Xtant Medical Holdings, Inc.

Xtant Medical entered 2025 with a clear mandate: concentrate resources on the fastest-growing, highest-margin segments of the business. The July 2025 agreement to sell select assets to Companion Spine for approximately $19.2 million positions Xtant to enhance its focus on regenerative medicine.

The transaction includes three product lines: the Coflex and CoFix spinal implant systems, as well as all international operations. These assets, while generating revenue, operated at lower margins than the core biologics business and required substantial resources to maintain. The Coflex system requires pre-authorization from managed care organizations, which is unique to Xtant as a whole. In short, the Coflex/CoFix and Paradigm International businesses only accounted for 16% of 2024’s revenue, but required significant cash and management focus.

Proceeds from the transaction are likely to serve multiple strategic purposes. The company plans to retire a portion of its $22.3 million in long-term debt, strengthen the balance sheet, and reduce interest expenses. These funds should enable expanded tissue procurement, increased manufacturing capacity, and the development of next-generation products.

Source: Company Documents

Streamlining enables management to focus more intently on the orthobiologics opportunity, where Xtant holds a unique position as the only company manufacturing products across all five major categories. The biologics market is experiencing growth driven by an aging population that requires more spine surgeries and surgical advances incorporating biological solutions. The focused approach may also enhance investor communications, as the company will be presenting a unified growth story rather than multiple narratives across different segments.

Xtant’s timing appears to be advantageous, given the company’s recent operational momentum. The second quarter 2025 results showed the biologics division generating record revenues, with the company achieving positive net income of $3.6 million, adjusted EBITDA of $6.9 million, and positive operating cash flow, indicating the earnings power of a streamlined business model. At the same time, the divestiture removes lower-margin products while preserving all high-growth product lines, including the demineralized bone matrix portfolio, which represents 59% of biologics revenue, the newly launched OsteoFactor Pro growth factor product, and the expanding amniotic membrane family.

With the transaction expected to close in the third quarter of 2025, Xtant is evolving into a pure-play regenerative device and biologics company, positioned to capture an expanding share of a large and growing orthobiologics market.

Source: Company Documents

The orthobiologics market serves a fundamental need in modern surgery: helping the human body regenerate bone and tissue when natural healing proves insufficient. Each year, surgeons perform hundreds of thousands of spinal fusion procedures in the United States, with nearly all requiring some form of bone graft material to promote successful fusion between vertebrae.

Beyond spine surgery, orthobiologics find applications in trauma reconstruction, tumor removal, and complex orthopedic procedures where bone defects need repair. The market appears to be growing steadily at a rate of 5% annually, driven by an aging population requiring more surgical interventions and the advancement of techniques that expand the use of biological materials.

Demineralized bone matrix (DBM), which accounts for 59% of the company’s biologics revenue, provides materials intended for bone grafting procedures while offering handling characteristics that surgeons prefer. The company produces DBM in multiple formats, including putty, paste, and fiber forms, each optimized for different surgical applications. Synthetic bone grafts provide consistent and predictable performance, eliminating the variability inherent in human-derived materials. Cellular allografts contain living cells intended for surgical applications, while traditional allografts provide structural support for large defects. Growth factors, including the recently launched OsteoFactor Pro, deliver concentrated proteins for use in surgical procedures.

No other orthobiologics company in the United States manufactures products across all five major categories, a distinction that positions Xtant Medical uniquely in a market where surgeons increasingly seek comprehensive solutions from single suppliers. In addition, its manufacturing capabilities distinguish Xtant from competitors who typically specialize in one or two product categories. The company operates tissue processing facilities in accordance with FDA regulations, handling everything from initial procurement to final product packaging. This vertical integration ensures control at every step, capturing margins that would otherwise be lost to third-party processors. The company’s relationships with Donor Agencies provide access to donor tissue, a scarce resource that limits the growth potential of many competitors.

