Title

Presentation

Vericel Corporation beats earnings expectations. Reported EPS is $-0.12, expectations were $-0.15.

Operator: Good day, and welcome to the Vericel Corporation First Quarter 2026 Earnings Call. [Operator Instructions] Today’s conference is being recorded. At this time, I would like to turn the conference over to Eric Burns, Investor Relations. Please go ahead.

Eric Burns: 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 Financial Officer, Joe Mara. Before we begin, I would like to remind you that the discussions during this conference call will include forward-looking statements. Factors that could cause actual results to differ materially from expectations are discussed more fully in the company’s most recent filings with the SEC. Also, the discussions today will include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures can be found in today’s press release that is an exhibit to Vericel’s current report on Form 8-K filed today with the SEC. A short presentation with highlights from today’s call is also available in the Investor Relations section of our website. I will now turn the call over to Nick.

Dominick C. Colangelo: Thank you, Eric, and good morning, everyone. The company had a great first quarter as we delivered outstanding financial and commercial results across the business and achieved a number of key business objectives that position the company to continue to generate strong revenue, profit and cash flow growth in 2026. The company generated record first quarter total revenue of more than $68 million, which increased 30% over last year and significantly exceeded our guidance for the quarter, driven by substantial growth for both MACI and the Burn Care business. This strong revenue performance drove significant margin expansion and profit growth as gross margin increased over 300 basis points, adjusted EBITDA margin increased nearly 800 basis points and adjusted EBITDA tripled to nearly $10 million.

We also generated more than $15 million of free cash flow, ending the first quarter with over $210 million in cash and investments as we continue to strengthen the company’s top-tier financial profile. Based on our first quarter outperformance, the significant momentum across the business that has continued with a strong start to the second quarter and the NexoBrid BARDA procurement revenue expected in the second half of the year, we’re raising our total revenue guidance range by $10 million for the full year. MACI had another great quarter as double-digit volume growth drove record first quarter revenue of more than $56 million, representing 22% growth versus the prior year. Notably, MACI’s trailing 4-quarter revenue growth rate increased to 23% compared to 19% in the prior four quarters, as we continue to execute on our strategic initiatives to deliver sustained high revenue growth for MACI.

To that end, we’re capitalizing on our larger MACI sales force, which meaningfully increases overall reach across our MACI target surgeons and provides an opportunity to continue to drive growth in new MACI surgeons as well as deeper penetration within our current MACI surgeon practices. This was the first quarter with the expanded MACI sales force in their new territories, and they’re off to a great start as we generated record first quarter biopsies, implants and biopsy and implanting surgeons as well as the second highest number of biopsies and biopsy surgeons in any quarter since launch. Importantly, as the quarter progressed, implant growth accelerated for both new and legacy territories, driving strong double-digit implant growth in the quarter.

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Growth in biopsies per surgeon also accelerated in the quarter, demonstrating deeper penetration within MACI surgeon practices and driving another quarter of double-digit biopsy growth, which was particularly strong in our new territories. Finally, with more concentrated call points in the smaller territories, biopsy pull-through to implants increased during the quarter, demonstrating the potential for the larger sales force to increase the biopsy conversion rate over time. Overall, we’re very pleased with the progress to date of the expanded MACI sales force as well as the impact of our commercial excellence initiatives, which have enhanced our commercial analytics and standardized best practices across the larger sales team. We believe that these initiatives will continue to elevate execution across the MACI commercial organization and drive deeper penetration within our surgeon user base.

We’re also focused on leveraging MACI Arthro to drive continued growth in the treatment of smaller cartilage defects and to expand overall MACI utilization. Leading indicators remain strong in the small condyle segment with higher first quarter and trailing biopsy growth rates than the overall biopsy growth rate and higher biopsy conversion rates to date for surgeons that have completed a MACI Arthro case. We’re also making significant progress in our efforts to generate new clinical data, demonstrating the potential for improved patient outcomes with the less invasive MACI Arthro procedure. Early data from ongoing investigator case series suggests a significant reduction in postsurgical pain, improved range of motion and a meaningful acceleration in the time line to achieving full weight bearing following MACI Arthro treatment.

These initial data results, which were recently accepted for publication, suggest positive patient outcomes that could also lead to shorter overall rehab and recovery time lines. We’re also continuing to work with additional surgeons as they complete MACI Arthro cases to collect prospective outcomes data in our MACI clinical outcomes registry. Finally, we achieved an important milestone for the company with the FDA approval for MACI commercial manufacturing at our new facility, which began in the second quarter. This important achievement not only increases our manufacturing capacity to support the long-term growth of MACI in the U.S., but also enables the potential commercialization of MACI outside the United States. To that end, we remain on track to submit a MACI marketing application in the U.K. later this year, and if approved, to potentially launch MACI in the U.K. in 2027 as we seek to expand the long-term growth and value creation opportunities for the company.

