VCEL - NASDAQ

Ladies and gentlemen, thank you for standing by. Welcome to Vericel's Third Quarter 2023 conference call. At this time, all participants are in a listen-only mode. I would also like remind you that this call is being recorded for replay. I will now turn the conference call over to Eric Burns, Vericel's Vice President of Finance and Investor Relations.

Thank you, operator and good morning everyone. Welcome to Vericel's third quarter 2023 conference call to discuss our financial results and business highlights. Before we begin, let me remind you, on today’s call, we will be making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995. These statements may involve risks and uncertainties that could cause actual results to differ materially from expectations and are described more fully in our filings with the SEC, which are available on our website. In addition, all forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Please note that a copy of our third quarter financial results press release is available in the Investor Relations section of our website. We also have a short presentation with highlights from today’s call that can be viewed directly on the webcast or accessed on our website. I am joined on this call by Vericel’s President and Chief Executive Officer, Nick Colangelo; and our Chief Financial Officer, Joe Mara. I will now turn the call over to Nick.

Thank you, Eric, and good morning everyone. I'll begin today's call by discussing our financial and business highlights for the third quarter as well as our expectations for the rest of the year. Joe will then provide a more detailed review of our third quarter financial performance and our updated 2023 financial guidance before opening the call to Q&A. The company had another excellent quarter as we delivered strong revenue growth and record third quarter revenue, continued profitability and positive operating cash flow, and achieved significant milestones in the quarter, including securing commercial availability of NexoBrid in the United States, which significantly expands the total addressable market for our burn care franchise, and completing the human factors validation study for the MACI arthroscopic delivery program, which remains on track for commercial launch in the first half of 2024. From a financial perspective, total revenue for the third quarter increased 18% to approximately $45.6 million, which was ahead of our guidance for the quarter. We also continued to generate strong profitability as our gross margin increased compared to last year, and we delivered our 13th straight quarter of positive adjusted earnings and operating cash flow, ending the third quarter with nearly $150 million of cash and investments, and no debt. Through the first three quarters of the year, total revenue has grown nearly 20%, and we're raising our full year revenue guidance for the third time this year. Importantly, as we look toward next year, we believe that we're well positioned to deliver higher total revenue growth in 2024 based on continued strength in the core MACI business, the anticipated launch of arthroscopic MACI, and accelerated NexoBrid uptake. We also expect further strengthening of our profitability metrics and further expansion of our gross margin and adjusted earnings margin, driven primarily by sustained strong revenue growth. From a commercial perspective, MACI had another strong quarter with record third quarter revenue of $37.6 million, representing sequential quarterly growth over the second quarter and 21% growth compared to the third quarter of 2022. MACI has achieved a sustained high growth trajectory with five consecutive quarters of 20 plus percent revenue growth and 26% growth year-to-date. Given these results and continued momentum to start the fourth quarter, we're increasing our MACI revenue guidance and now expect more than 20% growth for the full year. We also had a strong quarter with respect to the MACI core growth drivers as we generated record third quarter highs for both MACI biopsies and the number of surgeons taking biopsies. We expect this momentum to continue as we remain on track for another year of double-digit growth in surgeons taking MACI biopsies. With respect to our MACI Lifecycle Management initiatives, we announced this morning that we completed the human factors validation study for the arthroscopic MACI program and that we remain on track for commercial launch during the first half of next year. As we discussed on our last earnings call, the MACI arthroscopic instrument kit is designed to treat smaller 2 square centimeter to 4 square centimeter defects on the femoral condyles, which represents the largest addressable market opportunity for MACI. This segment consists of about 20,000 patients per year or approximately a third of the $3 billion addressable market for MACI. Our recent market research indicated that orthopedic surgeons view arthroscopic MACI as a meaningful innovation in the cartilage repair market and that regardless of their current MACI usage, surgeons expect to shift a meaningful share of their procedures in this segment from alternative products and procedures to the MACI arthroscopic procedure. We believe that the addition of an arthroscopic delivery option represents another significant growth driver for MACI and will positively impact our overall business in the years ahead. Before moving on from MACI, I wanted to address the ongoing commentary regarding the GLP-1 weight loss products and their potential impact on the medtech and other industries. With respect to MACI, we do not expect that GLP-1 or any other weight loss product will have any negative impact on MACI performance. As we've noted previously, MACI patients are typically young, active, and otherwise healthy patients seeking to get back to the physical activities they enjoyed prior to experiencing the debilitating knee pain caused by their cartilage injuries. Typically, MACI patients have relatively lower BMIs. The average BMI for MACI patients in the SUMMIT pivotal study was approximately 26, and the average BMI for MACI patients treated in the US since 2020 is approximately 28, both of which are below the BMI level indicated for use of a GLP-1 product in patients without other weight-related comorbidities. So a typical MACI patient wouldn't even be eligible for treatment with a GLP product. In addition, typical MACI payer policies require that patients have a BMI of 35 or below to be eligible for treatment with MACI, and we specifically excluded patients with high BMIs from our MACI addressable market of 60,000 patients per year. So to the extent that the use of GLP-1 products allows more patients to be eligible for MACI treatment, these products would actually serve as a tailwind for MACI utilization. Turning to our burn care franchise, we reported total third-quarter revenue of approximately $8 million. Epicel had a solid quarter with revenue in line with our expectations for the quarter. Average grafts per patient remained strong in the third quarter, although a slightly lower proportion of biopsy patients moved on to treatment with Epicel due to patient health-related issues. With respect to NexoBrid, we're very pleased to have worked successfully with the FDA to ensure that this important product is now commercially available to treat severe burn patients in the US. NexoBrid launch activities are well underway, with the first patients treated soon after the product became available in the U.S. Our commercial and medical teams continue to focus on supporting P&T committee approvals to enable burn center access to NexoBrid, training burn surgeons and their staffs, and supporting initial cases at burn centers that are treating their first patients. While year-to-date P&T committee submissions at our target centers remain on track despite the manufacturing-related delay, uncertainty around the ultimate timing of product availability did cause a number of centers to defer or delay NexoBrid training and P&T committee approval processes. As such, we've been focused on restarting these activities in the fourth quarter and reestablishing the strong momentum that we had ahead of the planned launch in June. Although we expect this to have some impact over the first few months of launch, NexoBrid already has gained P&T committee approval and a number of additional hospitals over the past month. Based on the continued enthusiasm for NexoBrid and the burn care community, we believe that NexoBrid will be well positioned for a very strong year in 2024 and will make a significant contribution to our revenue growth next year, enabling our burn care franchise to become a second high-growth franchise for the company in 2024 and beyond. I'll now turn the call over to Joe to discuss our third-quarter financial results and our updated financial guidance.

