Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2018	May 04, 2018
Document and Entity Information
Entity Registrant Name	Vericel Corp
Entity Central Index Key	0000887359
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding (in shares)		36,681,333

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Current assets:
Cash	$ 29,777	$ 26,862
Accounts receivable (net of allowance for doubtful accounts of $315 and $249, respectively)	13,162	18,270
Inventory	3,905	3,793
Other current assets	1,358	1,581
Total current assets	48,202	50,506
Property and equipment, net	4,207	4,071
Total assets	52,409	54,577
Current liabilities:
Accounts payable	5,768	5,552
Accrued expenses	4,007	5,573
Short term deferred rent	426	420
Current portion of term loan credit agreement (net of deferred costs of $69 and $67, respectively)	1,597	350
Warrant liabilities	1,921	1,014
Other	159	181
Total current liabilities	13,878	13,090
Revolving and term loan credit agreement (net of deferred costs of $185 and $196, respectively)	15,649	16,888
Long term deferred rent	1,947	2,059
Total liabilities	31,474	32,037
COMMITMENTS AND CONTINGENCIES (Note 12)
Shareholders’ equity:
Common stock, no par value; shares authorized — 75,000; shares issued and outstanding — 36,502 and 35,861, respectively	389,074	383,020
Warrants	397	397
Accumulated deficit	(368,536)	(360,877)
Total shareholders’ equity	20,935	22,540
Total liabilities and shareholders’ equity	$ 52,409	$ 54,577

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 315	$ 249
Current portion of term loan credit agreement, deferred costs	69	67
Revolving and term loan credit agreement, deferred costs	$ 185	$ 196
Common stock, authorized (in shares)	75,000	75,000
Common stock, issued (in shares)	36,502	35,861
Common stock, outstanding (in shares)	36,502	35,861

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Statement [Abstract]
Product sales, net	$ 18,027	$ 9,361
Cost of product sales	7,666	7,109
Gross profit	10,361	2,252
Research and development	3,729	3,467
Selling, general and administrative	10,954	8,408
Total operating expenses	14,683	11,875
Loss from operations	(4,322)	(9,623)
Other income (expense):
(Increase) decrease in fair value of warrants	(2,907)	107
Foreign currency translation (loss)	(44)	(1)
Interest income	0	1
Interest expense	(432)	(262)
Other income	46	0
Total other income (expense)	(3,337)	(155)
Net loss	$ (7,659)	$ (9,778)
Net loss per share attributable to common shareholders (Basic and Diluted) (in dollars per share)	$ (0.21)	$ (0.31)
Weighted average number of common shares outstanding (Basic and Diluted) (in shares)	36,140	31,896

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Operating activities:
Net loss	$ (7,659)	$ (9,778)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization	427	409
Stock compensation expense	1,342	502
Change in fair value of warrants	2,907	(107)
Inventory provision	(94)	93
Loss on sales of fixed assets	22	0
Foreign currency translation loss	44	1
Deferred rent	(106)	102
Changes in operating assets and liabilities:
Inventory	(18)	(563)
Accounts receivable	5,108	4,966
Other current assets	223	146
Accounts payable	(229)	(300)
Accrued expenses	(1,566)	1,507
Other assets and liabilities, net	4	(100)
Net cash provided by (used for) operating activities	405	(3,122)
Investing activities:
Expenditures for property, plant and equipment	(184)	(70)
Net cash used in investing activities	(184)	(70)
Financing activities:
Net proceeds from issuance of common stock	985	71
Deferred financing costs	8	0
Proceeds from exercise of warrants	1,727	0
Repayments of short-term debt	10	0
Other	0	(10)
Net cash provided by financing activities	2,694	61
Net increase (decrease) in cash	2,915	(3,131)
Cash at beginning of period	26,862	22,978
Cash at end of period	$ 29,777	$ 19,847

Organization	3 Months Ended
Organization	Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization	Organization Vericel Corporation, a Michigan corporation (the Company, Vericel, we, us or our), was incorporated in March 1989 and began employee-based operations in 1991. On May 30, 2014, Vericel completed the acquisition of certain assets and assumed certain liabilities of Sanofi, a French société anonyme (Sanofi), including all of the outstanding equity interests of Genzyme Biosurgery ApS (Genzyme Denmark or the Danish subsidiary) (now known as Vericel Denmark ApS), a wholly-owned subsidiary of Sanofi, and a portfolio of patents and patent applications of Sanofi and certain of its subsidiaries for purposes of acquiring the portion of the cell therapy and regenerative medicine business (the CTRM Business), which researches, develops, manufactures, markets and sells the MACI^® and Epicel^® products. The Company is a fully integrated, commercial-stage biopharmaceutical company and currently markets MACI^® and Epicel^® in the U.S. The Company is a leader in advanced cell therapies for the sports medicine and severe burn care markets and a developer of patient-specific expanded cell therapies for use in the treatment of patients with severe diseases and conditions. The Company operates its business primarily in the U.S. in one reportable segment — the research, product development, manufacture and distribution of patient-specific, expanded cellular therapies for use in the treatment of specific diseases. The accompanying condensed consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. As of March 31, 2018, the Company has an accumulated deficit of $368.5 million and had a net loss of $7.7 million during the quarter ended March 31, 2018. The Company had cash of $29.8 million as of March 31, 2018. The Company expects that existing cash together with its term loan and revolving line of credit agreement with Silicon Valley Bank (SVB) and MidCap Financial Services (MidCap) (the SVB-MidCap facility), will be sufficient to support the Company's current operations through at least May 2019. In connection with the SVB-MidCap facility, the Company must remain in compliance with minimum monthly net revenue covenants (determined in accordance with U.S. GAAP), measured on a trailing twelve month basis. SVB and MidCap also have the ability to call debt based on material adverse change clauses which are subjectively determinable and result in a subjective acceleration clause. If the Company's cash requirements exceed its current expectations, or if it is not in compliance with the monthly net revenue covenants or the subjective acceleration clauses are triggered under the SVB-MidCap facility, then SVB may call the debt resulting in the Company immediately needing additional funds. As of March 31, 2018, the Company was in compliance with the minimum revenue covenant set forth in the Third Loan Modification Agreement between the Company, SVB and MidCap. The Company may seek additional funding through debt or equity financings including the at-the-market sales agreement in place with Cowen and Company, LLC. However, the Company may not be able to obtain financing on acceptable terms or at all. The terms of any financing may adversely affect the holdings or the rights of the Company's shareholders. If the Company needs additional funds and is unable to obtain funding on a timely basis, the Company may need to significantly curtail its operations including its research and development programs in an effort to provide sufficient funds to continue its operations, which could adversely affect its business prospects.

Basis of Presentation

3 Months Ended

Mar. 31, 2018

Basis of Presentation [Abstract]

Basis of Presentation

The condensed consolidated financial statements included herein have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC). The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) requires management to make estimates, judgments, and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. The financial statements reflect, in the opinion of management, all adjustments (consisting only of normal, recurring adjustments) necessary to state fairly the financial position and results of operations as of and for the periods indicated. The results of operations for the three months ended March 31, 2018, are not necessarily indicative of the results to be expected for the full year or for any other period. The March 31, 2018 condensed consolidated balance sheet data was derived from the Company’s audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC on March 5, 2018 (Annual Report).