Distribution strength amplifies the product portfolio advantage. Hospital purchasing committees typically prefer vendors who can supply complete solutions rather than managing multiple suppliers for different products. Xtant’s 450 integrated delivery network contracts provide access to major hospital systems nationwide, while 670 independent distributors maintain relationships with individual surgeons. The breadth of offerings increases revenue per surgery, as distributors can supply multiple products for complex procedures, thereby enhancing the overall value of the service.

The regulatory environment creates additional barriers that protect Xtant’s market position. Each product category requires specific FDA clearances, manufacturing protocols, and quality systems. New entrants face years of development and regulatory review before bringing products to market. Established players like Xtant benefit from existing clearances, quality systems, and proven safety records that facilitate new product introductions. The company’s experience navigating these requirements provides institutional knowledge that would take competitors significant time to replicate.

Xtant’s recent product innovations demonstrate how the comprehensive platform enables rapid development. The SimpliMax and SimpliGraft amniotic membrane products leverage existing tissue processing capabilities while opening new markets in wound care. The Trivium allograft combines three bone components using processing techniques developed for other products. This ability to cross-pollinate technologies across categories accelerates innovation while reducing development costs. 

The economics of orthobiologics manufacturing reflect how companies that control their own production can capture value at each stage of the process. Tissue that enters the production process at modest values becomes finished products selling for significantly higher prices, with margins expanding across the range shown in the company’s product portfolio from 55% to 90% depending on the category and processing complexity. Xtant Medical captures this entire value progression through complete vertical integration, controlling every step from tissue procurement through final product delivery.

Source: Company Documents

The journey from donor tissue to surgical product involves multiple stages, each adding value and margin opportunity. Initial tissue procurement requires establishing relationships with Donor Agencies, implementing donor screening protocols, and maintaining strict chain-of-custody documentation. Primary processing involves cleaning, testing, and preparing tissue for further manufacturing. Secondary processing transforms raw tissue into specific product formats through techniques like demineralization, freeze-drying, or cellular preservation. Final manufacturing includes mixing with carriers, packaging in surgical-ready formats, and quality testing. Most competitors control only one or two of these stages, relying on third parties for the rest. Xtant performs all stages internally, retaining margins that would otherwise flow to suppliers and contract manufacturers.

Vertical integration enables Xtant to develop increasingly sophisticated products that capture higher margins. The company’s base demineralized bone matrix products sit at the lower end of the margin range, while enhanced DBM formulations command better pricing through improved handling characteristics or added components. As products move toward categories like growth factors and viable bone matrices, they require more advanced processing capabilities. Developing these sophisticated products requires complete control over manufacturing processes and proprietary techniques that contract manufacturers typically don’t provide.

Source: Company Documents

Supply chain control provides advantages beyond margins. The orthobiologics industry faces periodic shortages when tissue availability fluctuates or when regulatory changes affect processing requirements. Companies that are dependent on third-party suppliers may face challenges in fulfilling orders during these disruptions. Xtant’s direct relationships with tissue banks and internal processing capabilities support consistent product availability. The company can adjust production schedules to meet demand spikes, prioritize high-value products when tissue supplies are tight, and maintain safety stock without relying on external warehouses.

Xtant’s manufacturing platform creates opportunities for revenue beyond Xtant-branded products. The company monetizes excess capacity through OEM agreements, producing private-label products for other medical device companies. These arrangements generate incremental revenue at attractive margins since branded product sales already cover the infrastructure costs. Contract manufacturing for specialized products leverages Xtant’s regulatory clearances and quality systems, providing services that smaller companies cannot establish independently.

Ironically, regulatory compliance has become a competitive advantage since the FDA requires extensive documentation, validated processes, and regular inspections for tissue processing facilities. These requirements create substantial barriers to entry, as new competitors must invest considerable time and resources in establishing compliant operations. Xtant’s proven track record facilitates new product clearances, as regulators have confidence in the company’s quality systems. The company can leverage existing clearances to introduce line extensions more quickly than competitors, starting from scratch.  

