Item 1. Financial Statements (Unaudited)
VERICEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
2021
|
|
2020
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
54,553
|
|
|
$
|
33,620
|
|
Short-term investments
|
|
43,738
|
|
|
42,187
|
|
Accounts receivable (net of allowance for doubtful accounts of $40 and $143, respectively)
|
|
28,910
|
|
|
34,504
|
|
Inventory
|
|
13,059
|
|
|
9,356
|
|
Other current assets
|
|
4,686
|
|
|
3,893
|
|
Total current assets
|
|
144,946
|
|
|
123,560
|
|
Property and equipment, net
|
|
11,819
|
|
|
7,633
|
|
Restricted cash
|
|
211
|
|
|
211
|
|
Right-of-use assets
|
|
46,713
|
|
|
50,105
|
|
Long-term investments
|
|
20,235
|
|
|
24,099
|
|
Other long-term assets
|
|
219
|
|
|
—
|
|
Total assets
|
|
$
|
224,143
|
|
|
$
|
205,608
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
5,575
|
|
|
$
|
6,755
|
|
Accrued expenses
|
|
10,932
|
|
|
11,293
|
|
Current portion of operating lease liabilities
|
|
2,280
|
|
|
4,394
|
|
Other liabilities
|
|
41
|
|
|
41
|
|
Total current liabilities
|
|
18,828
|
|
|
22,483
|
|
Operating lease liabilities
|
|
48,493
|
|
|
48,789
|
|
Other long-term liabilities
|
|
42
|
|
|
76
|
|
Total liabilities
|
|
$
|
67,363
|
|
|
$
|
71,348
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
Common stock, no par value; shares authorized — 75,000; shares issued and outstanding 46,767 and 45,804, respectively
|
|
544,624
|
|
|
510,061
|
|
Accumulated other comprehensive income (loss)
|
|
(23)
|
|
|
14
|
|
Accumulated deficit
|
|
(387,821)
|
|
|
(375,815)
|
|
Total shareholders’ equity
|
|
156,780
|
|
|
134,260
|
|
Total liabilities and shareholders’ equity
|
|
$
|
224,143
|
|
|
$
|
205,608
|
|
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
VERICEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, amounts in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
Product sales, net
|
|
$
|
33,718
|
|
|
$
|
31,020
|
|
|
$
|
106,025
|
|
|
$
|
77,712
|
|
|
|
|
|
Other revenue
|
|
788
|
|
|
1,238
|
|
|
2,568
|
|
|
1,238
|
|
|
|
|
|
Total revenue
|
|
34,506
|
|
|
32,258
|
|
|
108,593
|
|
|
78,950
|
|
|
|
|
|
Cost of product sales
|
|
12,408
|
|
|
9,787
|
|
|
36,600
|
|
|
28,369
|
|
|
|
|
|
Gross profit
|
|
22,098
|
|
|
22,471
|
|
|
71,993
|
|
|
50,581
|
|
|
|
|
|
Research and development
|
|
4,284
|
|
|
2,913
|
|
|
12,363
|
|
|
9,902
|
|
|
|
|
|
Selling, general and administrative
|
|
22,775
|
|
|
16,041
|
|
|
71,625
|
|
|
50,596
|
|
|
|
|
|
Total operating expenses
|
|
27,059
|
|
|
18,954
|
|
|
83,988
|
|
|
60,498
|
|
|
|
|
|
Income (loss) from operations
|
|
(4,961)
|
|
|
3,517
|
|
|
(11,995)
|
|
|
(9,917)
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
44
|
|
|
121
|
|
|
163
|
|
|
574
|
|
|
|
|
|
Interest expense
|
|
(1)
|
|
|
(2)
|
|
|
(3)
|
|
|
(5)
|
|
|
|
|
|
Other income (expense)
|
|
(13)
|
|
|
(18)
|
|
|
45
|
|
|
(8)
|
|
|
|
|
|
Total other income
|
|
30
|
|
|
101
|
|
|
205
|
|
|
561
|
|
|
|
|
|
Income (loss) before tax expense
|
|
(4,931)
|
|
|
3,618
|
|
|
(11,790)
|
|
|
(9,356)
|
|
|
|
|
|
Tax expense
|
|
—
|
|
|
—
|
|
|
(215)
|
|
|
—
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,931)
|
|
|
$
|
3,618
|
|
|
$
|
(12,006)
|
|
|
$
|
(9,356)
|
|
|
|
|
|
Net income (loss) per common share (Basic and Diluted)
|
|
$
|
(0.11)
|
|
|
$
|
0.08
|
|
|
$
|
(0.26)
|
|
|
$
|
(0.21)
|
|
|
|
|
|
Weighted average common shares outstanding (Basic)
|
|
46,669
|
|
|
45,272
|
|
|
46,355
|
|
|
45,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (Diluted)
|
|
46,669
|
|
|
47,314
|
|
|
46,355
|
|
|
45,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
VERICEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,931)
|
|
|
$
|
3,618
|
|
|
$
|
(12,006)
|
|
|
$
|
(9,356)
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on investments
|
|
—
|
|
|
(68)
|
|
|
(37)
|
|
|
57
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
(4,931)
|
|
|
$
|
3,550
|
|
|
$
|
(12,043)
|
|
|
$
|
(9,299)
|
|
|
|
|
|
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
VERICEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited, amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
Accumulated Other Comprehensive Income (loss)
|
|
Accumulated Deficit
|
|
Total Shareholders' Equity
|
|
Shares
|
|
Amount
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2020
|
45,804
|
|
|
$
|
510,061
|
|
|
|
|
$
|
14
|
|
|
$
|
(375,815)
|
|
|
$
|
134,260
|
|
Net loss
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
(3,289)
|
|
|
(3,289)
|
|
Compensation expense related to stock options and restricted stock units granted, net of forfeitures
|
—
|
|
|
7,019
|
|
|
|
|
—
|
|
|
—
|
|
|
7,019
|
|
Stock option exercises
|
359
|
|
|
3,532
|
|
|
|
|
—
|
|
|
—
|
|
|
3,532
|
|
Shares issued under the Employee Stock Purchase Plan
|
14
|
|
|
249
|
|
|
|
|
—
|
|
|
—
|
|
|
249
|
|
Issuance of stock upon restricted stock unit vesting
|
76
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Restricted stock withheld for employee tax remittance
|
(28)
|
|
|
(1,501)
|
|
|
|
|
—
|
|
|
—
|
|
|
(1,501)
|
|
Unrealized loss on investments
|
—
|
|
|
—
|
|
|
|
|
(61)
|
|
|
—
|
|
|
(61)
|
|
BALANCE, MARCH 31, 2021
|
46,225
|
|
|
$
|
519,360
|
|
|
|
|
$
|
(47)
|
|
|
$
|
(379,104)
|
|
|
$
|
140,209
|
|
Net loss
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
(3,786)
|
|
|
(3,786)
|
|
Compensation expense related to stock options and restricted stock units granted, net of forfeitures
|
—
|
|
|
10,866
|
|
|
|
|
—
|
|
|
—
|
|
|
10,866
|
|
Stock option exercises
|
330
|
|
|
3,531
|
|
|
|
|
—
|
|
|
—
|
|
|
3,531
|
|
Shares issued under the Employee Stock Purchase Plan
|
13
|
|
|
309
|
|
|
|
|
—
|
|
|
—
|
|
|
309
|
|
Issuance of stock upon restricted stock unit vesting
|
12
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Restricted stock withheld for employee tax remittance
|
(1)
|
|
|
(61)
|
|
|
|
|
—
|
|
|
—
|
|
|
(61)
|
|
Unrealized gain on investments
|
—
|
|
|
—
|
|
|
|
|
24
|
|
|
—
|
|
|
24
|
|
BALANCE, JUNE 30, 2021
|
46,579
|
|
|
$
|
534,005
|
|
|
|
|
$
|
(23)
|
|
|
$
|
(382,890)
|
|
|
$
|
151,092
|
|
Net loss
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
(4,931)
|
|
|
(4,931)
|
|
Compensation expense related to stock options and restricted stock units granted, net of forfeitures
|
—
|
|
|
8,596
|
|
|
|
|
—
|
|
|
—
|
|
|
8,596
|
|
Stock option exercises
|
176
|
|
|
1,676
|
|
|
|
|
—
|
|
|
—
|
|
|
1,676
|
|
Shares issued under the Employee Stock Purchase Plan
|
9
|
|
|
404
|
|
|
|
|
—
|
|
|
—
|
|
|
404
|
|
Issuance of stock upon restricted stock unit vesting
|
4
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Restricted stock withheld for employee tax remittance
|
(1)
|
|
|
(57)
|
|
|
|
|
—
|
|
|
—
|
|
|
(57)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, SEPTEMBER 30, 2021
|
46,767
|
|
|
$
|
544,624
|
|
|
|
|
$
|
(23)
|
|
|
$
|
(387,821)
|
|
|
$
|
156,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
Accumulated Other Comprehensive Income
|
|
Accumulated Deficit
|
|
Total Shareholders' Equity
|
|
Shares
|
|
Amount
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2019
|
44,864
|
|
|
$
|
489,749
|
|
|
|
|
$
|
21
|
|
|
$
|
(378,679)
|
|
|
$
|
111,091
|
|
Net loss
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
(4,705)
|
|
|
(4,705)
|
|
Compensation expense related to stock options and restricted stock units granted, net of forfeitures
|
—
|
|
|
3,768
|
|
|
|
|
—
|
|
|
—
|
|
|
3,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option exercises
|
57
|
|
|
196
|
|
|
|
|
—
|
|
|
—
|
|
|
196
|
|
Shares issued under the Employee Stock Purchase Plan
|
20
|
|
|
224
|
|
|
|
|
—
|
|
|
—
|
|
|
224
|
|
Issuance of stock upon restricted stock unit vesting
|
36
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Restricted stock withheld for employee tax remittance
|
(14)
|
|
|
(163)
|
|
|
|
|
—
|
|
|
—
|
|
|
(163)
|
|
Unrealized gain on investments
|
—
|
|
|
—
|
|
|
|
|
41
|
|
|
—
|
|
|
41
|
|
BALANCE, MARCH 31, 2020
|
44,963
|
|
|
$
|
493,774
|
|
|
|
|
$
|
62
|
|
|
$
|
(383,384)
|
|
|
$
|
110,452
|
|
Net loss
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
(8,269)
|
|
|
(8,269)
|
|
Compensation expense related to stock options and restricted stock units granted, net of forfeitures
|
—
|
|
|
4,376
|
|
|
|
|
—
|
|
|
—
|
|
|
4,376
|
|
Stock option exercises
|
188
|
|
|
696
|
|
|
|
|
—
|
|
|
—
|
|
|
696
|
|
Shares issued under the Employee Stock Purchase Plan
|
32
|
|
|
257
|
|
|
|
|
—
|
|
|
—
|
|
|
257
|
|
Issuance of stock upon restricted stock unit vesting
|
11
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Unrealized gain on investments
|
—
|
|
|
—
|
|
|
|
|
84
|
|
|
—
|
|
|
84
|
|
BALANCE, JUNE 30, 2020
|
45,194
|
|
|
$
|
499,103
|
|
|
|
|
$
|
146
|
|
|
$
|
(391,653)
|
|
|
$
|
107,596
|
|
Net income
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
3,618
|
|
|
3,618
|
|
Compensation expense related to stock options and restricted stock units granted, net of forfeitures
|
—
|
|
|
2,675
|
|
|
|
|
—
|
|
|
—
|
|
|
2,675
|
|
Stock option exercises
|
77
|
|
|
500
|
|
|
|
|
—
|
|
|
—
|
|
|
500
|
|
Shares issued under the Employee Stock Purchase Plan
|
44
|
|
|
309
|
|
|
|
|
—
|
|
|
—
|
|
|
309
|
|
Unrealized loss on investments
|
—
|
|
|
—
|
|
|
|
|
(68)
|
|
|
—
|
|
|
(68)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, SEPTEMBER 30, 2020
|
45,315
|
|
|
$
|
502,587
|
|
|
|
|
$
|
78
|
|
|
$
|
(388,035)
|
|
|
$
|
114,630
|
|
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
VERICEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2021
|
|
2020
|
|
|
Operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(12,006)
|
|
|
$
|
(9,356)
|
|
|
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
2,185
|
|
|
1,649
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
26,481
|
|
|
10,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of premiums and discounts on marketable securities
|
|
737
|
|
|
24
|
|
|
|
Non-cash lease cost
|
|
3,420
|
|
|
3,312
|
|
|
|
Other
|
|
17
|
|
|
89
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Inventory
|
|
(3,703)
|
|
|
(3,264)
|
|
|
|
Accounts receivable
|
|
5,594
|
|
|
5,994
|
|
|
|
Other current assets
|
|
(793)
|
|
|
(633)
|
|
|
|
Accounts payable
|
|
(672)
|
|
|
(52)
|
|
|
|
Accrued expenses
|
|
(361)
