AxoGen, Inc. (NASDAQ:AXGN) Q2 2021 Earnings Conference Call August 4, 2021 4:30 PM ET Company Participants Pete Mariani – Executive Vice President and Chief Financial Officer Karen Zaderej – Chairman, Chief Executive Officer and President Conference Call Participants Brandon Folkes – Cantor Fitzgerald Anthony Petrone – Jefferies Jaime Morgan – SVB Leerink Operator Greetings, and welcome to the AxoGen, Inc. Report Second Quarter 2021 Financial Results Conference Call. At this time all participants are in a l ...

```markdown [FORM 10-Q](index=1&type=section&id=FORM%2010-Q) [Filing Information](index=1&type=section&id=Filing%20Information) Axogen, Inc.'s Q2 2021 Form 10-Q: accelerated filer, 41.4 million shares outstanding as of July 30, 2021 - Axogen, Inc. is an **accelerated filer** and not a shell company[2](index=2&type=chunk) - As of July 30, 2021, the registrant had **41,397,053 shares of common stock outstanding**[2](index=2&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) Axogen's forward-looking statements are subject to risks and uncertainties, with no obligation for public updates - Forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those expressed or implied[4](index=4&type=chunk) - The company assumes no responsibility to publicly update or revise any forward-looking statements, except as required by applicable law[4](index=4&type=chunk) [PART I — FINANCIAL INFORMATION](index=5&type=section&id=PART%201%20%E2%80%94%20FINANCIAL%20INFORMATION) [ITEM 1 — FINANCIAL STATEMENTS](index=5&type=section&id=ITEM%201%20%E2%80%94%20FINANCIAL%20STATEMENTS) Axogen, Inc.'s unaudited condensed consolidated financial statements for Q2/H1 2021 report net losses [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Axogen's balance sheets detail assets, liabilities, and shareholders' equity at June 30, 2021, and December 31, 2020 Condensed Consolidated Balance Sheets (In Thousands) | Assets/Liabilities & Equity | June 30, 2021 | December 31, 2020 | | :---------------------------------- | :------------ | :---------------- | | **Assets** | | | | Total current assets | $141,795 | $145,251 | | Property and equipment, net | $50,952 | $38,398 | | Total assets | $210,532 | $201,381 | | **Liabilities** | | | | Total current liabilities | $21,628 | $22,831 | | Long-term debt, net | $46,081 | $32,027 | | Total liabilities | $91,829 | $78,232 | | **Shareholders' Equity** | | | | Total shareholders' equity | $118,703 | $123,149 | | Total liabilities and shareholders' equity | $210,532 | $201,381 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents Axogen's unaudited condensed consolidated statements of operations, detailing revenues, expenses, and net losses Condensed Consolidated Statements of Operations (In Thousands, Except Per Share Amounts) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $33,580 | $22,116 | $64,617 | $46,377 | | Cost of goods sold | $7,092 | $5,605 | $12,264 | $10,421 | | Gross profit | $26,488 | $16,511 | $52,353 | $35,956 | | Total costs and expenses | $33,642 | $24,765 | $65,727 | $52,719 | | Loss from operations | $(7,154) | $(8,254) | $(13,374) | $(16,763) | | Net Loss | $(7,898) | $(8,105) | $(14,558) | $(16,297) | | Loss per common share | $(0.19) | $(0.20) | $(0.36) | $(0.41) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines Axogen's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In Thousands) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(11,515) | $(15,081) | | Net cash (used in) provided by investing activities | $(3,287) | $23,519 | | Net cash provided by financing activities | $18,604 | $35,768 | | Net increase in cash, cash equivalents, and restricted cash | $3,802 | $44,206 | | Cash, cash equivalents, and restricted cash, end of period | $59,411 | $85,930 | [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) This section details changes in Axogen's shareholders' equity, including net loss, stock-based compensation, and option exercises Condensed Consolidated Statements of Changes in Shareholders' Equity (In Thousands, Except Share Amounts) | Item | Balance at Dec 31, 2020 | Net Loss | Stock-based Compensation | Exercise of Stock Options | Balance at June 30, 2021 | | :--------------------------------- | :---------------------- | :------- | :----------------------- | :------------------------ | :----------------------- | | Common Stock Shares | 40,618,766 | — | — | 579,398 | 41,337,108 | | Common Stock Amount | $406 | — | — | — | $413 | | Additional Paid-in Capital | $326,390 | — | $6,499 | $3,607 | $336,495 | | Accumulated Deficit | $(203,647) | $(14,558) | — | — | $(218,205) | | Total Shareholders' Equity | $123,149 | $(14,558) | $6,499 | $3,613 | $118,703 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited condensed consolidated financial statements, covering the basis of presentation, significant accounting policies, and specific financial statement line items [1. Basis of Presentation](index=9&type=section&id=1.