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, 2017.
Second Quarter 2017 Financial Results and
Recent Business Highlights
- Revenue of $15.2 million, up 46% compared to $10.4 million in
the second quarter of 2016
- Gross margin of 85.0% compared to 85.2% in the second quarter
of 2016
- Net loss for the second quarter of 2017 is $2.1 million, or
$0.06 per share, compared with a net loss of $2.8 million, or $0.09
per share, in the second quarter of 2016
- Adjusted EBITDA loss of $593,000 compared to Adjusted EBITDA
loss of $932,000 in Q2 2016
- Increased our addressable market opportunity to $2 billion to
include expanded use in Oral and Maxillofacial (OMF) procedures,
including nerve repair during mandible reconstruction due to benign
tumor resections
- Appointed Jon Gingrich as Chief Commercial Officer. He brings
extensive medical device experience with Hologic and Boston
Scientific and will oversee the development and execution of the
company’s sales and marketing strategies
“Our continued growth reflects our focus on
execution,” said Karen Zaderej, President and Chief Executive
Officer. “We are building the peripheral nerve repair market and
increasing confidence in our portfolio of products, as illustrated
by OMF surgeons’ expanding use of our products in nerve repair
during mandible reconstruction.” Additional
Second Quarter and Recent Operational Highlights
- Increased active accounts in the second quarter to 510, up 36%
from 374 in Q2 2016
- Ended the quarter with 51 direct sales reps and 52
year-to-date, as well as 20 independent distributors
- Conducted three national education symposia in the second
quarter, and eight year-to-date; these surgeon lead symposia
highlight recent data and emerging best practices in peripheral
nerve repair
- Increased the number of presentations of our surgical portfolio
to a total of 18 year-to-date
- Built peer reviewed clinical publications for our surgical
portfolio to a total of 52. Three of these recent publications
focused on the use of AxoGen products in nerve repair during
mandible reconstruction
- Continued market development activities in potential expansion
applications, including breast reconstruction neurotization and
neuropathic pain associated with lower limb total joint
replacement
- Increased global awareness of our product portfolio by
exhibiting and conducting surgeon-lead educational programs at
professional society meetings in Europe and Asia
- Ended the quarter with $23.9 million in cash compared to $25.9
million at the end of Q1 2017. Net cash burn in Q2 was $2.0
million
- Ended the quarter with $25 million of total bank debt,
unchanged from the end of Q1 2017
“We’re pleased with our results through the first
half of 2017,” added Zaderej. “We continue to increase our
capabilities across the company, and will continue to develop new
nerve repair applications and expand our portfolio of products
where we believe we can bring meaningful solutions to current
clinical challenges.”
2017 Financial GuidanceManagement
reiterates 2017 annual revenue will grow at least 40% over 2016
revenue and gross margins will remain above 80%.
Upcoming EventsMembers of the
AxoGen management team will participate at the following upcoming
conferences and events:
- Wedbush PacGrow Healthcare Conference in New York City on
August 15
- American Society for Surgery of the Hand Annual Meeting in San
Francisco on September 7-9
- Lake Street Capital Markets Best Ideas Growth (BIG) Conference
in New York City on September 13
- Dougherty & Co Investor Conference in Minneapolis on
September 19
- Cantor Fitzgerald Healthcare Conference in New York City on
September 25
- American Association of Oral and Maxillofacial Surgeons
Scientific Sessions in San Francisco on October 9-14
The Company is also announcing that it will be
conducting its second analyst and investor day on Monday, November
20 in New York City. This event will provide an additional
opportunity to educate the investment community about the Company,
as well as a more detailed review of our current market and
expansion opportunities.
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 a
global leader in innovative surgical solutions for peripheral nerve
injuries. AxoGen is the only company focused specifically on the
science, development and commercialization of technologies for
peripheral nerve regeneration and repair. We are passionate about
restoring nerve function and quality of life to patients with
peripheral nerve injuries 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. Damage to
a peripheral nerve can result in the loss of muscle or organ
function, the loss of sensory feeling, or the initiation of
pain.
