Gerard Michel - Chief Financial Officer, Vice President of Corporate Development Nick Colangelo - President and Chief Executive Officer Dan Orlando - Chief Operating Officer Ross Tubo - Chief Scientific Officer

Kevin DeGeeter - Ladenburg. Jason Napodano - Zacks

Ladies and gentlemen, thank you for standing by. Welcome to Vericel’s First Quarter 2015 Conference Call. At this time all participants are in a listen-only mode. I would also like to remind you that this is call has been recorded for replay. I will now turn the conference over the Vericel’s Chief Financial Officer, Gerard Michel. You may begin.

Thank you, operator, and good afternoon, everyone. Welcome to Vericel’s first quarter 2015 conference call to discuss our first quarter 2015 financial results as well as the progress of our commercial business and development programs. Before we begin, let me remind you that on today's call, we will be making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995, and all of our projections and forward-looking statements represent our judgments as of today. These statements may involve risks and uncertainties that are described more fully in our filings with the SEC, which are also available on our website. In addition, any 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. With us on our today's call are Nick Colangelo, Vericel’s President and Chief Executive Officer; Dan Orlando, Vericel’s Chief Operating Officer; Dr. Dave Recker, our Chief Medical Officer; and Dr. Ross Tubo, Vericel’s Chief Scientific Officer. I will now turn the call over to Nick.

Thank you, Gerard, and good afternoon everyone. Vericel had a very productive first quarter of the year with measurable progress across all aspects of our business. As part of continuing transformation of the company we began the quarter with an expansion of our Board of Directors with the appointments of Dr. Steve Gilman, Former Chief Scientific Officer of Cubist, Kevin McLaughlin, Chief Financial Officer at Acceleron Pharma and Dr. Paul Wotton, Chief Executive Officer of Ocata Therapeutics. We’re very pleased to have the benefit of their expertise and experience, as we continue to implement our strategic plan and build the company. In January, we also announce the completion of patient enrollment in our Phase 2B ixCELL-DCM clinical trial that is evaluating the efficacy in safety of ixmyelocel-T in patients with advanced heart failure due to ischemic dilated cardiomyopathy. By completing enrollment on schedule, we remain on track to report top line results from the study in early 2016. In March we reported three-year follow-up results from the submitted extension study at MACI at 2015 Annual Meeting of the American Association of Orthopedic Surgeons. These results demonstrated that patients treated with MACI versus microfracture continue to show a statistically significant improvement from baseline in the co-primary endpoint of KOOS pain and function scores at year three, with higher responder rates in the MACI group than in the microfracture group supporting the positive risk benefit profile of MACI that was first demonstrated in the pivotal Phase 3 SUMMIT study. From a commercial perspective as we described on our last quarterly both Epicel and Carticel are lower volume specialty biologics product that exhibited fair amount of volatility even when comparing same period across years. The first quarter is traditionally a like quarter for Carticel, the sales that are generally less than two-third of fourth quarter sales. Within that context the first quarter combined net revenues for Epicel and Carticel were $10.7 million which represents 4% increased over the first quarter of 2014. We’re encouraged by the revenue trends we’ve seen in established territories and the growth we’re currently seen for both Carticel and Epicel as we increased promotional efforts and implement new peer-to-peer marketing programs and our new representatives gaining traction in their territories. Despite the inherent volatility with these products we expect a consistently achieve quarterly total revenue growth for Carticel and Epicel versus the same prior year period and unit growth for both products on an annual basis. Continued revenue growth is a core component of our strategy to drive the business to operating profitability. As we’ve discussed previously another important factor to achieving operating profit stability is we continue to improve gross margins, in light of the impact of lower volumes in our lighter sales quarter we pleased to achieve gross margins of 49% of total revenues for the first quarter. While gross margins will fluctuate with seasonal volume variations we expect that to continue to showing upward trend in gross margins on rolling annual basis. Our first quarter operating loss of $4.6 million was slightly lower compared to the first quarter of 2014. We expect quarterly losses for the balance of the year to decline due to increase sales volume and decreased R&D costs as a result of the completion of enrolment in the ixCELL-DCM clinical trial. We’re confident that with our talented new sales professionals for the implementation of new marketing programs and cost savings initiatives we can continue to increase utilization of our products and grow revenues and gross margins as we drive our company to operating profitability. Dan will provide more details about our first quarter commercial performance in a moment. As we’ve also discuss previously, our regulatory priorities are to bring MACI to market in the U.S. as rapidly as possible and to obtain a pediatric label change for Epicel. Our clinical and regulatory teams are meeting with the FDA this quarter on both of these topics. MACI is our Phase 3 product candidate for the treatment of new cartilage defects which has been approved in Europe and used in approximately 10,000 patients globally. We’re in discussions with the FDA regarding the existing preclinical and clinical package and U.S. registration requirements for MACI. We believe that these discussions will enable us to determine the next steps required to submit a BLA for MACI in the United States. With respect to Epicel we’re in discussions with the FDA regarding the submission of an HDE supplement to revise the labeled indications for Epicel to specify use in adult and pediatric patients, add pediatric labeling, and request an exemption from certain pricing restrictions for Epicel. Our request is based on the fact that Epicel is routinely used to treat both adult and pediatric patients and the original Humanitarian Device Exemption application included a significant amount of clinical data from pediatric patients. We look forward to obtaining feedback from the FDA on our proposed regulatory approach to filing an HDE supplement for Epicel and continuing to expand utilization of this life saving product. As you know, discussions with the FDA follow a formal process beginning with meeting and meeting request, briefing packages and culminating in final meeting minutes. We’re currently proceeding through this process for both MACI and Epicel, while we’re eager to provide a detailed update on these discussions. We believe it prudent to wait till final meeting minutes are in hand before sharing any additional information. We expect to be able to provide further updates on our regulatory pathway for filling a BOA for MACI around the end of this quarter and possibly sooner and provide guidance on our regulatory approach to filing an HDE supplement for Epicel during our next quarterly call. Now, I’d like to turn the call over to Dan for an update on our commercial activities.

