Celularity Inc. Faces Immediate Impact from CMS Withdrawal of Skin Substitute LCDs
Celularity Inc. (NASDAQ: CELU), a clinical‑stage biotechnology firm specializing in off‑the‑shelf placental‑derived allogeneic cell therapies, experienced a sharp decline in its share price following the Centers for Medicare & Medicaid Services’ (CMS) decision to withdraw reimbursement for its skin substitute product, LCDs. The announcement was made on December 26, 2025, and the company’s stock fell materially as investors reassessed the commercial viability of this product line.
Market Reaction
On the day of the CMS withdrawal, Celularity’s stock closed at $1.34, a level that is well below its 52‑week low of $1.001 but still above its 52‑week high of $4.35. The drop reflected a loss of confidence in the company’s revenue pipeline, particularly in the dermatology segment where the LCDs were positioned as a first‑in‑class therapeutic alternative. The market’s response underscored the sensitivity of clinical‑stage biotechs to payer decisions, especially when a single product represents a significant portion of projected sales.
Strategic Implications for Celularity
1. Revenue Diversification
Celularity’s core portfolio includes unmodified natural killer (NK) cells, genetically modified NK cells, chimeric antigen receptor (CAR) T‑cells, and mesenchymal‑like adherent stromal cells (ASCs). While these assets target oncology, infectious, and degenerative diseases, the skin substitute platform had been a critical revenue driver in the near term. The CMS withdrawal forces the company to accelerate diversification efforts across its product pipeline to mitigate concentration risk.
2. Pipeline Momentum
The company’s ongoing clinical programs in oncology and infectious disease are expected to progress through Phase II and III stages over the next 12–18 months. The loss of reimbursement for LCDs may accelerate the timeline for obtaining regulatory approval for other indications, as Celularity can reallocate resources and clinical trial budgets to accelerate development milestones.
3. Investor Outlook
With a market capitalization of approximately $38 million and a negative price‑earnings ratio of –0.39, Celularity’s valuation is heavily reliant on future earnings potential rather than current profitability. The CMS decision has sharpened the focus on the company’s ability to convert clinical success into commercial revenue. Analysts will likely revisit revenue forecasts, particularly in the dermatology segment, and adjust discount rates to reflect the heightened risk profile.
Forward‑Looking Perspective
Regulatory Engagement
Celularity’s executive team has signaled a commitment to engaging with CMS and other payers to explore alternative reimbursement pathways, including bundled payment models or outcome‑based contracts. Successful re‑approval could restore a critical revenue stream and enhance the company’s credibility with payers.
Strategic Partnerships
The firm has already demonstrated a willingness to forge collaborations to accelerate product development. A strategic alliance with a larger specialty‑tissue manufacturer could provide the manufacturing and distribution capabilities needed to re‑enter the dermatology market under a new reimbursement framework.
Product Expansion
Investors should monitor Celularity’s progress in extending its placental‑derived cell platforms to emerging indications such as autoimmune disorders and chronic wound management. These areas may offer higher reimbursement rates and less payer resistance, potentially offsetting the temporary loss in dermatology revenue.
Financial Management
Given the company’s modest cash reserves relative to its market cap, prudent capital allocation will be critical. Celularity may consider additional capital raises, either through a secondary offering or through convertible debt, to fund pipeline acceleration while maintaining liquidity for unforeseen regulatory setbacks.
Conclusion
The CMS withdrawal of the skin substitute LCDs presents an immediate challenge for Celularity Inc., eroding a key revenue source and prompting a reevaluation of its commercial strategy. However, the firm’s diversified pipeline, ongoing clinical programs, and proactive payer engagement position it to navigate this setback. Investors will be watching closely for evidence of accelerated approvals in other indications and for renewed reimbursement approvals in dermatology, both of which will be decisive in restoring confidence in Celularity’s long‑term value proposition.
