MiMedx Group, Inc

Good afternoon, and thank you for standing by. Welcome to the Memetics Third Quarter 2025 Operating and Financial Results Conference Call. At this time, all participants are in listen-only mode. The question-and-answer session will follow the forum presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Matt Natariani, Head of Investor Relations for Memetics. Thank you. You may now begin.

Thank you, Operator, and good afternoon, everyone. Welcome to the MiMedx Third Quarter 2025 Operating and Financial Results Conference Call. With me on today's call are Chief Executive Officer Joe Capper and Chief Financial Officer Doug Rice. As part of today's webcast, we are simultaneously displaying slides that you can follow. You can access the slides from the Investor Relations website at MiMedx.com. Joe will kick us off with some opening remarks and a summary of our operating highlights, as well as a discussion of our financial goals, And Doug will provide a review of our financial results for the quarter. And then Joe will conclude before we make ourselves available for your questions. Before we begin, I would like to remind you that our comments today will include forward-looking statements, including statements regarding future sales, operating results, and cash balance growth, future margins and expenses, our product portfolios, and expected market sizes for our product. These expectations are subject to risks and uncertainties, and actual results may differ materially from those anticipated due to many factors, including competition, access to customers, the reimbursement environment, unforeseen circumstances, and delays. Additional factors that could impact outcomes and our results include those described in the risk factors section of our annual report on Form 10-K and our quarterly report on Form 10-Q. Also, our comments today include non-GAAP financial measures, and we provide a reconciliation to the most comparable GAAP measures in our press release, which is available on our website at mymedics.com. With that, I'm now pleased to turn the call over to Joe Capper. Joe?