Thanks Nick. As we discuss on our last call, the first quarter generally is a softer quarter for product sales, driven by the seasonality of Carticel. However, despite this seasonality the inherent variability with our specialty biologics business, the challenge is that the severe winter weather here in the northeast and the fact that we have number new Carticel sales representatives in the field. Total revenues for Carticel and Epicel increased 4% compared to the first quarter of 2014. Total Carticel revenues were $7.1 million for the first quarter and we maintained our expectations for revenue growth for the year. I’m pleased to report that for the first time since acquiring this business every Carticel territory is filled including a new expansion territory bringing the territory in total to 21 sales representatives for Carticel. We expect to see the impact of our efforts and building a higher performance sales team in the second half of this year and we will continue to evaluate expansion opportunities for new territories that have the potential to be profitable. One of our top 2015 commercial priorities is to expand the Carticel prescriber base by initiating for the first time in several years a robust peer-to-peer education program. In April we conducted our first web-based peer-to-peer national meeting with approximately 500 orthopedic surgeons and clinical support staff. The program received very high marks, impact is relevant and we are excited about the renewed interest in Carticel which generated from this program and the opportunity to reengage top sports medicine KOL across the country. Our goal is for this year is to reach a total of more than 1,000 healthcare providers to a variety of high end factor through programs. We’ve also conducted several training programs already this year with residence and fellows as we seek to establish the next generation of Carticel surgeons. I addition to our commitments to growing top line revenues for Carticel this year, we are implementing several process improvement design to enhanced manufacturing efficiencies and capacity and continue to improve our gross margins. Turning to Epicel, net sales for the first quarter were approximately $3.6 million, an increase of nearly 10% over the fourth quarter. While seasonality is a factor for Epicel, the fourth and first quarters are typically relatively equivalent. Strong growth trends since we acquire this product is encouraging and reflects the increase in our promotional effort to reengage institutions that previous used Epicel. Based on this early success we add a fourth Epicel representative in April. As with Carticel peer-to-peer programs are key strategic priority for Epicel this year and in early Q3 we will be initiating programs, educate surgeons and new institution regarding the life saving potential of Epicel and best practices than administer in this product. Every life saving Epicel reinforces our commitment to these patients in the burn center to treat. We are pleased with the early response to our efforts to reengaged leaving burn centers and our expanded commercial administrative and we are confident in continue top line revenue growth for Epicel. So in summary, we’re making good progress and strengthening our Carticel and Epicel franchises and ensuring that the business is positioned for operating profitability and growth over the long term. Now, I’ll turn it back to Nick.

