Axogen, Inc. Reports 2021 Second Quarter Financial Results

ALACHUA, Fla. and TAMPA, Fla., Aug. 04, 2021 (GLOBE NEWSWIRE) -- Axogen, Inc. (NASDAQ: AXGN), a global leader in developing and marketing innovative surgical solutions for peripheral nerve injuries, today reported financial results and business highlights for the second quarter ended June 30, 2021.

Second Quarter 2021 Financial Results and Recent Business Highlights

• Net revenue was $33.6 million during the quarter, a 52% increase compared to second quarter 2020 revenue of $22.1 million.
• Gross margin was 78.9% for the quarter, compared to 74.7% one year ago. Gross margin would have been approximately 83.1% excluding the impact of a one-time charge of approximately $1.4 million reflecting the write-down of inventory and production costs related to the previously disclosed suspension of market availability of Avive^® Soft Tissue Membrane pending ongoing discussions with the FDA.
• Net loss for the quarter was $7.9 million, or $0.19 per share, compared to a net loss of $8.1 million, or $0.20 per share, in the second quarter of 2020.
• Adjusted net loss was $3.7 million for the quarter, or $0.09 per share, compared with adjusted net loss of $5.9 million, or $0.15 per share, in the second quarter of 2020.
• Adjusted EBITDA loss was $2.4 million for the quarter, compared to an adjusted EBITDA loss of $5.7 million in the second quarter of 2020.
• The balance of cash, cash equivalents, and investments on June 30, 2021 was $106.2 million, compared to a balance of $97.2 million on March 31, 2021. The net increase includes $15.0 million of additional debt proceeds drawn from the Company’s debt facility with Oberland Capital, and net operating cash flow in the quarter of $1.2 million, partially offset by facilities capital expenditures of $7.2 million.
• Appointed John H. Johnson to the Axogen, Inc. Board of Directors on July 19, 2021. Mr. Johnson has more than 30 years of experience in the biopharma industry, currently serves on the board of directors of Strongbridge Biopharma, Verastem Oncology, and BioAgilytix and is the CEO of Strongbridge Biopharma.
  

“I am pleased with our Q2 performance, as our team continued to execute in a dynamic healthcare market,” commented Karen Zaderej, chairman, CEO, and president of Axogen, Inc. “Surgeon demand for our products continued to increase as we drove deeper penetration in our customer accounts. Despite the ongoing impact of the pandemic, the success of our commercial strategy, supported by our ten-year investment in meaningful clinical data, provides us with increasing confidence in the long-term growth outlook for our business.”  

Additional Operational and Business Highlights

• Core accounts in the second quarter were 306, a 34% increase compared to 228 in the second quarter of 2020 and continue to represent approximately 60% of total revenue.
• Active accounts were 959, a 22% increase compared to 789 in the second quarter a year ago. Revenue from the top 10% of our active accounts continued to represent approximately 35% of total revenue in the quarter.
• Ended the quarter with 109 direct sales representatives, an increase of three from the prior quarter and compared to 112 one year ago.
• Ended the quarter with 164 peer-reviewed clinical publications featuring Axogen’s nerve repair product portfolio.

Updating 2021 Financial Guidance
Management is updating financial guidance, expecting full-year 2021 revenue will be in the range of $134.5 million to $137.5 million versus the prior range of $133.0 million to $136.0 million. Additionally, management continues to expect full-year 2021 gross margin to remain above 80%.

Conference Call
The Company will host a conference call and webcast for the investment community today at 4:30 p.m. ET. Investors interested in participating by phone are invited to call toll free at 1-877-407-0993 or use the direct dial-in number 1-201-689-8795. Those interested in listening to the conference call live via the Internet can do so by visiting the Investors page of the Company’s website at www.axogeninc.com and clicking on the webcast link on the Investors home page.

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

About Axogen
Axogen (AXGN) is the leading company focused specifically on the science, development, and commercialization of technologies for peripheral nerve regeneration and repair. Axogen employees are passionate about helping to restore peripheral nerve function and quality of life to patients with physical damage or transection to peripheral nerves by providing innovative, clinically proven, and economically effective repair solutions for surgeons and health care providers. Peripheral nerves provide the pathways for both motor and sensory signals throughout the body. Every day, people suffer traumatic injuries or undergo surgical procedures that impact the function of their peripheral nerves. Physical damage to a peripheral nerve, or the inability to properly reconnect peripheral nerves, can result in the loss of muscle or organ function, the loss of sensory feeling, or the initiation of pain.

