Proxy cover letter
(copied from PDF)
To Our Shareholders:
Over the past two years our strategic goals have
been focused on stabilizing
and growing the commercial
business that we acquired from Sanofi in 2014 while building a strong foundation for long-term growth of
the company, and we have diligently focused on
operational execution to accomplish these objectives.
From a commercial perspective, we have taken a business that had declining revenues of approximately
$42 million in the U.S. and negative gross margins prior to our acquisition and, for the third consecutive
year, generated increased revenues in 2016.
Total Carticel® and Epicel® net revenues for 2016 were $54.4
million, representing a 10% cumulative annual growth rate since the acquisition of the business and an 8% increase over 2015.
In 2016 we also created the drivers for long-term growth of the company by achieving two important regulatory milestones:
the FDA approval of MACI®, our third-generation autologous chondrocyte implant (ACI) product for the treatment of cartilage defects of
the knee, and the approval of a pediatric indication
for Epicel. We believe that these important approvals, combined with our expanded sales and marketing
infrastructure, position the company for significant growth in the years ahead.
MACI is the first tissue-engineered autologous cellularized scaffold product approved by the FDA and
offers several advantages over Carticel, our first-generation ACI product. MACI is indicated as a
first-line treatment for defects in the entire knee, with no limitation on defect size or the number of defects, with or without bone involvement.
Thus, we believe that MACI may be a viable treatment option for a larger number of patients compared to Carticel based on this expanded label indication. In addition, the MACI
procedure is simpler, faster, and less technically demanding for orthopedic surgeons. Accordingly, we
believe that MACI offers an opportunity to engage a broader group of
orthopedic surgeons than currently
perform ACI procedures. From a clinical perspective, MACI is the only FDA-approved product that has
demonstrated statistically significantly greater improvements in pain and function scores compared to microfracture in a well-controlled Phase 3 study, and to have overall efficacy data supporting a long-term
clinical benefit when used in patients with cartilage defects of the knee. We believe that these benefits,
together with published rehabilitation protocols supporting a shorter rehabilitation time than Carticel, provide the potential to expand our
cartilage repair business by broadening the appeal of ACI treatment to
a larger patient population and orthopedic surgeon audience.
To fully achieve MACI’s commercial potential, in
2016 we began the expansion of our salesforce from 21
to 28 representatives and developed a number of physic
ian training and communication tools to enable us
to reach a larger orthopedic surgeon customer base. Moreover, a key 2016 priority for the Company was
to prepare for the launch of MACI. As a result of these efforts, we were able to manufacture and ship the first MACI implant less than seven weeks after FDA a pproval and our existing facility and operations team
is well positioned to meet expected demand.
Turning to Epicel, in 2016 we received FDA approval of
the pediatric indication, which revised the label to
specifically include pediatric patients and specify the
probable survival benefit of Epicel, and allows the
company to sell Epicel for profit. This approval enables
us to invest to expand the use of this potentially
life-saving therapy in burn centers across the country.
As a result of restoring promotional efforts for Epicel
over the first two full years that we have owned the
product, we have brought Epicel volumes back to historic peak levels and generated record Epicel revenues, more than doubling revenues from the year prior to our acquisition and increasing the number of
institutions ordering Epicel by 40%. We also we saw a strong increase in the number of Epicel biopsies,
an important leading indicator, in 2016 versus 2015,
continuing a trend of year-over-year growth.
However, the revenue growth rate for Epicel did slow in 2016 relative to 2015. This lower growth was due
to a significant increase in cancelled grafts in 2016, es
pecially in the newer institutions using Epicel, due
primarily to patients expiring before treatment. In response, we are working diligently to educate burn
centers on the utility of using Epicel as part of the initial treatment plan and as a complement to autografts, as is the case in burn centers that have consistently u
sed Epicel for many years, rather than as a salvage
therapy after attempting to use autografts alone.
While executing on our strategic goals for the commercial business was our primary focus in 2016, I am
pleased to report continued progress with the ixmyelocel-T development program. In April, the results of
the ixCELL-DCM clinical trial, a randomized, double-blind,
placebo-controlled Phase 2b study designed
to assess ixmyelocel-T compared to placebo in patients with advanced heart failure due to ischemic dilated
cardiomyopathy (DCM), were published in the Lancet and presented at the American College of
Cardiology's 65
th
Annual Scientific Session. The trial met its
primary endpoint with a 37% reduction in the
composite endpoint of all-cause deaths, cardiovascular hospitalizations, and unplanned outpatient and emergency department visits to treat acute decompensated heart failure over the 12 months following
administration of ixmyelocel-T compared to placebo.
In the fourth quarter additional pre-specified
secondary results from the ixCELL-DCM study were presented at the American Heart Association Annual
Meeting Scientific Sessions, demonstrating a 24% reduction of ventricular arrhythmias in patients treated
with ixmyelocel-T compared to placebo.
Our near-term strategy with respect to the ixmyelocel-T program has been to meet our obligations to
patients and investigators in treating patients in the open-label crossover extension portion of the ixCELL-DCM study, which was accomplished in February, and to make relatively modest investments to maintain
certain manufacturing capabilities while we explore potential expedited regulatory pathways and
partnering opportunities for the program. Based on regulatory work conducted in the second half of 2016,
we announced in February that the FDA has designated the investigation of ixmyelocel-T for reduction in
the risk of death and cardiovascular hospitalization in
patients with chronic advanced heart failures due to
ischemic DCM as a Fast Track Development Program. We believe that achieving regulatory milestones
such as Fast Track designation enhances the value of ixmyelocel-T and our efforts to partner the further
development of the program. We will continue to i
nvestigate additional expedited regulatory pathways in
2017 as part of our effort to access a non-dilutive means to commercialize the program.
Our progress during 2016 reflects our unwavering
focus on execution and the commitment of an
extraordinary team of clinical, operations, and commercial professionals to our mission of becoming a leading cell therapy company. In the year ahead, we anticipate continued growth of MACI and Epicel,
and careful expense management as we move the comp
any toward profitability. Our achievements are not
possible without our dedicated employees, collaborators
and shareholders, and we th
ank all of you for your
continued support.
Sincerely,
Nick Colangelo
President and CEO
March 2017