Thank you, Dan. We’re encourage by the current revenue trends for Carticel and Epicel and believe our commercial progress reflects the success of our sales and marketing efforts and our commitment to meeting the needs of our customers with innovative products and outstanding sale support. I’ll now turn the call over to Gerard to review our first quarter financial results.

Vericel reported the net loss for the quarter ended March 31, 2015 of $4.9 million or $0.27 per share compared to a net loss of $6 million or $1.25 per share for the same period in 2014. Please note that per GAAP our EPS calculation not taken into accounts undeclared quarterly stock dividends accrued by the Series B preferred stock. In the first quarter a value of $1.6 million was assigned by the Series B on stock dividend and detected from that income prior to calculating EPS. Net product revenues for the quarter were approximately $10.8 million and included $7.1 million of net sales for Carticel implants and surgical kits, $3.6 million of net sales of Epicel and approximately $100,000 in sales from Marrow Donation business. As both Nick and Dan have mentioned, Carticel sale revenue was subject to seasonal fluctuations with the strong sales occurring on in the second and fourth quarters. As disclosed in our last call during 2014, the percentage of annual sales by quarter was as follows; 21.6% in the first quarter, 23.7% in the second quarter, 21.8% in the third quarter and 33% in the fourth quarter. This information will again be included in our 10-Q which we file after this call. Epicel revenue is also started the seasonal fluctuations with stronger sales in the winter month, although the trend at any single year could to be absent due to extreme variability inherent with Epicel’s low patient volume. Over the last four years, the percentage of annual sales like quarter has been has follows. First quarter 28%, second quarter 24% third quarter 20%and fourth quarter in 28%. Gross profit for Carticel, Epicel and Marrow Donation in the quarter ended March 31, 2015 was $5.3 million or 49% of total net revenues. R&D expenses for the quarter were $4.4 million versus $3.3 million for same period a year ago. The increase in R&D expenses is due to a greater number of patients treated and followed in the Phase 2b ixCELL-DCM clinical trial versus the same period in 2014. And the addition of personnel and other expenses associated with Epicel, Carticel and MACI. Selling, general and administrative expenses for the quarter were $5.5 million compared to $1.4 million for the same period a year ago. The increase in SG&A expenses in the first quarter is primarily due to sales and marketing expenses associated with the acquired commercial business and increased information technology, legal consulting and personnel costs related to integrating and managing the acquired business in the U.S. Loss from operations for the quarter was $4.6 million compared to $4.6 million for the same period a year ago, Material non-cash items impacting the operating loss for the quarter included $19,000 for stock based compensation expense and $3,000 in depreciation expense. Other expense for the quarter was approximately $300,000 compared to expense of $1.4 million in the same period a year ago. Other expense for both periods related to the non-chase change in the fair value of warrants. As of March 30, 2015, the Company had $25.9 million in cash compared to $30.3 million in cash for December 31, 2014. Based on our progress to-date and borrowing any strategic transactions for other events that required additional capital. We believe that our cash position is sufficient to fund our business operation until we reach profitability. That completes my financial review. Now I’ll turn the call over to Nick.

Thanks, Gerard. We’re continuing to make great progress today’s our goal commercial and scientific leadership in the field that’s out there for you. In the months ahead you look forward to continuing to increase the utilization of our marketed products, grow revenues and gross margins as we drive the Company to operating profitable and initiate the required steps to submit a BLA for MACI in the United States and obtain pediatric label change for Epicel. That concludes our prepared remarks. Now, I’d like to – like the operator to open the call to our questions.

Thank you. [Operator Instructions] We have a question from Kevin DeGeeter of Ladenburg. Your line is open.

Hey, good afternoon. Thanks for taking my questions. Can you talk a little bit more about the peer-to-peer training program for Carticel and to what extent? Is that sort of medical education program in certain respect, so is it largely a more kind of practical how and when to use Carticel led by KOL?

