Axogen, Inc. (NASDAQ: AXGN), a global leader in developing and
marketing innovative surgical solutions for damage or transection
to peripheral nerves, today reported financial results and business
highlights for the first quarter ended March 31, 2019.
First Quarter 2019 Financial Results and Recent Business
Highlights
- Revenue of $23.3 million, an increase of 35% compared to first
quarter 2018 revenue of $17.3 million
- Gross margin of 84.0% compared to 84.3% in the first quarter of
2018
- Net loss for the quarter was $9.5 million, or $0.24 per share,
compared to net loss of $5.6 million, or $0.16 per share in the
first quarter of 2018
- Adjusted net loss for the first quarter of 2019 was $6.0
million, or $0.15 per share, compared with adjusted net loss of
$3.9 million, or $0.11 per share, in the first quarter of
2018
- Adjusted EBITDA loss of $6.5 million compared to Adjusted
EBITDA loss of $3.1 million in the first quarter of 2018
- Completed planned blinded interim analysis for its RECON®
Study, with 50 additional patients to be enrolled by the summer of
2020
- Increased the number of members who may serve on our Board of
Directors to nine and appointed two new Board members: Quentin S.
Blackford, executive vice president and chief financial officer of
Dexcom, and Alan M. Levine, chairman, president, and chief
executive officer of Ballad Health
“We are pleased with our start to the year, and the
progress we’ve made strengthening and expanding our commercial
capabilities,” said Karen Zaderej, chairman, chief executive
officer, and president of Axogen. “We continue to make investments
across our broader capabilities, including additional clinical and
product development programs.”
Additional First Quarter and Recent Operational
Highlights
- Increased active accounts in the first quarter to 731, up 21%
from 604 a year ago
- Ended the quarter with 93 direct sales representatives and 18
independent agencies
- Conducted three national education courses in the first
quarter, including one Fellows program, and expect to conduct 25
programs in total during 2019
- Increased the number of clinical publications related to the
Axogen surgical portfolio to a total of 91
- Ended the quarter with $113.8 million in cash, cash
equivalents, and investments compared to $122.6 million at the end
of the fourth quarter of 2018. The decrease of $8.8 million in the
quarter includes $3.8 million for payment of the 2018 all-employee
annual performance bonuses, awards and related costs
“We are seeing growing surgeon awareness of our
clinical data that we believe will continue to drive adoption in
our core trauma market,” noted Zaderej. “We are also pleased with
continued surgeon response to our oral and maxillofacial
application, forward momentum in our breast reconstruction
neurotization market development, and early progress in our
development work in the surgical treatment of pain. I am confident
we are building strong capabilities to drive long-term, sustainable
growth across an expanding set of nerve repair applications.”
2019 Financial GuidanceThe Company continues to
expect 2019 revenue will be between $109 million and $114 million.
Management reiterates its expectation for gross margin to remain
above 80%. Additionally, the Company expects to have at least 115
direct sales representatives by year-end.
Conference CallThe 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 AxogenAxogen (AXGN) is the leading
company focused specifically on the science, development and
commercialization of technologies for peripheral nerve regeneration
