Q3 2024 Organogenesis Holdings Inc Earnings Call
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Please standby welcome ladies and gentlemen to the.
Operator: Welcome, ladies and gentlemen, to the third quarter of fiscal year 2024 earnings conference call for Organogenesis Holdings, Inc. At this time, all participants have been placed in listen-only mode. Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly.
Third quarter of fiscal year 2024 earnings conference call for organic Genesis Holdings, Inc. At this time all participants have been placed in listen only mode. Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly.
Operator: Before we begin, I would like to remind everyone that our remarks today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including item 1A, risk factors, of the company's most recent annual report and its subsequently filed quarterly report. You are cautioned not to place undue reliance upon any forward-looking statements which speak only as of the date made.
Before we begin I would like to remind everyone that our remarks today may contain forward looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated.
The risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including item one a risk factors of the company's most recent annual report and it subsequently filed quarterly reports.
You are cautioned not to place undue reliance upon any forward looking statements, which speak only as of the date made although it may voluntarily do so from time to time the company undertakes no commitment to update or revise the forward looking statements whether as a result of new information few.
Operator: Although it may voluntarily do so from time to time, the company undertakes no commitments to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws.
Sure events or otherwise, except as required by applicable securities laws.
Operator: This call will include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website.
This call will include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP.
We generally refer to these non-GAAP financial measures reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website.
Gary Gillheeney: I would now like to turn the call over to Mr. Gary S. Gillheeney, Sr., Organogenesis Holdings President, Chief Executive Officer, and Chair of the Board. Please go ahead, sir.
Speaker Change: I would now like to turn the call over to Mr. Gary S. Gill Heaney, SR, Organogenesis Holdings, President and Chief Executive Officer, and chair of the Board. Please go ahead Sir.
Gary Gillheeney: Thank you operator and welcome everyone to Organogenesis Holdings third quarter fiscal year 2024 earnings conference call. I'm joined on the call today by Dave Francisco, our Chief Financial Officer. Let me start with a brief agenda of what we'll cover during our prepared remarks. I will review an overview of our third quarter revenue results and an update on our key operating and strategic developments in recent months. They will then provide you with an in-depth review of our third quarter financial results, our balance sheet and financial condition at quarter end, as well as our financial guidance for 2024, which we updated in our press release this afternoon.
Speaker Change: Thank you operator, and welcome everyone to Organogenesis Holdings third quarter fiscal year 2024 earnings conference call.
Speaker Change: Joined on the call today by Dave Francisco, our Chief Financial Officer.
Speaker Change: Let me start with a brief agenda of what we'll cover during our prepared remarks I.
Speaker Change: I will review an overview of our third quarter revenue results and an update on our key operating and strategic developments in recent months. Dave will then provide you with an in depth review of our third quarter financial results, our balance sheet and financial condition at quarter end.
Speaker Change: As well as our financial guidance for 2024, which we updated in our press release. This afternoon. I'll then share some closing thoughts before we open the call up for questions.
Gary Gillheeney: I'll then share some closing thoughts before we open the call up for questions. beginning with a review of our revenue results for Q3. We delivered sales results above the high end of the guidance range outlined on our second quarter call. Our team's strong execution resulted in better-than-expected productivity despite continued disruption in the market. Third quarter results reflect improving momentum in the underlying business trends, and we were pleased to see customer demand in excess of what our guidance had assumed during the third quarter. We believe the better-than-expected revenue results we have delivered in each of the first three quarters of 2024 represent the clearest evidence that we have focused our commercial team on the right strategy to navigate through this challenging operating environment.
Speaker Change: Beginning with a review of our revenue results for Q3.
Speaker Change: We delivered sales results above the high end of the guidance range outlined on our second quarter call. Our teams strong execution resulted in better than expected productivity. Despite continued disruption in the marketplace.
Speaker Change: Our third quarter results reflect improving momentum in the underlying business trends and we were pleased to see customer demand in excess of what our guidance had assumed during the third quarter.
Speaker Change: We believe the better than expected revenue results, we have delivered in each of the first three quarters of 2024 represent the clearest evidence that we have focused our commercial team and the right strategies and navigate through this challenging operating environment.
Gary Gillheeney: turning to review of our progress towards key strategic initiatives in the third quarter. On August 8th, we announced the additional clinical results from our first Phase 3 clinical trial, a prospective, double-blinded, multi-center, saline-controlled, parallel-group clinical trial of 515 patients. The results met the expectations for the study by meeting the primary end point of a statistically significant reduction in knee pain and the first secondary end point of statistically significant maintenance of function at six months. We've also made important progress on our second phase three multi-senate randomized clinical trial evaluating the safety and efficacy of RENEW during the third quarter.
Speaker Change: Turning to a review of our progress towards key strategic initiatives in the third quarter.
Speaker Change: On August eight we announced the additional clinical results from our first phase III clinical trial, a prospective double blinded multicenter saline controlled parallel group clinical trial of 515 patients.
Speaker Change: Our results met the expectations for the study by meeting the primary endpoint of a statistically significant reduction in knee pain in the first secondary endpoint.
Speaker Change: Statistically significant maintenance a function at six months.
Speaker Change: We've also made important progress on our second phase III multicenter randomized clinical trial evaluating the safety and efficacy of renewed during the third quarter.
