Organogenesis Q1 2025 Earnings Report

Organogenesis EPS Results

• Actual EPS: -$0.13
• Consensus EPS: $0.04
• Beat/Miss: Missed by -$0.17
• One Year Ago EPS: N/A

Organogenesis Revenue Results

• Actual Revenue: $86.69 million
• Expected Revenue: $90.77 million
• Beat/Miss: Missed by -$4.07 million
• YoY Revenue Growth: N/A

Organogenesis Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 5:00PM ET

Organogenesis (NASDAQ:ORGO) Holdings Inc., a regenerative medicine company, develops, manufactures, and commercializes solutions for the advanced wound care, and surgical and sports medicine markets in the United States. The company's advanced wound care products include Affinity, an amniotic membrane in which viable cells, growth factors/cytokines, and ECM proteins in the native tissue are preserved; Novachor, a chorion membrane in which viable cells, growth factors/cytokines, and ECM proteins in the native tissue are preserved; Apligraf, a bioengineered living cell therapy that produce spectrum of cytokines and growth factors; Dermagraft, a bioengineered product that produces human collagen, ECM, proteins, cytokines, and growth factors; NuShield, dehydrated placental tissue covering amnion and chorion membranes for spongy/intermediate layer intact; and PuraPly AM, an antimicrobial barrier that enables conformability and fluid drainage. Its products also include FortiShield, a biosynthetic wound matrix for use as a temporary protective covering; PuraPly MZ, a micronized particulate version of PuraPly for the management of open wounds in the surgical setting; and CYGNUS Dual, a dehydrated placental tissue preserved to retain the ECM scaffold. The company's pipeline products include ReNu, a cryopreserved suspension used to support healing of soft tissues; PuraForce, a bioengineered porcine collagen surgical matrix for use in soft tissue reinforcement applications; and TransCyte, a bioengineered tissue for the treatment of partial thickness burns. It serves hospitals, wound care centers, government facilities, ambulatory service centers, and physician office through direct sales representives and independent agencies. Organogenesis Holdings Inc. was founded in 1985 and is headquartered in Canton, Massachusetts.

Organogenesis Q1 2025 Earnings Call Transcript

Key Takeaways

• The CMS delayed the final LCD implementation for skin substitutes until January 1, 2026, causing customer ordering disruptions in Q1, though the company believes the extended review period will ultimately broaden coverage.
• Organogenesis reaffirmed its 2025 revenue guidance of $480M–$535M, expecting market stabilization in H2 and significant improvement beginning in Q3 despite a challenging first half.
• First quarter net revenue of $86.7M declined 21% YoY and operating loss widened to $26.7M, driven by reduced volumes, inventory write-downs and lower fixed cost absorption.
• The RENEW program remains on schedule with Phase III completion by Q2, top-line data due in September, and a planned BLA submission by year-end for a potential first FDA-approved biologic for knee OA.
• Organogenesis is expanding its clinical validation through multiple RCTs and enhancing manufacturing capacity at a new Rhode Island facility to support product relaunches and future growth.

Presentation

[Operator]

Welcome, ladies and gentlemen, to the First Quarter twenty twenty five Earnings Conference Call for Organogenesis Holdings, Inc. At this time, all participants have been placed in a 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 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.

[Operator]

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 Generally Accepted Accounting Principles or GAAP. We generally refer to those 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 S. Gilhaney, Sr, Organogenesis Holdings President, Chief Executive Officer and Chief of the Board. Please go ahead.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

Thank you, operator, and welcome, everyone, to Organogenesis Holdings first quarter twenty twenty five 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'll begin with an overview of our first quarter revenue results and provide an update on key operating and strategic developments in recent months. Dave will then provide you with an in-depth review of our first quarter financial results, our balance sheet and financial condition at quarter end as well as our financial guidance for 2025, which we reaffirmed in our press release this afternoon.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

