What changed in Organogenesis Holdings Inc.'s 10-K — 2023 vs 2024
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Paragraph-level year-over-year comparison of Organogenesis Holdings Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.
+330 added−446 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-29)
Top changes in Organogenesis Holdings Inc.'s 2024 10-K
330 paragraphs added · 446 removed · 219 edited across 8 sections
- Item 1A. Risk Factors+216 / −307 · 136 edited
- Item 7. Management's Discussion & Analysis+91 / −118 · 69 edited
- Item 3. Legal Proceedings+4 / −7 · 2 edited
- Item 5. Market for Registrant's Common Equity+7 / −5 · 5 edited
- Item 2. Properties+5 / −2 · 2 edited
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
136 edited+80 added−171 removed302 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
136 edited+80 added−171 removed302 unchanged
2023 filing
2024 filing
Biggest changeIn general, physicians may be slow to change their medical treatment practices and use of our products for the following reasons, among others: • their lack of experience using our products; • lack of evidence supporting additional patient benefits from use of our products over conventional methods; • pressure to contain costs; • preference for other treatment modalities or our competitors’ products; • perceived liability risks generally associated with the use of new products and procedures; • limited availability of coverage and/or reimbursement from third-party payers; and • the time that must be dedicated to training. 39 Table of Contents The degree of market acceptance of our products will continue to depend on a number of factors, including: • the safety and efficacy of our products; • the potential and perceived advantages of our products over alternative treatments; • clinical data and the clinical indications for which our products are approved; • product labeling or product insert requirements of the FDA or other regulatory authorities, including any limitations or warnings contained in approved labeling; • the cost of, and relative reimbursement rate for, using our products relative to the use of our competitors’ products or alternative treatment modalities; • relative convenience and ease of administration; • the strength of marketing and distribution support; • the quality of the service and support provided to our customers; • the timing of market introduction of competitive products; • publicity concerning our products or competing products and treatments; • our reputation and the reputation of the products; • the shelf life of our products and our ability to manage the logistics of the end-user supply chain; and • sufficient and readily accessible third-party insurance coverage and reimbursement.
Biggest changeIn general, physicians may be slow to change their medical treatment practices and use of our products for many reasons, including but not limited to: their lack of experience using our products; pressure to contain costs; preference for other treatment modalities or our competitors’ products; perceived liability risks generally associated with the use of new products and procedures; limited availability of coverage and/or reimbursement from third-party payers; and the time that must be dedicated to training.
Nussdorf, Dennis Erani, Starr Wisdom, and certain of their respective affiliates, including Organo PFG LLC, Organo Investors LLC, Dennis Erani 2012 Issue Trust, Alan Ades as Trustee of the Alan Ades 2014 GRAT, Albert Erani Family Trust dated 12/29/2012, GN 2016 Family Trust u/a/d August 12, 2016, GN 2016 Organo 10-Year GRAT u/a/d September 30, 2016 and RED Holdings, LLC, who we refer to collectively as the Significant Stockholder Group, control a significant amount of the voting power of the outstanding Class A common stock.
Nussdorf, Dennis Erani, Starr Wisdom, Josette Ades, and certain of their respective affiliates, including Organo PFG LLC, Organo Investors LLC, Dennis Erani 2012 Issue Trust, Alan Ades as Trustee of the Alan Ades 2014 GRAT, Albert Erani Family Trust dated 12/29/2012, GN 2016 Family Trust u/a/d August 12, 2016, GN 2016 Organo 10-Year GRAT u/a/d September 30, 2016 and RED Holdings, LLC, who we refer to collectively as the Significant Stockholder Group, control a significant amount of the voting power of the outstanding Class A common stock.
U.S. federal and state laws that affect our ability to operate include, but are not limited to: • the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering, or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind in return for, the purchase, recommendation, leasing or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; • the federal physician self-referral law, which prohibits a physician from referring a patient to an entity with which the physician (or an immediate family member) has a financial relationship, for the furnishing of certain designated health services for which payment may be made by Medicare or Medicaid, unless an exception applies; • federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other government payers that are false or fraudulent; • 18 U.S.C. § 1347, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing a scheme or from making false or fraudulent statements to defraud any healthcare benefit program (i.e., public or private); • federal transparency laws, including the Physician Payments Sunshine Act which requires the tracking and disclosure to the federal government by pharmaceutical and medical device manufacturers of payments and other transfers of value to physicians and teaching hospitals as well as ownership and investment interests that are held by physicians and their immediate family members; and • state law equivalents of each of these federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payer, including commercial insurers; state laws that require pharmaceutical and medical device companies to comply with their industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict certain payments that may be made to healthcare providers and other potential referral sources; state laws that require drug and medical device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that prohibit giving gifts to licensed healthcare professionals; and state laws governing the 55 Table of Contents privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts in certain circumstances, such as specific disease states.
United States federal and state laws that affect our ability to operate include, but are not limited to: • the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering, or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind in return for, the purchase, recommendation, leasing or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; • the federal physician self-referral law, which prohibits a physician from referring a patient to an entity with which the physician (or an immediate family member) has a financial relationship, for the furnishing of certain designated health services for which payment may be made by Medicare or Medicaid, unless an exception applies; • federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other government payers that are false or fraudulent; • 18 U.S.C. § 1347, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing a scheme or from making false or fraudulent statements to defraud any healthcare benefit program (i.e., public or private); • federal transparency laws, including the Physician Payments Sunshine Act which requires the tracking and disclosure to the federal government by pharmaceutical and medical device manufacturers of payments and other transfers of value to physicians and teaching hospitals as well as ownership and investment interests that are held by physicians and their immediate family members; and • state law equivalents of each of these federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payer, including commercial insurers; state laws that require pharmaceutical and medical device companies to comply with their industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict certain payments that may be made to healthcare providers and other potential referral sources; state laws that require drug and medical device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that prohibit giving gifts to licensed healthcare professionals; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts in certain circumstances, such as specific disease states.
Because we depend upon a limited group of suppliers and manufacturers for our products, including our Apligraf, Affinity, CYGNUS, Novachor, NuShield and PuraPly Antimicrobial products, we may incur significant product development costs and experience material delivery delays if we lose any significant supplier, which could materially impact sales of our products.
Because we depend upon a limited group of suppliers and manufacturers for our products, including Apligraf, Affinity, CYGNUS, Novachor, NuShield and PuraPly Antimicrobial products, we may incur significant product development costs or experience material delivery delays if we lose any significant supplier, which could materially impact sales of our products.
Any changes in the healthcare regulatory, payment, or enforcement landscape relative to our customers’ healthcare services also have the potential to significantly affect our operations and revenue. In addition, Medicare uses regional contractors called Medicare Administrative Contractors, or MACs, to process claims, develop coverage policies and make payments within designated geographic jurisdictions.
Any changes in the healthcare regulatory, payment, or enforcement landscape relative to our customers’ healthcare services also have the potential to significantly affect our operations and revenue. In addition, Medicare uses regional contractors called MACs, to process claims, develop coverage policies and make payments within designated geographic jurisdictions.
Risks Related to Regulation of Our Products and Other Government Regulations Our products are subject to the Infrastructure Investment and Jobs Act and rebate obligations that took effect on January 1, 2023, and we may owe rebates, which could be material, on our Apligraf, Dermagraft, and PuraPly products and possibly other products.
Risks Related to Regulation of Our Products and Other Government Regulations Our products are subject to the Infrastructure Investment and Jobs Act and corresponding rebate obligations that took effect on January 1, 2023, and we may owe rebates, which could be material, on our Apligraf, Dermagraft, and PuraPly products and possibly other products.
Under the Company bylaws, unless the Company consents in writing to the selection of an alternative forum, the sole and exclusive forum will be the Court of Chancery of the State of Delaware for: • any derivative action or proceeding brought on behalf of the Company; • any action asserting a claim of breach of a fiduciary duty owed by, or any wrongdoing by, any director, officer or employee of the Company to the Company or the Company’s stockholders; 66 Table of Contents • any action asserting a claim arising pursuant to any provision of the DGCL, the certificate of incorporation (including as it may be amended from time to time), or the bylaws; • any action to interpret, apply, enforce or determine the validity of the certificate of incorporation or the bylaws; or • any action asserting a claim governed by the internal affairs doctrine, in each case, except for, (1) any action as to which the Court of Chancery determines that there is an indispensable party not subject to the personal jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten (10) days following such determination) and (2) any action asserted under the Securities Exchange Act of 1934, as amended, or the rules and regulations promulgated thereunder, for which federal courts have exclusive jurisdiction.
Under the Company bylaws, unless the Company consents in writing to the selection of an alternative forum, the sole and exclusive forum will be the Court of Chancery of the State of Delaware for: • any derivative action or proceeding brought on behalf of the Company; • any action asserting a claim of breach of a fiduciary duty owed by, or any wrongdoing by, any director, officer or employee of the Company to the Company or the Company’s stockholders; • any action asserting a claim arising pursuant to any provision of the DGCL, the certificate of incorporation (including as it may be amended from time to time), or the bylaws; • any action to interpret, apply, enforce or determine the validity of the certificate of incorporation or the bylaws; or • any action asserting a claim governed by the internal affairs doctrine, in each case, except for, (1) any action as to which the Court of Chancery determines that there is an indispensable party not subject to the personal jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten (10) days following such determination) and (2) any action asserted under the Securities Exchange Act of 1934, as amended, or the rules and regulations promulgated thereunder, for which federal courts have exclusive jurisdiction.
If we fail to comply or are deemed to have failed to comply with applicable privacy protection laws and regulations such failure could result in government enforcement actions and create liability for us, which could include substantial civil and/or criminal penalties, as well as private litigation and/or adverse publicity that could negatively affect our operating results and business. 45 Table of Contents We engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on our business, results of operations, and financial condition.
If we fail to comply or are deemed to have failed to comply with applicable privacy protection laws and regulations such failure could result in government enforcement actions and create liability for us, which could include substantial civil and/or criminal penalties, as well as private litigation and/or adverse publicity that could negatively affect our operating results and business. 20 Table of Contents We engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on our business, results of operations, and financial condition.
The failure by us or one of our suppliers to comply with applicable regulatory requirements could result in, among other things, the FDA or other governmental authorities: • imposing fines and penalties on us; • preventing us from manufacturing or selling our products; 69 Table of Contents • delaying or denying pending applications for approval or clearance of our products or of new uses or modifications to our existing products, or withdrawing or suspending current approvals or clearances; • ordering or requesting a recall of our products; • issuing warning letters or untitled letters; • imposing operating restrictions, including a partial or total shutdown of production or investigation of any or all of our products; • refusing to permit to import or export of our products; • detaining or seizing our products; • obtaining injunctions preventing us from manufacturing or distributing any or all of our products; • commencing criminal prosecutions or seeking civil penalties; and • requiring changes in our advertising and promotion practices.
The failure by us or one of our suppliers to comply with applicable regulatory requirements could result in, among other things, the FDA or other governmental authorities: • imposing fines and penalties on us; • preventing us from manufacturing or selling our products; • delaying or denying pending applications for approval or clearance of our products or of new uses or modifications to our existing products, or withdrawing or suspending current approvals or clearances; • ordering or requesting a recall of our products; • issuing warning letters or untitled letters; • imposing operating restrictions, including a partial or total shutdown of production or investigation of any or all of our products; • refusing to permit to import or export of our products; • detaining or seizing our products; • obtaining injunctions preventing us from manufacturing or distributing any or all of our products; • commencing criminal prosecutions or seeking civil penalties; and • requiring changes in our advertising and promotion practices.
This exemption is based on the possibility that CMS will, in future rulemaking, stop paying for skin substitutes using the ASP methodology and bundle payment into the payment for the application of the product.
This exemption is based on a possibility that CMS will, in future rulemaking, stop paying for skin substitutes using the ASP methodology and bundle payment into the payment for the application of the product.
Misconduct by these parties could include, but is not limited to, intentional, reckless and/or negligent failures to comply with: • the laws and regulations of the FDA and its foreign counterparts requiring the reporting of true, complete and accurate information to such regulatory bodies, including but not limited to safety problems associated with the use of our products; • laws and regulations of the FDA and its foreign counterparts concerning the conduct of clinical trials and the protection of human research subjects; • other laws and regulations of the FDA and its foreign counterparts relating to the manufacture, processing, packing, holding, investigating or distributing in commerce of medical devices, biological products and/or HCT/Ps; or • manufacturing standards we have established.
Misconduct by these parties could include, but is not limited to, intentional, reckless and/or negligent failures to comply with: • the laws and regulations of the FDA and its foreign counterparts requiring the reporting of true, complete and accurate information to such regulatory bodies, including but not limited to safety problems associated with the use of our products; 44 Table of Contents • laws and regulations of the FDA and its foreign counterparts concerning the conduct of clinical trials and the protection of human research subjects; • other laws and regulations of the FDA and its foreign counterparts relating to the manufacture, processing, packing, holding, investigating or distributing in commerce of medical devices, biological products and/or HCT/Ps; or • manufacturing standards we have established.
If we obtain BLA approval for ReNu or NuCel, compliance with applicable post-market regulatory requirements will involve significant time and substantial costs. Even for those products that remain regulated as Section 361 HCT/Ps, increasing regulatory scrutiny within the industry in which we operate could lead to heightened requirements, compliance with which could be costly.
