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): February 26, 2019

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 check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§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 February 26, 2019, Vericel Corporation issued a press release announcing its financial results for the fiscal quarter and year ended December 31, 2018, 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: February 26, 2019
 
 
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=12734454&doc=3
 
Vericel Corporation
64 Sidney Street Cambridge, MA 02139
T (617) 588-5555 F (617) 588-5554
www.vcel.com
Vericel Reports Fourth Quarter and Full-Year 2018 Financial Results and Provides Full-Year 2019 Financial Guidance
Record Quarterly Product Revenues of $31.3 Million Represent a 41% Increase Over Fourth Quarter 2017
Full-Year 2018 Product Revenues of $90.9 Million
Conference Call Today at 8:30am Eastern Time
CAMBRIDGE, Mass., February 26, 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 fourth quarter and year ended December 31, 2018 and provided full-year 2019 financial guidance.
Fourth Quarter 2018 Financial Highlights
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;
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:

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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.

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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 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 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 http://investors.vcel.com/events-presentations 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.
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

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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
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 adjusted EBITDA described in the release, or non-GAAP EBITDA adjusted for specific items that are generally not indicative of our core operations, provides 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 comparisons of 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. © 2019 Vericel Corporation. All rights reserved.
This document contains forward-looking statements, including, without limitation, all of the statements in “2019 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 2019 revenues, growth in revenues and profit, improvements in gross margins and cash flow, 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, 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, 2018, filed with the Securities and Exchange Commission ("SEC") on February 26, 2019, 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. 

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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


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

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
18,286

 
$
26,862

Short term investments
 
64,638

 

Accounts receivable (net of allowance for doubtful accounts of $514 and $249, respectively)
 
23,454

 
18,270

Inventory
 
3,558

 
3,793

Other current assets
 
2,847

 
1,581

Total current assets
 
112,783

 
50,506

Property and equipment, net
 
5,906

 
4,071

Total assets
 
$
118,689

 
$
54,577

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
7,108

 
$
5,552

Accrued expenses
 
6,930

 
5,573

Deferred rent
 
566

 
420

Warrant liabilities
 

 
1,014

Current portion of term loan credit agreement (net of deferred costs of $0 and $67, respectively)
 

 
350

Other
 
188

 
181

Total current liabilities
 
14,792

 
13,090

Revolving and term loan credit agreement (net of deferred costs of $0 and $196, respectively)
 

 
16,888

Deferred rent
 
1,666

 
2,059

Total liabilities
 
16,458

 
32,037

COMMITMENTS AND CONTINGENCIES
 
 
 
 
Shareholders’ equity:
 
 

 
 

Common stock, no par value; shares authorized — 75,000; shares issued and outstanding — 43,578 and 35,861, respectively
 
471,180

 
383,020

Other comprehensive loss
 
(39
)
 

Warrants
 
104

 
397

Accumulated deficit
 
(369,014
)
 
(360,877
)
Total shareholders’ equity
 
102,231

 
22,540

Total liabilities and shareholders’ equity
 
$
118,689

 
$
54,577


 

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VERICEL CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, amounts in thousands except per share amounts) 
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2018
 
2017
 
2018
 
2017
Product sales, net
 
$
31,335

 
$
22,186

 
$
90,857

 
$
62,760

Other
 

 
1,164

 

 
1,164

Total revenue
 
$
31,335

 
$
23,350

 
$
90,857

 
$
63,924

Cost of product sales
 
8,629

 
8,389

 
32,160

 
30,354

Gross profit
 
22,706

 
14,961

 
58,697

 
33,570

Research and development
 
3,018

 
3,587

 
13,599

 
12,944

Selling, general and administrative
 
13,693

 
10,183

 
49,007

 
35,610

Total operating expenses
 
16,711

 
13,770

 
62,606

 
48,554

Income (loss) from operations
 
5,995

 
1,191

 
(3,909
)
 
(14,984
)
Other income (expense):
 
 

 
-6

 
 

 
 

(Increase) decrease in fair value of warrants
 

 
255

 
(2,524
)
 
(257
)
Loss on extinguishment of debt
 
(838
)
 
(860
)
 
(838
)
 
(860
)
Interest income
 
507

 
8

 
897

 
14

Interest expense
 
(392
)
 
(229
)
 
(1,732
)
 
(1,107
)
Other (expense) income
 
(30
)
 
(78
)
 
(31
)
 
(92
)
Total other (expense) income
 
(753
)
 
(904
)
 
(4,228
)
 
(2,302
)
Net income (loss)
 
$
5,242

 
$
287

 
$
(8,137
)
 
$
(17,286
)
 
 
 
 
 
 
 
 
 
Net income (loss) per share attributable to common shareholders (Basic)
 
$
0.12

 
$
0.01

 
$
(0.20
)
 
$
(0.52
)
Net income (loss) per share attributable to common shareholders (Diluted)
 
$
0.11

 
$
0.01

 
$
(0.20
)
 
$
(0.52
)
Weighted average number of common shares outstanding (Basic)
 
43,445

 
35,054

 
40,242

 
33,355

Weighted average number of common shares outstanding (Diluted)
 
46,153

 
36,150

 
40,242

 
33,355






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RECONCILIATION OF REPORTED NET LOSS (GAAP) TO ADJUSTED EBITDA (NON-GAAP MEASURE) - UNAUDITED
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Year Ended December 31,
(In thousands)
 
2018
 
2017
 
2018
 
2017
Net income (loss)
 
$
5,242

 
$
287

 
$
(8,137
)
 
$
(17,286
)
Change in fair value of warrants
 

 
(255
)
 
2,524

 
257

Revenue reserve related to a dispute between pharmacy provider and payer
 

 

 

 
1,418

Stock compensation expense
 
1,484

 
627

 
7,223

 
2,680

Loss on Extinguishment of Debt
 
838

 
860

 
838

 
860

Depreciation and amortization
 
293

 
426

 
1,426

 
1,612

Net interest (income) expense
 
(115
)
 
221

 
835

 
1,093

Adjusted EBITDA (Non-GAAP)
 
$
7,742

 
$
2,166

 
$
4,709

 
$
(9,366
)


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