Burn Care first quarter revenue increased over 90% to $12 million, which was above our guidance range for the quarter and represented one of the highest Burn Care revenue quarters to date. We also announced a BARDA award valued at up to $197 million for the procurement and advanced development of NexoBrid. The base period contract of $35 million includes approximately $10 million over the next 12 months for the initial procurement of NexoBrid, funding for vendor-managed inventory-related services and initial development activities for a potential indication for the treatment of blast trauma injuries. The contract also includes optional awards for additional procurement and advanced development of NexoBrid over the 10-year period. We’re very pleased to work with BARDA to support U.S. national preparedness for potential mass casualty events and to drive further development of NexoBrid. More broadly, we believe that the BARDA award underscores the clinical importance of this innovative product and can help enhance the overall utilization of NexoBrid in the U.S. market.

I’ll now turn the call over to Joe to discuss our first quarter results and our 2026 guidance in more detail.

Joseph Mara: Thanks, Nick, and good morning, everyone. As Nick referenced, from a financial perspective, the company had its strongest first quarter to date across all key financial measures, including top line revenue, bottom line profitability and cash generation metrics. Total revenue increased 30% to $68.4 million, which was significantly above our guidance range for the quarter, driven by strength in both commercial franchises. MACI’s momentum continued as strong double-digit volume growth drove record first quarter revenue of $56.4 million, representing 22% growth versus the prior year, which was significantly higher than recent first quarter growth rates for MACI and marks the fourth consecutive quarter with MACI growth of 20% or more.

Burn Care first quarter revenue was $12 million, which was well above recent run rates and our guidance range for the quarter. Epicel revenue of $10.9 million was particularly strong, while NexoBrid revenue of $1.1 million increased nearly 60% versus the fourth quarter. With these strong first quarter results, the company is generating significant top line growth across the business. MACI’s trailing four-quarter growth rate increased to 23% and the trailing four-quarter growth rates for both the company and Burn Care are also above 20%. The company also delivered meaningful margin expansion in the first quarter. Gross margin increased over 300 basis points to 72% and adjusted EBITDA margin increased nearly 800 basis points to 14%, with adjusted EBITDA growing 195% versus the prior year to $9.6 million.

Finally, the company generated operating cash flow of $16.4 million and free cash flow of $15.1 million, representing the third consecutive quarter with free cash flow of $12 million or more as the company’s expected inflection in cash generation continues following the completion of our new manufacturing facility. We ended the quarter with approximately $211 million in cash and investments, an increase of nearly $50 million compared to the end of the first quarter last year. Turning to our financial guidance. Based on our very strong first quarter results across the business as well as expected NexoBrid procurement revenue in the second half of the year under the recent BARDA award, we are increasing our full year total revenue guidance range by $10 million.

We now expect total revenue of $326 million to $336 million for the year, which represents total revenue growth for the company of approximately 20% at the midpoint of our guidance range. After a very strong first quarter, we are raising full year MACI revenue guidance to $282 million to $288 million compared to the prior guidance of $280 million to $286 million. MACI is off to another strong start in the second quarter, and we expect approximately $62.5 million to $63.5 million of MACI revenue for the quarter. Our guidance implies similar growth rates for remaining quarters of the year, which is consistent with our framework to start the year, recognizing that there is an opportunity for outperformance based on the momentum in our key performance indicators, our expanded sales force and the commercial initiatives that we have put in place.

We are also increasing our Burn Care revenue guidance based on the strong first quarter performance as well as the incremental NexoBrid BARDA procurement revenue expected this year. We now expect full year Burn Care revenue of approximately $44 million to $48 million compared to our prior guidance of $36 million to $40 million. And for the second quarter, we expect approximately $9 million to $10 million of total Burn Care revenue. In terms of NexoBrid BARDA procurement revenue, at this point, we expect approximately $5 million to $6 million of revenue in the second half of the year with procurement expected to begin in the third quarter. Moving down the P&L. For the full year, we continue to expect gross margin of approximately 75% and adjusted EBITDA margin of approximately 27%, which accounts for additional costs related to our new Burlington manufacturing facility, the incremental investments related to our MACI sales force expansion, increased MACI ankle clinical trial expense and incremental life cycle management investments.

For the second quarter, we expect gross margin of approximately 72% and adjusted EBITDA margin of approximately 18%. Overall, 2026 is set up to be another positive year for the company with strong revenue growth as well as continued margin expansion, profit growth and cash generation. As we look ahead, we believe that the durable growth of our portfolio positions the company to sustain strong top line growth and supports our midterm revenue and profitability targets. This concludes our prepared remarks. We will now open the call to your questions.