Then we'll open it up for questions. Beginning with a review of our revenue results in Q1, we delivered sales in line with our guidance range outlined on our fourth quarter call. Our first quarter results reflected the expected disruption in customer demand and ordering patterns given the continued uncertainty related to the effective date of the final LCD for skin substitute grafts in cellular tissue based products for the treatment of DFU and BLU. Rumors of further delays in the effective date in late March added additional ambiguity and disruption in customer behavior, but we are proud of the team's execution in a challenging environment during the first quarter. They remain focused on ensuring our customers were both informed and well positioned to continue to treat patients with our full portfolio efficacious products.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

This process and this focus proved to be even more valuable in the weeks leading up to CMS' stated effective date of 04/13/2025, and the weeks following the announcement of the third delay in the implementation of the LCD until 01/01/2026. Organogenesis supports CMS' decision to delay the LCD implementation to review its coverage policies. As mentioned on previous earnings calls, we applaud the CMS and MACs for continuing to prioritize coverage with demonstrated clinical efficacy for skin substitute products. And we've been pushing for reform for many years and believe the LCD represented a substantial step forward towards cleaning up the market and providing access to all who need care. Importantly, we continue to believe that patients should have access to products with high quality evidence of effectiveness that includes real world evidence.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

We believe real world evidence not only demonstrates a product safety and efficacy, but also outcomes in the actual clinical use. Studies that use real world evidence are important because they provide affirmative data demonstrating the safety and effectiveness of medical interventions in everyday settings, leading to more informed clinical decision making. They also allow for larger sample sizes, more sites, as well as the ability to include more patients with a profile similar to the Medicare population as compared to an RCT. That said, we continue to believe that coverage policy alone are not sufficient to address the rapidly escalating Medicare costs, while ensuring cost effective patient care and innovation. To that end, we recommend that CMS implement an integrated coverage and payment policy.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

And as a leader in this space, we will continue to bring stakeholders together to develop and advocate for such an integrated policy that will ensure patient access to the most appropriate products while achieving significant cost savings to Medicare. While we were prepared to execute our strategy in a post LCD environment, following the CMS announcement on April 11, we quickly pivoted to maximize our substantial competitive advantages during the period of extended LCD delay. Organogenesis' strong brand equity, diverse portfolio and deep customer relationships have us well positioned to navigate a challenging market. And we are encouraged by the early progress in our team's broad based efforts to engage with our customers to ensure our full portfolio of products are available and approved in their healing algorithms and formularies. We have reaffirmed our financial guidance for 2025 and are confident in the team's ability to execute our commercial strategy this year.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

Importantly, we remain confident in the long term opportunity for Organogenesis as well. We continue to believe the material changes from the MAX in the coverage of skin substitutes to be implemented in 2026 represents an enormous opportunity for Organogenesis to serve more patients and importantly, will be positive for the long term health of the wound care market. We are aggressively pursuing our strategy to secure and submit additional clinical and real world evidence to the MACs by the newly established deadline of 11/01/2025, and expect to submit a compelling case to secure coverage for PuraPly AM when the LCDs are implemented in 2026. We expect to remain a leader in the space with highly innovative, highly efficacious products that deliver on our mission of advancing healing and recovery beyond our customers' expectations. Now before turning the call over to Dave, I wanted to provide a brief update on a key area of strategic focus for our company.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

We believe gathering robust and comprehensive clinical and real world evidence is an essential component of developing a competitive product portfolio and driving further penetrations in the markets where we compete. With respect to our RENEW program, we remain on plan and continue to expect that all patients will complete the second Phase III study by the end of the second quarter. We expect to complete the initial statistical analysis and have top line data results from the second Phase III study to share publicly in September of this year. Our time line continues to target completion of the final clinical study report required for the modular BLA submission in the fourth quarter, which has us on track for a BLA submission by the end of this year. We continue to believe, if approved, introducing RENEW to a large and growing pain management market represents a transformational opportunity for Arganogenesis.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

