Axogen, Inc Reports 2022 First Quarter Financial Results
ALACHUA and TAMPA, FL – May 4, 2022 – 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 first quarter ended March 31, 2022.
First Quarter 2022 and Business Highlights
•Net revenue was $31.0 million during the first quarter, matching the first quarter of 2021.
•Excluding Avive® revenue of $1.7 million in the first quarter of 2021, revenue in the first quarter of 2022 increased 6%. The company voluntarily suspended market availability of Avive Soft Tissue Membrane on June 1, 2021.
•Gross margin was 82.1% for the quarter compared to 83.3% in the first quarter of 2021.
•First quarter adjusted net loss was $8.5 million, or $0.20 per share, compared with an adjusted net loss of $3.1 million, or $0.08 per share, in the first quarter of 2021.
•Adjusted EBITDA loss was $7.4 million for the quarter, compared to an adjusted EBITDA loss of $1.9 million in the first quarter of 2021.
•The balance of all cash and cash equivalents and investments on March 31, 2022 was $73.7 million, compared to a balance of $90.3 million on December 31, 2021. The net change includes capital expenditures of $5.0 million related to the construction of our new processing facility in Dayton, OH, and $7.6 million related to items which typically occur in the first quarter, including bonuses, sales meeting and awards, and insurance premiums.
•Core Accounts as of March 31, 2022 were 288, a 5% increase compared to 274 as of March 31, 2021. Revenue from Core Accounts continued to represent approximately 60% of total revenue.
•Active Accounts as of March 31, 2022 were 926, a 1% increase from 919 as of March 31, 2021. Revenue from the top 10% of Active Accounts continued to represent approximately 35% of total revenue.
“We are pleased with our progress and execution as procedure trends improved during the quarter. Our outlook for the year remains on track, and we expect continued growth as surgeons adopt the Axogen nerve repair algorithm,” commented Karen Zaderej, chairman, CEO, and president of Axogen, Inc. “We are also pleased to announce today that our RECONSM study achieved its primary endpoint representing a critical milestone towards transitioning Avance® Nerve Graft to a licensed biologic and further supporting the expanded adoption of Avance.”
Additional Operational and Business Highlights
•Separately announced today, RECON Phase 3 Study of Avance met its primary endpoint. This study will provide the first ever Level 1 clinical evidence in support of Avance Nerve Graft for peripheral nerve repairs.
•REPOSESM Pilot Study results using Axoguard Nerve Cap® for protecting and preserving terminated nerve ends were published in Foot and Ankle Surgery: Techniques, Reports & Case.
•Initiated REPOSE-XLSM, a clinical study of large-diameter Axoguard Nerve Cap.
•Ended the quarter with 188 peer-reviewed clinical publications featuring Axogen’s nerve repair product portfolio.
•Published inaugural Environmental, Social, and Governance (ESG) report highlighting the company’s corporate responsibility and sustainability initiatives.
•Ended the quarter with 116 direct sales representatives, compared to 115 at year end and 106 one year ago.
2022 Financial Guidance
The Company continues to expect 2022 revenue will be in the range of $135.0 million to $142.0 million. This represents approximately 10% to 15% growth over 2021 revenue excluding the impact of $4.1 million of Avive revenue in 2021. Full-year 2022 gross margin is expected to be above 80%.
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 1-866-682-6100 or use the direct dial-in number at (862) 298-0702. 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.
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 test for non-inferiority between the 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.
A Multicenter, Prospective, Randomized and Subject Blinded Comparative Study of Axoguard Nerve Cap and Neurectomy for the Treatment of Symptomatic Neuroma and Prevention of Recurrent End-Neuroma Pain (REPOSE) is the company’s post-market study comparing placement of Axoguard Nerve Cap to standard neurectomy alone for subjects with symptomatic neuroma pain. The study design includes a 15-subject open label pilot phase and up to 86 subjects in a randomized comparative phase. The study requires a one year follow-up period for all subjects and is designed to assess changes in
pain scores as measured by Visual Analog Scale, quality of life outcomes, medication usage, and subject satisfaction.
The 15-subject, multicenter, prospective, single arm pilot safety and feasibility study is intended to evaluate the use of Axoguard Nerve Cap in large-diameter sizes to protect and preserve terminated nerve ends after limb trauma or amputation to optimize subsequent reconstructive procedures. The diameters of the Nerve Cap under investigation range from 5 to 7 millimeters, compared to the current commercially available Axoguard Nerve Cap, which ranges from 2 to 4 millimeters. The aim of the study is to demonstrate the reduction or mitigation of nerve pain with use of the Nerve Cap and its effect on limb function. Patient follow-up is up to 15 months with functional assessments at shorter intervals. This study is supported, in part, with funding by a grant from the United States Department of Defense Peer Reviewed Orthopedic Research Program.
