Organogenesis Q2 Earnings Call Highlights

Organogenesis NASDAQ: ORGO reported a sharp year-over-year decline in second-quarter revenue as the skin substitute market continued to adjust to coverage and payment changes from the Centers for Medicare & Medicaid Services, while management pointed to sequential improvement in product sales and market share gains.

President, Chief Executive Officer and Chair Gary S. Gillheeney Sr. said total revenue declined 58% from the prior-year period, primarily reflecting a 61% decline in Advanced Wound Care sales. He attributed the results to a significant contraction and slower-than-anticipated recovery in the skin substitute market following CMS actions and comments in late December 2025.

Still, the company said net product revenue rose 18% sequentially in the second quarter, driven by a 23% increase in Advanced Wound Care product sales. Gillheeney said Organogenesis’ wound care unit volume increased 30% from the first quarter, which he said outperformed reported industry declines.

Second-Quarter Financial Results

Chief Financial Officer Dave Francisco said net product revenue was $42.8 million in the second quarter, down 58% year over year. Advanced Wound Care revenue totaled $36.1 million, down 61%, while Surgical & Sports Medicine revenue was $6.7 million, down 18%.

Total revenue also included $1 million of income related to a grant from the Rhode Island Life Sciences Hub, which offset employee-related costs at the company’s Smithfield facility. That compared with $0.2 million in grant income in the prior-year period.

Gross profit was $19.1 million, or 45% of net product revenue, compared with 73% a year earlier. Cost of goods sold included $1.8 million in restructuring-related charges. Excluding those charges, non-GAAP gross profit was $20.9 million, or 49% of net product revenue, Francisco said.

Operating expenses fell 17% to $94.7 million. Excluding cost of goods sold, non-GAAP operating expenses declined 25% to $63 million, as a $19.8 million reduction in selling, general and administrative expenses was partially offset by a $7.9 million increase in research and development expenses. R&D expense included $5.6 million of non-recurring termination costs associated with R&D programs and vendors.

The company reported an operating loss of $51 million, compared with an operating loss of $12.6 million in the prior-year quarter. Its GAAP net loss was $96.3 million, versus a $9.4 million loss a year earlier. Francisco said the quarterly net loss included about $30 million in non-cash tax expense from recording a full valuation allowance on deferred tax assets.

Adjusted EBITDA loss was $34.4 million, compared with an adjusted EBITDA loss of $3.6 million in the prior-year period.

CMS Environment and Evidence Strategy

Gillheeney said CMS efforts to revise coverage and payment practices have addressed waste, fraud and abuse by certain market participants. He said the agency’s proposed hospital outpatient prospective payment system and physician fee schedule, announced in July, appeared intended to promote market stabilization by holding payment rates steady and reinforcing differentiation for premarket approval, or PMA, products and products supported by clinical data.

During the question-and-answer session, Gillheeney said CMS reinstated a reimbursement rate of $127.14 and maintained product tiers recognizing PMA products, 510(k) products and Section 361 products. He said clinicians have become more comfortable with the current payment and coverage framework but remain concerned about potential post-application audits and clawbacks.

He said products without randomized controlled trials, or RCTs, face greater risk of being considered investigational, contributing to what he described as a “flight to quality.”

Organogenesis highlighted recently submitted and published clinical evidence for its wound care portfolio. The company said results from a 170-patient RCT of PuraPly AM in non-healing diabetic foot ulcers showed statistically significant wound closure at 12 weeks and were submitted for publication.

It also cited a Journal of Wound Care publication involving nearly 11,000 Medicare beneficiaries with diabetic foot ulcers. The study associated PuraPly AM treatment with a 20% lower overall non-traumatic lower-leg amputation rate compared with standard of care, along with a 40% lower rate for amputations above or at the knee level.

Separately, the company said peer-reviewed results published July 27 in the Journal of Wound Care showed statistically significant improvements in wound closure at 12 and 16 weeks for Affinity plus standard of care in complex venous leg ulcers.

Restructuring, Liquidity and Revised Outlook

Organogenesis completed a June restructuring that reduced its workforce by 138 employees and is expected to generate approximately $18 million in annualized cost reductions. Together with a restructuring announced in March, the actions are expected to reduce annual operating expenses by more than $32 million, management said.

Francisco said the company had $46.8 million in cash equivalents and restricted cash as of June 30, down from $94.3 million at the end of 2025. The company had no outstanding debt obligations at either date. Management expects available cash, working capital components and net cash flow from product sales to fund operating expenses and capital expenditures for at least the next 12 months.

The company also entered into an at-the-market equity offering agreement with BTIG and Citizens JMP Securities, allowing it to sell up to $75 million of common stock from time to time. Organogenesis said any proceeds would be used for working capital, general corporate purposes, research and development, and other strategic initiatives.

For 2026, Organogenesis lowered its revenue outlook to a range of $179 million to $215 million, representing a year-over-year decline of 62% to 68%. Its prior outlook contemplated a decline of 45% to 52%.

• Advanced Wound Care revenue is projected at $151 million to $183 million.
• Surgical & Sports Medicine revenue is projected at $26 million to $30 million.
• Grant income is expected to total $1.9 million.

The company expects sequential revenue improvement in the third and fourth quarters, though at a more measured pace than previously anticipated. Francisco said the outlook is weighted more toward the fourth quarter and assumes positive adjusted EBITDA in that period. The company expects to reduce operating expenses excluding cost of goods sold by approximately 32% for the full year, including more than 40% in the second half.

Amnuvx and Dermagraft Updates

Organogenesis said the FDA accepted its biologics license application for Amnuvx, previously known as ReNu, and established an April 24, 2027, PDUFA target action date. Gillheeney said that, if approved, Amnuvx would be the first biologic in its treatment area for symptomatic knee osteoarthritis and could be launched using a temporary code before a permanent code is expected around late 2027 or early 2028.

The company is also slowing the manufacturing build-out for Dermagraft to preserve cash. Gillheeney said the expected launch timing has shifted from the middle of 2027 to approximately the middle of 2028, adding that the company had not assumed significant Dermagraft revenue in its 2027 or 2028 planning.

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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