Bioventus Inc.

Bioventus Inc. is a global medical device company focused on pain relief and musculoskeletal challenges, operating through two reporting segments: U.S. and International, which contributed 88% and 12% of total net sales, respectively, for the fiscal year ended December 31, 2025 ¹. The company's product portfolio is organized into three clinical use-based businesses: Pain Treatments & PRP, Surgical Solutions, and Restorative Therapies.

The core business model revolves around generating revenue from a diverse portfolio of active healing products sold primarily through direct sales teams in the U.S. and a mix of direct and indirect sales teams and distributors internationally. Revenue recognition generally occurs at the point of control transfer to the customer, such as shipment, patient acceptance, or consumption in a surgical procedure. The company also distributes the XCELL Platelet-Rich Plasma (PRP) system in the U.S. orthopedic and sports medicine markets, leveraging its existing HA sales force due to synergistic physician call points.

The Pain Treatments segment includes Knee Osteoarthritis (KOA) products, specifically intra-articular hyaluronic acid (HA) injections like Durolane, GELSYN-3, and SUPARTZ FX, which aim to relieve discomfort and improve mobility. Durolane is a single-injection therapy marketed in the U.S. and internationally, with U.S. patents expected to expire between 2028 and 2029, and a foreign patent in Australia expiring in 2026 ². GELSYN-3 is a three-injection therapy marketed in the U.S., while SUPARTZ FX is a five-injection therapy also marketed in the U.S. This segment also includes Peripheral Nerve Stimulation (PNS) devices, such as the StimRouter system, which provides relief for chronic peripheral pain and is marketed in the U.S. and internationally, with U.S. patents expiring between 2026 and 2031, and foreign patents expiring between 2028 and 2030 ³. New PNS products, TalisMann and StimTrial, received FDA 510(k) clearances in July 2025 ⁴ and began limited commercial release in Q3 2025, with broader launch in early 2026. The XCELL PRP System, exclusively distributed by Bioventus in the U.S. orthopedic and sports medicine markets, processes whole blood to produce high-yield PRP.

The Surgical Solutions segment comprises Ultrasonics and Bone Graft Substitutes (BGS). Ultrasonics products, including the neXus Ultrasonic Surgical System, BoneScalpel, SonaStar System, SonaStar Elite, and SonicOne, are used for precise bone cutting, soft tissue management, and tissue debridement in various surgeries. The neXus system is marketed in the U.S. and internationally. BoneScalpel U.S. patents are expected to expire between 2026 and 2044, and foreign patents between 2027 and 2039 ⁵. SonicOne U.S. patents are expected to expire between 2026 and 2039, and foreign patents between 2026 and 2038 ⁶. The BGS portfolio includes OSTEOAMP, SIGNAFUSE, PUREBONE, and Reficio Demineralized Bone Matrix (DBM), designed to improve bone fusion rates. OSTEOAMP U.S. patents are expected to expire in 2029 ⁷. SIGNAFUSE received FDA clearance for expanded indications in 2023.

The Restorative Therapies segment focuses on Fracture Care with the EXOGEN ultrasound bone stimulation system, indicated for non-invasive treatment of established nonunion fractures and certain fresh fractures. EXOGEN is marketed in the U.S., Canada, Europe, and Japan, and approved in Australia, New Zealand, Saudi Arabia, Turkey, and the UAE. EXOGEN U.S. patents are expected to expire between 2028 and 2029 ⁸.

For the fiscal year ended December 31, 2025, total net sales were $568.087 million ⁹, a decrease of 0.9% from $573.280 million in 2024 ¹⁰. Gross profit was $388.157 million ¹¹, resulting in a gross margin of 68.3% ¹², an increase from 67.7% in 2024 ¹³. Operating income was $53.975 million ¹⁴, representing an operating margin of 9.5% ¹⁵, a significant improvement from an operating loss of $(15.195) million in 2024 ¹⁶. Net income was $27.274 million ¹⁷, compared to a net loss of $(47.049) million in 2024 ¹⁸. Diluted EPS from continuing operations was $0.33 ¹⁹, up from $(0.56) in 2024 ²⁰. Net cash from operating activities was $74.673 million ²¹, an increase of 92.5% from $38.795 million in 2024 ²². Cash and cash equivalents totaled $51.238 million as of December 31, 2025 ²³, compared to $41.582 million in 2024 ²⁴. Total long-term debt, net of original issue discount and deferred financing costs, was $294.0 million ²⁵.