Gary Gillheeney: We completed enrollment of 594 patients, well ahead of our original timing expectations, and notably we enrolled 120 more patients than the 474 required by the study. As announced in a separate press release, we received a favorable outcome of the pre-specified interim analysis for the first 50% of the required patients in our second Phase 3 trial. The Independent Data Monitoring Committee, or DMC, for the trial provided directional guidance on the results of the interim analysis while rigorously maintaining all aspects of study blindness. The DMC recommended that the trial proceed without modification and without increase to sample size.
Speaker Change: We completed enrollment of 594 patients well ahead of our original timing expectations, and notably we enrolled 120 more patients than the 474 required by the study.
Speaker Change: As announced in a separate press release, we received a favorable outcome of the pre specified interim analysis for the first 50% of the required patients in our second phase III trial the.
Speaker Change: The independent data monitoring committee or DMC for the trial provided directional guidance on the results of the interim analysis, while rigorously maintaining all aspects of study blinding.
Speaker Change: The DMC recommended that the trial proceed without modification and without increase the sample size Adil.
Gary Gillheeney: Additionally, the DMC found the safety data to be consistent with the known safety profile for renew.
Speaker Change: Additionally, the DMC found the safety data to be consistent with the known safety profile for renewable.
Gary Gillheeney: We continue to believe that if approved, introducing Renew to the large and growing pain management market represents a transformational opportunity for organogenesis. We believe RENEW, if approved, will potentially address an unmet clinical need for all patients suffering from symptomatic Neo-A, a degenerative joint disease that affects more than 30 million Americans. We have a clear roadmap and timeline for our renewed BLA submission, and we are on track to deliver the renewed BLA submission by the end of Q4 2025. If successful, Renu would be the only FDA-approved biologic intra-articular injection to improve pain symptoms related to symptomatic knee OA.
Speaker Change: We continue to believe that if approved introducing renew to the large and growing pain management market represents a transformational opportunity for organogenesis.
Speaker Change: We believe renew if approved will potentially address an unmet clinical need for all patient suffering from symptomatic knee OA, a degenerative joint disease that affects more than 30 million Americans.
Speaker Change: We have a clear roadmap and timeline for our renewable BLA submission and we are on track to deliver the ran it renew BLA submission by the end of Q4 2025.
Speaker Change: If successful renew would be the only FDA approved biologic.
Speaker Change: Articular injection to improve pain symptoms related to symptomatic knee OA.
Gary Gillheeney: Before turning the call over to Dave, I wanted to share a brief update on our recent progress in the areas of clinical validation and Medicare reimbursement. On October 1st, we announced the publication of results from a robust 218 patient study of NuShield in the Journal of Wound Care. New Shield demonstrated statistically superior frequency of wound closure compared to the standard of care at five intervals from four weeks to 12. A total of 218 patients with challenging DFUs were randomized into two treatment groups, New Shield plus Standard of Care or Standard of Care Alone. The new SHIELD group demonstrated a 48% greater probability of wound closure and decreased medium time to complete wound closure when compared to standard of care.
Speaker Change: Before turning the call over to Dave I wanted to share a brief update on our recent progress in the areas of clinical validation and Medicare reimbursement and coverage.
Speaker Change: On October <unk>, we announced the publication of results from a robust 218 patient study of new shale in the journal of wound care.
Speaker Change: New shield demonstrated statistically superior frequency of wound closure compared to the standard of care at five intervals from four weeks to 12 weeks.
Speaker Change: A total of 218 patients with challenging DF use were randomized into two treatment groups, New shield plus standard of care or standard of care alone.
Speaker Change: The new show group demonstrated a 48% greater probability of wound closure and decreased medium time to complete wound closure when compared to standard of care.
Gary Gillheeney: We are pleased this data demonstrates new SHIELD provides a significant advantage when managing DFUs, a severe medical crisis that often leads to amputation and associated higher mortality rates, especially in underserved populations. As outlined on our latest earnings call, our comment letter to the MACS included this high-quality published data and evidence evaluating NuShield for the treatment of DFU that was not considered in the draft LCD, which we believe demonstrates that NuShield meets all the criteria for coverage. As a leader in this field, we support CMS's evidence-based approach to coverage for these serious wounds and believe this large peer-reviewed publication satisfies the requirements for medical coverage under the proposed LCD.
Speaker Change: We are pleased this data demonstrates new shield provides a significant advantage when managing DF use a severe medical crisis that often leads to amputation and associated higher mortality rates, especially in underserved populations.
Speaker Change: As outlined on our latest earnings call our comment letter to the Max included this high quality published data and evidence evaluating <unk> for the treatment of D. A few that was not considered in the draft LCD, which we believe demonstrates that <unk> meets all the criteria for coverage.
Speaker Change: As a leader in this field, we support Cms's evidenced based approach to coverage for these serious wounds and believe this large peer reviewed publication satisfies the requirements for medical coverage under the proposed LCD.
Gary Gillheeney: Our comment letter also included existing clinical and real-world data supporting our case that Pure Apply AM and XT meet the requirements for Medicare coverage as well. This data includes a high-quality published data from 728 patients supporting coverage for Pure Apply AM and XT for the treatment of DFU and VLUs and a comparative effectiveness study of 294 patients published in May of 2024 after the literature review for the draft LCD was completed, which shows non-inferiority to Theraskin, a product the draft LCD proposed to cover.
