Vericel Corporation (VCEL) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Vericel Analyst and Investor Day. I'd now like to turn the call over to Nick Colangelo, President and CEO of Vericel.

Thank you, operator, and good morning, everyone. I'd like to welcome you to Vericel's 2020 Virtual Analyst and Investor Day. We're delighted to have an opportunity this morning to provide an update on the overall performance of our business and to host a discussion with key burn surgeon opinion leaders and highlight our commercial plans for NexoBrid, which is currently under FDA review. Before I begin, I'd like to remind you that we will be making forward-looking statements during the course of our presentation today. These statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. These statements also 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 SEC, which are available on our website. I'd like to begin by welcoming our distinguished guest speakers, Dr. Yaron Shoham, Dr. Bill Hickerson, Dr. Jeremy Goverman and Dr. Joshua Carson to today's event. It's a privilege to have these burn surgeon opinion leaders with us to share their perspectives on NexoBrid, the importance of eschar removal and how NexoBrid, upon FDA approval, could change the current treatment paradigm for debridement of severe thermal burns. I'm also joined by members of the Vericel executive management team, including Jon Hopper, our Chief Medical Officer; Roland DeAngelis, our Senior Vice President of Commercial Operations; and Mike Halpin, our Chief Operating Officer and Head of Regulatory Affairs. We have a very exciting agenda this morning. We'll begin with the NexoBrid clinical discussion with Dr. Hopper providing an overview of the burn treatment pathway, followed by Dr. Shoham, who will provide an introduction to NexoBrid and discuss the importance of removing eschar or nonviable burn tissue. Dr. Hickerson will then present the pivotal U.S. Phase III DETECT clinical study results, followed by NexoBrid case studies presented by Dr. Goverman and Dr. Carson. Finally, we'll conclude the NexoBrid clinical session with a roundtable panel discussion and a clinical Q&A session. Please note that due to time limitations with our clinical experts, the first session will focus primarily on their clinical presentations, and we'll only be taking questions through the Ask a Question box on the webcast platform, which you can use to submit questions throughout the presentation. We'll then move on to the commercial and business update session of the program, with Roland providing an overview of our current NexoBrid launch plans and a general MACI and Epicel commercial update. I'll then provide a brief business update, followed by a Q&A session. Please note for the second Q&A session, we'll be taking dial-in questions as well as questions through the Ask a Question box on the webcast as time permits. So for those of you who are newer to the Vericel story, we are a leader in advanced therapies for the sports medicine and severe burn care markets with a portfolio of highly innovative advanced cell therapy and specialty biologic products. We currently market 2 cell therapy products in the United States, MACI and Epicel, which we acquired as part of the -- our acquisition of Sanofi's cell therapy and regenerative medicine business in 2014. These products are regulated by the FDA as combination biologic device products with the biologic component being the use of a patient's own cells to repair damaged tissue and restore function. Our lead product is MACI, which we've launched in 2017 for the treatment of cartilage defects of the knee. MACI is the leading restorative cartilage repair product in the market and the only FDA-approved product in its class. Our second commercial product, Epicel, is also the only FDA-approved permanent skin replacement for adult and pediatric patients with large deep dermal or full-thickness burns. Our business development strategy has been focused on expanding our sports medicine and burn care franchises around our current commercial products. And last year, we added an exciting new product to our portfolio when we entered into a license agreement with MediWound for North American rights to NexoBrid. NexoBrid is a perfect strategic fit for Vericel as it's highly synergistic with Epicel and our existing burn care franchise. As John will discuss, the treatment pathway for severe burn patients involves removing the nonviable burn tissue and then closing the wound. NexoBrid is an orphan biologic product that enzymatically removes eschar without harming viable tissue, which we believe represents a potential paradigm shift in the standard of care for hospitalized burn patients. Epicel is a permanent skin replacement used to close large burn wounds. We believe that having NexoBrid and Epicel together will create a unique strategic market position for Vericel and enhance the company's leader position -- leadership position in burn care by having a highly innovative product for both phases of the burn treatment pathway. NexoBrid will also significantly expand our burn care addressable market given that we'll be targeting a much larger segment of the hospitalized burn patients than with Epicel alone. The expansion of our target addressable market supports a broader commercial footprint, which we believe will drive both NexoBrid uptake and increased Epicel utilization as we build a larger share of voice and expand our presence in the burn care market. So we're very excited to have an opportunity to bring NexoBrid to market in the United States. And with that, I'll turn the call over to Dr. Hopper to begin the NexoBrid clinical section of the program. Jon?

Thank you, Nick, and good morning, ladies and gentlemen. I'm excited to introduce the clinical part of our virtual investor meeting today. By way of background, I'm in my third year serving as Chief Medical Officer at Vericel. I trained as a trauma and orthopedic surgeon in the U.K.; spent time at the Medical Devices division of MHRA, the U.K.'s regulatory agency; and before joining Vericel, held medical executive positions at a number of wound care, orthopedic and biotechnology companies, including ConvaTec and Stryker. I would like to welcome as well our expert panel of burn surgeons. Dr. Yaron Shoham is the Director of the Burn Unit at the Soroka University Medical Center in Israel and the current Chairman of the Israeli Burn Association. Dr. Shoham has over 15 years of experience with the use of NexoBrid, initially as an investigator in early clinical trials, and in recent years, in standard clinical practice since NexoBrid's approval in Israel. Additionally, Dr. Shoham previously served as the Vice President of Medical Affairs at MediWound Limited. I'd also like to welcome Dr. Bill Hickerson, who is Founder and Former Director of the Firefighters Burn Center, an HBO Wound Care Center in Memphis, and is the President of the American Burn Association. Thirdly, we have Dr. Jeremy Goverman, who is a critical care, burn and plastic surgeon at the Sumner Redstone Burn Center and Fraser Outpatient Burn Center at MGH, Massachusetts General Hospital, and is Assistant Professor of Surgery at Harvard Medical School. And Dr. Joshua Carson is a burn and critical care surgeon and Assistant Professor of Surgery at the University of Florida College of Medicine in Gainesville, Florida, and Associate Director of the Health Shands Burn Center. Each one of our expert panel has experience using NexoBrid during various clinical trials. Welcome, and thank you for joining us. It's important to point out at this time that NexoBrid is not approved for commercial use or sale in the United States. The Food and Drug Administration has accepted for review the recently submitted Biologics License Application, or BLA, for NexoBrid for eschar removal in adults with deep partial thickness and/or full-thickness burns and has assigned a Prescription Drug User Fee Act go date of June 29, next year, 2021. As such, NexoBrid is currently an investigational product in the United States, under regulatory review and has not yet been determined to be safe and effective by the FDA. Now we're going to start by reviewing the current clinical standards for treating patients who suffer thermal burns. The treatment path for a burn injury depends on 2 things: the size of the burn measured in percentage of total body surface area, or TBSA; and the depth that the burn extends into and through the skin and underlying structures. Burn patients typically arrive for initial treatment at the local hospital emergency room. After initial assessment and stabilization, emergency room or burn center personnel assess and record the size of the burn using standardized charts. For reference, the palm of an adult hand equates approximately to 1% TBSA. From the diagram you can see on the top right of this slide, you can see how the depth of the burn is assessed compared with anatomical structures. A burn wound limited to the epidermis is classified as superficial or a first degree burn. Extension of the burn wound to the superficial layer of the dermis is referred to as a superficial partial thickness burn and further extension to the deeper dermal structures is classified a deep partial thickness burn. These burns extending to the dermis are also referred to as second degree burns. A deeper burn that destroys the whole dermal layer and reaches the subcutaneous fat is referred to as a full-thickness or third degree burn. Burn size and depth are important because they dictate treatment pathways. The American Burn Association recommends that after initial stabilization, patients with full-thickness burns or partial thickness burns that are larger than 10% TBSA should be treated at specialized burn centers. After initial assessment, there are 2 phases to the treatment of burns that are deep partial or full thickness. First, burn wound debridement, and then second, an evaluation to determine an appropriate form of grafting or other treatment that will lead to burn wound closure. With Epicel, Vericel already produces cultured epithelial autografts that can be used to close large burn wounds of more than 30% TBSA. If approved by FDA, NexoBrid will be available as a biologic enzymatic debridement agent. Vericel will then offer treatment options for both the debridement and wound closure phases of burn wound care. It is my great pleasure to now invite Dr. Shoham to discuss the importance of debridement and introduce you to NexoBrid and how it is used. Dr. Shoham?

