CANTON, Mass., Nov. 09, 2020 (GLOBE NEWSWIRE) -- Organogenesis Holdings Inc. (Nasdaq: ORGO), a leading regenerative medicine company focused on the development, manufacture, and commercialization of product solutions for the Advanced Wound Care and Surgical & Sports Medicine markets, today reported financial results for the three and nine months ended September 30, 2020.

Third Quarter 2020 Financial Results Summary:

• Net revenue of $100.8 million for the third quarter of 2020, up 57% compared to net revenue of $64.3 million for the third quarter of 2019. Net revenue is based upon:
  • Net revenue from Advanced Wound Care products for the third quarter of 2020 of $90.0 million, an increase of 66% from the third quarter of 2019.
  • Net revenue from Surgical & Sports Medicine products for the third quarter of 2020 of $10.8 million, an increase of 9% from the third quarter of 2019.
• Net revenue from the sale of PuraPly products of $40.9 million for the third quarter of 2020, an increase of 29% from the third quarter of 2019.
• Net revenue from the sale of non-PuraPly products of $59.9 million, an increase of 84% from the third quarter of 2019.
• Net income of $20.9 million for the third quarter of 2020, compared to a net loss of $10.7 million for the third quarter of 2019, an increase of $31.7 million.
• Adjusted EBITDA of $24.6 million for the third quarter of 2020, compared to Adjusted EBITDA loss of $4.8 million for the third quarter of 2019, an increase of $29.4 million.

Third Quarter 2020 Highlights:

• In July 2020, the Company’s latest advanced wound care research on its Apligraf^®, Affinity^®, Dermagraft^®, Nushield^® and PuraPly^® AM product lines was showcased at the 2020 Symposium on Advanced Wound Care (SAWC) Spring | Wound Healing Society Virtual Experience.
• On August 24, 2020, the Company announced the appointment of Henry Hagopian, the Company’s Vice President of Finance and Treasurer, as interim Chief Financial Officer. The Company initiated a national search process to identify a permanent CFO.
• On September 17, 2020, Organogenesis Holdings Inc. acquired CPN Biosciences for aggregate consideration of $19.0 million in cash and common stock. The acquisition of CPN Biosciences did not materially impact revenue for the three months ended September 30, 2020.

“We delivered third quarter revenue growth of 57% year-over-year, which was well ahead of expectations and exceeded the high-end of our preliminary revenue range announced on October 14^th,” said Gary S. Gillheeney, Sr., President and Chief Executive Officer of Organogenesis. “During the third quarter, we grew our customer base, drove customer and clinician adoption deeper into existing accounts and leveraged the strong demand for our PuraPly and amniotic products, particularly in the office channel. The strong execution against our commercial strategy during the third quarter drove not only strong revenue growth, but also, significant improvement in our profitability as well. We also made a strategic acquisition of CPN Biosciences which we expect will significantly enhance our ability to drive growth in the office channel. CPN’s physician office management solution and complementary first-in-line advanced wound care products further broaden Organogenesis’ physician offering and accelerates our office strategy.”

Mr. Gillheeney, Sr. continued: “Despite the challenging operating environment caused by the COVID-19 pandemic, we believe the fundamentals of our business and strategy remain strong and that we are well positioned to deliver strong operating and financial performance over the balance of 2020. We are proud of Organogenesis’ resilience in the face of unprecedented challenges, and believe it is a direct result of our team’s hard work and commitment to delivering on our mission to provide integrated healing solutions that substantially improve medical outcomes while lowering the overall cost of care.”

Third Quarter 2020 Results:

Net revenue for the third quarter of 2020 was $100.8 million, compared to $64.3 million for the third quarter of 2019, an increase of $36.5 million, or 57%. The increase in net revenue was driven by a $35.7 million increase, or 66%, in net revenue of Advanced Wound Care products and a $0.9 million increase, or 9%, in net revenue of Surgical & Sports Medicine products, compared to the third quarter of 2019. The increase in Advanced Wound Care net revenue was primarily attributable to the expanded sales force, increased sales to existing and new customers and increased adoption of our amniotic product portfolio, including our Affinity product. The increase in Surgical & Sports Medicine net revenue was primarily attributable to the expanded sales force and penetration of existing and new customer accounts, partially offset by postponement or cancellation of medical procedures as a result of COVID-19. Net revenue from the sale of PuraPly products for the third quarter of 2020 was $40.9 million, compared to $31.8 million for the third quarter of 2019, an increase of $9.2 million, or 29%. Net revenue from the sale of PuraPly products represented approximately 41% of net revenue in the third quarter of 2020, as compared to 49% of net revenue in the third quarter of 2019.

