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What changed in Vericel Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Vericel Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+421 added−431 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-23)

Top changes in Vericel Corp's 2023 10-K

421 paragraphs added · 431 removed · 333 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

145 edited+28 added−34 removed147 unchanged
Biggest changeDevelopment of NexoBrid in North America will include discussion in 2023 with FDA on requirements for a supplemental BLA to expand the indication of NexoBrid to include pediatric patients. Under our license agreement with MediWound, NexoBrid has been manufactured for BARDA under an emergency use authorization since 2020.
Biggest changeAdditionally, under our license agreement with MediWound, NexoBrid has been manufactured for the U.S. Biomedical Advanced Research and Development Authority (“BARDA”) under an emergency use authorization since 2020. BARDA has procured quantities of NexoBrid from MediWound, for use as a medical countermeasure in the event of a mass casualty emergency in the U.S. involving thermal burns.
FDA review and approval of the BLA is required before marketing of the product may begin in the U.S.
FDA review and approval of the BLA is required before the marketing of the product may begin in the U.S.
The FDA has agreed to certain performance goals in the review of BLAs, including to review 90 percent of standard BLAs within 10 months from the date the application is accepted for filing. Although the FDA often meets its user fee performance goals, the FDA can extend these timelines as warranted.
The FDA has agreed to certain performance goals in its review of BLAs, including to review 90 percent of standard BLAs within 10 months from the date the application is accepted for filing. Although the FDA often meets its user fee performance goals, the FDA can extend these timelines as warranted.
Humanitarian Device Exemption Unless an exemption applies, each medical device commercially distributed in the U.S. requires either a substantial equivalence determination under a premarket notification submission pursuant to Section 510(k) of the FFDCA, or an approval of a premarket approval application (“PMA”).
Humanitarian Device Exemption Unless an exemption applies, each medical device commercially distributed in the U.S. requires either a substantial equivalence determination under a premarket notification submission pursuant to Section 510(k) of the FFDCA, or approval of a premarket approval application (“PMA”) application.
Except in certain circumstances, HUDs approved under an HDE cannot be sold for an amount that exceeds the costs of research and development, fabrication, and distribution of the device (i.e., for profit).
Except in certain circumstances, HUDs approved under an HDE cannot be sold for profit, i.e. for an amount that exceeds the costs of research and development, fabrication, and distribution of the device.
We cannot be certain that we, MediWound, or our present or future suppliers will be able to comply with the cGMP and other FDA regulatory requirements.
We cannot be certain that we, MediWound, or our present or future suppliers will be able to comply with the cGMP requirements and other FDA regulatory requirements.
Other post-approval requirements applicable to biological products include reporting of cGMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, monitoring and reporting of adverse effects, reporting updated safety and efficacy information, periodic reporting requirements and complying with electronic record and signature requirements.
Other post-approval requirements applicable to biological products include the reporting of cGMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, monitoring and reporting of adverse effects, reporting updated safety and efficacy information, periodic reporting requirements and complying with electronic record and signature requirements.
For product manufactured outside the U.S., failure to comply with applicable regulatory requirements, including cGMPs, could result in FDA placing the manufacturing facility on an import alert, meaning that the product cannot be imported into the U.S. until the non-compliance with regulatory requirements is corrected to FDA’s satisfaction.
For product(s) manufactured outside the U.S., failure to comply with applicable regulatory requirements, including cGMPs, could result in FDA placing the manufacturing facility on an import alert, meaning that the product(s) cannot be imported into the U.S. until the non-compliance with regulatory requirements is corrected to FDA’s satisfaction.
Biosimilars are biological products which are “highly similar” to a previously approved biologic product or “reference product” and for which there are no clinically meaningful differences between the biosimilar product and the reference product in terms of the safety, purity, and potency as shown through analytical studies, animal studies and a clinical study or studies.
Biosimilars are biological products which are “highly similar” to a previously approved biologic product or “reference product” and for which there are no clinically meaningful differences between the biosimilar product and the reference product in terms of safety, purity, and potency as shown through analytical studies, animal studies and a clinical study or studies.
For the FDA to approve a biosimilar product as interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product and, for products administered multiple times, the biosimilar and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
For the FDA to approve a biosimilar product as interchangeable with the reference product, the agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product and, for products administered multiple times, the biosimilar and the reference product may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
Other Healthcare Laws In the U.S., the research, manufacturing, distribution, sale and promotion of biological products and devices are subject to regulation by various federal, state, and local authorities in addition to the FDA, including the Centers for Medicare & Medicaid Services, other divisions of the U.S.
Other Healthcare Laws In the U.S., the research, manufacturing, distribution, sale and promotion of biological products and devices are subject to regulation by various federal, state, and local authorities, including (in addition to the FDA), the Centers for Medicare & Medicaid Services, other divisions of the U.S.
At a federal level, President Biden signed an Executive Order on July 9, 2021 and again on October 14, 2022, affirming the administration’s policy to (i) support legislative reforms that would lower the prices of prescription drug and biologics, including by allowing Medicare to negotiate drug prices, by imposing inflation caps, and, by supporting the development and market entry of lower-cost generic drugs and biosimilars; (ii) support the enactment of a public health insurance option, and (iii) take further steps to reduce drug prices beyond the changes approved by Congress in the IRA.
At a federal level, President Biden signed an Executive Order on July 9, 2021 and again on October 14, 2022, affirming the administration’s policy: (i) to support legislative reforms that would lower the prices of prescription drug and biologics, including by allowing Medicare to negotiate drug prices, by imposing inflation caps, and, by supporting the development and market entry of lower-cost generic drugs and biosimilars; (ii) to support the enactment of a public health insurance option, and (iii) to take further steps to reduce drug prices beyond the changes approved by Congress in the IRA.
FDA sanctions could include refusal to approve pending applications, license revocation, withdrawal of an approval, clinical hold, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties.
FDA sanctions could include refusal to approve pending applications, license revocation, withdrawal of an approval, clinical hold, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or other civil or criminal penalties.
The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving a BLA, the FDA will typically inspect one, or more, clinical sites to assure compliance with GCPs. Additionally, the FDA typically will inspect the facility or facilities at which the biologic is manufactured as part of a pre-license inspection.
The FDA is not bound by the recommendation of the advisory committee, but it generally follows such recommendations. Before approving a BLA, the FDA will typically inspect one, or more, clinical sites to assure compliance with GCPs. Additionally, the FDA typically will inspect the facility or facilities at which the biologic is manufactured as part of a pre-license inspection.
Phase 3 studies are performed after preliminary evidence suggesting effectiveness of the product has been obtained, and are intended to establish the overall benefit-risk relationship of the investigational product, and to provide an adequate basis for product approval and labeling. Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval.
Phase 3 studies are performed after preliminary evidence suggesting effectiveness of the product has been obtained and they are intended to establish the overall benefit-risk relationship of the investigational product, and provide an adequate basis for product approval and labeling. Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval.
Although we would not submit claims directly to payers, manufacturers can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label.
Although we would not submit claims directly to payers, manufacturers can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product for off-label uses.
Epicel was approved by FDA’s Center for Devices and Radiological Health, as an HDE medical device in 2007, but now is regulated by CBER under the same medical device regulations. MACI, approved in 2016, is regulated by CBER as a combination cell therapy/device product and required an approved BLA to be marketed in the U.S.
Epicel was approved by FDA’s Center for Devices and Radiological Health (“CDRH”), as an HDE medical device in 2007, but now is regulated by CBER under the same medical device regulations. MACI, approved in 2016, is regulated by CBER as a combination cell therapy/device product and required an approved BLA to be marketed in the U.S.
These requirements, if imposed, will add to the cost of regulatory compliance and the cost of selling, due to complex distribution and restricted commercial operations. Product approvals may be withdrawn if compliance with applicable regulations is not maintained or if safety issues are identified during routine safety monitoring following commercialization.
These requirements, if imposed, add to the cost of regulatory compliance and the cost of selling, due to complex distribution and restricted commercial operations. Product approvals may be withdrawn if compliance with applicable regulations is not maintained or if safety issues are identified during routine safety monitoring following commercialization.
With respect to NexoBrid, we will rely on MediWound to source supplies for the manufacture and to manufacture the product to support our commercialization efforts in the U.S. Manufacturers of our products are required to comply with applicable requirements in the cGMP regulations, including quality control and quality assurance and maintenance of records and documentation.
With respect to NexoBrid, we will rely on MediWound to source supplies for the manufacture and to manufacture the product to support our commercialization efforts in the U.S. Manufacturers of our products are required to comply with applicable cGMP requirements, including quality control, quality assurance and maintenance of records and documentation.
Post-approval requirements can be met through: • Clinical evidence, clinical studies, patient registries, or other sources of real-world evidence, such as electronic health records; • The collection of larger confirmatory data sets; or • Post-approval monitoring of all patients treated with such therapy prior to approval of the therapy.
Instead, post-approval requirements can be met through: • Clinical evidence, clinical studies, patient registries, or other sources of real-world evidence, such as electronic health records; • The collection of larger confirmatory data sets; or • Post-approval monitoring of all patients treated with such therapy prior to approval of the therapy.
Biological product and medical device manufacturers and other entities involved in the manufacture and distribution of approved biological products and devices are required to register their facilities with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws.
Biological product and medical device manufacturers and other entities involved in the manufacture and distribution of approved biological products and devices are required to register their facilities with the FDA and certain state agencies and they are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws.
For BLAs, changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission of a new BLA or BLA supplement and FDA approval before the change can be implemented.
For BLAs, changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission of a new BLA or BLA supplement and FDA approval of the same before the change can be implemented.
Orphan drug exclusivity, which would most likely run concurrently with the exclusivity, if any, received from the time of first licensure of a reference product, does not prevent the FDA from approving a different biologic for the same disease or condition, or the same biologic for a different disease or condition.
Orphan drug exclusivity, which would most likely run concurrently with the marketing exclusivity, if any, received from the time of first licensure of a reference product, does not prevent the FDA from approving a different biologic for the same disease or condition, or the same biologic for a different disease or condition.
The federal False Claims Act prohibits anyone from, among other things, knowingly presenting, or causing to be presented, for payment to federal programs (including Medicare and Medicaid) claims for items or services, including medical devices or biological products, that are false or fraudulent.
The federal False Claims Act prohibits anyone from, among other things, knowingly presenting, or causing to be presented, for payment by federal programs (including Medicare and Medicaid) claims for items or services, including for medical devices or biological products, that are false or fraudulent.
Similarly, there are a number of post-marketing requirements for devices, including medical device reporting regulations that require manufacturers to report to the FDA if a device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; and corrections and removal reporting regulations that require manufacturers to report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FFDCA that may present a risk to health.
Similarly, there are a number of post-marketing requirements for devices, including: 1) medical device reporting regulations that require manufacturers to report to the FDA if a device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; and 2) corrections and removal reporting regulations that require manufacturers to report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FFDCA that may present a risk to health.
An HDE application is a premarket approval application that seeks an exemption from the effectiveness requirement that would otherwise apply to the application. FDA approval of an HDE application authorizes the applicant to market the device. To obtain approval for a HUD, an HDE application is submitted to the FDA.
An HDE application is a premarket approval application that seeks an exemption from the effectiveness requirement that would otherwise apply to the application. FDA approval of an HDE application authorizes the applicant to market the device. To obtain marketing approval for a HUD, an HDE application is submitted to the FDA.
An HDE application is similar in both form and content to a PMA application in that the applicant must demonstrate a reasonable assurance of safety, but in an HDE application, the applicant seeks an exemption from the PMA requirement of demonstrating a reasonable assurance of effectiveness.
An HDE application is similar in both form and content to a PMA application in that the applicant must demonstrate a reasonable assurance of safety, but in an HDE application, the applicant seeks an exemption from the PMA requirement to demonstrate reasonable assurance of effectiveness.
Biosimilars The Patient Protection and Affordable Care Act, or the Affordable Care Act (“ACA”), includes the Biologics Price Competition and Innovation Act of 2009. That Act created an approval pathway authorizing the FDA to approve biosimilars and interchangeable biosimilars.
Biosimilars The Patient Protection and Affordable Care Act (“ACA”), includes the Biologics Price Competition and Innovation Act of 2009. That Act created an approval pathway authorizing the FDA to approve biosimilars and interchangeable biosimilars.
The FDA regulatory review and approval process is complex and can result in requests for additional data, increased development costs, and time to market delays, or they could preclude us altogether from bringing to market new products. The FDA may also require post-marketing studies and risk evaluation and mitigation strategies (“REMS”) as conditions of approval.
The FDA regulatory review and approval process is complex and can result in requests for additional data, resulting in increased development costs, and time to market delays, or could preclude us altogether from bringing to market new products. The FDA may also require post-marketing studies and risk evaluation and mitigation strategies (“REMS”) as conditions of approval.
The testing, preparation of necessary applications and processing of those applications by the FDA is expensive, can take several years to complete, and could have uncertain outcomes.
The testing, preparation of necessary applications and processing of those applications by the FDA is expensive, can take several years to complete, and can have uncertain outcomes.
Among policy makers and payors in the U.S. and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality, and/or expanding access. In the U.S., the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.
Among policy makers and payers in the U.S. and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality, and/or expanding access. In the U.S., the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.
EU pharmaceutical legislation requires Marketing Authorization Holders (“MAH”) in the EU to comply with the Pediatric Investigational Plan (“PIP”) that is in place as a post-authorization commitment agreed with the Pediatric Committee (“PDCO”) within the European Medicines Agency (“EMA”) to undergo an initial license renewal procedure within five years after initial market authorization.
EU pharmaceutical legislation requires a Marketing Authorization Holder (“MAH”) in the EU to comply with the Pediatric Investigational Plan (“PIP”) that is in place as a post-authorization commitment agreed to with the Pediatric Committee (“PDCO”) within the European Medicines Agency (“EMA”) to undergo an initial license renewal procedure within five years after initial market authorization.
To assure cGMP, GTP and GCP compliance, an applicant must expend significant time, money, and effort in the areas of training, record keeping, production, and quality control. After the FDA evaluates the BLA and the manufacturing facilities, it issues either an approval letter or a complete response letter.
To assure compliance with cGMP, GTP and GCP requirements, an applicant must expend significant time, money, and effort in the areas of training, record keeping, production, and quality control. After the FDA evaluates the BLA and the manufacturing facilities, it issues either an approval letter or a complete response letter.
The period of patent term restoration is generally one-half the time between the effective date of an IND (falling after issuance of the patent) and the submission date of a BLA, plus the time between the submission date of the BLA and the approval of that application, except that the review period is reduced by any time during which the applicant failed to exercise due diligence.
The period of patent term restoration is generally one-half the time between the effective date of an IND (falling after issuance of the patent) and the submission date of a BLA, plus the time between the submission date of the BLA and the approval of that application, except that the review period is reduced by any time during which the applicant failed to exercise due diligence in seeking approval of the application.
Additionally, devices must comply with the cGMP requirements that are set forth in the FDA’s Quality System Regulation (QSR), including complaint handling and corrective and preventative actions. After a BLA is approved, the biological product also may be subject to official lot release.
Additionally, devices must comply with the cGMP requirements that are set forth in the FDA’s Quality System Regulation (“QSR”), including complaint handling and corrective and preventative actions. After a BLA is approved, the biological product also may be subject to official lot release.
Factors that payors consider in determining reimbursement are based on whether the product is (i) a covered benefit under its health plan; (ii) safe, effective, and medically necessary; (iii) appropriate for the specific patient; (iv) cost-effective; and (v) neither experimental nor investigational.
Factors that payers consider in determining reimbursement are based on whether the product is (i) a covered benefit under its health plan; (ii) safe, effective, and medically necessary; (iii) appropriate for the specific patient; (iv) cost-effective; and (v) neither experimental nor investigational.
Over the past four years, a single quarter has ranged from as high as 37% to as low as 17% of annual volumes. Seasonal sales patterns and other variations related to our revenue recognition may cause significant fluctuations in our results of operations and cash flows.
Over the past five years, a single quarter has ranged from as high as 37% to as low as 17% of annual volumes. Seasonal sales patterns and other variations related to our revenue recognition may cause significant fluctuations in our results of operations and cash flows.
When these patents and data exclusivity expire, our opportunity to establish or maintain product revenue could be substantially reduced. 10 Table of Contents Since 2019, we have had exclusive license and supply agreements with MediWound to commercialize NexoBrid in North America.
When these patents and data exclusivity expire, our opportunity to establish or maintain product revenue could be substantially reduced. 10 Table of Contents Since 2019, we have held exclusive license and supply agreements with MediWound to commercialize NexoBrid in North America.
If the FDA determines that a HUD meets the eligibility criteria, the HUD is permitted to be sold for profit after receiving HDE approval as long as the number of devices distributed in any calendar year does not exceed the Annual Distribution Number (“ADN”) for the device.
If the FDA determines that a HUD meets the eligibility criteria, the HUD is permitted to be sold for profit after receiving HDE approval so long as the number of devices distributed in any calendar year does not exceed the FDA-determined Annual Distribution Number (“ADN”) for the device.
Because we commercialize products that could be reimbursed under a federal healthcare program and other governmental healthcare programs, we have developed and maintained a comprehensive compliance program that establishes internal controls to facilitate adherence to the rules and program requirements to which we are subject.
Because we commercialize products that could be reimbursed under a federal healthcare program and other governmental healthcare programs, we have developed and maintain a comprehensive compliance program that establishes internal controls to facilitate adherence to the rules and program requirements to which we are subject.
