Executive Summary / Key Takeaways

• Organogenesis Holdings Inc. (NASDAQ:ORGO) delivered robust third-quarter 2025 results, with record revenue exceeding guidance, driven by strong execution in Advanced Wound Care and Surgical & Sports Medicine segments.
• The Centers for Medicare & Medicaid Services (CMS) finalized a new payment policy for 2026, categorizing skin substitutes based on FDA regulatory status and implementing a per square centimeter payment. This "watershed moment" is expected to level the competitive playing field and favor Organogenesis's evidence-based, FDA-approved products like Apligraf.
• The company's ReNu program, a cryopreserved suspension for knee osteoarthritis, is on track for a Biologic License Application (BLA) submission by year-end 2025, despite mixed Phase 3 trial results, with management confident in combined data supporting potential approval.
• Organogenesis maintains a strong liquidity position with $64.4 million in cash and no outstanding debt as of September 30, 2025, bolstered by a $130 million preferred stock issuance in late 2024.
• Despite ongoing market disruption from Local Coverage Determination (LCD) delays and aggressive competitive pricing, Organogenesis's diverse portfolio, strong brand equity, and strategic investments position it for significant market share gains and long-term growth.

A New Era for Regenerative Healing: Organogenesis's Strategic Pivot

Organogenesis Holdings Inc. stands as a seasoned leader in the regenerative medicine landscape, boasting over four decades of pioneering advancements in cellular and tissue-based products for wound treatment. This deep-rooted expertise has shaped its core mission: to empower healing through an integrated portfolio of solutions for advanced wound care and surgical and sports medicine markets. The company's foundational strength lies in its diverse, evidence-based product offerings, many of which hold Premarket Application (PMA) approval or 510(k) clearance from the United States Food and Drug Administration (FDA). These regulatory distinctions, hard-won through extensive clinical trials, represent a significant competitive advantage in an industry where time and cost for approvals are substantial.

The current investment narrative for Organogenesis is profoundly influenced by a pivotal shift in the healthcare reimbursement landscape. On November 5, 2025, CMS released a final rule for the Physician Fee Schedule (PFS) for calendar year 2026, adopting policy changes for Medicare payments for skin substitute products. This landmark decision, which aligns skin substitute categorization with FDA regulatory status (361 HCTPs, PMAs, and 510ks) and introduces an initial payment rate of approximately $127.28 per square centimeter, is heralded by Organogenesis management as a "watershed moment" for the industry. This reform is anticipated to curb historical abuses, stabilize Medicare spending, and foster a consistent payment approach across various sites of care, including physician offices and hospital outpatient departments.

Organogenesis's technological differentiation is central to its competitive moat. The company's portfolio includes bioengineered living cell therapies like Apligraf, a PMA-approved bi-layered skin substitute for venous leg ulcers (VLUs) and diabetic foot ulcers (DFUs). Apligraf's PMA status is critical, as CMS has indicated an intent to propose differentiated payment rates for PMA products in future years, recognizing their clinical differentiation and resource costs. Other key technologies include amniotic and placental allografts such as Affinity, NuShield, CYGNUS Dual, CYGNUS Matrix, and VIA Matrix, which provide protective barriers and extracellular matrix (ECM) scaffolds to support healing. The PuraPly family of products (PuraPly AM, PuraPly XT, PuraPly MZ) offers antimicrobial barriers and native ECM scaffolds for various wound types. These products leverage advanced tissue engineering and cell therapy breakthroughs, which management believes support and accelerate tissue healing while improving patient outcomes.

The company's research and development efforts are robust, exemplified by its ReNu program, a cryopreserved suspension targeting symptomatic knee osteoarthritis (OA). ReNu has received Regenerative Medicine Advanced Therapy (RMAT) designation from the FDA, underscoring its potential to address an unmet need for the over 30 million Americans suffering from this serious condition. While the second Phase 3 trial for ReNu did not achieve statistical significance for its primary endpoint, it demonstrated a numerical improvement in baseline pain reduction that exceeded the first Phase 3 study, with ReNu showing a -6.90 reduction in baseline pain at six months in the second study compared to -6.0 in the first. Organogenesis believes the totality of data from three large randomized controlled trials (RCTs) involving over 1,300 patients provides compelling evidence for FDA review, with a BLA submission planned by the end of 2025. If approved, ReNu would be the only FDA-approved biologic intra-articular injection for symptomatic knee OA, offering a significant market opportunity.

Operationally, Organogenesis is expanding its biomanufacturing capabilities with a new facility in Smithfield, Rhode Island. This facility, expected to begin Dermagraft manufacturing in 2027, aims to provide significant capacity and substantial long-term cost savings. It will also support the reintroduction of TransCyte, a PMA-approved bioengineered tissue scaffold for burns, and the launch of FortiShield, a biosynthetic wound matrix. These strategic investments are designed to enhance the company's long-term growth and margin profile.

Financial Performance and Strategic Resilience

Organogenesis's recent financial performance reflects both the challenges of a dynamic regulatory environment and the company's strategic resilience. For the third quarter ended September 30, 2025, Organogenesis reported record net product revenue of $150.5 million, marking a 31% year-over-year increase and a 49% sequential increase. This performance exceeded the high end of the company's guidance, primarily driven by better-than-expected growth in Advanced Wound Care products, which rose 31% year-over-year to $141.5 million. Surgical & Sports Medicine products also contributed positively, increasing 25% year-over-year to $9.0 million.

