Axogen Inc
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 7, 2024
AXGN$50.02+2.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0000805928-24-000111
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0000805928-24-000137
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 85 previous paragraphs and 83 current paragraphs.
50 unchanged; 28 reworded; 4 added; 7 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
Our strategy remains focused on deepening our presence in high-potential accounts specifically, Level 1 trauma centers and academic-affiliated hospitals with a high number of trained micro-surgeons. We will drive growth in these accounts through targeted expansion of nerve repair indications, and driving deeper adoption of our Nerve Repair Algorithm across multiple surgical specialties.
Current report
•We completed the BLA submission for Avance® Nerve Graft on September 6, 2024. On November 1, 2024 the FDA informed us that they had accepted the BLA for filing and assigned a Prescription Drug User Fee Act (“PDUFA”) goal date of September 5, 2024. The FDA further indicated that it does not currently plan to hold an advisory committee meeting for the application.
Current report
Sales and marketing expenses decreased by $241 or 1.3% to $18,924 for the three months ended September 30, 2024, as compared to $19,165 for the three months ended September 30, 2023. This decrease was primarily attributable to royalty fees of $930, marketing programs of $770 and travel cost of $80, partially offset by increase in compensation costs of $1,495.
Current report
Comparison of the Nine Months Ended September 30, 2024, and 2023
Removed paragraphs (7)
Previous report
We have observed that surgeons are initially cautious adopters of nerve repair products. Surgeons typically start with a fewcases and then wait and review the results of these initial cases. Active accounts are usually past this wait period and have developed some level of product reorder. These active accounts have typically gone through the Value Analysis Committee approval process, have at least one surgeon who has converted a portion of his or her treatment algorithms of peripheral nerve repair to our portfolio and have ordered our products at least six times in the last twelve months. As of June 30, 2024, we had 1,042 active accounts, an increase of 7.0% from 974 as of June 30, 2023, and an increase of 3.0% from 1,012 compared to March 31, 2024. Active accounts account for approxim ately 85% of our revenue. The top 10% of these active accounts continue to represent approximately 40% of our revenue.
Previous report
Core accounts are defined as accounts that have purchased at least $100,000 in the past twelve months. As of June 30, 2024, we had 412 core accounts, an increase of 18.7% from 347 as of June 30, 2023, and an increase of 3.0% from 400 compared to March 31, 2024. These core accounts represent approximately 65% of our revenue in the quarter.
Previous report
•We had 117 and 116 direct sales representatives as of June 30, 2024, and December 31, 2023.
Previous report
•In May 2024, we submitted to FDA the complete non-clinical data package for the BLA of Avance® Nerve Graft. We anticipate the rolling submission proposal of the BLA to be completed in the third quarter of 2024. We believe the submission timeline will allow for a potential approval in mid- 2025.
Previous report
•We are pleased with the adoption of Axoguard HA+ Nerve Protector across multiple applications. We expect to drive continued growth within the nerve protection category following the full launch of Avive+ Soft Tissue Matrix in June of 2024.We continue to see strong interest in and adoption of the Resensation® neurotization techniques for autologous and implant-based breast reconstructions driven by expanding surgeon education and patient activation.
Previous report
Sales and marketing expenses increased by $838 or 4.4% to $19,698 for the three months ended June 30, 2024, as compared to $18,860 for the three months ended June 30, 2023. This increase was primarily attributable to compensation costs of $1,685 and occupancy costs of $113 partially offset by a decrease in royalty fees of $867 and other costs of $116.
Previous report
Comparison of thesix months ended June 30, 2024, and 2023
Reworded paragraphs (28)
Previous wording
•Revenues were $47,912 for the quarter ended June 30, 2024, an increase of $9,757 or 25.6%compared to the quarter ended June 30, 2023.
Current wording
•Revenues were $48,644 for the quarter ended September 30, 2024, an increase of $7,373 or 17.9%compared to the quarter ended September 30, 2023.