Gross profit for the third quarter of 2020 was $77.8 million, or 77% of net revenue, compared to $45.1 million, or 70% of net revenue, for the third quarter of 2019, an increase of $32.7 million, or 72%. The increase in gross profit resulted primarily from increased sales volume due to the strength in our Advanced Wound Care and Surgical & Sports Medicine products as well as a shift in product mix to our higher gross margin products.

Operating expenses for the third quarter of 2020 were $54.9 million, compared to $53.4 million for the third quarter of 2019, an increase of $1.5 million, or 3%. R&D expense was $3.7 million for the third quarter of 2020, compared to $3.9 million in the third quarter of 2019, a decrease of $0.2 million, or 5%. The decrease was primarily due to delayed enrollment in trials and limited clinical spending due to the COVID-19. Selling, general and administrative expenses were $51.1 million, compared to $49.5 million in the third quarter of 2019, an increase of $1.7 million, or 3%. The increase in selling, general and administrative expenses was primarily due to a $6.4 million increase related to additional headcount, primarily in our direct sales force and increased sales commissions due to increased sales, a $0.6 million increase in other selling expenses, including credit card processing fees and royalties. These increases were partially offset by a $3.3 million decrease related to reduced travel and marketing programs amid travel restrictions in place due to the COVID-19, a $0.6 million decrease in amortization associated with intangible assets amortized using an accelerated method, a $0.6 million decrease in legal, consulting fees and other costs associated with the ongoing operations of our business and a $0.8 million decrease in bad debt primarily due to the collection of the previously reserved related party receivables.

Operating income for the third quarter of 2020 was $23.0 million, compared to an operating loss of $8.3 million for the third quarter of 2019, an increase of $31.2 million, primarily due to higher revenue and gross profit compared to the prior year period.

Total other expenses, net, for the third quarter of 2020 were $2.0 million, compared to $2.4 million for the third quarter of 2019, a decrease of $0.5 million, or 19%. The decrease is primarily due to a $1.0 million decrease in legal accruals related to the settlement of the assumed legacy lawsuit from the sellers of NuTech Medical in October 2020. We assumed the legacy lawsuit as part of the resolution of the deferred acquisition consideration dispute with the sellers of NuTech Medical in February 2020. The decrease in total other expenses, net, was partially offset by a $0.5 million or 22% increase in interest expense resulting from the increased borrowings under the 2019 Credit Agreement.

Net income for the third quarter of 2020 was $20.9 million, or $0.19 per share, compared to a net loss of $10.7 million, or $0.12 per share, for the third quarter of 2019, an increase of $31.7 million.

As of September 30, 2020, the Company had $36.5 million in cash and $114.7 million in debt obligations, of which $15.7 million were capital lease obligations, compared to $60.2 million in cash and $100.6 million in debt obligations, of which $17.5 million were capital lease obligations as of December 31, 2019.

Net revenue for the nine months ended September 30, 2020 was $231.5 million, compared to $186.3 million for the first nine months of 2019, an increase of $45.2 million, or 24%. The increase in net revenue was driven by a $43.6 million increase, or 28%, in net revenue of Advanced Wound Care products and a $1.5 million increase, or 5%, in net revenue of Surgical & Sports Medicine products compared to the prior year. Net revenue of PuraPly products for the nine months ended September 30, 2020 were $102.0 million, compared to $86.9 million for the first nine months of 2019, an increase of $15.1 million, or 17%. Net revenue of PuraPly products represented approximately 44% of net revenue for the nine months ended September 30, 2020, compared to 47% for the first nine months of 2019.

Gross profit for the nine months ended September 30, 2020 was $169.7 million or 73% of net revenue, compared to $130.8 million, or 70% of net revenue, for the first nine months of 2019, an increase of $38.9 million, or 30%. The increase in gross profit resulted primarily from increased sales volume due to the strength in our Advanced Wound Care and Surgical & Sports Medicine products as well as a shift in product mix to our higher gross margin products.

