look in the out years, again, the launch potential launch outside The U. S. Of MACI and then MACI ankle indications that we think we’re well positioned for continued growth in the years ahead.

In addition to our strong revenue growth, we’ve now had two straight years in 2023 and 2024, where we’ve had 20% top line revenue growth and more than doubled our adjusted EBITDA or profit growth. And so with 58% adjusted EBITDA profit growth last year, and as I mentioned, we’re a GAAP net income positive as well. And we’re actually at a point now where our cash generation is reaching an inflection point. So we invested nearly $100,000,000 in our new facility over the past few years. Our cash balance actually grew during that time.

And with most of that CapEx behind us now, starting in the second quarter, we expect to generate significant cash going forward. So really excited about the outlook for the company as we move forward. So I’ll start with MACI in the cartilage repair market. Cartilage injuries are a significant issue because and their cause. It’s essentially a pothole on the surface of the knee caused by acute or repetitive injuries.

And the issue is that cartilage, unlike most tissues in your body, does not have intrinsic healing properties. So if you have a cartilage injury, basically puts you on a path to, obviously, chronic knee pain and loss of function, but also osteoarthritis, and ultimately, partial and full knee replacement. So it’s a very significant issue, very large commercial opportunity for us. There’s about 750,000 knee cartilage repair procedures each year. And without going through all the details, for us, there’s about 60,000 patients in our addressable market.

In our current revenue per implant of around $60,000 per implant, it results in a greater than $3,000,000,000 addressable market for us, which clearly has been supporting the growth that we’ve seen. The product itself is composed of taking a patient’s cartilage cells, or chondrocytes, seeding them onto a resorbable collagen membrane that is surgically implanted. So we take a biopsy, it’s sent to us, we process it, we expand the cells, we cryopreserve them until the surgeon and the patient are ready to move forward with surgery. We thaw the cells, further expand them, they’re seated at about 5,000,000 to 1,000,000 cells per square centimeter, shipped to the surgeon at this hospital or ASC. When they implant the membrane, basically the chondrocytes, which are spindle cells, they hold onto collagen fibers, they migrate down to the subchondral bone and then start to replicate, produce extracellular matrix, and ultimately fill that pothole on the knee with cartilage.

So very innovative product. The reason MACI has become the leading product on the market is that, first of all, was approved under a BLA by the FDA. It’s got a very broad label, unsurpassed clinical data. So addresses a good number of the patients in that overall addressable market. It’s a vastly superior, much less invasive, simpler, faster surgical procedure, and that’s what’s broadened out the surgeon base that uses MACI.

Rehab protocols are much shorter because it’s a less invasive surgery, and it’s got terrific reimbursement coverage. All the major plans in the country cover MACI under their medical policy. So we expect those attributes to continue to grow or support the growth of the core business. But really, MACI Arthro, or the arthroscopic delivery of MACI represents another significant procedural advancement that really targets the largest PACE portion of our addressable market, which I’ll cover in a moment. And it really just accelerates or continues down our path of trying to make these cartilage repair procedures with MACI simpler and less invasive, which is kind of a common playbook in the med tech industry.

So when you look at our overall this is a busy slide, but if you look at our overall addressable market of those 60,000 patients, on the left hand side, the two columns represent sort of where MACI prior to the launch was kind of a go to product. So in the patella or the back of the knee cap, when you have a cartilage injury, it’s really hard to use other treatments in that area. So we have other treatments in that area. So we have double digit penetration into the patella market, which is about ten thousand patients a year. Also, if you have large defects greater than four square centimeters, which is really a large pothole on the surface of the knee, that’s where MACI has double digit penetration as well.

Again, the MACI arthro instruments are designed to treat two to four square centimeter defects on the femoral condyle. So that’s the most common area, as you’d expect, that bears the most forces and weight from the knee. So you have a lot of injuries there, and it represents about twenty thousand patients a year, or a third of the addressable market. And again, the instruments are designed for either a two, a three, or a four square centimeter defect. It really simplifies, and we think, we’ve had single digit penetration in that part of the market, and we think MACIARTHRA will allow us to get much greater penetration into that market.