|
|
|
747
|
|
|
|
Operating lease liabilities
|
|
(2,410)
|
|
|
(3,110)
|
|
|
|
Other non-current assets and liabilities, net
|
|
—
|
|
|
16
|
|
|
|
Net cash provided by operating activities
|
|
18,489
|
|
|
6,235
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
Purchases of investments
|
|
(49,375)
|
|
|
(29,049)
|
|
|
|
Sales and maturities of investments
|
|
50,913
|
|
|
39,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property and equipment
|
|
(6,924)
|
|
|
(1,556)
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) investing activities
|
|
(5,386)
|
|
|
8,518
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from common stock issuance
|
|
9,701
|
|
|
2,182
|
|
|
|
Payments on employee's behalf for taxes related to vesting of restricted stock units
|
|
(1,619)
|
|
|
(163)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
(252)
|
|
|
(32)
|
|
|
|
Net cash provided by financing activities
|
|
7,830
|
|
|
1,987
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash, cash equivalents, and restricted cash
|
|
20,933
|
|
|
16,740
|
|
|
|
Cash, cash equivalents, and restricted cash at beginning of period
|
|
33,831
|
|
|
26,978
|
|
|
|
Cash, cash equivalents, and restricted cash at end of period
|
|
$
|
54,764
|
|
|
$
|
43,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
VERICEL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Vericel Corporation, a Michigan corporation (together with its consolidated subsidiaries referred to herein as the Company, or Vericel), was incorporated in March 1989 and began employee-based operations in 1991. The Company is a fully-integrated, commercial-stage biopharmaceutical company and is a leader in advanced therapies for the sports medicine and severe burn care markets. Vericel currently markets two cell therapy products in the United States, MACI® (autologous cultured chondrocytes on porcine collagen membrane) and Epicel® (cultured epidermal autografts).
MACI is an autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults. Epicel is a permanent skin replacement for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent of total body surface area (TBSA). The Company also holds an exclusive license from MediWound Ltd. (MediWound) for North American rights to NexoBrid® (concentrate of proteolytic enzymes enriched in bromelain), a registration-stage biological orphan product for the debridement of severe thermal burns. The Company operates its business primarily in the U.S. in one reportable segment — the research, product development, manufacture and distribution of cellular therapies for use in the treatment of specific diseases.
COVID-19
The pandemic caused by the spread of a novel strain of coronavirus (COVID-19) began directly affecting the United States in March of 2020 and has continued since that point. The pandemic has created significant disruptions to the U.S. and global economy and has contributed, at times, to significant volatility in financial markets. The global impact of the outbreak has fluctuated since early 2020. At times, many state, local and national governments – including those in Massachusetts and Michigan, where the Company’s operations are located – have responded by issuing, extending and supplementing orders requiring quarantines, restrictions on travel, and the mandatory closure of certain non-essential businesses, among other actions. In the U.S., the status and application of these orders have varied on a state-by-state basis since the early days of the pandemic. Many of the restrictions have been periodically updated as infection rates in the U.S. have risen and fallen, as new virus variants have emerged, as vaccines have been distributed and administered, and as world health leaders learn more about the virus, its transmission pathway and who is most at risk. Because Vericel is deemed an essential business, the Company has been exempted from government orders requiring the closure of workplaces and the cessation of business operations.
Notwithstanding being an essential business, the Company’s business and operations at time have been adversely impacted by the effects of COVID-19. For example, as a result of periodic restrictions placed on the performance of elective surgical procedures, the Company experienced a significant increase in cancellations of scheduled MACI procedures as well as a slowdown in new MACI orders during March and April of 2020. The widespread suspension of surgical procedures impacted the Company’s business and operations during the first and second quarters of 2020. The level and degree of restriction on elective surgeries, on the ability of patients to seek treatment and on U.S. business operations generally fluctuated throughout 2020 as COVID-19 infection rates rose and fell during the summer months and into the autumn. By the first quarter of 2021, the pandemic’s effects on the Company’s MACI business had largely dissipated. During the summer of 2021, however, the pandemic’s direct and ancillary effects again began to cause some disruption to the Company’s MACI business. For example, following the cessation of COVID-19-related travel restrictions in many parts of the United States and the availability of vaccinations in May and June 2021 some MACI patients postponed or delayed treatment – opting instead to take vacation and/or travel. Further, a surge of new COVID-19 cases during the summer of 2021 caused by the spread of the “Delta” variant again caused disruptions to health care networks, the scheduling of elective surgeries and overall patient behavior. These effects were compounded by staffing shortages at many healthcare facilities across the United States during the same period. Consequently, and notwithstanding the widespread distribution of vaccines in the United States, these factors contributed to a slowdown of MACI procedures during the third quarter of 2021. Although hospitals are now better prepared for subsequent surges in COVID-19 patients, the risk remains that regional or local restrictions could again be placed on the performance of elective surgical procedures if the number of COVID-19 infections in the United States were to continue to rise, or if new or existing COVID-19 variants render current vaccine treatments ineffective. Because Epicel is used almost exclusively in the emergent setting by burn centers and surgeons throughout the country, Epicel revenue and procedure volumes have been less affected by the pandemic.
At the outset of the pandemic, the Company put in place a comprehensive workplace protection plan, which instituted protective measures in response to COVID-19. The Company’s workplace protection plan has closely followed guidance issued by the Centers for Disease Control and Prevention (CDC) and has complied with applicable federal and state law. Because vaccines designed to protect against COVID-19 have become readily available and the rates of COVID-19 infections, hospitalizations and deaths in the majority of the U.S. have generally declined since their height at the beginning of 2021, the CDC and the Occupational Safety and Health Administration (OSHA) have altered their guidance for Americans, and emergency orders and mandatory workplace protocols in Michigan and Massachusetts have either been rescinded or greatly reduced – to include the lifting of all capacity limitations on businesses in both states. Accordingly, Vericel has begun a return to more normal workplace operations, but will continue to modify its workplace protection plan, and will reinstitute protective measures for its workforce as necessary.
The Company continues to review its policies and procedures regularly, including the Company’s workplace protection plan, as the pandemic evolves and may take additional actions to the extent required.
At-the-Market Offering
On August 27, 2021, the Company entered into a Sales Agreement with SVB Leerink LLC, as sales agent (SVB Leerink), pursuant to which it may offer and sell up to $200.0 million of shares of the Company’s common stock, no par value per share (ATM Shares). The ATM Shares to be offered and sold under the Sales Agreement will be issued and sold pursuant to an automatically effective shelf registration statement on Form S-3ASR (File No. 333-259119) filed by the Company on August 27, 2021, which expires three years from the filing date. The Company also filed a prospectus supplement relating to the offering and sale of the ATM Shares on August 27, 2021. The Company is not obligated to make any sales of ATM Shares, and SVB Leerink is not required to sell any specific number or dollar amount of the ATM Shares under the Sales Agreement. The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process stock financings as deferred offering costs until such financings are consummated. As of September 30, 2021, the Company has sold no shares pursuant to the Sales Agreement.
Going Concern
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 the satisfaction of liabilities and commitments in the normal course of business. As of September 30, 2021, the Company had an accumulated deficit of $387.8 million, and had a net loss of $4.9 million and $12.0 million, respectively, during the three and nine months ended September 30, 2021. The Company had cash and cash equivalents of $54.6 million and investments of $64.0 million as of September 30, 2021. The Company expects that cash from the sales of its products and existing cash, cash equivalents and investments will be sufficient to support the Company’s current operations through at least 12 months from the issuance of these Condensed Consolidated Financial Statements. To the extent the United States experiences a resurgence in COVID-19 infections and elective surgery restrictions are reinstated on a widespread basis and significantly impact the Company’s business, the Company may need to access additional capital; however, the Company may not be able to obtain financing on acceptable terms or at all, particularly in light of the impact of COVID-19 on the global economy and financial markets. The terms of any financing may adversely affect the holdings or the rights of the Company’s shareholders.
