Vericel (VCEL) Q4 2021 Earnings Call Transcript

Vericel (VCEL 1.58%)
Q4 2021 Earnings Call
Feb 24, 2022, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Vericel's fourth quarter 2021 conference call. [Operator instructions] I would also like to remind you that this call is being recorded for replay.mI will now turn the conference call over to Eric Burns, Vericel's head of financial planning and analysis and investor relations. Please go ahead.

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

Thank you, operator, and good morning, everyone. Welcome to Vericel's fourth quarter 2021 conference call to discuss our financial results and business highlights. Before we begin, let me remind you 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 SEC, 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 in 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 -- President and Chief Executive Officer

Thank you, Eric, and good morning, everyone. I'll begin today's call by discussing financial and operational highlights for the fourth quarter and full year as well as current trends and our expectations for 2022. Joe will then provide a more detailed update on our financial performance and financial guidance before opening the call to Q&A. The company delivered another year of strong revenue and profit growth in 2021 despite the continued impacts of COVID-19 throughout the year.

Total revenue for the year increased 26% to approximately $156 million. Our top line growth, which was at the higher end of the range that we pre announced last month, was also in line with our compounded annual revenue growth rate since we launched MACI in 2017. We also generated nearly $30 million of adjusted EBITDA and operating cash flow in 2021, ending the year with $129 million in cash and investments and no debt as we once again demonstrated the strong P&L and cash flow leverage in our business as revenue continues to grow. With respect to our fourth quarter results, despite the unexpected emergence of the omicron variant in late November and the resulting impact on MACI performance in December, MACI quarterly growth increased compared to the prior quarter and the same period in 2020, achieving record quarterly revenue in the fourth quarter.

We also finished the year with another strong quarter for Epicel as we generated revenue of over $9.5 million for the fifth consecutive quarter. From a commercial perspective, we continued to see strength across the underlying growth drivers for MACI and a high level of brand engagement from surgeons and patients. Importantly, we met our goal of increasing the number of surgeons taking MACI biopsies by 20% and generated biopsy growth of 30% for the year, with a record quarterly high in the number of biopsies and the number of surgeons taking biopsies in the fourth quarter. This strong biopsy growth was also driven by an increase in the biopsies per surgeon of approximately 10%, another key performance indicator for MACI as our penetration rate in individual practices is now higher than it was prior to the pandemic.

We also continue to see strength across the key growth drivers for Epicel. Epicel's growth of over 50% for the year was driven in large part by a significant increase in the average number of Epicel grafts per patient, which we believe was due to the outstanding commercial execution by our Burn Care sales team. This strong performance was also driven by over 30% growth in both the number of Epicel biopsies and the number of burn centers treating patients with Epicel in 2021. We believe that these key performance indicators will continue to help drive further penetration into Epicel's $200 million-plus addressable market over the coming years.

As we announced this morning, we expect total revenue in 2022 to increase to approximately $178 million to $189 million with continued margin expansion and strong profit and cash flow growth. Joe will provide further details regarding our financial guidance in a moment. But I wanted to take a minute to discuss the current operating environment and the framework underlying our guidance. As we discussed throughout 2021 and in connection with our preannouncement in January, we generated strong growth in both MACI biopsy surgeons and biopsies in 2021.

However, due to a variety of COVID-19-related factors throughout the year, we saw a much more pronounced impact on MACI implant growth as historical biopsy-to-implant conversion patterns were disrupted. This was the case again in December as the emergence of the omicron variant resulted in patients deferring cases and scheduled cases being canceled because patients tested positive for COVID-19 during their preop screening. While these patient-related dynamics created a biopsy backlog that we believe should contribute to MACI growth this year, the timing related to the recapture of this backlog and the normalization of conversion rates remains uncertain at this point given the carryover of the omicron wave into the first quarter. We've started to see general COVID-19 conditions begin to improve in February.