Year-over-year, U.S. net sales decreased by $4.7 million, or 0.9% ²⁶, to $502.097 million ²⁷. This was primarily due to a $30.7 million decrease in Restorative Therapies sales, driven by the divestiture of the Advanced Rehabilitation Business, which contributed $38.2 million in 2024 ²⁸. This decline was partially offset by a $13.3 million increase in U.S. Pain Treatments sales and a $12.7 million increase in U.S. Surgical Solutions sales ²⁹. International net sales decreased by $0.5 million, or 0.7% ³⁰, to $65.990 million ³¹, also impacted by the Advanced Rehabilitation Business divestiture, which contributed $7.3 million in 2024 ³². International Pain Treatments sales increased by $4.470 million, or 17.0% ³³, and Surgical Solutions sales increased by $1.662 million, or 7.7% ³⁴. Overall gross margin improved by 0.6% ³⁵ to 68.3% ³⁶, driven by favorable product mix in BGS and enhanced collections for EXOGEN, partially offset by freight and tariff costs and channel mix shifts.

Significant operational developments in 2025 included entering into a new 2025 Credit Agreement on July 31, 2025, providing a $300.0 million term loan and a $100.0 million revolving credit facility ³⁷. Proceeds from this, along with $30.0 million from the revolver and $2.6 million in cash, were used to repay $332.6 million of outstanding debt under the 2019 Credit and Guaranty Agreement ³⁸. The company also entered into two interest rate swaps totaling $150.0 million on August 1, 2025, to hedge floating-rate interest risk ³⁹. In August 2025, the XCELL PRP System was fully launched in the U.S. orthopedic and sports medicine markets ⁴⁰. In July 2025, FDA 510(k) clearances were received for TalisMann and StimTrial, with a limited commercial release in Q3 2025 and a broader launch in early 2026 ⁴¹. The sale of the Advanced Rehabilitation Business was completed on December 31, 2024, yielding $24.7 million in cash proceeds, net of transactional fees, with $20.0 million used to pay down long-term debt ⁴². Contingent earn-out payments of up to $20.0 million are possible for 2025 and 2026, though 2025 criteria were not met ⁴³.

Management anticipates that the 2025 Credit Agreement will provide $2.0 million of annual interest expense savings, increased liquidity, and an extended debt maturity to July 2030 ⁴⁴. The company expects to remain in compliance with the financial covenants under the 2025 Credit Agreement for the next twelve months, which include a maximum consolidated total net leverage ratio of 4.00 to 1.00 for the quarters ending September 30, 2025, through December 31, 2025, and 3.50 to 1.00 for each fiscal quarter thereafter, with an option to increase this ratio by 0.50 to 1.00 following certain permitted acquisitions, and a minimum interest coverage ratio of 2.50 to 1.00 ⁴⁵.

A major growth area is the full commercial launch of StimTrial and TalisMann, with the PRP system being sold through the existing HA sales force ⁴⁶. The FDA 510(k) clearances for TalisMann and StimTrial in July 2025 are seen as a substantial growth opportunity in the PNS market, enabling physicians to treat a broader spectrum of patients from initial assessment to long-term therapy ⁴⁷. TalisMann, with its patented electric field conduction technology and integrated pulse generator, is designed to provide more powerful stimulation for deeper, larger, or damaged nerves, potentially increasing patient response to neuromodulation therapy and easing lead placement for physicians ⁴⁸. StimTrial is expected to facilitate physician adoption and payer reimbursement by allowing trial assessments of PNS therapy ⁴⁹. A limited commercial release of both products began in select U.S. markets in Q3 2025, with a broader market launch in early 2026 ⁵⁰. The XCELL PRP System, fully launched in August 2025 in the U.S. orthopedic and sports medicine markets, offers customization, precision, and efficiency with high platelet count in a 10-minute single-spin process, providing leukocyte-rich and leukocyte-poor options with flexible dosing ⁵¹. This system is expected to leverage the strong HA sales force due to synergistic physician call points ⁵².

Another key growth vector is the further development and expansion of the Ultrasonics platform business, with a focus on establishing BoneScalpel as a standard of care for spine applications by accelerating market penetration through increased surgeon education and awareness ⁵³. The company plans to leverage the versatility of the neXus platform and its existing install base to expand into additional specialties like neurosurgery and general surgery ⁵⁴. The company also intends to strategically grow its international markets by focusing on current markets with the greatest growth opportunities where its portfolio can maintain and increase profitable growth, and by strategically expanding to new markets with existing products and selectively pursuing new opportunities ⁵⁵.

Operationally, the company expects selling, general and administrative expenses to increase with the continued expansion of its sales organization and marketization of current and pipeline products, including hiring more personnel to support business growth ⁵⁶. However, over time, as net sales grow, these expenses are expected to decline as a percentage of net sales ⁵⁷. Research and development expenses are expected to vary from low to mid-single digits as a percentage of net sales as new products are introduced, existing product lines are extended, and indications are expanded ⁵⁸.