%20Basis%20of%20Presentation) These unaudited condensed consolidated financial statements are prepared under Form 10-Q, with interim results not indicative of full-year performance - The unaudited condensed consolidated financial statements are prepared in accordance with Form 10-Q and Rule 10-01 of Regulation S-X, and include normal recurring adjustments[18](index=18&type=chunk) - Interim results are not necessarily indicative of full-year results, primarily due to the continued uncertainty of general economic conditions and potential COVID-19 resurgences[19](index=19&type=chunk) [2. Summary of Significant Accounting Policies](index=9&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines Axogen's key accounting policies, including cash equivalents, revenue recognition, and derivative instruments - Cash equivalents are highly liquid investments with maturities of three months or less. Restricted cash balances were **$6,333 thousand** at June 30, 2021, primarily for collateral on a standby letter of credit[20](index=20&type=chunk) Cash, Cash Equivalents, and Restricted Cash Reconciliation (In Thousands) | Item | June 30, 2021 | December 31, 2020 | | :----------------------------------------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $53,078 | $48,767 | | Restricted cash | $6,333 | $6,842 | | Total cash, cash equivalents, and restricted cash (statement of cash flows) | $59,411 | $55,609 | - Revenue is recognized when performance obligations are met and control of products/services is transferred to customers. For consigned inventory, revenue is recognized upon product use or implantation[23](index=23&type=chunk)[25](index=25&type=chunk) - The allowance for doubtful accounts was **$258 thousand** at June 30, 2021, down from **$416 thousand** at December 31, 2020, reflecting a large and geographically diverse customer base[30](index=30&type=chunk)[31](index=31&type=chunk) - Derivative instruments are recorded at fair value on the balance sheet, with changes recognized in the consolidated statement of operations[32](index=32&type=chunk) - Basic and diluted net loss per share were the same due to net losses, making potentially dilutive securities anti-dilutive[34](index=34&type=chunk) [3. Recently Issued Standards to be Adopted](index=11&type=section&id=3.%20Recently%20Issued%20Standards%20to%20be%20Adopted) Management believes no other recent accounting pronouncements will materially impact Axogen's financial condition or results - Management believes no other recent accounting pronouncements will have a material impact on the Company's consolidated financial condition, results of operations, or disclosures[35](index=35&type=chunk) [4. Inventory](index=12&type=section&id=4.%20Inventory) This section details Axogen's inventory composition and significant write-downs, including the Avive Soft Tissue Membrane suspension Inventory Composition (In Thousands) | Inventory Category | June 30, 2021 | December 31, 2020 | | :----------------- | :------------ | :---------------- | | Finished goods | $9,288 | $8,876 | | Work in process | $482 | $751 | | Raw materials | $3,645 | $2,902 | | Total Inventory | $13,415 | $12,529 | - The Company suspended market availability of Avive Soft Tissue Membrane effective June 1, 2021, resulting in a **$1,251 thousand** write-down of Avive inventory[38](index=38&type=chunk) - Total inventory write-downs for the six months ended June 30, 2021, were **$2,455 thousand**, including the Avive reserve, compared to **$1,624 thousand** in the prior year[38](index=38&type=chunk) [5. Fair Value Considerations](index=12&type=section&id=5.