Earnings call transcript: Biostem Technologies Q2 2025 sees significant earnings miss

BioStem Technologies Inc. (BSEM) reported its Q2 2025 earnings, revealing a significant miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of -$0.03, far below the forecasted $1.28, resulting in a negative surprise of -102.34%. Revenue also fell short, coming in at $49.29 million against a forecast of $102.3 million. In response, the stock price fell by 2.81% in post-market trading, closing at $10.6755. According to InvestingPro data, the company maintains strong profitability with a 96.28% gross profit margin in the last twelve months.

Key Takeaways

• BioStem reported a significant earnings miss with a negative EPS surprise of -102.34%.
• Revenue decreased by 34% from the previous year, falling short of expectations.
• The stock price declined by 2.81% following the earnings announcement.
• The company maintains a strong cash position and positive adjusted EBITDA.
• Market uncertainties persist due to potential CMS reimbursement changes.

Company Performance

BioStem Technologies experienced a challenging quarter with a substantial earnings miss. The company’s revenue for Q2 2025 was $49.3 million, marking a 34% decrease from the previous year. Despite the earnings miss, BioStem reported a gross profit of $48.6 million, which represents 98.6% of net revenue. The company also reported its sixth consecutive quarter of positive adjusted EBITDA, indicating operational resilience amidst financial challenges. InvestingPro analysis reveals the company holds more cash than debt on its balance sheet, with a healthy current ratio of 1.4x and an impressive Altman Z-Score of 4.23, suggesting strong financial stability.

Financial Highlights

• Revenue: $49.3 million, a 34% decrease year-over-year.
• Earnings per share: -$0.03, a significant miss compared to the forecast of $1.28.
• Cash Position: Increased to $30.8 million from $20.6 million in Q1 2025.
• Gross Profit: $48.6 million, 98.6% of net revenue.

Earnings vs. Forecast

BioStem’s actual earnings per share of -$0.03 fell significantly short of the forecasted $1.28, resulting in a negative EPS surprise of -102.34%. Revenue also missed expectations by 51.82%, coming in at $49.29 million against a $102.3 million forecast. These misses highlight potential challenges in the company’s financial projections or market conditions.

Market Reaction

Following the earnings announcement, BioStem’s stock price dropped by 2.81%, closing at $10.6755. This decline reflects investor concerns over the company’s financial performance and the broader market uncertainties affecting the chronic wound care sector. The stock remains closer to its 52-week low of $6.95, indicating ongoing pressure. InvestingPro analysis suggests the stock is currently undervalued, trading at an EV/EBITDA multiple of just 4.88x. Subscribers can access additional valuation metrics and 8 more exclusive ProTips about BSEM’s financial health and growth potential.

Outlook & Guidance

Looking forward, BioStem is focused on strategic growth in the wound care market, with plans to expand its product portfolio through research and development and acquisitions. The company is also pursuing a NASDAQ uplisting and is actively engaging with CMS regarding potential reimbursement changes. Despite the current challenges, early indicators from July and August show positive momentum. With a market capitalization of $178.77 million and analyst targets suggesting significant upside potential, detailed analysis available in the comprehensive Pro Research Report on InvestingPro provides valuable insights for investors evaluating the company’s growth trajectory.

Executive Commentary

CEO Jason Motoshevsky emphasized the company’s strong business model despite reimbursement-related uncertainties, stating, "While reimbursement related uncertainty has weighed on the broader market in our recent performance, BioStem’s business model remains fundamentally strong." Incoming CFO Brandon Poe highlighted growth opportunities, noting, "This is a pivotal time to capitalize on the growing opportunities in the chronic wound care market."

Risks and Challenges

• Potential CMS reimbursement changes could significantly impact market dynamics.
• Increased competition in the chronic wound care market poses challenges.
• The significant earnings miss raises concerns about financial projections.
• Market restructuring may result from proposed CMS rule changes.
• Continued reimbursement uncertainty could affect future performance.

Q&A

During the earnings call, analysts inquired about the proposed CMS local coverage decision. Jason Motoshevsky explained the company’s ongoing engagement with CMS and potential market impacts, highlighting BioStem’s preparations for potential reimbursement changes.

Full transcript - Biostem Technologies Inc (BSEM) Q2 2025:

Eric, Conference Operator: Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the BioStem Technologies Second Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer I would now like to turn the call over to Adam Holdsworth, Director of Investor Relations.

Please go ahead.

