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Earnings call: Vericel reports strong Q2 with record revenue growth

EditorBrando Bricchi
Published 2024-08-04, 01:44 p/m
© Reuters.
VCEL
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Vericel Corporation (NASDAQ:VCEL) has announced robust financial results for the second quarter of 2024, achieving a record revenue of nearly $53 million. This performance was driven by significant growth in their MACI product and solid demand for NexoBrid. The company has seen an expansion in gross margin and a substantial increase in adjusted EBITDA. With these results, Vericel not only reaffirmed its revenue guidance but also raised its profitability outlook for the year. The company is preparing to launch MACI Arthro and expects approval for a pediatric indication of NexoBrid, both of which are anticipated to contribute to future growth.

Key Takeaways

  • Vericel's Q2 revenue reached nearly $53 million, a record for the second quarter.
  • MACI revenue surpassed $44 million due to an expanding surgeon customer base and biopsy growth.
  • Gross margin improved by more than 400 basis points; adjusted EBITDA grew by 42% year-over-year.
  • Revenue guidance for the year remains at 20%+ growth, with raised profitability guidance for gross margin (71%) and adjusted EBITDA margin (21%).
  • NexoBrid revenue nearly doubled in Q2, with FDA approval for pediatric use expected soon.
  • Vericel anticipates Q3 revenue of about $55 million, representing over 20% year-over-year growth.

Company Outlook

  • Vericel forecasts continued high revenue and profit growth in 2024 and beyond.
  • For the full year, the company expects to be GAAP profitable.
  • Sequential growth is anticipated for both MACI and Burn Care revenue in Q3.

Bearish Highlights

  • Patient health variables can affect treatment timings, potentially causing revenue spillover from one quarter to the next.

Bullish Highlights

  • MACI is rebounding to a high growth profile and is becoming more accepted as the standard-of-care for cartilage repair.
  • The launch of MACI Arthro is targeting high-volume cartilage repair centers, expected to significantly impact utilization.
  • The company has a consistent strategy for corporate development and innovation, focusing on financial growth.

Misses

  • There are no significant misses reported in the earnings call.

Q&A Highlights

  • CEO Nick Colangelo expects strong indicators and a robust second half of the year.
  • Vericel will actively promote NexoBrid to about 20 pediatric burn centers, in addition to 90 Tier 1 and Tier 2 centers.
  • The pediatric indication for NexoBrid is projected to meaningfully impact its uptake.

Vericel Corporation's second quarter results have clearly set a positive tone for the company's outlook in 2024. With the expected launch of new products and the expansion of their customer base, Vericel is well-positioned to maintain its trajectory of revenue and profit growth. The company's strategic focus on both innovation and financial performance, coupled with anticipated regulatory approvals, suggests a strong potential for sustained success in the competitive biotechnology and burn care markets.

InvestingPro Insights

Vericel Corporation's (VCEL) recent financial performance reflects a company on the rise, with a record Q2 revenue and an optimistic outlook for the future. The InvestingPro data and tips provide additional context to these results and the company's valuation.

InvestingPro Data highlights include a market capitalization of $2.33 billion, illustrating the company's substantial market presence. The P/E ratio stands at a high 7649.8, which may indicate investor confidence in future earnings growth or a premium for the company's market position. Additionally, the revenue growth of 20.39% in the last twelve months as of Q2 2024 underscores the company's strong sales trajectory.

From the InvestingPro Tips, it's worth noting that analysts predict Vericel will be profitable this year, aligning with the company's own raised profitability outlook. Moreover, the stock has experienced significant volatility recently, with a notable drop over the last week, which may present an opportunity for investors looking to capitalize on the company's long-term growth prospects.

For investors interested in deeper analysis, there are additional InvestingPro Tips available, including insights on Vericel's debt levels, liquidity, and valuation multiples. For example, the company's liquid assets exceed short-term obligations, indicating financial stability, and it operates with a moderate level of debt, which is a positive sign for risk-averse investors. Furthermore, with a high EBITDA valuation multiple, investors may want to consider the company's growth prospects in relation to its current valuation.

