When Product Companies Try to Become Platforms: Lessons from Sanara's $26M Wound Care Bet

The Dual-Engine Dream

Sanara entered 2024 with a clear identity. Its surgical division was a financial powerhouse, distributing biologic wound care products like CellerateRX Surgical Activated Collagen through over 350 distributor partners to more than 1,300 U.S. hospitals. With gross margins consistently exceeding 90% and annualized revenue approaching $100 million, this "Prepare, Promote, Protect" product ecosystem represented everything a medical device company should aspire to be: profitable, scalable, and defensible.

But leadership saw a bigger prize. The chronic wound care market dwarfed the surgical opportunity. More importantly, it was broken. Standard-of-care healing rates languished between 40% and 66%, driving preventable hospital readmissions and amputations. The annual cost to the U.S. healthcare system exceeded $100 billion, much of it wasted on ineffective, fragmented care.

Tissue Health Plus was conceived as the solution: a "Wound Care Operating System" that would blend proprietary software, virtual physician oversight, and standardized clinical protocols. The vision was to take on risk-sharing contracts with Medicare Advantage payers, promising to improve healing rates to 85% while reducing total cost of care by 25%. If successful, Sanara would transform from a transactional product seller into a recurring-revenue service platform -the holy grail of healthcare business models.

Building a Platform Inside a Product Company

The technology ambition was genuine. Sanara invested heavily in developing THP Co-Pilot, a point-of-care software application that standardized patient encounters, suggested evidence-based interventions, and ensured documentation met payer requirements. An "Administrative Autopilot" backend automated billing codes and supply ordering to avoid claim denials. The system featured two-way integration with electronic medical records and incorporated telehealth for virtual specialist oversight.

Unlike a pure software play, however, THP was a hybrid beast. It required mastering four distinct disciplines simultaneously: software development, clinical operations management, medical supply chain coordination, and payer contract negotiation. For a company whose DNA was built around selling high-margin consumables through distributors, this was a radical departure.

The operational complexity showed. By the first half of 2025, while the surgical division was generating $7.4 million in adjusted EBITDA, THP was burning through $4.1 million (effectively incinerating 60% of the core business's profitability). In a high-interest-rate environment where Sanara was servicing $55 million in debt secured specifically to fund growth initiatives, this dual-engine model was becoming unsustainable.

The Pilot That Proved the Point

In July 2025, THP officially launched with a wound care provider group delivering at-home care across six states. This was the proof-of-concept moment, designed to generate the real-world evidence needed to sign payer contracts later in the year. The provider group began using the THP system for actual patient encounters, testing whether the technology could deliver on its promises.

Less than 90 days later, the Board of Directors initiated and completed a strategic review. The verdict: cease all development immediately and discontinue operations. While the specific data that triggered the shutdown wasn't publicly detailed, the brutal speed of the reversal suggests the unit economics (the cost to acquire and manage a patient versus the reimbursement realized) were fundamentally broken.

The Winner-Take-Most Problem

To understand why Sanara struggled, it helps to look at who succeeded. Swift Medical, a Canadian pure-play digital health company, was thriving in the same wound care technology space during this period. The contrast is instructive.

By early 2025, Swift had built a database of over 30 million wound images, training AI algorithms for tissue characterization and measurement with peer-reviewed accuracy that a newcomer like THP couldn't replicate without years of data collection. Swift had published research demonstrating their technology was 39% more accurate in measuring wounds on diverse skin tones—the kind of scientific validation that serves as currency in medical markets.

Critically, Swift positioned itself as infrastructure, not operator. They sold tools to help existing home health agencies meet CMS value-based purchasing mandates. They were selling shovels to gold miners. Sanara's THP, by contrast, tried to become the miner - taking on the care coordination risk, the payer contracting burden, and the operational complexity of managing patient populations. This is a far heavier lift requiring scale that Sanara simply didn't possess.

The capital structure mismatch was equally telling. Swift raised venture capital that expected high burn rates and 5-7 year timelines for returns. Sanara tried to fund a VC-style project with public market capital, where investors value quarterly EBITDA and revenue growth. When THP losses obscured the core surgical business performance, the market valuation suffered, forcing the Board's hand.

The Culture of "No"

Perhaps most fundamentally, there's a profound difference between selling products and delivering care. A sales culture optimizes for closing deals and expanding distribution footprint. A care delivery culture optimizes for clinical protocols, patient adherence, and outcome documentation. Software development culture operates on entirely different rhythms - iterative sprints, user testing, continuous deployment.

Sanara tried to run all three simultaneously. The result was predictable: none could be done excellently when each competed for capital, attention, and strategic clarity.

Strategic Purification

Following the THP shutdown and the appointment of new CEO Seth Yon in September 2025, Sanara made a decisive pivot back to its roots. The company didn't abandon growth. It changed how it would grow. Instead of building platforms, Sanara returned to what it does best: identifying and distributing innovative medical devices through its established channels.

The Q3 2024 investment of $5 million in ChemoMouthpiece, securing exclusive U.S. distribution rights for an oral mucositis cryotherapy device, exemplifies the new approach. It's a physical product that fits directly into existing sales bags, leveraging the distribution force without requiring a new business model. The innovation pipeline now focuses on OsStic, a synthetic bone adhesive targeted for 2027 commercial launch - hard tech medical devices, not soft tech service platforms.

With THP eliminated, the underlying health of the surgical business became visible: $75.6 million in revenue for the first nine months of 2025, up 25% year-over-year, with 93% gross margins and $12.3 million in adjusted EBITDA. Analysts maintained buy ratings with price targets suggesting confidence that the "new Sanara" would show dramatic earnings growth once the THP losses disappeared from financial statements.

The Platform Trap

The story of Tissue Health Plus is ultimately about the "Platform Trap." In the digital health era, traditional healthcare companies feel immense pressure to evolve from product sellers to platform owners, chasing the higher valuation multiples associated with software and recurring revenue.

But platform economics require different capabilities, capital structures, timelines, and organizational cultures than product businesses. The data moats are real. Incumbents with the most data have compounding advantages that new entrants can't overcome without massive head starts. And in value-based care specifically, taking on population health risk requires operational scale and clinical infrastructure that product distributors rarely possess.

Sanara's swift decision to recognize failure, absorb the write-down, and refocus on profitable core operations demonstrates strong corporate governance. By amputating the underperforming limb, they likely saved the body. But the broader lesson for the wound care industry is clear: the transition to value-based care is inevitable, but it will likely be led by specialized technology firms partnering with established providers. Not by product distributors trying to do it all.

The future of wound care is increasingly digital, data-driven, and outcome-focused. Getting there requires knowing what you're good at, and having the discipline to stay in your lane. Sanara learned that lesson the expensive way.