• Axogen, Inc. Reports 2023 Second Quarter Financial Results

    Source: Nasdaq GlobeNewswire / 07 Aug 2023 15:01:10   America/Chicago

    ALACHUA, Fla. and TAMPA, Fla., Aug. 07, 2023 (GLOBE NEWSWIRE) -- Axogen, Inc. (NASDAQ: AXGN), a global leader in developing and marketing innovative surgical solutions for peripheral nerve injuries, today reported financial results and business highlights for the second quarter ended June 30, 2023.

    Second Quarter Financial Results and Business Highlights

    • Revenue was $38.2 million during the second quarter, an increase of approximately 11% over the second quarter of 2022.
    • The Company estimates that revenues from scheduled non-trauma procedures represented approximately half of total revenues during the second quarter and grew over 20% from the second quarter of 2022.
    • The Company estimates that revenues from emergent trauma procedures represented approximately half of total revenues during the second quarter and grew in the low single digit range versus the second quarter of 2022.
    • Gross margin was 81.1% for the quarter, compared to 81.8% in the second quarter of 2022.
    • Net loss of $6.7 million, or $0.16 per share, compared to net loss of $7.7 million, or $0.18 per share in the second quarter of 2022.
    • Adjusted net loss of $1.3 million, or $0.03 per share, compared to adjusted net loss of $2.6 million, or $0.05 per share, in the second quarter of 2022.
    • Adjusted EBITDA loss of $0.2 million, compared to an adjusted EBITDA loss of $1.6 million in the second quarter of 2022.
    • The balance of all cash and cash equivalents and investments on June 30, 2023, was $40.8 million, as compared to $44.1 million on March 31, 2023. The net change includes capital expenditures of $3.6 million related to the construction of the Company's new processing facility in Dayton, OH, partially offset by $0.3 million of net positive other operating cash flow in the quarter.
    • The Company successfully initiated the pilot launch of the Axoguard HA+ Nerve Protector™ in the second quarter and will fully launch this extension of its nerve protection platform later this month.
    • On August 2nd the Phase 3 RECON study was published online in The Journal of Hand Surgery. The Company had previously announced in May of 2022 that RECON had met its primary endpoint. The publication includes the authors analysis of the results, which found that Avance returned a greater degree of functional recovery than conduits and superiority was demonstrated as gap lengths increased.

    "We are encouraged by the continued momentum of our overall business, which was led by over 20% growth of scheduled procedures," stated Karen Zaderej, AxoGen's Chairman, CEO, and President. "The strength of our scheduled procedures category is delivering on the Company’s underlying goal of gaining deeper surgeon adoption and expanded use cases of our products across our core and active accounts."

    "Emergent trauma procedures continue to experience headwinds as hospitals prioritize resources and address operating challenges particularly with routine trauma procedures. We believe that these challenges are transient and that recent clinical publications, demonstrating the clinical effectiveness, cost, and surgical time efficiencies of allograft nerve repairs, will support continued surgeon adoption and expansion of the trauma category,” continued Zaderej.

    • Core Accounts totaled 347, an increase of 16% over an adjusted* prior-year level of 299, and a decrease of 1% sequentially. Revenue from Core Accounts continued to represent approximately 60% of total revenue.
    • Active Accounts totaled 974, an increase of 4% over an adjusted* prior-year level of 941, and a decrease of 1% sequentially. Revenue from the top 10% of Active Accounts represents approximately 35% of total revenue.
    • Ended the quarter with over 200 peer-reviewed clinical publications featuring Axogen’s nerve repair product portfolio.
    • We ended the quarter with 115 direct sales representatives compared to 116 on March 31, 2023 and a year ago.

    Update on Axogen Processing Center (APC) and BLA Submission

    The Company completed construction of the APC and in the second quarter placed into service the warehouse and office spaces, and now expects to begin processing tissue in the new facility later this month. The Company will include tissue processing information from the APC in its submission of the BLA for Avance Nerve Graft. Additionally, the Company will be requesting to utilize a rolling submission process with the FDA at a pre-BLA meeting that is expected to occur early first quarter of 2024. If the FDA agrees, the Company expects to begin the submission in the first quarter of 2024 and complete the submission in the second quarter of 2024. The company believes this process will support BLA approval in the first half 2025.