Adam Holdsworth, Director of Investor Relations, BioStem Technologies: Good afternoon, everyone, and thank you for joining our conference call to discuss BioStem’s second quarter twenty twenty five financial results and corporate highlights. Leading the call today will be Jason Motoshevsky, the company’s Chairman and Chief Executive Officer Mike Fortunato, the company’s Chief Accounting Officer and Branson Poe, BioSyn’s incoming Chief Financial Officer. Before we begin, I’d like to remind everyone that our remarks may contain forward looking statements based on management’s current expectations. These involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated. These risks are described in our filings with OTC Markets in the Form 10 we filed with the SEC in January 2025.

You are cautioned not to place undue reliance on forward looking statements, which speak only as of the date made. The company undertakes no obligation to update them unless required by law. Additionally, as discussed in our Q1 twenty twenty five earnings call, we are undergoing an SEC review related to our planned uplisting to NASDAQ. Today’s financial results are preliminary and unaudited and results may change pending the completion of our financial statement audit, which is predicated on the resolution of SEC comments related to the review of our Form 10. Finally, this call also includes references to non GAAP financial measures.

A reconciliation to comparable GAAP measures and related information can be found in our earnings press release posted on the Investor Relations section of BioStent’s website. With that, I would now like to turn the call over to Jason Monashevsky.

Jason Motoshevsky, Chairman and Chief Executive Officer, BioStem Technologies: Good afternoon and thank you for joining. I’m pleased to share our second quarter twenty twenty five results and the progress we’ve made in strengthening BioSim’s commercial position, advancing our clinical pipeline and preparing for long term growth. Today, I will discuss industry environment, highlight our operational and clinical milestones and provide an update on our NASDAQ uplisting process. After my remarks, I’ll turn the call over to Mike Fortunato, who will review our second quarter financial results, and I will conclude by introducing our new CFO, Brandon Poe. In Q2, BioSim delivered its sixth consecutive quarter of positive adjusted EBITDA, positive free cash flow and industry leading gross margins.

In addition to strong profitability metrics, we maintained a strong cash position, ending the quarter with $30,800,000 in cash, which was an increase from $20,600,000 in Q1. Revenue totaled $49,300,000 for the quarter, reflecting a decline versus 2024. Amid this noisy market environment, I want to make clear that our view on the strong clinical value of our products and the substantial market opportunity ahead of us is unchanged. However, it is important to articulate the dynamics we are seeing across the chronic wound care market, the impact they’re having on our business and our action plan to return to positive revenue growth. At the highest level, in the second quarter, we experienced more pronounced pressure from reimbursement uncertainty as well as increased competitive pressure from new products that entered the market at a higher average sales price, or ASP, both of which impacted our revenues.

On the reimbursement front, our products were admitted from the preliminary Medicare Part B ASP drug pricing file for the second quarter, which indicates payment rates for products reimbursed under Q codes such as ours. While the final Medicare Part B ASP drug pricing file did include our products, the market and providers perceived increased reimbursement risk for our products not included on the preliminary list, which impacted their product selection at the outset of the quarter. Our commercial distributor, Venture Medical, acted quickly to reassure customers that we expected inclusion on the final list. However, the uncertainty ultimately led to a slower start to Q2 than we expected as customers chose competitive products that were included on the list. We experienced heightened competitive dynamics when the final ASP list was published with the introduction of approximately a dozen new brand names with higher ASPs than BioSim’s products, resulting in some customers choosing to use those alternative products.

Ultimately, this became the larger of the headwinds for us in the quarter. And while it impacted results, it also provided key insights into many of the core drivers and overall industry trends for sales reps, customers and end users that we will be able to leverage as we reset strategies to rebuild growth. More importantly, while we recognize that the LCDs, adjustments to the ASP list and uncertainty around CMS proposed payment methodology may continue to impact the market for the remainder of the year, we have developed a plan focused on ensuring that BioStem will remain a leader in the advanced wound care market in any market environment for years to come. First, with regard to clinical development, in June, we completed patient enrollment in our clinical trial evaluating BRAC for the treatment of diabetic foot ulcers, which is a key milestone that keeps us on track to report top line results and full data analysis in the 2025. This trial is one of the three ongoing studies designed to demonstrate the efficacy and competitive advantage of our BioRetain processed allografts.

We have two additional ongoing trials, one evaluating the treatment of venous leg ulcers with BRAC and another evaluating the treatment of diabetic foot ulcers with BRA. Both studies continue to enroll patients and are progressing on schedule. We believe the outcomes from these trials will further validate the BioRetain platform, support broader physician adoption and drive continued commercial expansion. Furthermore, we plan to expand and diversify our product portfolio through internal R and D efforts and through acquisitions to address the wound care continuum in a more comprehensive way and further strengthen our position as a business partner of choice for health care providers. Our manufacturing expertise, proprietary tissue processing capabilities and state of the art facilities will ensure we can produce products at scale in a cost effective way.

