AxoGen Reports Year-End 2011 Results

2011 Highlights



Increased revenues 61% from 2010 to $4.85 million



Increased gross profit 49% to $2.42 million



Expanded U.S. sales force to 12 direct and 21 independent representatives



Published peer-reviewed article in Microsurgery summarizing RANGER study, the first multi-center clinical trial on processed nerve allografts



Completed successful merger with LecTec Corporation

ALACHUA, FL – March 14, 2012– AxoGen, Inc. (OTCBB: AXGN) today reported revenues for the year ended December 31, 2011 of $4.85 million, a 61% increase over 2010 revenues of $3.0 million.

“We delivered solid results in what was a transition year,” commented Karen Zaderej, Chief Executive Officer of AxoGen, Inc. “In 2011, we completed our merger, expanded our sales force, published clinical results from the RANGER study and established a solid platform to drive sales growth in 2012 and beyond. Our goal is to continue executing on our commercialization strategy, solidifying our position as a leading peripheral nerve company and delivering increases in top-line performance.”


Revenues for the period increased $1.85 million, or 61%, to $4.85 million in 2011, compared to $3.0 million reported during 2010. The higher revenues reflect increased penetration into key accounts as a result of the Company’s direct sales force and independent distributor expansion efforts.

Gross Profit

Gross profit reached $2.42 million, a 49% increase, for 2011 up from $1.63 million reported for 2010. This improvement was realized despite a $0.83 million impact associated with inventory and raw-materials write-offs, as well as higher processing, travel, and temporary labor costs due to the resumption of Avance® Nerve Graft processing following a temporary shut-down in 2010 to allow the Company to manage inventory levels.


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The Company also reported a gross profit margin of 50% for the year, a decrease from the reported gross profit margin of 55% for 2010. Excluding inventory write-offs, the gross profit margin for 2011 was 66%.

Sales and Marketing Expenses

Sales and marketing expenses increased to $4.38 million in 2011, compared to $3.0 million reported last year. This increase was primarily due to expansion of the Company’s direct sales force and increased support for the direct and independent sales force.

Research and Development Expenses

Research and development expenses increased to $0.70 million in 2011 due primarily to investments in clinical research and activities.

General and Administrative Expenses

General and administrative expenses increased to $4.32 million in 2011, compared to $2.66 million reported last year. This increase was driven in large part by an increase in consulting, accounting and legal services and other expenses associated with securing additional funding and completing the Company’s merger.

Operating Loss

In addition, the Company reported a net loss of $9.22 million, or $2.77 per common share, compared to a net loss of $5.42 million, or $8.35 per common share, reported during the same period in 2010.

The loss reported for the period included financing and merger related expenses and $0.83 million associated with a one-time, inventory write-off.

Financial Liquidity

At December 31, 2011, the Company had $8.19 million in cash and cash equivalents, with $4.40 million in long-term debt and $0.43 million as the current portion of long-term debt.

Earnings Call Information

As previously announced, AxoGen, Inc. management will review year-end 2011 financials during a conference call scheduled for March 15, 2012 at 9:00 AM Eastern Time. The conference call information is as follows:


Conference dial-in:    877-879-6207
International dial-in    719-325-4837
Conference ID:    8414594
Webcast:    www.axogeninc.com/investors.html


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A webcast replay of the conference call will be available under the “Investor” tab on the Company’s website, www.axogeninc.com.

About AxoGen, Inc.

AxoGen (OTCBB: AXGN) is a regenerative medicine company with a portfolio of proprietary products and technologies for peripheral nerve reconstruction and regeneration. Every day, people suffer traumatic injuries or undergo surgical procedures that impact the function of their peripheral nerves. Peripheral nerves provide the pathways for both motor and sensory signals throughout the body and their damage can result in the loss of function and feeling. In order to improve surgical reconstruction and regeneration of peripheral nerves, AxoGen has developed and licensed patented and patent-pending technologies, which are used in its portfolio of products. This portfolio includes Avance® Nerve Graft, which AxoGen believes is the first and only commercially available allograft nerve for bridging nerve discontinuities (a gap created when the nerve is severed).