Axogen's platform for peripheral nerve repair features a comprehensive portfolio of products, including Avance^® Nerve Graft, a biologically active off-the-shelf processed human nerve allograft for bridging severed peripheral nerves without the comorbidities associated with a second surgical site; Axoguard Nerve Connector^®, a porcine submucosa extracellular matrix (ECM) coaptation aid for tensionless repair of severed peripheral nerves; Axoguard Nerve Protector^®, a porcine submucosa ECM product used to wrap and protect damaged peripheral nerves and reinforce the nerve reconstruction while preventing soft tissue attachments; and Axoguard Nerve Cap^®, a porcine submucosa ECM product used to protect a peripheral nerve end and separate the nerve from the surrounding environment to reduce the development of symptomatic or painful neuroma. The Axogen portfolio of products is available in the United States, Canada, the United Kingdom, South Korea, and several other European and international countries.

Cautionary Statements Concerning Forward-Looking Statements
This press release contains “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations or predictions of future conditions, events, or results based on various assumptions and management's estimates of trends and economic factors in the markets in which we are active, as well as our business plans. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “projects,” “forecasts,” “continue,” “may,” “should,” “will,” “goals,” and variations of such words and similar expressions are intended to identify such forward-looking statements. The forward-looking statements may include, without limitation, statements related to the expected impact of COVID-19 on our business, statements regarding our growth, our 2021 financial guidance, product development, product potential, regulatory process and approvals, APC renovation timing and expense, financial performance, sales growth, product adoption, market awareness of our products, data validation, our assessment of our internal controls over financial reporting, our visibility at and sponsorship of conferences and educational events. The forward-looking statements are and will be subject to risks and uncertainties, which may cause actual results to differ materially from those expressed or implied in such forward-looking statements. Forward-looking statements contained in this press release should be evaluated together with the many uncertainties that affect our business and our market, particularly those discussed under Part I, Item 1A., “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as well as other risks and cautionary statements set forth in our filings with the U.S. Securities and Exchange Commission. Forward-looking statements are not a guarantee of future performance, and actual results may differ materially from those projected. The forward-looking statements are representative only as of the date they are made and, except as required by applicable law, we assume no responsibility to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances, or otherwise. 

About Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements, we use the non-GAAP financial measures of EBITDA, which measures earnings before interest, income taxes, depreciation and amortization, and Adjusted EBITDA which further excludes non-cash stock compensation expense and litigation and related expenses. We also use the non-GAAP financial measures of Adjusted Net Income or Loss and Adjusted Net Income or Loss Per Common Share - basic and diluted which excludes non-cash stock compensation expense and litigation and related expenses from Net Loss and Net Loss Per Common Share - basic and diluted, respectively. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures should be read in conjunction with our financial statements prepared in accordance with GAAP. The reconciliations of Axogen’s GAAP financial measures to the corresponding non-GAAP measures should be carefully evaluated.

We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. We believe these non-GAAP financial measures are useful to investors because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the performance of our business.

Contact:
Axogen, Inc.
Peter J. Mariani, Executive Vice President and Chief Financial Officer
InvestorRelations@AxogenInc.com

	AXOGEN, INC.
	CONDENSED CONSOLIDATED BALANCE SHEETS
	(unaudited)
	(In Thousands, Except Share Amounts)
			June 30,				December 31,
				2021				2020
	Assets
	Current assets:
	Cash and cash equivalents		$	53,078			$	48,767
	Restricted cash			6,333				6,842
	Investments			46,839				55,199
	Accounts receivable, net			18,182				17,618
	Inventory			13,415				12,529
	Prepaid expenses and other			3,948				4,296
	Total current assets			141,795				145,251
	Property and equipment, net			50,952				38,398
	Operating lease right-of-use assets			15,272				15,614
	Finance lease right-of-use assets			53				64
	Intangible assets			2,460				2,054
	Total assets		$	210,532			$	201,381
	Liabilities and Shareholders’ Equity
	Current liabilities:
	Accounts payable and accrued expenses		$	19,839			$	21,968
	Current maturities of long-term lease obligations			1,789				863
	Total current liabilities			21,628				22,831
	Long-term debt, net of financing fees			46,081				32,027
	Debt derivative liability			3,776				2,497
	Long-term lease obligations			20,344				20,874
	Other long-term liabilities			—				3
	Total liabilities			91,829				78,232
	Shareholders’ equity:
	Common stock, $.01 par value per share; 100,000,000 shares authorized; 40,842,717 and 40,618,766 shares issued and outstanding			413				406
	Additional paid-in capital			336,495				326,390
	Accumulated deficit			(218,205	)			(203,647	)
	Total shareholders’ equity			118,703				123,149
	Total liabilities and shareholders' equity		$	210,532			$	201,381

AXOGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months ended June 30, 2021 and 2020
(unaudited)
		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
			2021				2020				2021				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
Costs and expenses:
Sales and marketing			19,250				14,290				37,224				32,128
Research and development			5,723				4,071				11,471				8,685
General and administrative			8,669				6,404				17,032				11,906
Total costs and expenses			33,642				24,765				65,727				52,719
Loss from operations			(7,154	)			(8,254	)			(13,374	)			(16,763	)
Other income (expense):
Interest income			29				237				63				548
Interest expense			(565	)			(31	)			(1,010	)			(62	)
Change in fair value of derivatives			(84	)			—				(105	)			—
Other expense			(124	)			(57	)			(132	)			(20	)
Total other expense			(744	)			149				(1,184	)			466
Net loss		$	(7,898	)		$	(8,105	)		$	(14,558	)		$	(16,297	)
Weighted average common shares outstanding – basic and diluted			41,081				39,823				40,894				39,761
Loss per common share – basic and diluted		$	(0.19	)		$	(0.20	)		$	(0.36	)		$	(0.41	)
Adjusted net loss - non GAAP			(3,694	)			(5,883	)			(6,823	)			(13,519	)
Adjusted loss per common share – basic and diluted		$	(0.09	)		$	(0.15	)		$	(0.17	)		$	(0.34	)

AXOGEN, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
Three and Six Months ended June 30, 2021 and 2020
(unaudited)
		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
			2021				2020				2021				2020
Gross profit		$	26,488			$	16,511			$	52,353			$	35,956
Avive inventory write-down and production costs			1,429				-				1,429				-
Adjusted gross Profit		$	27,917			$	16,511			$	53,782			$	35,956
Net loss		$	(7,898	)		$	(8,105	)		$	(14,558	)		$	(16,297	)
Depreciation and amortization expense			661				346				1,501				665
Investment income			(29	)			(237	)			(63	)			(548	)
Income tax			62				58				67				38
Interest expense			565				31				1,010				62
EBITDA - non GAAP		$	(6,639	)		$	(7,907	)		$	(12,043	)		$	(16,080	)
Non cash stock compensation expense			3,804				2,222				6,499				2,778
Litigation and related costs			400				—				1,236				-
Adjusted EBITDA - non GAAP		$	(2,435	)		$	(5,685	)		$	(4,308	)		$	(13,302	)
Net loss		$	(7,898	)		$	(8,105	)		$	(14,558	)		$	(16,297	)
Non cash stock compensation expense			3,804				2,222				6,499				2,778
Litigation and related costs			400				—				1,236				—
Adjusted Net Loss - non GAAP		$	(3,694	)		$	(5,883	)		$	(6,823	)		$	(13,519	)
Weighted average common shares outstanding – basic and diluted			41,081				39,823				40,894				39,761
Adjusted loss per common share – basic and diluted		$	(0.09	)		$	(0.15	)		$	(0.17	)		$	(0.34	)

 

