Good day, and thank you for standing by. Welcome to the Vericel Corporation Fourth Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today’s conference is being recorded. I would now like to hand the conference call over to your first speaker today, Eric Burns, Vice President of Finance and Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Joining me on today's call are Vericel's President and Chief Executive Officer, Nick Colangelo, and our Chief Finance Officer, Joe Mara. Before we begin, let me remind you that on today's call, we will be making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995. These statements may involve risks and uncertainties that could cause actual results to differ materially from expectations, and are described more fully in our filings with the SEC. In addition, all forward-looking statements represent our views only as of today, and should not be relied upon as representing our views as of any subsequent date. Please note that a copy of our fourth quarter financial results press release and a short presentation with highlights from today's call are available in the Investor Relations section of our website. I will now turn the call over to Nick.

Thank you, Eric, and good morning, everyone. As highlighted in our preliminary results release last month, the company delivered outstanding financial and business results in 2024, generating top-tier revenue growth and even higher profitability growth, along with significant operating cash flow. The company also achieved several key business objectives for the year, including FDA approval and commercial launch of MACI Arthro, the approval of a pediatric indication for NexoBrid, and completing construction of our new corporate headquarters and manufacturing facility, which will support the company's continued growth in the years ahead. From a financial perspective, total revenue was more than $237 million as the company delivered another year of 20% total revenue growth, as well as growth of 20% or more for both the MACI and Burn Care franchises. The company also delivered significant profit growth and operating cash flow, as adjusted EBITDA increased to over $50 million. The company achieved GAAP profitability for the year, and operating cash flow increased to nearly $60 million. For the fourth quarter, the company delivered record quarterly revenue of over $75 million, as well as record profitability, highlighted by a gross margin of 78%, an adjusted EBITDA margin of 40%, and net income of nearly $20 million. MACI had a very strong close to the year, with record fourth quarter revenue of more than $68 million, representing 21% growth versus the prior year and 53% sequential growth versus the third quarter. MACI's fourth quarter performance was driven by strong underlying fundamentals as we had the highest number of MACI implants, implanting surgeons, surgeons taking biopsies, and biopsies in any quarter since launch. For the full year, MACI's results were driven by strength in its key growth drivers, including growth in biopsy surgeons and biopsies per surgeon, as well as a slight uptick in the overall biopsy conversion rate. Based on these results, MACI's sales rep productivity increased significantly to $2.6 million per rep in 2024 as our commercial team continues to execute at a very high level. The strength of these key growth drivers, together with another quarter of significant increases in the number of peer-to-peer programs and attendance at those programs, which are at the highest level at any time since launch, demonstrates that surgeon interest in MACI remains extremely high. In addition, as I'll cover following Joe's comments, several key performance indicators for the MACI Arthro launch have been very strong to date, providing significant momentum for MACI Arthro to begin the year. We also developed Burn Care into a second high-growth franchise in 2024, with full-year revenue increasing 22% to approximately $40 million. In the fourth quarter, although we had more Epicel biopsies compared to the third quarter, Epicel revenue was below recent run rates due to a lower number of patient treatments as a result of patient health issues and fewer grafts per patient. While Epicel quarterly results can be variable given the relatively small patient population and the critical nature of their injuries, overall demand for Epicel was strong in 2024, as Epicel revenue grew 16% for the year, and we generated business in several dormant accounts as a result of our expanded Burn Care sales force. NexoBrid ended the year with strengthening underlying demand as hospital orders in the fourth quarter increased 42% versus the third quarter, a strong leading indicator of continued adoption of NexoBrid. Overall, the company executed very well in 2024, and we expect continued high revenue and profitability growth, as well as an inflection in cash generation as we move into 2025 and beyond. I'll now turn the call over to Joe to provide a more detailed review of our financial results and guidance for 2025.