Consolidated Statement of Cash Flows

The following table presents certain supplementary cash flows information for three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
(In thousands)	2018			2017
Supplementary Cash Flows information:
Warrants exchanged for common stock	$	2,000		$	—
Interest paid (net of interest capitalized)	357		226	221
Additions to equipment in process included in accounts payable	401			102

Recent Accounting Pronouncements	3 Months Ended
Recent Accounting Pronouncements	Mar. 31, 2018
Accounting Policies [Abstract]
Recent Accounting Pronouncements	Recent Accounting Pronouncements Revenue Recognition In May 2014, the Financial Accounting Standards Board (FASB) issued authoritative guidance requiring entities to apply a new model for recognizing revenue from contracts with customers and the reporting of principal versus agent considerations. The guidance supersedes the current revenue recognition guidance and requires entities to evaluate their revenue recognition arrangements using a five step model to determine when a customer obtains control of a transferred good or service. The guidance became effective for the Company beginning January 1, 2018. See note 4 for further discussion. Accounting for Leases The FASB issued guidance to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In accordance with the updated guidance, lessees are required to recognize the assets and liabilities arising from operating leases on the balance sheet. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within 2019. The Company is currently reviewing the potential impact of adopting the new guidance.

Revenue

3 Months Ended

Mar. 31, 2018

Revenue from Contract with Customer [Abstract]

Revenue

Revenue Recognition and Net Product Sales

The new revenue standard became effective for the Company on January 1, 2018, and was adopted using the modified retrospective method. Based on the Company's evaluation of all of its product revenue contracts under the new revenue standard there was no cumulative adjustment recorded in the financial statements upon adoption of Accounting Standards Codification 606, Revenue Recognition, (ASC 606) on January 1, 2018. In addition, there is no difference in the accounting for revenue under ASC 606 versus ASC 605 (applicable revenue guidance effective until December 31, 2017) for the three months ended March 31, 2018.

The Company recognized product revenue from sales to a customer (distributor or hospital) following the five step model in ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) the Company satisfies the performance obligation. Under the new revenue standard, the Company recognizes revenue when its customer obtains control of the promised goods, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods. There are no contractual rights of returns, refunds or similar obligations related to MACI, kits, or Epicel as of March 31, 2018; however, in certain limited cases the Company does not bill the customer for the product if a surgery is canceled and there is no impact to revenue recognized.

Currently, for MACI, kits and Epicel there are no variable pricing arrangements, warranties or rebates offered to customers. Primarily all orders are due within 60 days of delivery. Shipping and handling costs are included as a component of revenue. The Company recognizes any commission fees as an expense when incurred due to the short-term nature (less than 1 year) of the time period from order of a product to delivery. These fees are included in selling, general, and administrative expenses. There are no returns, refunds or similar obligations related to MACI, kits, or Epicel as of March 31, 2018.

MACI Kits and Implants

MACI (and previously Carticel) kits are sold directly to hospitals based on contracted rates in the approved contract or sales order. The Company recognizes MACI (or Carticel) kit revenue upon delivery of the biopsy kit at which time the customer (the doctor) is in control of the kit. The kit provides the doctor the ability to biopsy a sampling of cells to provide to the Company that can be used later to manufacture the implant. The ordering of the kit does not obligate the Company to manufacture an implant nor does the receipt of the cell tissue. The customer’s order of an implant is separate from the process of ordering the kit. Therefore, the sale of the kit and any subsequent sale of an implant are distinct contracts and are accounted for separately.

The Company recognizes product revenues from sales of MACI (and previously Carticel) implants upon delivery at which time the customer is in control of the implant and the claim is billable. Prior authorization or confirmation of coverage level by the patient’s private insurance plan, hospital or government payer is a prerequisite to the shipment of product to a patient. The Company's net product revenues from hospitals are based on contracted rates stated in the approved contract or purchase order. The Company’s net product revenues from the third party distributor are primarily based on a contracted rate stated in the approved contract. In certain cases, the Company sells through the distributor but retains the credit and collection risk as well as the risk that a third party payer rejected a claim or reduced the allowed amount payable for an implant. The net revenue for these certain cases are based on expected payments from the insurance provider, hospital or patient. The estimates are based on publicly available rates and past payer precedents. Changes in estimates are recorded through revenue in the period such change occurs. Net product revenues from sales to distributors may include a prompt pay discount.

Epicel

The Company sells Epicel directly to hospitals based on contracted rates stated in the approved contract or purchase order. Similar to MACI, there is no obligation to manufacture skin grafts upon receipt of a skin biopsy and Vericel has no contractual right to receive payment until the product is delivered to the hospital. The Company recognizes product revenues from sales of Epicel upon delivery to the hospital at which time the customer is in control of the skin grafts and the claim is billable to the hospital.

Revenue by Product and Customer

The following table and description below shows the products from which the Company generated its revenue:



	Three Months Ended March 31,
Revenue by product (in thousands)	2018			2017
MACI and Carticel implants and kits
Implants - based on contracted rate	$	10,749		$	297
Implants - subject to third party reimbursement	1,008			6,385
Biopsy kits - direct bill	436			439
Change in estimates related to prior periods	(138		)	(2,114		)
Epicel
Direct bill (hospital)	5,972			4,354
Total revenue	$	18,027		$	9,361

Revenue Recognition for License Grants, Milestone and Royalty Payments

The Company recognizes other revenue from contracts with customers related to license grants, milestone related payments and royalty based payments by also following the five step model described above.

Upon adoption of ASC 606, the Company reassessed the accounting for its license agreement with Innovative Cellular Therapeutics CO., LTD. (ICT) discussed in note 15. The Company identified its performance obligations under the agreement which include the license, a training obligation, and supply of certain raw materials for technology transfer. Based on its assessment of this agreement under the new revenue standard the Company determined that the license is distinct and provides ICT with the right to use the Company's technology and accordingly revenue should be recognized at the point in time at which the Company delivered the license (December 2017). This evaluation was based on 1) the rights provided to ICT under the license, including the ability to sublicense 2) the nature of the technology (primarily rights to technology already commercially approved in the US) and 3) ICT's ability to benefit from the license on its own including using its own existing resources as a manufacturer of autologous cell therapies. The transaction price was determined to be $1.2 million. No milestones or royalties are included in the transaction price as the criteria for including these variable payments have not yet been met. The Company assessed the allocation of arrangement consideration noting no differences in allocation from that determined under ASC 605. The license was delivered in December 2017 and revenue of $1.2 million was recorded in 2017 under the then applicable revenue accounting standard ASC 605. Based upon the Company's evaluation under ASC 606 there was no change in amount or timing of revenue recognized for the agreement and therefore no cumulative change adjustment was recorded upon adoption of the new revenue standard on January 1, 2018. The Company’s remaining performance obligations under the ICT license agreement consist of a training obligation related to technology transfer, and supply of certain raw materials for technology transfer.

The ICT license agreement provides for future milestone payments due to the Company upon the achievement of certain developmental and commercial events. The Company evaluates these milestones under the new revenue recognition standard at contract inception and at each reporting period date. Based on the Company’s evaluations to date, the Company has not included any of the future milestones in its determination of the transaction price as it is not yet probable that a significant reversal of revenue would not occur if the milestones were to be recognized. This evaluation was based on 1) the pace and eventual achievement of the milestones are largely dependent on ICT’s performance of its contractual obligations and the Company has no prior experience to determine the likelihood of ICT performing those obligations, and 2) the transfer of the funds for each of the milestone payments by ICT to the Company, if achieved, is subject to approval by the State Administration of Foreign Exchange of the People's Republic of China. The Company does not anticipate receiving any milestone payments in 2018 or in the near-term. Furthermore, there can be no assurance that the Company will receive any such milestone or receive any such transfer of funds from ICT ever.

