What happened
Shares of Organogenesis Holdings (ORGO 2.85%) were up more than 22% as of 11:15 a.m. on Thursday. The healthcare company's stock is up more than 19% this year.
So what
Organogenesis focuses on solutions for the advanced wound care and surgical and sports medicine markets. Its customers include hospitals, wound care centers, government facilities, ambulatory service centers, and doctors' offices. On Thursday, the company said that three Medicare Administrative Contractors (MACs) had withdrawn their final local coverage determinations (LCDs) for skin substitute grafts and tissue-based products to treat diabetic foot ulcers and venous leg ulcers. The LCDs had been scheduled to take effect on Oct. 1, and that would have cut into business for Organogenesis.
Initially, on Aug. 9, three MACs had installed LCDs that required that a covered product be a skin substitute and legally marketed. Of the 130 products that were not included on their lists were five products made by Organogenesis. The move by the MACs caused the company to withdraw full-year guidance.
Now what
Having the LCDs withdrawn lifts a big cloud from the company's finances. However, it is worth noting that Organogenesis was struggling even before the LCDs went into effect. In the second quarter, the company reported revenue of $117.3 million, down 3% year over year (YOY) and net income of $5.3 million, compared to $8.7 million in the same period a year ago. Through six months, though, the company is still partly ahead of last year. Six-months revenue was reported as $224.9 million, up 29.4% YOY, though net income was listed as $2.3 million, down 70% compared to the same period last year.
