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Vericel (NASDAQ:VCEL)
Q4 2020 Earnings Call
Feb 24, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by. Welcome to Vericel's fourth-quarter 2020 conference call. [Operator instructions] I would also like to remind you that this call is being recorded for replay. I will now turn the conference call over to Eric Burns, Vericel's head of financial planning and analysis and investor relations.

Eric Burns -- Head of Financial Planning and Analysis and Investor Relations

Thank you, operator, and good morning, everyone. Welcome to Vericel's fourth-quarter 2020 conference call to discuss our financial results and business highlights. 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. These statements may involve risks and uncertainties that could cause actual results to differ materially from expectations and are described more fully in our filings with the FCC, which are available on our website.

In addition, all 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. Please note that a copy of our fourth-quarter financial results press release is available on the Investor Relations section of our website. We also have a short presentation with highlights from today's call that can be viewed directly on the webcast or accessed on our website. I'm joined on this call by Vericel's president and chief executive officer, Nick Colangelo; and our chief financial officer, Joe Mara.

I will now turn the call over to Nick.

Nick Colangelo -- Chief Financial Officer

Thank you, Eric, and good morning, everyone. I'd like to begin by welcoming Joe who joined us in January from Biogen where he held several finance leadership roles, including most recently, vice president of finance and head of investor relations. Previously, Joe served as head of global financial planning and analysis in strategic corporate finance and also as divisional CFO for Biogen's U.S. business.

We're excited to have Joe join the Vericel team, and he'll discuss our fourth quarter and full-year 2020 financial results and our 2021 financial guidance later on this call. Turning to our financial and operational performance, we delivered strong fourth quarter and full-year results in 2020 despite the challenges presented by COVID-19. For the full year, we achieved record total revenue and delivered record product volumes and revenue for both MACI and Epicel. This strong revenue performance generated significant profitability and cash flow as we reported full-year positive GAAP net income for the first time in the company's history in January to over $18 million in non-GAAP adjusted EBITDA, and over $17 million in operating cash flow ending the year with $100 million in cash and investments and no debt.

We also had a strong finish to the year with quarterly records across several financial and commercial measures. From a financial perspective, we generated record quarterly MACI revenue and total revenue in the fourth quarter, record fourth quarter and the second-highest quarterly Epicel revenue in history, as well as record quarterly gross margin, net income, adjusted EBITDA, and operating cash flow clearly demonstrating the strength of the company's financial profile. From a commercial perspective, we achieved record quarterly MACI implants and the second-highest Epicel graft volume in history in the fourth quarter. We also had a record quarterly high in the number of surgeons taking MACI biopsies and double-digit growth in MACI biopsies achieving a record quarterly high in a record monthly high for biopsies in December.

Despite the significant impact of COVID-19 on physician access and elective surgeries throughout 2020, we exited the year in a strong position. We believe that our results demonstrate the resiliency of our long-term growth profile and that our strong operational execution has positioned the company for a rapid return to top-tier revenue growth in 2021 and beyond. Our guidance for 2021 reflects a return to MACI's pre-COVID growth trajectory as the underlying growth drivers accelerate over the coming quarters, continued momentum for Epicel, and additional NexoBrid procurement revenue as we prepare for a potential launch in the United States. As we announced this morning, we expect total revenue for 2021 to grow 30 to 32% to approximately $161 to $164 million driven by MACI growth in the low to mid-30% range and mid-teens growth for Epicel.

Joe will provide further details on our financial guidance in a few moments. With respect to MACI performance and expectations, our leading indicators remain strong and the commercial team continued to execute very well throughout 2020. Overall, we received biopsies from approximately 1,500 surgeons in 2020, an increase from approximately 1,400 surgeons in 2019. Our 2021 guidance assumes that we will grow the number of surgeons taking biopsies by more than 20%, which is more in line with the higher rate of growth that we generated in 2019.

While the average number of biopsies per surgeon decreased in 2020 due to the impact of COVID-19, by the third quarter, biopsies per surgeon had recovered to 2019 levels and we expect continued growth as we move through 2021. Finally, even with the expansion of our surgeon base, we expect the biopsy to implant conversion rate to remain within the historical range. We also expect to benefit from UnitedHealthcare's decision to expand coverage of MACI to include patients with full-thickness cartilage defects in the patella and multiple 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.