2. Basis of Presentation
The accompanying Condensed Consolidated Financial Statements as of September 30, 2021 and for the three and nine months ended September 30, 2021 are unaudited and 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 U.S. generally accepted accounting principles (GAAP) requires management to make estimates, judgments, and assumptions that may affect the reported amounts of assets, liabilities, equity, revenue 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 Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenue and expenses. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact its business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and
the actions taken to continue to contain or treat COVID-19, as well as the economic impact on its customers. The Company has made estimates of the impact of COVID-19 within these financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates. As of September 30, 2021, the Company has not recorded impairments to investments, inventory, other current assets or long-lived assets as a result of the COVID-19 pandemic.
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, 2020, as filed with the SEC on February 24, 2021 (Annual Report).
Consolidated Statement of Cash Flows
The following table presents certain supplementary cash flows information for the nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
(In thousands)
|
2021
|
|
2020
|
|
|
|
Supplementary Cash Flows information:
|
|
|
|
|
|
|
Non-cash information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Right-of-use asset and lease liability recognized
|
$
|
45
|
|
|
$
|
3,140
|
|
|
|
|
Additions to property and equipment included in accounts payable
|
85
|
|
|
340
|
|
|
|
|
Restricted stock held for employee tax remittance included in accounts payable
|
(57)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Cash information:
|
|
|
|
|
|
|
Interest paid
|
$
|
3
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
(In thousands)
|
|
2021
|
|
2020
|
|
|
Reconciliation of cash, cash equivalents, and restricted cash reported in the statement of financial position:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
54,553
|
|
$
|
43,507
|
|
|
Restricted cash
|
|
211
|
|
211
|
|
|
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows
|
|
$
|
54,764
|
|
|
$
|
43,718
|
|
|
|
3. Recent Accounting Pronouncements
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (ASC 740). The ASU enhances and simplifies various aspects of the income tax accounting guidance in ASC 740, including requirements related to hybrid tax regimes, the tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of entities not subject to tax, the intra-period tax allocation exception to the incremental approach, ownership changes in investments, changes from a subsidiary to an equity method investment, interim-period accounting for enacted changes in tax law, and the year-to-date loss limitation in interim-period tax accounting. This guidance became effective for the Company on January 1, 2021 and had no material impact on its Condensed Consolidated Financial Statements.
4. Revenue
Revenue Recognition and Net Product Sales
The Company recognizes product revenue from sales of MACI biopsy kits, MACI implants, Epicel grafts and other sources following the five-step model in Accounting Standards Codification 606, Revenue Recognition.
MACI Biopsy Kits
MACI biopsy kits are sold directly to hospitals and ambulatory surgical centers based on contracted rates in an approved contract or sales order. The Company recognizes MACI kit revenue upon delivery of the biopsy kit, at which time the customer (the facility) is in control of the kit. The kit is used by the doctor to provide a sample of cartilage tissue to the Company, which can later be used to manufacture a MACI implant. The ordering of the kit does not obligate the Company to manufacture an implant nor does the receipt of the cartilage tissue. The customer’s order of an implant is separate from the process of ordering the biopsy kit. Therefore, the sale of the biopsy kit and any subsequent sale of an implant are distinct contracts and are accounted for separately.
MACI Implants
The Company contracts with two specialty pharmacies, Orsini Pharmaceutical Services, Inc. (Orsini) and AllCare Plus Pharmacy, Inc. (AllCare) to distribute MACI in a manner in which the Company retains the credit and collection risk from the end customer. The Company pays both specialty pharmacies a fee for each patient to whom MACI is dispensed. Both Orsini and AllCare perform collection activities to collect payment from customers. The Company engages a third-party to provide services in connection with a patient support program to manage patient cases and to ensure complete and correct billing information is provided to the insurers and hospitals. In addition, the Company also sells MACI directly to DMS Pharmaceutical (DMS) for patients treated at military treatment facilities. The sales directly to DMS are made at a contracted rate.
Prior authorization and 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 recognizes product revenue from sales of all MACI implants upon delivery at which time the customer obtains control of the implant and the claim is billable. The total consideration which the Company expects to collect in exchange for MACI implants (the transaction price) may be fixed or variable. Direct sales to hospitals or distributors are recorded at a contracted price, and there are typically no forms of variable consideration.
When the Company sells MACI the patient is responsible for payment; however, the Company is typically reimbursed by a third-party insurer or government payer, subject to a patient co-pay amount. Reimbursements from third-party insurers and government payers vary by patient and payer and are based on either contracted rates, publicly available rates, fee schedules or past payer precedents. Net product revenue is recognized net of estimated contractual allowances, which considers historical collection experience from both the payer and patient, denial rates and the terms of the Company’s contractual arrangements. The Company estimates expected collections for these transactions using the portfolio approach. The Company records a reduction to revenue at the time of sale for its estimate of the amount of consideration that will not be collected. The total allowance for uncollectible consideration as of September 30, 2021 and December 31, 2020 was $7.2 million and $5.3 million, respectively. Changes to the estimate of the amount of consideration that will not be collected could have a material impact to the revenue recognized. A 0.5% change to the estimated uncollectible percentage could result in approximately a $0.3 million increase or decrease in the revenue recognized as of the nine months ended September 30, 2021.
Changes in estimates of the transaction price are recorded through revenue in the period in which such change occurs. Changes in estimates related to prior period sales for the three and nine months ended September 30, 2021 resulted in an increase to revenue of $0.2 million and a decrease to revenue of $0.1 million, respectively, and an increase to revenue of approximately $0.01 million and $0.7 million, respectively, for the same periods in 2020. The changes in estimates recorded during the three and nine months ended September 30, 2021 and September 30, 2020, were primarily due to completion of the billing claims process for implants that occurred in 2020 or prior. Upon completion of the billing claims process, the Company concluded that it was probable that a significant reversal in the amount of revenue recognized would not occur.
Additionally, potential credit risk exposure has been evaluated for the Company’s accounts receivable in accordance with ASC 326, Financial Instruments - Credit Losses. The loss percentage is calculated by pooling account receivables containing similar risk characteristics and applying collectability forecasts which are derived from current and historical economic and
financial information. The loss percentage calculated was applied to accounts receivables as of September 30, 2021 and December 31, 2020. The allowance related to the potential impacts of COVID-19 on accounts receivable from third-party insurers, government payers, hospitals and patients as of December 31, 2020 included approximately $0.1 million, and no additional allowance was recorded during the nine months ended September 30, 2021.
Epicel
The Company sells Epicel directly to hospitals and burn centers based on contracted rates stated in an approved contract or purchase order. Similar to MACI, there is no obligation to manufacture Epicel 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 revenue from sales of Epicel upon delivery to the hospital, at which time the customer is in control of the Epicel grafts and the claim is billable to the hospital.
NexoBrid
The Company entered into exclusive license and supply agreements with MediWound in May 2019, under which MediWound will manufacture and supply NexoBrid on a unit price basis, which may be increased pursuant to the terms of the agreement. The U.S. Biomedical Advanced Research and Development Authority (BARDA) committed to procure NexoBrid directly from MediWound, under an emergency use authorization. As a result, during 2020, BARDA accepted the first shipments of NexoBrid, per the agreement between BARDA and MediWound. The Company recognizes revenue based on a percentage of gross profits for sales of NexoBrid to BARDA upon delivery, at which time BARDA is in control of the product. As of September 30, 2021, the Company did not take title to the product or hold a direct contract or distribution agreement with BARDA.
Revenue by Product and Customer
The following table and description below shows the products from which the Company generated its revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
Revenue by product (in thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
MACI implants and kits
|
|
|
|
|
|
|
|
|
Implants based on contracted rates sold through a specialty pharmacy (a)
|
|
$
|
15,149
|
|
|
$
|
14,897
|
|
|
$
|
46,547
|
|
|
$
|
36,084
|
|
Implants subject to third party reimbursement sold through a specialty pharmacy (b)
|
|
3,463
|
|
|
3,529
|
|
|
11,357
|
|
|
10,299
|
|
Implants sold direct based on contracted rates (c)
|
|
3,895
|
|
|
4,602
|
|
|
12,876
|
|
|
9,528
|
|
Implants sold direct subject to third party reimbursement (d)
|
|
644
|
|
|
782
|
|
|
1,901
|
|
|
1,793
|
|
Biopsy kits - direct bill
|
|
577
|
|
|
539
|
|
|
1,647
|
|
|
1,348
|
|
Change in estimates related to prior periods (e)
|
|
153
|
|
|
8
|
|
|
(125)
|
|
|
695
|
|
Epicel
|
|
|
|
|
|
|
|
|
Direct bill (hospital)
|
|
9,837
|
|
|
6,663
|
|
|
31,822
|
|
|
17,965
|
|
|
|
|
|
|
|
|
|
|
Total product revenue
|
|
$
|
33,718
|
|
|
$
|
31,020
|
|
|
$
|
106,025
|
|
|
$
|
77,712
|
|
NexoBrid revenue (f)
|
|
788
|
|
|
1,238
|
|
|
2,568
|
|
|
1,238
|
|
Total net revenue
|
|
$
|
34,506
|
|
|
$
|
32,258
|
|
|
$
|
108,593
|
|
|
$
|
78,950
|
|
|
|
|
|
|
|
|
|
|
(a) Represents implants sold through Orsini and AllCare whereby such specialty pharmacies have a direct contract with the underlying insurance provider. The amount of reimbursement is based on contracted rates at the time of sale supported by the pharmacy's direct contracts.
|
|
|
|
|
|
|
|
|
|
(b) Represents implants sold through Orsini and AllCare whereby such specialty pharmacies do not have a direct contract with the underlying payer. The amount of reimbursement is established based on a payer or state fee schedule and/or payer history.
|
|
|
|
|
|
|
|
|
|
(c) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. Also represents direct sales under a contract to the specialty distributor DMS.
|
|
|
|
|
|
|
|
|
|
(d) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. The payment terms are subject to third-party reimbursement from an underlying insurance provider.
|
|
|
|
|
|
|
|
|
|
(e) Primarily represents changes in estimates related to implants sold through Orsini or AllCare in which such specialty pharmacy does not have a direct contract with the underlying payer. The initial estimate of the amount of reimbursement is established based on a payer or state fee schedule and/or payer history. The change in estimates is a result of additional information or actual cash collections received in the current period.
|
|
|
|
|
|
|
|
|
|
(f) Represents revenue based on a percentage of gross profits for sales of NexoBrid to BARDA, pursuant to the license agreement between the Company and MediWound.
|
Concentration of Credit Risk
The Company's total Epicel revenue concentration from a customer for the three and nine months ended September 30, 2021 was 9% and 11%, respectively, and there were no customers with a concentration greater than 10% for the same periods in 2020. For the Company's total MACI revenue, and MACI and Epicel accounts receivable balances, there were no customers for the three and nine months ended September 30, 2021 or the comparable periods in 2020, with a concentration greater than 10%.
