Of Integra LifeSciences, join us. One of the first questions, when we were putting these together, that came to me is that both of you are relatively new, and I'd love if you could just sort of give us a state of the union of what you've learned since you've arrived, what surprised you positively, and what you, like, didn't expect that.
Yeah. Thank you so much for having us, Joanne, first of all. And I get started, and then I pass it on to Lea. But I would say one of the things that really got me attracted to the opportunity to begin with was the portfolio that we have, the strength of our portfolio, the brand equity that we have. We play in attractive markets. We have niche positions that are really specialized, and the physicians really rely on our portfolio. So that's what my due diligence had told me before joining the company. And one of the things that I found out as I have interactions with the customers, I see that every day about what they appreciate about our product, about our portfolio. So the strength of our portfolio and attractiveness of the market we play in certainly has played out.
I would say on the other side, when it comes to improvements and the opportunities for us, one of the things that has been a little bit deeper and broader than I had anticipated is the operational challenges that we've had and execution challenges that we've had. And as you look at the priorities that we've been talking about over the entire year, it's really about Quality Management System transformation we're going after, and it's really about supply chain operations and execution. So those are the reasons why we have been full force going after making our quality systems, our operations, as well as our execution more robust. So that's a little bit about what I have observed so far.
Yeah. So and I'd echo a lot of what Mojdeh shared. I think since I came on board as well, right, a number of challenges that we've had to face that we didn't see coming, which kicked off kind of the compliance master plan and the work there. But through it, the resilience of our team, right, and how they stepped up in those moments. You think about a year ago, the rallying around the challenges we saw in Q3 and being able to get our products back on the market for the most part in Q4. You see the work that has continued this year and our ability to improve productivity on Integra Skin significantly, our ability to bring back to market PriMatrix and Durepair almost a year earlier.
So the individuals and collective teamwork required to drive that and make it happen despite everything else that's still going on has been admirable. And it's been a culture that has been inviting and one that makes me proud to be part of. So that's kind of my pleasant surprise.
We've been talking about the Boston facility 18 months, I feel. Maybe it's longer. Where are you on the remediation, and what is the path forward from here?
Yeah. So with the Boston facility, obviously, we started the Braintree facility, which is really a greenfield, state-of-the-art manufacturing facility that we're putting up. As we talked about it, the plant is going to be up and running by the end of June 2026. The work that remains still has to do with the equipment and the process validations and also completing the documentation of our quality management system in Braintree, which is going to take us up to the point where we will be ready for production. Then we would have to obviously build inventory and hopefully getting SurgiMend in the market by Q4 of next year. So that's the work that has been going on, and we have been so far on track and looking forward to operationalizing it by June 2026.
And then at that stage, do you close the older facility?
The older facility is already closed.
Oh, already closed.
Yeah. All the employees and everyone has been already switched to Braintree, so.
This happened before either of you arrived. You got the cleanup of it. But when you take a look, we'll call it Monday morning quarterbacking, do you say, "Aha, this is what went wrong," so we make sure that doesn't happen again?
I would say the aha is about having put in place a harmonized quality management system across our global footprint. I think that's one thing that had not happened where you had different companies that collectively made up Integra. Everybody had their own quality management system, but we had not harmonized, and when you don't have the harmonized quality management system, if something comes up, you don't systematically address it across the entire supply chain. So I think that is really the aha, and that's what the Compliance Master Plan that we initiated middle of 2024, that's what it's meant to do, and that's what we're on track of delivering and we're making good progress on.
Having watched Integra or covered it also, but mostly watched also for almost two decades, the company has evolved through a fair amount of M&A. Is it safe to say that part of the lack of harmonization was that as things came in, they may not have been integrated into sort of a global plan, or is that the wrong way to think about it?
I think for sure in terms of the quality management system, that's true. I think there are many things that we have done very well during those acquisitions. I would say on the commercial side, the integration on the commercial side of the businesses, as well as. I know a lot of the companies and from my past experiences, what usually breaks down is the ERP because most of the companies don't immediately integrate IT systems. But Integra has done a good job of that. At least everybody's on the same ERP. So I think there's elements that we've done really well, but there's elements that we could have stood, even in the case of the supply chain, that we would take the best practices and make sure they're applied.