%20Fair%20Value%20Considerations) This section details Axogen's fair value measurements, classifying financial instruments into a three-level hierarchy - Fair value measurements are classified into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[39](index=39&type=chunk)[40](index=40&type=chunk) Fair Value Hierarchy for Financial Assets and Liabilities (June 30, 2021, In Thousands) | Item | Level 1 | Level 2 | Level 3 | Total | | :------------------------------ | :------ | :------ | :------ | :------ | | **Assets:** | | | | | | Money market funds | $31,496 | — | — | $31,496 | | U.S. government securities | $12,059 | — | — | $12,059 | | Commercial paper | — | $34,780 | — | $34,780 | | Total assets | $43,555 | $34,780 | — | $78,335 | | **Liabilities:** | | | | | | Oberland facility | — | — | $50,663 | $50,663 | | Debt derivative liabilities | — | — | $3,776 | $3,776 | | Total liabilities | — | — | $54,439 | $54,439 | - The Oberland Facility and Debt Derivative Liabilities are classified as **Level 3** fair value measurements, relying on unobservable inputs like discount rates and prepayment probabilities[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) Rollforward of Level 3 Fair Value Instruments (Six Months Ended June 30, 2021, In Thousands) | Item | Amount | | :----------------------------------------- | :------ | | Beginning Balance, January 1, 2021 | $39,352 | | Addition of Oberland Facility - second tranche | $13,827 | | Addition of debt derivative - second tranche | $1,173 | | Change in fair value of Oberland Facility | $(18) | | Change in fair value of debt derivative | $105 | | Ending Balance, June 30, 2021 | $54,439 | [6. Prepaid Expense and Other](index=15&type=section&id=6.%20Prepaid%20Expense%20and%20Other) This section provides a breakdown of Axogen's prepaid expenses and other current assets at specific reporting dates Prepaid and Other Assets (In Thousands) | Item | June 30, 2021 | December 31, 2020 | | :------------------------ | :------------ | :---------------- | | Prepaid insurance | $1,389 | $2,596 | | Stock option receivable | $421 | $2 | | Litigation receivable | $23 | $23 | | Prepaid events | $318 | $203 | | Prepaid marketing | $270 | $587 | | Prepaid software license | $312 | $220 | | Prepaid professional fees | $380 | $251 | | Other prepaid items | $835 | $414 | | Total Prepaid and Other Assets | $3,948 | $4,296 | [7. Property and Equipment](index=16&type=section&id=7.%20Property%20and%20Equipment) This section details Axogen's property and equipment, including significant investments in the Axogen Processing Center (APC) facility Property and Equipment (In Thousands) | Item | June 30, 2021 | December 31, 2020 | | :-------------------------------------- | :------------ | :---------------- | | Furniture and equipment | $4,166 | $2,334 | | Leasehold improvements | $14,469 | $12,983 | | Processing equipment | $3,580 | $2,634 | | Land | $731 | $731 | | Projects in process | $34,236 | $24,540 | | Property and equipment, at cost | $57,182 | $43,223 | | Less: accumulated depreciation and amortization | $(6,230) | $(4,825) | | Property and equipment, net | $50,952 | $38,398 | - Depreciation expense for the six months ended June 30, 2021, was **$1,405 thousand**, a significant increase from **$618 thousand** in the prior year, primarily due to the Axogen Processing Center (APC) facility[56](index=56&type=chunk) - The Company disbursed **$759 thousand** from the Heights Union Escrow Account for tenant improvements during the three and six months ended June 30, 2021, with **$83 thousand** remaining[57](index=57&type=chunk) [8. Intangible Assets](index=16&type=section&id=8.%20Intangible%20Assets) This section outlines Axogen's intangible assets, including patents, license agreements, trademarks, and associated amortization expenses Intangible Assets (In Thousands) | Item | June 30, 2021 Net Carrying Amount | December 31, 2020 Net Carrying Amount | | :---------------------------------- | :-------------------------------- | :------------------------------------ | | Patents | $1,807 | $1,357 | | License agreements | $301 | $348 | | Total amortizable intangible assets | $2,108 | $1,705 | | Trademarks | $352 | $349 | | Total intangible asset, net | $2,460 | $2,054 | - Amortization expense for intangible assets was **$96 thousand** for the six months ended June 30, 2021, up from **$72 thousand** in the prior year[60](index=60&type=chunk) - The Company pays royalty fees ranging from **1% to 3%** on net sales of licensed products under license agreements, totaling **$1,350 thousand** for the six months ended June 30, 2021[62](index=62&type=chunk)[63](index=63&type=chunk) [9. Accounts Payable and Accrued Expenses](index=18&type=section&id=9.