and repair. We 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 Avive® Soft
Tissue Membrane, a minimally processed human umbilical cord
membrane that may be used as a resorbable soft tissue covering to
separate tissue layers and modulate inflammation in the surgical
bed. Along with these core surgical products, Axogen also offers
Acroval® Neurosensory & Motor Testing System and Axotouch®
Two-Point Discriminator. These evaluation and measurement tools
assist health care professionals in detecting changes in sensation,
assessing return of sensory, grip, and pinch function, evaluating
effective treatment interventions, and providing feedback to
patients on peripheral nerve function. The Axogen portfolio of
products is available in the United States, Canada, the United
Kingdom, 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 regarding our growth, our 2019 guidance,
product development, product potential, 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, 2018, 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 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. We also use the non-GAAP financial measures of
Adjusted Net Loss and Adjusted Net Loss Per Common Share - basic
and diluted which excludes non-cash stock compensation expense and
loss on extinguishment of debt 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 liquidity 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.Kaila
Krum, Vice President, Investor Relations and Corporate
Developmentkkrum@axogeninc.comInvestorRelations@AxogenInc.com
AXOGEN, INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(unaudited) |
(in thousands except share and per share amounts) |
|
|
|
|
|
March 31, |
|
December 31, |
|
|
|
|
|
|
2019 |
|
|
2018 |
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
$ |
23,522 |
|
|
$ |
24,294 |
|
Restricted cash |
|
|
|
|
|
6,000 |
|
|
|
6,000 |
|
Investments |
|
|
|
|
|
84,323 |
|
|
|
92,311 |
|
Accounts receivable, net |
|
|
|
|
|
15,193 |
|
|
|
15,321 |
|
Inventory |
|
|
|
|
|
13,120 |
|
|
|
11,982 |
|
Prepaid expenses and other |
|
|
|
|
|
3,471 |
|
|
|
1,045 |
|
Total current assets |
|
|
|
|
|
145,629 |
|
|
|
150,953 |
|
Property and equipment, net |
|
|
|
|
|
9,158 |
|
|
|
8,039 |
|
Operating lease right-of-use
assets |
|
|
|
|
|
4,437 |
|
|
|
- |
|
Finance lease right-of-use
assets |
|
|
|
|
|
104 |
|
|
|
- |
|
Intangible assets |
|
|
|
|
|
1,164 |
|
|
|
1,181 |
|
Total assets |
|
|
|
|
$ |
160,492 |
|
|
$ |
160,173 |
|
Liabilities and Shareholders’
Equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
|
|
$ |
15,107 |
|
|
$ |
12,998 |
|
Current maturities of long-term obligations |
|
|
|
|
|
1,361 |
|
|
|
28 |
|
Contract liabilities, current |
|
|
|
|
|
24 |
|
|
|
18 |
|
Total current liabilities |
|
|
|
|
|
16,492 |
|
|
|
13,044 |
|
Long-term obligations, net of
current maturities and deferred financing fees |
|
|
3,223 |
|
|
|
35 |
|
Other long-term liabilities |
|
|
|
|
|
- |
|
|
|
70 |
|
Contract liabilities |
|
|
|
|
|
34 |
|
|
|
42 |
|
Total liabilities |
|
|
|
|
|
19,749 |
|
|
|
13,191 |
|
Shareholders’ equity: |
|
|
|
|
|
|
|
Common stock, $.01 par value per share; 50,000,000 shares
authorized; 39,128,843 and 38,900,875 shares issued and
outstanding |
|
|
|
|
|
391 |
|
|
|
389 |
|
Additional paid-in capital |
|
|
|
|
|
300,582 |
|
|
|
297,319 |
|
Accumulated deficit |
|
|
|
|
|
(160,230 |
) |
|
|
(150,726 |
) |
Total shareholders’ equity |
|
|
|
|
|
140,743 |
|
|
|
146,982 |
|
Total liabilities and shareholders'
equity |
|
|
|
|
$ |
160,492 |
|