Thanks, Nick, and good morning, everyone. As Nick referenced, Vericel had an outstanding year in 2024, and closed out the year with very strong financial performance across the P&L. The company's substantial revenue growth translated into significant margin expansion, with both gross margin and adjusted EBITDA margin ahead of our guidance for the quarter and the full year. Revenue was in line with our pre-announced financial results, and gross margin, net income, and adjusted EBITDA results were even stronger, all coming in ahead of our preliminary financial results. Total net revenue for the year increased 20% to $237.2 million, driven by high growth for both of our franchises, with record fourth quarter revenue of $75.4 million. MACI revenue increased 20% to $197.3 million for the year, and fourth quarter revenue was $68.3 million, growing 21% versus the prior year and 53% sequentially over the third quarter, representing the highest fourth quarter sequential step-up in the last three years. Burn Care revenue for the year was $39.9 million, representing 22% growth, and consisted of $36.6 million of Epicel revenue and $3.3 million of NexoBrid revenue. In the fourth quarter, Burn Care revenue was $7 million, with $6 million of Epicel revenue and $1 million of NexoBrid revenue. Gross profit for the year was $172.1 million or 73% of net revenue, an increase of approximately 400 basis points compared to 2023. Full-year gross margin was ahead of our prior guidance and 300 basis points higher than our initial guidance of 70% to start the year. For the quarter, gross profit was $58.5 million or 78% of net revenue, which increased approximately 300 basis points versus the prior year and represents the highest gross margin for the company in any quarter to date. Total operating expenses for the year were $167.6 million compared to $142 million in 2023. For the quarter, operating expenses were $40 million compared to $35.8 million for the same period in 2023. The increase in operating expenses in 2024 was primarily due to development and commercial launch activities for MACI Arthro, increased headcount and related employee expenses, as well as additional marketing initiatives that helped drive a significant increase in physician engagement across both franchises. From a profitability perspective, the company achieved GAAP profitability for the full year, a key goal coming into the year, with net income of $10.4 million or $0.20 per share, compared to a net loss of $3.2 million or $0.07 per share in 2023, representing an improvement of over $13 million versus the prior year. In addition, net income for the fourth quarter grew 52% to $19.8 million or $0.38 per share, compared to $13 million or $0.26 per share for the fourth quarter of 2020. And net income was also significantly ahead of our preliminary results announced last month. Non-GAAP adjusted EBITDA for the year grew 58% to $53.4 million or 23% of net revenue, compared to $33.9 million or 17% of net revenue in 2023, representing an increase of approximately $20 million versus the prior year. Similar to gross margin, adjusted EBITDA margin for the year was ahead of our most recent guidance of 22% and 300 basis points ahead of the initial 20% guidance to start the year. For the quarter, adjusted EBITDA grew 34% to $29.9 million, or 40% of net revenue, an increase of over 500 basis points versus the prior year, representing the highest adjusted EBITDA margin for the company in any quarter to date. Importantly, adjusted EBITDA growth of 58% for the full year was more than double the company's top line revenue growth of 20%, as our results continue to demonstrate very strong P&L leverage and a top-tier profitability profile. The company generated operating cash flow of $58.2 million in 2024, ending the year with approximately $167 million in cash, restricted cash, and investments, and no debt, up from approximately $153 million to start the year, as our cash balance increased for the year despite significant CapEx investments in the new facility. Turning to financial guidance for 2025, we are maintaining the full year guidance announced at the start of the year, with revenue expected to grow 20% to 23%, gross margin of 73% to 74%, and adjusted EBITDA margin of 25% to 26%. In terms of our revenue guidance, we are using a similar framework as was used in 2023 and 2024 for both franchises. For MACI, we expect another strong year of revenue growth, and as a starting point, expect revenue growth similar to 2024, in the low 20% range, with biopsy surgeon growth, biopsy growth, and price continuing to serve as the primary MACI growth drivers. While MACI Arthro cases will contribute to MACI's revenue, our initial guidance to start the year does not build in a significant change in MACI's current strong growth trends. For the Burn Care franchise, we expect continued progression of NexoBrid revenue throughout the year, with full-year revenue in the high single-digit million range. As a starting point for Epicel, we expect full-year growth in the high single-digit percentage range, driven primarily by an increase in price. After a very strong close to the year in Q4, we expect MACI revenue in the first quarter to be approximately $45 million to $47 million, with a similar quarterly mix of full-year revenue as in prior years. For Burn Care, although Epicel biopsies in the first quarter currently are ahead of recent quarterly trends, patient treatments and grafts per patient continue to be at the lower end of our typical range, mainly due to patient health issues. As a starting point for the first quarter, we expect Burn Care revenue will be in the $7 million to $8 million range. Moving down the P&L, we expect another year of very strong margin expansion and profitability growth. In terms of the quarterly progression on margins, as is typical, we expect to have the lowest margins of the year in the first quarter, and expect to have the highest margins in the fourth quarter, which is our highest revenue quarter of the year. Full-year operating expenses are expected to be approximately $195 million. It is important to note that following the completion of construction of our new facility, operating expenses will now include approximately $10 million of incremental depreciation and other building-related expenses starting in 2025. Excluding these incremental building-related expenses, core operating expenses are expected to increase in the low double-digit percentage range in 2025. Finally, with the vast majority of the spend for the new facility complete, we anticipate a significant decrease in capital expenditures in 2025. We expect approximately $15 million to $20 million of CapEx in the first half of the year, primarily related to the final equipment purchases for the new facility, after which CapEx is expected to return to significantly lower annual run rates in the mid single-digit million range, with a corresponding inflection in cash generation. In total, this guidance points to continued high revenue growth and further enhancement of the company's top-tier profitability profile in 2025, which supports the increased midterm profitability targets that we announced earlier this year of gross margin in the high 70% range and adjusted EBITDA margin in the high 30% range by 2029. I'll now turn the call back over to Nick.