Good morning, everyone, and thank you, John, for the introduction. I'd like to begin with a very basic explanation about deep burns. The pathophysiology of deep burns consists of immediate tissue death by coagulation. This immediate tissue death is followed by release of mediators from the burned area into the bloodstream, that in turn, initiate a systemic inflammatory response, which leads to additional, more gradual tissue death, also termed burn wound conversion. These dead tissues also referred to as eschar must be completely removed from the body as early as possible in order to facilitate recovery and minimize complications. This process, which is a fundamental principle in the management of deep burns, is called eschar removal or debridement. Now if not removed, the dead tissue quickly becomes heavily contaminated and a source of local and systemic infection. Local infection initiates additional damage to adjacent tissue that was not damaged by the initial burn, thus further worsening burn wound conversion. Systemic infection and inflammation, also termed sepsis, contribute to burn wound conversion as well, but they are also life-threatening. So we definitely want to minimize these processes. Additionally, by removing the eschar, it becomes possible to properly visualize the wound bed, more accurately assess the damage and start to plan appropriate treatment to heal the wounds and achieve wound closure. Due to all of the above, achieving a complete eschar removal as early as possible is considered a cornerstone of modern burn care. So how do we achieve eschar removal? Well, there are nonsurgical techniques. These techniques mostly rely on a natural process termed autolysis, which is essentially waiting for the eschar to separate from the wound bed by local inflammation and infection with the use of topical medications and nonspecific enzymes to facilitate the process. The problem with this is that it can take a long time, and this can lead to an increased frequency and severity of the eschar-related morbidities that I discussed in the previous slide. Therefore, the current standard of care is surgical eschar removal. This is performed by surgically removing the dead tissue layer by layer, a procedure known as tangential excision, until reaching a viable wound bed. While surgical tangential excision is effective and timely, the main disadvantage of this current standard technique is that it is nonselective. It inevitably leads to unnecessary removal of healthy tissue. It's even more challenging in some anatomical locations. And of course, the sharp dissection leads to blood loss and subsequent challenges with temperature regulation, which may lead to hypothermia. Additionally, this necessitates an operating room and surgical staff, which may be a rate-limiting step and delay eschar removal. Therefore, there is a clear unmet need in burn care for a selective and effective method for eschar removal in deep burns, one that can rapidly and completely remove the eschar and just the eschar without damage to healthy tissue. But we're now at a point where we have an alternative to tangential excision. In a recent review of published clinical trial evidence on burn excision, the authors concluded that it was time for a paradigm shift, putting down the knife and using more modern approaches that have been shown to have comparable speed, safety and effectiveness, and at the same time, better preserve viable tissue, which has the potential to improve long-term outcomes. One such modern approach is the use of NexoBrid instead of surgical excision. NexoBrid has been shown to enzymatically and selectively remove nonviable burn eschar in patients with deep partial thickness and full-thickness burns within 4 hours without harming viable tissue. NexoBrid is currently a biological orphan investigational product in the United States and is under BLA review by the U.S. FDA. It is already approved in Europe and other international markets as well. So what is NexoBrid and how is it actually used? Well, NexoBrid is a bromelain-based biological product that contains a sterile mixture of proteolytic enzymes. It is presented in the form of a lyophilized powder, which is mixed with a gel vehicle just prior to application. After giving the patient suitable pain relief, NexoBrid is applied to the burn eschar at the patient's bedside and left in place for 4 hours under an occlusive dressing, the dose being 2 grams of powder with 20 grams of gel per 1% total body surface area. After 4 hours, the dissolved eschar is wiped away, and the wound is then soaped with dressings containing widely available antimicrobial solutions. Following the completion of enzymatic debridement, the burn wound is assessed and the definitive treatment plan is decided. We can see 2 examples of burns treated with NexoBrid on the bottom of this slide, a deep upper extremity burn and a deep lower extremity burn, pictures after burn on the left, both with complete removal of the eschar within the 4-hour NexoBrid treatment, as you can see on the pictures on the right. The burn team can now plan how to continue treatment of these wounds. So for instance, the upper extremity wound was judged to have sufficient viable skin left on the wound in order to facilitate spontaneous healing without the need for skin grafting. The lower extremity burn had an area on the side that did necessitate skin grafting, but the rest was able to heal spontaneously. So in case of the upper extremity, skin grafting was totally avoided due to the preservation of viable tissue by the use of NexoBrid. And in the case of the lower extremity, the extent of skin grafting was minimized due to this viable tissue preservation. Here are pictures of a burn treated during the DETECT clinical trial. Now while this is just one case where NexoBrid was used in the U.S. to debride a burn wound, you can already see the favorable outcome at just 12 months. While the FDA is still reviewing the evidence for the use of NexoBrid to debride burn wounds and the product remains investigational in the United States at this time, there is already extensive peer-reviewed literature on the product, describing its use in other international locations and the outcomes of earlier clinical trials. The results from the most recent Phase III study, which included burn centers in the United States, were recently presented at the American Burn Association Annual Meeting and will now be reviewed.

Thank you very much, Dr. Shoham, for your insights there. And it's now my great pleasure to ask Dr. Hickerson to present that top line data for the recent second Phase III study on NexoBrid, which forms an important part of the data currently under review by FDA. Thank you, Dr. Hickerson.

Jon, thank you. I appreciate the opportunity to show these slides and find that we can run through these and get those going through. And for some reason guys, my -- there we go. The top line results of the DETECT study were presented at the American Burn Association. And included in that, Dr. Goverman, who will talk later today, was one of those authors on that study as well. And the DETECT study itself was to actually look at a Phase III multicenter study, which means that we passed the first 2 stages with the FDA and now we're moving on to look at the patients' utilization. It was assessor-blinded, meaning that the people that were looking at the wounds did not know whether they had been treated by a gel vehicle or not or the actual enzyme, NexoBrid. And it was randomized. This was set up in conjunction with the regulatory authorities, the FDA and the EMA. And I can ensure you, when we were setting this study up, it was one of the hardest studies to really get everything the FDA wanted into it. And in the 35 years that I've been doing burns has -- this was a challenge. But we had 175 patients that were randomized to NexoBrid, standard of care and gel vehicle in a 3:3:1 ratio. There were 29 burn centers across 8 countries that were involved. The objectives of the study themselves were threefold actually: To demonstrate the efficacy of the enzyme itself versus the gel. And for that, we looked at complete eschar removal, again, by blinded assessors. And fortunately, they weren't blind, but they did not know what we were using. We were also going to look at the efficacy of the NexoBrid versus standard of care, earlier time to complete eschar removal, the reduction in the surgical burden with this and the related blood loss between the 2 sides. And the third aspect was to look at the safety versus standard of care. And this was including the time to complete wound closure and long-term cosmesis and function, for which the patients were followed for 2 years. This is the short-term study. The long-term study will be presented and actually looks very good as well. Inclusion and exclusion criteria for this study. The patients had to be at least 18 years of age. They had to have deep thermal burns that was 3% to 30% total body surface area. If the burns were greater than 15%, 2 treatments were done. They could not have hypersensitivity to bromelain, pineapple, papaya or papain. And we look -- also looked at the Baux index. The Baux index is a severity score for our burns. And that needed to be less than or equal to 80, and the patient could not have any smoke inhalation. These are pretty standard for any studies because of the complications that you get into with those that have a Baux index that are greater than 80 and those that have smoke inhalation. We couldn't have circumferential deep burns or pre-enrollment escharotomies. The deep burns give us problems because of the fact that we could have, with the amount of fluids these people require, more tension that builds up. And with that, we get a decrease in blood flow going to the hands or the feet or if it's the chest and back that's circumferential, we have problems with respirations. So those were excluded. And in addition, patients that had been treated with silver sulfadiazine, iodine, flammacerium or silver nitrate were not included due to the fact that these give a more dense eschar that makes it very difficult for an enzyme to penetrate. The study design itself was the 3 columns that you see here: The NexoBrid, the gel vehicle and standard of care. For the NexoBrid and gel, we presoaked for greater than or equal to 2 hours, meaning we applied saline to soften the wound so the enzyme would have a better chance of working. We then did a 4-hour NexoBrid application. Once that was removed, we soaked again for 2 hours. If we had partial debridement or if the burn was greater than 15% that was being treated, there were to be 2 applications. In the gel, the second application was only if it was greater than 15%. If we had incomplete debridement, we continued to the standard of care with eschar removal. And if we had complete debridement, we continued to wound closure, whether that was with a surgical procedure or whether the patients were allowed to heal on their own, like Dr. Shoham showed you in his discussion. Standard of care was a surgical eschar removal or nonsurgical eschar removal, depending upon what was felt to be best. And then with complete debridement, again, all of these then, we went to wound closure, followed the wound closure to it was complete wound closure, which meant that not only did we have to say that, that epithelial layer or the top layer of skin had regenerated, but it had to stay so for 2 weeks, and then we had follow-up up to 2 years here. The demographics were very similar: age, body mass index, male/female ratios. And so with the 175 patients, we had 75 that were in NexoBrid, 75 in standard of care and 25 in the gel vehicle. If we looked at the different etiologies, that, again, were very similar. Gel had more flames than scald, but across the board, otherwise, between flame, scald and contact, we were very similar to how patients got injured. Baseline wound characteristics were also very similar. The patients across the board had approximately a 9% total body surface area burn. Superficial partial thickness, deep partial thickness and full-thickness wounds were all the same. The target wounds or the wounds that we treated were approximately 6% in all of the patients. And again, the superficial, deep and full-thickness burns were all very similar with no statistical differences. Incidence of complete eschar removal. This was tremendously positive for the NexoBrid study, as 70 of 75% of the (sic) [ as 70 of 75 ] patients had full excision just with the enzyme, and that's 93.3%. On the other hand, the gel vehicle only had 4%. Time to complete eschar removal when we compared NexoBrid to standard of care was 1 day to almost 4 days, a statistically significant difference as well. So that means the patients can get in the hospital and out of the hospital sooner. They also, if it's shown that these wounds should definitely heal on their own, they can be treated as outpatients a lot sooner as well. The incidence of surgical eschar removal, only 4% of those with the NexoBrid required this, but standard of care, 72%. When you go to standard of care, as Dr. Shoham showed you, it's a whole different ballgame because the blood loss can be tremendous. When he spoke of autologous removal or the old way, as a little history, I had a 20% burn when I was in the seventh grade. Of that, there was no early excision at that point. And for approximately 30 days, it was wait, let the body clean itself up, which also meant that part of that was by infection. And then once that was removed, then you had wet to dry dressings for 24, 48 hours and then went back and had your skin grafts. Now we go early. It's been shown to be much better for the patient overall, decreases length of stay, improves the outcome because we don't have as many infections and also have decrease on scarring. But on the other hand, we have more blood loss. And in this study, with the burns that we had that were small compared to some that we can treat in the future, we had 14 milliliters of blood loss, plus or minus 500 milliliters as an outlier with 1 patient that may actually be with some fluids that skewed that result. On the other hand, the standard of care had almost a liter of blood required or blood loss and was statistically significant as well. Time to complete wound closure was no difference with NexoBrid being 27 days, standard of care 28 days. When we look at the safety, adverse events in studies such as this include anything from a small fever to a small amount of graft loss to anything that goes into not being 100%. There was 154 in the NexoBrid group, 123 in the standard of care and 51 in the gel group. This was in 99 patients. And when you looked at these, there was no difference between the treatment groups of patients being treated by at least 1 AE with a p-value of 0.84. There was no severe adverse effect that was related to the study treatment as determined by the review group. There was 1 death in the NexoBrid group that was not felt to be secondary to the NexoBrid, but autopsy was pending at the time of this study. So in conclusion, the study met all of its primary and secondary endpoints. NexoBrid versus gel, high rate of complete debridement. There was a significantly early time to complete eschar removal, less need for surgical debridement, significantly less blood loss, similar time to wound closure and a comparable safety profile as well. And over 35 years, I've seen a lot of things come into the burn world that we have done, done a lot differently. And I think that when we look at NexoBrid, that this can truly be a game-changer for the burn market. I appreciate the opportunity to present this to you today.