The ICT license agreement contains future sales-based royalties to the Company in the low-to-mid double digits. These royalties meet the exception for sales-based or usage-based royalties because they predominantly relate to the license and will be recognized when and if the subsequent sales occur. However, there can be no assurance that the Company will receive any such royalties or receive any such transfer of funds from ICT ever.

Concentration of Credit Risk

From July 2016 through June 2017, the Company utilized a direct sales model and contracted with Dohmen Life Science Services, LLC (DLSS) to provide administrative services associated with case management and reimbursement support and to provide billing and collection services for MACI. The Company also utilized Vital Care, Inc. (Vital Care) to provide similar billing and collection services for a subset of insurance payers and patients. In the second quarter of 2017, the Company and Dohmen Life Sciences Services, LLC (DLSS) mutually terminated their agreement effective June 30, 2017. On May 15, 2017, the Company entered into a distribution agreement with Orsini Pharmaceutical Services, Inc. as a specialty pharmacy distributor of MACI and has engaged a third party services provider to provide the patient support program previously provided by DLSS and to manage patient cases for MACI. The Company’s receivables risk is now more concentrated, and the concentration of credit risk also shifted for the Company. The Company sells Epicel directly to hospitals and not through a distributor. The Company's receivables are less concentrated than those for MACI.

The Company's total revenue and accounts receivable balances were comprised of the following concentrations greater than 10% from its largest customers of Carticel, MACI and Epicel, as follows:



	Revenue Concentration				Accounts Receivable Concentration
	Three months ended March 31,				March 31,		December 31,
	2018		2017		2018		2017
MACI and Carticel¹	43	%	—	%	41	%	46	%
Epicel	14	%	16	%	—	%	—	%

¹ Removed from market at the end of the second quarter of 2017

Selected Balance Sheet Components

3 Months Ended

Mar. 31, 2018

Balance Sheet Related Disclosures [Abstract]

Selected Balance Sheet Components

Inventory as of March 31, 2018 and December 31, 2017:



(In thousands)	March 31, 2018		December 31, 2017
Raw materials	$	3,537	$	3,532
Work-in-process	342		226
Finished goods	26		35
Inventory	$	3,905	$	3,793

Property and equipment, net as of March 31, 2018 and December 31, 2017:



(In thousands)	March 31, 2018			December 31, 2017
Machinery and equipment	$	1,249		$	1,249
Furniture, fixtures and office equipment	872			872
Computer equipment and software	3,584			3,536
Leasehold improvements	4,255			4,213
Construction in process	1,295			822
Total property and equipment, gross	11,255			10,692
Less: Accumulated depreciation	(7,048		)	(6,621		)
	$	4,207		$	4,071

Depreciation expense for both the three months ended March 31, 2018 and 2017 was $0.4 million.

Accrued expenses as of March 31, 2018 and December 31, 2017:



(In thousands)	March 31, 2018		December 31, 2017
Bonus related compensation	$	752	$	2,693
Employee related accruals	2,577		2,389
Clinical trial related accruals	678		491
	$	4,007	$	5,573

Stock Purchase Warrants

3 Months Ended

Mar. 31, 2018

Warrants and Rights Note Disclosure [Abstract]

Stock Purchase Warrants

The Company has historically issued warrants to purchase shares of the Company’s common stock in connection with certain of its common stock offerings and in September 2016 and December 2017 the Company issued warrants in connection with the amended debt agreement discussed in note 7 (collectively the Debt Warrants). The warrants issued in August 2013 (August 2013 Warrants) include anti-dilution price protection provisions that require cash settlement of the warrants and accordingly require the warrants to be recorded as liabilities of the Company at the estimated fair value at the balance sheet date, with changes in estimated fair value recorded as income or expense (non-cash) in the Company’s statement of operations in each subsequent period. The following table describes the outstanding warrants as of March 31, 2018:



	August 2013 Warrants	September 2016 Warrants	December 2017 Warrants
Exercise price	$4.80	$2.25	$4.27
Expiration date	August 16, 2018	September 9, 2022	December 6, 2023
Total shares issuable on exercise	365,150	117,074	53,902

During the three months ended March 31, 2018, the Company issued 359,800 shares of common stock upon the exercise of August 2013 Warrants with an exercise price of $4.80 per share for proceeds of $1.7 million.

On December 7, 2017, the Company issued 53,902 warrants to two holders in conjunction with the amended debt agreement described in note 7 (December 2017 Warrants). The initial valuation of the December 2017 Warrants was partially recorded as debt issuance costs and is being amortized over the remaining life of the loan agreement to interest expense and a portion was expensed as a loss on extinguishment of debt. The December 2017 Warrants are treated as equity instruments recorded at fair value with no subsequent remeasurement. Pursuant to the December 2017 Warrants, the holders may exercise their warrants for an aggregate of 53,902 shares of the Company’s common stock.

The fair value of the warrants described in the table above is measured using the Black-Scholes valuation model. Inherent in the Black-Scholes valuation model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. See further detail in note 8 of the condensed consolidated financial statements.

The assumptions used by the Company are summarized in the following tables:



August 2013 Warrants	March 31, 2018			December 31, 2017
Closing stock price	$	9.95		$	5.45
Expected dividend rate	—		%	—		%
Expected stock price volatility	75.4		%	63.7		%
Risk-free interest rate	1.95		%	1.65		%
Expected life (years)	0.38			0.62



September 2016 Warrants	September 9, 2016
Closing stock price	$	2.20
Expected dividend rate	—		%
Expected stock price volatility	89.8		%
Risk-free interest rate	1.4		%
Expected life (years)	6.00



December 2017 Warrants	December 6, 2017
Closing stock price	5.10
Expected dividend rate	—	%
Expected stock price volatility	86.4	%
Risk-free interest rate	2.2	%
Expected life (years)	6.00

Debt

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Debt

On December 6, 2017, the Company replaced its existing term loan and revolving line of credit agreement with the SVB-MidCap facility which provides access to up to $25.0 million. The updated debt financing consists of a $15.0 million term loan which was drawn at the closing and up to $10.0 million of a revolving line of credit. The term loans are interest only (indexed to Wall Street Journal (WSJ) Prime plus 4.25%) until December 1, 2018 followed by 36 equal monthly payments of principal plus interest maturing December 6, 2021. Under the terms of the agreement, the revolving line of credit is limited to a borrowing base calculated using eligible accounts receivable and maturing December 6, 2021 with an interest rate indexed to WSJ Prime plus 1.25%. The Company is subject to various financial and nonfinancial covenants including but not limited to a monthly minimum net revenue covenant (determined in accordance with GAAP), measured on a trailing twelve month basis. SVB and MidCap have the ability to call debt based on material adverse change clauses which are subjectively determinable and result in a subjective acceleration clause. SVB and MidCap have a shared first priority perfected security interest in all assets of the Company other than intellectual property

As of March 31, 2018, there was an outstanding balance of $15.0 million under the term loan and $2.5 million under the revolving line of credit (net of total deferred costs of $0.3 million). The weighted average interest rate on the outstanding term and revolving credit loans as of March 31, 2018 was 8.6% in addition to a final payment of 3.6% of the term loan due upon maturity. The available capacity under the revolving line of credit as of as of March 31, 2018 was $3.8 million. The Company was, and continues to be, in compliance with its financial and non-financial debt covenants.