%20Accounts%20Payable%20and%20Accrued%20Expenses) This section details Axogen's current liabilities, including accounts payable, accrued expenses, and accrued compensation Accounts Payable and Accrued Expenses (In Thousands) | Item | June 30, 2021 | December 31, 2020 | | :---------------------------------- | :------------ | :---------------- | | Accounts payable | $6,721 | $4,597 | | Accrued expenses | $5,480 | $3,778 | | Accrued compensation | $7,638 | $13,593 | | Total Accounts Payable and Accrued Expenses | $19,839 | $21,968 | [10. Long-Term Debt](index=18&type=section&id=10.%20Long-Term%20Debt) This section details Axogen's long-term debt, including the Oberland Facility tranches, interest rates, and financial covenants Long-Term Debt (In Thousands) | Item | June 30, 2021 | December 31, 2020 | | :----------------------------------------- | :------------ | :---------------- | | Oberland Facility - first tranche | $35,000 | $35,000 | | Oberland Facility - second tranche | $15,000 | — | | Less - unamortized debt discount and deferred financing fees | $(3,919) | $(2,973) | | Total long-term debt | $46,081 | $32,027 | - The Company drew the second tranche of **$15,000** from the Oberland Facility on June 30, 2021, bringing the total drawn to **$50,000**[69](index=69&type=chunk) - The Oberland Facility requires quarterly interest payments at **7.5%** plus the greater of LIBOR or **2.0%** (**9.5%** as of June 30, 2021), and includes a revenue participation agreement resulting in approximately **1.0%** additional annual interest[70](index=70&type=chunk) - The Company capitalized **$1,187 thousand** of interest towards the Axogen Processing Center (APC) construction costs for the six months ended June 30, 2021[70](index=70&type=chunk) - Oberland Capital exercised its option to purchase **$3,500 thousand** of common stock in December 2020, resulting in the issuance of **247,699 shares**[71](index=71&type=chunk)[72](index=72&type=chunk) - The Oberland Facility includes financial covenants requiring revenue targets and allows for acceleration of amounts outstanding upon certain events or a make-whole payment upon repayment[73](index=73&type=chunk)[74](index=74&type=chunk) - Embedded features within the Oberland Facility and Revenue Participation Agreement, such as mandatory/optional prepayments and contingent interest, are accounted for as bifurcated derivatives[75](index=75&type=chunk) [11. Stock Incentive Plan](index=20&type=section&id=11.%20Stock%20Incentive%20Plan) This section details Axogen's stock incentive plans, including available shares, stock-based compensation expense, and option activity - Shareholders approved an additional **2,500,000 shares** for issuance under the New Axogen Plan in May 2021, with **2,832,712 shares** available as of June 30, 2021[79](index=79&type=chunk) - Stock-based compensation expense was **$6,499 thousand** for the six months ended June 30, 2021, a significant increase from **$2,778 thousand** in the prior year[80](index=80&type=chunk) Stock Option Activity (June 30, 2021) | Item | Options | Weighted Average Exercise Price | | :--------------------------------- | :-------- | :------------------------------ | | Outstanding, December 31, 2020 | 3,516,484 | $12.79 | | Granted | 556,160 | $20.23 | | Exercised | (545,912) | $5.86 | | Cancelled | (126,171) | $16.81 | | Outstanding, June 30, 2021 | 3,400,561 | $14.97 | | Exercisable, June 30, 2021 | 1,978,225 | $13.57 | Non-Vested RSUs/PSUs Status (June 30, 2021) | Item | Stock Units | Weighted-Average Value at Grant Date per Share | | :--------------------------------- | :---------- | :--------------------------------------------- | | Unvested December 31, 2020 | 1,782,905 | $15.23 | | Granted | 810,316 | $20.68 | | Released | (139,145) | $17.81 | | Forfeited | (181,673) | $16.33 | | Unvested June 30, 2021 | 2,272,403 | $16.92 | - Total future stock compensation expense related to non-vested performance awards at maximum target payout is expected to be approximately **$7,721 thousand** at June 30, 2021[88](index=88&type=chunk) - The 2017 Employee Stock Purchase Plan (ESPP) had **272,489 shares** available for issuance as of June 30, 2021[92](index=92&type=chunk) [12. Income Taxes](index=22&type=section&id=12.