Q4 2023 Vericel Corp Earnings Call
Unknown Executive: Swayampakula Ramakanth, Sean Lee, Eric Burns, Vericel, Unknown Attendee, Yu He, Sean Lee, [inaudible] Sean Lee, Eric Burns, Vericel, Sean Lee, Sean Lee, Swayampakula Ramakanth, Ladies and gentlemen, thank you for standing by. Welcome to Vericel's fourth quarter 2023 conference call. At this time, all participants are in a listen-only mode.
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Unknown Executive: I would also like to remind you that this call is being recorded for replay. I will now turn the conference call over to Julie Downs, Vericel's Head of Corporate Communication. Thank you, operator. And good morning, everyone.
Unknown Executive: Welcome to Vericel's fourth quarter 2023 conference call to discuss our financial results and business highlights. Before we begin, let me remind you that on today's call, we will be making forward-looking statements covered under the Private Security 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 FCC, which are available on our website. In addition, all four 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.
Speaker Change: Ladies and gentlemen, thank you for standing by welcome to Bear sells Fourthquarter 20 twenty-three conference call. At this time all participants are in a listen only mode I.
Julie Downs: I would also like to remind you that this call is being recorded for replay I will now turn the conference call over to Julie Downs Bear sells head of corporate communications.
Julie Downs: Thank you operator, and good morning, everyone welcome to the fourth quarter twenty-three conference call to discuss our financial resolved.
Dominick C. Colangelo: Please note that a copy of our fourth quarter financial results press release is available in the investor relations section of our website. We also have a short presentation with highlights from today's call that can be viewed directly on the webcast or accessed on our website. I am joined on this call by Vericel's President and Chief Executive Officer, Nick Colangelo, and our Chief Financial Officer, Joe Mara. I will now turn the call over to Nick. Thank you, Julie. And good morning, everyone.
Speaker Change: Before it is again, let me remind you that onto data call you won't be making forward looking statements covered under the private security Litigation Reform Act of 1995.
Speaker Change: These statements may involve risks and uncertainty that could cause actual results to differ materially from expectations that are described more fully and our filings with the S. P C.
Speaker Change: Which are available on our website and.
Speaker Change: In addition, all forward looking statements represent our views only as of today and it should not be relied upon as representing our views as in any subsequent date.
Dominick C. Colangelo: I'll begin today's call by discussing financial and business highlights for the fourth quarter and full year, as well as our expectations for 2024. Joe will then provide a more detailed update on our 2023 financial results and financial guidance for this year before opening the call to Q&A. The company executed exceptionally well in 2023 and delivered outstanding financial and business results in the fourth quarter, generating top-tier revenue growth and even higher profitability. Total revenue for the full year increased 20% to over $197 million, which was at the top end of our guidance, with Macy revenue growing 25% to nearly $165 million in burn care revenue of nearly $33 million. The company also reached an inflection point with respect to our profitability profile, with bottom line profitability growing at twice the rate of our top line revenue growth, as adjusted EBITDA increased 40% to $34 million. And we generated over $35 million of operating cash flow, ending the year with approximately $153 million in cash and investments and no debt.
Speaker Change: Please note that a copy of our fourth quarter financial results press release is available in your Investor Relations section of our website.
Speaker Change: We also have a short presentation with highlights from today's call you.
Speaker Change: Directly on the webcast or access on our website.
Speaker Change: I enjoyed on a call by their resolve the president and Chief Executive Officer, <unk>, and our Chief Financial Officer Tomorrow, I will now turn the call over to Nick.
Nick: Thank you Julie and good morning, everyone.
Nick: Begin today's call by discussing financial and business highlights for the fourth quarter and full year as well as our expectations for 2024.
Nick: Joel then provide more detailed update on our 2023 financial results in the financial guidance for this year before opening the call to Q&A.
Nick: <unk> company executed exceptionally well in 2023 and delivered outstanding financial and business results in the fourth quarter generating top tier revenue growth it even higher profitability growth.
Dominick C. Colangelo: The company also had a very strong close to the year as we generated record total revenue of $65 million in the fourth quarter, an increase of 23% over the prior year. Our strong fourth-quarter performance was driven by record quarterly Macy revenue of nearly $57 million, which was above the high end of our guidance range and represented more than 50 percent sequential growth over the third quarter and 22 percent growth over the fourth quarter of 2022, marking the sixth straight quarter of 20 plus percent growth for me. This outstanding Macy revenue performance was driven by strong underlying business fundamentals, as we had the highest number of Macy implants, implanting surgeons, surgeons taking biopsies, and biopsies in any quarter since launch. We also generated very strong growth in the burn care franchise, as fourth-quarter revenue grew 31% over the prior year.
Nick: Total revenue for the full year increased 20% to over $197 million, which was at the top end of our guidance range with Macy revenue growing 25% to nearly $165 million to burn care revenue of nearly $33 million.
Nick: The company also reached an inflection point with respect to our profitability profile with bottom line profitability growing at twice the rate of our top line revenue growth has adjusted EBITDA increased 40% to $34 million.
Nick: Generated over $35 million of operating cash flow ended the year with approximately $153 million in cash and investments and no debt.
Nick: The company also had a very strong close to the year as we generated record total revenue of $65 million in the fourth quarter, an increase of 23 per cent over the prior year.
Dominick C. Colangelo: Our top line revenue performance drove significant margin expansion and profit growth in the fourth quarter, as we generated a gross margin of 75% and an adjusted EBITDA margin of 34%, with adjusted EBITDA growing 50% to over $22 million and net income for the quarter more than doubling to $13 million. As we look forward to 2024 and beyond, we expect that continued high revenue growth will drive further expansion of our margins and enhancement of our profitability metrics. From a commercial perspective, Macy's sustained growth has been driven by continued expansion of our surgeon-customer base, as we had another year of double-digit growth in surgeons taking biopsies in 2023. We're now approaching 50% penetration of our current 5000 target surge.
Nick: Are strong fourth quarter performance was driven by record quarterly Macy revenue of nearly 7 million $57 million.
Nick: Which was above the high end of our guidance range and represented more than 50 per cent sequential growth over the third quarter and.
Nick: 22 per cent growth over the fourth quarter of 2022.
Nick: Marking the sixth straight quarter of 20 per cent growth for me C.
Nick: This outstanding Macy revenue performance was driven by strong underlying business fundamentals as we had the highest number of me see implants, implanting surgeons surgeons, taking biopsies and biopsies in any quarter since launch.
Nick: We also generated very strong growth in the Burger franchise is fourth quarter revenue grew 31% over the prior year.
Nick: Our top line revenue performance drove significant margin expansion and profit growth in the fourth quarter is regenerated gross margin of 75% and adjusted EBITDA margin of 34% with.
Dominick C. Colangelo: The expansion of our surgeon base and the corresponding growth in biopsies has fueled Macy's success and helped drive sales rep productivity to its highest level ever at $2.2 million per rep in 2023. Our commercial team continues to execute high-quality peer-to-peer programs to help drive surge and uptake, and we had our highest number of programs to date in the fourth quarter, demonstrating that interest in Macy continues to grow. In addition, Macy's positive long-term clinical outcomes were highlighted in a prospective study published in the American Journal of Sports Medicine last week. The study showed improved clinical scores, high levels of patient satisfaction, and clinical and MRI-based outcomes that were maintained out to 10 years for patients treated with Mason.
Nick: With adjusted EBITDA growing 50 per cent to over $22 million and net income for the quarter more than doubling to $13 million is.
Nick: We look forward to 2024 and beyond we expect that continued high revenue growth will drive further expansion of our margins and enhancement of our profitability metrics.
Nick: From a commercial perspective, Macy's sustained growth has been driven by continued expansion of our surgeon customer base as we had another year of double digit growth insurgents taking biopsies in 2023.
Nick: We're now approaching 50 per cent penetration of our current 5000 targets surges.
Nick: The expansion of our surgeon base and the corresponding growth and biopsy says fuel Macy's success and helped drive sales rep productivity to its highest level ever at $2.2 million per rep in 2023.
Dominick C. Colangelo: The study also showed excellent long-term outcomes for MACE patients treated for both patellofemoral and femoral condyle defects, which is the focus of our MACE Arthro program. Based on Macy's clinical outcomes, top-line revenue performance, and its underlying growth drivers, our core Macy business remains very well positioned for continued strong growth in 2024 and the years ahead. Looking beyond this core Macy growth to our life cycle management and indication expansion initiatives, we announced last month that our Macy Arthro arthroscopic delivery submission was accepted for review by the FDA and that we expect to launch Macy Arthro in the third quarter of this year. As we previously discussed, the Macy Arthro kit targets two to four square centimeter femoral condyle defense, which comprises the largest segment of our addressable market, representing approximately In January, the USPTO issued a patent covering the complete set of Macy Arthur instruments until 2043.
Nick: Our commercial team continues to execute high quality peer to peer programs to help drive surgeon uptake that we had our highest number of programs to date in the fourth quarter demonstrating that interest in Macy continues to grow.
Nick: In addition, Macy's positive longterm clinical outcomes were highlighted in a prospective study published in the American Journal of Sports Medicine last week.
Nick: [noise] study showed improved clinical scores high levels of patient satisfaction and clinical an M. R. I based outcomes that were maintained out to 10 years for patients treated with Macy.
Nick: The study also showed excellent longterm outcomes for me see patients treated for both Patellofemoral and femoral condyle defects, which is the focus of our Macy Arthur a program.
Based on the strength of Macy's clinical outcomes top line revenue performance and its underlying growth drivers are core Macy business remains very well positioned for continued strong growth in 2024 and the years ahead.
Nick: Looking beyond this core macy growth to our lifecycle management and indication expansion initiatives, we announced last month that are Macy arthroscopic delivery submission was accepted for review by the F. D. A and that we expect to launch macy or throw in the third quarter of this year.
Dominick C. Colangelo: Underscoring our market research indicating that orthopedic surgeons view Macy's Arthro as a meaningful innovation in the cartilage repair market, and that regardless of their current usage, surgeons expect to shift a meaningful share of their procedures to the Macy Arthro procedure. Our pre-launch commercial activities are well underway. In addition, in connection with the Macy Arthro launch, we'll be expanding our surgeon target base from 5000 to approximately 7000 surgeons to include surgeons that perform high volumes of cartilage repair predominantly through arthroscopic procedures. Based on our experience to date, we'd expect to achieve more than 50% penetration of this larger target surgeon base over time, meaning that surgeon adoption and biopsy growth will continue to be important growth drivers for MACE in the years ahead.