Annual principal payments on debt at March 31, 2018, are as follows:



(In thousands)
Years Ending December 31,	Amount
2018	$	417
2019	5,000
2020	5,000
2021	7,083
2022	—
Thereafter	—
	$	17,500

Stock-based Compensation

3 Months Ended

Mar. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation

Stock Option and Equity Incentive Plans

The Company has historically had various stock incentive plans and agreements that provide for the issuance of nonqualified and incentive stock options as well as other equity awards. Such awards may be granted by the Company’s Board of Directors to certain of the Company’s employees, directors and consultants. Options granted under these plans expire no later than ten years from the date of grant, and other than those granted to non-employee directors, generally become exercisable over a four year period, under a graded-vesting methodology, following the date of grant. The Company generally issues new shares upon the exercise of stock options.

The 2017 Omnibus Incentive Plan (2017 Plan) was approved by the Company's shareholders on May 3, 2017 at the annual meeting of shareholders. The 2017 Plan provides incentives through the grant of stock options, stock appreciation rights, restricted stock awards and restricted stock units. The exercise price of stock options granted under the 2017 Plan shall not be less than the fair market value of the Company’s common stock on the date of grant. The 2017 Plan replaced the 1992 Stock Option Plan, the 2001 Stock Option Plan, the Amended and Restated 2004 Equity Incentive Plan and the 2009 Second Amended and Restated Omnibus Incentive Plan (Prior Plans), and no new awards have been granted under the Prior Plans. However, the expiration or forfeiture of options previously granted under the Prior Plans will increase the number of shares available for issuance under the 2017 Plan.

As of March 31, 2018, there were 3,081,651 shares available for future grant under the 2017 Plan.

Employee Stock Purchase Plan

Employees are able to purchase stock under the Vericel Corporation Employee Stock Purchase Plan (ESPP). The ESPP allows for the issuance of an aggregate of 1,000,000 shares of common stock of which 461,434 have been granted since the inception of the plan in 2015. Participation in this plan is available to substantially all employees. The ESPP is a compensatory plan accounted for under the expense recognition provisions of the share-based payment accounting standards. Compensation expense is recorded based on the fair market value of the purchase options at the grant date, which corresponds to the first day of each purchase period and is amortized over the purchase period. On April 3, 2018, employees purchased 31,923 shares resulting in proceeds from the sale of common stock of $0.1 million under the ESPP.

Service-Based Stock Options

During the three months ended March 31, 2018, the Company granted 1,363,310 service-based options to purchase common stock. The options have an exercise price equal to the fair market value per share of common stock on the grant date, generally vest over four years (other than non-employee options which vest over one year), and have a term of ten years. The Company issues new shares upon the exercise of stock options. The weighted average grant-date fair value of service-based options granted under the Option Plan during the three month periods ended March 31, 2018 and 2017 was $6.63 and $2.00, respectively.

The net compensation costs recorded for the service-based stock options related to employees and directors (including the impact of forfeitures) for the three month periods ended March 31, 2018 and 2017 were $1.3 million and $0.5 million, respectively.

Stock Compensation Expense

Non-cash stock-based compensation expense (employee stock purchase plan and service-based stock options) is summarized in the following table:



	Three Months Ended March 31,
(In thousands)	2018		2017
Cost of goods sold	$	142	$	91
Research and development	475		58
Selling, general and administrative	725		353
Total non-cash stock-based compensation expense	$	1,342	$	502

The fair value of each service-based stock option grant for the reported periods is estimated on the date of the grant using the Black-Scholes option-pricing model using the weighted average assumptions noted in the following table.



	Three Months Ended March 31,
Service-Based Stock Options	2018		2017
Expected dividend rate	—	%	—	%
Expected stock price volatility	82.3 – 84.4%		81.3 – 88.2%
Risk-free interest rate	2.4 – 2.8%		2 – 2.3%
Expected life (years)	6.1 – 6.3		6.1 – 6.3

Fair Value Measurements

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

The Company’s fair value measurements are classified and disclosed in one of the following three categories:


•	Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;


•	Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and


•	Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

There was no movement between level 1 to level 2 or between level 2 to level 3. The following table summarizes the valuation of the Company’s financial instruments that are measured at fair value on a recurring basis:



	March 31, 2018								December 31, 2017
			Fair value measurement category								Fair value measurement category
(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Liabilities:
Warrant liabilities	$	1,921	$	—	$	1,921	$	—	$	1,014	$	—	$	1,014	$	—

The following table summarizes the change in the estimated fair value of the Company’s outstanding warrant liabilities as of March 31, 2018:



Warrant Liabilities (In thousands)
Balance at December 31, 2017	$	1,014
Increase in fair value	2,907
Warrant exercise	(2,000		)
Balance at March 31, 2018	$	1,921

The increase in fair value of warrants is due to the increase in stock price which has a direct impact to the Black-Scholes valuation model discussed in note 6.

Revolving and Term Loan Credit Agreements

At each of March 31, 2018 and December 31, 2017, the Company had a total of $17.2 million net debt outstanding under our revolving and term loan credit agreements, which are variable rate loans. The fair value of these loans approximates book value based on the borrowing rates currently available for variable rate loans obtained from third party lending institutions. These fair values represent Level 2 under the three-tier hierarchy described above.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Shareholders' Equity	3 Months Ended
Shareholders' Equity	Mar. 31, 2018
Stockholders' Equity Note [Abstract]
Shareholders' Equity	Shareholders' Equity At-the-Market Sales Agreement On October 10, 2016, the Company entered into its at-the-market sales agreement with Cowen (ATM Agreement), pursuant to which the Company may sell shares of its common stock through Cowen, as sales agent, in registered transactions from the Company's shelf registration statement filed in June 2015, for aggregate proceeds of up to $25.0 million. Shares of common stock sold under the ATM are to be sold at market prices. The Company will pay up to 3% of the gross proceeds to Cowen as a commission. A total of 2,340,879 shares of common stock have been sold under the ATM Agreement of which 1,983,023 were sold in 2017 for proceeds of $7.2 million (net of $0.3 million in commission and issuance costs) and as of March 31, 2018 had remaining capacity of approximately $16.7 million. There were no shares sold under the ATM Agreement during the three months ended March 31, 2018.

Net Loss Per Common Share

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Net Loss Per Common Share

The following reflects the net loss attributable to common shareholders and share data used in the basic and diluted earnings per share computations using the two class method:



	Three months ended March 31,
(Amounts in thousands except per share amounts)	2018			2017
Numerator:
Net loss	$	(7,659	)	$	(9,778	)
Denominator for basic and diluted EPS:
Weighted-average common shares outstanding	36,140			31,896
Net loss per share attributable to common shareholders (basic and diluted)	$	(0.21	)	$	(0.31	)

Common equivalent shares are not included in the diluted per share calculation where the effect of their inclusion would be anti-dilutive. The aggregate number of common equivalent shares (related to options, warrants and preferred stock) that have been excluded from the computations of diluted net loss per common share at March 31, 2018 and 2017 were $6.2 million and $5.0 million, respectively.

Commitments and Contingencies

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

The Company leases facilities in Ann Arbor, Michigan and Cambridge, Massachusetts. In March 2016, the Company amended its current lease in Cambridge to, among other provisions, extend the term until February 2022. Under the amendment, the landlord will contribute approximately $2.0 million toward the cost of tenant improvements. The contribution toward the cost of tenant improvements is recorded as deferred rent on the Company's condensed consolidated balance sheet and is amortized to our condensed consolidated statement of operations as reductions to rent expense over the lease term. As of March 31, 2018, the Company has recorded $1.7 million of leasehold improvements funded by the tenant improvement allowance.