And moving forward, we expect continuous improvement throughout the year. However, because the timing and impact of COVID-19 dynamics this year remain difficult to predict, we've assumed a wider range of revenue scenarios in our initial financial guidance for the year. The lower end of our revenue range assumes additional significant COVID-related headwinds and continued disruption within the healthcare environment, which would represent a more modest improvement over 2021. The higher end of our range assumes some disruption beyond the first quarter, but gradual improvements in patient flow and conversion rates during the year.

Importantly, we expect the year-over-year quarterly growth rate for MACI to increase each quarter throughout the year. And the midpoint of our revenue growth range for total MACI and Epicel product revenue is in line with our 20-plus percent compounded annual growth rate that we expect to maintain over the next several years. We also expect to generate additional margin expansion and increases in adjusted EBITDA and operating cash flow this year as we further enhance our strong profitability profile. Turning to our pipeline.

We remain on track for a midyear resubmission of the NexoBrid BLA, which would position NexoBrid for a potential commercial launch in the U.S. in the first half of 2023. We also continue to advance important life cycle management initiatives for MACI. We expect to meet with the FDA later this year to discuss the clinical development program for our custom arthroscopic delivery system, which we believe offers the potential to make MACI an even simpler and less invasive procedure and to expand the use of MACI for the treatment of cartilage defects in the knee.

We also continue to advance our MACI ankle program, which we believe could increase our overall MACI addressable market to approximately $3 billion. Finally, we're very pleased to have announced plans earlier this month for a new state-of-the-art advanced cell therapy manufacturing and corporate headquarters facility in the Boston area. The new facility, which is expected to begin commercial manufacturing in 2025, will significantly increase our manufacturing capacity and demonstrates our confidence in the continued growth trajectory for MACI and Epicel in the years ahead. I'll now turn the call over to Joe to discuss our fourth quarter and full year financial results as well as our financial guidance for 2022.

Joe Mara -- Chief Financial Officer

Thanks, Nick, and good morning, everyone. Starting with the income statement. Total net revenue for the full year grew 26% to $156.2 million, driven by strong growth in both of our franchises. MACI revenue grew 18% to $111.6 million, while Epicel revenue grew 51% to $41.5 million.

Total net revenue for the fourth quarter increased 5% to $47.6 million versus the fourth quarter of 2020, while product revenues, excluding BARDA-related NexoBrid shipments, grew 6%. MACI's fourth quarter revenue was $37.3 million, growing 8% versus the prior year. Despite continued COVID-19 impact on volumes due primarily to the omicron variant, MACI fourth quarter revenue increased 56% sequentially versus the third quarter of 2021 compared to a 42% sequential increase for the same period in 2020. Epicel fourth quarter revenue was $9.7 million, similar to the strong results in Q4 2020 of $9.6 million and the fifth straight quarter above $9.5 million for Epicel.

In addition, total revenue in the fourth quarter also included approximately $0.5 million of revenue related to the procurement of NexoBrid by BARDA for emergency response preparedness. Gross profit for the quarter was $34 million, or 72% of net revenue compared to 74% of net revenue for the fourth quarter of 2020. This decline in gross margin is mainly driven by the shortfall in revenue versus our initial expectations for the quarter due in large part to our scale up to meet expected demand. Total operating expenses for the quarter were $29.9 million, compared to $21.4 million for the same period in 2020.

The increase in operating expenses was primarily due to higher noncash stock compensation expense driven by share price appreciation. Net income for the quarter was $4.5 million, or $0.09 per share compared to net income of $12.2 million or $0.25 per share for the fourth quarter of 2020. Non-GAAP adjusted EBITDA for the quarter was $12.8 million, or 27% of net revenue. And importantly, this is now the sixth consecutive quarter that we've generated positive adjusted EBITDA.

For the full year, non-GAAP adjusted EBITDA was $29.5 million, an increase of approximately $11 million compared to $18.6 million in 2020. Finally, we generated approximately $10.6 million of operating cash flow in the quarter and $29 million for the full year. And as of the end of the year, the company had approximately $129 million in cash and investments compared to $100 million as of December 31, 2020, and no debt. Before turning to 2022 guidance, I wanted to comment on capital expenditures, which increased in 2021 relative to historical trends.