AxoGen's portfolio of products includes Avance®
Nerve Graft, an off-the-shelf processed human nerve allograft for
bridging severed 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 nerves, AxoGuard® Nerve Protector, a porcine
submucosa ECM product used to wrap and protect injured 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 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," 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 assessment on
our internal control over financial reporting, our growth, our 2017
guidance, product development, product potential, financial
performance, sales growth, product adoption, market awareness of
our products, data validation, our visibility at and sponsorship of
conferences and educational events. The forward-looking statements
are subject to risks and uncertainties, which may cause results to
differ materially from those set forth in the statements.
Forward-looking statements in this release should be evaluated
together with the many uncertainties that affect AxoGen's business
and its market, particularly those discussed in the risk factors
and cautionary statements in AxoGen's filings with the Securities
and Exchange Commission. Forward-looking statements are not
guarantees of future performance, and actual results may differ
materially from those projected. The forward-looking statements are
representative only as of the date they are made and, except as
required by law, AxoGen assumes no responsibility to update any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
About Non-GAAP Financial
MeasuresTo 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. 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 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.
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AXOGEN, INC. |
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CONDENSED CONSOLIDATED BALANCE
SHEETS |
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June 30, |
|
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2017 |
December 31, |
|
(unaudited) |
2016 |
|
|
Assets |
|
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|
|
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|
Current
assets: |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
$ |
23,870,200 |
|
|
|
|
$ |
30,014,405 |
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|
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Accounts
receivable, net |
|
9,422,467 |
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|
|
|
|
8,052,203 |
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|
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Inventory |
|
6,304,097 |
|
|
|
|
|
5,458,840 |
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|
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Prepaid
expenses and other |
|
585,090 |
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|
|
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|
511,804 |
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Total current assets |
|
40,181,854 |
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|
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|
44,037,252 |
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Property and
equipment, net |
|
1,643,257 |
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|
1,494,247 |
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Intangible
assets |
|
940,594 |
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|
|
|
|
828,979 |
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|
$ |
42,765,705 |
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$ |
46,360,478 |
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Liabilities and
Shareholders’ Equity (Deficit) |
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Current
liabilities: |
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Borrowings under revolving loan agreement |
$ |
3,829,765 |
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$ |
4,025,023 |
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Accounts
payable and accrued expenses |
|
7,057,831 |
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|
|
|
|
|
7,002,165 |
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Current
maturities of long term obligations |
|
24,947 |
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|
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|
20,899 |
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Deferred
revenue, current |
|
39,399 |
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|
|
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|
33,282 |
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Total current liabilities |
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10,951,942 |
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|
11,081,369 |
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Long Term
Obligations, net of current maturities and deferred financing
fees |
|
20,314,254 |
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|
20,265,745 |
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Deferred
lease |
|
109,332 |
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|
-- |
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Deferred
revenue |
|
81,423 |
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|
|
|
|
92,215 |
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Total liabilities |
|
31,456,951 |
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|
31,439,329 |
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Shareholders’