We believe we have ample flexibility to absorb any potential pricing pressure that may be dictated by new reimbursement coverage and pricing policies. Commercially, there are several levers we can pull near term and long term to maintain our competitive advantage in the market. Venture Medical has sharpened its focus to reaccelerate growth in the year ahead by prioritizing the larger mobile wound care providers. By targeting these types of providers, we are limiting many of the concerns exposed by the headwinds discussed above, and this strategic shift allows us to better align our offerings with key customer segments that prioritize consistency, efficiency and improve patient outcomes. Some of these organizations involve longer onboarding cycles, but they typically represent more stable contract driven relationships with reduced product turnover.

We believe Ventura’s OneView practice management platform, combined with our superior BioRetain technology, represents a unique value prop that will align with these scaled providers’ needs in the physician office and mobile sites of care. We are confident that renewing our focus on these providers is an opportunity for BioSim to generate durable revenue. Early indicators from July and August suggest positive momentum is already underway, and we are seeing stronger results in customer conversions as we move through the third quarter. In addition, we are focused on scaling our internal commercial footprint to complement Venture Medical’s sales initiatives. The strategy to expand our commercial presence is centered around strengthening the sales team, broadening territory coverage and diversifying the business to other sites of service and new markets.

We believe that with these core drivers, we can continue to accelerate our commercial progress and that this strategic shift will advance our long term positioning in the chronic wound care market and improve channel stability. Now I want to briefly discuss the recent CMS calendar year 2026 proposed Medicare reimbursement rule changes for skin substitutes. The proposed rule reclassifies skin substitute products as incident to supplies and eliminates the separate ASP plus six reimbursement methodology, which is currently standard in the physician office and mobile settings. CMS is proposing to use a single payment rate reflecting the weighted average sales price of all skin substitute products based on historical usage in the hospital outpatient setting. The proposed price is significantly below the current ASPs of many of the products in the market.

We welcome CMS’ effort to reform skin substitute payment policy and will continue to engage with CMS through the open commenting period to advocate for proposed changes. These changes offer an opportunity to level set the wound care market and disincentivize opportunistic players in the market. We believe those who have chosen to invest in substantial R and D and generation of clinical evidence will emerge among a smaller group of market participants. That said, the current proposal could significantly impact the mobile wound care market. Considering the demographics of patients served by Mobile Wound Care providers, many of these patients do not have access to or the ability to travel to medical offices or hospitals.

Mobile Wound Care is a vital solution for treating this patient population and plays a critical role across the treatment continuum. If these patients were not able to be treated in their homes, we believe the overall cost of care could increase significantly due to an increased infections, amputations and other life threatening complications. We look forward to constructive engagement with CMS, providers and industry stakeholders during the sixty day comment period to help shape a fair and sustainable reimbursement framework for skin substitutes. Our objective is to support policies that recognize the value of advanced therapies, foster innovation and most importantly, improve patient outcomes, strengthening both the chronic wound care landscape and BioSim’s long term growth. Now I want to turn to an update regarding our NASDAQ uplisting.

We are pursuing the uplisting as part of our long term strategic plan. There are several benefits to trading on NASDAQ, including increased visibility for BioStem, improved share liquidity and more efficient market valuation, expanded access to capital and an enhanced ability to attract top tier talent to drive further innovation in Advanced Wound Care. On our Form 10 submission, we continue to work through the audit process. We now have clarity on the accounting treatment for the distribution agreement with Venture Medical and our continuing efforts to resolve all open comments. At the same time, with our new CFO on board, we are also evaluating the long term strategic plan for the business.

This includes a comprehensive review of BioSim’s operations and the associated financials, which we expect to finalize over the coming months. As part of this process, we are also evaluating the optimal timing for uplisting to NASDAQ. We are taking the necessary steps to ensure BioStim is best positioned to capture the opportunities ahead and believe it is prudent to time the uplisting accordingly. Uplisting remains a top priority for BioStim, and we plan to provide further updates when appropriate. With that, I’ll now turn the call over to Mike Fortunato, who will walk you through our second quarter financial results in more detail.

Mike, take it away.

Mike Fortunato, Chief Accounting Officer, BioStem Technologies: Thank you, Jason, good afternoon, everyone. In the 2025, net revenue was $49,300,000 compared to $74,500,000 in 2024, representing a 34% decrease. This decrease was primarily driven by lower sales volume in our wound care portfolio, resulting from perceived reimbursement uncertainty in the marketplace for our products and increased competition from higher ASP products. Gross profit was $48,600,000 or 98.6% of net revenue compared to 70,700,000.0 or 95% of net revenue in 2024. The increase in gross margin reflects product mix benefits, particularly as the Dahi AC continues to gain traction in the market.

