Axogen, Inc.

Welcome to the AxiGEN third quarter 2022 conference call. At this time, all participants are in listen-only mode. The brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference today, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Ed Joyce, AxiGEN's Director of Investor Relations. Please begin, Mr. Joyce.

Thank you, Rob. And good morning, everyone. Joining me on today's call is Karen Zatteray, AxiGen's Chairman, Chief Executive Officer and President, and Pete Mariani, Executive Vice President and Chief Financial Officer. Karen will discuss the quarter and our outlook for the year, and Pete will provide an analysis of our financial performance, followed by a question and answer session. Today's call is being broadcast live via webcast, which is available on the investor section of the AxiGen website. Following the end of the live call, a replay will be available in the investor section of the company's website at www.axigeninc.com. Before we get started, I'd like to remind you that during this conference call, the company will make projections and forward-looking statements regarding future events. Forward-looking statements are based on current beliefs and assumptions and are not guarantees of future performance and are subject to risks and uncertainties, including, without limitation, the risks and uncertainties reflected in the company's annual and periodic reports. Actual results or events could differ materially from those described in any forward-looking statement as a result of various factors, including, without limitation, the impact of COVID-19 on our business, global supply chain issues, record inflation, hospital staffing issues, product development, product potential, expected clinical enrollment timing and outcomes, regulatory process and approvals, APC renovation timing and expense, financial performance, sales growth, product adoption, market awareness of our products, data validation, our visibility at and sponsorship of conferences and educational events, global business disruptions caused by Russia's invasion of Ukraine and related sanctions, and other factors including legislative, regulatory, political, and economic developments not within our control. The forward-looking statements are representative only as of the date they are made or 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. And with that, I'd like to turn the call over to Karen. Karen?

