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Axogen, Inc. Reports 2018 Fourth Quarter and Full Year 2018 Financial Results

February 26, 2019 4:01 PM

Fourth Quarter Revenue of $23.4 million, representing 38% growth over prior yearFull Year 2018 Revenue of $83.9 million, representing 39% growth over prior year

ALACHUA, Fla., Feb. 26, 2019 (GLOBE NEWSWIRE) -- 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 fourth quarter and full year ended December 31, 2018.

Fourth Quarter 2018 Financial Results and Recent Business Highlights

“We continue to see momentum in our core trauma, oral and maxillofacial, and breast reconstruction neurotization markets,” said Karen Zaderej, chairman, chief executive officer, and president of Axogen. “Looking ahead, we believe the investments made in 2018, including our strengthened and expanded commercial capabilities, will allow us to drive sharper and more consistent execution. I am confident in our ability to deliver another successful year as we continue to grow our core markets and develop expansion markets.”

Regarding the RECON study, as required by the statistical analysis plan and agreed to by the FDA and Axogen, a blinded independent statistical analysis was conducted to determine if greater study enrollment is appropriate. The interim analysis looks only at the pooled standard deviation of the first 80 enrolled subjects and does not include an interim look at outcomes. Axogen is working with the FDA to review the interim analysis findings and obtain agreement on the next phase of the study.

Additional Fourth Quarter and Recent Operational Highlights

Full Year 2018 Summary Financial Results and Business Highlights

Updating 2019 Financial Guidance and DisclosureGoing forward, the Company will be providing revenue guidance as a dollar range. The Company now expects 2019 revenue will be between $109 million and $114 million. Management reiterates its expectation for gross margin to remain above 80%. Additionally, we expect 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 Development[email protected][email protected]

AXOGEN, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
December 31, December 31,
2018 2017
Assets
Current assets:
Cash and cash equivalents$24,294 $36,507
Restricted cash 6,000 -
Investments 92,311 -
Accounts receivable, net 15,321 11,065
Inventory 11,982 7,316
Prepaid expenses and other 1,045 853
Total current assets 150,953 55,741
Property and equipment, net 8,039 2,197
Intangible assets 1,181 937
$160,173 $58,875
Liabilities and Shareholders’ Equity
Current liabilities:
Borrowings under revolving loan agreement$- $4,000
Accounts payable and accrued expenses 12,998 8,952
Current maturities of long term obligations 28 735
Contract liabilities, current 18 32
Total current liabilities 13,044 13,719
Long Term Obligations, net of current maturities and deferred financing fees 35 19,810
Other long-term liabilities 70 95
Contract liabilities 42 69
Total liabilities 13,191 33,693
Shareholders’ equity:
Common stock, $.01 par value; 100,000,000 shares authorized; 38,900,875 and 34,350,329 shares issued and outstanding 389 343
Additional paid-in capital 297,319 153,168
Accumulated deficit (150,726) (128,329)
Total shareholders’ equity 146,982 25,182
Total liabilities and shareholders’ equity$160,173 $58,875

AXOGEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months and Years ended December 31, 2018 and 2017
(In Thousands, Except per Share Amounts)
Three Months Ended Years Ended
December 31, December 31, December 31, December 31,
2018 2017 2018 2017
Revenues$23,433 $16,971 $83,937 $60,426
Cost of goods sold 3,640 2,614 12,923 9,311
Gross profit 19,793 14,357 71,014 51,115
Costs and expenses:
Sales and marketing 15,462 10,121 56,617 37,636
Research and development 3,807 1,972 11,773 6,699
General and administrative 6,373 4,071 23,124 14,731
Total costs and expenses 25,642 16,164 91,514 59,066
Loss from operations (5,849) (1,807) (20,500) (7,951)
Other income (expense):
Investment income 641 - 1,525 -
Interest expense (3) (577) (1,127) (2,217)
Interest expense—deferred financing costs - (110) (81) (246)
Loss on extinguishment of debt - - (2,186) -
Other income (expense) (13) (5) (28) (31)
Total other income (expense) 625 (692) (1,897) (2,494)
Net loss$(5,224) $(2,499) $(22,397) $(10,445)
Weighted Average Common Shares outstanding – basic and diluted 38,745 33,846 37,127 33,323
Loss Per Common share - basic and diluted$(0.13) $(0.07) $(0.60) $(0.31)
Adjusted net loss$(3,599) $(1,382) $(12,605) $(6,836)
Adjusted loss per Common share - basic and diluted$(0.09) $(0.04) $(0.34) $(0.21)