    Axoguard HA+ Nerve Protector Launch

    The Company successfully initiated the pilot launch of the Axoguard HA+ Nerve Protector™ in the second quarter and will fully launch this extension of its nerve protection platform later this month. Axoguard HA+ Nerve Protector is a proprietary nerve protection device designed to provide short- and long-term protection for peripheral nerve injuries. The device is comprised of a processed porcine submucosa extracellular matrix (ECM) base layer with a hyaluronate-alginate gel coating. The gel layer facilitates enhanced nerve gliding to aid in minimizing soft tissue attachments, while the base layer is remodeled into a long-term protective tissue layer. It is available in a variety of sizes to meet patients' and surgeons' needs.

    2023 Financial Guidance

    Management is maintaining full-year 2023 revenue guidance in the range of $154 million to $159 million, which represents annual growth of 11% - 15%. The Company anticipates that gross margin will be reduced with the transition to the new processing facility in the third and fourth quarters and that gross margins for the full year 2023 will be approximately 80%.

    *The Company voluntarily suspended market availability of Avive® Soft Tissue Membrane on June 1, 2021; and therefore, no Avive revenue was recorded in 2022. Core and Active Account metrics for prior periods were adjusted for Avive revenue. For a reconciliation of adjusted Core and Active Account numbers, please see our Corporate Presentation on the investors page on www.axogeninc.com

    Conference Call

    The Company will host a conference call and webcast for the investment community today at 4:30 p.m. ET. Investors interested in participating in the conference call by phone may do so by dialing toll free at (877) 407-0993 or use the direct dial-in number at (201) 689-8795. Those interested in listening to the conference call live via the Internet may do so by visiting the Investors page of the Company's website at www.axogeninc.com and clicking on the webcast link.

    Following the conference call, a replay will be available in the Investors section of the Company's website at www.axogeninc.com under Investors.

    About RECON

    RECON is a multicenter, prospective, randomized, subject and evaluator blinded comparative clinical study of nerve cuffs (manufactured conduits) and Avance® Nerve Graft, evaluating recovery outcomes for the repair of nerve discontinuities. The phase 3 pivotal study is designed to provide clinical evidence for the Company’s BLA filing to transition the Company’s Avance Nerve Graft from a section 361 tissue product to a section 351 biologic product; and, as such was designed to test for non-inferiority between static two-point discrimination outcomes for Avance Nerve Graft and manufactured conduit. The study design also allows for a sequential test for superiority of Avance Nerve Graft, following the non-inferiority analysis.

    About Avance Nerve Graft

    Avance Nerve Graft is a biologically active off-the-shelf processed human nerve allograft for bridging severed peripheral nerves without the comorbidities associated with a second surgical site. Avance provides structural guidance for regenerating axons, and revascularizes and remodels into the patient’s own tissue. It is available in a variety of lengths and diameters.

    A 2010 written agreement between the FDA and Axogen allows the company to continue marketing Avance as a section 361 Human Cells, Tissues and Cellular and Tissue Based Product (HCT/P) while taking the necessary steps to file a Biologics License Application (BLA) under section 351.

    In 2018 the FDA granted a Regenerative Medicine Advance Therapy (RMAT) designation for Avance Nerve Graft. A regenerative medicine therapy is eligible for the designation if it is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product has the potential to address unmet medical needs for such a disease or condition. The RMAT designation provides access to a streamlined approval process for regenerative medicine technologies and ensures continued informal meetings with the FDA in support of the BLA for Avance Nerve Graft.

    About Axogen

    Axogen (AXGN) is the leading Company focused specifically on the science, development, and commercialization of technologies for peripheral nerve regeneration and repair. Axogen employees are passionate about helping to restore peripheral nerve function and quality of life to patients with physical damage or transection to peripheral nerves by providing innovative, clinically proven, and economically effective repair solutions for surgeons and health care providers. Peripheral nerves provide the pathways for both motor and sensory signals throughout the body. Every day, people suffer traumatic injuries or undergo surgical procedures that impact the function of their peripheral nerves. Physical damage to a peripheral nerve, or the inability to properly reconnect peripheral nerves, can result in the loss of muscle or organ function, the loss of sensory feeling, or the initiation of pain.

    Axogen's platform for peripheral nerve repair features a comprehensive portfolio of products that are used across two primary application categories: scheduled, non-trauma procedures and emergent trauma procedures. Scheduled procedures are generally characterized as those where a patient is seeking relief from conditions caused by a nerve defect or surgical procedure. These procedures include providing sensation for women seeking breast reconstruction following a mastectomy, nerve reconstruction following the surgical removal of painful neuromas, oral and maxillofacial procedures, and nerve decompression. Emergent procedures are generally characterized as procedures resulting from injuries that initially present in an ER. These procedures are typically referred to and completed by a specialist either immediately or within a few days following the initial injury.