Thanks, Nick, and good morning, everyone. Starting with the income statement, total net revenue for the quarter was $45.6 million and was comprised of $37.6 million of MACI revenue, $7.4 million of Epicel revenue, and $0.6 million of initial stocking revenue for NexoBrid. Total revenue grew 18% in the third quarter and has increased 19% on a year-to-date basis, representing a significant acceleration in total revenue growth for the company versus the prior year. For MACI, third-quarter revenue grew 21% versus the prior year, and through three-quarters of the year, MACI revenue increased 26% versus the same period last year as it has resumed its high-growth profile with now five consecutive quarters of 20-plus percent growth. Total burn care revenue is $8 million in the third quarter, which increased versus the prior year for the second consecutive quarter, with a meaningful contribution from NexoBrid in Q3. Gross profit for the quarter was $30.6 million or 67% of net revenue, which increased compared to both the prior quarter and the prior year. For three-quarters of the year, our gross margin was 66%, an increase of approximately 160 basis points compared to 2022. In addition, for the second consecutive quarter, the revenue growth pull-through to gross margin was approximately 80% as we continue to see the expansion of our key profitability metrics. Total operating expenses for the quarter were $35.7 million, compared to $32 million for the same period in 2022. The increase in operating expenses is primarily due to higher sales and marketing expenses and research and development program costs. Net loss for the quarter was $3.7 million, or $0.08 per share, compared to $6.6 million, or $0.14 per share for the third quarter of 2022. Non-GAAP-adjusted EBITDA for the quarter was $5.4 million, which grew 64% versus the prior year, and importantly, we have now generated positive adjusted EBITDA each quarter for more than three years. The company generated approximately $7.2 million of operating cash flow in the quarter and ended Q3 with approximately $149 million in cash, restricted cash and investments, and no debt. Turning to our financial guidance, based on the strong results through the first three quarters of the year and our outlook for Q4, we are increasing our full year total revenue guidance for 2023 to $192.5 million to $197.5 million, an increase compared to our prior guidance of $190 million to $197 million. This represents the third time this year that we are raising our total revenue guidance driven by increased revenue expectations for both of our franchises. Starting with MACI, we now expect full year revenue of $160 million to $164 million, with growth in the low 20% range for the full year, an increase versus our prior guidance of $159 million to $163 million. MACI results were ahead of our prior guidance for the third quarter, and our updated Q4 guidance of approximately $54 million at the midpoint also represents an increase versus our prior guidance for the fourth quarter. Overall, this MACI outlook represents a significant increase versus prior year growth rates and our initial expectations at start of the year. For burn care, which includes both Epicel and NexoBrid, this is our first opportunity to update our burn care revenue guidance since NexoBrid became commercially available in late September. As a reminder, our prior guidance assumed that NexoBrid would not be available until 2024, and under that scenario, we assumed that we would recognize approximately $1 million of BARDA-related revenue in Q4 of this year. With the commercial availability of NexoBrid in the US, we now anticipate only commercial revenue, and we do not expect any BARDA procurement revenue this year, a change from our prior guidance. We now expect full year burn care revenue of $32.5 million to $33.5 million versus our prior guidance of $31 million to $34 million. This updated guidance represents an increase in burn care revenue of $0.5 million at the midpoint, even after removing the $1 million of BARDA-related revenue for NexoBrid. With this updated guidance, the midpoint represents approximately $8.5 million of burn care revenue in the fourth quarter. We are also maintaining our profitability guidance and expect gross margin to be in the high 60% range and adjusted EBITDA in the mid-teens percentage range for the full year. Overall, we are very pleased with our third quarter performance and encouraged by the start to the fourth quarter. As we look toward 2024, we anticipate a higher total company revenue growth rate with continued strong execution on our core products as well as the anticipated contributions of arthroscopic MACI and NexoBrid. In addition, we expect to significantly enhance our P&L profile in 2024 with anticipated increases in both gross margin and adjusted EBITDA margin next year. This now concludes our prepared remarks. We will open up the call to your questions.