For a comprehensive understanding of Vericel's investment profile, including all 12 InvestingPro Tips, visit https://www.investing.com/pro/VCEL.

Full transcript - Aastrom Bioscienc (VCEL) Q2 2024:

Operator: Ladies and gentlemen, thank you for standing by. Welcome to Vericel's Second Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. I would also like to remind you that this call is being recorded for replay. I will now turn the conference call over to Eric Burns, Vericel's Vice President of Finance and Investor Relations.

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, 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 second quarter quarter financial results press release in a short presentation with highlights from today's call are available in the Investor Relations section of our website. I will now turn it over to Nick.

Nick Colangelo: Thank you, Eric, and good morning, everyone. I'll begin today's call by discussing the company's financial and business highlights for the second quarter, as well as our expectations for the remainder of the year. Joe will then provide a more detailed review of the company's second quarter financial results and guidance for 2024, before opening the call to Q&A. The company had another strong quarter as we generated record second quarter revenue of nearly $53 million, highlighted by continued high growth for MACI and solid progression in demand for NexoBrid. We also delivered another quarter of significant margin expansion and profit growth with record second quarter gross margin of 70% and adjusted EBITDA growth of 42%, compared to last year, as the company's profit growth continues to outpace our high revenue growth. Through the first half of the year, the company generated 20% growth in total revenue, MACI revenue and Burn Care revenue, expanded gross margin by over 400 basis points and more than doubled adjusted EBITDA compared to the first half of last year. Based on the strength of our first half performance, we're reaffirming our revenue guidance of 20% plus growth for the full year and raising our profitability guidance for gross margin to 71% and adjusted EBITDA margin to 21% for the full year. MACI had another excellent quarter with record second quarter revenue of more than $44 million, which increased 21% and exceeded our guidance for the quarter. MACI's second quarter performance was once again driven by strong underlying business fundamentals, as we continue to expand the MACI surgeon customer base and drive growth in biopsies. We had the second highest number of MACI biopsies and surgeons taking biopsies in any quarter since launch, as well as the highest number of biopsies in any month since launch during the quarter. The strength of these key MACI growth drivers together with another quarter of significant increases in peer-to-peer programs and attendees at those programs demonstrates that surgeon interest in MACI remains high, as we continue to build a strong foundation for sustained MACI growth over the long-term. As our expanded surgeon base gains further experience with MACI, we also expect biopsies per surgeon and biopsy conversion rates to become more significant growth drivers. Notably, we saw a significant increase in biopsies per surgeon during the second quarter, which helped to drive an acceleration in biopsy growth in the quarter. We also saw an uptick in the conversion rate versus the prior year, as there's a direct correlation between surgeon experience with MACI and higher conversion rates. Typically, once surgeons perform more than a few implants on average per year, their conversion rate tends to increase into the mid-40% range and even higher at higher average plant volumes per year, which is significantly above our overall conversion rate and demonstrates the clear potential for conversion rate to become an important growth driver over time, as MACI utilization increases across our surgeon customer base. Turning to our MACI lifestyle management initiatives, we're excited about the potential launch of MACI Arthro later this quarter. Our custom MACI Arthro instruments have already been registered with the FDA, and plans are in place for the commercial launch of this innovative addition to our portfolio upon FDA approval to expand MACI's label to include arthroscopic delivery. As part of the planned launch, we're expanding our target surgeon base from 5,000 to 7,000 surgeons to include surgeons that perform high volumes of cartilage repair surgeries predominantly through arthroscopic procedures. Given that the MACI Arthro instruments target smaller cartilage defects that comprise the largest segment of our addressable market, representing approximately 20,000 patients for a year or one-third of the $3 billion addressable market for MACI, we believe that MACI Arthro will have a meaningful impact on utilization and provides a significant potential upside growth opportunity for the brand and the company in the years ahead. We also remain on track to initiate the MACI Ankle clinical study in 2025. Cartilage defects in the ankle represent the second largest market opportunity for MACI. We believe that a potential MACI Ankle indication with an estimated $1 billion addressable market could be another significant growth driver for MACI in the next decade and beyond. Turning to our Burn Care franchise. NexoBrid launch momentum continued to build during the second quarter, as revenue nearly doubled and we made further progress with respect to our burn center key performance indicators. Through the end of second quarter, approximately 70 burn centers had completed P&T Committee submissions, more than 40 centers had gained P&T Committee approval, and nearly 40 centers had placed an initial product order. There also was a meaningful increase in hospital orders and patients treated in the quarter, as more burn centers incorporate NexoBrid into their regular clinical practices. We also expect FDA approval of a pediatric indication for NexoBrid in the coming weeks, which would provide an important treatment option for pediatric patients with severe thermal burns. There are approximately 20 pediatric burn centers in the U.S. that will be added to our target customer base following approval, which we believe will have a meaningful impact on overall NexoBird uptake overtime. Turning to Epicel. While we had a similar number of biopsies in the second quarter, as in the first quarter of this year and the second quarter of last year, which resulted in revenue in the $10 million range for both of those quarters, Epicel revenue in the second quarter of this year was closer to its quarterly run rate entering the year of approximately $8 million. After a strong start to the quarter in April, the number of patients treated with Epicel was lower in May and June due to a number of factors, including patient health issues and the timing of patient treatments. While there can be variability in Epicel quarterly results, given the relatively small patient population and the critical nature of their injuries, demand for Epicel remains strong. Over the first half of the year, the quarterly run rate for Epicel has increased as expected to more than $9 million per quarter, with double-digits growth for the first half of the year versus last year. We're also off to a very good start in the third quarter based on the strength in Epicel biopsies, patients treated and graft volumes to date in the quarter. Overall, the company delivered another strong quarter in first half of the year with sustained high revenue and profitability growth, excellent MACI results, solid progression in NexoBrid demand and meaningful growth for Epicel in the first half of the year. Based on the strength of our core portfolio and expected contributions from new product launches, we believe that, the company is very well-positioned for continued high revenue and profit growth in 2024 and beyond. I'll now turn the call over to Joe.