Importantly, the Dahi AC does not carry licensing fees which supports margin expansion. Operating expenses for Q2 were CAD48.5 million, down from CAD61.9 million in the prior year period. This decline primarily reflects a decrease in bona fide service fees due to lower sales volume of our products through our distribution channel. GAAP net loss for the quarter was $564,000 or $03 per share compared to net income of $6,300,000 or $0.39 per share in 2024. Adjusted EBITDA was $2,500,000 compared to $10,100,000 in the same period last year.

I’ll now pass the call back to Jason.

Jason Motoshevsky, Chairman and Chief Executive Officer, BioStem Technologies: Thanks, Mike. Before we end the call, I want to take a moment to thank Mike for his time as our CFO and welcome Brandon Poe to the BioStent team as our new CFO. Brandon has stepped into the CFO role this week as Mike continues as our Chief Accounting Officer. Brandon is a veteran executive with more than twenty five years of financial experience across various industries, including life science, medical device and health care services. Not only does Brandon bring with him a wealth of industry knowledge, but as he is transitioning from the BioStem Board of Directors, he’s already familiar with the company’s strategy and objectives.

As we are entering this new chapter at BioStem, we believe that Brandon’s significant experience leading finance teams in the health care industry will be critical to defining, prioritizing and achieving our strategic objectives and will help position us for the opportunities ahead. We look forward to working with him and we have him here with us today. So I’ll let him say a few words before we open up for Q and A.

Branson Poe, Incoming Chief Financial Officer, BioStem Technologies: Thanks, Jason. I’m excited to take on a more active role with this exceptional team. Having served on the board, I’ve had a front row seat to the dedication and momentum behind BioStem’s business. This is a pivotal time to capitalize on the growing opportunities in the chronic wound care market, and I believe our BioRetain platform, in house manufacturing capabilities, and expansion potential position us well for continued success. Stepping into the CFO role, I look forward to leveraging my experience to help drive growth.

I am excited to share more on our progress and future updates. And with that, I’ll turn it back over to Jason for closing.

Jason Motoshevsky, Chairman and Chief Executive Officer, BioStem Technologies: Thanks, Brandon, and welcome to the STEM. While reimbursement related uncertainty has weighed on the broader market in our recent performance, BioSense business model remains fundamentally strong. With a solid financial foundation, a growing partnership with Venture Medical, ongoing capital markets initiatives and a solid plan to diversify and grow our business, we believe we are well positioned to drive strong performance in the quarters ahead. With that, operator, please open the line for questions.

Eric, Conference Operator: Your first question comes from the line of Bruce Jackson with The Benchmark Company. Please go ahead.

Bruce Jackson, Analyst, The Benchmark Company: Hi. Good afternoon. Thank you for taking my questions. Really, I just have one question. It’s about the proposed local coverage decision that’s being contemplated right now by by CMS and set to go into effect on January 1.

So there could be some some major changes to the reimbursement climate. Your partner, Venture Medical, has been very vocal in their view about how things should play out. What does this mean for BioStem? What are your possible approaches and what scenarios are you preparing for?

Jason Manicheski, Chairman and Chief Executive Officer, BioStem Technologies: Hey, Bruce. Thanks. Thanks for the question. Jason Manicheski here. You know, I I think when we’re looking at a multitude of scenarios here, we have the OPPS PFS preliminary ruling that came out just over a month ago.

You know, that is theoretically, we should we should have an effectiveness of that sometime in November for for published pricing rates. And and, you know, we’ll see where that dictates how the LCD unfolds going forward. As many of you know, the LCD was really driven around what we believe is more cost containment than than really about coverage. And and there was a lot of vocal, response through the open commenting period by companies, providers, and and frankly, advocacy groups saying how restrictive, the LCD would be to the industry around providing skin substitutes to patients, more specifically in the mobile wound care segment or the physician office segment. So I think for us, we’re we’re watching to see how the OPPS and PFS, rule comes out.

We are actively going to comment, within the sixty day comment window on both both the OPPS and PFS, and then we’ll we’ll see once that becomes final how the LCD is kinda unfolds.

Bruce Jackson, Analyst, The Benchmark Company: Alright. That’s it for me. Thank you.

Jason Manicheski, Chairman and Chief Executive Officer, BioStem Technologies: Thanks, Bruce.

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