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Bear of the Day: Vericel (VCEL)

I last wrote about Vericel VCEL in late January as the Bull of the Day and recommended that investors buy shares on dips under $40. You got one more chance in March and then it was off to the races for this innovative maker of cell therapies for knee cartilage and severe burns.

VCEL shares rallied sharply to new highs above $60 in April and then again in June, as investor anticipation grew about a pending FDA approval for their NexoBrid product in severe burn treatment.

But on June 29, Vericel announced that its development partner, MediWound MDWD, received a complete response letter from the U.S. Food and Drug Administration regarding the Biologics License Application for NexoBrid, a potential treatment for eschar removal in adults with deep partial-thickness and/or full-thickness burns. The FDA communicated to MediWound that it had completed its review of the BLA, as amended, and has determined that it cannot approve the BLA in its present form.

Following this news, VCEL shares gapped down from a new closing high near $68 to $57. As the bearish trend persists, shares have slid to $50 because EPS estimates have been revised downward as well, pushing the stock into the lower tiers of the Zacks Rank.

More Than NexoBrid

What investors should keep evaluating is how much the current sales growth of 30% and the valuation of only 10X sales means in light of other product categories that are working just fine. For instance, as a VCEL shareholder, I was delighted to see this news I reported on in early January...

Vericel announces expansion of MACI coverage by UnitedHealthcare UNH

Vericel Corporation announced that UnitedHealthcare has expanded its medical policy for MACI to include coverage for patients with symptomatic full-thickness cartilage defects in the patella and multiple cartilage defects in the knee. UnitedHealthcare is the largest commercial payer in the United States, covering more than 26 million lives, and more patients treated with MACI are covered by UnitedHealthcare than any other plan in the United States. The revised policy is effective February 1, 2021.

Getting to Know VCEL And Deciding Where You Buy

Here's how I've described the company in several reports since we first bought shares at $14 in July of 2020...

The goal of Vericel therapies is to repair or restore a patient’s damaged tissues or organs using their own cells. The company markets two autologous cell therapy products in the United States: Carticel for the treatment of cartilage defects in the knee, and Epicel for the treatment of severe burns.

It is also developing MACI (TM) for the treatment of cartilage defects in the knee, and ixmyelocel-T for the treatment of advanced heart failure due to ischemic dilated cardiomyopathy.

Sales for this small-cap are projected to launch 40% to over $170 million next year and profits are expected to vault more than 400% after a rough 2020 due to the massive hold on elective medical procedures during the COVID-19 shutdown.

And in September, Vericel announced the FDA accepted the company's filing for the recently submitted Biologics License Application (BLA) for NexoBrid® (concentrate of proteolytic enzymes enriched in bromelain) for eschar removal (debridement) in adults with deep partial-thickness and/or full-thickness thermal burns.

NexoBrid is a bromelain-based biological product containing a sterile mixture of proteolytic enzyme that selectively removes burn eschar within four hours without harming surrounding viable tissue.

What is Cell Therapy?

Cell therapy is the infusion, injection or transplantation of whole cells back into a patient for treatment of a condition. In autologous therapy the patient is the source (donor) of their own tissue cells. With the patient acting as their own donor, the risk of rejection and the use of immunosuppressive therapy is minimized.

How does autologous cell therapy work?

The goal of cell therapy is to repair or restore damaged tissues using cells. For Vericel therapies, tissue from the patient is collected by a qualified and trained surgeon, and then processed and expanded by Vericel into a specific cell type or multicellular therapy. The patient’s own cells are then returned to the surgeon for implantation.

The Vericel Process

Vericel uses a proprietary cell-processing technology to expand naturally occurring populations of cells derived from the patient’s own tissue. Specific to the type of therapy needed, a small sample of tissue is taken from the patient. The sample is then sent to their laboratory in Cambridge Massachusetts for cellular expansion. Rigorous testing ensures the quality and viability of cells before they are delivered back to health care professionals. These cells, in conjunction with rehabilitation regimes, have demonstrated the ability to restore function to patients with serious medical conditions.

To learn more about the Vericel experience, check out their website with a great testimonial from 5-time Olympic swimmer and mom Dara Torres who has benefited greatly from the company's approach to knee cartilage restoration.

The Vericel science is exciting because it addresses two areas of common injury and severe pain that don't have ready solutions.

Keep VCEL on your watchlist because after this earnings and FDA hiccup, this stock will be a buy again in the $40S.

Disclosure: I do not currently own shares of VCEL but may begin a position at any time.

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Vericel Corporation (VCEL): Free Stock Analysis Report
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