Joe Mara: Thanks, Nick, and good morning, everyone. Starting with our second quarter results. Sotal net revenue for the quarter was $52.7 million with MACI revenue of $44.1 million and total Burn Care revenue of $8.5 million, which was made up of Epicel revenue of $7.8 million and NexoBrid revenue of $0.8 million. In the second quarter, MACI revenue grew 21% versus the prior year and 10% versus the prior quarter, while NexoBrid increased 76% versus the prior quarter. In addition, through the first half of the year, both of our franchises delivered 20% revenue growth versus the prior year. Gross profit for the quarter was $36.6 million or 70% of net revenue, an increase of 430 basis points versus the prior year, which was the company's highest second quarter gross margin to date. Total operating expenses for the quarter were $42.6 million, compared to $35.9 million for the same period in 2023. The increase in operating expenses was primarily due to development and pre-launch activities for MACI Arthro, increased headcount and related employee expense, and lease expense associated with the Company's new facility that is under construction. Net loss for the quarter was $4.7 million or $0.10 per share, compared to $5 million or $0.11 per share for the second quarter of 2023. In addition, the company has now generated positive GAAP net income on a rolling 12 month basis, as we continue to enhance our strong profitability profile. Non-GAAP adjusted EBITDA for the quarter increased 42% to $6.3 million or 12% of net revenue, compared to $4.4 million or 10% of net revenue in 2023. As adjusted EBITDA growth continued to significantly outpace our high revenue growth. For the first half of the year, adjusted EBITDA more than doubled to $13.5 million and adjusted EBITDA margin increased approximately 600 basis points, demonstrating continued strong leverage across our P&L. Finally, the company generated $18.5 million of operating cash flow in the quarter and ended the second quarter with $154 million in cash, restricted cash and investments and no debt. Turning to our financial guidance. For the full year after a very strong first half of the year, we are reaffirming our total company revenue guidance of $238 million to $242 million or 20% to 23% total revenue growth. Within our guidance framework, based on the strong first half results for MACI and the continued strength in its key leading indicators, we have increased our expectations for MACI for the full year. We now expect MACI revenue growth of approximately 20% for the full year, an increase versus our prior expectation of high teens growth to start the year, with the balance of revenue coming from our Burn Care franchise. In addition, based on the company's strong overall financial performance, we are increasing gross margin guidance to 71%, and adjusted EBITDA margin guidance to 21% for the full year compared to the previous guidance of 70% 20%, respectively. Importantly, we also expect to be GAAP profitable in 2024 on a full year basis. For the third quarter, we expect sequential growth in both MACI and Burn Care revenue with total company revenue of approximately $55 million, representing growth of more than 20% versus the prior year. For MACI, we expect another strong quarter with year-over-year growth in a similar range as the first two quarters of the year and revenue of approximately $44.5 million. For Burn Care, we also expect a strong third quarter with total Burn Care revenue of approximately $10.5 million. Finally, we expect gross and adjusted EBITDA margins in the third quarter to be similar to second quarter margins. This concludes our prepared remarks. We will now open up the call to your questions.