5. Selected Balance Sheet Components
Inventory
Inventory as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
September 30, 2021
|
|
December 31, 2020
|
Raw materials
|
|
$
|
12,014
|
|
|
$
|
8,775
|
|
Work-in-process
|
|
976
|
|
|
537
|
|
Finished goods
|
|
68
|
|
|
44
|
|
Inventory
|
|
$
|
13,059
|
|
|
$
|
9,356
|
|
Property and Equipment
Property and Equipment, net as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
September 30, 2021
|
|
December 31, 2020
|
Machinery and equipment
|
|
$
|
4,365
|
|
|
$
|
3,672
|
|
Furniture, fixtures and office equipment
|
|
1,551
|
|
|
809
|
|
Computer equipment and software
|
|
7,669
|
|
|
6,846
|
|
Leasehold improvements
|
|
10,277
|
|
|
5,560
|
|
Construction in process
|
|
1,416
|
|
|
2,021
|
|
Financing right-of-use lease
|
|
83
|
|
|
111
|
|
Total property and equipment, gross
|
|
25,361
|
|
|
19,019
|
|
Less accumulated depreciation
|
|
(13,542)
|
|
|
(11,386)
|
|
Property and equipment, net
|
|
$
|
11,819
|
|
|
$
|
7,633
|
|
Depreciation expense for the three and nine months ended September 30, 2021 was $0.7 million and $2.2 million, respectively, and $0.6 million and $1.6 million, respectively, for the same periods in 2020.
Accrued Expenses
Accrued Expenses as of September 30, 2021 and December 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
September 30, 2021
|
|
December 31, 2020
|
Bonus related compensation
|
|
$
|
4,553
|
|
|
$
|
5,721
|
|
Employee related accruals
|
|
2,975
|
|
|
3,482
|
|
Other accrued expenses
|
|
3,404
|
|
|
2,090
|
|
Accrued expenses
|
|
$
|
10,932
|
|
|
$
|
11,293
|
|
6. Leases
The Company leases facilities in Ann Arbor, Michigan and Cambridge, Massachusetts. The Ann Arbor facility includes office space, and the Cambridge facilities include clean rooms, laboratories for MACI and Epicel manufacturing and office space. The Company also leases offsite warehouse space, vehicles and computer equipment. Certain of the Company’s lease agreements include lease payments that are adjusted periodically for an index or rate. The leases are initially measured using the present value of the projected payments adjusted for the index or rate in effect at the commencement date. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. All operating lease commitments with a lease term greater than 12 months are recognized as right-of-use assets and liabilities, on a discounted basis on the balance sheet. Effective October 21, 2020 the Company entered into an agreement with one of its Cambridge, Massachusetts facility leases. The agreement extended the terms of the lease to expire on February 29, 2032, with monthly contractual lease payments ranging from $0.4 million to $0.6 million. The agreement also provides a tenant improvement allowance of approximately $4.3 million, available through December 31, 2023.
Leases with an initial term of 12 months or less are not recorded on the balance sheet. For both the three and nine months ended September 30, 2021 and 2020, lease expense of less than $0.1 million was recorded for each of short-term leases and financing leases. During the nine months ended September 30, 2021, the Company recorded $0.4 million of leasehold improvements funded by tenant improvement allowances available under the lease agreements. The contribution toward the cost of tenant improvements is recorded as a reduction of the operating lease assets. For the three and nine months ended September 30, 2021, the Company recognized $1.8 million and $5.5 million, respectively, of operating lease expense and $1.6 million and $4.5 million, respectively for the same periods in 2020. The Company’s leases contain non-lease components and activities that do not transfer a good or service to the Company. The Company elected not to combine lease and non-lease components and therefore non-lease costs were not included in the net lease assets or lease liabilities.
Total leased assets and liabilities classified on the balance sheet, as of September 30, 2021 and December 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Classification
|
|
September 30, 2021
|
|
December 31, 2020
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Operating
|
|
Right-of-use assets
|
|
$
|
46,713
|
|
|
$
|
50,105
|
|
|
|
Finance
|
|
Property and equipment, net
|
|
83
|
|
|
111
|
|
|
|
Total leased assets
|
|
$
|
46,796
|
|
|
$
|
50,216
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Operating
|
|
Current portion of operating lease liabilities
|
|
$
|
2,280
|
|
|
$
|
4,394
|
|
|
|
Finance
|
|
Other liabilities
|
|
41
|
|
|
41
|
|
|
|
|
|
|
|
$
|
2,321
|
|
|
$
|
4,435
|
|
|
|
Non-current
|
|
|
|
|
|
|
|
|
Operating
|
|
Operating lease liabilities
|
|
$
|
48,493
|
|
|
$
|
48,789
|
|
|
|
Finance
|
|
Other long-term liabilities
|
|
42
|
|
|
76
|
|
|
|
Total leased liabilities
|
|
$
|
48,535
|
|
|
$
|
48,865
|
|
|
|
7. Stock-Based Compensation
Stock Option, Restricted Stock Units and Equity Incentive Plans
The Company has historically had various stock incentive plans and agreements that provide for the issuance of non-qualified and incentive stock options and restricted stock units 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 to employees and non-employees under these plans expire no later than ten years from the date of grant. Options and restricted stock units generally become exercisable or vest over a four-year period, under a graded-vesting methodology for stock options and annually on the anniversary grant date for restricted stock units, following the date of grant. The Company generally issues new shares upon the exercise of stock options or vesting of restricted stock units.
The Company's Amended and Restated 2019 Omnibus Incentive Plan (2019 Plan) was approved on April 29, 2020 and 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 2019 Plan shall not be less than the fair market value of the Company’s common stock on the date of grant. The 2019 Plan replaced the 1992 Stock Option Plan, the 2001 Stock Option Plan, the Amended and Restated 2004 Equity Incentive Plan, the 2009 Second Amended and Restated Omnibus Incentive Plan and the 2017 Omnibus Incentive Plan (Prior Plans), and no new grants have been granted under the Prior Plans after approval of the 2019 Plan. However, the expiration or forfeiture of options previously granted under the Prior Plans will increase the number of shares available for issuance under the 2019 Plan.
As of September 30, 2021, there were 2,730,746 shares available for future grant under the 2019 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 736,375 shares have been issued 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 options at the grant date, which corresponds to the first day of each purchase period and is amortized over the purchase period. In October 2021, employees purchased 7,102 shares resulting in proceeds from the sale of common stock of $0.3 million under the ESPP for the third quarter of 2021.
Service-Based Stock Options
During the three and nine months ended September 30, 2021, the Company granted service-based options to purchase common stock of 189,882 and 1,663,954, respectively, and 28,000 and 1,324,890, respectively, for the same periods in 2020. The exercise price of the options is the fair market value per share of common stock on the grant date, and the options generally vest over four years (other than non-employee director options which may vest over one to three years from the grant date pursuant to the provisions of the Company's Amended and Restated Non-Employee Director Compensation Guidelines) 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 during the three and nine months ended September 30, 2021 was $35.65 and $33.03, respectively, and $10.81 and $8.70, respectively, for the same periods in 2020.
Restricted Stock Units
During the three and nine months ended September 30, 2021, the Company granted 22,310 and 263,364 service-based restricted stock units, respectively, and 0 and 196,836, respectively, for the same periods in 2020. The restricted stock units vest annually over four years in equal installments commencing on the first anniversary of the grant date (other than non-employee director awards which may vest over one to three years from the grant date pursuant to the provisions of the Company's Amended and Restated Non-Employee Director Compensation Guidelines). The Company issues new shares upon the vesting of restricted stock units. Restricted stock units are recorded at fair value at the date of grant, which is based on the closing share price on the grant date. Compensation expense is recorded for restricted stock units that are expected to vest based on their fair value at grant date and is amortized over the expected vesting period. The weighted average grant-date fair value of restricted stock units granted during the three and nine months ended September 30, 2021 was $54.35 and $52.19, respectively, and $11.41, for the nine months ended September 30, 2020. The aggregate fair value of restricted stock units granted in the three and nine months ended September 30, 2021 was $1.2 million and $13.7 million, respectively, and $2.2 million for the nine months ended September 30, 2020. There were no restricted stock units granted during the three months ended September 30, 2020.
During the three and nine months ended September 30, 2021, 2,826 and 62,259 shares, respectively, of common stock were issued upon the vesting of restricted stock units. These amounts are net of 1,174 and 30,588 shares, respectively, that were withheld for payment of taxes on the behalf of employees. During the nine months ended September 30, 2020, 32,840 shares of common stock were issued upon the vesting of restricted stock units. This amount is net of 13,872 shares withheld for payment of taxes, as no shares are withheld at vesting for shares awarded to the members of the Company's Board of Directors.
For the three and nine months ended September 30, 2021, the total fair value of restricted stock awards vested was $0.2 million and $5.1 million, respectively, and $0.0 million and $0.6 million, respectively, for the same periods in 2020. The total fair value of restricted stock units withheld for payment of taxes during the three and nine months ended September 30, 2021, was $0.1 million and $1.6 million, respectively. During the nine months ended September 30, 2020, the total fair value of
restricted stock units withheld for payment of taxes was $0.2 million. No restricted stock units vested during the three months ended September 30, 2020.