Thanks, Joe. The company had a strong year in 2024, and we expect continued strong performance in 2025 and the years ahead. While we're still early in the MACI Arthro launch, we're seeing significant interest in engagement with both previous MACI targets, as well as the incremental 2000 high-volume arthroscopy surgeons that are now part of our 7,000 target surgeon base. Surgeon feedback has been very positive and clearly supports the potential patient benefits noted by surgeons in our market research as the MACI Arthro procedure offers a less invasive treatment option, requiring smaller incisions, which may result in less postoperative pain and faster postoperative recovery for patients. In terms of some of the early key performance indicators for the MACI Arthro launch, we've trained approximately 250 MACI Arthro surgeons to date, have had MACI implants scheduled or completed from each of our surgeon segments of previous MACI and non-MACI users, have received a meaningful number of biopsies from our new MACI Arthro-only targets, and have had several cases treating smaller defects outside of the femoral condyles. Looking more closely at our trained surgeons, the biopsy growth rate for MACI Arthro-trained surgeons to start the year is substantially higher than surgeons that have not been trained, which would be expected to drive a potential increase in their MACI implant activity over time. And importantly, a significant percentage of the trained surgeons are those that historically used MACI primarily for patella defects, suggesting that these surgeons may be considering MACI for a broader patient population that encompasses the largest segment of the MACI addressable market. So, overall, we're very pleased with the initial launch progress and continue to believe that MACI Arthro will have a meaningful impact on overall MACI utilization and potentially bolster its current high growth trajectory. We're also encouraged by the recent positive trends for NexoBrid, with the strong sequential growth in hospital orders in the fourth quarter carrying over into this year as more centers regularly order and use NexoBrid. Importantly, the efficacy and value proposition for NexoBrid remain strong, and we have a number of key initiatives this year designed to continue to drive uptake in utilization of NexoBrid in 2025 as more centers become consistent users, and we have our larger sales force, which is now cross-trained on both products in place for the entire year. Similar to the dynamic we saw in 2024, we also expect that our larger Burn Care footprint with NexoBrid will continue to drive Epicel usage from new and dormant accounts in 2025. We also continue to advance the MACI Ankle development program, and remain on track to submit an IND in the first half of this year, and expect to initiate the Phase 3 clinical study in the second half of the year. With an estimated addressable market of $1 billion, potential MACI Ankle indication represents a substantial longer-term growth driver for MACI, and would enable the company to expand into other orthopedic markets. Finally, with construction of our new commercial manufacturing facility complete, we've initiated the tech transfer process and remain on track to begin commercial manufacturing for MACI in the new facility next year. This facility is designed to meet both US and global manufacturing requirements, which provides strategic flexibility for the company to potentially commercialize MACI outside the United States. We've recently initiated an evaluation of the market opportunities and regulatory requirements in several OUS geographies as we continue to expand the long-term growth and value-creation opportunities for the company. Overall, we believe we're very well positioned to deliver a unique combination of sustained high revenue and profitability growth in 2025 and the years ahead based on the strength of our core portfolio, the recent launch of MACI Arthro, and the continued progress on other long-term growth initiatives. This concludes our prepared remarks. We’ll now open the call to your questions.

Our first question comes from Ryan Zimmerman with BTIG. Your line is now open.

Good morning, and thanks for taking our questions. Congrats on all the progress. I want to start with MACI and guidance for the year if I could, and talk about it in the context of both the training and the contributions to MACI Arthro. When we think about the growth for MACI this year, I could be wrong, but it doesn't appear that you're assuming a meaningful contribution from MACI Arthro in the guidance. But when you reconcile that with the training, with the expectations for adoption in a broader customer base, I guess why wouldn't that come through potentially both in the first quarter, which is by my math 15% growth, but for the broader year?

Yes. So, good morning, Ryan. This is Joe. So, I'll start on this one. So, appreciate the question. So, I'd say from a framework perspective, obviously we reaffirmed the company guidance, and we think we've had a solid framework the last couple of years. And I think to your point, as we think about MACI on a full-year basis, our starting point for the year is essentially a very similar year as 2024. So, same core growth drivers, think about strong biopsies, continue to expand our surgeons and price. So, it's really the core growth drivers at MACI that gets you to call it kind of the low 20% range, something in the high 230s, call it 239, is probably a good starting point. That's about 21% growth. And I think from your question, just to comment on that, as Nick mentioned, we are seeing a number of very encouraging indicators on MACI Arthro, including that 250 trained surgeons to date. But I would say to start the year, and importantly to answer your question, we are not building in at this point a significant change in the MACI trends into the guidance to start the year. Having said that, clearly the indicators have been strong. We think there is an opportunity to potentially outperform on MACI due to MACI Arthro, but again, it's early in the year and we're not going to assume that kind of out of the gates. And then from a Q1 perspective ..