We believe RENEW, if approved, will potentially address an unmet medical need for all patients suffering from symptomatic knee OA, a degenerative joint disease that affects more than thirty million Americans. And we have a clear roadmap and timeline for our RENEW BLA submission. And if successful, RENEW would be the only FDA approved biologic intra articular injection to improve pain symptoms related to symptomatic knee OA. Respect to our recent progress in expanding our clinical validation of our wound care solutions, our PREPARE study evaluating PuraPly AM plus standard of care versus standard of care alone continues to progress. We initiated enrollment of up to 170 patients with chronic DFUs last August and have enrolled more than 60 patients to date.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

We accelerated investigator site activation during the quarter and expect to complete an interim analysis in the third quarter. Our RCT evaluating AFFINITY for patients with VLU completed last patient, last visit for the initial patient cohort in Q1, and we are currently engaged in data monitoring and management activities. We expect to initiate new RCTs evaluating NuShield for patients with VLU and NOVACOR for patients with Mohs surgical excision wounds in the third quarter of twenty twenty five and the first quarter of twenty twenty six, respectively. We continue to invest in generating clinical data for our existing products and pipeline products and believe such data enhances sales efforts with physicians and reimbursement dynamics with payers over time. And finally, we're pleased with the significant progress we've made in our efforts to expand our manufacturing capabilities, efficiencies and capacity with our newly leased biomanufacturing facility in Smithfield, Rhode Island.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

Upon completion, this new facility will support the reintroduction of both Dermagrap and Transite. Transite is a bioengineered cellular tissue scaffold that promotes burn healing and has received PMA approval for the treatment of deep second and third degree burns. This new facility will also support the introduction of FortiShield, a biosynthetic transitional wound matrix for second degree burns. Together, we believe these new products and the expansion of our manufacturing capacity overall will enhance our long term growth and margin profile. With that, let me turn the call over to Dave.

[David Francisco, Chief Financial Officer at Organogenesis]

Thanks, Gary. I'll begin with a review of our first quarter financial results. Unless otherwise specified, all growth rates referenced during my prepared remarks are on a year over year basis. Net revenue for the first quarter was $86,700,000 down 21%.

[David Francisco, Chief Financial Officer at Organogenesis]

As Gary mentioned, these results were in line with the expectations we provided on our Q4 call, which called for total revenue in a range of 85,000,000 to $95,000,000 Our Advanced Wound Care net revenue for the first quarter was $79,900,000 down 23%. Net revenue from Surgical and Sports Medicine products for the first quarter was $6,800,000 up 11%. Gross profit for the first quarter was $63,000,000 or 72.6% of net revenue compared to 73.9% last year. Gross profit was unfavorably impacted in the period due primarily from lower revenue over our fixed costs as well as the expiration of excess product resulting from the delayed implementation of the LCD and related uncertainty. Operating expenses for the first quarter were $89,700,000 compared to $85,100,000 last year, an increase of $4,600,000 or 5%.

[David Francisco, Chief Financial Officer at Organogenesis]

The year over year change in operating expenses was driven by a $6,600,000 write down of cost to adjust certain assets held for sale to their fair market value, offset partially by a $2,200,000 reduction in research and development expenses, which declined 17% year over year due to the timing of expenses associated with clinical research and trials. SG and A expenses were essentially flat year over year as continued investments in our key long term projects were offset by lower commissions and our focus on managing discretionary expenses in the period. Operating loss for the first quarter was $26,700,000 compared to an operating loss of $3,900,000 last year, an increase of $22,900,000 Excluding noncash amortization expenses in both periods and the write down of assets held for sale in the quarter, our non GAAP operating loss was $19,300,000 compared to $3,000,000 last year. GAAP net loss for the first quarter was $18,800,000 compared to a net loss of $2,100,000 last year, an increase of 16,700,000.0 Net loss to common for the first quarter was $21,600,000 compared to a net loss of $2,100,000 last year. Net loss to common includes both the impact of the cumulative dividend and the noncash accretion to redemption value on our convertible preferred stock.