    Axogen’s product portfolio includes Avance® Nerve Graft, a biologically active off-the-shelf processed human nerve allograft for bridging severed peripheral nerves without the comorbidities associated with a second surgical site; Axoguard Nerve Connector®, a porcine submucosa ECM coaptation aid for tensionless repair of severed peripheral nerves; Axoguard Nerve Protector®, a porcine submucosa ECM product used to wrap and protect damaged peripheral nerves and reinforce the nerve reconstruction while preventing soft tissue attachments; Axoguard HA+ Nerve Protector™, a porcine submucosa ECM base layer coated with a proprietary hyaluronate-alginate gel, a next-generation technology designed to provide short- and long-term protection for peripheral nerve injuries; and Axoguard Nerve Cap®, a porcine submucosa ECM product used to protect a peripheral nerve end and separate the nerve from the surrounding environment to reduce the development of symptomatic or painful neuroma. The Axogen portfolio of products is available in the United States, Canada, Germany, the United Kingdom, Spain, South Korea, and several other countries.

    Cautionary Statements Concerning Forward-Looking Statements
    This press release contains “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations or predictions of future conditions, events, or results based on various assumptions and management's estimates of trends and economic factors in the markets in which we are active, as well as our business plans. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “projects,” “forecasts,” “continue,” “may,” “should,” “will,” “goals,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements include statements about (i) fully launching Axoguard HA+ later this month, (ii) anticipated timetable for seeking approval of the rolling BLA submission in early first quarter of 2024, (iii) subject to approval of the rolling submission, anticipated timetable for the initial BLA submission in the first quarter of 2024 and completion in the second quarter of 2024, (iv) potential BLA approval in the first half of 2025, and (v) initial processing of tissue in the new facility later this month, as well as statements under the subheading "2023 Financial Guidance." Actual results or events could differ materially from those described in any forward-looking statements as a result of various factors, including, without limitation, statements related to the continued impact of COVID-19, global supply chain issues, record inflation, hospital staffing issues, product development, product potential, expected clinical enrollment timing and outcomes, regulatory process and approvals, APC renovation timing and expense, financial performance, sales growth, surgeon and product adoption, market awareness of our products, data validation, our visibility at and sponsorship of conferences and educational events, global business disruption caused by Russia’s invasion of Ukraine and related sanctions, as well as those risk factors described under Part I, Item 1A., “Risk Factors,” of our Annual Report on Form 10-K for the most recently ended fiscal year. Forward-looking statements are not a guarantee of future performance, and actual results may differ materially from those projected. The forward-looking statements are representative only as of the date they are made and, except as required by applicable law, we assume no responsibility to publicly update or revise any forward-looking statements.

    About Non-GAAP Financial Measures

    To supplement our consolidated financial statements, we use the non-GAAP financial measures of EBITDA, which measures earnings before interest, income taxes, and depreciation and amortization, and Adjusted EBITDA which further excludes non-cash stock compensation expense and litigation and related expenses. We also use the non-GAAP financial measures of Adjusted Net Loss and Adjusted Net Loss Per Common Share - basic and diluted which excludes non-cash stock compensation expense and litigation and related expenses from Net Loss and Net Loss Per Common Share - basic and diluted, respectively. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures should be read in conjunction with our financial statements prepared in accordance with GAAP. The reconciliations of the non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP should be carefully evaluated.

    We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. We believe these non-GAAP financial measures are useful to investors because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the performance of our business, the Company’s cash available for operations, and the Company’s ability to meet future capital expenditure and working capital requirements.

    Contact:
    Axogen, Inc.
    InvestorRelations@axogeninc.com


     
    Axogen, Inc.
    Condensed Consolidated Balance Sheets
    (unaudited)
    (In thousands, except share and per share amounts)
     
    June 30,
    2023
     December 31,
    2022
    Assets 
    Current assets: 
    Cash and cash equivalents$        23,219  $        15,284 
    Restricted cash         6,252           6,251 
    Investments         11,312           33,505 
    Accounts receivable, net of allowance for doubtful accounts of $595 and $650, respectively         21,573           22,186 
    Inventory         21,237           18,905 
    Prepaid expenses and other         2,583           1,944 
    Total current assets         86,176           98,075 
    Property and equipment, net         87,459           79,294 
    Operating lease right-of-use assets         13,958           14,369 
    Intangible assets, net         4,048           3,649 
    Total assets$        191,641  $        195,387 
       