If we obtain BLA approval for ReNu, compliance with applicable post-market regulatory requirements will involve significant time and substantial costs. Even for those products that remain regulated as Section 361 HCT/Ps, increasing regulatory scrutiny within the industry in which we operate could lead to heightened requirements, compliance with which could be costly.
In the United States, allegations of such wrongful conduct could also result in a corporate integrity agreement with the U.S. government that imposes significant administrative obligations and costs. We and our employees and contractors are subject, directly or indirectly, to federal, state and foreign healthcare fraud and abuse laws, including false claims laws.
In the United States, allegations of such wrongful conduct could also result in a corporate integrity agreement with the United States government that imposes significant administrative obligations and costs. We and our employees and contractors are subject, directly or indirectly, to federal, state and foreign healthcare fraud and abuse laws, including false claims laws.
Provisions in the Company’s charter may inhibit a takeover of the Company, which could limit the price investors might be willing to pay in the future for the Company's Class A common stock and could entrench management. The Company’s certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that shareholders may consider to be in their best interests.
Provisions in the Company’s charter may inhibit a takeover of the Company, which could limit the price investors might be willing to pay in the future for the Company's Class A common stock and could entrench management. The Company’s certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests.
The Company’s future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of the Company’s deferred tax assets and liabilities; • expected timing and amount of the release of any tax valuation allowances; • tax effects of stock-based compensation; • costs related to intercompany restructurings; • changes in tax laws, regulations or interpretations thereof; and • lower than anticipated future earnings in jurisdictions where the Company has lower statutory tax rates and higher than anticipated future earnings in jurisdictions where the Company has higher statutory tax rates.
The Company’s future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of the Company’s deferred tax assets and liabilities; • expected timing and amount of the release of any tax valuation allowances; • tax effects of stock-based compensation; • costs related to intercompany restructurings; 45 Table of Contents • changes in tax laws, regulations or interpretations thereof; and • lower than anticipated future earnings in jurisdictions where the Company has lower statutory tax rates and higher than anticipated future earnings in jurisdictions where the Company has higher statutory tax rates.
Compliance with these regulations and laws is costly, and failure to comply with applicable legal and regulatory obligations could adversely affect us in a variety of ways that include, but are not limited to, significant criminal, civil, and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments and 57 Table of Contents restrictions on certain business activities.
Compliance with these regulations and laws is costly, and failure to comply with applicable legal and regulatory obligations could adversely affect us in a variety of ways that include, but are not limited to, significant criminal, civil, and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments and restrictions on certain business activities.
Patent and Trademark Office developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, including the first to file provisions, only became effective in March 2013.
The United States Patent and Trademark Office developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, including the first to file provisions, only became effective in March 2013.
The size and complexity of our information technology and information security systems, and those of our third-party vendors with whom we contract (and the large amounts of confidential information that is present on them), make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from malicious attacks by third parties.
The size and complexity of our information technology and information 19 Table of Contents security systems, and those of our third-party vendors with whom we contract (and the large amounts of confidential information that is present on them), make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from malicious attacks by third parties.
We may have liability for the actions of independent sales agencies in marketing our products and our lack of control over their activities impedes our ability to prevent, detect or address such non-compliance. 42 Table of Contents We intend to develop relationships and arrangements with additional independent sales agencies in order to increase our sales with respect to certain of our products.
We may have liability for the actions of independent sales agencies in marketing our products and our lack of control over their activities impedes our ability to prevent, detect or address such non-compliance. We intend to develop relationships and arrangements with additional independent sales agencies in order to increase our sales with respect to certain of our products.
We are subject to the following factors, among others, that may negatively affect our operating results: • the announcement or introduction of new products by our competitors; • failure of government healthcare programs and private health plans to cover our products or to timely and adequately reimburse the users of our products; • the rate of reimbursement by government and private insurers for use of our products; • any change in Medicare payment policy which provides a competitive advantage to our competitor’s products; 37 Table of Contents • any change in government healthcare programs’ and private health plans’ policies regarding sales and reimbursement of durable medical equipment (DME), including a prohibition on physician-owned DME supplier entities; • whether our products or our competitors’ products are granted pass-through reimbursement status or included in the "bundled" reimbursement structure; • our ability to upgrade and develop our systems and infrastructure to accommodate growth; • our ability to attract and retain key personnel in a timely and cost-effective manner; • our ability to offer our wound care and surgical products and supplies using our existing sales force and distribution network; • the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations, and infrastructure; • changes in, or enactment of new laws or regulations promulgated by federal, state, or local governments; • cost containment initiatives or policies developed by government and commercial payers that create financial incentives not to use our products; • our inability to demonstrate that our products are cost-effective or superior to competing products; • our ability to develop new products; • discovery of product defects during the manufacturing process; • initiation of a government investigation into potential non-compliance with laws or regulations; • issuance of government advisory opinions or program bulletins that could negatively affect one or more of our sales models; • sanctions imposed by federal or state governments due to non-compliance with laws or regulations; • recall of one or more of our products by the FDA due to noncompliance with FDA requirements; and • general economic conditions as well as economic conditions specific to the healthcare industry.
We are subject to the following factors, among others, that may negatively affect our operating results: • the announcement or introduction of new products by our competitors; • failure of government healthcare programs and private health plans to cover our products or to timely and adequately reimburse the users of our products; • the rate of reimbursement by government and private insurers for use of our products; • any change in Medicare payment policy which provides a competitive advantage to our competitor’s products; • any change in government healthcare programs’ and private health plans’ policies regarding sales and reimbursement of durable medical equipment (DME), including a prohibition on physician-owned DME supplier entities; • our ability to upgrade and develop our systems and infrastructure to accommodate growth; • our ability to attract and retain key personnel in a timely and cost-effective manner; • our ability to offer our wound care and surgical products and supplies using our existing sales force and distribution network; • the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations, and infrastructure; • changes in, or enactment of new laws or regulations promulgated by federal, state, or local governments; • cost containment initiatives or policies developed by government and commercial payers that create financial incentives not to use our products; • our inability to demonstrate that our products are cost-effective or superior to competing products; • our ability to develop new products; • discovery of product defects during the manufacturing process; • initiation of a government investigation into potential non-compliance with laws or regulations; • issuance of government advisory opinions or program bulletins that could negatively affect one or more of our sales models; • sanctions imposed by federal or state governments due to non-compliance with laws or regulations; • recall of one or more of our products by the FDA due to noncompliance with FDA requirements; and • general economic conditions as well as economic conditions specific to the healthcare industry.
If we are unable to maintain product liability insurance at an acceptable cost or on acceptable terms with adequate coverage or otherwise protect ourselves against potential product liability claims or we underestimate the amount of insurance we need, we could be exposed to significant liabilities, which may harm our business.
If we are unable to maintain product liability insurance at an acceptable cost or on acceptable terms with adequate coverage or otherwise protect ourselves against potential product liability claims or we underestimate 16 Table of Contents the amount of insurance we need, we could be exposed to significant liabilities, which may harm our business.
Despite the steps taken to date by U.S. agencies to protect depositors and our current belief that we do not have exposure to loss as a result of SVB’s receivership, the follow-on effects of the events surrounding the SVB, Signature Bank and First Republic Bank failures and pressure on other banks are unknown and could include failures of other financial institutions or significant disruptions to our operations, financial position, and reputation.
Despite the steps taken to date by United States agencies to protect depositors and our current belief that we do not have exposure to loss as a result of SVB’s receivership, the follow-on effects of the events surrounding the SVB, Signature Bank and First Republic Bank failures and pressure on other banks are unknown and could include failures of other financial institutions or significant disruptions to our operations, financial position, and reputation.
While we cannot predict the outcome of current or future legislation, we anticipate, particularly given the recent focus on healthcare reform legislation, that governmental authorities will continue to introduce initiatives directed at lowering the total cost of healthcare and restricting coverage and reimbursement for our products.
While we cannot predict the outcome of current or future legislation or regulation, we anticipate, particularly given the recent focus on healthcare reform legislation and regulatory actions, that governmental authorities will continue to introduce initiatives directed at lowering the total cost of healthcare and restricting coverage and reimbursement for our products.
The amount of time that is required to resolve these lawsuits is unpredictable and any litigation or claims against us, even those without merit, may cause us to incur substantial costs, divert management’s attention from the day-to-day operation of our business, and materially harm our reputation.
The amount of time that is required to resolve these lawsuits is unpredictable and any litigation or claims against us, even those without merit, may cause us to 41 Table of Contents incur substantial costs, divert management’s attention from the day-to-day operation of our business, and materially harm our reputation.
Any of these events could adversely affect our ability to achieve our development and commercialization goals, which could have a material adverse effect on our business, results of operations, and financial condition. Our future success depends on our ability to retain key employees, consultants and advisors, and to attract, retain and motivate qualified personnel.
Any of these events could adversely affect our ability to achieve our development and commercialization goals, which could have a material adverse effect on our business, results of operations, and financial condition. 42 Table of Contents Our future success depends on our ability to retain key employees, consultants and advisors, and to attract, retain and motivate qualified personnel.
If any of our products are implicated in the transmission of any communicable disease, our officers, employees and we could be subject to government sanctions including but not limited to recalls, and civil and criminal liability, with sanctions that include exclusion from doing business with the federal government.
If any of our products are implicated in the transmission of any communicable disease, our officers, employees and we could be subject to government sanctions including but not limited to recalls, and civil and criminal liability, with sanctions that include exclusion from doing business with the federal 28 Table of Contents government.
We may also hire additional employees who are currently employed at other medical device, pharmaceutical, or biotechnology 61 Table of Contents companies, including our competitors. Additionally, consultants or other independent agents with whom we may contract may be or have been in a contractual arrangement with one or more of our competitors.
We may also hire additional employees who are currently employed at other medical device, pharmaceutical, or biotechnology companies, including our competitors. Additionally, consultants or other independent agents with whom we may contract may be or have been in a contractual arrangement with one or more of our competitors.
For product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens.
For product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of 25 Table of Contents patients placed in ineffective control regimens.
This expansion will place a significant strain on management, operational and financial resources. To manage the expected growth of our operations, we must both modify our existing operational and financial systems, procedures and controls and implement new systems, procedures and controls. We must also expand our finance, administrative, and operations staff.
This expansion will place a significant strain on management, operational and financial resources. To manage the expected growth of 18 Table of Contents our operations, we must both modify our existing operational and financial systems, procedures and controls and implement new systems, procedures and controls. We must also expand our finance, administrative, and operations staff.
We engage in various types of activities, including the conduct of speaker programs to educate physicians, the provision of reimbursement advice and support to customers, and the provision of customer and patient support services, that have been the subject of government scrutiny and enforcement action within the medical device industry.
We engage in various types of activities, including the 30 Table of Contents conduct of speaker programs to educate physicians, the provision of reimbursement advice and support to customers, and the provision of customer and patient support services, that have been the subject of government scrutiny and enforcement action within the medical device industry.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed. We may be subject to claims challenging the inventorship or ownership of the patents and other intellectual property that we own or license.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed. 36 Table of Contents We may be subject to claims challenging the inventorship or ownership of the patents and other intellectual property that we own or license.
A breakdown in existing controls and procedures around our cyber-security environment may prevent us from detecting, reporting or responding to cyber incidents in a timely manner and could have a material adverse effect on our financial position and 44 Table of Contents value of our stock.
A breakdown in existing controls and procedures around our cyber-security environment may prevent us from detecting, reporting or responding to cyber incidents in a timely manner and could have a material adverse effect on our financial position and value of our stock.
Unfavorable results from these trials or studies or from similar trials or studies conducted by others may negatively 52 Table of Contents affect the use or adoption of our products by physicians, hospitals, and payers, which could have a negative impact on the market acceptance of these products and their profitability.
Unfavorable results from these trials or studies or from similar trials or studies conducted by others may negatively affect the use or adoption of our products by physicians, hospitals, and payers, which could have a negative impact on the market acceptance of these products and their profitability.
Operating in international markets also requires significant management attention and financial resources. We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws. The U.S. Foreign Corrupt Practices Act, or FCPA, the U.K.
Operating in international markets also requires significant management attention and financial resources. We could be adversely affected by violations of the United States Foreign Corrupt Practices Act and similar worldwide anti-bribery laws. The United States Foreign Corrupt Practices Act, or FCPA, the U.K.
Such licenses may not be available on commercially reasonable terms, if at all. We have in the past and may in the future choose to settle disputes involving third-party intellectual property by taking a license. Such licenses or other settlements may involve, for example, upfront payments, yearly maintenance fees and royalties.
Such licenses may not be available on commercially reasonable terms, if at all. We 35 Table of Contents have in the past and may in the future choose to settle disputes involving third-party intellectual property by taking a license. Such licenses or other settlements may involve, for example, upfront payments, yearly maintenance fees and royalties.
This could significantly disrupt our ability to purchase or lease required equipment, supplies, products 41 Table of Contents and components in a cost-effective and timely manner and could have a material adverse effect on our business, results of operations, and financial condition.
This could significantly disrupt our ability to purchase or lease required equipment, supplies, products and components in a cost-effective and timely manner and could have a material adverse effect on our business, results of operations, and financial condition.
On November 16, 2017, the FDA issued a final guidance document entitled, "Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use", or 361 HCT/P Guidance, which provides FDA’s current thinking on how to apply the existing regulatory criteria for regulation as a Section 361 51 Table of Contents HCT/P.
