Q2 2025 Organogenesis Holdings Inc Earnings Call
Please stand by welcome and Lady. Welcome, ladies and gentlemen, to the second quarter, 2025 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.
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 involved inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risk and uncertainties described in the company's filings with the Securities and Exchange Commission, including the item. 1, a risk factors of the company's most recent annual report and its subsequently filed. Quarterly reports. You are cautioned not to place under 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, future events or otherwise, except as required by applicable. Securities laws.
This call will also include references to certain Financial measures that are not calculated. In accordance with the journaling accepted accounting principles or gaap. We generally refer to this as 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.
I would now like to turn the call over to Mr. Gary, as joining me.
Senior organogenesis Holdings, President Chief Executive Officer and chair of the board. Please go ahead sir.
Thank you, operator and welcome everyone to organogenesis holding second quarter 2025 earnings conference call.
I am joined on the call today by David Francisco, our Chief Financial Officer.
Let me start with a brief agenda of what we'll cover during our prepared remarks.
I'll begin with an overview of our second quarter, Revenue results and provide an update on key operating and strategic developments in recent months. And then Dave will provide you with an in-depth review of our second quarter Financial results. Our balance sheet and financial condition at quarter end as well as our financial guidance for 2025, with the updated and our press release this afternoon, then we will open up the calls for questions.
Beginning with the review of our Revenue results in Q2, we delivered sales results within the guidance range outlined on our first quarter. Call driven by better than expected growth and our Surgical and Sports Medicine products, and sales of advanced wound care products that came in at the lower end of our expectations.
Effective date of the final LCD for skin, substitute grass and cellular tissue based products for the treatment of dfus and vlus until January 1st 2026. Our team's second quarter execution, and focus on engagement education, and support health. Customers, navigate a confusing and challenging environment.
While a delay in the effective dates for the final LCD fueled even more aggressive pricing strategies from our competitors. Our team remains committed to building Upon Our deep customer relations and promoting access to existing and recently launched products
Last month, CMS announced the proposed. Med Medicare physician fee schedule and outpatient prospective payment systems for calendar year 2026.
This is a watershed moment for this industry in the most impactful development in more than a decade.
We applaud the proposed new payment approach for skin substitutes. As we have long advocated for an integrated coverage and payment policy to address rapid escalation of Medicare spending while ensuring patients have access to the products, best suited to their care.
Organogenesis has more than 40 years of experience in pioneered, the use of cellular and tissue based products for wound treatment and we have spent the past several years, leading key stakeholders who share our patient focused values to inform policy makers and advocate for reform, that will increase access improve outcomes, and curve. The rampid waste and abuse in the space.
We have long supported, many of the points included in the proposed rules, notably a per square, centimeter payment methodology based on FDA classification for skin. Substitutes, covering all ASP sites of care as well as the hospital outpatient setting, bringing a much-needed, consistent payment approach,
Exploitation of the current ASP based payment system. Has resulted in excessive and unsustainable spending these past few years. Closing this loophole and shifting away from the ASP model will bring stability to the market and push spending on dehydrated placentals in line with appropriate utilization.
And we have pleased that the proposed FDA classification. Categories, insurers patients will have access to appropriate therapies and encourage innovation in the space.
As the population ages and more people face the prospect of chronic wounds associated with diabetes and other comorbid conditions, it's imperative that the industry reignite. Its Innovation engine to deliver Advanced regenerative technologies that will speed healing and reduce the total cost of care.
we believe the proposed rule if finalized will support these goals, while bringing long-term stabilization to the skin substitute markets,
Importantly, we are pleased that CMS has recognized the clinical differentiation of pre-market approval or PMA products. That outline steps to expand access to these healing Technologies.
PMA products such as Apple graph and dermagraphic threatening amputations and costly complications associated with dfuse and Deal use.
The proposed rules will encourage the continued development of PMA products that will greatly benefit both clinicians and patients.
As the public comment, period opens. We remain committed to engage with CMS in other stakeholders to refine and enhance the proposed rules that will expand access to appropriate therapies for patients while reducing the overall cost to Medicare.
With the payment and coverage changes expected to be implemented in 2026. We believe We Are Better positioned to continue to lead the space with highly Innovative highly efficacious, products that deliver on our mission of advancing healing and Recovery beyond our customers expectations.
