COMPANY PRESENTATION JANUARY 2019

Transcription

1 COMPANY PRESENTATION JANUARY 2019

2 Safe Harbor This presentation contains forward-looking statements, including, without limitation, statements concerning anticipated progress, objectives and expectations regarding profitability, growth in revenue, the commercial potential of our products, intended product development, clinical trial and regulatory plans and progress, objectives and expectations, all of which involve certain risks and uncertainties. These statements are often, but are not always, made through the use of words or phrases such as anticipates, intends, estimates, plans, expects, we believe, we intend, target, goals and similar words or phrases, or future or conditional verbs such as will, would, should, potential, could, may, or similar expressions. Actual results may differ significantly from the expectations contained in the forward-looking statements. Among the factors that may result in differences are the inherent risks and uncertainties associated with our financial goals, competitive developments, clinical trial and product development activities, regulatory approval requirements, ability to achieve or sustain profitability, our need to generate significant sales to become profitable, potential fluctuations in sales volumes and our results of operations, estimating the commercial potential of our products and product candidates and growth in revenues and improvement in costs, market demand for our products, our ability to secure consistent reimbursement for our products, changes in third party coverage and reimbursement, any disruption or delays in operations at our facilities, our dependence on a limited number of third party suppliers, our ability to maintain and expand our network of direct sales employees our long-term plans and our ability to supply or meet customer demand for our products. These and other significant factors are discussed in greater detail in Vericel s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission ( SEC ) on March 5, 2018, Quarterly Reports on Form 10-Q and other documents filed by the Company with the SEC from time to time. These forward-looking statements reflect management s current views and Vericel does not undertake to update any of these forwardlooking statements to reflect a change in its views or events or circumstances that occur after the date of this release except as required by law. 2

3 Vericel is a leader in advanced cell therapies for the sports medicine and severe burn care markets I N V E S T M E N T H I G H L I G H T S L E A D I N G R E S T O R A T I V E C A R T I L A G E R E P A I R P R O D U C T in the sports medicine market L E A D I N G P E R M A N E N T S K I N R E P L A C E M E N T in the severe burn care field Innovative Advanced Therapy Platform Combination device/biologics that use a patient s own cells to repair tissue and restore function 3

4 Vericel is a leader in advanced cell therapies for the sports medicine and severe burn care markets I N V E S T M E N T H I G H L I G H T S 4 2 % T R A I L I N G T W E L V E M O N T H R E V E N U E G R O W T H * Total TTM revenues of $82.9 million* $ 2 B + C U R R E N T A D D R E S S A B L E M A R K E T S Underpenetrated and growing Top-Tier Revenue Growth Driven by momentum of MACI launch uptake and expanded Epicel utilization * As of September 30,

5 Vericel is a leader in advanced cell therapies for the sports medicine and severe burn care markets I N V E S T M E N T H I G H L I G H T S V O L U M E G R O W T H D R I V I N G G R O S S M A R G I N E X P A N S I O N Marginal COGS < 20% for MACI and Epicel S U B S T A N T I A L O P E R A T I N G M A R G I N L E V E R A G E Premium products with concentrated call points Significant Gross Margin and Operating Margin Expansion 5

6 Vericel is a leader in advanced cell therapies for the sports medicine and severe burn care markets I N V E S T M E N T H I G H L I G H T S C A S H O N H A N D Cash and short-term investments of ~$98 million* to execute operating and strategic business plans S H A R E H O L D E R B A S E Strong institutional healthcare shareholder base Strong Balance Sheet * As of September 30,

7 A R T I C U L A R C A R T I L A G E Articular Cartilage Structure and Function A R T I C U L A R C A R T I L A G E I S A H I G H LY S P E C I A L I Z E D C O N N E C T I V E T I S S U E O F S Y N O V I A L J O I N T S Articular cartilage function Provide a smooth, lubricated surface allowing for nearly frictionless movement Facilitate transmission of loads to underlying subchondral bone Protect joints from compressive, tensile and shearing forces Chondrocytes are the resident cells responsible for the production, maintenance and repair of cartilage 7

