Part I [Business](index=7&type=section&id=Item%201.%20Business) Axogen leads in peripheral nerve repair, offering a product portfolio targeting a $2.7 billion market and pursuing a Biologics License Application for its key graft [General Overview](index=7&type=section&id=General) The company develops and commercializes technologies for peripheral nerve regeneration and repair, offering a portfolio of clinically proven products - Axogen's core business is providing solutions for peripheral nerve repair, aiming to restore function and quality of life for patients[21](index=21&type=chunk) - The main product portfolio includes **Avance® Nerve Graft** (human nerve allograft), **Axoguard® products** (porcine ECM-based connector, protector, and cap), and Avive® Soft Tissue Membrane (human umbilical cord)[22](index=22&type=chunk) - The market availability of **Avive® Soft Tissue Membrane was suspended** effective June 1, 2021, pending FDA discussions regarding its regulatory classification, not due to safety issues[23](index=23&type=chunk) [Peripheral Nerve Regeneration Market Overview](index=8&type=section&id=Peripheral%20Nerve%20Regeneration%20Market%20Overview) The company estimates its total addressable market in the U.S. at approximately $2.7 billion across trauma, oral, breast, and compression segments Total Addressable Market (U.S.) | Market Segment | Estimated Size | | :--- | :--- | | **Total Addressable Market** | **$2.7 billion** | | Trauma | $1.9 billion | | Oral Maxillofacial (OMF) | $300 million | | Breast Reconstruction Neurotization | $250 million | | Upper Extremity Compression | $270 million | - The company is expanding into the surgical treatment of pain, with the market size for this segment still under evaluation[35](index=35&type=chunk) [Axogen's Product Portfolio](index=9&type=section&id=Axogen's%20Product%20Portfolio) The company's product portfolio provides a comprehensive platform for peripheral nerve repair, led by the Avance® Nerve Graft and Axoguard® product line - **Avance® Nerve Graft:** A decellularized human peripheral nerve allograft for bridging nerve gaps up to 70mm, supported by over 10 years of clinical evidence[36](index=36&type=chunk)[37](index=37&type=chunk)[39](index=39&type=chunk) - **Axoguard® Nerve Connector:** A porcine ECM tube for tensionless repair of nerve gaps up to 5mm, reducing the need for sutures at the repair site[40](index=40&type=chunk)[41](index=41&type=chunk) - **Axoguard® Nerve Protector:** A porcine ECM wrap to protect damaged nerves, reinforce repairs, and prevent soft tissue attachments[42](index=42&type=chunk)[43](index=43&type=chunk) - **Axoguard® Nerve Cap:** A porcine ECM cap designed to protect severed nerve ends and reduce the formation of painful neuromas[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) - **Avive® Soft Tissue Membrane:** Market availability was suspended on June 1, 2021, and it historically accounted for approximately **5% of revenues**[44](index=44&type=chunk) [Tissue Recovery and Processing](index=12&type=section&id=Tissue%20Recovery%20and%20Processing%20for%20Avance%20Nerve%20Graft%20and%20Avive%20Soft%20Tissue%20Membrane) The company processes human tissue using its proprietary Avance Method™ and is building a new facility to support future growth and its BLA submission - The company uses the proprietary **Avance Method™** to process human nerve tissue, preserving the essential extracellular matrix structure[54](index=54&type=chunk) - Processing is currently conducted at a facility licensed from Community Tissue Services (CTS), with the agreement terminating on **December 31, 2023**[57](index=57&type=chunk)[58](index=58&type=chunk) - Axogen is renovating a new **Axogen Processing Center (APC)** facility in Ohio to support growth and the Avance Nerve Graft BLA submission[59](index=59&type=chunk) [Manufacturing of Other Products](index=14&type=section&id=Manufacturing%20of%20Axogen%20Products%20Other%20Than%20Avance%20Nerve%20Graft%20and%20Avive%20Soft%20Tissue%20Membrane) The Axoguard® product line is manufactured exclusively by Cook Biotech under agreements extending to 2027 - The **Axoguard product line** is manufactured by Cook Biotech Incorporated under exclusive distribution and supply agreements that terminate in 2027[64](index=64&type=chunk)[65](index=65&type=chunk)[67](index=67&type=chunk) - Axogen has sufficient inventory of the Axotouch Two-Point Discriminator to support sales through 2024[68](index=68&type=chunk) [Sales and Marketing](index=15&type=section&id=Sales%20and%20Marketing) The company's commercial strategy focuses on surgeon education, clinical data expansion, and a specialized direct sales force - The company focuses on educating surgeons, including training over **three-quarters of U.S. hand and microsurgery fellows** in 2021[74](index=74&type=chunk) - As of December 31, 2021, the commercial team consisted of **115 direct sales professionals** and approximately 28 independent sales agencies in the U.S[74](index=74&type=chunk) - In 2021, approximately **88% of global product revenue** was generated through the direct sales channel[74](index=74&type=chunk) - The company is generating extensive clinical data through studies like **RANGER** (over 2,500 enrollments), **RECON** (Phase 3), and **REPOSE** (neuroma study)[71](index=71&type=chunk)[73](index=73&type=chunk) [Research and Development](index=17&type=section&id=Research%20and%20Development) R&D efforts are concentrated on expanding clinical data and developing product line extensions, with a total investment of $24.2 million in 2021 - Current development focus is on expanding clinical data and developing line extensions of Avance and Axoguard products[79](index=79&type=chunk) R&D Expense | Year | R&D Expense | | :--- | :--- | | 2021 | $24.2 million | [Competition](index=17&type=section&id=Competition) Axogen competes with traditional repair methods and off-the-shelf products from major medical technology companies - Primary competition includes traditional methods (autograft) and off-the-shelf products (hollow-tube conduits, wraps)[80](index=80&type=chunk)[81](index=81&type=chunk) - Major corporate competitors for off-the-shelf repair options are **Integra LifeSciences**, **Baxter International**, and **Stryker Corporation**[81](index=81&type=chunk) - Axogen believes its key competitive advantages include its intellectual property, regulatory expertise with the **FDA BLA process**, and its broad product portfolio[82](index=82&type=chunk)[84](index=84&type=chunk) [Intellectual Property](index=18&type=section&id=Intellectual%20Property) The company protects its technology through patents, trademarks, and exclusive licenses, anticipating 12 years of market exclusivity upon BLA approval - Axogen holds exclusive worldwide licenses from the **University of Florida Research Foundation (UFRF)** and the **University of Texas at Austin (UTA)** for Avance Nerve Graft technologies[86](index=86&type=chunk) - The company owns or is the exclusive licensee of about **30 issued U.S. patents** and over 175 international patents and applications[87](index=87&type=chunk) - U.S. patent protection for Avance Nerve Graft extends through at least September 2023; upon BLA approval, the company expects **12 years of data exclusivity**[88](index=88&type=chunk) [Government Regulations](index=19&type=section&id=Government%20Regulations) The company operates under extensive FDA regulation, managing a transition to a full Biologics License Application (BLA) for its lead product - Axoguard products are regulated as medical devices and have **510(k) clearance** from the FDA[93](index=93&type=chunk)[94](index=94&type=chunk) - Avance Nerve Graft is being transitioned from a Human Tissue product (HCT/P) to a fully licensed biologic, requiring a **Biologics License Application (BLA)**[104](index=104&type=chunk)[106](index=106&type=chunk) - The **RECON study**, a Phase 3 pivotal trial for the Avance BLA, has completed subject enrollment and follow-up[125](index=125&type=chunk) - Avance Nerve Graft received **Regenerative Medicine Advanced Therapy (RMAT) designation** from the FDA, which may streamline the approval process[114](index=114&type=chunk) - The company is subject to various healthcare laws, including **Anti-Kickback**, **False Claims**, and the **Sunshine Act**[134](index=134&type=chunk)[135](index=135&type=chunk)[238](index=238&type=chunk) [Human Capital](index=28&type=section&id=Human%20Capital) As of December 31, 2021, the company employed approximately 451 people, with a significant portion dedicated to sales and marketing Employee Breakdown (as of Dec 31, 2021) | Department | Number of Employees | | :--- | :--- | | **Total Employees** | **~451** | | Sales and Marketing | 228 | | Corporate | 79 | | Research and Development | 65 | | Operations | 56 | - No employees are represented by a labor union, and the company believes its relationship with employees is satisfactory[151](index=151&type=chunk) [Executive Officers of the Registrant](index=29&type=section&id=Executive%20Officers%20of%20the%20Registrant) The company's leadership team includes Karen Zaderej as Chairman, CEO, and President, and Peter J. Mariani as Executive Vice President and CFO - Key executive officers include **Karen Zaderej** (Chairman, CEO, President), **Peter J. Mariani** (EVP, CFO), Bradley L. Ottinger (General Counsel), and Eric A. Sandberg (Chief Commercial Officer)[156](index=156&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from