Operator: [Operator Instructions] We will go first to Richard Newitter with Truist Securities.

Richard Newitter: I’m juggling calls this morning, so I may have missed it. But just on the guidance outlook, can you — you increased it looks like by the 1Q outperformance. I would just love to hear kind of what your assumption set is, especially for MACI trends and MACI Arthro moving through the year and most particularly in the 2Q?

Joseph Mara: Good morning Rich, this is Joe. I’ll take that question. So thanks for the question. So in terms of the guidance update and the increase, I would say, on a full year basis, you’re right, there’s kind of two key drivers. So one, the outperformance in the first quarter at a company level, whether you look at guidance or consensus, it’s kind of in that $4 million to $5 million range. We’ve included that in our full year guidance update to let that flow through. And then the second piece is the remainder of that increase is really the incremental NexoBrid BARDA revenue, which we expect to begin in H2 and call it, we said about $5 million to $6 million. So, if you kind of put that together, just quickly on the assumptions to the second part of your question, starting with Burn Care, obviously, a very strong first quarter across the board for Burn Care.

It’s actually our highest quarter since 2024 and a particularly strong Epicel quarter. So, I feel like we’re really executing well on the Burn Care side. So, to your question, we’ve assumed, call it, about $2 million of outperformance from Q1 in our full year outlook on Burn Care and then that remainder, call it, about $6 million on the BARDA side. So up 8% on a full year basis on the Burn Care side. So if you kind of think about the guidance going forward, obviously, there’s some moving pieces, but we’re sticking with our framework that’s worked quite well on the Burn Care side over the last few quarters and our run rate framework, which has been, call it, $9 million to $10 million on a quarterly basis, and then we’re adding in the second half quarter.

So, to be clear on kind of just how to think about that and how to model it, it’s really, call it, $9 million in the second quarter and it steps up to $12 million in both Q3 and Q4 with that incremental, call it, $3 million of BARDA revenue flowing through. So, that gets you to call it, $45 million on a full year basis on Burn Care. So again, we’re not changing our assumptions in the back half of the year in terms of the core business. We’re sticking with that run rate. But obviously, great performance in the first quarter and the incremental BARDA revenue has been included. On the MACI side, so a very strong first quarter, as we talked about, our first quarter with our expanded sales force, we feel like the team executed extremely well there, a much higher Q1 growth rate than we’ve seen in recent years.

And importantly, we pointed to another quarter of both double-digit biopsy and implant growth in the first quarter. I also say we’ve gotten off to a strong start in Q2 and April as well. So, I feel very good about kind of the MACI execution, particularly with that larger sales force. So, from a full year perspective, again, call it about a $2 million beat in the first quarter on MACI. We’ve included that on a full year basis. You kind of add that updated $285 million on MACI. You’re right around $330 million or so at the midpoint, which also is the midpoint of our guidance is also 20% company growth. So that’s important and good to see. In terms of the MACI assumptions for the remainder of the year, I think importantly, we’re not changing any assumptions or our approach for whether it’s the second quarter or the back half of the year in Q3 and Q4.

So, we’re keeping the same framework and approach we used in Q1. I’d say we’re going to remain very prudent on the guidance. We’ve done that on the Burn Care side with the run rate framework. We’re going to continue to do that with MACI going forward. So, the assumptions for MACI in total are essentially keeping that high teens growth for both Q2 as well as the back half. And I think importantly, that also implies kind of similar year-over-year dollar revenue growth assumptions, which, again, we feel like is a balanced starting point and consistent to how we started the year. So, it implies about $63 million in the second quarter. That’s about 18% growth at the midpoint of our guide, and it’s pretty similar for the remaining two quarters. And so again, I would just say from a second half outlook perspective, we definitely do not want to assume an acceleration in growth in the second half in MACI.

So, this is consistent to what we talked about last quarter. So, we think this positions us really well. And to that point, whether it’s kind of the sales force contribution, continue to ramp up in Arthro, I would just say broadly, if we maintain the recent trends we’re seeing. If we continue to execute well, we think this sets us up for potential outperformance both in the second quarter, but also on a full year basis. So, for MACI in particular, the pieces are in place with a very strong pool of biopsies. We had a particularly strong Q4 that we think will play out during the year from a biopsy growth perspective. Leading indicators remain strong. And again, we have the larger sales force, which we think can be impactful. So, we’re going to remain prudent on both franchises, but certainly, the goal internally is to outperform that.

But again, we’re not going to change the approach on the guidance, and we’d rather just stay prudent there.

Richard Newitter: Really helpful. And then maybe just a follow-up. On the competitive landscape, you have a competitor that will likely be stepping into some better reimbursement situations in the first quarter of next year. Just wanted to get a feel for how you see the market kind of segmenting? How you’re kind of thinking and preparing for this? What you’re hearing, if anything, from your customer base on expectations for that product? And how it may or may not impact you guys?