[David Francisco, Chief Financial Officer at Organogenesis]

Adjusted EBITDA loss for the first quarter was $12,500,000 compared to adjusted EBITDA of $2,600,000 last year. And turning to the balance sheet, as of 03/31/2025, the company had $110,500,000 in cash, cash equivalents and restricted cash with no outstanding debt obligations, and that compared to $136,000,000 in cash, cash equivalents and restricted cash with no outstanding debt obligations as of 12/31/2024. We expect to see improving cash performance over the balance of 2025 and believe we have the requisite capital to execute our growth strategies with $110,500,000 in cash, cash equivalents and restricted cash and $125,000,000 available for future revolving borrowings under our revolving facility. Turning to a review of our 2025 revenue guidance, which we reaffirmed this afternoon's press release. For twelve months ending 12/31/2025, the company continues to expect net revenue of between $480,000,000 and $535,000,000 representing year over year change in the range of roughly flat to an increase of 11%.

[David Francisco, Chief Financial Officer at Organogenesis]

The 2025 net revenue guidance range continues to assume net revenue from Advanced Wound Care products of between $450,000,000 and $500,000,000 representing a year over year change in the range of a decline of 1% to an increase of 10% net revenues from Surgical and Sports Medicine products of between 30,000,000 and $35,000,000 representing a year over year increase in the range of 6% to 23%. With respect to our profitability and EBITDA guidance, the company now expects GAAP net income in a range of $4,700,000 to $34,000,000 compared to $9,500,000 and $38,800,000 previously, EBITDA in a range of $20,000,000 to $59,600,000 compared to $27,000,000 to $66,600,000 previously non GAAP adjusted net income in the range of $15,300,000 to 44,600,000.0 unchanged versus our prior guidance and adjusted EBITDA in the range of $43,600,000 to $83,200,000 again, unchanged versus our prior guidance. In addition to our formal financial guidance for 2025, we are providing some considerations for modeling purposes. We continue to expect the environment to be very challenging through the first half of twenty twenty five, followed by a significant improvement in our business trends beginning in the third quarter. For modeling purposes, we expect the second quarter revenue in the range of approximately $100,000,000 to $110,000,000 Our profitability guidance for 2025 now assumes gross margin in the range of approximately 78% to 79% compared to seventy six percent to 78% previously GAAP operating expenses up low single digits year over year and excluding noncash intangible amortization of approximately $3,300,000 the nonrecurring FDA payment related to our BLA filing of $4,600,000 and the $6,600,000 write down of assets in Q1, our total non GAAP operating expenses will increase approximately 5% to 7% year over year.

[David Francisco, Chief Financial Officer at Organogenesis]

There are no material changes to the other modeling assumptions for 2025 we outlined in our fourth quarter call. With that, I'll turn the call over to the operator to open up the call for your questions.

[Operator]

Thank you, sir. And our first question will come from Brooks O'Neil of Lake Street Capital Markets. Your line is open, Brooks.

[Aaron Wukmir, Healthcare Equity Research Associate at Lake Street Capital Markets, LLC]

This is Aaron on the line for Brooks. Just curious maybe about the cadence as we move throughout the year, understanding the back half being more weighted, but and also there's some still uncertainty out there. But maybe just more curious about some of the key puts and takes that are embedded within the guidance and maybe what you're most confident with moving forward?

[David Francisco, Chief Financial Officer at Organogenesis]

Yes, sure, Aaron. This is Dave. So look, we're very confident in our prior guide. I think what we've illustrated here is we have a lot of optionality in our portfolio, given the uncertainty that we saw in 2024 and regarding the reimbursement landscape that we see now. So we're pretty excited about that opportunity.

[David Francisco, Chief Financial Officer at Organogenesis]

We have all the tools, products and people that we need to execute against that initiative that we've got this year. So I'd say, look, from the last time we guided, there was a significant change in the market environment. But nonetheless, we've reaffirmed our guidance on the top line and the bottom line. And I think the big piece there is, we've got a situation where PuraPly is now available across the full healing algorithms. So all indications inclusive of DFU and VLU.