Stock Compensation Expense
Non-cash stock-based compensation expense (employee stock purchase plan, service-based stock options and restricted stock units) included in cost of product sales, research and development expenses and selling, general and administrative expenses is summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(in thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Cost of product sales
|
|
$
|
1,114
|
|
|
$
|
481
|
|
|
$
|
3,313
|
|
|
$
|
1,541
|
|
Research and development
|
|
1,126
|
|
|
458
|
|
|
3,222
|
|
|
1,455
|
|
Selling, general and administrative
|
|
6,356
|
|
|
1,736
|
|
|
19,946
|
|
|
7,823
|
|
Total non-cash stock-based compensation expense
|
|
$
|
8,596
|
|
|
$
|
2,675
|
|
|
$
|
26,481
|
|
|
$
|
10,819
|
|
8. Investments
Marketable debt securities held by the Company are classified as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities, and carried at fair value in the accompanying Condensed Consolidated Balance Sheets on a settlement date basis. The following tables summarize the gross unrealized gains and losses of the Company’s marketable securities as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
|
|
Gross Unrealized
|
|
|
|
Estimated Fair Value
|
(In thousands)
|
|
Amortized Cost
|
|
Gains
|
|
Losses
|
|
Credit Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
$
|
13,243
|
|
|
$
|
—
|
|
|
$
|
(1)
|
|
|
$
|
—
|
|
|
$
|
13,242
|
|
Corporate notes
|
|
48,178
|
|
|
—
|
|
|
(22)
|
|
|
—
|
|
|
48,156
|
|
U.S. government securities
|
|
1,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,500
|
|
U.S. government agency bonds
|
|
1,075
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
63,996
|
|
|
$
|
—
|
|
|
$
|
(23)
|
|
|
$
|
—
|
|
|
$
|
63,973
|
|
Classified as:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
|
|
|
|
|
|
|
$
|
43,738
|
|
Long-term investments
|
|
|
|
|
|
|
|
|
|
20,235
|
|
|
|
|
|
|
|
|
|
$
|
63,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
Gross Unrealized
|
|
|
|
Estimated Fair Value
|
(In thousands)
|
|
Amortized Cost
|
|
Gains
|
|
Losses
|
|
Credit Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
$
|
8,993
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,994
|
|
Corporate notes
|
|
35,917
|
|
|
—
|
|
|
—
|
|
|
(6)
|
|
|
35,911
|
|
U.S. government securities
|
|
12,828
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
12,842
|
|
U.S. government agency bonds
|
|
5,000
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
5,001
|
|
U.S. asset-backed securities
|
|
3,534
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
3,538
|
|
|
|
$
|
66,272
|
|
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
(6)
|
|
|
$
|
66,286
|
|
Classified as:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
|
|
|
|
|
|
|
$
|
42,187
|
|
Long-term investments
|
|
|
|
|
|
|
|
|
|
24,099
|
|
|
|
|
|
|
|
|
|
$
|
66,286
|
|
Investments classified as short-term have maturities of less than one year. Investments classified as long-term are those which: (i) have a maturity of greater than one year, and (ii) the Company does not intend to liquidate within the next twelve months, although these funds are available for use and, therefore, are classified as available-for-sale. The Company’s investment strategy is to buy short-duration marketable securities with a high credit rating. As of September 30, 2021 and December 31, 2020, all marketable securities held by the Company had remaining contractual maturities of three years or less.
Unrealized gains are included as a component of accumulated other comprehensive income in the Condensed Consolidated Balance Sheets and Statements of Shareholders’ Equity and a component of total comprehensive income (loss) in the Condensed Consolidated Statements of Comprehensive Loss, until realized. Unrealized losses are evaluated for impairment under ASC 326, Financial Instruments - Credit Losses, to determine if the impairment is credit-related or non-credit-related. Credit-related impairment is recognized as an allowance on the Condensed Consolidated Balance Sheet with a corresponding adjustment to earnings, and non-credit-related impairment is recognized in other comprehensive income (loss), net of taxes. There were no material realized losses on marketable securities during the three and nine months ended September 30, 2021. There have been no impairments of the Company’s assets measured and carried at fair value during the three and nine months ended September 30, 2021 or September 30, 2020, respectively.
9. 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;
•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 and Level 2 or between Level 2 and Level 3 from December 31, 2020 to September 30, 2021. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The commercial paper, corporate notes, U.S. government securities, U.S. government agency bonds and U.S. asset-backed securities are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. The following table summarizes the valuation of the Company’s financial instruments that are measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
|
|
|
Fair value measurement category
|
|
|
|
Fair value measurement category
|
(In thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
6,146
|
|
|
$
|
6,146
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,698
|
|
|
$
|
3,698
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
13,242
|
|
|
—
|
|
|
13,242
|
|
|
—
|
|
|
8,994
|
|
|
—
|
|
|
8,994
|
|
|
—
|
|
Corporate notes
|
|
48,156
|
|
|
—
|
|
|
48,156
|
|
|
—
|
|
|
35,911
|
|
|
—
|
|
|
35,911
|
|
|
—
|
|
U.S. government securities
|
|
1,500
|
|
|
—
|
|
|
1,500
|
|
|
—
|
|
|
12,842
|
|
|
—
|
|
|
12,842
|
|
|
—
|
|
U.S. government agency bonds
|
|
1,075
|
|
|
—
|
|
|
1,075
|
|
|
—
|
|
|
5,001
|
|
|
—
|
|
|
5,001
|
|
|
—
|
|
U.S. asset-backed securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,538
|
|
|
—
|
|
|
3,538
|
|
|
—
|
|
|
|
$
|
70,119
|
|
|
$
|
6,146
|
|
|
$
|
63,973
|
|
|
$
|
—
|
|
|
$
|
69,984
|
|
|
$
|
3,698
|
|
|
$
|
66,286
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair values of the cash equivalents and marketable securities are based on observable market prices.
10. Net Income (Loss) Per Common Share
The following reflects the net income (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 September 30,
|
|
Nine Months Ended September 30,
|
|
|
(Amounts in thousands, except per share amounts)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,931)
|
|
|
$
|
3,618
|
|
|
$
|
(12,006)
|
|
|
$
|
(9,356)
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding (Basic)
|
|
46,669
|
|
|
45,272
|
|
|
46,355
|
|
|
45,112
|
|
|
|
Weighted-average common shares outstanding (Diluted)
|
|
46,669
|
|
|
47,314
|
|
|
46,355
|
|
|
45,112
|
|
|
|
Net income (loss) per common share (Basic and Diluted)
|
|
$
|
(0.11)
|
|
|
$
|
0.08
|
|
|
$
|
(0.26)
|
|
|
$
|
(0.21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares excluded from the calculation of diluted earnings per share(a):
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
5,852
|
|
|
2,390
|
|
|
5,852
|
|
|
5,692
|
|
|
|
Restricted stock units
|
|
412
|
|
|
—
|
|
|
412
|
|
|
273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Common equivalent shares are not included in the diluted per share calculation where the effect of their inclusion would be anti-dilutive.
|
|
|
11. NexoBrid License and Supply Agreements
On May 6, 2019, the Company entered into exclusive license and supply agreements with MediWound to commercialize NexoBrid and any improvements to NexoBrid in North America. NexoBrid is a topically-administered biological product that enzymatically removes nonviable burn tissue, or eschar, in patients with deep partial and full-thickness thermal burns. On September 16, 2020, the Company announced acceptance of MediWound's submission of a biologics license application (BLA) for review by the U.S. Food and Drug Administration (FDA) to seek marketing approval for NexoBrid in the United States for the treatment of severe burns, and the FDA's assignment of a Prescription Drug User Fee Act (PDUFA) target date for the product of June 29, 2021. Subsequently, on June 29, 2021, the Company announced that MediWound received a complete response letter (CRL) from the FDA regarding the BLA, through which the FDA communicated to MediWound that it had completed its review of the BLA, as amended, and had determined that it cannot approve the BLA in its present form. The Company continues to work with MediWound, BARDA and the FDA to address the issues identified in the CRL, to prepare and submit a BLA resubmission to the FDA and to seek the potential approval of NexoBrid.
Pursuant to the terms of the license agreement, if the BLA is approved, MediWound will transfer the BLA to the Company and the Company will market NexoBrid in the U.S. Both MediWound and the Company, under the supervision of a Central Steering Committee comprised of members of both companies will continue to guide the development of NexoBrid in North America. NexoBrid is approved in the European Union and other international markets and has been designated as an orphan biologic in the United States, European Union and other international markets.
In May 2019, the Company paid MediWound $17.5 million in consideration for the license. The $17.5 million upfront payment was recorded to research and development expense during 2019, as the license was considered in process research and development. The Company is also obligated to pay MediWound $7.5 million, which is contingent upon U.S. regulatory approval of the BLA for NexoBrid and up to $125 million contingent upon meeting certain sales milestones, subsequent to approval. The first sales milestone of $7.5 million would be triggered when annual net sales of NexoBrid or improvements to it in North America exceed $75 million. As of September 30, 2021, the milestone payments were not yet probable and therefore, not considered a liability. The Company also will pay MediWound tiered royalties on net sales ranging from mid-high single-digit to mid-teen percentages, subject to customary reductions, following approval. The Company also entered into a supply agreement with MediWound under which MediWound will manufacture NexoBrid for the Company on a unit price basis which may be increased based on a published index. MediWound is obligated to supply the Company with NexoBrid for sale in North America on an exclusive basis for the first five years of the term of the supply agreement. After the exclusivity period or upon supply failure, the Company will be permitted to establish an alternate source of supply.
BARDA has committed to procure NexoBrid directly from MediWound under an emergency use authorization, and under such commitment the Company will receive a percentage of gross profit for sales directly to BARDA. If BARDA procures NexoBrid directly from the Company, the Company will pay a percentage of gross profits to MediWound on initial committed amounts and a royalty on any additional BARDA purchases of NexoBrid beyond the initial committed amount. As of September 30, 2021, the Company did not hold a direct contract or distribution agreement with BARDA. In the third quarter of 2020, BARDA accepted the first shipments of NexoBrid for emergency use preparedness per the agreement between BARDA and MediWound. During the three and nine months ended September 30, 2021, the Company recognized revenue related to the procurement of NexoBrid by BARDA of $0.8 million and $2.6 million, respectively, and $1.2 million during the three months ended September 30, 2020.