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, including 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 extracellular matrix (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; 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. The forward-looking statements may include, without limitation, statements related to the impact of COVID-19 on our business, including but not limited to global supply chain issues, hospital staffing challenges and its impact on our business, statements regarding our growth, our financial guidance and performance, product development, product potential, regulatory process and approvals, APC renovation timing and expense, sales growth, product adoption, market awareness of our products, anticipated capital requirements, including the potential of future financings, data validation, expected clinical study enrollment, timing and outcomes, our assessment of our internal controls over financial reporting, our visibility at and sponsorship of conferences and our educational events, regulatory process and approvals and other factors, including legislative, regulatory, political, geopolitical, and economic developments, including global business disruption caused by Russia’s invasion of Ukraine and related sanctions, not within our control. The forward-looking statements are and will be subject to risks and uncertainties, which may cause actual results to differ materially from those expressed or implied in such forward-looking statements. Forward-looking statements contained in this press release should be evaluated together with the many uncertainties that affect our business and our market, particularly 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, as well as other risks and cautionary statements set forth in our filings with the U.S. Securities and Exchange Commission. 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, whether as a result of new information, future events, changed circumstances, or otherwise.
Ed Joyce, Director, Investor Relations
Condensed Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
|Cash and cash equivalents||$||14,559 ||$||32,756 |
|Restricted cash||6,251 ||6,251 |
|Investments||52,859 ||51,330 |
Accounts receivable, net of allowance for doubtful accounts of $366 and $276, respectively
|18,590 ||18,158 |
|Inventory||17,400 ||16,693 |
|Prepaid expenses and other||2,816 ||1,861 |
|Total current assets||112,475 ||127,049 |
|Property and equipment, net||66,954 ||62,923 |
|Operating lease right-of-use assets||15,406 ||15,193 |
|Intangible assets, net||3,190 ||2,859 |
|Total assets||$||198,025 ||$||208,024 |
|Liabilities and shareholders’ equity|
|Accounts payable and accrued expenses||$||20,872 ||$||22,459 |
|Current maturities of long-term lease obligations||2,073 ||1,834 |
|Total current liabilities||22,945 ||24,293 |
|Long-term debt, net of debt discount and financing fees||45,041 ||44,821 |
|Long-term lease obligations||20,878 ||20,798 |
|Debt derivative liabilities||5,310 ||5,562 |
|Total liabilities||94,174 ||95,474 |
|Commitments and contingencies - see Note 12|
Common stock, $0.01 par value per share; 100,000,000 shares authorized; 41,972,987 and 41,736,950 shares issued and outstanding
|420 ||417 |
|Additional paid-in capital||345,538 ||342,765 |
|Total shareholders’ equity||103,851 ||112,550 |
|Total liabilities and shareholders’ equity||$||198,025 ||$||208,024 |
Condensed Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
|Three Months Ended|
|Revenues||$||31,007 ||$||31,037 |
|Cost of goods sold||5,546 ||5,172 |
|Gross profit||25,461 ||25,865 |
|Costs and expenses:|
|Sales and marketing||20,888 ||17,973 |
|Research and development||6,275 ||5,748 |
|General and administrative||9,618 ||8,364 |
|Total costs and expenses||36,781 ||32,085 |
|Loss from operations||(11,320)||(6,220)|
|Other (expense) income:|
|Investment income||(46)||34 |
|Change in fair value of derivatives||252 ||(22)|
|Total other (expense) income, net||(155)||(440)|
|Weighted average common shares outstanding — basic and diluted||41,804,330 ||40,705,840 |
|Loss per common share — basic and diluted||$||(0.27)||$||(0.16)|
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
Three Months ended March 31, 2022 and 2021
(In Thousands, Except Per Share Amounts)
|Three months ended|
|Depreciation and amortization expense||773 ||819 |
|Investment income||46 ||(34)|
|Income tax expense||— ||(5)|
|Interest expense||354 ||444 |
|EBITDA - non GAAP||$||(10,302)||$||(5,436)|
|Non cash stock-based compensation expense||2,678 ||2,694 |
|Litigation and related costs||267 ||836 |
|Adjusted EBITDA - non GAAP||$||(7,357)||$||(1,906)|
|Non cash stock-based compensation expense||2,678 ||2,694 |
|Litigation and related costs||267 ||836 |
|Adjusted net loss - non GAAP||$||(8,530)||$||(3,130)|
|Weighted average common shares outstanding - basis and diluted||$||(0.27)||$||(0.16)|
|Non cash stock-based compensation expense||0.06 ||0.07 |
|Litigation and related costs||0.01 ||0.02 |
|Adjusted net loss per common share - basis and diluted - non GAAP||$||(0.20)||$||(0.08)|
Note: In the Press Release dated February 22, 2022, the Company presented a revised calculation of EBITDA and Adjusted EBITDA which included an adjustment for the amortization of the right of use assets. The Company has since reverted to its former presentation which allows investors to more readily assess operating performance among peer companies.