Thank you, Dr. Hickerson, for that clear presentation of the results of the DETECT study. I'd now like to focus on some cases from that study and would like to invite Dr. Goverman to present 2 cases from the DETECT clinical trial. Dr. Goverman?

Thank you, Dr. Hopper, for the introduction and for the opportunity to talk. I think a lot like -- I share the same enthusiasm that Dr. Hickerson has for the product as far as a paradigm shift and game-changer. It's something that like I -- in my time in burns, and there's nothing really that has made such a big change in how we practice, and it's really an unmet need. The current instruments and tools that we use to remove burn are pretty antiquated. They do it in a 2-dimensional fashion and a burn is a 3-dimensional injury. And this really allows for us to preserve as much healthy tissue as possible, which up until now, we have not been able to do. So the first case is a 50-year-old male with a flame burn. It was actually an electronic cigarette device, which has been -- frequently, we've seen these things have problems. And you see there -- what you see there is a mixed depth injury, those various colors represent mixed depth. And the traditional course for this burn for me would be to go to the OR and to use a very large knife that's kind of got a guard on it. It looks like a giant razor blade with a guard. And I would remove layers of that dead tissue down to the point where I see healthy bleeding tissue with my eyes. And typically, it would be a larger -- a pretty large area that we would remove most of that burn. The white part to me looks like it's full thickness. And as you get to the periphery of the burn, it looks a little bit more like deep partial thickness. In this case, this occurred indoors. In this case, after treatment -- he was initially treated with antibiotic ointment, and he went in -- he was in the study. He was fortunately randomized to the NexoBrid arm. And this is what it looks like just 4 hours after treatment -- actually, this is a 4-hour treatment and a 2-hour soak, so it's 6 hours after treatment. And what you see there -- for a burn surgeon to see something like this, it pretty much blows my mind. What we're looking at there is a lot of dermis, dermis being that second layer of skin. There's an epidermis and the dermis and the dermis is really what regenerates the epidermis. And the dermis is what provides all the good qualities to the upper layer of skin, the dermis is what can regenerate. And so this burn, I mean, I most -- I would have like -- most likely taken that burn to the OR, excise it with the big knife and put a skin graft on it, which would require a painful donor site. And in this case, when you do the NexoBrid, you see all that dermis, you can treat that. We treated that with dressing changes, no excision, no operative -- did not need to go to the operating room, and eventually healed in -- complete wound closure was in week 5. We had 60% of that closed in 3 weeks, and you can see there. The dressing changes for this patient were very -- they were infrequent. They were every 5 days. We put a soft foam dressing on there. And this patient was able to avoid an operative procedure, and he was able to avoid a skin graft and a donor site that goes along with it. The next case that -- and here's the 6-month follow-up picture, which shows some mild hypopigmentation. So it's a little bit lighter. There's a little bit of pink area there. And typically, that continues to improve with time. Most skin grafts, you can really tell there's a skin graft there. And skin grafts -- because of all that dermis that was left because it was preserved, that's why we get such a nice outcome. My ability to do that with a knife, it's just not possible. And typically, skin grafting is then performed onto fat or adipose tissue, and you don't have that same -- it doesn't have that same look that you see here that's a little more natural. The second case is a 21-year old male with a contact burn. And this kid was in school and in training for something that requires a very fine use of his hands. And so -- fortunately, he also was randomized to the treatment arm. He had 3 wounds. The main wound was on the hand that we treated. And we determined this to be a deep partial thickness burn. Again, this is a burn that, in my experience, I would take to the operating room and excise and skin graft. And most of those patients end up requiring reconstruction after their skin graft to help -- skin grafts typically contract and get tight and require further procedures down the line over the next year or a few years to help with the range and mobility. This was before treatment, and that was after treatment. And again, what you see there is, the white is dermis, the red is also dermis, but even more superficial dermis. After removal of the eschar, to us, again, it's remarkable to us to see something like this because in the OR, after I excise it, I would be looking at a lot more fat, adipose tissue. There's a risk of injuring tendons and other structures in the hand. But this is a much more fine -- this can do what my eyes and that knife cannot do. And so we ended up treating this. He was initially treated with a xenograft, which is just an artificial, a piece of pig skin for a dressing. That stayed on. And you can see after 1 week, he started to get some healing, and he was completely closed, essentially mostly closed by 3 weeks, 99% closed at 3 weeks. There's a classic teaching in burns where you want all your wounds to be healed by 3 weeks. I think that is being -- definitely being challenged and shown to be not super critical if you control the wound bed. But he was closed in 3 weeks and by 5 weeks, 100% closed at the visit. He had -- he was able to avoid a skin graft, avoid a surgery. This is his 1 month. That's just 1 month after the NexoBrid treatment. And typically, you see hyperemia, which is that redness. There's a lot of blood vessels there as that skin continues to improve. And because we were able to preserve all that dermis by the use of NexoBrid, that overlying skin will continue and did continue to improve. The color improved. His range of motion returned to 100% and he didn't need any reconstructive procedures at all. So he was pretty happy. He was back in school, and he is since doing what he trained to do. So those are my cases to present, and I'll hand it off to Dr. Carson.

Thank you, Dr. Goverman. And we'll be starting a panel discussion shortly with some of the questions that are coming in, but I'd like to invite you, Dr. Carson, to present your cases. Thank you. Dr. Carson?