Over 85% of covered commercial lives in the U.S. have access to MACI and more than 90% of MACI cases submitted to payors are approved. We believe that the expanded coverage will not only improve access for UnitedHealthcare patients but also reinforce with surgeons the broad access and favorable reimbursement for MACI and contribute to its strong growth in the years ahead. With respect to Epicel, we had a very strong finish to 2020 and achieved record fourth quarter and full-year graft volumes and revenue.

In fact, we generated two of the three highest Epicel revenue quarters ever in the third and fourth quarters of 2020. We believe that the leadership and sales force structure changes that we previously implemented, which were in place for a full year for the first time in 2020, have yielded positive operational results across a number of important measures. Despite significant hospital access restrictions in 2020, the Epicel team generated orders from several burn centers that had never placed an Epicel order or had not done so in several years. We've also seen an uptick in the number of treatments per patient and the resulting number of grafts per patient as our sales representatives and clinical support specialists work with surgeons to optimize treatment protocols for Epicel patients with very large total body surface area burns.

We're encouraged by these trends and we're optimistic that they can continue in 2021 and beyond. And accordingly, we've increased our growth expectations for Epicel in 2021. In terms of NexoBrid, extensive pre-commercialization activities are under way to support the planned launch upon approval. In addition to the ongoing disease state awareness campaign that we launched last year, we continue to advance our commercial launch plans including a number of brand development and market access initiatives.

Our medical affairs team is engaged with burn centers and training and educational initiatives through the next expanded access protocol which we believe will be critical for NexoBrid to potentially replace surgical excision as the standard of care for removing a scar in patients with severe burns. We expect to recognize the remaining revenue related to the BARDA procurement of NexoBrid in 2021. And based upon expected time lines required for P&T committees to review and ultimately approve the inclusion of NexoBrid on hospital formularies following its potential approval, we'd expect a more meaningful uptake in commercial revenue for NexoBrid in 2022. I'll now turn the call over to Joe to provide more details on our fourth-quarter financial performance and in our initial 2021 financial guidance.

Joe Mara -- Chief Financial Officer

Thanks, Nick. First, I want to start by saying that I'm very excited to be part of the Vericel team and I look forward to getting to know many of you over the coming weeks and months. Turning to the income statement. Total net revenue for the fourth quarter increased 15% to 45.2 million, compared to 39.4 million in the fourth quarter of 2019, and included 34.7 million of MACI revenue and 9.6 million of Epicel revenue, compared to 33.6 million and 5.8 million of MACI and Epicel revenue, respectively, in the fourth quarter of 2019.

MACI revenue grew 3% and Epicel revenue grew 65% compared to the fourth quarter of 2019. Total revenue for the quarter also included approximately 1 million of revenue related to the procurement of NexoBrid by BARDA for emergency response preparedness. Gross profit for the quarter was 33.6 million or 74% of net revenue, compared to 28.8 million or 73% of net revenue for the fourth quarter of 2019. Total operating expenses for the quarter were 21.4 million, compared to 19.6 million for the same period in 2019.

The increase in operating expenses was primarily driven by incremental employee expenses related to the MACI's sales force expansion in 2020. Net income for the quarter was 12.2 million or $0.25 per share, compared to 9.5 million or $0.20 per share for the fourth quarter of 2019. Non-GAAP adjusted EBITDA for the quarter was 16 million or 35% of net revenue, compared to 12.8 million or 33% of net revenue in the fourth quarter of 2019. Our non-GAAP adjusted EBITDA of 16 million in the fourth quarter increased approximately 25% versus the fourth quarter of 2019.

On a full-year basis, total revenue increased 5% over 2019 to 124.2 million driven by the growth in both MACI and Epicel revenue as well as revenue from the BARDA procurement of NexoBrid. Net income for the year was 2.8 million or $0.06 per share, while non-GAAP adjusted EBITDA was 18.6 million or 15% of net revenue. Finally, we generated 11.3 million of operating cash flow in the fourth quarter and 17.6 million for the full year. As of the end of the year, the company had approximately 100 million in cash and investments, compared to 79 million as of December 31st, 2019, and no debt.