Yes, please, Joe. Yes.

Yep. So, just for MACI and Q1 on the question there, so yes, from a guidance perspective, I think a couple of important pieces to think about as you think about the first quarter. So, first off, we're essentially using the same guidance framework we used a year ago in Q1. We were also coming off a very strong fourth quarter, which was around 22%. We guided last year in the mid-teens. We ended up a little bit higher than that on a year-over-year growth basis. This year kind of similar dynamics. We're coming off a strong fourth quarter, 21%. Our guidance is in a very similar range. It's actually a little bit higher in the midpoint, around that 15%. So, first off, we just want to make sure we're consistent and have a similar approach from a year-over-year perspective. The other piece that will have an impact, as you know, we do have one fewer selling day and one fewer day for MACI cases in the quarter. So, for us, that's around 150 basis points. So, if you adjust for that, you're kind of more in that call it 16% range, which is similar to last year. So, that's kind of how we're thinking about Q1. We still think we're set up for a strong first half, and we think the MACI - the guidance in general is the right starting point for the year, including the way we're thinking about MACI Arthro.

Okay, very helpful, very clear. Maybe turn to NexoBrid for a minute here. I mean, you've historically talked, Nick, about kind of the number of ordering sites, the number of sites on P&T committee, et cetera. We didn't hear that this quarter. What do you think it's going to take to accelerate NexoBrid adoption review? And I'm also trying to reconcile the 42% order growth with the fact that NexoBrid sales just stepped down a hair from Q3 to Q4 and kind of what the expectations are for that franchise in 2025.

Yes, thanks, Ryan. So, the Q4 dynamic, as we've talked about sort of in kind of the early phase of the launch, is that hospital orders obviously were up 42%. As we've talked about before, we recognize revenue based on our specialty distributor purchases from our 3PL cardinal. And so, you can definitely have mismatches as they're managing different inventory levels to end the year, and that's really what ended up happening. So, we're really focused on the underlying hospital demand. As we mentioned in our prepared remarks, it was a pretty big progression in Q4. We've seen continued momentum as we come into the year as hospitals begin to become more consistent users and we expect that to continue. I think Joe kind of mentioned high single-digit NexoBrid revenue guidance for the year, and that's a pretty meaningful uptick versus where we were last year.

Okay. I'll hop back in queue. Thanks for taking the question.

Thank you. Our next question comes from the line of Mike Kratky with Leerink Partners. Your line is now open.

Hi, everyone. Thanks for taking our questions. One thing that stood out, you talked a little bit about the conversion rate. So, what factors would you call out that could be responsible for that uptick in the conversion rate? Do you expect to see that continue this year and beyond? And then lastly, is a potential increase in your conversion rate factored into your 2025 guidance in any capacity?

Yes, so we saw a small uptick for the year, as I mentioned, on the conversion rate. I think we've always said that as our customer base sort of matured, which was the case before we expanded our customer base for MACI Arthro from 5,000 to 7,000 surgeons, that you'd likely see a little drift. So, I think that was primarily the reason for it. As we go forward, again, we're adding a lot more surgeons that will be in the customer base with the launch of MACI Arthro. So, as Joe mentioned, we really haven't sort of factored a big movement in the conversion rate in our guidance for the year. Again, those are the kinds of things that potentially provide upside. We certainly believe that the hurdle for patients moving forward with surgery within an arthroscopic option potentially could be less. So, we're hopeful to see conversion over time, as we've always talked about, increase, but that's not baked into our guidance for the year.

Understood. That's helpful. Thanks. And then maybe just one follow-up. You had some helpful commentary on the 250 trained surgeons for MACI Arthro. Just curious if there's any color you can provide on the utilization that you're seeing from some of the new surgeons not previously trained or using MACI and how we should think about the pace at which they could start to get on board.

Yes. So, as we talked about to finish last year, Q4 obviously is kind of a big quarter for us and a lot of the activity is really bringing home the cases for Q4, and we were very successful with that. And so, from our perspective, the MACI Arthro launch is really kicking into full gear to start this year. As you know, we’re kind of giving you some commentary right now around biopsies because that's sort of a leading indicator for us, right? And we did mention that we've seen either cases scheduled or completed from all four of the MACI user and non-user previous segments. So, that's obviously very encouraging. When you have the trained surgeon biopsy growth outperforming sort of the total, that's encouraging. And so, I think all these indicators give us a lot of optimism about the potential impact of MACI Arthro. We are, as you know, given the sort of timelines from biopsies to implants, we're kind of in the early innings here, but just wanted to share some commentary on sort of the early leading indicators and what we've seen with MACI Arthro to date.