On November 16, 2017, the FDA issued a final guidance document entitled, "Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use", or 361 HCT/P Guidance, which provides FDA’s current thinking on how to apply the existing regulatory criteria for regulation as a Section 361 HCT/P.
The presence of this competition in our market may lead to pricing pressure, which would make it more difficult to sell our products at a price that will make us profitable 67 Table of Contents or prevent us from selling our products at all.
The presence of this competition in our market may lead to pricing pressure, which would make it more difficult to sell our products at a price that will make us profitable or prevent us from selling our products at all.
Possible reductions in, or eliminations of, coverage or reimbursement by third-party payers, or the denial of, or provision of uneconomical reimbursement for new products, as a result of these changes may affect our customers’ revenue and ability to purchase our products.
Possible reductions in, or eliminations of, coverage or reimbursement by third-party payers, or the denial of, or provision of uneconomical reimbursement for new products, as a result of changes in coverage and reimbursement, may affect our customers’ revenue and ability to purchase our products or product candidates.
In such an event, potential competitors might be able to enter the market, which could have a material adverse effect on our business, results of operations, and financial condition. C hanges in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
In such an event, potential competitors might be able to enter the market, which could have a material adverse effect on our business, results of operations, and financial condition. C hanges in United States patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
In addition, we are obligated to indemnify and advance expenses to certain individuals involved in certain of these proceedings. Any adverse judgment in or settlement of any pending or any future litigation could result in significant payments, fines and penalties that could have a material adverse effect on our business, results of operations, financial condition and reputation.
In addition, we may be obligated to indemnify and advance expenses to certain individuals involved in certain of these proceedings. Any adverse judgment in or settlement of any future litigation could result in significant payments, fines and penalties that could have a material adverse effect on our business, results of operations, financial condition and reputation.
We may be required in the future to record additional charges to earnings if our goodwill, amortizable intangible assets, or other investments become impaired. Any such charge would adversely impact our financial results. 46 Table of Contents Our ability to use our net operating loss carryforwards may be subject to certain limitations.
We may be required in the future to record additional charges to earnings if our goodwill, amortizable intangible assets, or other investments become impaired. Any such charge would adversely impact our financial results. Our ability to use our net operating loss carryforwards may be subject to certain limitations.
In particular, such products may require FDA approval of Biologics License Applications, or BLAs, under Section 351 of the PHSA, Premarket Approval, or PMA, submissions under Section 515 of the Federal Food, Drug, and Cosmetic Act, or FDCA, or may require clearance under Section 510(k) of the FDCA.
In particular, such products may require FDA approval of BLAs, under Section 351 of the PHSA, Premarket Approval, or PMA, submissions under Section 515 of the Federal Food, Drug, and Cosmetic Act, or FDCA, or may require clearance under Section 510(k) of the FDCA.
These changes may negatively affect the sales of our existing or development of future products, increase the cost, and decrease the availability of financing, or increase costs associated with producing and distributing our products and potential product candidates. Moreover, there has been recent turmoil in the global banking system.
These changes may negatively affect the sales of our existing or development of future products, increase the cost, and decrease the availability of financing, or increase costs associated with producing and distributing our products and potential product candidates. Moreover, there has been recent turmoil in the global banking system over the past few years.
Events that may prevent successful or timely completion of clinical development include: • the FDA may require additional clinical trials in connection with the approval of product candidates; • delays in reaching a consensus with the FDA or other regulatory authorities on trial design; • delays in reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites; • delays in opening clinical trial sites or obtaining required IRB or independent ethics committee approval at each clinical trial site; • our decision or the requirement of regulators or IRBs to suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements, a finding that the participants are being exposed to unacceptable health risks, or the imposition of a clinical hold as a result of a serious adverse event or after an inspection of our clinical trial operations or clinical trial sites; • delays in recruiting suitable patients to participate in our future clinical trials, including, but not limited to challenges associated with any resurgence of COVID-19; • failure by us, any CROs we engage or any other third parties to adhere to clinical trial or regulatory requirements; • failure by us, any CROs we engage or any other third parties to perform in accordance with Good Clinical Practice, or GCP, cGMPs, or applicable regulatory guidelines in the United States and other international markets; • failure by physicians to adhere to delivery protocols leading to variable results; 48 Table of Contents • delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical trial sites, including delays by third parties with whom we have contracted to perform certain of those functions due to COVID-19 or other reasons; • insufficient or inadequate supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates; • delays in having patients complete participation in a clinical trial or return for post-treatment follow-up; • clinical trial sites or patients dropping out of a clinical trial at a rate higher than we anticipate; • selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the resulting data; • receipt of negative or inconclusive clinical trial results; • occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; • occurrence of serious adverse events in clinical trials of the same class of agents conducted by other sponsors; and • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; ReNu is in Phase 3 clinical development for the management of symptoms associated with knee OA.
Events that may prevent successful or timely completion of clinical development include: • the FDA may require additional clinical trials in connection with the premarket review of product candidates; • delays in reaching a consensus with the FDA or other regulatory authorities on trial design; • delays in reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites; • delays in opening clinical trial sites or obtaining required IRB or independent ethics committee approval at each clinical trial site; • our decision or the requirement of regulators or IRBs to suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements, a finding that the participants are being exposed to unacceptable health risks, or the imposition of a clinical hold as a result of a serious adverse event or after an inspection of our clinical trial operations or clinical trial sites; • failure by us, any CROs we engage or any other third parties to adhere to clinical trial or regulatory requirements; • failure by us, any CROs we engage or any other third parties to perform in accordance with Good Clinical Practice, or GCP, cGMPs, or applicable regulatory guidelines in the United States and other international markets; • failure by physicians to adhere to delivery protocols leading to variable results; • delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical trial sites, including delays by third parties with whom we have contracted to perform certain of those functions; • insufficient or inadequate supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates; • delays in having patients complete participation in a clinical trial or return for post-treatment follow-up; • clinical trial sites or patients dropping out of a clinical trial at a rate higher than we anticipate; • enrollment of clinical trial participants that are not representative of the intended user population; • selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the resulting data; • receipt of negative or inconclusive clinical trial results; • occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; • occurrence of serious adverse events in clinical trials of the same class of agents conducted by other sponsors; and • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols. 23 Table of Contents ReNu is in Phase 3 clinical development for the management of symptoms associated with knee OA.
Furthermore, GPO and IDN contracts typically are terminable without cause upon 60 to 90 days’ notice. The healthcare industry has been consolidating, and the consolidation among third-party payers into larger purchasing groups will increase their negotiating and purchasing power.
Furthermore, GPO and IDN contracts typically are terminable without cause upon 60 to 90 days’ notice. The healthcare industry has been consolidating, and the consolidation among third-party payers into larger purchasing groups will increase their negotiating and 34 Table of Contents purchasing power.
In addition, the Company may be subject to audits of the Company’s income, sales and other taxes by U.S. federal, state, local and non-U.S. taxing authorities. Outcomes from these audits could have an adverse effect on the Company’s financial condition and results of operations.
In addition, the Company may be subject to audits of the Company’s income, sales and other taxes by United States federal, state, local and non-United States taxing authorities. Outcomes from these audits could have an adverse effect on the Company’s financial condition and results of operations.
The Company’s quarterly operating results may fluctuate significantly because of several factors, including: • labor availability and costs for hourly and management personnel; • profitability of the Company’s products, especially in new markets and due to seasonal fluctuations; • changes in interest or exchange rates; 71 Table of Contents • impairment of long-lived assets; • macroeconomic conditions, both nationally and locally; • negative publicity relating to our products; • changes in consumer preferences and competitive conditions; and • expansion to new markets.
The Company’s quarterly operating results may fluctuate significantly because of several factors, including: • labor availability and costs for hourly and management personnel; • profitability of the Company’s products, especially in new markets and due to seasonal fluctuations; • changes in interest or exchange rates; • impairment of long-lived assets; • macroeconomic conditions, both nationally and locally, including changes in regulatory coverage and pricing of our products; • negative publicity relating to our products; • changes in consumer preferences and competitive conditions; and • expansion to new markets.
Periodic maintenance fees, renewal fees, annuity fees, and other fees on patents and patent applications will be due to be paid to the U.S. Patent and Trademark Office and similar foreign agencies in several stages over the lifetime of the patents and patent applications. We rely on our outside counsel to pay these fees due to foreign patent agencies.
Periodic maintenance fees, renewal fees, annuity fees, and other fees on patents and patent applications will be due to be paid to the United States Patent and Trademark Office and similar foreign agencies in several stages over the lifetime of the patents and patent applications. We rely on our outside counsel to pay these fees due to foreign patent agencies.
For example, currently most private payers provide limited coverage for our PuraPly AM, PuraPly, Novachor, and NuShield products and as a result, there is limited use of these products for patients covered by private payers.
For example, currently most private payers provide limited coverage for our PuraPly AM, PuraPly, Novachor, and NuShield products and, as a result, there may be limited use of these products for patients covered by private payers.
General Risk Factors We are currently and in the future may be, subject to securities class action litigation or other litigation that could cause us to incur significant legal expenses, divert management’s attention, and result in harm to our business. We are exposed to potential liabilities and reputational risk associated with securities class action litigation.
General Risk Factors We have previously been, and may in the future be, subject to securities class action litigation or other litigation that could cause us to incur significant legal expenses, divert management’s attention, and result in harm to our business. We may be exposed to potential liabilities and reputational risk associated with securities class action litigation.
The sale and shipment of our products across international borders, as well as the purchase of components and products from international sources, subject us to extensive U.S. and foreign governmental trade, import and export and customs regulations and laws, including but not limited to, the Export Administration Regulations and trade sanctions against embargoed countries, which are administered by the Office of Foreign Assets Control within the Department of the Treasury, as well as the laws and regulations administered by the Department of Commerce.
The sale and shipment of our products across international borders, as well as the purchase of components and products from international sources, subject us to extensive United States and foreign governmental trade, import and export and customs regulations and laws, including but not limited to, the Export Administration Regulations and trade sanctions against 32 Table of Contents embargoed countries, which are administered by the Office of Foreign Assets Control within the Department of the Treasury, as well as the laws and regulations administered by the Department of Commerce.
Enacted in 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, made significant changes to U.S. patent law, including provisions that affect the prosecution of patent applications and also affect patent litigation. The U.S.
Enacted in 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, made significant changes to United States patent law, including provisions that affect the prosecution of patent applications and also affect patent litigation.
The U.S. Patent and Trademark Office and various foreign patent agencies require compliance with a number of procedural, documentary, fee payment, and other provisions during the patent application process.
The United States Patent and Trademark Office and various foreign patent agencies require compliance with a number of procedural, documentary, fee payment, and other provisions during the patent application process.
We obtain some of the components for our products from a limited group of suppliers. These suppliers must be able to provide us with these components in substantial quantities, in compliance with regulatory requirements, in accordance with agreed-upon specifications, at acceptable costs, and on a timely basis.
We obtain some of the components for our products from a limited group of suppliers. These suppliers must be able to provide us with these components in substantial quantities, in compliance with regulatory requirements, in accordance with agreed-upon specifications, at acceptable costs, and on a timely basis. Our efforts to maintain a continuity of supply may not be successful.
We may encounter substantial delays or difficulties in our clinical trials. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates. Clinical testing is expensive, time-consuming and uncertain as to the outcome. We have limited experience with clinical trials.
Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates. Clinical testing is expensive, time-consuming and uncertain as to the outcome. We have limited experience with clinical trials.
Congress, the federal courts, and the U.S. Patent and Trademark Office, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce any current or future patents that we may own or license.
Depending on decisions by the United States Congress, the federal courts, and the United States Patent and Trademark Office, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce any current or future patents that we may own or license.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities.
We also could incur significant costs associated with civil or criminal fines and penalties. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities.
In particular, the Company is required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules is difficult, time-consuming and costly.
The Company is subject to laws, regulations and rules enacted by national, regional and local governments and Nasdaq. In particular, the Company is required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules is difficult, time-consuming and costly.
Our long-term assets include property and equipment of $116.2 million and $102.5 million, of which $60.8 million and $37.6 million represents the value of improvements to our leased assets, and of which $59.1 million and $65.6 million represents construction in progress (each as described more fully in Note 8, Property and Equipment, Net , to our audited consolidated financial statements included in this Annual Report on Form 10-K), as of December 31, 2023 and 2022, respectively.
Our long-term assets include property and equipment of $89.1 million and $116.2 million, of which $63.3 million and $60.8 million represents the value of improvements to our leased assets, and of which $21.9 million and $59.1 million represents construction in progress (each as described more fully in Note 8, Property and Equipment, Net , to our audited consolidated financial statements included in this Annual Report on Form 10-K), as of December 31, 2024 and 2023, respectively.
These prices may fluctuate based on a number of factors beyond our control, including changes in supply and demand, general economic conditions, labor costs, fuel-related delivery costs, competition, import duties, excises and other indirect taxes, currency exchange rates, and government regulation.
Our profitability is affected by the prices of the raw materials used in the manufacture of our products. These prices may fluctuate based on a number of factors beyond our control, including changes in supply and demand, general economic conditions, labor costs, fuel-related delivery costs, competition, import duties, excises and other indirect taxes, currency exchange rates, and government regulation.