This growth was related to the build-out of a new office building in Cambridge that helped to free up space for additional manufacturing capacity over the next few years. We expect capital spend in 2022 to increase as we begin to make preliminary investments for our new facility, although the majority of capital expenditures for our new facility are expected in 2023 as well as 2024. Transitioning to our financial guidance for 2022. We expect total revenue of $178 million to $189 million.

MACI full year revenue is expected to be in the range of $132 million to $141 million. As Nick mentioned, we are assuming a wider range of MACI revenue scenarios for 2022 at this point given the variability of potential COVID-19-related impacts on the business, the uncertainty around patient behavior dynamics and the timing of the normalization of patient flow and capacity within the overall healthcare system. Importantly, we are expecting another year of double-digit growth in surgeons taking MACI biopsies, that conversion trends begin to normalize throughout the year and that we start to recapture some of the COVID-driven 2021 biopsy backlog although we expect this to be gradual during the year. While there are a number of moving parts to what we are seeing in the first quarter, more broadly, trends are beginning to improve of late.

And we project MACI volume in Q1 will still represent a typical percentage of our full year volume of approximately 18%. We would also expect trends to continue to improve during subsequent quarters with year-over-year quarterly growth rates accelerating throughout the year. For Epicel, we expect full year revenue in the range of $45.5 million to $47.5 million. At the midpoint, this would be approximately $11.5 million Epicel revenue per quarter on average.

However, we expect that it will take a quarter or two to get up to that higher run rate as the team continues to add new burn centers. And we anticipate that Epicel revenues in the first quarter will be more in line with the recent run rate of approximately $9.5 million per quarter. For NexoBrid, we anticipate recognizing the remaining BARDA-related revenue of approximately $0.5 million in Q2 of this year and do not expect commercial revenue from NexoBrid this year. Moving down the P&L.

We expect gross margin to be approximately 70% and full year operating expenses to be in the range of $134 million to $137 million. Non-GAAP adjusted EBITDA margin for the full year is expected to be approximately 21%, an increase from 19% in 2021. For the full year, adjusted EBITDA is expected to increase from approximately $30 million in 2021 to approximately $40 million in 2022, which also points to continued meaningful growth in our operating cash flow. This concludes our prepared remarks.

We will now open the call to your questions.

Questions & Answers:

Operator

Thank you, presenters. [Operator instructions] Your first question is from Ryan Zimmerman of BTIG. Your line is open. 

Ryan Zimmerman -- BTIG -- Analyst

Hey. Good morning. Thanks for taking the questions and congrats on your progress this year. I guess I want to start with MACI and the guidance there.

I appreciate your comments on the first quarter, Nick and Joe. Help us think through the backlog though. There's -- I think by our estimates from the last quarter, there was about a $7 million backlog on MACI. And so how much of that is assumed in that guidance this year? It sounds like some of it -- and kind of what's that underlying growth rate on MACI ex the backlog?

Joe Mara -- Chief Financial Officer

Thanks, Ryan. This is Joe. I'll start and take that question. So I think as we think about the backlog, I think the way we're thinking about it is as we talked about in the prepared remarks, we certainly want to be mindful of the operating environment we're in.

We have a wider range in terms of MACI guidance for the year. I think as we think about the backlog, you're right. So in Q3, we talked about that number kind of being in the $7 million range. As we came out of Q4, we actually saw an increase.

So I'd say the number is closer to $10 million. In terms of how that plays into the scenarios, what I would say is certainly on the higher end of our guidance. We would assume or we are assuming a more substantial or substantive part of that backlog is -- kind of pulls through as part of that revenue number. And in the low end, I would say it's certainly a much lower percentage.

So as we think about kind of MACI growth for the year, I mean, there's some competing dynamics. Certainly, we think that backlog can help. But as we talked about, we don't think conversion rates and kind of patient flow will fully normalize or get closer to fully normalizing until the back half of the year. And we also have some kind of COVID impacts to start the year.

