Among the most prominent companies in the cartilage regeneration market are familiar names like Zimmer Bioment Holdings Inc. (ZBH, Financial), Stryker (SYK, Financial), and Smith & Nephew (SNN). One of the lesser-knowns that appears poised to climb the ranks is Vericel Corp. (VCEL). With a market cap of $1.4 billion, the Boston-based company is expected to dramatically improve on its results in 2021 as the number of biopsying surgeons returns to pre-Covid levels, Nick Colangelo, president and CEO, told analysts on a third-quarter earnings call in early November.
That news should further warm the hearts of investors, who have seen the value of their shares rise steadily from just under $8 last March to the current price of nearly $31. In the third quarter, Vericel's $32 million in sales topped expectations by more than 4% and the company recorded a statutory profit of 8 cents, surprising analysts who were forecasting a loss, according to Yahoo Finance.
While Colangelo said he wouldn't provide 2021 guidance during the earnings call, the most recent consensus from seven analysts calls for revenues of $158 million in 2021, up 34% from sales over the past 12 months, and a whopping earnings gain of more than 7,000% to 24 cents. Both projections were higher before third-quarter results were reported.
Vericel's key product is called MACI, which uses cell therapy to replace damaged knee cartilage. Cell therapy is the infusion, injection or transplantation of whole cells back into a patient for treatment of a condition, according to the company's website. In Vericel's case, tissue from the patient is collected (biopsying) by a qualified and trained surgeon and then processed and expanded by Vericel into a specific cell type or multicellular therapy. The patient's own cells are then returned to the surgeon for implantation. With the patient acting as their own donor, the risk of rejection and the use of immunosuppressive therapy is minimized.
MACI gives surgeons a new tool to repair cartilage injuries and possibly postpone more serious problems. The first therapy of its kind in the U.S., MACI received the Food and Drug Administration's approval in late 2016. Data from a five-year study showed MACI is generally more effective than microfracture, a surgical technique to treat chondral defects, which are damaged areas of the cartilage of the knee.
A report from Markets and Markets said the global cartilage regeneration and repair market will grow at a compound rate of more than 15%, reaching $1.6 billion by 2025. However, in the near term, the market may decline due to Covid-19, which has caused the postponement or cancellation of most elective surgeries. However, during the second half of the forecasted period, the demand for repair and regeneration products is expected to rise significantly.
Vericel's other cell therapy product is Epicel, a cultured graft grown from a patient's own skin. These grafts provide skin replacement for people who have deep dermal or full-thickness burns comprising a total body surface area of greater than or equal to 30%. From two postage stamp-sized biopsies, Vericel can grow enough skin to cover the patient's entire body.
The company recently achieved another milestone with the FDA's acceptance of its application for NexoBrid, another burn care product. Vericel holds an exclusive license for North American commercial rights to NexoBrid. Funding and technical support for its development is being provided by the U.S. Biomedical Advanced Research and Development Authority.
Disclosure: The author holds no positions in any of the stocks mentioned in this article.
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