Got it. Thanks very much.

Thank you. One moment for our next question. Our next question comes from Richard Newitter with Truist Securities. Your line is now open.

Hi, this is Felipe Lamar on for Rich. Just, you guys are making real progress on physicians being trained. I think it was 250 in 2024. Looking out to 2025, can you just give us some color on any incremental physicians being added and expectations for potentially like revenue, like incremental revenue growth contributions for 2025? Thank you.

Yes, so just to be clear, we ended the year with 150 trained surgeons, as we talked about at the J.P. Morgan Conference. And then as of now, we're up to around 250 surgeons, so good progression to start the year in 2025. Obviously, our commercial team has a goal that they would like to get to and we would expect over the course of this year, obviously that we'll continue to train a meaningful number of surgeons. And as Joe alluded to, we haven't baked in, obviously we’re already doing MACI Arthro cases, as we talked about during Q4, and that obviously is continuing into Q1. We have not yet - I mean, the reality is the guidance for the year is already above MACI growth for last year. So, obviously, we're maintaining and expecting some increase in the growth rate. But there's obviously some upside to that if MACI Arthro progresses, as we hope it will.

Great. And then just on the high single-digit growth guide for Epicel, I know performance has been a little bit lumpy, so if you could help us understand the cadence of growth for Epicel through 2025, that would be helpful. Thank you.

Yes, so from an Epicel perspective, if you think about the framework, I think a couple of important points. So, last year, obviously there was some quarterly variability, but from a full-year perspective, the performance was very strong. We grew 16% on a full-year basis. We had a higher share of voice in the market with NexoBrid. We had an expanded sales force for part of the year. So, a lot of good signs on Epicel in 2024. I think to start the year, we're probably going to be a little bit more conservative perhaps, or a little bit more of a traditional guide on Epicel, which is in that high single-digit range. So, that probably gets you to kind of around $40 million plus or minus. I think as you think about the framework, one important point, and I think we had it in the prepared remarks as well, is essentially that's very little volume growth on a year-over-year basis because we do get some growth from price on Epicel that is part of the guidance framework. So, essentially, if we can kind of have flat, call it flat volume on a year-over-year basis, that kind of gets us into that high single-digit range. From a quarterly perspective, I think we can certainly - I think we will certainly still see some variability. We saw that last year, but I think from a framework perspective, as we think about Epicel, particularly coming off a very strong year, that's I think an appropriate starting point for the year this year.

Thank you. One moment for our next question. Our next question comes from Josh Jennings with TD Cowen. Your line is now open.

Hi, good morning, Nick, and Joe. I wanted to just ask about the LRP kind of margin targets. You put out some gross margin, adjusted EBITDA margin expectations, suggest an attractive expansion trajectory. So, hoping to just get a better understanding of why was now the right time. I think Q4 gave the team a lot of confidence, even more confidence in the margin expansion performance over the next couple of years. But also just maybe help us think, in 2026, as you start manufacturing at the new facility, if there's any turbulence there in kind of the ramp up to the high 70s gross margins and high 30s adjusted EBITDA margins you guys have put on the table.

Yes, so good morning, Josh. Thanks for the question. So, I would say a couple of things on kind of increasing our midterm targets. So, if you think about 2024, we started the year with a guidance on gross margin of 70%, and we said from a call it a midterm perspective, mid to long-term, we can kind of get to that 70% plus range. That was the kind of thinking and the midterm assumption a year ago. So, obviously as we progressed throughout the year, we significantly kind of overperformed, outperformed our initial expectation, got up all the way to 73% on a full-year basis. So, we're kind of close to that kind of mid 70% range exiting last year, and we think we can improve a little bit on it this year. So, I think that is certainly part of kind of the reasoning in terms of why we wanted to update that. Start the year this year, that felt like the right time, thinking about from a gross margin perspective. So, if you think about that high 70s, to your point, we were 78% in the fourth quarter, which is an important data point as we kind of think about where this can be in a few years at scale. And it's essentially around a point a year from a gross margin perspective. I think I don't really want to get too far into 2026, et cetera, right now because the targets are by the end of the decade, but there will be - we will have to kind of incorporate this building into the gross margin, et cetera, in the next couple of years. So, I think it’s, we had quite a bit of expansion last year. We assume it's going to go up this year. What exactly that shape looks like from now to 2029, it could vary a little bit as we include the building in 2026 for example, but we think kind of that one point a year and particularly given, if we can maintain that strong top line, is the right assumption on the gross margin side. And then just briefly, it's kind of a similar story on the adjusted EBITDA side, but we kind of started at 20% last year. We ended at 23% on a full-year basis. And again, if you look at the fourth quarter, it's a great marker where we got the 40% adjusted EBITDA margin. So, as we think about that margin by the end of the decade, as we think about kind of the revenue growth and the opportunity, thinking about MACI Arthro, et cetera, we think it's reasonable to assume call it around three points a year of expansion over the next few years. So, that's kind of how we're thinking about the midterm targets and why we wanted to make the update to start the year.