So I think all of those are certainly part of the equation when we think about the full year.

Ryan Zimmerman -- BTIG -- Analyst

OK. And then your cost, just a follow-up. So just, Joe, help me understand. I mean your costs are largely labor-related, right? And there's lower kind of material, raw material costs for development of both Epicel and MACI.

We're hearing a ton of companies talk about rising wage pressures, just given the inflationary environment. And so I just want to get your thoughts about what to think about from that perspective, both from an SG&A level and R&D level. And appreciating the guidance on adjusted EBITDA, but just help us think through kind of what kind of pressures you may be feeling on those lines. Thanks.

Joe Mara -- Chief Financial Officer

Yes. No. Thanks, Ryan. So certainly, we're mindful of kind of the operating environment we're in from a cost perspective, and we're considering that as we're thinking about guidance for the year.

As we talked about, we do think we can improve on our gross margin on a year-over-year basis and similarly on an adjusted EBITDA perspective. As we think about some of those potential cost kind of impacts, I think the good news is a lot of our raw material spend on some of our higher dollar items are tied up in kind of longer-term contracts. I do think the team got ahead in some areas to make sure we had enough stock and whatnot on a materials perspective. But I think to your point, I mean, we're certainly going to see some impact in terms of inflationary increases on some of our vendor spend, some other pieces.

On the labor piece, I think it's important to recognize and remember we've been in the Cambridge area for quite some time. There's a lot of competition for labor here. So that's something I think that's kind of been here for a while. But certainly in the environment we're in, that's going to impact labor costs a bit more on a year-over-year basis.

So I think we're doing what we can certainly to manage on the cost side, but there are some impacts kind of here and there, I would say.

Ryan Zimmerman -- BTIG -- Analyst

Thanks for taking the question. 

Operator

Thank you. Your next question is from Danielle Antalffy of SVB Leerink. Your line is open.

Danielle Antalffy -- SVB Leerink -- Analyst

Hey. Good morning, guys. Thanks so much for taking the question. Just a question on the biopsy backlog and conversion rate.

I mean, Nick and Joe, do you think that there's -- I guess, how are you thinking about the potential to actually keep those patients in the funnel? I guess what I'm saying is, how much visibility or how many touch points do you have with those patients in order to ensure that at some point, those patients do get treated? And then I have one follow-up.

Nick Colangelo -- President and Chief Executive Officer

Yes. Thanks, Danielle. Good to hear from you. And that's a great question and something we're really focused on here, right? So I think Joe went through sort of the dynamics of how we're thinking about for the year that backlog may be worked down.

And I'll just add one comment there on the first quarter. Obviously, the omicron wave kind of carried into the first quarter. So I don't think we're under any illusions that backlog gets worked down in the first quarter, given the dynamics. But that's more something that we've consistently been talking about we would expect to occur over the course of the year.

To your point of the sort of biopsies that were collected last year that under normal circumstances would have converted, that is something we are hyper focused on here. If you're running a commercial organization, you certainly -- we are in a unique position in that we certainly understand, obviously, a biopsy comes with a transmittal form. We know the surgeon that sent it in, the patient, the nature of the defects, etc. And so it's very easy for us, from both the marketing and sales team perspective, to be able to create those biopsy lists, focus our reps on having those discussions with the surgeons so that we're able to kind of make sure we don't lose those biopsies to the extent we can control that and that they don't go stale.

So that is something we are really focused on. There are initiatives on the commercial team to be able to focus on, for instance, Q2 and Q3 biopsies from last year. So I think we're uniquely positioned to make sure we maintain those touch points. And of course, we have a very strong case management team that is routinely in contact with surgeons' offices and staff regarding patients that are in the pipeline.

So we think we're -- that's a focus for us. I'll just stand there. And we think we have certainly the ability to influence that to the extent possible.

Danielle Antalffy -- SVB Leerink -- Analyst

Got it. No, that's super helpful. And then, Nick, it's been a few years since you guys expanded the sales force. Unfortunately, I guess, your last sales force expansion was literally right before COVID or during the early days of COVID.