For products that are regulated as biologics, the FDA requires: (i) nonclinical animal testing to establish a safety profile and/or a starting dose for initiation of clinical trials in humans; (ii) submission to the FDA of an IND application, which must become effective prior to the initiation of human clinical trials; (iii) adequate and well-controlled clinical trials to demonstrate the safety, purity and potency, or effectiveness, of the product for its intended use; (iv) submission to the FDA of a BLA; and (v) review and approval of the BLA, including pre-license inspections conducted by FDA of the facility that manufacturers the biological product or components of the biological product.
For products that are regulated as biologics, the FDA requires: (i) nonclinical animal testing to establish a safety profile and/or a starting dose for initiation of clinical trials in humans; (ii) submission to the FDA of an IND application, which must become effective prior to the initiation of human clinical trials; (iii) adequate and well-controlled clinical trials to demonstrate the safety, purity and potency, or effectiveness, of the product for its intended use; (iv) submission to the FDA of a BLA; and (v) review and approval of the BLA, including pre-license inspections conducted by FDA of the facilities that manufacture the biological product or components of the biological product.
The War in Ukraine The ongoing war between Russia and Ukraine and the related sanctions and other penalties imposed by countries across the globe against Russia are continuing to create substantial uncertainty in the global economy and have resulted in heightened inflation and supply chain disruptions.
The War in Ukraine The ongoing war between Russia and Ukraine and the related sanctions and other penalties imposed by countries across the globe against Russia are continuing to create substantial uncertainty in the global economy and have contributed to heightened inflation and supply chain disruptions.
This requirement applies upon initiation of a Phase 2 or Phase 3 trial of the investigational drug. Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the physical characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements.
This requirement applies upon initiation of a Phase 2 or Phase 3 trial of the investigational drug. 13 Table of Contents Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the physical characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements.
Regulation of Combination Products in the U.S. Certain products may be comprised of components that would normally be regulated under different types of regulatory authorities and frequently by different centers at the FDA. These products are known as combination products.
Regulation of Combination Products in the U.S. Certain products may be comprised of components that would normally be regulated under different types of regulatory requirements and frequently by different centers at the FDA. These products are known as combination products.
The following Corporate Governance documents are also posted on the Investor Relations section of our website: Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics for Senior Financial Officers, Insider Trading Policy, Special Trading Procedures for Insiders, Board Member Attendance at Annual Meetings Policy, Director Nominations Policy, Shareholder Communications with Directors Policy and the Charters for each of the Committees of the Board of Directors.
The following Corporate Governance documents are also posted on the Investor Relations section of our website: Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics for Senior Financial Officers, Insider Trading Policy, Special Trading Procedures for Insiders, Board Member Attendance at Annual Meetings Policy, Director Nominations Policy, Shareholder Communications with Directors Policy and the Charters for each of the Committees of the Board of Directors. 23 Table of Contents
Failure to comply with these requirements can result in adverse publicity and significant penalties, including the issuance of untitled or warning letters directing a company to correct deviations from FDA standards, corrective advertising, FDA pre-clearance of future advertising and promotional materials, injunctions, and federal and state civil and criminal investigations and prosecutions.
A company’s failure to comply with these requirements can result in adverse publicity and significant penalties, including the issuance of untitled or warning letters directing a company to correct deviations from FDA standards, a requirement to issue corrective advertising, FDA pre-clearance of future advertising and promotional materials, injunctions, and federal and state civil and criminal investigations and prosecutions.
There are multiple other cartilage repair technologies currently being studied in clinical and preclinical studies. Hyalofast ® is a biodegradable hyaluronic acid-based scaffold used in conjunction with autologous concentrated bone marrow aspirate being developed by Anika Therapeutics, Inc. It is currently being studied in a Phase 3 trial that was initiated in 2015.
There are multiple other cartilage repair technologies currently being studied in clinical and preclinical studies. Hyalofast ® is a biodegradable hyaluronic acid-based scaffold used in conjunction with autologous concentrated bone marrow aspirate being developed by Anika Therapeutics, Inc. It is currently being studied in a Phase 3 trial in the U.S. that was initiated in 2015.
While we do not have operations in Russia or Ukraine and do not have exposure to distributors, or third-party service providers in Russia or Ukraine, we are unable to predict the ultimate impact that these actions will have on the global economy or on our financial condition, results of operations, and cash flows as of the date of these consolidated financial statements.
While we do not have operations in Russia or Ukraine and do not have exposure to distributors, or third-party service providers in Russia or Ukraine, we are unable to predict the ultimate impact that these actions 5 Table of Contents will have on the global economy or on our financial condition, results of operations, and cash flows as of the date of these consolidated financial statements.
ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, distribution controls, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS or use of a companion diagnostic with a biologic can materially affect the potential market and profitability of the biologic.
ETASU can include, but are not limited to, special training or certification for prescribing or 14 Table of Contents dispensing, distribution controls, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS (or use of a companion diagnostic with a biologic) can materially affect the potential market and profitability of the biologic.
In addition, many of our smaller potential competitors have formed strategic collaborations, partnerships and other types of joint ventures with larger, well-established industry competitors that afford these companies potential research and development and commercialization advantages in the technology and therapeutic areas currently being pursued by us.
In addition, many of our smaller potential competitors have formed strategic collaborations, partnerships and other types of joint ventures with larger, well-established industry competitors that afford these companies potential research and development and commercialization advantages in the technology and therapeutic areas currently being 21 Table of Contents pursued by us.
A new drug application or BLA for a regenerative advanced therapy may be eligible for priority review or accelerated approval through surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites.
A new drug application or BLA 15 Table of Contents for a regenerative advanced therapy may be eligible for priority review or accelerated approval through surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites.
In addition, our activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information, and other information affecting federal, state, and third-party reimbursement for our products, and the sale and marketing of our products, are subject to scrutiny under this law.
In addition, our 19 Table of Contents activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information, and other information affecting federal, state, and third-party reimbursement for our products, and the sale and marketing of our products, are subject to scrutiny under this law.
Written IND safety reports must be promptly submitted to the FDA and the investigators for serious and unexpected adverse events; any findings from other studies, testing in laboratory animals or in vitro testing that suggests a significant risk for human subjects; or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.
Written IND safety reports must be promptly submitted to the FDA and the investigators for serious and unexpected adverse events; any findings from other studies, testing in laboratory animals or in vitro testing that suggests a significant risk for human subjects; or any clinically important increase in the rate of a serious suspected adverse reactions over that listed in the protocol or investigator’s brochure.
Specifically, in the U.S., the FDA regulates drugs, biologics and medical devices and requires new product approvals or clearances to assure the safety and effectiveness of these products. Governments in other countries have similar requirements for testing and marketing.
Specifically, in the U.S., the FDA regulates drugs, biologics and medical devices and requires new product approvals or clearances to assure the safety and effectiveness of these products. Governments in other countries have similar requirements for testing and 11 Table of Contents marketing.
Employees and Human Capital Resources As of December 31, 2022, we employed approximately 305 full-time employees. A significant number of our management and professional employees have had prior experience with pharmaceutical, biotechnology or medical product companies. None of our employees are covered by collective bargaining agreements, and management considers relations with our employees to be good.
Employees and Human Capital Resources As of December 31, 2023, we employed approximately 314 full-time employees. A significant number of our management and professional employees have had prior experience with pharmaceutical, biotechnology or medical product companies. None of our employees are covered by collective bargaining agreements, and management considers relations with our employees to be good.
Because the FDA has not issued any such regulations, submission of a pediatric assessment is not required for an application to market a product for an orphan-designated indication, and waivers 17 Table of Contents are not needed at this time.
Because the FDA has not issued any such regulations, submission of a pediatric assessment is not required for an application to market a product for an orphan-designated indication, and waivers are not needed at this time.
These trials may be required by the FDA as a condition of approval and are used to gain additional information and data from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. The FDA has express statutory authority to require post-market clinical trials to address safety issues.
These trials may be required by the FDA as a condition of approval to generate additional information and data from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. The FDA has express statutory authority to require post-market clinical trials to address safety issues.
We will need to comply with the terms of such agreements in order to maintain our rights to such patents as we commercialize NexoBrid in 2023. Our efforts to secure our proprietary rights also include our reliance on trade secrets and know-how, which we seek to protect, in part, by confidentiality agreements.
We will need to continue to comply with the terms of such agreements in order to maintain our rights to such patents as we further commercialize NexoBrid in 2024. Our efforts to secure our proprietary rights also include our reliance on trade secrets and know-how, which we seek to protect, in part, by confidentiality agreements.
To help reduce the risk of the introduction of adventitious agents with the use of biological products, the Public Health Service Act emphasizes the importance of 13 Table of Contents manufacturing control for products whose attributes cannot be precisely defined.
To help reduce the risk of the introduction of adventitious agents with the use of biological products, the Public Health Service Act emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined.
Regenerative advanced therapies do not include those HCT/Ps regulated solely under section 361 of the Public Health Service Act and 21 CFR Part 1271. The new program is intended to facilitate efficient development and expedite review of regenerative advanced therapies, which are intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition.
Regenerative advanced therapies do not include those HCT/Ps regulated solely under section 361 of the PHSA and 21 CFR Part 1271. The new program is intended to facilitate efficient development and expedite review of regenerative advanced therapies, which are intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition.
The BLA must include the results of all nonclinical, clinical, and other testing and a compilation of data relating to the quality and manufacture of the product, including, chemistry, manufacture, and controls information demonstrating the safety, purity and potency, or efficacy, of the product. The cost of preparing and submitting a BLA is substantial.
The BLA must include the results of all nonclinical, clinical, and other testing, as well as a compilation of data relating to the quality and manufacture of the product, including, chemistry, manufacturing, and controls (“CMC”) information demonstrating the safety, purity and potency, or efficacy, of the product. The cost of preparing and submitting a BLA is substantial.
Therapies with a Regenerative Medicine Advanced Therapy (“RMAT”) designation will be eligible for accelerated approval through, as appropriate: (i) Surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit; or 15 Table of Contents (ii) Reliance upon data obtained from a meaningful number of sites, including through expansion to additional sites, as appropriate.
Therapies with a Regenerative Medicine Advanced Therapy (“RMAT”) designation will be eligible for accelerated approval through reliance on: (i) Surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit; or (ii) Data obtained from a meaningful number of sites, including through expansion to additional sites, as appropriate.
Some of these, such as Smith and Nephew, plc., Arthrex, Inc. and Zimmer Biomet Holdings, Inc., are well-established and have substantial technical and financial resources compared to ours. However, as cell-based products are only just emerging as viable medical therapies, many of our potential competitors are smaller biotechnology and specialty medical products companies.
Some of these, such as Smith & Nephew, plc, Arthrex, Inc. and Zimmer Biomet Holdings, Inc., are well-established and have substantial technical and financial resources compared to us. 22 Table of Contents However, as cell-based products are only just emerging as viable medical therapies, many of our potential competitors are smaller biotechnology and specialty medical products companies.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH and their respective implementing regulations, including the Final Omnibus Rule published in January 2013, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates, independent contractors, or agents of covered entities, that perform services for them that involve the creation, maintenance, receipt, use, or disclosure of, individually identifiable health information relating to the privacy, security and transmission of individually identifiable health information.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH and their respective implementing regulations, including the Final Omnibus Rule published in January 2013, imposes requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates, independent contractors, or agents that perform services involving the creation, maintenance, receipt, use, or disclosure of, individually identifiable health information relating to the privacy, security and transmission of individually identifiable health information.
Some human cell or tissue products that are intended for implantation, transplantation, infusion, or transfer into a human recipient are regulated solely as human cell, tissue, and cellular and tissue-based products (“HCT/Ps”) and do not require the 11 Table of Contents FDA’s premarket review.
Some human cell or tissue products that are intended for implantation, transplantation, infusion, or transfer into a human recipient are regulated solely as human cell, tissue, and cellular and tissue-based products (“HCT/Ps”) and do not require the FDA’s premarket review.
Some of these state prohibitions apply to the referral of patients for healthcare services reimbursed by any insurer, not just federal healthcare programs such as Medicare and Medicaid.
Some of these state prohibitions apply to the referral of patients for healthcare services reimbursed by any insurer, not just federal healthcare programs like Medicare and Medicaid.
In addition, a provision of the Patient Protection and Affordable Care Act, referred to as the Sunshine Act, requires biological product manufacturers to track and report to the federal government certain payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals in the previous calendar year.
In addition, a provision of the ACA, referred to as the Sunshine Act, requires biological product manufacturers to track and report to the federal government certain payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals in the previous calendar year.
Noncompliance with applicable requirements can result in civil penalties, recalls, injunctions or seizures of products, refusal of the government to approve our product approval applications or to allow us to enter into government supply contracts, withdrawal of previously approved applications and criminal prosecution.
Noncompliance with applicable requirements can result in inspectional observations, FDA warning letters, civil penalties, recalls, injunctions or seizures of products, refusal of the government to approve our product approval applications or to allow us to enter into government supply contracts, withdrawal of previously approved applications and criminal prosecution.
The intent of PREA is to compel sponsors whose products have pediatric applicability to study those products in pediatric populations, rather than ignoring pediatric indications for adult indications that could be more economically desirable. The FDA may grant deferrals for submission of data or full or partial waivers.
The intent of PREA is to compel sponsors whose products have pediatric applicability to study those products in pediatric populations, rather than ignoring pediatric indications in favor 17 Table of Contents of adult indications that could be more economically desirable. Even so, the FDA may grant deferrals for submission of pediatric data or full or partial waivers.
In addition to the preclinical studies and clinical trials, the BLA includes a description of the facilities, equipment and personnel involved in the manufacturing process. A biologics license, which is the product’s approval, is granted on the basis of inspections of the applicant’s facilities.
In addition to describing the preclinical studies and clinical trials of the biologic product, the BLA includes a description of the facilities, equipment and personnel involved in the manufacturing process. A biologics license, which is the product’s approval, is granted on the basis of inspections of the facilities where the product is manufactured.
Another benefit of RMAT designation is that it creates the option to meet post-approval requirements beyond the standard, controlled clinical trial.
Another benefit of RMAT designation is that it creates the option to meet post-approval requirements without having to conduct the standard, controlled clinical trial.
Orphan drug designation must be requested to and granted by the FDA before submitting a BLA. Among the other benefits of orphan drug designation are opportunities for grant funding towards clinical trial costs, tax credits for certain research and a waiver of the BLA application user fee.
Orphan drug designation must be requested by the BLA sponsor and granted by the FDA before the application is submitted. Among the other benefits, orphan drug designation provides opportunities for grant funding towards clinical trial costs, tax credits for certain research and a waiver of the BLA application user fee.
We are currently evaluating the potential for the arthroscopic delivery of MACI to the cartilage defect – a procedure in which a surgeon can evaluate, prepare and treat the defect under direct vision using specialized instruments delivered through a number of smaller incisions or portals.
We are currently focused on the arthroscopic delivery of MACI to the cartilage defect – a procedure in which a surgeon can evaluate, prepare and treat the cartilage defect under direct arthroscopic visualization using specialized instruments delivered through a number of smaller incisions or portals.
Epicel ® (cultured epidermal autografts) is a permanent skin replacement Humanitarian Use Device (“HUD”) for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent of total body surface area (“TBSA”). We also hold an exclusive license from MediWound Ltd. (“MediWound”) for North American rights to NexoBrid ® (anacaulase-bcdb).
Epicel® is a permanent skin replacement Humanitarian Use Device (“HUD”) for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent of total body surface area (“TBSA”). We also hold an exclusive license from MediWound Ltd.
We value diversity of backgrounds and perspectives and our policy is that we do not discriminate based on race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, military and veteran status, sexual orientation or any other protected characteristic as established by federal, state or local laws. 23 Table of Contents Available Information Additional information about Vericel is included on our website, www.vcel.com.
We value diversity of backgrounds and perspectives and our policy is that we do not discriminate based on race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, military and veteran status, sexual orientation or any other protected characteristic as established by federal, state or local laws.
For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may sometimes overlap: • Phase 1—The biological product is initially tested for safety and tolerability. In the case of biological products and those for severe or life-threatening diseases, the initial human testing is generally conducted in healthy patients.
For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may sometimes overlap: • Phase 1—The biological product is initially tested for safety and tolerability. The initial human testing is generally conducted in healthy patients.
Similarly, changes to approved or cleared devices may require FDA’s premarket review. 18 Table of Contents Orphan Drug Under the Orphan Drug Act, the FDA may grant orphan designation to drugs or biologics intended to treat a rare disease or condition, generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or affects more than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making available the drug or biologic in the U.S. for such disease or condition will be recovered from sales in the U.S. of such drug or biologic.
Orphan Drugs Under the Orphan Drug Act, the FDA may grant orphan designation to drugs or biologics intended to treat a rare disease or condition, generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or affects more than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making available the drug or biologic in the U.S. for such disease or condition will be recovered from sales in the U.S. of such drug or biologic.
NexoBrid Our portfolio of commercial products now includes NexoBrid (anacaulase-bcdb), a botanical drug product containing proteolytic enzymes, which was approved by the FDA on December 28, 2022, and is indicated for the removal of eschar in adults with deep partial-thickness and/or full thickness thermal burns.
NexoBrid Our portfolio of commercial-stage products now includes NexoBrid (anacaulase-bcdb), a topically-administered biological product containing proteolytic enzymes. The FDA approved NexoBrid on December 28, 2022, and the product is indicated for the removal of eschar in adults with deep partial-thickness and/or full thickness thermal burns.
Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product and the level of coverage and reimbursement can differ significantly from payor to payor.
