vcel-20240331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-35280

VERICEL CORPORATION

(Exact name of registrant as specified in its charter)


Michigan						94-3096597
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

64 Sidney Street

Cambridge, MA 02139

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (617) 588-5555

Securities registered pursuant to Section 12(b) of the Act:


Title of Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock (No par value)	VCEL	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of April 30, 2024, 48,601,736 shares of Common Stock, no par value per share, were outstanding.


		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Shareholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	28
	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	30
Exhibit Index		30
Signatures		31


	March 31,		December 31,
	2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	62,938	$	69,088
Restricted cash	7,804		17,778
Short-term investments	47,710		40,469
Accounts receivable (net of allowance for doubtful accounts of $87 and $43, respectively)	49,934		58,356
Inventory	13,557		13,087
Other current assets	7,775		6,853
Total current assets	189,718		205,631
Property and equipment, net	56,392		41,635
Intangible assets, net	6,719		6,875
Right-of-use assets	73,682		73,462
Long-term investments	29,433		25,283
Other long-term assets	717		771
Total assets	$	356,661	$	353,657
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	19,432	$	22,347
Accrued expenses	11,026		17,215
Current portion of operating lease liabilities	6,012		6,187

Total current liabilities	36,470		45,749
Operating lease liabilities	86,141		81,856
Other long-term liabilities	154		100
Total liabilities	122,765		127,705
COMMITMENTS AND CONTINGENCIES (Note 12)
Shareholders’ equity:
Common stock, no par value; shares authorized — 75,000; shares issued and outstanding — 48,489 and 47,829, respectively	641,180		629,229
Accumulated other comprehensive loss	(245)		(100)
Accumulated deficit	(407,039)		(403,177)
Total shareholders’ equity	233,896		225,952
Total liabilities and shareholders’ equity	$	356,661	$	353,657


	Three Months Ended March 31,
	2024		2023
Product sales, net	$	51,281	$	41,017

Total revenue	51,281		41,017
Cost of product sales	15,927		14,497
Gross profit	35,354		26,520
Research and development	6,418		5,212
Selling, general and administrative	34,400		29,485
Total operating expenses	40,818		34,697
Loss from operations	(5,464)		(8,177)
Other income (expense):
Interest income	1,762		839
Interest expense	(153)		(145)
Other expense	(7)		(12)
Total other income	1,602		682


Net loss	$	(3,862)	$	(7,495)
Net loss per common share:
Basic and diluted	$	(0.08)	$	(0.16)

Weighted-average common shares outstanding:
Basic and diluted	48,141		47,387


	Common Stock			Accumulated Other Comprehensive Gain (Loss)		Accumulated Deficit		Total Shareholders’ Equity
	Shares	Amount
BALANCE, DECEMBER 31, 2023	47,829	$	629,229	$	(100)	$	(403,177)	$	225,952
Net loss	—	—		—		(3,862)		(3,862)
Stock-based compensation expense	—	9,834		—		—		9,834
Stock option exercises	487	6,779		—		—		6,779
Shares issued under the Employee Stock Purchase Plan	9	247		—		—		247
Issuance of stock for restricted stock unit vesting	265	—		—		—		—
Restricted stock withheld for employee tax remittance	(101)	(4,909)		—		—		(4,909)
Unrealized loss on investments	—	—		(145)		—		(145)
BALANCE, MARCH 31, 2024	48,489	$	641,180	$	(245)	$	(407,039)	$	233,896


	Three Months Ended March 31,
Revenue by product (in thousands)	2024		2023
MACI implants and kits
Implants based on contracted rate sold through a specialty pharmacy (a)	$	27,196	$	22,698
Implants subject to third party reimbursement sold through a specialty pharmacy (b)	3,253		3,485
Implants sold direct based on contracted rates (c)	6,402		6,919
Implants sold direct subject to third-party reimbursement (d)	1,185		501
Biopsy kits - direct bill	565		535
Change in estimates related to prior periods (e)	1,580		52
Total MACI implants and kits	40,181		34,190
Epicel
Direct bill (hospital)	10,664		6,827

NexoBrid (f)	436		—
Total revenue	$	51,281	$	41,017

(a) Represents implants sold through Orsini and AllCare whereby such specialty pharmacies have a direct contract with the underlying insurance provider. The amount of reimbursement is based on contracted rates at the time of sale supported by the pharmacy’s direct contracts.

