Organogenesis (NASDAQ:ORGO) reported record fourth-quarter 2025 results that surpassed the high end of the revenue range the company had outlined on its third-quarter call, driven primarily by stronger-than-expected growth in advanced wound care. Management also provided a 2026 outlook that calls for a year-over-year revenue decline amid what it described as near-term market disruption tied to recent CMS comments and policy changes.
Fourth-quarter revenue topped expectations on advanced wound care strength
CEO Gary Gillheeney said the company delivered “record sales results,” exceeding prior guidance, with advanced wound care product sales up 83% year-over-year in the fourth quarter. Surgical and Sports Medicine product sales declined 2% year-over-year, which management said was within its guidance assumptions.
- Advanced wound care net product revenue: $217.2 million, up 83% year-over-year
- Surgical & Sports Medicine net revenue: $7.9 million, down 2% year-over-year
Total fourth-quarter revenue also included $0.5 million of grant income from the Rhode Island Life Science Hub, which the company said offset employee-related costs at its Smithfield facility.
Margin and profitability improved; expenses rose
Fourth-quarter gross profit was $175.2 million, or 78% of net product revenue, compared with 75% in the prior-year period. Francisco attributed the change primarily to a shift in product mix.
Operating expenses in the quarter were $162.3 million, compared with $116.4 million a year earlier, an increase of $45.9 million, or 39%. Excluding cost of goods sold, non-GAAP operating expenses were $112.4 million versus $85.4 million last year, up 32%. Francisco said the year-over-year change excluding cost of goods sold was driven by a $26.3 million increase in SG&A and a $1.9 million write-down of certain non-recurring expenses, partially offset by a $1.2 million decrease in R&D.
Operating income was $63.3 million, up from $10.2 million in the prior-year quarter. Non-GAAP operating income was $75.9 million versus $11.7 million last year, excluding non-cash amortization and certain non-recurring costs.
GAAP net income was $43.7 million compared with $7.7 million last year. Net income to common shareholders was $31.5 million, which Francisco said reflects items tied to the company’s convertible preferred stock, including cumulative dividends, non-cash accretion, and undistributed earnings allocated to participating redeemable convertible preferred stock.
Adjusted net income was $52.9 million, compared with $8.8 million a year earlier. Francisco said adjusted results excluded items including intangible amortization and a range of non-recurring charges, such as FDA BLA fees for ReNu and regulation-related charges that included non-recurring inventory write-down adjustments and other one-time inventory write-downs tied to the loss of a key distributor in an international location.
Adjusted EBITDA was $84.2 million, or 37% of total revenue, compared with $18.2 million, or 14% of total revenue, in the prior-year quarter.
CMS policy changes and market disruption in early 2026
Gillheeney said 2025 brought major industry changes, describing CMS actions as “the most meaningful health policy changes in decades.” He said CMS shifted reimbursement to support “high-quality, evidence-backed PMA products” while reducing payment for non-PMA products, and he characterized the shift as favorable to Organogenesis’ portfolio.
However, he said the withdrawal of LCD coverage policies for skin substitutes announced on December 24 and CMS comments regarding discarded product on December 30 created “clinical confusion and material disruption in the market.” Gillheeney said the confusion has impacted utilization of the company’s PMA-approved product in the first two months of 2026. Management said it does not believe the commentary on discarded products should apply to PMA products and expects the issue to be resolved in a manner consistent with CMS grouping products based on FDA classification.
In the Q&A, management was asked whether the fourth-quarter outperformance was driven by customers pulling forward inventory ahead of January 1 reimbursement changes. Gillheeney said he did not believe there was “a tremendous amount of opportunity” for that because products are used on patients, and he said the company did not see an increase in aggressive pricing tactics late in the quarter that it had assumed might occur.
2026 outlook calls for revenue decline, with improvement expected in second half
Francisco said the company expects near-term challenges as it enters 2026 due to uncertainty and clinician confusion tied to CMS’s December 30 comments. As a result, Organogenesis expects full-year 2026 total net revenue to decline 25% to 38% year-over-year.
Key elements of the company’s 2026 expectations include:
- Q1 2026: revenue declines of approximately 50% year-over-year
- First half 2026: revenue declines of approximately 30% to 35%, with strong sequential growth in Q2
- Second half 2026: strong sequential growth expected in both Q3 and Q4
- Profitability: positive adjusted EBITDA expected, particularly in Q4, with high-teens adjusted EBITDA margins
In response to questions about the gap between Q4 performance and the 2026 decline outlook, management pointed to clinician confusion as a major driver of the near-term impact. Gillheeney also referenced the reimbursement level of “$127” as an element the company had planned for, while emphasizing that the “major factor” was the impact from the December 30 comments. He added that the company expects to gain share over 2026 as competitive dynamics evolve, even as near-term disruption weighs on the market.
Strategic updates: manufacturing expansion and ReNu program
Gillheeney said the company’s new manufacturing and R&D center in Smithfield, Rhode Island is “advancing well” and is intended to support scaling manufacturing for Apligraf and PuraPly AM, the recommercialization of Dermagraft, and potential capacity to expand the portfolio for burns with FortiShield and TransCyte. He also said the company is increasing its focus on clinical evidence through trials and published studies.
On ReNu, Gillheeney said Organogenesis initiated a rolling BLA submission late last year and expects to complete it in the first half of 2026. He described ReNu as a potential “transformational opportunity” if approved by the FDA, particularly for patients with knee osteoarthritis pain.
On the balance sheet, Francisco said Organogenesis ended 2025 with $94.3 million in cash equivalents and restricted cash and no outstanding debt obligations, compared with $136.2 million a year earlier. He added that the company has availability under a revolving credit facility of up to $75 million and expects to support operations through cash on hand, working capital, and net cash flows from product sales.
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.