Just curious about where you think the sales force is today versus where it needs to go from here? Do you think you have the sales force where it needs to be? Thanks so much.

Nick Colangelo -- President and Chief Executive Officer

Well, yes, we're certainly very pleased with that expansion and the results we've seen even during these COVID times. And I think we've talked about that a lot in terms of the sales force expansion was necessary for a bunch of reasons. One, we increased our target surgeon universe. Two, we wanted to get sales territories down to kind of more manageable geographic size.

And for those reasons, it was something we needed to do. We've talked during the past couple of years about the performance of the new territories and driving new surgeon acquisitions and so on. So we're very pleased, and these were highly experienced sales reps that we added. So from that perspective, we're very pleased.

We'll take another look. As you'll recall, when we expanded the sales force back in 2020, it was intended to cover us through pretty much a two to three-year period. So we will look again sort of at the end of this year about what our needs are going forward. And I would just say the performance is kind of the bottom line here, right? I mean we have access to procedural data for the procedures that make up our market, microfractures, chondroplasties, osteochondral allografts, etc.

That data tells us that since 2019, procedural volumes for the market as a whole are down double digits. And over that time period, MACI revenues are up 20% plus. So I think that speaks to the effectiveness of our sales force, and we certainly don't ever question kind of expanding. It was definitely something that we thought was the right thing to do, and we certainly continue to think that.

Danielle Antalffy -- SVB Leerink -- Analyst

Got it. Thank you.

Nick Colangelo -- President and Chief Executive Officer

Thanks, Danielle.

Operator

Your next question is from Chris Cooley of Stephens. Your line is open.

Chris Cooley -- Stephens Inc. -- Analyst

Good morning and thanks for taking the questions. Just two for me. Maybe first, when we talk about expanding the number of surgeons taking biopsies for MACI, I think the target you gave during the prepared comments was approximately 10%. Could you help us with maybe just how the sales force is incentivized in that regard? Is it going deeper within existing practices where I would assume those surgeons would ramp faster if their peers were already utilizing MACI, and they were familiar with it to some degree? Or are they more incentivized at this time to broaden the reach? And then if I could just go ahead and ask my second question now, and then I'll be quiet and get in queue.

But maybe just help us think, Joe, a little bit about the sequential gaining on the spend. Obviously, you're driving much greater leverage there, better cash flow, really impressive. But just help us think about what the timing of the spend, getting ready for the submission for NexoBrid, the timing of the expansion. Just help us think a little bit there about how we should think about that opex as it plays through the year, if there's anything different this year versus maybe the last two so-called normal COVID years? Thanks so much. 

Nick Colangelo -- President and Chief Executive Officer

Thanks for your questions, Chris. It's Nick. I'll take the first one regarding kind of the sales force incentives and how you build a successful business and then turn it over to Joe. So as I think we've talked about before, at the end of the day, our sales reps are paid in addition to sort of cash and salary and equity on a commission basis for the implants that are done, right? That's when we recognize revenue and that's when their -- how their incentive comp works.

But just as we talk to investors and analysts about the growth drivers for the company at the high level, that's exactly what the reps are focused on at the territory level. And it's very clear throughout the organization to be successful as a sales rep, you need to be doing everything we talk about, which is expanding the number of surgeons taking biopsies; penetrating deeper in their practices, which is represented by the biopsies per surgeon; and then getting those cases activated and converted. So that is the focus throughout the organization and particularly with the regional directors and their sales reps.

Joe Mara -- Chief Financial Officer

Yes, Chris. Thanks. On the second question, I would say if you look back in the last couple of years kind of from an opex perspective, if you look at 2021, I mean, there were some ebbs and flows during the year. But I wouldn't expect anything hugely variable from a quarter-to-quarter perspective.

There's certainly some things we're looking to get ahead of in terms of some of the investments. The life cycle side, that started. There's certainly some spend in there as we think about NexoBrid, which will kind of balance throughout the year and then obviously have some second half components. So I wouldn't think of it as kind of hugely material differences from a quarter-to-quarter perspective although it may ebb and flow, if you take that full year number and kind of work back to the quarters.