Yes. So, Kevin, this is Dan. It really was fantastic program. We went down to New York City and from a studio there broadcast to you 27 sites across the country. And the format was first an introduction of Vericel is. As you know we’re apparently a new name in the orthopedics space and we want to make sure that the physicians understood our commitment to sell therapies and all of the exciting programs that we have going not just Carticel. So that was the first part of it. We have the benefit of being normally ACI product on the market and so we took a very nice educational approach on the utility of autologous cartilage repair and we allowed for a lot of dialogue in interaction, in challenge about how to use ACI versus the other modalities to treat cartilage repair. And I think that’s why we got such great remarks. We had a national KOL in the studio with us that also communicated to all of the flights from the studio, and then after that we had KOL at each of the sites doing case studies. So again it was very interactive, they got to talk about challenges with every type of modality for a cartilage therapy and if you count [ph] there just to pitch your own, you really don’t get great barks in these settings. So you have to create an excellent dialogue where the KOLs can address in the market if you will. So I think it was extremely well prepared. We got great marks from it and fantastic attendance.

Great. And then with regard to the Epicel’s sales force expansion, we’re now I guess going we’re gone up to 4 reps and had a bit of experience since September and you’re sort of adding out reps, do we have a sense as to what a realistic uptake period should be for a new rep is it really kind of 6 months reps for Epicel until they begin to gain traction maybe a bit sooner, how do we think about just translating the increased investments sales force to revenue ramp greater revenue ramp on Epicel?

So I’ll start Kevin, it’s Nick and thanks for your questions and then I’ll let Dan add as well. But I think the distinction with Epicel is what we did was go from one sales rep that was primarily servicing our leading customer, added two experienced burn nurses who previously sold Epicel in the fall and then added the fourth. We also had previously sold Epicel left the prior organization and rejoined Vericel. And so there’s a pretty linear response where you are bringing experienced people back into the field and re-engaging with institutions that have already used the product which as we discussed at our – on our last call was our strategy to go back to the institutions that had used Epicel in the previous two years but had not used it 2014. So there’s a very straightforward road map. Dan and Jack have done a great job in laying out the targets for each representative and I think you can the numbers speak for themselves right, where according to you the data that Gerard shared where the fourth quarter and first quarters are roughly equivalent at 28% in the business, we still saw a sequential 10% increase in Epicel for the first quarter. So, I think that in contrast to Carticel where when we’ve gone in and restructured as we’ve done over the past couple of quarter, you pull a rep out of the field for Carticel and you absolutely see the impact. So, my comment around being pleased with our growth trends in established territories will focus for and we’re obviously focused on establishing the business in the new territories where you are starting a little bit more from scratch and building relationships, collecting biopsies and so on. And so it’s a little longer lead time with respect to our Carticel changes that have occurred.

Yes, I’ll just add Kevin that your initial question was specifically on Epicel. As Nick stated our primary emphasis is on institutions that have used Epicel in the last three years but didn’t use it in 2014. So there isn’t necessarily a lot of training as we re-engage with these institutions. Now later in the year and that’s why our peer to peer programs are targeted towards second half of the year. As we start to engage with institutions that haven’t used Epicel say in the last several years, or have used it at all, then we’ll there is a training scenario that needs to take place. So you can look at it as our early wins or kind of our lower hanging fruit and we’re going to have to invest more to bring into the fold institutions that haven’t used Epicel prior.

Great. Thanks so much. I’ll get back in the queue.

[Operator Instructions] And we have a follow up question from Kevin DeGeeter, your line is open.

All right, hey guys. Just a really just a housekeeping question from me and SG&A did increase sequentially in the quarter relative to the fourth quarter. Should we think of it about the current expense level as being sort of a new baseline for this high sales force or were there some onetime items in the quarter that may have caused that number to step up a bit.

I think it’s close to new baseline. There are a couple of onetime items on integration that weren’t capitalized but I think it’s pretty close to a new baseline.

And again on a similar front with regard to I guess R&D expense challenge, should we think about that flattening out or perhaps trailing off in a somewhat linear manner through the remainder of the year or is there a point where there is a stepwise decrease in the absence of some sort of additional programs for Macy or other pipeline programs.

Well there’ll be a noticeable decline moving into this quarter due to DCM trials being filling at all the managed primary follow up, where that trend goes is highly dependent on the outcome of the ongoing FDA discussions regarding Macy and Epicel. If things turn out as we would hope that we see a pretty consistent decline as the DCM trial winds down otherwise it might come to increase a bit towards the fourth quarter. Again, and it all depends on what is required to get BLA filed and what is required to get pediatric indication.

And one last one from me, you’ve commented several times on the call with regard to the seasonality of the products. As we sit here in the middle of May half way through the second quarter, are you seeing similar kind of seasonality this year with regard to particularly Cartisel you seen improved these years.