Sorry, mute issues there. Hi there, everybody. So thanks, everybody. Just to add to the other doctors' sort of input, I kind of want to give you some insight into my anxieties and pains, all right? So one of the hardest things for burn surgery is that our operation that we would depend upon to build people back is skin graft. And a skin graft is a horrible wound in many cases, except it is much better than not keeping the skin graft. It's a big burn, it's deep, right? So when we decide whether a patient needs a skin graft, we really got to decide does the patient really need it or not, and that's a very currently subjective assessment based on how things look. So this is a 19-year-old girl who came to me. She was a college kid, [ born quite well ], and she has this burn on her leg, all right? If you do what we could do and you look at things we look at, you see that it's dry, it's pale, it didn't blanch, which is the thing we look at, all the signs of being really deep and it's going to need excision and then a graft, okay? If I'm going to take her to the operating room, it may just be a sear on the top of the skin, maybe it'll heal, I don't know. So the only way to find out would be to cut away the top layer of skin with the knife. And I've got wonderful hands. I'm very happy with them, but if I cut away a layer of that skin with a knife, it's going to give her a significant wound, okay? And like Dr. Goverman said, sometimes it may not look right, and she may have ended up with -- I would have predicted -- I did predict that this lady was going to need a skin graft, okay? So we talked to her about the study. I told her what I just told you all, which is that essentially, I know how to do skin grafts, works real well. But if it was me, and I wanted to know for sure whether she really needed one before I gave her one, I will try this new thing in research context. All right? And I was surprised by this. Probably because of her age, I think her dermis, so Dr. Goverman referred to it that that's the bottom critical layer of skin was thicker and more robust, she ended up having more of a sear. And I was able to identify that without having to take too much of her skin away, all right, which, for her worked great. So rather than take here to the operating room and use that big knife he was talking about and putter put her graft on, which would have closed the wound, don't get me wrong. And in some cases, it looks fine. But if we're honest with ourselves as surgeons, I think we all recognize that in most cases, in the vast majority of cases, it's extremely noticeable, and in some cases, it causes problems to patients. In her case, we didn't need any, all right? We put this pig skin on it, which is kind of basically, I tell my patients is a fancy Band-Aid. And in about a month or less than a month even, she looked good. Now this is 3 weeks. Her scar will be there and will continue to change for another year or so. I can't promise you it's going to be perfect, but I can tell you that's a heck of a lot better than I would have gotten with the skin graft. If Dr. Goverman and Hickerson thinks they could have done better, I applaud them. But let's be honest. This is a -- this for us is, in my experience, far better than we expect with any skin grafting procedures we do. And I think, if I am honest, I think she would have probably gotten significant grafting I had not had this enzyme, all right? Shifting to the end of the spectrum, 52-year-old male, okay? He had a fire or a flame burn. He works for himself. He was working, something flared up. Very nervous, very nervous family. We have this conversation about are we going to excise him? Are we going to skin graft him? Does he need skin graft? How would we know? And I spent way more time talking to this patient and the family than you guys are going to spend on this call. I can tell you that much. In these patients, it's really hard for them to go into the operating room and know that they may or may not need something. And if I give it to them because I think they're going to need it, but who knows. That sounds wishy-washy, and it makes that's kind of what we live in. So he was a perfect guy for NexoBrid. His burn looks like it could be deep in some areas, in some areas, maybe not as deep. You see sort of the numbers on the size of the burn. We thought it was a little bit more superficial. Moving forward, gave him a NexoBrid. I was surprised. One of that burn was live, all right? Did he need some grafting? In this case, yes, he did. A patient of this age doesn't have the same dermis as a kid. But the key is, here, we were able to identify the exact areas where he needed the grafting, used a graft only there. And if you guys -- I'm sure you've heard about what's taking the skin graft and tell, but it's very unpleasant. So we were limited how much -- we had to take far less skin graft, and we were able to get that great healing in the other areas that ended up not needing a skin graft while giving the areas that were deep the skin graft they needed. And again, from a selfish standpoint, I know he got the exact appropriate debridement. I didn't take anything more than needed because the enzyme figured it out for me, all right? Doing pretty well. His graft healed. I told you guys grafts could be ugly. Maybe I'm hard on myself, but I think we can all see that that guy's got a graft. I think the graft does better when you have as much dermis as possible. I think we all -- I don't think that we know that from the data. And preserving that dermis, even if you do have to graft, was very helpful for this man. And then in the areas that didn't need graft, again, this is only 3 months as he may have discoloration rest of his life, but it very easily could get very close to normal. We won't know, but I feel fairly confident, very confident that it looks better than it would have looked if we grafted it, and it certainly went much easier for the patient than it would have otherwise. So those are a couple of cases. And I share the other doctors' enthusiasm. Like I said, we've -- for whatever reason, people on this call have chosen to work in the field with a lot of uncertainty and a lot of what's going to -- what do we need to do, what's this? And in the end, as I mentioned, there's a lot of questions for us that I had to spend a lot of time -- I do spend a lot of time bringing my head -- hands over known current standard of care. So I look forward to having it as a big part of my armamentarium.

Thank you, Dr. Carson, and I'm now going to open up the roundtable panel for discussion. And we're getting some great questions in, but I would like to remind you that for this question-and-answer session, if you have a question, please submit it through the Ask a Question box. So we have got a number of questions, which I'm going to group together, but I would like to start with Dr. Shoham and then the other members of the panel. There's been some discussion about the pain associated with enzymatic debridement. And I wonder if you could comment on how you manage that pain during the debridement process with NexoBrid and whether, in fact, this can be managed well in a burn center and whether this has caused you any difficulties. So I'll start with Dr. Shoham on that, and then we'll move to Dr. Hickerson after that.

Okay. This is true. NexoBrid is associated with pain. But actually, if you think about it, this is not surprising at all. We have a method here. We have a technique that, in fact, replaces surgery. It does the work of a knife. So it's to be expected that it's going to hurt. Now it doesn't hurt as much as a knife. So -- but we do need to give some pain management. And I think that in the same manner that we would never dream of performing surgery without adequate pain management, in the same manner, we should pretreat or actually manage the pain for the NexoBrid treatment as well. There are several methods to treat the pain associated with NexoBrid. Of course, one can go for general anesthesia as we do in many surgeries. But in fact, there usually is no need for that, and this is also, I think, reflected in the results of the DETECT trial where only a small minority of NexoBrid-treated patients necessitated general anesthesia for that. The majority were treated either with some sort of sedation or nerve blocks. And this is, in fact, what I do in my common practice as well. So yes, NexoBrid is associated with pain. It is less than what is associated with surgery, and it is definitely manageable.

Dr. Hickerson, I wonder if you'd like to comment on how easy it was to manage your patient's pain in the clinical studies that you've used NexoBrid in.

Sure, Jon. I think that like Yaron said, Yaron had more experience with this than the rest of us. And I agree with him 100%. There's nothing that we do in burns to take care of that wound unless it is truly a full-thickness injury that's down into the subcutaneous tissue that doesn't have much nerve innings left. That's not going to hurt. Now then the photographs that you saw where our eyes were not detecting viable tissue. And that's important because now we've got a way to salvage that and get this to heal without having to put on a graft for a lot of times. It's a paradigm shift from the surgeon's standpoint because you have to look at the difference in the wound bed. And that white that you saw after the NexoBrid was collagen that was in the dermis that says, guys, I can heal rather than being into the fat. With that, we know we've got to control the pain. We can do IV sedation during this time period while they're setting in the room or we can do a continuous block. And if it's an upper extremity or a lower extremity, for me, that's one of the best routes because then we know we've got complete control of the pain. When the patients come in, that's how we treat them. We give them IV sedation while we're cleaning their wounds and putting in lines and doing anything else. So this is just an extension from that. It prevents us from having the blood loss and prevents us from the operating room time. And so I think that it is a great addition, and pain control was no problem.

Thank you. I'd like to go to another subject where we've had several questions and ask Dr. Goverman and then Dr. Carson. We have the results of several peer-reviewed clinical trials, but what do you think it will take to persuade your peers in America at burn centers to start to use NexoBrid as their primary method of debridement once NexoBrid has been approved? I'll start with Dr. Goverman.

Yes. So Dr. Goverman here. And kind of on that topic, there was a question there about standard of care being surgical eschar removal and other nonsurgical eschar removal products not seeing good uptake. And there's -- there are no other nonsurgical eschar removal products. This is really in a class by itself. There's another product mentioned there that -- the Smith & Nephew's. And that's a totally different situation, really, that's a different product there. There's nothing we have in our armamentarium that can do what we've seen it do. And so for me -- I mean for me, all I needed to see was before and after pictures, and I was pretty much sold. Never seen anything like it. There's nothing out there that in 4 hours does what I can do with a knife, but in a way, way more specific way in a specific manner. So I don't think this -- to me, I think this is a product that really sells itself because it's not a question of like, does this work? Does it debride? Does it not debride? It always works. And for me, the only issues I had were, if there was some way that I did not apply the product appropriately, like if it didn't come in contact with the wound then, of course, it's not going to work. Otherwise, it's just -- it's like a magic bullet for dead tissue. So again, it's like how is it going to fit into our armamentarium, that remains to be seen, but it really is like a -- you see one, and for me, that I was a one-and-done because it's completely something new and unmet -- and filling an unmet need. And it takes us really well into -- I mean we've been dealing with instruments from the civil war era, the knives that we're using. And suddenly, we have something that can function, the technology of this is way where we need to be. It brings us ahead many, many years that we've been waiting for something like this.