[David Francisco, Chief Financial Officer at Organogenesis]

We've got the full portfolio beyond PuraPly as well for all indications. And we see in the back half a stabilization of the market and customer buying behavior. The offset to that to some extent that gets us to the same level is, obviously, we've got a situation where we've got to get those products back on to formularies. The competition remains in a push off of the LCD that's been challenging for us in the past, but obviously we executed very, very well in 2024. And there is some uncertainty that remains probably in the back half of fourth quarter of this year as well.

[David Francisco, Chief Financial Officer at Organogenesis]

So we're also seeing some high ASP entrants still continue to enter the market as well. So those are the kinds of puts and takes that I see from the overall guidance perspective.

[Aaron Wukmir, Healthcare Equity Research Associate at Lake Street Capital Markets, LLC]

Right. Okay. That makes sense. Appreciate that. And maybe just a little bit more color on the gross margin.

[Aaron Wukmir, Healthcare Equity Research Associate at Lake Street Capital Markets, LLC]

I appreciate again the guidance there at the end of the call. But is there anything we should be thinking about as far as based on your typical historical margin sort of sequential growth or just maybe any more color there would be fantastic. Thanks, guys.

[David Francisco, Chief Financial Officer at Organogenesis]

Yes, sure. So similar to the revenue, it should be back end loaded. And the issue there is that we've got just based on the dynamics of the marketplace, we've got a major mix shift in the product portfolio. And I also mentioned that we had excess inventory in our living technology that expired in the first quarter. Some of that will spill into the second quarter as well.

[David Francisco, Chief Financial Officer at Organogenesis]

We don't expect that to repeat in the second half. And that's all related to delays in the LCD as we really obviously, the living technology was on the covered list. And therefore, we have a six week lead time for the demand pull for those products. And so obviously, had some extra expiry that we saw in the first quarter and expect that to continue into the second quarter as well. So a big jump up in gross margin overall based on that mix shift and the lack expiry going forward.

[Operator]

Our next question will be coming from Ryan Zimmerman of BTIG. Your line is open.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

Good afternoon. Thanks for taking the questions, guys.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

Hey, Ryan.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

In the fourth quarter, you had a really strong performance. And I kind of think about the environment at that time in the market with some of the uncertainty. At the time, we thought the LCD was coming, and so you saw buying patterns that were really strong for you and maybe not so much for those companies that were not included on the covered list. I guess I'm curious why that didn't follow a similar pattern this quarter given kind of going into the first quarter, again, the LCD is now delayed a second time at this point before the third delay. And I would have expected kind of a similar dynamic.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

So I'm curious, Gary, what you can say about kind of why that didn't follow a similar pattern this quarter?

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

Sure, Ryan. So when you look at the fourth quarter, we didn't see much of a change until the December. And we did start to see some softening at the end of the year with the confusion setting in. So, that really did happen at the December, and then it continued, you know, to perpetuate in January. So a lot of the financial buyers were continuing to buy high ASP products until such time as the LCD drops.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

There was a lot of caution and a little contraction in the market that we've seen in the first quarter that we hadn't seen in the fourth quarter last year. And that contraction, which we believe is temporary, has a lot to do with the confusion and also all the audits that are going on in the field right now, particularly for our customers. So, the dynamics were a little different, but we've pivoted and with our portfolio, we have the optionality to do extremely well with the LCD or with our optionality without the LCD.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

That's very fair, Gary. That's helpful color. I guess, as you think about getting back on the same question, the pacing dynamics, I guess I'm curious why the second quarter now would have maybe still a slowdown relative to the back half of the year? And what makes the back half of the year normal in the face of the LCDs now occurring Jan one, twenty twenty six, in your guys' view?