Chris Cooley -- Stephens Inc. -- Analyst

Thank you.

Operator

Your next question is from Jeffrey Cohen of Ladenburg Thalmann. Your line is open.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Just a couple of questions from our end. So looking at the Epicel guidance for '22, could you walk us through some of the trends you've seen thus far in the first couple of months? And it seems a little cautious on the aggregate numbers there, particularly given the fact that you're discussing higher ASPs on an average case. Anything to read in there? Anything we should think about? I know it's been a strong five quarters in succession now.

Nick Colangelo -- President and Chief Executive Officer

Yes. Thanks, Jeff. So when you look back at Epicel's growth in 2021, it was obviously a phenomenal year, particularly for a product that, as we often say, has been on the market for close to 30 years now. So 50% growth.

A big piece of that as I mentioned in my prepared remarks was that we have seen consistently now over the past five or six quarters sort of an uptick or an increase in the average number of Epicel grafts used per patient. And we talked about this last fall as well that as we adjusted our TAM upwards that the average grafts per patient had increased from about 90 to 120 grafts on average. And so that if you look at that growth for last year, you can say two-thirds of it or thereabouts was due to sort of that increase in the grafts per patient. And that's -- what that did was sort of move the market up to where the premier burn centers kind of the level of utilization per patient that they were using.

So we may get some small incremental growth in that over time, right, especially when you're treating these sort of large total body surface area burns. But really where the growth is going to come from is adding more burn centers that are treating patients with Epicel and increasing the biopsies or the patients that are being treated. And we saw both of those sort of increase last year, as I mentioned as well. But I think it's a more realistic forward-looking perspective to say we'll kind of baseline it at low double-digit growth.

And then obviously, we're focused on exceeding that.

Joe Mara -- Chief Financial Officer

Yes. And maybe just to add as well, I think a couple of points. So again, on those kind of average grafts per patient, the patient utilization, obviously, that was a huge growth driver last year. If you look back, that actually has been pretty consistently high over several quarters.

So even as we compare to last year kind of the first quarter, etc., that's really, for the most part, in the run rate. A couple of other things just to highlight. So if you look at the last several quarters, that run rate has actually been right around $9.5 million if you look across the last five quarters. If you take a bigger picture view, we think we can grow the overall kind of business.

And again, it's really thinking about adding burn centers and driving up volume into that double-digit range. But if you look at last year, there's kind of that one outlier of $12 million plus. So we think on a full year basis, again, we can get into that double-digit growth range and that's a realistic number for us. But what we're kind of seeing and where we are in Q1 right now, we're kind of more in that run rate, similar run rate at least at this point.

So I still think given the nature of the product, there's going to be ebbs and flows even as we try to drive growth. Although as you look back in the last few quarters, it's been more stable. I still think it will ebb and flow. But overall, we're still looking for that double-digit growth.

Chris Cooley -- Stephens Inc. -- Analyst

Perfect. And then could you talk about? You said year-over-year quarterly sequential increase for '22. I'm just wanting to clarify that. You don't mean the cadence of Q1 through Q4 sequential, but you mean the year over year?

Joe Mara -- Chief Financial Officer

Yes. So I think when we talked -- and we're talking about MACI specifically there. I mean what we're saying is if you kind of think about the MACI progression throughout the year, what we said in the first quarter is if you take our full year guidance for MACI, we'll be around that 18%, which is a pretty typical percent of the business or of the overall revenue for the year as you think about seasonality. I think given kind of the trends we're seeing, we'll probably lean a little bit more kind of back-loaded when you think about the percentage of business H2 versus H1 or at least look more like some of the years that were more slanted toward H2.

So if you play that out and assume similar seasonality, what you'll see there on a year-over-year basis when you look at kind of MACI quarterly is sequential -- sorry, year over year each quarter we'll have increasing year-over-year growth rates. So just to clarify, we meant year over year relative to '21.