Transitioning to our full-year guidance for 2021. We expect total revenue to grow 30 to 32% which represents full-year total revenue of approximately 161 to 164 million. MACI revenue is expected to grow in the low to mid-30% range over 2020. This guidance assumes that surgeons taking biopsies will grow approximately 20% over 2020, that biopsies per surgeon will increase above 2019 levels and a stable conversion rate.

Importantly, our full-year expectations for MACI assume that the current overall COVID-19 trends do not materially worsen and that we continue to see steady improvement in COVID-19 cases and hospitalization rates throughout the year. In terms of the mix of MACI revenue across the quarters, we expect that MACI quarterly revenue generally will follow the seasonality pattern that we saw in 2019. As mentioned earlier, Epicel had a very strong finish to 2020 and we are optimistic that the positive trends described earlier will continue into 2021. As a result, we are increasing our expected Epicel growth rate from high single digits to mid-teens growth for the full year.

For NexoBrid, we anticipate the remaining 3.8 million of BARDA revenue to be recognized evenly across each quarter in 2021 and meaningful commercial revenue for NexoBrid beginning in 2022. Moving down the P&L, we expect gross margin to be 70% to 71% up from 68% in 2020. Full-year operating expenses are expected to be approximately 115 million. Overall, approximately 50% of the operating expense growth is driven by our non-cash stock compensation expenses due primarily to the share price appreciation over the last 12 months.

Our operating expenses excluding stock compensation are expected to grow by approximately 20% driven by a full year of our larger MACI sales force and an increase in NexoBrid sales and marketing investments and normalization of other discretionary commercial spend. Non-GAAP adjusted EBITDA margin for the full year is expected to be 21 to 23% up from 15% in 2020. This guidance is consistent with our expectation to convert approximately 80% and 50% of marginal revenue to gross margin and adjusted EBITDA, respectively. For the full year, adjusted EBITDA is expected to increase from approximately 18.5 million in 2020 to approximately 35 million in 2021 or roughly twice the adjusted EBITDA versus 2020 which also points to continued meaningful growth in operating cash flow.

I will now turn it back over to Nick for some closing remarks.

Nick Colangelo -- Chief Financial Officer

Thanks, Joe. Wanted to take a moment to thank all of our dedicated employees for their contributions in 2020. Despite the challenges resulting from COVID-19, our manufacturing and quality teams continued to manufacture and deliver our products without interruption. And our commercial and clinical support team continued to partner with surgeons to ensure that patients in need had access to our important products.

The entire Vericel team looks forward to continuing to execute on our long-term growth strategy, provide our therapies to even more patients in need, and in the process create significant value for both patients and our shareholders. Thank you. And now I'd like the operator to open the call to your questions.

Questions & Answers:


Operator

[Operator instructions] Please hold for your first question. Ryan Zimmerman with BTIG.

Ryan Zimmerman -- BTIG -- Analyst

Great. Thanks for taking the questions. And Joe, I wanna start with NexoBrid for a minute and just get your sense around timing of that launch. Previously, the PDUFA date was -- it is, I assume, still January 2021.

So maybe why start expecting sales in 2022 and not maybe first half -- or excuse me, second-half '21?

Nick Colangelo -- Chief Financial Officer

Yeah. Hey, Ryan. It's Nick. So just to be clear, the PDUFA date, which remains the same, is June 29th, 2021, not January.

And so that remains the case. Obviously, we're excited to have an opportunity to launch NexoBrid in the US. MediWound, of course, who submitted the BLA, is working with the FDA during the review process, and that process is moving forward. As we had talked about you know with midyear approval, you still go through a quarter or so of P&T committee reviews at the individual burn centers and then go through the approval process.

And so we've been very consistent in saying we expect a more meaningful uptake and revenue from NexoBrid in 2022.

Ryan Zimmerman -- BTIG -- Analyst

OK. Thank you for correcting me. I meant June 2021. The second question is just around MACI.

You expect to get back to that kind of pre-COVID growth rate of above 30%. Are we to assume that that's a sustainable growth rate maybe looking at longer term on the MACI business over time? And I think, if I do the math correct, and correct me if I'm wrong, Joe, but the implied growth in MACI in at least the first quarter is somewhere in the mid-teens based on that seasonality cadence. So just comments around that business would be appreciated.