Even if we are able to expand our manufacturing facilities as we plan, we may not realize the full expected benefit of our investment. We may expand our business through acquisitions, similar to our acquisitions of NuTech Medical and CPN Biosciences, licenses, investments, and other commercial arrangements in other companies or technologies.
Even if we are able to expand our manufacturing facilities as we plan, we may not realize the full expected benefit of our investment. We may expand our business through acquisitions, licenses, investments, and other commercial arrangements in other companies or technologies. Such acquisitions or commercial arrangements may entail significant risks.
Accordingly, even if coverage and reimbursement are provided, market acceptance of our products has been and will be adversely affected if access to coverage is administratively burdensome to obtain, use of our products is administratively burdensome, or is unprofitable for healthcare providers or less profitable than alternative treatments.
Accordingly, even if coverage and reimbursement are provided, market acceptance of our products has been and will be adversely affected if access to coverage and/or use of our products is administratively burdensome to obtain and/or more costly than alternative treatments.
These legal means, however, afford 60 Table of Contents only limited protection and may not adequately protect our rights.
These legal means, however, afford only limited protection and may not adequately protect our rights.
Although we have independent third-party appraisals that confirm the reasonableness of the service fees we pay, if we were to be found to have violated NOTA’s prohibition on the sale or transfer of human tissue for valuable consideration, we, our officers, or employees, would potentially be subject to criminal enforcement sanctions, which could materially and adversely affect our business, results of operations, and financial condition. 53 Table of Contents Many of the products we manufacture and process are derived from human tissue and therefore have the potential for disease transmission.
Although we have independent third-party appraisals that confirm the reasonableness of the service fees we pay, if we were to be found to have violated NOTA’s prohibition on the sale or transfer of human tissue for valuable consideration, we, our officers, or employees, would potentially be subject to criminal enforcement sanctions, which could materially and adversely affect our business, results of operations, and financial condition.
Starting with the reporting deadline for the first quarter of 2022, we were required to report ASP for all our skin substitute products that are paid separately as biologics as a result of provisions included in the Consolidated Appropriations Act of 2020.
However, starting with the reporting deadline for the first quarter of 2022, we have been required, and have submitted, ASP reports for all our skin substitute products that are paid separately as biologics as a result of provisions included in the Consolidated Appropriations Act of 2020.
The Company bylaws designate the Court of Chancery of the State of Delaware, to the fullest extent permitted by law, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by the Company stockholders, which could limit the ability of the Company stockholders to obtain a favorable judicial forum for disputes with the Company or with directors, officers or employees of the Company and may discourage stockholders from bringing such claims.
Our quarterly operating results have varied substantially in the past and may vary substantially in the future. 40 Table of Contents The Company bylaws designate the Court of Chancery of the State of Delaware, to the fullest extent permitted by law, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by the Company stockholders, which could limit the ability of the Company stockholders to obtain a favorable judicial forum for disputes with the Company or with directors, officers or employees of the Company and may discourage stockholders from bringing such claims.
Both before and after a product is commercially released, we have ongoing responsibilities under regulations promulgated by the FDA, the Federal Trade Commission, and similar U.S. and foreign regulations governing product labeling and advertising, distribution, sale, and marketing of our products.
We are subject to various governmental regulations relating to the labeling, marketing, and sale of our products. Both before and after a product is commercially released, we have ongoing responsibilities under regulations promulgated by the FDA, the Federal Trade Commission, and similar United States and foreign regulations governing product labeling and advertising, distribution, sale, and marketing of our products.
We may seek RMAT or breakthrough therapy designation for our other product candidates, but the FDA may not grant this status to any such product candidates. 50 Table of Contents We may seek fast track designation by the FDA for one or more of our product candidates, but we might not receive such designation, and even if we do, such designation may not actually lead to a faster development or regulatory review or approval process.
We may seek fast track designation by the FDA for one or more of our product candidates, but we might not receive such designation, and even if we do, such designation may not actually lead to a faster development or regulatory review or approval process.
Inability to recover our investment, or any write off of such investment, associated goodwill, or assets, could have a material and adverse effect on our business, results of operations, and financial condition.
Inability to recover our investment, or any write off of such investment, associated goodwill, or assets, could have a material and adverse effect on our business, results of operations, and financial condition. New lines of business or new products and services may subject us to additional risks.
Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful. Even product candidates in later stages of clinical trials may fail to show the required safety profile or meet the efficacy endpoints despite having progressed through preclinical studies and initial clinical trials.
Even product candidates in later stages of clinical trials may fail to show the required safety profile or meet the efficacy endpoints despite having progressed through preclinical studies and initial clinical trials.
For example, the PPACA and the Medicare Access and CHIP Reauthorization Act of 2015 substantially changed the way healthcare is delivered and financed by both governmental and private insurers.
For example, the Affordable 31 Table of Contents Care Act of 2010 (ACA) and the Medicare Access and CHIP Reauthorization Act of 2015 substantially changed the way healthcare is delivered and financed by both governmental and private insurers.
The continuing efforts of government agencies, private health plans, and other payers of healthcare services to contain or reduce costs of healthcare may adversely affect: • the availability of our products due to restricted coverage; • the ability of our customers to pay for our products; • our ability to maintain pricing so as to generate revenues or achieve or maintain profitability; and • our ability to access capital.
The continuing efforts of government agencies, private health plans, and other payers of healthcare services to contain or reduce costs of healthcare may adversely affect: • the availability of our products due to restricted coverage; • the ability of our customers to pay for our products; • our ability to maintain pricing so as to generate revenues or achieve or maintain profitability; and • our ability to access capital. 33 Table of Contents The implementation of cost containment measures or other healthcare reforms may have an adverse effect on our business operations.
These changes included the creation of demonstration programs and other value-based purchasing initiatives that provide financial incentives for physicians and hospitals to reduce costs, including incentives for furnishing low-cost therapies for chronic wounds even if those therapies are less effective than our products. There were extensive efforts recently to modify or repeal all or part of PPACA.
These changes included the creation of demonstration programs and other value-based purchasing initiatives that provide financial incentives for physicians and hospitals to reduce costs, including incentives for furnishing low-cost therapies for chronic wounds even if those therapies may be less effective than our products.
To the extent that any of these products are deemed not to be HCT/Ps or Section 361 HCT/Ps, the FDA may require that we revise our labeling and marketing claims for these products or that we suspend sales of such products until FDA approval is obtained, which could adversely affect our business, results of operations, and financial condition. • The FDA may determine that our suspension of NuCel and ReNu commercialization on May 31, 2021 was not conducted in a timely or otherwise proper manner.
To the extent that any of these products are deemed not to be HCT/Ps or Section 361 HCT/Ps, the FDA may require that we revise our labeling and marketing claims for these products or that we suspend sales of such products until FDA approval is obtained, which could adversely affect our business, results of operations, and financial condition.
As of February 26, 2024, the Significant Stockholder Group collectively beneficially owns approximately 46% of the Company’s Class A common stock.
As of February 24, 2025, the Significant Stockholder Group collectively beneficially owns approximately 40% of the Company’s Class A common stock.
External factors, such as regulatory compliance obligations, competitive alternatives, lack of market acceptance, and shifting market preferences, may also affect the successful implementation of a new line of business or a new product or service.
In developing and marketing new lines of business and new products and services, we may invest significant time and resources. External factors, such as regulatory compliance obligations, competitive alternatives, lack of market acceptance, and shifting market preferences, may also affect the successful implementation of a new line of business or a new product or service.
We may be unable to find a sufficient alternative supply channel in a reasonable time period or on commercially reasonable terms, if at all, which would have a material adverse effect on our business, results of operations, and financial condition.
We may be unable to find a sufficient alternative supply channel in a reasonable time period or on commercially reasonable terms, if at all, which would have a material adverse effect on our business, results of operations, and financial condition. 17 Table of Contents Increased prices for, or unavailability of, raw materials used in our products could adversely affect our business, results of operations, and financial condition.
Further, the appearance of conflicts of interest created by related party transactions could impair the confidence of our investors. It is possible that a conflict of interest could have a material adverse effect on our business, results of operations, and financial condition. Our financial performance may be adversely affected by medical device tax provisions in healthcare reform laws.
Further, the appearance of conflicts of interest created by related party transactions could impair the confidence of our investors. It is possible that a conflict of interest could have a material adverse effect on our business, results of operations, and financial condition.
The loss of the services of any of our executive officers or other key employees and our inability to find suitable replacements could potentially harm our business, prospects, financial condition or results of operations.
The loss of the services of any of our executive officers or other key employees and our inability to find suitable replacements could potentially harm our business, prospects, financial condition or results of operations. We do not maintain "key person" insurance policies on the lives of these individuals or any of our other employees.
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Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
2 edited+2 added−0 removed6 unchanged
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
2 edited+2 added−0 removed6 unchanged
2023 filing
2024 filing
Biggest changeWe may also from time to time engage partners for periodic penetration testing and vulnerability assessments. We intend to continue to work to formalize our cybersecurity program, including developing processes for third-party service provider cyber-risk oversight and management.
Biggest changeWe may also from time to time engage partners for periodic penetration testing and vulnerability assessments. Our third-party service providers, suppliers, and vendors face their own risks from cybersecurity threats that could potentially impact Organogenesis. We are developing and implementing processes for overseeing and managing these risks and are committed to maintaining robust governance and oversight of these risks.
Our information security team manages and enhances our cybersecurity infrastructure with the ultimate goal of preventing cybersecurity incidents to the extent feasible, while simultaneously increasing our system resilience in an effort to minimize the business impact should an incident occur. We utilize cybersecurity tools, including the Collective Controls Catalog, in assessing the threat landscape and continuously monitoring our environment.
Our information security team manages and enhances our cybersecurity infrastructure with the ultimate goal of preventing cybersecurity incidents to the extent feasible, while simultaneously increasing our system resilience in an effort to minimize the business impact should an incident occur. We utilize cybersecurity tools, including the NIST Cybersecurity Framework, in assessing the threat landscape and continuously monitoring our environment.
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Those processes include assessing the third parties’ cybersecurity practices and where applicable, requiring the third parties to implement appropriate cybersecurity controls and otherwise agree to contractual requirements designed to address cybersecurity risks in our agreements with them including conducting ongoing monitoring of their compliance with those requirements.
Added
We have also identified the potential for cybersecurity risks stemming from the use of artificial intelligence (AI) tools developed by third parties. We have implemented policies and training programs to govern the use of AI by our employees. Additionally, the Company’s Audit Committee regularly reviews our uses of AI as part of its ongoing risk oversight responsibility.
Item 2. Properties
Properties — owned and leased real estate
2 edited+3 added−0 removed3 unchanged
Item 2. Properties
Properties — owned and leased real estate
2 edited+3 added−0 removed3 unchanged
2023 filing
2024 filing
Biggest changeNussdorf, who are also our stockholders. In addition, Messrs. Ades and Nussdorf are members of our Board of Directors. In Norwood, Massachusetts, we have a leased facility of approximately 43,850 square feet for office, laboratory, and manufacturing use. The lease commenced on March 13, 2019. The rent commencement date was February 1, 2020.
Biggest changeNussdorf, who are also our stockholders. In addition, Messrs. Ades, Erani and Nussdorf are members of the Significant Stockholder Group, which has the right to designate four members of our Board of Directors. In Norwood, Massachusetts, we have a leased facility of approximately 43,850 square feet for office, laboratory, and manufacturing use. The lease commenced on March 13, 2019.
The initial lease term is ten years from the rent commencement date and was extended for additional five years in December 2021. We have an option to extend the term for another ten years if exercised within 16-24 months from the end of the lease term.
The rent commencement date was February 1, 2020. The initial lease 48 Table of Contents term is ten years from the rent commencement date and was extended for additional five years in December 2021. We have an option to extend the term for another ten years if exercised within 16-24 months from the end of the lease term.
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In November 2024, we entered into a lease for a facility in Smithfield, Rhode Island, comprising approximately 122,000 square feet of manufacturing and office space.
Added
The lease of the office space commenced at the time of the lease signing, and we expect lease commencement of the manufacturing space in 2027, upon completion of the build out of the space for commercial manufacturing purposes. The initial term of the lease expires in May 2041, with two ten-year renewal options.
Added
We have a one-time right of first offer to purchase the Smithfield Facility and have a right to terminate the lease for a payment to the landlord of $1.3 million, if we have not secured certain anticipated state and local tax incentives by March 31, 2025.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
2 edited+2 added−5 removed1 unchanged
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
2 edited+2 added−5 removed1 unchanged
2023 filing
2024 filing
Biggest changeWe are not a party to any other material legal proceedings. From time to time, we may become involved in litigation or other legal proceedings relating to claims arising from the ordinary course of business. These matters may include intellectual property, employment and other general claims.
Biggest changeThe Company believes the claims are without merit and intends to vigorously contest them. We are not a party to any other material legal proceedings. From time to time, we may become involved in litigation or other legal proceedings relating to claims arising from the ordinary course of business. These matters may include intellectual property, employment and other general claims.
However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. ITEM 4. MINE SA FETY DISCLOSURES Not applicable. 74 Table of Contents PART II
However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. ITEM 4. MINE SA FETY DISCLOSURES Not applicable. 49 Table of Contents PART II
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ITEM 3. LE GAL PROCEEDINGS On December 10, 2021, a class action complaint captioned Somogyi v.
