Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 8-K


CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 

Date of Report (Date of Earliest Event Reported): August 6, 2018

Vericel Corporation
(Exact name of registrant as specified in its charter)

Michigan
 
  001-35280
 
94-3096597
(State or other jurisdiction of
 
(Commission File Number)
 
(l.R.S. Employer Identification No.)
incorporation)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
64 Sidney Street
 
 
 
 
Cambridge, MA
 
02139
 
 
(Address of principal executive offices)
 
(Zip Code)
 

Registrant's telephone number, including area code: (800) 556-0311

Not Applicable
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:


 o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by a checkmark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§240.12b-2 of this chapter). Emerging Growth Company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o



 
 
 







Item 2.02. Results of Operations and Financial Condition

On August 6, 2018, Vericel Corporation issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information in this Report on Form 8-K and Exhibit 99.1 attached hereto is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits
Exhibit No.
 
Description
 
 
99.1
 






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
Vericel Corporation
 
 
 
 
 
Date: August 6, 2018
 
 
By:
/s/ Gerard Michel
 
 
 
 
Name: Gerard Michel
 
 
 
 
Title: Chief Financial Officer and Vice President Corporate Development








EXHIBIT INDEX
 
Exhibit No.
 
Description
 
 
 
99.1
 




Exhibit


 
 
 
 
Exhibit 99.1
 
 
 
 
 
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12391841&doc=3
 
Vericel Corporation
64 Sidney Street Cambridge, MA 02139
T (617) 252-7999 F (617) 252-7550
www.vcel.com

Vericel Reports Record Second Quarter Revenues of $19.0 Million and Raises Full Year 2018 Revenue Guidance
Conference Call Today at 4:30pm Eastern Time
CAMBRIDGE, Mass., August 6, 2018 (GLOBE NEWSWIRE) - Vericel Corporation (NASDAQ:VCEL), a leader in advanced cell therapies for the sports medicine and severe burn care markets, today reported financial results and business highlights for the second quarter ended June 30, 2018.
Second Quarter 2018 Financial Highlights
Total net revenues of $19.0 million compared to $17.0 million in the second quarter of 2017; second quarter 2017 revenues included a favorable $1.4 million reversal of a revenue reserve for Carticel® and MACI® related to a contractual dispute between one of the Company’s pharmacy providers and a third-party payer;
Gross margins of 59% compared to gross margins of 55% on a GAAP basis and 51% on a non-GAAP basis excluding the impact of the revenue reserve reversal in the second quarter of 2017;
Net loss of $4.7 million, or $0.12 loss per share, compared to net loss of $2.4 million, or $0.07 per share on a GAAP basis and $3.7 million, or $0.11 per share, on a non-GAAP basis excluding the impact of the revenue reserve reversal, in the second quarter of 2017;
Non-GAAP adjusted EBITDA loss of $1.4 million compared to a loss of $2.7 million in the second quarter of 2017;
As of June 30, 2018, the company had $95.0 million in cash compared to $26.9 million in cash at December 31, 2017; and
Full year 2018 revenue guidance raised to $80 to $83 million compared to previous full year revenue guidance of $73 to $78 million.
Recent Business Highlights
During and since the second quarter of 2018, the company:
Reported record second quarter revenues marking the fifth consecutive quarter with record revenues for the reported quarter;

1



Deployed the expanded MACI sales force, which increased from 28 to 40 sales representatives;
Completed an expansion of MACI manufacturing capacity to support expected growth in MACI demand;
Implemented an expanded pharmacy distribution network to continue expansion of MACI payer access;
Closed a $74.8 million public offering; and
Joined the Russell 3000® Index.
“We continued our strong start to 2018 with solid revenue growth and expanding margins in the second quarter, and we believe that key performance indicators point to continued robust growth for MACI in the second half of the year,” said Nick Colangelo, president and CEO of Vericel. “Moreover, based on our strengthened financial position, we are well positioned to execute on our business and strategic plans.”