Nick Colangelo -- Chief Financial Officer

Yeah. I'll start, Ryan. So just in terms of the long-term growth rate, I think we've said pretty consistently that the increase in biopsying surgeons is kind of a good floor for sort of the longer-term growth rate, obviously to the extent as we've talked about previously that we get more biopsies per surgeon and we take a little bit of a price increase that is what sort of gets you from growth in biopsying surgeons to sort of the revenue growth. And an example of that was 2019 where we had 25% growth in biopsying surgeons.

But because we got more biopsies per surgeon and then obviously a little bit low single-digit price increase, we ended up with closer to 35% growth. So that's how we look at the business going forward. We think those growth drivers remain pretty strong as we talked about. But again, baseline over years, yeah.

I mean, we expect strong double-digit growth.

Joe Mara -- Chief Financial Officer

Yeah, Ryan. So in terms of kind of the quarterly question, I think going back to the guidance, we talked about kind of low to mid-30s range for the full year in MACI. In the prepared remarks, we talked about kind of 2019 being a good kind of estimate. I think at this point, yeah, there certainly can still be some variability.

But that's kind of our best estimate. And I think if you kind of get into the math, you do get -- and you apply that mix, you get into the double digits in terms of MACI in Q1.

Ryan Zimmerman -- BTIG -- Analyst

OK. Congrats again, guys. Thank you.

Nick Colangelo -- Chief Financial Officer

Thanks, Ryan.

Operator

Your next question is from Danielle Antalffy with SVB Leerink.

Rebecca Wang -- SVB Leerink -- Analyst

Hi. Good morning, guys. This is actually Rebecca Wang on for Danielle. Thank you for taking the question. I guess I'll start with the adoption ramp in MACI.

I wanted to get a sense of the same-store sales in early adopters versus new physician growth for MACI. How many new physicians sent in biopsies over the last 12 months, how does that compare with historical trends?

Nick Colangelo -- Chief Financial Officer

Yes. So, Rebecca, as we've mentioned, in 2019, the number of biopsying surgeons increased 25% over 2018. In 2020, which obviously was a disrupted year, we still were able to grow those surgeons, obviously, not at the rate we had anticipated prior to COVID-19. But we were up about 7% or 8% to about 1,500 surgeons.

We've mentioned and did so, again, today that we expect biopsying surgeons in 2021 to grow more than 20% over 2020. So you can kind of do the math and see that we'll end up somewhere around 1,800 biopsying surgeons for 2021 would be our expectation.

Rebecca Wang -- SVB Leerink -- Analyst

All right. Got it. That's very helpful. Another question on sales reps, I remember you guys normally hire new reps, increase reps in Q1.

Can you give us an update on that front?

Nick Colangelo -- Chief Financial Officer

Yes. Well, obviously, in 2020, we did a relatively meaningful sales force expansion from 49 to 76 territories. And our perspective is that that was where we would be for a couple of years. So we're not planning to expand the sales force again this year.

We'll look at it at the end of the year, but this was intended to be sort of an expansion for a two to three-year time period at least.

Rebecca Wang -- SVB Leerink -- Analyst

All right. Thank you.

Operator

Your next question is from Kaila Krum with Truist Securities.

Kaila Krum -- Truist Securities -- Analyst

Hi, guys. Thanks for taking our questions. So first, has there been any update on NexoBrid pricing that you can provide? I think historically, you said maybe something in the range of 5,000 to 7,000. Does that range still seem reasonable at this point? Are you more comfortable at the high or low end of that per-patient rate? Just any additional color there would be helpful.

Nick Colangelo -- Chief Financial Officer

Yes. Kaila, thanks for your question. And yes, that was our perspective when we sort of introduced the addressable market for NexoBrid. And it was really based on a benchmark product that's out there.

We're in the midst of a pricing study right now. I think when we laid out sort of our pre-commercial launch activities, this was something that was going to be going on through the first quarter. So we haven't made any final determinations. I'd say we're certainly comfortable with that entire range.

And really, the question is, what kind of premium will we end up taking given the compelling clinical data for NexoBrid.

Kaila Krum -- Truist Securities -- Analyst

Great. No. That makes sense. And then I think you guys have had a month under your belt now with the UnitedHealthcare positive coverage decision.

