Organogenesis Q1 Earnings Call Highlights

Key Points

• Organogenesis reported Q1 net product revenue of $36.3M, down 58% year‑over‑year (advanced wound care down 63%), which management attributes to market disruption and clinician confusion after CMS withdrew local coverage determinations and issued controversial "wastage" commentary.
• Management cut 2026 revenue guidance to $270–$310M (a 45–52% decline), completed a March restructuring (88 job cuts and a facility closure) targeting about $14M in annualized savings, and expects measured sequential improvement with positive adjusted EBITDA in the second half.
• As longer‑term positives, the company completed its ReNu BLA submission and reported a positive randomized trial for PuraPly AM in diabetic foot ulcers; Organogenesis also holds about $92.1M in cash with up to $75M of revolver availability.

Organogenesis NASDAQ: ORGO reported a sharp year-over-year revenue decline in the first quarter of 2026, with executives pointing to significant disruption in the skin substitute market following Medicare policy changes and related commentary from the Centers for Medicare & Medicaid Services (CMS).

President, CEO, and Chair Gary S. Gillheeney Sr. said first-quarter performance “reflect[s] the significant challenges in the operating environment” discussed on the company’s prior call. Net revenue fell 58% year-over-year, driven by a 63% drop in advanced wound care sales, while surgical and sports medicine revenue was flat.

CMS policy shifts drove market disruption

Gillheeney said clinicians faced “confusion and material disruption in the market” after the withdrawal of local coverage determination (LCD) policies for skin substitutes announced on Dec. 24 and CMS commentary on discarded product issued Dec. 30. He characterized CMS’s wastage commentary as “material but transient” for 2026 revenue trends, but said the impact on patient care could be longer lasting, arguing reduced use of PMA-approved products can expose patients to “preventable complications, infections, amputations, and potentially fatal outcomes.”

During Q&A, Gillheeney added that the reimbursement transition was more complex than expected, citing “two sites of care with complete changes in the reimbursement model” and changes to reimbursement by product. He also highlighted issues related to “WISeR,” saying the company encountered technology challenges in states where prior authorization is required, as well as claim-processing problems at a “large MAC” that struggled “the entire first quarter,” with March claims only recently beginning to process. He said customers must rebill for January and February.

Gillheeney said Organogenesis is engaging with CMS but does not have “direct clarity” on when the agency might clarify its wastage comments. He said the company’s objective is either an exemption for PMA products “because of all of the confusion around the handling and the billing and usage of a biologic, like our product Apligraf,” or clearer guidance. “There’s been no instructions or clarity on exactly what… their wastage policy is,” he said.

First-quarter financial results

Chief Financial Officer Dave Francisco reported net product revenue of $36.3 million, down 58% year-over-year. Advanced wound care net product revenue was $29.5 million, down 63%, and surgical and sports medicine net product revenue was $6.8 million, flat year-over-year. Total revenue included $1 million of income tied to a grant from the Rhode Island Life Science Hub, which Francisco said offset employee-related costs at the company’s Smithfield facility.

Gross profit was $10.5 million, or 29% of net product revenue, compared to 73% in the prior-year period. Francisco attributed part of the pressure to inventory write-downs, including $4.3 million of adjustments for excess and obsolete inventory tied to a facility closure ($1 million) and LCD regulatory changes ($3.3 million). Excluding those write-downs, he said non-GAAP gross profit was $14.8 million, or 41% of net product revenue.

Operating expenses were $106.1 million, down from $113.4 million a year earlier. Excluding cost of goods sold, non-GAAP operating expenses were $80.3 million compared to $89.7 million, a 10% decline. Francisco said the change reflected a $7.3 million decrease in SG&A and a $6.6 million write-down of certain non-recurring expenses that impacted the first quarter of 2025, partially offset by a $4.5 million increase in R&D expense.

Organogenesis posted an operating loss of $68.9 million, compared to an operating loss of $26.7 million in the prior-year quarter. On a non-GAAP basis, operating loss was $56.0 million versus $19.3 million. GAAP net loss was $53.2 million compared to $18.8 million, while net loss to common stockholders was $56.2 million, which Francisco said reflected the cumulative dividend and non-cash appreciation to redemption value of convertible preferred stock. Adjusted net loss was $43.7 million versus $13.4 million, and adjusted EBITDA loss was $48.2 million versus $12.5 million.