8 Knee Cartilage Defects and Treatment Options A R T I C U L A R C A R T I L A G E I N J U R Y I S A C A U S E O F S I G N I F I C A N T M U S C U L O S K E L E TA L M O R B I D I T Y Cartilage defects are found in ~60% of knee arthroscopies Damage is caused by acute and repetitive trauma, degenerative and inflammatory conditions Limited capacity for intrinsic healing and repair Devoid of blood vessels, nerves, or lymphatics Mature chondrocytes have limited potential for replication Untreated lesions may lead to debilitating joint pain, dysfunction, and osteoarthritis T R E A T M E N T G O A L S Reduce symptoms Improve function Prevent degeneration P A L L I A T I V E R E P A R A T I V E R E S T O R A T I V E Techniques intended to relieve or prevent pain with little repair of underlying defect Lavage and debridement Thermal chondroplasty Marrow-stimulation techniques that result in formation of fibrocartilage Microfracture/microdrilling Augmented microfracture Techniques designed to recreate hyaline-like cartilage at the site of the defect Autologous chondrocyte implant Autograft or allograft 8

9 MACI 3 rd Generation Autologous Chondrocyte Implant for the Treatment of Knee Cartilage Defects Cross section of ACI-Maix membrane at 75X magnification High magnification SEM shows chondrocyte attachment to collagen fibers MACI is the first tissue-engineered autologous cellularized scaffold product approved by the FDA 9

10 MACI Production and Administration BIOPSY TAKEN CHONDROCYTES EXTRACTED, EXPANDED, & LOADED DEFECT DEBRIDED TEMPLATE CREATED MACI creates a repair tissue that allows patients to resume an active lifestyle MACI DELIVERED MACI IMPLANTED 10

11 MACI Label Indications and Usage 1. Indications and Usage MACI (autologous cultured chondrocytes on porcine collagen membrane) is an autologous cellularized scaffold product indicated for the repair of single or multiple symptomatic, full-thickness cartilage defects of the knee with or without bone involvement in adults. Limitations of Use Effectiveness of MACI in joints other than the knee has not been established. Safety and effectiveness of MACI in patients over the age of 55 years have not been established. I N D I C A T E D U S E D E F E C T L O C A T I O N D E F E C T S I Z E N U M B E R O F D E F E C T S B O N E I N V O L V E M E N T MACI Label Highlights First-line treatment Cartilage defects of the knee, including patella No limitation Single or multiple With or without bone involvement 11

12 Significant MACI Administration Advantages Carticel Technically exacting procedure Required arthrotomy, periosteal patch harvest and sutures Extended surgical time MACI Simpler, less invasive ACI procedure Eliminates periosteal harvest and sutures Significant reduction in surgical time Uniform distribution of cells Improved post-operative course Simpler, less invasive MACI procedure appeals to broader surgeon and patient populations 12

13 SUMMIT Clinical Study Results Superiority of MACI Implant Versus Microfracture Treatment KOOS Pain and Function Co-Primary Endpoint at Year 2 P = Improvement in Score (Mean Score) Pain Function MACI demonstrated statistically significantly greater improvement in the co-primary endpoint of KOOS pain and function (SRA) scores compared to microfracture at year 2 MACI (n=72) Microfracture (n=69) KOOS Subscale The American Journal of Sports Medicine (2014) 42(6),

14 SUMMIT Clinical Study Results Response Rate Response Rate* 100% P = % KOOS Response Rate (%) 80% 70% 60% 50% 40% 30% 20% 87.50% 68.10% 31.90% The proportion of patients responding to treatment was statistically significantly greater with MACI compared to microfracture at year 2 10% 0% MACI 12.50% Microfracture Responders Non-Responders *Response defined as 10-point improvement in both pain and function subscores. The American Journal of Sports Medicine (2014) 42(6),

