Press Releases

AxoGen, Inc. Reports 2017 Second Quarter Financial Results

Record Q2 Revenue of $15.2 million, representing 46% growth over prior year

ALACHUA, Fla., Aug. 02, 2017 (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, 2017.

Second Quarter 2017 Financial Results and Recent Business Highlights

  • Revenue of $15.2 million, up 46% compared to $10.4 million in the second quarter of 2016
  • Gross margin of 85.0% compared to 85.2% in the second quarter of 2016
  • Net loss for the second quarter of 2017 is $2.1 million, or $0.06 per share, compared with a net loss of $2.8 million, or $0.09 per share, in the second quarter of 2016
  • Adjusted EBITDA loss of $593,000 compared to Adjusted EBITDA loss of $932,000 in Q2 2016
  • Increased our addressable market opportunity to $2 billion to include expanded use in Oral and Maxillofacial (OMF) procedures, including nerve repair during mandible reconstruction due to benign tumor resections
  • Appointed Jon Gingrich as Chief Commercial Officer. He brings extensive medical device experience with Hologic and Boston Scientific and will oversee the development and execution of the company’s sales and marketing strategies

“Our continued growth reflects our focus on execution,” said Karen Zaderej, President and Chief Executive Officer. “We are building the peripheral nerve repair market and increasing confidence in our portfolio of products, as illustrated by OMF surgeons’ expanding use of our products in nerve repair during mandible reconstruction.”
  
Additional Second Quarter and Recent Operational Highlights

  • Increased active accounts in the second quarter to 510, up 36% from 374 in Q2 2016
  • Ended the quarter with 51 direct sales reps and 52 year-to-date, as well as 20 independent distributors
  • Conducted three national education symposia in the second quarter, and eight year-to-date; these surgeon lead symposia highlight recent data and emerging best practices in peripheral nerve repair
  • Increased the number of presentations of our surgical portfolio to a total of 18 year-to-date
  • Built peer reviewed clinical publications for our surgical portfolio to a total of 52. Three of these recent publications focused on the use of AxoGen products in nerve repair during mandible reconstruction
  • Continued market development activities in potential expansion applications, including breast reconstruction neurotization and neuropathic pain associated with lower limb total joint replacement
  • Increased global awareness of our product portfolio by exhibiting and conducting surgeon-lead educational programs at professional society meetings in Europe and Asia
  • Ended the quarter with $23.9 million in cash compared to $25.9 million at the end of Q1 2017. Net cash burn in Q2 was $2.0 million
  • Ended the quarter with $25 million of total bank debt, unchanged from the end of Q1 2017

“We’re pleased with our results through the first half of 2017,” added Zaderej. “We continue to increase our capabilities across the company, and will continue to develop new nerve repair applications and expand our portfolio of products where we believe we can bring meaningful solutions to current clinical challenges.”

2017 Financial Guidance
Management reiterates 2017 annual revenue will grow at least 40% over 2016 revenue and gross margins will remain above 80%.

Upcoming Events
Members of the AxoGen management team will participate at the following upcoming conferences and events:

  • Wedbush PacGrow Healthcare Conference in New York City on August 15
  • American Society for Surgery of the Hand Annual Meeting in San Francisco on September 7-9
  • Lake Street Capital Markets Best Ideas Growth (BIG) Conference in New York City on September 13
  • Dougherty & Co Investor Conference in Minneapolis on September 19
  • Cantor Fitzgerald Healthcare Conference in New York City on September 25
  • American Association of Oral and Maxillofacial Surgeons Scientific Sessions in San Francisco on October 9-14

The Company is also announcing that it will be conducting its second analyst and investor day on Monday, November 20 in New York City. This event will provide an additional opportunity to educate the investment community about the Company, as well as a more detailed review of our current market and expansion opportunities.

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 by phone are invited to call toll free at 1-877-407-0993 or use the direct dial-in number 1-201-689-8795. Those interested in listening to the conference call live via the Internet can do so by visiting the Investors page of the Company’s website at www.axogeninc.com and clicking on the webcast link on the Investors home page.

Following the conference call, a replay will be available on the Company’s website at www.axogeninc.com under Investors.

About AxoGen
AxoGen (AXGN) is a global leader in innovative surgical solutions for peripheral nerve injuries. AxoGen is the only company focused specifically on the science, development and commercialization of technologies for peripheral nerve regeneration and repair. We are passionate about restoring nerve function and quality of life to patients with peripheral nerve injuries 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. Damage to a peripheral nerve can result in the loss of muscle or organ function, the loss of sensory feeling, or the initiation of pain.