Restructuring and liquidity position

With the recovery now expected to take longer, Gillheeney said the company completed a restructuring in March that included a workforce reduction of 88 employees and the closure of operations at its St. Petersburg, Florida facility. He said the actions are expected to produce about $14 million in annualized cost reductions.

As of March 31, 2026, Francisco said Organogenesis had $92.1 million in cash, cash equivalents, and restricted cash, with no outstanding debt, compared to $94.3 million at the end of 2025. He also cited “working capital availability under a revolving facility of up to $75 million.”

Updated 2026 outlook and expectations for sequential improvement

Management lowered its full-year 2026 revenue outlook, citing a “more measured improvement in clinician confusion and overall operating environment” than previously anticipated. Francisco said the company now expects total net revenue of $270 million to $310 million in 2026, representing a 45% to 52% year-over-year decline. Previously, the company’s guidance assumed a decline in the range of 25% to 38%.

Francisco said the revision primarily reflects updated assumptions for advanced wound care sales. While the company continues to expect sequential improvement in the second quarter, he said the pace is expected to be more measured, and the updated view implies first-half revenue declining approximately 49% to 52% year-over-year. He said the company continues to expect “strong sequential revenue growth in both the third and fourth quarters of 2026,” while the low end of guidance assumes a more prolonged recovery with second-half revenue declines similar to the first half.

On profitability, Francisco said the company’s updated outlook still assumes improved adjusted EBITDA performance sequentially and positive adjusted EBITDA generation in the second half. To help protect profitability and cash flow, the company now expects to reduce operating expenses excluding cost of goods sold by about 25% year-over-year in 2026, including more than 30% in the second half. He said these assumptions include approximately $7 million of estimated cost savings in the third and fourth quarters tied to the restructuring.

In response to an analyst question about confidence in a back-half recovery, management pointed to month-over-month improvement within the first quarter that continued into April, along with expectations that “customer confusion should abate” and that “competition dynamics will be quite a bit different” later in the year.

Regulatory and clinical updates: ReNu BLA submission and PuraPly AM trial

Gillheeney highlighted two recent developments the company views as important to its longer-term strategy. He said Organogenesis completed its biologics license application (BLA) submission for ReNu on April 28, describing it as a milestone for a regenerative therapy aimed at symptomatic knee osteoarthritis. He said the company began a rolling BLA submission in December 2025 with nonclinical modules and completed the application with submission of the clinical and chemistry, manufacturing, and controls modules.

Gillheeney also cited clinical results for PuraPly AM. He said the company announced completion of a randomized controlled trial on April 6 evaluating PuraPly AM plus standard of care versus standard of care alone in non-healing diabetic foot ulcers. The prospective multicenter trial enrolled 170 patients and achieved its primary endpoint, demonstrating statistically significant wound closure at 12 weeks compared to standard of care alone, with a p-value of less than 0.0477. Gillheeney said the company believes publication of the results will support inclusion in future coverage policies.

In closing remarks, Gillheeney said the operating environment is expected to remain difficult through the first nine months of 2026, with sequential revenue improvement through the year and a return to “more normalized profitability” in the fourth quarter.

About Organogenesis NASDAQ: ORGO

Organogenesis Inc operates as a regenerative medicine company focused on the development, manufacturing and commercialization of therapeutic solutions for wound care, surgical repair and sports medicine. The company's product portfolio addresses a range of acute and chronic tissue repair needs, leveraging bioengineered skin substitutes, human placental-derived products and other allografts designed to promote healing and reduce scarring. Organogenesis markets its therapies to hospitals, outpatient clinics, wound care centers and other healthcare providers.

Key offerings include Apligraf, a living skin substitute for treatment of diabetic foot ulcers and venous leg ulcers; Dermagraft, a cryopreserved human fibroblast-derived dermal substitute; Grafix, a placental membrane allograft for complex and chronic wounds; and TheraSkin, a cryopreserved human skin allograft used in surgical and reconstructive procedures.

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