%20Income%20Taxes) Axogen has not recorded current income tax expense due to net operating losses and a full valuation allowance on deferred tax assets - The Company has not recorded current income tax expense due to net operating losses and has established a full valuation allowance on deferred tax assets[93](index=93&type=chunk) - The Company has not recognized a liability for uncertain tax positions and its open tax years subject to examination are 2018 through 2020[94](index=94&type=chunk) [13. Commitments and Contingencies](index=23&type=section&id=13.%20Commitments%20and%20Contingencies) This section details Axogen's lease commitments, processing agreements, facility projects, and ongoing legal proceedings - The Company leases office, lab, distribution, and tissue processing space, recognizing lease expense on a straight-line basis[97](index=97&type=chunk) - For the new Tampa office lease, the Company recorded a right-of-use asset of **$13,323 thousand** and a lease liability of **$18,573 thousand** as of the August 28, 2020 commencement date[99](index=99&type=chunk) Total Lease Cost (In Thousands) | Period | 2021 | 2020 | | :----------------------------------- | :---- | :---- | | Three Months Ended June 30, Total Lease Cost | $1,211 | $559 | | Six Months Ended June 30, Total Lease Cost | $2,437 | $1,060 | - The CTS Agreement for Avance Nerve Graft processing was extended to December 31, 2023, with fees paid to CTS totaling **$1,271 thousand** for the six months ended June 30, 2021[108](index=108&type=chunk) - The Company is highly dependent on its processing facilities and the exclusive distribution agreement with Cook Biotech for Axoguard products, the loss of which could materially harm the business[112](index=112&type=chunk)[113](index=113&type=chunk) - The Axogen Processing Center (APC) renovation project has incurred **$27,390 thousand** to date, with substantial completion expected by late 2022[115](index=115&type=chunk)[116](index=116&type=chunk) - The Company is involved in a putative class action lawsuit (Einhorn v. Axogen, Inc., et al.) alleging federal securities law violations, which was dismissed with prejudice in March 2021, but the plaintiff filed a notice of appeal[118](index=118&type=chunk)[119](index=119&type=chunk) [14. Retirement Plan](index=29&type=section&id=14.%20Retirement%20Plan) This section outlines Axogen's 401(k) Plan, including employer matching contributions and total expenses for the period - The Company sponsors a 401(k) Plan with matching contributions of **3% on the first 3%** of salary and **1% on the next 2%**[125](index=125&type=chunk) - Employer contributions to the 401(k) Plan were **$615 thousand** for the six months ended June 30, 2021, compared to **$583 thousand** in the prior year[125](index=125&type=chunk) [15. Subsequent Events](index=29&type=section&id=15.%20Subsequent%20Events) This section reports on significant events occurring after the reporting period, including amendments to lease agreements - On July 12, 2021, the Company amended the Heights Union Office Lease, revising the commencement date to October 30, 2020, and the termination date to October 31, 2034, and entitling the Company to an additional 1.5 months of free rent[126](index=126&type=chunk) - On July 13, 2021, the Company amended its corporate headquarters lease, extending the term to October 21, 2026[127](index=127&type=chunk) [ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=30&type=section&id=ITEM%202%20%E2%80%93%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Axogen's financial condition and results, focusing on nerve regeneration products, revenue drivers, and liquidity [OVERVIEW](index=30&type=section&id=OVERVIEW) Axogen is a leading company in peripheral nerve regeneration, with nerve repair products driving revenue growth and increased active accounts - Axogen is a leading company focused on peripheral nerve regeneration and repair, offering a comprehensive portfolio of products including Avance Nerve Graft and Axoguard products[129](index=129&type=chunk)[130](index=130&type=chunk) - Revenue from nerve repair products in the United States is the main contributor to total sales and growth[130](index=130&type=chunk) - Active accounts increased **22% to 959**, representing approximately 85% of revenue. Core Accounts (purchasing at least $100,000 in 12 months) increased **34% to 306**, representing approximately **60% of revenue**[131](index=131&type=chunk) [Avive](index=30&type=section&id=Avive) Axogen suspended market availability of Avive Soft Tissue Membrane pending FDA discussions, not due to safety concerns - Axogen suspended market availability of Avive Soft Tissue Membrane effective June 1, 2021, pending discussions