Conference Transcript - IART 2026-06-16

Robbie Mizra, Analyst — Truist Securities

All right, great. Thanks. I'm Robbie Mizra on the MedTech team here at Truist Securities. Very happy to have Bob Davis from Integra Life Sciences. He's the leader of the tissue reconstruction segment at the company. And with that, we'll wrap up the conference with our last presentation. So thanks for attending, Bob.

Robert Davis, Analyst — Other

Thanks for having me.

Robbie Mizra, Analyst — Truist Securities

Want to maybe just not tissue related, but overall leadership related at the company. Maybe you can talk a little bit before we get into it around what's changed, what hasn't since Stuart came back to the CEO chair.

Robert Davis, Analyst — Other

That's a great first question. Look, I've been at Integra 14 years now. And my first six years, I led the global neurosurgery business. And now recently, in the last seven years, with tissue reconstruction. So I've got a chance to know Stuart Essig quite well, right, As someone who's mentoring and caring, I think the thing that, you know, he's jumped right in, in his 17-day schedule, and very focused around leading in with the comeback with products. So we're very focused around customer getting off our heels, leaning into this. Very big on culture. As you all know, his history at Integra is long. former CEO, executive chair, knows the business as well, knows our people, knows our customers. So we've jumped right into this. And, you know, the other part of this with some of the appointments with Mike McGreen as chief commercial officer is something that we've talked about for a while, and that is how do we have more one-facing at an enterprise level with our customers. And if you look at neurosurgery and specialty surgery, excuse me, and tissue reconstruction, the overlay of those customers and those hospitals are quite aligned. So the idea that we can go in with our robust portfolio and really get some contracting power to look a lot like a large global med tech because those customers want to have less vendors to deal with. So I'd say with Stuart, the change has been around that, leaning in and getting our confidence back in there with our customer base to win the back.

Robbie Mizra, Analyst — Truist Securities

Yeah, and just on that front regarding that kind of one face to the client, any kind of early green shoots on that that you're seeing in tissue, at least in your organization, on your –

Robert Davis, Analyst — Other

Yeah, no, and look, for us, we've had a product called Primatrix that has come back. Obviously, we had some products that were challenged over the last couple of years. We brought Primatrix back into the market late Q4. The customer reception has been quite strong, and we're very excited about that. So our goal is to win back about half of that revenue base in 2026, and we're on pace to do that. We focus very much on our customer-installed base for Primatrix. So we went at customers, our largest customers, that ordered Primatrix starting on the burn side to display some of the low-cost providers or competitors that had gotten in. So that's also been great. And now we're working our way across the board because now we have a portfolio to play. So that's helped pull some of the other products in as well. And we're broadening out into trauma. So Primatrix has some very unique clinical differentiation and a lot of clinical evidence. And so it does well in certain procedures where they may see that patient once. So we've gotten some good input from our surgeon base as well on that. So overall, it's been very impactful from a standpoint of pulling the portfolio forward and letting customers know that we're back. I think that's been a big thing.

Robbie Mizra, Analyst — Truist Securities

And just, you know, when it comes to tissue recon, you have a broad set of offerings across the portfolio. So maybe if you'd use this opportunity to to help us understand that the TAM the various kind of components of it and the growth rates of each Wamblers of those the

Robert Davis, Analyst — Other

You know the markets that we play in the addressable markets are about two and a half to three billion dollars So if you think about skin substitutes, it makes up about 1.6 billion ish a year in skin substitutes of which there's over 250 companies in there with various products. If you look at implant-based breast reconstruction, of which we have pending PMAs that I'm sure we'll talk about, and the hernia market, that's about another $1.1 billion. So think about between $2.5 to $3 billion focused around burn and trauma, plastics, hernia, and soon to be for us, implant-based breast reconstruction.