I'm just curious if you've seen any benefit or it sounds like you guys are pretty excited about it. Just how would you help us sort of frame up the opportunity there in 2021?

Nick Colangelo -- Chief Financial Officer

So we actually are under a month because we announced it in January, but the policy went into effect on February 1st. So it's very early days. But the way we look at the opportunity is, is first of all, you can kind of look at our TAM and say that about 15% of our business is UnitedHealthcare business, about 20% of cartilage defects are patella defects. And so you can do the math and say, if I want to look at it in terms of the TAM, it's probably a $60 million, $70 million piece of the TAM.

And obviously, we have some of that already because Patella cases were approved, but just on a case-by-case basis for United. So that's kind of the market opportunity. We can then obviously look at, as we mentioned before, UnitedHealthcare patella cases were approved at a much lower rate than our average rate. As I mentioned in my prepared remarks, the approval rates generally for MACI are over 90%, and it was much less for UnitedHealthcare patella cases.

So you can look at that and say, well, that's business that you can expect to capture. I think the bigger picture issue is that surgeons knew that UnitedHealthcare didn't cover patella cases. And so the real question is sort of how many patients that they saw, who were UnitedHealthcare patients with patella defects that they otherwise would have treated, did they not even bother taking biopsies for, and that's the bigger piece of it. So that relates more to the TAM portion, obviously.

But yes, we're excited about it. We think it will allow us to not only capture more UnitedHealthcare patients, but there's kind of a halo effective just continuing strong reimbursement and access for MACI.

Kaila Krum -- Truist Securities -- Analyst

Great. Thank you.

Operator

The next question is from Chris Cooley with Stephens.

Chris Cooley -- Stephens Inc. -- Analyst

Good morning, and thanks for taking the questions. And congratulations on the litany of records there. I think I lost track of the number there in the fourth quarter. If I could just follow on Kaila's question for my first when you think about the change in the UnitedHealth coverage policy, do you think that will be more impactful going forward within sports med or the general orthopedic surgeon community? I'm just curious if one was a little bit more skewed, and as a result, if that could be maybe more beneficial from an uptake standpoint.

And then I have one quick follow-on.

Nick Colangelo -- Chief Financial Officer

Yes. I don't think we feel like there's a particular segmentation. I think the benefit will apply across the board to our 5,000 surgeon targets. And again, that's almost a 60-40, roughly 50-50 split of sort of designated sports medicine surgeons versus general orthopedic surgeons.

So I wouldn't say it skews one way or the other. I think it's a benefit that we can realize across the board.

Chris Cooley -- Stephens Inc. -- Analyst

Understood. And then just looking back at the Epicel growth in the back half of last year, which was obviously very impressive, I'm just curious if you feel like this is now kind of the overall level of productivity that we should think about on a per rep basis, or is there still leverage there or opportunity to improve that going forward? And here in calendar '21, independent of the NexoBrid launch, I mean, are they hitting stride now? Or is there still some room to go there, I guess, in short?

Nick Colangelo -- Chief Financial Officer

Well, I would say we're always careful about calling trends with Epicel just because of the small numbers and variable nature of severe burns. But I do think we've pointed folks to look at in 2019, we had three quarters that were below $6 million and then the record quarter of $9.9 million in the third quarter. And that was in an uninterrupted year. When you look at 2020, where clearly there were access issues and things sort of ground to a halt in Q2.

Each of the quarters was above $6 million other than the second quarter. And so we do think that there's probably a stronger baseline there. But we, by no means, feel like we're done or we're capped out. Our goal, obviously, would be to continue growing Epicel on its own.

And we think with an expanded sales force ahead of a NexoBrid launch that we'll get further uptake for Epicel as well.

Chris Cooley -- Stephens Inc. -- Analyst

Thank you. Appreciate it.All right. Thanks, Chris.

Operator

Your next question is from Jeffrey Cohen with Ladenburg Thalmann.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Hi, Nick and Joe. How are you?

Nick Colangelo -- Chief Financial Officer

Good, Jeff.