Previous wording
•Gross profit was $35,345 for the quarter ended June 30, 2024, an increase of $5,693 or 19.2% compared to the quarter ended June 30, 2023.
Current wording
•Gross profit was $36,438 for the quarter ended September 30, 2024, an increase of $4,734 or 14.9% compared to the quarter ended September 30, 2023.
Previous wording
Revenues for the three months ended June 30, 2024, increased by $9,757 or 25.6% to $47,912 as compared to $38,155 for the three months ended June 30, 2023. The increase in revenue was driven by anincrease in, unit volume of 15.6%, product mix 6.8% and a 3.2% increase in prices.
Current wording
Revenues for the three months ended September 30, 2024, increased by $7,373 or 17.9% to $48,644 as compared to $41,271 for the three months ended September 30, 2023. The increase in revenue was driven by anincrease in unit volume of 7.7%, product mix of 6.0% and a 4.2% increase in prices.
Previous wording
Gross profit for the three months ended June 30, 2024, increased by $5,693 or 19.2% to $35,345 as compared to $29,652 for the three months ended June 30, 2023. Gross margin was 73.8% and 77.7% for the three months ended June 30, 2024, and 2023, respectively. The decrease in gross margin is due to the change in our product mix.
Current wording
Gross profit for the three months ended September 30, 2024, increased by $4,734 or 14.9% to $36,438 as compared to $31,704 for the three months ended September 30, 2023. Gross margin was 74.9% and 76.8% for the three months ended September 30, 2024, and 2023, respectively. The decrease in gross margin is due to the change in our product mix.
Previous wording
Total costs and expenses decreased by $781 or 2.1% to $35,773 for the three months ended June 30, 2024, as compared to $36,554 for the three months ended June 30, 2023. Thenet decrease in total costs and expenses was primarily the result of a reduction in R&D projects of $1,371 and royalty fees of $867, partially offset by an increase in professional services of $1,055, compensation costs of $359 and other costs of $54.
Current wording
Total costs and expenses increased by $1,025 or 2.9% to $36,754 for the three months ended September 30, 2024, as compared to $35,729 for the three months ended September 30, 2023. Thenet increase in total costs and expenses was primarily due tocompensation costs of $3,552 partially offset by a reduction in royalty fees of $930, R&D projects of $874, and marketing programs of $770.
Previous wording
Research and development expenses decreased $486 or 6.8% to $6,658 for the three months ended June 30, 2024, as compared to $7,144 for the three months ended June 30, 2023. The decrease was primarily due to product development, clinical expenses as well as non-clinical expenses related to the the BLA for Avance Nerve Graft. Product development expenses represented approximately 52% and 58% of total research and development expense for the three months ended June 30, 2024, and 2023, respectively. Clinical trial expenses represented approximately 48% and 42% of total research and development expense the three months ended June 30, 2024, and 2023, respectively.
Current wording
Research and development expenses increased $302 or 4.5% to $6,996 for the three months ended September 30, 2024, as compared to $6,694 for the three months ended September 30, 2023. The increase was primarily due to product development, clinical expenses, as well as non-clinical expenses related to the BLA for Avance Nerve Graft. Product development expenses represented approximately 52% and 62% of total research and development expense for the three months ended September 30, 2024, and 2023, respectively. Clinical trial expenses represented approximately 48% and 38% of total research and development expense the three months ended September 30, 2024, and 2023, respectively.
Previous wording
General and administrative expenses decreased by $1,133 to $9,417 for the three months ended June 30, 2024, as compared to $10,550 for the three months ended June 30, 2023. Thedecreasewas primarily due tocompensation costs of $2,295, partially offset by an increase in professional services of $877, occupancy related cost of $204 and other costs of $80.
Current wording
General and administrative expenses increased by $964 or 9.8% to $10,834 for the three months ended September 30, 2024, as compared to $9,870 for the three months ended September 30, 2023. The increasewas primarily due tocompensation costs of $1,281 of which $695 was stock compensation related to the departure of the former CEO, bad debt expense of $350, and certain other cost of $133, partially offset by a decrease in professional services of $800.