|
$ |
160,173 |
|
|
|
|
|
|
|
|
|
AXOGEN, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
Three Months ended March 31, 2019 and 2018 |
(unaudited) |
(in thousands except share and per share amounts) |
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
March 31, |
|
|
|
|
|
|
2019 |
|
|
|
2018 |
|
Revenues |
|
|
|
|
$ |
23,285 |
|
|
$ |
17,260 |
|
Cost of goods sold |
|
|
|
|
|
3,714 |
|
|
|
2,712 |
|
Gross profit |
|
|
|
|
|
19,571 |
|
|
|
14,548 |
|
Costs and expenses: |
|
|
|
|
|
|
|
Sales and marketing |
|
|
|
|
|
16,434 |
|
|
|
12,469 |
|
Research and development |
|
|
|
|
|
4,139 |
|
|
|
2,058 |
|
General and administrative |
|
|
|
|
|
9,201 |
|
|
|
5,012 |
|
Total costs and expenses |
|
|
|
|
|
29,774 |
|
|
|
19,539 |
|
Loss from operations |
|
|
|
|
|
(10,203 |
) |
|
|
(4,991 |
) |
Other income (expense): |
|
|
|
|
|
|
|
Investment income |
|
|
|
|
|
716 |
|
|
|
- |
|
Interest expense |
|
|
|
|
|
(14 |
) |
|
|
(586 |
) |
Interest expense - deferred financing costs |
|
|
|
|
|
- |
|
|
|
(61 |
) |
Other expense |
|
|
|
|
|
(3 |
) |
|
|
(1 |
) |
Total other income (expense) |
|
|
|
|
|
699 |
|
|
|
(648 |
) |
Net loss |
|
|
|
|
$ |
(9,504 |
) |
|
$ |
(5,639 |
) |
Weighted Average Common Shares outstanding
– basic and diluted |
|
|
|
|
38,933,984 |
|
|
|
34,521,122 |
|
Loss Per Common share – basic and diluted |
|
|
|
|
$ |
(0.24 |
) |
|
$ |
(0.16 |
) |
|
|
|
|
|
|
|
|
Adjusted Net Loss |
|
|
|
|
|
(6,004 |
) |
|
|
(3,910 |
) |
Adjusted Net Loss Per Common Share - basic and
diluted |
|
|
|
|
$ |
(0.15 |
) |
|
$ |
(0.11 |
) |
|
|
|
|
|
|
|
|
AXOGEN, INC. |
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP
FINANCIAL MEASURES |
Three Months ended March 31, 2019 and 2018 |
(unaudited) |
(in thousands except share and per share amounts) |
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
March 31, |
|
|
|
|
|
|
2019 |
|
|
|
2018 |
|
Net loss |
|
|
|
|
$ |
(9,504 |
) |
|
$ |
(5,639 |
) |
Depreciation and amortization expense |
|
|
|
|
|
251 |
|
|
|
260 |
|
Investment income |
|
|
|
|
|
(716 |
) |
|
|
- |
|
Interest expense |
|
|
|
|
|
14 |
|
|
|
586 |
|
EBITDA - non
GAAP |
|
|
|
|
$ |
(9,955 |
) |
|
$ |
(4,793 |
) |
|
|
|
|
|
|
|
|
Non Cash Stock Compensation
Expense |
|
|
|
|
|
2,315 |
|
|
|
1,729 |
|
Litigation and related
costs |
|
|
|
|
|
1,185 |
|
|
|
- |
|
Adjusted EBITDA - non
GAAP |
|
|
|
|
$ |
(6,455 |
) |
|
$ |
(3,064 |
) |
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
$ |
(9,504 |
) |
|
$ |
(5,639 |
) |
Non Cash Stock Compensation
Expense |
|
|
|
|
|
2,315 |
|
|
|
1,729 |
|
Litigation and related
costs |
|
|
|
|
|
1,185 |
|
|
|
- |
|
Adjusted Net Loss -
non GAAP |
|
|
|
|
$ |
(6,004 |
) |
|
$ |
(3,910 |
) |
Weighted Average
Common Shares outstanding – basic and diluted |
|
|
|
|
38,933,984 |
|
|
|
34,521,122 |
|
Adjusted Net Loss Per Common
Share - basic and diluted |
|
|
|
|
$ |
(0.15 |
) |
|
$ |
(0.11 |
) |
|
|
|
|
|
|
|
|
AXOGEN, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY |
Three Months ended March 31, 2019 and 2018 |
(unaudited) |
(in thousands except share and per share amounts) |
|
|
Common Stock |
|
Additional Paid-in Capital |
|
Accumulated Deficit |
|
Total Shareholders' Equity |
Balance at December 31, 2017 |
$ |
344 |
|
$ |
153,167 |
|
$ |
(128,329 |
) |
|
$ |
25,182 |
|
Net Loss |
|
- |
|
|
- |
|
|
(5,639 |
) |
|
|
(5,639 |
) |
Stock-based compensation |
|
- |
|
|
1,729 |
|
|
- |
|
|
|
1,729 |
|
Exercise of stock options |
|
3 |
|
|
416 |
|
|
- |
|
|
|
419 |
|
Balance at March 31, 2018 |
$ |
347 |
|
$ |
155,312 |
|
$ |
(133,968 |
) |
|
$ |