Nick: As we previously discussed the Macy Arthral kit targets two to four square centimeter femoral condyle defects, which comprise the largest segment of our addressable market, representing approximately 20000 patients per year or roughly one third of the 3 billion dollar addressable market for me.
Nick: In January the U S. P T O issued a pet and covering the complete set the macy Arthur instruments into 2043.
Nick: Underscore into our market research, indicating that orthopedic surgeons view VCR through as a meaningful innovation the cartilage repair market and that regardless of their current me see usage, Sir surgeons expect to shift a meaningful share of their procedures to the Macy Arthur a procedure.
Dominick C. Colangelo: We're very excited about the anticipated launch of MacyR later this year as we believe it represents another significant growth opportunity for Macy and a key value driver for our business moving forward. We're also advancing our Macy development program for the treatment of cartilage injuries in the ankle and expect to initiate the Macy ankle clinical study in 2025. Cartilage defects in the ankle represent the second largest market opportunity for Macy.
Nick: Our prelaunch commercial activities are well under way.
In addition in connection with the Macy Arthur launch will be expanding our surgeon target based from 5000 to approximately 7000 surgeons to include searches that perform high volumes of cartilage repair predominantly through arthroscopic procedures Bay.
Dominick C. Colangelo: We believe that a potential ankle indication with an estimated $1 billion addressable market could be another significant growth driver for Macy in the next decade and beyond. Turning to our burn care franchise, we also saw strength in the underlying business fundamentals for EpiCell in the fourth quarter, as we had the highest number of EpiCell biopsies in the quarter since 2021. And that momentum is carried into 2024 with a strong start to the year. We continue to see positive pull-through for EpiCel from our expanded burn care sales team, which further supports our belief that EpiCel will benefit from a larger commercial footprint and higher share of voice in the burn care market. With respect to Nexibrid, our burn care team is executing on the initial phases of our launch plan following commercial availability of the product in the US beginning in the fourth quarter of last year.
Nick: Based on our experience to date, we'd expect to achieve more than 50 per cent penetration of this larger targets surgeon base over time.
Nick: Meaning that surging adoption biopsy growth will continue to be important growth drivers for me see in the years ahead.
Nick: We're very excited about the anticipated launch abuse yard earlier this year as we believe it represents another significant growth opportunity for Macy and a key value driver for our business moving forward.
Nick: We're also advancing are Macy development program for the treatment of cartilage injuries in the ankle and expect to initiate the Macy's ankle clinical study in 2025.
Nick: Cartilage defects in the ankle represent the second largest market opportunity for Macy.
Dominick C. Colangelo: Our commercial and medical teams remain focused on building a strong foundation for Nexibrid by supporting P&T committee approvals to enable burn care center access to Nexibrid, training burn surgeons and their staff, and supporting initial cases at burn centers to ensure successful patient outcomes. We're pleased with the progress that we made in the fourth quarter in terms of the early launch phase key performance indicators for the onboarding bird set. As of the end of 2023, more than 50 burn centers had submitted packages to their P&T committees, more than 25 centers had gained P&T committee approval, and nearly 20 centers placed an initial product order. While our performance on these metrics was strong, as we mentioned on our last call, the manufacturing-related delay in 2023 and the resulting uncertainty around the ultimate timing of product availability did cause a number of burn centers to defer or delay next-of- Most importantly, however, the clinical outcomes for the initial patients treated with Nexabrid and the feedback from burn surgeons treating those patients has been very positive, which is a great signal for the long-term potential of Nexabrid as we look to change the standard of care for eschar removal for patients with severe burns.
Nick: We believe that a potential ankle indication with an estimated 1 billion dollar addressable market could be another significant growth driver for Macy and the next step eat and beyond.
Nick: Turning to our burn care of franchise, we also saw strength and the underlying businessmen fundamentals for episodes in the fourth quarter as we had the highest number of episodes biopsies and a quarter since 2021.
Nick: And that momentum is carried into 2024 with a strong start to the year.
Nick: We continued to see positive pull through for episode from our expanded burnt care sales team.
Nick: Which further supports our belief that episode will benefit from a larger commercial footprint in higher sure a voice in the burn care market.
Nick: With respect to <unk> or burnt care team is executing on the initial phases of our launch plan following commercial availability of the product and the U S. Beginning in the fourth quarter of last year.
Nick: Our commercial and medical teams remain focused on building a strong foundation for next spurred by supporting P and T Committee approval to enable urgent care center access to <unk>.
Nick: Training burn surgeons and their staffs and supporting initial cases of burn centers to ensure successful patient outcomes.
Nick: We're pleased with the progress that we made in the fourth quarter in terms of the early launch fees key performance indicators for Onboarding bird centers.
Nick: As of the end of 2023 more than 50 burn centers had submitted packages to the P and T committees more than 25 centers had gained P and T Committee approval.
Joseph Anthony Mara: In addition to progress with initial burn center onboarding, we also completed a number of initiatives designed to build a strong foundation for next-of-breed commercial success over time. In the fourth quarter, we submitted a supplemental BLA for a pediatric indication for Nexibrig that was accepted for review by the FDA. In terms of commercial access, CMS granted Nexabrid a permanent J code and transitional pass-through payment status, which became effective in January, and provides a reimbursement pathway for the outpatient treatment of appropriate Nexabrid patients in our target burn centers, as well as additional hospitals over time. So overall, we're very pleased with the strong surgeon interest in Nexabrid, our progress in market access activities and onboarding burn centers, the excellent clinical outcomes and positive feedback from surgeons treating patients, and the clear impact that our broader burn care portfolio and expanded sales team is having on EpiCel.
Nick: Nearly 20 Senators placed an initial product order.
Nick: While our performance on these metrics as strong as we mentioned on our last call the manufacturing related delay in 2023, and the resulting uncertainty around the ultimate timing of product availability did cause a number of burn centers to defer delayed next spring training and Pee in Tikkun <unk> approval processes, which is.
Nick: <unk> to the typical administrative hurdles at hospitals impacts ordering patterns in the time it abuse. It uptake at many of these centers most.
Nick: Most importantly, however, the clinical outcomes for the initial patients treated with next spring and the feedback from burn surgeons treating those patients has been very positive which is a great signal for the long term potential of <unk> as we look to change the standard of care for eschar removal for patients with severe burns.
Nick: In addition to the progress with initial burn Center Onboarding. We also completed a number of initiatives designed to build a strong foundation for <unk> commercial success over time.
Nick: In the fourth quarter, we submitted a supplemental BLA for a pediatric indications for <unk> that was accepted for review by the FDA.
Joseph Anthony Mara: We believe that all of these factors will enable the company to build a strong foundation for Nexavir in 2024, meaningfully contribute to our burn care franchise revenue this year, and enable the company to have a second high-growth franchise in burn care moving forward. Finally, turning to guidance for 2024, we expect continued strong revenue growth of 20 plus percent with full year revenue of 237 to 241 million dollars, driven by the continued strength in our core portfolio. Our first full year of Nexabrid revenue, which will contribute to growth this year and even more meaningfully so next year, and the anticipated launch of Macy Arthur in the third quarter, which is expected to generate some revenue towards the end of the year and support a sustained high level of growth for Macy and the company in 2025 and beyond. We also expect that our sustained high revenue growth will drive further expansion of our margins and growth in our profitability. I'll now turn the call over to Joe. Thanks, Nick. And good morning, everyone.
Nick: In terms of commercial access CMS granted an extra burden of permanent J code and transitional pass through payment status, which became effective in January and provides a reimbursement pathway for the outpatient treatment of appropriate <unk> patients in our target burn centers as well as additional hospitals over time.
So overall, we're very pleased with the strong surge in interest in <unk>, our progress in market access activities and Onboarding burnt centers, the excellent clinical outcomes and positive feedback from surgeons treating patients and to clear impact that are broader burden care portfolio and expanded sales team is having an episode we.
Nick: Believe that all of these factors will enable the company to build a strong foundation for an expert in 2024 meaningfully contribute to our bird care franchise revenue. This year enabled the company to have a second high growth franchise and burnt care moving forward.
Nick: Finally, turning to guidance for 2024, we expect continued strong revenue growth of 20 plus percent with full year revenue of $237 million to $241 million driven by the continued strength in our core portfolio. Our first full year of next to bird revenue, which will.
Nick: Reviewed to growth this year and even more meaningfully so next year.
Nick: And the anticipated launch it may see our through in the third quarter, which is expected to be January some revenue towards the end of the year and support a sustained high level of growth from Macy's and the company in 2025 and beyond.
Joseph Anthony Mara: Starting with our 2023 financial results. Total net revenue for the full year was $197.5 million, representing growth of 20%. Total net revenue in the fourth quarter was $65 million, with growth of 23% driven by strong results from both of our franchises. Macy's revenue of $164.8 million for the full year was above our guidance, by 25% versus the prior year. For Q4, Macy revenue was $56.7 million and grew 51% over the third quarter and 22% versus the prior year, as we continued our momentum in the Macy business with our sixth consecutive quarter with growth over 20%. Total burn care revenue for the full year was $32.7 million, consisting of $31.6 million of EPSA revenue and $1.1 million of NEXA revenue.
Nick: We also expect that are sustained high revenue growth will drive further expansion of our margins and growth in our profitability matrix.
Nick: I will now turn the call over to Joe.
Thanks neck and good morning, everyone.
Joe: Starting with our 2023 financial results total net revenue for the full year was $197.5 million representing growth of 20%.
Joe: Total net revenue in the fourth quarter with $65 million with growth of 23%. During my strong results from both of our franchises may.
Joe: <unk> revenue of $164.8 million for the full year was above our guidance range from 25% versus the prior year.
Joe: Q for Macy revenue was 56.7 million and grew 51% or the third quarter and 22% versus the prior year.
Joe: We continued our momentum and then macy business with our sixth consecutive quarter with growth over 20%.