Further, one payer’s determination to provide coverage for a product does not assure that other payers will also provide coverage and reimbursement for the product and the level of coverage and reimbursement can differ significantly from payer to payer.
To achieve this objective, we intend to: • Increase MACI revenue by increasing the number of surgeons implanting MACI and the average number of implants per surgeon, seeking to expand the clinical indications for which the MACI procedure is approved, and optimizing the ease of use of the MACI procedure for surgeons through, among other efforts, developing and potentially commercializing an arthroscopic delivery method for MACI; • Increase Epicel revenue by expanding the number of burn centers and surgeons consistently using Epicel; • Develop a new source of revenue from the commercialization of NexoBrid which will be marketed in the U.S. for the removal of eschar; and • Generate positive operating income and cash flow.
To achieve this objective, we intend to: • Increase MACI revenue by increasing the number of surgeons implanting MACI and the average number of implants per surgeon, seeking to expand the clinical indications for which the MACI procedure is approved, and optimizing the ease of use of the MACI procedure for surgeons through, among other efforts, developing and potentially commercializing an arthroscopic delivery method for MACI; • Increase Epicel revenue by expanding the number of burn centers and surgeons consistently using Epicel; • Increase NexoBrid revenue by continuing the successful commercial launch of the product in the U.S. and expanding the number of burn centers, hospitals and physicians consistently using NexoBrid for the removal of eschar; and • Generate positive operating income and cash flow.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf at any time we or a regulatory agency discovers a previously unknown safety concern with a product, such as a serious adverse event of unanticipated severity or frequency that cannot be adequately managed and changes the risk-benefit profile of the product, or there are problems with the facility where the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including suspension of manufacturing, recall, placement of non-U.S. facilities on an import alert, or the withdrawal of the product from the market. 41 Table of Contents The failure by us or one of our suppliers, including MediWound, to comply with applicable legal statutes and regulations administered by the FDA and other regulatory agencies, or the failure to timely and adequately respond to any adverse inspectional or review observations, or product safety issues, could result in, among other things, any of the following enforcement actions: • Untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; • Unanticipated expenditures to address or defend such actions; • Client notifications for repair, replacement, or refund of a product; • Recall, detention or seizure of our products; • Operating restrictions or partial suspension or total shutdown of production; • Denial, refusal or delay of our requests for approval of new products or proposed changes to existing products; • Implementation of operating restrictions; • Withdrawal of product approvals that have already been granted; • Refusal to approve a pending marketing application, such as a BLA or supplements to a BLA submitted by us; • Placement of non-U.S. facilities on an import alert; • Refusal to grant export approval for our products; or • Criminal prosecution.
Biggest changeThe failure by us or one of our suppliers, including MediWound, to comply with applicable legal statutes and regulations administered by the FDA and other regulatory agencies, or the failure to timely and adequately respond to any adverse inspectional or review observations, or product safety issues, could result in, among other things, any of the following enforcement actions: • Untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; • Unanticipated expenditures to address or defend such actions; • Client notifications for repair, replacement, or refund of a product; • Recall, detention or seizure of our products; • Operating restrictions or partial suspension or total shutdown of production; • Denial, refusal or delay of our requests for approval of new products or proposed changes to existing products; • Implementation of operating restrictions; • Withdrawal of product approvals that have already been granted; • Refusal to approve a pending marketing application, such as a BLA or supplements to a BLA submitted by us; • Placement of non-U.S. facilities on an import alert; • Refusal to grant export approval for our products; or • Criminal prosecution.
Failure to meet regulatory requirements and post-marketing commitments and maintain cGMP compliance could result in severe and detrimental regulatory actions, including the loss of marketing approval. The price and sale of any of our products may be limited by health insurance coverage and government regulation.
Failure to meet regulatory requirements and post-marketing commitments and to maintain cGMP compliance could result in severe and detrimental regulatory actions, including the loss of marketing approval. The price and sale of any of our products may be limited by health insurance coverage and government regulation.
Governmental and regulatory actions against us could result in various consequences that could adversely impact our operations, including: 39 Table of Contents • The recall or seizure of products; • The suspension or revocation of the authority necessary for the production or sale of a product; • The suspension of shipments from particular manufacturing facilities, including non-U.S. facilities placed on an import alert; • The imposition of fines and penalties; • The delay of our ability to introduce new products into the market; • Our exclusion or the exclusion of our products from being reimbursed by federal and state healthcare programs (such as military, Medicare, Medicaid, Veterans Administration health programs and/or Civilian Health and Medical Program Uniformed Service, or CHAMPUS); and • Other civil or criminal prosecution or sanctions against us or our officers, directors and employees, such as fines, penalties or imprisonment.
Governmental and regulatory actions against us could result in various consequences that could adversely impact our operations, including: • The recall or seizure of products; • The suspension or revocation of the authority necessary for the production or sale of a product; • The suspension of shipments from particular manufacturing facilities, including non-U.S. facilities placed on an import alert; • The imposition of fines and penalties; • The delay of our ability to introduce new products into the market; 39 Table of Contents • Our exclusion or the exclusion of our products from being reimbursed by federal and state healthcare programs (such as military, Medicare, Medicaid, Veterans Administration health programs and/or Civilian Health and Medical Program Uniformed Service, or CHAMPUS); and • Other civil or criminal prosecution or sanctions against us or our officers, directors and employees, such as fines, penalties or imprisonment.
Even if we obtain such regulatory approval, our ability to successfully market the MACI for arthroscopic administration or treatment of cartilage defects in the ankle may be limited. If we cannot commercialize the arthroscopic administration of MACI and other new products or product improvements as planned, our financial results could be harmed.
Even if we obtain such regulatory approval, our ability to successfully market MACI for arthroscopic administration or treatment of cartilage defects in the ankle may be limited. If we cannot commercialize the arthroscopic administration of MACI and other new products or product improvements as planned, our financial results could be harmed.
If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including administrative, civil and criminal penalties, damages, fines, disgorgement, the exclusion from participation in federal and state healthcare programs, individual imprisonment, reputational harm, and the curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to 44 Table of Contents resolve allegations of non-compliance with these laws.
If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including administrative, civil and criminal penalties, damages, fines, disgorgement, the exclusion from participation in federal and state 44 Table of Contents healthcare programs, individual imprisonment, reputational harm, and the curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws.
Some of the factors that will impact our ability to raise additional capital and our overall success include: • Our ability to further commercialize our products; • The rate and degree of progress of our product development; • The rate of regulatory approval to proceed with clinical developmental programs; • The level of success achieved in clinical trials; • The requirements necessary for marketing authorization from regulatory bodies in the U.S. and other countries; • The liquidity and market volatility of our equity securities; and 51 Table of Contents • Regulatory and manufacturing requirements and uncertainties, and technological developments by competitors.
Some of the factors that will impact our ability to raise additional capital and our overall success include: • Our ability to further commercialize our products; • The rate and degree of progress of our product development; 51 Table of Contents • The rate of regulatory approval to proceed with clinical developmental programs; • The level of success achieved in clinical trials; • The requirements necessary for marketing authorization from regulatory bodies in the U.S. and other countries; • The liquidity and market volatility of our equity securities; and • Regulatory and manufacturing requirements and uncertainties, and technological developments by competitors.
Any such testing could lengthen the time before these product enhancements would be commercially available. We rely on third parties to conduct some of our clinical trials, and their failure to perform their obligations in a timely or competent manner may delay development and/or impact commercialization, if approved, of our current and future product candidates.
Any such testing could lengthen the time before these product enhancements are approved and would be commercially available. We rely on third parties to conduct some of our clinical trials, and their failure to perform their obligations in a timely or competent manner may delay development and/or impact commercialization, if approved, of our current and future product candidates.
With respect to any clinical trials affecting our approved products or future development candidates, failures or delays can occur at any stage of the trials, and may be directly or indirectly caused by a variety of factors, including but not limited to: • Delays in securing clinical investigators or trial sites for our clinical trials and their subsequent performance in conducting accurate and reliable trials on a timely basis; • Delays in obtaining IRB and other regulatory approvals to commence a clinical trial; • Slower than anticipated rates of patient recruitment and enrollment in our clinical trials, or failing to reach the targeted number of patients due to competition for patients from other trials; • Limited or no availability of coverage, reimbursement, and adequate payment from health maintenance organizations and other third-party payers for the use of biological products supplied for use in our clinical trials; 31 Table of Contents • Negative or inconclusive results from clinical trials; • Unforeseen adverse effects interrupting, delaying, or halting clinical trials of any future therapeutic product candidates, and possibly resulting in the FDA or other regulatory authorities denying approval of any future therapeutic product candidates; • Unforeseen safety issues; • Approval and introduction of new therapies or changes in standards of practice or regulatory requirements or guidance that render our clinical trial endpoints or the targeting of our proposed indications obsolete; • Inability to monitor patients adequately during or after treatment or problems with investigator or patient compliance with the trial protocols; • Inability to replicate in large controlled trials safety and efficacy data obtained from a limited number of patients in uncontrolled trials; • Inability or unwillingness of medical investigators to follow our clinical protocols; and • Unavailability of clinical trial supplies.
With respect to any clinical trials affecting our approved products or future development candidates, failures or delays can occur at any stage of the trials, and may be directly or indirectly caused by a variety of factors, including but not limited to: • Delays in securing clinical investigators or trial sites for our clinical trials and their subsequent performance in conducting accurate and reliable trials on a timely basis; • Delays in obtaining IRB and other regulatory approvals to commence a clinical trial; • Slower than anticipated rates of patient recruitment and enrollment in our clinical trials, or failing to reach the targeted number of patients due to competition for patients from other trials; • Limited or no availability of coverage, reimbursement, and adequate payment from health maintenance organizations and other third-party payers for the use of biological products supplied for use in our clinical trials; • Negative or inconclusive results from clinical trials; • Unforeseen adverse effects interrupting, delaying, or halting clinical trials of any future therapeutic product candidates, and possibly resulting in the FDA or other regulatory authorities denying approval of any future therapeutic product candidates; • Unforeseen safety issues; • Approval and introduction of new therapies or changes in standards of practice or regulatory requirements or guidance that render our clinical trial endpoints or the targeting of our proposed indications obsolete; • Inability to monitor patients adequately during or after treatment or problems with investigator or patient compliance with the trial protocols; • Inability to replicate in large, controlled trials safety and efficacy data obtained from a limited number of patients in uncontrolled trials; • Inability or unwillingness of medical investigators to follow our clinical protocols; and • Unavailability of clinical trial supplies.
All of our products face intense competition from other surgical procedures as well as existing and future products marketed by large companies. These competitors may successfully market products that compete with our products, identify and bring to market new product candidates earlier than we do, or develop products that are more effective or less costly than our products.
All of our products face competition from other surgical procedures as well as existing and future products marketed by large companies. These competitors may successfully market products that compete with our products, identify and bring to market new product candidates earlier than we do, or develop products that are more effective or less costly than our products.
The commercial success of NexoBrid depends, in part, on MediWound’s ability to obtain and maintain patent protection and trade secret protection for NexoBrid and its uses, as well as our ability to operate without infringing upon the proprietary rights of others. The family of patents that covers NexoBrid specifically includes 35 granted patents worldwide.
The commercial success of NexoBrid depends, in part, on MediWound’s ability to obtain and maintain patent protection and trade secret protection for NexoBrid and its uses, as well as our ability to operate without infringing upon the proprietary rights of others. The family of patents that covers NexoBrid specifically includes approximately 35 granted patents worldwide.
In addition, acceptance of products for the treatment of eschar removal is dependent upon, among other factors, the level of awareness and education of the medical community about the removal of eschar in adults with deep partial-thickness and/or full-thickness thermal burns and the existence, effectiveness, and safety of our products.
In addition, acceptance of products for the treatment of eschar removal is dependent upon, among other factors, the level of awareness and education of the medical community about the removal of eschar in adults with deep partial-thickness and/or full-thickness thermal burns and the existence, effectiveness, safety, and cost effectiveness of our products.
We face intense competition in the markets targeted by our products. Many of our competitors have substantially greater resources than we do, and we expect that all of our products will face intense competition from existing or future products, which may impact our ability to successfully commercialize our products.
We face competition in the markets targeted by our products. Many of our competitors have substantially greater resources than we do, and we expect that all of our products will face competition from existing or future products, which may impact our ability to successfully commercialize our products.
Further, the nation of Israel has been embroiled in a periodic and ongoing conflict with certain Palestinian militant groups within its own borders and, at times, with neighboring nations in the Middle East, since the end of the nineteenth century.
The nation of Israel has been embroiled in a periodic and ongoing conflict with certain Palestinian militant groups within its own borders and, at times, with neighboring nations in the Middle East, since the end of the nineteenth century.
The degree of market acceptance of any of our marketed or potential new products will depend on a number of factors, including: • The clinical safety and effectiveness of our products and their demonstrated advantage over alternative treatment methods; • Our ability to demonstrate to healthcare providers that our products provide a therapeutic advancement over standard of care treatment or other competitive products and methods; • Our ability to educate healthcare providers on the autologous use of human tissue, to avoid potential confusion with, and differentiate ourselves from, the ethical controversies associated with human fetal tissue and engineered human tissue; • Our ability to educate healthcare providers on the benefits and appropriate use of enzymatic agents for the removal of eschar in adult patients suffering from deep partial-thickness and full-thickness thermal burns; • Our ability to educate healthcare providers, patients and payers on the safety and adverse reactions associated with our products; • Our ability to meet supply and demand and develop a group of medical professionals familiar with and committed to the use of our products; and • The cost-effectiveness of our products and the reimbursement policies of government and third-party payers.
The degree of market acceptance of any of our marketed or potential new products will depend on a number of factors, including: • The clinical safety and effectiveness of our products and their demonstrated advantage over alternative treatment methods; • Our ability to demonstrate to healthcare providers that our products provide a therapeutic advancement over standard of care treatment or other competitive products and methods; • Our ability to educate healthcare providers on the autologous use of human tissue, to avoid potential confusion with, and differentiate ourselves from, the ethical controversies associated with human fetal tissue and engineered human tissue; • Our ability to educate healthcare providers on the benefits and appropriate use of enzymatic agents for the removal of eschar in adult patients suffering from deep partial-thickness and full-thickness thermal burns; • Our ability to educate healthcare providers, patients and payers on the safety and adverse reactions associated with our products; • Our ability to meet supply and demand and develop a group of medical professionals familiar with and committed to the use of our products; and 27 Table of Contents • The cost-effectiveness of our products and the reimbursement policies of government and third-party payers.
Some of the factors that will impact our ability to raise additional capital and our overall success include: • The ability to maintain our manufacturing facility’s compliance with FDA requirements, including establishment and product fees; 27 Table of Contents • The requirements necessary to maintain in good standing marketing authorizations and licenses from regulatory bodies in the U.S. and other countries; • The liquidity and market volatility of our equity securities; • Regulatory and manufacturing requirements and uncertainties; • Anticipating technological developments by competitors; • The rate and degree of progress of our product development and product lifecycle management initiatives; and • The rate and cadence of the regulatory approvals needed to proceed with clinical development programs.
Some of the factors that will impact our ability to raise additional capital and our overall success include: • The ability to maintain our manufacturing facility’s compliance with FDA requirements, including establishment and product fees; • The requirements necessary to maintain in good standing marketing authorizations and licenses from regulatory bodies in the U.S. and other countries; • The liquidity and market volatility of our equity securities; • Regulatory and manufacturing requirements and uncertainties; • Anticipating technological developments by competitors; • The rate and degree of progress of our product development and product lifecycle management initiatives; and • The rate and cadence of the regulatory approvals needed to proceed with clinical development programs.
If other federal or state regulatory authorities determine that we have engaged in off-label promotion and/or engaged in conduct violative of ant-kickback laws, we may be subject to civil or criminal penalties and could be prohibited from participating in government healthcare programs, such as Medicaid and Medicare.
If other federal or state regulatory authorities determine that we have engaged in off-label promotion and/or engaged in conduct violative of anti-kickback laws, we may be subject to civil or criminal penalties and could be prohibited from participating in government healthcare programs, such as Medicaid and Medicare.
The extent and duration of the war in Ukraine, geopolitical tensions, record inflation and resulting market disruptions are impossible to predict but could be substantial. We are dependent on our key manufacturing, quality and other management personnel and the loss of any of these individuals could harm our business.
The extent and duration of the war in Ukraine and the Israel-Hamas war, geopolitical tensions, record inflation and resulting market disruptions are impossible to predict but could be substantial. We are dependent on our key manufacturing, quality and other management personnel and the loss of any of these individuals could harm our business.
Further, continued market acceptance of Epicel and MACI, and the market acceptance of NexoBrid, once launched, and any future product candidates that may be approved, depends on our efforts to educate the medical community and third-party payers on the benefits of our products and product candidates and will require significant resources from us.
Further, continued market acceptance of Epicel, MACI and NexoBrid, and any future product candidates that may be approved, depends on our efforts to educate the medical community and third-party payers on the benefits of our products and product candidates and will require significant resources from us.
However, making such changes may be costly and may delay our trials, could affect regulatory approval and contractual restrictions may make such a change difficult or impossible. Additionally, it may be difficult to find a replacement organization that can conduct our trials in an acceptable manner and at an acceptable cost.
However, making such changes may be costly and may delay our trials or affect regulatory approval, and certain contractual restrictions may make such a change difficult or impossible. Additionally, it may be difficult to find a replacement organization that can conduct our trials in an acceptable manner and at an acceptable cost.
During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan product to meet the needs of 40 Table of Contents patients with the disease or condition for which the biologic was designated.