Joe Mara -- Chief Financial Officer

Great. Thanks.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

So a few questions from our side, very strong margins for Q4, and what's the pull-through on the margin potential? Should we still be thinking about low 70s as per your guidance two or three years out? Or does BARDA drive those revenues higher or keep them kind of in the same range?

Joe Mara -- Chief Financial Officer

Sorry. Can you repeat the second part? I got the gross margin.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Sorry. How that looks in '22 and '23 and the ramifications from NexoBrid on those, call it, low to mid-70s.

Joe Mara -- Chief Financial Officer

Yes. So I would say if you kind of go back to our guidance, we talked about from a gross margin perspective, being in that 70% to 71% range for the full year. Obviously, it was kind of strong in the fourth quarter of 2020 when we typically see higher revenues. More broadly, I would say, and we talked about this in the prepared remarks.

So as we move forward, we're still kind of focused on as marginal revenue comes in, I'd say approximately kind of 80% of that converting on the gross profit line and also about 50% on the adjusted EBITDA. So those remain kind of the longer-term goals, both in '21 and certainly beyond. In terms of NexoBrid, there's kind of two components there in the margin. There's a royalty, which is kind of in the high single digits, and then there's a fixed cost component.

So I think from a P&L perspective, that kind of fits in with our current portfolio. So we expect that to be consistent from a margin perspective relative to where we are now.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

OK. Got it. And just to review your commentary on the OPEX, what you said was $115 million, and that's a GAAP number, and then that's inclusive of approximately 15% stock comp. Is that correct for '21?

Joe Mara -- Chief Financial Officer

I think what we said was, so year over year, about 50% of the increase, when you kind of look back at 2020 versus the guidance on 2021 is related to stock comp and that kind of if you exclude that stock comp component, the underlying growth rate is more like 20%.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

OK. Got it. And then any read into conversions over the past few quarters, Nick? It sounds like there's some strong trends, but any read recently into uptake or downtake or throughputs or time from biopsies through manufacturing?

Nick Colangelo -- Chief Financial Officer

No. I think we've said, and this underlies our assumptions for 2021, that the biopsy-to-implant conversion rate has remained relatively stable within historical ranges. Even though we're adding, obviously, a large number of new surgeons who typically have lower conversion rates as they engage with the brand and then sort of move up as they become more experienced and higher volume users. So I'd say to be remaining stable is good now, but of our three drivers of adding new surgeons, getting more biopsies per surgeon, and then increasing the conversion rate over time; right now, growth is clearly being driven by adding new surgeons and getting more biopsies per surgeon.

Over time, as we saturate our current 5,000 surgeon target universe, you'd expect those latter two drivers to really start to take prominence in the outer years.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

OK. Perfect. Thanks again for putting out 2021 guidance, it's appreciated, and for taking our questions.

Nick Colangelo -- Chief Financial Officer

OK. Thanks, Jeff.

Joe Mara -- Chief Financial Officer

Thank you.

Operator

Your next question is from Kevin DeGeeter with Oppenheimer.

Kevin DeGeeter -- Oppenheimer & Company -- Analyst

Hey, guys. Thanks for taking my questions. Maybe the first one on MACI, I appreciate the guidance is very strong. Nick, can you provide an update as to how you're thinking about the percentage of the sports medicine doc portion of the TAM that you think you've penetrated? And as we think about that 20% year-over-year growth in ordering surgeons, do those increasingly look -- the mix shift a little bit more toward general orthopedic surgeons? Or do you think sort of the historical mix of new surgeon ads, which skew sports medicine is still the right way to think about the business? I'm just trying to get to kind of ordering patterns and whether there might be some differences in those new docs as opposed to the longer-term sports medicine docs?

Nick Colangelo -- Chief Financial Officer

Yes. Well, I'll just go back and sort of give you the historical background as I get to the answer of your question, which is we started with 3,000 target surgeons when we launched in 2017. And those were principally -- those were folks who were -- who had used Carticel in years gone by. And then you can go to the sports medicine societies and sort of get the lists of surgeons and call through them and so on.

And so it was probably obviously more heavily focused toward sports medicine surgeons when we launched. But I wouldn't say it was exclusively so. We penetrated, call it, roughly 50% of that initial 3,000 targets by 2019 when we said we had gotten biopsies from about 1,400 surgeons. And now we've expanded to 5,000 surgeons.

