Full Press Release Details
Axogen, Inc. Reports Second Quarter 2020 Financial Results
ALACHUA, FL - August 5, 2020 - 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, 2020.
Second Quarter 2020 Financial Results and Recent Business Highlights
"We are encouraged by the performance of our commercial team and the demand for our products over the course of the quarter as surgery schedules opened and hospitals quickly moved to complete nerve repair procedures," commented Karen Zaderej, chairman, CEO, and president of Axogen. "We expect that most deferred nerve repair procedures will be scheduled by the end of the summer and believe that regional COVID-19 resurgence may continue to negatively impact the incidence of trauma and surgical procedure volumes in certain geographies. As a result, we remain measured in our outlook for the remainder of the year and expect that revenue in the third and fourth quarters will continue to trend below prior-year results. However, we are pleased with the resilience we have seen with our business and we believe that the strength of our balance sheet, along with our cost mitigation initiatives, will allow us to emerge from this pandemic-related downturn as a stronger, leaner organization on a path to profitability."
Additional Operational and Business Highlights
RECON Clinical Study Enrollment and Follow-Up
RECON is a pivotal clinical study supporting the Company's Biologics License Application (BLA) for Avance Nerve Graft. The study protocol requires a one-year follow-up assessment with an allowance for an additional
three-month visit window. With the final subject enrolled in July of 2020, the last patient is expected to complete the study no later than October of 2021. The Company anticipates it will provide a preliminary report of study data in the second quarter of 2022 and expects to file the BLA in 2023.
2020 Financial Guidance
On April 1, 2020, the Company disclosed that it was suspending its 2020 annual financial guidance as previously provided on February 24, 2020 due to factors associated with COVID-19. At this date, the Company cannot predict the extent or duration of the impact of the COVID-19 pandemic on its financial results but expects the current environment will lead to revenues below the prior year in the third and fourth quarter.
The 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.
Axogen (AXGN) is the leading company focused specifically on the science, development and commercialization of technologies for peripheral nerve regeneration and repair. Axogen employees 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; Axoguard Nerve Cap, a porcine submucosa ECM product used to protect a peripheral nerve end and separate the nerve from the surrounding environment to reduce the development of symptomatic or painful neuroma; and Avive Soft Tissue Membrane, a processed human umbilical cord intended for surgical use as a resorbable soft tissue barrier. The Axogen portfolio of products is available in the United States, Canada, the United Kingdom, South Korea, 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 related to the expected impact of COVID-19 on our business, statements regarding our growth, 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, as amended on Form 10-K/A, for the fiscal year ended December 31, 2019, 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 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||
| 2020 | 2019 | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 75,320 | $ | 35,724 | ||
| Restricted Cash | 10,610 | 6,000 | ||||
| Short-term investments | 24,009 | 60,786 | ||||
| Accounts receivable, net | 14,049 | 16,944 | ||||
| Inventory | 12,836 | 13,861 | ||||
| Prepaid expenses and other | 3,405 | 1,706 | ||||
| Total current assets | 140,229 | 135,021 | ||||
| Property and equipment, net | 24,858 | 14,887 | ||||
| Operating lease right-of-use assets | 3,138 | 3,133 | ||||
| Finance lease right-of-use assets | 76 | 87 | ||||
| Intangible assets | 1,660 | 1,515 | ||||
| Total assets | $ | 169,961 | $ | 154,643 | ||
| Liabilities and Shareholders' Equity | ||||||
| Current liabilities: | ||||||
| Accounts payable and accrued expenses | $ | 12,451 | $ | 19,130 | ||
| Current maturities of long term obligations | 1,553 | 1,736 | ||||
