Vericel Corporation (VCEL) Earnings Call Transcript & Summary

Hello, everybody, and welcome. My name is Chris Shibutani. I'm a member of the Goldman Sachs equity research team. We're really pleased that you could join us today. We're very fortunate to have Vericel present for us at our 42nd Annual Goldman Sachs Healthcare Conference. Certainly, within the whole realm of therapeutic treatments and clinical unmet needs, the notion of addressing severe sports injuries, burn care with cell and tissue therapies has been foundational and been around really for decades. And currently, some of the most advanced generation of therapies which are available clinically and having a real impact are being brought to the fore by Vericel. Here to tell us about the story, Nick Colangelo, President and CEO. Nick, thank you for joining us.

Well, thank you, Chris. It's a pleasure to be here. And before I begin, I would just like to remind the audience that this presentation contains forward-looking statements, and you should refer to our documents on file with the SEC for further information. So for those of you who are not as familiar with Vericel, we are a leader, as Chris mentioned, in the sports medicine and the severe burn care markets. And one of the defining features of our company is that we have a portfolio of highly innovative advanced cell therapies and specialty biologics that have significant barriers to entry. So we currently market 2 cell therapies in the United States: MACI and Epicel, and these are products that we acquired from Sanofi back in 2014. And these products are regulated by the FDA as combination device and biologic products, with the biologic component, of course, being the use of the patient's own cells to repair damaged tissue and to restore function. So MACI is our lead product, which we launched in 2017 for the treatment of cartilage defects in the knee. It's the leading restorative cartilage repair product on the market and the only FDA-approved product in its class. Our second commercial product is Epicel, and it likewise is the only FDA-approved permanent skin replacement for adult and pediatric patients with large total body surface area burns. And we recently licensed an exciting new product called NexoBrid, which is a complementary product to Epicel in the burn treatment pathway where when you have severe burns in hospitalized patients, the first thing you need to do is remove the burn tissue or eschar, and that's what NexoBrid does, before you decide how you're going to cover the wound to promote wound closure, which is where Epicel comes into play, so highly synergistic for our burn care franchise. And as I mentioned earlier, these products all have significant barriers to entry. So because MACI and Epicel are combination device biologic products, there is no established generic or 510(k) pathway for other companies to enter the market. And there's no like competition that's in clinical development or near-term like competition in clinical development, so great competitive barriers to entry for us for our existing portfolio. And because NexoBrid is an orphan biologic product in the U.S., it will have orphan and biologic exclusivities in addition to its patent coverage upon approval in the U.S. so a really unique portfolio from that standpoint. And we think that gives us a great opportunity for sustained top-tier revenue growth for many years. Even through the pandemic year of 2020, we've delivered 25% compounded annual revenue growth since we launched MACI in 2017. And again, we think this is sustainable for many years because these are very large and relatively underpenetrated markets for both -- or for all 3 of these products. So getting into more detail about our revenue progression since we launched MACI back in 2017. So through 2019, we had 30% growth in 2019 over 2018, led by MACI which was up 35%. Epicel had its third straight year of double-digit growth, which is amazing for a product that's been on the market for over 2 decades. Even in 2020 and despite the impact of COVID-19, we had record total revenues for the year, record volumes and revenues for each of the products so really strong growth. The underlying growth drivers of the business were really strong in the fourth quarter of 2020. So we entered 2021 with a lot of momentum, and that momentum carried through in the first quarter as well. So revenues, total revenues were up 30%, with Epicel having another fantastic quarter with revenues up 54% versus the first quarter of last year, and MACI up 17%, so really strong growth. It led to record adjusted EBITDA, gross margins, operating cash flow for the first quarter, and so really strong momentum as we exited the first quarter of 2021. And the other unique aspect of our business is that it's got a really attractive profitability profile. So we make both MACI and Epicel here in our facility in Cambridge. Our marginal cost of goods is about 20%, so about 80% of incremental revenue falls to the gross profit line. And we provided guidance this year for margins in the 70% to 71% range, and we expect that with the increase in volumes to sort of settle out in the mid-70% range for our gross margins. The really unique aspect of our business model though is that MACI and Epicel are premium-priced products. So a MACI implant generates about $40,000 in revenue for us. And the typical Epicel order is a little north of $200,000. So premium-priced products and very concentrated call points. So we have 76 territories for MACI and about 11 commercial people in the field for Epicel, and that gives us a lot of leverage on the adjusted EBITDA line and about 50% of incremental revenue falls to the adjusted EBITDA line. So last year, we had adjusted EBITDA margins of about 15%, generated about $18.5 million in adjusted EBITDA and operating cash flow. This year, we've guided to 21.5% to 23.5% adjusted EBITDA margins, which would translate, based on our revenue guidance, of about $165 million to $168 million or 33% to 35% revenue growth for the year. It will translate to $35 million to $40 million in adjusted EBITDA, and again, that's a pretty good proxy for us for operating cash flow. So really interesting not only top-tier revenue growth story but an interesting profitability profile as well. And then we have a very strong balance sheet, ended the first quarter with about $110 million in cash, no debt and a really strong institutional shareholder base. And the whole profile of the company being again a top-tier growth company, strong profitability was reflected as we were included in the S&P SmallCap 600 in March, which was a great thing for the company. So I'll start with our cartilage repair franchise. And as I'm sure most of you know, cartilage is on the end of the bones and all the synovial joints. And the function of cartilage is to provide a lubricated surface for a frictionless movement in the joints, to facilitate transmissions