Thanks, Matt. Good afternoon, everyone. Thank you all for joining us for today's call. I'm very pleased to report that our third quarter performance was outstanding across the enterprise, generating strong top-line growth in both our wound and surgical franchises. We set new company highs for quarterly revenue, adjusted EBITDA, and adjusted EBITDA margin, which added $23 million of cash in the quarter. I am extremely proud of the team's focus, which drove these superior results. We continue to prove we can adjust to challenges and advance on opportunities whenever they arise. As such, we are once again raising our full year 2025 revenue growth guidance and our expectations for adjusted EBITDA margin. Our goal for the remainder of the year is to maximize near-term opportunities to ensure a strong finish and usher in the pending Medicare reimbursement reforms from a position of strength. The final rules are likely to be implemented at the start of 2026, and we are well prepared for a range of potential scenarios, especially given the dramatic financial improvements we've made to the business over the last few years. I will touch on some of the highlights of the quarter and then provide an update on our strategic focus, which I'm confident will help you understand why we are so bullish about the future for Mimetics. For the third quarter, year-over-year net sales growth was an exceptional 35%, finishing at a record $114 million. Our adjusted gross profit margin was 88% in the quarter. Adjusted EBITDA was $35 million or 31% of net sales. We continued to build cash, NEQ3 with $124 million in net cash, a sequential increase of $23 million for the quarter, and we expect to end the year with a net cash balance of more than $150 million. Our surgical business was an important contributor, growing 26% this quarter, driven by the continued growth across the portfolio. We now have over half of the target patients enrolled in our EpiEffect randomized controlled trial. And we have recently completed an interim analysis with favorable results. We launched a few strategic collaborations with companies offering complimentary solutions in the wound care market. And we continue to evaluate additional products to expand our portfolio for both our wound and surgical businesses. In terms of our strategic focus, we continue to make excellent progress in the three areas we have consistently highlighted as the most important for our long-term growth. Our top strategic priority is to continue to innovate and diversify our product portfolio. As you have witnessed, one of the ways we have been able to maintain strong momentum in the business has been with the introduction of products designed to address the numerous unmet needs in both the wound care and surgical markets. In this year alone, we continued with the full market release of EpiEffect, licensed and introduced Heliogen, Celera, and Emerge. We have just begun the rollout of Epi-Express. A randomized control trial for Epi-Effect continues to progress on schedule. As mentioned, we have over half of the target number of patients enrolled and randomized, which provided sufficient data for integral analysis and manuscript submission. These favorable results will be presented tomorrow at the Tissue Repair Evidence Summit. This is excellent news. as we will then have completed all the necessary steps to request reimbursement coverage for EpiEffect as required by the pending LCDs. On our last call, I mentioned that we had received a TRG letter for EpiExpress, which confirmed its status as an FDA Section 361 product. EpiExpress is a fenestrated allograft designed to be used in post-acute cases where the flow or extraction of fluid is of critical importance to the healing process. The full market release of EpiExpress is now underway, and the early feedback is extremely positive. Celera and Emerge, allografts we licensed to remain competitive in the private office marketplace until Medicare reform is enacted, both performed well in the quarter, contributing to our growth in wound care. We also continued executing on the previously announced co-marketing pilot with Vaperox. As a reminder, the Vaperox system, named VHT, or vaporous hyperoxia therapy, is a 510K cleared device that delivers ultrasonic mist and concentrated oxygen for the treatment of nine types of hard to heal chronic wounds, including diabetic foot ulcers, venous leg ulcers, and pressure ulcers. We are receiving excellent early feedback about this solution. Our second priority is to develop and deploy programs intended to expand our footprint in the surgical market. To achieve our continued success in this area, exemplified by our 26% surgical revenue growth in Q3, we have committed significant resources toward the introduction of products like our xenograft particulate heliogen, additional commercial resources, and development of robust real-world evidence demonstrating the potential clinical benefits for patients, the healthcare economic payoff, and the immense business opportunity for my medics. By way of example, We've mentioned the use of our technology in anastomosis procedures a few times in the past. One of those common complications from those procedures are leaks, which occur in upwards of 9% of patients who undergo colorectal surgery and are associated with statistically significant increases in morbidity, mortality, length of stay, and rehospitalization. The cost associated with these complications is estimated to be approximately $28 million for 1,000 patients. making anastomotic leaks a nearly $14 billion challenge for the healthcare system. As we have demonstrated in peer-reviewed publications, the application of AmnioFix as a protective barrier at the surgical closure site has proven to help reduce anastomotic leaks by nearly 50% and readmissions by approximately 40%, which would provide massive savings. Given there are over 500,000 colorectal surgeries per year in the US, our TAM is in excess of $500 million for amniotic just in colorectal procedures. We will continue to make these critical investments and expect to generate evidence across a variety of procedures. Our third initiative is to introduce programs designed to enhance customer intimacy. As we have mentioned, we believe the way we interact with our customers and our company's comprehensive value offering will help drive engagement and retention, especially as we transition to a reimbursement environment where profit potential is no longer primary driver in product selection. We continue to invest in ways to enhance these relationships, including increase and improve customer interaction at various levels within the company. We also continue to experience excellent adoption