Xtant Medical’s tissue processing expertise extends naturally beyond spine surgery. The same technologies that process bone for orthopedic applications apply equally to chronic wounds, sports medicine, and surgical repairs - markets collectively worth ~$20 billion that the company is now entering.

Source: Company Documents

Chronic wound care represents the largest immediate opportunity at $12 billion. Millions of Americans suffer from diabetic ulcers, pressure sores, and non-healing surgical wounds. SimpliMax and SimpliGraft, launched in Q2 2025, apply amniotic membrane technology to these applications. The cellular scaffolding and growth factors used in bone grafting procedures also find applications in wound care products.

Sports medicine, a $7.2 billion market, increasingly favors biological solutions over traditional surgical techniques. Athletes seeking faster recovery from tendon, ligament, and cartilage injuries drive demand for regenerative products. Xtant’s connective tissue processing capabilities translate directly to rotator cuff repairs, ACL reconstructions, and meniscus replacements. Many orthopedic surgeons perform both spine and sports procedures, providing natural entry points through existing relationships.

The surgical repair market ($500+ million) requires materials for hernia repairs, dural patches, and other soft tissue applications. These procedures need temporary structural support while the body regenerates its own tissue. The Ematrix product line under development targets these opportunities with specialized membranes intended to provide barrier functions while supporting tissue integration.

Three additional segments offer longer-term potential. Hemostatic biologics ($1.2 billion) control bleeding during surgery, a necessity in every procedure. Antimicrobial biologics ($500+ million) address surgical site infections that affect 2-5% of patients. Nerve regeneration ($2.2 billion) guides peripheral nerve regrowth after trauma. Each new market leverages existing tissue processing capabilities while requiring targeted development.

Product development at Xtant Medical follows a disciplined strategy: enhance existing technologies for premium pricing while maintaining short development cycles. The company launched five major products between early 2024 and mid-2025, demonstrating this focused approach.

Source: Company Documents

A slate of new products launched in 2024 has allowed Xtant to enter new and large markets: SimpliMax and SimpliGraft represent Xtant’s expansion beyond orthopedics into wound care. These amniotic membrane allografts apply the same tissue processing expertise the company uses for bone products to address acute and chronic wounds. The amniotic membrane contains growth factors and provides a biological scaffold that supports wound healing. The transition from orthopedic to wound applications required primarily regulatory work and packaging changes rather than new processing capabilities, allowing the company to enter the $12 billion wound care market with minimal additional investment.

OsteoFactor Pro addresses a specific challenge in bone grafting: delivering growth factors in a stable, usable form. The product combines solubilized allogeneic growth factors, i.e., proteins that signal bone formation, with native human collagen that acts as both a stabilizer and carrier. This formulation allows surgeons to apply concentrated growth factors directly to surgical sites where enhanced bone formation is desired. The development leveraged Xtant’s existing protein extraction capabilities from its DBM operations.

OsteoVive Plus enters the viable bone matrix category, where living cells are preserved through aseptic processing rather than the terminal sterilization used for traditional allografts. The aseptic processing maintains cellular viability, meaning the bone matrix contains living cells that can actively participate in the healing process. The presence of living cells distinguishes OsteoVive Plus from standard allografts, which provide only a structural scaffold. The product required modifications to processing protocols but not new facilities, allowing Xtant to enter this higher-value category efficiently.

The company’s pipeline through 2026 was designed to systematically expand its portfolio. FibreX advances DBM fiber technology with new carriers intended to improve surgical handling. NanOss 2.0 updates the synthetic platform based on surgeon feedback about porosity and resorption rates. Molded Trivium takes the successful three-component allograft into pre-shaped forms for common defects, reducing operative time. The Ematrix platform branches into multiple applications: bone graft scaffolds, wound care products, and particulate collagen for versatile surgical use. Each leverages the same base collagen processing with targeted modifications.