12. Commitments and Contingencies
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. In addition, the Company also pays for usage of an offsite warehouse space. In February 2021, the terms of the warehouse operating agreement were extended through March 31, 2027. The Company records rent expense related to this agreement on a straight-line basis over the remaining term.
Future minimum payments related to the Company's contractual obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
Contractual Obligations (in thousands)
|
|
Total
|
|
October 1, 2021 - December 31, 2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
More than 5 Years
|
Purchase commitments
|
|
$
|
8,782
|
|
|
$
|
3,011
|
|
|
$
|
5,771
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Warehouse operating agreement
|
|
4,930
|
|
|
263
|
|
|
1,046
|
|
|
1,046
|
|
|
792
|
|
|
792
|
|
|
991
|
|
Total
|
|
$
|
13,712
|
|
|
$
|
3,274
|
|
|
$
|
6,817
|
|
|
$
|
1,046
|
|
|
$
|
792
|
|
|
$
|
792
|
|
|
$
|
991
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Vericel Corporation is a leader in advanced cell therapies and specialty biologics for the sports medicine and severe burn care markets. We currently market two U.S. Food and Drug Administration (FDA)-approved autologous cell therapy products in the United States. MACI® is an autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults. Epicel® is a permanent skin replacement Humanitarian Use Device (HUD) for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent of total body surface area (TBSA). We also hold an exclusive license from MediWound for North American rights to NexoBrid®, a registration-stage biological orphan product. In 2020, MediWound submitted to the FDA a biologics license application (BLA) seeking the approval of NexoBrid for eschar removal (debridement) in adults with deep partial-thickness and/or full-thickness thermal burns. The FDA subsequently accepted the BLA for filing and assigned a Prescription Drug User Fee Act (PDUFA) target date of June 29, 2021.
Subsequently, on June 29, 2021, we announced that MediWound received a complete response letter (CRL) from the FDA regarding the BLA for NexoBrid. The FDA communicated to MediWound that it had completed its review of the BLA, as amended, and had determined that it cannot approve the BLA in its present form. The FDA had identified issues related to the Chemistry, Manufacturing and Controls (CMC) section of the BLA and had requested that MediWound provide additional CMC information. The FDA stated that it had not reviewed several amendments submitted by MediWound in response to the CMC information requests related to the BLA. The FDA also stated that inspections of manufacturing facilities in Israel and Taiwan are required before the BLA can be approved, but that it was unable to conduct the required inspections during the original review cycle due to COVID-19-related travel restrictions. In addition, the CRL referenced observations that were made during good clinical practice (GCP) inspections related to the DETECT study and requested that MediWound address questions regarding the impact of the observations on the study’s efficacy findings. The FDA also requested that MediWound provide a safety update as part of its BLA resubmission. The Company continues to work with MediWound, BARDA and the FDA to address the issues identified in the CRL, to prepare and submit a BLA resubmission to the FDA and to seek the potential approval of NexoBrid.
See "Risk Factors - NexoBrid’s approval in the United States for the treatment of severe burns may be further delayed, and it may not be approved for use in the United States and other North American markets at all."
For patents related to MACI, we have one issued patent in the United States directed to a device related to MACI that is set to expire in November 2033, and one issued patent in the European Union set to expire in November 2034.
COVID-19
The pandemic caused by the spread of a novel strain of coronavirus (COVID-19) has created significant disruptions to the U.S. and global economy and has contributed to significant volatility in financial markets. The global impact of the outbreak has fluctuated since early 2020. At times, many state, local and national governments – including those in Massachusetts and Michigan, where our operations are located – have responded by issuing, extending and supplementing orders requiring quarantines, restrictions on travel, and the mandatory closure of certain non-essential businesses, among other actions. In the U.S., the status and application of these orders have varied on a state-by-state basis since the early days of the pandemic. Many of the restrictions have been periodically updated as infection rates in the U.S. have risen and fallen, as new virus “variants” have emerged, as vaccines have been distributed and administered, and as world health leaders learn more about the virus, its transmission pathway and who is most at risk. Because Vericel is deemed an essential business, we have been exempted from government orders requiring the closure of workplaces and the cessation of business operations.
Notwithstanding being an essential business, our business and operations have been, at times, adversely impacted by the effects of COVID-19. As a result of periodic restrictions placed on the performance of elective surgical procedures, we have experienced a significant increase in cancellations of scheduled MACI procedures as well as a slowdown in new MACI orders during March and April of 2020. The widespread suspension of surgical procedures impacted our business and operations during the first and second quarters of 2020. The level and degree of restriction on elective surgeries, on the ability of patients to seek treatment and on U.S. business operations generally fluctuated throughout 2020 as COVID-19 infection rates rose and fell during the summer months and into the autumn. By the first quarter of 2021, the pandemic’s effects on our MACI business had largely dissipated. During the summer of 2021, however, the pandemic’s direct and ancillary effects again began to cause some disruption to our MACI business. For example, following the cessation of COVID-19-related travel restrictions in many
parts of the United States and the availability of vaccinations in May and June 2021 some MACI patients postponed or delayed treatment – opting instead to take vacation and/or travel. Further, a surge of new COVID-19 cases during the summer of 2021 caused by the spread of the “Delta” variant again caused disruptions to health care networks, the scheduling of elective surgeries and overall patient behavior. These effects were compounded by staffing shortages at many healthcare facilities across the United States during the same period. Consequently, and notwithstanding the widespread distribution of vaccines in the United States, these factors contributed to a slowdown of MACI procedures during the third quarter of 2021. Although hospitals are now better prepared for subsequent surges in COVID-19 patients, the risk remains that regional or local restrictions could again be placed on the performance of elective surgical procedures if the number of COVID-19 infections in the United States were to continue to rise, or if new or existing COVID-19 variants render current vaccine treatments ineffective.
Because Epicel is used almost exclusively in an emergent setting by burn centers and surgeons throughout the country, Epicel revenue and procedure volumes have been less affected by the pandemic. Nevertheless, large burns and burn admissions can be affected by restrictions on human activity resulting from more severe government lockdown orders. Epicel procedure volumes did experience a slow-down during the second quarter of 2020, however, the reduction was less pronounced than that observed with MACI. Further reductions could be observed in the future, based on the degree of restrictions imposed.
At the outset of the pandemic, we put in place a comprehensive workplace protection plan, which instituted protective measures in response to COVID-19. Our workplace protection plan closely follows guidance issued by the Centers for Disease Control and Prevention (CDC) and complies with applicable federal and state law. Because vaccines designed to protect against COVID-19 have become readily available and the rates of COVID-19 infections, hospitalizations and deaths in the majority of the U.S. have generally declined since their height at the beginning of 2021, the CDC and the Occupational Safety and Health Administration (OSHA) have altered their guidance for Americans, and emergency orders and mandatory workplace protocols in Michigan and Massachusetts have either been rescinded or greatly reduced – to include the lifting of all capacity limitations on businesses in both states. Accordingly, we have begun a return to more normal workplace operations, but will continue to modify our workplace protection plan, and will reinstitute protective measures for our workforce as necessary.
We are reviewing our policies and procedures regularly as the pandemic evolves and may take additional actions to the extent required.
We continue to manufacture MACI and Epicel and are maintaining a significant safety stock of all key raw materials. We do not expect current supply chain interruptions will impact our ongoing manufacturing operations. With respect to customer delivery, MACI final product has an established shelf life of six (6) days and established shipping shelf life of three (3) days. Currently, MACI is picked up by courier and shipped by commercial air or ground transportation to customer surgical sites. Epicel final product has an established shelf life of 48 hours and is hand carried to customer hospitals by courier. Transportation is primarily by commercial or charter airline. Although we have not experienced material shipping delays or materially increased costs to date, significant disruption of air travel could result in the inability to deliver MACI or Epicel final products to customer sites within appropriate timeframes, which could further adversely impact our business. At this time, we are not aware of COVID-19-related impacts on our distributors, operations or third-party service providers’ ability to manage patient cases.
We believe it is possible that we could continue to experience variable impacts on our business, should the current resurgence of COVID-19 in various areas of the United States continue for an extended period, or should a new resurgence occur in the future. Measures taken to limit the impact of COVID-19 at the international, national and local levels, including the availability and effectiveness of COVID-19 vaccines, shelter-in-place orders, social distancing measures, travel bans and restrictions, and business and government shutdowns, may again create significant negative economic impacts on a global basis. Given that uncertainty, we cannot reliably estimate the extent to which the COVID-19 pandemic may continue to impact utilization and revenue of our products for the remainder of 2021 and beyond.
For a discussion of additional risks associated with COVID-19, please see Item 1A. Risk Factors.
Manufacturing
We have a cell-manufacturing facility in Cambridge, Massachusetts which is used for U.S. manufacturing and distribution of MACI and Epicel.
Product Portfolio
Our marketed products include two FDA-approved autologous cell therapies. MACI, a third-generation autologous implant for the repair of symptomatic, full-thickness cartilage defects of the knee in adult patients and Epicel, a permanent skin replacement for adult and pediatric patients with deep dermal or full thickness burns greater than or equal to 30% of TBSA. Both products are currently marketed in the U.S. In addition, we have entered into exclusive license and supply agreements with MediWound to commercialize NexoBrid in North America, following regulatory approval. As previously mentioned, MediWound has submitted a BLA to the FDA seeking commercial approval of NexoBrid. On June 29, 2021, we announced that MediWound had received a CRL in response to the BLA and that the Company is committed to working with MediWound and the FDA to respond to the CRL to seek the potential approval of NexoBrid.
MACI
MACI is a third-generation autologous chondrocyte implantation (ACI) product for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults.
Our target audience of U.S. physicians is approximately 5,000 orthopedic surgeons and is divided into two segments - a group of orthopedic surgeons who self-identify and/or have a formal specialty as sports medicine physicians, and a sub-population of general orthopedic surgeons who perform a high volume of cartilage repair procedures. As of the date of this report, we currently have 76 MACI sales representatives to enable the sales force to reach our target audience. Most private payers have a medical policy that covers treatment with MACI with the top 30 largest commercial payers having a formal medical policy for MACI or ACI in general. Even for private payers that have not yet approved a medical policy for MACI, for medically appropriate cases, we often obtain approval on a case-by-case basis. For the three and nine months ended, September 30, 2021, net revenue for MACI was $23.9 million and $74.2 million, respectively, and $24.4 million and $59.7 million, respectively, for the same periods in 2020.