Before turning the call over to David. I want to provide updates on key, strategic, focuses for our companies.
We Believe Gathering robust and comprehensive, clinical, and real world evidence is an essential component of developing a competitive product portfolio and driving further. Penetration in the markets where we compete,
We expect to submit published clinical data, supporting pure apply am for dfu and affinity for vlu to the max by the established deadline of November 1st 2025.
We have been preparing our organization to succeed in a new world that is coming to fruition by investing to optimize our industry-leading, portfolio of healing Technologies.
Welcoming the governor and other state and Civic leaders to share our plans for the site.
And completed the Smithfield facility will support the reintroduction of dermagraphic a PMA approved, bioengineered cellular tissue scaffold for the treatment of deep second, and third degree burns as well as the introduction of for Shield of biosynthetic transitional wound. Matrix for the treatment of second degree burns and surgical wounds.
We believe the added manufacturing capacity and portfolio expansion will further, enhance our long-term growth and margin profile, create additional stakeholder value in positively impacting more people's lives.
With respect to our renew program, we we remain on plan for submission for renewed, by the end of this year, which if approval further, enrich our already, robust regenerative portfolio.
All patients completed the second phase 3 study and we remain on track to share publicly the top line data results from the study in September of 2025.
a timeline continues to Target completion of the final clinical study report required for the bla submission in the fourth quarter, which has us on track for a modular bla submission by the end of 2025
We continue to believe in the potential of renew to address the need for more than 30 million American suffering from symptomatic, nioso arthritis.
This is a defining moment for the industry and an exciting opportunity for organogenesis to serve more patients.
We see our vision for skin substitutes in wound care becoming a reality following years of advocating, for health policy reform to ensure patient access to the most appropriate products while achieving significant cost savings to Medicare.
We believe we are positioned to win going forward with our comprehensive portfolio, including products from all FDA classifications.
We have a development engine, fueling new innovation, and the capacity to launch and reintroduce products in a transformational opportunity with renew.
With that, let me turn the call over to Dave.
Thank you, Gary. I'll begin with a review of our second quarter Financial results.
Unless otherwise specified, all growth rates referenced during my prepared. Remarks are on a year-over-year basis.
Net product revenue, for the second quarter was 100.8 million down 23%.
Our Advanced Wound Care. Net product, revenue for the second quarter was 92.7 million down 25%.
As Gary mentioned, the commercial team executed well in the period, driving increased momentum towards the end of Q2, despite the delay of the effective date of the LCD, which increased the aggressive competitive pricing tactics in the period.
Net product revenue from Surgical and Sports Medicine products for the second quarter was up was 8.1 million up to 16%.
Our total revenue results for the second quarter included 0.2 million of Grant income related to the grant issued from the Rhode Island Life Sciences Hub. Offsetting our employee related costs in our Smithfield facility.
This compares to no impact in the prior year period and we expect Grant income to be immaterial in 2025
Gross profit for the second quarter was 73.1 million or 73% of net product Revenue compared to 78% last year.
Gross profit was unfavorably impacted in the period, due primarily to lower Revenue, over a fixed cost as well as the expiration of excess product resulting from the delayed implementation of the LCD and related uncertainty.
Operating expenses for the second second quarter were 113.6 million compared to 144.1 Million last year. A Duke, curious of 30.5 million or 21%.
Excluding cost of goods sold of 27.6 million for the second quarter and 29.2 Million. Last year, are non-gaap operating expenses for the second quarter were 86 million compared to 114.9% a decrease of 29 million or 25%.
The year-over-year change in operating expenses, excluding cost of goods sold was driven by a 22.8 million write down of certain non-recurring costs. In the second quarter of 2024 compared to a 1.7 million in the second quarter of 2025 as well as lower research and development and sgna expenses which declined 33% and 4% year-over-year respectively.
Operating loss for the second quarter was 12.6 million compared to an operating loss of 13.9 Million last year. The decrease of 1.3 million
Costs in both periods are non-gaap operating loss was 10 million compared to 9.7 million of income last year.
Gap. Net loss for the second quarter was 9.4 million compared to a net loss of 17 million last year, a decrease of 76 million 7.6 million net loss to common. For the second quarter was 12.2 million compared to a net loss of 17 million last year.
Net loss to Common includes the impact of both the cumulative dividend and the non-cash accretion to Redemption value on our convertible preferred stock.