[Operator Instructions] And your first question comes from the line of Ryan

Hey, guys. Nice quarter. Thanks for taking our questions. I'll ask both my questions up front. Nick, if you can just elaborate a little bit. You talked a little bit about kind of the cadence and kind of commercialization of NexoBrid for the end of the year and then into next year. But I'm just kind of wondering if you can elaborate a little bit on kind of how you're thinking about you've got some stock in revenue, I think the third quarter, how you're thinking about kind of revenue, fourth quarter, and then just the pace at which you're getting through some of these P&T committees to help us kind of think about sales for next year? And then I have a follow up on the cartilage side.

Yeah, thanks, Ryan. So appreciate the question. So I'll start and Joe can add some commentary as well in terms of how we're thinking about next year. But I would just start by saying that, first of all, fantastic work by our cross functional team to be able to work with the FDA to secure commercial availability in the US, that doesn't happen by accident. And it was just a tremendous accomplishment for the team to be able to do that. Our original assumption was that product would be available from MediWound at the end of June. And obviously, all of our pre-commercial activities were geared to that launch date. And our activities essentially include training the burn centers, and identifying and gaining commitment from surgeons to kind of shepherd the product through the P&T committee approval process, and then of course, providing materials for surgeons to be able to do that. So we certainly had a lot of momentum as we were moving towards that June date, when we had sort of the manufacturing related delay. Obviously, we continued with our activities, but not surprisingly, burn centers, as I mentioned, some of them delayed or deferred sort of the P&T committee process or sort of postponed training until there was clarity around product availability. So obviously, last week of September, product became available. We restarted those efforts in earnest. And as I mentioned on the call, we've secured a number of P&T committee approvals since that time. And I would say from our sort of goals, the things that we control, which again, includes identifying those champions, gaining commitment from them, and then doing the P&T committee submissions. Through October, we're actually ahead of our commercial plan in that regard. So our team has done a good job in terms of kind of getting to where we need to be on our 90 target burn centers that we are initially focused on. And so, I think the cadence essentially places us in October and early November, where we originally planned to have been in July, and early August, and so kind of pushed it out a little bit, obviously. And just to finish up at that time, we had said, we would expect sort of the meaningful portion of NexoBrid revenue coming in the back half of the year as those activities continue to unfold. And so that's what we said we think will be pretty well positioned for 2024 going forward.