Dominick C. Colangelo: Yes. Rich, this is Nick. And so, I’ll take that question. And obviously, you’re referring to Agili-C, which is a product we’ve talked about for years now as we’ve talked about potential sort of new market entrants. And the position that we’ve kind of taken is one that’s kind of aligned with our surgeon and KOL feedback that Agili-C is really a product that’s geared towards use in older patients with osteoarthritis and really as a bridge to a partial or full knee replacement where those patients have no other options. And the product has been — it was approved four years ago. So, it’s been around and really obviously hasn’t had an impact on MACI to date nor should it. As you know, these are two different patient populations, older osteoarthritic patients that are potentially more appropriate for Agili-C and then the young active patients where MACI is typically used.

And there’s — when you think about sort of the typical MACI patient, less than, if you look at publications, a very small low single-digit percentage of patients that are treated with MACI have any sort of bone involvement, even though it’s included in the label. And there’s no way if you have a clean cartilage injury that a surgeon is going to sort of core out over a centimeter of bone to use a product like Agili-C. So, we actually don’t think there’s a lot of overlap. There hasn’t been to date nor should there be for these patients. And as you think about sort of the — if you take a double hook count, a couple of dimensions. Number one, as you know, the patella treatment or treatment of patella defects for MACI is our largest and fastest-growing part of the business historically.

And Agili-C is contraindicated for use in patella defects. And so, absolutely no impact on the biggest part of our business. It’s not indicated for arthroscopic — administration. So, we actually haven’t seen much, if any, impact at all from Agili-C nor do we expect to see it. And we do pulse surveys pretty frequently and out of our — the surgeons that we talk to haven’t used it and don’t really plan to use it in the future. So.

Operator: We’ll go next to Michael Kratky with Leerink Partners.

Michael Kratky: Congrats on a very nice quarter. So, you provided some encouraging commentary on accelerating implant growth. So would love to get a sense of some of the progress you’re seeing specifically for MACI Arthro. Where — and what portion of your implants today are coming from MACI Arthro and whether you’ve been able to get some traction among those new accounts that you identified that typically were ortho only?

Dominick C. Colangelo: Hey Mike, it’s Nick. So yes, on MACI Arthro, obviously we’re very pleased with our progress to date. As we talked about on our last call, really strong foundation established in 2025, where we trained upwards of 1,000 surgeons on MACI Arthro and we’re at critical mass where those trained surgeons are responsible for over half of our implants already. So really great critical mass there, a great job by the team, both the medical and sales teams in training surgeons. Obviously, we talked about the fact that contributed to growth last year and in the first year on the market, as the smaller femoral condyle defects that MACI Arthro are intended to be used for. The growth rate there was at par with patella which was great compared to lower single-digit penetration and lower growth in prior years.

As we said on the call, the leading indicators for MACI Arthro remain strong. We had higher first-quarter and trailing biopsy growth rates than the overall biopsy growth rate and we continue to see that MACI Arthro implanters had higher biopsy conversion rates. So it’s clearly been one of the factors in a multifactorial dynamic that has elevated MACI’s overall performance. The fundamentals, as Joe mentioned, coming into this year were very strong, with biopsy acceleration in the fourth quarter. We have a larger sales force that’s off to a great start. We have MACI Arthro in there as well, which has generated a ton of interest. And then the commercial excellence initiatives are clearly taking hold as well. So we’re pretty excited about the MACI Arthro start to date, and we expect it’s going to continue to contribute to growth as we move forward.

Michael Kratky: Super helpful. And maybe just one follow-up. I would love to hear a little bit more about the progression of the BARDA award. Obviously, some nice contribution expected already in the back half of this year. But how and when could we see that remaining — $197 million start to materialize over time?

Dominick C. Colangelo: Yes. We’re really excited about working with BARDA to help with U.S. national preparedness for mass casualty burn events. We had talked about this potential award. Obviously, it was delayed a little bit with the government shutdown, but it’s a very meaningful overall contract. As you mentioned, nearly $200 million and a $35 million initial award. And just to be clear, about 2/3 of the value of that award whether it’s the base contract or the overall flows in one form or another to Vericel, either through procurement and VMI service revenue or other cost offsets for some of the work that would go on. So the base contract is the $35 million. Obviously, that includes the initial procurement and then VMI establishment and related services and work around a potential blast indication.

And those are already funded. And as Joe mentioned on the procurement side, we expect that revenue over a 12-month period begin in the third quarter, $5 million to $6 million this year, the remainder early in 2027 on the procurement revenue. So that’s $10 million of the first $35 million. The other will involve obviously doing the work around the proof of concept for the blast trauma indication, and that will start later this year and flow through. So we’ll probably give a little more guidance potentially on that as we go through the year. In terms of the optional awards, there is a number of components there as well, including additional ramp-up for procurement, which is a — pretty meaningful clin or option. That will depend — if you think about when BARDA had the initial stockpile, it was something like 16,500 units when they worked with MediWound on that.

