Organogenesis (ORGO) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net revenue of $116.9 million for Q3 2022, a 3% increase year-over-year, driven by a 2% increase in advanced wound care products and a 15% increase in surgical and sports medicine products [7][33] - Gross profit for Q3 2022 was$ 90.7 million, approximately 77.6% of net revenue, compared to 77% in the previous year [34] - Operating income decreased to $1.8 million from$ 16.3 million year-over-year, while net income fell to $0.2 million from$ 12.6 million [39][40] - Adjusted EBITDA for Q3 2022 was $11.6 million, or 10% of net revenue, down from$ 21.7 million, or 19% of net revenue, in the prior year [40] Business Line Data and Key Metrics Changes - Advanced wound care net revenue was $109.5 million, up 2% year-over-year, while surgical and sports medicine products generated$ 7.3 million, up 15% [33] - Sales of PuraPly products increased by 12% year-over-year, contributing $63.7 million to net revenue [34][33] - Non-PuraPly product sales declined by 6% year-over-year, primarily due to a 21% decline in PMA and other products [15][16] Market Data and Key Metrics Changes - The company experienced a challenging operating environment in the physician office setting, impacted by competitive pressures and staffing challenges [9][10] - The hurricane Ian affected demand in Florida during the last week of the quarter, which contributed to lower sales results [8] - The company anticipates continued competitive pressure in the amniotic products market until CMS publishes ASPs [21][22] Company Strategy and Development Direction - The company aims to diversify revenue across physician specialties and sites of care, targeting product development and commercial strategies to drive growth [12] - The company paused the construction of a manufacturing facility in Canton, Massachusetts, due to a 40% increase in expected investment costs [24][25] - The company plans to continue launching innovative products and expanding its sales force to enhance market penetration [23][11] Management's Comments on Operating Environment and Future Outlook - Management noted that competitive pressures and reimbursement confusion are significant challenges, particularly in the office setting [52][58] - The company updated its full-year 2022 guidance, expecting net revenue between$ 448 million and $465 million, reflecting a decline of approximately 2% year-over-year [20][43] - Management expressed confidence in the company's unique value proposition and broad product portfolio to navigate current challenges [22][23] Other Important Information - The company is progressing in its Phase 3 clinical trial for ReNu for knee osteoarthritis, with over 82% of patients enrolled [27] - The company plans to submit an IND amendment to the FDA and expects to launch a second Phase 3 trial by mid-2023 [28] Q&A Session Summary Question: What factors contributed to the decline in the amnion business? - Management indicated that competitive pressure and confusion regarding reimbursement have persisted, impacting sales [52] Question: Any updates on Novachor and its impact on TransCyte? - Novachor is currently in a soft launch phase, with expectations for a more significant impact next year. Alternatives for TransCyte manufacturing are being explored [54] Question: How do the recent challenges affect the fourth quarter outlook? - Management acknowledged that the hurricane and competitive pressures impacted sales, but they expect to remain at the lower end of guidance [57] Question: What is the expectation for pricing strategies moving forward? - Management confirmed that pricing has been affected by competition, and they are focused on understanding account dynamics to navigate the situation [61] Question: What are the expectations for growth in 2023? - Management refrained from providing specific guidance for 2023 but noted that a larger sales force and new products should positively impact growth [64] Question: How will the company manage costs in the upcoming year? - Management emphasized a prudent investment approach based on revenue outlook while maintaining strong fundamentals [66]