TELA Bio (NASDAQ:TELA) reported an 8% decline in third-quarter revenue as weaker sales of its plastic and reconstructive surgery products offset growth in Europe. Management said a sales-force realignment and cost reductions are intended to restore growth and reduce cash consumption.
Revenue for the quarter ended September 30 was $19 million, down from the same period a year earlier. CEO Heather Getz said a $2 million decline in OviTex PRS revenue drove the decrease, partly offset by higher international sales. U.S. hernia revenue was down slightly year over year, although both revenue and unit volume rose from the second quarter.
Getz, who joined as CEO in August, said she expects sequential revenue growth in the fourth quarter and continued growth into 2027, but is still evaluating the pace of the recovery. Asked about the company’s longer-term prospects, she said the changes underway could help TELA Bio return to double-digit growth, without providing a timeline.
PRS Sales Remain Under Pressure
OviTex PRS revenue fell 20% from a year earlier and 6% from the second quarter. President Jeff Blizard said the decline was concentrated in a limited number of markets, where turnover and the departure of several key surgeons from their practices affected procedure volumes.
Getz said the company is rebuilding its sales pipeline, supporting existing users and retraining representatives to sell the full product portfolio. She said PRS has a longer sales cycle and a more concentrated surgeon community than hernia repair, making lost accounts harder to replace quickly.
Blizard said an earlier pilot involving six dedicated PRS salespeople was suspended in the first quarter. All sales representatives now have responsibility for the full portfolio, he said.
U.S. revenue totaled $15.4 million in the third quarter. Blizard said LIQUIFIX recorded its strongest quarter to date, with its customer base expanding 60% year to date. European revenue was $3.6 million, up 18% year over year, driven by higher-value complex cases, particularly in the U.K.
Blizard said the shift toward smaller product sizes for minimally invasive and robotic hernia procedures has created a gap between unit and revenue growth. He expects that gap to narrow in the fourth quarter as year-over-year product-mix comparisons stabilize, though not to close immediately.
Cost Cuts and Cash Position
TELA Bio began a cost-reduction program on September 1 that it expects to generate $17 million in annualized savings. The realignment included a targeted headcount reduction of approximately 20% and reduced use of external resources. Getz said the reductions were substantially complete by the end of the quarter.
Total operating expenses, excluding other expenses, fell 17.8% to $17.6 million. The operating loss narrowed by $300,000 from a year earlier to $7.3 million, while the adjusted EBITDA loss improved 40% year over year to $3.4 million.
Gross margin declined to 64.9% from 67.5%, primarily because of a higher charge for excess and obsolete inventory as a percentage of revenue. Getz said gross margin would have been 71% after adjusting for the $1.1 million non-cash charge.
The company ended the quarter with $22.7 million in cash and cash equivalents. Getz said lender Perceptive agreed to suspend testing of the minimum revenue covenant under TELA Bio’s credit agreement for the quarters ending September 30 and December 31, 2026. The consent applies only to that covenant, she said.
For 2027, Getz said she expects expenses in the range of $76 million to $78 million, with sales and marketing spending typically heavier in the first part of the year because of events including national sales meetings.
Product and Market Access Updates
Getz said the Food and Drug Administration granted 510(k) clearance for the Liora Monofilament Scaffold, a fully resorbable surgical mesh for soft tissue reinforcement. TELA Bio plans to provide an update on its commercial plans for Liora in early 2027.
The company is also pursuing hospital-by-hospital OviTex agreements while continuing to seek a national agreement to broaden access, Blizard said. Management cited competitor contracting and bundling practices as barriers to entering some accounts.
Getz said Nasdaq notified the company on October 5 that it had regained compliance with the exchange’s minimum bid-price requirement. TELA Bio does not currently intend to implement a reverse stock split, although it retains the option for 12 months, she said.
About TELA Bio (NASDAQ:TELA)
TELA Bio, Inc. is a medical technology company that develops and commercializes advanced tissue-reinforcement products for soft-tissue repair and reconstruction. The company’s products are designed to support the repair of damaged or weakened tissue while preserving a more natural tissue response. TELA Bio’s principal product platform is OviTex Reinforced Tissue Matrix, which combines biologic tissue with polymer reinforcement in a proprietary, textile-like design. OviTex products are used in procedures involving hernia and abdominal wall repair, as well as other soft-tissue reconstruction applications.
