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Vericel Corp (VCEL) Q4 2018 Earnings Conference Call Transcript

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Vericel Corp  (NASDAQ: VCEL)
Q4 2018 Earnings Conference Call
Feb. 26, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Vericel Corporation Fourth Quarter 2018 Earnings Call. (Operator Instructions) As a reminder, this call will be recorded.

I would now like to introduce your host for today's conference, Gerard Michel. Please go ahead, sir.

Gerard J. Michel -- Chief Financial Officer and Vice President of Corporate Development

Thank you, operator and good morning everyone. Welcome to Vericel's fourth quarter 2018 conference call to discuss our financial results.

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, and all of our projections and forward-looking statements represent our judgments as of today. These statements may involve risks and uncertainties that could cause actual results to differ from expectations and that are described more fully in our filings with the SEC, which are also available on our website.

In addition, any 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.

With us on today's call are Nick Colangelo, Vericel's President and Chief Executive Officer; and Dan Orlando, our Chief Operating Officer.

I will now turn the call over to Nick.

Dominick C. Colangelo -- President and Chief Executive Officer

Thank you, Gerard, and good morning everyone. Our fourth quarter results reflect a very strong finish to a great year for the company in 2018. Net product revenues increased 41% compared to the fourth quarter of 2017 marking the seventh consecutive quarter with record revenues for the reported quarter, and we delivered 45% net product revenue growth for the full year. Our growth was driven largely by the continued strong uptake for MACI, which had revenue growth of 56% for the quarter and 54% for the full year.

This strong revenue growth generated significant improvements in profitability and operating cash flow for both the quarter and the year. Gross margins in the fourth quarter increased to 72% of net revenues and we delivered net income of $5.2 million or $0.11 per share on a fully diluted basis. We also generated positive full-year adjusted EBITDA for the first time in the company's history. In light of the significant expansion of the targeted addressable market or TAM. Our continued commercial investments in the lack of any near-term competitive product entrance, we expect strong growth for MACI to continue in 2019.

We also believe that this revenue growth will lead to strong profit growth given our low marginal product costs in the significant operating margin leverage in our business model. As announced earlier today, we expect total net product revenues for 2019 to be in the range of $108 million to $112 million that approximately 80% of margin revenues over 2018 will contribute to incremental gross profit and that approximately 50% of marginal revenues over 2018 will contribute to adjusted EBITDA.

Gerard will provide further details regarding our financial guidance for 2019. We're obviously very pleased with our commercial and financial performance for the fourth quarter and the full year, the underlying drivers of near and mid-term revenue growth for MACI that we've seen to date are consistent with the larger TAM that we discussed last quarter.

And I'll now turn the call over to Dan to provide more detail regarding our commercial performance and activities.

Daniel R. Orlando -- Chief Operating Officer

Thank you, Nick. I'll start by welcoming the new sales representatives, who recently joined Vericel and are now in training. On April 1, they'll move into their new territories, increasing our MACI sales force by 20% to 48 representatives. The sales force expansion is a direct reflection of our confidence in the market research that substantiated the increased MACI TAM and confirmed the continued strong adoption of MACI by both previous advocate and new adopters.

As we look back at the previous MACI sales force expansion, which were implemented at the same time at year end 2017 and 2018. We find that the biopsy rate increased significantly in the expansion territories in the first year and that the expansion territories led the nation in percentage increase in implants, the following year. We expect this dynamic to be repeated. With this expansion as well and we will continue to closely assess our sales force sizing as we balance the vital sales representative insurgent relationships with the desire to best serve the potential 60,000 annual patients, who could benefit from MACI.

Given that 2018 is its first full year on the market, MACI is still early in its life cycle. So we maintain focus on continued growth and expanding the targeted and trained surgeon population, which is now over 900 surgeons and we are continuously improving our payer medical policies to best reflect the full indications for MACI, which in turn reduces case approval times.

