Gerard Michel - Chief Financial Officer Nick Colangelo - President and Chief Executive Officer Dan Orlando - Chief Operating Officer David Recker - Chief Medical Officer Ross Tubo - Chief Scientific Officer

Kevin DeGeeter - Ladenburg Thalmann Esther Pang - Needham

Ladies and gentlemen, thank you for standing by. Welcome to Vericel’s Third 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 morning everyone. Welcome to Vericel’s third quarter 2015 conference call to discuss our third 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 in 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 statement 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 today’s call are Nick Colangelo, Vericel’s President and Chief Executive Officer; Dan Orlando, Vericel’s Chief Operating Officer; Dr. David 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 morning everyone. Vericel had another strong quarter during which we continued to generate significant revenue growth in our commercial business, and made substantial progress in advancing our upcoming regulatory submissions for MACI and Epicel. From a commercial perspective, Total Carticel and Epicel net revenues for the third quarter were $11 million, representing a 19% increase over net revenues in the third quarter of 2014. For the nine months ended September 30, 2015, total Carticel and Epicel net revenues increased 18% over pro forma net revenues for the same period in 2014. The significant revenue growth we achieved during the third quarter was primarily due to very strong growth for Epicel, which has benefited from additional promotional support and [indiscernible] focused on increasing Epicel utilization in burns centers that previously used the product. Epicel revenues for the third quarter increased 83% over the third quarter of 2014, moreover the number of burn centers that placed orders for Epicel so far this year has increased nearly 40% compared to the number burn centers that placed orders for Epicel in all of 2014. These results demonstrate that our targeting strategy and investment and an expanded sales force are bearing fruit and enabling us to bring this important life-saving product to more patients. Carticel net revenues increased 4% during the third quarter. Our core orthopedic surgeon customer base remained solid, and were optimistic about the potential to continue to grow Carticel revenues. In addition physician interest in MACI is extremely high, which leads us to believe that MACI will hold an important place in the knee cartilage repair market. So we are very optimistic about the future of our cartilage repair franchise. In summary, our continued strong growth bodes well for the future of Carticel and Epicel, as we drive the business to operating profitability. Our trailing 12 month revenue at $50 million demonstrates sustained growth and a positive response to our sales and marketing initiatives. Moreover, our gross margins of 49% for the core cell therapeutics business over the past four quarters illustrates significant progress we’ve made in driving the business to profitability. I believe that these results demonstrates that we’ve established a successful and sustainable cell therapy business. Having made clear in continuing progress in turning around the existing commercial business, we’re now squarely focused on the substantial growth opportunities ahead with MACI and Epicel. Following discussions with the FDA earlier this year, our clinical and regulatory teams are now working aggressively on the submission of a biologics license application for MACI. As a third generation cartilage repair product with a potential to substantially advance patient care, we believe that MACI represents a compelling opportunity to significantly expand our knee cartilage repair franchise and the market for cartilage repair products in the United States. We believe that there is significant interest in MACI not only among our core customer base of orthopedic surgeons that currently use Carticel, but that this interest extends to a broader set of orthopedic surgeons that currently do not routinely use Carticel. Over the course of the next 18 months, we intend to invest in a multitude of pre-launch and post-launch commercialization activities to support this exciting product candidate. Turning to Epicel, we’re preparing to submit a humanitarian device exemption supplement to the FDA this quarter to revise the labeled indications for use of Epicel to specifically include pediatric patients and add pediatric labeling. While Epicel is routinely used to treat pediatric patients and the original HDE application included a significant amount of pediatric clinical data, it currently is not specifically indicated for use in this patient population. We believe that revising the label that provide information describing the safety and clinical use of Epicel for pediatric patients will better inform surgeons regarding the safe use of Epicel in the pediatric patient population. Approval of the HDE supplement will allow Epicel to be sold for profit up to the annual distribution number which is defined as the number of devices reasonably needed to treat a population of 4,000 individuals per year in the United States. Given the continued growth in Epicel and the broad physician interest in MACI, we believe that Vericel is poised for significant growth moving forward. We intend to continue to invest in both of these products to ensure that they will reach their full potential. I’ll now turn the call over to Gerard to review our third quarter financial results.