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

Well, the first delay, which was, I guess, sixty days, there really was confusion, assuming that this thing was going to drop. Now you've got it basically pushed off almost nine months. So we're now getting our customers back and our products back on formulary like PuraPly and others for DFU and VLUs. So that takes time. If you recall, when we had this issue, I guess, back in 'twenty three, it took us maybe three months to get everybody back on formulary.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

We're actually seeing a better trend right now. But that trend of getting folks back, we still saw in Q2 excuse me, in Q1.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

Okay. That's very helpful. And then stepping back for a second, just given the effort that has occurred over the year in years past with corralling costs in the wound care market, it seems like, again, we wanna know, Medicare wants to get this right, having you know, trying to read through the tea leaves here. But at the same time, it's being held off till 2026. So what in your mind is gonna change, or what are you hearing from CMS in terms of why they're holding off?

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

And and what may change between now and early twenty twenty six, if you have any thoughts, Gary.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

Sure. That's a great question. So, you know, we think that CMS is now heavily involved in driving this process. And I think they were pretty clear in their press release that they're reviewing the coverage policies that exist today in the MAX. So, that's encouraging.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

They're looking to look at the data. They are offering time to get more data. They've indicated that where products may have big impacts in the market and could be left off or there are gaps in the market, that those types of products would be looked at. So, I think it's not just a delay, which if it was delayed in its current form, that would not be a good thing. But the fact that it's delayed to reevaluate the data and look for additional data, as well as giving you more time to provide the data, we think it just expands the number of products, and we think that's extremely positive for our PuraPly AM product, for sure, that it has the ability to get and we do expect with the additional data that we'll be filing that PuraPly AM will be on the approved list.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

That's our belief right now, and that's how we view this. So, you know, I think that's one reason for the delay. The second is, as you know, we believe payment is a big part of the solution here, and we think CMS is aggressively looking at payment. We don't know if we'll see anything in July in the proposed rule. But if there is no payment solution, there needs to be something to baffle the cost and slow down spending, and that would be the LCD that's available to them on January 1.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

So, I think they're expanding the LCD so it's more impactful to patients, meaning more products, more accessibility. But at the same time, it's a backstop. If payment doesn't happen and then they have no LCD, then it's basically where we are today, which is not a good place. So, don't know if that's helpful, Ryan, but that's my view.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

No, no. That's very appreciative. And it sounds like there's a range of options maybe more so than what we saw in the original CDs that could come out of this kind of come early January twenty twenty six. And maybe we are having that discussion around either new payment models or so forth. But, yeah, we'll we'll have to see.

[Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG]

So I appreciate the color. Thank you for taking the question.

[David Francisco, Chief Financial Officer at Organogenesis]

Sure. Of course.

[Operator]

And our next question will be coming from Ross Osborne of Cantor Fitzgerald. Your line is open, Ross.

[Ross Osborn, Director, Lead Research Analyst - MedTech and Diagnostics at Cantor Fitzgerald]

Hi, guys. Thank you for taking the questions. Starting off, I'm going to go back to guidance. And if I remember the commentary correctly for this year, guidance which you reiterated today assumed a strong inflection point in the second half of the year due to the LTV coming through. So if you could just go over, I guess, one more time, why you think you can still hit your prior guidance given the fact that the FDA is asking about it there?

[David Francisco, Chief Financial Officer at Organogenesis]

Ross. I'm sorry, but it was very difficult to understand what you said. We can hear you loud and clear, but it's a little garbled.

[Ross Osborn, Director, Lead Research Analyst - MedTech and Diagnostics at Cantor Fitzgerald]

Is this better now?

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

That's much Okay,

[Ross Osborn, Director, Lead Research Analyst - MedTech and Diagnostics at Cantor Fitzgerald]

great. So I was just asking about guidance and sorry to hone on this topic. But based upon your original guidance and your commentary, it assumed a strong inflection in the second half of the year, given that the LCD would go through. I'm just still a little bit confused why you guys were able to reiterate guidance given that it won't go through. So just curious what the uplift and the revenue is at this point?

[David Francisco, Chief Financial Officer at Organogenesis]

Yes, sure. So what I indicated a little bit earlier was the benefits that we've got is PuraPly is now available for all indications. And obviously, that's a huge win for us. We've got the full portfolio of products as well, which PuraPly and some of the licensed products are higher margin products. So obviously, that helps gross margin as well, as well as the top line.

