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Vericel Corp Stock Skyrockets On Record 4Q Revenues

support@smarteranalyst.com (Ben Mahaney)

Biopharmaceutical company Vericel Corp (NASDAQ:VCEL) reported record revenues and improved net income for the 2017 fourth quarter and full year, sending shares rising nearly 8% in pre-market trading Monday.

“We had record fourth quarter revenues and achieved both positive operating income and net income for the quarter, an important milestone for the company,” said Nick Colangelo, president and CEO of Vericel.  “Our record fourth quarter revenues represent the third straight quarter of 30% or higher revenue growth compared to the same quarter of the prior year, and this strong growth and margin expansion were driven by both the accelerating uptake of MACI as well as substantial growth for Epicel in the quarter.”

Fourth Quarter 2017 Results

Total net revenues for the quarter ended December 31, 2017 were $23.4 million, which included $16.1 million of MACI net revenue and $6.1 million of Epicel net revenue, compared to $12.8 million of Carticel® (autologous cultured chondrocytes) net revenue and $3.8 million of Epicel net revenue, respectively, in the fourth quarter of 2016.  Total net revenues for the quarter ended December 31, 2017 also included $1.2 million in license revenue related to the company’s collaboration agreement with ICT.  Total net revenues increased 41% compared to the fourth quarter of 2016, with MACI revenue increasing 26% and Epicel revenue increasing 62%, respectively, compared to the same period in 2016.  Excluding license revenue, net revenues increased 34% compared to the fourth quarter of 2016.

Gross profit for the quarter ended December 31, 2017 was $15.0 million, or 64% of net revenues, compared to $8.9 million, or 54 % of net revenues, for the fourth quarter of 2016.

Total operating expenses for the quarter ended December 31, 2017 were $13.8 million compared to $14.8 million for the same period in 2016.  Operating expenses for the quarter ended December 31, 2016 included $2.6 million from the write-off of commercial use rights related to Carticel.  Given the approval of MACI in December 2016 and the replacement of Carticel with MACI, it was determined that the Carticel-related intangible asset was fully impaired as of December 31, 2016.  Excluding the impairment, the increase in fourth quarter operating expenses is primarily due to an increase in the MACI sales force during 2017 as well as case management services to support MACI.

Income from operations for the quarter ended December 31, 2017 was $1.2 million, compared to a loss of $5.9 million for the fourth quarter of 2016.  Material non-cash items impacting the operating income for the quarter included $0.7 million of stock-based compensation expense and $0.4 million in depreciation expense.

Other expense for the quarter ended December 31, 2017 was $0.9 million compared to $0.3 million for the same period in 2016.  The change in other expense for the quarter is primarily due to the loss on extinguishment of debt associated with the expanded long-term debt facility which closed in December 2017.

Vericel’s net income for the quarter ended December 31, 2017 was $0.3 million, or $0.01 per share, compared to a net loss of $6.2 million, or $0.34 per share, for the same period in 2016.

Full Year 2017 Results

Total net revenues for the year ended December 31, 2017 were $63.9 million, including $43.9 million of Carticel and MACI net revenues, $18.9 million of Epicel net revenue and $1.2 million in license revenue.  Total net revenues for the year ended December 31, 2017 increased 18% over 2016.

Gross profit for the year ended December 31, 2017 was $33.6 million, or 53% of net revenues, compared to $26.1 million, or 48% of net revenues, for the year ended December 31, 2016.

Total operating expenses for the year ended December 31, 2017 were $48.6 million compared to $45.3 million in 2016.  Operating expenses for the year ended December 31, 2016 included $2.6 million from the write-off of commercial use rights related to Carticel.  The increase in operating expenses during 2017 is primarily due to an increase in the MACI sales force, expenses for marketing initiatives related to the launch of MACI, and an increase in case management services to support MACI.

Loss from operations for the year ended December 31, 2017 was $15.0 million, compared to a loss of $19.2 million in 2016.  Material non-cash items impacting the operating loss for the year included $2.7 million of stock-based compensation expense and $1.6 million in depreciation expense.

Other expense for the year ended December 31, 2017 was $2.3 million compared to $0.3 million in 2016.  The change in other expense is primarily due to the loss on extinguishment of debt associated with the expanded long-term debt facility which closed in December 2017 and the interest expense related to the outstanding revolver and credit term loans.

Vericel’s net loss for the year ended December 31, 2017 was $17.3 million, or $0.52 per share, compared to a net loss of $19.6 million, or $1.18 per share, in 2016.

As of December 31, 2017, the company had $26.9 million in cash compared to $23.0 million in cash at December 31, 2016.

Full Year 2018 Financial Guidance

The company expects total net product revenues for the full year 2018, excluding additional license revenue, to be in the range of $73 million to $78 million compared to total net product revenue, excluding license revenue, of $62.8 million in 2017.  The company also expects the seasonality of MACI and Epicel revenues for 2018 to be in line with prior years, wherein  total product quarterly revenues were, on average, 21%, 25%, 21%, and 33% in the first through the fourth quarters.

“We successfully executed the launch of MACI and expanded Epicel utilization in 2017,” added Mr. Colangelo.  “These successes, combined with a strong balance sheet and an expanded sales force in 2018, have positioned the company for continued strong revenue growth in the years ahead.”

Analyst Ratings

The word on the Street rings largely bullish on this drug maker, with TipRanks analytics demonstrating VCEL as a Buy.


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