In addition to the property leases, the Company also leases an offsite warehouse, various vehicles and computer equipment. The Company's purchase commitments consist of minimum purchase amounts of materials used in the Company's cell manufacturing process to manufacture its marketed cell therapy products.

As of March 31, 2018, future minimum payments related to leases and other contractual obligations are as follows:



(In thousands)	Total		2018		2019		2020		2021		2022		More than 5 years
Operating leases	$	18,444	$	3,679	$	4,710	$	4,699	$	4,595	$	761	—
Purchase commitments	3,244		462		718		688		688		688		—
Capital leases	101		63		14		10		10		4		—
Debt and Interest Related Payments	18,413		1,431		6,068		5,620		5,294		$	—	$	—
Total	$	40,202	$	5,635	$	11,510	$	11,017	$	10,587	$	1,453	$	—

Rent expense for the three months ended March 31, 2018 and 2017 was $1.5 million and $1.3 million, respectively.

License Agreement

On May 10, 2017, the Company announced that it has entered into a License Agreement (License Agreement) with Innovative Cellular Therapeutics CO., LTD. (ICT), a leading cell therapy company and developer of CAR-T cell therapy for cancer treatment, for the development and distribution of the Company's product portfolio in Greater China, South Korea, Singapore, and other countries in Asia. ICT acquired an exclusive license to certain patent rights, know-how and intellectual property relating to Carticel, MACI, ixmyelocel-T, and Epicel. The remaining variable consideration, which is related to the development and commercialization milestones and royalty based payments are monitored for completion and related revenue recognition as discussed in note 4.

Recent Accounting Pronouncements (Policies)	3 Months Ended
Recent Accounting Pronouncements (Policies)	Mar. 31, 2018
Accounting Policies [Abstract]
Recent Accounting Pronouncements	Recent Accounting Pronouncements Revenue Recognition In May 2014, the Financial Accounting Standards Board (FASB) issued authoritative guidance requiring entities to apply a new model for recognizing revenue from contracts with customers and the reporting of principal versus agent considerations. The guidance supersedes the current revenue recognition guidance and requires entities to evaluate their revenue recognition arrangements using a five step model to determine when a customer obtains control of a transferred good or service. The guidance became effective for the Company beginning January 1, 2018. See note 4 for further discussion. Accounting for Leases The FASB issued guidance to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In accordance with the updated guidance, lessees are required to recognize the assets and liabilities arising from operating leases on the balance sheet. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within 2019. The Company is currently reviewing the potential impact of adopting the new guidance.
Revenue Recognition and Net Product Sales	Revenue Recognition and Net Product Sales The new revenue standard became effective for the Company on January 1, 2018, and was adopted using the modified retrospective method. Based on the Company's evaluation of all of its product revenue contracts under the new revenue standard there was no cumulative adjustment recorded in the financial statements upon adoption of Accounting Standards Codification 606, Revenue Recognition, (ASC 606) on January 1, 2018. In addition, there is no difference in the accounting for revenue under ASC 606 versus ASC 605 (applicable revenue guidance effective until December 31, 2017) for the three months ended March 31, 2018. The Company recognized product revenue from sales to a customer (distributor or hospital) following the five step model in ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) the Company satisfies the performance obligation. Under the new revenue standard, the Company recognizes revenue when its customer obtains control of the promised goods, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods. There are no contractual rights of returns, refunds or similar obligations related to MACI, kits, or Epicel as of March 31, 2018; however, in certain limited cases the Company does not bill the customer for the product if a surgery is canceled and there is no impact to revenue recognized. Currently, for MACI, kits and Epicel there are no variable pricing arrangements, warranties or rebates offered to customers. Primarily all orders are due within 60 days of delivery. Shipping and handling costs are included as a component of revenue. The Company recognizes any commission fees as an expense when incurred due to the short-term nature (less than 1 year) of the time period from order of a product to delivery. These fees are included in selling, general, and administrative expenses. There are no returns, refunds or similar obligations related to MACI, kits, or Epicel as of March 31, 2018. MACI Kits and Implants MACI (and previously Carticel) kits are sold directly to hospitals based on contracted rates in the approved contract or sales order. The Company recognizes MACI (or Carticel) kit revenue upon delivery of the biopsy kit at which time the customer (the doctor) is in control of the kit. The kit provides the doctor the ability to biopsy a sampling of cells to provide to the Company that can be used later to manufacture the implant. The ordering of the kit does not obligate the Company to manufacture an implant nor does the receipt of the cell tissue. The customer’s order of an implant is separate from the process of ordering the kit. Therefore, the sale of the kit and any subsequent sale of an implant are distinct contracts and are accounted for separately. The Company recognizes product revenues from sales of MACI (and previously Carticel) implants upon delivery at which time the customer is in control of the implant and the claim is billable. Prior authorization or confirmation of coverage level by the patient’s private insurance plan, hospital or government payer is a prerequisite to the shipment of product to a patient. The Company's net product revenues from hospitals are based on contracted rates stated in the approved contract or purchase order. The Company’s net product revenues from the third party distributor are primarily based on a contracted rate stated in the approved contract. In certain cases, the Company sells through the distributor but retains the credit and collection risk as well as the risk that a third party payer rejected a claim or reduced the allowed amount payable for an implant. The net revenue for these certain cases are based on expected payments from the insurance provider, hospital or patient. The estimates are based on publicly available rates and past payer precedents. Changes in estimates are recorded through revenue in the period such change occurs. Net product revenues from sales to distributors may include a prompt pay discount. Epicel The Company sells Epicel directly to hospitals based on contracted rates stated in the approved contract or purchase order. Similar to MACI, there is no obligation to manufacture skin grafts upon receipt of a skin biopsy and Vericel has no contractual right to receive payment until the product is delivered to the hospital. The Company recognizes product revenues from sales of Epicel upon delivery to the hospital at which time the customer is in control of the skin grafts and the claim is billable to the hospital.
Revenue Recognition for License Grants, Milestone and Royalty Payments	Revenue Recognition for License Grants, Milestone and Royalty Payments The Company recognizes other revenue from contracts with customers related to license grants, milestone related payments and royalty based payments by also following the five step model described above. Upon adoption of ASC 606, the Company reassessed the accounting for its license agreement with Innovative Cellular Therapeutics CO., LTD. (ICT) discussed in note 15. The Company identified its performance obligations under the agreement which include the license, a training obligation, and supply of certain raw materials for technology transfer. Based on its assessment of this agreement under the new revenue standard the Company determined that the license is distinct and provides ICT with the right to use the Company's technology and accordingly revenue should be recognized at the point in time at which the Company delivered the license (December 2017). This evaluation was based on 1) the rights provided to ICT under the license, including the ability to sublicense 2) the nature of the technology (primarily rights to technology already commercially approved in the US) and 3) ICT's ability to benefit from the license on its own including using its own existing resources as a manufacturer of autologous cell therapies. The transaction price was determined to be $1.2 million. No milestones or royalties are included in the transaction price as the criteria for including these variable payments have not yet been met. The Company assessed the allocation of arrangement consideration noting no differences in allocation from that determined under ASC 605. The license was delivered in December 2017 and revenue of $1.2 million was recorded in 2017 under the then applicable revenue accounting standard ASC 605. Based upon the Company's evaluation under ASC 606 there was no change in amount or timing of revenue recognized for the agreement and therefore no cumulative change adjustment was recorded upon adoption of the new revenue standard on January 1, 2018. The Company’s remaining performance obligations under the ICT license agreement consist of a training obligation related to technology transfer, and supply of certain raw materials for technology transfer. The ICT license agreement provides for future milestone payments due to the Company upon the achievement of certain developmental and commercial events. The Company evaluates these milestones under the new revenue recognition standard at contract inception and at each reporting period date. Based on the Company’s evaluations to date, the Company has not included any of the future milestones in its determination of the transaction price as it is not yet probable that a significant reversal of revenue would not occur if the milestones were to be recognized. This evaluation was based on 1) the pace and eventual achievement of the milestones are largely dependent on ICT’s performance of its contractual obligations and the Company has no prior experience to determine the likelihood of ICT performing those obligations, and 2) the transfer of the funds for each of the milestone payments by ICT to the Company, if achieved, is subject to approval by the State Administration of Foreign Exchange of the People's Republic of China. The Company does not anticipate receiving any milestone payments in 2018 or in the near-term. Furthermore, there can be no assurance that the Company will receive any such milestone or receive any such transfer of funds from ICT ever. The ICT license agreement contains future sales-based royalties to the Company in the low-to-mid double digits. These royalties meet the exception for sales-based or usage-based royalties because they predominantly relate to the license and will be recognized when and if the subsequent sales occur. However, there can be no assurance that the Company will receive any such royalties or receive any such transfer of funds from ICT ever.