Adjusted. I lost the second quarter was 3.6 million compared to adjusted. I income of 15.6 million last year.
Turning to the balance sheet, as of June 30th, 2025 the company had 73.7 million in cash, cash equivalents and restricted cash with no outstanding debt obligations that compared to 136.2 million in cash. Cash equivalents and restricted cash with no outstanding debt obligations as of December. 31st 2024.
Now turning to a review of our 2025 Revenue guidance, which we updated in this afternoon's press release.
For the 12 months, ending December 31st 2025 the company. Now expects net revenue of between 480 million and 510 million representing a year-over-year change in the range of flat to an increase of 6%.
The 2025, net revenue, guidance. Now assumes net revenue from Advanced wound care products between 450 million and 475 million. Representing a year-over-year change in the range of a decline of 1% to an increase of 5%.
Net revenue from Surgical and Sports Medicine, products between 30 million, and 35 million. Represent a year-over-year increase in the range of 6% to 23%.
The expected increase in our Revenue over the second half of 2025, will be driven by our recently launched in licensed products that are all. Well, well, positioned in today's market.
We have tightened our total revenue revenue guidance range reflecting the performance in the first half of 2025, and our more refined expectations for the remaining 2 quarters.
With respect to our profitability and Evita Guidance. The company. Now, expects, gaap net loss in the range of 6.4 million to net income of 16.4 million, compared to net income of 4.7 million to 34 million previously, debits on the range of 6.2 million to 37 million compared to 20 million to 59.6 million previously.
Non-gaap adjusted net income. In a range of 5.5 million to 28.3 million compared to 15.3 million and 444.6 million million previously.
Adjusted. I bet on the range of 31.1 million to 61.9 million compared, to 43.6 million to 83.2 million previously.
In addition to our formal Financial guidance for 2025, we are providing some considerations for modeling purposes.
For modeling purposes. We expect the third quarter Revenue in the range of approximately 130 million to 145 million.
Our profitability guidance for 2025 now assumes gross margins in the range of approximately, 74% to 76%.
Compared to 78% to 79% previously.
The updated gross margin range, reflects the expected impact related to products mixed shift in Our in-licensed Brands in the second half of 2025.
Gap, art, operating expenses, excluding cost of goods sold, and the range of flat to up 1% year-over-year, and excluding non-cash and tangible amortization of approximately $3.4 million; the non-recurring FDA payment related to our renewed BLA filing of $4.6 million; and the $8.3 million write-down of assets. In the first half, our total non-GAAP operating expenses will increase 3% to 4% year-over-year compared to a range of 5% to 7% previously.
With that, I'll turn the call over to the operator, to open the call for your questions.
Thank you, sir. If you'd like to ask a question, please signal by pressing *1 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.
Okay. And our first question will come from the line of Ryan Zimmerman with btig. Your line is open.
Uh, thanks for taking our questions, uh, good afternoon uh, Gary and Dave, so good afternoon, maybe we could start with um, the CMS proposal for 2026. Um, it's it, it is a radical, you know, change from what we've seen and I believe the The Proposal was set at about 125 and change per square. Centimeter if I'm not mistaken.
Um, maybe Gary you could talk about kind of how you, you know, see, orgo fit in within that structure as it starts the year in 2026.
From let's say today through the back half of 25 and then you know what?
It, what changes in 26 with that proposal and how the market may change?
Sure, I'd be happy to. So as you know, we've been advocating for this type of payment reform for years and literally years. So it is a transformational event for the industry and a real opportunity for our products. Um, and uh, the organogenesis organization, you know, we agree with the CMS approach of setting tears.
Uh and those tiers based on clinical differentiation relative resource costs, they've kind of broken them out, based on FDA classifications, we're you know, data and evidence really matters.
So, you know, we feel great about this change. And the fact that it's also, uh, in hopd, it's not just in the ASP sites of care. It's now opened up the hobt market to a larger more complex wounds where we are. The leader in that space, that just gives more opportunity for folks to utilize, you know, our Technologies, um, like apple graph and soon to be released, uh, you know,
You know, Applied Graph is reimbursed today at $30 per square centimeter, and the current proposal at $125 would be a significant change. It would eliminate any of the disincentives financially to use the product and put it on a level playing field?