Got you. Thank you. And wanted to ask a follow-up on just the biopsy bank for MACI and how just thinking about some of the femoral condyle lesions that are in that biopsy bank and how, if that's been sized up, is that a potential small driver at least of volume growth in 2025, but is also benefiting maybe the commercial effort to go back to the MACI surgeon base and get them trained up on MACI Arthro, if they're seeing that they have some patients with femoral condyle lesions that are now potentially not candidates for MACI Arthro. Thanks for taking the questions.

Yes, I think, Josh, as you expect, our commercial team did a really nice job in advance of launch to kind of take a look back and say, hey, of biopsies that haven't converted to date, which of these patients might be candidates for an arthroscopic administration, provide that list to each of the reps so that they could go have discussions with their surgeon. So, of course, all of that happened. And I'd say there certainly would've been some examples of that even in those early days of the fourth quarter launch where those cases were done. Obviously, the first case was done a couple of days after approval, and that was an existing femoral condyle case that had planned to be done open and then was shifted over to MACI Arthro. So, that actually has happened, and certainly will have contributed to some of those early cases, as I mentioned, and may contribute to cases in 2025 as well.

Okay. Thanks a lot, Nick.

Thank you. One moment. Our next question comes with the line of Caitlin Cronin from Canaccord Genuity. Your line is now open.

Morning. Thanks for taking the questions. So, just to touch on the MACI commercial org, I mean, you just touched on a focus in the early days on existing biopsies for the team. What's the sales team focus and strategy for this year as Arthro ramps? And then just any more color on if you'll conduct a sales force sizing exercise for the MACI team this year?

Yes. So, as I mentioned, to close out Q4, I mean, it's all hands on deck to bring the quarter home, and the team did a really nice job doing that, obviously with record MACI revenue and sort of all-time highs on all the underlying metrics of biopsies and implants, surgeons, et cetera. So, that was obviously a big focus in Q4. National sales meeting in January was all about the MACI Arthro launch. And so, that's a high priority activity for the sales force for this year. So, I'd say kind of that is in line with what we had kind of expressed earlier that we just expected their efforts to kick off in earnest to start the year. And I think there's a high level of enthusiasm around the MACI Arthro opportunity. It really doesn't take a lot to significantly move the needle when you think about hundreds of trained surgeons. And if each surgeon does even one more implant throughout the year at our price point, it can really have a big effect. So, I think everybody in our organization understands that. In terms of kind of the sales force sizing, we last did a meaningful expansion from 49 to 76 territories back in 2020. I think we said previously that we'll be refreshing that analysis along the way in some of the higher volume, more geographically dispersed territories. We have added some junior territory managers to help with the workload. But we will be refreshing that analysis this year. And as similar to the playbook that we ran when we expanded essentially every year from 2017 through 2020, we'll do that analysis, hope to have it wrapped, or we'll have it wrapped up by the middle of the year. And depending on what the outcome is of that, if it's more junior support reps, then that's something you could implement sort of during the year. If it's a more meaningful somewhat territory realignment, we would probably do that into 2026, like we did each of the prior expansions because we obviously don't want to disrupt anything in the second half of the year, which is the bigger part of the year for us.

Got it. Makes sense. And then just on the MACI OUS opportunity, you've noted that might start to materialize in 2026 as you move to the new facility and you begin assessing the opportunities there. What do you currently expect for the cadence of that expansion?

Yes, I would say we've kicked off the evaluation this year. The timing would be, we would hope to be commercially producing and expect to be MACI in this facility in 2026. I think we've talked previously that we'd expect, there's obviously a regulatory component to it once you decide there might be attractive countries to go into. And so, that will take some time, and this would probably be more of a 2027, 2028 sort of opportunity, but on a country-by-country basis, and those can move in different timeframes. So, it will not be a 2026 launch, I wouldn't expect, but probably 2027 and 2028, as I mentioned.

Thank you. One moment for our next question. Our next question comes from Mason Carrico with Stephens, Inc. Your line is now open.