Basis of Presentation (Tables)

3 Months Ended

Mar. 31, 2018

Basis of Presentation [Abstract]

Schedule of cash flow, supplemental disclosures

The following table presents certain supplementary cash flows information for three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
(In thousands)	2018			2017
Supplementary Cash Flows information:
Warrants exchanged for common stock	$	2,000		$	—
Interest paid (net of interest capitalized)	357		226	221
Additions to equipment in process included in accounts payable	401			102

Revenue (Tables)

3 Months Ended

Mar. 31, 2018

Revenue from Contract with Customer [Abstract]

Schedule of revenue by product and customer

The following table and description below shows the products from which the Company generated its revenue:



	Three Months Ended March 31,
Revenue by product (in thousands)	2018			2017
MACI and Carticel implants and kits
Implants - based on contracted rate	$	10,749		$	297
Implants - subject to third party reimbursement	1,008			6,385
Biopsy kits - direct bill	436			439
Change in estimates related to prior periods	(138		)	(2,114		)
Epicel
Direct bill (hospital)	5,972			4,354
Total revenue	$	18,027		$	9,361

Schedules of concentration of risk

The Company's total revenue and accounts receivable balances were comprised of the following concentrations greater than 10% from its largest customers of Carticel, MACI and Epicel, as follows:



	Revenue Concentration				Accounts Receivable Concentration
	Three months ended March 31,				March 31,		December 31,
	2018		2017		2018		2017
MACI and Carticel¹	43	%	—	%	41	%	46	%
Epicel	14	%	16	%	—	%	—	%

¹ Removed from market at the end of the second quarter of 2017

Selected Balance Sheet Components (Tables)

3 Months Ended

Mar. 31, 2018

Balance Sheet Related Disclosures [Abstract]

Schedule of inventory

Inventory as of March 31, 2018 and December 31, 2017:



(In thousands)	March 31, 2018		December 31, 2017
Raw materials	$	3,537	$	3,532
Work-in-process	342		226
Finished goods	26		35
Inventory	$	3,905	$	3,793

Schedule of property and equipment, net

Property and equipment, net as of March 31, 2018 and December 31, 2017:



(In thousands)	March 31, 2018			December 31, 2017
Machinery and equipment	$	1,249		$	1,249
Furniture, fixtures and office equipment	872			872
Computer equipment and software	3,584			3,536
Leasehold improvements	4,255			4,213
Construction in process	1,295			822
Total property and equipment, gross	11,255			10,692
Less: Accumulated depreciation	(7,048		)	(6,621		)
	$	4,207		$	4,071

Schedule of accounts payable and accrued expenses

Accrued expenses as of March 31, 2018 and December 31, 2017:



(In thousands)	March 31, 2018		December 31, 2017
Bonus related compensation	$	752	$	2,693
Employee related accruals	2,577		2,389
Clinical trial related accruals	678		491
	$	4,007	$	5,573

Stock Purchase Warrants (Tables)

3 Months Ended

Mar. 31, 2018

Warrants and Rights Note Disclosure [Abstract]

Schedule of warrants outstanding

The following table describes the outstanding warrants as of March 31, 2018:



	August 2013 Warrants	September 2016 Warrants	December 2017 Warrants
Exercise price	$4.80	$2.25	$4.27
Expiration date	August 16, 2018	September 9, 2022	December 6, 2023
Total shares issuable on exercise	365,150	117,074	53,902

Schedule of assumptions used in calculating estimated fair value of warrants

The assumptions used by the Company are summarized in the following tables:



August 2013 Warrants	March 31, 2018			December 31, 2017
Closing stock price	$	9.95		$	5.45
Expected dividend rate	—		%	—		%
Expected stock price volatility	75.4		%	63.7		%
Risk-free interest rate	1.95		%	1.65		%
Expected life (years)	0.38			0.62



September 2016 Warrants	September 9, 2016
Closing stock price	$	2.20
Expected dividend rate	—		%
Expected stock price volatility	89.8		%
Risk-free interest rate	1.4		%
Expected life (years)	6.00



December 2017 Warrants	December 6, 2017
Closing stock price	5.10
Expected dividend rate	—	%
Expected stock price volatility	86.4	%
Risk-free interest rate	2.2	%
Expected life (years)	6.00

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

+ References + Details

Debt (Tables)

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Schedule of annual principal payments on debt

Annual principal payments on debt at March 31, 2018, are as follows:



(In thousands)
Years Ending December 31,	Amount
2018	$	417
2019	5,000
2020	5,000
2021	7,083
2022	—
Thereafter	—
	$	17,500

Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of non-cash stock-based compensation expense

Non-cash stock-based compensation expense (employee stock purchase plan and service-based stock options) is summarized in the following table:



	Three Months Ended March 31,
(In thousands)	2018		2017
Cost of goods sold	$	142	$	91
Research and development	475		58
Selling, general and administrative	725		353
Total non-cash stock-based compensation expense	$	1,342	$	502

Schedule of weighted average assumptions used to estimate fair value of each service-based stock option grant



	Three Months Ended March 31,
Service-Based Stock Options	2018		2017
Expected dividend rate	—	%	—	%
Expected stock price volatility	82.3 – 84.4%		81.3 – 88.2%
Risk-free interest rate	2.4 – 2.8%		2 – 2.3%
Expected life (years)	6.1 – 6.3		6.1 – 6.3

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Summary of valuation of the Company's investments and financial instruments that are measured at fair value on a recurring basis

The following table summarizes the valuation of the Company’s financial instruments that are measured at fair value on a recurring basis:



	March 31, 2018								December 31, 2017
			Fair value measurement category								Fair value measurement category
(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Liabilities:
Warrant liabilities	$	1,921	$	—	$	1,921	$	—	$	1,014	$	—	$	1,014	$	—

Summary of change in estimated fair value of warrant liabilities

The following table summarizes the change in the estimated fair value of the Company’s outstanding warrant liabilities as of March 31, 2018:



Warrant Liabilities (In thousands)
Balance at December 31, 2017	$	1,014
Increase in fair value	2,907
Warrant exercise	(2,000		)
Balance at March 31, 2018	$	1,921

Net Loss Per Common Share (Tables)

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Schedule of net loss attributable to common shareholders and share data used in the basic and diluted earnings per share computations using the two class method

The following reflects the net loss attributable to common shareholders and share data used in the basic and diluted earnings per share computations using the two class method:



	Three months ended March 31,
(Amounts in thousands except per share amounts)	2018			2017
Numerator:
Net loss	$	(7,659	)	$	(9,778	)
Denominator for basic and diluted EPS:
Weighted-average common shares outstanding	36,140			31,896
Net loss per share attributable to common shareholders (basic and diluted)	$	(0.21	)	$	(0.31	)

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Schedule of future minimum payments related to leases

As of March 31, 2018, future minimum payments related to leases and other contractual obligations are as follows:



(In thousands)	Total		2018		2019		2020		2021		2022		More than 5 years
Operating leases	$	18,444	$	3,679	$	4,710	$	4,699	$	4,595	$	761	—
Purchase commitments	3,244		462		718		688		688		688		—
Capital leases	101		63		14		10		10		4		—
Debt and Interest Related Payments	18,413		1,431		6,068		5,620		5,294		$	—	$	—
Total	$	40,202	$	5,635	$	11,510	$	11,017	$	10,587	$	1,453	$	—

Organization (Details) $ in Thousands	3 Months Ended
Organization (Details) $ in Thousands	Mar. 31, 2018 USD ($) segment	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable segments \| segment	1
Accumulated deficit	$ 368,536		$ 360,877
Net loss	7,659	$ 9,778
Cash	$ 29,777	$ 19,847	$ 26,862	$ 22,978

Basis of Presentation (Details) - USD ($) $ in Thousands	3 Months Ended
Basis of Presentation (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Mar. 31, 2017
Basis of Presentation [Abstract]
Warrants exchanged for common stock	$ 2,000	$ 0
Interest paid (net of interest capitalized)	357	221
Additions to equipment in process included in accounts payable	$ 401	$ 102

Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
Revenue (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Disaggregation of Revenue [Line Items]
Revenue	$ 18,027	$ 9,361
Accounting Standards Update 2014-09 \| Difference between Revenue Guidance in Effect before and after Topic 606
Disaggregation of Revenue [Line Items]
Revenue	(138)	(2,114)
Implants \| Contracted rate \| Third party distributor
Disaggregation of Revenue [Line Items]
Revenue	10,749	297
Implants \| Estimated payments \| Third party distributor
Disaggregation of Revenue [Line Items]
Revenue	1,008	6,385
Biopsy kits \| Direct bill
Disaggregation of Revenue [Line Items]
Revenue	436	439
Epicel \| Direct bill
Disaggregation of Revenue [Line Items]
Revenue	$ 5,972	$ 4,354
License Grants, Milestone And Royalty Payments \| Innovative Cellular Therapeutics
Disaggregation of Revenue [Line Items]
Revenue			$ 1,200

Revenue - Concentration of Credit Risk (Details) - Customer concentration	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
MACI and Carticel \| Revenue Concentration
CONCENTRATION
Concentration risk	43.00%	0.00%
MACI and Carticel \| Accounts Receivable Concentration
CONCENTRATION
Concentration risk	41.00%	46.00%
Epicel \| Revenue Concentration
CONCENTRATION
Concentration risk	14.00%	16.00%
Epicel \| Accounts Receivable Concentration
CONCENTRATION
Concentration risk	0.00%	0.00%

Selected Balance Sheet Components - Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Inventory:
Raw materials	$ 3,537	$ 3,532
Work-in-process	342	226
Finished goods	26	35
Inventory	$ 3,905	$ 3,793

Selected Balance Sheet Components - Property and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Property and equipment, net:
Total property and equipment, gross	$ 11,255		$ 10,692
Less: Accumulated depreciation	(7,048)		(6,621)
Total, net	4,207		4,071
Depreciation and amortization	400	$ 400
Machinery and equipment
Property and equipment, net:
Total property and equipment, gross	1,249		1,249
Furniture, fixtures and office equipment
Property and equipment, net:
Total property and equipment, gross	872		872
Computer equipment and software
Property and equipment, net:
Total property and equipment, gross	3,584		3,536
Leasehold improvements
Property and equipment, net:
Total property and equipment, gross	4,255		4,213
Construction in process
Property and equipment, net:
Total property and equipment, gross	$ 1,295		$ 822

Selected Balance Sheet Components - Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Accounts payable and accrued expenses:
Bonus related compensation	$ 752	$ 2,693
Employee related accruals	2,577	2,389
Clinical trial related accruals	678	491
Total	$ 4,007	$ 5,573

Stock Purchase Warrants (Details) $ / shares in Units, $ in Millions			3 Months Ended	12 Months Ended
	Dec. 06, 2017 $ / shares	Sep. 09, 2016 $ / shares shares	Mar. 31, 2018 USD ($) $ / shares shares	Dec. 31, 2017 $ / shares	Dec. 07, 2017 holder $ / shares shares	Aug. 16, 2013 $ / shares shares
August 2013 Warrants
Stock Purchase Warrants
Exercise price (in dollars per share)						$ 4.80
Total shares issuable on exercise (in shares) \| shares						365,150
Shares issued upon the exercise of warrants, value \| $			$ 1.7
Assumptions used in calculating the estimated fair value of the warrants
Closing stock price (in dollars per share)			$ 9.95	$ 5.45
Expected dividend rate			0.00%	0.00%
Expected stock price volatility			75.40%	63.70%
Risk-free interest rate			2.00%	1.70%
Expected life			4 months 17 days	7 months 13 days
August 2013 Warrants \| Common Stock
Stock Purchase Warrants
Shares issued upon the exercise of warrants (in shares) \| shares			359,800
September 2016 Warrants
Stock Purchase Warrants
Exercise price (in dollars per share)		$ 2.25
Total shares issuable on exercise (in shares) \| shares		117,074
Assumptions used in calculating the estimated fair value of the warrants
Closing stock price (in dollars per share)		$ 2.2
Expected dividend rate		0.00%
Expected stock price volatility		89.80%
Risk-free interest rate		1.40%
Expected life		6 years
December 2017 Warrants
Stock Purchase Warrants
Exercise price (in dollars per share)					$ 4.27
Total shares issuable on exercise (in shares) \| shares					53,902
Number of warrant holders \| holder					2
Assumptions used in calculating the estimated fair value of the warrants
Closing stock price (in dollars per share)	$ 5.10
Expected dividend rate	0.00%
Expected stock price volatility	86.40%
Risk-free interest rate	2.20%
Expected life	6 years

Debt (Details)	Dec. 06, 2017 USD ($) installment	Mar. 31, 2018 USD ($)	Dec. 31, 2017
Silicon Valley Bank And MidCap Financial Services
Debt Instrument [Line Items]
Interest rate, stated percentage, final payment due upon maturity			3.60%
Silicon Valley Bank And MidCap Financial Services \| Debt Financing Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity (up to)	$ 25,000,000.0
Silicon Valley Bank And MidCap Financial Services \| Debt Financing Agreement \| Line of Credit \| Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	10,000,000.0
Silicon Valley Bank And MidCap Financial Services \| Term Loan
Debt Instrument [Line Items]
Debt instrument, face amount	$ 15,000,000.0
Silicon Valley Bank And MidCap Financial Services \| Term Loan \| Prime Rate
Debt Instrument [Line Items]
Basis spread on variable rate	4.25%
Number of installments \| installment	36
Silicon Valley Bank And MidCap Financial Services \| Term Loan \| Prime Rate \| Minimum
Debt Instrument [Line Items]
Basis spread on variable rate	1.25%
Silicon Valley Bank
Debt Instrument [Line Items]
Weighted average interest rate		8.60%
Silicon Valley Bank \| Debt Financing Agreement \| Line of Credit \| Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit, current		$ 2,500,000
Deferred costs		300,000
Remaining borrowing capacity		3,800,000
Silicon Valley Bank \| Term Loan
Debt Instrument [Line Items]
Short-term bank loans and notes payable		$ 15,000,000