And finally, the last twenty thousand patients of the sixty thousand patient TAM are really just other small defects throughout the knee, which I’ll talk about in a minute as well. So when we look at the progress of our MACIARTHRO launch, which really began in earnest this year, as we talked about on our earnings call last week, we’ve trained over 400 surgeons to date. So that pace is actually ahead of our plan and ahead of the number of surgeons we had trained at a similar point in time following the original MACI launch. So really encouraged by that. But what we’re seeing with the behaviors of those surgeons is even more encouraging in terms of the early leading indicator.

So we see that biopsy growth rate for MACI arthro trained surgeons year to date versus last year is up over thirty percent, so significantly greater than the overall biopsy growth rate. And then we see within certain segments of those surgeons, for instance, surgeons who maybe only thought about MACI for patella or back of the kneecap injuries actually taking biopsies, growing at a higher rate, but taking biopsies for other parts of the knee, which is great because they’re thinking about more patients for MACI. And then we’ve seen a significant number of the MACIARFRO cases that are done are actually outside of the femoral condyle. So surgeons are thinking about using or are actually using MACIARFRO in other parts of the knee, in particular the trochlea, which is behind the kneecap, and it’s a difficult place to do procedures. And so we’re encouraged that surgeons are kind of thinking about a broader application for MACI Arthro, and we think that’s going to drive continued growth for us.

So turning to our burn care franchise. First of all, as I mentioned, you know, when you’ve had these hospitalized burn patients, the first part of the treatment pathway is to remove the burn tissue so that you reduce the possibility of infection, sepsis, burn progression, because your body has an inflammatory response. So you need to get rid of that dead tissue. So very important to do so. Right now surgical excision is the standard of care.

So into the OR, take a knife, slice a bit of dead tissue until you get to healthy tissue, which you can tell when you start to see blood, etcetera. So there’s a lot of healthy tissue and blood loss, so very traumatic for the patient. There are some nonsurgical treatments that are recognized as being less efficacious. So there’s clearly an unmet need for an effective and selective debridement agent for or eschar removal agent for this eschar. And that’s where NexoBrid comes in.

So NexoBrid is a product that we think is going to change the standard of care for these patients. So it’s a mixture of proteolytic enzymes that are topically applied, and these enzymes recognize collagen proteins in the skin that are denatured by thermal burns, And they’re able to dissolve away that tissue but leave the healthy tissue. Much better for the patient. It’s applied outside of the OR. And really, again, we think will change the standard of care over time.

We’ve seen good adoption in terms of the number. There’s 140 burn centers in the country. We were targeting the top 90 when we launched NexoBrid a little over a year ago. Currently have 60 ordering centers, so making good progress in adoption of NexoBrid. And then, as I mentioned, once you remove the eschar, you need to figure out how you’re going to cover the wound.

Skin is highly immunogenic. You can’t do it’s the largest organ in the body, but you can’t do an organ transplant of someone else’s skin. The body will just slough it off. So you either have to do autografts of a patient’s own skin, which is difficult when you have these large burns. So we’re routinely treating patients who have sixty percent, seventy percent, eighty percent of their body surface area burns, so there’s not a lot of healthy skin to do autografts.

So we take a small biopsy of the skin, just like with MACI, we expand the keratinocytes, we create these grafts that are applied to the patient and promote healing. As I mentioned, it’s the only FDA approved permanent skin replacement, and the chart on the right just shows there’s a profound survival benefit for patients who are treated with Epicel at every decile of burn compared to the standard of care. So really excited about the burn care franchise. As I said, turned it into a second high growth franchise. Our goal now is we’ve expanded our commercial footprint.

The entire sales force is selling both products, focused on NexoBrid uptake, having all the centers who are using NexoBrid become consistent users, and then broadening out the Epicel utilization as we’re in more hospitals. So last slide in my last seven seconds is that while we’ve got a great portfolio, really provides a long pathway for growth for us. We’re also continuing we built the company on business development deals. We acquired Macy Epicell from Sanofi about a decade ago. We licensed in NexoBrid, we continue to look for products in the sports medicine or the burn care markets or other adjacencies that leverage our cell therapy manufacturing and development skills.

So with that, we are out of time, and I thank you for attending.

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