Our initial procurement is about call it roughly 3,000 units, with a ramp-up of another 5,000. So I think BARDA is pretty interested in increasing the stockpile because we run it through a VMI structure that will require commercial progression and so on. So that will play out. It’s intended to start after the first year of procurement. And then obviously, if the proof of concept on the blast trauma indication works out, that could trigger the second and further development for that indication. And then MediWound has also been working on room-temperature formulation, and that work will continue and to the extent that moves forward over the course of the next year, that could trigger further work on that room-temperature formulation and additional procurement of that product in — starting in 2027 and beyond.

Operator: We’ll go next to Josh Jennings with TD Cowen.

Joshua Jennings: I was hoping to just have you share your view just on the environment. There have been some concerns around ortho procedure volumes just trending down, pressures from access, hurdles like the ACA subsidy expiration. Clearly, you’re not seeing that in Q1 with the MACI franchise. The guidance suggests that you’re not — expecting to see much but have you baked in any just over high level ortho procedure volume pressures into the guide? It seems like there is some conservatism in terms of the setup for the rest of the year in terms of how you’ve positioned guidance for MACI post-Q1. But would love to just hear what you’re hearing and any more insights into your outlook.

Dominick C. Colangelo: Yes, hey, Josh, it’s Nick. I’ll start and Joe can kind of talk about our guidance perspective. So, we made a point on our Q4 earnings call because there was some commentary out there about slowing procedures in December and so on. And we actually had a stellar December, and we didn’t see any impact there. And obviously, as we talked about, we had strong double-digit biopsy and implant growth in the first quarter. So I would say we haven’t seen anything, nor have we baked any sort of procedural slowdown into the guidance. And Joe, you can cover that a little bit more…

Joseph Mara: Yes. I mean, I’d just echo what Nick said, we certainly haven’t baked into any expectations on kind of the negative side there. Again, I’d probably go back to where Nick started, which is I think we referenced we feel like we have a great pool of biopsies. We continue to generate double-digit growth there. And just to talk again about Q4, I mean, we really saw an acceleration, a pretty significant acceleration in biopsy growth in the fourth quarter and had a particularly strong December. And obviously, that’s our highest quarter in terms of activity. So that’s really encouraging as we kind of make the turn into 2026 or having made the turn. And so what’s important there, as you know, Josh, is there’s a longer cycle here when we think about conversion.

And from a conversion perspective, I mean, those typically convert over the subsequent quarters. So some of that is probably early in Q1, but most of that is, frankly, whether it’s Q2 or the back half of the year. So we feel like we’re in a very good position. Of course, we’re going to be mindful of the environment, but we haven’t seen any signals that any of that slowdown is impacting any part of our business.

Joshua Jennings: Excellent. That’s great to hear. And I also wanted to just touch on the international MACI expansion opportunity. I know you guys are set up for potential launches in 2027. But can you just help us think about the buzz that’s been generated by MACI, MACI Arthro? Is there pent-up demand in specific countries? Maybe just anything, again, a little temperature check question in terms of what you guys are hearing from international ortho sports medicine specialists and the anticipation for getting access to MACI and MACI Arthro for their patients? Appreciate it.

Dominick C. Colangelo: Yes. Josh, it’s Nick again. Certainly, the international cartilage repair sort of community is very concentrated. And MACI, as you know, was on the market in Europe when we first bought this business. And so there is a significant sort of interest in having MACI come back. We talked about it with the U.K. being our first beachhead for a lot of reasons, potential expedited approval process, very high surgeon awareness and advocacy over there. We had a positive nice opinion for MACI back in the late teens. So really set up well and concentrated sort of cartilage repair surgical centers, centers of excellence in the U.K. So it’s a perfect beachhead for us, as I mentioned. And yes, there’s a ton of interest and excitement about potentially having MACI back because there’s very limited options in Europe right now for restorative cartilage repair procedures.

Operator: We’ll go next to Caitlin Roberts with Canaccord Genuity.

Caitlin Roberts: Congrats on the great quarter. Maybe just starting with the sales force. It seems like they were beginning to really contribute this quarter. Maybe just provide some metrics around that and the time you’re seeing it take these reps to reach breakeven or close to breakeven.