Joseph Anthony Mara: In the fourth quarter, our total burn care revenue increased by 31 percent, with Epicell growth of 22 percent and the addition of Nexavirid revenue in the quarter, leading to a very strong fourth quarter burn care result. Gross profit for the year was $135.6 million, or 69% of net revenue, an increase of approximately 200 basis points compared to 2022. For the quarter, gross profit was $48.5 million, or 75% of net revenue, which also increased by 200 basis points versus last year and represents the highest gross margin for the company in any quarter to date. In addition, our pull-through of incremental revenue to gross profit has now returned to levels similar to 2019, with a pull-through to gross margin of 83% for the fourth quarter and nearly 80% for the full year. Total operating expenses for the year were $142 million, compared to $126.8 million in 2022.
Joe: Coburn care revenue for the full year was $32.7 million consisting of 31.69 of Epistyle revenue in 1.1 million of an extra bread revenue.
Joe: And a fourth order or total burn care revenue increased by 31% with episodes Rosa, 22% and the addition of next great revenue in the quarter it into a very strong fourth quarter <unk>.
Joe: Gross profit for the year was $135.6 million or 69% of net revenue an increase of approximately 200 basis points compared to 2022.
Joe: For the quarter gross profit was 48.5 million or 75% of net revenue, which also increased by 200 basis points versus last year and represent the highest gross margin for the company in any quarter to date.
Joe: In addition, our pull through of incremental revenue to gross profit has now returned to levels similar to 2019 with the pull through the gross margin, 83% for the fourth quarter and nearly 80% for the full year.
Joe: Total operating expenses for the year or $142 million compared to $126 $8 million in 2022.
Joseph Anthony Mara: For the quarter, operating expenses were $35.8 million compared to $32.2 million for the same period in 2022. The increase in operating expenses in 2023 was primarily due to increased headcount and related employee expenses, lease expense associated with the company's new facility that is under construction, variable sales and marketing expenses, as well as other external, Net income for the fourth quarter more than doubled to $13 million or $0.26 per share compared to net income of $5.9 million or $0.12 per share for the fourth quarter of 2022. For the full year, our net loss was $3.2 million, or $0.07 per share, compared to a loss of $16.7 million, or $0.35 per share in 2022, representing an improvement of nearly $14 million on a year-over-year basis, non-gap adjusted EBITDA for the year grew 40% to $33.9 million or 17% of net revenue compared to $24.2 million or 15% of net revenue in 2022, for the quarter adjusted EBITDA group 50% 22.3 million or 34% of net revenue, an increase of approximately 600 base, versus 28% in the fourth quarter last year.
Joe: For the quarter operating expenses were $35.8 million compared to $32 2 million for the same period of 2022.
Joe: The increase in operating expenses in 2023 was primarily due to increase headcount and related employee expenses lease expense associated with the company's new facility that is under construction variable sales and marketing expenses as well as other external expenses.
Joe: Net income for the fourth quarter more than double the $13 million or 26 cents per share compared to net income of $5.9 million or 12 cents per share for the fourth quarter of 2022.
Joe: For the full year, our net losses, $3 $2 million or seven cents per share compared to a loss of $16.7 million or 35 cents per share in 2022, representing an improvement of nearly 14 million on a year over year basis.
Joe: non-GAAP adjusted EBITDA for the year grew 40% to $33.9 million or 17% of net revenue compared to $24.2 million or 15% of net revenue in 2022.
Joe: For the quarter, adjusted EBITDA group, 50% to $22 3 million or 34% of net revenue an increase of approximately 600 basis points versus 28% in the fourth quarter last year.
Joseph Anthony Mara: Importantly, our adjusted EBITDA growth of 40% for the full year is double our top line revenue growth of 20%, and our adjusted EBITDA growth of 50% in the fourth quarter is more than double our revenue growth of 23%. As a result, our results continue to demonstrate very strong P&L leverage and a top tier profitability profile. In addition, the company has now consistently generated positive adjusted EBITDA each quarter for more than three years and continues to convert adjusted EBITDA into strong cash. We generated operating cash flow of $35.3 million in 2023 and ended the year with $152.6 million in cash, restricted cash, and investments, and no debt, up from approximately $140 million to start the year as our cash balance increased in 2023 despite CapEx investments for our new facility.
Joe: Importantly, our adjusted EBITDA growth, 40% for the full year is double our top line revenue growth of 20 per cent and our adjusted EBITDA growth of 50% in the fourth quarter is more than double our revenue growth of 23%.
Joe: As our results continue to demonstrate very strong P&L leverage and a top tier profitability profile.
In addition, the company is now consistently generated positive adjusted EBITDA each quarter for more than three years and continues to convert adjusted EBITDA and a strong cash flow.
Joe: We generated operating cash flow of $35.3 million and 2023 and ended the year with $152.6 million in cash restricted cash and investments and know that.
Joe: Up from approximately $149 to start the year is our cash balance increased in 2023, despite capex investments for our new facility.
Joseph Anthony Mara: Turning to our financial guidance for 2020, we're using a similar guidance framework to start the year that we will use in 2023 for both Macy and our burn camp. For the full year, we expect total company revenue of $237 to $241 million, representing growth of approximately 20 to 22 percent.
Joe: Turning to our financial guidance for 2024.
Joe: Using a similar guidance framework to start the year that we used in 2023 for both Macy and our burn care franchise.
Joe: For the full year, we expect total company revenue of $237 million to $241 million representing growth of approximately 20% to 22%.
Joseph Anthony Mara: Driven by continued strong growth in both of our branches, with Macy on track for another strong year, Epifel benefiting from a higher share of voice, and Nexabrit early in its launch phase, we have multiple paths to our 20 plus percent total revenue guidance for the year. We expect another strong year.
Joe: Driven by continued strong growth in both of our franchises.
Joe: What made me on track for another strong year Epistyle benefiting from a high sheriff higher share voice and next bread early in his launch phase we have multiple paths to our 20th plus percent total revenue guidance for the year.
Joe: We expect another you're.
Joseph Anthony Mara: Another year of growth for Macy's. Another year of strong growth for Macy's. And as a starting point, we expect full-year revenue growth in the high teens percent, with biopsy surgeon growth, biopsy growth, and an increase in price continuing to serve as the key Macy's growth drivers. For the burn care franchise, we expect growth of over 30% for the full year, based on significantly improved FSL trends over the past several quarters, plus the initial revenue contribution from next. For the first quarter, we expect a strong start to the year And for Burn Care, we expect total revenue in the first quarter to be $9.5 million to $10.5 million, with the vast majority of revenue coming from Epicel, which is trending above our recent run rates based on the strength of biopsies to close out 2023 and next to break revenue to be in a similar range as Q4.
Joe: Now that you're broke from Macy's.
Joe: Strong growth from AC and as a starting point, we expect full year revenue growth in the high teens percentage range with biopsy surgeon growth biopsy growth and an increase in price continuing to serve as the key macy growth drivers.
Joe: But it burned care franchise, we expect broke up over 30% a full year based on significantly improved epistyle trends over the past several quarters plus the initial revenue contribution from Mexico.
Joe: For the first quarter, we expect a strong start to the year would total company revenue of approximately $48 million to $50 million.
Joe: Representing approximately 20% revenue growth at the midpoint.
Joe: We expect Q1, Macy revenue of $38 $5 million to $39.5 million.
Joe: And for burn care, we expect total revenue in the first quarter to be 9.5 million to 10.5 million with the vast majority of revenue coming from Epistyle, which is training above a recent run rates based on the strength of biopsies Dakota 2023, <unk> revenue to be in a similar range as two four.
Joseph Anthony Mara: Moving down the P&L, for the full year, we expect gross margin of approximately 70% and adjusted EBITDA margin of approximately 20%, which would imply another year of very strong adjusted EBITDA growth of around 40%. We would expect similar quarterly trends in terms of seasonality and progression for both our gross margin and adjusted EBITDA margin percentages throughout the year. And we would expect operating expenses to be approximately $165 million for the full year.
Joe: Moving down the P&L for the full year, we expect gross margin of approximately 70% and adjusted EBITDA margin of approximately 20%, which would imply another ear very strong adjusted EBITDA growth of around 40%.
Joe: We would expect similar quarterly trends in terms of seasonality and progression for both our gross margin and adjusted EBITDA margin percentages throughout the year.
Joe: And we would expect operating expenses to be approximately $165 million for the full year.
Unknown Executive: Finally, we anticipate an increase in capital investment for the buildout of our new manufacturing and headquarters facility, with our share of construction costs expected to be in the $50 million range for 2020. In total, this guidance points to continued high revenue growth in 2024 with further enhancement of our top tier profitability. In addition, we would also anticipate continued strong revenue growth in 2025, with a full year of arthroscopic Macy and further acceleration of Nexenbridge usage, as well as continued expansion in our key profitability metrics. This now concludes our prepared remarks. We will open the call to your questions. Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Joe: Finally, we anticipate an increase in capital investment for the build out of our new manufacturing headquarters facility with our share of construction costs expected to be in a 50 million dollar range for 2024.
Joe: In total.
Joe: This guidance points to continued high revenue growth in 2024 with further enhancement of our top tier profitability profile.
Joe: In addition, we would also anticipate continued strong revenue growth in 2025 with a full year of arthroscopic Macy's and further acceleration of an expert usage as well as continued expansion and our key profitability metrics.
Speaker Change: It's now concludes our prepared remarks, we will open the call to your questions.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you'll need to press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again in the interest of time, we kindly ask that you limit yourself to one question. Please stand by while we compiled a Q and a roster.
Ryan Benjamin Zimmerman: In the interest of time, we kindly ask that you limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question comes from Ryan Zimmerman with BTIG. Please go ahead. Good morning. Can you hear me okay?
Speaker Change: Our first question comes from Ryan Zimmerman with P. T. I G. Please go ahead.
Ryan Benjamin Zimmerman: Good morning can you hear me okay.
Ryan Benjamin Zimmerman: We can't get anywhere in the morning and figure out so I'm not really strong 2023.
Unknown Executive: Good morning and congratulations on a really strong 2023. Appreciate all the commentary and guidance this morning, Joe. I was wondering if you could talk a little bit about seasonality on the top line, though. I mean, it is kind of an abnormal year, relative to years prior with the launch of Nexobrid, potentially some benefit late in the third and fourth quarter for Arthroscopic Macy. I'm just curious if you could kind of expand a little bit on that in terms of how to think about maybe seasonality and pacing this year, given it is a little abnormal. Yeah, so, you know, thanks for the question, Ryan, and good morning. So I can hit on that.