In addition to these HCP and payer efforts, we're also focus on several patient-focused marketing initiatives to increase the biopsy to implant ratio and drive MACI demand. We are launching a MACI ambassador program that will highlight compelling patient success stories and integrating this program into our celebrity spokesperson campaign, which together will form the cornerstone of our social media brand engagement efforts. We also will be launching a number of physical therapist focused initiatives to enhance MACI rehabilitation resources and build our network of advocates and opinion leaders within this important patient-focused community.

I'll now shift gears to Epicel, which had a good year in its own right. Although, it's hard to measure on a quarterly basis due to the variable incidents and burn injury. Epicel remains strong when looking at the performance over the full year. And although, a new entrant has entered the lower TBSA burn market, Epicel remains the only FDA-approved permanent skin replacement for the treatment of adult and pediatric patients with large total body surface area burned. Epicel's clinical utility in the severe burn population was further reinforced by the recent landmark publication in the Journal of burn care and research, which reported outcomes data from 954 burned patients treated with Epicel, compared to a standard of care treatment and over 177,000 patients in the National Burn Registry over the same period of time.

The data demonstrated that patients treated with Epicel, a third of whom are children had an 85% survival rate, which was significantly greater than the comparative population. This demonstrated improvement in survival rates for severely burned patients treated with Epicel certainly will help as an important tool as we target new burn centers that have not yet utilized Epicel. Wrapping up, I'd like to thank our commercial and operating teams for their outstanding performance in 2018.

I'll now turn the call over to Gerard to review our fourth quarter 2018 financial results, and the updated financial guidance.

Gerard J. Michel -- Chief Financial Officer and Vice President of Corporate Development

Thanks, Dan. We reported total net product revenues of $31.3 million for the fourth quarter of 2018, an increase of 41% over the quarter of 2017. Total net revenues for the quarter included $25.1 million of MACI and $6.2 million of Epicel net revenue, compared to $16.1 million of MACI and $6.1 million of Epicel net revenues, respectively in the fourth quarter of 2017. This represents revenue growth of 56% and 2% for MACI and Epicel respectively.

Our full year 2018, net product revenues were $90.9 million or approximately $900,000 above the top end of our updated revenue guidance, which represent a full-year product revenue growth of 54% and 23% for MACI and Epicel respectively versus 2017. Please note the 2017 product revenues and comparisons exclude $1.2 million in revenue related to the company's license agreement with ICT. Gross margins for the fourth quarter of 2018 improved to 72% versus 64% in the fourth quarter of 2017 and for the full year increased to 64% versus 53% in 2017.

Total operating expenses for fourth quarter of 2018 were $16.7 million, compared to $13.8 million for the same period in 2017. The increase was primarily due to $1.4 million in service fees paid the MACI pharmacy distributors, an incremental $1.2 million in employee-related expenses associated with the expanded MACI sales force, and an incremental $500,000 in stock-based compensation expense. Non-GAAP adjusted EBITDA was $7.7 million for the fourth quarter compared to $2.2 million in the fourth quarter of 2017 for details reconciling non-GAAP measures to the table in this morning's press release.

Vericel's net income for the quarter ended December 31, 2018 was $5.2 million or $0.11 per share on a fully diluted basis compared to approximately $300,000 or $0.01 per share for the fourth quarter of 2017. As of December 31, 2018, the company had $82.9 million in cash and short-term investments compared to $26.9 million in cash at December 31st, 2017. We ended the year with a very clean balance sheet having a retiring all outstanding debt in the fourth quarter, and with all but approximately 27,000 warrants have either converted or expired.

