Vericel Corporation (NASDAQ:VCEL) Q2 2020 Earnings Conference Call - Final Transcript

Aug 05, 2020 • 08:30 am ET

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Vericel Corporation (NASDAQ:VCEL) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Gerard Michel

our volume will be from cash up from the first half of 2020.

A second factor impacting our model is the impact of elective surgery restrictions on overall surgical capacity. As Nick mentioned, recent restrictions are more targeted and nuanced and thus have had less of an impact on MACI relative to earlier restrictions. We assume that for the balance of the year, there will be an evolving set of regions and hospital systems, which have targeted restrictions in place, but these restrictions will have only a limited impact on elective surgery capacity, including MACI procedures. With these assumptions in mind, we expect MACI growth to improve from the 23% decline in the second quarter to at least mid-single digit growth for the third quarter. We expect at least a $1 million sequential step-up from the second quarter in Epicel revenue, which represents a return to the average level we saw in Q4 2019 and Q1 of 2020, prior to COVID-19 disruptions in the second quarter. We also expect to recognize approximately $1 million in revenue in connection with the first delivery by MediWound under the existing BARDA procurement contract, which is scheduled to take place later this quarter, with another purchase in the fourth quarter at that same level, and the remaining purchases spread across 2021.

Gross margins in the quarter are expected to be at least equivalent to Q1 of this year or approximately 63%. Operating expenses will absorb a full quarter of the larger MACI sales force. And with higher revenue, we will also see proportional increases in our variable SG&A expenses, leading to an approximate $2 million increase in Q3 relative to Q2. As of June 30, we had approximately $81 million of cash and investments, which is down slightly from the end of the first quarter, but still up $2 million from the end of 2019. Looking ahead, we expect net cash flow to remain relatively neutral for the second half of the year under most scenarios.

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

Executive
Dominick Colangelo

Thanks, Gerard. As I mentioned earlier, we're pleased with the second quarter results in light of the current environment. And while uncertainties remain, we expect our business to further strengthen in the third quarter. We're also looking forward to working with the FDA during the NexoBrid BLA filing and review process as we seek marketing approval for NexoBrid in the U.S. in 2021. That concludes our prepared remarks. As a reminder, the presentation available on our website provides highlights of today's call.

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