and loads to the underlying bones and to protected joints from shearing and other forces. And chondrocytes are the cells that are responsible for producing cartilage. Cartilage defects or injuries, which you can think of as like a pothole on the surface of the knee, are a significant cause of morbidity. So these defects or injuries are found on about 60% of knee arthroscopies. And the damage is caused by either acute or repetitive trauma, degenerative conditions like osteoarthritis or inflammatory conditions like rheumatoid arthritis. And the issue is that unlike virtually every other tissue in your body, cartilage doesn't have intrinsic healing properties, so there's no blood vessels that bring in repair cells. There's no lymphatics to get rid of cellular and other debris and there's no nerves. So once you have an injury, you're on a path to osteoarthritis and then ultimately, partial or full knee replacements. And that's what we're trying to avoid with the MACI treatment. So the goal is obviously to reduce symptoms, restore function and prevent this degeneration that I mentioned. And there's really fairly limited choices for surgeons in terms of restorative treatment. So in the table at the bottom of the slide, we talk about the options for surgeons. And if you present to your physician with a knee injury, typically after a physical exam and an X-ray or MRI, they often will do an investigational arthroscopy. And while they're doing that to confirm a cartilage defect, they'll do what's called a chondroplasty, where they'll clean up the cartilage, they'll get rid of frayed portions of the cartilage or if you have any floaters that are causing the knee to lock, and that does provide some pain relief, but obviously, it doesn't address the underlying cartilage defect. In the middle bucket are what are known as reparative techniques, so principally marrow stimulation techniques like microfracture, the theory being that as the surgeon drills into the bone and the bone marrow bleeds into the defect, that because the mesenchymal stem cells, which are the precursor cells for chondrocytes are present in the bone marrow, although differentiate into chondrocytes and start to produce the cartilage that's naturally present in the knee. But in reality, what it does is form a fiber cartilage scab that doesn't have the native properties or the properties of the native tissue. And so it doesn't have the durability of repair and has really fallen out of favor, particularly with large defects. And so when you look at the restorative techniques, as I mentioned earlier, MACI is the only FDA-approved product. The only other options for surgeons are cadaver-based, so you can do an osteochondral allograft, which as the name implies, is where they'll take a cadaver knee, punch out some biopsy or a plug of cartilage and bone and fill the defect that way, or Zimmer has a product called DeNovo NT, which is essentially a juvenile cadaver cartilage that's minced and put into a paste and filled that way. Those are tissue-regulated products. They were not approved under a BLA like MACI was so there's really not robust clinical data, but those are other options. So really, MACI stands alone as a proven -- clinically proven restorative cartilage repair product for these patients. So the final product is shown on the left side of this slide where MACI is essentially comprised of a patient's own cells, as I mentioned earlier, seeded at a density of about 0.5 million to 1 million cells per square centimeter onto a resorbable collagen membrane. The production process begins typically during the chondroplasty that I described earlier. A surgeon will take a biopsy, as shown from an area -- as shown on the upper left-hand image in yellow, highlights from a [ non weight ] burning portion of the knee. It's [ tic tac ] size biopsy that they send to our facility here in Cambridge. We isolate the chondrocytes, we expand them, typically cryopreserve the cells until a surgeon and patient are ready to move forward with a surgery, then further expand the cells, seed them on to the membrane. And as you can see in the middle image on the left, chondrocytes are spindle cells. So what they do is they grab onto those collagen fibers. And then when it is implanted, they migrate down to the subchondral bone and then begin replicating and basically fill the defect from the bottom of -- from the bone up through the defect. And the administration is shown on the right. So typically, a surgeon will clean out the defect. They simply cut the membrane to the size of the defect, glue it in with commercially available fibrin glue and they're done. And so it's a very simple procedure, as I'll describe in a moment, and very effective for the patients as well. So MACI, obviously, is one of the fastest-growing products in the med tech industry. We attribute that to principally 4 reasons: number one is the label for MACI. So there was a precursor product or a predecessor product to MACI called Carticel that was part of this franchise. And it was essentially produced the same way except that the finished product was in a cell suspension. And it had a very narrow label. So it was a second-line therapy. You had to have failed a prior surgical procedure. It was limited to only certain defects on certain parts of the knee so was, again, very narrow as opposed to MACI, which is indicated as a first-line therapy indicated for defects anywhere in the knee, no limit on the size, location, the defect, whether there's bone involvement or not. So a much broader label, which obviously means there are more patients that are eligible to be treated with MACI than prior generations of this technology. This slide shows the perspective or the advantages of MACI from a surgeon perspective. So on the left-hand side was the predecessor product I talked about called Carticel, which because again, it was finished in a cell suspension, it made for a very difficult procedure. It was highly invasive. You had to open up the whole knee. You had to cover the defect with some sort of patch, either a periosteal membrane or a collagen membrane that had to be microsutured into place. You had to have a watertight seal. So it was very technically demanding, highly invasive and took a lot of time. So it really became a niche product. I think in the last year, Carticel was on the market, which was in 2016, the full year it was on the market. There were about 350 surgeons that did a Carticel procedure. So that was typically sort of the top-end surgical cartilage repair specialists. They did -- they did these procedures because it worked. There's durability of repair data for Carticel out for 20 years. So once you regenerate the cartilage, can last a lifetime unless there's another injury. But again, it was very demanding and was kind of -- had very narrow adoption. As opposed to MACI, the procedure is shown on the right. So you basically do a mini