Dominick C. Colangelo: Yes. Caitlin, it’s Nick. Obviously, as we kind of referenced on our prepared remarks, I mean, we’re really pleased with the initial expansion and the contribution that the new territories are making to our overall business. And I would just remind the listeners that the fact that we expanded our sales reps in Q4 and then obviously, we realigned the territories and everyone went into their new territories in Q1 with absolutely zero disruption in Q4 as the new reps were working together. And then obviously, a super strong performance in Q1. As Joe mentioned, a higher growth rate than we’ve typically seen in the first quarter over the past several years. I mean, I think that says it all in terms of the flawless execution from the commercial leadership team and great execution from the reps themselves.

So as we referenced on the call, as the quarter progressed, we saw implant growth accelerate for both new and legacy territories, which led to that strong double-digit implant growth. And that continued into April for both legacy and new territories. So off to a strong start, as Joe alluded to as well. The growth in biopsies per surgeon also accelerated in the first quarter, which is always our metric that we refer to for deeper penetration within MACI surgeon practices, and that led to another quarter of double-digit biopsy growth. And that was particularly strong in the new territories. So that continued. We had strong biopsy growth in the fourth quarter, accelerated again in Q1 in terms of biopsies per surgeon. So really great metrics there.

And then obviously, they’re getting up to speed very quickly. We talked about the fact that the pull-through to implants was very strong across the board. They’re smaller, more concentrated territories now. So you’re seeing great pull-through. So again, I — we don’t look at it in terms of sort of how quickly do they get to breakeven. They’re probably — certainly a good portion of them who are already beyond breakeven as they moved into these new territories. Because again, it’s not like they moved into white spaces. They were existing territories, existing biopsies. They did a great job on pulling those biopsies into implants in their territories and then obviously, building a pipeline for the rest of the year with their strong biopsy growth.

So honestly, I don’t think it could have gone any better.

Caitlin Roberts: That’s great. And then maybe just talk through the Epicel dynamics in the quarter and what really drove the strength?

Dominick C. Colangelo: Yes. So obviously, as Joe mentioned, one of the highest Burn Care quarters we’ve had ever and strongest since 2024. And we talked about it last year that we were taking a different approach to how we were evaluating and working through each of the biopsies we receive. And I’d say probably the biggest contributor to Epicel’s performance was some growth on biopsies, which is great, but really converting those biopsies into grafts. And again, that’s just a sales force execution with clinical support on the patient treatment parameters as well. So really just different level of execution, not only for Epicel, but across the entire commercial organization.

Operator: We’ll go next to Mason Carrico with Stephens Inc.

Mason Carrico: On the potential near-term publication of data showing less post-op pain, faster range of motion — earlier weight bearing. I guess, how material could that publication be in terms of catalyzing broader adoption or higher utilization of MACI Arthro? Are there docs out there that are saying they’d like to see this peer-reviewed data on better patient outcomes for adopting or ramping use? Just trying to get a sense of what that can mean.

Dominick C. Colangelo: Yes. Hey, thanks, Mason. It’s Nick. So obviously, we’ve been talking about the fact that because MACI Arthro was approved through human factors study, that you didn’t really have that kind of clinical data at launch, but that we were very focused on building it both through individual KOLs who do a lot of MACI Arthro cases and have these case series, which is the first set of data that demonstrates those early positive outcomes, which could lead to the longer-term patient outcomes and the benefits there as well as through our MACI clinical outcomes registry where that can lead to a series of publications over time. So there’s no doubt that clinical data is important. I don’t think we hear a lot of we need to see those outcomes.

I think it’s just intuitive to the surgeons that a less invasive surgery, you have these better early outcomes, but we definitely want to have the clinical data to support that. I would use our experience with patella as an analog back in the teens. In 2017, when MACI was launched, there were no patella patients in the study. And over time, there were publications about the effectiveness in the patella of MACI treatment that led to even broader coverage by insurance companies. We referenced back in the early 2020s, UnitedHealthcare adding patella cases to its medical policy. And so there’s no doubt over time that that kind of clinical data will just support continued utilization and uptake of MACI Arthro. So yes, we’re really focused on that.

We think it will have a very positive impact.

Mason Carrico: That’s helpful. And then on the dynamic of arthro-trained surgeons showing higher biopsy and implant growth than untrained surgeons, has that gap widened or narrowed or stayed the same as the trained base of surgeons has grown?

Dominick C. Colangelo: Yes. I mean, obviously, I would say broadly and at the higher level, those trends that we saw in trained surgeons remain. Now we’re kind of getting into a point now where we have this relatively large critical mass of MACI users who are now trained and you’re lapping the quarterly things. So the gap is a little narrower, but the trends remain the same that they definitely increase their biopsy and growth rates.

Operator: We’ll go next to Jeffrey Cohen with Ladenburg Thalmann.

Jeffrey Cohen: Just one from our perspective. Could you drill in a little bit further on the Burn franchise? I want to know a little more about Epicel, maybe per case, number of cases and NexoBrid and talk a little bit about the franchise as well as the commercial organization and some cross-selling and awareness on NexoBrid.