And that's what we're doing now to ensure that our supply chain is robust end-to-end, our quality management systems are. So that's some of the work that we're doing now.
And my sense, as guidance has been lowered throughout the year, is it's like a box. When you keep opening it, you discover new things. Is that the right interpretation? And do you feel like you're near the end of finding new things? Do you feel like you've scrubbed all the corners and been like, "Okay, we're in good shape here"?
Yeah, so I would say, obviously, we're committed to getting to a point where we meet demand because the demand for our products is strong. It's just the challenges that we've had have been on the supply side and some of the things that we had put on hold in the process throughout the year, and I would say we're getting to the point where we will be able to build into our guide, as we talked about, some of the disruptions that may come either through supply or the quality management work that we're still doing. But our commitment to coming back to meeting demand is definitely there in terms of the trajectory as to when we get there. We will obviously share that when we share the long-range plan at the investor day. We plan on having an investor day next year.
We haven't set a date yet, but we will be covering that at that point.
When we think about Braintree coming online in June of 2026, what are the milestones that you're going to be sharing with investors for us to follow your path?
Yeah. So I think from now until the time that the plant is up and running, it's really, as I said, continuous running the qualifications for manufacturing and processes and finalizing the documentation. So really, they all go up until the time they're built into the timeline that we have provided. So there's really not going to be any hard stop. I would say that we are on a weekly basis getting updates on the progress. And should anything change, we will be providing input. But at this point, we're still sticking with June 26th.
Excellent. PriMatrix and Durepair are currently being relaunched. What goes into relaunching a product, and why are these two the ones that are going out at this stage, and what's important about them?
Yeah. So as part of building, as I mentioned, we're working very in a foundational systemic way when it comes to supply chain optimization and strengthening our supply chain. So dual sourcing is one of those things that we are doing foundationally in the right places where it makes sense in order to be able to build resiliency across our supply chain. So with PriMatrix and Durepair, we had an opportunity through collaboration with a partner, with a third-party supplier, to bring those two products into the market quicker and not necessarily through Braintree to get ahead of it and bring it on, which we actually launched both of the products in the beginning of October of this year, which is really nearly a year ahead of time.
We're having pretty good traction and reception on both of those products, which really validates some of the things I have been hearing about as I joined the company and I was meeting with the surgeons and physicians where they talk about they miss these products in their bags because the way they handle, the way their outcome, their patient outcomes have been delivered with these products, they're missing them. We're actually doing pretty well with PriMatrix and Durepair, both of them, since their launch in early October.
If they're using these products now, what are they not using? What is it replacing?
If they're using the PriMatrix and Durepair, so there's many products that they have been using on the PriMatrix side. The market and the companies that play are a significant number of them, obviously. So there's many competitors that are using. But again, what we're hearing from the customers is that they were missing these products for the properties that they have, the way they handle, the strength, the handleability of the products.
Yeah. The market is fairly fragmented, and there is a lot of trial that tends to happen. And I think to Mojdeh's point, what we're learning when our products were off the market is that customers, in some instances, they've trained on PriMatrix as an example, and that's what they're familiar with. That's what they know that works, and that's why they want it back or are interested in having it back because in the midst of doing their trial, they didn't find a competitive offering that met their need completely. And so that's the opportunity that we're tapping into as we relaunch these products.
Yeah. Thank you. But what I'm really trying to get at, and maybe it's just obvious at this stage, is I think some of the investor concern was when these products are off the market, others will come in and fill the gap, and therefore the demand for them will be lower. But I'm not hearing you say that.
Yeah. So it remains to be seen. As I said, the early indication on PriMatrix has been very positive. So it's actually exceeded our expectation as we launched the product. And we're going to be continuing to watch it, right, because there's a lot to be learned about how PriMatrix gets the share back that we have lost over time and then also as we build the learnings through that into the launch of SurgiMend. But what we are hearing is that the customers that we have approached, which have been the loyal users of PriMatrix, they're thrilled to have it back. So it's early indication. We're going to continue to watch it for the fourth quarter. And obviously, we're going to build those expectations into the guide that we will bring in February for next year, so.