During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan product to meet the needs of patients with the disease or condition for which the biologic was designated.
Collaboration and licensing arrangements pose many risks, including, but not limited to, the following: • collaborations and licensing arrangements may be terminated; • collaborators and licensors may delay clinical trials and prolong clinical development, or under-fund or stop a clinical trial; • expected revenue might not be generated because clinical adoption of the product may be less than predicted; • collaborators and licensors could independently develop, or develop with third parties, products that could compete with our future products despite non-competition provisions; • the terms of our contracts with current or future collaborators and license parties may not be favorable to us in the future; • disputes may arise delaying or terminating the research, development, or commercialization of our product candidates, or result in significant and costly litigation or arbitration; and • one or more third-party developers could obtain approval for a similar product resulting in unforeseen price competition in connection with the product.
Collaboration and licensing arrangements pose many risks, including, but not limited to, the following: • collaborations and licensing arrangements may be terminated; • collaborators and licensors may delay clinical trials or post-market studies and prolong clinical development, or under-fund or stop a clinical trial; • expected revenue might not be generated because clinical adoption of the product may be less than predicted; • collaborators and licensors could independently develop, or develop with third parties, products that could compete with our future products despite non-competition provisions; • the terms of our contracts with current or future collaborators and license parties may not be favorable to us in the future; • disputes may arise delaying, or terminating or interrupting the research, development, supply or commercialization of our products or product candidates, or result in significant and costly litigation or arbitration; and • one or more third-party developers could obtain approval for a similar product resulting in unforeseen price competition in connection with the product.
Our ability to maintain profitability will depend on, among other things, increasing sales of our current products, improving gross margins, successfully commercializing new products, completing the development of our future product candidates, timely initiation and completion of clinical trials, obtaining regulatory approvals, establishing manufacturing, sales and marketing arrangements with third parties, maintaining supplies of key manufacturing components and the possible acquisition and development of additional and complementary products.
Our ability to maintain profitability will depend on, among other things, increasing sales of our current products, improving gross margins, successfully commercializing new products, completing the development of our 26 Table of Contents future product candidates, timely initiation and completion of clinical trials, obtaining regulatory approvals, establishing manufacturing, sales and marketing arrangements with third parties, maintaining supplies of key manufacturing components and the possible acquisition and development of additional and complementary products.
Other patent filings that include technology relevant to MACI (e.g., its production and/or use of chondrocytes and collagen membranes, surgical devices, and related arthroscopic procedures) include granted patents and pending applications inside and outside the U.S. These granted patents and pending applications, if granted, have already expired or are expected to expire, absent any extensions, between late-2023 and late-2043.
Other patent filings that include technology relevant to MACI (e.g., its production and/or use of chondrocytes and collagen membranes, surgical devices, and related arthroscopic procedures) include granted patents and pending applications inside and outside the U.S. These granted patents and pending applications, if granted, have already expired or are expected to expire, absent any extensions, between late-2027 and early-2043.
An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly. 48 Table of Contents Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
This could result in higher costs to us or deprive us of potential product revenues. Complying with cGMP, International Conference on Harmonization (“ICH”) and other non-U.S. regulatory requirements will require that we expend time, money, and effort in production, recordkeeping, and quality control to assure that the product or product candidate meets applicable specifications and other requirements.
This could result in higher costs to us or deprive us of potential product revenues. 35 Table of Contents Complying with cGMP, International Conference on Harmonization (“ICH”) and other non-U.S. regulatory requirements will require that we expend time, money, and effort in production, recordkeeping, and quality control to assure that the product or product candidate meets applicable specifications and other requirements.
The price of our common stock may continue to fluctuate in response to a number of events and factors, such as: • Announcements of research activities, business developments, technological innovations or new products by us or our competitors; • Entering into or terminating strategic relationships; • Information related to decisions by regulatory authorities regarding our products or product candidates or other regulatory developments or guidance in both the U.S. and abroad; • Disputes concerning patents or proprietary rights; • Changes in our revenues or expense levels; • Changes in our pricing policies or the pricing policies of our competitors; 49 Table of Contents • Substantial changes in reimbursement practices; • The amount of our cash resources and our ability to obtain additional funding; • Seasonal or other variations in patient demand for MACI, Epicel and NexoBrid; • Demand for and clinical acceptance of our products; • The timing of sales of products and of the introduction of new products; • Public concern regarding the safety, efficacy or other aspects of the products or methodologies we are developing; • Clinical trial results; • News or reports from other cell therapy, regenerative medicine companies, or companies competing for market share in the burn care space; • Actual or threatened litigation or governmental investigations or other major developments in such matters; • Reports by securities analysts; • Status and condition of the global economy, investment markets, or other developments that may affect the global supply chain or ability to manufacture and distribute our products; • Public or private sales of additional securities; • Cybersecurity incidents that materially affect our products, services, relationships or competitive conditions; • Loss of key personnel; • The impact of the ongoing COVID-19 pandemic on our business, operations, prospects and financial condition; • Changes in management or the Board of Directors; and • Concerns related to management transitions.
The price of our common stock may continue to fluctuate in response to a number of events and factors, such as: • Announcements of research activities, business developments, technological innovations or new products by us or our competitors; • Entering into or terminating strategic relationships; • Information related to decisions by regulatory authorities regarding our products or product candidates or other regulatory developments or guidance in both the U.S. and abroad; • Disputes concerning patents or proprietary rights; • Changes in our revenues or expense levels; • Changes in our pricing policies or the pricing policies of our competitors; • Substantial changes in reimbursement practices; • The amount of our cash resources and our ability to obtain additional funding; • Seasonal or other variations in patient demand for MACI, Epicel and NexoBrid; • Demand for and clinical acceptance of our products; • The timing of sales of products and of the introduction of new products; • Public concern regarding the safety, efficacy or other aspects of the products or methodologies we are developing; • Clinical trial results; • News or reports from other cell therapy, regenerative medicine companies, or companies competing for market share in the burn care space; • Actual or threatened litigation or governmental investigations or other major developments in such matters; • Reports by securities analysts; • Status and condition of the global economy, investment markets, regional or global conflicts or other developments that may affect the global supply chain or ability to manufacture and distribute our products; • Public or private sales of additional securities; • Cybersecurity incidents that materially affect our products, services, relationships or competitive conditions; • Loss of key personnel; • A resurgence of COVID-19, which may impact our business, operations, prospects and financial condition; • Changes in management or the Board of Directors; and • Concerns related to management transitions.
There are certain limitations in the supply of certain animal-derived materials, which may lead to delays in our ability to complete clinical trials or eventually to meet the anticipated market demand for our cell products. If our licensing arrangement with MediWound is unsuccessful, our development of NexoBrid and its associated revenues may be limited.
There are certain limitations in the supply of certain animal-derived materials, which may lead to delays in our ability to complete clinical trials or eventually to meet the anticipated market demand for our cell products. 32 Table of Contents If our licensing arrangement with MediWound is unsuccessful, our development of NexoBrid and its associated revenues may be limited.
Regulatory requirements outside the U.S. often require additional studies and data to obtain registration and, as a result, approval timelines can also be longer than those in the U.S. The safety, potency, and purity of our products must be monitored to be in compliance with FDA requirements for safety, cGMPs, and all other applicable regulations.
Regulatory requirements outside 36 Table of Contents the U.S. often require additional studies and data to obtain registration and, as a result, approval timelines can also be longer than those in the U.S. The safety, potency, and purity of our products must be monitored to be in compliance with FDA requirements for safety, cGMPs, and all other applicable regulations.
The GDPR (and UK equivalent laws and other changes in laws or regulations associated with the enhanced protection of certain types of personal data, such as healthcare data or other sensitive information, could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions that we may operate in.
The GDPR (and UK equivalent laws) and other changes in laws or regulations associated with the enhanced protection of certain types of personal data, such as healthcare data or other 29 Table of Contents sensitive information, could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions that we may operate in.
If we are unable to protect the confidentiality of our proprietary information and know-how related to our products, our competitive position would be impaired and our business, financial condition and results of operations could be adversely affected. Some of our technology, including our knowledge regarding the processing of our products, is maintained by us as trade secrets.
If we are unable to protect the confidentiality of our proprietary information and know-how related to our products, our competitive position would be impaired and our business, financial condition and results of operations could be adversely affected. 45 Table of Contents Some of our technology, including our knowledge regarding the processing of our products, is maintained by us as trade secrets.
The results from an open-label trial may not be predictive of future clinical trial results with any of our product candidates for which we include an open-label clinical trial when studied in a controlled environment with a placebo or active control. Our planned clinical trials may not begin or be completed on schedule, if at all.
The results from an 30 Table of Contents open-label trial may not be predictive of future clinical trial results with any of our product candidates for which we include an open-label clinical trial when studied in a controlled environment with a placebo or active control. Our planned clinical trials may not begin or be completed on schedule, if at all.
Any of these problems or delays could damage our relationships with our customers, adversely affect our reputation and adversely affect our business, financial condition, results of operations, our ability to grow our business, and the market price and liquidity of our shares. 34 Table of Contents We have limited manufacturing capacity and our commercial manufacturing operations in the U.S. depend on one facility.
Any of these problems or delays could damage our relationships with our customers, adversely affect our reputation and adversely affect our business, financial condition, results of operations, our ability to grow our business, and the market price and liquidity of our shares. We have limited manufacturing capacity and our commercial manufacturing operations in the U.S. depend on one facility.
As of December 31, 2022, we had no outstanding borrowings under the Revolving Credit Agreement. We may be exposed to the impact of interest rate changes primarily through our borrowing activities.
As of December 31, 2023, we had no outstanding borrowings under the Revolving Credit Agreement. We may be exposed to the impact of interest rate changes primarily through our borrowing activities.
The FDA may also impose operating restrictions on a companywide basis, enjoin and restrain certain violations of applicable law pertaining to our products and assess civil or criminal penalties against our officers, employees, or us. The FDA may also recommend further investigation and prosecution to the U.S. Department of Justice (“DOJ”).
The FDA may also impose operating restrictions on a company-wide basis, enjoin and restrain certain violations of applicable law pertaining to our products and assess civil or criminal penalties against our officers, employees, or us. The FDA may also recommend further investigation and prosecution to the U.S. Department of Justice (“DOJ”).
Although, to date, we have not experienced a significant number of departures among our manufacturing staff, we cannot be sure such departures will not occur in the future.
Although, to date, we have not experienced a material number of departures among our manufacturing staff, we cannot be sure such departures will not occur in the future.
Furthermore, the healthcare industry in the U.S. has experienced a trend toward cost containment as government and private insurers seek to control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Increasingly, 37 Table of Contents third-party payers have attempted to control costs by challenging the prices charged for medical products.
Furthermore, the healthcare industry in the U.S. has experienced a trend toward cost containment as government and private insurers seek to control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Increasingly, third-party payers have attempted to control costs by challenging the prices charged for medical products.
Under the contract, BARDA agreed to fund up to $56.0 33 Table of Contents million of the development costs of NexoBrid required to obtain marketing approval in the U.S., including its ongoing pediatric Phase 3 study and its expansion to include U.S. pediatric burn care sites, and has an option to further fund $10.0 million in development activities for other potential NexoBrid indications.
Under the contract, BARDA agreed to fund up to $56.0 million of the development costs of NexoBrid required to obtain marketing approval in the U.S., including its pediatric Phase 3 study and its expansion to include U.S. pediatric burn care sites, and has an option to further fund $10.0 million in development activities for other potential NexoBrid indications.
Our facilities and quality systems and the facilities and quality systems of some or all of our third-party contractors and suppliers are subject to pre-approval and routine FDA inspections for compliance with the applicable regulations as a condition of FDA approval of our products.
Our facilities and quality systems and the facilities and 37 Table of Contents quality systems of some or all of our third-party contractors and suppliers are subject to pre-approval and routine FDA inspections for compliance with the applicable regulations as a condition of FDA approval of our products.
Product manufacturers are subject to payment of annual prescription drug product program user fees and their facilities are subject to periodic inspections by the FDA and other regulatory agencies for compliance with cGMP and other applicable regulations.
Product manufacturers are subject to payment of annual prescription drug product program user fees and their facilities are subject to periodic inspections by the FDA and other regulatory agencies for compliance with cGMP and other applicable 41 Table of Contents regulations.
These agreements require that all 45 Table of Contents confidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties.
These agreements require that all confidential information developed by the individual, or made known to the individual by us during the course of the individual’s relationship with us, be kept confidential and not disclosed to third parties.
In addition, in an infringement proceeding, a court may decide that a patent owned by or licensed to us is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.
In addition, in an infringement proceeding, a court may decide that a patent owned by or licensed to us is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our 48 Table of Contents patents do not cover the technology in question.
Factors that may affect our results of operations include: • the timing of new orders and revenue recognition for new and prior year orders; • seasonal buying patterns of our customers; • volatility in the sales of our products; • volume of revenues; • competitive developments; • changes in third-party coverage and reimbursement for our products; • our ability to supply and meet customer demand for our products; • our ability to increase sales to our existing customers, particularly larger customers; • our ability to attract new customers; • our ability to develop and achieve market adoption of our products; • our ability to successfully launch and commercialize NexoBrid; • the impact of a recession or any other adverse global economic conditions on our business; • the impact of the ongoing COVID-19 pandemic, or the future outbreak of another highly infectious or contagious disease; • erosion in margins or significant fluctuations in revenues caused by changing customer demand; • the timing and cost of hiring personnel and of large expenses such as third-party professional services; • stock-based compensation expenses, which vary along with changes to our stock price; • supply chain disruptions or constraints; • fluctuations in foreign currency exchange rates; and • future accounting pronouncements or changes in accounting rules or our accounting policies.
Factors that may affect our results of operations include: • the timing of new orders and revenue recognition for new and prior year orders; • seasonal buying patterns of our customers; • volatility in the sales of our products; • volume of revenues; • competitive developments; • changes in third-party coverage and reimbursement for our products; • our ability to supply and meet customer demand for our products; • our ability to increase sales to our existing customers, particularly larger customers; • our ability to attract new customers; • our ability to develop and achieve market adoption of our products; • our ability to continue to successfully commercialize NexoBrid; • the impact of a recession or any other adverse global economic conditions on our business; • the impact of public health crises, such as the COVID-19 pandemic; • erosion in margins or significant fluctuations in revenues caused by changing customer demand; • the timing and cost of hiring personnel and of large expenses such as third-party professional services; • stock-based compensation expenses, which vary along with changes to our stock price; • supply chain disruptions or constraints; • fluctuations in foreign currency exchange rates; and • future accounting pronouncements or changes in accounting rules or our accounting policies.
These competitive factors could require us to conduct substantial new research and development activities to establish new 32 Table of Contents product targets, which would be costly and time consuming. These activities can adversely impact our ability to effectively commercialize products and achieve revenue and profits.
These competitive factors could require us to conduct substantial new research and development activities to establish new product targets, which would be costly and time consuming. These activities can adversely impact our ability to effectively commercialize products and achieve revenue and profits.
Although, to date, our business has not been materially impacted by the ongoing military conflict between Russian and Ukraine, geopolitical tensions, or record inflation, it is impossible to predict the extent to which our operations will be impacted in the short and long term, or the ways in which such matters may impact our business.
Although, to date, our business has not been materially impacted by the ongoing military conflict between Russia and Ukraine or the Israel-Hamas war, geopolitical tensions, or record inflation, it is impossible to predict the extent to which our operations will be impacted in the short and long term, or the ways in which such matters may impact our business.
These risks include, but are not limited to, the following: • The current and ongoing pandemic of COVID-19 and the future outbreak of other highly infectious or contagious diseases, could seriously harm our research, development and commercialization efforts, increase our costs and expenses and have a material adverse effect on our business, financial condition and results of operations. • We may experience significant quarterly and annual fluctuations in our results of operations due to a number of factors. • Our operating results will be harmed if we are unable to effectively manage and sustain our future growth or scale our operations. • We may be unable to effectively manage and sustain our future growth or scale our operations. • We may not be able to manage inventory in an effective and efficient manner, which could adversely affect our results of operations. • We have incurred losses and may not achieve consistent profitability for some time or at all. • Our products and product development programs are based on novel technologies and are inherently risky, which may decrease the chances of regulatory approval and could have a material effect on our financial condition and operating results. • We may not be able to raise the required capital to develop and commercialize our future product candidates and otherwise grow and expand our business. • Current financial market conditions may exacerbate certain risks affecting our business. • We are dependent on our key manufacturing, quality and other management personnel and the loss of any of these individuals could harm our business. • Inflationary pressures and our responses thereto as well as other unfavorable global and regional economic conditions, geopolitical events, and military conflicts, such as repercussions from the ongoing war in Ukraine.
These risks include, but are not limited to, the following: • We may experience significant quarterly and annual fluctuations in our results of operations due to a number of factors. • Our operating results will be harmed if we are unable to effectively manage and sustain our future growth or scale our operations. • The COVID-19 pandemic and other global crises have had and may have in the future a significant adverse effect on our business, financial condition, and results of operations. • We may be unable to effectively manage and sustain our future growth or scale our operations. • We may not be able to manage inventory in an effective and efficient manner, which could adversely affect our results of operations. • We have incurred losses and may not achieve consistent profitability for some time or at all. • Our products and product development programs are based on novel technologies and are inherently risky, which may decrease the chances of regulatory approval and could have a material effect on our financial condition and operating results. • We may not be able to raise the required capital to develop and commercialize our future product candidates and otherwise grow and expand our business. • Current financial market conditions may exacerbate certain risks affecting our business. • We are dependent on our key manufacturing, quality and other management personnel and the loss of any of these individuals could harm our business. • Inflationary pressures and our responses thereto as well as other unfavorable global and regional economic conditions, geopolitical events, and military conflicts, such as repercussions from the ongoing war in Ukraine or the Israel-Hamas war.
