Team here at Wells Fargo. I'm joined today by Nick Colangelo, President and CEO of Vericel, as well as Joe Mara, Chief Financial Officer at Vericel. Thanks very much for joining us today. Great. Thanks, good to be here. Thanks. Great. Nick, I thought maybe we could start with just to kind of level set those that are perhaps a little newer to the story, if you could start by giving kind of a brief overview of the company and the product portfolio. Yep. Happy to do that. I guess just as a matter of housekeeping, I will mention that our discussion may contain forward-looking statements, and listeners should look at our documents on file with the SEC for further information. Vericel, kind of at a high level, is a leading provider of advanced therapies, advanced cell therapies, and specialty biologics for the sports medicine and the burn care markets. Our leading product is MACI, which is an advanced cell therapy that uses the patient's own cells to repair damaged cartilage tissue and restore function, which we launched for the treatment of knee cartilage injuries back in 2017. Since then, MACI has become the leading restorative cartilage repair product on the market, and it's the only FDA-approved product in its class. Late last year, MACI was approved for the arthroscopic administration. We now have MACI Arthro on the market as well, which is a less invasive way of administering MACI. It is the only restorative biologic cartilage repair product on the market that's approved for arthroscopic delivery, which we think, because it's a less invasive surgery, will allow us to gain greater penetration in the market. On the burn care side, we're focused on the treatment of hospitalized patients with severe burns. For these patients, the treatment pathway entails first removing the burned tissue or eschar and then grafting the wound to promote healing. We have two products in that space. One is NexoBrid, which is a product we launched a year and change ago, which is an orphan biologic product in the U.S. that's indicated for the removal of eschar in adult and pediatric patients with severe burns. Then Epicel, which is a product we've marketed in the U.S. for over 10 years, and prior to that, by Genzyme and Sanofi, which is a skin graft product that's made from a patient's own cells. It's the only FDA-approved permanent skin replacement on the market. We think with two products that are the only FDA-approved products in their class that address both parts of the treatment pathway, that we have a really interesting portfolio on the burn care side as well. I would just say, for our portfolio as a whole, it's a pretty unique portfolio in that each of our products, again, are the only FDA-approved products in their class. We have great competitive barriers to entry. Epicel and MACI are regulated by the FDA as combination device biologic products. There is really no generic pathway to come to market, so anybody who wants to compete in these spaces has to run kind of full-blown clinical programs, which is difficult to do in these spaces. There really are no competitors for any of our products on the horizon. We think we're in just a great foundational portfolio to drive growth, both in revenue and profit going forward. Just quickly on the financial side, we do have a strong track record of growth, both from a profitability and revenue perspective. On the revenue side, since we launched MACI back in 2017, our compounded annual revenue growth rate is around 20%. That is kind of top-tier revenue growth, and that has led to really impressive margin expansion. Gross margins last year were about 73%, adjusted EBITDA margins of 23%. From a profitability perspective, we've been profitable every quarter for the past five years and positive operating cash flow. We feel the company is really well positioned from that standpoint as well to hit our midterm targets, which are gross margins in the high 70% range, adjusted EBITDA margin in the high 30% range, which is what we did last fourth quarter, which is our strongest quarter and a good proxy for how we think the business will operate going forward. Finally, from a balance sheet perspective, we ended the second quarter with about $165 million in cash and no debt. With a big CapEx investment in our new facility behind us, we expect a pretty significant inflection in our cash generation or free cash flow moving forward as well. That is a high-level view of the portfolio and the financial profile of the company. Great. Thank you. That's a very helpful overview. To start with, I thought maybe we start on the MACI side, Arthro specifically, and maybe just help us think a little bit about how we should think about the market expansion opportunity that MACI Arthro provides to the overall MACI franchise, and then maybe a little bit specifically around the anatomy of the cartilage defects, what kind of that opens up, and then also the surgeon community. Yeah. So a couple of dimensions there. You know, we've characterized the market as about 60,000 patients comprise our addressable market each year. You know, since we launched MACI, it's really become a go-to product for defects on the back of the kneecap or the patella, and for larger defects greater than four square centimeters. Those two areas combined, talking about anatomy of the knee, make up about a third of the market, about 10,000 patients each. We have essentially mid-teens penetration in the patella defects. We have double-digit penetration in the larger defects. Really strong performance, and it's been an engine for growth for the company since we launched the product. With MACI Arthro, we're really targeting smaller defects in other parts in the knee. Specifically, the instruments were designed to treat