	AXOGEN, INC.
	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
	Six Months Ended June 30, 2021 and 2020
	(unaudited)
			Common Stock															Total
			Shares			Amount				Additional Paid- in Capital				Accumulated Deficit				Shareholders' Equity
	For the Three Months Ended June 30, 2021:
	Balance at March 31, 2021		40,842,717			$	408			$	329,603			$	(210,307	)		$	119,704
	Net loss		-				-				-				(7,898	)			(7,898	)
	Stock-based compensation		-				-				3,804				-				3,804
	Issuance of restricted /performance service awards		44,411																-
	Exercise of stock options and employee stock purchase plan		449,980				5				3,088				-				3,093
	Balance at June 30, 2021		41,337,108			$	413			$	336,495			$	(218,205	)		$	118,703
	For the Six Months Ended June 30, 2021:
	Balance at December 31, 2020		40,618,766			$	406			$	326,390			$	(203,647	)		$	123,149
	Net loss		-				-				-				(14,558	)			(14,558	)
	Stock-based compensation		-				-				6,499				-				6,499
	Issuance of restricted /performance service awards		138,944				1				(1	)			-				-
	Shares surrendered by employees to pay taxes		-				-				-				-				-
	Exercise of stock options and employee stock purchase plan		579,398				6				3,607				-				3,613
	Balance at June 30, 2021		41,337,108			$	413			$	336,495			$	(218,205	)		$	118,703
	For the Three Months Ended June 30, 2020:
	Balance at March 31, 2020		39,738,767			$	397			$	311,850			$	(188,053	)		$	124,194
	Net loss		-				-				-				(8,105	)			(8,105	)
	Stock-based compensation		-				-				2,222				-				2,222
	Issuance of restricted and performan stock units		10,021				-												-
	Shares surrendered by employees to pay taxes		(1,766	)			-				(17	)			-				(17	)
	Exercise of stock options and employee stock purchase plan		273,758				3				1463								1,466
	Balance at June 30, 2020		40,020,780			$	400			$	315,518			$	(196,158	)		$	119,760
	For the Six Months Ended June 30, 2020:
	Balance at December 31, 2019		39,589,755			$	396			$	311,618			$	(179,861	)		$	132,153
	Net loss		-				-				-				(16,297	)			(16,297	)
	Stock-based compensation		-				-				2,778				-				2,778
	Issuance of restricted /performance service awards		145,943				1				(1	)			-				-
	Shares surrendered by employees to pay taxes		(38,736	)			(1	)			(657	)			-				(658	)
	Exercise of stock options and employee stock purchase plan		323,818				4				1,780				-				1,784
	Balance at June 30, 2020		40,020,780			$	400			$	315,518			$	(196,158	)		$	119,760

	AXOGEN, INC.
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	Six Months ended June 30, 2021 and 2020
	(unaudited)
			Six Months Ended
			June 30,				June 30,
				2021				2020
	Cash flows from operating activities:
	Net loss		$	(14,558	)		$	(16,297	)
	Adjustments to reconcile net loss to net cash used in operating activities:
	Depreciation			1,405				618
	Amortization of right-of-use assets			960				802
	Amortization of intangible assets			96				72
	Amortization of deferred financing fees			227				—
	Provision for bad debt			(65	)			(115	)
	Provision for inventory write down			2,455				1,624
	Change in fair value of derivatives			105				—
	Change in investment gains and losses			31				(141	)
	Share-based compensation			6,499				2,778
	Change in assets and liabilities:
	Accounts receivable			(498	)			3,010
	Inventory			(3,341	)			(600	)
	Prepaid expenses and other			199				(1,699	)
	Accounts payable and accrued expenses			(5,061	)			(4,212	)
	Operating Lease Obligations			35				(915	)
	Cash paid for interest portion of Finance Leases			(1	)			—
	Contract and other liabilities			(3	)			(6	)
	Net cash used in operating activities			(11,515	)			(15,081	)
	Cash flows from investing activities:
	Purchase of short-term investments			(10,924	)			(13,183	)
	Purchase of property and equipment			(23,966	)			(22,965	)
	Sale/Maturities of short-term investments			32,295				59,883
	Cash payments for intangible assets			(692	)			(216	)
	Net cash provided by/ (used for) investing activities			(3,287	)			23,519
	Cash flows from financing activities:
	Proceeds from the issuance long term debt			15,000				35,000
	Proceeds from the paycheck protection program			—				7,820
	Repayment of paycheck protection program			—				(7,820	)
	Payments of debt issuance costs			—				(350	)
	Payments for repurchase of common stock for employee tax withholding			—				(658	)
	Cash paid for debt portion of finance leases			(8	)			(8	)
	Proceeds from exercise of stock options and warrants			3,612				1,784
	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, beginning of year			55,609				41,724
	Cash, cash equivalents and restricted cash, end of period		$	59,411			$	85,930
	Supplemental disclosures of cash flow activity:
	Cash paid for interest			739				23
	Supplemental disclosure of non-cash investing and financing activities
	Acquisition of fixed assets in accounts payable and accrued expenses			3,035				617
	Obtaining a right-of-use asset in exchange for a lease liability			371				796
	Embedded derivative associated with the long-term debt			1,173				2,563
	Acquisition of intangible assets in accounts payable and accrued expenses			190				—