Others may challenge our patent or other intellectual property rights or sue us for infringement. Risks Related to an Investment in our Common Stock Our common stock price has been volatile and future sales of shares of common stock could have an adverse effect on the market price of such shares.
Others may challenge our patents or other intellectual property rights or sue us for infringement. 49 Table of Contents Risks Related to an Investment in our Common Stock Our common stock price has been volatile and future sales of shares of common stock could have an adverse effect on the market price of such shares.
In addition, particularly in light of the Biden Administration, our future earnings could be negatively impacted by changes in tax legislation, including a repeal or modification of the Tax Cuts and Jobs Act of 2017, changes in tax rates and tax base such as limiting, phasing-out or eliminating deductions or tax credits, increase taxing of certain excess income from intellectual 53 Table of Contents property, revising tax law interpretations and changes in other tax laws in the U.S.
In addition, particularly in light of the Biden Administration, our future earnings could be negatively impacted by changes in tax legislation, including a repeal or modification of the Tax Cuts and Jobs Act of 2017, changes in tax rates and tax base such as limiting, phasing-out or eliminating deductions or tax credits, increased taxation of certain excess income from intellectual property, revising tax law interpretations and changes in other tax laws in the U.S.
In addition, regulators in the U.S. and globally are also inquiring more about and imposing greater monetary fines for privacy violations. In the last year, the FTC has announced that it will begin enforcing the Health Breach Notification Rule, and entered into a consent order with a $1.5 million fine.
In addition, regulators in the U.S. and globally are also inquiring more about and imposing greater monetary fines for privacy violations. In the last year, the FTC has announced that it will begin enforcing the Health Breach Notification Rule, and has entered into at least one consent order with a different organization that involved a $1.5 million fine.
Our licensor, MediWound, is dependent on a contract with the U.S. Biomedical Advanced Research and Development Authority to fund the Phase 3 clinical trial and other development activities of NexoBrid in the U.S. and these contracts may be terminated by BARDA at any time.
Our licensor, MediWound, is dependent on a contract with the U.S. Biomedical Advanced Research and Development Authority to fund development activities of NexoBrid in the U.S. and these contracts may be terminated by BARDA at any time.
We are continuing to monitor inflation, the situation in Ukraine and global capital markets and assessing the potential impact on our business.
We are continuing to monitor inflation, the situations in Ukraine and Israel and global capital markets and assessing the potential impact on our business.
To the extent MediWound is unable to manufacture NexoBrid in accordance with the requirements of its BLA approval, or experiences supply chain or other disruptions, it could affect the commercial success of NexoBrid. • NexoBrid may not be approved for the treatment of severe burns in other North American markets, outside of the U.S., and NexoBrid may not be accepted in the markets where regulatory approvals have been received. • A cyber security incident could result in a loss of confidential data, give rise to remediation and other expenses, expose us to liability under HIPAA, consumer protection and privacy laws, or other common law theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business. • Failure to obtain adequate reimbursement and reimbursement rates for our products could have a material adverse effect on our financial condition and operating results. • Failure to obtain and/or maintain required regulatory approvals would severely limit our ability to sell our products. • Any changes in the regulatory requirements that affect our products and/or future product candidates could prevent, limit or delay our ability to market or develop new product candidates. • Changes to our products or future product candidates, including the development of an arthroscopic delivery method for MACI, and the use of MACI to treat cartilage defects in the ankle, may require regulatory approvals which could result in the delay of the change being made or, if not approved, prevent any changes from being made. • If any federal or state agency determines that we have promoted the off-label use of our products and/or we have violated anti-kickback or other anti-bribery laws, we may be subject to various penalties, including civil or criminal penalties, and the off-label use of our products may result in injuries that lead to product liability lawsuits, which could be costly to our business. • If MediWound’s family of patents and proprietary rights covering NexoBrid do not provide substantial protection, our commercialization efforts with respect to NexoBrid could suffer • Future sales of shares of common stock could have an adverse effect on the market price of such shares.
To the extent MediWound is unable to manufacture NexoBrid in accordance with the requirements of its BLA approval, or experiences supply chain or other disruptions, whether as a result of the ongoing Israel-Hamas war, military or other conflicts between China and Taiwan, or some other event, it could adversely affect the commercial success of NexoBrid. • NexoBrid may not be approved for the treatment of severe burns in other North American markets, outside of the U.S., and NexoBrid may not be accepted in the markets where regulatory approvals have been received. • A cyber security incident could result in a loss of confidential data, give rise to remediation and other expenses, expose us to liability under HIPAA, consumer protection and privacy laws, or other common law theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business. • Failure to obtain adequate reimbursement and reimbursement rates for our products could have a material adverse effect on our financial condition and operating results. • Failure to obtain and/or maintain required regulatory approvals would severely limit our ability to sell our products. • Environmental, social and governance matters (“ESG”) and any related reporting obligations may adversely impact our business, financial condition and results of operations. 24 Table of Contents • Any changes in the regulatory requirements that affect our products and/or future product candidates could prevent, limit or delay our ability to market or develop new product candidates. • Changes to our products or future product candidates, including the development of an arthroscopic delivery method for MACI, and the use of MACI to treat cartilage defects in the ankle, will require regulatory approvals which could result in the delay of the change being made or, if not approved, prevent any changes from being made. • If any federal or state agency determines that we have promoted the off-label use of our products and/or we have violated anti-kickback or other anti-bribery laws, we may be subject to various penalties, including civil or criminal penalties, and the off-label use of our products may result in injuries that lead to product liability lawsuits, which could be costly to our business. • If MediWound’s family of patents and proprietary rights covering NexoBrid do not provide substantial protection, our commercialization efforts with respect to NexoBrid could suffer. • Future sales of shares of common stock could have an adverse effect on the market price of such shares.
Failure to do so may harm our long-term growth prospects. We have incurred losses and may not achieve consistent profitability for some time or at all. For the year ended December 31, 2022 we reported net loss of $16.7 million.
Failure to do so may harm our long-term growth prospects. We have incurred losses and may not achieve consistent profitability for some time or at all. For the year ended December 31, 2023 we reported net loss of $3.2 million.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, an ongoing war between Russia and Ukraine, and record inflation.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, ongoing wars between Russia and Ukraine and between Israel and Hamas, and record inflation.
Tensions between China and Taiwan, or escalation of hostilities in Israel or the wider Middle East, could continue to create substantial uncertainty in the global economy and contribute to heightened inflation and supply chain disruptions. • If our manufacturing facility is destroyed or we experience any manufacturing difficulties, disruptions or delays, this could limit supply of our products or adversely affect our ability to conduct clinical trials and our business would be adversely impacted. • Failure of third parties, including for example Matricel GmbH (“Matricel”), to manufacture or supply certain components, equipment, disposable devices and other materials used in our MACI or Epicel cell manufacturing processes would impair our cell product development and commercialization. • Because our manufacturing and supply chain are subject to significant regulations, failure by our third-party manufacturers, including Matricel, to comply with the regulatory requirements set forth by the FDA with respect to our products could limit our ability to manufacture commercial products and/or result in the products being subject to restrictions or withdrawn from the market. • Failure to obtain the commercial success of NexoBrid following the FDA’s approval of the product’s Biologics License Application (“BLA”) on December 28, 2022. 24 Table of Contents • The ultimate timing of the commercial launch of NexoBrid in the U.S. is dependent, in part, on MediWound’s ability to timely manufacture and supply sufficient quantities of NexoBrid to meet customer demand.
Tensions between China and Taiwan, or an escalation of hostilities in the wider Middle East, could continue to create substantial uncertainty in the global economy and contribute to heightened inflation and supply chain disruptions. • If our manufacturing facility is destroyed or we experience any manufacturing difficulties, disruptions or delays, this could limit supply of our products or adversely affect our ability to conduct clinical trials and our business would be adversely impacted. • Failure of third parties, including for example Matricel GmbH (“Matricel”), to manufacture or supply certain components, equipment, disposable devices and other materials used in our MACI or Epicel cell manufacturing processes would impair our cell product development and commercialization. • Because our manufacturing and supply chain are subject to significant regulations, failure by our third-party manufacturers, including Matricel, to comply with the regulatory requirements set forth by the FDA with respect to our products could limit our ability to manufacture commercial products and/or result in the products being subject to restrictions or withdrawn from the market. • Failure to achieve the commercial success of NexoBrid in the U.S. • The commercial success of NexoBrid in the U.S. is dependent, in part, on MediWound’s ability to timely manufacture and supply sufficient quantities of NexoBrid to meet customer demand.
Our research and development and manufacturing processes involve the use of hazardous materials. We are subject to federal, state, local and foreign environmental requirements, including regulations governing the use, manufacture, handling, storage and disposal of hazardous materials, discharge to air and water, the cleanup of contamination and occupational health and safety matters.
We are subject to federal, state, local and foreign environmental requirements, including regulations governing the use, manufacture, handling, storage and disposal of hazardous materials, discharge to air and water, the cleanup of contamination and occupational health and safety matters.
Specifically, our debt could have important consequences to our investors, including the following: • making it more difficult for us to satisfy our obligations under the Revolving Credit Agreement; and if we fail to comply with these requirements, an event of default could result; • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, or other general corporate requirements; • requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes; • increasing our vulnerability to general adverse economic and industry conditions; • exposing us to the risk of increased interest rates as borrowings under our Revolving Credit Agreement are subject to floating interest rates based on SOFR, which could increase the cost of servicing our financial instruments and could materially reduce our profitability and cash flows; • limiting our flexibility in planning for and reacting to changes in the industry in which we compete; • placing us at a disadvantage compared to other, less leveraged competitors; and • increasing our cost of borrowing.
Specifically, our debt could have important consequences to our investors, including the following: • making it more difficult for us to satisfy our obligations under the Revolving Credit Agreement; and if we fail to comply with these requirements, an event of default could result; • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, or other general corporate requirements; • requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes; • increasing our vulnerability to general adverse economic and industry conditions; • exposing us to the risk of increased interest rates as borrowings under our Revolving Credit Agreement are subject to floating interest rates based on SOFR, which could increase the cost of servicing our financial instruments and could materially reduce our profitability and cash flows; • limiting our flexibility in planning for and reacting to changes in the industry in which we compete; • placing us at a disadvantage compared to other, less leveraged competitors; and • increasing our cost of borrowing. 52 Table of Contents Adverse developments affecting financial institutions, companies in the financial services industry or the financial services industry generally, such as actual events or concerns involving liquidity, defaults or non-performance, could adversely affect our operations and liquidity.
Our success depends, in part, on the commercial success of NexoBrid for the removal of eschar in adults with deep partial-thickness and/or full-thickness thermal burns following FDA approval of our Biologics License Application. 28 Table of Contents On December 28, 2022, we announced that the FDA granted a BLA and approved NexoBrid for the removal of eschar in adults with deep partial-thickness and/or full thickness thermal burns.
Our success depends, in part, on the commercial success of NexoBrid for the removal of eschar in adults with deep partial-thickness and/or full-thickness thermal burns. On December 28, 2022, we announced that the FDA granted a BLA and approved NexoBrid for the removal of eschar in adults with deep partial-thickness and/or full thickness thermal burns.
Prior to that, with the exception of the year ended December 31, 2020, when we reported net income of $2.9 million, we had incurred net losses each year since our inception. As of December 31, 2022, we had accumulated a deficit of approximately $400.0 million and $139.5 million of cash, cash equivalents and investments.
Prior to that, with the exception of the year ended December 31, 2020, when we reported net income of $2.9 million, we had incurred net losses each year since our inception. As of December 31, 2023, we had accumulated a deficit of approximately $403.2 million and $152.6 million of cash, cash equivalents and investments.
Additional factors that may affect our ability to successfully commercialize NexoBrid include: • Our ability and the ability of MediWound to recruit and retain employees with the right expertise and experience, at sufficient numbers; • Our ability to access and develop relationships with key healthcare providers and public health agencies; • Our ability to compete successfully as a new entrant in established distribution channels for similar products; and • Our ability to maintain sufficient funding to cover the costs and expenses associated with building and operating an effective commercial organization.
Additional factors that may affect our ability to successfully commercialize NexoBrid include: • Our ability and the ability of MediWound to recruit and retain employees with the right expertise and experience, at sufficient numbers; • Our ability to access and develop relationships with key healthcare providers and public health agencies; • Our ability to educate key healthcare providers on the clinical efficacy, cost effectiveness and appropriate use of NexoBrid in the clinical setting; • Our ability to compete successfully as a new entrant in established distribution channels for similar products; • Our ability to maintain sufficient funding to cover the costs and expenses associated with building and operating an effective commercial organization; and • MediWound’s ability to timely manufacture and supply sufficient quantities of NexoBrid to meet customer demand.
The success of your investment will likely depend entirely upon any future appreciation of the market price of our common stock, which is uncertain and unpredictable. There is no guarantee that our common stock will appreciate in value.
The success of your investment will likely depend entirely upon any future appreciation of the market price of our common stock, which is uncertain and unpredictable.
In order to obtain marketing authorization of any of our current or future product candidates in the U.S., the FDA requires us to submit a BLA or marketing application, which is subject to the agency’s detailed review and the denial of such applications could negatively impact our prospects, financial condition, and future results. 38 Table of Contents Cell therapy and other products require FDA review under an appropriate marketing application prior to commercialization.
In order to obtain marketing authorization of any of our current or future product candidates in the U.S., the FDA requires us to submit a BLA or marketing application, which is subject to the agency’s detailed review and the denial of such applications could negatively impact our prospects, financial condition, and future results.
As a result, such claims could affect our earnings and financial condition. 50 Table of Contents We face an inherent business risk of exposure to product liability claims in the event that the manufacture and/or use of our products during clinical trials, or after commercialization, result in adverse events.
We face an inherent business risk of exposure to product liability claims in the event that the manufacture and/or use of our products during clinical trials, or after commercialization, result in adverse events.
Although Taiwan has been governed independently from China since 1949, China views Taiwan as part of its territory and has vowed to eventually unify Taiwan with China, using military force if necessary.
Further, geopolitical tensions between Taiwan and China have risen steadily in recent months. Although Taiwan has been governed independently from China since 1949, China views Taiwan as part of its territory and has vowed to eventually unify Taiwan with China, using military force if necessary.
In February 2022, a full-scale military invasion of Ukraine by Russian troops began. Although the length and impact of the ongoing military conflict is highly unpredictable, the war in Ukraine has led to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions, which has contributed to record inflation globally.
Although the length and impact of the ongoing military conflict in Ukraine and the Israel-Hamas war is highly unpredictable, the geopolitical uncertainty caused by the conflicts has led to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions, which has contributed to record inflation globally.
As a result, if future revenues are below expectations, net income or loss may be disproportionately affected by a reduction in revenues, as any corresponding reduction in expenses may not be proportionate to the reduction in revenues.
Additionally, our expense levels are based, in part, on our expectations as to future revenues. As a result, if future revenues are below expectations, net income or loss may be disproportionately affected by a reduction in revenues, as any corresponding reduction 25 Table of Contents in expenses may not be proportionate to the reduction in revenues.
We have implemented multiple layers of security measures, and have developed an enterprise-wide incident response plan, which are designed to protect this confidential data through technology, processes, and our people.
We have implemented multiple layers of security measures, and have developed an enterprise-wide incident response plan, which are designed to protect this confidential data through technology, processes, and our people. We strive to utilize current security technologies, and our defenses are monitored and routinely reviewed by internal and external parties.
This variability may lead to volatility in our stock price as investors and research analysts respond to quarterly fluctuations. In addition, comparing our results of operations on a period-to-period basis, particularly on a sequential quarterly basis, may not be meaningful. You should not rely on our past results as an indication of our future performance.
In addition, comparing our results of operations on a period-to-period basis, particularly on a sequential quarterly basis, may not be meaningful. You should not rely on our past results as an indication of our future performance.
Any failure by a CRO, a clinical trial site, or clinical investigator, or us to successfully accomplish clinical trial monitoring, data collection, safety monitoring and reporting, and data management and other services in a timely manner and in compliance with regulatory requirements could have a material adverse effect on our ability to utilize the trial to obtain regulatory approval or complete clinical development of our product candidates to support regulatory approval.
If GCP and other regulatory requirements are not adhered to by us or our third-party providers or clinical investigators, the conduct of the trial may be compromised and the development and commercialization of our current and future product candidates could be delayed or approval may never be obtained. 31 Table of Contents Any failure by a CRO, a clinical trial site, or clinical investigator, or us to successfully accomplish clinical trial monitoring, data collection, safety monitoring and reporting, and data management and other services in a timely manner and in compliance with regulatory requirements could have a material adverse effect on our ability to utilize the trial to obtain regulatory approval or complete clinical development of our product candidates to support regulatory approval.
We have also developed an integrated information technology system for benefit coordination for MACI patients who have opted-in to the My Cartilage Care program, which we use with our benefit coordination contractor and our contracted specialty pharmacies.
We have also developed an integrated information technology system for benefit coordination for MACI patients who have opted-in to the My Cartilage Care program, which we use with our benefit coordination contractor and our contracted specialty pharmacies. This system contains patient-related information some of which is accessible by company personnel and healthcare professionals for surgery coordination activities.
We cannot predict the extent to which reimbursement for our products will be affected by initiatives to reduce costs for healthcare providers. Failure to collect from such payers or to obtain or maintain written agreements with such payers or obtaining lower than estimated reimbursement for our products would adversely affect our business, financial conditions and results of operations.