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(In Thousands, Except Share Amounts)
|Common Stock||Additional Paid-in|
|Three Months Ended March 31, 2022|
|Balance at December 31, 2021||41,736,950 ||$||417 ||$||342,765 ||$||(230,632)||$||112,550 |
|Net loss||— ||— ||— ||(11,475)||(11,475)|
|Stock-based compensation||— ||— ||2,678 ||— ||2,678 |
|Issuance of restricted and performance stock units||215,287 ||2 ||(2)||— ||— |
|Exercise of stock options and employee stock purchase plan||20,750 ||1 ||97 ||— ||98 |
|Balance at March 31, 2022||41,972,987 ||$||420 ||$||345,538 ||$||(242,107)||$||103,851 |
|Three Months Ended March 31, 2021|
|Balance at December 31, 2020||40,618,766 ||$||406 ||$||326,390 ||$||(203,647)||$||123,149 |
|Net loss||— ||— ||— ||(6,660)||(6,660)|
|Stock-based compensation||— ||— ||2,694 ||— ||2,694 |
|Issuance of restricted and performance stock units||94,533 ||1 ||(1)||— ||— |
|Exercise of stock options and employee stock purchase plan||129,418 ||1 ||520 ||— ||521 |
|Balance at March 31, 2021||40,842,717 ||$||408 ||$||329,603 ||$||(210,307)||$||119,704 |
Condensed Consolidated Statements of Cash Flows
|Three Months Ended|
|Cash flows from operating activities:|
|Adjustments to reconcile net loss to net cash used in operating activities:|
|Depreciation and amortization||704 ||772 |
|Amortization of right-of-use assets||427 ||500 |
|Amortization of intangible assets||69 ||47 |
|Amortization of debt discount and deferred financing fees||220 ||112 |
|Provision for bad debt||267 ||(26)|
|Provision for inventory write-down||459 ||783 |
|Change in fair value of derivatives||(252)||22 |
|Investment losses||96 ||15 |
|Stock-based compensation||2,678 ||2,694 |
|Change in operating assets and liabilities:|
|Prepaid expenses and other||(1,030)||(313)|
|Accounts payable and accrued expenses||(1,104)||(5,061)|
|Operating lease obligations||(320)||119 |
|Cash paid for interest portion of finance leases||— ||— |
|Contract and other liabilities||— ||(1)|
|Net cash used in operating activities||(11,051)||(10,820)|
|Cash flows from investing activities:|
|Purchase of property and equipment||(5,037)||(3,095)|
|Purchase of investments||(6,024)||(15,279)|
|Proceeds from sale of investments||4,400 ||19,400 |
|Cash payments for intangible assets||(580)||(156)|
|Net cash (used in) provided by investing activities||(7,241)||870 |
|Cash flows from financing activities:|
|Cash paid for debt portion of finance leases||(2)||(4)|
|Proceeds from exercise of stock options and ESPP stock purchases||97 ||521 |
|Net cash provided by financing activities||95 ||517 |
|Net decrease in cash, cash equivalents, and restricted cash||(18,197)||(9,433)|
|Cash, cash equivalents, and restricted cash, beginning of period||39,007 ||55,609 |
|Cash, cash equivalents, and restricted cash, end of period||$||20,810 ||$||46,176 |
|Supplemental disclosures of cash flow activity:|
|Cash paid for interest, net of capitalized interest||$||— ||$||312 |
|Supplemental disclosure of non-cash investing and financing activities:|
|Acquisition of fixed assets in accounts payable and accrued expenses||$||1,119 ||$||4,836 |
|Obtaining a right-of-use asset in exchange for a lease liability||$||641 ||$||321 |
|Acquisition of intangible assets in accounts payable and accrued expenses||$||239 ||$||166 |