AxoGen’s portfolio also includes AxoGuard® Nerve Connector, a coaptation aid allowing for close approximation of severed nerves, and AxoGuard® Nerve Protector, a bioscaffold used to reinforce a coaptation site, wrap a partially severed nerve or isolate and protect nerve tissue. AxoGen is bringing the science of nerve repair to life with thousands of surgical implants of AxoGen products performed in hospitals and surgery centers across the United States, including military hospitals serving U.S. service men and women.

AxoGen is the parent of its wholly owned operating subsidiary, AxoGen Corporation. AxoGen’s principal executive office and operations are located in Alachua, FL.

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”, “may”, “should”, 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 product development, product potential or financial performance. 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 AxoGen assumes no responsibility to update any forward-looking statements, whether as a result of new information, future events or otherwise.


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Rich Cockrell, President






AxoGen, Inc.

Greg Freitag, Chief Financial Officer





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December 31, 2011 and 2010


     December 31,
    December 31,



Current assets:


Cash and cash equivalents

   $ 8,190,781      $ 1,799,048   

Accounts receivable

     797,654        407,350   


     1,760,540        1,902,789   

Prepaid expenses and other

     133,500        74,437   

Deferred financing costs

     —          1,083,630   







Total current assets

     10,882,475        5,267,254   

Property and equipment, net

     247,824        500,742   


     169,987        —     

Intangible assets

     899,480        637,771   

Deferred financing costs

     295,276        —     






   $ 12,495,042      $ 6,405,767   







Liabilities and Stockholders’ Equity (Deficit)


Current liabilities:


Accounts payable and accrued expenses

   $ 1,585,100      $ 967,896   

Current portion of long-term debt, related party

     —          1,338,455   

Current portion of long-term debt

     434,734        7,080,512   







Total current liabilities

     2,019,834        9,386,863   

Long-term debt

     4,403,737        —     

Preferred stock dividends payable

     —          6,048,378   

Warrant liability

     —          2,669,815   







Total liabilities

     6,423,571        18,105,056   

Commitments and contingencies


Temporary equity:


Series B convertible preferred stock, $.00001 par value; 17,065,217 shares authorized; 9,782,609 shares issued and outstanding at December 31, 2010

     —          4,243,948   

Series C convertible preferred stock, $.00001 par value; 16,798,924 shares authorized; 11,072,239 shares issued and outstanding at December 31, 2010

     —          8,092,568   

Series D convertible preferred stock, $.00001 par value; 67,000,000 shares authorized; 30,156,259 shares issued and outstanding at December 31, 2010

     —          3,075,523   







Total temporary equity

     —          15,412,039   







Stockholders’ equity (deficit):


Common stock, $.01 par value; 50,000,000 shares authorized; 11,062,188 and 1,205,624 shares issued and outstanding

     110,622        12,056   

Series A convertible preferred stock, $.00001 par value; 2,544,750 shares authorized, issued and outstanding at December 31, 2010

     —          1,125,000   

Additional paid-in capital

     54,391,784        9,934,980   

Accumulated deficit

     (48,430,935     (38,183,364







Total stockholders’ equity (deficit)

     6,071,471        (27,111,328






   $ 12,495,042      $ 6,405,767   









Years ended December 31, 2011 and 2010


     2011     2010  


   $ 4,849,470      $ 3,004,445   

Cost of goods sold

     2,426,544        1,378,936   







Gross profit

     2,422,926        1,625,509   

Costs and expenses:


Sales and marketing

     4,378,694        3,007,163   

Research and development

     697,355        436,008   

General and administrative

     4,315,604        2,663,908   







Total costs and expenses

     9,391,653        6,107,079   







Loss from operations

     (6,968,727     (4,481,570







Other income (expense):


Interest expense

     (1,094,657     (814,994

Interest expense – deferred financing costs

     (1,223,126     (1,322,413

Gain from termination of distribution agreement

     —          1,119,094   

Change in fair value of warrant liability

     62,305        78,306   

Other income (expense)

     4,985        (1,584







Total other income (expense)

     (2,250,493     (941,591







Net loss

     (9,219,220     (5,423,161

Preferred Stock dividends (assumes all paid)

     (1,028,351 )     (1,566,361







Net loss available to common shareholders

   $ (10,247,571   $ (6,989,522







Weighted Average Common Shares outstanding – basic and diluted

     3,697,390       836,645   







Loss Per Common share – basic and diluted

   $ (2.77 )   $ (8.35