Thank you, Dr. Goverman. Can I ask Dr. Carson, what do you think your peers will need to see over and above the trial to actually be as enthusiastic as you and uptake this enzymatic treatment?

So I mean, I think largely what Jeremy said, but I just sort of add -- I mean we're cynical people, surgeons. We think we only want to do anything. So we tend to sometimes doubt pictures, but ultimately, you got to try this if you look at the data and as it grows. And the people who have tried it in the study are, frankly, people training everyone around the country. So people know about it. And my experience with it is once you do it, it just makes so much sense, all right? I mean we can talk ourselves into thinking that everything we do is perfect. But you can't take away -- when he says these are old instruments, old instruments, I can't go into detail about how we excised burns in this call because I fear I would upset and it would be sort of too graphic for people who aren't used to it, all right? I mean I'm not joking. It's -- and look, I mean, I like what I do and we help a lot of people, but we use, no pun intended, blunt instrument. You cut away the chunk. Well, a burn isn't exactly uniform. It goes up and down. It's deeper here, it's fully [indiscernible] there, and it's my eyeball, I got partners with -- between them, dozens of years of experience, not to mention mine, and we'll all look at the same burn and have different ideas about how deep it is. And there's no question after this. So in my opinion, I think this is going to be the kind of thing -- and I think those of us who have been doing burns for any period of time -- the way things work in burns is a lot of stuff shows up in the market and the stuff that works sticks and the stuff that doesn't, doesn't. And this is where this comes in. I mean that's my personal opinion. I think if you -- once you get it into a center, they're going to see how it works. And it's going to take some work to get -- to sort of figure out this new approach and orient their sort of center around a little different sort of ability. But like any innovation in medicine, if it works for the patients and it works for the physicians and it's financially is viable, and this hits all 3 of those, they're going to figure out how to make it work real well. And I think that -- I think it's going to spread with time pretty reliably. Pretty continuous.

Thank you. We've had a couple of questions of size of burn. And which patients do you see primarily NexoBrid being used initially? Will it be larger burns? Will there be a place for outpatient smaller burns? Where do you see this fitting into your surgical practice and the range of burn sizes that come in? If I could ask Dr. Hickerson, what your views are on that.

Jon, I think that's going to go across the board. Obviously, when they first come in, a lot of these, even that are smaller, we don't have a good idea of what's happening. So with that having been said, I think that most of the patients would be ones that would be admitted. Those that we would look at and say, well, is this really a full-thickness wound that's going to have to be grafted or not? So I think that there's -- it crosses the gamut for you. And the more people become used to it, the more they become trusting in it, the more they'll use. Now to go back and say what it's going to take, I think that if I'm not mistaken, you'll probably be looking at a few other things for coating and things like that, that would probably be beneficial in the future as well. But overall, I would foresee using it on those that look like that they're indeterminant, are those that I feel like that I could excise 30%, 45%. The larger burns, a lot of them, you could pick and choose. I think that eventually, it will also be used as a nonsurgical escharotomy, meaning that if we're concerned that we may be developing a compartment syndrome, that we would use it and that the release of that dead tissue would allow the pressure in the limbs or the trunk to go down. So I think that once you start using a tool such as this, you find more and more ways to use it. And once it's approved by the FDA, then we can use it for how we really want to use it as well.

I would add on to Bill's comments there. I agree to everything he said. I think one thing is we're going to find even more ways to use it when we have -- it takes time to find out when the perfect uses are. And I think if you ask all 3 of us, you probably have different predictions of what's the perfect use was, but the one prediction, I think -- one thing Bill said that's really important is that when you have these, what we call "small burns" from a surgeon's perspective, 5%, it's probably big if it's yours, trust me, we keep them in the hospital and watch them and look at them and think about it and hem and haw, Yaron mentioned conversion of wounds. So we want to see, is it going to get deeper? Is it going to -- how deep is it really? And that process can take days, 5 days, 6 days, 7 days and then they go home or then they go to the operating room. So if you look back at the data that Bill presented, this gives you the answer right away. It skips that -- and I'm an inpatient person, so I'm very sympathetic to that. But patient who wants to have an answer, what they're going to do, doesn't want to spend a week in the hospital figuring out how to treat this burn before they even treat it, I think this is a big help for us. I think it's going to, therefore, lead to us to use it earlier on more burns than we usually would take to the operating room. It will increase our volume because we just have something to do rather than sit and wait and send it home and have it come back. We're just going to find out that we're in an end phenomenon. And we'll find out with time, but that's my suspicion is how we're going end up using it.

Dr. Shoham, I wonder if you'd comment on the size of burn that's used in other parts of the world where NexoBrid has been approved, and how that's all settling out in the post-market realm. What percentage burn size? What type of burn is NexoBrid being used with most frequently?

I think the answer -- the size of burn that is most frequently treated is most probably the most frequent size of burn that we encounter as is also reflected by the American Burn Association repository where all the data exists. So that would be about 10% to 15% total body surface area. That's the most common hospitalized size of burn. But how large does it get? I mean there was a publication that was just published a couple of months ago about a European consensus where I think 10 burn centers with a combined experience of over 1,000 total patients treated, and they all agreed that NexoBrid can be used safely on a surface area of up to 30% total body surface area. And they all had experience with that, if I remember the quote correctly. And some of them even had experience on treating more than 30% TBSA. So I think this is something that the burn care community is still evaluating as it gains more and more experience. With regards to my personal experience, I do have experience treating large burns, up to 30% total body surface area with NexoBrid. And my personal feeling or expectation is that this is probably going to grow within the next couple of years.

Thank you, Dr. Shoham. Unfortunately, because of time constraints, we're going to have to draw the discussion to a close. But I would like to thank each of our surgeon panel members for their presentations, the case presentations and discussing their insights into the use of NexoBrid, this exciting investigational product, which is, as we all know, currently under consideration by FDA. Thank all of you for your time today. And so now I'm going to hand you over to Roland DeAngelis, Senior Vice President of Commercial Operations at Vericel, to discuss our NexoBrid commercial launch plans and to provide a brief commercial update for MACI and Epicel. Roland?