15 SUMMIT Clinical Study Results Improvement in KOOS Pain and Function Scores Over Time Difference in KOOS Pain (95% CI) Weeks MACI MFX Difference in KOOS Function (95% CI) Weeks MACI MFX A significant improvement for MACI over microfracture was observed for the KOOS pain and function subscales as early as 36 weeks, and was maintained at 52 and 104 weeks The American Journal of Sports Medicine (2014) 42(6),

16 SUMMIT Extension Study Improvement in KOOS Pain and Function Scores With MACI Over Microfracture Was Maintained to 5 Years Mean Change from Baseline In KOOS Pain Weeks MACI Microfracture Mean Change from Baseline In KOOS Function Weeks MACI Microfracture Overall efficacy data support a long-term clinical benefit from the use of MACI in patients with cartilage defects of the knee The American Journal of Sports Medicine (2018) 46(6),

17 MACI Rehabilitation Protocol Rehabilitation Timelines for ACI procedures: Time to Weight-Bearing 1 % Weight Bearing 100% 80% 60% 40% 20% 0% MACI Carticel Rehabilitation Week Published MACI rehabilitation protocols achieve full weight-bearing in 6-8 weeks compared to weeks for published Carticel rehabilitation protocols Minas 1999 Ebert 2012 Edwards Ebert J et al, Osteoarthritis & Cartilage 2008; Edwards PK et al, AJSM

18 Large Addressable Cartilage Repair Market for MACI Estimated Annual Addressable Patient Population (U.S.) ~750,000 1 Cartilage Repair Procedures ~315,000 2 Patients Consistent With Label ~125,000 2 Patients MD s Consider Clinically Appropriate For MACI $ 2+ Billion Addressable Market in the U.S. ~60,000 2 Patients With Larger Lesions 1 Health Advances LLC MACI market assessment report (2018), Vericel data, LexisNexis, Medtech Insight, NY SASD, SmartTRAK, LSI, PSPS, McCormick, Frank et al. Arthroscopy, (2014) 30(2): 222-6, Montgomery, et al. Knee Surg Sports Traumatol Arthrosc (2014) 22: Health Advances LLC MACI market assessment report (2018). 18

19 MACI Sales Force Expansion Supported by Additional Investments Carticel (21 Representatives) 2017 MACI Launch (28 Representatives) 2018 MACI (40 Representatives) C O V E R A G E O F S U R G E O N TA R G E T S ( % ) 6 0 % 7 5 % 9 0 % 2019 MACI (Planned) (48 Representatives) 9 0 % + Surgeon Training Payer Access Case Management Patient Engagement Maintaining investment on par with launch year More than 800 surgeons trained to date, with ~50% of trained surgeons coming from former and non-carticel user segments Achieved payer access for MACI consistent with Carticel within nine months of launch Priority shifts to improved Medical Policy and reimbursement pathways Expanded by 33% to meet increased physician, patient and sales force demand Considerable expansion of investment to increase biopsy conversion rate Secure patient contact consent Rehabilitation experience Patient testimonials & advocacy 19

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21 E P I C E L O V E R V I E W Epicel is a permanent skin replacement for full thickness burns 30% of total body surface area Only FDA-approved permanent skin replacement for adult and pediatric patients with full-thickness burns Important treatment option for severe burn patients where little skin is available for autografts 21

22 Epicel Production and Administration B I O P S Y H A R V E S T G R A F T S A P P L I E D K E R A T I N O C Y T E E X P A N S I O N Production Administration T A K E D O W N P R O C E D U R E E P I C E L G R A F T N E W S K I N E X P O S E D 22

23 Comparison of Epicel Patient Database to National Burn Repository 1 Data Demonstrates Lower Mortality Rate Mortality Rate by TBSA Decile Stratified CMH Chi-square p < Chi-square for all subgroups > 40%TBSA p < Mortality Rate (%) >90 Epicel, N=936 National Burn Repository N=177,498 Percent TBSA Burned Twenty-five Years Experience and Beyond with Cultured Epidermal Autografts (CEA) for Coverage of Large Burn Wounds in Adult and Pediatric Patients, ; Hickerson, American Burn Association Annual Meeting (March 23, 2017). 1 American Burn Association, National Burn Repository 2016, Version