Dominick C. Colangelo: Yes, I’ll start, Jeff, and Joe can jump in. I’d say on Epicel, it’s as I mentioned. I mean, obviously, it was a very, very strong quarter, driven mostly by biopsy growth, but more importantly, of the biopsies we received, a higher treatment rate for those patients, which is great. As you know, in some quarters in the past couple of years, there were issues around patient health and those biopsies didn’t really convert into the grafts. I think that was my point around commercial execution. I think the team, both the medical and commercial teams are doing a great job in focusing on how you take those biopsies and treat patients and realize that patient benefit of Epicel. So that’s the dynamic with Epicel.

We’re encouraged. It’s been a series now of good, strong quarters for Epicel. On NexoBrid, we remain excited about the opportunity. Obviously, the BARDA contract reinforces the clinical utility of the product. And as we’ve talked about, it takes time to change standard of care, especially when you’re going from a surgical to a nonsurgical approach. So this obviously bolsters the revenue and utilization potentially for NexoBrid as we move forward. So we expect that over time, we’re going to see that continued uptick in NexoBrid utilization, a very positive broadening of the number of ordering centers for NexoBrid to start the year, which, again, we think will translate into higher utilization as we move through the year. And obviously, we have reps now that, to your cross-selling point, promote both Epicel and NexoBrid.

And yes, we’ve talked repeatedly about the fact that ideally, we have utilization of both products in every burn center. But certainly, having NexoBrid has allowed us to regain traction with some of the dormant burn centers over time. So I think a good string of quarters now for burn care, and we certainly expect that to continue.

Joseph Mara: Yes. I mean, I would say not a lot to add. This is Joe. I mean just to echo a couple of Nick’s points, I think the commercial excellence initiatives we’re talking about, just to be clear on those, we obviously talk about that a lot from a MACI perspective. But certainly, there’s a number of things we’re doing on the burn care side to replicate the same commercial excellence, better analytics, et cetera, as we think about execution. So I think certainly on the burn care side, that’s important to point out. And then as Nick talked about on the NexoBrid side or just in burns in general, you can see quarter-to-quarter there could always be changes in terms of the number of burns and we look at that data. But we are definitely encouraged on NexoBrid.

We are starting to see a broadening of centers, and we’ve seen actually a growth in the number of orders. So our strategy to drive higher uptake there is how can we not only get our regular ordering centers continue to stay high and strong, but try to move the rest of the business from starting to use NexoBrid more towards the middle and making them more regular orders. So we’re actually seeing some good signals there on the NexoBrid side. So I think similar to MACI, I think on the burn care side, if you take a step back, the execution has been quite strong, in particular over the last few quarters, and obviously, we had a great Q1.

Operator: We’ll go next to Ryan Zimmerman with BTIG.

Unknown Analyst: This is Izzy on for Ryan. Just to start, Nick, you touched on this to a earlier question, but I was hoping you could speak a little bit more about the segmentation that you’re seeing in the market for cartilage lesions between MACI and other two-step procedures in terms of the lesion type, anatomical segmentation, grade levels, et cetera.

Dominick C. Colangelo: Yes. I mean I don’t think anything has changed. As I mentioned, we’ve talked about the competitive landscape for MACI for several years. It’s been — obviously very static certainly over the past four years plus and pretty much essentially since we launched the product. So MACI stands alone as the clear market leader in cartilage repair. There are no other MACI-like products. So that hasn’t changed at all. We’ve talked about on — I mean, there’s very complicated decision — treatment algorithms that are publicly available for how surgeons think about different patient types based on size, location of the defect, age, ability to do rehab, things like that, and that hasn’t changed at all over the years to any significant degree.

We talked about there’s Agili-C for older osteoarthritis patients and then some other more microfracture augmentation kinds of products. And there’s been a bunch of both of those kinds of things. Synthetic implants have come and gone over the years. You have a bunch of microfracture augmentation products that are out there for smaller defects. So I’d say relatively status quo. And MACI, again, just remains the clear market leader, and that has expanded over time.

Unknown Analyst: Appreciate that. This is maybe a longer-term dynamic, but could we ever see a master cell line for a one-step MACI in the future?

Dominick C. Colangelo: Yes. We have looked at — obviously, MACI is an autologous cell therapy product. There have been those in years gone by that have thought about allogeneic approaches. We, in fact, have developed an allogeneic cell line. And so is it possible? Perhaps, there’s a lot of technical issues that would be required there. And there’s nothing that’s, to my knowledge, I think there was one potential early-stage clinical study more than a decade ago that was abandoned. So there’s really nobody anywhere near clinical development right now for that. And I guess it’s a misnomer to a certain extent to say that a product like that would be a one-step procedure. There’s not a lot of one-step off-the-shelf procedures in cartilage repair.