Failure to collect from such payers or to obtain or maintain written agreements with such payers or obtaining lower than estimated reimbursement for our products would adversely affect our business, financial conditions and results of operations.
MediWound has additionally registered trademarks with respect to NexoBrid, which we have licensed as part of our License Agreement with MediWound. Third parties may challenge our use of these trademarks.
We rely on our trademarks to distinguish our products from the products of our competitors, and have registered or applied to register a number of these trademarks. MediWound has additionally registered trademarks with respect to NexoBrid, which we have licensed as part of our License Agreement with MediWound. Third parties may challenge our use of these trademarks.
Failure of third parties, including for example Matricel GmbH, to manufacture or supply certain components, equipment, disposable devices, and other materials used in our MACI or Epicel cell manufacturing processes would impair our cell product development and commercialization.
Additionally, any supply interruption could harm our reputation and cause our product sales and profitability to suffer even after such supply interruption is corrected. 34 Table of Contents Failure of third parties, including for example Matricel GmbH, to manufacture or supply certain components, equipment, disposable devices, and other materials used in our MACI or Epicel cell manufacturing processes would impair our cell product development and commercialization.
Our business, financial condition and results of operations could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the war in Ukraine, geopolitical tensions, or record inflation. 52 Table of Contents U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine.
Our business, financial condition and results of operations could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the war in Ukraine, the Israel-Hamas war, geopolitical tensions, or record inflation.
A HUD is a medical device intended to benefit patients in the treatment or diagnosis of a disease or condition that affects not more than 8,000 individuals in the U.S. per year. Once a HUD receives a HDE from the FDA, the product may be marketed and sold in the U.S.
For example, the FDA approved Epicel as a HUD pursuant to an HDE application. A HUD is a medical device intended to benefit patients in the treatment or diagnosis of a disease or condition that affects not more than 8,000 individuals in the U.S. per year.
The market price of shares of our common stock has been volatile, ranging in closing price between $17.65 and $43.29 during January 3, 2022 through January 31, 2023.
The market price of shares of our common stock has been volatile, ranging in closing price between $23.85 and $44.56 during January 2, 2023 through January 31, 2024.
Individual states have become increasingly aggressive in passing legislation and implementing regulations designed to control product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, 43 Table of Contents and marketing cost disclosure and transparency measures, and designed to encourage importation from other countries and bulk purchasing.
We cannot predict how the IRA will be implemented, whether future litigation will be filed seeking to revise the law, or whether other laws or proposals will be made or adopted, or what impact these efforts may have on us. 43 Table of Contents Individual states have become increasingly aggressive in passing legislation and implementing regulations designed to control product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, and marketing cost disclosure and transparency measures, and designed to encourage importation from other countries and bulk purchasing.
See “Cautionary Note Regarding Forward-Looking Statements” and the risks of our businesses described elsewhere in this Annual Report on Form 10‑K.
See “Cautionary Note Regarding Forward-Looking Statements” and the risks of our businesses described elsewhere in this Annual Report on Form 10‑K. Risks Related to Our Operations We may experience significant quarterly and annual fluctuations in our results of operations due to a number of factors.
We strive to utilize current security technologies, and our defenses are monitored and routinely reviewed by internal and external parties. 29 Table of Contents Despite these efforts, threats from malicious persons and groups, new vulnerabilities, and advanced and increased attacks against our and our service providers’ or partners’ information systems create risk of cyber security and/or privacy incidents.
Despite these efforts, threats from malicious persons and groups, new vulnerabilities, and advanced and increased attacks against our and our service providers’ or partners’ information systems create risk of cyber security and/or privacy incidents.
If a prolonged government shutdown occurs in the future, due to COVID-19 or for any reason, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
As a result, certain regulatory agencies, including the FDA, have had to furlough essential employees and stop critical activities in the past. If a prolonged government shutdown occurs in the future, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business. We could incur significant costs complying with environmental and health and safety requirements, or as a result of liability for contamination or other harm caused by hazardous materials that we use.
We could incur significant costs complying with environmental and health and safety requirements, or as a result of liability for contamination or other harm caused by hazardous materials that we use. Our research and development and manufacturing processes involve the use of hazardous materials.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOn January 28, 2022, we entered into a new lease for approximately 126,000 square feet of to-be-constructed manufacturing, laboratory and office space in Burlington, Massachusetts, which will serve as our new corporate headquarters and primary manufacturing facility. See Note 5, “Leases” in our accompanying consolidated financial statements for further informatio n.
Biggest changeAdditional facilities will be required to support expansion of our manufacturing operations and research and development activities. On January 28, 2022, we entered into a new lease for approximately 126,000 square feet of manufacturing, laboratory and office space in Burlington, Massachusetts, which is currently being constructed, and will serve as our new corporate headquarters and primary manufacturing facility.
We lease approximately 14,000 square feet of additional office space in Cambridge, Massachusetts expiring in 2024 and we have the right to extend until 2029. We also lease approximately 6,000 square feet of office space in Ann Arbor, Michigan, which expires in April 2023.
We lease approximately 14,000 square feet of additional office space in Cambridge, Massachusetts expiring in 2024 and we have the right to extend until 2029. We also lease approximately 6,000 square feet of office space in Ann Arbor, Michigan, which expires in April 2025. We believe that our facilities are adequate to meet our current needs.
Removed
We intend to extend our Ann Arbor lease for an additional period of time prior to the April 2023 expiration. We believe that our facilities are adequate to meet our current needs. Additional facilities will be required to support expansion of our manufacturing operations and research and development activities.
Added
See Note 5, “Leases” in our accompanying consolidated financial statements for further informatio n.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe historical stock price performance of our common stock shown in the graph below is not necessarily indicative of future stock price performance, and we do not make or endorse any predictions as to future stockholder returns. 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Vericel Corporation (VCEL) $100 $319 $319 $567 $721 $483 NASDAQ Composite Index (^IXIC) $100 $96 $130 $187 $227 $152 NASDAQ Biotechnology Index (^NBI) $100 $91 $113 $142 $141 $126 56 Table of Contents Purchases of Equity Securities by the Issuer There were no repurchases of shares of common stock made during the year ended December 31, 2022.
Biggest changeThe historical stock price performance of our common stock shown in the graph below is not necessarily indicative of future stock price performance, and we do not make or endorse any predictions as to future stockholder returns. 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Vericel Corporation (VCEL) $100 $100 $177 $226 $151 $205 NASDAQ Composite Index (^IXIC) $100 $135 $194 $236 $158 $226 NASDAQ Biotechnology Index (^NBI) $100 $124 $156 $155 $138 $144 57 Table of Contents Purchases of Equity Securities by the Issuer There were no repurchases of shares of common stock made during the year ended December 31, 2023.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchase of Equity Securities Market Information Our common stock is currently trading on the NASDAQ Stock Market under the symbol “VCEL”. Holders of Record As of January 31, 2023 there were approximately 170 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchase of Equity Securities Market Information Our common stock is currently trading on the NASDAQ Stock Market under the symbol “VCEL”. Holders of Record As of January 31, 2024 there were approximately 170 holders of record of our common stock.
The comparison assumes that a hypothetical $100 was invested on December 31, 2017 in our common stock and in both of the foregoing indices. All values assume reinvestment of the pre-tax value of dividends paid by companies included in these indices.
The comparison assumes that a hypothetical $100 was invested on December 31, 2018 in our common stock and in both of the foregoing indices. All values assume reinvestment of the pre-tax value of dividends paid by companies included in these indices.
Set forth below is a line graph comparing the cumulative total shareholder return on Vericel’s common stock with the cumulative total return of (i) the NASDAQ Composite Index, and (ii) the NASDAQ Biotechnology Index, for the period from December 31, 2017 through December 31, 2022.
Set forth below is a line graph comparing the cumulative total shareholder return on Vericel’s common stock with the cumulative total return of (i) the NASDAQ Composite Index, and (ii) the NASDAQ Biotechnology Index, for the period from December 31, 2018 through December 31, 2023.
Added
Rule 10b5-1 Trading Plans During the three months ended December 31, 2023, the following Section 16 officers and directors adopted, modified or terminated a “Rule 10b5-1 trading arrangement” (as defined in Item 408 of Regulation S-K of the Exchange Act): • On November 15, 2023, Sean Flynn, Senior Vice President, General Counsel and Secretary, entered into a Rule 10b5-1 trading arrangement providing for the potential sale of up to 11,365 shares of our common stock between March 8, 2024, and November 29, 2024.
Added
There were no “non-Rule 10b5-1 trading arrangements” (as defined in Item 408 of Regulation S-K of the Exchange Act) adopted, modified or terminated during the fiscal quarter ended December 31, 2023 by our directors and section 16 officers.
Added
Each of the Rule 10b5-1 trading arrangements are in accordance with our Statement of Company Policy on Insider Trading and Disclosure and actual sale transactions made pursuant to such trading arrangements will be disclosed publicly in Section 16 filings with the SEC in accordance with applicable securities laws, rules and regulations.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe expect to begin commercial sales of NexoBrid in the U.S. during the second quarter of 2023. 60 Table of Contents Results of Operations The following is a summary of our consolidated results of operations: Year Ended December 31, 2022 vs. 2021 (In thousands) 2022 2021 2020 Change $ Change % Total revenue $ 164,365 $ 156,184 $ 124,179 $ 8,181 5.2 % Cost of product sales 54,577 50,159 39,951 4,418 8.8 % Gross profit 109,788 106,025 84,228 3,763 3.5 % Research and development 19,943 16,287 13,020 3,656 22.4 % Selling, general and administrative 106,903 97,592 68,836 9,311 9.5 % Total operating expenses 126,846 113,879 81,856 12,967 11.4 % (Loss) income from operations (17,058) (7,854) 2,372 (9,204) 117.2 % Total other income 1,070 272 672 798 293.4 % Income tax expense (benefit) 721 (111) 180 832 (749.5) % Net (loss) income $ (16,709) $ (7,471) $ 2,864 $ (9,238) 123.7 % Comparison of the Periods Ended December 31, 2022 and 2021 Total Revenue Revenue by product is as follows: Year Ended December 31, 2022 vs. 2021 (In thousands) 2022 2021 2020 Change $ Change % MACI $ 131,967 $ 111,554 $ 94,432 $ 20,413 18.3 % Epicel 31,731 41,521 27,536 (9,790) (23.6) % NexoBrid 667 3,109 2,211 (2,442) (78.5) % Total revenue $ 164,365 $ 156,184 $ 124,179 $ 8,181 5.2 % Total revenue increase for the year ended December 31, 2022, compared to 2021, was driven primarily by MACI volume and price growth, offset primarily by lower Epicel volume associated with lower incidence of severe burns and lower revenue associated with the delivery of NexoBrid to BARDA for emergency response preparedness.
Biggest changeCertain raw materials utilized in NexoBrid’s manufacture, including the supply of the active ingredient bromelain are obtained from Taiwan. 61 Table of Contents Results of Operations The following is a summary of our consolidated results of operations: Year Ended December 31, 2023 vs. 2022 (In thousands) 2023 2022 2021 Change $ Change % Total revenue $ 197,516 $ 164,365 $ 156,184 $ 33,151 20.2 % Cost of product sales 61,940 54,577 50,159 7,363 13.5 % Gross profit 135,576 109,788 106,025 25,788 23.5 % Research and development 21,042 19,943 16,287 1,099 5.5 % Selling, general and administrative 120,998 106,903 97,592 14,095 13.2 % Total operating expenses 142,040 126,846 113,879 15,194 12.0 % Loss from operations (6,464) (17,058) (7,854) 10,594 (62.1) % Total other income 4,096 1,070 272 3,026 282.8 % Income tax expense (benefit) 814 721 (111) 93 12.9 % Net loss $ (3,182) $ (16,709) $ (7,471) $ 13,527 (81.0) % Comparison of the Periods Ended December 31, 2023 and 2022 Total Revenue Revenue by product is as follows: Year Ended December 31, 2023 vs. 2022 (In thousands) 2023 2022 2021 Change $ Change % MACI $ 164,800 $ 131,967 $ 111,554 $ 32,833 24.9 % Epicel 31,574 31,731 41,521 (157) (0.5) % NexoBrid 1,142 667 3,109 475 71.2 % Total revenue $ 197,516 $ 164,365 $ 156,184 $ 33,151 20.2 % Total revenue increase for the year ended December 31, 2023, compared to 2022, was driven primarily by MACI volume and price growth and the launch of NexoBrid after its commercial availability during the third quarter of 2023.
As of December 31, 2022, we have sold no shares pursuant to the Sales Agreement. On July 29, 2022, we entered into a $150.0 million five-year senior secured revolving credit agreement by and among the Company, the other loan parties thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as the administrative agent (the “Revolving Credit Agreement”).
As of December 31, 2023, we have sold no shares pursuant to the Sales Agreement. On July 29, 2022, we entered into a $150.0 million five-year senior secured revolving credit agreement by and among the Company, the other loan parties thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as the administrative agent (the “Revolving Credit Agreement”).
See Note 8, “Revolving Credit Agreement” in the accompanying consolidated financial statements for further details. Contractual Obligations We lease facilities in Ann Arbor, Michigan and Cambridge, Massachusetts. The Cambridge facilities include clean rooms, laboratories for MACI and Epicel manufacturing and office space. We also pay for use of two offsite warehouse spaces and lease computer equipment.
See Note 8, “Revolving Credit Agreement” in the accompanying consolidated financial statements for further details. Contractual Obligations We lease facilities in Ann Arbor, Michigan, Cambridge, Massachusetts and Burlington, Massachusetts. The Cambridge facilities include clean rooms, laboratories for MACI and Epicel manufacturing and office space. We also pay for use of two offsite warehouse spaces and lease computer equipment.
MACI orders are normally stronger in the fourth quarter due to several factors including the satisfaction by patients of insurance deductible limits and the time of year patients prefer to start rehabilitation. Due to the low incidence and variable occurrence of severe burns, Epicel revenue has inherent variability from quarter-to-quarter and does not exhibit significant seasonality.
Historically, MACI orders are normally stronger in the fourth quarter due to several factors including the satisfaction by patients of insurance deductible limits and the time of year patients prefer to start rehabilitation. Due to the low incidence and variable occurrence of severe burns, Epicel revenue has inherent variability from quarter-to-quarter and does not exhibit significant seasonality.
NexoBrid’s approval expands our burn care franchise’s total addressable market, which will permit us to treat a significantly larger segment of hospitalized burn patients than with Epicel alone.
NexoBrid’s FDA approval expands our burn care franchise’s total addressable market, which will permit us to treat a significantly larger segment of hospitalized burn patients than with Epicel alone.
We have no immediate plans to borrow under the Revolving Credit Agreement, but we may use the facility for working capital needs and other general corporate purposes. As of December 31, 2022 , there are no outstanding borrowings under the Revolving Credit Agreement, and we are in compliance with all applicable covenant requirements.
We have no immediate plans to borrow under the Revolving Credit Agreement, but we may use the facility for working capital needs and other general corporate purposes. As of December 31, 2023 , there are no outstanding borrowings under the Revolving Credit Agreement, and we are in compliance with all applicable covenant requirements.
We recognize product revenue from sales to a customer (distributor or hospital) following the five-step model in ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.
We recognize product revenue from sales to a customer following the five-step model in ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.
We also filed a prospectus supplement relating to the offering and sale of the ATM Shares on August 27, 2021. We are not obligated to make any sales of ATM Shares, and SVB Leerink is not required to sell any specific number or dollar amount of the ATM Shares under the Sales Agreement.
We also filed a prospectus supplement relating to the offering and sale of the ATM Shares on August 27, 2021. We are not obligated to make any sales of ATM Shares, and Leerink Partners is not required to sell any specific number or dollar amount of the ATM Shares under the Sales Agreement.
Recent Accounting Pronouncements 66 Table of Contents Refer to Note 2, “Summary of Significant Accounting Policies” in the accompanying consolidated financial statements located under Item 8 of this Annual Report on Form 10-K for information regarding recently issued accounting standards that may have a significant impact on our business.
Recent Accounting Pronouncements Refer to Note 2, “Summary of Significant Accounting Policies” in the accompanying consolidated financial statements located under Item 8 of this Annual Report on Form 10-K for information regarding recently issued accounting standards that may have a significant impact on our business.
The total remaining contractual obligations related to the warehouse agreement are $5.8 million as of December 31, 2022. See Note 15, “Commitments and Contingencies” in our accompanying consolidated financial statements for further informatio n. We have no off-balance sheet arrangements that have or are reasonably likely to have a material effect on our financial condition.
The total remaining contractual obligations related to the warehouse agreement are $3.8 million as of December 31, 2023. See Note 15, “Commitments and Contingencies” in our accompanying consolidated financial statements for further informatio n. We have no off-balance sheet arrangements that have or are reasonably likely to have a material effect on our financial condition.
The expansion of our target addressable market supports a broader commercial footprint, and we believe that this may help drive both increased NexoBrid use as well as increased Epicel awareness throughout the burn care space.
The expansion of our target addressable market supports a broader commercial footprint, and we believe that this may help drive both increased NexoBrid use as well as increased Epicel awareness throughout the burn care space. The commercial launch of NexoBrid is well underway.
Comparison of the Periods Ended December 31, 2021 and 2020 For a comparison of our results of operations for the fiscal years ended December 31, 2021 and December 31, 2020, see “Part II, Item 7.
Comparison of the Periods Ended December 31, 2022 and 2021 For a comparison of our results of operations for the fiscal years ended December 31, 2022 and December 31, 2021, see “Part II, Item 7.