Yes I think we definitely with Cartisel we expect the seasonality trends to continue and a point of fact I think, first we think when I look back at what happened in the fourth and first quarters over the past four years or so that seasonality if anything has been increasing in terms of the increase in the fourth and a drop in the first. We hope though of course and planning on an annualized basis to continue to have volume growth despite the seasonality, but yes, we are going to see these ups and down I think that’s just digged into the market.

Great. Thanks so much.

Thank you. And the next question is from Jason Napodano of Zacks. Your line is open.

Hi guys thanks for taking the question. I just wanted to make sure that I understand the process with the HD supplement on Epicel. So, you are waiting for the minutes back from the meeting with the FDA and then how quickly do you think assuming that that goes as planned, do you think that you can get a something kind of repackaged and filed?

So Jason, thanks for the question and I’ll start and Dave can provide any additional comment. So, we are in different stages of the discussions with the FDA relative or with respect to both of these items. We haven’t disclosed I guess when the meetings occur and so on, we just said they are happening in this quarter, we’ll have meeting minutes presumably shortly thereafter its sort of dictated how quickly those things happen and so I think as we’ve talked about before with respect to Epicel, once you file an HDE supplement it’s a pretty short review time, right it’s 75 days. HDE supplements are relatively rare generally usually managed by [Indiscernible] Epicel happens to be managed by Cebe [ph] so I think the first stage of the discussions relate to exactly what information would be included and how its formatted and so on, and whether it’s already prepared and acceptable or we have to kind of review things or we just won’t know until we get that feedback. So the backend of the process in term of a review of an HD supplement is well defined. The front end of what will be required and any additional analysis or work we have to do has yet to be defined. So I can’t really give you a time line.

Okay, all right. That’s all I had thanks guys.

Thank you. And the next question is from Tim [Indiscernible] your line is open.

Hey everyone thanks for taking my call. Just a question about the profitability comment. Do you that profitability happening with the current approved product portfolio or is there an assumption in there that Macy will be part of that, and I’m just trying to do the math on getting the profitability on your current products with current growth which seem too all tight?

No with our current currently approved portfolio of the sale in Carticel we will reach profitability.

Okay and so is there an implied kind of a greater uptick in growth as a result of all the efforts you are making to be able to achieve that?

Yes there are two components to it. What really credit components, probably the smallest is price increases which will occur. I think more important than that is volume growth that we anticipate and are definitely seeing signals of and then the last is the steady increasing gross margins. We’ve done the low hanging fruit in terms of restructuring, now we’re doing the I’d say more technical aspects being led by Ross here who has we’ve changed the number of matters in terms of the processing, and that’s going to cut cost significantly. So we see some steady increases in gross margins, it’s the last part of that puzzle and I think I’m not going to get the time frame but definitely we are going to achieve profitability in the annuity meeting in Germany.

Great. Okay, that’s helpful thanks. And then just one last question, just aside from that do you feel that you are in a position to start looking at additional on the market prior to opportunities at this stage or is it a little bit early given the turnaround that you are so focused on just in terms of leveraging the infrastructure you have and have been growing. Is that something we should start looking for over the next kind of 12 to 18 months the possibility of adding products

Yes we are definitely looking. The bar is high, because there is only so much bandwidth whether its management time or dollars and we think there is a lot of growth opportunity with our current products. So first and foremost we’re really doing a lot of homework trying to understand what the key leverage points are to growth to all the products and that’s going to advance spending a lot of time doing that. On the outside, it is interesting a number of things that come over the trends to us, given our unique position of being the only company that’s commercially manufacturing sell therapy products right up, right now with all of these products and probably assume to be the only profitable ones where a number of products have come our way that look intriguing. We are currently building a capability for systemic look but again I think as Nick’s always saying internally the bar has to be high for these things they either need to be create a lot of value and that be that expensive or be very accretive in the near term. We don’t want to give up on the goal of becoming cash flow positive with this current portfolio.

Great. Thank you very much.

[Operator Instructions] And there are no further questions in queue at this time. I’ll turn the call back over for closing remarks.

Okay, well, thank you very much and we want to thank you for your questions and continued interest in Vericel. We are excited about the opportunities ahead and look forward to reporting on our progress on our next call. So have a great day and thanks again.

Thank you. Ladies and gentlemen, this concludes today’s conference. You may now disconnect. Good day.