with the FDA regarding regulatory classification[133](index=133&type=chunk) - The suspension was not due to safety concerns, and Avive historically represented approximately **5% of the company's revenues**[133](index=133&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section analyzes Axogen's revenues, gross profit, operating expenses, and net loss for the three and six months ended June 30, 2021 Key Financial Highlights (Three Months Ended June 30, 2021 vs 2020, In Thousands) | Metric | 2021 Amount | 2021 % of Revenue | 2020 Amount | 2020 % of Revenue | YoY Change (%) | | :-------------------------- | :---------- | :---------------- | :---------- | :---------------- | :------------- | | Revenues | $33,580 | 100.0% | $22,116 | 100.0% | 52% | | Gross Profit | $26,488 | 78.9% | $16,511 | 74.7% | 60% | | Sales and marketing | $19,250 | 57.3% | $14,290 | 64.6% | 35% | | Research and development | $5,723 | 17.0% | $4,071 | 18.4% | 41% | | General and administrative | $8,669 | 25.8% | $6,404 | 29.0% | 35% | | Total costs and expenses | $33,642 | 100.2% | $24,765 | 112.0% | 36% | | Loss from operations | $(7,154) | (21.3)% | $(8,254) | (37.3)% | (13)% | | Net Loss | $(7,898) | (23.5)% | $(8,105) | (36.6)% | (3)% | Key Financial Highlights (Six Months Ended June 30, 2021 vs 2020, In Thousands) | Metric | 2021 Amount | 2021 % of Revenue | 2020 Amount | 2020 % of Revenue | YoY Change (%) | | :-------------------------- | :---------- | :---------------- | :---------- | :---------------- | :------------- | | Revenues | $64,617 | 100.0% | $46,377 | 100.0% | 39% | | Gross Profit | $52,353 | 81.0% | $35,956 | 77.5% | 46% | | Sales and marketing | $37,224 | 57.6% | $32,128 | 69.3% | 16% | | Research and development | $11,485 | 17.8% | $8,685 | 18.7% | 32% | | General and administrative | $17,018 | 26.3% | $11,906 | 25.7% | 43% | | Total costs and expenses | $65,727 | 101.7% | $52,719 | 113.7% | 25% | | Loss from operations | $(13,374) | (20.7)% | $(16,763) | (36.2)% | (20)% | | Net Loss | $(14,558) | (22.5)% | $(16,297) | (35.1)% | (11)% | - Revenue growth was driven by a **40% increase in unit volume** and **8% from product mix changes** for Q2 2021, and **31% unit volume growth** and **8% from price/mix** for H1 2021, reflecting recovery from COVID-19 impacts[137](index=137&type=chunk)[147](index=147&type=chunk) - Gross margin improved to **79% in Q2 2021** (from **75% in Q2 2020**) and **81% in H1 2021** (from **78% in H1 2020**), despite a **$1,429 thousand** inventory write-down for Avive in Q2 2021[138](index=138&type=chunk)[148](index=148&type=chunk) - Total costs and expenses increased due to a return to normalized spending levels and higher non-cash stock compensation, but decreased as a percentage of revenue[139](index=139&type=chunk)[149](index=149&type=chunk) - Other expense increased significantly due to interest expense from the Oberland Facility and lower investment income[143](index=143&type=chunk)[153](index=153&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section details Axogen's cash position, working capital, cash flow activities, and future capital commitments for facility projects - Cash, cash equivalents, and restricted cash increased by **$3,802 thousand** to **$59,411 thousand** at June 30, 2021, primarily from long-term debt proceeds and employee option exercises[155](index=155&type=chunk) - Working capital was **$120,167 thousand** with a current ratio of **6.6x** at June 30, 2021, indicating sufficient liquidity for at least the next 12 months[155](index=155&type=chunk) Net Cash Flows (Six Months Ended June 30, In Thousands) | Activity | 2021 | 2020 | | :----------------------- | :---------- | :---------- | | Operating activities | $(11,515) | $(15,081) | | Investing activities | $(3,287) | $23,519 | | Financing activities | $18,604 | $35,768 | | Net increase in cash | $3,802 | $44,206 | - Operating cash outflows decreased due to higher accounts receivable collections and reduced net loss[160](index=160&type=chunk) - Investing activities used cash in 2021, compared to providing cash in 2020, mainly due to fewer investment sales[161](index=161&type=chunk) - Financing cash provided decreased due to a smaller debt tranche drawdown in 2021 (**$15,000 thousand**) compared to 2020 (**$35,000 thousand**), partially offset by increased stock option exercises[162](index=162&type=chunk) - The Company anticipates spending approximately **$20,400 thousand** on APC