product concentration, the COVID-19 pandemic, regulatory hurdles for its key products, and intellectual property challenges [Risks Related to the Company](index=32&type=section&id=Risks%20Related%20to%20the%20Company) Revenue is highly dependent on four products, while the COVID-19 pandemic, a history of negative cash flow, and facility dependencies pose material risks - Substantially all revenue is derived from four products: **Avance Nerve Graft**, **Axoguard Nerve Protector**, **Axoguard Nerve Connector**, and **Axoguard Nerve Cap**[172](index=172&type=chunk) - The **COVID-19 pandemic** could continue to adversely affect operations and financial results through procedure deferrals and supply chain disruptions[176](index=176&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk) - The company is highly dependent on its facility licensed from Community Tissue Services (CTS), which expires on **December 31, 2023**[186](index=186&type=chunk) - The company has a history of not consistently generating positive cash flow and had an accumulated deficit of approximately **$230.6 million** as of December 31, 2021[182](index=182&type=chunk)[183](index=183&type=chunk) [Risks Related to the Regulatory Environment](index=38&type=section&id=Risks%20Related%20to%20the%20Regulatory%20Environment%20in%20which%20the%20Company%20Operates) Significant regulatory risks include reliance on FDA enforcement discretion for Avance, the suspension of Avive, and the uncertain outcomes of clinical trials - The **Avance Nerve Graft** is distributed under an FDA enforcement discretion policy, and failure to obtain BLA approval would have a material adverse effect[226](index=226&type=chunk)[227](index=227&type=chunk) - The market availability of **Avive Soft Tissue Membrane was voluntarily suspended** on June 1, 2021, and there is no guarantee it will return to market[220](index=220&type=chunk)[221](index=221&type=chunk) - Clinical trials, such as the **RECON study** for the Avance BLA, are long, expensive, and have uncertain outcomes that could jeopardize regulatory approval[241](index=241&type=chunk)[242](index=242&type=chunk) - The company is subject to extensive healthcare fraud and abuse laws (e.g., **Anti-Kickback Statute**, **False Claims Act**), and violations can lead to significant penalties[215](index=215&type=chunk)[237](index=237&type=chunk) [Risks Related to Intellectual Property](index=45&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Success depends on protecting intellectual property, as key patents for the Axoguard line have expired and the company relies on exclusive licenses for Avance - Failure to protect intellectual property rights could lead to **costly litigation** and loss of competitive advantage[263](index=263&type=chunk) - The patent protection for products may expire, subjecting the company to increased competition; material U.S. patents covering the **Axoguard product line have expired**[267](index=267&type=chunk) - The company depends on maintaining exclusive licenses from the **University of Florida Research Foundation (UFRF)** and the **University of Texas at Austin (UTA)** for its Avance technology[269](index=269&type=chunk) [Risks Related to Common Stock](index=47&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Investors face risks from high stock price volatility, a no-dividend policy, and anti-takeover provisions under Minnesota law - The price of the company's common stock (AXGN) has been and is likely to continue to be **highly volatile**[274](index=274&type=chunk) - The company **does not anticipate paying any cash dividends** in the foreseeable future, retaining earnings to finance growth[276](index=276&type=chunk) - **Anti-takeover provisions** in Minnesota law may discourage or deter acquisition bids[277](index=277&type=chunk) [Risks Related to Financing Our Business](index=48&type=section&id=Risks%20Related%20to%20Financing%20Our%20Business) The company's credit facility contains restrictive covenants, and future fundraising efforts could result in shareholder dilution - The credit facility with Oberland Capital contains **restrictive operating and financial covenants**, and a breach could lead to default[280](index=280&type=chunk)[281](index=281&type=chunk) - The company may need to raise additional funds in the future, which could **dilute shareholder interests** or be difficult to obtain on acceptable terms[284](index=284&type=chunk)[285](index=285&type=chunk) [General Risk Factors](index=49&type=section&id=General%20Risk%20Factors) The company is exposed to general risks including legal proceedings, loss of key personnel, cybersecurity threats, and potential internal control weaknesses - The company is currently a defendant in **securities class action lawsuits** and may be subject to other costly legal proceedings[286](index=286&type=chunk) - The **loss of key members** of the executive management team could adversely affect the business[290](index=290&type=chunk) - The company is dependent on internal information systems that are vulnerable to **cybersecurity attacks and breaches**[302](index=302&type=chunk)[303](index=303&type=chunk) - If the company's **internal controls over financial reporting are not effective**, it could result in unreliable financial reports[307](index=307&type=chunk)[308](index=308&type=chunk) [Properties](index=52&type=section&id=Item%202.