TELA Bio cuts costs as OviTex PRS sales pressure revenue

By Amara Osei

What changed in the third quarter?

TELA Bio (NASDAQ: TELA) reported revenue of $19 million for the quarter ended September 30, down 8% from a year earlier, as weaker sales of plastic and reconstructive surgery products offset growth in Europe. CEO Heather Getz, who joined in August, said a $2 million decline in OviTex PRS revenue drove the decrease, partly offset by higher international sales.

U.S. hernia revenue slipped slightly year over year, although both revenue and unit volume rose from the second quarter. Getz said she expects “sequential revenue growth in the fourth quarter and continued growth into 2027,” while the company continues to evaluate the recovery pace.

Getz said the changes underway could return TELA Bio to double-digit growth, though she gave no timeline. Management paired the sales realignment with cost reductions intended to restore growth and reduce cash consumption.

The takeaway: A lower quarterly base makes the fourth quarter the first test of the recovery.

Why did OviTex PRS remain the pressure point?

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 reduced procedure volumes.

TELA Bio is rebuilding its sales pipeline, supporting existing users and retraining representatives to sell the full portfolio. PRS has a longer sales cycle and a more concentrated surgeon community than hernia repair, so lost accounts take longer to replace.

An earlier pilot with six dedicated PRS salespeople was suspended in the first quarter. All sales representatives now carry the full portfolio.

The takeaway: The PRS decline is concentrated, but replacing lost surgeon accounts will take time.

Which businesses offset the decline?

U.S. revenue reached $15.4 million in the third quarter. Blizard said LIQUIFIX recorded its strongest quarter to date, while its customer base expanded 60% year to date.

European revenue rose 18% year over year to $3.6 million, driven by higher-value complex cases, particularly in the United Kingdom. The regional gain helped offset the $2 million PRS decline but did not prevent the group revenue drop.

Blizard noted a shift toward smaller product sizes for minimally invasive and robotic hernia procedures. That mix has created a gap between unit growth and revenue growth; he expects the gap to narrow in the fourth quarter as year-over-year product-mix comparisons stabilize, though not close immediately.

The takeaway: Europe and LIQUIFIX provided support, but product mix still distorted revenue growth.

What do the cost cuts change?

TELA Bio began a cost-reduction program on September 1 that it expects to generate $17 million in annualized savings. The realignment includes a targeted headcount reduction of about 20% and lower use of external resources; Getz said the reductions were substantially complete by quarter-end.

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, and the adjusted EBITDA loss improved 40% year over year to $3.4 million.

Gross margin declined to 64.9% from 67.5%, primarily because excess and obsolete inventory represented a higher percentage of revenue. Getz said margin would have been 71% after adjusting for a $1.1 million non-cash charge.

TELA Bio ended the quarter with $22.7 million in cash and cash equivalents. 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 covers only that covenant.

For 2027, Getz expects expenses of $76 million to $78 million. Sales and marketing spending usually runs heavier in the first part of the year because of events such as national sales meetings.

The takeaway: Cost controls reduce the cash drain, but covenant relief covers only two quarters.

What changed on products and market access?

Getz said the FDA granted 510(k) clearance for the Liora Monofilament Scaffold, a fully resorbable surgical mesh for soft-tissue reinforcement. TELA Bio plans to update Liora’s commercial plans in early 2027.

The company is pursuing hospital-by-hospital OviTex agreements while continuing to seek a national agreement to broaden access. Blizard cited competitor contracting and bundling practices as barriers to entering some accounts.

On October 5, Nasdaq notified TELA Bio that it had regained compliance with the exchange’s minimum bid-price requirement. The company does not currently intend to implement a reverse stock split, although it retains that option for 12 months.

TELA Bio develops and commercializes tissue-reinforcement products for soft-tissue repair and reconstruction. The products aim to repair damaged or weakened tissue while preserving a more natural tissue response. Its principal platform, OviTex Reinforced Tissue Matrix, combines biologic tissue with polymer reinforcement in a proprietary textile-like design and is used in hernia, abdominal-wall repair and other reconstruction procedures.

The takeaway: Liora has market clearance, but contracting barriers still slow OviTex access.