Operator: Thank you. [Operator Instructions] Our first question comes from Ryan Zimmerman from BTIG. Your line is now open.

Ryan Zimmerman: Good morning. Thanks for taking our questions. I want to start first on MACI, and then I have a Burn Care question, but a two part question on MACI. Appreciate the guidance, Joe, both for the year and quarterly. I just want to make sure people are clear about the pacing expectations and kind of the step-up implied in fourth quarter coupled with the Arthro launch, that may be happening over the back half of the year? And then the second part of the question, a little different, but it's around your comments, Nick, on conversion, which is, you're seeing more tenure in the user base of conversion, which as you noted is going to increase conversion ratios. At the same time, as you move to smaller cartilage defects, which in absolute value will increase, I would imagine that has some downward pressure on the conversion ratio, just given that there may be less acute injuries and so maybe there's less likelihood to convert from biopsy to procedure there. How would you have us think about conversion against those two factors over time, just given the nature of the injuries treated in the arthro launch? And then, I have one follow-up on Burn Care. Thanks.

Joe Mara: Yes. Good morning, Ryan. Thanks for the questions. I'll start on maybe the MACI cadence, and then we'll address kind of your conversion question second. From a MACI perspective, obviously, two strong quarters to start the year. As Nick said, extremely strong leading indicators. We do have higher expectations on a full year basis. We started in kind of the, call it, the mid to high teens, now around that 20% range. Certainly, increasing expectations on MACI as it continues to perform well. In terms of the cadence for the rest of the year, we did call out to your point a Q3 estimate of around $44.5 million on MACI. That's pretty similar growth that we've seen over the first couple of quarters, probably about an average of the 2%. As you think about kind of the seasonality and the step up for Q4, I would generally say it follows our typical seasonal pattern. Whether we look at kind of the H1 to H2 growth, you kind of look at the step up to Q4, which is in that 50% range, you look at, call it, H1, H2 mix, which is around our 43% to 57% if you look at that guidance. I'd say, it's very similar to what we've seen in the past in terms of expectations and sort of assumptions around kind of MACI Arthro. I think we've consistently said our expectation is that's more of a 2025 driver. It's really kind of the core performance of MACI that's continued to perform. Again, the seasonality and mix is very much in line within the guidance to what we've seen last year and what we typically see.

Nick Colangelo: Thanks. Ryan to your conversion rate, yes, as we've talked about for years now, as surgeons gain more experience and our higher volume surgeons clearly have higher conversion rates, a lot of the dynamics that we point to are that we're adding a lot of new surgeons and we continue to do so. That's what sort of balances out sort of those higher conversion rates because obviously as they're getting up to speed, they have lower conversion rates. It's remained relatively stable. In terms of the size of the defect, I'll just tell you that a two to four square centimeter defect on the surface of your knee, that's a pretty big injury. When we look at, for instance, we're targeting MACI Arthro for those two to four square centimeter femoral condyle defects. We can see sort of how those defects are treated in the patella, which obviously MACI is a go to product there. It's a pretty significant piece of our business now. To the best of my knowledge, at least the average conversion rate, if not higher, for patella cases. I don't anticipate any impact on conversion rate from that size and location of the defect. They're getting treated somehow. We just think MACI will be able to have a greater penetration into those defects on the femoral condyle, with the MACI Arthro instrument kit.