Source: Company Documents

The company prioritizes commercial viability when selecting development projects. New products target specific surgical challenges identified through surgeon feedback, including difficulties with product handling, lengthy preparation times, and unpredictable results. Clinical opinion leaders participate throughout the development process to validate market demand and ensure product design is effective. Because Xtant controls its own manufacturing, the company can rapidly modify formulations and processes without external negotiations, shortening the typical development timeline. The company’s established quality systems and regulatory history facilitate faster clearances for new products built on existing platforms.

While Xtant’s biologics portfolio includes 50 issued patents on various processing techniques and formulations, the company’s competitive advantage extends to its manufacturing expertise. The company understands how different tissue types respond to processing, how to maintain consistency across batches, and how to troubleshoot production challenges. In each case, these capabilities enable the company to deliver consistent product quality that builds surgeon confidence and supports premium pricing.

Xtant Medical generates revenue through both its biologics portfolio and its remaining fixation hardware business, while implementing operational improvements that expand margins across the enterprise. The second-quarter 2025 results validate this approach, with positive net income of $3.6 million, adjusted EBITDA of $6.9 million, and a 69% gross margin.

Operating leverage provides a solid foundation for the company’s continued growth. The Belgrade facility and other locations carry substantial fixed costs regardless of production volume. As volumes increase, these costs spread across more units. Revenues of $91.3 million in 2023 are projected to grow to $131-135 million in 2025. The same infrastructure that was inefficient to operate at lower volumes now generates expanding margins as utilization increases.

The biologics business represents the primary growth engine, with its five product categories commanding margins ranging from 55% to 90%. The fixation hardware portfolio, while operating at lower margins, continues to provide steady revenue and supports full-service relationships with spine surgeons who prefer single-vendor solutions. This dual-product approach allows the company to maximize revenue per surgery.

Distribution efficiency multiplies the impact. Among 670 independent distributors, the company focuses on deeper penetration with existing relationships rather than adding new ones. By providing additional products across both biologics and hardware lines, as well as training and territory support, the company increases revenue per distributor. The company’s 450 integrated delivery network contracts provide stability that independent distributors cannot match. Hospital system agreements support predictable volume while reducing selling costs. Once established, IDN relationships generate recurring revenue with less maintenance than individual surgeon adoption. Approved vendor status also facilitates new product introductions.

Source: Company Documents

The shift toward Xtant-branded products over private label drives margin improvement. Private label captures only manufacturing margins, but the same product under the Xtant brand captures the full value chain.

Xtant is investing selectively in opportunities that meet return thresholds. The company’s R&D investment is focusing on products with clear commercial paths, while its sales and marketing efforts target high-volume accounts and productive distributors. This highly strategic approach has now proven to be profitable. With positive cash flow funding operations and the pending $19.2 million from the Companion Spine transaction providing additional growth capital, the company can maintain this disciplined expansion without external financing pressures. The transition from cash-burning turnaround to self-funding growth marks the completion of Xtant’s financial transformation.

Source: Company Documents

The transformation of Xtant Medical from a struggling medical device company to a profitable leader in orthobiologics reflects the expertise of its executive team. Each member brings specific industry experience directly relevant to the company’s current strategy and future growth plans.

Sean Browne, Chief Executive Officer, has over three decades of expertise in the medical device and healthcare industry. Most recently, he served as Chief Revenue Officer of CCS Medical, Inc., a provider of home delivery medical supplies. Previously, Mr. Browne served as Chief Operating Officer of The Kini Group, an integrated cloud-based software analytics and advisory firm; President and Chief Executive Officer and a director of Neuro Resource Group, a venture start-up medical device company that was sold to a strategic buyer; President, Miltex Surgical Instrument Division for Integra LifeSciences Corporation, a publicly held medical device company that acquired Miltex Holdings, Inc.; Vice President, Sales and Marketing of Esurg.com, an e-commerce company serving physician and ambulatory surgery markets; Senior Vice President, Health Systems Division of McKesson Corporation; and held various positions with increasing responsibility at Baxter Healthcare. Mr. Browne holds a Master of Business Administration from the Kellogg School of Management at Northwestern University and a Bachelor of Science degree, with a major in Finance and minor in Statistics, from Boston University.