femoral condyle. The end of the thigh bone is where it bears a lot of the weight in the knee, so you have a lot of cartilage injuries there. Those 2 sq cm to 4 sq cm defects make up about 20,000 patients a year, or 1/3 of the market. Very large opportunity there for us as well. There's another 20,000 patients a year that have smaller defects in other parts of the knee. That's kind of the hypothesis around the opportunity for us. As we've talked about in our earnings calls, and we'll talk about a little bit more, we've seen sort of additional utilization in terms of where biopsies are being taken and implants occurring in each of those areas. Very encouraging from that standpoint that we'll be able to generate, as I mentioned earlier, deeper penetration in the smaller defects, which make up the bigger part of the market while continuing to grow MACI in its core large defects and patella. That's kind of the patient anatomy of the knee opportunity for us. From a surgeon perspective, prior to the launch of MACI Arthro, we had targeted about 5,000 surgeons who did high volumes of cartilage repair procedures, typically through open procedures. We can buy procedural data so we can see what kind of procedures they do. We wanted to make sure because MACI was done historically through a mini-arthrotomy that they also did open procedures. We had pretty good penetration. As of last year, we had roughly half of those target surgeons taking biopsies. Of those MACI users, as we call them, about half really focused on patella defects, half did patella and femoral condyle, but typically larger defects. We still had 2,500 other surgeons who had not adopted yet. When we launched MACI, we added another 2,000 or so targets who, based on the data, do high volumes of cartilage repair, but typically do it arthroscopically. There are significant opportunities there to sort of increase the surgeon base, which is a strong driver of growth for MACI generally. Okay. Can you provide an update on those surgeon trainings for MACI Arthro? Right. I think you've said in the past that I believe it's about 1/3 are new MACI users. Yep. Within those, what percent of those would be considered the Arthro only? Yep. How many could you see going back to also using for the first time MACI core? Yeah. If you break out those segments into, you know, of the 2,500 MACI users, as I mentioned, about half did patella, about half did femoral condyles and patella procedures with MACI. Our surgeon trainings were about 1/3 in each of those. Two-thirds coming from sort of existing MACI users, and then the other 1/3 of trained surgeons coming from new users. A lot of them were sort of old MACI open targets or prior targets, and then some of them were also these new Arthro-only surgeons. We've sort of had a good breadth of trainings across those segments, and then, of course, we've had biopsies and implants coming out of each of those segments since we launched MACI Arthro. Okay. Thanks. That's helpful. With regards to ASP gross margin within the Arthro product versus core MACI, is there any, how should we think about that? Yep. MACI itself, the implant, you know, the reimbursement we get occurs under a J-c ode because it's a biologic product. It doesn't matter whether it's implanted through a MACI open procedure or arthroscopically. That doesn't change in terms of our level of reimbursement. You know, for the surgeons, even, you know, the CPT code, the professional fee they get for a MACI implant, that doesn't, you know, distinguish between MACI Arthro or MACI open procedures either. The facility fee is whatever the facility fee is. It's basically the same. We do, the MACI Arthro instruments are disposable, so we do charge, you know, a relatively modest amount for the MACI Arthro instruments. It's pretty much the same whether they're doing a MACI Arthro or a MACI open procedure. Got it. Okay. When you think about the long-term kind of steady-state mix of procedures that will be done MACI Arthro versus MACI core, where does that shake out several years down the line? Yeah. I would say, you know, you're always going to have, I mean, as you know, in our industry, moving towards minimally invasive surgeries, that's the whole reason. That's just, this is just a continuation of our story. Prior to MACI being launched, there was a product called Carticel, which we were marketing in the U.S., and that was a liquid cell suspension. It made for a very difficult, when you think about filling a pothole on the surface of the knee with a liquid suspension, it required suturing a cover over the defect and injecting the cells. It was just a very, you had to open up the knee to be able to do all of those things. It was a pretty significant, highly invasive surgery. The key to MACI and the adoption we've seen in a broader group is that it became a less invasive surgery, a mini-arthrotomy, a centimeter or two to be able to implant the MACI membrane with the cells already on that membrane. All you had to do is cut the membrane to the size of the defect, glue it in with fibrin glue, and you're done. It was a much simpler, less invasive procedure. That's what has fueled MACI's growth. Now you're taking that a step further with a MACI arthroscopic option or even less invasive surgery for appropriate smaller defects. For the larger defects, especially on the patella, those are going to remain open procedures going forward. That's about 1/3 of the market, and it has fueled our growth and will continue, core MACI will continue to fuel that growth. The exciting part about MACI Arthro is it's targeted towards the smaller defects in other parts of the knee that make up 2/3 of the market. While we've had business there, we've had the double-digit or mid-teens penetration