And how do you think about the ENT franchise? You've built it out through acquisition. Can you discuss the products in that portfolio and how it's growing?
Yeah, so a portion of the portfolio is Balloon Sinuplasty, which is the lower growth part of the portfolio, and that was a known thing at the time of the acquisition that that's in the lower growth spaces, and we are challenged in that segment a little bit with the reimbursement and prior authorization and so on and so forth, so we've been working with our health economics teams, with the payers, as well as our customers to help them with a more successful prior authorization process as they go through it, so we put a lot of time and effort into that.
We're putting time and effort into continued publications and clinical evidence that we bring forward, as well as ensuring that our product development roadmap is so that our products are competitive and we are in the price points that are allowing us to play successfully in the market. So that's the Balloon Sinuplasty side. But the high-growth segment of that portfolio is growing very strongly, high single-digit-low double-digit. And that's the ERA Eustachian tube dilation products. And a couple of things about that part of the business. We are the only company that has an indication for pediatrics, A plus. And we just recently launched a registry to accumulate, obviously, clinical data to further substantiate for reimbursement, appropriate reimbursement levels, and build evidence for it.
And then also with the new product introductions and developments that we're working on, the 2D product itself and also the 2D navigated handhelds are doing also very good. So hopefully, the strength in the growth of the growth part of the portfolio is going to be overtaking the growth of the Balloon Sinuplasty side. But those are the work that we're doing. And ultimately, at the right time in the future, we have opportunities for also bolt-ons for this product line, obviously. But at this point, we're focused on executing and delivering, so.
That was a question for later on, but since you opened that door, Integra has been built through M&A. It's a hard pause since you've been dealing with the newness of both of your positions and newness of the Compliance Master Plan, etc., etc. At what stage does the company go back to M&A?
Yeah. So our focus is really, as you said, quality management systems, supply resiliency, as well as execution excellence. And bringing down our leverage is number one priority. Reinvestment beyond that, reinvestment in growth, obviously, is going to be a key one. But we have a lot of focus on the cash flow and cash flow improvements in order to be able to bring down our leverage. So those are our key priorities. I don't know, Lea, if you want to.
Yeah. And to put a finer point on that, to Mojdeh's point, we expect those to continue to be our priorities through the end of 2026 in terms of focus on debt reduction and leverage improvement. And so we'd look to do some of the acquisitions that Mojdeh talked about at a point beyond that.
Specifically to debt coverage, your goal for end of 2026, is that what I heard, or?
No. So it's a focus now, right, number one priority now today. And the biggest part of how we execute on that is driving improved operational cash flow. And we saw evidence of that in our Q3 results. We continue to expect to see momentum in that regard in terms of improving cash flow management throughout Q4 and into 2026, driven by our ability to drive better supply reliability, bring our products back to market, improve EBITDA, but also through very aggressive working capital management discipline that we've instituted across the organization. So looking critically around CapEx and investment, certainly as we bring Braintree online, that's a sizable kind of CapEx investment that we no longer have to make, as an example. Instituting critical controls around AR, AP, inventory management are also part of that.
And then coupled with the margin expansion program that we talked about in our July call, phase one of which is going to be implemented in 2026. And so all of those things will be contributing factors as to how we accomplish that and drive leverage down.
How should we think about the private label business today and then going forward?
So the private label business, we actually have had pretty good business in that in the sense that it has been growing decently. It hasn't been necessarily dilutive. And in terms of the profitability, it's been pretty profitable for us because of the fact that we don't have a lot of SG&A that's associated with it. We have had challenges this year because of the fact that one of our partners, they are having challenges with their product and share position with their customers. So as such, they have been modulating the orders that they put through us as they reduce their inventory. So we've been impacted by that. As we move forward, hopefully, they are going to be stabilizing more as their demand stabilizes. And we do have good partnerships with a few of our partners that have been long-term partners with us.
So it's a strong business for us in terms of both not being dilutive on the growth side and also being accretive on the margin. Lea, if you want to make any additional comments.
Yeah. That's perfect.
But we've had a couple of bumps this year because of that one partner.
How many partners do you have?
For competitive reasons, we don't disclose the number of partners that we work with.