Ryan Benjamin Zimmerman: I appreciate all the commentary guidance. This morning, Joe wondering if you could talk a little bit about seasonality on the top line, though I mean, it is kind of in a normal year relative to yours fire with the launch next of Red potentially some benefit late in the fourth and a third and fourth quarter.
Ryan Benjamin Zimmerman: For arthroscopic Macy and just just curious if you could kind of expand a little bit on that in terms of how to thinking about maybe seasonality and patient. This year given it is a little abnormal.
Yeah. So thanks for the question Ryan and good morning, if I can handle that and maybe I'll just sort of start at a high level guidance just to make sure people understand the framework and then I can touch on the seasonality as part of that so first off I'm a total company in perspective, you talked about it at 20 per cent plus range.
Joseph Anthony Mara: And maybe I'll just sort of start, you know, at a high level with guidance, just to make sure people understand the framework, and then I can touch on seasonality as part of that. So, you know, first off, from a total company perspective, as we talked about in that 20% plus range, very consistent with our messaging to close out last year and early this year at JPM, where we updated our corporate presentation and thinking for this year in 2025. You know, importantly, as part of that question, we're using the same framework we used last year, obviously a higher starting point for the company and both franchises. So it is a bit higher, but the same framework, which is important.
Ryan Benjamin Zimmerman: Especially with our message and they closed out last year and early this year at J P M or we updated our corporate presentation and begging for this year 2025.
Ryan Benjamin Zimmerman: Fortunately it as part of that question you know we're using the same framework, we use last year, obviously, a higher starting point that accompany an adult franchise. It so I need a bit higher by St framework, which is important.
Joseph Anthony Mara: So on Macy, and I'll touch on seasonality. So on Macy, you know, from a framework perspective, again, it's very similar to 2023, which is starting the year, you know, assuming our key growth drivers are surging, continued surging growth, which has been strong, that leads to additional biopsies and volumes, and an increase in price. So, you know, that gets you into the, call it, high teens on a full year basis.
Ryan Benjamin Zimmerman: So I may see and I'll touch on the seasonality. So it may see from a framework perspective again, it's very similar to 2020th reunion, which is starting to hear you know assuming R. T. <unk> wrote drivers are surging continued surging growth, which has been strong at least some additional biopsy and volume's an increase in price sorry that got you into that.
Speaker Change: <unk> hi teams on a on a full year basis, and so as part of your question I would say we.
Joseph Anthony Mara: And so, you know, as part of your question, I would say, you know, we factored in some impact from the arthroscopic launch; it's really more, I would say, from a Q4 perspective, but I wouldn't say that meaningfully changes kind of how we're thinking about seasonality from a Macy perspective. So, you know, it certainly could have some impact because we do think ours will have an impact in Q4, but to start, I wouldn't think, from a quarterly perspective, it'll be significant relative to last year, kind of what an average year would look like. So if you think about Macy's and what we talked about in the pair of remarks, you know, I think a good place to start. We're not giving formal product guidance, but we did want to touch on kind of our framework across the franchises.
Speaker Change: <unk> some impact and the arthroscopic launch, it's really more I would say from a cue for perspective, but I wouldn't say that meaningfully changes kind of how we're thinking about seasonality from amazing perspective. So yeah. It certainly could have some impact because we do thank you know orange will have an impact in queue for but to start I I wouldn't think.
Speaker Change: For my quarterly perspective, it'll be significant relative to last year and I don't want an average here it looks like.
Speaker Change: So you'd think about Macy and we talked about in the prepared remarks, you know what I think I'm good.
Speaker Change: Good place to start you know without getting formal product guidance, but we didn't want to touch on kind of our framework across the franchise and so yeah. If you assume Macy's kind of in that high teens, as we talked about which which is higher than our starting point in the last year and that gets you in how low to mid one nineties on a full year basis. So for example, if you use kind of 18 per <unk>.
Joseph Anthony Mara: So, you know, if you assume Macy's kind of in the high teens as we talked about, which is higher than our starting point for last year, you know, that gets you in the kind of low to mid-190s on a full year basis. So, for example, if you use kind of 18% or 194 million, that would kind of lead to burn care, which, you know, the balance at our midpoint would be about 45 million. And so from a bird care perspective, and I'll tie in seasonality as part of this, you know, I think, you know, that would certainly be pretty strong growth. You know, it implies 30 percent, more than 30 percent at that midpoint, and we call it 45.
Speaker Change: Or 194 million that would tell me the burnt air which you know the balance that our mid point would be about $45 million.
Speaker Change: And so from a very care perspective, and then I'll I'll tie in the seasonality as part of this you know I I think that would certainly be pretty strong growth and 530 per cent you know more than 30% up at that bitcoin a call at 45 and again I think what's really important is you know a couple of things one is certainly a range of possibilities across the <unk>.
Joseph Anthony Mara: And again, I think what's really important is, you know, a couple of things. One, there's certainly a range of possibilities across the product. So we don't know exactly what that's going to look like across Epitel and Nexabrid. Again, we're not being given specific product guidance, but we'll talk a little bit about a framework. But I think, you know, to that framework perspective, again, very similar to last year, which is we came out of 22 a year ago and said we think we can grow our Epitel run rate off that exit rate. You know, our expectation is kind of the same this year. So last year, if you remember, we were coming out of the year kind of called the six to seven million run rate range on Epitel. And actually, if you look back at where we ended up, you know, our run rate in the last three quarters was more like, I call it, eight plus million, around eight point three million.
Speaker Change: <unk>. So we don't know exactly what that's gonna look quite cross at the cell and <unk> again, we're not getting specific product guidance, but we'll talk a little bit about a framework, but I think you know to that framework perspective. It again very similar to last year, which is free came out of 22, a year ago and said, we think we can grow our epistyle run right off that exit right.
Speaker Change: You know our expectation is kind of the same this year. So last year. If you remember when we were coming out of the out of the euro kind of cough, a six or $7 million run rate range on Epicel and actually if you look back at where we ended 23, you know our run rate in the last three quarters was more like call at eight eight plus 90 around 8.3 million.
Joseph Anthony Mara: So our exit rate on Epitel is actually really a $30 million number, and we certainly think it's reasonable to grow that number. So last year, we grew that exit rate over 20 percent and even more if you assume the starting point for like six million. And prior to COVID on Epitel, you know, we generally grew in kind of the 20 percent range.
Speaker Change: So our exit right on epitaph was actually really 33 million dollar number.
Speaker Change: And we certainly think it's reasonable to grow that number so last year, we hear that exit right over 20% and even more if you assume the starting point for like 6 million and fire to Covid on Epistyle. Yeah. We generally grew in kind of a 20 per cent range. So you know our expectation epicel, obviously can vary from quarter to quarter, but from a full year perspective.
Joseph Anthony Mara: So, you know, our expectation for Epitel obviously can vary from quarter to quarter. But from a full year perspective, we certainly think it's reasonable to, again, assume, you know, achieve low double digit growth. And importantly, you know, we're seeing a higher share of voice. We have a strong Q4 in terms of biopsies. And, you know, part of that equation is an increase in price. We do take price increases on Epitel. So it's certainly reasonable to expect, I think, low double digits, which would be lower than last year and lower than pre-COVID years, relative to the exit rate on Epitel.
Speaker Change: We certainly think it's reasonable to again as soon you know cause the low double digit growth and importantly, we're seeing a higher share of voice. We had a strong case for inherited the biopsies and you're part of that equation is an increase in price. We do take price inquiry cause I'd have to sell so it's certainly reasonable to expect I think low double digits, which would be lower than <unk>.
Speaker Change: Last year and lower than pre COVID-19 years from relative to the agent right I'd have to sell.
Joseph Anthony Mara: So obviously, from a seasonality perspective, there, you know, as you know, well, that can vary quarter to quarter. But we think from a full year perspective, that's probably a pretty good place to start. So, you know, if you assume that, you know, for example, call it a low double digit or double digit range, you're kind of probably the starting point is, you know, I think a good scenario is called 37 to 38 million, for example. In that scenario, Nexabrid would be in that seven to eight million range.
Speaker Change: So obviously from a seasonality perspective, there you know as you know a while back and bury quarter to quarter, but we take from a whole year perspective, that's probably a pretty good place to start. So if you assume that you know for example call at low double digit our double digit ran you're kind of probably the starting point is you know I think I put scenarios <unk> <unk>.
Speaker Change: Seven to 38 million for example, so you know in that scenario and extra bread would be and that's $789 range and clearly you know an extra branch obviously very early in the launch installed difficult to predict the absolute number let alone. The quarterly numbers you know we have not given any specific guidance today in 2024 and that's spelled.
Joseph Anthony Mara: And clearly, you know, Nexabrid is obviously very early in the launch. It's still difficult to predict the absolute number, let alone the quarterly numbers. You know, we have not given any specific guidance to date on 2024. And that's still difficult.
Joseph Anthony Mara: Obviously, a few, you know, a month and a few weeks in the launch or quarter rather than a few weeks in the launch phase. But we would expect some kind of progression throughout the year on Nexabrid. So, again, FSL can vary a bit, as we know, from quarter to quarter. But you know, I think it's safe to assume that Nexabrid will continue to build during the year. So, there will be a degree of seasonality, certainly in Nexabrid. But just to bring it back, I wouldn't assume anything materially different about Macy. And again, FSL is a typical quarterly volatility indicator. Thank you for all that color.
Speaker Change: Difficult obviously, a few you know a month in a few weeks in the last quarter, rather than a few weeks at lunch, but we would expect kind of progression throughout the year <unk> branch. So again epistyle can vary a bit as we know from quarter to quarter. You know you I think it's safe to assume that an extra burden will continue to build during the year. So there there will be a degree of <unk>.
Speaker Change: Nowadays certainly adnexa bread, but just to bring it back I witnessed her maiden name is materially different macy.
Speaker Change: <unk> and you're gonna have to spell out the typical quarterly volatility.
Speaker Change: Thank you for all that color that's very that's very appreciative <unk>, maybe just to ask <unk> you know I think.