Previous wording
Other expense, net increased by $1,735 or 717% to $1,493 for the three months ended June 30, 2024, as compared to other income, net of $242 for the three months ended June 30, 2023. The net increase in other expense was due to an increase in interest expense of $2,037, partially offset by the decrease in other expenses of $279 and the change in the fair value of the derivative of $32.
Current wording
Other expense, net increased by $1,478 to $1,542 for the three months ended September 30, 2024, as compared to other expense, net of $64 for the three months ended September 30, 2023. The net increase in other expense was due to an increase in interest expense of $1,066, and the change in the fair value of derivatives of $389.
Previous wording
Interest expense increased by $2,037 to $2,185 for the three months ended June 30, 2024, as compared to $148 for the three months ended June 30, 2023. The increase was due to the completion of the APC facility in 2023 resulting in no interest expense being capitalized for that facility. We recognized total interest expense of $2,162 and $2,184 in connection with the Credit Facility for the three months ended June 30, 2024, and 2023, respectively, of which $0 and $2,049 of this interest was capitalized to the construction costs of the APC Facility during the second quarter of 2024 and 2023, respectively.
Current wording
Interest expense increased by $1,066 to $1,893 for the three months ended September 30, 2024, as compared to $827 for the three months ended September 30, 2023. The increase was due to the completion of the APC facility in 2023 resulting in no additional interest expense being capitalized for that facility during 2024. We recognized total interest expense of $1,877 and $1,866 in connection with the Credit Facility for the three months ended September 30, 2024, and 2023, respectively, of which $0 and $1,043 of this interest was capitalized to the construction costs of the APC Facility during the third quarter of 2024 and 2023, respectively.
Previous wording
Revenues forsix months ended June 30, 2024, increased by$14,470 or 19.3% to$89,289 as compared to$74,819 for thesix months ended June 30, 2023. The increase in revenue was driven by an increase in unit volume of 10.4%,6.1%in product mix and 2.8% in prices.
Current wording
Revenues fornine months ended September 30, 2024, increased by$21,843 or 18.8% to$137,933 as compared to$116,090 for thenine months ended September 30, 2023. The increase in revenue was driven by an increase in unit volume of 9.4%, product mix of 6.0% and a 3.4% increase in prices.
Previous wording
Gross profit for thesix months ended June 30, 2024, increased by$9,820 or 17% to 67,964 as compared to$58,144 for thesix months ended June 30, 2023. Gross margin was 76.1% and 77.7% for thesix months ended June 30, 2024, and 2023, respectively.
Current wording
Gross profit for thenine months ended September 30, 2024, increased by$14,554 or 16% to 104,402 as compared to$89,848 for thenine months ended September 30, 2023. Gross margin was 75.7% and 77.4% for thenine months ended September 30, 2024, and 2023, respectively.
Previous wording
Total costs and expenses increased by$564 or 1% to$72,952 for thesix months ended June 30, 2024, as compared to$72,388 for thesix months ended June 30, 2023. The net increase in total costs and expenses was primarily the result of increased professional services of $1,915, compensation costs of $1,566, and occupancy cost of $174, partially offset by the reduction in royalty fees of $1,703, research projects of $1,205, and marketing programs of $212.
Current wording
Total costs and expenses increased by$1,590 or 1% to$109,706 for thenine months ended September 30, 2024, as compared to$108,116 for thenine months ended September 30, 2023. The net increase in total costs and expenses was primarily the result of increased compensation costs of $5,118, professional services of $1,892 and bad debt expense of $915, partially offset by the reduction in royalty fees of $2,632, research projects of $2,079, marketing programs of $982 and other operating expense totaling $645.
Previous wording
Sales and marketing expenses increased by $1,206 or 3% to$39,513 for thesix months ended June 30, 2024, as compared to$38,307 for thesix months ended June 30, 2023. This increase was primarily attributable to compensation costs of $2,931, occupancy costs of $195 and professional services of $174, partially offset by the reduction in royalty fees of $1,703, marketing programs of $212 and other costs of $203.