We announced earlier this morning that we expect the total net product revenues for the full year 2019 to be in the range of $108 million and $112 million. We expect the majority of revenue growth for the year to be generated by MACI with Epicel growth in the single digits. We expect revenue growth to continue to drive increased margins. In 2019, we expect the marginal cost of goods for MACI and Epicel to be approximately 20% resulting in about 80% of marginal revenue over 2018 revenues to contribute to gross profit likewise given our premium products and concentrated call points. We expect approximately 50% of marginal revenue over 2018 revenues to contribute to adjusted EBITDA. Quarterly seasonality, which impacts both revenues and margins is expected to follow the same pattern as 2018.

That completes my financial review. Now I'll turn the call over to Nick.

Dominick C. Colangelo -- President and Chief Executive Officer

Thanks, Gerard. Our business continues to perform very well and the company is in a strong position to execute on both our operating and strategic business plans. We look forward to sharing our progress with you throughout 2019. That concludes our prepared remarks.

And now I'd like the operator to open the call to your questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And our first question comes from Chad Messer with Needham. Your line is now open.

Chad Messer -- Needham -- Analyst

Great. Good morning and thanks for taking my question. The question is actually on your sort of, cost of goods and margins. At an annual level, the sort of guidance you've given about your marginal revenue makes sense and is tracked very well, but it's a lot harder to figure out what's going on, on a quarterly basis. So revenues, the breakdown of revenue across the quarters at seasonality looks very different on the cost line. Just wondering, if there's something about your fixed versus variable cost structure that explains that. So I can try to understand it a little better for the future.

Gerard J. Michel -- Chief Financial Officer and Vice President of Corporate Development

Sure. Good to hear you, Chad. The -- it tracks actually fairly well. If you just kind of follow the following framework. And I'll give an example for let's say Q2 of 2019. If you took the midpoint of our guidance, which would yield $23 million in net revenue. We did $19 million in Q2 of 2018. It just the midpoint of that -- the incremental revenue is about $4 million, all right? So, I'm assuming you follow the same seasonality for the 21% as I said, take the midpoint of our guidance that would yield $23 million in revenue for this year. Incremental $23 million over $19 million is $4 million, OK? We would expect 80% of that $4 million to hit the incremental growth gross margin lines, so you'd have $3.2 million above what we did last year, which is about $11.3 million in gross margin.

So it's just 80% of the margin, the marginal revenue over the same quarter prior year and it works the same way for adjusted EBITDA, you'd use 50% and sort of 80% of the revenue. So it should track pretty closely and it did track pretty closely, and did track pretty closely this year -- this past year 2018 according to that framework.

Chad Messer -- Needham -- Analyst

I could give you some counter examples, I won't do it on this call, maybe that's something we can take offline. But, thank you.

Gerard J. Michel -- Chief Financial Officer and Vice President of Corporate Development

Yeah. All right.

Operator

Thank you. And our next question comes from Ryan in Zimmerman with BTIG. Your line is now open.

Ryan Benjamin Zimmerman -- BTIG -- Analyst

Great, thanks for taking the question, guys. Congrats on the strong end to the year. So I want to talk about your guidance for a minute here and just you're growing in line with the Street's expectations, but maybe you could just speak to how you view the drivers of your growth in '19 and what some of the levers are that give you confidence in not just meeting those expectations, but then potentially beating them? And I have the follow-up.

Dominick C. Colangelo -- President and Chief Executive Officer

Sure. Ryan. As you know, we're giving guidance is as much of an art as a science. In terms of the growth drivers, what gives us confidence is, Dan's team is seeing good healthy biopsy growth, still coming in line with what we'd expect with our models, the conversion rates stay steady as they have, I think up and down a 0.5 percentage point here and there, may be slightly up. But, if conversion rate stays steady, we should see -- and the new doctors continue to send in biopsies as new doctors did last year, we've got about maybe 60% or 70% of our model -- the revenue for 2019, kind of in the bag.