Chris Cooley -- Stephens Inc. -- Analyst

Got it. And then lastly for us, just to recap, I know there's been a couple of questions on some of the conversion rates in biopsies. So anything -- any read into this quarter thus far, for 2022 thus far as far as any biopsy trends specifically? I mean excluding any conversion rate commentary but biopsy trends for this year versus, say, '20 or '19 as far as beginning of year. Is it similar?

Nick Colangelo -- President and Chief Executive Officer

Yes. Obviously, we're kind of early in the year. And as we've mentioned, you have omicron carryover, etc. I would just say that we certainly expect biopsies to grow for the year, and that hasn't changed.

And so again, when you have this dynamic of increasing the biopsy surgeons at a double-digit rate, which Joe mentioned, and then continued penetration into those practices, which means higher biopsies per surgeon, sort of by definition, you're going to have biopsy growth, right? So that is certainly something that we expect for this year as well.

Chris Cooley -- Stephens Inc. -- Analyst

Perfect. Thanks for taking the questions.

Operator

Your next question is from Samuel Brodovsky of Truist. Your line is open.

Samuel Brodovsky -- Truist Securities -- Analyst

Hi. Thanks for taking the question. And I'll just start off with the high level, just kind of -- I'll ask both of them upfront, but just two kind of high-level thoughts on MACI going forward. Starting off with the sales force and as the expanded group matures and we hopefully are moving into a more normalized market going forward, any kind of updated thoughts on how we think about peak or target productivity for reps on an annual basis? And then sort of as we think about biopsy growth in '22, can you give us any granularity into where we should be expecting biopsy growth to come from, whether it be sort of the difference between the pre-COVID doc group, the docs added last year and the new docs?

Nick Colangelo -- President and Chief Executive Officer

Well, I'll start with sort of the first question or the second question around biopsy growth. We kind of believe, given the size of the addressable market, that biopsy growth is really coming from sort of all segments in terms of the initial -- the existing users, new surgeons coming in. I mean we've commented previously about the fact that we kind of see it across the board that when new surgeons join that they end up the -- that they end up kind of moving up over the course of a year or two to sort of the average level. So we see growth with existing users.

We see new surgeons kind of getting to that level. And so we don't expect that there will be anything other than what we've seen in the past, which is sort of across-the-board growth among our surgeon customers.

Joe Mara -- Chief Financial Officer

Yes. And just to add on the productivity metrics. So certainly, I think we talked about in the past, we're certainly looking to get back up to call that sort of that 2-ish range for rep, the two million range. If you look at last year, '21 versus '22, there's an improvement.

We're not quite there based on kind of where our full year guidance is, but we certainly think we're kind of trending back in that direction. And we can kind of get back to that number that we've been talking about.

Samuel Brodovsky -- Truist Securities -- Analyst

Thank you. 

Operator

Your next question is from RK Swayampakula of H.C. Wainwright. Your line is open.

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

Thank you. Good morning, Nick and Joe. Quite a bit of my questions have been answered. But I'm just trying to understand certain comments that you made.

Obviously, by your announcement of getting into a new manufacturing facility, you're kind of telegraphing the expectation for total growth of both MACI and Epicel. So in terms of long term, what sort of growth are we thinking about, both -- for both products? And also, as you said, the sales force expansion, obviously, has allowed you to penetrate better into the surgeon groups. Is there -- what sort of expectations do you have on your sales force in terms of how much -- even though it has been a tough two years, do you think the sales force is working at the optimal level at this point? Or do you still need to add more sales force, as you said, by the end of this year? Thank you. 

Nick Colangelo -- President and Chief Executive Officer

Thanks, RK. I'll start. Joe, you can add additional comments. So first of all, with respect to the new facility, as we mentioned, that is intended to support the long-term growth for both MACI and Epicel.

We haven't really gone beyond sort of mid-decade. But as we talked about in our earlier preannouncement this year, we certainly expect to be in the 20-plus percent compounded annual growth rate as a product portfolio through mid-decade. And then given the fact that these are large underpenetrated markets, we think there's growth ahead for multiple years, especially when you sort of layer on hopefully an increased commercial presence on the burn side with the NexoBrid launch and then life cycle management for MACI. So we're really confident and bullish on the prospects through the end of the decade and beyond.