of MiMedx Connect, our proprietary customer portal, In the third quarter, we saw sequential sales growth of nearly 60% for orders managed within MyMedics Connect. We also recently added bill pay functionality within Connect for online payments and invoicing, and we are actively developing additional features to this system designed to improve workflow and strengthen the bond between MyMedics and our customers. We believe our commitment to this approach will lead to enhanced customer relationships, improved net promoter scores, higher margins, and ultimately an increase in the average lifetime value of a customer. On last quarter's call, we discussed the reforms CMS plans to implement to address the runaway fraud, waste, and abuse plaguing the skin substitute market. As a reminder, CMS announced the following initiatives. First, at the end of June, CMS introduced the Wasteful and Inappropriate Service Reduction, or WISER model, which is focused on leveraging artificial intelligence and machine learning in concert with human clinical review to curb fraud, waste, and abuse in healthcare. This voluntary model, which aims to encourage safe and evidence-supported best practices for treating Medicare beneficiaries, will run from January 1, 2026 through December 31, 2031 in five states and will examine several product categories, including skin substitutes. Next. In July, CMS posted the proposed Physician Fee Schedule, or PFS, and the Outpatient Prospective Payment System, or OPPS, for calendar year 2026. These proposed rules move away from the ASP methodology in the private office and the bundle in wound care centers in favor of a fixed payment for skin substitutes of $125.38 per square centimeter in all outpatient sites of care, private offices, and wound care centers alike. We submitted our comments to the proposed rules in September, recommending CMS consider setting a higher application fee for providers covered by the PFS, reimbursing skin substitutes as pass-through items, setting the fixed price using other reasonable inputs we highlighted, resulting in a relatively modest increase to the price per square centimeter, applying an inflationary index moving forward, and phasing in the price change over time. We believe these suggestions taken together would compensate providers appropriately for the important work they do, eliminate perverse incentives to overutilize skin substitutes, and ensure product developers continue to invest in cutting edge technologies and solutions, all while saving US taxpayers, the Medicare Trust Fund, and beneficiaries billions of dollars. Final rules are expected to be published in November to take effect at the start of the new year. Lastly, the much discussed LCDs are scheduled to go into effect on January 1st. It remains to be seen if they will be modified and or delayed once again. But as I said earlier, we are well positioned for any scenario. As we stated in the past, we are extremely confident of the company's position post Medicare reimbursement reform. When product performance is once again the primary factor driving product selection, our best-in-class technology will carry the day. Let me offer three facts in support of this statement. First, in 2023, we grew our business by 20% with constant pricing. It was all volume-related growth driven in part by the introduction of a few new products and commercial executions. This was just about the time we started to see a rapid uptick of new high priced skin substitutes entering the market, which subsequently caused our growth to slow. Second, in the surgical market, where profit potential does not so overwhelmingly drive product selection, we have been outperforming in the market, as evidenced by our 26% growth in third quarter. And third, we've recently introduced a few boom products that are, quote unquote, more competitively priced. While these products are priced below the mean of other available products on the market, they have been enough to stem the attrition of customers in search of these opportunities. These three points illustrate that when profit potential is not such an outsized motivator in product selection and performance and outcomes are of greater importance, mimetics grows faster than the market. We also expect to see a number of competitors decrease in the wound care market when the reimbursement reform goes into effect, as certain business models will become significantly less attractive. We, therefore, see this as an excellent opportunity to pick up market share. Before I turn the call over to Doug for a detailed financial review of the quarter, I'd like to share some of my thoughts on guidance. First, we had a great third quarter, and we expect to finish the year in similar fashion. As such, we are increasing our full year 2025 revenue growth rate outlook from the low teens to the mid to high teens. We also now expect our full year adjusted EBITDA margin to be at least in the mid-20s as a percentage of net sales. Second, you are no doubt trying to determine how to model the business for 2026 post the implementation of the proposed reforms. We are somewhat in the same boat. However, it would not be prudent to project the base case from the proposed numbers and current volumes given the other factors which will no doubt benefit our business. Until we have clarity on the CMS final rules for the PFS and OPPS, which have yet to be published, we do not want to over-speculate. At a higher level, we do expect some choppiness in the early part of the year as the industry navigates the changes. Still, We welcome these reforms and expect the change will bring much needed stability and predictability to the market. We firmly believe that the change is an opportunity for MiMedx to pick up share due to our numerous competitive advantages. We have a fully vertically integrated business from product development to manufacturing to commercialization, including donor recovery. We have an excellent, robust and defensible intellectual property portfolio. We have arguably the most comprehensive and effective commercial organization in the States. And over the past two and a half years, we have dramatically improved our financial position to include an anticipated net cash balance of more than $150 million by year end. I've been running MedTech companies for decades, and I can tell you that these types of events have a way of shaking out the marginal players. Our fundamentals are solid. and we are going to leverage our competitive advantages to ensure continued success in this new area. That is why I am incredibly bullish regarding the prospects for my medics. Now let me turn the call over to Doug for a more detailed review of our financial results.