Current wording
Sales and marketing expenses increased by $966 or 2% to$58,437 for thenine months ended September 30, 2024, as compared to$57,471 for thenine months ended September 30, 2023. This increase was primarily attributable to compensation costs of $4,425, professional services of $272, and occupancy costs of $184, partially offset by the reduction in royalty fees of $2,632, marketing programs of $982, and other costs of $352.
Previous wording
Research and development expenses increased by$596 or 4% to$14,066 for thesix months ended June 30, 2024, as compared to$13,470 for thesix months ended June 30, 2023. The increase was primarily due to product development and clinical expensesas well as non-clinical expenses related to the BLA for Avance Nerve Graft. Product development expenses represented approximately 57% of total research and development expense for each of the six months ended June 30, 2024, and 2023. Clinical trial expenses represented approximately 43% of total research and development expense for each of the six months ended June 30, 2024, and 2023, respectively.
Current wording
Research and development expenses increased by$899 or 4% to$21,063 for thenine months ended September 30, 2024, as compared to$20,164 for thenine months ended September 30, 2023. The increase was primarily due to product development and clinical expensesas well as non-clinical expenses related to the BLA for Avance Nerve Graft. Product development expenses represented approximately 54% and 60%of total research and development expense for the nine months ended September 30, 2024, and 2023, respectively. Clinical trial expenses represented approximately 46% and 40%of total research and development expense for the nine months ended September 30, 2024, and 2023, respectively.
Previous wording
General and administrative expenses decreased by $1,238 or 6% to$19,373 for thesix months ended June 30, 2024, as compared to $20,611 for thesix months ended June 30, 2023. The decrease was primarily due to a reduction in net compensation costs of $3,217, partially offset by an increase in professional service costs of $1,343, other costs of $264, occupancy costs of $259, and travel costs of $112.
Current wording
General and administrative expenses decreased by $275 or 1% to$30,206 for thenine months ended September 30, 2024, as compared to $30,481 for thenine months ended September 30, 2023. The decrease was primarily due to a reduction in net compensation costs of $1,935 of which $695 was stock compensation related to the departure of the former CEO, partially offset by an increase in bad debt of $915, professional service costs of $542, and other costs of $203.
Previous wording
Other (expense) income, netdecreased by$4,078 or 800%to other expense, net$3,568 for thesix months ended June 30, 2024, as compared to other income, net of$510 for thesix months ended June 30, 2023. The net decrease was driven by an increase in interest expense of $4,348 and decrease in investment income of$264, partially offset by an increase in the change in fair value of derivatives of $282 and other expense of $252.
Current wording
Other (expense), net was$5,110 for thenine months ended September 30, 2024, as compared to other income, net of$445 for thenine months ended September 30, 2023. The decrease was driven by an increase in interest expense of $5,413, a decrease in investment income of$335, and the change in fair value of derivatives of $107, partially offset by the decrease in other expense of $210 and rental income of $90.
Previous wording
Investment income decreased by$264 or 34% to $520 for thesix months ended June 30, 2024, as compared to investment income of$784 for thesix months ended June 30, 2023. This change was primarily due to the decrease in investments.
Current wording
Investment income decreased by$335 or 29% to $816 for thenine months ended September 30, 2024, as compared to investment income of$1,151 for thenine months ended September 30, 2023. This change was primarily due to the decrease in investments.
Previous wording
Interest expense increased by $4,348 to $4,512 for the six months ended June 30, 2024, as compared to $164 for the six months ended June 30, 2023. We recognized total interest expense of$4,465 and $4,332 in connection with the Credit Facility for the six months ended June 30, 2024, and 2023, respectively, of which $0 and $4,196 of this interest was capitalized to the construction costs of the APC Facility during the six months ended June 30, 2024, and 2023, respectively.