Operating expenses for the nine months ended September 30, 2020 were $164.0 million, compared to $158.5 million for the first nine months of 2019, an increase of $5.6 million, or 4%. The increase in operating expenses in 2020 was driven primarily by higher selling, general and administrative expenses which increased to $150.3 million, compared to $147.3 million for the first nine months of 2019, an increase of $2.9 million, or 2% and, to a lesser extent, higher R&D expense which was $13.8 million, compared to $11.2 million for the first nine months of 2019, an increase of $2.6 million, or 24%. The increase in selling, general and administrative expenses was primarily due to a $10.5 million increase related to additional headcount, primarily in our direct sales force and increased sales commissions due to increased sales, a $2.0 million cancellation fee for certain product development and consulting agreements, and a $0.9 million increase in credit card processing fees due to increased collection. These increases were partially offset by a $6.4 million decrease related to reduced travel and marketing programs amid travel restrictions in place due to the COVID-19, a $1.4 million decrease in legal, consulting fees and other costs associated with the ongoing operations of our business, a $2.0 decrease in amortization associated with the intangible assets amortized using an accelerated method and a $0.8 million decrease in bad debt primarily due to the collection of the previously reserved related party receivables. The increase in research and development expenses was primarily due to an increase in process development costs associated with a new contract manufacturer, increased headcount associated with our existing Advanced Wound Care and Surgical & Sports Medicine products, an increase in product costs associated with our pipeline products not yet commercialized and an increase in costs to move products through the regulatory pathway (e.g., seek BLA approval). The increase was partially offset by a decrease due to delayed enrollment in trials and limited clinical spending due to the COVID-19.

Operating income for the nine months ended September 30, 2020 was $5.6 million, compared to an operating loss of $27.7 million for the first nine months of 2019, an increase of $33.3 million.

Total other expenses for the nine months ended September 30, 2020 were $6.1 million, compared to $8.2 million for the first nine months of 2019, a decrease of $2.2 million, or 27%. The decrease in total other expenses for the nine months ended September 30, 2020 was driven primarily by a gain of $2.2 million on the settlement of deferred acquisition consideration for the nine months ended September 30, 2020, and a $1.9 million non-cash loss on the extinguishment of debt related to the write-off of unamortized debt discount upon repayment of the master lease agreement as well as early payment penalties for the nine months ended September 2019, which did not impact results in the current period. The decrease in total other expenses for the nine months ended September 30, 2020 was partially offset by an increase in interest expense of $2.0 million related to increased borrowings compared to the prior year period.

Net loss for the nine months ended September 30, 2020 was $0.5 million, or $0.01 per share, compared to a net loss of $36.1 million, or $0.40 per share, for the first nine months of 2019.

Fiscal Year 2020 Financial Guidance:

The Company is reaffirming the financial guidance provided on October 14, 2020. For the twelve months ending December 31, 2020, the Company continues to expect:

• Net revenue of between $311 million and $314 million, representing growth of approximately 19% to 20% year-over-year, as compared to net revenue of $261 million for the twelve months ended December 31, 2019.
• The 2020 net revenue guidance range assumes:
  • Net revenue from Advanced Wound Care products of between $273 million and $275 million, representing growth of approximately 24% to 25% year-over-year as compared to net revenue of $221 million for the twelve months ended December 31, 2019.
  • Net revenue from Surgical & Sports Medicine products of between $38 million and $39 million, representing a decrease of approximately 3% to 6% year-over-year as compared to net revenue of $40 million for the twelve months ended December 31, 2019.
  • Net revenue from the sale of PuraPly products of between $119 million and $121 million, representing a decrease of approximately 5% to 6% year-over-year, as compared to net revenue of $127 million for the twelve months ended December 31, 2019.
• The Company expects to report positive GAAP net income and positive Adjusted EBITDA for the three months ended December 31, 2020.
• The Company expects to report positive GAAP net income and positive Adjusted EBITDA for the full fiscal year 2020 period.

About Organogenesis Holdings Inc.

Organogenesis Holdings Inc. is a leading regenerative medicine company offering a portfolio of bioactive and acellular biomaterials products in advanced wound care and surgical biologics, including orthopedics and spine. Organogenesis’s comprehensive portfolio is designed to treat a variety of patients with repair and regenerative needs. For more information, visit www.organogenesis.com.