Ryan Zimmerman: Very helpful, Nick and Joe. And then just on Burn Care, the nature of the business is volatile. I've covered you guys long enough to know that. I just want to make sure that there's no structural change in the burn market from what you saw? It sounds like you guided early May and then you saw some volatility in the patient population around Epicel in later May and June. But, just want to be clear that, you're not seeing any structural change there with the Epicel.

Nick Colangelo: Yes. Thanks, Ryan. Appreciate the question and it's a fair one. But our my point of we had similar biopsies. That's the top of the funnel. If you saw some sort of structural train change in the burn market, you would expect it. That the place you see it. We also mentioned that, we had a very strong start in April. And then, we just had sort of that variability that you can see in certain months based on patient health issues and again the critical nature of their injuries, and right back to a strong start in July, highest biopsies of the year in the month of July. We feel pretty good about Epicel and the continued growth, first half of the year, up 12%. I think we're again feeling pretty good about that. We also have implemented kind of our sales force optimization plan, where we've added a few additional territories for the Burn Care sales force. We're up to 17. As of the third quarter, all reps will now be promoting both Epicel and NexoBrid. We've seen a pretty strong pull through for Epicel from the formerly dormant accounts that were being called on for NexoBrid. We think, we're set up nicely for strong Burn Care growth. Based on the guidance we've given, it's in the 30% range for the year, so pretty robust growth.

Operator: Our next question comes from Mike Kratky from Leerink Partners. Your line is now open.

Mike Kratky: Hi, everyone. Thanks for taking our questions. It looks like MACI sales came in a bit higher than The Street during the quarter and you also started seeing the highest number of biopsies in any month since launch. Can you just confirm what month of the quarter that record number of biopsies came in? To what extent is that tied to some of your ongoing pre-arthroscopic launch activities that you mentioned?

Nick Colangelo: I mean, it just it was in May for what that's worth. I think the more important part is, we're continuing to see very strong engagement with surgeons in terms of the number of surgeons taking biopsies continuing to be at sort of very high levels. Obviously, that translates to more biopsies, particularly when you see an uptick in biopsies per surgeon, which is great. That's really independent of the arthroscopic prep. Obviously, the arthroscopic delivery is not approved yet. It's really independent. It's just kind of the strength of the core MACI business that we've really been seeing for quite some time now.

Mike Kratky: Understood. Maybe just as a follow-up, can you give us a sense of, a, regarding the 2,000 new target surgeons that you cited, basically just how quickly you can start targeting those surgeons, reaching out to them and at what point you really expect the sales force efficiency to start taking up?

Nick Colangelo: Well, obviously, we have the target list set and ready to go. Immediately upon FDA approval, sales reps can start calling on those surgeons. There's really no limitation, on that. Excited to to have that. I'd say, we probably feel like, we'll see more immediate uptake potentially from MACI surgeons who are obviously familiar with the product. They also do a lot of arthroscopic procedures as we always remind folks. Anytime they're doing chondroplasties, micro fractures, oats and the vast majority of cartilage repair procedures are done arthroscopically. They're used to treating cartilage injuries that way. I think it's a pretty easy transition for patients with appropriate defects or experienced surgeons to kind of flip to MACI arthroscopic delivery. Similarly, though, as you know, those 2,000 surgeons will be adding, who really do their cartilage, high volumes of cartilage repair predominantly through arthroscopic procedures. They too are used to treating cartilage injuries with arthroscopic instruments and doing things like microfracture augmentation, where they're also doing implants as part of that. We think it's a pretty seamless transition that will continue. It'll occur over time and give us a pretty long runway, we think, for MACI growth as we move forward in the years ahead.