Second Quarter 2018 Results
Total net revenues for the quarter ended June 30, 2018 were $19.0 million, which included $14.1 million of MACI® (autologous cultured chondrocytes on porcine collagen membrane) net revenue and $4.9 million of Epicel® (cultured epidermal autografts) net revenue, compared to $12.9 million of Carticel® (autologous cultured chondrocytes) and MACI net revenue and $4.0 million of Epicel net revenue, respectively, in the second quarter of 2017. Total net revenues for the quarter ended June 30, 2017 included a favorable $1.4 million reversal of a revenue reserve for Carticel and MACI related to a contractual dispute between one of the Company’s pharmacy providers and a third-party payer.
Gross profit for the quarter ended June 30, 2018 was $11.3 million, or 59% of net revenues, compared to $9.3 million, or 55% of net revenues on a GAAP basis and 51% on a non-GAAP basis excluding the impact of the revenue reserve reversal, for the second quarter of 2017. See table reconciling non-GAAP measures for more details.
Total operating expenses for the quarter ended June 30, 2018 were $15.5 million compared to $11.8 million for the same period in 2017. The increase in operating expenses was due primarily to a $1.7 million increase in stock-based compensation expense, a $1.6 million increase in MACI related sales and marketing activities, and $0.7 million increase in R&D expense related to the preparations for a MACI pediatric clinical study in the U.S.
Loss from operations for the quarter ended June 30, 2018 was $4.2 million, compared to a loss of $2.5 million on a GAAP basis and $3.9 million on a non-GAAP basis excluding the impact of the revenue reserve reversal for the second quarter of 2017. Material non-cash items impacting the operating loss for the quarter in the current year included $2.5 million of stock-based compensation expense and $0.4 million in depreciation expense, compared to $0.8 million of

2



stock-based compensation expense and $0.4 million in depreciation expense in the second quarter of 2017.
Other expense for the quarter ended June 30, 2018 was $0.4 million compared to other income of $0.1 million for the second quarter of 2017.
Non-GAAP adjusted EBITDA loss was $1.4 million for the quarter ended June 30, 2018 compared to a loss of $2.7 million in the second quarter of 2017.
Vericel’s net loss for the quarter ended June 30, 2018 was $4.7 million, or $0.12 per share, compared to a net loss of $2.4 million, or $0.07 per share on a GAAP basis and $3.7 million, or $0.11 per share on a non-GAAP basis excluding the impact of the revenue reserve reversal, for the second quarter of 2017.
As of June 30, 2018, the company had $95.0 million in cash compared to $26.9 million in cash at December 31, 2017.
Full Year 2018 Financial Guidance
The company now expects total net product revenues for the full year 2018 to be in the range of $80 to $83 million, compared to the previous full year revenue guidance of $73 to $78 million.
Conference Call Information
Today's conference call will be available live at 4:30pm Eastern time in the Investor Relations section of the Vericel website at http://investors.vcel.com/events-presentations. 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 second-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 http://investors.vcel.com/events-presentations until August 6, 2019. A replay of the call will also be available until 7:30pm (EDT) on August 11, 2018 by calling (855) 859-2056, or from outside the U.S. (404) 537-3406. The conference ID is 9699288.

About Vericel Corporation
Vericel is a leader in advanced cell therapies for the sports medicine and severe burn care markets. The company markets two cell therapy products in the United States. MACI (autologous cultured chondrocytes on porcine collagen membrane) 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. Epicel (cultured epidermal autografts) is a permanent skin replacement for the treatment of patients with deep dermal or full thickness burns greater than or equal to 30% of total body surface area. For more information, please visit the company's website at www.vcel.com.
GAAP v. Non‑GAAP Measures