Now, in the bag means people behave the way they used to. Then, there's a certain number of new docs we need to get on board and behave like new docs did last year. So, our model is, again, we look at biopsy trends, we look at conversion trends, we look at new doc start trends, and we project to what extent do we think that will continue. I mean, it's prudent to have new docs tail off a little bit on a percentage basis. You can't continue to grow at the same percentage year-on-year out. So, obviously, you see our percentage growth has tampered a bit versus what we actually did in '18. Similarly, we make the same assumption for '20 and we're not giving guidance to that, but we wouldn't expect exactly the same percentage growth over '18 and '19 that we'll see '20 over '19. So, we're probably not backed down a couple of percentage points. So, I give you a bit to chew on there. Does that answer your question?

Ryan Benjamin Zimmerman -- BTIG -- Analyst

Yeah. No, it's very helpful color and I appreciate the thought process behind it. And then, I have two questions. One, just can you speak qualitatively, I know you're not speaking to biopsy trends quantitatively but can you speak qualitatively the biopsy trends in the early part of the year? And then, my last question is, you did mention competitive entrants in the burn market. Maybe help us understand how that's either butting up against that Epicel or how you see it interacting with Epicel? Thank you.

Gerard J. Michel -- Chief Financial Officer and Vice President of Corporate Development

Sure. On the biopsy fronts, I think what I'll say is, it is trending per our expectations and it's trending in a manner it gives us comfort to issue the guidance we just gave this morning, which is probably a great non-answer for you, Ryan, but the best I can give you right now. And in terms of Epicel new entrants, Dan, can you comment on that?

Daniel R. Orlando -- Chief Operating Officer

So, the ReCell is the new entrant and it's indicated for partial thickness and full thickness along with I'll call, I guess support up to 50% TBSA. Now, Epicel, as you know is normally used in a patient that's burned well beyond 50%, only maybe about 10% or so of this utility is used in patients burned under 50% TBSA. So, there's really not a lot of cross-talk or crossover when we're discussing with physician for the use of ReCell and Epicel. There could be some patients where they're extensively burned in some areas of their body where they're being treated with Epicel and maybe on some peripheral surfaces are treated with ReCell but that's yet to be determined. It's still fairly early. We haven't seen a lot of that.

Ryan Benjamin Zimmerman -- BTIG -- Analyst

Great. Thank you, Dan.

Operator

Thank you. And our next question comes from Jeffrey Cohen with Ladenburg Thalmann. Your line is now open.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Hi, Gerard, Nick and Dan. Can you hear me OK?

Gerard J. Michel -- Chief Financial Officer and Vice President of Corporate Development

Yes, we can.

Dominick C. Colangelo -- President and Chief Executive Officer

Yes.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Good morning. So Q4 I guess top line a bit of a blow out, can you talk a little bit about the seasonality and the pull-through as far as procedures, is it a one-time in nature, where these were newer biopsies that were being converted or not. And what kind of pull-through should we expect in seasonality for '19?

Dominick C. Colangelo -- President and Chief Executive Officer

Well, I'll start Jeff and then turn it over to Gerard. As I think you know, our fourth quarter is always the strongest quarter for MACI and a strong quarter for Epicel generally as well. So on total -- total revenue basis fourth quarter is always our strongest quarter and that's probably been increasing a bit over the past couple of years. We'll continue to see even more strength in the fourth quarter. So that's just sort of the normal dynamic for the company. And Gerard, if you want to give more details on today's percentages.

Gerard J. Michel -- Chief Financial Officer and Vice President of Corporate Development

Sure. Yeah. So, and this year combining MACI and Epicel, the seasonality was and I'll just give the numbers 20%, 21%, 25% and 34%. People can do the math on their own, but hopefully I did that correctly. The one reason that the fourth quarter in the last couple of years is getting larger is any growing -- whenever you have growth, if you're breaking things down by a seasonal buckets, you're going to see the later quarters look larger than they would in a flat revenue scenario. So that's another factor pushing things into the fourth quarter.