Hey, thanks for taking the questions, guys. We saw a post on your starter surgeon training on the Arthro technique program. How many of these programs are you guys offering around the country this year? What kind of adoption utilization trends are you seeing after surgeons attend one of these programs, and how soon after do you begin to see them taking biopsies or even scheduling Arthro procedures following one of these events?

Yes, so we have a number - I think I've mentioned this before, a number of different training events and opportunities. Just to take a step back for a minute, just like MACI Open, there are different ways surgeons can be trained. As part of our submission, we had to submit sort of the online training materials so surgeons can simply go online and train on MACI Arthro if they choose to do that. They could attend some of these kind of start programs, as you mentioned, which are sort of bigger programs with call it a dozen or two surgeons at a time. They can kind of have individual cadaver lab training, or we have synthetic models that can be used as well. So, there's a number of different ways surgeons can train. The start program, as you mentioned, is just one of them, where we tend to bring surgeons together on the weekends. We'll do several of those during the course of the year, but there'll be a lot of regional and individual trainings as well. So, I think I mentioned earlier that we certainly - I mean, I think we're off to a good start with 250-ish trained surgeons already. It's pretty early in the year. We'd certainly expect that to increase meaningfully throughout the year. And so, we're trying to make sure that it goes without saying that you get the surgeons trained, they can be taking biopsies even before they're trained, right? You can expect that some will take biopsies, having attended a peer-to-peer program, and then maybe get trained later or having seen videos and get trained right before the surgery. We see that all the time. So, there's a bunch of different sort of ways this happens. And I think what you've seen, as I mentioned earlier, is that there's been a - we've seen already, and it's very early in the year, we're only through February now, but the biopsies coming from the trained surgeons, the growth rate is significantly greater than those who have not been trained. So, I think that gives you some sense of the idea on how quickly they start taking biopsies. And then of course, it's a patient dynamic of when exactly surgeries get done.

Got it. Okay. And on the potential international expansion of MACI, could you just give us your thoughts on maybe what initial markets you would be targeting there and what the required commercial infrastructure would look like to support an OUS MACI business?

Yes. So, just to kind of remind you, MACI was approved in Europe when we bought this business 10 years ago. And for various reasons, a lot had to do with the fact that the clinical trial, the pivotal study was conducted in Europe. That product for this study was made here in the US and then shipped over, and there would've been some manufacturing facility changes that would've been required to reintroduce MACI into the market. And so, we weren't going to interrupt our US manufacturing for that, but we did build this facility with global manufacturing requirements in mind. So, there are a number of European countries that we believe will be attractive markets. We do not expect to have to run a clinical study. The pivotal study with - the Summit study was already conducted in Europe. So, our expectation is that it will be more of a regulatory process. And again, we'll go on a country-by-country basis and look at both the regulatory requirements, reimbursement, market opportunity, et cetera. As another reminder, we did have a nice opinion in the UK that was positive for the product. So, there's some good starting foundation points for us to kind of potentially go back into certain countries in Europe. We'll also look at certain countries in South America as well as in Asia Pacific. So, it'll be a country-by-country basis, and that's kind of the way that we’ll be approaching it. The commercial infrastructure I think will vary on, again, a country-by-country basis. There's certain countries in Europe where patients with these kinds of cartilage injuries are treated more at a small number of centers of excellence. That's something we could think about doing on our own. There may be countries where we might want to use a partner or a distributor. So, that will be part of the assessment as well.

Got it. Thanks.

Thank you. Our next question comes to the line of Jeffrey Cohen with Ladenburg Thalmann & Co., Inc. Your line is now open.

Hi Nick and Joe, thanks for taking our questions and congrats on the Q4 and your readout. So, a couple of questions is, I guess firstly, could you talk about the IND for MACI Ankle in the back half of this year and give us a sense of perhaps the size of the patient population as well as the sites or locations?

Yes, so just for the study itself, there's obviously always some preclinical work that needs to be done. We've been working with the FDA over the past year plus on sort of our plan for the MACI Ankle development program. That work is essentially complete and will be compiled and submitted as part of the IND for the study, which again, we expect in the first half of the year. With that done, we would then expect to initiate the study in the second half of the year. In terms of the patient numbers, there were a couple hundred patients in the Summit study. You'd expect something along those lines, probably a little bit more just because these are smaller defects. You want to make sure you power the study appropriately to demonstrate the MACI results. But it won't be - it'll be within those kinds of parameters that we would be conducting the study. When we look at the Summit study, took a couple of years to enroll. There's a two-year follow-up, call it roughly 18 months to two years to kind of go through the regulatory process. So, we consider this kind of a 20, 30 plus opportunity for the company, but again the context of really strong core MACI growth currently, MACI Arthro on top of that in earnest this year and going forward potential OUS opportunities in the back half of this decade, and then MACI Ankle in 2030 and beyond, we think MACI is really well set up for the next decade.