However, the nine months ended September 30, 2025, tell a more nuanced story for the Advanced Wound Care segment, with net product revenue decreasing 6% to $314.1 million compared to the prior year. This decline was largely attributed to increased ambiguity and disruption in customer behavior following the delayed implementation of the LCDs, which fueled aggressive competitive pricing strategies. Despite this, the Surgical & Sports Medicine segment demonstrated consistent growth, with revenue increasing 17% to $23.9 million for the nine-month period.

Profitability metrics for Q3 2025 showed strength, with gross profit at $114.2 million, representing 76% of net product revenue, a slight decrease from 77% in the prior year due to product mix shifts. Operating income for the quarter was $20.7 million, a significant increase of $14.5 million year-over-year. GAAP net income reached $21.6 million, up $9.2 million from the previous year, and Adjusted EBITDA was $30.1 million, compared to $13.4 million in Q3 2024. These figures underscore the company's ability to leverage strong sales execution into improved profitability.

Organogenesis maintains a robust liquidity position. As of September 30, 2025, the company held $64.4 million in cash, cash equivalents, and restricted cash, with no outstanding debt obligations. This strong balance sheet was significantly enhanced by a private placement of Series A Convertible Preferred Stock to Avista Healthcare Partners in November 2024, which generated $130 million in gross proceeds. A portion of these proceeds, $66.6 million, was used to repay outstanding long-term debt, effectively deleveraging the company. The company's credit agreement was further amended in October 2025, reducing the Revolving Facility to $75 million and adjusting financial covenants, which management believes better aligns with its business fundamentals. Management anticipates that current cash, working capital, and available credit, combined with net cash flows from product sales, will be sufficient to fund operations, capital expenditures, and debt service for at least the next 12 months.

Competitive Landscape and Strategic Outlook

The competitive landscape for Organogenesis is characterized by both established players and evolving regulatory dynamics. Direct competitors like MiMedx Group (MDXG), Integra LifeSciences (IART), Smith & Nephew (SNN), and Johnson & Johnson (JNJ) offer overlapping products in wound care and regenerative medicine. Organogenesis differentiates itself through its focus on bioengineered living cell therapies and its strong regulatory standing, particularly with PMA-approved products like Apligraf. While MDXG, IART, SNN, and JNJ benefit from broader distribution networks and larger scale, Organogenesis's specialized portfolio and direct sales force allow for targeted market penetration and deep customer relationships.

The recent CMS payment reforms are a significant competitive catalyst. With over 200 skin substitute products expected to be classified as non-covered for DFUs and VLUs under the new LCDs effective January 1, 2026, Organogenesis's three commercialized products (Apligraf, Affinity, and NuShield) that are on the covered list provide a substantial advantage. Apligraf, as the only PMA-approved product for both DFUs and VLUs, is particularly well-positioned, especially given CMS's intent to differentiate payment for PMA products in the future. This shift is expected to "level the playing field" by reducing financial incentives for less efficacious products, allowing Organogenesis to compete more effectively on brand equity, clinical efficacy, and service. The company anticipates significant market share gains, particularly in the hospital outpatient department (HOPD) setting where Apligraf will see higher reimbursement rates.

Organogenesis's 2025 guidance reflects this strategic outlook. The company now expects net revenue between $500 million and $525 million, representing a year-over-year increase of 4% to 9%. This includes Advanced Wound Care revenue between $470 million and $490 million (4% to 8% increase) and Surgical & Sports Medicine revenue between $30 million and $35 million (6% to 23% increase). Profitability guidance has also been raised, with GAAP net income projected between $8.6 million and $25.4 million, and Adjusted EBITDA between $45.5 million and $68.3 million. These figures are based on assumptions of gross margins between 74% and 76% and a 3% to 5% increase in non-GAAP operating expenses, driven by investments in clinical studies for ReNu and commercial initiatives.

Key risks to this outlook include the ongoing uncertainty surrounding the full implementation and impact of the LCDs, potential further delays, or revisions that could affect product coverage. The commercial success of ReNu is also contingent on FDA approval and subsequent payer coverage, which are not guaranteed. Furthermore, aggressive competitive pricing, particularly in late 2025 as competitors seek to clear inventory, could pressure margins. However, Organogenesis is actively mitigating these risks by generating additional clinical and real-world evidence for products like PuraPly AM to secure future coverage and by leveraging its flexible portfolio to adapt to market dynamics.

Conclusion

Organogenesis Holdings Inc. is at a pivotal juncture, poised to capitalize on a transformative shift in the regenerative medicine market. The company's deep heritage in advanced wound care, coupled with its robust portfolio of FDA-classified products and a strong pipeline, positions it favorably as CMS reforms reshape the competitive landscape. The anticipated leveling of the playing field in 2026, favoring clinically differentiated and evidence-based therapies, presents a significant opportunity for Organogenesis to expand its market share, particularly with its PMA-approved Apligraf product.

The strategic investments in manufacturing capacity, the reintroduction of key products like Dermagraft, and the potential market entry of ReNu for knee osteoarthritis underscore the company's commitment to long-term growth and innovation. While regulatory uncertainties and competitive pressures remain, Organogenesis's solid financial health, proactive engagement with policymakers, and continuous generation of clinical evidence demonstrate a resilient and adaptable strategy. For discerning investors, Organogenesis represents a compelling opportunity to participate in the evolution of regenerative medicine, driven by technological leadership and a strategic alignment with healthcare's evolving value-based paradigm.