Doug? Thank you, Joe, and good afternoon to everyone on today's call. I'm pleased to review our results with you all today. As a quick reminder, as Matt mentioned at the top, many of the financial measures covered in today's call are on a non-GAAP basis So please refer to our earnings release for further information regarding our non-GAAP reconciliations and disclosures. Moving on to the results, our third quarter 2025 net sales of $114 million represent 35% growth compared to the prior year period. By product category, third quarter wound sales of $77 million increased 40% versus the prior year period, while surgical sales of $37 million were up 26% reflecting strong results across both of our franchises. We saw significant contributions across our business in the third quarter. In wound, our third quarter performance was driven by new product sales of Celera and Emerge. In our surgical franchise, AmnioFix and AmnioEffect once again delivered strong, double-digit year-over-year increases in sales. And our particulate products also demonstrated strong growth on a year-over-year and sequential basis. Our third quarter 2025 GAAP gross profit was about $95 million, a 38% increase compared to the prior year period. Our GAAP gross margin was 84% in the third quarter 2025 compared to 82% last year. Excluding the incremental acquisition-related amortization expense in the quarter, our non-GAAP adjusted gross margin was 88%, up about 540 basis points compared to the third quarter of 2024. This increase was primarily a result of product mix as well as the timing of positive production variances. In light of the strong year-to-date results, we now expect our full-year non-GAAP gross margin to be around 85%. Turning to our operating expenses, GAAP sales and marketing expenses were $54 million, or 47% of net sales in the third quarter, compared to $42 million, or 50% of net sales in the prior year period. The dollar increase was due to a combination of increased sales costs, including higher commissions associated with both higher sales, as well as the changes we made to our sales commission plans in the middle of 2024. As a result of our year-to-date results, we now expect full-year 2025 sales and marketing expenses to be between 49% and 50% of net sales, which would be a modest improvement on a percentage of sales basis compared to 2024, albeit up in absolute dollars. GAAP general and administrative expenses or GNA were $15 million or 13% of net sales in the third quarter compared to $12 million or 14% of net sales in the prior year period. The dollar increase was driven by incremental spend from legal and regulatory disputes in the current period, including our ongoing litigation with certain competitors and former employees. As with other OpEx lines, we expect GAAP G&A to grow in absolute dollars for the full year 2025 and to be about 14 to 15% of net sales. Our third quarter R&D expenses of $4 million for 3% of net sales was up $800,000 compared to the prior year period. Our R&D expenses are primarily comprised of the costs associated with our EpiEffect RCT, as well as additional spend related to the development of future products in our pipeline. As Joe mentioned, we have prepared an interim analysis of the FE Effect RCT and have submitted it for publication and presentation later this year in support of any potential Medicare coverage requirements. As we think about the full year, we expect R&D expenses to be about 3% of net sales. GAAP income tax expense for Q3 2025 was around $6 million reflecting an effective GAAP tax rate of 27%. We continue to expect our long-term non-GAAP effective tax rate to be 25%. Our third quarter GAAP net income was $17 million or 11 cents per share on a diluted basis compared to GAAP net income of $8 million or 5 cents per share in the prior year period. Adjusted net income for the third quarter was $23 million or 15 cents per share compared to $10 million or 7 cents per share in the prior year period. Third quarter adjusted EBITDA was $35 million or 31% of net sales compared to $18 million or 22% of net sales in the prior year period. Sequentially, our third quarter adjusted EBITDA grew by nearly $11 million as we focus on expense management that enables our sales increases to drop to the bottom line. Turning to our liquidity, we continue to bolster our balance sheet and position the company to make growth investments. In the third quarter, the business generated $29 million in free cash flow, a record for the company, and our net cash position rose to $124 million. The steady improvement in our balance sheet provides us with the ability to evaluate a range of organic and inorganic investments, and we believe we have a healthy amount of combined firepower between cash on hand and borrowing capacity to help continue to grow and diversify our business. I will now turn the call back to Joe. Joe?

