Cell-therapy company Vericel (VCEL) delivered strong third-quarter earnings driven by success from MACI, a cartilage cell implant that repairs joints, and Epicel, which helps burn patients. The revenue for each of the specific therapies topped expectations. MACI generated $16.4 million, trumping consensus of $13.4 million and Epicel with $6 million, outdoing consensus of $4.7 million. Guidance for the company as a whole has also been boosted to $87 million to $90 million, from $80 – $83 million.
In response to the positive growth, BTIG’s Ryan Zimmerman reiterates a Buy rating for the stock and raises the price target to $20 from $17, showing an 18% upside from the current share price. (To watch Zimmerman’s track record, click here)
“When we made VCEL our top pick in FY18, we didn’t expect the pace of adoption to increase as fast as it has. Given the momentum we now expect through 4Q (with a clear line of sight on procedure growth), the margin leverage, the lack of incoming competition in FY19, an expanding TAM, and growing sales force, it’s hard to imagine VCEL not seeing multiple expansion even as estimates move higher,” Zimmerman said.
Zimmerman expects new sales reps for the company by the second quarter of 2019. The company announced the plans to increase the MACI sales force by 20% from 40 to 48 reps and also added a sixth sales region in a location that was without MACI previously. Vericel’s management announced the company is seeing expanded cartilage lesion usage and indication, payer coverage and further surgeon adoption, bringing MACI up to 60,000 patients per year, which is around 45k – 55k more than last year.
“We believe the clear line of sight from biopsy growth combined with growing surgeon utilization will support encouraging 4Q18 results. Our FY19 numbers increase as a result of today’s report but we also expect a more moderated pace of growth in FY19. Mgmt. will likely guide conservatively early in the year and as new reps fill-in territories may move the top-line higher,” the analyst added.
Wall Street’s confidence backing this biotech player is strong, with TipRanks analytics showcasing VCEL as a Strong Buy. Based on 5 analysts polled in the last 3 months, all 5 rate a Buy on the stock. The 12-month average price target stands at $17.62, marking a nearly 6% upside from where the stock is currently trading. (See VCEL’s price targets and analyst ratings on TipRanks)