arthrotomy, cut the membrane to the size of the defect and glue it in. So it's much less invasive, much simpler and much faster. And that's why we've seen such broad adoption with MACI, as I'll describe further, where we've had, even last year, about 1,500 surgeons taking biopsies from MACI. And so it gives you an idea of the breadth of the surgeon bases, we continue to increase that base and has really led to sort of strong growth for MACI as we've described. Third component is the unsurpassed clinical data. So MACI is the only product that's demonstrated superiority versus microfracture, which is the FDA-required comparator in these studies in a randomized controlled Phase III clinical study. And the basis of the endpoints are basically pain and function scales and demonstrated statistically significantly greater improvements on both those scales versus microfracture. And importantly, on the right-hand side, the response rate, which meant you had a clinically meaningful improvement on both pain and function, was about 90% with MACI, which is very high for any kind of therapeutic. We also published a couple of years ago, there was an extension study for 3 years. The pivotal study was a 2-year outcome, then these patients were followed for another 3 years. And you can see that even out to 5 years, the improvements that we're seeing at 2 years were carried through. And again, we'd expect that to be the case. And now we're starting to see 10-year data for MACI published from outside the United States showing the durability of the repair. And then finally, because MACI is a much less invasive procedure, the rehab is much shorter. So there's published data around patients being back to weight-bearing within 6 to 8 weeks versus almost twice that with Carticel and that carries through the whole rehab process. So it's really that expanded label, the simplicity of the procedure, the unsurpassed clinical data and the short rehab that's really driving the growth for MACI. And there's a very large addressable market, as I mentioned earlier. We did a very comprehensive quantitative market assessment a couple of years ago with a firm called Health Advances that does a lot of work in this area. And it's well understood that there's about 0.75 million cartilage repair procedures that are done in the U.S. each year. And when we asked the surgeons and the assessment included over 200 orthopedic surgeons, what percentage of the patients they see fall within the MACI label? Well, obviously, it was a very high percentage because the MACI label is broad. And so over 300,000 of those patients would fit within the MACI label. But we know that surgeons have certain profiles of patients in mind in this market. And we asked, and this is where we diverted from a normal addressable market process, but of these patients that fit within a label, who would you deem to be clinically appropriate for MACI based on the age of the patient, their ability to do rehab, the size and location of the defect, et cetera. And that really cut the addressable market down by about 2/3 to 125,000 patients. And then because insurance companies typically require a defect to be 1.5 or 2 square centimeters or greater, you take another cut for that. And we end up with about 60,000 patients as the addressable market for MACI in the U.S. So less than 10% of the procedures that are done each year, but at the price point I mentioned earlier, it makes for a very large commercial opportunity for us, which obviously supports the growth we've seen over the past several years. So besides -- to make sure we actually capture this opportunity, we expanded our sales force last year from about 49 to 76 territories. During the pandemic, obviously, like other companies in the industry, we ended up using virtual platforms to connect with surgeons that were very productive for us, whether it was VuMedi, KOL Cast, Doximity, so very productive way to train surgeons through peer-to-peer method, same thing with patients. But one of the important parts from this slide is really just the great access for MACI. So all the major plans have a medical policy that provides access for MACI, so nearly 90% of covered commercial lives in the U.S. have access to MACI. And about 91% of all cases that are submitted for approval are approved, so it's a really strong reimbursement for MACI, which has also helped fuel its growth. So turning quickly to our burn care franchise. I'll just start with a quick background where the treatment pathway for these severe burn patients is really determined by the size of the injury and the depth of the burn. And really for these severe patients, which are the patients that we're focused on, if you have a full thickness burn of any size, so that means that the burn goes through the top layer or epidermal layer of the skin, through the dermal layer of the skin and all the way down to the muscle fat or bone, if you have a full thickness burn of any size, you'll typically be treated at 1 of the 140 specialized burn centers in the U.S. Or if you have a partial thickness burn, which means it goes through the epidermal layer and partway through the dermal layer of 10% or greater, you'll be treated at 1 of these centers as well pursuant to the ABA guidelines. So those are the kind of patients that we are focused on. And for those patients, there's really 2 components of their treatment. First, once patients are stabilized, et cetera, is to, as I mentioned earlier, remove the dead tissue or eschar. And then you have to determine how you're going to cover the wound. And so those are the 2 aspects that we focus on. So in terms of eschar removal, the reason getting rid of that eschar early is critical in the burn care treatment pathway is, number one, that dead tissue is a source of bacterial infections and so on and why these patients often end up with sepsis. So you need to get rid of it quickly for that reason. And then there's an aspect or dynamic around burn progression. So your body has an inflammatory response to the burn tissue and it actually leads to further burn progression. So it's very important to remove the eschar as quickly as possible. And right now, the standard of care for eschar removal is surgical. So essentially, you take a knife and you slice away and excise that burnt tissue. And the issue there is that burns are 3-dimensional so they're variable depth, and you're taking a 2-dimensional knife to remove that eschar. So there's a lot of healthy tissue loss. The only reason -- or the way you know that you've removed all the eschar is because you hit healthy tissue. So you lose a lot of healthy tissue. There's a lot of blood loss. And so there's clearly an unmet need for a selective and effective eschar removal. And that's where NexoBrid comes in. So NexoBrid is a product that was developed by a company in Israel called MediWound. It's approved in the EU and other countries around the world. As