ORGO's Q3 2025 Earnings Call: Contradictions Emerge on Dermagraft Reintroduction Timelines, Market Reimbursement Impact, and ReNu Approval Delays

Date of Call: None provided

Financials Results

• Revenue: $150.5M net product revenue, up 31% YOY and up 49% sequentially
• Gross Margin: 76% of net product revenue, compared to 77% last year

Guidance:

• Net revenue for 2025 expected to be $500M–$525M (up 4%–9% YOY).
• Advanced wound care net revenue $470M–$490M (up 4%–8%).
• Surgical & sports medicine net revenue $30M–$35M (up 6%–23%).
• GAAP net income $8.6M–$25.4M; EBITDA $19.1M–$41.9M.
• Adjusted EBITDA $45.5M–$68.3M; adjusted net income $21.5M–$38.4M.
• Modeling assumptions: gross margin ~74%–76%; non-GAAP OPEX up ~3%–5% (ex items).

Business Commentary:

• Strong Revenue Growth and Product Performance:
• Organogenesis Holdings reported third quarter net product revenue of $150.5 million, up 31% year-over-year and 49% sequentially.

• The growth was driven by better-than-expected sales of advanced wound care products, which increased 31% year-over-year, and strong performance of surgical and sports medicine products, up 25% year-over-year.

• CMS Payment Reform and Market Positioning:

• CMS finalized a new payment policy for Medicare, which recognizes clinical differentiation of PMA products and per square centimeter pricing.

• The company is well-positioned for 2026 and beyond with its diverse, evidence-based portfolio and strong brand equity in the skin substitute market, poised to benefit from these changes.

• Regulatory and Clinical Developments:

• Organogenesis' Renew product did not meet statistical significance for its primary endpoint in Phase 3 trials but demonstrated a numerical improvement in pain reduction.

• The company remains confident in its potential approval, with an FDA meeting scheduled for December 12th to discuss its BLA submission, supported by comprehensive clinical evidence.

• Financial Guidance and Outlook:

• For the 12 months ending December 31, 2025, the company expects net revenue of $500 million to $525 million, representing a year-over-year increase of 4% to 9%.
• The guidance reflects the company's strong revenue performance and strategic positioning in the skin substitute market, with expectations of expanded access and market stabilization.

Sentiment Analysis:

Overall Tone: Positive

• Management said: 'We delivered sales results which exceeded the high end of our guidance range' and called it a 'record revenue performance.' CFO highlighted 31% YOY revenue growth and upgraded 2025 guidance. Management described the CMS PFS as a 'watershed moment' and 'an enormous opportunity,' and indicated expectations for margin and cash-flow improvements.

Q&A:

• Question from Ross Osborne (Cantor Fitzgerald): How are conversations going with the clinical community in terms of when you’re expecting physician behavior to change following the PFS? Is that December this year, earlier? Any thoughts there?
  Response: Administrative changes and contract updates are already occurring and clinicians are beginning to move toward LCD-covered products; sales behavior not yet evident but utilization shifts are expected going forward.

• Question from Ross Osborne (Cantor Fitzgerald): What can you do from a company standpoint to help generate awareness regarding your products as incremental volume opens up?
  Response: Emphasize strong brand equity and clinical efficacy, communicate reimbursement likelihood for LCD-listed products, and use targeted messaging (including Wiser) to drive adoption of appropriate, reimbursable therapies.

• Question from Ryan Zimmerman (BTIG): How do you think the new physician fee schedule rates might impact margins as we model next year?
  Response: While ASPs will decline industry-wide, management expects offsetting growth drivers—Apligraf reimbursement in HOPD, regained market share, and hospital outpatient expansion—leading to improved margins and cash flow in 2026.

• Question from Ryan Zimmerman (BTIG): Were you surprised by the final per-sqcm rate ending up around $127, or was that expected?
  Response: No; management expected a final rate near the proposed level (~$125); they note CMS recognized PMA differentiation and may increase PMA reimbursement over time.

• Question from Ryan Zimmerman (BTIG): Given the Renew Phase 3 readout, are your prior approval timeline targets (late 2026/early 2027) still realistic?
  Response: A filing remains possible after the December 12 FDA meeting, but management now guides a roughly two-month potential delay relative to prior timelines as a conservative assumption.

Contradiction Point 1

Timing of Dermagraft Reintroduction

It involves the timeline for the reintroduction of a key product, which impacts expectations regarding market presence and revenue.

How can the company boost product awareness as 2026 volume grows, given that many high-ASP competitors will exit the market? - Ross Osborne (Cantor Fitzgerald)

2025Q3: We anticipate launching Dermagraft by the middle of 2027. - Gary Gillheeney(CEO)

Can you clarify the timing of the Dermagraft reintroduction? Are you choosing not to disclose this due to competitive reasons? - Ryan Zimmerman (BTIG)

2025Q2: We anticipate launching Dermagraft by the second half of 2027. - Gary Gillheeney(CEO)

Contradiction Point 2

Market Expectations and Reimbursement Impact

It involves differing expectations and assessments of the market impact following a significant CMS reimbursement proposal, which affects strategic positioning and investor outlook.

When do you expect physician behavior to change following the PFS—this December or earlier? - Ross Osborne (Cantor Fitzgerald)

2025Q3: We're starting to see changes in administrative behavior, such as clinicians moving to products on the approved LCD list and processing contracts to replace them. We haven't observed changes in sales behavior yet, but the pieces for utilization changes are being put in place. - Gary Gillheeney(CEO)

How does ORGO fit into the 2026 CMS proposal's $125/sq cm pricing structure, and what are your expectations for market dynamics from late 2025 through 2026? - Ryan Zimmerman (BTIG)

2025Q2: We expect an increase in the utilization of our PMA products, and a level playing field for amnions. We see strong momentum continuing in Q3 and Q4, with new products competiting well in the market as we transition to 2026. - Gary Gillheeney(CEO)

Contradiction Point 3

ReNu Approval Timeline

It involves the expected timeline for the approval and market introduction of a key product, which could impact revenue forecasts and investor expectations.

Are the initial approval timelines for Renew still on track, considering the recent data readout? - Izzy(BTIG)

2025Q3: We still think there's an opportunity to file in a modular form in December, with a potential two-month delay. Staying on the current timeline is possible, but a two-month delay seems reasonable. - Dave Francisco(CFO)

Can you provide an update on the timeline for ReNu after submitting the application and how quickly you expect to receive feedback and launch the product? - Brooks O'Neil(Lake Street Capital Markets)

2024Q4: We're expecting to file the BLA submission at the end of 2025. The timeline for ReNu includes hearing from the FDA in Q4 2026 and expecting approval at the end of 2026 or early 2027. - Gary S. Gillheeney, Sr.(CEO)