[David Francisco, Chief Financial Officer at Organogenesis]

And so we see continued stabilization of the market and customer buying behaviors in the back half. And so those all coupled together, we think, are really beneficial for us overall. The offset to that, of course, is that, as Gary mentioned, it takes time to bring the products back on to the formularies. The competition dynamics are still the same as they were in 'twenty four, which again, we were successful in that year. But remember, we had assumed post LCD, we'd have three commercialized products out of 18 for DFUs and VLUs.

[David Francisco, Chief Financial Officer at Organogenesis]

That doesn't exist anymore. The competition is still there. There's still some uncertainty and we assume there's some offsets to the benefit in the late part of Q4, just like we saw in Q1.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

If you think about it, under the LCD that we had fewer products on the LCD. So the forecast is built on volume moving to those products. Now we have the breadth of our portfolio, as Dave said, which is much broader, and we do have higher margin products in our portfolio. So you're replacing a few products with a lot of volume with a number of products with higher margins. So, that offset basically is volume versus price.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

That's the magic of our portfolio, the optionality that we have and the flexibility we have to be able to pivot and move to different products at different pricings and different sites of care is what allows us to continue to reinforce guidance, and we're confident in the guidance.

[Ross Osborn, Director, Lead Research Analyst - MedTech and Diagnostics at Cantor Fitzgerald]

Understood. And that's helpful. And then stabilization is an interesting word, obviously, given all the market dynamics. Could you expand on that a little bit and why you think that will occur?

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

Yes, I'll start, Dave, you can jump in. So, as we're educating our customers, we spend a lot of time engaging with our customers. There was confusion around which products were on the LCD or not, whether or not the non DFU and VLU wounds could still be utilizing our products. So as that information gets in, we're seeing customers starting to go back to their old buying habits and their buying patterns as we get on formulary. So we think that's the stabilization and there's no LCD impact at all for the rest of the year.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

So we think the combination of our education and the fact that the LCD is now pushed into another year is what the stabilization is based on.

[David Francisco, Chief Financial Officer at Organogenesis]

Yes, agree, Gary. I think The last announcement was on April 11. So obviously, we have some lingering impact in the second quarter, and we expect that to really be stable in the back half as people really understand the reimbursement landscape and get more comfortable in this market.

[Ross Osborn, Director, Lead Research Analyst - MedTech and Diagnostics at Cantor Fitzgerald]

Understood. And then last question for me, and I'll jump back in queue. Could you guys parse out volume versus pricing for the second half of this year? Meaning, are you planning on introducing higher priced products to make up for potentially lost volume, kind of playing the game of the company's on LCD?

[David Francisco, Chief Financial Officer at Organogenesis]

Yes. So we're not introducing anything new necessarily. I mean, we've obviously got new products periodically. But the reality is, it's just the fact that, as Gary said, and I think I mentioned as well, that we have the full portfolio at our disposal for DFUs and DLUs. So it really just is higher margin products across some of the licensed products as well as our PuraPly franchise now is available for that fairly large subset of the market.

[David Francisco, Chief Financial Officer at Organogenesis]

So we can address all indications with the entire portfolio. So it's just a mix shift from only the covered products in that subset to the full portfolio.

[Operator]

And we are currently showing no remaining questions in the queue at this time. This does conclude our conference for today. Thank you for your participation.

[Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board at Organogenesis]

Thank you very much.

Participants

Executives

• Gary Gillheeney, Sr, Director, President, CEO & Chair of the Board
• David Francisco, Chief Financial Officer

Analysts

• Aaron Wukmir, Healthcare Equity Research Associate at Lake Street Capital Markets, LLC
• Ryan Zimmerman, Managing Director & Medical Technology Analyst at BTIG
• Ross Osborn, Director, Lead Research Analyst - MedTech and Diagnostics at Cantor Fitzgerald