%20Properties) Axogen leases its corporate and distribution facilities and is building its own processing center in Ohio to replace an expiring services agreement - Corporate headquarters are leased in Alachua, FL (19,000 sq ft) and a major office/lab facility is leased in Tampa, FL (75,000 sq ft)[309](index=309&type=chunk)[310](index=310&type=chunk) - A distribution facility is leased in Burleson, TX (17,500 sq ft)[312](index=312&type=chunk) - The company is renovating its own **Axogen Processing Center (APC)** facility in Vandalia, OH, to replace its current processing arrangement with CTS, which ends in 2023[314](index=314&type=chunk) [Legal Proceedings](index=53&type=section&id=Item%203.%20Legal%20Proceedings) The company is defending a securities class action lawsuit that was dismissed by the District Court but is currently under appeal - The company is a defendant in a putative **securities class action lawsuit**, Einhorn v Axogen, Inc, et al, filed in January 2019[537](index=537&type=chunk) - The District Court **dismissed the Second Amended Complaint with prejudice** on March 19, 2021; the plaintiff has appealed the dismissal to the Eleventh Circuit[537](index=537&type=chunk) - A separate stockholder derivative complaint, Bach v Zaderej, et al, was **voluntarily dismissed** by the plaintiff in November 2021[538](index=538&type=chunk) [Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - None[316](index=316&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=54&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Axogen's common stock trades on Nasdaq as "AXGN," and the company has never paid cash dividends, retaining earnings for growth - The company's common stock is traded on the Nasdaq Capital Market under the symbol **"AXGN"**[317](index=317&type=chunk) - As of February 22, 2022, there were **41,795,240 shares of common stock outstanding**[318](index=318&type=chunk) - The company has **never declared or paid cash dividends** and does not anticipate paying them in the foreseeable future[321](index=321&type=chunk) - The company did not repurchase any of its securities in the fourth quarter of 2021 and had no sales of unregistered securities in 2021[320](index=320&type=chunk) [Reserved](index=55&type=section&id=Item%206.%20Reserved) This item is intentionally left blank [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenues grew 13.4% to $127.4 million in 2021, though net loss widened to $27.0 million due to increased operating expenses [Results of Operations](index=57&type=section&id=Results%20of%20Operations) In 2021, revenue increased 13.4% to $127.4 million and gross margin improved, but a 14.0% rise in expenses led to a wider net loss of $27.0 million Financial Performance Comparison (2021 vs. 2020) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Revenues | $127.4M | $112.3M | +13.4% | | Gross Profit | $104.4M | $90.7M | +15.1% | | Gross Margin | 82.0% | 80.8% | +1.2 p.p. | | Loss from Operations | ($25.4M) | ($23.2M) | +9.5% | | Net Loss | ($27.0M) | ($23.8M) | +13.4% | Financial Performance Comparison (2020 vs. 2019) | Metric | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Revenues | $112.3M | $106.7M | +5.2% | | Gross Profit | $90.7M | $89.4M | +1.5% | | Gross Margin | 80.8% | 83.7% | -2.9 p.p. | | Loss from Operations | ($23.2M) | ($31.4M) | -26.2% | | Net Loss | ($23.8M) | ($29.1M) | -18.3% | - **R&D expenses increased 35.5%** in 2021 to $24.2 million, primarily due to increased spending on the BLA for Avance Nerve Graft[337](index=337&type=chunk) [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) The company held $84.1 million in cash and investments at year-end 2021, which management believes is sufficient for at least the next 12 months Liquidity Position (as of Dec 31, 2021) | Metric | Value | | :--- | :--- | | Cash, Cash Equivalents & Investments | $84.1M | | Working Capital | $102.8M | | Current Ratio | 5.2x | Cash Flow Summary (2021) | Activity | Cash Flow | | :--- | :--- | | Operating Activities | ($13.4M) | | Investing Activities | ($23.6M) | | Financing Activities | $20.5M | - The company has a