Added
ITEM 3. LE GAL PROCEEDINGS On January 22, 2025, the Company was served with a complaint captioned United States of America, State of Texas, ex rel. John Doe vs. Organogenesis Holdings, Inc. , which was filed in the United States District Court for the Southern District of Texas. The complaint is being brought by an employee the Company terminated.
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Organogenesis Holdings Inc., et al. was filed on behalf of a putative class of all purchasers of our securities against us and our Chief Executive Officer and Chief Financial Officer in the 73 Table of Contents United States District Court for the Eastern District of New York. The court appointed Donald Martin as lead plaintiff. Mr.
Added
The United States and the State of Texas each declined to intervene in the case in September 2024. The complaint alleges claims pursuant to the United States False Claims Act and the Texas State Medicaid Fraud Prevention Act, seeking unquantified damages as well as fines, attorneys’ fees and other costs.
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Martin filed an amended complaint on October 24, 2022 that brings claims on behalf of a purported class of all purchasers of our securities from August 10, 2020 through August 9, 2022 and alleges violations of federal securities law in connection with alleged false and misleading statements with respect to, among other matters, revenue, sales growth and ability to compete in connection with our Affinity and PuraPly XT products.
Removed
The amended complaint alleges violations of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and seeks unquantified damages as well as attorneys’ fees, expert fees and other costs. The action is in the early stages of litigation. We believe the claims are without merit and intend to vigorously contest them.
Removed
On March 13, 2023, we filed our motion to dismiss the litigation for failure to state a claim upon which relief can be granted. Briefing was completed on May 30, 2023 and on February 20, 2024, the Court heard oral arguments on the motion to dismiss. The timing for a ruling on the motion to dismiss is currently uncertain.
Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
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Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
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2023 filing
2024 filing
Biggest changeItem 4. Mine Safety Disclosures 74 PART II Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 75 Item 6. Reserved 76 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 77 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 90 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 49 PART II Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 50 Item 6. Reserved 51 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 52 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 64 Item 8.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
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Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
5 edited+2 added−0 removed2 unchanged
2023 filing
2024 filing
Biggest changeCOMPARISON OF FIVE YEARS CUMULATIVE TOTAL RETURN Among Organogenesis Holdings Inc., the NASDAQ Composite Index, and the NASDAQ Biotechnology Index (1) This performance graph shall not be deemed to be "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that 75 Table of Contents Section, and shall not be deemed incorporated by reference into any filing of Organogenesis Holdings Inc. under the Securities Act of 1933, as amended.
Biggest changeCOMPARISON OF FIVE YEARS CUMULATIVE TOTAL RETURN Among Organogenesis Holdings Inc., the NASDAQ Composite Index, and the NASDAQ Biotechnology Index (1) This performance graph shall not be deemed to be "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed incorporated by reference into any filing of Organogenesis Holdings Inc. under the Securities Act of 1933, as amended. 50 Table of Contents Issuer Purchases of Equity Securities The following table presents information with respect to purchases of Class A common stock we made during the three months ended December 31, 2024.
Dividend policy We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and future earnings, if any, to finance the growth and development of our business. We do not expect to pay any cash dividends on our Class A common stock in the foreseeable future.
Dividend policy We have never declared or paid any cash dividends on our Class A common stock. We currently intend to retain all available funds and future earnings, if any, to finance the growth and development of our business. We do not expect to pay any cash dividends on our Class A common stock in the foreseeable future.
Stock Performance Graph (1) The following graph shows a comparison from December 31, 2018 through December 29, 2023 of cumulative total return on assumed investments of $100.00 in cash in each of our Class A common stock, the NASDAQ Composite Index and the NASDAQ Biotechnology Index.
Stock Performance Graph (1) The following graph shows a comparison from December 31, 2019 through December 31, 2024 of cumulative total return on assumed investments of $100.00 in cash in each of our Class A common stock, the NASDAQ Composite Index and the NASDAQ Biotechnology Index.
In addition, the terms of our 2021 Credit Agreement restrict our ability to pay cash dividends on our capital stock without the bank’s consent.
In addition, the terms of our 2021 Credit Agreement, as amended by the 2024 Amendment, as well as the terms of our Convertible Preferred Stock, restrict our ability to pay cash dividends on our capital stock without the bank’s consent.
As of February 26, 2024, a total of 131,963,176 shares of our Class A common stock were outstanding and we had 607 holders of record of our Class A common stock. This number does not include shareholders for whom shares are held in "nominee" or "street" name.
As of February 24, 2025, a total of 126,828,092 shares of our Class A common stock were outstanding and we had 585 holders of record of our Class A common stock. This number does not include stockholders for whom shares are held in "nominee" or "street" name.
Added
As previously disclosed, in connection with our November 2024 offering of Convertible Preferred Stock, approximately $25.5 million of the net proceeds were used to fund the repurchase of an aggregate of 7,921,731 shares of Class A common stock from certain existing stockholders of the Company, including certain of its directors and their affiliates that are members of the Significant Stockholders Group.
Added
Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs October 1, 2024 — $-- — — November 1, 2024 7,921,731 1 $ 3.2163 2 — — December 1, 2024 — $-- — — Total 7,921,731 N/A — — 1. 7,421,731 shares of Class A common stock were repurchased from certain existing stockholders of the Company, including certain of its directors and their affiliates, at a price per share equal to $3.1597, which represents the 10-day trailing volume weighted average price of the Common Stock as of market close on November 11, 2024, pursuant to stock repurchase agreements entered into on November 12, 2024 between the Company and the stockholders. 500,000 shares of Class A common stock were repurchased from an affiliate of a director of the Company at a price per share equal to $4.057, which represents the 10-day trailing volume weighted average price of the Common Stock as of market close on November 26, 2024, pursuant to a stock repurchase agreement entered into on November 27, 2024 between the Company and the stockholder. 2.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
69 edited+22 added−49 removed47 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
69 edited+22 added−49 removed47 unchanged
2023 filing
2024 filing
Biggest changeResults of Operations The following table sets forth, for the periods indicated, our results of operations: Year Ended December 31, 2023 2022 2021 Net revenue $ 433,140 $ 450,893 $ 467,359 Cost of goods sold 106,481 105,019 114,199 Gross profit 326,659 345,874 353,160 Operating expenses: Selling, general and administrative 269,754 283,808 250,200 Research and development 44,380 39,762 30,742 Total operating expenses 314,134 323,570 280,942 Income from operations 12,525 22,304 72,218 Other expense, net: Interest expense, net (2,190 ) (2,009 ) (7,236 ) Loss on the extinguishment of debt — — (1,883 ) Other income (loss), net 57 (13 ) (13 ) Total other expense, net (2,133 ) (2,022 ) (9,132 ) Net income before income taxes 10,392 20,282 63,086 Income tax (expense) benefit (5,447 ) (4,750 ) 31,116 Net income and comprehensive income $ 4,945 $ 15,532 $ 94,202 81 Table of Contents EBITDA and Adjusted EBITDA The following table presents a reconciliation of GAAP net income to non-GAAP EBITDA and non-GAAP Adjusted EBITDA, for each of the periods presented: Year Ended December 31, 2023 2022 2021 (in thousands) Net income $ 4,945 $ 15,532 $ 94,202 Interest expense, net 2,190 2,009 7,236 Income tax expense (benefit) 5,447 4,750 (31,116 ) Depreciation 10,448 5,845 5,781 Amortization 4,918 4,883 4,949 EBITDA 27,948 33,019 81,052 Stock-based compensation expense 8,996 6,552 3,864 Restructuring charge (1) 3,796 2,268 4,704 Recovery of certain notes receivable from related parties (2) — — (179 ) Write-off of certain assets (3) — 4,200 1,104 Change in fair value of earnout (4) — — (3,985 ) Settlement fee (5) — 2,600 700 Loss on extinguishment of debt (6) — — 1,883 Facility construction project pause (7) — 632 — Legal and consulting fees (8) 1,182 — — Sales retention (9) 694 — — Adjusted EBITDA $ 42,616 $ 49,271 $ 89,143 (1) Amounts reflect employee retention and benefits as well as other exit costs associated with the Company’s restructuring activities.
Biggest changeResults of Operations The following table sets forth, for the periods indicated, our results of operations: 55 Table of Contents Year Ended December 31, 2024 2023 2022 Net revenue $ 482,043 $ 433,140 $ 450,893 Cost of goods sold 115,741 106,481 105,019 Gross profit 366,302 326,659 345,874 Operating expenses: Selling, general and administrative 294,513 269,754 283,808 Research and development 50,271 44,380 39,762 Impairment of property and construction 18,842 — — Write down of capitalized internal-use software costs 3,959 — — Total operating expenses 367,585 314,134 323,570 Income (loss) from operations (1,283 ) 12,525 22,304 Other expense, net: Interest expense, net (1,544 ) (2,190 ) (2,009 ) Other income (expense), net 20 57 (13 ) Total other expense, net (1,524 ) (2,133 ) (2,022 ) Net income (loss) before income taxes (2,807 ) 10,392 20,282 Income tax (expense) benefit 3,668 (5,447 ) (4,750 ) Net income and comprehensive income 861 4,945 15,532 EBITDA and Adjusted EBITDA The following table presents a reconciliation of GAAP net income to non-GAAP EBITDA and non-GAAP Adjusted EBITDA, for each of the periods presented: Year Ended December 31, 2024 2023 2022 (in thousands) Net income $ 861 $ 4,945 $ 15,532 Interest expense, net 1,544 2,190 2,009 Income tax expense (benefit) (3,668 ) 5,447 4,750 Depreciation and amortization 13,623 10,448 5,845 Amortization of intangible assets 3,403 4,918 4,883 EBITDA 15,763 27,948 33,019 Stock-based compensation expense 10,578 8,996 6,552 Restructuring charge (1) — 3,796 2,268 Write-off of certain assets (2) — — 4,200 Settlement fee (3) — — 2,600 Facility construction project pause (4) — — 632 Legal and consulting fees (5) — 1,182 — Sales retention (6) — 694 — Impairment of property and construction (7) 18,842 — — Write-down of capitalized software costs (8) 3,959 — — Disposal of construction in progress (9) 645 Adjusted EBITDA $ 49,787 $ 42,616 $ 49,271 (1) Amounts reflect employee retention and benefits as well as other exit costs associated with our restructuring activities.
Indebtedness 2021 Credit Agreement In August 2021, we and our subsidiaries entered into a credit agreement with SVB and several other lenders, which we refer to as the 2021 Credit Agreement.
Indebtedness 2021 Credit Agreement In August 2021, we and our subsidiaries entered into a credit agreement with SVB and several other lenders (the Lenders), which we refer to as the 2021 Credit Agreement.
In determining whether a valuation allowance for deferred tax assets is necessary, we analyze both positive and negative evidence related to the realization of deferred tax assets including projected future taxable income, recent financial results and estimates of future reversals of deferred tax assets and liabilities.
In determining whether a valuation allowance for deferred tax assets is necessary, we analyze both positive and negative evidence related to the realization of deferred tax assets including projected future taxable income, recent financial results and estimates of future reversals of deferred tax assets and liabilities.
Factors that we consider in deciding when to perform an impairment review include, but are not limited to, significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets.
Factors that we consider in deciding when to perform an impairment review include, but are not limited to, significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of our assets.
Some of these limitations are: • Although depreciation and amortization are non-cash charges, the assets that we currently depreciate and amortize will likely have to be replaced in the future, and Adjusted EBITDA does not reflect the cash required to fund such replacements; • Adjusted EBITDA does not reflect interest expense or the cash requirements necessary to service payments on our debt; • Adjusted EBITDA excludes stock-based compensation expense which has been, and will continue to be for the foreseeable future, a significant recurring non-cash expense for our business and an important part of our compensation strategy; • Adjusted EBITDA does not reflect the effect of earnings or charges resulting from matters that our management does not consider to be indicative of our ongoing operations.
Some of these limitations are: • Although depreciation and amortization are non-cash charges, the assets that we currently depreciate and amortize will likely have to be replaced in the future, and Adjusted EBITDA does not reflect the cash required to fund such replacements; • Adjusted EBITDA does not reflect interest expense or the cash requirements necessary to service payments on our debt; 53 Table of Contents • Adjusted EBITDA excludes stock-based compensation expense which has been, and will continue to be for the foreseeable future, a significant recurring non-cash expense for our business and an important part of our compensation strategy; • Adjusted EBITDA does not reflect the effect of earnings or charges resulting from matters that our management does not consider to be indicative of our ongoing operations.
The 2021 Credit Agreement requires us to make consecutive quarterly installment payments equal to the following: (a) from September 30, 2021 through and including June 30, 2022, $0.5 million; (b) from September 30, 2022 through and including June 30, 2023, $0.9 million; (c) from September 30, 2023 through and including June 30, 2025, $1.4 million and (d) from September 30, 2025 and the last day of each quarter thereafter until August 6, 2026 (the "Term Loan Maturity Date"), $1.9 million.
The 2021 Credit Agreement required us to make consecutive quarterly installment payments equal to the following: (a) from September 30, 2021 through and including June 30, 2022, $0.5 million; (b) from September 30, 2022 through and including June 30, 2023, $0.9 million; (c) from September 30, 2023 through and including June 30, 2025, $1.4 million and (d) from September 30, 2025 and the last day of each quarter thereafter until August 6, 2026 (the Term Loan Maturity Date), $1.9 million.