Epicel
Epicel is a permanent skin replacement for deep dermal or full-thickness burns greater than or equal to 30% of TBSA. Epicel is regulated by the Center for Biologics Evaluation and Research, or CBER of the U.S. Food and Drug Administration under medical device authorities, and is the only FDA-approved cultured epidermal autograft product available for large total surface area burns. Epicel was designated as a HUD in 1998 and a Humanitarian Device Exception (HDE) application for the product was submitted in 1999. HUDs are devices that are intended for diseases or conditions that affect fewer than 8,000 individuals annually in the U.S. Under an HDE approval, a HUD cannot be sold for an amount that exceeds the cost of research and development, fabrication and distribution unless certain conditions are met. A HUD is eligible to be sold for profit after receiving HDE approval if the device meets certain eligibility criteria, including where the device is intended for the treatment of a disease or condition that occurs in pediatric patients and such device is labeled for use in pediatric patients. If the FDA determines that a HUD meets the eligibility criteria, the HUD is permitted to be sold for profit so long as the number of devices distributed in any calendar year does not exceed the Annual Distribution Number (ADN). The ADN is defined as the number of devices reasonably needed to treat a population of 8,000 individuals per year in the U.S.
On February 18, 2016, the FDA approved our HDE supplement to revise the labeled indications of use for Epicel to specifically include pediatric patients. The revised product label also now specifies that the probable benefit of Epicel, mainly related to survival, was demonstrated in two Epicel clinical experience databases and a physician-sponsored study comparing outcomes in patients with massive burns treated with Epicel relative to standard care. Because of the change in the label to specifically include use in pediatric patients, Epicel is no longer subject to the HDE profit restrictions. In conjunction with adding the pediatric labeling and meeting the pediatric eligibility criteria, the FDA has determined the ADN number for Epicel is 360,400 which is approximately 45 times larger than the volume of grafts sold in 2019. We currently have a thirteen-person field force comprised of seven (7) account managers and six (6) burn clinical specialists, led by a regional and a national sales director. For the three and nine months ended September 30, 2021, net revenue for Epicel was $9.8 million and $31.8 million, respectively, and $6.7 million and $18.0 million, respectively, for the same periods in 2020.
NexoBrid
Our portfolio also includes NexoBrid, a registration-stage, topically-administered biological product that enzymatically removes nonviable burn tissue, or eschar, in patients with deep partial and full-thickness thermal burns. On June 30, 2020, we announced MediWound's submission of a BLA to the FDA seeking the approval of NexoBrid. On June 29, 2021, the Company
announced that MediWound received a CRL from the FDA regarding the BLA, through which the FDA communicated to MediWound that it had completed its review of the BLA, as amended, and had determined that it cannot approve the BLA in its present form. The Company announced further that it is committed to working with MediWound and the FDA on the next steps to address the issues identified in the CRL to seek the potential approval of NexoBrid. See "Risk Factors - NexoBrid’s approval in the United States for the treatment of severe burns may be further delayed, and it may not be approved for use in the United States and other North American markets at all."
NexoBrid is approved in the European Union and other international markets and has been designated as an orphan biologic in the United States, European Union and other international markets. Pursuant to the terms of our existing license agreement, if the BLA is approved, MediWound will transfer the BLA to Vericel and Vericel will market NexoBrid in the U.S. Both MediWound and Vericel, under the supervision of a Central Steering Committee comprised of members of both companies will continue to guide development of NexoBrid in North America. Under our license agreement with MediWound, NexoBrid is being manufactured for BARDA prior to approval by the FDA under an emergency use authorization. For the three and nine months ended September 30, 2021, $0.8 million and $2.6 million, respectively, of net revenue associated with delivery of NexoBrid to BARDA was recorded, and $1.2 million during the three months ended September 30, 2020.
Results of Operations
Net Income (loss)
Our net loss for the three and nine months ended September 30, 2021 totaled $4.9 million and $12.0 million, respectively, and for the same periods of 2020, we had net income of $3.6 million and net loss of $9.4 million, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(In thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net revenue
|
|
$
|
34,506
|
|
|
$
|
32,258
|
|
|
$
|
108,593
|
|
|
$
|
78,950
|
|
Cost of product sales
|
|
12,408
|
|
|
9,787
|
|
|
36,600
|
|
|
28,369
|
|
Gross profit
|
|
22,098
|
|
|
22,471
|
|
|
71,993
|
|
|
50,581
|
|
Total operating expenses
|
|
27,059
|
|
|
18,954
|
|
|
83,988
|
|
|
60,498
|
|
Income (loss) from operations
|
|
(4,961)
|
|
|
3,517
|
|
|
(11,995)
|
|
|
(9,917)
|
|
Other income
|
|
30
|
|
|
101
|
|
|
205
|
|
|
561
|
|
Tax expense
|
|
—
|
|
|
—
|
|
|
(215)
|
|
|
—
|
|
Net Income (loss)
|
|
$
|
(4,931)
|
|
|
$
|
3,618
|
|
|
$
|
(12,006)
|
|
|
$
|
(9,356)
|
|
Net Revenue
The net revenue increase for the three months ended September 30, 2021 compared to the same period in 2020, was driven by Epicel volume growth. The net revenue increase for the nine months ended September 30, 2021 compared to the same period in 2020, was driven by volume growth for both MACI and Epicel. Additionally, for the three and nine months ended September 30, 2021, we recorded $0.8 million and $2.6 million, respectively, of revenue associated with delivery of NexoBrid to BARDA for emergency response preparedness.
Net revenue by product for the three and nine months ended September 30, 2021 and 2020 are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
Revenue by product (In thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
MACI
|
|
$
|
23,881
|
|
|
$
|
24,357
|
|
|
$
|
74,205
|
|
|
$
|
59,747
|
|
Epicel
|
|
9,837
|
|
|
6,663
|
|
|
31,820
|
|
|
17,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NexoBrid
|
|
788
|
|
|
1,238
|
|
|
2,568
|
|
|
1,238
|
|
Total Revenue
|
|
$
|
34,506
|
|
|
$
|
32,258
|
|
|
$
|
108,593
|
|
|
$
|
78,950
|
|
Seasonality. The effects of the COVID-19 pandemic has disrupted the normal seasonality of our MACI business at times over the past nineteen months. These effects included, among others, the temporary limitation of elective surgical procedures throughout the country, the inability of our Clinical Account Specialists to call on surgeon customers and, we believe, a reduction in the number of patients seeking treatment for cartilage damage. In the four years preceding 2020, ACI sales volumes from the first through the fourth quarter on average represented 19% (16%-24% range), 23% (21%-25% range), 22%
(20%-23% range) and 36% (32%-38% range) respectively, of total annual volumes. MACI orders are consistently stronger in the fourth quarter due to several factors including insurance deductible limits and the time of year patients prefer to start rehabilitation. Due to COVID-19, the seasonality in 2020 did not follow our historical patterns, and seasonality in 2021 has been and could continue to be impacted by COVID-19 related factors, as well - such as patient behavior and vacations and the spread of the COVID-19 Delta variant. Due to the low incidence and variable occurrence of severe burns, Epicel revenue has inherent variability from quarter-to-quarter and does not exhibit significant seasonality. Over the past four years, Epicel revenue in a single quarter has ranged from as high as 38% to as low as 18% of annual revenue.
Gross Profit and Gross Profit Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(In thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Gross profit
|
|
$
|
22,098
|
|
|
$
|
22,471
|
|
|
$
|
71,993
|
|
|
$
|
50,581
|
|
Gross profit %
|
|
64
|
%
|
|
70
|
%
|
|
66
|
%
|
|
64
|
%
|
Gross profit decreased for the three months ended September 30, 2021 compared to the same period in 2020 primarily due to higher stock-based compensation expense, an increase in manufacturing headcount and a decrease in MACI sales driven by the impact of MACI implant scheduling that occurred due to the Delta variant's spread and its disruption to healthcare systems. Gross profit increased for the nine months ended September 30, 2021, primarily due to continued growth of both products, the impacts of the COVID-19 pandemic in the prior year, and increased units of procured NexoBrid to BARDA that led to higher revenue related to NexoBrid, compared to the prior period in 2020.
Research and Development Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(In thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Research and development costs
|
|
$
|
4,284
|
|
|
$
|
2,913
|
|
|
$
|
12,363
|
|
|
$
|
9,902
|
|
The following table summarizes research and development expenses which include license fees, materials, professional fees and the approximate allocation of employee-related salary and fringe benefit costs for our research and development projects:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(In thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACI
|
|
$
|
2,572
|
|
|
$
|
1,655
|
|
|
$
|
6,993
|
|
|
$
|
5,425
|
|
|
|
|
|
|
|
|
|
|
Epicel
|
|
992
|
|
|
685
|
|
|
3,157
|
|
|
2,397
|
|
NexoBrid
|
|
720
|
|
|
573
|
|
|
2,213
|
|
|
2,080
|
|
|
|
|
|
|
|
|
|
|
Total research and development costs
|
|
$
|
4,284
|
|
|
$
|
2,913
|
|
|
$
|
12,363
|
|
|
$
|
9,902
|
|
Research and development expenses for the three months ended September 30, 2021 were $4.3 million, compared to $2.9 million for the same period in 2020. Research and development costs continue to be centered around process development and regulatory and medical affairs for MACI and Epicel. The increase is primarily due to an increase of $0.7 million in stock-based compensation expense compared to the same period a year ago.
Research and development expenses for the nine months ended September 30, 2021 were $12.4 million, compared to $9.9 million for the same period in 2020. The increase is primarily due to an increase of $1.8 million in stock-based compensation expense compared to the same period a year ago.
Selling, General and Administrative Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(In thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Selling, general and administrative costs
|
|
$
|
22,775
|
|
|
$
|
16,041
|
|
|
$
|
71,625
|
|
|
$
|
50,596
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses for the three months ended September 30, 2021 were $22.8 million compared to $16.0 million for the same period in 2020. The increase in selling, general and administrative expenses during the three months ended September 30, 2021, compared to the same period in 2020, is primarily due to a $4.6 million increase in stock-based compensation expenses.