I mentioned, it's been designated an orphan biologic in the U.S. MediWound reported out on the Phase III study, which met its primary endpoint and all secondary endpoints. A BLA was filed in the middle of last year, accepted by the FDA with a PDUFA date at the end of June. And as I mentioned earlier, great exclusivities in terms of biologic and orphan exclusivities. And importantly, the U.S. Biomedical Advanced Research and Development Authority, or BARDA, has funded the development of this program. And really what BARDA is concerned about is a mass burn casualty event in the U.S. and how to be prepared for that. So you can imagine if there was any kind of event in the U.S., a large -- a dirty bomb in a city in the U.S. and you have hundreds or thousands of burn patients, if the standard of care for removing that eschar is surgical, you don't have enough either burn surgeons or operating room to be able to handle that kind of patient. So that is why BARDA is so -- has funded the program and is currently stockpiling NexoBrid for national preparedness. So just in terms of the product itself, so NexoBrid is a mixture of proteolytic enzymes that for somehow are able to recognize proteins that are denatured through thermal burns. And so it is topically applied at the bed side. Over a 4-hour period, it will dissolve the eschar but leave the healthy tissue intact, which is amazing. And you can see that in the images below. So when that patient presented with the burn on the arm, it's really hard to tell how deep it is, where the margins are. And when the patient was treated with NexoBrid, you could see they were wearing a watch and that healthy tissue was spared. So we think that NexoBrid will provide a significant improvement in the standard of care when it is approved in the U.S. So as I mentioned earlier, once you've removed the eschar, you have to figure out how you're going to then cover the wound so that you achieve wound closure. For full thickness burns, as I mentioned, Epicel is the only approved permanent skin replacement in the U.S. for adult and pediatric patients. And so it's a very important product because when you are treating these catastrophic burn patients, and we routinely treat patients with 70%, 80%, 90% body surface area burns, they really don't have enough healthy tissue for the other alternative, which is autografting. So you take a dermatome and take off a layer of skin, run it through a measure typically so that you can cover more area. And again, there's just -- when you get to that size of a burn, there's just not enough healthy tissue to be able to treat these patients. So it's a very important product in the burn care world. And it's made much like MACI, where there are 2 posted stamp-sized biopsy as a healthy skin that are sent to our facility here in Cambridge. We isolate the keratinocytes, which are the predominant cell in the epidermal layer of the skin. We culture them in proprietary media. And over the course of a few weeks, there's a sheet of cells, 2 to 8 cells thick that are formed. We put petroleum gauze on the back of those, put them in their final containers, and they're shipped overnight typically to burn centers around the country. So skin being an organ, it's much like an organ transplant. And at the site, obviously, the wound bed is prepared but then the grafts are placed on the patient. 7 to 10 days later in a takedown procedure, the petroleum gauze is removed and the healthy skin is exposed. So really a remarkable concept to be able to take 2 small posted stamp-sized biopsies and a few weeks later, be able to cover these catastrophic wounds for these patients. And there is a profound survival benefit. So this data was published a couple of years ago in the Journal of Burn Care and Research. That basically showed that at every decile, which is how these patients are sort of managed burn, there's a profound safe survival benefit with MACI -- or Epicel, excuse me, compared to standard of care. So a very important product that we're very pleased to be able to provide to an increasing number of patients. So in terms of the addressable market for our burn care franchise, there's about 0.5 million burns in the U.S. each year. About 40,000 of these patients are hospitalized. And there's about 1,500 of those patients that fall within the Epicel label of 30% or greater body surface area burns. But we're typically treating 40% and above. And there's really only 600 to 800 of those patients each year, so less than 2% of the burn patients constitute the addressable market for Epicel. But again, at the price point, it makes for a nice $100 million-plus market opportunity. The great thing about NexoBrid is not only is it synergistic from a treatment care pathway perspective, but virtually all of those patients who are hospitalized are going to have some sort of debridement or eschar removal. And so we've termed it that we'll be able to play at the top of the funnel, right, where most of these patients will constitute eligible patients for NexoBrid. at a relatively conservative $5,000 per patient, that would lead to a $200 million-plus market opportunity. So triples our market opportunity for the burn care franchise, certainly justifies expanding our footprint, which is what we're in the process of doing in terms of our commercial efforts. And so again, very excited to have an opportunity to bring NexoBrid to market upon approval. So we think we've positioned Vericel very well for long-term success, having built an innovative portfolio, demonstrated sustainable top-tier revenue growth and unique profitability profile at the scale, strong balance sheet that we think this portfolio will lead to really strong revenue and profit growth in the years ahead. But in addition to that, we continue looking at additional business development efforts. So we really are focused on 3 areas: number one is building out our franchises around our core products, MACI and Epicel an episode just like we did bringing in NexoBrid. And that's really where we spend the preponderance of our time. But we are, to my knowledge, one of the only companies with 2 approved cell therapies products in the U.S. So we have a tremendous amount of expertise in the development, manufacture and importantly, commercialization of these kinds of products. So we often look at opportunities for new verticals that would fit our profile, which is high on the innovation scale, obviously a similar financial profile to our current portfolio in terms of strong price points and concentrated call points as well. And so we do look at those areas as well, albeit there are fewer and further between. So Chris, I'm going to stop there and I think this gave, hopefully, a pretty comprehensive overview of the company and sort of where we are and where we're going. And to the extent you or anyone listening in have any questions, I'd like to leave a few minutes for that as well.