Stock-Based Compensation The accounting for stock-based compensation requires us to determine the fair value of common stock issued in the form of stock option awards and restricted stock units. The fair value of restricted stock units held by the employees is determined based on the fair value of our common stock on the date of the grant.
Stock-Based Compensation The accounting for stock-based compensation requires us to determine the fair value of common stock issued in the form of stock option awards and restricted stock units. The fair value of restricted stock units held by employees and non-employee directors is determined based on the fair value of our common stock on the date of the grant.
We use the value of our common stock at the date of the grant in the calculation of the fair value of our share-based awards. The fair value of stock options held by our employees is determined using a Black-Scholes option valuation method, which is a valuation technique that is acceptable for share-based payment accounting.
We use the value of our common stock at the date of the grant in the calculation of the fair value of our share-based awards. The fair value of stock options held by our employees and non-employee directors is determined using a Black-Scholes option valuation method, which is a valuation technique that is acceptable for share-based payment accounting.
Total Other Income The change in total other income for the year ended December 31, 2022, was due primarily to fluctuations in the rates of return on our investments in various marketable debt securities slightly offset by interest expense related to our Revolving Credit Agreement.
Total Other Income The change in total other income for the year ended December 31, 2023, was due primarily to fluctuations in the rates of return on our investments in various marketable debt securities partially offset by interest expense related to our Revolving Credit Agreement.
Reimbursements from third-party insurers and government payers vary by patient and payer and are based on either contracted rates, publicly available rates or a fee schedule. Net product revenue is recognized net of estimated contractual allowances, which considers historical collection experience from both the payer and patient, denial rates and the terms of our contractual arrangements.
Reimbursements from third-party insurers and government payers vary by patient and payer and are based on either contracted rates, publicly available rates, fee schedules or past payer precedents. Net product revenue is recognized net of estimated contractual allowances, which considers historical collection experience from both the payer and patient, denial rates and the terms of our contractual arrangements.
Sources of Capital On August 27, 2021, we entered into a Sales Agreement with SVB Leerink LLC, as sales agent (“SVB Leerink”), pursuant to which we may offer and sell up to $200.0 million of shares of our common stock, no par value per share (“ATM Shares”).
Sources of Capital On August 27, 2021, we entered into a Sales Agreement with Leerink Partners (f/k/a SVB Leerink LLC), as sales agent, pursuant to which we may offer and sell up to $200.0 million of shares of our common stock, no par value per share (“ATM Shares”).
In the last five years through 2022, MACI sales volumes from the first through the fourth quarter on average represented 20% (18%-21% range), 21% (16%-24% range), 24% (21%-26% range) and 35% (33%-38% range) respectively, of total annual volumes.
In the last five years through 2023, MACI sales volumes from the first through the fourth quarter on average represented 20% (18%-22% range), 22% (16%-24% range), 23% (21%-26% range) and 35% (33%-38% range) respectively, of total annual volumes.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 24, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 23, 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 24, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 23, 2023.
Our actual cash requirements may differ from projections and will depend on many factors, including any future impacts of the COVID-19 pandemic, the level and pace of future research and development efforts, the scope and results of ongoing and potential clinical trials, the costs involved in filing, prosecuting and enforcing patents, the need for additional manufacturing capacity, competing technological and market developments, costs associated with possible acquisitions or development of complementary business activities, and the cost to market our products.
Our actual cash requirements may differ from projections and will depend on many factors, including the level and pace of future research and development efforts, the scope and results of ongoing and potential clinical trials, the costs involved in filing, prosecuting and enforcing patents, the need for additional manufacturing capacity, competing technological and market developments, global macroeconomic conditions, costs associated with possible acquisitions or development of complementary business activities, and the cost to market our products.
Certain of our lease agreements include lease payments that are adjusted periodically for an index or rate. The leases are initially measured using the present value of the projected payments adjusted for the index or rate in effect at the commencement date. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The leases are initially measured using the present value of the projected payments adjusted for the index or rate in effect at the commencement date. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Although the effects of the ongoing COVID-19 pandemic have lessened in recent months, our business and operations may be adversely affected in the future if conditions were to worsen.
Although the effects of the COVID-19 pandemic have largely moderated in recent months, our business and operations may be adversely affected in the future if conditions were to worsen.
As a result, if factors change and different assumptions are used, the stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those stock options expected to vest over the service period.
As a result, if factors change and different assumptions are used, the stock-based compensation expense could be materially different in the future. In addition, we estimate the expected forfeiture rate and only recognize expense for those stock options expected to vest over the service period. We estimate the forfeiture rate considering the historical experience of our stock-based awards.
Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: Year Ended December 31, 2022 2021 2020 Net cash provided by operating activities $ 17,687 $ 29,040 $ 17,572 Net cash used in by investment activities (36,206) (3,501) (17,160) Net cash provided by financing activities 1,045 9,171 6,441 Net (decrease) increase in cash, cash equivalents, and restricted cash $ (17,474) $ 34,710 $ 6,853 For a discussion of our liquidity and capital resources related to our cash flow activities for the fiscal year ended December 31, 2020, see “Part II, Item 7.
Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: Year Ended December 31, 2023 2022 2021 Net cash provided by operating activities $ 35,311 $ 17,687 $ 29,040 Net cash used in investment activities (3,130) (36,206) (3,501) Net cash provided by financing activities 3,618 1,045 9,171 Net increase (decrease) in cash, cash equivalents, and restricted cash $ 35,799 $ (17,474) $ 34,710 For a discussion of our liquidity and capital resources related to our cash flow activities for the fiscal year ended December 31, 2021, see “Part II, Item 7.
MACI MACI is a third-generation ACI product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults.
MACI MACI is a third-generation autologous chondrocyte implantation (“ACI”) product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults.
Income Tax Expense (Benefit) For the year-ended December 31, 2022, we recorded $0.7 million of income tax expense as a result of state income taxes primarily due to the elimination of the option to deduct research and development expenditures immediately in the year incurred and instead amortize such expenditures over five years for tax purposes, and in the same period of 2021, we recorded a state income tax benefit of $0.1 million.
Income Tax Expense For the years ended December 31, 2023 and December 31, 2022, we recorded $0.8 million and $0.7 million, respectively, of income tax expense as a result of state income taxes primarily due to the elimination of the option to deduct research and development expenditures immediately in the year incurred and instead amortize such expenditures over five years for tax purposes.
To date, we have financed our operations primarily through cash received through Epicel and MACI sales, debt, and public and private sales of our equity securities. We generated $17.7 million in operating cash flows during 2022 and we may finance our operations through the sales of equity securities, revolver borrowings or other debt financings.
To date, we have financed our operations primarily through cash received through MACI, Epicel and NexoBrid sales, debt, and public and private sales of our equity securities. We generated $35.3 million in operating cash flows during 2023 and we may finance our operations through the sales of equity securities, revolver borrowings or other debt financings.
Net cash provided by financing activities during the year ended December 31, 2021 was the result of net proceeds from the exercise of stock options and the employee stock purchase plan of $11.2 million, partially offset by the payment of employee withholding taxes related to the vesting of restricted stock units of $1.7 million.
Net cash provided by financing activities during the year ended December 31, 2021 was the result of net proceeds from the exercise of stock options and the employee stock purchase plan of $3.7 million, partially offset by the payment of employee withholding taxes related to the vesting of restricted stock units of $1.5 million and payments of debt issuance costs of $1.1 million.
We are currently evaluating the potential for the arthroscopic delivery of MACI to the cartilage defect – a procedure in which a surgeon can evaluate, prepare and treat the cartilage defect under direct vision using specialized instruments delivered through a number of smaller incisions or portals.
We are currently focused on the arthroscopic delivery of MACI to the cartilage defect – a procedure in which a surgeon can evaluate, prepare and treat the cartilage defect under direct arthroscopic visualization using specialized instruments delivered through a number of smaller incisions or portals.
“Risk Factors”. 58 Table of Contents The War in Ukraine The ongoing war between Russia and Ukraine and the related sanctions and other penalties imposed by countries across the globe against Russia are continuing to create substantial uncertainty in the global economy and have resulted in heightened inflation and supply chain disruptions.
The War in Ukraine The ongoing war between Russia and Ukraine and the related sanctions and other penalties imposed by countries across the globe against Russia are continuing to create substantial uncertainty in the global economy and have contributed to heightened inflation and supply chain disruptions.
Net cash used in investing activities during the year ended December 31, 2021 was the result of $60.0 million in investments purchases and $7.9 million of property and equipment purchases primarily for manufacturing upgrades, offset by $64.4 million of investment sales and maturities through December 31, 2021. 63 Table of Contents Net Cash Provided by Financing Activities Net cash provided by financing activities during the year ended December 31, 2022 was the result of net proceeds from the exercise of stock options and the employee stock purchase plan of $3.7 million, partially offset by the payment of employee withholding taxes related to the vesting of restricted stock units of $1.5 million and payments of debt issuance costs of $1.1 million.
Net cash used in investing activities during the year ended December 31, 2022 was the result of $69.6 million in investments purchases and $7.6 million of property and equipment purchases primarily for manufacturing upgrades, partially offset by $40.9 million of investment sales and maturities through December 31, 2022. 64 Table of Contents Net Cash Provided by Financing Activities Net cash provided by financing activities during the year ended December 31, 2023 was the result of net proceeds from the exercise of stock options and the employee stock purchase plan of $6.0 million, partially offset by the payment of employee withholding taxes related to the vesting of restricted stock units of $2.3 million.
The $29.0 million of net cash provided by operations in 2021, was primarily the result of non-cash charges of $34.3 million related to stock compensation expense, $4.4 million in operating lease amortization and $3.0 million in depreciation and amortization expense, offset by a net loss of $7.5 million and a net decrease of $6.2 million related to movements in our working capital accounts.
The $35.3 million of net cash provided by operations in 2023, was primarily the result of non-cash charges of $32.3 million related to stock compensation expense, $6.1 million in operating lease amortization and $4.6 million in depreciation and amortization expense, offset by a net loss of $3.2 million and a net decrease of $4.1 million related to movements in our working capital accounts.
Net Cash Provided by Operating Activities Our cash and cash equivalents totaled $51.1 million, short-term investments totaled $68.5 million and long-term investments totaled $20.0 million as of December 31, 2022.
Our cash, cash equivalents and restricted cash totaled $51.1 million, short-term investments totaled $68.5 million and long-term investments totaled $20.0 million as of December 31, 2022.
Epicel was designated as a HUD in 1998 and an HDE application for the product was submitted in 1999. HUDs are devices that are intended for diseases or conditions that affect fewer than 8,000 individuals annually in the U.S.
Epicel was designated as a HUD in 1998 and an HDE application for the product was submitted in 1999. HUDs are devices that are intended for diseases or conditions that affect fewer than 8,000 individuals annually in the U.S., and certain HUDs are restricted by the amount which a manufacturer may charge for its use.
Revenue Recognition and Net Product Sales Revenue from sales to a customer (distributor, hospital or other party) is recognized in accordance with ASC 606, Revenue Recognition.
Revenue Recognition and Net Product Sales Revenue from sales to a customer is recognized in accordance with ASC 606, Revenue Recognition.
Selling, General and Administrative Expenses Selling, general and administrative expenses for the year ended December 31, 2022 were $106.9 million, compared to $97.6 million for 2021.
Selling, General and Administrative Expenses Selling, general and administrative expenses for the year ended December 31, 2023 were $121.0 million, compared to $106.9 million for 2022.
The overall decreases in cash from our working capital accounts were primarily driven by an increase in accounts receivable due to an increase in sales volume, an increase in inventory due to increased production needs and payments on operating leases, offset by an increase of accounts payable and accrued expenses due to timing of payments.
The overall decreases in cash from our working capital accounts were primarily driven by an increase in accounts receivable due to an increase in sales volume, offset by a decrease in inventory due to usage for production needs, an increase of accounts payable and accrued expenses due to timing of payments and receipts of tenant improvement allowances which exceeded payments on operating leases amortization.
We assess risk and determine a loss percentage by pooling accounts receivable based on similar risk characteristics. The loss percentage is calculated through the use of forecasts that are based on current and historical economic and financial information. Changes in estimates of the transaction price are recorded through revenue in the period in which such change occurs.
We assess risk and determine a loss percentage by pooling accounts receivable based on similar risk characteristics. The loss percentage is calculated through the use of forecasts that are based on current and historical economic and financial information.
We believe that a resurgence of COVID-19 because of emerging variants or other factors could result in additional disruptions that could impact our business and operations in the future, including intermittent restrictions on the ability of our personnel to travel and access customers for selling, marketing, training, case support and product development feedback, delays in approvals by regulatory bodies, delays in product development efforts, and additional government requirements or other incremental mitigation efforts that may further impact our capacity to manufacture, sell and support the use of our products.
Should a resurgence of COVID-19 occur, or new virus variants emerge, it could result in additional disruptions that could impact our business and operations in the future, including U.S. hospital or surgical center staffing shortages, periodic cancellation or delay of elective MACI surgical procedures, intermittent restrictions on the ability of our personnel to travel and access customers for selling, marketing, training, case support and product development feedback, delays in approvals by regulatory bodies, delays in product development efforts, and additional government requirements or other incremental mitigation efforts that may further impact our capacity to manufacture, sell and support the use of our products.
NexoBrid is a topically-administered biological product containing proteolytic enzymes and is indicated for the removal of eschar in adults with deep partial-thickness and/or full thickness thermal burns. We expect to begin commercial sales of NexoBrid in the U.S. during the second quarter of 2023.
(“MediWound”) for North American rights to NexoBrid ® (anacaulase-bcdb), a topically-administered biological orphan product containing proteolytic enzymes, which is indicated for the removal of eschar in adults with deep partial thickness and/or full thickness thermal burns. Following FDA approval, we began commercial sales of NexoBrid in the U.S. during the third quarter of 2023.
Product Portfolio Our marketed products include two FDA-approved autologous cell therapies: MACI, a third-generation autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults; and Epicel, a permanent skin replacement for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent TBSA and a specialty biologic: NexoBrid, a biological orphan product containing proteolytic enzymes indicated for eschar removal in adults with deep partial-thickness and/or full-thickness burn.
MACI is a third-generation autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults; and Epicel is a permanent skin replacement for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent TBSA.
Stock-based Compensation Expense Non-cash stock-based compensation expense is summarized in the following table: Year Ended December 31, 2022 vs. 2021 (In thousands) 2022 2021 2020 Change $ Change % Cost of product sales $ 3,630 $ 3,681 $ 1,949 $ (51) (1.4) % Research and development 5,261 4,120 1,884 1,141 27.7 % Selling, general and administrative 28,292 26,521 10,010 1,771 6.7 % Total non-cash stock-based compensation expense $ 37,183 $ 34,322 $ 13,843 $ 2,861 8.3 % 62 Table of Contents The increase in stock-based compensation expense for the year ended December 31, 2022, is due primarily to fluctuations in stock prices which impacts the fair value of the options and restricted stock units awarded and the expense recognized in the period.
Stock-based Compensation Expense Non-cash stock-based compensation expense is summarized in the following table: Year Ended December 31, 2023 vs. 2022 (In thousands) 2023 2022 2021 Change $ Change % Cost of product sales $ 2,970 $ 3,630 $ 3,681 $ (660) (18.2) % Research and development 3,705 5,261 4,120 (1,556) (29.6) % Selling, general and administrative 25,650 28,292 26,521 (2,642) (9.3) % Total non-cash stock-based compensation expense $ 32,325 $ 37,183 $ 34,322 $ (4,858) (13.1) % 63 Table of Contents The decrease in stock-based compensation expense for the year ended December 31, 2023, is due primarily to fluctuations in stock prices and the mix of service-based options and restricted stock units, which impacts the fair value of the options and restricted stock units awarded and the expense recognized in the period.
Gross Profit Gross profit increased for the year ended December 31, 2022, compared to the same period in 2021, driven by higher MACI volume and price growth, offset by lower Epicel labor utilization, raw material price increases and higher external storage and manufacturing facility costs. 61 Table of Contents Research and Development Expenses The following table summarizes research and development expenses, which include materials, professional fees and an allocation of employee-related salary and fringe benefit costs for our research and development projects: Year Ended December 31, 2022 vs. 2021 (In thousands) 2022 2021 2020 Change $ Change % MACI $ 11,969 $ 9,170 $ 7,157 $ 2,799 30.5 % Epicel 4,924 4,061 3,257 863 21.3 % NexoBrid 3,050 3,056 2,606 (6) (0.2) % Total research and development expenses $ 19,943 $ 16,287 $ 13,020 $ 3,656 22.4 % Research and development expenses for the year ended December 31, 2022 were $19.9 million, compared to $16.3 million for 2021.
Gross Profit Gross profit increased for the year ended December 31, 2023, compared to the same period in 2022, driven by higher MACI volume and price growth. 62 Table of Contents Research and Development Expenses The following table summarizes research and development expenses, which include materials, professional fees and an allocation of employee-related salary and fringe benefit costs for our research and development projects: Year Ended December 31, 2023 vs. 2022 (In thousands) 2023 2022 2021 Change $ Change % MACI $ 13,813 $ 11,969 $ 9,170 $ 1,844 15.4 % Epicel 3,885 4,924 4,061 (1,039) (21.1) % NexoBrid 3,344 3,050 3,056 294 9.6 % Total research and development expenses $ 21,042 $ 19,943 $ 16,287 $ 1,099 5.5 % Research and development expenses for the year ended December 31, 2023 were $21.0 million, compared to $19.9 million for 2022.