    Liabilities and shareholders’ equity   
    Current liabilities:   
    Accounts payable and accrued expenses$        22,893  $        22,443 
    Current maturities of long-term lease obligations         1,040           1,310 
    Total current liabilities         23,933           23,753 
       
    Long-term debt, net of debt discount and financing fees         46,154           45,712 
    Long-term lease obligations         20,131           20,405 
    Debt derivative liabilities         4,271           4,518 
    Total liabilities         94,489           94,388 
       
    Commitments and contingencies - see Note 12   
       
    Shareholders’ equity:   
    Common stock, $0.01 par value per share; 100,000,000 shares authorized; 42,979,541 and 42,445,517 shares issued and outstanding         430           424 
    Additional paid-in capital         370,036           360,155 
    Accumulated deficit         (273,314)          (259,580)
    Total shareholders’ equity         97,152           100,999 
    Total liabilities and shareholders’ equity$        191,641  $        195,387 

     
    Axogen, Inc.
    Condensed Consolidated Statements of Operation
    (unaudited)
    (In thousands, except per share amounts)
     
    Three Months Ended Six Months Ended
    June 30,
    2023
     June 30,
    2022
     June 30,
    2023
     June 30,
    2022
           
    Revenues$        38,155  $        34,454  $        74,819  $        65,461 
    Cost of goods sold         7,228           6,284           13,937           11,830 
    Gross profit         30,927           28,170           60,882           53,631 
    Costs and expenses:       
    Sales and marketing         20,838           19,669           42,456           40,557 
    Research and development         7,363           7,022           14,043           13,296 
    General and administrative         9,628           9,403           18,627           19,021 
    Total costs and expenses         37,829           36,094           75,126           72,874 
    Loss from operations         (6,902)          (7,924)          (14,244)          (19,243)
    Other income (expense):       
    Investment income (loss)         235           32           784           (15)
    Interest expense         (148)          (249)          (164)          (603)
    Change in fair value of derivatives         432           434           247           686 
    Other expense         (277)          (33)          (357)          (40)
    Total other income, net         242           184           510           28 
    Net loss$        (6,660) $        (7,740) $        (13,734) $        (19,215)
            
    Weighted average common shares outstanding — basic and diluted         42,862,384           41,994,618           42,719,096           41,900,000 
    Loss per common share — basic and diluted$        (0.16) $        (0.18) $        (0.32) $        (0.46)

     
    Axogen, Inc.
    RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
    Three Months Ended March 31, 2023 and 2022
    (unaudited)
    (In thousands, except per share amounts)
     
     Three Months Ended Six Months Ended
     June 30,
    2023
     June 30,
    2022
     June 30,
    2023
     June 30,
    2022
            
    Net loss$        (6,660) $        (7,740) $        (13,734) $        (19,215)
    Depreciation and amortization expense         871           777           1,650           1,550 
    Investment (income) loss         (235)          (32)          (784)          15 
    Income tax expense         240           33           318           33 
    Interest expense         148           249           164           603 
    EBITDA - non GAAP$        (5,636) $        (6,713) $        (12,386) $        (17,014)
            
    Non cash stock-based compensation expense         5,390           4,910           8,344           7,588 
    Litigation and related costs         —           216           —           483 
    Adjusted EBITDA - non GAAP$        (246) $        (1,587) $        (4,042) $        (8,943)
            
    Net loss$        (6,660) $        (7,740) $        (13,734) $        (19,215)
    Non cash stock-based compensation expense         5,390           4,910           8,344           7,588 
    Litigation and related costs         —           216           —           483 
    Adjusted net loss - non GAAP$        (1,270) $        (2,614) $        (5,390) $        (11,144)
            
    Weighted average common shares outstanding — basic and diluted          42,862,384           41,994,618           42,719,096           41,900,000 
            
    Loss per common share — basic and diluted$        (0.16) $        (0.18) $        (0.32) $        (0.46)
    Non cash stock-based compensation expense         0.13           0.12  $        0.20  $        0.18 
    Litigation and related costs         —           0.01  $        —  $        0.01 
    Adjusted net loss per common share — basic and diluted - non GAAP$        (0.03) $        (0.05) $        (0.12) $        (0.27)


     
    Axogen, Inc.
    Condensed Consolidated Statements of Changes in Shareholders’ Equity
    (unaudited)
    (In thousands, except share amounts)
            