Speaker Change: Our comment letter also included existing clinical and real World data supporting our case that pure play AAM and <unk> meet the requirements for Medicare coverage as well. This data includes a high quality published data from 728 patients supporting coverage for pure play am and X T for the.
Speaker Change: Treatment of <unk> and a comparative effectiveness study of 294 patients published in May of 2024. After the literature review for the draft LCD was completed which shows non inferiority to <unk> a product the draft LCD proposed to cover.
Gary Gillheeney: We also made progress in expanding our clinical validation for PeerApply in the third quarter. In August, we enrolled the first patient in our new RCT, the PREPARE study, evaluating the Pure Apply AM plus standard of care versus standard of care alone in 170 patients with chronic DFU.
Speaker Change: We also made progress in expanding our clinical validation for pure play in the third quarter and.
Speaker Change: In August we enrolled the first patient in our new RCT. The prepare study evaluating the peer apply AAM plus standard of care versus standard of care alone.
Speaker Change: Third 70 patients with chronic <unk>.
Gary Gillheeney: On November 1st, CMS issued the final rules for the Medicare Physician Fee Schedule and the Hospital Outpatient Department. CMS has not proposed any changes to the payment policies for skin substitutes in either setting and the final rule maintains the status quo. In the Physician Fees Schedule Final Rule, there were no changes in payment policy for skin substitutes for 2025. CMS reiterated that its goal is to achieve a consistent payment approach for skin substitute products that does not negatively impact beneficiary access. CMS also noted that it intends to bridge the gap in variations of pricing for these products through the establishment of consistent framework for payment of skin substitutes under the physician fee schedule in future rulemaking.
Speaker Change: On November 1st CMS issued the final rules for the Medicare physician fee schedule and the hospital outpatient department.
Speaker Change: S has not proposed any changes to the payment policies for skin substitutes in either setting and the final route REIT rule maintains the status quo.
Speaker Change: And the physician fee schedule final rule, there were no changes in payment policy for skin substitutes for 2025.
Speaker Change: CMS reiterated that its goal is to achieve a consistent payment approach her skin substitute products that does not negatively impact beneficiary access.
Speaker Change: CMS also noted that it intends to bridge the gap and variations of pricing for these products through the establishment of consistent framework for payment of skin substitutes under the physician fee schedule and future rulemaking.
Gary Gillheeney: CMS does not say more about what that framework might look like or the timing of any future changes. Now we have communicated to CMS that they should transition to a value-based payment methodology where skin substitute categories are paid on a fixed-per-square-centimeter basis. This value-based payment methodology has the potential substantially reduce Medicare Part B expenditures, improve patient access, and enable physicians to prescribe treatments that are based on the individual needs of the patients and provide the best outcome for patients and the health care While there was no change in payment policy for skin substitutes in the final rule for 2025, we were pleased to see the final rule included commentary from CMS recognizing the benefit of continued dialogue with interested parties on payment for skin substitute products to help inform policy changes for future rulemaking.
Speaker Change: CMS does not say more about what that framework might look like.
Speaker Change: The timing of any future changes.
Speaker Change: Now we have communicated to CMS that they should transition to a value based payment methodology, where skin substitute categories are paid on a fixed per square centimeter basis. This value based payment methodology has the potential to substantially reduce Medicare part b expenditures improve patient access and enable.
Speaker Change: Physicians have prescribed treatments that are based on the individual needs of the patients and provide the best outcome for patients and the healthcare system.
Speaker Change: While there was no change in payment policy for skin substitutes in the final rule for 2025, we were pleased to see the final rule included commentary from CMS recognizing the benefit of continued dialogue with interested parties on payment for skin substitute two products to help inform policy changes the future.
Speaker Change: Nathan.
Gary Gillheeney: As a leader in the market, we have been and will continue to actively engage with CMS to advocate for the requisite changes to the payment system. We appreciate CMS's willingness to consider our framework and our feedback and we are particularly pleased in the acknowledgement of the need to establish a framework for consistent payment for skin substitute products under the physician fee schedule that does not negatively impact beneficiary access.
Nathan: As a leader in the market, we have been and will continue to actively engage with CMS to advocate for the requisite changes to the payment systems.
We appreciate cms's willingness to consider a framework and our feedback and we are particularly pleased and the acknowledgment of the need to establish a framework for consistent payment a skin substitute products under the physician fee schedule that does not negatively impact beneficiary access.
Gary Gillheeney: We applaud the MACs for continuing to prioritize coverage with demonstrated clinical effort. for Skin Substitute Products. We have been pushing for reform for many years and believe that this proposed LCD represents a substantial step forward towards cleaning up the market. Importantly, given our leadership position in the space, we remain vocal and active in support.
Nathan: We applaud the Max we're continuing to prioritize coverage with demonstrated clinical efficacy for skin substitute products, we have been pushing for reform for many years and believe that this proposed LCD represents a substantial step forward towards cleaning up the marketplace.
Nathan: Importantly, given our leadership position in this space, we remain vocal and active in support.
Gary Gillheeney: of the Immediate Need for Reform. In addition to our direct efforts with CMS and the MACs, we are engaging with stakeholders including physicians, patient advocacy groups, and clinical and industry associations. and we are leading primary health policy education initiatives directed to 59 congressional offices. We want to ensure all parties are as well informed as possible and that they are carefully considering the impacts of potential changes to the coverage of skin substitutes for the treatment of DFUs and VLUs, including the potential treatment disparity in health and equity impact on populations with higher rates of diabetes and comorbidity.