Robbie Mizra, Analyst — Truist Securities

And your presence has been stronger, I guess, in the inpatient settings so uh somewhat insulated from the cms changes to the ascs and office space payments and wastage but you do have some some exposure there can you maybe talk about like that that market a little bit and kind of what you're seeing are you seeing procedures shift in terms of site of care are you seeing kind of a wait and see approach inventory work down in that space yeah

Robert Davis, Analyst — Other

No, it can get quite complex, and my goal would be to just keep it simple. I'd say for us, our business is focused 85% around inpatient reimbursement in that skin substitute space. So that represents the DRG space. So that was untouched by the recent CMS changes. So if you think about where our teams are, they are in those IDNs, they're in those hospitals, they're focused around inpatient, but while we're in there, those procurement centers are also buying for hospital outpatient as well as their wound care clinics. So 70% of the wound care clinics in the U.S. are owned by those hospitals and those IDNs. And I would say in that part of the business, inpatient and DRG grew double digit that we saw in Q1. That seems to be quite robust. I'd say we're very cautious around hospital outpatient and the wound care clinic in that IDN space. It's slowed down. It's disrupted a bit from a standpoint of, I think, customers trying to figure out the reimbursement. So we're watching that one, and we're in there. And then if you shift over to the other sites of care, physician office has been impacted significantly. I don't think that's new news, as well as some of those ambulatory surgical centers as well. Now, that is not a strategic play for us, but obviously we're watching it. We do think there could be opportunity there one day for us to leverage some of the things that we have that CMS provides, and I'm sure we'll talk about that. But that's how we look at the market, right? So we're trying to figure out from an IDN perspective, we're spending a lot of time educating those customers in the hospital around what that means for their outpatient ORs and their wound care clinics, because there's an underlying clinical demand for that space.

Robbie Mizra, Analyst — Truist Securities

Got it. And then, you know, there's been also a lot of kind of just manufacturing dynamics in the tissue recon space, kind of idiosyncratic to Integra. So as those products start returning to market, you have new facilities hopefully coming on, I guess, now, right? Sometime now.

Robert Davis, Analyst — Other

And as that comes back, help us kind of frame what the long-term kind of sustainable growth profile of this business looks like.

Robbie Mizra, Analyst — Truist Securities

Maybe couch it against where you think the market is growing.

Robert Davis, Analyst — Other

Yeah, if you look at, you know, our guidance this year, right, we are quoting mid-single digits for tissue reconstruction business, and we're, you know, confident that we will achieve those targets. If you look at the markets themselves, that addressable market, we have growth that swings anywhere from lower single to mid-single digits, say around burn, up through double-digit growth in implant-based breast reconstruction. So that market demand, you know, remains and continues. And, again, I think the CMS on the skin substitute space will have impact, but not necessarily where we play. So I think we're excited about the markets we're in. They're niched markets that we've spoken about before, and there's high barriers of entry. And when you think about where we are, you know, even from a CMS perspective, we're bringing Surgamend back, you know, we expect to be operationalizing our new Braintree plant at the end of this month, and we'll be building product and launching Surgamend in mid-Q4.

Robbie Mizra, Analyst — Truist Securities

Yeah, and I think, you know, kind of one of the areas that we've been thinking about with our thesis is, you know, these are products that have been involved in the market now for a couple of years. so what what gives you the conviction that there hasn't been kind of structural damage I guess yeah to the to the relationship between you and the customer since that's been no it's fair and

Robert Davis, Analyst — Other

again we have not stepped back from our customer base as I said we have a portfolio of products right we have Integra skin primatrix micromatrix sites all we have various products in the in the wound reconstruction or tissue and burn space and we have products called durazorb for plastic reconstructive surgery and a product called gentrix for hernia so our teams have been calling on our customers right so they didn't they didn't leave us we left them a bit with some of our portfolio and some of the challenges that we had so we've kept in constant contact with them letting them know when we're coming back um and it's going to be you know it's it's challenging right but we're we're measuring that with our customers so with primatrix we we understood where we were going to go first we talked to those customers we let them know we were coming back we've had good response there and we're talking about recovering about 50% of that this year and I think we'll do the same as we get closer for surgery men so we know exactly who the high users are we know where they are in plastics and we know where they're used in hernia so we're going to take the same stated approach and again it'll be challenging but I would say the underlying clinical differentiation surrounding a product like surgery man PRS still remains, right? The tensile strength, the revascularization properties of that product still remain, and we're seeing that with Primatrix as well as we're coming back into the market. So I don't think we're going to win 100% of all those customers back, but we're going to win with new customers as well, and we've had very good response with them. And when we get in with those customers, like I said, we haven't left them, so we'll remain in there to learn more as