    Common Stock Additional Paid-in
    Capital
     Accumulated
    Deficit
     Total Shareholders'
    Equity
    Shares
     Amount   
    Three Months Ended June 30, 2023     
    Balance at March 31, 2023        42,809,994  $        428  $        363,739  $        (266,654) $        97,513 
    Net loss        —           —           —           (6,660)          (6,660)
    Stock-based compensation        —           —           5,390           —           5,390 
    Issuance of restricted and performance stock units        57,659           1           (1)          —           — 
    Exercise of stock options and employee stock purchase plan        111,888           1           908           —           909 
    Balance at June 30, 2023        42,979,541  $        430  $        370,036  $        (273,314) $        97,152 
              
    Six Months Ended June 30, 2023          
    Balance at December 31, 2022        42,445,517  $        424  $        360,155  $        (259,580) $        100,999 
    Net loss        —           —           —           (13,734)          (13,734)
    Stock-based compensation        —           —           8,344           —           8,344 
    Issuance of restricted and performance stock units        296,378           4           (4)          —           — 
    Exercise of stock options and employee stock purchase plan        237,646           2           1,541           —           1,543 
    Balance at June 30, 2023        42,979,541  $        430  $        370,036  $        (273,314) $        97,152 
               
    Three Months Ended June 30, 2022          
    Balance at March 31, 2022        41,972,987  $        420  $        345,538  $        (242,107) $        103,851 
    Net loss        —           —           —           (7,740)          (7,740)
    Stock-based compensation            —           4,910           —           4,910 
    Issuance of restricted and performance stock units        44,054           —           —           —           — 
    Exercise of stock options and employee stock purchase plan        117,463           —           669           —           669 
    Balance at June 30, 2022        42,134,504  $        420  $        351,117  $        (249,847) $        101,690 
               
    Six Months Ended June 30, 2022          
    Balance at December 31, 2021        41,736,950  $        417  $        342,765  $        (230,632) $        112,550 
    Net loss        —           —           —           (19,215)          (19,215)
    Stock-based compensation        —           —           7,588           —           7,588 
    Issuance of restricted and performance stock units        259,341           2           (2)          —           — 
    Exercise of stock options and employee stock purchase plan        138,213           1           766           —           767 
    Balance at June 30, 2022        42,134,504  $        420  $        351,117  $        (249,847) $        101,690 


     
    Axogen, Inc.
    Condensed Consolidated Statements of Cash Flows
    (unaudited)
    (In Thousands)
     
    Six Months Ended
    June 30,
    2023
     June 30,
    2022
    Cash flows from operating activities:   
     $        (13,734) $        (19,215)
    Adjustments to reconcile net loss to net cash used in operating activities:   
    Depreciation         1,506           1,418 
    Amortization of right-of-use assets         642           859 
    Amortization of intangible assets         144           132 
    Amortization of debt discount and deferred financing fees         442           442 
    Provision for bad debt         (37)          550 
    Provision for inventory write-down         1,052           928 
    Change in fair value of derivatives         (247)          (686)
    Investment (income) loss         (578)          145 
    Stock-based compensation         8,344           7,588 
    Change in operating assets and liabilities:   
    Accounts receivable         650           (2,719)
    Inventory         (3,384)          (3,458)
    Prepaid expenses and other         (639)          (1,081)
    Accounts payable and accrued expenses         (529)          (786)
    Operating lease obligations         (762)          (856)
    Cash paid for interest portion of finance leases         (1)          — 
    Net cash used in operating activities         (7,131)          (16,739)
    Cash flows from investing activities:   
    Purchase of property and equipment         (8,719)          (9,086)
    Purchase of investments         (10,203)          (6,024)
    Proceeds from sale of investments         32,974           11,000 
    Cash payments for intangible assets         (516)          (852)
    Net cash from (used in) investing activities         13,536           (4,962)
    Cash flows from financing activities:   
    Cash paid for debt portion of finance leases         (12)          (1)
    Proceeds from exercise of stock options and ESPP stock purchases         1,543           767 
    Net cash provided by financing activities         1,531           766 
    Net increase (decrease) in cash, cash equivalents, and restricted cash         7,936           (20,935)
    Cash, cash equivalents, and restricted cash, beginning of period         21,535           39,007 
    Cash, cash equivalents, and restricted cash, end of period$        29,471  $        18,073 
    Supplemental disclosures of cash flow activity:   
    Cash paid for interest, net of capitalized interest$        —  $        — 
    Supplemental disclosure of non-cash investing and financing activities:   
    Acquisition of fixed assets in accounts payable and accrued expenses$        1,818  $        1,817 
    Obtaining a right-of-use asset in exchange for a lease liability$        268  $        700 
    Acquisition of intangible assets in accounts payable and accrued expenses$        326  $        186 

     


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