VCEL Q3. Stock up 40% !!!

VCEL reported an impressive Q3 and is up 41% as I write this.

first some history.
The company has an interesting past. They use to be called Aastrom Biosciences. They had multiple products that never really went anywhere but had developed a technology platform that allowed them to grow patient’s cells reliably. In 2014 VCEL executed a huge pivot and acquired a french company that had developed and produced Epicel (more below) and Carticel. Carticel is a similar product to MACI that is more difficult technically and has longer surgery times. After acquiring MACI, vericel has gone through the regulatory and structural issues to now sell MACI. The company now brands themselves specializing in autologous cell therapies. Basically what they do is take the patient’s own (autologous) cells grow them in a culture over an appropriate membrane and reimplant them into the patient’s body. So far they have two commercial product lines.”

Business Highlights.

  • the closest competitor to a commercial product, HSGX had disappointing phase 2 results which at the very least will delay the release of their product. The company is barely alive, receiving a delist notice. They did successfully raise 15 million cash to stay alive.
  • VCEL raised 70 million from equity that they indicated is for new products.
  • increasing salesforce from 40 to 48 (this year they went from 23-40) by q1 2019
  • Hugely Expanded TAM for MACI 11k patient to 60k patients (as i’ve been predicting and we haven’t even had an expanded indication which i think is basically guaranteed in the next 5 years)
  • expanded insurance coverage
  • expanded epicel training
    -900 surgeons at the end of 2018…probably about 3k that they can target.

Revenue and margins

  • Revenue increased 58% from 14.3 to 22.5 million
  • Improving gross margin 64% from 50% (this is a really really positive sign)
  • MACI revenue of 16.4 million !!! from 9 up 66%
  • Epicel Revenue of 6 million from 4.4 36%


  • OPEX 15.7 million compared to 11.1 million up 41%
  • Loss from operations of 1.3 million compared to 4 million


  • nonGAAP EBITDA of 0.9 million compared to -2.9 million
  • Net loss 1.1 million or -0.02 a share compared to -0.16 a share
  • 2 million of positive cash flow
  • Cash 97.8 million from equity raise, up from 26.9

Raised guidance for this year from 80-83 to 87-90.

My Take
Huge, huge quarter. I hope people were buying over the last few months when I was saying they looked attractive! They blew past my best expectations and dramatically raised their guidance. They said they are somewhat conservatively increasing their TAM about 5x. They are growing much faster than anyone thought they would and they are showing incredible operational leverage. This is one of those quarters where I don’t see anything I don’t like. I don’t know if they will turn the financial screws to be profitable in 2019, they are keeping quiet about that. I think it will depend on if they find an acquisition or not. Guidance started at the beginning of the year at 73-78 million, was raised to 80-83 and is now 87-90 million.

On the business front VCEL is sitting very very pretty. They have no competition, and their closest competitor may never make it past their phase 2 data. Even if they do, their commercial release has been delayed at least a year if not more. VCEL is using that time to expand and solidify relationships across the country.

I’m very happy with my position. This is still a small company with a market cap sitting around 700 million market cap on revenues of ~90 million this year. Their TAM now is in the 2.5 billion a YEAR of revenue. If they can capture ½ of that (they have no competition) that would be 1.25 billion a year. They would be a much much larger company in the future and with their operational leverage they would be very profitable. Heck even if they could only get a ¼ of it that they would have somewhere around 600 million of revenue so should have a market cap north of 3 billion a 4x increase. Half would be 6 billion…etc etc, so I guess my takeaway is this. Even with the 40% increase today one has not missed out on the long term opportunity. I have no idea what the stock with do over the next year, but the company should kick serious butt.

Happy investing!



Nice one Ethan. Any chance you can post the numbers of your earlier posts on VCEL, so that I can have a read of your earlier commentary?



those posts have links to my old ones. IN the future you can use google to search the board or you can click on my name and just go through my old posts.