Ryan Benjamin Zimmerman: That's very, very appreciated. Maybe just to ask on NexoBridge, you know, I think people were hoping it would kind of get rolling pretty quickly here. You're guiding to kind of a similar level from the fourth quarter. Talk to us about how the process is going. I mean, clearly, there's interest. You wouldn't have that many sites ordering this early if there wasn't.
Speaker Change: People were hoping it would kind of get rolling pretty quickly here uhm your guidance to kind of a similar level from the fourth quarter talk to us about kind of you know how the process is going I mean, clearly there's interest you wouldn't have that many sites ordered this early if there wasn't but you know how do you thinking about kind of early adoption.
Dominick C. Colangelo: But, you know, how do you think about kind of the early adoption of NexoBridge from what you're seeing so far, you know, a couple weeks after the launch? Thanks for taking the question. Yeah, hey, Ryan, this is Nick.
Speaker Change: Uhm next no bread from what you're saying so far you know a couple of weeks at a launch thanks for taking questions.
Next: Hey, Brian. This is next I'll start and then you know joking kind of talk about sort of the dynamics of the distribution system, but you know from our perspective as you referenced whether it's our market research or independent work that others have done I mean, there is this high level of interest from surgeons in <unk> there's.
Dominick C. Colangelo: I'll start and then you know, Joe can kind of talk about sort of the dynamics of the distribution system. But, you know, from our perspective, as you referenced, whether it's our market research or independent work that others have done, I mean, there is a high level of interest from surgeons for Nexavir. There's no doubt about that.
Brian: No doubt about that you know obviously, we you know the teams done a great job on in terms of the Onboarding of burn centers and you know <unk>.
Dominick C. Colangelo: You know, obviously, we, you know, the team's done a great job in terms of the onboarding of burn centers, and, you know, we'll continue to keep adding those burn centers. You know, with the delay last year, there was an interruption to the sort of onboarding process for many centers when the product did become available. Obviously, those that were farther along were able to kind of finish out that process and start making some initial orders. And with respect to other centers where they had really kind of put things on hold, you know, it was a re-engagement process. And all of that's going really well, obviously. But importantly, we think about this, obviously, as we've always said, over the long term when you're changing the standard of care for what burn surgeons have done for the last several decades, in terms of their eschar removal protocols, etc. You know, those things take time, but we are making great progress.
Brian: Continue to keep adding those burn centers you know with the delay last year. You know there was an interruption to sort of the the.
Brian: Courting process for many centers when the product did become available obviously those that were farther long, we're able to kind of finish up that process and start making some initial orders.
Brian: Respect to other centres, where they had really kind of put things on hold you know it was reengagement krug process and all of that it's going really well. Obviously you know importantly, we think about this obviously as we've always said over the longterm.
Brian: When you're changing the standard of care for burn surgeons have done for the last several decades in terms of their eschar removal protocols et cetera.
Brian: You know those things take time, but making great progress and importantly.
Joseph Anthony Mara: And importantly, you know, we take great care to make sure we support the initial patient applications and treatments; the outcomes have been great, the surgeons' feedback has been great. So, you know, we think we're kind of where we thought we'd be and sort of making the progress that we would expect. Yeah, maybe just to add a little bit as well on the NextGrid side. So, you know, first, as Nick said, obviously, the metrics have been very strong to start. The clinical feedback has been very positive.
Brian: We take great care to make sure we support the initial patients applications and treatments the outcomes have been great. The surgeons feedback has been great. So you know we think we're you know kind of where we thought we'd be in and sort of making the progress that we we would expect.
Brian: <unk>.
Speaker Change: Yeah, I just need to just add a little bit as well on an expert side. So you know at first as <unk> as the metrics have been very strong start the clinical feedback has been very positive. So so those are great signals.
Joseph Anthony Mara: So those are great signals. You know, I think it is important to understand that we're early in the launch. And a couple of things just to point out, which is, you know, again, the distribution on NextGrid is very different than basically an FSL. And just as a reminder, you know, we have a 3PL that kind of manages our inventory. And then the distribution network that's in place consists of multiple specialty distributors, some of whom have multiple locations.
I think it is important to understand you know or early in the launch in a couple of things just to point out which is you know again.
Speaker Change: Again, a distribution on <unk> is very different and it's basically an app itself. Just as a reminder, you know we have a three P. L kind of matches our inventory and.
Speaker Change: And then a distribution network that's in place cause that's multiple specialty distributors some have multiple locations and we recognise revenue windows specialty distributors order from our three P. L.
Joseph Anthony Mara: And we recognize revenue when those specialty distributors order from our 3PL. The second kind of part of the channel, if you will, is then the burn centers and hospitals order from those distributors. It might be the one that they typically work with, most likely for some different products at their centers.
Speaker Change: Second kind of part of that the channel with you well as in the burn center in hospitals order from though that the that might be the one that they typically work work with most likely for some different products at the <unk> at their centers. So when they order that drive additional orders from our at fees each quarter and then leads to our quarterly revenue and then lastly.
Joseph Anthony Mara: So when they order, that drives additional orders from our FDs each quarter and then leads to our quarterly revenue. And then lastly, you know, it's important to remember that both the FDs and the hospitals will keep some level of inventory, which can vary and impact ordering patterns. So, you know, just briefly, as you kind of think about the first couple quarters of launch, you know, again, Q3, that was, you know, if you remember in Q3, we got commercial availability very late in the quarter. So, you know, that was essentially the FDs kind of ordering from a channel perspective in Q3.
Speaker Change: <unk>, it's important to remember that for B S D and the hospitals will keep some level of inventory, which can which can bury an impact ordering pattern. So you know just briefly if you kind of think about the first couple of quarters launch now again Q3 that was you know if you remember in Q3, we commercial ability <unk> avail.
Speaker Change: Ability very late in the quarter. So yeah that was essentially the S. D kind of ordering from a channel perspective in Q3, and we didn't really get into the market and start treating patients. So Q4, that's at the corner, where hospitals you know start ordering from S. D and kind of it's in the market et cetera, you know in general.
Joseph Anthony Mara: And we didn't really get into the market and start treating patients until Q4. That's the quarter where hospitals, you know, start ordering from FDs, and it kind of gets into the market, etc. You know, and generally, I think what we've seen is a lot of the burn centers that were more physicians, or sorry, more and more familiar with Nexabrid, some of the burn surgeon KOLs, you know, as well as the hospitals that were farther along in the P&T process, even when things were disrupted last year. So, you know, that was as anticipated.
I think what we've seen is it's a lot of the burnt centers that were more physician or sorry, more more familiar with <unk>. Some of the burnt surgeon Kols, you know as well as the hospitals never farther along in a P and T process, even when things were disrupted last year. So yeah that was that was anticipated.
Joseph Anthony Mara: That leads to essentially some initial stocking at hospitals. And, you know, now as we get into Q1, we're seeing continued use on patients, you know; we're seeing some of those hospitals start to use that inventory, which can then lead to some reorders. And at the same time, as Nick mentioned, the team's working to add new centers on top of the ones that have already been ordered and working through some of those, you know, administrative challenges at the burn center. So, you know, I think as these dynamics play out, particularly early in the launch, it's going to take some time for ordering patterns to normalize at both the SDs and the hospitals, which is, you know, which is anticipated, I would say, at this point in the launch.
Speaker Change: <unk> essentially some initial stocking at hospitals and you know now as we get into an a Q1. We're seeing you know continue to use on patients. We're seeing some of those hospitals start to use that inventory that can then lead to some reorders and at the same time as Nick mentioned the team is working to add new centers on top of the ones that I've already ordered and working through some of those.
Speaker Change: Administrative challenges at the Burn center. So you know I think at least dynamics play out, particularly early in the launch it's gonna take some time for ordering patterns to normalize at both the S. D and hospitals, you know, which is which is anticipated I would say I kind of just pointing to launch an and lastly, again you know we have we have one quarter of history, and so and so.
Speaker Change: Well a few weeks left in Q1, and again I'm like <unk>, we have a ton of history and data you know we won't know exactly what those S. D ordered look like until we get you know later in the corner and so they're still arrange it all comes out with today.
Joseph Anthony Mara: And lastly, again, we have one quarter of history and still a few weeks left in Q1. And again, unlike Macy and Epicel, we have a ton of history and data. But we won't know exactly what those SD orders look like until we get, you know, later in the quarter. And so there's still a range of outcomes. All fair. Thanks, guys, for the very comprehensive answers. I appreciate it. Thanks Ryan. Thanks Ryan.
Speaker Change: All Sir Thanks, Scott for the very comprehensive answers appreciate it.
Speaker Change: I try and <unk>.
Speaker Change: Thank you one moment for our next question.
Kratky: Our next question comes from my Kratky with Leerink partners. Please go ahead.
Hi, everyone. Thanks for taking my questions can.
Michael Holden Kratky: Can you speak you're thinking about how quickly you can get traction and the new targets started can population once you get arthroscopic approval <unk>.
Ryan Benjamin Zimmerman: Thank you. One moment for our next question. Our next question comes from Mike Kratky with Leering Partners. Please go ahead. Hi everyone.
Michael Holden Kratky: You get the sense, there's pent up demand from surgeons that are not currently using macy presently, but we'll start doing implants. Once you have arthroscopic appraisals.
Michael Holden Kratky: Thanks for taking our questions. Can you speak to how you're thinking about how quickly you can get traction in the new target surgeon population once you get arthroscopic approval? I mean, do you get the sense there's pent-up demand from surgeons that are not currently using Macy presently but will start doing implants once you get arthroscopic approval? Yeah, hey, Mike, this is Nick.
Michael Holden Kratky: Yeah, Hey, Mike. This is Nick you know obviously as we said, we're really excited about macy or throat for the reasons. We've described it to <unk> you know targets for a larger center <unk>.
Nick: Segment of our addressable market you know it will be the only arthroscopic.
Nick: Restorative cartilage repair procedure for these Ah femoral condyle defects of a certain size. So you know we think.
Dominick C. Colangelo: You know, obviously, as we said, we're really excited about Macy Arthro for the reasons we've described; it's the look, you know, targets the largest sender segment of our addressable market; it will be the only arthroscopic restorative cartilage repair procedure for these femoral condyle defects of a certain size. So you know, we think this is going to be very meaningful for us as we move forward You know, obviously, we can't at this point, since it's not an approved method of administration, be out there talking generally to surgeons.