So I guess if you just look at it proportionately, there were still 1,500 of those original targets we hadn't penetrated yet, plus 2,000 new general orthopedic surgeons, so roughly evenly split in terms of potential new customers. And I think that's probably the best way to look at it.

Kevin DeGeeter -- Oppenheimer & Company -- Analyst

Super helpful. And maybe a follow-up on that, and then I'll just ask my second question. And the follow-up is just, have you seen any differences historically in terms of kind of conversion rates or other features between the two pools, sports medicine, and general orthopedic surgeons? And my separate question is really on Epicel. I mean, tremendous results, particularly against some of the industry commentary toward decrease in overall sort of burn volumes related to COVID restrictions in portions of 2020.

And I guess my question on Epicel is, does your guidance imply from a rate of severe burn standpoint, a return to kind of pre-COVID dynamics in terms of the macro market? Or just how do I think about any feed-through from new really behaviors and the size of the overall addressable market in your guidance?

Nick Colangelo -- Chief Financial Officer

Right. Well, I'll start with MACI and just the conversion rate historically versus new customers. I mean, you started with a bit of an enriched pool with the original MACI users, right, because they were Carticel users, typically sports medicine surgeons, had pretty high volumes, obviously, more so than new users in either case. So that skewed it a little toward heavier volumes with sports medicine surgeons.

But when we did our sales force sizing exercise with ZS Associates, we were really looking -- we had the claims data and the new surgeons we added were really high-volume cartilage repair surgeons that did open knee procedures. And when you think about sort of the lower levels of utilization for MACI generally, it doesn't take many patients to become a pretty important volume user. So I think there's potential across the board with the surgeons that we're calling on. In terms of Epicel, just sort of the dynamics, we had a lot of discussions sort of when in the early days of COVID-19 about what the impact would be when you had reduced industrial activity and maybe reduced activity generally and then folks who were going to be at home more often.

And what we said back in sort of the midst of all that was we really didn't see a change in the top of our funnel. The mix might have changed. I think a couple of our burn centers who typically treat a lot of industrial accidents, their activity went down a little. But obviously, it was made up in other areas.

And that's because these unfortunate accidents happen for many reasons at home or at work. And so we really didn't see a meaningful change at the top of the funnel. I think what's driven Epicel, as we said, was getting business from some new centers, the way our new sales force structure and leadership is approaching the treatment protocols for how you treat these patients with severe burns. So we're seeing some more retreatments and then more grafts per patient.

And I think that's a pretty focused effort on our behalf.

Kevin DeGeeter -- Oppenheimer & Company -- Analyst

Good thing. Congrats. Great job, guys. Thank you.

Nick Colangelo -- Chief Financial Officer

Thanks, Kevin.

Joe Mara -- Chief Financial Officer

Thank you.

Operator

Your next question is from Swayampakula Ramakanth with H.C. Wainwright. Your line is open.

Swayampakula Ramakanth -- H.C. Wainwright -- Analyst

Hello. Sorry about that. Good morning, Nick and Joe. A couple of quick questions.

Based on your guidance, it looks like you're looking for like 2019, like growth. So can you highlight for us some of the things that you are looking at, which is kind of giving you the confidence that you pretty much are quite close to a pre-pandemic situation?

Nick Colangelo -- Chief Financial Officer

Yes. Well, I think, RK, we'll -- good morning, and thanks for the question. We'll kind of take a look at both products. So for Epicel, obviously, as we mentioned on the call, we've had two of our three highest revenue quarters ever in the back half of 2020.

So I think bumping our expectations from high single to low double digits to sort of mid-teens just reflects kind of how the product has been performing through the pandemic year. So that one's pretty straightforward. With respect to MACI, obviously, we have a view into part of the business through the biopsies and sort of the conversion rates, and in light of sort of how that performed in 2020. So using models that have served us pretty well, we're able to have a pretty good feel for where things are going.

I would say, obviously, in terms of reasonableness of assuming 30%-plus growth for MACI, we have -- it's a very large market, obviously, as I mentioned, early innings, relatively low penetration. So there's a lot of room to grow both on surgeon penetration, patient penetration. We've got a larger sales force now that will be in place and is experienced that will be in place for the full year and then obviously, more surgeons to call on as well. So we think it's pretty reasonable.