24 Large Addressable Burn Care Market for Epicel Estimated U.S. Burn Patients 1 Epicel Grafting Burn Centers 500,000 Annual Burns (U.S.) 40,000 Hospitalized Patients 1,500 Epicel-Indicated (>30% TBSA) Patients 600 Surviving >40% TBSA Patients $ 120 Million Addressable Market in the U.S National Burn Repository Report Version 8; 2013 National Burn Repository Report Version 9; 2014 National Burn Repository Report Version Assumes 600 patients x 1.25 (25% re-order rate) x 67 grafts per order x $2,354 per graft. 24

25 Epicel Strategic Investments E X PA N D E D Commercial & Medical Affairs Team Expanded to five sales representatives, a clinical support specialist and a dedicated Regional Sales Director Hired a dedicated Product Manager and Medical Science Liaison E N H A N C E D Patient & Customer Support Programs Comprehensive peer-topeer programs, including Fellowship Programs and Medical Programs Enhanced training and reimbursement support Increased presence through sponsorships, publications, and public relations campaigns 25

26 Strong and Accelerating Total Revenue Growth Since Acquisition $25 Total Net Revenue $82.9M $Millions $20 $15 $10 $5 $0 $42.8M $58.5M* Trailing 12 Month Revenue = $82.9 million 17% CAGR since the acquisition of Carticel/MACI and Epicel, with trailing twelve month revenue growth of 42%* Pre-Acquisition Post-Acquisition *Excluding a $1.4 million net revenue reserve booked in H

27 Revenue Growth Translating into Significant Enhancement in Profitability $100 $80 $60 +$25.8M >80% of marginal revenue contributes to incremental gross profit $Millions $40 $20 +$23.4M ~50% of marginal revenue contributes to incremental EBITDA* $0 -$20 Q Q Q Q Q Q Q Q $12.8M Approaching adjusted EBITDA* breakeven point in Q on a rolling four quarter basis Revenue Gross Margin Adjusted EBITDA *See slide 31 for EBITDA to GAAP reconciliation 27

28 Strategic Transactions to Maximize Long-Term Value A D VA N C E D C E L L T H E R A P Y D E V E L O P M E N T A N D M A N U FA C T U R I N G P L AT F O R M Sports Medicine Franchise Severe Burn Care Franchise New Advanced Cell Therapy Vertical(s) Business development activities focused on opportunities having a strategic fit with current franchises or advanced cell therapy platform 28

29 Balance Sheet and Capital Structure Balance Sheet Highlights September 30, 2018 Capitalization (as of September 30, 2018) Shares Cash, Cash Equivalents and Short Term Investments Term Loan and Revolver $97.8 million $17.5 million* Common Stock 43,170,359 September 2016 Warrants (strike price=$2.25; expire September 9, 2022) December 2017 Warrants (strike price=$4.27; expire December 6, 2023) 58,537 53,902 Options Outstanding 5,174,006 Fully Diluted Shares Outstanding 48,456,804 * Term loan and revolver paid off in Q

30 Vericel is a leader in advanced cell therapies for the sports medicine and severe burn care markets. Innovative Advanced Therapy Platform Top-Tier Revenue Growth I N V E S T M E N T H I G H L I G H T S Significant Margin Expansion Potential Strong Balance Sheet 30

31 RECONCILIATION OF REPORTED NET LOSS (GAAP) TO ADJUSTED EBITDA (NON-GAAP MEASURE) UNAUDITED Rolling Four Quarters (In Thousands) Q Q Q Q Q Q Q Q Net Loss (GAAP) -13,800-18,279-23,770-13,092 Change in fair value of warrants ,269 Revenue reserve related to a dispute between pharmacy provider and payer 0 0 1,418 0 Stock compensation expense 2,374 2,532 2,580 6,366 Depreciation and amortization 1,438 1,803 1,679 1,559 Net interest expense ,094 1,171 Asset impairment 0 0 2,638 0 Adjusted EBITDA (Non-GAAP) -10,406-14,031-13,