Thanks, Nick. Now that was a tremendous overview. And in my introduction, I referenced some of these businesses, which I recall from Since I'm 100 years old, going back to the days of even legacy ownership and the folks that were at Genzyme, right, where you discussed so many of the products, including like Carticel. And what always struck me was this whole notion that you were -- your kind of purchasing decision-maker was an orthopedic surgeon, typically, right sports medicine, typically very fast, with procedures and hardware, and you're trying to introduce kind of a biologic tissue type therapy, which is more nuanced, et cetera. And it seems to me that whenever you have that kind of a customer, and this is going to come across maybe a little bit insulting, but the ideal thing whenever you have a procedure and technique is required where you have a product where it's like KISS, Keep It Simple, Stupid. So there's someone who perhaps wasn't as skilled in the arts, could still get a very good outcome. Would you say that the evolution from Carticel to MACI, that there's been that evolution where the product becomes less easy to screw up and less -- and it becomes so that you can get a good outcome. And I would think that training is still a very important part of that still.

Yes. Well, I think that we see often in the med tech industry, whether it's cardiovascular stents, when you take a highly invasive procedure and make it minimally invasive, that's a big driver for kind of this expanding utilization by other surgeons. And then, yes, as I referenced earlier, Carticel was very, very technically demanding, right? That is microsutures and taking periosteal harvest, that is not what orthopedic surgeons typically would do. And so when you supply them a highly effective product that they simply cut to the size of a defect and glue in, that does kind of align with your keep it simple concept, right? And so yes, it -- I mean, that's -- there's no doubt that, that is what's driving the growth. And it's really interesting. We -- in 2019, we basically started with 3,000 targets. And as we did a sales force sizing and we were able to purchase LexisNexis data on high-volume cartilage repair surgeons, we expanded to 5,000 surgeons. We expanded our sales force. But even in 2019, when we were calling on those initial 3,000 surgeons, we got biopsies from about 1,400 surgeons and that had grown 25% in 2019. So 3 years into a launch and you're still getting that kind of surgeon adoption as this was rolling out. That took a little bit of a pause in 2020 during COVID, but we still grew the number of biopsying surgeons to about 1,500. And we're right back on that 20-plus percent growth for this year, which is what we have guided to in terms of the number of surgeons. So we expect you can do the math, 20% growth at least. You're up to 1,800-plus surgeons, and we expect that to grow over the next several years. So yes, I think as people or surgeons use this product and become aware of it and its great outcomes, yes, we're seeing great adoption. And just in terms of training and to sort of reinforce the simplicity, surgeons can just train online. So this is not like Carticel where they had to fly into this facility. We trained in cadaver labs on how to do this. They can train online. It is a simple procedure.