Thank you, Dr. Hopper. I am Roland DeAngelis. I'm the Senior Vice President of Commercial Operations. I was a Sanofi Genzyme legacy employee. And next week, I will celebrate my 25th year with this business unit. I am now pleased to share our commercial launch plans for NexoBrid. As has been previously discussed, Vericel currently markets Epicel, a permanent skin replacement for severe burn victims. Epicel is an important life-saving product, but operates at the far end of the severe burn care treatment spectrum where there are fewer patients. We estimate that the addressable patient population for Epicel, which is typically used in patient with greater than 40% total body surface area burns, is around 600 patients out of the 40,000 hospitalized burn patients each year. While the patient population is small, the addressable market opportunity is attractive at more than $100 million per year. This opportunity is based on the fact that the average order for Epicel generates approximately $200,000 in revenue. NexoBrid provides Vericel a complementary product in the burn care space that will be indicated for a much broader patient population. The vast majority of the 40,000 hospitalized burn patients each year will need some level of debridement, which we believe represents a $200 million plus addressable market, roughly tripling the size of the addressable market for our burn care franchise. With NexoBrid, Vericel will be launching a product with considerable clinical history both in the -- both in and outside the United States. The first clinical application of NexoBrid occurred almost 18 years ago. NexoBrid is now commercialized in 18 countries, and more than 7,000 patients have been treated with the product. Experience in the U.S. dates back to the initiation of the DETECT clinical trial in 2015. And as we heard earlier, there is also extensive peer-reviewed literature on the product, describing its use and the outcomes of earlier clinical trials. This clinical history and experience provides Vericel great resources for commercial success. Market research conducted in the U.S. has confirmed NexoBrid's value proposition to our customers and highlights the potential for broad use across hospitalized burn patients. In terms of potential benefits, NexoBrid is seen as enhancing the speed and precision of eschar removal in patients with severe burns, reducing surgical incision and autografting and reducing blood loss. The research also informed us of the types of patients NexoBrid would most likely be used for, at least initially. These patients would include those with lower TBSA, partial thickness burns, particularly on extremities and delicate areas such as hands and feet and joints. Perhaps the area where NexoBrid provide -- may provide its greatest value, as you heard, is in burns of indeterminant depth superficial to deep partial or deep partial to full-thickness burns. Use of NexoBrid on these burns will help surgeons quickly remove eschar for a more accurate evaluation of the wound, which in turn, will inform decisions regarding selection of the most appropriate methods for closure. On the current standard of care, patients with these indeterminant burn depths would likely have the entire area surgically excised, which could potentially remove viable tissue that otherwise could have been saved to mitigate subsequent grafting. Our target audience in the U.S. for NexoBrid is concentrated to about 140 burn centers. With Epicel, we currently focus on approximately 80 of these centers, but with NexoBrid, we will be sizing our sales team to provide appropriate support to reach all 140 burn centers. In addition to the pivotal U.S. Phase III DETECT trial discussed earlier today, there were currently 2 clinical trials underway in the U.S. The first is the expanded access study called NEXT, which aims to increase clinical experience of NexoBrid prior to approval in order to increase national preparedness for mass burn casualty events. There is also an ongoing trial called CIDS, which aims to evaluate the safety and efficacy of NexoBrid in pediatric patients. Taken together, we estimate that there will be up to 33 sites or about 1/4 of the burn centers in the U.S. with NexoBrid experience prior to our commercial launch. And many of these sites rank at the top of the U.S. centers with the highest number of admissions. Also, of the 33 NexoBrid experienced burn centers, 24 are active users of Epicel. We believe that these established relationships will aid in our NexoBrid uptake upon launch. Our sales team has been going through a transition, which began last year. In 2018, we had a small team comprised of 5 representatives. The team was highly skilled, most were former burn nurses with considerable clinical experience. Their focus was primarily on education and clinical support. In 2019, we adopted a new model, which bifurcated our commercial team into sales representatives and clinical support specialists. These representatives -- the sales representative's role is focused more on traditional sales and account development activities. They work in close collaboration with their burn clinical specialist peers who provide the needed education and clinical support functions so vital in burn care. Our team is now comprised of 7 sales representatives and 4 burn clinical specialists. We will be expanding this team in 2021 in anticipation of the NexoBrid launch to 11 sales representatives and 10 burn clinical specialists organized into 2 regions led by new managers. NexoBrid adoption will require a significant amount of education to develop the protocols for successful use of the product. Education and clinical support are strengths of our team. Given the team's experience with the demands of Epicel, there was perhaps no team that is suited in the industry to commercialize NexoBrid in the U.S. We just completed our strategic planning, which confirmed our strategic imperatives for the NexoBrid launch. First, to educate the burn community on gaps in the standard of current debridement protocols and the potential of advanced enzymatic agents through our disease state awareness campaign. Next, to establish NexoBrid as a valuable debridement option in burn care. And lastly, to develop an effective pricing and reimbursement environment for NexoBrid, which appropriately reflects NexoBrid's value while ensuring easy access to patients and burn centers. We launched our disease state awareness campaign at the Virtual American Burn Association Annual Meeting this summer. You can see the branding we used to address the benefits of a rapid eschar removal and the current challenges with the standard of care debridement options. In addition to our disease state awareness campaign, our launch campaign will focus on differentiating NexoBrid from the standard of care, including surgical debridement options, particularly the speed, selectivity and reduction in surgical burden, autografting and blood loss. Given the current environment, we are also incorporating into our tactical planning platforms and programming designed for virtual health care provider engagement. The use of the latest technology will facilitate peer-to-peer activities, including using our investigators to increase brand awareness, train, educate and answer frequently asked questions as well as address the best practice protocols for the use of NexoBrid. Our third strategic imperative relates to market access initiatives prior to launch. These activities include pricing and market access work, including a BARDA-funded pharmacoeconomic analysis, which will inform our pricing, research and strategy. We will also be conducting assessments for both product and procedural coding later this year and early next. In terms of trade and distribution, our state licensing is underway and we are in the process of finalizing our distribution channel strategy, including the use of a 3PL. And finally, sales resource plans include the development of a VAC, a Value Analysis Committee, and P&T Committee toolkits as well as assessments of sampling programs and contracting strategies. This timeline slide illustrates the comprehensive set of disease state awareness, brand development and market access activities underway or planned in anticipation of the NexoBrid launch in the second half of 2021. We also plan to begin recruitment and training of the expanded sales team in early 2021 in order to complete their training in advance of the anticipated launch. I would now like to quickly turn our attention to our current commercial products, Epicel and MACI, beginning with Epicel. As Dr. Hopper described earlier, managing patients with severe burns involves not only debridement of nonviable tissue, but also the application of products or grafts to close burn wounds. Epicel is the only FDA-approved permanent skin replacement for patients with large burns. And with the addition of NexoBrid to our portfolio, Vericel will have 2 highly effective products in both segments of patient care. Our goal for Epicel is to continue to increase utilization for all Epicel-appropriate patients by achieving broader and deeper penetration into the addressable patient market. Our strategic imperatives for Epicel designed to achieve these goals are to continue to reinforce Epicel as a life-saving option for patients with survival burns, work with our KOLs to raise awareness on what patients may benefit from Epicel as well as educating on best practices, and finally, to differentiate Vericel as a trusted leader in this space. Shifting gears to MACI, our goal for MACI is to dive -- to drive deeper penetration into the 60,000-patient addressable market by continuing to increase the number of surgeons taking biopsies, increasing the average number of biopsies per surgeon and increasing their biopsy-to-implant conversion rate. Our strategic imperatives for MACI are designed to achieve these objectives. Two items I would like to highlight are, first, we will be reaching beyond orthopedic surgeons to others in the spectrum of care, including physical therapists to raise brand awareness; and second, a significant focus of our expanded sales team is the conversion of MACI-naive high-volume cartilage repair surgeons. 2020 has provided its challenges. And while customer access restrictions have eased, we'll be increasing our investments to ensure we have a powerful armamentarium of digital and virtual engagement resources so that we can bring impactful programs, education and peer-to-peer experiences to customers virtually. In addition to the tools like VuMedi and Doximity that are widely used for surgeons' education and training purposes and that we find to be highly effective, we are also investing in other impactful apps such as [ KOL CAS ], which will further enhance these initiatives. We recently completed the expansion of our MACI sales team for the fourth year on a row, increasing from 49 to 76 territories. While COVID-19 created some challenges to our standard expansion implementation, we were able to overcome these challenges and believe that our team emerged from the period of suspended elective surgeries in great shape. The extensive training on new reps received and the business plans that they were able to put in place this year allowed them to enter their territories as prepared as reps as in any previous expansion as reflected in our third quarter MACI performance. As part of our sales force sizing analysis conducted with VS Associates last year, we are -- we also re-segmented our target universe of 5,000 surgeons and developed specific reach and call frequency targets for each segment. Our top 4 segments, 1A through 3, include current MACI implant surgeons. And I would like to highlight one customer segment, which is segment 4. These are surgeons that, based on various data sources, perform a significant amount of open knee as well as cartilage repair procedures, but have never taken a biopsy. This segment also includes surgeons who have taken a biopsy but never performed an implant. Based on their practice volume, they have the potential to be high-volume MACI users. With a larger sales team, this segment, for which we can now increase both our sales call, reach and frequency. While most of our new reps have only been in their respective territories for one full quarter, we've begun to see the fruits of the expansion in the form of increased calls and call frequency across all customer segments. We believe that this will allow us to achieve deeper penetration into the addressable patient population and drive MACI growth over the next several years. Thank you, and I will now turn the call back over to Nick.