equity (deficit): |
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Common
stock, $.01 par value; 50,000,000 shares authorized; 33,184,710 and
33,008,865 shares issued and outstanding |
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331,847 |
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330,088 |
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Additional paid-in capital |
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134,682,934 |
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|
132,474,884 |
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Accumulated deficit |
|
(123,706,027 |
) |
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|
(117,883,823 |
) |
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Total shareholders’
equity |
|
11,308,754 |
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|
14,921,149 |
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$ |
42,765,705 |
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$ |
46,360,478 |
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AXOGEN, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
Three and Six Months ended June 30, 2017 and
2016 |
(unaudited) |
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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June 30, |
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June 30, |
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2017 |
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2016 |
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2017 |
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2016 |
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Revenues |
$ |
15,168,064 |
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$ |
10,381,883 |
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$ |
27,409,137 |
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$ |
18,493,642 |
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Cost of goods
sold |
|
2,277,201 |
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|
1,534,412 |
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|
4,192,849 |
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|
2,940,003 |
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Gross profit |
|
12,890,863 |
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|
8,847,471 |
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|
23,216,288 |
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|
15,553,639 |
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Costs and
expenses: |
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Sales and
marketing |
|
9,438,288 |
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|
6,780,363 |
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|
18,048,770 |
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|
12,986,238 |
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Research
and development |
|
1,521,123 |
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|
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|
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|
936,823 |
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|
|
|
2,932,259 |
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|
|
|
1,915,163 |
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General
and administrative |
|
3,377,105 |
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|
|
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|
2,736,255 |
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|
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|
6,881,144 |
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|
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|
4,881,012 |
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Total costs and expenses |
|
14,336,516 |
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|
10,453,441 |
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|
27,862,173 |
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|
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|
19,782,413 |
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Loss from operations |
|
(1,445,653 |
) |
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|
(1,605,970 |
) |
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|
(4,645,885 |
) |
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|
(4,228,774 |
) |
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Other
expense: |
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Interest
expense |
|
(554,384 |
) |
|
|
|
|
|
(1,163,413 |
) |
|
|
|
(1,061,933 |
) |
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|
(2,166,440 |
) |
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Interest
expense – deferred financing costs |
|
(46,110 |
) |
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|
(32,696 |
) |
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|
(90,601 |
) |
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|
(63,506 |
) |
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Other
expense |
|
(14,032 |
) |
|
|
|
|
|
(617 |
) |
|
|
|
(23,785 |
) |
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|
|
(20,067 |
) |
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Total other expense |
|
(614,526 |
) |
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|
(1,196,726 |
) |
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|
(1,176,319 |
) |
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|
(2,250,013 |
) |
|
Net
loss |
$ |
(2,060,179 |
) |
|
|
|
|
$ |
(2,802,696 |
) |
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|