Selling, general and administrative expenses for the nine months ended September 30, 2021 were $71.6 million, compared to $50.6 million for the same period in 2020. The increase in selling, general and administrative expenses during the nine months ended September 30, 2021, compared to the same period in 2020, is primarily due to a $12.1 million increase in stock-based compensation expenses, a $1.0 million increase in MACI expenses driven by the sales force expansion in 2020, a $1.2 million increase in patient reimbursement support services as a result of higher MACI volume, an increase in headcount and a recovery of marketing activities that were partially reduced during 2020, because of COVID-19.
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(In thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net interest income
|
|
$
|
43
|
|
|
$
|
119
|
|
|
$
|
160
|
|
|
$
|
569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
(13)
|
|
|
(18)
|
|
|
45
|
|
|
(8)
|
|
Total other income
|
|
$
|
30
|
|
|
$
|
101
|
|
|
$
|
205
|
|
|
$
|
561
|
|
The decrease in other income for the three and nine months ended September 30, 2021, compared to the same periods in 2020 is due primarily to the decreasing rates of return on our investments in various marketable debt securities compared to the prior period.
Stock Compensation
Non-cash stock-based compensation expense included in cost of product sales, research and development expenses and selling, general and administrative expenses is summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(In thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Cost of product sales
|
|
$
|
1,114
|
|
|
$
|
481
|
|
|
$
|
3,313
|
|
|
$
|
1,541
|
|
Research and development
|
|
1,126
|
|
|
458
|
|
|
3,222
|
|
|
1,455
|
|
Selling, general and administrative
|
|
6,356
|
|
|
1,736
|
|
|
19,946
|
|
|
7,823
|
|
Total non-cash stock-based compensation expense
|
|
$
|
8,596
|
|
|
$
|
2,675
|
|
|
$
|
26,481
|
|
|
$
|
10,819
|
|
The increase in stock-based compensation expense for the three and nine months ended September 30, 2021 compared to the same periods in 2020, is due primarily to increases in stock prices which impact the fair value of the options and restricted stock units awarded and the expense recognized in the period.
As of September 30, 2021, there was approximately $43.5 million of total unrecognized compensation cost related to non-vested service-based stock options granted under the 2019 Plan and the Prior Plans, compared to $13.1 million as of December 31, 2020. That cost is expected to be recognized over a weighted-average period of 3.2 years.
As of September 30, 2021, there was approximately $10.6 million of total unrecognized compensation cost related to non-vested restricted stock units granted under the 2019 Plan and Prior Plans, compared to $2.1 million as of December 31, 2020. That cost is expected to be recognized over a weighted-average period of 3.1 years. The estimated unrecognized compensation cost is not reduced by expected forfeitures.
Liquidity and Capital Resources
Since our acquisition of MACI and Epicel in 2014, our primary focus has been to invest in our existing commercial business with the goal of growing revenue. We have raised significant funds in order to complete our product development programs and to market and commercialize our products, and product candidates. To date, we have financed our operations primarily through cash received through Epicel and MACI sales, debt and public and private sales of our equity securities. We generated $18.5 million in operating cash flows during the nine months ended September 30, 2021, and we may finance our operations through the sales of equity securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
(In thousands)
|
|
2021
|
|
2020
|
Cash provided by operating activities
|
|
$
|
18,489
|
|
|
$
|
6,235
|
|
Cash provided by (used for) investing activities
|
|
(5,386)
|
|
|
8,518
|
|
Cash provided by financing activities
|
|
7,830
|
|
|
1,987
|
|
Net increase in cash, cash equivalents and restricted cash
|
|
$
|
20,933
|
|
|
$
|
16,740
|
|
Our cash and cash equivalents totaled $54.6 million, short-term investments totaled $43.7 million and long-term investments totaled $20.2 million as of September 30, 2021. The $18.5 million of cash provided by operations during the nine months ended September 30, 2021 was primarily the result of non-cash charges of $26.5 million related to stock compensation expense, $3.4 million of operating lease amortization and $2.2 million in depreciation and amortization expense, which offset our $12.0 million net loss. Additionally, there was a decrease in accounts receivable of $5.6 million and an increase in inventory of $3.7 million primarily to meet increased production needs.
Our cash and cash equivalents totaled $43.6 million and short-term investments totaled $42.0 million as of September 30, 2020. The $6.2 million of cash provided by operations during the nine months ended September 30, 2020 was the primarily the result of non-cash charges of $10.8 million in stock compensation expense and $1.6 million in depreciation and amortization expense, which offset our $9.4 million net loss. Additionally, there was a decrease in accounts receivable of $6.0 million.
The change in cash used in investing activities during the nine months ended September 30, 2021 was the result of $50.9 million of investment sales and maturities offset by $49.4 million in investment purchases and property and equipment purchases of $6.9 million primarily for manufacturing upgrades through September 30, 2021. The cash provided by investing activities for the nine months ended September 30, 2020 was the result of $39.1 million of investment sales and maturities offset by $29.0 million in short term investment purchases, and property plant and equipment purchases of $1.6 million primarily for manufacturing upgrades and leasehold improvements.
The change in cash provided by financing activities was the result of net proceeds from the exercise of stock options and the employee stock purchase plan of $9.7 million, partially offset by the payment of employee withholding taxes related to the vesting of restricted stock units of $1.6 million during the nine months ended September 30, 2021. The change in cash provided from financing activities during the nine months ended September 30, 2020 was the result of proceeds from the exercise of stock options and the employee stock purchase plan of $2.2 million, slightly offset by the payment of employee withholding taxes related to the vesting of restricted stock units of $0.2 million.
We believe that our current cash on hand, cash equivalents and investments will be sufficient to support our current operations through at least 12 months from the issuance of these Condensed Consolidated Financial Statements. However, the ongoing effects of the COVID-19 pandemic continue to evolve and may result in irrecoverable losses from customers.
On August 27, 2021, we entered into a Sales Agreement with SVB Leerink LLC, as sales agent (SVB Leerink), pursuant to which we may offer and sell up to $200.0 million of shares of our common stock, no par value per share (ATM Shares). The ATM Shares to be offered and sold under the Sales Agreement will be issued and sold pursuant to an automatically effective shelf registration statement on Form S-3ASR (File No. 333-259119) filed by us on August 27, 2021, which expires three years from the filing date. We also filed a prospectus supplement relating to the offering and sale of the ATM Shares on August 27, 2021. We are not obligated to make any sales of ATM Shares, and SVB Leerink is not required to sell any specific number or dollar amount of the ATM Shares under the Sales Agreement. As of September 30, 2021, we have sold no shares pursuant to the Sales Agreement.
If revenue declines for a sustained period, we may need to access additional capital; however, we may not be able to obtain financing on acceptable terms or at all. Market volatility could also adversely impact our ability to access financing when needed. The terms of any financing may adversely affect the holdings or the rights of our shareholders. Actual cash requirements may differ from projections and will depend on many factors, including any future impacts of the COVID-19 pandemic, the level of future research and development, the scope and results of ongoing and potential clinical trials, the costs involved in filing, prosecuting and enforcing patents, the need for additional manufacturing capacity, competing technological and market developments, costs of possible acquisition or development of complementary business activities, and the cost to market our products.
Off-Balance Sheet Arrangements
At September 30, 2021, we were not party to any off-balance sheet arrangements.
Critical Accounting Policies
Our Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these Condensed Consolidated Financial Statements requires the application of appropriate technical accounting rules and guidance, as well as the use of estimates. The application of these policies necessarily involves judgments regarding future events. These estimates and judgments, in and of themselves, could materially impact the Condensed Consolidated Financial Statements and disclosures based on varying assumptions. The accounting policies discussed in our Annual Report are considered by management to be the most important to an understanding of the consolidated financial statements because of their significance to the portrayal of our financial condition and results of operations. There have been no material changes to that information disclosed in our Annual Report during the nine months ended September 30, 2021.
Cautionary Note Regarding Forward-Looking Statements
This report, including the documents incorporated by reference herein, contain certain statements that describe our management’s beliefs concerning future business conditions, plans and prospects, growth opportunities and the outlook for our business based upon information currently available. Such statements are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). Wherever possible, we have identified these forward-looking statements by words such as “will,” “may,” “anticipates,” “believes,” “intends,” “estimates,” “expects,” “plans,” “projects,” “trends,” “opportunity,” “current,” “intention,” “position,” “assume,” “potential,” “outlook,” “remain,” “continue,” “maintain,” “sustain,” “seek,” “target,” “achieve,” “continuing,” “ongoing,” and similar words or phrases, or future or conditional verbs such as “would,” “should,” “could,” “may,” or similar expressions. These forward-looking statements are based upon assumptions our management believes are reasonable. Such forward-looking statements are subject to risks and uncertainties which could cause our actual results, performance and achievements to differ materially from those expressed in, or implied by, these statements, including, among others, the risks and uncertainties listed in our Annual Report under “Part I, Item 1A Risk Factors.”
Because our forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different and any or all of our forward-looking statements may turn out to be wrong. Forward-looking statements speak only as of the date made and can be affected by assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in our Annual Report will be important in determining future results. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. Consequently, we cannot assure you that our expectations or forecasts expressed in such forward-looking statements will be achieved. Except as required by law, we undertake no obligation to publicly update any of our forward-looking or other statements, whether as a result of new information, future events, or otherwise. These forward-looking statements include statements regarding:
•manufacturing and facility capabilities;
•potential strategic collaborations with others;
•future capital needs and financing sources;
•adequacy of existing capital to support operations for a specified time;
•reimbursement for our products;
•the timing of a response to the FDA’s CRL regarding the NexoBrid BLA;
•the timing of the FDA’s review of any resubmission of the NexoBrid BLA;
•expectations regarding approval by the FDA of the NexoBrid BLA;
•product development and marketing plans;
•features and successes of our therapies;
•clinical trial plans, including publication thereof;
•the effects of the COVID-19 pandemic on our business, including economic slowdowns or recessions, impact to our operations or to the healthcare industry generally, which could reduce demand for our products;
•anticipation of future losses;
•replacement of manufacturing sources;
•commercialization plans; or
•revenue expectations and operating results.