Robbie Mizra, Analyst — Truist Securities

we come back to market i guess just in terms of the guidance just tying it back to the guide your mid single digit approach for the business this year uh how much of that is based on the return of brain tree or is that kind of pure upside to the model yeah look we're i would say

Robert Davis, Analyst — Other

we're we're being very conservative right now to make sure that we uh deliver and execute um and uh right now for q4 with surgery then it's quite minimal in the return there and then for 27 as we come back to market we'll offer more guidance around that but we are again starting with you know we've been out of the market uh three plus years and understand that so i think as we divvy this space up between plastic reconstructive surgery and then into hernia the 27 guide will really be bolstered by our pmas that we have in play as well so we have PMAs in play for Sergiment, and we're expecting approval there in 27, as well as Dorzorb in 27. So the Sergiment ramp will be bolstered by those PMAs in 27, so that'll help with that ramp, and we'll be the first company in the market with a PMA-approved product for implant-based breast reconstruction for safety and efficacy, and that will be a big deal to that space.

Robbie Mizra, Analyst — Truist Securities

Yeah, and is there market development required to go after the revenue opportunity there, or is it already in existing accounts?

Robert Davis, Analyst — Other

Yeah, no, it's absolutely, and again, we're unable to promote. One of the things that a PMA will allow us to do is to promote in the OR with surgeons, professional education, and be part of that procedure training. So that's all in the plans, and part of our plans today is to have those customer-facing activities, And then we already have, you know, our plans to ramp up our sales force, which are already, you know, in budget and part of the guidance for next year. So, yeah, so the plans are underway. And, you know, we're working on that, as I said, as we get closer for 27 PMAs.

Robbie Mizra, Analyst — Truist Securities

Yeah, it's a pretty substantial kind of market expansion for you into that, I guess, IBBR space. Just how should we think about maybe the drop through to profitability, if that kind of plays out as we think it's going to?

Robert Davis, Analyst — Other

Yeah, if you think about as we come back to market with surgery men, one of the things that's quite interesting, I haven't seen anything like this, but we're returning to market as a 510K, and we don't promote in implant-based breast reconstruction, but the significant part of those procedures the surgeons are using in that space. So we'll get a good idea of surgeon without promotion in our pivot strategy, and then as we move into the PMA, that's really going to help us with, think about two products. One of Biologics that's going to have a distinct profile for what the surgeons will use with that surgeon type, as well as a Resorbal Synthetic Endorazorb that will also have PMA that will have another distinct profile that they can go at it. And so the portfolio play really is a huge cost of sale savings for us as well. And if you think about Surgiment, to answer your question, we were running at about $35 million to $40 million a year in Surgiment. And again, a higher margin product of profitability. So as we ramp up, we'll offer that guidance in 27 to return to profitability.

Robbie Mizra, Analyst — Truist Securities

And you basically said recovering 50% of that, so about, what, $18 million?

Robert Davis, Analyst — Other

For Primatrix, that's the model we're using today. But again, I'm not committing to that, but we're going to take that same approach, and a lot of pre-work was done with that installed base. So as we're calling those customers back now, we'll have a good indication of what's the proper rate of recovery with that customer base.

Robbie Mizra, Analyst — Truist Securities

Do you think it's unreasonable for us as we think about our models for 27 to kind of put in 50% recovery?

Robert Davis, Analyst — Other

I don't. After a full year, I don't think it is.