in larger and patella defects, we really had sort of low single-digit on bigger numbers penetration into the bigger part of the market. If we can kind of lift that up to the core MACI levels, it'll dramatically, obviously, increase our business. Got it. Okay. Since the launch of MACI Arthro, is there anything that you can share around some of those things that you've talked about in the past, the biopsy conversion rates or timing of biopsy to implant, and how that might be similar or different from what you've seen with core MACI historically? Yeah. I'll start with trained surgeons because we've mentioned on a few of our, a couple of our earnings calls, the dynamic we're seeing when MACI surgeons are trained and how their behavior changes. On our last call, we noted that the biopsy and implant growth rate for MACI Arthro trained surgeons is significantly greater than the surgeons that have not been trained. In the second quarter, the smaller femoral condyle implants grew 40%, which is obviously higher than the overall MACI growth rate. We've received over 100 biopsies from the Arthro-only surgeons, and we've seen that about 20% of the Arthro procedures are not on the femoral condyles but actually on the trochlea behind the kneecap. Surgeons have, you can just kind of go right through the patella tendon, come in over the defect, and that's become a meaningful number of the MACI Arthro surgeons. That wasn't built into our business case when we were thinking about MACI Arthro, but it's certainly as big as the patella segment of the market as well. Very encouraging signs in terms of once those trained surgeons are trained, how are they behaving? As I mentioned earlier, obviously, we've had implants scheduled for each of those or completed by each of those surgeon segments in all of the locations in the knee that we've been talking about. Okay. Thank you. I think you mentioned previously on the commercial side, an expansion in the sales force for the MACI sales force in the second half. Where are you with that onboarding process right now? Yeah. We posted these positions at the end of the second quarter. The whole idea being, our business is seasonally strongest in the fourth quarter. It makes up pretty much about 1/3 of our year, and given the growth of MACI, we wanted to make sure we had adequate support to be able to cover the expected implant growth in the fourth quarter. We wanted to, given the opportunity ahead of us with the MACI Arthro launch, make sure that we had sufficient resources in place for all of 2026. We've begun that hiring process. We have trainings scheduled next month and in November. We fully expect we'll have those positions filled in the coming month or so. We'll realign the territories on January 1st. They'll be in a support function for the fourth quarter and doing all the prep work in their territories. These are experienced reps that are joining us. They have relationships in the territories that they'll be in. They'll begin scheduling trainings, meetings, things like that, and then hit the ground running on January 1st in their new territories. We should start to see some of the productivity from those reps, you think. Yeah, I mean. Kind of come in throughout the year next year? You know, historically, as we've, you know, I think we've done a pretty good job when we've expanded our sales force over the past years. I mean, we did a sales force expansion in 2017, 2018, 2019, and 2020. In those first three expansions, revenue per rep actually increased in the year when we expanded, which is kind of unusual. 2020, obviously, was disrupted by COVID and so on. You can, we currently have 75 territories. We're projecting sort of, you know, $230-something million in revenue. The revenue per rep is pretty strong already, over $3 million. Of course, you will add these couple dozen territories. Given our growth rates, you'll see you'll still be up near that range. Typically, we would track these cohorts of new reps, and you'd see that it might take four to six quarters for them to get up to average. That was probably a little bit more when we had a lot more white space and a smaller sales force. Now they're typically, you're splitting cities into two territories. There's a built-in book of business, and we have very experienced and high-performing reps that will be joining us. I would expect that you'll see that productivity in the course of 2026 as they ramp up. Okay. Thanks. Now turning a little bit to the burn care side of things, how should we think about the outlook for a burn care division over, you know, the next few years at a high level? Yeah. We certainly, starting with Epicel, Epicel is used in really 30% body surface area burns or above. I mean, these are sort of, the palm of your hand is about 1% TBSA. A 30% burn is huge. We're routinely treating patients with 60%, 70%, 80% body surface area burns. They have multiple injuries, treating the skin and the burn is just one sort of dimension of their treatment. It's a relatively small number of patients each year. Think maybe a couple dozen patients a quarter, and it tends to be pretty variable because not all the patients survive to be treated. They often have other injuries that prevent the treatment in a particular quarter and so on. We've grown the business. Last year was pretty variable in our quarters. If you just kind of look at the whole year, Epicel revenue was up 16%. Historically, we've kind of guided to just assume high single-digit growth on average, and we try to outperform that. Epicel, we believe, will continue to grow. Part of adding NexoBrid, which we licensed back in 2019 and completed the development and got through the approval process and launched in 2023, part of adding that product