Operator: Our next question comes from Josh Jennings from TD (TSX:TD) Cowen. Your line is now open.

Josh Jennings: Hi, good morning. Thanks for taking the questions. It's nice to see that MACI momentum here. Wanted to just follow-up on the last question just around, but in a different angle. Just thinking about the success you've had in terms of getting more surgeons in peer-to-peer events, getting trained. I just wanted to hear from you just, what's driving that? I mean, clearly, it's you're experiencing momentum, but you do have 10 year data out there early in the year. You have arthro on tap. I guess for the gist of the question, just trying to figure out that leading indicator, any just high level comments on the first half, the drivers of that and whether this MACI arthro approval is driving some of that increased interest this year?

Nick Colangelo: No. I'd say, back to the prior response that, we've just seen a lot of momentum in the core MACI business sort of as we exited sort of those COVID-impacted years. Since that time, we've seen MACI just in total rebound to its prior high growth profile. As it becomes more and more the standard-of-care for cartilage repair based on, as you mentioned, not only sort of the two year data in the pivotal study, the five year data in the extension study, 10 year data that was published earlier this year. I just think you kind of see this broadening of the customer base that has just continued for a number of years now. And then, as we launch MACI Arthro, those are new targets. Again, they're doing high volumes of cartilage repair already. MACI will be a new option for them. But, I'm pretty sure they're aware of sort of MACI and its profile from the clinical and efficacy perspective.

Josh Jennings: Understood. Thanks for that. And also wanted to just get an update on business development initiatives. I think your team is out there on the hunt with the profitability profile inflecting, how would you have investors think about those efforts and M&A opportunities out there to bring even more portfolios under the Vericel roof? Thanks.

Nick Colangelo: Yes. Our corporate development strategy has been quite consistent over the number of years. Obviously, we have a lot ahead of us with new product launches and continued high growth with our core business. As you said, we have a dedicated effort on the business development front, always looking at opportunities in the sports medicine space that would be synergistic with MACI for our customer base in the Burn Care space, and then probably relatively less so, but also given our expertise in advanced cell therapy development, manufacturing, commercialization, a lot of folks come to us with different opportunities as well. I'd say, for us, the hurdles are relatively high. You all know and have seen sort of BD deals sort of go awry even in our space. And so, we're very focused on maintaining the innovation profile of our portfolio. I think we're in a relatively unique position where our products are the only approved products of their kind in our space. And so, that's where it all starts. And then we also have a unique financial profile. And so, we're very focused on making sure we maintain our high revenue growth rate, our our profitability and so on. I always say that, if something transaction should be pretty comfortable, we probably looked at it, but we have a pretty high bar. We'll add products and portfolios as it makes sense for us. But, you're right, we certainly have the financial sort of firepower to be able to do that. It's all about just making sure it's the right fit for us.

Operator: Our next question comes from Jeff Cohen from Ladenburg Thalmann & Company. Your line is now open.

Jeff Cohen: Hi, Nick and Joe. Good morning. Couple of questions from our end. Firstly, could you talk about NexoBrid and pediatric indication and how that might go out as far as the kind of doing some of the things that are in addition to the code 17 and you're likely the some of the commercial folks as well focus on that area?

Nick Colangelo: Yes. I think I had a little bit of a hard time hearing you, Jeff, but I think I have the gist of the question. Yes, upon approval, obviously, we have the 17 territories that I mentioned as we've implemented kind of our sales force optimization for the Burn Care franchise. On average, it's about one center per territory. And so, it's certainly they're already in the target base for these reps. But until the approval comes, they're obviously not sort of in there promoting the use of NexoBrid. We certainly have seen a few centers using it, these pediatric burn centers. They're free to do that. We just can't promote it. But, on Day 1, we've got a playbook for the reps to go out, and sort of promote NexoBrid. We'll have to go through the same processm P&T committee approval and establishing ordering protocols and and patient protocols, et cetera. But, we do think there'll be a pretty meaningful impact over time. Roughly 25% to 30% of hospitalized burn patients are pediatric patients. As I mentioned on the call, we think this will certainly aid in NexoBird uptake over time.