$ |
(5,822,204 |
) |
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|
$ |
(6,478,787 |
) |
|
Weighted Average Common
Shares outstanding – basic and diluted |
|
33,124,139 |
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|
|
|
|
|
30,079,960 |
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|
|
|
33,075,555 |
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|
|
|
30,037,013 |
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|
Loss Per Common share –
basic and diluted |
$ |
(0.06 |
) |
|
|
$ |
(0.09 |
) |
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|
$ |
(0.18 |
) |
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|
$ |
(0.22 |
) |
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AXOGEN, INC. |
RECONCILIATION OF GAAP FINANCIAL MEASURES TO
NON-GAAP FINANCIAL MEASURES |
Three and Six Months ended June 30, 2017 and
2016 |
(unaudited) |
|
|
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|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
June 30, |
|
|
|
June 30, |
|
|
|
|
June 30, |
|
|
June 30, |
|
2017 |
|
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2016 |
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|
2017 |
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2016 |
|
|
Net
loss |
$ |
(2,060,179 |
) |
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|
|
|
$ |
(2,802,696 |
) |
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$ |
(5,822,204 |
) |
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$ |
(6,478,787 |
) |
|
Depreciation and amortization expense |
|
109,517 |
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|
|
|
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|
88,734 |
|
|
|
|
|
217,876 |
|
|
|
|
167,590 |
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|
Amortization expense of intangible assets |
|
18,517 |
|
|
|
|
|
|
16,017 |
|
|
|
|
|
41,706 |
|
|
|
|
32,033 |
|
|
Income
Taxes |
|
14,173 |
|
|
|
|
|
|
-- |
|
|
|
|
|
23,974 |
|
|
|
|
21,427 |
|
|
Interest
expense |
|
554,384 |
|
|
|
|
|
|
1,163,413 |
|
|
|
|
|
1,061,933 |
|
|
|
|
2,166,440 |
|
|
Interest
expense - deferred financing costs |
|
46,110 |
|
|
|
|
|
|
32,696 |
|
|
|
|
|
90,601 |
|
|
|
|
63,506 |
|
|
EBITDA - non
GAAP |
$ |
(1,317,478 |
) |
|
|
|
|
$ |
(1,501,836 |
) |
|
|
|
$ |
(4,386,114 |
) |
|
|
$ |
(4,027,791 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Cash Stock
Compensation Expense |
|
724,377 |
|
|
|
|
569,834 |
|
|
|
|
1,572,966 |
|
|
|
|
752,789 |
|
|
Adjusted EBITDA
- non GAAP |
$ |
(593,101 |
) |
|
|
$ |
(932,002 |
) |
|
|
$ |
(2,813,148 |
) |
|
|
$ |
(3,275,002 |
) |
|
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AXOGEN, INC. |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
Six Months ended June 30, 2017 and
2016 |
|
(unaudited) |
|
|
|
|
2017 |
|
2016 |
|
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
|
|
Net
loss |
$ |
(5,822,204 |
) |
|
|
|
|
$ |
(6,478,787 |
) |
|
|
Adjustments to reconcile net loss to net cash used for operating
activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
217,876 |
|
|
|
|
|
|
167,590 |
|
|
|
Amortization of intangible assets |
|
41,706 |
|
|
|
|
|
|
32,033 |
|
|
|
Amortization of deferred financing costs |
|
90,601 |
|
|
|
|
|
|
63,506 |
|
|
|
Provision
for bad debt |
|
99,834 |
|
|
|
|
|
|
48,600 |
|
|
|
Share-based compensation |
|
1,572,966 |
|
|
|
|
|
|
752,789 |
|
|
|
Interest
added to note payable |
|
-- |
|
|
|
|
|
|
187,002 |
|
|
|
Change in
assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
Accounts
receivable |
|
(1,470,098 |
) |
|
|
|
|
|
(1,337,732 |
) |
|
|
Inventory |
|
(845,257 |
) |
|
|
|
|
|
(852,362 |
) |
|
|
Prepaid
expenses and other |
|
(73,286 |
) |
|
|
|
|
|
(190,586 |
) |
|
|
Accounts
payable and accrued expenses |
|
55,666 |
|
|
|
|
|
|
198,707 |
|
|
|
Deferred
liabilities |
|
104,657 |
|
|
|
|
|
|
3,684 |
|
|
|
Net cash used
for operating activities |
|
(6,027,539 |
) |
|
|
|
|
|
(7,405,556 |
) |
|
|
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|
|
|
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|
|
|
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|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment |
|
(366,886 |
) |
|
|
|
|
|
(456,910 |
) |
|
|
Acquisition of intangible assets |
|
(153,321 |
) |
|
|
|
|
|
(97,341 |
) |
|
|
Net cash used
for investing activities |
|
(520,207 |
) |
|
|
|
|
|
(554,251 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
|
|
Borrowing
on revolving loan |
|
26,119,539 |
|
|
|
|
|
|
-- |
|
|
|
Payments
on revolving loan |
|
(26,314,797 |
) |
|
|
|
|
|
-- |
|
|
|
Repayments of long term debt |
|
(8,572 |
) |
|
|
|
|
|
-- |
|
|
|
Debt
issuance costs |
|
(29,472 |
) |
|
|
|
|
|
-- |
|
|
|
Proceeds
from exercise of stock options |
|
636,843 |
|
|
|
|
|
|
323,510 |
|
|
|
Net cash
provided by financing activities |
|
403,541 |
|
|
|
|
|
|
323,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash
and cash equivalents |
|
(6,144,205 |
) |
|
|
|
|
|
(7,636,297 |
) |
|
|
Cash and cash
equivalents, beginning of year |
|
30,014,405 |
|
|
|
|
|
|
25,909,500 |
|
|
|
Cash and cash
equivalents, end of period |
$ |
23,870,200 |
|
|
|
|
|
$ |
18,273,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow activity: |
|
|
|
|
|
|
|
|
|
|
Cash paid
for interest |
$ |
1,058,599 |
|
|
|
|
|
$ |
1,964,256 |
|
|
|
Contacts:
AxoGen, Inc.
Peter J. Mariani, Chief Financial Officer
InvestorRelations@AxoGenInc.com
The Trout Group – Investor Relations
Brian Korb
646.378.2923
bkorb@troutgroup.com
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