in addition to the treatment pathway synergies between the two products was to build critical mass into burn care. NexoBrid is a product where you're changing the standard of care in how these patients typically were treated, which was surgical excision. You would take the patient, surgeons take them into the OR and basically slice off the damaged tissue and then do their graftings. Very traumatic for the patient. Now, with NexoBrid, it's an enzymatic product that you topically apply. It's a mixture of proteolytic enzymes that dissolve the damaged tissue but leave the healthy tissue. Great advancement for patients. You're changing the standard of care and what surgeons have done for 100 years, and that takes time. The clinical outcomes are great. The feedback has been great. It just takes time to get through P&T committee approvals, to get into the Epic ordering system, to work it into hospital protocols when you're not going into an OR, but you're treating them on a burn center floor. Those things take time. We think over time, again, it has built critical mass in our business. We get pulled through on Epicel because we have more reps now both promoting both products. We remain, despite the variability in burn care performance, pretty enthusiastic about what we can do with these products. Got it. Is there anything within that business segment that could be a catalyst for predictability? Is it simply, this is a new market, it's maturation of the market, and at that point, there will be better kind of predictability of it? Yeah. I think, again, because with Epicel, you know, you have these small patient numbers and, you know, very high revenue. It's almost, it is absolutely like an orphan disease product where you're talking several hundred thousand dollars per order. You know, a few orders move around between quarters or patients are unable to be treated. You're never going to remove that aspect of the variability. The sort of plan would be that, or expectation would be that as NexoBrid grows, that should be a more predictable sort of product because it's used on smaller burns. There's a lot more patients that make up sort of the NexoBrid addressable market, probably 30,000 patients a year. There's about 40,000 hospitalized burn patients each year. About 30,000 end up needing some form of eschar removal. There's only about 600 - 800 Epicel patients per year. You can see that as NexoBrid grows over time, and it's a more sort of predictable product in terms of revenue and utilization, you can dampen some of the variability that you would see in Epicel. If you get broader adoption of Epicel, bigger numbers mean less variability when patients either can or can't be treated in a particular quarter. Understood. Okay. The last one in the burn care, any updates on the BARDA RFP for NexoBrid? I think the proposal responses were being submitted late August. Yeah. BARDA basically worked with the licensor of the product to us and supported essentially the full development of the product. What they do typically when they've invested in the development is it's a strategic product for BARDA in terms of response preparedness to a mass casualty event. That's what they're trying. They will typically then procure a stockpile of these products that they think are important for national security reasons and so on. That's the phase we're at now. The RFP that, you know, it's a public document that you referenced, it includes a number of different things. One is procurement, essentially, of a stockpile that we would manage or whoever wins the proposal would manage through a vendor-managed inventory thing. When you have a commercial product, you kind of add additional inventory that flows into the commercial distribution, and that's sort of how they manage it. There are procurement proposals that are part of that. There's also development of a room temperature stable NexoBrid product. There's additional indications for trauma, where the product's been used in other parts of the world that are in conflict. I think there's 11 different areas for that proposal. Yes, proposals were due sort of at the end of August. The federal government's fiscal year begins on October 1st. I think their idea would be to have something in place before then. Okay. Thank you. Now switching gears to what's up and coming here, can you provide an update on the timing and strategy for your international commercial expansion opportunity? Yeah. By way of background, MACI, when we bought this business back in 2014, was approved in Europe. It had been approved in other parts of the world as well. Australia was a big MACI country back when Genzyme owned the business. When we bought it, there was a manufacturing facility in Europe. It was losing a lot of money, and we were a smaller company at the time. We just said, look, the pivotal study was run in Europe. When MACI gets approved in the U.S., we would plan to supply Europe from our facility here in Boston, just as was the case for the clinical study supply. We suspended the license. We shut down that manufacturing plant and said, we'll go back again when we have a facility that has been built for global regulatory requirements, which is the case with our new facility that we built up in Burlington. That's what enables us to consider going back into other markets outside the U.S. As we've said publicly before, we're engaging this year with a consulting group that does a lot of this kind of work for U.S. companies looking to expand globally. We would expect that if there are countries, you do a health technology assessment, what kind of pricing can you get, what are the regulatory requirements, and so on, and you make a decision on which markets you would want to go in. What we've