Robbie Mizra, Analyst — Truist Securities

Okay. And then, you know, hernia, breast expansion, doesn't sound like a different call point is required here. You're going through a GPO here or?

Robert Davis, Analyst — Other

Yeah, our call point that we focus on primarily is process reconstructive surgery for implant-based breast reconstruction and anything in plastics relative to soft tissue reinforcement where weakness exists. So you have one or two call points in that hospital that that team's already on. Remember, this is a business that sold surgery men, PRS, and hernia before it left the market, so we know how to do it. And typically in that marketplace, vendors will carry both. The customers buy similarly, in effect, of when they come under contract, they're looking for plastic reconstructive surgery as well as hernia in the same purchasing contract. And I think it gets back to my earlier thing about bringing all that together with an Integra skin, a Primatrix, and some of the products over in specialty surgery to really get some contracting power there.

Robbie Mizra, Analyst — Truist Securities

Okay. And then just on, maybe on Braintree, just on the, can you just talk to investors about, you know, the investments that are going into place that were, I guess, booked in SG&A that are now kind of looping into COGS as you go active on that? How should we kind of roll that up into the broader margin story?

Robert Davis, Analyst — Other

Yeah, I think it'll be a bit dilutive coming to market with Braintree. Right now we have a vendor pulling on Primatrix with healthier margins, and with more volume we'll get accreted to the company with Braintree. And I think that's the goal. Volume will drive a big part of that. So coming back to market as a 510K with that ramp and seeing that reception and then moving into the PMA will return to healthier margins with that product. And just with Primatrix, kind of that dual-source strategy

Robbie Mizra, Analyst — Truist Securities

was something kind of laid out last year as you came back to market. How long would you plan on continuing that? Like, is there a, all right, you know, we don't need it anymore, but we're just going to hold on to it? Or like, what's the thinking there?

Robert Davis, Analyst — Other

No, listen, our goal is not to talk about Braintree too much in the future, right? Let's get the plan up and running. Let's be shipping product. Let's get healthy about it. I think for us, the dual source strategy is something that we have as a company mantra to make sure that we're protecting ourselves with primary and secondary suppliers across the board. It's something that's a lesson learned, and that's something that we're going to pursue. So no, I think longer term, we'll continue to have secondary suppliers across the businesses.

Robbie Mizra, Analyst — Truist Securities

Not only just Primatrix, but yeah.

Robert Davis, Analyst — Other

Across the biologics, et cetera. MetaHoney was another kind of product that I guess a few months back,

Robbie Mizra, Analyst — Truist Securities

uh that was something that was taken off the market so just uh level set us i guess what was

Robert Davis, Analyst — Other

the revenue and growth of that business yep again we had a voluntary recall at the end of q1 in 25 and meta honey is an interesting business for us so has a strong brand recognition with our with our customer base it's a wound dressing that has over 40 scientific papers um so not all medical grade honey is created the same. So one of the products that customers are continually acquiring when it's returning, the product was around $35 to $40 million a year annualized. And again, we're going to take that same stated approach coming with a condensed level of SKUs. The goal is in 27, we'll be returning to market there. And we'll start in the U.S. and work our way back into Europe where we had some significant international revenues. But it's a great business. And it really helps if you're in that wound side of the business. It has a lot of recognition in that space. And it works. So we're excited to get and be investing in that. I think we talked about that on the last earning calls that we announced

Robbie Mizra, Analyst — Truist Securities

that we'd be bringing that back to market. And these various products that are coming back to market, just similar types of contribution margin to the broader integral? Yeah, I mean,

Robert Davis, Analyst — Other

you know from a metahoney perspective i mean look when you get into the biologics and this higher margin products it doesn't have that level it's not diluted to the company metahoney and it brings us in a new set of customers that we want to maintain contact with you know we have other products like total contact casting that are frontline defense for diabetic foot ulcers And as I think the government has, you know, really reinforced pricing and, you know, initial standards of care, we'll see that in DFU and the wound care market. So we think there's upside there.