Nick: You know this is gonna be very meaningful for us as we move forward you know obviously, we can't at this point since it's not an approved method of administration be out there talking generally to surgeons.
Nick: But you know we are working with a couple of dozen surgeons through you know the human factor study voice of the customer labs, additional trainings et cetera, and I'll just say the enthusiasm from the surgeons, who have been exposed to the new instruments has been significant and great. So they're real.
Dominick C. Colangelo: But, you know, we are working with a couple dozen surgeons through, you know, the Human Factors Study, voices at customer labs, additional training, et cetera. And I'll just say the enthusiasm from the surgeons who have been exposed to the new instruments has been significant and great. So they're really excited about it.
Nick: Are you excited about it and I would expect that that will translate.
Nick: To those who aren't as familiar with it right now and I would just last point would be that you know for the surgeons. If you look at our addressable market right now the vast majority of cartilage repair procedures are done arthroscopic Lee whether it's Chondroclast DS microfracture those are the things that.
Dominick C. Colangelo: And I would expect that that will translate, you know, to those who aren't as familiar with it right now. And my last point would be that, you know, for these surgeons, if you look at our addressable market right now, the vast majority of cartilage repair procedures are done arthroscopically, whether it's chondroplasties, or microfracture; those are the things that make up the majority of the cartilage repair market So this kind of is right in the wheelhouse for those surgeons in terms of how they currently do their cartilage repair procedures, and there's nothing out there that has the clinical outcomes that Macy has.
Nick: Make up the majority of the card with repair market. So this kind of is right in the wheelhouse for those surgeons in in terms of how they currently do their cartilage repair procedures and there's nothing out there that has a clinical outcomes that macy has so we think that combination is going to be very powerful.
Nick: For us as we move forward.
Speaker Change: Got it yeah I really appreciate the color there and then maybe just as a follow up you know is it reasonable to think that as you get arthroscopic approval that could ultimately lead to an improvement in the conversion rate just as more implants end up getting done over time is that available.
Dominick C. Colangelo: So we think that combination is going to be very powerful for us as we move forward. Got it. Yeah, I really appreciate the color there.
Michael Holden Kratky: And then maybe just as a follow-up question, you know, is it reasonable to think that if you get arthroscopic approval, that could ultimately lead to an improvement in the conversion rate just as more implants end up getting done over time with that available? Yeah, well, we certainly believe in our surgeons' belief that, number one, you know, with a less invasive procedure, there's better aesthetic outcomes, there's less post-operative pain, and we would expect there to be, you know, faster post-surgical recoveries. And that is something from a medical affairs perspective that will be focused on as soon as we launch the product and generate data that actually supports what I think everybody expects to be the case. So, yeah, I think that that is, you know, very much in line with sort of what we're thinking. I got it. Thanks very much.
Speaker Change: Yeah, well, we certainly believe in our surgeons believe that number one night, you know with a less invasive procedure that you know obviously, there's better astatic outcomes, there's less postoperative pain and we would expect there to be you know faster post surgical <unk>.
Speaker Change: Coverage and that is something from your medical affairs perspective that will be focused on S. As soon as we launched the product generating data that actually supports would I think everybody expects.
Speaker Change: To be the case. So so yeah I think that that is very much in line and sort of what we're thinking.
Speaker Change: Got it thank you very much.
Speaker Change: It takes Mike thank.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from Richard <unk> Securities. Please go ahead.
Richard Newitter: Hey, thanks, Mike. Thank you. One moment for our next question. Our next question comes from Richard Newitter with Truist Securities. Please go ahead. Hey, sorry, it's actually Sam on.
Speaker Change: Hey, sorry is actually Sam on.
Sam: Thanks for taking questions just just.
Sam: First one.
Samuel E. Brodovsky: Thanks for taking the questions. Just the first one, on Macy, can you just sort of walk us through the price dynamic in 2023 and then any changes there for 2024 and about that revenue, and any price impact from our discussion? Yeah, hey, Sam, this is Nick.
Sam: On on <unk> can you.
Sam: Just sort of walk us through the the price dining out of my account in 2023 and then.
Sam: Any changes made are some 2024 and how should we be thinking about that impacting.
Sam: Revenue in and any any price impact from arthroscopic as well.
Dominick C. Colangelo: So yeah, so you know, we've spoken before about sort of, you know, we routinely take annual price increases for Macy's. And we, of course, expect to do that this year as well. We've typically taken a mid-year price increase. The, you know, with respect to arthroscopic Macy's, the product itself is reimbursed under a J code. That pricing will not change whether a surgeon delivers Macy in a mini-arthrotomy or an arthroscopic procedure. So that won't impact it. The CPT codes are the same.
Sam: Yeah, Hey, Sam this is Nick so yeah. So you know we've spoken before about sort of you know we routinely take annual price increases for Macy's. We of course expect to do that this year as well tip.
Nick: Typically taken a mid year price increase the with respect to arthroscopic me see <unk>. The product itself, obviously is reimbursed under a J code.
Nick: That pricing will not change whether a surgeon delivers macy is in a mini arthrotomy or an arthroscopic procedure. So so that won't be impacted the CPT codes. It is the same so the the the.
Dominick C. Colangelo: So the reimbursement or for the surgeon will be the same for the procedure. You know, we do anticipate charging. This will be a disposable set of instruments, and we do expect to charge for those instruments.
Nick: The reimbursement or <unk>.
Nick: For the surgeon will be the same for the procedure. We do anticipate charging this will be a disposable set of instruments and we do expect to charge for those instruments. So you know much like our Macy biopsy kids, where there's a line item in our financial filings that you can see.
Dominick C. Colangelo: So, you know, much like our Macy biopsy kits where there's a line item in our financial filings that you can see, we expect that these instruments will generate revenue for the company and offset some other costs, potentially over time, but, you know, really the main revenue driver is the reimbursement for the implant itself. Thanks for that. And then thanks for all the really detailed red color earlier.
Nick: <unk> you know we expect that these instruments will generate some revenue for the company and offset some other cost potentially over time, but you know really the the main revenue driver is reimbursement for the implant itself.
Speaker Change: Great. Thanks for that and then thanks.
Speaker Change: Thanks for all the really detailed color earlier those those really helpful. I did just want to touch a little more on Apple shell given the you know the the quarterly volatility. This product can have can you just give us a little more insight into any visibility.
Dominick C. Colangelo: That was really helpful. I did just want to touch on Epicel, given the, you know, the quarterly volatility of this product. Can you just give us a little more insight into the visibility you have into that sort of run right through the year and why you're so confident again? Yeah, I'll start and Joe can, you know, kind of chime in. I think Joe referenced it in the prepared remarks that, you know, historically, and pre-COVID, I mean, things got a little, you know, more variable during COVID, obviously. And, you know, we would always say it's probably a safe place to start the year, assuming high single-digit to low double-digit growth for EPSIL. But we kind of routinely outperformed that.
Speaker Change: Visibility, you have and and that sort of run me through the years and why are you. So confident again thanks.
Speaker Change: Yeah, I'll I'll start in joke and <unk> chime in you know I think Joe referenced it in the prepared remarks that you know historically.
Speaker Change: Historically and pre Covid I mean things got a little you know.
Speaker Change: More variable during Covid obviously.
Joe: Yeah, we would always say, it's probably safe place to start the year, assuming high single digit to low double digit growth for episode, we kind of routinely outperformed that but again given sort of less visibility than we have for instance, with macy, we kind of always just assume that you know kind of communal.
Dominick C. Colangelo: But again, given sort of less visibility than we have, for instance, with Macy, we kind of always just assume that, you know, kind of communicated. I should say that that was a good place to start. You know, I would say that over the past essentially three quarters now, you know, EPSIL with a larger share of voice has been sort of returning, it's not even back to its highest levels ever. And, but, you know, we've seen it kind of get back routinely into more of like an eight plus million dollar run rate. And, you know, the market's kind of normalized. We had some dynamics with respect to our largest customer that have now been resolved at their facility, not Epicel-related, but other issues. And so all of that is kind of normalized, and so we're kind of back into sort of that place we were in from previous years.
Joe: Hated I should say that that was a good place to start you know I would say that over the past essentially three quarters. Now you know episode with a large larger share of voice has been sort of returning it's not even back to its highest levels ever.
Joe: And but you know we've seen it kind of get back routinely into more of like an eight plus million dollar run rate and you know the market's kind of normalized the you know we had some dynamics with respect to our largest customer that has now been resolved at their their facility.
Joe: Episode related but other issues and so all of that is kind of normalized and so we're kind of back into sort of that.
Joe: Place we were in.
Joseph Anthony Mara: And so, again, you know, obviously we have, when we have,,,,,,,,,,,,,,,,,,,,, starting kind of the middle of last year, as we talked about on earlier calls, and it continues that. Yeah, just to add, you know, just to kind of reiterate or add a little bit, Sam But, you know, I think it is important to recognize that EPSL meaningfully grew versus where it exited at 22. Sometimes it's a little bit tough to look at calendar years, but, you know, we know it was running in the six to $7 million range.
Joe: From prior years, and so again you know obviously, we have when we have.
Joe: A biopsy quarter like we did in the fourth quarter, we know that's gonna create strength into the year as we discussed earlier. So so yeah, we're feeling pretty good about it and again, we said all along that we expected pull through for episode from having a larger sure a voice worried more hospitals than we were previous.
Joe: <unk> and all that it had an impact.
Joe: Starting kind of the middle of last year as we talked about an earlier calls and it continues to have an impact.
Speaker Change: Yeah, just to add yeah, just to kind of reiterate or add a little bit to kind of me earlier question around seasonality ties into it and guidance sat around but you know I think it is important to recognize you know epicel meaningfully grew versus wearing exited 20th two sometimes it's a little bit tough the luggage calendar years by you know we know is running in a <unk>.
Joseph Anthony Mara: Again, if you just use the last couple quarters of 22, it was kind of high sixes; now we're above, I mean, that's more than 20% growth, which also lines up historically to kind of where we were. And, you know, again, as we think about growth on a full year basis, just to reiterate, there's, you know, multiple components there. So, you know, we think the volume could be a bit better, and we're starting to see some signs of that with a larger footprint and a share of voice.