Bigger than a bread box, more than a dozen, less than five, any way to gauge this?
Yeah. Again, so I think relative to the size of our portfolio, again, it's about probably bigger than a bread box.
On the third quarter call, you discussed that you'd completed a portfolio review. And why was this the right time to do the portfolio review, and what was the outcome of it?
Yeah. Well, I think the timing is the responsible thing to do for any leadership team, and especially as a new leader coming in, to make sure that you understand the role each part of your portfolio plays in your performance and your future is really, really important. So there's no better time than now to do it. And the main reason why is because I wanted to make sure that we have an aligned understanding of the role each part of our portfolio plays so that Lea and I have a better view as we do capital allocation because we want to make sure that we put the resources behind those priorities that drive the most value creation for the company in the long term.
And in the process, we also have to understand what parts of our portfolio are not aligned because either they're dilutive in terms of growth or margin, or they're not strategically aligned, or they're in a competitive position where we don't have the right to win or whatever have you because we need to then line those up for ultimately, over time, potentially sunsetting them, rationalizing them, simplifying them. So it's guiding a lot of the work that we are going to be driving as we roll out our LRP.
Can you share which ones you were like, "Let's lean into this," and others you're like, not so much?
Yeah. Well, more to come as we bring our long-range plan forward. But there are clear areas that are focus areas for us on the growth side of it, which is IBBR. We're pursuing PMAs, tissue technology. Wound care is going to continue to be a focus for us. Beyond that, in the sense of the neurosurgery business, we're going to be very interested in adjacent areas that we have strength in, brand equity, and the right to win. But more to come when we roll out the LRP. But in terms of parts of our portfolio to sunset over time and all of that, we're still in the midst of deciding at what point those are going to happen. And again, we'll bring that forward as we talk 2026 and beyond.
Can we talk a little bit about tissue technologies? And can you remind us the products that you have in there and what's really working for you and what may not be so much?
Yeah. So we're in wound care, obviously, wound reconstruction as well as surgical reconstruction, which the key part of the growth for the future that we are putting our bets on is implant-based breast reconstruction, which SurgiMend is ultimately a product that we're getting a PMA for that indication. So that's an area of focus for us. And then on the wound side, obviously, we have burns and wound reconstruction where you need tissue reinforcement. That's being used where we have Integra Skin, PriMatrix, and several other products. We have products, obviously, our UBM products that are being used also for other indications. So we believe and we know that we have the broadest portfolio across the tissue technologies business that any player in the market has today.
With the changes that are happening on the CMS side in terms of payment, it's going to be a significant upside for us moving forward.
Yeah. I just want to add in, show DuraSorb some love on the surgical recon side.
Mesh DuraSorb. Yes. We also have DuraSorb, which is a synthetic, right? So we're pursuing a PMA strategy for that. So as we think about growth opportunities in implant-based breast reconstruction, we come with a portfolio that includes both a biologic device as well as a synthetic device, which we think is fundamental to being able to capture share meaningfully in that space.
And how fast do you think the market is growing versus what you think you can deliver?
So, specific to IBBR? So, right now, we size that market at about $800 million market. It's growing at high single-digit, actually low double-digit growth. And so again, for us, we have to get surgery back on the market. We have to get the PMAs. But we do think there's meaningful opportunity for us to operate on the market as we grab share.
What launches are on the calendar for next year?
So it's going to be the continuation, obviously, of the full year of launch of PriMatrix and Durepair. We also, hopefully, are bringing back by the Q4 of next year. SurgiMend 510(k) is going to be another one. And I believe we have a launch also in the Acclarent arena that's due to come towards the end of the year. Am I missing something?
Yeah.
Prior to the recall and some of the manufacturing discussions, we spent a fair amount of time talking about implant-based breast reconstruction. Is that still on the table, or how should I think about that as potentially a contributor?
Specific to 2026, or you're talking about beyond?
I'll take any year. You tell me.