Got it. And then second, first, could you talk about the expanded label on NexoBrid? Congrats on that to pediatrics. Any effect on the size or scope of the commercial organization regarding call points and areas that it may open up?

Well, yes, if you'll recall, we went basically to - we expanded to 17 territories in the middle of last year with all reps kind of selling both products. So, that was kind of the ultimate plan that we had in place. So, that has already occurred. The pediatric indication, we mentioned at that time there were about 90 tier one and tier two targets. The pediatric indication, there's about 20 pediatric burn centers around the country, so those are obviously on the list now. And there definitely are a handful of centers that are already using the product as there was a pediatric study that included centers in the US as well. So, familiarity with the product even before the approval.

Our next question comes from the line of Swayampakula Ramakanth with HCW. Your line is now open.

Thank you. Good morning, Nick and Joe. A couple of quick questions for me. On the Arthro product itself, does that product require separate P&T meetings in the hospitals that are already using MACI? Is that another hurdle to cross in the commercial cycle?

Yes, so just to be clear, the drug product and the drug substance is the same for MACI, which has its own J code, and so billed separately, unless a hospital wants to buy and bill. So, P&T committee approvals have never been part of the equation for MACI open procedures. There are some institutions that require VAC committee approval for the instruments that we're now selling for MACI Arthro. These are not particularly expensive. It's a revenue generator for us. So, there are cases where you have to go through that process, but it really has not been - it's not something that is kind of a hurdle to being able to move forward with MACI Arthro cases.

Okay. So, on the Ankle program, as you are planning to initiate this IND, would some of the centers that conduct the study be the same centers that are already using MACI, and would that help in reducing the timeline for enrollment and also running the study as such?

Yes. Certainly, there are surgeons in the US who are already doing MACI Ankle cases. I mean, there are a number of publications out there. It was a pretty big part of the business in Europe back in the day. And surgeons who do - we can't promote obviously ankle cases at this point. But there certainly are cases that are done either patient self-pay or insurance who - payers that will cover those cases. And yes, there are some surgeons that do both ankle and knee procedures. So, those are obvious go-tos as potential sites in the clinical study.

Okay, the last question is on the gross margin and the growth of - I mean, on the expansion of the gross margin down over the coming years. So, with the new manufacturing facility coming on board, would there be a dip in the gross margin initially before that facility completely starts contributing, or that really should not matter too much?

Yes, so for this year, we've obviously given the guidance, we expect kind of being that 73% to 74% range. I think the facility kind of as it works with the P&L, initially a lot of those costs this year on the OpEx side, that will kind of mix in as we're manufacturing starting in 2026. Generally, I would say we obviously feel like we get to the high 70s by the end of the decade. Again, as I said earlier, it may not be exactly linear. We probably expect it to be probably similar I would say as we're taking that - as the facility kind of works its way through the P&L. But we don't think that'll be hugely material over the next couple of years, but certainly consideration as we kind of move from call it 2025 to 2029. But we're obviously thinking about that in the next year. And from a longer-term 2029 perspective, we feel like the high 70s is definitely the right number from a gross margin perspective with the new facility.

Okay, and the last question for me is on the burn franchise itself. In terms of the factors that are helping to grow the burn franchise, what generally are the ones which are doing that? And then how many of - I mean, what sort of factors do you think will be sustainable, not only for this year but beyond?

Well, I think if you look at the Burn Care franchise performance, obviously as Joe mentioned, while Epicel was a variable last year, quarter to quarter, it still had a pretty good year in terms of being up 16% on a revenue basis. And we expect Epicel will continue, as Joe mentioned, to contribute to growth for the company, starting the year kind of in the high single-digit range. At the same time, we obviously had strong underlying demand for NexoBrid in the fourth quarter in terms of hospital orders that we said has carried through into Q1. And so, we expect continued progression for NexoBrid throughout this year and revenue growing from a little over $3 million last year to high single digits as a starting point this year. So, I think both products, we expect to continue to contribute to that growth. And having the larger Burn Care sales force team for the full year versus only part of the year last year, we think will contribute, as well as that team continues to kind of enhance its execution as we move throughout the year.

Okay, fantastic. Thank you both. Thanks for taking all my questions.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Nick for closing remarks.

Okay. Well, just want to thank everyone for your questions and continued interest in Vericel. Obviously, the company had a really great year last year, and we expect continued strong growth and momentum in 2025. So, we look forward to providing further updates on our progress on our next call. Thanks and have a great day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.