Thanks, Nick. Total revenues for the quarter ended September 30, 2015 were $11.3 million and included $7.7 million of net sales of Carticel implants and surgical kits, 3.3 million of net sales of Epicel and approximately $327,000 in sales from our marrow donation business. Total Carticel and Epicel net product revenues in the third quarter increased approximately 19% over third quarter net product revenues in 2014. For the nine months ended, September 30, 2015 total Carticel and Epicel net product revenues increased approximately 18% over pro forma net product revenues for the same period in 2014. Gross profit for the quarter ended September 30, 2015 was $4.5 million or 40% of total revenues. Gross profit for the quarter was reduced by 4% due to higher than normal inventory write-offs. R&D expenses for the quarter were $3.7 million versus $7.8 million for the same period in 2014. The decrease in third quarter R&D expenses is primarily due to a reduction in expenses associated with the ongoing ixCELL-DCM clinical trial and the $3.2 million payment to Verigen shareholders in 2014 pursuant to a settlement agreement that eliminated all future milestone payments related to the development and commercialization of MACI in the US partially offset by the addition of personnel and other expenses associated with Epicel, Carticel and MACI. Selling, general and administrative expenses for the quarter were $5.7 million compared to 4.3 million for the same period a year ago. The increase in SG&A expenses in the third quarter is primarily due to an increase in sales and marketing expenses associated with Carticel and Epicel, as well as strategic planning activities for MACI. Loss from operations for the quarter ended September 30, 2015 was $4.9 million compared to $8 million for the same period in 2014. Material non-cash items impacting the operating loss for the quarter included approximately $600,000 of stock based compensation expense and 500,000 in depreciation and amortization expense. Other income for the quarter ended September 30, 2015 was $500,000 compared to 1.1 million for the same period a year ago, the change in other income for the quarter is primarily due to a non-cash change in the fair value of warrants. Vericel reported a net loss for the quarter of $4.4 million or $0.26 per share compared to a net loss of $6.9 million or $0.82 per share for the same period in 2014. For the nine months ended September 30, 2015 our net loss was $11.4 million or $0.69 per share, compared to $17.6 million or $2.90 per share for the same period in 2014. Please note that per GAAP our EPS calculation must take into account the undeclared quarterly stock dividends accrued by the Series B preferred stock. The loss per share figure includes a $1.7 million and $1.5 million non-cash charge for 2015 and 2014 respectively for undeclared quarterly stock dividends accrued by the Series B preferred stock. As of September 30, 2015 the company had $18.7 million in cash compared to 30.3 million in cash at December 31, 2014. Finally, in support of the MACI development program, we recently announced the execution of a long term supply agreement with a German company, Matricel for the ACI-Maix collagen membrane used in the manufacture of MACI. Matricel supplied the membrane used in the production of MACI when it was previously marketed outside of the US by Genzyme Corporation. Matricel’s proprietary collagen scaffold technology and previous experience as a reliable supplier of the ACI-Maix membrane for MACI makes Matricel a valuable partner for us, as we pursue registration at MACI in the United States. That completes my review. Now I’ll turn the call over to Nick.

Thanks Gerard. In summary, our financial results reflect significant progress with our commercial business which is performing well in a very solid footing for sustainable long term growth. Our near-term priorities are to continue our commercial progress, submit the MACI BLA and after sell HDE supplement to the FDA by the end of the year, and complete the ongoing Phase 2b ixCELL-DCM clinical study with ixmyelocel-T. That concludes your prepared remarks. Now I’d like the operator to open the call to your questions.

[Operator Instructions] our first question comes from the line of Kevin DeGeeter with Ladenburg. Your line is now open.

Congrats on a nice quarter. A few questions for me; first off, in terms of the Carticel growth rate over the next couple of quarters, are you seeing any feedback from surgeons to suggest some of them may be waiting for MACI to come to market to before bringing certain patients in for surgery or perhaps certain surgeons who may be interested in trying or retrying Carticel, but because of impending launch of MACI may hold off.