Robbie Mizra, Analyst — Truist Securities

And then just, I guess, the other part of your tissue business on the private label side, some easy comps, I guess, you're against, but you still grew nicely in the first quarter. How should we think about this business on kind of a go-forward basis?

Robert Davis, Analyst — Other

Yeah, look, it's a choppy business, and we had some good guys in Q1, and a lot of that is around capacity and matching that. And I think in the back half of the year, you know, we'll look to be flattish for the year in private label. And, you know, it's a strong profit business for us across the company, so it's less about growth and more about the profitability. And, again, it gets back to sourcing and taking care of our corporate partners as well that we're really focused around. We have a few very large customers. So it's been about stability of execution on those products for private label. But, again, we remain committed to private label. Got it.

Robbie Mizra, Analyst — Truist Securities

One of the things that we've been asking each company here is just following concerns on ACA volumes volumes or ACA subsidy expirations and kind of hospital commentary around volumes, just what you've been seeing in the field on your end, either in tissue or if you can comment on the broader Integra business, any kind of, any impact there?

Robert Davis, Analyst — Other

Yeah, I mean, it's almost, you almost want to go down in it vertically. You know, you look at trauma one way, you're looking at plastics, you're looking at implant-based breast reconstruction and hernia. And I think I talked about, you know, in the CMS, that skin subspace, pretty robust in hospital. And I think we see cautious in the outpatient in the hospital. And then we see a most definite downturn around physician office in that outpatient arena. So that I would heavily agree with. And I think in the procedures around plastic reconstructive surgery, we're not seeing anything that would indicate a procedure turn down in the plastic side of that

Robbie Mizra, Analyst — Truist Securities

space yeah i want to turn a little bit just a little bit more back to that asc around you know you're seeing a lot of maybe the ankle biters in the space fall out given the reimbursement changes doesn't seem to be a strategic focus for integra yeah but potentially one where you could be So what would cause you to be more excited or get more competitive in that space? Given that your economics seem pretty good to kind of play in the $127 environment.

Robert Davis, Analyst — Other

Yeah, I think the CMS part that gets us excited, if you think about the waste and fraud that they wanted to take out, I think they've accomplished that. We'll see. It's probably, you know, as soon as you bring the patient to front and center about closing wounds, that's where I think we'll come into play. So we're very strong with our clinical evidence. We have a portfolio of products that we're investing heavily on clinical evidence. Our pricing, we didn't have to change at all. So we didn't have to make any price concessions there. And we have various sizes across the portfolio. So you're hearing a lot of different terminologies around the government only reimbursing for the size of the wound, et cetera. I mean, we totally support. So now customers have the ability to do all that with us. So I think when the dust settles, if you go over to physician office, we'll watch and see, you know, to see if there is a place for us to go there, and we'll be able to take advantage of that opportunity. What I'm most interested in is getting our customers in the hospital, educated as fast as we can around outpatient and wound care clinic, because they have that underlying demand, and we have a complete portfolio to work with.

Robbie Mizra, Analyst — Truist Securities

Yeah, and I guess just on that front, the converse would be, are you seeing peers that were in focused on the in-office space trying to move into, I guess, onto your turf?

Robert Davis, Analyst — Other

Yeah, I mean, the outside-in approach is not new. It's a pretty high barrier of entry if you think about access into the hospital, access into procurement, the other vendors that are in there in a very strong contracting way, VAC committees, et cetera. It's a really tough thing to just say, hey, I'm going to go over here to the hospital space and unseat. You have to have some good reasons why that would happen. It's not that it hasn't. But, again, a lot of vendors are going to exit the space because of the economics now, and I think that's a good thing. I think it's a good thing. We had 250 products in one space that had varying degrees of clinical evidence or impact. So I think it's a good thing to make it about the patient and patient closure.

Robbie Mizra, Analyst — Truist Securities

Yeah, got it. And then you presumably have the scale across the businesses to help defend against that as well. That's the list of questions for me. I mean, I think we can finish it a little bit earlier on then. And, Bob, thank you so much for your time.