Yeah, very helpful. And then --

To add --

Oh, please, Joe. Yeah, please. Sorry.

Yeah, just to add, I think Nick kind of hit the key points in terms of how we're thinking about NexoBrid, but just maybe to frame that a bit on kind of your question on cadence and just maybe transitioning from Q4 to next year. So for this year, we raised guidance for kind of both franchises. I think it's important to understand kind of the exit rate, which I think is part of your question on the burn care side. So as Nick talked about, we're in a different place than we were last quarter, in Q4, and now in the back half of the year with NexoBrid. So our prior guidance, again, assumed commercial availability wouldn't happen until 2024. And that had assumed the BARDA revenue. So, as you're thinking about 2023, it's important to remember that that million of BARDA revenue comes out and it's essentially replaced by the commercial revenue that comes back in a NexoBrid in the back, and really the last quarter. And so I think as you think about the last quarter of the year, for NexoBrid and kind of the revenue and the cadence in the next year, essentially, the way we look at it, it's really been launched in Q4. Given that, this was announced in late September, there was some stocking revenue in Q3, but that's really kind of the end of the month, and by the time it gets from kind of our 3PL, the specialty distributors, the hospitals, and ultimately the patients, and given those activities are restarting, we really think about kind of Q3 and Q4 in total. So I would say kind of the way we're thinking about it is, we're probably kind of in the range of about a $1 million number, as we think about Q3 and Q4 collectively. And that's probably how we think about an exit rate into next year. So that gets you to Q4, kind of a similar revenue range as Q3. And again, just to reiterate what Nick said, as we move into next year, to start the year, we assume the mid-year launch, and really the vast majority of our revenue would have been in the second half of the year. So if you kind of think about where we are now, I mean, that's very much in line with, I think, expectations really for essentially one quarter. And I think sets us up really well for 2024. In terms of 2024, obviously, we would expect, as we get into the year to start to see that number start to increase. And we've not given specific guidance for NexoBrid at this point. But as we talked about company level growth at a higher level, certainly that the NexoBrid growth is going to drive, we think the burn care to be kind of high growth as a franchise. So we do think that'll be a significant driver. And then lastly, just, on NexoBrid, because I think it's important, it's just that kind of maybe help how to think about it from an investor and analyst perspective. When we think about the uptake on NexoBrid over the next few quarters, and the framework, it really is kind of comes down to a couple of key aspects. So one, we think about the burn center, the burn center adoption. So, as a reminder, we're targeting about 90 of the 140 centers to start. And we would expect that would increase during the year next year, we get a significant portion of those through P&T, and then a meaningful subset of those will actually place orders. And then the second piece is really just thinking about the patient opportunity. So, as a reminder, our TAM is around 30,000 patients on an annual basis. So if you break that down by center, it's probably about 200 patients per year at each center, it's around 15 per month. So ultimately, our adoption, as we think about kind of our cadence next year is going to come down to how many burn centers and what's the penetration within those centers. So, it's obviously just literally a couple of weeks or a few weeks in the launch. So it's very early days, but I would expect us to start to give some updates on those metrics as we move into next year.

Okay, very thorough. Thank you. Just on the accelerated growth next year, I can appreciate a lot of that is coming from NexoBrid driving the company's overall growth. I just want to be clear about your comments, though, and make sure there's no misinterpretation. You guys are exiting right now, above 20% on MACI, and you have the arthroscopic product coming to market next year. Just to be clear, you're not expecting growth next year, specifically within MACI to accelerate over the 20 plus percent that you're seeing this year.

Yeah, so I think at this point, all we talked about is total company growth, just to reiterate and clarify. So we're saying, if you look at our guidance this year, we're kind of just under that 20% range. We think, based on kind of the momentum we have, and then the additions on NexoBrid and arthroscopic MACI, we can be at that 20% plus as a company next year. I will say, on MACI, as we've kind of talked about, we've had a ton of momentum this year, and kind of the key indicators. I think as we think about the framework for next year, it's probably pretty similar as we think about core MACI, the surgeon growth continues to be strong, biopsies kind of layer in price. So I think we're set up for another solid strong year on MACI. And then kind of on the arthro piece, as we talked about, we anticipate a first half launch probably more likely Q2 is a better place to start. So, and I would also say kind of given the sales cycle component on MACI, the time you start seeing kind of biopsies and the arthro usage, you're probably looking at kind of later in the year or Q4.