Debt - Principal Repayments (Details) - Line of Credit - Debt Financing Agreement - Silicon Valley Bank And MidCap Financial Services - Revolving Credit Facility $ in Thousands	Mar. 31, 2018 USD ($)
Line of Credit Facility [Line Items]
2018	$ 417
2019	5,000
2020	5,000
2021	7,083
2022	0
Thereafter	0
Total principal payments on debt	$ 17,500

Stock-based Compensation (Details) - USD ($)		3 Months Ended		12 Months Ended	39 Months Ended
Stock-based Compensation (Details) - USD ($)	Apr. 03, 2018	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Mar. 31, 2018
Stock-Based Compensation
Stock-based compensation expense		$ 1,342,000	$ 502,000
Subsequent Event
Stock-Based Compensation
Employee Stock Purchase Plan, stock issued during period (in shares)	100,000
2004, 2001, 1992, and 2009 Plans
Stock-Based Compensation
Number of shares available for grant (in shares)		0			0
2017 Plan
Stock-Based Compensation
Number of shares available for grant (in shares)		3,081,651			3,081,651
Service-Based Stock Options
Stock-Based Compensation
Expiration period		10 years
Vesting period		4 years		4 years
Granted (in shares)		1,363,310
Grant date fair value (in dollars per share)		$ 6.63	$ 2.00
Stock-based compensation expense		$ 1,300,000	$ 500,000
Weighted average assumptions used to estimate fair value of each service-based stock option grant
Expected dividend rate		0.00%	0.00%
Service-Based Stock Options \| Maximum
Stock-Based Compensation
Expiration period				10 years
Weighted average assumptions used to estimate fair value of each service-based stock option grant
Expected stock price volatility		84.40%	88.20%
Risk-free interest rate		2.80%	2.30%
Expected life		6 years 3 months 18 days	6 years 3 months 18 days
Service-Based Stock Options \| Minimum
Weighted average assumptions used to estimate fair value of each service-based stock option grant
Expected stock price volatility		82.30%	81.30%
Risk-free interest rate		2.40%	2.00%
Expected life		6 years 1 month 4 days	6 years 1 month 4 days
Employee Stock
Stock-Based Compensation
Employee Stock Purchase Plan, number of shares authorized (in shares)		1,000,000			1,000,000
Employee Stock Purchase Plan, grants since inception (in shares)					461,434
Stock-based compensation expense			$ 100,000
Employee Stock \| Subsequent Event
Stock-Based Compensation
Employee Stock Purchase Plan, stock issued during period (in shares)	$ 31,923

Stock-based Compensation - Non-cash Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Non-cash stock-based compensation expense	$ 1,342	$ 502
Cost of goods sold
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Non-cash stock-based compensation expense	142	91
Research and development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Non-cash stock-based compensation expense	475	58
Selling, general and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Non-cash stock-based compensation expense	$ 725	$ 353

- Recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended
- Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Dec. 31, 2017
Liabilities that are measured at fair value on a recurring basis
Warrants	$ 397		$ 397	$ 397
Change in the estimated fair value of warrant liabilities
Balance at December 31, 2017	397
Increase in fair value	2,907	$ (107)
Warrant exercise	(2,000)	$ 0
Balance at March 31, 2018	397
Silicon Valley Bank \| Debt Financing Agreement and Term Loan
Change in the estimated fair value of warrant liabilities
Debt instrument, fair value			17,200	17,200
Warrants
Liabilities that are measured at fair value on a recurring basis
Warrants	1,014		1,921	1,014
Change in the estimated fair value of warrant liabilities
Balance at December 31, 2017	1,014
Increase in fair value	2,907
Warrant exercise	(2,000)
Balance at March 31, 2018	1,921
Warrants \| Recurring
Liabilities that are measured at fair value on a recurring basis
Warrants	1,014		1,921	1,014
Change in the estimated fair value of warrant liabilities
Balance at December 31, 2017	1,014
Balance at March 31, 2018	1,921
Warrants \| Recurring \| Level 1
Liabilities that are measured at fair value on a recurring basis
Warrants	0		0	0
Change in the estimated fair value of warrant liabilities
Balance at December 31, 2017	0
Balance at March 31, 2018	0
Warrants \| Recurring \| Level 2
Liabilities that are measured at fair value on a recurring basis
Warrants	1,014		1,921	1,014
Change in the estimated fair value of warrant liabilities
Balance at December 31, 2017	1,014
Balance at March 31, 2018	1,921
Warrants \| Recurring \| Level 3
Liabilities that are measured at fair value on a recurring basis
Warrants	0		$ 0	$ 0
Change in the estimated fair value of warrant liabilities
Balance at December 31, 2017	0
Balance at March 31, 2018	$ 0

Shareholders' Equity (Details) - Cowen - USD ($)		3 Months Ended	12 Months Ended	18 Months Ended
Shareholders' Equity (Details) - Cowen - USD ($)	Oct. 10, 2016	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2018
Class of Stock [Line Items]
At-the-market sales agreement, maximum aggregate proceeds	$ 25,000,000.0
At-the-market sales agreement, proceeds from issuance of common stock		$ 7,200,000
Commission and issuance costs			$ 300,000
Amount of net capacity remaining on the at-the-market sales agreement		$ 16,700,000		$ 16,700,000
Common Class A
Class of Stock [Line Items]
At-the-market sales agreement, shares issued (in shares)		0	1,983,023	2,340,879
Maximum
Class of Stock [Line Items]
Percentage of gross proceeds payable as commission	3.00%

Net Loss Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Numerator:
Net loss	$ (7,659)	$ (9,778)
Denominator for basic and diluted EPS:
Weighted-average common shares outstanding (in shares)	36,140	31,896
Net loss per share attributable to common shareholders (basic and diluted) (in dollars per share)	$ (0.21)	$ (0.31)
Aggregate number of common equivalent shares (related to options, warrants and preferred stock) excluded from diluted net loss per common share (in shares)	6,200	5,000

Commitments and Contingencies (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
Incentive from Lessor	$ 2,000
Deferred rent credit	1,700
Operating leases
Total	18,444
2018	3,679
2019	4,710
2020	4,699
2021	4,595
2022	761
More than 5 years	0
Purchase commitments
Total	3,244
2018	462
2019	718
2020	688
2021	688
2022	688
More than 5 years	0
Capital leases
Total	101
2018	63
2019	14
2020	10
2021	10
2022	4
More than 5 years	0
Debt and Interest Related Payments
Total	18,413
2018	1,431
2019	6,068
2020	5,620
2021	5,294
2022	0
More than 5 years	0
Total
Total	40,202
2018	5,635
2019	11,510
2020	11,017
2021	10,587
2022	1,453
More than 5 years	0
Rent expense	$ 1,500	$ 1,300