renovations, equipment, and furniture over the next twelve months[163](index=163&type=chunk) - The Company drew the second **$15,000 thousand** tranche of the Oberland Facility on June 30, 2021, and has a third tranche of **$25,000 thousand** available upon achieving revenue targets[166](index=166&type=chunk) - The APC renovation project's estimated cost is **$28,846 thousand**, with **$27,390 thousand** recorded to date, and material processing expected to transition in late 2022[169](index=169&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=37&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) No material changes to Axogen's market risks have occurred since the 2020 Annual Report on Form 10-K - There have been no material changes to the company's market risks since December 31, 2020, as discussed in the 2020 Annual Report on Form 10-K[172](index=172&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=38&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded Axogen's disclosure controls were effective as of June 30, 2021, with no material changes in internal control - Management concluded that disclosure controls and procedures were effective as of June 30, 2021[175](index=175&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2021[176](index=176&type=chunk) [PART II – OTHER INFORMATION](index=39&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [ITEM 1 – LEGAL PROCEEDINGS](index=39&type=section&id=ITEM%201%20%E2%80%93%20LEGAL%20PROCEEDINGS) Axogen is involved in various legal proceedings, as detailed in the notes to the condensed consolidated financial statements - The company is engaged in various legal proceedings, as detailed in Note 13 to the condensed consolidated financial statements[178](index=178&type=chunk) [ITEM 1A - RISK FACTORS](index=39&type=section&id=ITEM%201A%20-%20RISK%20FACTORS) No material changes to Axogen's risk factors since the 2020 Annual Report on Form 10-K, emphasizing high investment risk - No material changes to risk factors have occurred since the 2020 Annual Report on Form 10-K[179](index=179&type=chunk) - Investment in the company's business involves a high degree of risk, which could materially harm the business and financial condition[179](index=179&type=chunk) [ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=39&type=section&id=ITEM%202%20-%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) No unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[180](index=180&type=chunk) [ITEM 3 - DEFAULTS UPON SENIOR SECURITIES](index=39&type=section&id=ITEM%203%20-%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) No defaults upon senior securities to report for the period - No defaults upon senior securities to report[180](index=180&type=chunk) [ITEM 4 - MINE SAFETY DISCLOSURES](index=39&type=section&id=ITEM%204%20-%20MINE%20SAFETY%20DISCLOSURES) Mine safety disclosures are not applicable to Axogen - Mine safety disclosures are not applicable[180](index=180&type=chunk) [ITEM 5 - OTHER INFORMATION](index=39&type=section&id=ITEM%205%20-%20OTHER%20INFORMATION) No other information to report for the period - No other information to report[180](index=180&type=chunk) [ITEM 6 - EXHIBITS](index=40&type=section&id=ITEM%206%20-%20EXHIBITS) This section lists exhibits filed with the Form 10-Q, including lease amendments and officer certifications - Exhibits include First Amendment to Office Lease, Sixth Amendment to Lease, Certifications of Principal Executive and Financial Officers, and XBRL Instance, Schema, Calculation, Definition, Labels, and Presentation Documents[181](index=181&type=chunk) [SIGNATURES](index=41&type=section&id=SIGNATURES) The report is signed by Axogen's Chief Executive Officer and Chief Financial Officer - The report is signed by Karen Zaderej, Chief Executive Officer and President, and Peter J. Mariani, Executive Vice President and Chief Financial Officer[183](index=183&type=chunk)[184](index=184&type=chunk) ```

AxoGen, Inc. (NASDAQ:AXGN) Q1 2021 Earnings Conference Call May 5, 2021 4:30 PM ET Company Participants Peter Mariani - Executive Vice President and Chief Financial Officer Karen Zaderej - Chairman, President and Chief Executive Officer Conference Call Participants Jaime Morgan - SVB Leerink Brandon Folkes - Cantor Fitzgerald David Turkaly - JMP Securities Anthony Petrone - Jefferies Operator Good afternoon, ladies and gentlemen, and thank you, for standing by. Welcome to the AxoGen Incorporated First Quart ...