AXOGEN, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
Three Months and Years ended December 31, 2018 and 2017
(In Thousands, Except per Share Amounts)
Three Months Ended Years Ended
December 31, December 31, December 31, December 31,
2018 2017 2018 2017
Net loss$(5,224) $(2,499) $(22,397) $(10,445)
Depreciation and amortization expense 199 141 774 488
Amortization expense of intangible assets 18 18 77 79
Income taxes - 5 13 29
Investment income (641) - (1,525) -
Interest expense - 577 2,637 2,217
Interest expense - deferred financing costs - 110 754 246
EBITDA - non GAAP$(5,648) $(1,648) $(19,667) $(7,386)
Non Cash Stock Compensation Expense 1,625 1,117 7,606 3,609
Adjusted EBITDA - non GAAP$(4,023) $(531) $(12,061) $(3,777)
Net loss$(5,224) $(2,499) $(22,397) $(10,445)
Loss on extinquishment of debt - - 2,186 -
Non cash stock compensation expense 1,625 1,117 7,606 3,609
Adjusted Net Loss - non GAAP$(3,599) $(1,382) $(12,605) $(6,836)
Weighted Average Common Shares outstanding – basic and diluted 38,745 33,846 37,127 33,323
Adjusted net loss per Common share - basic and diluted$(0.09) $(0.04) $(0.34) $(0.21)

AXOGEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2018 and 2017
(In Thousands)
20182017
Cash flows from operating activities:
Net loss$(22,397) $(10,445)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation 774 488
Amortization of intangible assets 77 79
Amortization of deferred financing costs 81 246
Loss on diposal of equipment 1 -
Loss on extinguishment of debt 2,186 -
Provision for bad debts 852 223
Provision for inventory write down 1,343 1,438
Changes in investment gains and losses (721) -
Share-based compensation 7,606 3,609
Change in assets and liabilities:
Accounts receivable (5,108) (3,236)
Inventory (6,009) (3,295)
Prepaid expenses and other (192) (342)
Accounts payable and accrued expenses 3,711 1,927
Contract and other liabilities (66) 70
Net cash used for operating activities (17,862) (9,238)
Cash flows from investing activities:
Purchase of property and equipment (6,282) (1,105)
Purchase of investments (114,736) -
Sale of investments 23,146 -
Acquisition of intangible assets (321) (187)
Net cash used for investing activities (98,193) (1,292)
Cash flows from financing activities:
Proceeds from issuance of common stock 132,964 15,891
Cash paid for equity offering (257) (228)
Borrowing on revolving loan 26,253 57,599
Payments on revolving loan (30,489) (57,624)
Repayments of long-term debt (22,513) (21)
Debt issuance costs - (29)
Proceeds from exercise of stock options 3,884 1,434
Net cash provided by financing activities 109,842 17,022
Net (decrease) increase in cash, cash equivalents and restricted cash (6,213) 6,492
Cash, cash equivalents, and restricted cash beginning of year 36,507 30,015
Cash, cash equivalents, and restricted cash end of year$30,294 $36,507
Supplemental disclosures of cash flow activity:
Cash paid for interest$1,325 $2,198
Supplemental disclosure of non-cash investing and financing activities:
Payments of fixed assets in accounts payable and accrued expenses$335 $55
Capital lease additions$- $62

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Source: Axogen, Inc.

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