Nathan: Of the immediate need for reform in addition to our direct efforts with CMS and the Max we are engaging with stakeholders, including physicians patient advocacy groups and clinical and industry associations and we are leading primary health policy education initiatives directed to 59 congressional offices, we want.
Nathan: To ensure all parties are as well informed as possible and that they are carefully considering the impacts of potential changes to the coverage of skin substitutes for the treatment of <unk> and <unk>, including the potential treatment disparity in health and equity impact on populations with higher rates of diabetes and comorbid.
Nathan: Scott.
Gary Gillheeney: We continue to believe these material changes from the MACs and CMS in the coverage and payment of skin substitutes, if ultimately adopted, will be positive for the long-term health of the wound care market and its patients. Well, there'll be a preliminary period of transition and disruption if these sweeping changes are implemented.
Speaker Change: We continue to believe these material changes from the Max and CMS and the coverage and payment of skin substitutes. If ultimately adopted will be positive for the long term health of the wound care market and its patients while there'll be a preliminary period of transition and disruption if the sweeping changes are implemented we believe <unk>.
Gary Gillheeney: We believe Organogenesis' strong brand equity, established commercial infrastructure, and our plan to establish additional clinical validation to secure coverage of key commercialized products taken together represent a substantial competitive advantage for us that has us well positioned to maximize the enormous opportunity to serve more patients with our highly innovative and highly efficacious products.
Speaker Change: Genesis has strong brand equity established commercial infrastructure and our plan to establish additional clinical validation to secure coverage of key commercialized products taken together represent a substantial competitive advantage for us that has this has us well positioned to maximize the enormous opportunity to serve more patients with our.
Speaker Change: Highly innovative and highly efficacious product.
David Francisco: With that, let me turn the call over to Dave. Thanks, Gary. I'll begin the review of our third quarter financial. Unless otherwise specified, all growth rates referenced during my prepared remarks are on a year-over-year basis. Net revenue for the third quarter was $115.2 million, up 6%. As Gary mentioned, these results were ahead of the expectations we provided on our Q2 call, which called for total second quarter revenue in a range of $105 million to $113 million, reflecting continued strong momentum in the business during the third quarter. Our advanced wound care net revenue for the third quarter was $108 million, up 7%.
Dave Francisco: With that let me turn the call over to Dave.
Dave Francisco: Thanks, Gary I'll begin with a review of our third quarter financial results.
Dave Francisco: Unless otherwise specified all growth rates referenced during my prepared remarks are on a year over year basis.
Dave Francisco: Net revenue for the third quarter was $115 2 million up 6%.
Speaker Change: As Gary mentioned these results were ahead of expectations, we provided on our Q2 call, which called for total second quarter revenue in a range of $105 million to $113 million.
Speaker Change: Reflecting continued strong momentum in the business during the third quarter, our advanced wound care net revenue for the third quarter was $108 million up 7% and net revenue from surgical and sports medicine products for the third quarter was $7 million up 1%.
David Francisco: And net revenue from surgical and sports medicine products for the third quarter was $7 million, up 1%. Gross profit for the third quarter was $88 million, or 76.7% of net revenue, compared to 76.2% last quarter. Operating expenses for the third quarter were $82.1 million compared to $74.7 million last year, an increase of $7.4 million, or 10%. The year-over-year change in operating expenses was driven by a 7.6 million or 12% increase in selling general and administrative expenses compared to the prior year period. Research and development expenses declined 1% year-over-year and declined 34% sequentially, the latter of which was due to the timing of expenses associated with clinical research and trials.
Speaker Change: Gross profit for the third quarter was $88 million or <unk> 76, 7% of net revenue compared to 76, 2% last year.
Speaker Change: Operating expenses for the third quarter were $82 1 million compared to $74 7 million last year, an increase of $7 4 million or 10%.
Speaker Change: The year over year change in operating expenses was driven by a $7 6 million or 12% increase in selling general and administrative expenses compared to the prior year period research and development expenses declined 1% year over year and declined 34% sequentially. The latter of which was due to the timing of expenses associated with clinical research and trials.
David Francisco: Operating income for the third quarter was $6.2 million, compared to operating income of $8.1 million last year, a decrease of $1.8 million, or 22%. Net income for the third quarter was $12.3 million compared to net income of $13.2 million last year, an increase of $9.2 million. Adjusted net income for the third quarter was $12.9 million compared to $5.3 million last year. The largest contributor to the year-over-year increase in net income and adjusted net income was a change in income tax. We had a benefit of $6.5 million in the third quarter of 2024, compared to an expense of $4.5 million last year.
Speaker Change: Operating income for the third quarter was $6 2 million compared to operating income of $8 $1 million last year, a decrease of $1 8 million or 22%.
Speaker Change: Net income for the third quarter was $12 3 million compared to net income of $13 2 million last year, an increase of $9 2 million adjusted net.
Speaker Change: Net income for the third quarter was $12 9 million compared to $5 $3 million last year, the largest contributor to the year over year increase in net income and adjusted net income was the change in income tax we had a benefit of $6 5 million in the third quarter of 2024 compared to an expense of $4 5 million last year. The change in income taxes year over year was due.