AxoGen's portfolio of products includes Avance® Nerve Graft, an off-the-shelf processed human nerve allograft for bridging severed nerves without the comorbidities associated with a second surgical site, AxoGuard® Nerve Connector, a porcine submucosa extracellular matrix (ECM) coaptation aid for tensionless repair of severed nerves, AxoGuard® Nerve Protector, a porcine submucosa ECM product used to wrap and protect injured peripheral nerves and reinforce the nerve reconstruction while preventing soft tissue attachments, and Avive® Soft Tissue Membrane, a minimally processed human umbilical cord membrane that may be used as a resorbable soft tissue covering to separate tissue layers and modulate inflammation in the surgical bed. Along with these core surgical products, AxoGen also offers AcroVal® Neurosensory & Motor Testing System and AxoTouch® Two-Point Discriminator. These evaluation and measurement tools assist health care professionals in detecting changes in sensation, assessing return of sensory, grip, and pinch function, evaluating effective treatment interventions, and providing feedback to patients on nerve function. The AxoGen portfolio of products is available in the United States, Canada, the United Kingdom, and several other European and international 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," and variations of such words and similar expressions are intended to identify such forward-looking statements. The forward-looking statements may include, without limitation, statements regarding our assessment on our internal control over financial reporting, our growth, our 2017 guidance, product development, product potential, financial performance, sales growth, product adoption, market awareness of our products, data validation, our visibility at and sponsorship of conferences and educational events. The forward-looking statements are subject to risks and uncertainties, which may cause results to differ materially from those set forth in the statements. Forward-looking statements in this release should be evaluated together with the many uncertainties that affect AxoGen's business and its market, particularly those discussed in the risk factors and cautionary statements in AxoGen's filings with the Securities and Exchange Commission. Forward-looking statements are not guarantees 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 law, AxoGen assumes no responsibility to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

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, depreciation and amortization, and Adjusted EBITDA which further excludes non-cash stock compensation expense.  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 AxoGen’s GAAP financial measures to the corresponding non-GAAP measures 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 liquidity and that both management and investors benefit from referring 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.

                                     
AXOGEN, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
   
   
    June 30,          
2017 December 31,  
(unaudited) 2016    
Assets                
Current assets:                
Cash and cash equivalents $ 23,870,200         $ 30,014,405      
Accounts receivable, net   9,422,467           8,052,203      
Inventory   6,304,097           5,458,840      
Prepaid expenses and other   585,090           511,804      
Total current assets   40,181,854           44,037,252      
Property and equipment, net   1,643,257           1,494,247      
Intangible assets   940,594           828,979      
  $ 42,765,705         $ 46,360,478      
Liabilities and Shareholders’ Equity (Deficit)                  
Current liabilities:                  
Borrowings under revolving loan agreement $ 3,829,765           $ 4,025,023      
Accounts payable and accrued expenses   7,057,831             7,002,165      
Current maturities of long term obligations   24,947             20,899      
Deferred revenue, current   39,399           33,282      
Total current liabilities   10,951,942           11,081,369      
Long Term Obligations, net of current maturities and deferred financing fees   20,314,254             20,265,745      
Deferred lease   109,332             --      
Deferred revenue   81,423           92,215      
Total liabilities   31,456,951           31,439,329      
Shareholders’ equity (deficit):                  
Common stock, $.01 par value; 50,000,000 shares authorized; 33,184,710 and 33,008,865 shares issued and outstanding   331,847           330,088      
                   
Additional paid-in capital   134,682,934           132,474,884      
Accumulated deficit   (123,706,027 )         (117,883,823 )    
Total shareholders’ equity    11,308,754           14,921,149      
  $ 42,765,705         $ 46,360,478      
                     
     
     
     
AXOGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months ended June 30, 2017 and 2016
(unaudited)
                     