Epicel ® is a permanent skin replacement HUD for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent of TBSA. We also hold an exclusive license from MediWound for North American rights to NexoBrid (anacaulase-bcdb).
Epicel ® is a permanent skin replacement Humanitarian Use Device (“HUD”) for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent of total body surface area (“TBSA”). We also hold an exclusive license from MediWound Ltd.
Direct sales to hospitals or ambulatory surgical centers are recorded at a contracted price, there are typically no forms of variable consideration. When we sell MACI the patient is responsible for payment; however, we are typically reimbursed by a third-party insurer or government payer, subject to a patient co-pay amount.
Direct sales to hospitals or distributors are recorded at a contracted price, and there are typically no forms of variable consideration. 66 Table of Contents When we sell MACI through its specialty pharmacies, we are typically reimbursed by a third-party insurer or government payer, subject to a patient co-pay amount.
MACI ® is an autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults.
Food and Drug Administration (“FDA”) approved autologous cell therapy products and one FDA-approved specialty biologic product in the U.S. MACI ® is an autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults.
For a discussion of additional risks associated with the ongoing COVID-19 pandemic, please see Part I, Item 1A.
For a discussion of additional risks associated with the COVID-19 pandemic and other potential future public health emergencies, please see Part I, Item 1A. “Risk Factors”.
NexoBrid has the potential to change the standard of care for eschar removal with respect to hospitalized burn patients and treat a significant addressable market in the U.S. With respect to NexoBrid, of the approximately 40,000 burn patients that are hospitalized in the U.S. each year, the majority, over 30,000, will likely require some level of eschar removal.
With respect to NexoBrid, of the approximately 40,000 people that are hospitalized in the U.S. each year for burn-related injuries, the majority, over 30,000, have thermal burns and will likely require some level of eschar removal.
Under this revenue standard, we recognize revenue when our customer obtains control of the promised goods, in an amount that reflects the consideration which we expect to receive in exchange for those goods.
Under this revenue standard, we recognize revenue when our customer obtains control of the promised goods, in an amount that reflects the consideration which we expect to receive in exchange for those goods. MACI Implants We contract with two specialty pharmacies, Orsini Pharmaceutical Services, Inc. (“Orsini”) and AllCare Plus Pharmacy, Inc.
Leases We determine if an arrangement is a lease at inception, in accordance with ASC Topic 842, Leases . All operating lease commitments with a lease term greater than 12 months are recognized as right-of-use (“ROU”) assets and liabilities, on a discounted basis on the balance sheet.
All operating lease commitments with a lease term greater than 12 months are recognized as right-of-use (“ROU”) assets and liabilities, on a discounted basis on the balance sheet. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
Leases with an initial term of 12 months or less are not recorded on the balance sheet. We primarily enter into lease agreements for manufacturing and office space, warehouses space, and other computer-related equipment. The leases have varying terms, some of which may include options to extend.
We primarily enter into lease agreements for manufacturing and office space, warehouses space, and other computer-related equipment. The leases have varying terms, some of which may include options to extend. Certain of our lease agreements include lease payments that are adjusted periodically for an index or rate.
See Note 5, “Leases” in our accompanying consolidated financial statements for further informatio n. Our purchase commitments consist of minimum purchase amounts of materials used in our cell manufacturing process to manufacture our marketed cell therapy products and total $3.4 million as of December 31, 2022, as well as usage of offsite warehouse space.
Our total purchase commitments consist of minimum purchase amounts of raw materials and finished goods used in our cell manufacturing process to manufacture our marketed cell therapy products and total $19.3 million as of December 31, 2023, as well as usage of offsite warehouse space.
MACI Implants We have engaged a third-party services provider to provide the patient support program to manage patient cases and to ensure complete and accurate billing information is provided to the insurers and hospitals, to facilitate reimbursement.
We engage a third party to provide services in connection with a patient support program to manage patient cases and to ensure that complete and correct billing information is provided to the insurers and hospitals.
We have recently discussed with the FDA a non-clinical regulatory strategy to support the potential inclusion of arthroscopic delivery in MACI’s approved labeling.
We have designed and are currently developing novel and specialized instruments to be used in and help facilitate such a procedure. We discussed with the FDA a non-clinical regulatory strategy to support the potential inclusion of arthroscopic delivery in MACI’s approved labeling.
Our cash, cash equivalents and restricted cash totaled $68.5 million, short-term investments totaled $35.1 million and long-term investments totaled $25.7 million as of December 31, 2021.
Net Cash Provided by Operating Activities Our cash, cash equivalents, and restricted cash totaled $86.9 million, short-term investments totaled $40.5 million and long-term investments totaled $25.3 million as of December 31, 2023.
Certain raw materials utilized in NexoBrid’s manufacture, including the supply of the active ingredient bromelain are obtained from Taiwan.
Certain raw materials utilized in NexoBrid’s manufacture, including the supply of the active ingredient bromelain, are obtained from Taiwan. Product Portfolio Our marketed products include two FDA-approved autologous cell therapies and one FDA-approved specialty biologic product.
We also are evaluating the feasibility and potential market opportunity involved in delivering MACI treatment to patients suffering from cartilage damage in the ankle. We believe that this potential lifecycle enhancement and indication expansion for MACI will require the conduct of an additional randomized clinical trial concerning the product’s use in the ankle.
We also are evaluating the feasibility and potential market opportunity involved in delivering MACI treatment to patients suffering from cartilage damage in the ankle.
The arthroscopic delivery of MACI could increase the ease of MACI’s use for physicians and reduce both the length of the procedure and a patient’s post-operative pain and recovery. We have designed and are currently developing novel and specialized instruments to be used in and help facilitate such a procedure.
The arthroscopic delivery of MACI could increase the ease of MACI’s use for physicians and reduce both the length of the procedure as well as procedure-induced trauma, ultimately resulting in a reduction of a patient’s post-operative pain and accelerating a patient’s recovery.
Manufacturing We have a cell manufacturing facility in Cambridge, Massachusetts, which is used for U.S. manufacturing and distribution of MACI and Epicel. The manufacturing process for NexoBrid is conducted by MediWound, primarily at manufacturing locations in Israel. Certain raw materials utilized in NexoBrid’s manufacture, including the supply of the active ingredient bromelain, are obtained from Taiwan.
For a discussion of additional risks associated with the ongoing conflict in Israel, please see Part I, Item 1A. “Risk Factors”. Manufacturing We have a cell manufacturing facility in Cambridge, Massachusetts, which is used for U.S. manufacturing and distribution of MACI and Epicel. The manufacturing process for NexoBrid is conducted by MediWound, primarily at manufacturing locations in Israel.
We will continue to monitor our cumulative loss position and forecasts and reevaluate the need for a valuation allowance as it could be reversed in future periods. This summary of significant accounting policies should be read in conjunction with our consolidated financial statements and related notes and this discussion of our results of operations.
This summary of significant accounting policies should be read in conjunction with our consolidated financial statements and related notes and this discussion of our results of operations.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Vericel Corporation is a fully-integrated, commercial-stage biopharmaceutical company and a leader in advanced therapies for the sports medicine and severe burn care markets. We currently market two FDA-approved autologous cell therapy products and also market one specialty biologic product in the U.S.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Vericel Corporation is a fully-integrated, commercial-stage biopharmaceutical company and a leading provider of advanced therapies for the sports medicine and severe burn care markets. Whether we are treating damaged cartilage or severe burns, we provide advanced therapies to repair serious injuries and restore lives.
On December 28, 2022, the FDA approved a BLA for NexoBrid, granting a license for commercial use in the U.S. NexoBrid is a topically-administered biological product containing proteolytic enzymes and is indicated for the removal of eschar in adults with deep partial-thickness and/or full thickness thermal burns.
The FDA approved NexoBrid on December 28, 2022, and the product indicated for the removal of eschar in adults with deep partial-thickness and/or full thickness thermal burns. Following NexoBrid’s approval we immediately began cross-functional commercial launch activities for the product, including education, training, and engagement activities. We began U.S. commercial sales of NexoBrid in September 2023.
Tax Valuation Allowance A valuation allowance is recorded if it is more likely than not that a deferred tax asset will not be realized based on the weight of available evidence, both positive and negative. Due to our three-year cumulative loss position and history of operating losses, a full valuation allowance against our net deferred tax assets was considered necessary.
Due to our three-year cumulative loss position and history of operating losses, a full valuation allowance against our net deferred tax assets was considered necessary. We will continue to monitor our cumulative loss position and forecasts and reevaluate the need for a valuation allowance as it could be reversed in future periods.
Net Cash Used in Investing Activities Net cash used in investing activities during the year ended December 31, 2022 was the result of $69.6 million in investment purchases and $7.6 million of property and equipment purchases primarily for manufacturing upgrades, offset by $40.9 million of investment sales and maturities through December 31, 2022.
Net Cash Used in Investing Activities Net cash used in investing activities during the year ended December 31, 2023 was the result of $55.2 million in investment purchases, a $7.5 million regulatory milestone payment to MediWound resulting from the FDA’s approval of the NexoBrid BLA, and $20.0 million of property and equipment purchases primarily for construction in process related to the Burlington Lease partially offset by $79.6 million of investment sales and maturities.
See “Risk Factors - “ Our success depends, in part, on the commercial success of NexoBrid for the removal of eschar in adults with deep partial-thickness and/or full-thickness thermal burns following FDA approval of our Biologics License Application. ” COVID-19 In March 2020, the World Health Organization declared the spread of a novel strain of coronavirus (“COVID-19”) to be a pandemic.
See “Risk Factors - “ Our success depends, in part, on the commercial success of NexoBrid for the removal of eschar in adults with deep partial-thickness and/or full-thickness thermal burns. ” COVID-19 On May 11, 2023, the U.S. Department of Health and Human Services announced the expiration of the federal Public Health Emergency for COVID-19.
As of the date of this report, we have 75 MACI sales representatives to enable the sales force to reach our target audience. Most private payers have a medical policy that covers treatment with MACI with the top 30 largest commercial payers having a formal medical policy for MACI or ACI in general.
The team is divided into geographic regions, each managed by a Regional Manager and led by a Vice President of National MACI Sales. Most private payers have a medical policy that covers treatment with MACI with the top 30 largest commercial payers having a formal medical policy for MACI or ACI in general.
The ADN is defined as the number of devices reasonably needed to treat a population of 8,000 individuals per year in the U.S. On February 18, 2016, the FDA approved our HDE supplement to revise the labeled indications of use for Epicel to specifically include pediatric patients.
Epicel is not price-restricted in this manner because on February 18, 2016, the FDA approved our HDE supplement to revise the labeled indications of use for Epicel to specifically include pediatric patients, thus allowing Epicel to be sold for profit.
We have entered into exclusive license and supply agreements with MediWound to commercialize NexoBrid in North America. NexoBrid is approved in the European Union (“EU”) and other international markets and has been designated as an orphan biologic in the U.S., EU and other international markets.
NexoBrid is approved in the European Union (“EU”) and other international markets and has been designated as an orphan biologic in the U.S., EU and other international markets. NexoBrid has the potential to change the standard of care for eschar removal with respect to hospitalized burn patients and treat a significant addressable market in the U.S.
Changes to the estimate of the amount of consideration that will not be collected could have a material impact to the revenue 65 Table of Contents recognized. A 50 basis points change to the estimated uncollectible percentage could result in approximately $0.4 million decrease or increase in the revenue recognized for the year ended December 31, 2022.
A 50 basis points change to the estimated uncollectible percentage could result in approximately $0.4 million decrease or increase in the revenue recognized for the year ended December 31, 2023. Leases We determine if an arrangement is a lease at inception, in accordance with ASC Topic 842, Leases .
Our target audience of U.S. physicians is approximately 5,000 orthopedic surgeons and is divided into two segments: a group of orthopedic surgeons who self-identify and/or have a formal specialty as sports medicine physicians, and a subpopulation of general orthopedic surgeons who perform a high volume of cartilage repair procedures.
Our target audiences are orthopedic surgeons who self-identify and/or have formal specialty training in sports medicine, and a subpopulation of general orthopedic surgeons who perform a high volume of cartilage repair procedures involving the knee. Our MACI commercial team consists of individual sales representatives that regularly engage with our target audience.
Both autologous cell therapy products are currently manufactured and marketed in the U.S. In addition, we have entered into exclusive license and supply agreements with MediWound to commercialize NexoBrid in North America. On December 28, 2022, the FDA approved a BLA for NexoBrid, granting a license for commercial use in the U.S.
Both autologous cell therapy products are currently manufactured and marketed in the U.S. NexoBrid is a topically-administered biological orphan product containing proteolytic enzymes that is indicated for eschar removal in adults with deep partial-thickness and/or full-thickness burns. We hold exclusive license and supply agreements with MediWound to commercialize NexoBrid in North America.
We recognize product revenues from sales of all MACI implants upon delivery at which time the customer obtains control of the implant and the claim is billable. The total consideration which we expect to collect in exchange for MACI implants (the transaction price) may be fixed or variable.
The total consideration which we expect to collect in exchange for MACI implants (the “Transaction Price”) may be fixed or variable.
The increase is primarily due to an increase of $1.1 million in stock-based compensation expense, additional spend on the design of instruments to be used in connection with the potential arthroscopic delivery of MACI to the knee, if approved by the FDA, and increased headcount, partially offset by reimbursement of expenses related to the NexoBrid BLA resubmission.
The increase is primarily due to $1.6 million of professional services largely related to the MACI arthroscopic development program costs in 2023, a $0.7 million increase in headcount and employee expenses and lower reimbursement of expenses from MediWound related to the NexoBrid BLA resubmission that occured in the first half of 2022. partially offset by lower stock compensation expense.
The increase in selling, general and administrative expenses is primarily due to a $1.8 million increase in stock-based compensation expenses, incremental marketing spend for both MACI and burn care franchises, additional travel and in person events across the commercial organization in addition to higher depreciation related to the new office space in Cambridge, Massachusetts.
The increase in selling, general and administrative expenses is primarily due to a $8.1 million increase in headcount and employee expenses, an increase of $3.3 million associated with the Burlington lease which commenced in June of 2023, and additional travel and in person events across the commercial organization, partially offset by lower stock compensation expense.
Most cases in which MACI is used require prior authorization and confirmation of coverage by the patient’s insurance plan or government payers prior to the shipment of product to a hospital or an ambulatory surgical center.
Prior authorization and confirmation of coverage level by the patient’s private insurance plan, hospital or government payer is a prerequisite to the shipment of product to a patient. We recognize product revenue from sales of all MACI implants upon delivery at which time the customer obtains control of the implant and the claim is billable.
We estimate the forfeiture rate considering the historical experience of our stock-based awards. If the actual forfeiture rate is different from the estimate, we adjust the expense accordingly. We record the expense for stock options and restricted stock units using a graded-vesting attribution method.
If the actual forfeiture rate is different from the estimate, we adjust the expense accordingly.
Specifically, following a Type C meeting with the FDA, we are now planning to initiate a human factors validation study, coupled with published literature, to support expanding the MACI label to include arthroscopic administration of MACI for the treatment of cartilage defects of the knee, and we now anticipate an accelerated potential commercial launch of arthroscopic MACI in 2024.
Specifically, following a Type C meeting with the FDA, we submitted a protocol for a MACI arthroscopic delivery human factors validation study, which we conducted and completed during the third quarter of 2023.
Removed
We expect to begin commercial sales of NexoBrid in the U.S. during the second quarter of 2023.
Added
Our highly differentiated portfolio of cell therapy and specialty biologic products combines innovations in biology with medical technologies. We were among the first companies to achieve commercial success in the complex field of cell therapies with treatments that use tissue engineering to regenerate skin and healthy knee cartilage. We currently market two U.S.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe operate in the U.S. only. We are primarily exposed to foreign exchange risk with respect to recognized assets and liabilities due to vendors in countries outside the U.S., which are typically paid in Euro. We do not enter into hedging transactions and do not purchase derivative instruments. 67 Table of Contents
Biggest changeWe operate in the U.S. only. We are primarily exposed to foreign exchange risk with respect to recognized assets and liabilities due to vendors in countries outside the U.S., which are typically paid in Euros. We do not enter into hedging transactions and do not purchase derivative instruments. 68 Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk As of December 31, 2022, we held marketable debt securities, which are classified as available-for-sale and carried at fair value in the accompanying consolidated balance sheet included in this Form 10-K. The fair value of our cash equivalents and marketable securities is subject to changes in market interest rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk As of December 31, 2023, we held marketable debt securities, which are classified as available-for-sale and carried at fair value in the accompanying consolidated balance sheet included in this Form 10-K. The fair value of our cash equivalents and marketable securities is subject to changes in market interest rates.
We do not currently use interest rate derivative instruments or hedging transactions to manage exposure to interest rate changes of our investments. We estimate that a 100 basis point, or 1%, unfavorable change in interest rates would have resulted in approximately a $0.5 million decrease in the fair value of our investment portfolio as of December 31, 2022.
We do not currently use interest rate derivative instruments or hedging transactions to manage exposure to interest rate changes of our investments. We estimate that a 100 basis point, or 1%, unfavorable change in interest rates would have resulted in approximately a $0.5 million decrease in the fair value of our investment portfolio as of December 31, 2023.
We are also subject to interest rate risks in connection with our Revolving Credit Agreement, which is variable rate indebtedness. As of December 31, 2022, there were no borrowings outstanding under the Revolving Credit Agreement.
We are also subject to interest rate risks in connection with our Revolving Credit Agreement, which is variable rate indebtedness. As of December 31, 2023, there were no borrowings outstanding under the Revolving Credit Agreement.

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