3



Vericel's reported earnings are prepared in accordance with generally accepted accounting principles in the United States, or GAAP, and represent earnings as reported to the Securities and Exchange Commission.  Vericel has provided in this release financial information that has not been prepared in accordance with GAAP.  Vericel's management believes that the non-GAAP gross margins, net loss and adjusted EBITDA loss described in the release, or the non-GAAP gross margins, net loss and EBITDA loss adjusted for specific items that are generally not indicative of our core operations, provide additional information that is useful to investors in understanding Vericel's underlying performance, business and performance trends, and helps facilitate period to period comparisons and compare its financial measures with other companies in Vericel's industry.  However, non-GAAP financial measures that Vericel uses may differ from measures that other companies may use.  Non-GAAP financial measures are not required to be uniformly applied, are not audited and should not be considered in isolation or as substitutes for results prepared in accordance with GAAP.
Epicel®, MACI® and Carticel® are registered trademarks of Vericel Corporation. © 2018 Vericel Corporation. All rights reserved.
This document contains forward-looking statements, including, without limitation, all of the statements in the last bullet under the section captioned “Second Quarter 2018 Financial Highlights” and in “Full Year 2018 Financial Guidance” and statements concerning anticipated progress, objectives and expectations regarding the commercial potential of our products and growth in revenues, and objectives and expectations regarding our company described herein, all of which involve certain risks and uncertainties. These statements are often, but are not always, made through the use of words or phrases such as "anticipates," "intends," "estimates," "plans," "expects," "we believe," "we intend," “guidance,” ”outlook,” “future,” and similar words or phrases, or future or conditional verbs such as "will," "would," "should," "potential," "could," "may," or similar expressions. Actual results may differ significantly from the expectations contained in the forward-looking statements. Among the factors that may result in differences are the inherent uncertainties associated with our expectations regarding 2018 revenues, our ability to achieve or sustain profitability, our need to generate significant sales to become profitable, potential fluctuations in sales volumes and our results of operations over the course of the year, competitive developments, estimating the commercial growth potential of our products and product candidates and growth in revenues and improvement in costs, market demand for our products, our ability to secure consistent reimbursement for our products, changes in third party coverage and reimbursement, any disruption or delays in operations at our facilities, our dependence on a limited number of third party suppliers, our ability to maintain and expand our network of direct sales employees, and our ability to supply or meet customer demand for our products. These and other significant factors are discussed in greater detail in Vericel's Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission ("SEC") on March 5, 2018, Quarterly Reports on Form 10-Q and other filings with the SEC. These forward-looking statements reflect management's current views and Vericel does not undertake to update any of these forward-looking statements to reflect a change in its views or events or circumstances that occur after the date of this release except as required by law. 

4



Global Media Contacts:
David Schull
Russo Partners LLC
David.schull@russopartnersllc.com
+1 212-845-4271 (office)
+1 858-717-2310 (mobile)


Karen Chase
Russo Partners LLC
Karen.chase@russopartnersllc.com
+1 646-942-5627 (office)
+1 917-547-0434 (mobile)


Investor Contacts:
Chad Rubin
Solebury Trout
crubin@troutgroup.com
+1 (646) 378-2947

Lee Stern
Solebury Trout
lstern@troutgroup.com
+1 (646) 378-2922






5



VERICEL CORPORATION 
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, amounts in thousands)
 
 
June 30,
 
December 31,
 
 
2018
 
2017
ASSETS
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
94,969

 
$
26,862

Accounts receivable (net of allowance for doubtful accounts of $102 and $249, respectively)
 
17,499

 
18,270

Inventory
 
3,725

 
3,793

Other current assets
 
1,327

 
1,581

Total current assets
 
117,520

 
50,506

Property and equipment, net
 
4,673

 
4,071

Total assets
 
$
122,193

 
$
54,577

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
5,011

 
$
5,552

Accrued expenses
 
5,111

 
5,573

Deferred rent
 
503

 
420

Current portion of term loan credit agreement (net of deferred costs of $69 and $67, respectively)
 
2,848

 
350

Warrant liabilities
 
1,549

 
1,014

Other
 
198

 
181

Total current liabilities
 
15,220

 
13,090

Revolving and term loan credit agreement (net of deferred costs of $167 and $196, respectively)
 
14,416

 
16,888

Deferred rent
 
1,959

 
2,059

Total liabilities
 
31,595

 
32,037

 
 
 
 
 
Shareholders’ equity:
 
 

 
 

Common stock, no par value; shares authorized — 75,000; shares issued and outstanding — 42,684 and 35,861, respectively
 
463,483

 
383,020

Warrants
 
302

 
397

Accumulated deficit
 
(373,187
)
 
(360,877
)
Total shareholders’ equity
 
90,598

 
22,540

Total liabilities and shareholders’ equity
 
$
122,193

 
$
54,577


 

6



VERICEL CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, amounts in thousands except per share amounts) 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Product sales, net
 
$
19,011

 
$
16,953

 
$
37,038

 
$
26,314

Cost of product sales
 
7,727

 
7,670

 
15,393

 
14,779

Gross profit
 
11,284

 
9,283

 
21,645

 
11,535

Research and development
 
3,739

 
2,971

 
7,468

 
6,438

Selling, general and administrative
 
11,791

 
8,833

 
22,745

 
17,241

Total operating expenses
 
15,530

 
11,804

 
30,213

 
23,679

Loss from operations
 
(4,246
)
 
