Biostem Technologies (NASDAQ:BSEM) raised the low end of its 2026 revenue forecast and outlined plans to cut annual cash operating expenses, as the company reported a wider third-quarter loss and a decline in its cash balance.
The company now expects full-year revenue of $28 million to $29 million, up from its previous forecast of $26 million to $29 million. Management expects sequential hospital revenue growth in the fourth quarter, while contributions from physician offices are expected to be minimal.
Chairman and CEO Jason Matuszewski said BioStem is focusing on reducing expenses, improving gross margins by bringing production in-house, narrowing its adjusted EBITDA loss and strengthening its balance sheet.
Hospital sales rise as overall revenue slips
Third-quarter revenue was $7.6 million, down from $7.9 million in the second quarter. Hospital revenue rose to $6.8 million from $6.7 million, while physician office revenue fell to $810,000 from $1.1 million.
Chief Commercial Officer Barry Hassett said July and September were the business’s strongest sales months since its acquisition earlier in the year. He attributed some of the quarter’s revenue constraint to disruptions in August as services transitioned from BioTissue to BioStem.
The BioTissue transition services agreement ended at the beginning of August, transferring responsibilities including sales logistics, invoicing, collections and inventory management to BioStem. Matuszewski said the company’s customer relationship management platform is now integrated with its enterprise resource planning system, giving it better insight into account activity and ordering behavior.
BioStem is seeking to increase sales within existing hospitals as well as add accounts. In September, its VENDAJE product family was added to existing agreements with two major group purchasing organizations. The number of accounts buying at least two product lines rose 14% from the second quarter, while those buying three or more increased by more than 40%, Matuszewski said. Customers purchasing more than one product accounted for more than half of revenue.
Loss widens and cash declines
Gross margin fell to 56% from 61% in the second quarter, primarily because of higher transfer pricing under the BioTissue supply agreement after initial discounted pricing expired, CFO Brandon Poe said. He expects margins to remain in the 50% range until the manufacturing transfer is completed.
Operating expenses rose to $14.1 million from $13.2 million, driven primarily by higher general and administrative costs related to the Nasdaq uplisting and financing activity. BioStem reported a net loss of $11.4 million, or $0.64 per share, compared with a loss of $9 million, or $0.52 per share, in the prior quarter. The adjusted EBITDA loss widened to $6.4 million from $4.6 million.
The third-quarter net loss included a $1 million payment to BioTissue to extend a clearance payment deadline. Matuszewski said the companies are discussing a restructuring of the outstanding clearance payment to reduce BioStem’s near-term cash obligations. He said supply of Neox and Clarix continues without interruption.
Cash and cash equivalents declined to $1 million at September 30 from $7 million at June 30. Cash used in operating activities rose to $8.8 million from $5.5 million.
Cost cuts and financing plans
BioStem is finalizing a plan it expects to reduce annualized cash operating expenses by approximately $10 million to $12 million from its current run rate. Proposed measures include focusing sales efforts on the most productive territories and accounts, streamlining support functions and ending certain outside services, media and sponsorship spending. Poe said the company expects the full benefit to begin in the first quarter of 2027.
Matuszewski and Chief Operating Officer Andrew Van Vurst have offered to reduce their annual cash salaries to $250,000 each in 2027 and receive the balance in company stock, subject to board approval.
To address its cash needs, BioStem is evaluating financing alternatives with a preference for non-dilutive structures, including a receivables-based credit facility. It is also exploring a land sale and expects, but cannot assure, a near-term tax refund of approximately $1 million.
The company established a $40 million committed equity facility with Roth Capital Partners in September but has not sold shares under it. Management said BioStem may not use the facility until early April 2027, subject to conditions or a waiver. A private placement at quarter-end generated approximately $3 million in gross proceeds, and Matuszewski and Van Vurst exercised options in October that contributed approximately $1 million in cash.
Manufacturing and clinical milestones ahead
BioStem is targeting the start of in-house Neox and Clarix production at its Pompano Beach facility in the first half of 2027, subject to process validation and applicable regulatory requirements. Poe said the products would transfer over time and that he expects gradual margin improvement through 2027, with a potential increase of 10 to 15 percentage points over time.
The company also expects to report top-line results from its VLU study at the Innovations in Wound Healing meeting in early December. Separately, Hassett said BioStem is preparing to launch Catalyze, whose 510(k) clearance would allow it to make claims for specific indications.
Poe also said Chief Accounting Officer Michael Fortunato plans to retire on December 18.
About Biostem Technologies (NASDAQ:BSEM)
BioStem Technologies, Inc. is a biotechnology company focused on regenerative medicine and biologic tissue products. The company develops, manufactures and commercializes human tissue allografts intended to support wound care, tissue repair and other medical applications. Its product portfolio includes placental- and birth-tissue-derived products, such as amniotic membrane and umbilical cord allografts. These products are marketed for use by healthcare providers in areas including wound management, surgical procedures and related regenerative-care applications.