David Francisco: The change in income tax year-over-year was driven primarily by R&D tax credit incentives, partially offset by tax adjustments related to executive compensation and other non-defectable expenses. Adjusted EBITDA for the third quarter was $13.4 million, or 12% of net revenue, compared to $16 million, or 14.7% of net revenue last year. We provided a full reconciliation of our adjusted net income and adjusted EBITDA results in our earnings report. Turning to the balance sheet, as of September 30, 2024, the company had $94.9 million in cash, cash equivalents, and restricted cash, and $62.1 million in net debt obligations, compared to $104.3 million in cash, cash equivalents, and restricted cash, and $66.2 million in net debt obligations as of December 31, 2024.
Given primarily by R&D tax credit incentives, partially offset by tax adjustments related to executive compensation and other non deductible expenses.
Speaker Change: EBITDA for the third quarter was $13 4 million or 12% of net revenue compared to $16 million or 14, 7% of net revenue last year. We provided a full reconciliation of our adjusted net income and adjusted EBITDA results in our earnings release.
Speaker Change: Turning to the balance sheet as of September 32024, the company had $94 9 million in cash cash equivalents and restricted cash and $62 $1 million and net debt obligations compared to $104 3 million in cash cash equivalents and restricted cash and $66 2 million in net debt obligations as of December 31.
Speaker Change: 2023, we also have up to a $125 million of available borrowings on our revolving credit facility as of September 32024.
David Francisco: We also have up to $125 million of available borrowings on our Revolve and Credit Facility as of September 30, 2011.
David Francisco: As announced in a separate press release this afternoon, we completed the closing of a private placement of Series A convertible preferred stock to Avista Healthcare Partners, with gross proceeds to the company of $100 million prior to deduction of fees and expenses. The company intends to use these net proceeds from the closing of the private placement to fund strategic growth initiatives, including but not limited to operating and commercial activities, clinical development programs, working capital, capital expenditures, and for general corporate purposes. This transaction substantially enhances our balance sheet and financial condition with important capital to execute our long-term growth strategies and to provide us cash to serve as remaining principal owed at the maturity of our term loan facility in mid-2026.
Speaker Change: As announced in a separate press release. This afternoon, we completed the closing of a private placement of series a convertible preferred stock to Avista healthcare partners with gross proceeds to the company of $100 million prior to deduction of fees and expenses.
Speaker Change: The company intends to use these net proceeds from the closing of the private placement to fund strategic growth initiatives, including but not limited to operating and commercial activities clinical development programs working capital capital expenditures and for general corporate purposes.
Speaker Change: This transaction substantially enhances our balance sheet and financial condition with important capital to execute our long term growth strategies and to provide us cash to service remaining principal owed at the maturity of our term loan facility in mid 2026, we appreciate the support from leading health care Investor and believe it reflects.
David Francisco: We appreciate the support from leading healthcare investor and believe it reflects Avista's confidence in the compelling opportunity investing in Organogenesis presents.
Avista has confidence in the compelling opportunity investing in organic Genesis presents.
David Francisco: Turning to a review of our 2024 financial guidance, we are updating revenue guidance to reflect the better-than-expected results in the third quarter. Our revenue guidance continues to reflect the potential near-term disruption in the fourth quarter in the market that we expect from the LCDs. Note our guidance continues to reflect the expectation that the final ruling from the MACs will be announced in the fourth quarter with an effective date of January 1, 2025. For the 12 months ending December 31st, 2024, the company now expects net revenue between $455 million and $480 million, representing a year-over-year increase in the range of 5% to 11%, as it compared to net revenue of $433.1 million for the year ended December 31st, 2022.
Speaker Change: Turning to a review of our 2024 financial guidance, we are updating revenue guidance to reflect the better than expected results in the third quarter. Our revenue guidance continues to reflect the potential near term disruption in the fourth quarter in the market that we expect from the LCD note. Our guidance continues to reflect the expectation that the final ruling from the Max.
Speaker Change: It will be announced in the fourth quarter with an effective date of January one 2025.
Speaker Change: For the 12 months ending December 31, 2024, the company now expects net revenue between $455 million and $480 million, representing a year over year increase in the range of 5% to 11% as compared to net revenue of $433 1 million for the year ended December 31 2023.
David Francisco: The 2024 Net Revenue Guidance Range assumes net revenue from advanced wound care products between $429 million and $452 million, representing a year-over-year increase in the range of 6 to 11 percent. and Net Revenue from Surgical and Sports Medicine Products between $26 million and $28 million, representing a year-over-year change in the range of a decline of 6% to an increase of 1%. We have updated our GAAP profitability and EBITDA guidance as well. Specifically, we now expect net loss in the range of $12.3 million to $0.6 million, compared to a range of GAAP net loss of $27 million to a GAAP net loss of $12 million previously.
Speaker Change: The 2024 net revenue guidance range assumes net revenue from advanced wound care products between $429 million and $452 million, representing a year over year increase in the range of 6% to 11%.
Speaker Change: And net revenue from surgical and sports medicine products between $26 million and $28 million, representing a year over year change in the range of a decline of 6% to an increase of 1% we have updated our GAAP profitability and EBITDA guidance as well specifically, we now expect net loss in the range of $12 3 million to <unk> 6 million.