As I said before, I think, for those of you modeling '19, I would recommend using those seasonality percentage that's our best estimate of what's going to happen this year as well. But in terms of (inaudible) I think it's the same drill that Dan and his team will be doing for the last few years.

Daniel R. Orlando -- Chief Operating Officer

Yeah, as far as the timing of biopsies and things there's no shift in dynamics there.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay, got it. And secondly, can you talk a little bit about any data, which you expect as far as your studies, podium presentations around any significant conferences up coming in the coming quarter or two?

Daniel R. Orlando -- Chief Operating Officer

Sure. So, we do not have any specific company sponsored data that will be released anytime soon. We do have an ongoing pediatric trial that is well under way, our sites are up and running and patients are being recruited. So, that's probably the next big significant investment for MACI on the clinical front. There are a number of investigator-initiated observations that will be presented this year and in the coming years. So, their own personal data on say patients and populations with patella, things like that are published. So, you will see data but it will mostly come from independent investigator-initiated result.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay, got it. And then lastly from me, can you discuss a little bit about your commercial expansion and how that may relate to your M&A appetite going forward? Do you feel like currently, with the more recent understanding of the TAM out there, you've got plenty on your plate to address with only arguably 1% market share? Or is it that you're looking for other products, which may fit well into the space?

Dominick C. Colangelo -- President and Chief Executive Officer

Yeah, I think, our position on that Jeff has not changed. We don't view sort of, the business development activities and sort of in line activities as mutually exclusive. So Dan and his team will continue, I'm confident to execute on the commercial front with our current products. At the same time Gerard and his team will continue to look for opportunities as we've discussed before to support our two commercial franchises either in sports medicine or burn care or potentially looking at other cell therapy vertical, so our position on that has been relatively constant.

And again, from our perspective, we do have a pretty high hurdle, right? We certainly understand the value drivers for the company. We have two great products that are the only FDA-approved products in their class. And so, anything else when you bring in needs to have a similar profile and those are the types of opportunities we spend time looking at.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay, got it. Thanks for taking the questions. Nice readout.

Dominick C. Colangelo -- President and Chief Executive Officer

Thanks.

Operator

Thank you. And our next question comes from Kevin DeGeeter with Oppenheimer. Your line is now open.

Kevin DeGeeter -- Oppenheimer -- Analyst

Hey, good morning guys. Congrats on a really, really nice quarter and some nice growth. A few things, with regard to surgeons trained, I think you called out over 900 in the quarter. Can you just provide us a little bit of context, how to think about the assumptions within 2000 guidance with regard to newly trained surgeons versus going deeper in terms of penetration with surgeons, who are already trained on MACI?

Daniel R. Orlando -- Chief Operating Officer

So, Kevin, we trained 500 in 2016, so that was about -- 2017, excuse me, as we launched MACI, we trained 400 last year. So, that's where we sit at over 900 now today. We expect to continue to invest there as much as we have previously. We've got large meetings as we've already attended this year with considerable training opportunities and we've got a few here in the coming weeks. So, we'll continue that investment. With the sales force expansion, we get more time in front of physicians who are now aware of MACI. So, we expect that to help drive our surgeon training as well. But I think you'll see a continued decline in the rate of new physicians being trained. But, we will continue this to make that investment.

I think, what's most important is that we offer the (inaudible) because we found that at some physicians want to train online. They want to do it at their convenience, so they're own home or office, others who want to attend cadaver lab and touch and feel the product first. So, it just depends on the physicians' appetite, and we make sure that we create those appropriate opportunities.

Kevin DeGeeter -- Oppenheimer -- Analyst

Okay. And then, a separate question kind of going back to one of today's themes as financial guidance. The guidance seems to imply MACI growth 27%, 30% somewhere in that general range, if my math is correct. And that's as a percentage of growth is significant step down from what we saw both in the fourth quarter and 2018. How do we think about -- with through the course of 2019, the relative pacing of growth recognizing, you're not giving Q1 guidance but if some -- pretty meaningful percentage wise, deceleration to think about, is it -- should we think about its somewhat linear through the year or being more kind of second half of the year for that step down.

