Organogenesis (NASDAQ:ORGO) reported a 70% year-over-year decline in third-quarter net product revenue and lowered the upper end of its full-year revenue outlook as the skin substitute market recovered more slowly than management had anticipated.
The regenerative medicine company also said the Food and Drug Administration’s target date for a decision on Amnuvx, its investigational therapy for knee osteoarthritis, will be extended beyond April 24, 2027. Organogenesis expects to complete remediation work at its Norwood facility by September 30, 2027, following an FDA inspection.
President and CEO Gary Gillheeney Sr. said the operating environment improved from the second quarter, even as the market continued to contend with changes in reimbursement policy and clinician confusion. Net product revenue rose 6% sequentially to $45.5 million.
Revenue Declines as Losses Widen
Third-quarter Advanced Wound Care net product revenue fell 73% from a year earlier to $38.2 million. Surgical & Sports Medicine product revenue declined 19% to $7.3 million, Chief Financial Officer Dave Francisco said. Sequentially, the two categories grew 6% and 10%, respectively.
Gross profit was $23.6 million, or 52% of net product revenue, compared with a gross margin of 76% a year earlier. Operating expenses declined 42% to $75 million, while the company recorded an operating loss of $29.5 million, compared with operating income of $20.7 million in the prior-year period.
Organogenesis reported a GAAP net loss of $29.6 million, versus net income of $21.6 million a year earlier. Its adjusted EBITDA loss was $22.4 million, compared with adjusted EBITDA of $30.1 million in the year-ago quarter.
Cash, cash equivalents and restricted cash totaled $26.9 million at September 30, down from $94.3 million at the end of 2025. The company had no outstanding debt at either date. Francisco said cash, working capital and net cash flow from product sales are expected to fund operating expenses and capital expenditures for at least the next 12 months.
Outlook Reflects Slower Recovery
Organogenesis now expects 2026 total net revenue of $179 million to $200 million, a decline of 65% to 68% from the prior year. Its previous guidance called for a decline of 62% to 68%. The updated outlook assumes $151 million to $171 million in Advanced Wound Care sales, $26 million to $27 million in Surgical & Sports Medicine sales and $1.9 million in grant income.
The company continues to expect sequential improvement in adjusted EBITDA. Francisco said fourth-quarter adjusted EBITDA could turn positive at the high end of the revenue range, but would remain negative at the low end.
Organogenesis completed two restructurings this year and has taken additional cost-reduction measures. Francisco said those actions are expected to reduce operating expenses by approximately $45 million, including about $32 million associated with restructuring. In the question-and-answer session, he described the savings as approximately $45 million on an annualized basis.
Amnuvx Review and Facility Remediation
The FDA accepted Organogenesis’ biologics license application for Amnuvx in June. During the third quarter, an FDA pre-license inspection of the Norwood facility identified 18 items requiring remediation. The agency also requested information related to clinical data submitted with the application, Gillheeney said.
Organogenesis estimates the remediation will cost about $8 million in total, including approximately $4 million in incremental costs and $4 million for facility improvements brought forward. Francisco said about 25% of the spending is expected in 2026, with the remainder in 2027 through the third quarter. The company did not provide a new FDA target decision date.
Francisco said Organogenesis is evaluating alternative financing strategies to accelerate investments, including potential Amnuvx commercialization and improvements to capacity and efficiency at its Smithfield facility.
Management Sees Signs of Market Stabilization
Gillheeney attributed the revenue decline to contraction in the skin substitute market following the withdrawal of local coverage determination policies and comments from the Centers for Medicare & Medicaid Services about discarded product. He said uncertainty around discarded product had created confusion for customers, particularly regarding the company’s Apligraf product.
Gillheeney said claims data indicated that Organogenesis had gained market share, with its share increasing more than 30% versus the first quarter. He said the market had bottomed, although complete third-quarter market data was not yet available. He estimated that nearly 20% of third-quarter skin substitute sales came from inventory sold by companies no longer in the market and expected that inventory to clear over the next quarter or two.
The company also highlighted the October publication of results from its PREPARE trial of PuraPly AM in non-healing diabetic foot ulcers. Gillheeney said the study met its primary endpoints and showed statistically significant improvement in wound closure at 12 weeks when the product was used with standard care.
About Organogenesis (NASDAQ:ORGO)
Organogenesis Holdings Inc is a biotechnology company that develops, manufactures and commercializes products intended to support tissue regeneration and wound healing. The company serves the advanced wound care and surgical and sports medicine markets, with a focus on therapies that help manage complex wounds and support the repair of damaged tissue.
Its product portfolio includes bioengineered skin substitutes and other biologic products, such as Apligraf, Dermagraft, NuShield, Affinity and NuCel.