For ABR Loans, the interest rate is equal to (1) the highest of (a) the Wall Street Journal Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the Adjusted Term SOFR rate plus 1.0%, plus (2) an Applicable Margin between 1.00% to 2.25% based on the Total Net Leverage Ratio.
For ABR Loans, the interest rate was equal to (1) the highest of (a) the Wall Street Journal Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the Adjusted Term SOFR rate plus 1.0%, plus (2) an Applicable Margin between 1.00% to 2.25% based on the Total Net Leverage Ratio.
The decrease in Advanced Wound Care net revenue was primarily attributable to a decrease in sales of certain of our products due to changes in customer buying patterns as well as the impact of the recently withdrawn LCDs on sales of certain of our products, partially offset by an increase in sales of certain of our products to our existing and new customers.
The decrease in Advanced Wound Care net revenue was primarily attributable to a decrease in sales of certain of our products due to changes in customer buying patterns as well as the impact of the 2023 withdrawn LCDs on sales of certain of our products, partially offset by an increase in sales of certain of our products to our existing and new customers.
These expenses were partially offset by a $1.2 million increase in legal and consulting costs primarily related to efforts to convince three MACs to withdraw the final LCDs for skin substitutes for the treatment of DFUs and VSUs.
These expenses were partially offset by a $1.2 million increase in legal and consulting costs primarily related to efforts to convince three MACs to withdraw the final LCDs for skin substitutes for the treatment of DFUs and VLUs.
This consisted primarily of the payment of term loan and finance lease obligations of $3.0 million and the payment of $0.6 million related to the CPN deferred acquisition consideration, partially offset by the net receipts of $1.4 million in connection with stock awards activities. During the year ended December 31, 2021, net cash used in financing activities was $1.0 million.
During the year ended December 31, 2022, net cash used in financing activities was $2.2 million. This consisted primarily of the payment of term loan and finance lease obligations of $3.0 million and the payment of $0.6 million related to the CPN deferred acquisition consideration, partially offset by the net receipts of $1.4 million in connection with stock awards activities.
Recently Issued Accounting Pronouncements For a description of recently issued accounting pronouncements, including the expected dates of adoption and the estimated effects, if any, on our consolidated financial statements, see Note 2, Significant Accounting Policies to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K. 89 Table of Contents
Recently Issued Accounting Pronouncements For a description of recently issued accounting pronouncements, including the expected dates of adoption and the estimated effects, if any, on our consolidated financial statements, see Note 2, Significant Accounting Policies to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K.
This consisted primarily of principal payments on the Term Loan of $4.7 million, and on finance lease obligations of $0.5 million, and payments of $0.3 million in connection with stock awards activities. During the year ended December 31, 2022, net cash used in financing activities was $2.2 million.
During the year ended December 31, 2023, net cash used in financing activities was $5.5 million. This consisted primarily of principal payments on the Term Loan of $4.7 million, and on finance lease obligations of $0.5 million, and payments of $0.3 million in connection with stock awards activities.
We expect that our cash on hand and other components of working capital as of December 31, 2023, availability under the 2021 Credit Agreement, plus net cash flows from product sales, will be sufficient to fund our operating expenses, capital expenditure requirements and debt service payments for at least 12 months beyond the filing date of this Annual Report on Form 10-K.
We expect that our cash on hand and other components of working capital as of December 31, 2024, availability under the 2021 Credit Agreement as amended by the 2024 Amendment, plus net cash flows from product sales, will be sufficient to fund our operating expenses, capital expenditure requirements and debt service payments for at least 12 months beyond the filing date of this Annual Report on Form 10-K.
In addition, the Company is required to pay a low double-digit royalty and a high single-digit royalty on the Net Sales of Dual and Matrix, respectively, during the royalty term, as defined in the agreement with Vivex. The royalty term is commensurate with the initial term of the contract and will continue for each subsequent renewal period.
Additionally, we are required to pay a low double-digit royalty on the Net Sales of Dual and VIA, and a high single-digit royalty on the Net Sales of Matrix, respectively, during the royalty term, as defined in the Vivex Agreement. The royalty term is commensurate with the initial term of the contract and will continue for each subsequent renewal period.
The following table presents our cash and outstanding debt as of the dates indicated: December 31, 2023 2022 (in thousands) Cash and cash equivalents $ 103,840 $ 102,478 Line of credit $ — $ — Term loan net of debt discount and issuance cost 66,231 70,769 Finance lease obligations 2,969 — Total debt $ 69,200 $ 70,769 Under the Revolving Facility, we have up to $125.0 million available for future revolving borrowings, subject to maintaining compliance with financial and non-financial covenants.
The following table presents our cash and outstanding debt as of the dates indicated: December 31, 2024 2023 (in thousands) Cash and cash equivalents $ 135,571 $ 103,840 Line of credit $ — $ — Term loan net of debt discount and issuance cost — 66,231 Finance lease obligations 1,888 2,969 Total debt $ 1,888 $ 69,200 Under the Revolving Facility, we have up to $125.0 million available for future revolving borrowings, subject to maintaining compliance with financial and non-financial covenants.
Overview Organogenesis is a leading regenerative medicine company focused on the development, manufacture, and commercialization of solutions for the Advanced Wound Care and Surgical & Sports Medicine markets. Our products have been shown through clinical and scientific studies to support and in some cases accelerate tissue healing and improve patient outcomes.
Overview Organogenesis is a leading regenerative medicine and tissue innovations company focused on empowering healing through the development, manufacturing, and sale of products for the advanced wound care, and surgical and sports medicine markets. Our products have been shown through clinical and scientific studies to support and in some cases accelerate tissue healing and improve patient outcomes.
We offer our differentiated products and in-house customer support to a wide range of health care customers including hospitals, wound care centers, government facilities, ASCs and physician offices. Our mission is to provide integrated healing solutions that substantially improve medical outcomes and the lives of patients while lowering the overall cost of care.
We offer our differentiated products and in-house customer support to a wide range of health care customers including hospitals, wound care centers, government facilities, ASCs and physician offices. Our mission is to provide an integrated portfolio of healing and tissue solutions that improve lives while lowering the overall cost of health care.
We paid an upfront licensing fee to Vivex to sell Dual and Matrix, and also agreed to pay a fixed milestone payment for Dual in the event that its ASP is published by certain government agencies for a specified period of time.
We paid an upfront licensing fee to Vivex to sell Dual and Matrix, and also agreed to pay a fixed milestone payment for Dual in the event that its average sales price (ASP) is published by certain government agencies for a specified period of time, which we remitted in December 2024.
However, some of these charges and gains (such as restructuring charge, mark-to-market adjustments, etc.) have recurred and may recur; and • Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
However, some of these charges and gains (such as restructuring and impairment charges) have recurred and may recur; and • Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
For the year ended December 31, 2022, income tax expense of $4.8 million included $2.8 million of current income taxes and $2.0 million of deferred income taxes.
For the year ended December 31, 2023, income tax expense of $5.4 million included $3.4 million of current income taxes and $2.0 million of deferred income taxes.
Our Advanced Wound Care products include Apligraf for the treatment of VLUs and DFUs; Dermagraft for the treatment of DFUs (manufacturing and distribution currently suspended pending transition to a new manufacturing facility or engagement of a third-party manufacturer); PuraPly AM and PuraPly XT as antimicrobial barriers and native, cross-linked ECM scaffold for a broad variety of wound types; and Affinity, Novachor and NuShield placental allografts to address a variety of wound sizes and types as a protective barrier and ECM scaffold.
Our Advanced Wound Care products include Apligraf for the treatment of VLUs and DFUs; Dermagraft for the treatment of DFUs (manufacturing and distribution currently suspended pending transition to a new manufacturing facility or engagement of a third-party manufacturer); PuraPly AM and PuraPly XT as antimicrobial barriers and native, cross-linked ECM scaffold for a broad variety of wound types; CYGNUS Dual as a dual-layered amniotic membrane that promotes an optimal environment for wound healing; and VIA Matrix, Affinity, Novachor, and NuShield placental allografts to address a variety of wound sizes and types as a protective barrier and extracellular matrix scaffold.
Our primary uses of cash are working capital requirements, capital expenditure and debt service payments. Additionally, from time to time, we may use capital for acquisitions and other investing and financing activities. Working capital is used principally for our personnel as well as manufacturing costs related to the production of our products.
Our primary uses of cash are working capital requirements and capital expenditure. Additionally, from time to time, we may use capital for acquisitions and other investing and financing activities, such as our recent repurchase of our Class A common stock. Working capital is used principally for our personnel as well as manufacturing costs related to the production of our products.
We primarily sell our Advanced Wound Care products through direct sales representatives who manage and maintain the sales relationships with hospitals, wound care centers, government facilities, ASCs, and physician offices. We primarily sell our Surgical & Sports Medicine products through third-party agencies.
We primarily sell our Advanced Wound Care products through direct sales representatives who manage and maintain the sales relationships with hospitals, wound care centers, government facilities, ASCs, and physician offices. We primarily sell our Surgical & Sports Medicine products through third-party agencies. As of December 31, 2024, we had 256 direct sales representatives and approximately 160 independent agencies.
If an asset is determined to be impaired, the asset is written down to fair value, which is determined based on discounted cash flows or appraised value, depending on the nature of the asset.
If we determine an asset to be impaired, we reduce its carrying value to fair value, which is determined based on discounted cash flows or its appraised value, depending on the nature of the asset.
Cash Flows The following table summarizes our cash flows for each of the periods presented: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 30,917 $ 24,859 $ 61,978 Net cash used in investing activities (24,364 ) (33,898 ) (31,220 ) Net cash used in financing activities (5,505 ) (2,199 ) (1,036 ) Net increase (decrease) in cash and restricted cash $ 1,048 $ (11,238 ) $ 29,722 Operating Activities During the year ended December 31, 2023, net cash provided by operating activities was $30.9 million, resulting from our net income of $4.9 million, non-cash charges of $44.0 million, partially offset by net cash used in connection with changes in our operating assets and liabilities of $18.1 million.
Cash Flows The following table summarizes our cash flows for each of the periods presented: Year Ended December 31, 2024 2023 2022 (in thousands) Net cash provided by operating activities $ 14,208 $ 30,917 $ 24,859 Net cash used in investing activities (10,032 ) (24,364 ) (33,898 ) Net cash provided by (used in) financing activities 27,637 (5,505 ) (2,199 ) Net increase (decrease) in cash, cash equivalents, and restricted cash $ 31,813 $ 1,048 $ (11,238 ) Operating Activities During the year ended December 31, 2024, net cash provided by operating activities was $14.2 million, resulting from our net income of $0.9 million, non-cash charges of $62.2 million, partially offset by net cash used in connection with changes in our operating assets and liabilities of $48.9 million.
Investing Activities During the year ended December 31, 2023, we used $24.4 million of cash in investing activities solely consisting of capital expenditures. During the year ended December 31, 2022, we used $33.9 million of cash in investing activities solely consisting of capital expenditures.
During the year ended December 31, 2023, we used $24.4 million of cash in investing activities solely consisting of capital expenditures. During the year ended December 31, 2022, we used $33.9 million of cash in investing activities solely consisting of capital expenditures. Financing Activities During the year ended December 31, 2024, net cash provided by financing activities was $27.6 million.
The increase in cost of goods sold was primarily due to product mix. For the year ended December 31, 2023, gross profit decreased by $19.2 million, or 6%, as compared to the year ended December 31, 2022.
For the year ended December 31, 2023, cost of goods sold increased by $1.5 million, or 1%, as compared to the year ended December 31, 2022. The increase in cost of goods sold was primarily due to product mix.
In addition, we are also required to make representations and warranties and comply with certain non-financial covenants that are customary in loan agreements of this type, including restrictions on the payment of dividends, repurchase of stock, incurrence of indebtedness, dispositions and acquisitions. As of December 31, 2023, we were in compliance with the covenants under the 2021 Credit Agreement.
In addition, we are also required to make representations and warranties and comply with certain non-financial covenants that are 62 Table of Contents customary in loan agreements of this type, including restrictions on the payment of dividends, repurchase of stock, incurrence of indebtedness, dispositions and acquisitions.
Research and Development Expenses Years Ended December 31, Change 2023 2022 2021 2023 to 2022 2022 to 2021 (in thousands, except for percentages) Research and development $ 44,380 $ 39,762 $ 30,742 $ 4,618 12 % $ 9,020 29 % For the year ended December 31, 2023, research and development expenses increased by $4.6 million, or 12%, as compared to the year ended December 31, 2022.
Research and Development Expenses Years Ended December 31, Change 2024 2023 2022 2024 to 2023 2023 to 2022 (in thousands, except for percentages) Research and development $ 50,271 $ 44,380 $ 39,762 $ 5,891 13 % $ 4,618 12 % For the year ended December 31, 2024, research and development expenses increased by $5.9 million, or 13%, as compared to the year ended December 31, 2023.
During the year ended December 31, 2021, net cash provided by operating activities was $62.0 million, resulting from our net income of $94.2 million, non-cash charges of $4.8 million, partially offset by net cash used in connection with changes in our operating assets and liabilities of $37.0 million.
During the year ended December 31, 2023, net cash provided by operating activities was $30.9 million, resulting from our net income of $4.9 million, non-cash charges of $44.0 million, partially offset by net cash used in connection with changes in our operating assets and liabilities of $18.1 million.