Jeff Cohen: Perfect. And then lastly, John, I did hear you follow-up regarding franchise for Q3 on your guide of 10.5. Could you give us a composition or some flavor beneath that on NexoBrid versus Epicel, please?

Joe Mara: Sorry, Jeff. We're having a hard time in the morning. This is Joe. Are you asking about kind of Q3 revenue composition within the guidance?

Jeff Cohen: Within burns.

Joe Mara: Within burns. I'd say, if you kind of look at Burn Care and you kind of think about the framework there. Nick talked about this a bit. But in the first half of the year, Epicel obviously can vary a bit by quarter and we saw that, but pretty encouraging that, it was kind of over the $9 million mark, grew in the double digits from a run rate perspective, also from a year-over-year perspective on total revenue for Epicel. As we think about the back half and I think Q3 is certainly part of that equation, we expect Epicel to kind of be at that higher run rate, call it in that $9 million to $10 million range. Don't know exactly what it's going to look like across quarters, but I think that's a reasonable assumption. In terms of NexoBrid, I'd say, as we talked about in the prepared remarks, some strong progression from Q1 to Q2. As we think about the second half of the year and think about the third quarter, that should certainly continue that progression kind of throughout the year. Difficult to say exactly what the mix will be, but we certainly expect Epicel to kind of remain at these higher run rates and have a strong second half of the year. We're seeing strong indicators there and NexoBrid is moving in the right direction as well. I'd say, both of those are part of it and that's how we're thinking about Q3 in the back half.

Operator: Our next question comes from Swayampakula Ramakanth from HCW. Your line is now open.

Swayampakula Ramakanth: Thank you. Good morning, Nick and Joe. A quick question on the burn franchise. If I heard everything correctly, when you're talking, Nick, about conversion rates, you were saying something about Epicel biopsy and conversion there. Did some of that spillover into the third quarter because you are also talking about some timing? I'm just trying to have an idea, if any of the revenue that you had expected in the second quarter spilled over into the third?

Nick Colangelo: As I mentioned, just kind of the top of the funnel again was pretty consistent with prior quarters. I did mentioned that, there's always going to be patient health variables that impact timing of treatments. We certainly did see particularly late in the quarter cases that were pushed into or rescheduled into third quarter. Again, that happens because these patients have a lot of other injuries or infections that prevent surgeries from taking place. The short answer is yes, but that is relatively common.

Swayampakula Ramakanth: Okay. And then a quick question on the pediatric indication of NexoBrid. You said you have 70 centers, burn centers already had the PTN approval. If you get the pediatric indication on board, yes, how many of these centers also, do pediatric? And also, would you add, centers outside of this 70, which are just only for pediatric? I'm not really good at the burn market.

Nick Colangelo: Yes. Let me just kind of give a quick overview. As you know, in the launch, there's about 140 burn centers in the U.S. that are accredited by the ABA. We break them up into three tiers. We're really focused on the 90 Tier 1 and Tier 2 centers with our initial launch. That's kind of what we've been reporting on in terms of the 70 submissions, the 40 approvals, et cetera. There's about 20 pediatric burn centers that will now, we will actively promote to. Certainly, in some of our existing centers, pediatric patients can be treated. They don't all get treated at the pediatric centers. But again, we can't be in there promoting. You'll have some pediatric centers that used the product, a few, but many of them were sort of waiting for the pediatric indication. And so, we think, as I mentioned on the call that, we have a meaningful impact on NexoBird uptake as we get out there and get these centers through the process and they start treating this pediatric burn population.

Swayampakula Ramakanth: Thank you. Looking forward to the exciting second half of this new introductions.

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

Nick Colangelo: Thank you everyone for your questions and continued interest in Vericel. As we mentioned, the company had a very strong first half of the year. We expect to continue to deliver sustained high revenue and profit growth for the remainder of the year and beyond and we look forward to providing further updates on our progress on our next call. Thanks again and have a great day.

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

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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