Gerard J. Michel -- Chief Financial Officer and Vice President of Corporate Development

Kevin, I think -- I think the best way to think about is -- in your models, come up with the full year number for '19 whatever -- whatever you think it should be based on our guidance in your own analysis. And then in terms of -- see the seasonality for that total number, the midpoint of that guidance I think would be roughly $110 million. In terms of seasonality, I would use the same seasonality that we saw this year for both products 20%, 21%, 25% and then 34% and then we gave you our sense of Epicel, we think single digit growth there. So you can back into MACI from that I think.

Kevin DeGeeter -- Oppenheimer -- Analyst

Fair enough. And then just lastly, one for me. With regard to insurance coverage, which has always been healthy for MACI, but specifically in terms of any evolving language with some of the coverage policies for covering the patella or sort of, other sort of sub populations for MACI, (inaudible) or expect any change through '19 in terms of specific language with regard to coverage for MACI policy decisions and how does that sort of factor into potential puts and takes on that guidance for 19?

Unidentified Speaker --

So, Kevin, I think we've -- mentioned before as you suggest that MACI has strong coverage and access across the board, right all the top plans cover MACI, Dan and his team did a great job in getting that access probably within six to eight months after launch when -- as we announced, but a year ago in the third quarter when guided updated its medical policy to include MACI, so all the plans cover MACI. There were some plans that didn't cover patella right out of the gate, just because as you know MACI's label is much more expensive than for Carticel, so easy way to update plans was just to see MACI is not investigational but it really reflected the Carticel policy.

So throughout the year, Dan and his team have been working on updating those few plans that still have not formally added patella. We announced last quarter that Cigna had updated their policy to include the patella. So there's really only a couple left that we want to try to knock out. But even so, with those plans, the patella cases are still approved. They just end up being approved on a case by case basis. And we just want to make things as smooth as possible and have all policies reflect the breadth of the MACI label.

Kevin DeGeeter -- Oppenheimer -- Analyst

Great. Thanks for taking my questions.

Operator

Thank you. And our last question comes from Danielle Antalffy with SBB Leerink. Your line is now open.

Danielle Antalffy -- SBB Leerink -- Analyst

Thanks so much. Good morning, guys. Thanks for taking the question. I have two. First, I was wondering if you could talk about how high volume centers are growing versus low volume centers, I guess what I'm trying to get at is where you're seeing the most growth, is it on newer centers coming onboard or is it actually existing centers that are already using it, but are using it a lot more? And then I have one follow-up.

Dominick C. Colangelo -- President and Chief Executive Officer

Danielle, thanks for the question. So, we've assessed that and certainly that is one of the factors we consider in the sales force expansion sizing, territory alignments and things like that. And in our models, it's been about 50-50 growth coming from, I don't want to call it necessarily small centers, but it's centers that have not traditionally used Carticel or MACI, and 50% from centers that are expanding their use. And you know the names of the largest centers. Those has been a big growth driver for us early on here as well.

Danielle Antalffy -- SBB Leerink -- Analyst

Okay. And then, just a follow-up question, Gerard, just something I think you -- I think it was you that referenced, not really yet seeing a meaningful change in the biopsy conversion rate? Tell me if I got that wrong. But, just curious, I mean, I know with this direct to patient initiative, I feel like that's something that could move over time. A few questions there. Why hasn't it moved the needle yet, if in fact it has? Number one. And number two, when can we see that start to move the needle? Do you have the right initiatives in place to do so? Will we see you guys have to take a broader approach or a different approach to really move that? Thanks so much.