But what we really appreciate is CMS establishing these tears and uh, we expect, uh, that will be lobbying for different payment rates based on those tiers. So, uh, Apple graph and dermatology products will, you know, have the appropriate reimbursement based on the evidence and relative resource costs to produce those products. So this is very exciting for us. Very exciting for the industry.
Um as it relates to the market and you know today you know, apply graph represents about, 3% of the units sold.
Believe it or not, a PMA product with arguably, the best evidence in the space has about 3% of the market. We see that significantly changing in 2026.
Um, you know, 5 10K products as well. Um, you know, our Pure Apply product, um, is priced below $125 per square centimeter today. So we would see an enhancement in that product the more utilization going forward and then a level playing field for all the Amnesia. So there wouldn't be a significant price.
Uh, Advantage going forward levels, the playing field. So we see a lot of reasons why 26 is going to be extremely positive for us, the rest of 25. I think, you know, we've seen in, in the in Q2, we've seen some aggressive pricing. We think that's going to continue and get worse at the end of the year.
Um I assume there'll be a lot of discounting and um you know, inventory sales, uh you know, anybody who's got a lot of inventory at higher prices are going to need to move those, you know, those products and we expect to see aggressive pricing.
But for us, you know, we've seen strong momentum coming out of the second quarter. Dave will talk a little bit about that that momentum's continuing both in accounts and in revenue and we have a couple of new products that we've launched that will compete extremely well in this market as we Bridge the 2026.
Yeah, yeah. Just well, just to follow up on that. Thank, thank you for that answer, Gary. It's it's appreciated.
Your guidance reduction I think is around uh, 12 and a half million if I'm not mistaken. If I did my math, right? Um, for the year at the midpoint, um, you know, given the results today. Um, you know, Dave, how do you do you think you sufficiently accounted for this kind of aggressive behavior in the back half of the year with the reduction of the AWC segment for uh, for the balance of the year?
Down the top end, you know, knowing that we've got 2 quarters behind us. Uh, 2 quarters ahead. So we just thought we'd narrow that range but we think the, uh, the low end we're confident in given the, uh, the performance that we saw at the end of the second quarter.
Okay, last 1 for me and I'll hop back in Gary, I don't think I heard um you may not want to say the timing of the dermagraphic or for competitive purposes. Are you not saying
Well, we can give you um, you know, a sense, you know, we think that, you know, by the second half of the 27 that we'll have uh the opportunity to Launch.
Sure. Thanks Ryan.
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Question has raised from Ross Osborne with counterfeit Gerald, please go ahead.
This is Matt Park on for us today. Thanks for taking the questions. Um, I guess something right in.
On renew. Um, you know, as you guys move closer to pla submission, guess was trying to get your thoughts on how you think about renew's positioning within the broader nioa treatment landscape. And I guess what you guys view as the key differentiators versus uh existing injectable options
I think with, uh, what's really exciting is the actual data
So, you know, in the in both studies we had a significant number of kale fours in the study. So you know, the second study hasn't been completed yet. But in the first study, those kale Force performs similar to kale 3s and kale 2s. So, you know that is unique and it speaks to the strength of the product and potential, labeling potential labeling improvements in the product, over anything else. So, um, you know, we're pretty excited that the data is showing that it's a robust product and we'll compete extremely well.
Um, you know, against the other competitors, which is primarily hyaluronic acid and steroids.
Got it, that's helpful. And then maybe just 1 more from me on the surgical Sports side of the business. Um, we're just hoping to get some more color on, what's driving, uh, are on what drove strength in the quarter. Um, and how you expect this momentum to continue in the back half of the year.
Yeah, sure. We didn't adjust the guidance there. Um, I think we did see some very strong performance. I think you're seeing, you know, some transition into, um, you know, the, some of the key products that we've got in the, in the portfolio. And so we could continue to see some some nice, uh, um, you know, numbers coming up from there. In addition to that, we've kind of implemented some hybrid rep, um, uh, situations where, you know, you're really seeing reps coming. Um, spanning across both wound care and Surgical and that added some value in the in the quarter as well. So we held that guidance. But um, you know, it's between 6 and 23%, so nice performance in the first half of 12, excuse me, 16% in the quarter, and 13% for the half. So we're excited to see that.
Got it. Thanks for taking the question.
Thank you. Thank you.
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