Speaker Change: Compared to a range of GAAP net loss of $27 million to a GAAP net loss of $12 million. Previously we now expect EBITDA in the range of a loss of $1 3 million to positive EBITDA of $14 4 million compared to an EBITDA range of a loss of $17 million to positive EBITDA of $2 million previously.
David Francisco: We now expect EBITDA in the range of a loss of $1.3 million to positive EBITDA of $14.4 million compared to an EBITDA range of a loss of $17 million to positive EBITDA of $2 million previously. We now expect non-GAAP adjusted income in the range of $6.7 million to $18.4 million compared to a range of non-GAAP adjusted net loss of $8 million to non-GAAP adjusted net income of $7 million. And we now expect adjusted EBITDA in the range of $31.7 million to $47.4 million, compared to adjusted EBITDA in the range of $16 to $35 million previously.
Speaker Change: We now expect non-GAAP adjusted income in the range of $6 7 million to $18 4 million compared to a range of non-GAAP adjusted net loss of $8 million to non-GAAP adjusted net income of 7 million previously and.
Speaker Change: And we now expect adjusted EBITDA in the range of $31 7 million to $47 4 million compared to adjusted EBITDA in the range of 16% to $35 million previously with that I'll turn the call back to Gary for some closing remarks.
Gary Gillheeney: With that, I'll turn the call back to Gary for some closing remarks.
Gary Gillheeney: Thank you. Our third quarter results reflect strong execution from our commercial team amidst a continuing challenging operating environment. We strongly believe the material changes proposed by the MACS in the coverage of skin substitutes, if ultimately adopted, will be positive for the long-term health of the wound care market. We have a strategy to leverage our existing strong clinical and real-world data, including RCTs, and have already initiated a new RCT to secure additional clinical evidence, and we expect to secure coverage for additional products on the covered list later this year and into next year. While there will be a period of transition and disruption if these sweeping changes are implemented, we believe that Organogenesis' strong brand equity, established commercial infrastructure, and plan to establish additional clinical validation The shared and secure coverage of key commercialized products, taken together, represent a substantial competitive advantage for us, that has us well positioned to maximize the enormous opportunity to serve more patients.
Speaker Change: Thanks, David.
Speaker Change: Our third quarter results reflect strong execution from our commercial team amidst the continuing challenging operating environment.
Speaker Change: We strongly believe the material changes proposed by the Max and the coverage of skin substitutes. If ultimately adopted will be positive for the long term health of the wound care market.
Speaker Change: We have a strategy to leverage our existing strong clinical and real world data, including <unk> and have already initiated the new RCT to secure additional clinical evidence and we expect to secure coverage for additional products on the covered list later this year and into next year.
Speaker Change: While there will be a period of transition and disruption if the sweeping changes are implemented we believe that organogenesis has strong brand equity established commercial infrastructure and plan to establish additional clinical validation to secure coverage of key commercialized products taken together represent a substantial competitive advantage for us that.
Speaker Change: Has us well positioned to maximize the enormous opportunity to serve more patients.
Gary Gillheeney: Further, while the final physician fee schedule rule for 2025 did not include We believe CMS' willingness to consider our feedback, and we're particularly pleased in its acknowledgment of the need to establish a framework for consistent payment for skin substitute products under the physician fee schedule that does not negatively impact patient beneficiary access. We are excited by the continued progress in our RENEW program and have a clear target for submission of our BLA by the end of Q4 2025. And if approved, introducing RENEW as an innovative pain management solution for the millions of patients suffering from EOA represents a truly transformational opportunity for organogenesis.
Speaker Change: Further while the final physician fee schedule rule for 2025 did not include the substantial changes that we believe are needed to be implemented we believe cms's willingness to consider our feedback.
Speaker Change: We're particularly pleased and its acknowledgment of the need to establish a framework for consistent payment for skin substitute products under the physician fee schedule that does not negatively impact patient beneficial officiary access.
Speaker Change: We are excited by the continued progress in our renew program and have a clear target for submission of our BLA by the end of Q4, 2025, and if approved introducing renewable as an innovative pain management solutions for the millions of patients suffering from knee OA represents a truly transformational opportunity for organogenesis and.
Gary Gillheeney: And importantly, one that is consistent with our mission to provide integrated healing solutions that substantially improve outcomes while lowering the overall cost of care.
Speaker Change: Importantly, one that is consistent with our mission to provide integrated healing solutions that substantially improve outcomes, while lowering the overall cost of care.
Gary Gillheeney: And I would also like to acknowledge the continued hard work and dedication to our mission demonstrated by our employees throughout the organization, our strong performance and progress towards our key strategic initiatives over the first nine months of 2024 as a result of their efforts.
Speaker Change: And I would also like to acknowledge the continued hard work and dedication to our mission demonstrated by our employees throughout the organization, our strong performance and progress towards our key strategic initiatives over the first nine months of 2024 as a result of their efforts.
Gary Gillheeney: And finally, I'd like to recognize the significant investment in Organogenesis that we received from Avista Healthcare Partners, a leading healthcare investor and one of the original investors when we went public in 2018. This financing provides valuable strategic growth capital and significantly enhances our balance sheet and financial flexibility. We look forward to leveraging Avista's deep industry expertise and proactive value-added investment approach and believe this investment from a leading healthcare investor represents a strong validation of the long-term opportunity for Organogenesis as a leader in our space with highly innovative products that deliver on our mission.