21,691 |
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018 |
$ |
389 |
|
$ |
297,319 |
|
$ |
(150,726 |
) |
|
$ |
146,982 |
|
Net Loss |
|
- |
|
|
- |
|
|
(9,504 |
) |
|
|
(9,504 |
) |
Stock-based compensation |
|
- |
|
|
2,315 |
|
|
- |
|
|
|
2,315 |
|
Exercise of stock options |
|
2 |
|
|
948 |
|
|
- |
|
|
|
950 |
|
Balance at March 31, 2019 |
$ |
391 |
|
$ |
300,582 |
|
$ |
(160,230 |
) |
|
$ |
140,743 |
|
|
|
|
|
|
|
|
|
AXOGEN, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
Three Months ended March 31, 2019 and 2018 |
(unaudited) |
(in thousands except share and per share amounts) |
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
March 31, |
|
|
|
|
|
|
2019 |
|
|
|
2018 |
|
Cash flows from operating
activities: |
|
|
|
|
|
|
|
Net loss |
|
|
|
|
$ |
(9,504 |
) |
|
$ |
(5,639 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
Depreciation |
|
|
|
|
|
211 |
|
|
|
180 |
|
Amortization of right-of-use assets |
|
|
|
|
|
437 |
|
|
|
- |
|
Amortization of intangible assets |
|
|
|
|
|
26 |
|
|
|
20 |
|
Amortization of deferred financing costs |
|
|
|
|
|
- |
|
|
|
61 |
|
Provision for bad debt |
|
|
|
|
|
16 |
|
|
|
57 |
|
Inventory write-downs |
|
|
|
|
|
444 |
|
|
|
354 |
|
Unrealized (gains) losses on short term investments |
|
|
|
|
|
(294 |
) |
|
|
- |
|
Share-based compensation |
|
|
|
|
|
2,315 |
|
|
|
1,729 |
|
Change in assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
|
112 |
|
|
|
(759 |
) |
Inventory |
|
|
|
|
|
(1,582 |
) |
|
|
(1,091 |
) |
Prepaid expenses and other |
|
|
|
|
|
(1,783 |
) |
|
|
(502 |
) |
Accounts payable and accrued expenses |
|
|
|
|
|
1,161 |
|
|
|
(241 |
) |
Cash paid for Operating Leases |
|
|
|
|
|
(423 |
) |
|
|
- |
|
Cash paid for interest portion of Finance Leases |
|
|
|
|
|
(1 |
) |
|
|
- |
|
Contract and other liabilities |
|
|
|
|
|
(2 |
) |
|
|
(13 |
) |
Net cash used in operating
activities |
|
|
|
|
|
(8,867 |
) |
|
|
(5,844 |
) |
|
|
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
|
|
|
(478 |
) |
|
|
(360 |
) |
Sale of investments |
|
|
|
|
|
57,171 |
|
|
|
- |
|
Purchase of investments |
|
|
|
|
|
(48,914 |
) |
|
|
- |
|
Acquisition of intangible assets |
|
|
|
|
|
(9 |
) |
|
|
(141 |
) |
Net cash provided by / (used for) investing
activities |
|
|
|
|
|
7,770 |
|
|
|
(501 |
) |
|
|
|
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
|
|
|
Borrowing on revolving loan |
|
|
|
|
|
- |
|
|
|
16,146 |
|
Payments on revolving loan |
|
|
|
|
|
- |
|
|
|
(16,163 |
) |
Repayments of long term debt |
|
|
|
|
|
- |
|
|
|
(3 |
) |
Cash paid for debt portion of Finance Leases |
|
|
|
|
|
(7 |
) |
|
|
- |
|
Proceeds from exercise of stock options and warrants |
|
|
|
|
332 |
|
|
|
419 |
|
Net cash provided by financing
activities |
|
|
|
|
|
325 |
|
|
|
399 |
|
|
|
|
|
|
|
|
|
Net decrease in cash, cash equivalents,
and restricted cash |
|
|
|
|
(772 |
) |
|
|
(5,947 |
) |
Cash, cash equivalents, and
restricted cash, beginning of period |
|
|
|
|
30,294 |
|
|
|
36,507 |
|
Cash, cash equivalents, and
restricted cash, end of period |
|
|
|
$ |
29,522 |
|
|
$ |
30,560 |
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow
activity: |
|
|
|
|
|
|
|
Cash paid for interest |
|
|
|
|
$ |
14 |
|
|
$ |
577 |
|
Supplemental disclosure of
non-cash investing and financing activities |
|
|
|
|
|
Payments of fixed assets in accounts payable and accrued
expenses |
|
$ |
946 |
|
|
$ |
- |
|
Proceeds from stock option exercise in Other Receivables |
|
|
|
$ |
618 |
|
|
$ |
- |
|
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