Thank you, Ed. And thanks to everyone joining us this morning. We're pleased to report revenue of $37 million, representing 18% growth over last year's third quarter, driven by strong commercial execution with increases in each of our products and across our applications. As expected, we continue to see sequential improvement in surgical procedure volumes during the quarter as hospitals address staffing and other challenges resulting in improved consistency in emergency department staffing and an increased surgical capacity. We're pleased with the sequential improvement Although we note that hospitals continue to report some residual impact from these challenges, and accordingly, we remain measured in our outlook regarding the pace of continued improvements over the near term. Our strategy remains anchored with continued focus and execution in our core and active accounts. As a reminder, active accounts are those that have ordered at least six times in the last 12 months and may still be in the early stages of adoption. Core accounts represent more penetrated accounts, defined as those that have had greater than $100,000 in revenue in the trailing 12 months. The number of our core accounts increased to 331 in the quarter, representing growth of 11% sequentially and 17% over a prior year adjusted level of 283, excluding the impact of Avive purchases in 2021. This growth represents the impact of our strategy to drive deeper penetration into accounts as they continue to open surgical capacity across nerve repair applications. Core accounts continue to represent about 60% of our revenue and typically contain at least one surgeon who has adopted the oxygen nerve repair algorithm for a significant portion of his or her nerve injury patients. Leveraging this surgeon's success with our products We focus on gaining more cases with that first early adopter surgeon and gaining use by additional surgeons including middle adopters in that account. We continue to see that our best opportunity for growth resides with our core accounts by driving more deeply penetrating the treatment of traumatic injuries and continuing to expand into other nerve repair applications including breast, OMF, and the surgical treatment of pain. The number of our active accounts increased to 952 in the quarter, representing growth of 1% sequentially, and 2% over an adjusted prior year of 930. Active accounts continue to represent about 85% of our total revenue, with the top 10% contributing about 35% of our revenue. We ended the quarter with 111 direct sales representatives, down five from the end of second quarter, and up from 109 a year ago. Our commercial execution in the quarter was strong, and we're continuously evaluating the productivity of our sales representatives and making adjustments as necessary. We believe our revenue growth can be primarily driven by sales rep productivity gains, and we will continue to add additional sales reps as their territories approach targeted levels. Our direct sales force continues to be supplemented by independent sales agencies that represent approximately 10% of our total revenue. In September, we participated at the American Society for Surgery of the Hand meeting in Boston. This annual conference is a valuable event for driving innovation and an important forum for Axigen's expanding portfolio of clinical data. We were pleased to see the continued discussion of the importance of our recently reported recon study results at the conference. As a quick reminder, our RECON study is the culmination of years of work with the FDA and serves primarily as the pivotal study for our biologics license application, or BLA, towards transitioning advanced from a 361 tissue product to a 351 biological product. We expect to submit this BLA in the second half of 2023. At the ASSH conference, the RECON study data was the focus of a surgeon panel symposium titled State-of-the-Art Nerve Reconstruction Data, the How and Why of Implementing This New Data into Your Clinical Practice. We believe RECON is a landmark addition to our growing body of clinical evidence used to drive surgeon engagement and adoption. As a reminder, the study achieved its primary endpoint, The study also observed that as nerve gap lengths increased, Avance demonstrated statistical superiority over conduits in the return of sensibility as measured by static two-point discrimination in gaps greater than 12 millimeters. Also for gap lengths greater than 10 millimeters, Avance had statistically superior time to recovery, with patients achieving normal two-point discrimination up to three months earlier than in the conduit group. The study also demonstrated lower incidences of persistent and unresolved pain for advanced subjects. The ASSH symposium also included a presentation by the surgeon authors titled, A Systematic Review and Meta-Analysis of Nerve Gap Repair. This comprehensive clinical review and analysis compared the meaningful recovery rates between allografts, autografts, and conduits. For this meta-analysis, several hundred peer-reviewed studies were screened for nerve injury type and similar outcome measurements, with over 1,500 nerve repairs included in this analysis. This is the largest peripheral nerve repair meta-analysis to date, and the study concluded that meaningful recovery rates for allograft and autograft repairs were comparable across all gap lengths and up to 70 millimeters. and that there were no statistical differences between allograft and autograft outcomes in both sensory and motor repairs. Additionally, allograft and autograft repairs delivered significantly better rates of meaningful recovery in short gaps as compared to conduit repairs. Lastly, an additional part of this meta-analysis was an examination of the acute procedure-related costs comparing autograft procedures to allograft procedures. and the study found the costs were comparable. Overall, we were excited with the high level of interest and engagement at the ASSH conference this year. The strong surgeon participation highlights the importance of clinical data to peripheral nerve surgeons. We continue to build market awareness of nerve repair with both healthcare providers and through our direct-to-patient initiatives, particularly for breast and pain applications. We utilize our marketing initiatives to drive patient engagement to our Resensation and Rethink Pain websites. These sites are aimed at increasing patient awareness and education for the potential of nerve repair procedures to improve outcomes for those undergoing mastectomy and reconstruction and those suffering from chronic neuropathic pain. October was Breast Cancer Awareness Month, and this annual campaign raises awareness about the impact of breast cancer. Our breast team has been highly involved in the monthly awareness events. For us, quality of life for patients undergoing mastectomy and reconstruction is a year-round focus, and we're pleased to see that throughout the quarter, there were eight presentations at clinical conferences on restoring sensation and incorporating neurotization into these patients' reconstructions. We believe the increased awareness and enthusiasm from the thought leaders in the space will continue to elevate both the importance of incorporating nerve reconstruction into these surgeries and the role the re-sensation technique plays in providing the opportunity for a return of sensation following mastectomy. Our surgeon education programs remain a top priority for Axigen and continue to generate interest in the surgical community. We have achieved our annual goal of training more than 75% of the most recent class of hand and microsurgery fellows, And as I mentioned, we had great interactions and engagement during all of our educational events at the ASSH conference. Moving on to updates in our growing body of clinical evidence. We remain committed to developing the clinical evidence to demonstrate the safety, performance, and utility of our nerve repair solutions to support the continued adoption of the oxygen algorithm across our full portfolio of nerve repair products. We added 11 new peer-reviewed publications this quarter, now with a total of 207 across extremity, trauma, breast, OMF, and pain. As I mentioned, our RECON study was discussed during ASSH. We believe that the addition of the RECON study's Level 1 evidence will provide compelling incremental data to support further expansion into the middle adopters in our core accounts. We believe that our growing portfolio of high-quality clinical evidence is the most comprehensive in the area of nerve repair and a key data-driven part of gaining surgeon adoption. Our ranger and match registries continue to enroll, now with over 2,700 advanced nerve graft repairs enrolled in ranger. Data from these two clinical registries continue to play an important role in informing surgeons in their clinical decision-making. Repose is our study of Axigard nerve cast compared to standard treatment for reducing symptomatic neuroma. Earlier this year, we announced strong top-line data results from the pilot phase of this study, and we've achieved full enrollment with 86 subjects in our comparative phase of this study. We expect top-line data readout from the comparative phase in Q4 of 2023. We remain on track towards We remain on track working towards all the requirements necessary for a BLA submission for advanced nerve graft in the second half of 2023. Our new tissue processing facility in Dayton, Ohio, also remains on track, and we anticipate beginning transitioning production in the first quarter of 2023. Turning now to our outlook. Today we narrowed the range of our full-year guidance and expect 2022 revenue to be in the range of $137.5 to $140 million, compared to our prior guidance range of $135 to $142 million. Full-year gross margin is expected to be above 80%. Now I'll turn the call over to Pete for a review of financial highlights. Pete?