70 million dollar range mechanically just used the last couple of quarters of 22. It was kind of high six is now her body I mean, that's more than 20 per cent growth, which also wind up historically to kind of where we work and you know again cause we think about what kind of growth on a full year visa just to reiterate there's multiple components there so.
Speaker Change: We think the volume can be a bit better and we're starting to see some signs of that with a larger footprint in the share voice, but also as I said earlier, there's a price components in there as well. So do you think about call low double digit growth on <unk> and again, that's one scenario within our guidance and Bernie Kerik, there can be shifts London franchise products, but no one I referenced.
Joseph Anthony Mara: But also, as I said earlier, there's a price component to there as well. So as you think about, call low double digit growth on EPSL. And again, that's one scenario within our guidance and burn care guidance. There can be shifts across the franchise products, but the one I referenced, I mean, that's below where we were last year. So I certainly think that's a reasonable expectation. Again, it could vary quarter to quarter in terms of how we get there, but we think that's certainly a reasonable expectation going into the year. Great, thanks for taking the time.
Speaker Change: I mean, that's below where we were last year. So I I, certainly think that's a reasonable expectation again it could it could very corner to corner in terms of how we get there, but we think you know that is certainly a reasonable expectation going ahead a year.
George Stone Sellers: Thank you. One moment for our next question. Our next question comes from George Sellers with Stevens. Please go ahead.
Speaker Change: Great Thanks for different questions.
Speaker Change: <unk>.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from George Tellers was Stevens. Please go ahead.
George Stone Sellers: Hey, good morning, and thanks for taking the question. Maybe to shift gears a little bit, the margin guidance, I'm just curious, what does that assume in terms of the improvement driven by price versus Nexabrid and EpiCel ramping up? And then what's also sort of assumed related to investment for commercializing arthroscopic delivery? Yeah, so morning, George, and thanks for the question.
George Stone Sellers: Hey, good morning, and thanks for taking the question.
Speaker Change: Maybe to shift gears, a little bit the margin guidance I'm just curious what does that assume in terms of the improvement terrific by price persons next Brandon Epicel ramping up and then what's also sort of assumed.
Speaker Change: I'd like to to investment for commercializing arthroscopic delivery.
Joseph Anthony Mara: So, you know, I'll kind of hit that and just make sure we talk a little bit about some of the guidance, you know, beyond the revenue piece. So, you know, as we talked about, we're expecting improvement in gross margin, you know, from the high 60s last year to 70. On adjusted EBITDA, we ended last year on a full year basis at 17.
Speaker Change: Yeah, Good morning, George and extra questions. So you know all kind of hit that and just make sure every time I've been about some of the the guidance you know beyond a revenue teeth. So you know as.
Speaker Change: We talked about you know, we're expecting improvement gross margin from high sixties lack here Saturday how does your acid EBITDA. We ended last year and a four year basis 17, we think we can be around at 20 per cent number this year you know.
Joseph Anthony Mara: We think we could be around that 20% number this year. You know, first off, and just kind of point out, I did make a comment in my prepared remarks. But you know, as you think about that guidance, I would say it's also important to think about the quarterly progression and the trends there. So, you know, the way our business works, which is some seasonality and whatnot, is that we typically see improving margins throughout the year, particularly, you know, Q1 often ends up being kind of on the low end, and then Q4 obviously ends up being on the higher end. So there's going to be a progression, I would say, and you can really reference last year's trajectory and assume, you know, probably something similar on a year-over-year basis, you know, with some improvement, and there can obviously be some puts and takes within quarters. In terms of kind of what's driving kind of the margin improvement, you know, I would say, Yeah, I guess on the last piece on the OpEx side, I think I mentioned 165 from an OpEx perspective.
Speaker Change: First off I, just kind of point out I did I did comment on my prepared remarks, but you know I should think about that guidance I would say, it's also important to think about the quarterly progression and his friends there. So.
Speaker Change: The way he kind of our business works with just some of the seasonality and whatnot. It's you know we typically see improving margins throughout the year, particularly you know Q1, often ended up being kind of on the low end in queue for obviously ends up being a higher and so there's going to be a progression I would say and and you can really reference last year's trajectory.
Speaker Change: And assume you know probably some something similar on a year over year basis, you know, what's improved Meghan <unk> puts it takes within quarters in terms of the kind of what's driving margin improvement you know I would say.
Speaker Change: Yeah, I guess on the last piece on the Opex side, just before I go there yeah, we did talk about one.
Speaker Change: One six days I think I mentioned 165 from an AB ex perspective and from an investment perspective.
Joseph Anthony Mara: And from an investment perspective, you know, it's the thing that we've been talking about. So certainly, we want to make sure our launch is set up for success. You know, there's some spending there to kind of get ready from a commercial perspective, to make sure the instruments are ready.
Speaker Change: I think we've been talking about so I certainly wouldn't want to make sure. Our throw is set up for success. Yeah. There's some spend there to kind of get rite aid from a commercial perspective to make sure. The instruments were ready. So that is you know clearly a priority investment this year to make sure that is successful and then you know things like ankle from a lifecycle management and other investments.
Joseph Anthony Mara: So that is, you know, clearly a priority investment this year to make sure that it's successful. And then, you know, things like angle from lifecycle management and other investments, just, you know, they're far more modest, but things, you know, to make sure things like that continue to track. So those remain the investment areas, you know, are certainly are, are leveraged, you know, broadly driven by the top line, growth is being sustained at a high level, we certainly want to make sure we manage our OpEx growth at a lower level than that. And we did that last year.
Speaker Change: There are more modest but thanks, you know to make sure things like extra branner kind of continue to track. So those remain the investment areas are certainly are on leverage Broadway is driven by the top line you know groza being sustained at a high level. You know, we certainly want to make sure we manager Opex growth.
Speaker Change: Lower level than that and we did that last year and that's certainly our plan. This year in terms of the kind of what flows through to the margin. Yes, certainly yeah, we talked about an extra brain kind of fits ended the margin profile gross margin perspective. So that's helpful. And then you know some of that to your question, obviously hesitate to increase in price.
Joseph Anthony Mara: And that's certainly our plan this year. In terms of kind of what flows through to the margin, you know, certainly, as we talked about next to break, kind of fit into the margin profile from a gross margin perspective. So that's helpful. And then, you know, some of that to your question: obviously, as you take increases in price, that certainly helps from a gross margin perspective. But there's also just a natural leverage in the business.
Speaker Change: Certainly house from my gross margin perspective, but it's also just a natural leverage in the business and I think we're starting to see her again, if we can kinda manage our costs lower level.
Speaker Change: All revenue and we're going to see that false room.
Speaker Change: And then lastly, I talked about and I'm prepared remarks, but you can also see just you know we also talk about pull through in terms of how much it's dropping and the bottom line like if you look at Q4 last year you know what that was really strong any adjusted EBITDA line call through Uhm and gross margin involved Q for all your current at 80 per cent range. So you know I think.
Joseph Anthony Mara: And I think we're starting to see where again, if we can kind of manage our costs at a lower level, then overall revenue, we're going to see that pull through. And then lastly, you know, I talked about in the fair remarks, but you can also see just, you know, we also talk about pull through in terms of how much is dropping to the bottom line. Like, if you look at Q4 last year, you know, that was really strong in the adjusted EBITDA line and pull through in gross margin, both Q4 and full year kind of in that 80% range. So, you know, I think that's kind of where it needs to be this year and something we're focused on maintaining. Okay, that's really helpful, Keller. I appreciate all that detail. You touched on Macy's ankle.
Speaker Change: That's kind of where they were needed to be last year in something more focused on maintaining this year.
Speaker Change: Okay. That's really helpful Teller I appreciate all that detail.
Speaker Change: You touched on May see ankle.
Speaker Change: Just curious split that clinical study initiating a 2025 and then you've also talked about getting close to 30% adjusted EBITDA margins in 2025 and beyond how do we sort of reconcile.
Speaker Change: Those two items and you know what should we think about in terms of the investments for for launching that clinical trial.
Speaker Change: Yeah, Hey, Georgia, Nick you know as we've talked about you know this study has always been sort of <unk> is included and sorted the longterm longer term projections that that we've given you know this is not you know large.
Dominick C. Colangelo: Just curious, with that clinical study initiating in 2025, and then you've also talked about getting close to 30% adjustability without margins in 2025 and beyond, how do we sort of reconcile those two items? And, you know, what should we think about in terms of the investments for launch in that clinical trial? Unknown Speaker, Yeah, George, Nick, you know, as we've talked about, this study has always been sort of, So, you know, it's kind of a single-digit million dollar kind of study. And so, you know, it's, again, not compared to our overall sort of OPEX and investment, you know, it's really not that significant.
Speaker Change: Study by pharma or biotech standards, you know it'll be very much like stomach study that was the pivotal study for me C D.
Speaker Change: You know somewhere.
Speaker Change: Call it.
Speaker Change: Around 200 patients it'll take a couple of years to enroll.
So you know, it's kind of single digit million dollars kinds of study and so you know.
Speaker Change: It's again compared to our overall sorta Opex and an investment you know, it's really not that significant.
George Stone Sellers: Okay, great. Thank you all again for the time. All right. Thank you. Thank you. One moment for our next question. Our next question comes from Jeffrey Cohen with Lattenberg. Please go ahead. Hi Nick and Joe, how are you? Brennan.
Speaker Change: Okay, great. Thank you all against the time.
Speaker Change: Alright, Thank you charged.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from Jeffrey calling with Langberg. Please go ahead.
Speaker Change: You can go <unk>.
Jeffrey Scott Cohen: Well, good job. A couple of quick ones from our end. So when you talk about Macy Arthro and the Surgeon Population Expanding Out from 5 to 7,000, how do we equate that or think about the overall TAM? As there's certainly some other levers out there.
Jeffrey: Alright, well good yet.
Jeffrey: <unk>. So when you talk about make sure you or throw in the the.
Jeffrey: The surgeon population expanding from five to 7000, how do we.
Quick to think about the overall town.
Jeffrey: Surely some other level of shelter, so to 40 per cent greater tram or.
