Vericel Corp. (VCEL)

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Vericel looks to market a gel for burns with new $142M licensing deal

https://www.bizjournals.com/boston/news/2019/05/07/vericel-looks-to-market-a-gel-for-burns-with-new.html?ana=twt

Cambridge-based cell therapy firm Vericel Corp. has forged a $142 million deal to license a gel used to help heal burns that made just over $3 million in sales last year at an Israeli company.

Vericel (Nasdaq: VCEL) will pay $17.5 million upfront and up to $125 million in milestones to license and sell the burn repair product NexoBrid from Israeli company MediWound Ltd., it announced Tuesday. The gel uses enzymes to remove burned tissue, with around 93 percent of subjects experiencing complete removal of the damaged tissue in a Phase 3 clinical trial.

It will be Vericel’s first commercial step outside of the two products it purchased from French firm Sanofi in 2014. One of those products, Epicel, is a type of skin graft also intended for burn patients.

Vericel announced the deal Tuesday along with its first quarter financials, which fell short of expectations. Although the company hiked its revenue guidance for the remainder of the year, Vericel’s stock price dropped 6 percent Tuesday, hovering around $17.30 when markets closed.

In an interview, CEO Nick Colangelo told the Business Journal that licensing NexoBrid will allow the company to expand the burn product branch of its business, which he described as “volatile." Colangelo estimated there's a $200 million U.S. market opportunity for MediWound's gel, about twice the size of the market for Epicel.

That's because NexoBrid can be used on a larger portion of the 40,000 burn victims hospitalized in the U.S. annually than Epical, said Colangelo. It also comes with a $16 million purchase order from the federal Biomedical Advanced Research and Development Authority and the possibility of another $50 million order in the next 10 years.

Still, the product has not yet been approved in the U.S., and brought in less than $4 million in sales last year, according to MediWound’s year-end financial report. Colangelo attributed the low sales to MediWound’s small sales force and the NexoBrid label in Europe, which states the gel in must be used in a specialized burn center rather than a standard hospital.

“Quite frankly, it’s a very challenging environment in Europe. It’s common to see products that don’t do quite well in Europe do well in U.S.,” Colangelo said. “It hasn’t performed up to their expectations, but I don’t think that’s representative of the market opportunity here in the U.S.”

MediWound plans to file an application with the FDA in late this year or early next year, according to Colangelo.

Most of Vericel’s growth in recent years has been from its knee cartilage repair product, MACI. Vericel executives raised the company’s 2019 revenue guidance Tuesday based on the expectation that MACI will drive $90 million in sales this year compared to $68 million last year, according to Colangelo.

Revenue from Epicel, meanwhile, dropped 13 percent from the $6 million the company reported in the first quarter of 2018.