Thanks, Doug. As you just heard, we had an outstanding quarter and expect a strong finish to the year. We set record highs for revenue and adjusted EBITDA with strong growth in both the wound care and surgical businesses. We continue to generate excellent cash flow. We launched EpiExpress. We advanced a few pilot programs to co-market complementary solutions in the wound care market, and we increased our 2025 guidance meaningfully to reflect our strong momentum. As far as the upcoming wound care reimbursement reform is concerned, it is a matter of when, not if, this is going to happen. The current trends are not sustainable. We hope these much needed reforms incorporate our recommendations. We believe they would be beneficial to all stakeholders. And as I said, we are confident in our ability to excel when the industry resets to the proposed guidelines. In closing, I would like to once again thank the Mimetics team for a tremendous quarterly performance and for your unwavering commitment to our mission and the many individuals we have the good fortune to serve. Let's now shift to Q&A and open the call to questions. Operator, we are ready for our first question.

Please proceed. Thank you. At this time, we'll be conducting the question and answer session. If you'd like to ask a question at this time, you may press star 1 on your telephone keypad, and the confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, for our first question. Thank you. Our first question comes from the line of Frank Takanan with Lake Street Capital Markets.

Please proceed with your questions. Great, thanks for taking the questions. Congrats on a really nice quarter. I was hoping to start with the guide for the rest of the year. How should we be thinking about kind of contribution from wound versus surgical? Obviously, we still have the wound policy in place through year end, and that might change at the beginning or likely will change at the beginning. But should we continue to expect that that grows really heavily? And then should we continue to expect that surgical business, too, as well? Just trying to kind of get a little bit more of the variables behind the Q4 guide.

Thanks, Frank. This is Doug. Good question. We're obviously super happy with record revenue for the quarter led by 40% growth in our wound franchise and 26% in surgical with regards to the guide and how that looks going forward. We continue to expect strong uptake in the surgical suite. And so I would think that that momentum continues into Q4 and the The wound business and franchise is certainly going to continue to grow at a healthy clip. So 40% is – you have to also recall that Q3 last year was sort of the nadir of our impact from the sales turnover that we experienced in Q2. And so the comps are going to get a little tougher there in Q4.

I'll leave it at that. The only caveat to Q4 around this, Doug mentioned, it's going to be a tough account to create. And as the rules, once the rules are announced and adjustments start to take place, there's probably some folks that will make those adjustments a little bit earlier. So back at the time of December, it will be a little bit more difficult to do that. But, you know, we've got great momentum going.

Obviously, the first month is over.

So we know we're in good shape.

Got it. That's helpful. And then maybe just thinking a little bit about kind of post-January 1, I know you've mentioned you're doing a number of things to prepare for that. Maybe call out some of those things that you're doing today to prepare for different reform options, and maybe if you can extend to what you feel like would be the best outcome for your company. Is it kind of how your comments were structured and proposed, or is there anything else you think would be kind of the best outcome for MiMedx?

Yeah, I think how our comments were structured and proposed would be the best outcome for industry and for mimetics. But what we have been advocating for some time is level the playing field and take this price variability out of the equation. I think it's untouchable, right? We don't need it. The reason is that it looks like that's going to happen. So we clearly welcome the reform. And given our experience in competing on a level playing field, we're really comfortable that we're going to outperform the market. I don't want to go into details in terms of what types of scenario planning we have done. But again, you can imagine an environment that's less attractive from a profitability perspective. Some participants are not going to. to be in the market, they're probably not gonna find this as attractive as it did over the last couple of years. So I think there's gonna be ample opportunity for market share growth in a number of different ways. And look, we have plenty of evidence to that, right? We've done it in the past. You see it today in our surgical market, how we're growing there, where it's much more of a level playing field. Last thing I would leave you with is you have a great balance sheet. So if there's opportunities to do things to kind of aggregate a little bit of share that way. We'll look at those opportunities.

Got it. And then maybe if I can squeak one more quick one in. Cash ending at 142. I know you guided to greater than 150 million in cash. That obviously leaves the door open above 150. But how should we maybe think about cash generation if you just put up 20 million this quarter and that 150 is out there?

Yeah, we probably confuse people because sometimes we talk gross cash and net cash. We still have about $18 million drawn on our line. So when we say 150 by year end, think of that as net. So you're probably in the high 160s from a gross standpoint. And the question is, why haven't you paid that line down? And it's just Doug yells at me every quarter. It's because, frankly, we've been looking at so many different opportunities that we thought it made sense to do it all at the same time.

Got it. Okay, that's helpful. Thanks for taking the questions.

Our next questions are from the line of Chase Knickerbocker with Craig Howland. Please receive your questions.

Good afternoon. Congrats on the quarter, and thanks for taking the questions. Maybe just first, Joe, was hoping you'd be willing to share in your wound business on an overall square centimeters basis what volume growth was either sequentially or year over year. Respect your comments on the uncertainty as it relates to 26, but just trying to get some sort of guidepost for us as we think about Q4 and then 2026 as it relates to volumes.

Yeah. As you know, we have not been public about that because there's puts and takes and ups and downs. When you launch a new product, some products need less tissue, and so your volume per square centimeter may go down, may go up. So there's so many factors that go into that. We tend to stay away from that. We certainly stay away from it by segment. I think the way I answered the previous question, we feel very comfortable about pending changes. We feel that we're in great, we're in the pole position to pick up share, depending on what the ultimate price is. And the other thing too, is depending on what other factors are associated with the new rules. Is there pass-through pricing? Is there opportunity to continue to discount? How much discounting is going to be permitted? There's several other kind of like mechanics, I would say, about how these rules are going to go into effect. It could affect, you know, the way people market products. So it's just too soon. We'll know the final rules in a couple weeks. I'd say, you know, we always want the answer today, so do we. but it's right around the corner. And I have to stress, I don't see another company that is in a better position than us to compete once these rules are in effect.