When you think about the sales force, as we were mentioning earlier, for the reasons we mentioned and just to repeat myself, we have obviously procedural data for the market that makes up our addressable market. And while that declined overall by double digits since 2019, MACI revenues are up 20% versus 2019. So we are clearly -- we were outgrowing the market by a wide margin before COVID, we've outgrown it through COVID and we certainly expect to outgrow it when we're through COVID. So we feel really good about that.

That's driven in part, obviously, by the sales force. They continue to execute well, and we don't expect that to change. And just on the productivity question that Sam mentioned and Joe touched upon, I mean, we kind of -- before the expansion, we're up to about two million per rep. That took a step back through COVID and through the expansion.

But we certainly expect to be back to those ranges and beyond as we continue to grow the brand.

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

In terms of the pipeline growth, especially with the arthroscopic delivery of MACI and also the ankle, you said you're expecting to initiate some conversations with the FDA. Could you give us a little bit more color on those timelines so that we understand how to think through some of the R&D expenses going forward?

Nick Colangelo -- President and Chief Executive Officer

Yes. Well, I'll start with kind of timeline thoughts. And then, Joe, you can kind of layer in the expenses. But not to pre-empt them, but we've said pretty routinely that for these life cycle management initiatives, for sales force expansions, I mean, that's just -- those are expenditures that we can sort of absorb in our operating margins and so on that we've shared with analysts and investors previously.

So -- but for timelines around arthroscopic MACI, what we said is we plan to meet with the FDA later this year. We got a lot on our plate right now, right, getting the NexoBrid submission in by mid-year. But also we want to meet with the FDA shortly thereafter. So that work is ongoing to discuss what the development plan would look like going forward.

And it's a little hard to give a lot of detail around sort of precise expenditures until you sort of understand and agree with the FDA on what the program is going to look like. And the same, of course, is for MACI. But we have placeholders in sort of our long-range plans that cover that. So as we said earlier, we expect that an arthroscopic delivery for MACI is more of a 2025-plus kind of endeavor.

And the ankle indication would be more of a -- toward the end of the decade just because it would involve a more robust clinical study to be able to get that indication under our current thinking. So Joe, I'll...

Joe Mara -- Chief Financial Officer

Yes. I mean not a whole lot more to add. I mean I'd say these are certainly kind of areas we think it makes sense from an investment perspective and a business case perspective over kind of the mid to long term as you think about life cycle management. In terms of kind of the P&L and the operating expense impact, I mean, there certainly will be an impact over that time frame.

But as Nick said, it's kind of built into the numbers. We think we can kind of manage that within our kind of operating cash flow and existing P&L structure. It will add some costs, but it's not hugely meaningful over the next few years and not so much on an annual basis.

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

Thank you very much. 

Operator

Presenters, I'm showing no further questions at this time. I would like to turn the conference back to Nick Colangelo for closing remarks.

Nick Colangelo -- President and Chief Executive Officer

OK. Well, great. And thank you all for your questions and your continued interest in Vericel. Overall, the company continued to execute very well across all areas of the business in 2021.

And we expect another year of significant top line revenue growth, margin expansion and operating cash flow driven by both our franchises in 2022. And given the significant market opportunities for our products, our strong financial profile, we believe the company is well positioned for sustained long-term growth in the years ahead. So we're excited about the business as we move forward. And again, I want to thank you for your questions and interest in the company.

Have a great day.

Operator

[Operator signoff]

Duration: 46 minutes

Call participants:

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

Nick Colangelo -- President and Chief Executive Officer

Joe Mara -- Chief Financial Officer

Ryan Zimmerman -- BTIG -- Analyst

Danielle Antalffy -- SVB Leerink -- Analyst

Chris Cooley -- Stephens Inc. -- Analyst

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Samuel Brodovsky -- Truist Securities -- Analyst

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

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