Scott Neils, Chief Financial Officer, has 15 years of experience focused on public accounting and corporate finance and previously served as the Company’s Controller since August 2019. In this role, Mr. Neils gained extensive experience managing the Company’s finance and accounting functions. Prior to joining Xtant Medical, Mr. Neils served as Audit Senior Manager at Baker Tilly US, LLP (formerly Baker Tilly Virchow Krause, LLP), an advisory, tax, and assurance firm, from November 2015 to August 2019. Prior to that position, Mr. Neils was at Grant Thornton LLP, an accounting and advisory organization, from September 2007 to November 2015, most recently as Audit Manager. Mr. Neils is a Certified Public Accountant. He holds a Bachelor of Science in Business in Accounting and a Master of Accountancy from the Carlson School of Management at the University of Minnesota.

Mark Schallenberger, Chief Operating Officer, has deep experience in orthobiologics. Prior to joining Xtant Medical, Mr. Schallenberger served as Chief Operations Officer of Surgenex LLC, a medical technology manufacturer, from June 2019 to January 2023. Prior to Surgenex, Mr. Schallenberger served as Senior Director of Marketing & Product Development of DCI Donor Services Tissue Bank, a tissue bank, from February 2016 to June 2019. Prior to DCI Donor Services Tissue Bank, Mr. Schallenberger served in various roles with increasing responsibility from September 2010 to February 2016 culminating with Director of Scientific Affairs with Xtant Medical Holdings, Inc. formerly Bacterin International Holdings, Inc. Mr. Schallenberger holds a Master of Science in Chemical Biology from The Scripps Research Institute and a Bachelor of Science degree in Chemistry from the University of Montana. 

The second quarter of 2025 marks a turning point in Xtant Medical’s financial trajectory. For the first time in recent history, the company achieved profitability across multiple metrics simultaneously: positive net income of $3.6 million, adjusted EBITDA of $6.9 million, and positive operating cash flow of $1.2 million.

Source: Company Documents

Revenue growth accelerated throughout the period. The second-quarter 2025 revenue of $35.4 million represents 18% growth over the prior year, building on the momentum that drove full-year 2024 revenue to $117.5 million, up from $91.3 million in 2023. The company raised its full-year 2025 revenue guidance to $131-135 million, representing 11-15% growth over 2024. This guidance has not yet been adjusted for the pending asset sale to Companion Spine.

Source: Company Documents

Margin expansion demonstrates operational improvements beyond volume growth. Gross margins increased from 62% in Q2 2024 to 69% in Q2 2025, reflecting a better product mix that favored biologics over hardware, improved manufacturing efficiency, and premium pricing on newly launched products.

The balance sheet provides flexibility for continued growth. The company ended Q2 2025 with $7.0 million in cash against $22.3 million in long-term debt. The pending receipt of $19.2 million from the Companion Spine transaction is likely to strengthen this position, providing capital to reduce debt while funding growth initiatives. Operating cash flow turned positive in Q4 2024 and remained positive through the first half of 2025, indicating that the business generates sufficient internal funding for its operations.

The transformation from 2020 to 2025 underscores the magnitude of change. From 2020 to 2022, Xtant generated modest organic growth with revenues increasing from $51 million to $58 million. The 2023 acquisition of assets from Surgalign Holdings accelerated the transformation, though integration took time. Now, with integration complete and the product portfolio optimized, quarterly revenue significantly exceeds historical levels.

The financial improvements demonstrate the company’s operational progress. With the pending asset sale expected to strengthen the balance sheet, profitability achieved in the core business, and multiple drivers from new products and market expansion, Xtant Medical has completed its turnaround phase and appears poised to enter a new stage of growth.

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