What happened

Shares of Vericel (NASDAQ:VCEL) are up 25% at 11:57 a.m. EST after the company released solid fourth-quarter earnings with revenue up 41% year over year, helping the biotech turn a profit for the quarter.

So what

Licensing revenue helped increase the top line, but even excluding that boost, revenue was up 34% year over year.

Vericel's MACI product to repair cartilage defects of the knee made up $16.1 million of the $23.4 million in revenue. Approximately 600 surgeons -- up from "more than 440" last quarter -- are trained on the MACI surgical procedure and MACI biopsies were up 48% year over year.

Epicel, Vericel's permanent skin replacement treatment, contributed $6.1 million. While that's only about a quarter of the revenue, Epicel revenue grew 60% year over year with 40 burn centers using Epicel during 2017, up from 20 centers a few years ago when Vericel acquired the product.

Doctor examining a patient's knee

Image source: Getty Images.

The higher sales helped Vericel use its manufacturing resources better, boosting gross margins to 64%, compared to 54% in the year-ago quarter. The increased gross profits combined with slightly lower research and development expenses, as well as selling, general, and administrative expenses that grew slower than revenue, helped Vericel turn a small profit of $0.3 million. But that's certainly better than the $6.2 million loss in the year-ago quarter.

Now what

Management guided for revenue of $73 million to $78 million this year, up 20% year over year at the midpoint, although they pointed out that there's some seasonality of its sales with 33% of 2017's sales coming in the fourth quarter.

However, the company didn't reveal its expectations for the profit line, likely because it wants flexibility to invest potential profits back into the growth of MACI revenue, such as Vericel's recent move to expand the number of MACI sales territories from 28 to 40 and the launch of a direct-to-consumer campaign for the product.

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