Right. Yes, no, I was going to mention. I think for our investor audience broadly, one of the themes that everyone's been paying attention to is trying to understand the dynamics of training, access to decision-makers in terms of sales points and actually doing procedures. It's been one of the things that I think our Medtech group, in particular, has been trying to monitor. Can you talk to what the procedure volumes were like? And we look at everything from the number of people who aren't seeing their psychiatrists or the number of deferrable semi-elective procedures. Now these are people who are qualifying for your product because there's some degree of conicity This is not an acute injury, right? They have to meet certain size criteria. I think you talked about the insurance companies have like 1.5- to 2-centimeter lesion kind of threshold for approving repairs. So these aren't things that pop up. These people are suffering from paying discomfort and getting to a point where they want to intervene, right, oral medicines, maybe the HA injections are no longer working and stuff. What did you see through COVID as people were hunkering down, operating and closing. What was the trajectory for your experience?

Yes. So we had -- I guess, what was we would refer to as a very strong V-shaped recovery. Even within the second quarter, once things opened up and then certainly in the third and fourth quarter, and as I mentioned earlier, we had our highest volumes ever for MACI in 2020. And that you mentioned a couple of aspects. One is the patient profile. So these are young, our typical patient, both in the pivotal study and in the publication last year that -- or manuscript that was published. The average age is about 35, so it's a bell-shaped curve from the teens up into the early 50s, but these are younger patients, right? So they were probably less susceptible to serious COVID disease, and you were in pain, right? These are painful knee injuries. And so that was 1 dynamic, plus close -- 98% or so of these surgeries were done are done in outpatient surgery centers. The only reason you have to stay overnight is if there's a concomitant procedure that requires that. So these were -- when there were restrictions on hospital surgeries, et cetera, didn't really apply to MACI once you were out of that first April wave because those were really directed towards an overnight hospital stay. So yes, MACI really did well. Fourth quarter, we had the highest number of surgeons ever taking biopsies, highest biopsies ever, and that carried into the first quarter of this year.