credit facility with Oberland Capital, with **$50 million drawn** as of year-end 2021[365](index=365&type=chunk)[366](index=366&type=chunk) - Significant capital expenditures are ongoing for the renovation of the APC Facility, with **$19.3 million** anticipated to be spent in 2022[364](index=364&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=63&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate risk from its variable-rate debt, while credit and foreign currency risks are considered minimal - **Interest Rate Risk:** The company is exposed to interest rate changes through its Oberland debt facility, which has an interest rate floor of **9.5%**[372](index=372&type=chunk) - **Credit Risk:** Financial instruments subject to credit risk include cash balances exceeding FDIC limits (**$32.2 million** as of Dec 31, 2021) and accounts receivable[373](index=373&type=chunk)[375](index=375&type=chunk) - **Foreign Currency Exchange Risk:** Exposure is minimal as revenue from international markets is denominated in U.S. dollars[376](index=376&type=chunk) [Financial Statements and Supplementary Data](index=64&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the audited consolidated financial statements, accompanying notes, and the independent auditor's report from Deloitte & Touche LLP [Report of Independent Registered Public Accounting Firm](index=65&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued an unqualified opinion on the financial statements and internal controls, identifying inventory valuation as a Critical Audit Matter - Deloitte & Touche LLP issued an **unqualified opinion**, stating the financial statements are presented fairly in all material respects[380](index=380&type=chunk) - The auditor also opined that the company maintained **effective internal control over financial reporting** as of December 31, 2021[380](index=380&type=chunk) - A **Critical Audit Matter** was identified related to the valuation of excess and obsolete (E&O) inventory, which involves significant management judgment[386](index=386&type=chunk)[387](index=387&type=chunk) [Consolidated Financial Statements](index=67&type=section&id=Consolidated%20Financial%20Statements) The financial statements show total assets of $208.0 million, a 2021 net loss of $27.0 million, and net cash used in operations of $13.4 million Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$208,024** | **$201,381** | | Cash, Cash Equivalents & Investments | $84,086 | $103,966 | | Inventory | $16,693 | $12,529 | | Property and equipment, net | $62,881 | $38,398 | | **Total Liabilities** | **$95,474** | **$78,232** | | Long-term debt, net | $44,821 | $32,027 | | **Total Shareholders' Equity** | **$112,550** | **$123,149** | Consolidated Statement of Operations Data (in thousands, except per share) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Revenues | $127,358 | $112,300 | $106,712 | | Gross Profit | $104,427 | $90,719 | $89,363 | | Loss from Operations | ($25,416) | ($23,182) | ($31,406) | | Net Loss | ($26,985) | ($23,786) | ($29,135) | | Loss per Share | ($0.65) | ($0.60) | ($0.74) | Consolidated Statement of Cash Flows Data (in thousands) | Activity | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net Cash Used in Operating | ($13,405) | ($9,626) | ($19,872) | | Net Cash (Used in)/Provided by Investing | ($23,649) | ($16,963) | $27,271 | | Net Cash Provided by Financing | $20,452 | $40,474 | $4,031 | [Notes to Consolidated Financial Statements](index=72&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail key accounting policies, debt terms, commitments for the new APC facility, and the status of ongoing legal proceedings - **Inventory:** The company recorded an inventory write-down of **$1.25 million** in 2021 related to the suspension of its Avive product[413](index=413&type=chunk) - **Long-Term Debt:** As of Dec 31, 2021, the company had **$50 million in debt outstanding** from its Oberland Facility, with a net carrying value of $44.8 million[472](index=472&type=chunk)[473](index=473&type=chunk) - **Stock-Based Compensation:** Total stock-based compensation expense was **$10.9 million** in 2021, with $19.5 million of unrecognized cost remaining[485](index=485&type=chunk) - **Commitments:** The company has significant commitments for its new APC facility, with an estimated **$19.3 million** to be spent in 2022[531](index=531&type=chunk) - **Legal Proceedings:** The company is defending a securities class action lawsuit (Einhorn v Axogen) which was dismissed by the district court but is now on appeal[537](index=537&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=96&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There were no changes in or disagreements with accountants during the period - None[542](index=542&type=chunk) [Controls and Procedures](index=96&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - Management concluded that the company's **disclosure controls and procedures were effective** as of December 31, 2021[544](index=544&type=chunk) - Management concluded that the company's **internal control over financial reporting was effective** as of December 31, 2021[547](index=547&type=chunk) - The company's independent registered public accounting firm has issued an **attestation report on the effectiveness** of management's internal control over financial reporting[549](index=549&type=chunk) [Other Information](index=97&type=section&id=Item%209B.