(2,521
)
 
(8,568
)
 
(12,144
)
Other income (expense):
 
 

 
 

 
0

 
 

(Increase) decrease in fair value of warrants
 
(37
)
 
441

 
(2,944
)
 
548

Foreign currency translation loss
 
(5
)
 
(13
)
 
(49
)
 
(14
)
Interest income
 
83

 
3

 
83

 
4

Interest expense
 
(448
)
 
(299
)
 
(880
)
 
(561
)
Other income
 
2

 
1

 
48

 
1

Total other income (expense)
 
(405
)
 
133

 
(3,742
)
 
(22
)
Net loss
 
$
(4,651
)
 
$
(2,388
)
 
$
(12,310
)
 
$
(12,166
)
 
 
 
 
 
 
 
 
 
Net loss per share attributable to common shareholders (Basic and Diluted)
 
$
(0.12
)
 
$
(0.07
)
 
$
(0.33
)
 
$
(0.38
)
Weighted average number of common shares outstanding (Basic and Diluted)
 
38,349

 
32,765

 
37,251

 
32,333






7



 
RECONCILIATION OF REPORTED GROSS MARGIN (GAAP) TO ADJUSTED GROSS MARGIN (NON-GAAP MEASURE) - UNAUDITED
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
(In thousands)
 
2018
 
2017
 
2018
 
2017
 
Total Revenues (GAAP)
 
$
19,011

 
$
16,953

 
$
37,038

 
$
26,314

 
Revenue reserve related to a dispute between pharmacy provider and payer
 

 
(1,357
)
 

 
1,418

 
Total Revenues (Non-GAAP)
 
$
19,011

 
$
15,596

 
$
37,038

 
$
27,732

 
 
 
 
 
 
 
 
 
 
 
Gross profit (GAAP)
 
$
11,284

 
$
9,283

 
$
21,645

 
$
11,535

 
Revenue reserve related to a dispute between pharmacy provider and payer
 

 
(1,357
)
 

 
1,418

 
Adjusted gross profit (Non-GAAP)
 
$
11,284

 
$
7,926

 
$
21,645

 
$
12,953

 
Adjusted gross margin (Non-GAAP)
 
59
%
 
51
%
 
58
%
 
47
%
RECONCILIATION OF REPORTED NET LOSS (GAAP) TO ADJUSTED EBITDA (NON-GAAP MEASURE) - UNAUDITED
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands)
 
2018
 
2017
 
2018
 
2017
Net loss (GAAP)
 
$
(4,651
)
 
$
(2,388
)
 
$
(12,310
)
 
$
(12,166
)
Change in fair value of warrants
 
37

 
(441
)
 
2,944

 
(548
)
Revenue reserve related to a dispute between pharmacy provider and payer
 

 
(1,357
)
 

 
1,418

Stock compensation expense
 
2,465

 
796

 
3,807

 
1,298

Depreciation and amortization
 
386

 
375

 
813

 
784

Net interest expense
 
365

 
296

 
797

 
557

Adjusted EBITDA (Non-GAAP)
 
$
(1,398
)
 
$
(2,719
)
 
$
(3,949
)
 
$
(8,657
)
 
RECONCILIATION OF REPORTED LOSS PER SHARE (GAAP) TO ADJUSTED LOSS PER SHARE (NON-GAAP MEASURE) - UNAUDITED
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
(In thousands)
 
2018
 
2017
 
2018
 
2017
 
Net loss (GAAP)
 
$
(4,651
)
 
$
(2,388
)
 
$
(12,310
)
 
$
(12,166
)
 
Revenue reserve related to a dispute between pharmacy provider and payer
 

 
(1,357
)
 

 
1,418

 
Net loss (Non-GAAP)
 
$
(4,651
)
 
$
(3,745
)
 
$
(12,310
)
 
$
(10,748
)
 
Net loss per share attributable to common shareholders (Basic and Diluted) (Non-GAAP)
 
$
(0.12
)
 
$
(0.11
)
 
$
(0.33
)
 
$
(0.33
)


8