Current wording
Interest expense increased by $5,413 to $6,405 for the nine months ended September 30, 2024, as compared to $992 for the nine months ended September 30, 2023. We recognized total interest expense of$6,342 and $5,442 in connection with the Credit Facility for the nine months ended September 30, 2024, and 2023, respectively, of which $0 and $5,240 of this interest was capitalized to the construction costs of the APC Facility during the nine months ended September 30, 2024, and 2023, respectively.
Previous wording
We had no income tax expense or benefit during thesix months ended June 30, 2024, and 2023, due to the incurrence of net operating losses in each of these periods, the benefits of which have a full valuation allowance. From time to time, we receive notices of examination of prior tax filings from federal and state authorities. We do not believe that there are any additional tax expenses or benefits currently available.
Current wording
We had no income tax expense or benefit during thenine months ended September 30, 2024, and 2023, due to the incurrence of net operating losses in each of these periods, the benefits of which have a full valuation allowance. From time to time, we receive notices of examination of prior tax filings from federal and state authorities. We do not believe that there are any additional tax expenses or benefits currently available.
Previous wording
As of June 30, 2024, our principal sources of liquidity were our cash and cash equivalents and investments totaling $21,133. Our cash equivalents are comprised primarily of a money market mutual fund and our investments consist of U.S. Treasuries. Our cash and cash equivalents and investments decreased by$9,891 from $31,024 at December 31, 2023, primarily as a result of operating activities.
Current wording
As of September 30, 2024, our principal sources of liquidity were our cash and cash equivalents and investments totaling $24,530. Our cash equivalents are comprised primarily of a money market mutual fund and our investments consist of U.S.
Previous wording
We had working capital of $58,847 and a current ratio of 3.5x at June 30, 2024, compared to working capital of $57,574 and a current ratio of 2.9x at December 31, 2023. The increase in our working capital at June 30, 2024, as compared to December 31, 2023, was primarily due to a decrease in accounts payable and accrued expenses. Based on current estimates, we believe that our existing cash and cash equivalents and investments, as well as cash provided by sales of our products will allow us to fund our operations through at least the next 12 months from the date of the accompanying financial statements.
Current wording
We had working capital of $63,219 and a current ratio of 3.7x at September 30, 2024, compared to working capital of $57,574 and a current ratio of 2.9x at December 31, 2023. The increase in our working capital at September 30, 2024, as compared to December 31, 2023, was primarily due to a decrease in accounts payable and accrued expenses. Based on current estimates, we believe that our existing cash and cash equivalents and investments, as well as cash provided by sales of our products will allow us to fund our operations through at least the next 12 months from the date of the accompanying financial statements.
Previous wording
Net cash used in operating activities was $8,101 and $7,131 during the six months ended June 30, 2024, and 2023, respectively. The unfavorable change in net cash used in operating activities of $970, or 14%, is due to the net unfavorable change of $9,400 in working capital accounts partially offset by the decrease in the net loss of $5,178 and noncash changes of $3,252.
Current wording
Net cash used in operating activities was $4,200 and $5,505 during the nine months ended September 30, 2024, and 2023, respectively. The unfavorable change in net cash used in operating activities of $1,305, or 24%, is due to the net unfavorable change of $9,656 in working capital accounts partially offset by the decrease in the net loss of $7,409 and noncash changes of $3,552.
Previous wording
Net cash used in investing activities for the six months ended June 30, 2024, was $4,484 as compared to net cash provided by investing activities of $13,536 for the six months ended June 30, 2023, an increase of $18,020, or 133% of net cash used in investing activities. The increase of net cash used in investing activities is principally due to the decrease in the net proceeds from the sale and purchase of investments totaling $24,682, and the increase in purchases of intangible assets of $223, partially offset by the reduction in purchases of property and equipment of $6,885 during the six months ended June 30, 2024.