Speaker Change: And finally I'd like to recognize the significant investment and we're going to Genesis that we received from Avista healthcare partners, a leading health care investor and one of the original investors. When we went public in 2018. This financing provides valuable strategic growth capital and significantly enhances our balance sheet and financial flexibility.
Speaker Change: <unk> ability.
Speaker Change: We look forward to leveraging <unk> deep industry expertise and proactive value add added investment approach and believe this investment from a leading healthcare investor represents a strong validation of the long term opportunity for organogenesis as a leader in our space with highly innovative products that deliver on our mission.
Operator: With that, I'll turn the call over to the operator to open the call for questions. Thank you, sir. If you would like to ask a question, please signal by pressing star 11 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself to the queue again by pressing star 11. One moment for our first question.
Speaker Change: With that I'll turn the call over to the operator to open the call for questions.
Speaker Change: Thank you Sir if you would like to ask a question. Please signal by pressing star one one on your telephone keypad.
Speaker Change: You're using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
We do ask that you limit yourself to one question and one follow up.
Speaker Change: You would like to ask additional questions. We invite you to add yourself to the queue again by pressing star one one.
Speaker Change: One moment for our first question.
Ross Osborn: And our first question will come from Ross Osborn from Cantor Fitzgerald. Hey guys, congrats on the quarter and thanks for taking our questions. So starting off, would you walk through how your initiatives on broadening your sales force has gone during the quarter in terms of direct reps? And would you provide an update on how many of those reps are now focused on the sports med business?
Speaker Change: And our first question will come from Ross Osborne from Cantor Fitzgerald.
Speaker Change: Hey, guys congrats on the quarter and thanks for taking our question.
Speaker Change: So starting off with GE walked through.
Speaker Change: All your initiatives on broadening your sales force has gone during the quarter in terms of direct reps and would you provide an update on how many of those reps are now focused on exports in that business.
David Francisco: Tate, do you want to grab that? Dave, you on mute?
Dave Francisco: Dave you want to grab that.
Speaker Change: Dave you on mute.
David Francisco: Sorry, I was. Yeah, we did increase our rep count in the quarter. We're seeing some good performance from that standpoint and seeing some great productivity that we're seeing, particularly at the wound care reps.
Dave Francisco: Sorry, it was.
Dave Francisco: Yes, we did increase our rep count.
In the quarter, we're seeing some good performance from that standpoint and seeing some.
Dave Francisco: Great productivity that we're seeing particularly out of the at the wound care reps I think on the direct side and the SSM I think we're under 20 at this point.
David Francisco: I think on the direct side and SSM, I think we're under 20 at this point. Okay, got it.
Dave Francisco: Yes.
Speaker Change: Okay got it and then looking at Opex and in particular, the R&D line would.
David Francisco: And then looking at OpEx spend and particularly the R&D line, would you find some more color where you were able to pull in spend during the quarter?
Speaker Change: Would you provide some more color on where you were able to pull in spend during the quarter and how we should think about spend in 2025, but some of the trials going on there.
David Francisco: And how we should think about spend in 2025 with some of the trials going on there? Yeah, sure. So that was lower than our expectations, where we expected it to tick down a little bit from Q2. And we expected to be closer to the Q2 spend rate in the fourth quarter as we kind of pulled back up. As you know, we're spending quite a bit on the BLA, and so it does tend to be lumpy sometimes. And so it just was the timing of spend that hit in the third quarter a little bit less than we had anticipated.
Speaker Change: Yes sure so.
Speaker Change: It was lower than our expectations, where we expected it to tick down a little bit from Q2.
Speaker Change: And we expect it to be closer to the Q2 spend rate in the fourth quarter as we kind of pulled back up as you know, we're spending quite a bit on the BLA and so it does tend to be lumpy, sometimes and so it just was the timing of spend in the third quarter, a little bit less than we had anticipated as.
David Francisco: As far as 25 is concerned, obviously, we haven't guided to that yet. But we're going to continue to invest in a similar fashion as those efforts around the BLA continue.
As far as 25 is concerned obviously, we haven't guided to that yet, but we're going to continue to invest in.
Speaker Change: A similar fashion.
Those efforts around the BLA continue.
Ross Osborn: Great, thanks for taking our questions and congrats again on the quarter. Thanks very much, Ross.
Speaker Change: Alright, Thanks for taking my questions and congrats again on the quarter.
Speaker Change: Thanks, very much Ross.
Operator: Thank you.
Operator: If you would like to ask a question, please signal by pressing star one one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: Thank you if you would like to ask a question. Please signal by pressing star one one on your telephone keypad.
Speaker Change: You're using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
Ryan Zimmerman: Our next question comes from the line of Ryan Zimmerman from BTIG. Hey, good afternoon. Can you hear me okay? Yes.
Speaker Change: Our next question comes from the line of Ryan Zimmerman from <unk>.
Ryan Zimmerman: Hey, good afternoon.
Speaker Change: Can you hear me okay.
Gary Gillheeney: Good afternoon, Ryan. So I appreciate that there's still some uncertainty in the market, Gary and Dave, around DLCDs. But, you know, seasonally, the fourth quarter is typically the strongest.
Speaker Change: Yes, good afternoon, Brian Alright.
Speaker Change: So.
Speaker Change: No I appreciate that there is still some uncertainty in the market, Gary and Dave <unk>.
Speaker Change: Around DLC days.