Thank you, Roland. So as you've heard today, we have a highly innovative advanced cell therapy and specialty biologics portfolio. Our portfolio is really unique in that we have significant competitive barriers to entry. For MACI and Epicel, this combination biologic device products, there's no established generic biosimilar or 510(k) pathways to enter the market, so that any future entrants will have to follow a standard clinical development pathway and there currently are no near-term like products in development for either of our markets. Likewise, in addition to patent protection, upon FDA approval, NexoBrid will have orphan and 12-year biologic exclusivities in the United States. So we have a portfolio with a long runway that we believe will continue to generate sustainable top-tier revenue growth for many years. We've delivered 30% plus compounded annual revenue growth since the launch of MACI in 2017. We believe that we'll continue to deliver strong double-digit growth in the years ahead given the large underpenetrated addressable markets for our products. We also have a highly attractive business model with a robust profitability profile. The marginal cost of goods for MACI and Epicel are approximately 20%, so that about 80% of every incremental revenue dollar drops to the gross margin line. We expect that continued long-term volume growth will drive further expansion of our gross margin from the 76 -- 68% we achieved in 2019 into the mid-70% range in the coming years. Additionally, because our portfolio consists of premium-priced products with concentrated call points, we expect over the coming years that approximately 50% of every incremental revenue dollar will fall to the adjusted EBITDA or operating margin line. Finally, we have a strong balance sheet with over $85 million of cash and investments and no debt as of the end of the third quarter, and a strong institutional shareholder base with approximately 90% of outstanding shares held by institutional investors. On Wednesday, we announced preliminary third quarter financial results. Total third quarter net revenues were approximately $32 million, with MACI net revenue of $24.2 million, an increase of approximately 17% compared to the third quarter of 2019. Epicel net revenue was approximately $6.7 million, which represents the second highest quarter for Epicel in history. We also reported $1.2 million of revenue related to the BARDA procurement of NexoBrid for emergency response preparedness. Based on these preliminary revenue estimates, revenue is now up year-to-date through the third quarter compared to 2019. The robustness of our business model was also demonstrated in the third quarter as we generated operating cash flow of approximately $4.6 million for the quarter and were cash flow positive year-to-date in 2020. Our strong third quarter performance was driven by MACI as we generated consistent double-digit growth in revenue, implants and biopsies. We also achieved a record monthly high for biopsies in September. Given the strength of our patient pipeline, we expect to maintain strong MACI growth in the fourth quarter. We'll provide greater financial and business highlights related to our third quarter performance on our upcoming earnings call on November 5. Moving forward, we believe that MACI is well positioned to return to its prior growth trajectory, even if we find ourselves in a challenging COVID-19 environment, based on a number of factors. MACI's strong revenue growth prior to the COVID-19 crisis and its rapid recovery following the resumption of elective surgeries, reflects the strong underlying demand for MACI in the market, based on its unique benefits for patients. MACI patients typically are young, active and otherwise healthy individuals who are less likely to have risk factors associated with COVID-19. And given the symptomatic nature of their injuries, including chronic pain and loss of function, we believe that they are far less likely to defer treatment compared to patients for other orthopedic procedures. Importantly, MACI procedures are performed on an outpatient basis over 95% of the time in either a hospital outpatient surgery center or an ambulatory surgical center. So we don't expect MACI to be significantly impacted by any potential future restrictions focused on procedures that utilize inpatient hospital beds. Orthopedic surgeries are a significant source of revenue for hospitals and surgery centers, and MACI is well positioned in this environment given its favorable reimbursement profile. And finally, our case management team remains connected to patients and surgeon offices to move cases through the pipeline and schedule cases in a timely manner. We believe that the MACI sales force expansion this year and the burn care sales force expansion planned for the NexoBrid launch provide a broader footprint to drive sustained double-digit growth in the years ahead. We'll now have over 100 commercial team members in the field and 2 commercial franchises with critical mass to drive rapid growth in large underpenetrated markets, supported by a leadership team with the clinical, regulatory, operational and strategic expertise required to change standard of care with advanced cell therapy and specialty biologics products. From an overall company perspective, we've made significant progress to date in 2020, and we believe we're positioned for continued success in 2021 and beyond. We've achieved several milestones this year, including effectively implementing the MACI sales force expansion, submitting the NexoBrid BLA by midyear in accordance with our original time line, achieving revenue growth and generating positive cash flow year-to-date, despite the impact of COVID-19. And we have a number of upcoming catalysts. We're on track to deliver record MACI net revenue and total net revenues for the fourth quarter, and we expect to deliver strong MACI and Epicel growth in 2021 and beyond. We also expect to launch NexoBrid in the second half of 2021, which we believe will contribute rapidly to our overall growth rate. So having built a strong foundation with a highly innovative portfolio and having achieved a number of operational and financial milestones, we believe that we are positioned to return to rapid growth. We remain on track to deliver strong long-term revenue growth and to generate gross margins in the mid-70% range and operating margins in the 20%-plus range over the next several years. In addition to MACI and Epicel life cycle management initiatives, we'll also continue to focus on strategic transactions to maximize the long-term value of the company. We're focused on innovative product opportunities that have a strategic fit with our current sports medicine and severe burn care franchises or that leverage our cell therapy expertise in the development and the commercialization of these products and that have a similar financial profile to our current portfolio. So with that overview, this concludes our prepared remarks, and we'll now move into our Q&A session. As a reminder, for the second Q&A session, we'll be taking dial-in questions as well as questions through the Ask a Question box on the webcast as time permits. So we'll start with questions from the phone line. Operator?

[Operator Instructions] Our first question is coming from the line of Ryan Zimmerman with BTIG.

Great. Thank you. Thank you, everyone, for the update today. It was very informative. I want to ask about pricing related to NexoBrid, if I could. Previously, I think you've commented around potentially $500 for 1% TBSA. I'm wondering if you can comment on your current thinking around pricing, and if that changed at all? And then my second question in line with that is right now, the street is looking, I think, for a little over $4 million on NexoBrid sales in '21, and I suspect a lot of that is BARDA-related. And I'm just wondering, Nick, if you can comment on kind of your expectations for launch and how you intend to pace the launch, particularly in the back half of 21?

Yes. Thanks, Ryan. Good to hear your questions. And so first of all, on pricing, yes, we've been pretty consistent in that. We were estimating that with the 40,000 hospitalized patients and sort of the reference pricing that's out there, that prior to doing our pricing research, which we were just kicking off now, that a pretty good floor, we thought, was about $5,000 per patient. Obviously, as I mentioned, we're just kicking off our pricing research. And so that is to be determined exactly how we're going to price the product. But one thing we want to do is make sure, obviously, that we price it appropriately given the innovative nature of the product, but that we don't limit access to the product either. So that's the typical exercise that you go through. In terms of the revenue for next year for NexoBrid, you are correct that, as you know, the initial revenue is coming from the BARDA procurement contract for mask casualty preparedness, and we recognized the first piece of that revenue in the third quarter, about $1.2 million. We expect about $1 million in the fourth quarter as well. And then about $3.8 million over the course of next year ratably. So that makes up the bulk of the revenue from the initial BARDA procurement contract that we'll recognize next year. We've been pretty consistent that the PDUFA goal date is June 29. And assuming that the product is approved on that date, it obviously takes several weeks and months to get the labeling done and to launch the product. So sort of mid third quarter, it may become available. And so that we have been guiding that any real commercial revenue would begin in the fourth quarter of next year.

And then just one follow-up for me. I mean given what we've seen in the European launch -- or the European commercialization of NexoBrid, I'm just curious, kind of we asked the physicians this question earlier around how the U.S. market may differ, but I'd love to just understand what you think is different about the U.S. market and your approach to this market, given what we've seen in Europe? And how do you intend to maybe differentiate that in the U.S.?

Yes. And I'll start with what's the same. What's the same is that no matter where the surgeons reside, they are very enthusiastic about the product. So even when we did market research with European burn surgeons during our diligence, they were very enthusiastic about the product. I think the biggest difference in the markets is what you heard this morning. In the U.S., if you have a full-thickness burn of any size or a partial thickness burn greater than 10%, ABA recommends that you go to one of the burn centers in the U.S., and there's only 140 of them. So there's a very concentrated market here in the U.S., which is obviously very advantageous. It's almost the opposite in Europe, where most patients are treated at regional hospitals. And it's really hard to have sort of broad coverage of that large of a geography, that number of hospitals as a smaller company. So we're excited about the product. Surgeons around the world have been excited about the product. And as Roland mentioned earlier, given the relationships that we have in the space, I don't think there's a commercial team in the industry that is as well positioned as we are to launch this product in the U.S.

Our next audio question comes from the line of Kaila Krum with Truist Securities.

So how do you guys think about sort of sales rep productivity going forward for your sales -- your burn sales reps? On one hand, you're expanding your bag, and then on the other, your reps maybe spread between a greater number of accounts and procedures. So do you expect your burn reps will be able to -- or are they going to be needed in all of these debridement procedures? I just want to try to understand some of those factors that can influence rep productivity.

Kaila, thanks for the question. And I'll begin, and Roland, you can add any additional commentary. But as you know, with Epicel, we have a very highly productive sales force. And as we've expanded and we've continued to grow Epicel, which is, I think, had its straight year of double-digit growth in 2019, that productivity has continued. Epicel is a very labor-intensive product between the surgical procedure itself, the takedown and so on. And so there is a heavy component of clinical support for Epicel. For NexoBrid, we believe that, obviously, there's an upfront training component. But once centers become familiar with the use of the product, we don't expect that we're going to have to be in those procedures going forward. So Roland, I'll ask if you have any additional commentary.

No, I would say that's pretty accurate in that there is a little bit of time that's going to be required and on the upfront for the development of the protocols to ensure that they have it down in the center. But once they have those protocols established, I think the amount of training that will be necessary at that particular institution will dissipate over time. So we've done a lot of work to determine the workload between both Epicel and, of course, the experience -- the global experience that we know of with NexoBrid as to what it requires to get a burn center up to speed. So I feel like we've got a good handle on that. And I feel like the team that we have recommended with respect to its size is going to be appropriate.

Yes. Well, I'll just add to that, Kaila. Obviously, that's why the next protocol is so important to us. So obviously, we'll have 1/4 of these centers who will have NexoBrid experience out of the gate. And as we alluded to earlier, those are typically centers with the highest burn admissions and so on. So kind of the top of the funnel from our perspective. And we obviously had an opportunity to select those centers that we wanted to target for the next protocol in addition to those who had been in some of the other clinical studies. So I think it's a good -- gives us a good start and a good run in terms of the launch uptake.

Great. And then I guess, I mean, how are burn sales reps incentivized today? And how do you expect that those incentives will change once NexoBrid is launched? Basically just trying to ensure you continue to see a strong uptake with Epicel, while balancing NexoBrid. And I guess, one more question if I can squeeze it in. I'm just hearing all of kind of the positive commentary around NexoBrid. And I mean, is there any reason why this product couldn't be a $15 million to $20 million product by 2022? Or what would be some of the factors that could push it higher or lower?