Kevin, this is Dan. We have no sense of that at this point. I think it’s a bit premature. We haven’t even filed yet; upon the filing, of course that will create a lot of buzz, and as we get closer to an FDA conclusion of that filing, we may get some sense of that, so that could be later next year, early 2017. But at this point we have no sense that physicians are hesitating on Carticel.

This is Dave Recker, clinically it’s tough that make a – to ask a patient to wait over a year.

Sure. I was thinking more in the context of maybe surgeons who are not actively using Carticel at the moment, who [indiscernible] calling upon, and kind of how you target those folks. But it sounds like that continues kind of as to plan.

I’ll just say this Kevin, we’ve just kicked off our market research with physicians and of course we are talking with physicians who currently use Carticel and those that had used it in the past and don’t use it today and those who haven’t used it. The interest is extremely high in MACI and the advantages that it holds, but we don’t get any sense that they are really [banking] [ph] patients or holding off on Carticel. So especially the core physicians who have continued to utilize Carticel over now a decade demonstrate that consistency month in and month out.

Great, very helpful. And could you provide an update as to how to think about the timeline for the humanitarian device exemption filing for Epicel specifically once filed the process there is a bit different than definitely a standard kind of therapeutic review. What’s the realistic timeline for potential answer on that filing?

So this is, as Nick mentioned, this is submitted as a supplement to an HDE which is you have reminded this is a completely different mechanism for approval. Technically the FDA by law has 75 days to complete their review and give an opinion. Now that’s not been necessarily the experience that HDE supplements or HDE submissions have had in the past. And it depends on how the agency looks at this. We believe that the product is very, very safe in children that it obviously meets the standard of probable benefit, and we are hopeful that this will get a quick review.

Maybe one more from me and then I’ll get back in the queue. Specifically with regard to the BLA filing for MACI do you anticipate being able to seek a small company exemption from that fee or should we think about that fee falling in the fourth quarter here.

We have looked at every single angle we can possibly come up with and I don’t think we can get an exemption. Offline I can tell you that, I don’t want to bore everyone with the details on that, but offline we could chat through the avenues we’ve looked at. But I think you can bank on that roughly $2.4 million fee being paid by us unfortunately.

[Operator Instructions] our next question comes from the line of Chad Messer of Needham. Your line is now open.

Hi, this is Esther in for Chad. Thanks for taking my question and congrats on the quarter. I just had a question about Carticel’s sales in the past and going forward. Do you see any competition from other products in the pipeline that are taking away from Carticel sales, for example NeoCart or NovoCart 3D. Do you see physicians going to those instead of Carticel?

This is Nick, and I’ll take a first stab at it and then Dan can add as well. There really are not any current ACI competitors for Carticel. Certainly there are ongoing clinical studies for NovoCart and NeoCart and they are targeting our target patient population and that may have a bit of an impact on Carticel usage. But again with the great work that Dave and his team did to secure a path to submit our BLA, we believe we’ll be first to market with the next generation product, and we feel like we are really well positioned in that regard.

And one more, do you see still expect the ixCELL-DCM trial to read out early ’16?

We are well on track, as you know, our last patient was enrolled February 04, 2015 this year. We are actively pursuing all of the remaining data and hope to have our results available by early next year.

And our next question comes from the line of Kevin DeGeeter of Ladenburg. Your line is now open.

Just one more from me as a follow-up to the last question. What is your current thinking with regards to potential next steps for the ixCELL-DCM program, specifically if you’re fortunate to have a positive outcome, do you anticipate moving forward to Phase 3 under the Vericel spending or would you more likely than not look to partner that program.

Well, I’ll start with that one again Kevin. We think with positive results in the ixCELL-DCM program or specifically the study that, that will create a lot of great options for the company we do have preliminary plans in place for what the next steps for our phase 3 program would look like, but we certainly would explore whether it make sense with this orphan program to move forward on our own or to seek partnership obviously heart failure represents a significant unmet need, there’s a lot of interest in the area and we certainly would explore all avenues before we made a decision on that.

[Operator Instructions] And I am showing no further questions at this time.

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

Ladies and gentlemen, thank you for participating in today’s conference. That does conclude today’s program, you may all disconnect. Have a great day everyone.