Dominick C. Colangelo: Is that a 40% greater TAM or, One way we think. Yeah, so, as we've talked about previously, when you look at our 60,000 patient TAM, you know, clearly Macy's the go-to product in the patella and larger defects on the femoral condyle or other areas of the knee. You know, we do get business on these two to four square centimeter defects in the femoral condyle, but just our penetration rate there is lower, and we think Macy's arthroscopic will allow us to have deeper penetration there. So for Macy's arthro, it's really about sort of deeper penetration into the existing addressable market of three billion dollars plus. You know, the TAM expansion for Macy's occurs when you move to other joints, and that's where Macy's ankle comes into play.
Jeffrey: <unk>.
Speaker Change: Yeah, So you know like.
Speaker Change: We've talked about previously you know when you look at our 60000 patient Tam you know clearly Macy's or go to product and <unk>.
Speaker Change: The teller and larger defects on the femoral condyle or other areas of the knee you know we do get business on these two to four square centimetre defects in the femoral condyle, but just our penetration rate there is lower than we think macy arthroscopic will allow us to have deeper penetration there.
Speaker Change: So four b C or throw it's really about sort of deeper penetration into the existing addressable market.
Speaker Change: Of $3 billion, plus you know the T. M expansion for me see occurs when you moved to other joint So that's where <unk> comes into play and as I mentioned.
Dominick C. Colangelo: And as I mentioned in my prepared remarks, you know, that's about a billion dollar addressable market opportunity for us with around 20,000 eligible patients per year. Okay, got it. And then lastly, first, could you talk about cash a little bit? You had a strong cue for with 10 million of free cash flow. Any thoughts on cash? I know that some portion of that would be for Schulte, but any thoughts there?
Speaker Change: Prepared remarks, you know that's about a billion dollar addressable market opportunity for us with a room 20000 eligible patients per year.
Speaker Change: Okay got it and then lastly, first could you talk about cash a little bit showing three or four with.
Speaker Change: 10 million of free cash flow.
Speaker Change: Thoughts on cash I know that some portion of that would be for the the facility, but any culture.
Joseph Anthony Mara: Yeah, so you know, I think we talked about a pretty strong year from kind of a cash flow perspective, but it was great to end the year at a higher place than we started, even as we started funding the building. You know, I think as I talked about the prepared remarks, you know, I mean, this is more the year where you're going to see some more substantial kind of capital and or cash kind of allocated to our new building. But we also expect to continue to generate kind of new cash, you know, additional cash, and sort of self-fund that. So, you know, that's probably the key dynamic, I would say, as you think about the cash flow and 2024. Okay, perfect. That does it for us.
Speaker Change: Yeah. So you know I think we talked about you know pretty strong year from kind of a cash flow perspective. My name is grace and a year at a higher place and we started even as we started funding a building you know.
Speaker Change: As I talked about the prepared remarks, you know that I mean, this is more of the year, where you're gonna see some more substantial kind of capital R cash kind of allocated to our new building, but we also expect to continue to generate kind of your cat you know additional cash and sort of self on that so yeah. That's probably the key dynamic I would say I should think about the cash flow and 10.
Speaker Change: 2024.
Speaker Change: Okay perfect that those are for us thanks for the pressure.
Jeffrey Scott Cohen: Thanks for the question. Thank you. Thank you. One moment for our next question. Our next question comes from Swayampakula Ramakanth with HCW.
Speaker Change: I gotcha.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from it so I have to pull over I'm account with H T. W. Please go ahead.
Swayampakula Ramakanth: Please go ahead. Thank you. Good morning, Nick and Joe.
Speaker Change: Thank you and good morning, they can show most of my questions have been answered, but just have a quick questions regarding how to think through uhm next of red not.
Dominick C. Colangelo: Most of my questions have been answered, but I just have one regarding how to think through Nexobred, not just over 24, but even beyond. Just like what we had seen with Epicel, I remember. Even even about a year, year and a half ago, you folks are not quite sure how to talk about the dynamics of it. So, but now. You're able to give guidance for the year. And also, I listened to what Joe had talked about, specialty centers and specialty centers and how the product moves through them. Should we expect similar dynamics, or since you have had some learnings? How to Commercialize EpiCel, NexaBrit probably will get to a decent, Dynamic, and earlier than what you had experienced with it?
Not just our 24, but even beyond.
Speaker Change: Just like what we have seen that episode I remember.
Speaker Change: Even even about a year and a half ago, you folks I'm not quite sure how to talk to the dynamics affect yourself, but now and are you are you are able to give you guidance.
Speaker Change: A year and also I listen to what Joe had talked about special centers and special dissenters on how the product moves through it.
Speaker Change: So should.
Speaker Change: Should we expect similar dynamics are since you have had some learnings with how to commercialize epicel Uhm next but it probably will mmk get to.
Speaker Change: Decent dynamics uhm earlier than what you had to experience Rebecca Shaw.
Dominick C. Colangelo: Yeah, hey, RK, I'll try to parse that out. And just, you know, the variability that we have seen historically with epicellar is really just a matter of, you know, a smaller patient population that you're typically treating, right? So if you have a few more or less treatments per year when the average treatment is, you know, pretty significant in terms of revenue, it can bounce around a little bit. And that's why we kind of historically said before, again, COVID sort of disruptions that, you know, starting out high single digit or low double digits for epicellar is usually safe ground. And, you know, we typically outperformed that. So it's really kind of reverting back to kind of what we did previously. With Nexibrid, of course, you're really sort of playing more at the top of the addressable market funnel, where there are, you know, multiple times more patients. 30,000, we believe out of the 40,000 hospitalized patients each year are eligible for Nexibrid treatment.
Rebecca Shaw: Yeah, Hey, or K I'll try to parse that out and just you know the the variability that we had seen Pepsi historically with episodes really just a matter of you know a smaller patient population that you typically treating right. So if you have a few more or less.
Rebecca Shaw: Treatments per year when the average treatment is pretty significant in terms of revenue you know it it can bounce around a little bit and that's you know why we kind of historically said before again COVID-19 sort of disruptions that you know starting out high single digit or low double digits for.
Rebecca Shaw: Episode is usually safe ground and you know, we typically outperform to that so it's really kind of reverting back to kind of what we did previously.
Rebecca Shaw: <unk> of course, you're really sort of playing more at the top of the addressable market funnel, where there's you know multiple times more patients 30000, we believe out of the 40000 hospitalized patients each you're eligible for <unk> treatment and so yeah. Once you get through.
Dominick C. Colangelo: And so yeah, once you get through, as Joe was talking, sort of the initial, you know, dynamics around, Specialty Distributor, Stocking, Hospital Stocking, you have kind of a more mature customer base that, you know, has more kind of normalized or routine treatment protocols, then you kind of, you know, we would expect, as we've said for a long time, that, you know, it will help dampen any variability So nothing has changed in terms of our belief in how that will play out and sort of our excitement around Nexibrid. Thank you. One quick question. Um, so do you think you have better leading indicators? with Maxwell Bread, then obviously, you know, it's difficult to do that with an episode, but is the next update in a better place in that sense?
Rebecca Shaw: Joe was talking sorted the initial.
Rebecca Shaw: You know dynamics around specialty distributor stocking hospital stocking you have kind of a more mature customer base that you know as more.
Rebecca Shaw: Kinda normalized or routine treatment.
Rebecca Shaw: Protocols, then you kind of you know we would expect as we've said for a long time that you know it will help dampen any variability that you would see with episode as.
Rebecca Shaw: As <unk> kind of revenues grow overtime so <unk>.
Rebecca Shaw: Nothing has changed in terms of our belief on how that will play out and sort of our excitement around <unk>.
Speaker Change: Alright. Thank you one one quick question. So do you think you have better uhm leading indicators.
Speaker Change: <unk>, then obviously it's difficult to.
Speaker Change: To do that with the episodes, but his next upgrade in a better place in that sense.
Dominick C. Colangelo: Yeah, well, again, yes, the answer is definitely yes. Because again, as we kind of get into this, you can kind of think about, you know, we have a certain number of centers, right? 140 burn centers, we've got certain tiered targeting of those as you onboard those, they get P&T committee approvals, and then they start to, you know, make their initial orders, and you see penetration into the patients that they see, you'll see, you know, sort of routine or more routine reordering patterns. And we're just so early in this right now that, you know, those patterns haven't emerged yet.
Speaker Change: Yeah, well again, yes. The answer is definitely yes, because again as we kind of get into sorted you can kind of think about you know we have a certain number of centres right 140 burn centers, we've got certain tiered targeting of those as you onboard those.
Speaker Change: They get P. P. T Committee approvals and then they start to make.
Speaker Change: Make their initial order and you see.
Speaker Change: Penetration into the the patients that they see you'll see.
Speaker Change: Sort of routine.
Speaker Change: <unk> and are more routine reordering patterns and we're just so early in this right now that you know those patterns hasn't emerged yet but once they do.
Dominick C. Colangelo: But once they do, we certainly will have sort of more visibility in terms of forecasting as we go out. Okay, thank you very much. Thanks. All right. Thank you. Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Nick Colangelo for closing remarks. Okay, well, thank you, everyone, for your questions and continued interest in Vericel. Obviously, we had outstanding financial and business results in 2023. And we expect that the momentum in our core portfolio and new product launches will drive continued strong revenue and profit growth in 2024 and the years ahead.
Speaker Change: We certainly will have sort of more visibility in terms of forecasting as we as we go out.
Speaker Change: Perfect. Thank you very much thanks for taking my questions today Sir.
Speaker Change: Alright, thank you.
Speaker Change: Thank you I'm showing no further questions at this time and I'd like to turn it back to Nicole Angela for closing remarks.
Nicole Angela: Okay, well. Thank you everyone for your questions and continued interest in bear. So obviously, we had outstanding financial and business results in 2023, and we expected the momentum in our core portfolio, a new product launches will drive continued strong revenue and profit growth in 2024 and the years ahead. So we look forward.
Dominick C. Colangelo: So we look forward to talking to you again on our next call. And thanks, and have a great day. Thank you for your participation in today's conference. This concludes the program. You may now disconnect.
Speaker Change: To talking to you again at our next call and thanks and have a great day.
Speaker Change: Thank you for your participation in today's conference. This concludes the program you may now disconnect.
Speaker Change: Mmm.
Speaker Change: [music].