Financial Data and Key Metrics Changes - Total revenue for Q4 2020 was $32.5 million, representing a 15% increase compared to the prior year [6][30] - Full-year revenue for 2020 was $112.3 million, reflecting a 5% growth compared to 2019 [7] - Gross profit for Q4 was $27 million, with a gross margin of 83.2%, up from 82.7% in the prior year [30] - Adjusted net loss for Q4 was $3.3 million, or $0.08 per share, compared to a loss of $4 million, or $0.10 per share, in the prior year [33] Business Line Data and Key Metrics Changes - Trauma business was the key driver of volume and revenue growth in Q4, although growth was dampened by below-normal incidence of traumatic injuries [8] - The breast neurotization business showed recovery in Q4, but faced challenges due to COVID-19, impacting elective procedures [9] - The emerging business for surgical treatment of pain improved, while oral maxillofacial nerve repair lagged behind other applications [10] Market Data and Key Metrics Changes - The company ended Q4 with 111 direct sales representatives, an increase of one representative during the quarter [11] - Active accounts increased by 12% to 893 from 797 a year ago, indicating deeper penetration in existing accounts [14] - Independent sales agencies represented 12% of total revenue in Q4, down from 13% in the prior quarter [11][12] Company Strategy and Development Direction - The company plans to achieve revenue growth by driving sales productivity and strategically adding up to 10 sales representatives in the second half of 2021 [13] - Focus on extremity trauma as the largest market opportunity, with efforts to deepen penetration with existing surgeon customers [14] - Continued investment in digital marketing capabilities to engage with surgeon customers during the pandemic [16] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the near-term outlook due to ongoing COVID-19 impacts, particularly on elective procedures [29] - The company is optimistic about the recovery of deferred procedures and expects to see improvements as COVID cases decline [42] - Management highlighted the importance of the reimbursement environment for nerve repair procedures, which could lead to increased procedure volumes [18][60] Other Important Information - The company has completed the pilot phase of the REPOSE Study, showing promising results for the AxoGuard Nerve Cap in managing painful neuromas [22][23] - The company opened a new office and lab facility in Tampa, which is expected to enhance scientific discovery and development [36] - The company anticipates capital expenditures of approximately $26 million for the new biologics processing center in 2021 [36] Q&A Session Summary Question: What changed from the previous quarter regarding COVID-19 impacts? - Management noted a strong start to Q4 but faced challenges in December as COVID-19 cases surged, leading to a decrease in elective procedures [41] Question: Can you provide insights on the Avance product innovation post-BLA? - Management stated that while there are opportunities for innovation, details are not yet available due to competitive and regulatory reasons [44] Question: How do you size the nerve cap market opportunity? - Management indicated that the nerve cap market is substantial but difficult to quantify due to underdiagnosis of symptomatic neuromas [48] Question: What are the implications of improved reimbursement for allograft and conduits? - Management believes the changes in reimbursement structure will facilitate nerve repair procedures in outpatient settings, although it may take time for commercial payers to follow suit [60] Question: How many new active accounts were added during COVID-19? - Management reported adding nearly 100 new active accounts in 2020, with expectations for these accounts to stabilize as vaccine rollouts progress [75]

Financial Performance & Market Position - Q3 2020 revenue reached $33.4 million, a 17% increase compared to Q3 2019[8] - 2019 revenue totaled $106.7 million, demonstrating 27% growth versus 2018[8] - High gross margins were sustained at 83.0% for the quarter ended September 30, 2020[8] - Cash, cash equivalents, and investments amounted to $106.7 million as of September 30, 2020[8] - The company estimates a $2.7 billion market opportunity in existing applications[15] Market Opportunity & Procedures - The U S potential procedural estimates exceed 900,000[14] - Trauma procedures account for over 700,000 of the potential procedures[14] - Carpal Tunnel Revisions & Cubital Tunnel procedures account for 130,000 of the potential procedures[14] - Oral and Maxillo-Facial (OMF) procedures account for over 55,000 of the potential procedures[14]

AxoGen, Inc. (NASDAQ:AXGN) Q3 2020 Earnings Conference Call October 29, 2020 4:30 PM ET Company Participants Pete Mariani - Chief Financial Officer Karen Zaderej - Chairman, Chief Executive Officer & President Conference Call Participants Raj Denhoy - Jefferies Chris Pasquale - Guggenheim Operator Greetings and welcome to the AxoGen Third Quarter Earnings Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instruct ...