Right.

Now, all that being said, we expect another very strong year at MACI but we're not giving specific growth rates, it's at the company level. Just to answer your question.

Yeah. No, I appreciate that, Joe. I wanted to make sure it was clarified. Thank you. Thanks for taking the questions, guys.

Thanks, Ryan.

And one moment for the next question. Your next question comes to the line of Mike Kratky with Leerink Partners. Your line is now open.

Hi, everyone. Thanks for taking our question. I guess first just on the manufacturing standpoint on NexoBrid, can you provide any additional color on your expectations of supply continuity for that product and then some of the recent geopolitical concerns that have emerged since the start of 4Q? And then is that part of revenue? I mean, should we be baking that in for the start of 2024? And then I have a separate follow-up on MACI.

Yeah, so I'll start, Mike. Thanks. So, obviously, we have been monitoring the ongoing, you know, war in Israel and been in close contact with MediWound. At this time, obviously, manufacturing operations continue, and we've actually received deliveries during October, after this situation began. So for the time being, the supply issues are under control, and we continue to receive product, but obviously, we're going to continue to monitor this.

Yeah, just on the BARDA piece, I would say, again, we don't expect that in Q4, as I talked about, given the priority is now commercial product. I would not bake that into next year, that's not our assumption. BARDA, the stockpile is starting to expire, so at some point, it may make some sense to replenish but I think we'll get more visibility as we get into next year, but at this point, I would not bake that into our assumptions.

Got it, really helpful. And then just on the MACI side, just wanted to clarify, in terms of your preliminary revenue growth dynamic comments for 2024, so is it fair to say that that does consider some additional contribution from the arthroscopic MACI side?

Yeah, no, it definitely does. I think we're just, when I was talking to the MACI components, we think of kind of the core growth drivers that extend into this year based on what the business is doing this year, and then with a launch around mid-year, it's probably more like Q2. We're just saying with the sales cycle, it'll probably take -- it'll really be the back half until arthroscopic MACI starts contributing, but we certainly do expect it to have an impact in 2024.

Perfect. Thanks very much.

Thanks Mike.

Thank you.

And one moment for the next question. Your next question comes to the line of Jeff Cohen with Ladenburg Thalmann. Your line is now open.

Hi, Nick and Joe. How are you?

Good morning.

Thanks for taking our questions. Could you talk a little bit about the instrument kit for arthroscopic MACI as far as what will be in an assembly manufacturing delivery of those kits, and then maybe talk about the surgeon audience itself and the opportunity for opening up additional surgeons and centers based upon the approaches?

Yeah. Thanks, Jeff. I'll take it. So, first of all, the kit, those instruments that you can see on our website are disposable instruments that will be made available to surgeons. We obviously have an implant kit currently that is used. And so, over time the idea would be to try to integrate all of the instruments, whether it's an open or an arthro procedure. So that's relatively straightforward. And I think the team's done a great job in designing a set of instruments that are really appealing those surgeons. In terms of, opening up additional surgeons, as we've talked about in the past, we currently have about 5,000 surgeons that we target. And that was based on our sales force sizing exercise and targeting exercise we did back a few years ago, where we were able to acquire CPT code data on cartilage repair procedures and open procedures, and obviously find the intersection of high volume cartilage repair surgeons that did open procedures. We know there's a segment of essentially arthroscopic only surgeons out there. At the time, we had data on about 5,000 surgeons that did -- that had cartilage repair activity, but didn't, we didn't have open procedure data on it. So we, there's probably half of those that fall into a category of doing high volumes of cartilage repair. And we're -- the commercial team is actually doing this exercise now to identify how many of those, call it 2500 high volume, no open data surgeons, should become targets for us. So we haven't locked in on a number yet. My guess is it's probably 1000 to 2000 new targets that we will be calling on. And just as a reminder, the market research said that both surgeons that currently utilize MACI would expect to do more procedures or shift procedures to arthroscopic MACI. And then of course, the other component is surgeons that do arthroscopic procedures not currently using MACI would be the other part of that growth opportunity for us.