There’s often — probably most often a diagnostic arthroscopy to determine the extent of a cartilage injury or as part of other arthroscopic investigational procedures, cartilage defect is noted and then a treatment plan is put in place. So it’s, again, a bit of a misnomer to talk about one-step procedures and especially where prior authorizations will be needed to — or just patient — patients being informed and consenting to a certain treatment will be required. So anyway, hope that helps.

Operator: Our next question comes from the line of Swayampakula Ramakanth with H.C. Wainwright.

Swayampakula Ramakanth: This is RK from H.C. Wainwright. I have a couple of them since most of my questions have been answered. On the biopsies and implants, in terms of the biopsy and implanting surgeon counts, is there — what percentage of them were repeat versus first-time users? And also with the increased biopsy, I mean with record biopsies, how much of that is coming from the new sales force? What incremental gain did you get from the new sales force?

Joseph Mara: Yes. Good morning RK, this is Joe. I’ll start. I’d probably say we can certainly talk about the metrics, but perhaps at a slightly higher level. I would say we’ve obviously seen very strong biopsy growth over the last few quarters, really the last several years since COVID, we’ve seen that consistent double-digit growth in biopsies. So we think that positions us well. I think we’re highlighting the biopsies per surgeon because we feel like that’s an important metric to make sure we’re driving gaps. And we think that those are surgeons that we think have a significant — probably a more significant opportunity when we see that metric tick up to sort of pull through those biopsies into implants. So it’s an important metric.

Obviously, that’s coming from — you’re going to see a mix of existing and new surgeons, but that will be weighted more toward existing surgeons just based on the metrics. So that’s important for us. I will say — one note on that is with the strong biopsy growth, we’ve obviously seen similar implant growth over the last few years and a few quarters tracking, they generally track together. And you would expect that with a stable conversion rate that we’ve talked about. As Nick referenced in his prepared remarks, we’re seeing some good signals from an Arthro implanter perspective in terms of some of the conversion metrics there. And obviously, very early days with the new sales force, but encouraged with the pull-through we’ve seen there. So I’d say our conversion rate has consistently been stable, but we are seeing some positive signs there.

And so for example, if that ticked up a bit, that would be upside for us. We’re not going to bake that into our guidance or long-range outlook. But that’s been a metric we have been highly focused on for the last few years. And so that’s something we’ll continue to focus on. And then remind me of the second part of your question?

Swayampakula Ramakanth: No, I was just wondering how much of the gains came from the new folks on the sales force?

Joseph Mara: Yes. I mean I’d probably just point to what we talked about, which is we definitely saw significant strength in the metric I’d say across the board. And as Nick talked about the execution to bring on our new sales force, how they were integrated into Q4, which was strong, how they performed so far in Q1. So I would say we’ve been pretty pleased right out of the gates, and these are very experienced reps that have relationships they’re bringing into — our business. So I think it’s certainly a mix, I would say, of our existing reps and our legacy reps, I should say, our new reps, but we’ve been encouraged with what we’ve seen so far from our new sales force.

Swayampakula Ramakanth: Okay. One last question, if I may. This is on the Arthro product. What do you think is the Arthro penetration within the small condyle defect TAM? And also, what is your estimate of the addressable Arthro eligible patient population right now?

Dominick C. Colangelo: Yes. So we think, obviously, there’s been a meaningful contribution for MACI Arthro in that segment because that’s what the instruments are designed to do. So we’re very pleased there. As we talked about, when you take it up a level, these instruments — the biggest part of our business is in patella. It’s a fast-growing part of the business. The current instruments aren’t really designed for those, although some surgeons are using that. That is a life cycle iteration that we’re considering doing for patella. But right now, that’s typically done open. The larger defects are done open procedures, but within appropriate size 2 to 4 square centimeter defects on the femoral condyle, as you know without concomitant kinds of other procedures that need to be done, we’re pretty pleased with the penetration we’re seeing in that subsegment of the smaller femoral condyle defects.

So it’s the biggest part of our TAM. That’s why we’re focused on growing it. And again, just like patella, we think over years that we’re going to see some pretty significant impact in that particular segment.

Operator: This concludes today’s portion of the Q&A. I would like to turn the call over to Nick Colangelo for any closing or additional remarks.

Dominick C. Colangelo: Okay. Well, I’ll just close by thanking everyone for joining us this morning. Obviously, the company had an outstanding first quarter, and we feel like we’re really well positioned to continue to deliver what is a very unique combination of sustained high revenue growth, profitability and cash generation in 2026 and the years ahead. So we look forward to providing further updates on our next call. And thanks again, and have a great day.

Operator: This concludes today’s call. Thank you for your participation. You may now disconnect.

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