| Contract liabilities, current | 14 | 14 | ||||
| Total current liabilities | 14,018 | 20,880 | ||||
| Long-term Debt, net of financing fees | 31,960 | - | ||||
| Debt derivative liability | 2,387 | - | ||||
| Common stock derivative option liability | 176 | - | ||||
| Other long-term liabilities | 1,660 | 1,610 | ||||
| Total liabilities | 50,201 | 22,490 | ||||
| Shareholders' equity: | ||||||
| Common stock, $.01 par value; 100,000,000 shares authorized; 40,020,780 and 39,589,775 shares issued and outstanding | 400 | 396 | ||||
| Additional paid-in capital | 315,518 | 311,618 | ||||
| Accumulated deficit | (196,158) | (179,861) | ||||
| Total shareholders' equity | 119,760 | 132,153 | ||||
| Total liabilities and shareholders' equity | $ | 169,961 | $ | 154,643 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months ended June 30, 2020 and 2019
| Three Months Ended | Six Months Ended | |||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Revenues | $ | 22,116 | $ | 26,701 | $ | 46,377 | $ | 49,986 | ||||
| Cost of goods sold | 5,605 | 4,244 | 10,421 | 7,958 | ||||||||
| Gross profit | 16,511 | 22,457 | 35,956 | 42,028 | ||||||||
| Costs and expenses: | ||||||||||||
| Sales and marketing | 14,290 | 18,467 | 32,128 | 34,901 | ||||||||
| Research and development | 4,071 | 4,282 | 8,685 | 8,421 | ||||||||
| General and administrative | 6,404 | 7,380 | 11,906 | 16,581 | ||||||||
| Total costs and expenses | 24,765 | 30,129 | 52,719 | 59,903 | ||||||||
| Loss from operations | (8,254) | (7,672) | (16,763) | (17,875) | ||||||||
| Other income (expense): | ||||||||||||
| Interest income | 237 | 654 | 548 | 1,370 | ||||||||
| Interest expense | (31) | (11) | (62) | (25) | ||||||||
| Interest expense - deferred financing costs | - | - | - | - | ||||||||
| Loss on extinguishment of debt | - | - | - | - | ||||||||
| Other expense | (57) | 6 | (20) | 4 | ||||||||
| Total other expense | 149 | 649 | 466 | 1,349 | ||||||||
| Net loss | $ | (8,105) | $ | (7,023) | $ | (16,297) | $ | (16,526) | ||||
| Weighted average common shares outstanding - basic and diluted | 39,823 | 39,175 | 39,761 | 39,055 | ||||||||
| Loss per common share - basic and diluted | $ | (0.20) | $ | (0.18) | $ | (0.41) | $ | (0.42) | ||||
| Adjusted net loss - non GAAP | (5,883) | (3,738) | (13,519) | (9,741) | ||||||||
| Adjusted net loss per common share - basic and diluted | $ | (0.15) | $ | (0.10) | $ | (0.34) | $ | (0.25) |
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
Three and Six Months ended June 30, 2020 and 2019
| Three Months Ended | Six Months Ended | |||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Net loss | $ | (8,105) | $ | (7,023) | $ | (16,297) | $ | (16,526) | ||||
| Depreciation and amortization expense | 346 | 264 | 665 | 514 | ||||||||
| Investment income | (237) | (654) | (548) | (1,370) | ||||||||
| Income tax | 58 | (12) | 38 | (12) | ||||||||
| Interest expense | 31 | 11 | 62 | 25 | ||||||||
| EBITDA - non GAAP | $ | (7,907) | $ | (7,414) | $ | (16,080) | $ | (17,369) | ||||
| Non cash stock compensation expense | 2,222 | 2,674 | 2,778 | 4,989 | ||||||||
| Litigation and related costs | - | 611 | - | 1,796 | ||||||||
| Adjusted EBITDA - non GAAP | $ | (5,685) | $ | (4,129) | $ | (13,302) | $ | (10,584) | ||||
| Net loss | $ | (8,105) | $ | (7,023) | $ | (16,297) | $ | (16,526) | ||||
| Non cash stock compensation expense | 2,222 | 2,674 | 2,778 | 4,989 | ||||||||
| Litigation and related costs | - | 611 | - | 1,796 | ||||||||
| Adjusted Net Loss - non GAAP | $ | (5,883) | $ | (3,738) | $ | (13,519) | $ | (9,741) | ||||
| Weighted average common shares outstanding - basic and diluted | 39,823 | 39,175 | 39,761 | 39,055 | ||||||||
| Adjusted net loss per common share - basic and diluted | $ | (0.15) | $ | (0.10) | $ | (0.34) | $ | (0.25) |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Six Months Ended June 30, 2019 and 2018
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders' Equity | |||||||||
| For the Three Months Ended June 30, 2020: | ||||||||||||
| Balance at March 31, 2020 | $ | 397 | $ | 311,850 | $ | (188,053) | $ | 124,194 | ||||
| Net loss | - | - | (8,105) | (8,105) | ||||||||
| Stock-based compensation | - | 2,222 | - | 2,222 | ||||||||
| Shares surrendered by employees to pay taxes | - | (17) | - | (17) | ||||||||