%20Other%20Information) There is no other information to report in this section - None[549](index=549&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=97&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This section is not applicable to the company - Not applicable[549](index=549&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=98&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, officers, and corporate governance is incorporated by reference from the 2022 definitive proxy statement - Information regarding directors, executive officers, and corporate governance is **incorporated by reference** from the company's 2022 definitive proxy statement[551](index=551&type=chunk)[552](index=552&type=chunk) - The company has adopted a **Code of Business Conduct and Ethics**, which is posted on its website[553](index=553&type=chunk) [Executive Compensation](index=98&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive compensation is incorporated by reference from the 2022 definitive proxy statement - Information regarding executive compensation is **incorporated by reference** from the company's 2022 definitive proxy statement[554](index=554&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=98&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and equity compensation plans is incorporated by reference from the 2022 definitive proxy statement - Information regarding security ownership and equity compensation plans is **incorporated by reference** from the company's 2022 definitive proxy statement[554](index=554&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=98&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2022 definitive proxy statement - Information regarding certain relationships, related transactions, and director independence is **incorporated by reference** from the company's 2022 definitive proxy statement[555](index=555&type=chunk) [Principal Accountant Fees and Services](index=98&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information concerning principal accountant fees and services is incorporated by reference from the 2022 definitive proxy statement - Information regarding principal accountant fees and services is **incorporated by reference** from the company's 2022 definitive proxy statement[556](index=556&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=99&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the report and includes Schedule II detailing valuation and qualifying accounts Schedule II – Valuation and Qualifying Accounts (in thousands) | Description | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | **Allowance for Doubtful Accounts (Ending Balance)** | $1,092 | $416 | $276 | | **Valuation Allowance for Deferred Tax Assets (Ending Balance)** | $39,932 | $46,517 | $53,251 | - A comprehensive list of exhibits is provided, including articles of incorporation, bylaws, material contracts, and certifications[562](index=562&type=chunk)[566](index=566&type=chunk)[567](index=567&type=chunk) [Form 10-K Summary](index=107&type=section&id=Item%2016.%20Form%2010-K%20Summary) This section is not applicable, and no summary is provided in the report - None[572](index=572&type=chunk)

AxoGen, Inc. (NASDAQ:AXGN) Q4 2021 Earnings Conference Call February 22, 2022 4:30 PM ET Company Participants Ed Joyce - Director, IR Karen Zaderej - Chairman, President & CEO Peter Mariani - EVP & CFO Conference Call Participants David Turkaly - JMP Securities\ Erin Broderick - SVB Leerink Operator Greetings. Welcome to the AxoGen, Incorporated Fourth Quarter 2021 Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal of presentat ...

AxoGen, Inc. (NASDAQ:AXGN) Q3 2021 Earnings Conference Call November 3, 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 Erin Soldatis – SVB Leerink Anthony Petrone – Jeffries Kyle Rose – Canaccord Operator Greetings, welcome to AxoGen Reports Third Quarter 2021 Financial Results Call. At this time all participants are in a listen-only mode. A question-and-ans ...

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 ...