(b) Represents implants sold through Orsini and AllCare whereby such specialty pharmacy does not have a direct contract with the underlying payer, and are subject to third-party reimbursement. The amount of reimbursement is established based on publicly available rates, fee schedules or past payer precedents.

(c) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. Also represents direct sales under a contract to specialty distributor DMS.

(d) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. The payment terms are subject to third-party reimbursement from an underlying insurance provider.

(e) Primarily represents changes in estimates related to implants sold through Orsini or AllCare and relate to changes to the initial expected reimbursement or collection expectations upon completion of the billing claims process. The change in estimates is a result of additional information, changes in collection expectations or actual cash collections received in the current period.

(f) Represents U.S. commercial revenue of NexoBrid.


(In thousands)	March 31, 2024		December 31, 2023
Raw materials	$	10,858	$	11,348
Work-in-process	1,745		1,210
Finished goods	954		529
Total inventory	$	13,557	$	13,087


(In thousands)	Amount
Remainder of 2024	$	469
2025	625
2026	625
2027	625
2028	625
Thereafter	3,750
Total	$	6,719


(In thousands)	Classification	March 31, 2024		December 31, 2023
Assets
Operating	Right-of-use assets	$	73,682	$	73,462


Liabilities
Current
Operating	Current portion of operating lease liabilities	$	6,012	$	6,187

Non-current
Operating	Operating lease liabilities	$	86,141	$	81,856

Total leased liabilities		$	92,153	$	88,043


	March 31, 2024
			Gross Unrealized						Estimated Fair Value
(In thousands)	Amortized Cost		Gains		Losses		Credit Losses
Commercial paper	$	7,396	$	—	$	(13)	$	—	$	7,383
Corporate notes	56,803		—		(199)		—		56,604
U.S. government securities	2,473		—		(1)		—		2,472
U.S. government agency bonds	10,713		—		(29)		—		10,684
	$	77,385	$	—	$	(242)	$	—	$	77,143
Classified as:
Short-term investments									$	47,710
Long-term investments									29,433
									$	77,143


	Three months ended March 31,
	2024		2023
Operating activities:
Net loss	$	(3,862)	$	(7,495)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization expense	1,378		1,158
Stock-based compensation expense	9,834		8,731
Amortization of premiums and discounts on marketable securities	(102)		(290)
Amortization of debt issuance costs	54		54
Non-cash lease costs	1,771		1,112
Other	7		12
Changes in operating assets and liabilities:
Inventory	(470)		616
Accounts receivable	8,422		8,180
Other current assets	(922)		263
Accounts payable	(4,883)		(274)
Accrued expenses	(6,198)		(3,079)
Operating lease liabilities	2,119		(1,128)
Other non-current assets and liabilities, net	54		—
Net cash provided by operating activities	7,202		7,860
Investing activities:
Purchases of investments	(22,555)		(9,787)
Sales and maturities of investments	11,120		21,500
Expenditures for property and equipment	(14,017)		(1,413)
Purchases of intangible assets	—		(7,500)
Net cash (used in) provided by investing activities	(25,452)		2,800
Financing activities:
Net proceeds from common stock issuance	7,026		2,225

Payments on employee’s behalf for taxes related to vesting of restricted stock unit awards	(4,900)		(2,097)
Other	—		(21)
Net cash provided by financing activities	2,126		107
Net (decrease) increase in cash, cash equivalents, and restricted cash	(16,124)		10,767
Cash, cash equivalents, and restricted cash at beginning of period	86,866		51,067
Cash, cash equivalents, and restricted cash at end of period	$	70,742	$	61,834


	Three months ended March 31,
	2024		2023
Supplemental disclosure of cash flow information:
Non-cash information:
Right-of-use asset and lease liability recognized	$	1,991	$	419
Additions to property and equipment included in accounts payable	12,115		2,282


(In thousands)	March 31, 2024		December 31, 2023
Machinery and equipment	$	5,822	$	5,562
Furniture, fixtures and office equipment	1,647		1,731
Computer equipment and software	9,976		9,116
Leasehold improvements	14,901		14,901
Construction in process	47,474		32,531

Total property and equipment, gross	79,820		63,841
Less accumulated depreciation	(23,428)		(22,206)
Total property and equipment, net	$	56,392	$	41,635

SEC Form 10-Q filed by Vericel Corporation