Speaker Change: But seasonally the fourth quarter is typically the strongest.
Gary Gillheeney: and I guess I'm curious, you know, the implied guidance for fourth quarter, you know, calls for a bit of a step down. So maybe what's assumed on the low end, what's assumed on the high end in terms of, you know, impacts to the AWC business? And what did you see this quarter?
Speaker Change: And I guess I'm curious.
The implied guidance for fourth quarter.
Costs were a bit of a step down so maybe what's assumed on the low end what's assumed on the high end in terms of.
Speaker Change: Impacts to.
Speaker Change: The AWAC business and.
Speaker Change: And what did you see this quarter.
David Francisco: Just real quick, Dave, what did you see this quarter in terms of impact? Because you were able to really manage through it. Yeah, so we had relatively limited impact in the quarter.
Speaker Change: Just real quick Dave what did you already this quarter in terms of impact because you were able to really manage through it.
Speaker Change: Yes, So we had relatively limited impact in the quarter, but obviously, we wanted to keep a relatively wide range in the third and fourth quarter just to ensure that we have that captured but what we've seen is great momentum in the business in the first half that carried into the third quarter again as you mentioned very little R. I mentioned very little disruption from that perspective.
David Francisco: But, you know, obviously, we wanted to keep a relatively wide range in the third and fourth quarter, you know, just to be sure that, you know, we had that captured. But, you know, what we've seen is great momentum in the business in the first half that carried into the third quarter. Again, as you mentioned, very little or I mentioned very little disruption from that perspective as far as the Q4 guide. Obviously, we took up the full year on both the low and the high, but then we kept the the low end consistent with what we talked about in the Q2 call.
Speaker Change: As far as the Q4 guide obviously, we took up the full year on both the low and the high but then we kept.
Speaker Change: The low and consistent with what we talked about in the Q2 call. So the concept. There really is is that our expectation continues to be that we expect the LCD to go into effect in early January and so sometime in mid November we would expect to see that come out because I think there's a 45 day.
David Francisco: So the concept there really is is that our expectation continues to be that we expect the LCD to go into effect in early January. And so sometime in mid-November, we would expect to see that come out because I think there's a 45 day period between when it's announced and when it goes live. So the question is, is do customers pull back on their spending from that perspective, you know, given the drop of the LCD, depending on what it says. So that's the kind of lower end. And then on the higher end, of course, it's just business as usual.
Speaker Change: Between when it's announced and when it goes live. So the question is is do customers pull back on their spending from that perspective.
Speaker Change: Given the drop of the LCD, depending on what it says so that's the kind of lower end and then on the higher end of course, it's just business as usual again, we've seen very good progress and a great business momentum in the first three quarters of the year, beating each consecutive quarter. So that's kind of the range if that helps.
David Francisco: Again, we've seen very good progress in and great business momentum in the first three quarters of the year, beating each consecutive quarter. So that's kind of the range, if that helps.
Ryan Zimmerman: OK.
Ryan Zimmerman: Very helpful.
Speaker Change: Okay very.
Gary Gillheeney: And then, you know, Gary, on Renew, saw the interim analysis yesterday, you know, nice to see, certainly consistent another proof point in the potential for Renew.
Speaker Change: Very helpful and then Gary on renew.
Speaker Change: And saw the interim analysis yesterday nice to see certainly consistent another proof point and the potential for renewal between now and fourth quarter 25, what needs to occur in order to meet those timelines and what's assumed in terms of you guys kind of wrapping up the second confirmatory trial.
Gary Gillheeney: Between now and fourth quarter 25, what needs to occur in order to meet those timelines? And what's assumed in terms of you guys kind of wrapping up the second confirmatory trial? Sure. So, you know, we've achieved last patient, last visit in June. We would expect to have the interim analysis of that second trial by Q4. And assuming that we're able to hit that deadline, then we expect that we'll be able to make the filing of the BLA in Q4 of 25. So, you know, fortunately, you know, last patient, last visit has been accomplished, and now it's a matter of actually crunching the data and getting that true interim analysis in Q4 of this year.
Speaker Change: Sure so.
Speaker Change: <unk> achieved last patient last visit in June.
We would expect to have the interim analysis of that second trial by Q4.
Speaker Change: And assuming that we're able to hit that deadline.
Speaker Change: Then we expect that we'll be able to make the filing of the BLA in Q4 of 25 so.
Fortunately last patient last visit has been accomplished and now it's a matter of actually crunching the data.
Speaker Change: And getting that true interim analysis in Q4 of this year and we.
Gary Gillheeney: And we feel confident that we'll be on track to submit in Q4 of 25 the full BLA.
Speaker Change: We feel confident that we will be on track to submit in Q4 of 25 of the <unk> BLA.
Ryan Zimmerman: Okay, thank you for taking the questions. Sure.
Speaker Change: Okay. Thank you for taking the questions.
Sure.
Operator: Thank you. If you'd like to ask a question, please signal by pressing star 11 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: Thank you if you'd like to ask a question. Please signal by pressing star one one on your telephone keypad, if youre using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Operator: We are currently showing no remaining questions in the queue at this time.
Speaker Change: We are currently showing no remaining questions in the queue. At this time that does conclude our conference for today. Thank you for your participation.
Operator: That does conclude our conference for today. Thank you for your participation.
Speaker Change: Okay.
Operator: Music
Speaker Change: Okay.
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