| Exercise of stock options and employee stock purchase plan | 3 | 1,463 | - | 1,466 | ||||||||
| Balance at June 30, 2020 | $ | 400 | $ | 315,518 | $ | (196,158) | $ | 119,760 | ||||
| For the Six Months Ended June 30, 2020: | ||||||||||||
| Balance at December 31, 2019 | $ | 396 | $ | 311,618 | $ | (179,861) | $ | 132,153 | ||||
| Net loss | - | - | (16,297) | (16,297) | ||||||||
| Stock-based compensation | - | 2,778 | - | 2,778 | ||||||||
| Issuance of restricted /performance service awards | 1 | (1) | - | - | ||||||||
| Shares surrendered by employees to pay taxes | (1) | (657) | - | (658) | ||||||||
| Exercise of stock options and employee stock purchase plan | 4 | 1,780 | - | 1,784 | ||||||||
| Balance at June 30, 2020 | $ | 400 | $ | 315,518 | $ | (196,158) | $ | 119,760 | ||||
| For the Three Months Ended June 30, 2019: | ||||||||||||
| Balance at March 31, 2019 | $ | 391 | $ | 300,582 | $ | (160,229) | $ | 140,743 | ||||
| Net loss | - | - | (7,023) | (7,023) | ||||||||
| Stock-based compensation | - | 2,674 | - | 2,674 | ||||||||
| Exercise of stock options and employee stock purchase plan | 2 | 1,563 | - | 1,565 | ||||||||
| Balance at June 30, 2019 | $ | 393 | $ | 304,819 | $ | (167,252) | $ | 137,959 | ||||
| For the Six Months Ended June 30, 2019: | ||||||||||||
| Balance at December 31, 2018 | $ | 389 | $ | 297,319 | $ | (150,726) | $ | 146,982 | ||||
| Net loss | - | - | (16,526) | (16,526) | ||||||||
| Stock-based compensation | - | 4,989 | - | 4,989 | ||||||||
| Exercise of stock options and employee stock purchase plan | 4 | 2,511 | - | 2,515 | ||||||||
| Balance at June 30, 2019 | $ | 393 | $ | 304,819 | $ | (167,252) | $ | 137,960 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months ended June 30, 2020 and 2019
| Six Months Ended | ||||||
| June 30, | June 30, | |||||
| 2020 | 2019 | |||||
| Cash flows from operating activities: | ||||||
| Net loss | $ | (16,297) | $ | (16,526) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Depreciation | 618 | 439 | ||||
| Amortization of right-of-use assets | 802 | 891 | ||||
| Amortization of intangible assets | 72 | 56 | ||||
| Provision for bad debt | (115) | (159) | ||||
| Provision for inventory write down | 1,624 | (95) | ||||
| Change in investment gains and losses | (141) | (602) | ||||
| Share-based compensation | 2,778 | 4,989 | ||||
| Change in assets and liabilities: | ||||||
| Accounts receivable | 3,010 | (805) | ||||
| Inventory | (600) | (1,510) | ||||
| Prepaid expenses and other | (1,699) | (1,312) | ||||
| Accounts payable and accrued expenses | (4,212) | 816 | ||||
| Operating Lease Obligations | (915) | (846) | ||||
| Cash paid for interest portion of Finance Leases | - | (2) | ||||
| Contract and other liabilities | (6) | (12) | ||||
| Net cash used in operating activities | (15,081) | (14,678) | ||||
| Cash flows from investing activities: | ||||||
| Purchase of short-term investments | (22,965) | (84,142) | ||||
| Purchase of property and equipment | (13,183) | (1,685) | ||||
| Sale/Maturities of short-term investments | 59,883 | 98,871 | ||||
| Cash payments for intangible assets | (216) | (280) | ||||
| Net cash provided by/ (used for) investing activities | 23,519 | 12,764 | ||||
| Cash flows from financing activities: | ||||||
| Proceeds from the issuance long term debt | 35,000 | - | ||||
| Payments of debt issuance costs | (350) | - | ||||
| Payments for repurchase of common stock for employee tax withholding | (658) | - | ||||
| Cash paid for debt portion of finance leases | (8) | (17) | ||||
| Proceeds from exercise of stock options and warrants | 1,784 | 2,515 | ||||
| Net cash provided by financing activities | 35,768 | 2,498 | ||||
| Net increase in cash, cash equivalents and restricted cash | 44,206 | 584 | ||||
| Cash, cash equivalents and restricted cash, beginning of year | 41,724 | 30,294 | ||||
| Cash, cash equivalents and restricted cash, end of period | $85,930 | $30,878 | ||||
| Supplemental disclosures of cash flow activity: | ||||||
| Cash paid for interest | 23 | 25 | ||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||
| Acquisition of fixed assets in accounts payable and accrued expenses | 617 | 567 | ||||
| Right-of-use asset and operating lease liability | 796 | 26 |