As of December 31, 2023, we had approximately 260 direct sales representatives and approximately 160 independent agencies. 79 Table of Contents We recognize revenue from sales of our Advanced Wound Care and Surgical & Sports Medicine products when the customer obtains control of our product, which occurs at a point in time and may be upon procedure date, shipment, or delivery, based on the contractual terms of a contract.
We recognize revenue from sales of our Advanced Wound Care and Surgical & Sports Medicine products when the customer obtains control of our product, which occurs at a point in time and may be upon procedure date, shipment, or delivery, based on the contractual terms of a contract.
To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute on our business strategy, we anticipate that they will be obtained through additional equity or debt financings, other strategic transactions or a combination of these potential sources of funds.
Our capital expenditures consist primarily of building improvements, manufacturing equipment, and computer hardware and software. 60 Table of Contents To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute on our business strategy, we anticipate that they will be obtained through additional equity or debt financings, other strategic transactions or a combination of these potential sources of funds.
Income Tax (Expense) Benefit Years Ended December 31, Change 2023 2022 2021 2023 to 2022 2022 to 2021 (in thousands, except for percentages) Income tax (expense) benefit $ (5,447 ) $ (4,750 ) $ 31,116 $ (697 ) 15 % $ (35,866 ) (115 %) For the year ended December 31, 2023, income tax expense of $5.4 million included $3.4 million of current income taxes and $2.0 million of deferred income taxes.
Income Tax (Expense) Benefit Years Ended December 31, Change 2024 2023 2022 2024 to 2023 2023 to 2022 (in thousands, except for percentages) Income tax (expense) benefit $ 3,668 $ (5,447 ) $ (4,750 ) $ 9,115 (167 %) $ (697 ) 15 % For the year ended December 31, 2024, income tax benefit of $3.7 million included $7.1 million of current income taxes and ($10.7) million of deferred income taxes.
Dermagraft As previously disclosed, manufacturing of Dermagraft was suspended in the fourth quarter of 2021 and sales of Dermagraft were suspended in the second quarter of 2022. We currently plan to transition our Dermagraft manufacturing to a new manufacturing facility or engage a third-party manufacturer, which we expect will result in substantial long-term cost savings.
Dermagraft As previously disclosed, manufacturing of Dermagraft was suspended in the fourth quarter of 2021 and sales of Dermagraft were suspended in the second quarter of 2022. We currently plan to transition our Dermagraft manufacturing to our newly-leased biomanufacturing facility in Smithfield, Rhode Island, which we expect will begin in 2027, and will result in substantial long-term cost savings.
For the year ended December 31, 2022, research and development expenses increased by $9.0 million, or 29%, as compared to the year ended December 31, 2021.
For the year ended December 31, 2023, research and development expenses increased by $4.6 million, or 12%, as compared to the year ended December 31, 2022.
Significant judgments and estimates used by management when evaluating long-lived assets for impairment include: an assessment as to whether an adverse event or circumstance has triggered the need for an impairment review; determination of asset groups, the primary asset within each group, and the primary asset's average estimated useful life; undiscounted future cash flows generated by the assets; and determination of fair value when an impairment is deemed to exist, which may require assumptions related to future general economic conditions, future expected production volumes, product pricing and cost estimates, working capital and capital investment requirements, discount rates and estimated liquidation values.
Judgments and estimates used by management when evaluating long-lived assets for impairment include: an assessment as to whether an adverse event or circumstance has triggered the need for an impairment review; determination of asset groups, the primary asset within each group, and the primary asset's average estimated useful life; undiscounted future cash flows generated by the assets; and determination of fair value when an impairment is deemed to exist.
Net cash used in changes in our operating assets and liabilities included an increase in accounts receivable of $8.8 million, an increase in inventory and prepaid expenses of $9.8 million, a decrease in operating lease liability of $7.0 million and a decrease of accrued expenses of $11.9 million, all of which were partially offset by an increase in accounts payable and other liabilities of $3.3 million.
Net cash used in changes in our operating assets and liabilities included an increase in accounts receivable of $8.8 million, an increase in inventory and prepaid expenses of $9.8 million, a decrease in operating lease liability of $7.0 million and a decrease of accrued expenses of $11.9 million, all of which were partially offset by an increase in accounts payable and other liabilities of $3.3 million. 61 Table of Contents Investing Activities During the year ended December 31, 2024, we used $10.0 million of cash in investing activities solely consisting of capital expenditures.
For the year ended December 31, 2023, we reported $433.1 million in net revenue, $4.9 million in net income and $30.9 million of cash inflows from operating activities.
For the year ended December 31, 2024, we reported $482.0 million in net revenue, $0.9 million in net income and $14.2 million of cash inflows from operating activities.
We believe that our net U.S. deferred tax assets did not require a valuation allowance as of December 31, 2023. Our U.S. provision for income taxes relates to current tax expense associated with taxable income that could not be offset by net operating losses or research and development credits.
Our U.S. provision for income taxes relates to current tax expense associated with taxable income that could not be offset by net operating losses or research and development credits.
Cost of Goods Sold and Gross Profit Years Ended December 31, Change 2023 2022 2021 2023 to 2022 2022 to 2021 (in thousands, except for percentages) Cost of goods sold $ 106,481 $ 105,019 $ 114,199 $ 1,462 1 % $ (9,180 ) (8 %) Gross profit $ 326,659 $ 345,874 $ 353,160 $ (19,215 ) (6 %) $ (7,286 ) (2 %) For the year ended December 31, 2023, cost of goods sold increased by $1.5 million, or 1%, as compared to the year ended December 31, 2022.
Cost of Goods Sold and Gross Profit Years Ended December 31, Change 2024 2023 2022 2024 to 2023 2023 to 2022 (in thousands, except for percentages) Cost of goods sold $ 115,741 $ 106,481 $ 105,019 $ 9,260 9 % $ 1,462 1 % Gross profit $ 366,302 $ 326,659 $ 345,874 $ 39,643 12 % $ (19,215 ) (6 %) For the year ended December 31, 2024, cost of goods sold increased by $9.3 million, or 9%, as compared to the year ended December 31, 2023.
When such an event occurs, we determine whether there has been impairment by comparing the anticipated undiscounted future net cash flows to the related asset group’s carrying value.
When such an event occurs, we determine whether our asset groups are appropriate for impairment considerations, based on any changed facts and circumstances, and we then determine whether there has been impairment by comparing the anticipated undiscounted future net cash flows to the related asset group’s carrying value.
For SOFR Loans, the interest rate is a per annum interest rate equal to the Adjusted Term SOFR plus an Applicable Margin between 2.00% to 3.25% based on the Total Net Leverage Ratio.
Advances made under the 2021 Credit Agreement were either SOFR Loans or ABR Loans, at our option. For SOFR Loans, the interest rate was a per annum interest rate equal to the Adjusted Term SOFR plus an Applicable Margin between 2.00% to 3.25% based on the Total Net Leverage Ratio.
Our working capital requirements vary from period to period depending on manufacturing volumes, the timing of shipments and the payment cycles of our customers and payers. 85 Table of Contents Our capital expenditures consist primarily of building improvements, manufacturing equipment, and computer hardware and software.
Our working capital requirements vary from period to period depending on manufacturing volumes, the timing of shipments and the payment cycles of our customers and payers.
The decrease in gross profit resulted primarily from decreased sales volume and increased manufacturing-related costs, partially offset by a shift in product mix to our higher gross margin products. 83 Table of Contents Selling, General and Administrative Expenses Years Ended December 31, Change 2023 2022 2021 2023 to 2022 2022 to 2021 (in thousands, except for percentages) Selling, general and administrative $ 269,754 $ 283,808 $ 250,200 $ (14,054 ) (5 %) $ 33,608 13 % For the year ended December 31, 2023, selling, general and administrative expenses decreased by $14.1 million, or 5%, as compared to the year ended December 31, 2022.
The decrease in gross profit resulted primarily from a decrease in the pricing for certain of our products, as well as a shift in product mix. 58 Table of Contents Selling, General and Administrative Expenses Years Ended December 31, Change 2024 2023 2022 2024 to 2023 2023 to 2022 (in thousands, except for percentages) Selling, general and administrative $ 294,513 $ 269,754 $ 283,808 $ 24,759 9 % $ (14,054 ) -5 % For the year ended December 31, 2024, selling, general and administrative expenses increased by $24.8 million, or 9%, as compared to the year ended December 31, 2023.
The 2021 Credit Agreement, as amended, provides for a term loan facility not to exceed $75.0 million (the Term Loan Facility) and a revolving credit facility not to exceed $125.0 million (the Revolving Facility). Advances made under the 2021 Credit Agreement may be either SOFR Loans or ABR Loans, at our option.
The 2021 Credit Agreement, as amended, provides for a term loan facility not to exceed $75.0 million (the Term Loan Facility) and a revolving credit facility not to exceed $125.0 million (the Revolving Facility).
As of December 31, 2023, we had an accumulated deficit of $41.0 million and working capital of $144.5 million which included $103.8 million in cash and cash equivalents.
As of December 31, 2024, we had an accumulated deficit of $40.1 million and working capital of $208.5 million which included $135.6 million in cash and cash equivalents.
See Note 12, Long-Term Debt Obligations , to our audited consolidated financial statements included in this Annual Report on Form 10-K. (7) Amount reflects the cancellation fees incurred in connection with the Company’s decision to pause one of its manufacturing facility construction projects. (8) Amount reflects the legal and consulting fees incurred related to the recently published and withdrawn LCDs.
See Note 2, Significant Accounting Policies to our audited consolidated financial statements included in this Annual Report on Form 10-K. 56 Table of Contents (4) Amount reflects the cancellation fees incurred in connection with the Company’s decision to pause one of its manufacturing facility construction projects.
See Note 8, Property and Equipment, Net , to our audited consolidated financial statements included in this Annual Report on Form 10-K. (4) Amounts reflect the change in the fair value of the earnout liability in connection with the CPN acquisition. See Note 3, Acquisition to our audited consolidated financial statements included in this Annual Report on Form 10-K.
See Note 8, Property and Equipment, Net to our audited consolidated financial statements included in this Annual Report on Form 10-K.
The increase resulted primarily from increases in interest rates in 2023. For the year ended December 31, 2022, total other expense, net, decreased by $7.1 million, or 78%, as compared to the year ended December 31, 2021. The decrease in interest expense in 2022 resulted from the lower interest rate for the borrowings under the 2021 Credit Agreement.
The decrease resulted primarily from a decrease in the balance of the Term Loan Facility, leading to lower interest expense in 2024. For the year ended December 31, 2023, total other expense, net, increased by $0.1 million, or 5%, as compared to the year ended December 31, 2022. The increase resulted primarily from increases in interest rates in 2023.
We generally expect our selling, general and administrative expenses to continue to increase due to increased investments in market development and the geographic expansion of our sales forces as we drive for continued revenue growth.
We generally expect our selling, general and administrative expenses to continue to increase due to increased investments in market development and the geographic expansion of our sales forces as we drive for continued revenue growth. 54 Table of Contents Research and development expenses Research and development expenses include expenses for clinical trials, personnel costs for our research and development personnel, expenses related to improvements in our manufacturing processes, enhancements to our currently available products, and additional investments in our product and platform development pipeline.
In addition, we consider whether it is more likely than not that the 80 Table of Contents tax position will be sustained on examination by taxing authorities based on the technical merits of the position.
In addition, we consider whether it is more likely than not that the tax position will be sustained on examination by taxing authorities based on the technical merits of the position. We believe that our net U.S. deferred tax assets did not require a valuation allowance as of December 31, 2024.
Net cash used in changes in our operating assets and liabilities included an increase in accounts receivable of $28.7 million, an increase in inventory of $9.3 million, and a decrease 86 Table of Contents in operating leases and other liabilities of $12.2 million, all of which were partially offset by an increase in accounts payable, accrued expenses and other current liabilities of $13.2 million.
Net cash used in changes in our operating assets and liabilities included an increase in accounts receivable of $31.8 million, an increase in inventories of $6.2 million, an increase prepaid expenses and other current and other assets of $2.5 million, a decrease in net operating lease liabilities of $14.1 million, and a decrease in accounts payable of $2.4 million; partially offset by an increase in accrued expenses and other current liabilities of $9.2 million, and a decrease in other liabilities of $1.1 million.
We must pay in arrears, on the first day of each quarter prior to August 6, 2026 (the "Revolving Termination Date") and on the Revolving Termination Date, a fee for our non-use of available funds (the Commitment Fee). The Commitment Fee rate is between 0.25% to 0.45% based on the Total Net Leverage Ratio.
We prepaid the Term Loan Facility in November 2024, and amounts borrowed under the Term Loan Facility may not be re-borrowed. We must pay in arrears, on the first day of each quarter prior to August 6, 2026 (the Revolving Termination Date) and on the Revolving Termination Date, a fee for our non-use of available funds (the Commitment Fee).
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are provided when necessary to reduce net deferred tax assets to an amount that is more likely than not to be realized.
Valuation allowances are provided when necessary to reduce net deferred tax assets to an amount that is more likely than not to be realized.
The decrease in cost of goods sold was primarily due to decreased sales volume in our Advanced Wound Care and Surgical & Sports Medicine products. For the year ended December 31, 2022, gross profit decreased by $7.3 million, or 2%, as compared to the year ended December 31, 2021.
The increase in Surgical & Sports Medicine net revenue was primarily due to growth in new customers and product mix. For the year ended December 31, 2023, net revenue from our Advanced Wound Care products decreased by $16.7 million, or 4%, as compared to the year ended December 31, 2022.