Okay, thanks. And then one more quick one. Joe, could you comment, we're not looking for guidance on margins, but you did have a nice beat in Q3. Any commentary on some of the overall inflationary pressures, have they diminished to a certain degree?

Yeah, I would just say, I mean, we're obviously, we're kind of focused on that on that gross margin and the margin expansion. So certainly kind of be at the higher revenue growth, I think kind of helps us. We're seeing higher margin, we're seeing higher pull through, so I don't think --certainly a lot of that kind of baked in already. And I think we're just trying to manage kind of margins effectively. So nothing new to call out, that adding additional pressure, I just think, the focus right now from a team perspective to do what we can to grow the top line, but also enhance those margins this year and in the next year, as we talked about in the prepared remarks.

Got it. Thanks for taking our questions.

Thank you.

Thanks, Jeff.

One moment for the next question. And your next question comes to the line of Samuel Brodovsky with Truist Securities. Your line is now open.

Hey, guys, thanks for taking the questions. Just to start off, just want to ask a clarifying one on NexoBrid, with the presumed contribution in 4Q, is that still largely expected to be stocking revenue? And what one, how long do you think stocking can be a driver of revenue and when should we think about sort of procedural revenue taking over that? That's that first half ’24 comment you think?

Yeah, so I think as Joe mentioned, we're kind of, product was shipped from our Cardinal, our 3PL to the specialty distributors the last couple of days of the quarter. So it's essentially one quarter of activity in this year. The stocking, essentially is done once that initial stocking happen, right? They think about sort of, obviously, there's kind of three main distributors, they have different locations, they think about sort of uptake at hospitals. And so I'd say we're kind of through that phase. And now it's really just as Joe mentioned, kind of getting through getting the P&T committee approvals, getting the initial orders, getting initial patients treated, that then turns into reorders. And that's how we build our model going forward. So I'd say, again, as we ramp up through the fourth quarter and get these hospitals on board, we'll start to see some initial utilization revenue and then that kind of feeds into Q4 and the uptake that we were talking about.

Okay, that's helpful. Thanks. And then on arthroscopic, should we be thinking about any price component in terms of that adding to revenue growth next year?

Yeah, I'd say, from again, our -- the main component of our revenue on MACI is really the implant itself, right. And so, we've taken typical price increases, as we've talked about each year, and we would expect to do that again, next year. I think having an innovative instrument set will help shape sort of the price increase that we would take. And then, we're still sort of in the process of determining sort of instrument revenue opportunities as well, that obviously would be like our biopsies kits currently where it contributes a little bit of revenue, but is not kind of the main driver for the MACI business.

Got it. So then just, I guess, I know it's early days here, but as we think about the MACI over sort of the medium term, what will be a reasonable expectation for the mix between the traditional sort of open versus arthroscopic revenue mix or implant mix is maybe the better way to frame it over, call it like the next few years here?

Yeah, that is a good question. And you're right, it is early days. I think it's important, as Joe mentioned that assuming a Q2 launch, and given the revenue cycle, one -- the initial question is going to be, do surgeons kind of look at it prospectively? And maybe I'll take a step back, as we said earlier, we expected to complete the human factor study in the third quarter, and great job by the team getting that done. We expect, as we said publicly, to submit the prior approval supplement by the end of the year. That's typically, by statute, a six month review period, although they try to get them done within, in a shorter period of time. So that's what kind of gets you to sort of the latter portion of the first half of the year for anticipated approval and launch. The first question will be, do surgeons kind of look at it prospectively? In other words, now the instruments are available, as patients come in, I'm going to identify patients with 2 square centimeter to 4 square centimeter defects on the femoral condyles, and then you're kind of into the typical sort of revenue cycle that and when you go from biopsy timing for -- going from biopsies to implants, which again, kind of points you towards the back half of the year, and when we think, MACI arthroscopic could start contributing. As you move out into the sort of midterm years, I think it will still it's to be determined kind of exactly what that mix looks like. If you looked at sort of the addressable market, as we mentioned, the third of the defects fall into that sort of arthroscopic eligible category. And the rest, kind of fall into sort of the more of the open opportunities via patella defects or larger defects, etc. So, yeah, I think that sort of puts some bounds around what you might think over time, it could end up being.