Right, no. And so I mean, to a certain extent, perhaps Vericel is a reopening trade as all these want-to-be weekend warriors get back out there a little bit excited at hunkering down and then more injury. So remind us now on the burn side of the business, the product portfolio that you have with, I'm going to mispronounce it, is it NexoBrid? Is there anything that you need to do with your commercial organization and interface there to prepare how that's going to do well in the context of that?

Yes. And the great part is, because BARDA is funding the development and obviously stockpiling NexoBrid ahead of its approval, they're also funding an expanded access study because they want burn centers to remain trained on the use of NexoBrid during this period. So that's a very important positive aspect. In terms of our commercial efforts, we had, as I mentioned, about 11 people in the field with a plan to go to about 21 to prepare for the NexoBrid approval. We mentioned on our first quarter earnings call that because of inspection issues and FDA's ability to potentially review additional CMC information that they requested, that it's our belief is there's likely to be a delay in the approval. Nonetheless, Epicel is doing so well that we're moving forward with our expansion plans in a staged manner because again, you have Epicel that was up 65% in the fourth quarter, 54% in the first quarter, and it's just seen a resurgence that has been tremendous. So we want to make sure we're capturing that and making sure we're bringing Epicel to as many patients as possible.

Right. And I think probably it's helpful and important for investors to understand that the dynamics of this treatment market, you're talking about patients who have had greater than 30% or 40% total body surface area burns off of these are patients for burn centers. I think about where you guys are located. I did my anesthesia residency at Mass General, and so the was like an intense area of focus. So you have a concentrated area. And what that translates to -- for you and your commercial business is that you're able to have a very focused kind of sales force so that you don't have any...

Absolutely. Yes, there's, like I mentioned, only 140 burn centers in the U.S. so we'll end up with 11 territories, a dozen-ish centers per sales representatives, so certainly manageable from that standpoint.

Yes. We're into a little overtime, but I did want to emphasize 1 last point, which was that you started your presentation talking about the barriers to entry. And tissue and cell therapy products for these indications, it's not like there's a patent with a cliff. There are so many dimensions, including the proceed through the process that are inherently making it difficult. Maybe you can make that point a little bit more emphatic about the sustainability of these franchises in that regard.

Yes. When we think about competition in a couple of ways, one is like products. And we were very fortunate to be able to achieve MACI approval in the U.S. on the basis of a single European study and leveraged the Carticel data. So at that point in time, it really allowed us to leapfrog the competition, get to market probably 4 or 5 years faster, obviously not have to do an additional study. So that was a huge win for us back in 2016 when the product was approved. And since that time, there was 1 other potential like competitor that didn't beat their endpoint and is no longer around. There's only 1 other product in development that started probably 6 or 7 years ago on a Phase III study. These are tremendously difficult studies to enroll because if you have a large cartilage defect and you go see a surgeon, they're going to say, "I can treat you with MACI or a MACI-like product, but you might be randomized to microfracture, right?" So you don't know if the product itself works and you might be randomized to microfracture. So you wouldn't do that unless, for instance, you're uninsured or have a high deductible co-pay or something else that might drive you there. So these Phase III studies take years to get through, if you can even get through. And then once you launch, you're essentially coming to product -- or coming to market, anything that would ever get to market will be a decade after us, right? And with an undifferentiated product, where you take a biopsy and then 6 months later, it might turn into an implant, so you have to invest in a commercial and manufacturing infrastructure, and you're probably not going to see $1 of revenue for quarters, right? So it will be a challenge for anybody to come in and try to compete with us with a MACI-like product.

Yes. No, all of these very nuanced but very important barriers to entry, that's the definition of franchise. So Nick, thank you very much for joining us. It's been great learning about Vericel and wish you all the best. Thank you, everyone, for joining us.

Thanks so much. Appreciate it.