The initial term of the agreement expires on December 31, 2026 and can be renewed for up to five additional one-year terms.
The initial term of the agreement expires on December 31, 2026 and can be renewed for up to five additional one-year terms. Management’s Use of Non-GAAP Measures Our management uses financial measures that are not in accordance with GAAP (Non-GAAP), in addition to financial measures in accordance with GAAP, to evaluate our operating results.
(5) Amounts reflect the fee the Company paid to a GPO to settle previously disputed GPO fees. See Note 2, Significant Accounting Policies to our audited consolidated financial statements included in this Annual Report on Form 10-K. (6) Amount reflects the loss recognized on the extinguishment of the 2019 Credit Agreement upon repayment in 2021.
See Note 8, Property and Equipment, Net , to our audited consolidated financial statements included in this Annual Report on Form 10-K. (3) Amounts reflect the fee we paid to a GPO to settle previously disputed GPO fees.
Other expense, net Interest expense, net —Interest expense, net consists of interest on our outstanding indebtedness, including amortization of debt discount and debt issuance costs, net of interest income recognized.
Other expense, net Other expense, net comprises primarily interest expense on our indebtedness that was outstanding until November 2024, including amortization of debt discount and debt issuance costs, net of interest income recognized. Income taxes We account for income taxes using an asset and liability approach.
See Note 11, Restructuring , to our audited consolidated financial statements included in this Annual Report on Form 10-K. (2) Amounts reflect the collection of certain notes receivable from related parties previously reserved. See Note 19, Related Party Transactions , to our audited consolidated financial statements included in this Annual Report on Form 10-K.
See Note 11, Restructuring , to our audited consolidated financial statements included in this Annual Report on Form 10-K. (2) Amount reflects the disposal of certain equipment related to construction in progress at one of our Canton, Massachusetts facilities.
These items include non-cash equity compensation, restructuring charges, recovery of certain notes receivable from related parties, write-off of the capitalized costs related to certain unfinished construction work and other long-term assets, the change in the fair value of the earnout liability in connection with the CPN acquisition, fees paid in connection with settlement of previously disputed GPO fees, loss on the extinguishment of debt, and the cancellation fee for terminating certain agreements or pausing a certain construction project.
These items include non-cash equity compensation, restructuring charges, write-off of the capitalized costs related to certain unfinished construction work and other long-term assets, fees paid in connection with settlement of previously disputed GPO fees, the cancellation fee for terminating certain agreements or pausing a certain construction project, legal and consulting fees associated with, as well as compensation expense related to retention for certain sales employees impacted by the published and subsequently withdrawn LCDs, impairment charges of a purchased building and associated unfinished construction work, and the write-down of costs previously capitalized in the development of internal-use software, that the Company determined have no future value.
(9) Amount reflects the compensation expenses related to retention for those sales employees impacted by the recently published and withdrawn LCDs. 82 Table of Contents Comparison of the Years Ended December 31, 2023, 2022, and 2021 Revenue Years Ended December 31, Change 2023 2022 2021 2023 to 2022 2022 to 2021 (in thousands, except for percentages) Advanced Wound Care $ 405,514 $ 422,231 $ 430,237 $ (16,717 ) (4 %) $ (8,006 ) (2 %) Surgical & Sports Medicine 27,626 28,662 37,122 (1,036 ) (4 %) (8,460 ) (23 %) Net revenue $ 433,140 $ 450,893 $ 467,359 $ (17,753 ) (4 %) $ (16,466 ) (4 %) For the year ended December 31, 2023, net revenue from our Advanced Wound Care products decreased by $16.7 million, or 4%, as compared to the year ended December 31, 2022.
(9) Amount reflects construction in progress terminated and disposed of at one of our Canton, Massachusetts facilities, resulting from the Company’s decision to move certain operations to the Smithfield Facility. 57 Table of Contents Comparison of the Years Ended December 31, 2024, 2023, and 2022 Revenue Years Ended December 31, Change 2024 2023 2022 2024 to 2023 2023 to 2022 (in thousands, except for percentages) Advanced Wound Care $ 453,639 $ 405,514 $ 422,231 $ 48,125 12 % $ (16,717 ) (4 %) Surgical & Sports Medicine 28,404 27,626 28,662 778 3 % (1,036 ) (4 %) Net revenue $ 482,043 $ 433,140 $ 450,893 $ 48,903 11 % $ (17,753 ) (4 %) For the year ended December 31, 2024, net revenue from our Advanced Wound Care products increased by $48.1 million, or 12%, as compared to the year ended December 31, 2023.
We may elect to reduce or terminate the Revolving Facility in its entirety at any time by repaying all outstanding principal and unpaid accrued interest. 87 Table of Contents Under the 2021 Credit Agreement, we are required to comply with certain financial covenants including the Consolidated Fixed Charge Coverage Ratio and Consolidated Total Net Leverage Ratio, tested quarterly.
Under the 2021 Credit Agreement as amended by the 2024 Amendment, we are required to comply with certain financial covenants including the Consolidated Fixed Charge Coverage Ratio and Consolidated Total Net Leverage Ratio, tested quarterly.
For the year ended December 31, 2022, net revenue from our Advanced Wound Care products decreased by $8.0 million, or 2%, as compared to the year ended December 31, 2021.
For the year ended December 31, 2023, gross profit decreased by $19.2 million, or 6%, as compared to the year ended December 31, 2022.
We believe the following critical accounting policies involve significant areas where management applies judgments and estimates in the preparation of our consolidated financial statements. Revenue Recognition We generate revenue through the sale of Advanced Wound Care and Surgical & Sports Medicine products.
We believe the following critical accounting estimates involve significant areas where management applies judgments and estimates in the preparation of our consolidated financial statements, and supplement our discussion in Note 2, Significant Accounting Policies , to our audited consolidated financial statements included in this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
If these estimates or their related assumptions change in the future, we may be required to record impairment charges against these assets in the reporting period in which the impairment is identified. 63 Table of Contents Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
The decrease in gross profit resulted primarily from a decrease in the pricing for certain of our products, as well as a shift in product mix. For the year ended December 31, 2022, cost of goods sold decreased by $9.2 million, or 8%, as compared to the year ended December 31, 2021.
For the year ended December 31, 2024, gross profit increased by $39.6 million, or 12%, as compared to the year ended December 31, 2023. The increase in gross profit resulted primarily from an increase in volume and a shift in product mix.
For the year ended December 31, 2022, net revenue from our Surgical & Sports Medicine products decreased by $8.5 million, or 23%, as compared to the year ended December 31, 2021.
The increase in Advanced Wound Care net revenue was primarily attributable to an increase in sales of certain products for new and existing customers. For the year ended December 31, 2024, net revenue from our Surgical & Sports Medicine products increased by $0.8 million, or 3%, as compared to the year ended December 31, 2023.
For the year ended December 31, 2022, selling, general and administrative expenses increased by $33.6 million, or 13%, as compared to the year ended December 31, 2021.
These increases in expenses were partially offset by a $1.0 million decrease in commissions, restructuring and other headcount-related expense; and a $1.5 million decrease in amortization expense. For the year ended December 31, 2023, selling, general and administrative expenses decreased by $14.1 million, or 5%, as compared to the year ended December 31, 2022.
The increase in research and development expenses was primarily due to 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 the clinical study and related costs necessary to seek regulatory approvals for certain of our products. 84 Table of Contents Other Expense, Net Years Ended December 31, Change 2023 2022 2021 2023 to 2022 2022 to 2021 (in thousands, except for percentages) Interest expense, net $ (2,190 ) $ (2,009 ) $ (7,236 ) $ (181 ) 9 % $ 5,227 (72 %) Loss on the extinguishment of debt — — (1,883 ) — ** 1,883 (100 %) Other income (expense), net 57 (13 ) (13 ) 70 (538 %) — 0 % Total other expense, net $ (2,133 ) $ (2,022 ) $ (9,132 ) $ (111 ) 5 % $ 7,110 (78 %) ** not meaningful For the year ended December 31, 2023, total other expense, net, increased by $0.1 million, or 5%, as compared to the year ended December 31, 2022.
See Note 8, Property and Equipment, Net , to our consolidated financial statements included in this Annual Report on Form 10-K. 59 Table of Contents Other Expense, Net Years Ended December 31, Change 2024 2023 2022 2024 to 2023 2023 to 2022 (in thousands, except for percentages) Interest expense, net $ (1,544 ) $ (2,190 ) $ (2,009 ) $ 646 (29 %) $ (181 ) 9 % Other income (expense), net 20 57 (13 ) (37 ) (65 %) 70 (538 %) Total other expense, net $ (1,524 ) $ (2,133 ) $ (2,022 ) $ 609 (29 %) $ (111 ) 5 % For the year ended December 31, 2024, total other expense, net, decreased by $0.6 million, or 29%, as compared to the year ended December 31, 2023.
Removed
We generated net revenue of $433.1 million, $450.9 million, and $467.4 million for the years ended December 31, 2023, 2022, and 2021, respectively. We reported net income of $4.9 million, $15.5 million, and $94.2 million (which includes a $48.3 million benefit from release of a tax valuation allowance) for the years ended December 31, 2023, 2022, and 2021, respectively.
Added
If there are significant delays in the build out of the Smithfield Facility or in approval of the facility for manufacturing of Dermagraft, it could have an adverse effect on our consolidated net revenue and results of operations. 52 Table of Contents Local Coverage Determinations On April 25, 2024, seven Medicare Part A/B MACs published new proposed LCDs for skin substitute grafts/CTPs for the treatment of DFUs and VLUs in the Medicare population.
Removed
While we reported net income for the most recent four years, we have incurred significant losses since inception and we may incur operating losses in the future as we expend resources as part of our efforts to grow our organization to support the planned expansion of our business.
Added
These LCDs were finalized by the MACs on November 14, 2024, and were originally set to become effective on February 12, 2025. However, on January 24, 2025, the MACs announced a delay in the implementation of the LCDs until April 13, 2025.
Removed
As of December 31, 2023, we had an accumulated deficit of $41.0 million. Our primary sources of capital to date have been from sales of our products, borrowings from related parties and institutional lenders and proceeds from the sale of our Class A common stock.
Added
Under the new LCDs finalized in November 2024, should they take effect as scheduled, eighteen products would remain covered, including our Apligraf and Dermagraft products for DFU and VLU, and our Affinity and NuShield products for DFU; however, more than 200 products would be classified as “non-covered,” including our PuraPly, PuraPly AM, PuraPly XT, Novachor, TransCyte, Dual and Matrix products for DFU and VLU.
Removed
We operate as one segment of regenerative medicine. 77 Table of Contents CPN Acquisition On September 17, 2020, we acquired certain assets and assumed certain liabilities of CPN Biosciences, LLC (CPN) pursuant to an asset purchase agreement dated July 24, 2020, which was accounted for using the acquisition method of accounting in accordance with applicable accounting standards.
Added
The LCDs as finalized apply only to DFU and VLU indications for skin substitute products; other indications would remain subject to case-by-case review of medical necessity by the MACs if the LCDs take effect. It is uncertain if there will be further delays in implementing the new LCDs and/or if the new LCDs will be revised or rescinded going forward.
Removed
The aggregated consideration amounted to $19.0 million as of the acquisition date which consisted of $6.4 million in cash, 2,151,438 shares of our common stock with a fair value of $8.8 million, and a contingent consideration (the Earnout) with a fair value at such time of $3.8 million.
Added
If implemented, the LCDs could materially impact utilization of these products, our business, and our revenue. Any future changes or other developments related to these or other LCDs also could affect utilization of our products, our business, and our revenue. License And Manufacturing Agreement We have a trademark license and manufacturing agreement with Vivex for Dual, Matrix, and VIA.
Removed
At the closing, we paid $5.8 million in cash and issued 1,947,953 shares of our Class A common stock. The remaining consideration of $1.4 million was held back and was released in April 2022 by the Company paying $0.6 million in cash and issuing 203,485 shares of the Company’s Class A common stock to the former equity holders of CPN.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
2 edited+0 added−2 removed1 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
2 edited+0 added−2 removed1 unchanged
2023 filing
2024 filing
Biggest changeITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK We are exposed to various market risks, including fluctuations in interest rates and variability in currency exchange rates. We have established policies, procedures and internal processes governing our management of market risk.
Biggest changeITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK We are exposed to various market risks, including variability in currency exchange rates. We have established policies, procedures and internal processes governing our management of market risk. Foreign Currency and Market Risk The majority of our employees and our major operations are currently located in the United States.
The functional currency of our foreign subsidiary in Switzerland is the U.S. dollar. We have, in the normal course of business, engaged in contracts with contractors or other vendors in a currency other than the U.S. dollar.
The functional currency of our foreign subsidiary in Switzerland is the United States dollar. We have, in the normal course of business, engaged in contracts with contractors or other vendors in a currency other than the United States dollar.
Removed
Interest Rate Risk As of December 31, 2023, we had $66.6 million in borrowings outstanding under our Term Loan Facility and no borrowings outstanding under our Revolving Facility, respectively. Borrowings under our 2021 Credit Agreement bear interest at variable rates.
Removed
Based on the principal amount outstanding as of December 31, 2023, an immediate 10% change in the interest rate would not have a material impact on our financial position, results of operations or cash flows. Foreign Currency and Market Risk The majority of our employees and our major operations are currently located in the United States.