Yeah. I'll take that. So absolutely, right. So that goes to what we were just talking about in terms of how our portfolio is positioned. SurgiMend, as well as DuraSorb and the PMAs we're pursuing, that gives us license to penetrate that space more deeply than what we can right now because we have an ability to promote once we get those in place. And so for us, SurgiMend, we announced the planned return-to-market timeline as Q4 of 2026 for our 510(k). And again, expect to be well-positioned to get a PMA subject to kind of FDA PAI inspection shortly thereafter. And then DuraSorb, similar timeline. And absolutely, as part of the LRP or investor data we'll come forward with in 2026, that'll be a core part of our growth strategy.
You talked about a program for savings. And I think the amount that you target is $25-$30 million for next year. Where does the savings come from? And does it come out of the system and remain out, or is this an annual depletion? How should I think about some of your internal cost structure?
Yeah. So our phase one program, right now, we have identified $25-$30 million of savings to be delivered in 2026, identified in a couple of areas. Within our cost of goods sold, so within our gross margin area, there are opportunities in terms of driving enhanced productivity, in terms of driving site efficiencies that will contribute to that, and stronger procurement category management to help mitigate some of the inflationary headwinds that we see on price. From an OpEx perspective, we expect to see benefits from a simplified operating model along with better third-party cost management. So as we look at contingent workers, as we look at consultants, that becomes a part of that. Category management will also play a role there as well.
And then also looking at kind of our support structure and how we can position that to better enable the business will all be key contributors.
Yeah. And the thinking is that's what we talked about. This is the phase one of our journey on margin improvement plan because part of this is going to the way we're approaching it, especially on the supply chain side and manufacturing and operations, is going to be continuous improvement. We should be able to deliver continuous improvement year- over- year. We should expect to do that when it comes to COGS improvement, when it comes to yield improvements. And those are the sets of disciplines we're trying to establish within the supply chain that would allow us to build that culture of continuous improvement year- over- year. So this is just the phase one. But.
Yeah. To that end, from a long-term perspective, I mean, you think just, what, two to three years ago, right, profitability in our business was in a different place, right? And since that time, we've made investments in Compliance Master Plan. We've made investments in remediation. Those costs begin to go away, right, as we strengthen our QMS, as we strengthen our supply chain. And that will be a vehicle to drive improved profitability coupled with all of the things that Mojdeh talked about. So we do see an opportunity from a profitability perspective for the business to exceed where it was in the recent past.
What do you think investors are missing at this stage? And what do you think? I'm going to ask a different question. They're focusing on too much.
I think the investors want to see consistent delivery of results. I think for the most part, everybody knows we're significantly undervalued. I mean, that's not lost to anyone. And I think they do see the opportunity. But I think they want to see delivery of consistent results, I would say, for a few quarters.
Yeah. I agree. They want to see the stabilization of our operations, and they want to see kind of that return-to-growth trajectory. And I'd love to be able to get to a point where we continue to talk about all the exciting things, right, and don't have to talk about so much on remediation in terms of, to your point around where do we spend too much time. It's probably there, necessarily so because of the moment we're in. But I think given kind of the trajectory that we're on, I do see in the not-too-distant future an ability to be able to talk about those exciting things, which we'll bring forward as part of our investor day.
When are you planning your investor day?
We haven't announced yet.
First the second half?
Coming soon.
Coming soon. Okay. When we meet this time next year, what do you think we will be talking about, and what do you think we won't be talking about?
I think we're going to be talking a lot about the leverage of the growth opportunities moving forward and less about when this is going to be behind you, when this is going to be behind you. I'm really hopeful. There's a lot to be optimistic about this business, what we are doing in terms of building the strengths. I keep on talking about our approach is systemic and foundational because we want to establish the company in a way that we will be able to deliver sustainable, predictable results consistently moving into the future so that we can focus on the growth and the opportunities that are in the markets that we play in and fully leveraging the strength of the portfolios that we have. We haven't been able to do that in the last two years.
We haven't been able to fully leverage the strength of the portfolio and the commercial excitement that there is out there about our products, and we're going to be able to be talking about that.
And I'll add on to that selfishly. I hope the conversation is, Lea. You've improved your overall balance sheet strength. Leverage is down, cash flow generation's up, free cash flow conversion is looking really strong. Remind us, how did you do that again?
No, it is true.
It is true.
I look forward to that conversation. Mojdeh and Lea, thank you so much for joining us today.
[audio distortion]
Have a great day.
Thank you.