Thanks for taking the questions.

Thank you.

One moment for the next question. Your next question comes from the line of George Sellers with Stephens Inc. Your line is now open.

Good morning. Thanks for taking the question and congrats on the quarter. Maybe sticking with a question on the arthroscopic delivery option, you touched on some of the regulatory timeline pieces. I'm just curious from a commercialization perspective, you touched on some of the arthroscopic only surgeons, maybe 1000 to 2000 target range, would that imply a few extra sales reps need to be hired? Or how should we think about some of the commercial investments ahead of launching that arthroscopic delivery option?

Yeah, just from a kind of a headcount perspective, we would anticipate adding a relatively small number of support reps and specialists to kind of support the rollout. But again, nothing that sort of would change kind of the margin profile that Joe has been alluding to. So sort of like when we expanded our burn care franchise to support the launch of NexoBrid, somewhere kind of in a similar range, half a dozen to call it a dozen folks over the course of the year.

Okay, that's really helpful. And then maybe switching to that burn care franchise, I know it's still very early days with the NexoBrid rollout, but could you just give us any color on maybe some initial indications of what the cross selling opportunity or the pull through of Epicel might look like?

Yeah, we mentioned on even the second quarter call, once we had the initial group of NexoBrid only reps in place, that we had actually received biopsies and orders from, what we kind of refer to as dormant or naive Epicel centers. Because again, we have NexoBrid reps in there talking not only about NexoBrid, but Epicel as well and that continued into the third quarter. So as you noted, it's early days, we did kind of fill our remaining couple of NexoBrid positions recently, once product availability was clarified, and so we really haven't had the full force out there yet. So I think time will tell. But there's absolutely no doubt that part of our strategy was in having a larger footprint in both the Epicel only initially and then the NexoBrid reps, they're going to be talking about both products, and we would absolutely expect that that pull through would continue.

Okay, that's really helpful. Thank you all again for the time.

Okay, thanks, George.

One moment for the next question. And your next question comes from the line of Arthur He with HCW. Your line is now open.

Hi, good morning, Nick and Joe. This is Arthur on for RK. Congrats on another strong quarter. Most of my questions have been asked. Just a quick one on the MACI, for when we're looking beyond the arthroscope, how -- could you give us more color on the future new product development in the ankle for MACI? And is there any more color on the exact timing for starting the study?

Yeah, thanks. So as we talked about previously, we think obviously the MACI ankle opportunity is kind of a, as you paint sort of a long-term vision, strengthen our core current indication layer on arthroscopic MACI kind of mid-decade and then a potential ankle indication towards the end of the decade. And this gives MACI a really, really long runway with, no near-term competition. So we're pretty excited about that opportunity. The initial steps there, as I've mentioned previously, is that there is some pre-clinical work that needs to be done. But that work is ongoing. And we'd expect that potentially towards the end of 2024, we may be in a position after discussions with the FDA to initiate that study or sometime in early 2025.

Great. Thanks for taking my question.

Okay. Thank you.

And we have no further questions at this time. I will now turn the call back over to Nick Colangelo.

Okay. Well, thank you very much. And just in closing, I just wanted to kind of reiterate that, at this point, the company continues to operate at a very high level across the entire business. And as we've delivered strong financial results and achieved significant milestones throughout 2023, we believe we're very well positioned for a strong close to the year and an even stronger year in 2024. From a revenue perspective, as we mentioned, total revenues grow nearly 20% through the first three quarters of the year. We expect total revenue growth to increase in 2024 based on continued strength in our core products, as well as the anticipated contributions of arthro MACI and NexoBrid. From a profitability perspective, we've delivered sustained positive adjusted earnings and operating cash flow each quarter for more than three years. And we expect further strengthening of our profitability metrics and margin expansion in 2024 driven by sustained high revenue growth. And obviously, we're starting from a very strong financial position with $150 million in cash and investments and no debt. So overall, really excited to deliver a strong finish to the year and look forward to continuing our momentum in 2024 as we as a company remain focused on continuing to deliver on our long-term strategy to bring innovative products to even more patients and drive significant growth and profitability in the years ahead. So look forward to providing further updates on our next call. Thanks again, and have a great day.