Understood. Maybe just on that, have you had a chance to get any feedback on the Hill or from any sort of constituents on some of those suggestions that you made? I think particularly around kind of a potential passenger mechanism or You know, like a CPI adjustment, for example, instead of a recalculation annually. I mean, have you gotten any feedback from that?

Nothing that we could publicly comment on. You know, we work through third-party advisors who communicate directly with as much as possible. Obviously, we're in a shutdown, but as much as possible directly with CMS and the MACs, and we try to put together as much information on it as we can. But there's nothing that we can share publicly publicly. that we can stand behind 100% at this point today.

And then just last, maybe just on the LCDs, you know, that submission as far as when the clinical data is supposed to be submitted, it's obviously coming up here very quickly. Have you heard from the MACs as far as, you know, get your data in as in, you know, LCDs could likely be moving forward? Um, and then on that front, I know you mentioned that, um, that presentation tomorrow. Um, but just kind of, can you speak any more additional detail to that data or, you know, I guess your confidence that it'll be sufficient to support inclusion, um, on, on the LCD as it relates to Happy Effect?

So I'm going to frustrate you for the third time, Chase. I apologize. Um, there's, there's really not a whole lot more. I can offer in terms of LCD, go, no-go, whether they're going to be implemented, whether they're going to be modified, and all that's kind of rumor in the industry. Everybody's got their opinion. The second part of your question is whether or not we feel that we've got sufficient evidence relative to EpiEffect to justify reimbursement. The answer to that is yes. The analysis was very strong. And then there's steps we have to go through. There has to be a presentation and there has to be a manuscript submission, and then you can apply for reimbursement. And we have those steps completed as of tomorrow. So we feel comfortable that our submission is in good shape. Whether or not they stick to that protocol is yet to be seen, or that I would say requirement is yet to be seen. That will tie back to whether or not the LCDs are once again postponed and or modified. But we're in pretty good shape with that product.

Got it. Thanks, Jeff.

Thank you. Our next question is from the line of Carl Burns with Northland Capital. Please receive your question.

Congratulations on the quarter, and thanks for the questions. Considering the foreseeable shakeup, obviously rising from reimbursement changes, which are long overdue, and your cash buildup, are you seeing any compelling so-called low-hanging fruit with respect to M&A prospects or business development opportunities that would fit nicely? Thanks.

Yeah, the answer is yes, there are compelling assets. We have leaned a little bit more into the surgical side of our business in terms of scouring the landscape for opportunities to license and or acquire technologies or products or companies. That does not mean that we're dismissive of the wound care business, just that if assets have any exposure to the pending changes are much more difficult to value at this juncture. But I think there's ample opportunity to kind of leverage or use our balance sheet to accelerate the strategic growth plan. You know, so we're not, we've said this in the past, we're not buying for the sake of buying, but if it fits our strategic plan, if it augments our current product portfolio in the wound care business, if it adds assets that are a strategic fit for us in the surgical business. They're the types of assets that we're looking at.

Great. Thanks so much, and congrats again. Thank you.

Our next question is coming from the line of Russ Osborne. We can't hear Fitzgerald. Please proceed with your question.

Hey, guys. Congrats on the strong quarter. So starting off, would you walk through where you're seeing adoption of Heliogen and where you stand on evidence generation there?