communicated publicly is that we would have a roadmap for that sort of by the end of this year, and that if we were to go into other OUS markets, it's probably in the 2027, 2028 timeframe. Understood. More to come from that later this year. Got it. Okay. Thank you. Just doing a time check here. I'm going to move on to the kind of the pipeline opportunity. Can you discuss the product pipeline opportunity overall over the next several years and then also including MACI Ankle, and discuss a little bit around that TAM expansion opportunity that the ankle provides? Yeah. So the overall, you know, strategy with MACI, again, in the context of really no like products expected, you know, anytime soon, is that, you know, we have a core MACI product that eight years into launch is, you know, still grew 20% last year. We layer MACI Arthro on top of that in 2025, which, again, opens up a lot more of the opportunity for deeper penetration across the addressable market. You look to potential OUS expansion in select markets in 2027 or 2028. When you get to kind of the 2030 timeframe, think about MACI Ankle. Part of lifecycle management, you know, includes using MACI in other joints. Knee is by far the largest opportunity. You know, it's the greatest weight-bearing joint in the body. You have a lot of injured cartilage in the knee, but you also have a lot of cartilage injuries in the ankle as well as you have those forces pounding on the talus. Do the same kind of addressable market exercise. There's about 170,000 procedures that are done each year for ankle cartilage injuries. You say what are likely, you know, MACI applications there in the larger defects within the ankle. It's about 20,000 patients a year, which at our price point is, you know, kind of north of a $1 billion market opportunity. Again, expands the overall MACI addressable market to over $4 billion. You know, it's a meaningful opportunity for us. In terms of the timeline, we expect it to be much like the pivotal study that was conducted for the knee, the SUMMIT Study where a couple of years to enroll, a two-year follow-up period, and then between gathering, you know, and submitting, BLA settlement, and then the review period for the FDA. You know, it's probably more like a 2031 kind of opportunity for us. Again, fits really nicely in this sort of roadmap we have for overall MACI growth in the years ahead. Okay. That will be a completely new kind of sales force? No, there's an overlap between the sports medicine and orthopedic surgeons that we call on now. There are currently MACI cases, there are publications out there. It was a big part of the use in Europe, and even now, cases are done in the U.S. We don't promote it, but patients can pay if it's not covered by insurance, or sometimes insurance will cover it. There's a subset of our current users who do both knee, ankle, shoulder, but there are also foot and ankle specialists and surgical podiatrists who surgically treat cartilage injuries. I'd say we would be augmenting our current sales force and then adding to cover the new surgeons that you would add to a target list. Got it. Okay. Maybe last one or two from me. Regardless, you've got the manufacturing facility in Boston here, essentially complete at this point. You got $165 million in cash on the balance sheet. You're going to be continuing to generate cash. Can you talk a little bit around the kind of capital allocation strategy that you guys are going to deploy here? Yeah. Happy to take that one. I think, you know, when you think about kind of the profile of the company that Nick talked about, we ended the third quarter with about $165 million in cash. The manufacturing facility is now complete. That was about a $100 million project over the last two or three years. As we kind of look forward, over the last few years, we've seen a bit of an inflection in our profitability metrics. Our expectations start to see an inflection in our kind of balance sheet and free cash flow generation. That's, you know, we're excited to have that ahead of us. As we think about capital allocation, there's some areas in investment that are kind of more operating P&L. Sales force expansion, ankle study, etc. Those are some key initiatives in the next few years. That kind of leaves business development as another area that certainly we are always taking a look at, whether that's in sports medicine or in the burn care market, perhaps a third vertical based on our cell therapy manufacturing expertise. That said, I think we'll, based on the profile we have from a financial perspective, and then just based on the innovation of our product portfolio, we're pretty selective. We certainly take a look at a lot. That certainly could be an area as you think about the next few years that could be additive on top of the core portfolio and some of the key initiatives on the lifecycle side and international side that Nick pointed out. Okay. Thanks. That's helpful. Nick, Joe, we're up on time here, but thank you very much. I'd just like to offer you any closing remarks that you'd like to leave the audience here with today? I think you did a good job, sort of, in terms of kind of focusing on the areas we're excited about, which is, you know, obviously, we're seeing good, early indicators on MACI Arthro to support the current MACI growth. You know, the company's got a pretty unique revenue growth and profitability profile, and, you know, as we move forward, as Joe mentioned, that will translate into a pretty significant inflection in our cash flow growth as well. You know, pretty excited about where we are and look forward to executing and capitalizing on the opportunity. Great. Thanks very much for the time. All right. Thank you for having us. Absolutely. Thanks.