AxoGen (AXGN) Reports Preliminary Revenue for Q1, Provides Business Update

Axogen, Inc. (NASDAQ: AXGN), a global leader in developing and marketing innovative surgical solutions for peripheral nerve injuries, today announced preliminary first quarter 2020 revenue, provided a business update on its actions in response to the COVID-19 pandemic, and announced the dismissal of its class-action lawsuit.

First quarter 2020 net revenue is estimated to be approximately $24.3 million, an increase of approximately 4% over the first quarter 2019. Although revenue exiting February was trending toward the Company’s annual guidance, hospital reallocation of resources toward the COVID-19 pandemic, along with deferrals and restrictions placed on elective procedures, had a material negative impact on revenue in March. Additionally, management believes that demand for the Company’s products has been temporarily reduced as nationwide shelter-in-place orders have lowered the incidence of traumatic injuries.

In response to the current restrictions in hospital and community activity, as well as the anticipated reduction of revenue caused by these factors, the Company has implemented a cost mitigation initiative designed to defer and reduce certain expenses and capital expenditures during this time. More specifically, the Company has:

• Implemented a plan reducing executive cash compensation and board fees by 20%, and reducing cash compensation for all other employees by 10% to 15%;
• Completed an employee layoff of approximately 10% of its workforce and implemented a hiring freeze;
• Temporarily suspended recovery and processing of tissue in order to utilize existing inventory;
• Deferred completion of its new biologics processing center in Dayton, Ohio by up to one year, which defers approximately $25 million of expected 2020 capital expenditures to 2021, and extended its current production facility License and Services agreement with Community Tissue Services (CTS) by one year; and
• Reduced certain discretionary spending, including travel, conference participation, surgeon education (as a result of surgeon travel restrictions), and selected projects across the organization.

Additionally, the Company announced today approval for a Small Business Administration loan under the Paycheck Protection Program in the amount of $7.8 million. The loan will preserve key positions in the Company by providing necessary economic relief during this period of reduced surgical volumes.

“Our first priority in response to the COVID-19 pandemic is the health and safety of those we serve, including healthcare teams and patients, as well as our employees, communities, and suppliers. Our team has adapted to this environment, and we will continue to provide full support to our hospitals and their patients as surgical volumes recover,” commented Karen Zaderej, chairman, CEO, and president of Axogen, Inc. “We believe the long-term fundamentals of our business remain intact, and we are taking steps to defer and reduce our spending while maintaining the ability to respond to our customers’ needs and drive future revenue growth.

2020 Financial Guidance
On April 1, 2020, the Company suspended its 2020 annual financial guidance as previously provided on February 24, 2020, due to uncertainty associated with COVID-19. At this date, management cannot predict the extent or duration of the impact of the COVID-19 pandemic on its financial results but believes the current environment will continue to negatively impact its revenue in the second quarter of 2020 and potentially beyond.

The Company will provide final financial results for the quarter, along with commentary and additional information related to the impact of COVID-19, during its upcoming Q1 2020 earnings call on May 6, 2020, at 4:30 pm ET. More information about the conference call is available on the Company’s website at https://ir.axogeninc.com/.

Update on Class Action Lawsuit
On April 21, 2020, the United Stated District Court for the Middle District of Florida (Court) dismissed a putative class action complaint filed January 9, 2019, against the Company, certain of its directors and officers, and Company underwriters alleging violations of the federal securities laws. The Court dismissed the complaint without prejudice, finding the Plaintiff failed to state a claim upon which relief could be granted. The Plaintiff has 60 days to file an amended complaint or the action will be dismissed with prejudice.

Commenting on the courts finding, Zaderej stated, “We are extremely pleased that the Court found in our favor, dismissing the Class Action, which we have spent considerable time and resources defending, and allowing us to move forward without this distraction.”

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