We haven't put out a number on that, but, you know, it's increasing quarter to quarter. It's increasing month to month, quarter to quarter. But it takes a while, right? So you have to get the product on contract. You have to get it through batch. You have to or value analysis committees, I should say. And then, you know, you have to prove efficacy at the surgical level. Feedback is great. We are building evidence around it in various cases. So, you know, I would expect it to be, we haven't put out a growth number on that, but let's just say it's becoming a meaningful contributor to our surgical business. And I can't stress enough how important it is for us to to point out the fact that the surgical business continues to grow well. When we decided this to shut down the KOA business about two years ago, we did that with the intention of pivoting more and focusing more on the surgical business. And we've done that. We've added human resources to that group. We've added products, as you know, lots of new products, including Heliogen, which we just started talking about. And we spent a lot of time on the evidence. I walked through one example of that. in our comments, that's about a third of our business today. So the surgical business is about a third of our total business. You could do the math on that. And it's growing at, you know, 15, 20 plus percent all year long. If that was a standalone surgical company with that kind of growth rate, it would be, I think we would all agree, it would be trading in a much higher multiple than my medics is trading at today. So we're super excited about continuing to invest in that business.

Great. And then turning to Axiophil, what's the path forward there following the September court ruling?

We have to kind of resubmit our arguments, and I'm likely to have another hearing with the judge. So we're sort of back to the beginning, which is, you know, in the meantime, Axiophil continues to do well in the marketplace. As you remember, when we brought Heliogen in, uh, into the portfolio. That was part of that was mitigation and the event that axial fill went away. So we have not overtly tried to change out that product and it has stabilized even in some cases grown. So we looked at our, our particulate business, which would be axial fill and heliogen together. That's a really strong business. Um, it can, it continues to grow. Uh, so, you know, we'll see, we'll, we'll get through that, but we have, um, You know, we have some mitigation plans in place, including actually fill it for some reason that does not go our way. But we think our case is really strong. Our arguments are really, really strong. And I wouldn't read anything into that delay other than it was a little bit long in the tooth from a scheduling standpoint, and that may have motivated the judge to kind of do a reset.

Okay, got it. Thanks for taking our questions. Sure.

Thank you. The next question is from the line of Anthony Petrone with Mizuho Group. Please proceed with your question.

Congrats here on a great quarter. Very, very bullish results all around. Maybe on the 40% wound growth in the quarter, and obviously you mentioned the final CMS LCD outcome here coming in November. Do you think there was you know, pull forward of demand in the physician channel specifically just ahead of that ruling? Did you notice any of that taking place? And then just when you think of underlying volumes on the surgical side, we've heard from others in the medical device space that there's some, you know, pull forward of just surgeries generally on the notion that potentially ACA policies, you know, may not renew just with the government shutdown happening here. Did you notice any pull through on the surgical side from any Medicaid or ACA dynamics? And I'll have one quick follow up.

We didn't notice pull through on either side of the business. We certainly didn't notice pull forward, I should say, on the surgical side of the business. Frankly, I wouldn't expect it in the types of procedures where our product is being utilized. These are not elective surgeries, so I doubt we would be impacted by that. You might see it more in orthopedic space or something like that, but you're not going to see it really where our products are being used for the most part.

Okay, great. And then, you know, just to follow up again on looking at the final rule here, and I know there's just a debate out there on potentially how skin substitute products could settle on a per centimeter square basis, but also on, you know, the allotment for how many applications could be, you know, decided on in the LCD. So is there any way to just set expectations on, you know, what the range of scenarios could be on a per centimeter squared basis, but as well as a total application basis? Thanks again.

Yeah, I think it's a good point you bring up about limitations because there are things that we still need clarity on, which is one of the reasons why I'm staying away from speculating. And I'm going to frustrate you as much as I frustrated Chase. I just can't give you that range right now. I certainly am not going to speculate on what the final price is going to be because there's all kinds of rumors running around the marketplace, and they are just that. We're really close to this thing being public. If I were a betting person, I'd say we're going to see it sooner in November rather than later in November. So we're going to know real soon, Anthony. And then we'll be able to kind of plug these inputs into the way we've been modeling potential scenarios and we'll have more clarity. But again, I have to stress that regardless of the rules, the industry will be more stable. It will be more predictable. If it resets somewhat early, that's okay because this company will outperform the market as it has done in the past when the playing field is even. When everybody's playing by the same rules, especially relative to price and profitability, we will outperform the market. So we welcome it. Appreciate that. Thank you.

Thank you. At this time, this concludes our question and answer session. I'll hand the floor back to Joe Capper for closing comments.

Thanks, Operator, and appreciate you guys being on the call today and the interest in the company. That concludes today's call, and we will speak to you after our next quarter. Thanks, everybody.

Thank you. Today's conference has concluded. You may now disconnect your lines at this time and have a wonderful day.