Gerard J. Michel -- Chief Financial Officer and Vice President of Corporate Development

All right. So, for the conversion rate, I mean, I think, we've seen them tick up as we said before slightly. So, I don't want to -- they're definitely not going down, let me put it that way. But we certainly haven't seen a multi-percentage increase in it today. Maybe we've had a 1% tick up, and it takes a bit of time before we can confidently say that's trend.

In terms of changing that conversion rate. There are a lot of components to it. And you have to start with why isn't the conversion happening. A lot of patients just do chondroplasty, they feel better, if they go on their way. One way that, change that is to try to reach out to the patients, and that's what Dan's team is doing. But, we have to -- we're not going to call the patients a day after surgery. That's probably not a good idea. And Dan, go ahead...

Daniel R. Orlando -- Chief Operating Officer

Yeah. I would just say, Danielle, we've spoken to this before, we have a strong program now to capture patient consent and that's really the start of biopsy -- improving the biopsy the conversion ratio because with that consent we can then start to communicate with the patient. We've invested last year and making sure that has an easy opportunity for the patient. We've increased the volume of that and it's a steady increase, just like we're seeing a steady increase in biopsies. We're seeing an increase in the percentage of patients where we capture consent.

Second piece of that is just how do we speak to the patients? So, we have our launch materials for rehab and et cetera. We have -- this year, we are reassessing all of our patient materials and how we speak to it. An example is something like weight bearing. What does that mean, when you translate that to a patient, how quickly can I walk? What kind of work can I do over weeks to months? And what kind of activities can I engage in, such as driving and things that are important to a patient as they get back to activity? So, we're changing the way we speak to patients and the timing of when we speak to them. So, we've got metrics as to when we engage with the patients versus when they have follow-up with their physician.

The piece that I spoke to you during the call here, we now have a strong group of patients who have had success with MACI because of the experience over the last couple years. Now, we're capturing some of that in our new patient ambassador program and we're marrying that with the Dara Torres campaign, so that when patients go on to maci.com, they'll see the aspirational Olympic athlete and they'll see a patient that looks maybe a little bit more like them, and they can connect there and see highlights on rehab.

The next piece of that that we're initiating is working with physical therapists who have now successfully treated patients and moved them through rehab quicker than they had prior with Carticel. And that's an important rate limiter for biopsy to implant in the patients' mind when they are considering -- excuse me, MACI.

So, it's like I ran through my three children right there. So, Danielle, we're really confident that we're on the right track. We have seen early signs of improvement in conversion ratio and we're confident that these further investments will reap the results as well.

Gerard J. Michel -- Chief Financial Officer and Vice President of Corporate Development

In terms of modeling, Danielle, we view increasing the conversion rate a multiyear effort. We view that as a second leg of growth after we have probably done far more penetration into the surgeon base, got more business for those individual surgeons. So this is kind of a multiyear effort. I don't expect to change dramatically over quarters, this can change over years. So, I think our predominant growth is going to come in the near to medium term from more docs, more biopsies and then longer term higher conversion rate.

Danielle Antalffy -- SBB Leerink -- Analyst

Yeah, that's fair. That's very helpful. Thank you so much, guys.

Operator

Thank you. And that does conclude today's question-and-answer session. I would now like to turn the call back to Mr. Nick Colangelo for any further remarks.

Dominick C. Colangelo -- President and Chief Executive Officer

Okay. Well, thank you, and thanks for your questions and continued interest in Vericel. We're obviously excited about the opportunities ahead and look forward to reporting on our progress on our next call. Have a great day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.

Duration: 37 minutes

Call participants:

Gerard J. Michel -- Chief Financial Officer and Vice President of Corporate Development

Dominick C. Colangelo -- President and Chief Executive Officer

Daniel R. Orlando -- Chief Operating Officer

Chad Messer -- Needham -- Analyst

Ryan Benjamin Zimmerman -- BTIG -- Analyst

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Kevin DeGeeter -- Oppenheimer -- Analyst

Unidentified Speaker --

Danielle Antalffy -- SBB Leerink -- Analyst

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