  Three Months Ended   Six Months Ended
    June 30,           June 30,     June 30,       June 30,  
    2017         2016     2017         2016    
Revenues  $ 15,168,064           $ 10,381,883       $ 27,409,137       $ 18,493,642    
Cost of goods sold   2,277,201             1,534,412         4,192,849         2,940,003    
Gross profit   12,890,863             8,847,471         23,216,288         15,553,639    
Costs and expenses:                                  
Sales and marketing   9,438,288             6,780,363         18,048,770         12,986,238    
Research and development   1,521,123             936,823         2,932,259         1,915,163    
General and administrative   3,377,105             2,736,255         6,881,144         4,881,012    
Total costs and expenses   14,336,516             10,453,441         27,862,173         19,782,413    
Loss from operations   (1,445,653 )           (1,605,970 )       (4,645,885 )       (4,228,774 )  
Other expense:                                  
Interest expense   (554,384 )           (1,163,413 )       (1,061,933 )       (2,166,440 )  
Interest expense – deferred financing costs   (46,110 )           (32,696 )       (90,601 )       (63,506 )  
Other expense   (14,032 )           (617 )       (23,785 )       (20,067 )  
Total other expense    (614,526 )           (1,196,726 )       (1,176,319 )       (2,250,013 )  
Net loss $ (2,060,179 )         $ (2,802,696 )     $ (5,822,204 )     $ (6,478,787 )  
Weighted Average Common Shares outstanding – basic and diluted   33,124,139             30,079,960         33,075,555         30,037,013    
Loss Per Common share – basic and diluted $ (0.06 )     $ (0.09 )     $ (0.18 )     $ (0.22 )  
                   
 
 
AXOGEN, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
Three and Six Months ended June 30, 2017 and 2016
(unaudited)
                       
    Three Months Ended       Six Months Ended
    June 30,       June 30,         June 30,     June 30,  
2017       2016         2017     2016    
Net loss $ (2,060,179 )         $ (2,802,696 )       $ (5,822,204 )     $ (6,478,787 )  
Depreciation and amortization expense   109,517             88,734           217,876         167,590    
Amortization expense of intangible assets   18,517             16,017           41,706         32,033    
Income Taxes   14,173             --           23,974         21,427    
Interest expense   554,384             1,163,413           1,061,933         2,166,440    
Interest expense - deferred financing costs   46,110             32,696           90,601         63,506    
EBITDA - non GAAP $ (1,317,478 )         $ (1,501,836 )       $ (4,386,114 )     $ (4,027,791 )  
                                     
Non Cash Stock Compensation Expense   724,377         569,834         1,572,966         752,789    
Adjusted EBITDA - non GAAP $ (593,101 )     $ (932,002 )     $ (2,813,148 )     $ (3,275,002 )  
 
 
 
AXOGEN, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
Six Months ended June 30, 2017 and 2016  
(unaudited)  
   
  2017   2016  
Cash flows from operating activities:                    
Net loss $ (5,822,204 )         $ (6,478,787 )    
Adjustments to reconcile net loss to net cash used for operating activities:                    
Depreciation   217,876             167,590      
Amortization of intangible assets   41,706             32,033      
Amortization of deferred financing costs   90,601             63,506      
Provision for bad debt   99,834             48,600      
Share-based compensation   1,572,966             752,789      
Interest added to note payable   --             187,002      
Change in assets and liabilities:                    
Accounts receivable   (1,470,098 )           (1,337,732 )    
Inventory   (845,257 )           (852,362 )    
Prepaid expenses and other   (73,286 )           (190,586 )    
Accounts payable and accrued expenses   55,666             198,707      
Deferred liabilities   104,657             3,684      
Net cash used for operating activities   (6,027,539 )           (7,405,556 )    
                     
Cash flows from investing activities:                    
Purchase of property and equipment   (366,886 )           (456,910 )    
Acquisition of intangible assets   (153,321 )           (97,341 )    
Net cash used for investing activities   (520,207 )           (554,251 )    
                     
Cash flows from financing activities:                    
Borrowing on revolving loan   26,119,539             --      
Payments on revolving loan   (26,314,797 )           --      
Repayments of long term debt   (8,572 )           --      
Debt issuance costs   (29,472 )           --      
Proceeds from exercise of stock options   636,843             323,510      
Net cash provided by financing activities   403,541             323,510      
                     
Net decrease in cash and cash equivalents   (6,144,205 )           (7,636,297 )    
Cash and cash equivalents, beginning of year   30,014,405             25,909,500      
Cash and cash equivalents, end of period $ 23,870,200           $ 18,273,203      
                     
Supplemental disclosures of cash flow activity:                    
Cash paid for interest $ 1,058,599           $ 1,964,256      


Contacts:
AxoGen, Inc.
Peter J. Mariani, Chief Financial Officer
InvestorRelations@AxoGenInc.com

The Trout Group – Investor Relations
Brian Korb
646.378.2923
bkorb@troutgroup.com

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Source: AxoGen, Inc.