And I'd say if you looked back at sort of our initial guidance last year, which was in the $141 million to $146 million range and how we sort of characterized that, you would have expected MACI in the mid-100-teens, right, 115 or so. So to say, applying 30% to the $94 million from this past year, you're into kind of in the mid-20s, so a $10 million uptick with all those dynamics at play, we're pretty comfortable with that.

Swayampakula Ramakanth -- H.C. Wainwright -- Analyst

Yes. No. That's great. So a couple of things which you just said, and so let's kind of tease them up a little bit.

So on Epicel, congratulations on two quarters. I'm not sure two quarters make a trend, but certainly, it's very, very promising, right? What were the drivers for some of those clinics that never had ordered Epicel, for them to up now? And Part B is, in terms of sales force expansion for the burn franchise in '21, should we expect some -- or will this merge along with what you're expecting for NexoBrid as well?

Nick Colangelo -- Chief Financial Officer

Yes. So just in terms of the dynamic of new centers, I mean, first of all, as I mentioned, we brought in new leadership in 2019. We restructured the sales force into sales representatives and then clinical support specialists. So it's always about having the right people in the right roles.

We brought on a few new representatives. They obviously come to the business with existing relationships. So I think it's just very strong sales execution, and obviously, good work in explaining the profound benefits with Epicel to these centers who may not have been using it previously. So that's, I think, really the explanation for why we're seeing that.

Swayampakula Ramakanth -- H.C. Wainwright -- Analyst

Perfect. And then any specifics on the sales force expansion for the bone franchise, specifically?

Nick Colangelo -- Chief Financial Officer

Yes. We'll probably -- we're planning to follow the same playbook that we've done when we expand MACI that when we get closer to a potential launch, we'll end up bringing the reps on ahead of that. So they obviously can get trained up, do their home study, their office study and then field training. So we would expect to do that a quarter ahead of launch.

So we're kind of entering that zone, hopefully.

Swayampakula Ramakanth -- H.C. Wainwright -- Analyst

OK. One last quick question. Congratulations on the UnitedHealthcare coverage. So should we expect additional payers also to jump in now that you have UnitedHealthcare in 2021? Are you having conversations with the other folks?

Nick Colangelo -- Chief Financial Officer

Yes. Well, as I mentioned, we have outstanding access for MACI. So more than 85% of covered lives in the U.S. have access to MACI, all the major plans.

The nuance here was that when MACI was approved, all these plans had existing medical policies that were really based around the Carticel label, which was more limited in that it was only for defects on the femoral condyle or part of the knee. It was a second-line therapy. So MACI as a first-line therapy, labeled to cover defects anywhere in the knee, had a much broader label. And plans just took different time periods -- time frames or time to get there.

Some of them reviewed the MACI label and updated their policy immediately. Some just took it off the investigational list but didn't update other parts of the policy. And so this was really just an update. We had mentioned a couple of years ago that Aetna and Cigna had done the same, and United was really the last of the major plans to kind of just mirror the policy to the current MACI label.

So we'll continue to focus on any incremental enhancements, but there's no sort of big one left out there that we're waiting on.

Swayampakula Ramakanth -- H.C. Wainwright -- Analyst

Great. Thank you very much for taking all my questions, Nick.

Nick Colangelo -- Chief Financial Officer

OK. Thank you.

Operator

At this time, there are no questions.

Nick Colangelo -- Chief Financial Officer

Great. Well, I just wanted to thank everybody for joining us on the call today. We appreciate your continued interest and support. And so have a great day and look forward to talking to you again soon.

Thank you.

Operator

[Operator signoff]

Duration: 49 minutes

Call participants:

Eric Burns -- Head of Financial Planning and Analysis and Investor Relations

Nick Colangelo -- Chief Financial Officer

Joe Mara -- Chief Financial Officer

Ryan Zimmerman -- BTIG -- Analyst

Rebecca Wang -- SVB Leerink -- Analyst

Kaila Krum -- Truist Securities -- Analyst

Chris Cooley -- Stephens Inc. -- Analyst

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Kevin DeGeeter -- Oppenheimer & Company -- Analyst

Swayampakula Ramakanth -- H.C. Wainwright -- Analyst

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