Well, I'll just start with your IC question. Much like our MACI sales representatives, our reps have a base salary component and then an incentive compensation piece that's based on volume of product that is sold. So that won't change. And we're pretty comfortable that -- and one of the reasons we're expanding the footprint is, again, with only 140 target centers and you have -- we'll have reps that will basically have between 12 and 15 centers, which is entirely manageable. So we are perfectly confident, particularly with the expansion of the leadership team and some really high-quality leadership already on board, that they'll be able to manage both products. So I think that's pretty straightforward from our perspective. In terms of sort of the uptake, this is a product which -- a couple of different aspects: Number one, as I said, we're not aware of any effective or even any enzymatic debridement agents that are in development now. And so NexoBrid, in addition to its 12-year biologics exclusivity and patent protection, we believe is going to have a very long runway in this market and, really, over time, should become the standard of care and have very deep penetration into the hospitalized burn patient population. Exactly what that curve looks like or uptake curve looks like, we're just in the process of putting that together. So we haven't given any forecast around first year sales yet, first full year sales, which would be the case in 2022. Obviously, that has a lot to do with pricing, volume, et cetera. So a little premature to sort of opine at this point on first year sales.

We have no additional audio questions at this time. So Nick, I'd like to pass the floor over to you for any web questions.

Great. Thank you. So there is one question related to the regulatory process, and I'll turn that over to Mike. And Mike, the question is, do we have any expectations about an AdCom for NexoBrid?

Thanks, Nick. At this time point, MediWound and Vericel have been working as a team with the FDA as well as BARDA very closely. And we haven't identified anything that we believe would trigger a formal AdCom meeting with the FDA. Of course, the FDA has the right to ask for an advisory committee, but -- and they will also reach out to individual panel members of the advisory committee for advice. But we're not anticipating a formal AdCom meeting at this time.

Great. Thanks. And we do have a question related to how NexoBrid will be reimbursed in the U.S.? Will it be billed through the pharmacy as a separate product? Or will it be covered under a global payment for burn care? And Roland, I'll turn that one over to you.

Yes, it's our expectation that NexoBrid will be paid within the current framework of the DRGs for burns.

Another commercial question, Roland, for you, is based on the comments from physicians, adoption is dependent on experience of surgeons. So what are the plans to speed the experience by sampling or for how long would you do sampling when the launch starts in the middle of 2021? So obviously, in addition to sort of the running start we have with the 33-or-so burn centers that already have experience, and again, those are the high-volume centers around the country. Again, each -- what we want to be doing is going deeper into those centers, obviously, and then expanding the number of using centers. So the sampling program is the question.

So yes, good question regarding sampling and something that we are -- we haven't -- we recognize the kind of the value of a sampling program. And I would say it's more than likely our intention to have a sampling program. As to how long that sampling program needs to run with any institution in order for them to kind of cross that barrier into adoption, I think that's a little unclear right now. I think we need to do some additional work there to determine just how long that sampling program has to live with a particular institution in order to drive adoption. So additional work definitely needs to be done there, but we do recognize that sampling, I think, will be very, very important for us, penetrating those other accounts, particularly those other accounts that don't have current NexoBrid experience at the time of launch.

Thanks, Roland. We also have a question related to the gross margin impact of NexoBrid. Is it higher or lower than the corporate average? So I'll take that one. We have discussed previously that between the -- well, first of all, I'll take a step back. So I mentioned earlier that our overall gross margin for the company in 2019 was 68%, and that we see that moving up into the mid-70s in the coming year or 2. And so that's sort of the baseline. So the question is how does NexoBrid impact that, and our previous comments were that between the supply price and our royalties, we expect that it will be right in line. Our gross margin for NexoBrid will be right in line with our -- the corporate average that we'll be getting to over the next couple of years. Okay. The next question relates to what pharmacoeconomic data would be utilized for NexoBrid when conducting conversations with the P&T committees in the hospitals?

So a pharmacoeconomic analysis is actually underway right now. It's being funded by BARDA. And that model is a very sophisticated model, and that work is pending. Our expectation is that the findings or output of that model will be available to us early next year, I'd say, in the first quarter of next year. And obviously, that -- the information, if you will, from that model will serve several purposes. One, it will obviously inform some of the strategic decisions that we make around pricing and also be incorporated into our toolkit for our VAC and P&T committees. So that work is pending, and we imagine it will be very helpful with those discussions with VAC and P&T committees.

Thanks, Roland. And I'll just finish up on sort of the market access set of questions. There's a question about sort of reimbursement for the surgeons, CPT codes that currently exist for surgical excision and enzymatic debridement. And I'll start by saying there is a code for enzymatic debridement and there certainly are codes for surgical excision. This is not, I would say, sort of the big-ticket items for surgeons when you think about typical standard of care now, which involves surgical excision and then autografting. It's really autografting where the reimbursement under the CPT codes is higher. So obviously, as Roland mentioned earlier, we'll be exploring opportunities to create a separate CPT code. But again, there certainly are codes that exist now. And again, I would just say that it's not the sort of the bigger portion of the reimbursement for the work surgeons are doing in the current standard of care. Okay. So the next is a question around the NexoBrid packaging. So Roland, I'll let you go ahead and sort of cover that.

Okay. So the packaging right now, the NexoBrid right now is packaged in -- there are 2 different packages. There's a 5 -- 2-gram and a 5-gram dose, if you will. And the 2-gram is for -- the 5-gram is for 2.5% TBSA. So we don't anticipate kind of changing that packaging as it is now. We are still trying to determine whether we're going to make both the 2- and 5-gram packages available in the U.S., but as how it's packaged right now, I think we'd make a selection of one of those to go-to-market with.

Yes, and I think underlying that question is, is it a single pack to treat an average patient that drives the revenue estimates that we've used. And the reality is that, again, there's -- the 2-gram covers 1% TBSA. So it's priced ultimately on a per gram unit with an average somewhere in, call it, the 8-ish-percent total body surface area burn for patients. So that's how it will be accounted for and utilized in the burn centers. We do have time for one more question, and I think it's coming back in through the audio line. So operator, please open the line.

Absolutely. We do have a follow-up question from the line of Ryan Zimmerman with BTIG.

I'll try and squeeze in the questions here. Just number one, Roland, you -- or it might have been Nick, you commented just on the record monthly high biopsies in September on MACI. I'm just wondering if you can comment around your expectations or dynamics related to that in September. Was that, in your view, backlog to some capacity? Was that a normalization? I'd appreciate any color there. And then, Roland, you provided a ton of metrics around MACI and just the doctors that you categorized by each bucket. I'm just wondering if it's a change in any strategy away from trying to increase conversion rates from biopsy to procedure and more focused on filling the funnel, so to speak? And then the last one I'll just squeeze in, if there's any comment or update you can give investors on where you're at with the CFO search?

Yes. So I will start with the September biopsy question, Ryan. And obviously, we had a very strong third quarter for MACI with double-digit growth in revenues, implants and biopsies. And as you noted, sort of the all-time high number of biopsies in September. And to be honest with you, from our perspective, we basically normalized now, and that was really attributed to normal patient flow. So now we have, obviously, our high-quality new reps out in the field. And so we have just a stronger sales force, and they're driving implant and biopsy growth. And so we expect that kind of level of activity to continue into the third quarter and beyond as they gain more experience. Recall, the third quarter is really the first full quarter in the field. So we're very pleased with what we're seeing in early days in terms of the rep expansion. Roland, the second question related to segmentation. And Ryan, I'll start, and Roland can add his commentary as well. But this is a project we did, as we talked about extensively with VS Associates last year. We expanded the number of surgeons that we're calling on because, as Roland noted, based on data that we were able to access, that there are -- NEXT's data that there are a number of surgeons that we were not calling on that do a large number of open-knee procedures and cartilage repair procedures. So we think they are very high-value potential targets that we needed to be calling on. And part of the reason for the sales force expansion was to make sure we had adequate reach and frequency, both on our current MACI users as well as this other group of surgeons that we think can be very valuable for the company. So I guess I'll move on to the third question, which is where do we stand on our CFO search. And so Ryan, as we talked about previously, we initiated a search with a leading global executive search firm that's in its early days, obviously, with Gerard having departed just a couple of weeks ago. So fortunately, as we discussed, we have a very strong bench with Sandra Pennell, who's our Controller, who's been in her position and has built a great team over the course of the past 5 years. And with Eric running financial planning and analysis, we're kind of just marching along as we -- as one would expect for a company of our size. So I think that wraps it up for our Q&A session. And I just want to thank all of the listeners for joining us for today's event. We're obviously very excited about the prospects for our company moving forward. And we look forward to providing further updates on our third quarter earnings call in a couple of weeks on November 5. So thank you all very much, and have a great day.