Current wording
Net cash used in investing activities for the nine months ended September 30, 2024, was $9,484 as compared to net cash provided by investing activities of $19,530 for the nine months ended September 30, 2023, a net increase of $29,014, or 149% of net cash used in investing activities. The increase of net cash used in investing activities is principally due to the decrease in the net proceeds from the sale and purchase of investments totaling $38,444, and the increase in purchases of intangible assets of $548, partially offset by the reduction in purchases of property and equipment of $9,978 during the nine months ended September 30, 2024.
Previous wording
Net cash provided by financing activities was $748 and $1,531 for the six months ended June 30, 2024, and 2023, respectively, a decrease of $783. The unfavorable change in net cash provided by financing activities was primarily due to the decrease in proceeds from the exercise of stock options of $791 during the six months ended June 30, 2024.
Current wording
Net cash provided by financing activities was $1,320 and $1,536 for the nine months ended September 30, 2024, and 2023, respectively, a decrease of $216. The unfavorable change in net cash provided by financing activities was primarily due to the decrease in proceeds from the exercise of stock options of $217 during the nine months ended September 30, 2024.
Previous wording
As of June 30, 2024, we had $50,000 outstanding in indebtedness under a credit facility $35,000 maturing on June 30, 2027, and $15,000 maturing on June 30, 2028. Quarterly interest only and revenue participation payments are due through each of the maturity dates. Interest is calculated as 7.5% plus the greater of three-month SOFR plus 0.1% ("Adjusted SOFR") or 2.0% (12.90% as of June 30, 2024). Revenue participation payments are calculated as a percentage of our net revenues, up to $70,000 in any given year, adding approximately 1.5% per year of additional interest payments on the outstanding indebtedness. Upon each maturity date or upon such date earlier repayment occurs, we will repay the principal balance and provide a make-whole payment calculated to generate an internal rate of return to the lender equal to 11.5%, less the total of all quarterly interest and revenue participation payments previously paid. See Note 8 - Long-Term Debt, Net of Debt Discount and Financing Fees and Note 12 - Commitments and Contingencies.
Current wording
As of September 30, 2024, we had $50,000 outstanding in indebtedness under a credit facility $35,000 maturing on June 30, 2027, and $15,000 maturing on June 30, 2028. Quarterly interest only and revenue participation payments are due through each of the maturity dates. Interest is calculated as 7.5% plus the greater of three-month SOFR plus 0.1% ("Adjusted SOFR") or 2.0% (12.92% as of September 30, 2024). Revenue participation payments are calculated as a percentage of our net revenues, up to $70,000 in any given year, adding approximately 1.5% per year of additional interest payments on the outstanding indebtedness. Upon each maturity date or upon such date earlier repayment occurs, we will repay the principal balance and provide a make-whole payment calculated to generate an internal rate of return to the lender equal to 11.5%, less the total of all quarterly interest and revenue participation payments previously paid. See Note 8 - Long-Term Debt, Net of Debt Discount and Financing Fees and Note 12 - Commitments and Contingencies.
Previous wording
(2)Calculated at 12.90%, the interest rate as of June 30, 2024.
Current wording
(2)Calculated at 12.92%, the interest rate as of September 30, 2024.
Previous wording
(3)See Note 7 - Leases in this Form 10-Q.
Current wording
(3)See Note 7 - Leases in Part I, Item I of this Form 10-Q.
Previous wording
(4)Includes CEO's 2024 Salary, 2024 bonus to paid in March of 2025, accrued PTO through January 4, 2025, nine months of senior advisory fees, and eighteen months of COBRA payments. Actual timing of payments is subject to the determination of the end of the CEO Term per the Transition and Separation Agreement. See Note 12 - Commitments and Contingencies in Part I, Item 1 in this Form 10-Q.
Current wording
(4)Includes former CEO's 2024 bonus to be paid in March of 2025, senior advisory fees through May 2025, and eighteen months of COBRA payments. See Note 12 - Commitments and Contingencies in Part I, Item 1 in this Form 10-Q.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Treasuries. Our cash and cash equivalents and investments decreased by$6,494 to $24,530 from $31,024 at December 31, 2023, primarily as a result of operating activities.