Planned capital allocation includes continued investment in new emerging technologies and further development of the Ultrasonics platform ⁵⁹. The company anticipates that, to the extent additional capital is required, it will seek funding through a combination of equity financings, additional indebtedness, or other strategic sources ⁶⁰. The five-year 2025 Revolver includes an initial annual commitment fee of 0.30%, calculated based on the average daily amount of the available revolving commitment, payable quarterly in arrears ⁶¹.

Management has flagged several structural headwinds and execution risks. The proposed down-classification of non-invasive bone growth stimulators, including EXOGEN, by the FDA from Class III to Class II with special controls, could increase future competition from new market entrants using the less onerous 510(k) clearance pathway ⁶². This could also make EXOGEN eligible for inclusion in Medicare's competitive bidding program for DMEPOS, potentially leading to lower reimbursement amounts ⁶³. The reclassification of HA products from medical devices to drugs by the FDA could negatively impact marketing ability and require costly additional clinical studies for current or future indications, potentially increasing costs, changing coverage/reimbursement levels, and adversely impacting the HA business ⁶⁴. Recent actions by CMS to change ASP calculation methodologies for device-like biologicals, such as skin substitutes, to a standardized flat rate, may signal a broader policy shift that could eventually target the HA portfolio, materially reducing ASP and impacting the HA business and financial condition ⁶⁵. The Final Rule published by CMS on October 31, 2025, regarding bona fide service fees (BFSFs) for ASP calculations, could lead to reduced ASP and CMS reimbursement for HA products if contracts cannot be restructured to comply with new standards or if more stringent requirements are implemented ⁶⁶. Executive orders from the U.S. presidential administration aiming to lower drug prices could also negatively impact reimbursement for HA products ⁶⁷.

The company faces material risks including financial and operating restrictions under the 2025 Credit Agreement, which could limit access to credit and require repayment of indebtedness if financial covenants, such as a maximum consolidated total net leverage ratio of 4.00 to 1.00 for the quarter ending September 30, 2025 through December 31, 2025, and 3.50 to 1.00 thereafter, or a minimum interest coverage ratio of 2.50 to 1.00, are not met ⁶⁸. There is a risk of requiring additional capital to fund obligations and growth, which could lead to significant stockholder dilution or restrictive debt covenants. Failure to maintain effective financial controls could result in material weaknesses and misstatements, negatively affecting the stock price. The company is highly dependent on a limited number of products, with HA products accounting for 49% of total revenue in 2025 ⁶⁹, making it vulnerable to market acceptance issues or supply agreement terminations. Inability to develop, acquire, and commercialize new products or expand indications could limit long-term growth. Reliance on a limited number of third-party manufacturers for critical components and products, including HA products which constituted 49% of total net sales in 2025 ⁷⁰, poses risks of supply disruptions, increased costs, and quality issues. Unexpected increases in rebate claims due to payer system changes could negatively impact financial results. Inadequate coverage or reimbursement for products, including the TalisMann product which is currently only covered under Medicare, or the PRP product which is not reimbursed by any third-party payer ⁷¹, could severely hinder commercial success. Consolidation in the healthcare industry may lead to demand for price concessions. The proposed FDA down-classification of non-invasive bone growth stimulators like EXOGEN could increase competition and reduce reimbursement. The reclassification of HA products from medical devices to drugs by the FDA could require costly additional clinical studies and impact marketing. Cybersecurity threats, such as the 2024 Change Healthcare incident that disrupted patient billing and collections processes ⁷², pose risks of business loss, legal liability, and reputational harm. International operations expose the company to economic, political, regulatory, and currency risks, including tariffs that could increase import costs for products like Durolane and Gelsyn manufactured in Sweden and Switzerland ⁷³. Non-compliance with extensive governmental regulations, including the federal Anti-Kickback Statute with civil penalties of up to $127,973 per violation ⁷⁴ and the False Claims Act with fines up to $29,363 per false claim ⁷⁵, could result in substantial penalties. The Tax Receivable Agreement requires significant cash payments to the Continuing LLC Owner, potentially reducing overall cash flow and accelerating payments in certain circumstances.

Management's overall tone emphasizes a strategic focus on strengthening core market positions, investing in new emerging technologies, expanding the Ultrasonics platform, and growing international markets. They highlight the successful refinancing of debt with the 2025 Credit Agreement, which is expected to yield $2.0 million in annual interest expense savings and extend debt maturity to July 2030 ⁷⁶. Key strategic priorities include the full commercial launches of StimTrial and TalisMann, leveraging the existing HA sales force for the XCELL PRP system, and accelerating market penetration of BoneScalpel in spinal surgery ⁷⁷. Management acknowledges the challenges of a highly competitive and rapidly changing medical device industry, as well as the extensive regulatory landscape, particularly regarding potential FDA reclassification of HA products and the impact of new reimbursement policies. They also note the importance of attracting and retaining highly qualified personnel and managing cybersecurity risks, citing the 2024 Change Healthcare incident as an example of operational disruption ⁷⁸.