Axogen, Inc.

Welcome to Axiogen Report's third quarter 2023 financial results. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Adonna Alexander, Investor Relations Consultant. Adonna, you may now begin.

Thanks, Rob. Good morning, everyone. Joining me on today's call is Karen Zatteray, Axygen'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 and guidance, followed by a question and answer session. Today's call is being broadcast live via webcast, which is available on the investor section of Axygen's website. Following the end of the live call, a replay will be available in the investor section of the company's website at www.oxygeninc.com. Before we get started, I'd like to remind you that during this conference call, the company will make projections and follow-looking statements, including our expectations regarding our ability to expand our footprint and expand core accounts, anticipated growth for revenue categories, penetration of core accounts, marketing opportunities with nerve applications associated with emergent trauma, breath, OMF, and surgical treatment of pain, and new products. Our expectations regarding the timing of a launch for Avive Plus, our expectations regarding our ability to make a rolling biologics license application submission for advanced nerve graft, and the timing of the BLA submission for approval. Our belief that our balance sheet will continue to be sufficient to bridge through to cash flow breakeven and longer-term profitability, Our expectation that we will continue trending towards cash flow break-even and our belief that trends towards operating leverage will allow us to maintain a strong balance sheet position and provide ample support as we work towards profitability. Our 2023 financial guidance, including revenue range and gross margin, optimism associated with the adoption of our new products, key strategic pillars, and our balance sheets. 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, not without limitation, the risks and uncertainties reflected in the company's annual and periodic reports, such as hospital staffing issues, regulatory process and approvals, surgeon and product adoption, and market awareness of our products. The forward-looking statements are representative only as of the date they are made and accept as required by applicable law, we assume no responsibility to publicly update or revise any forward-looking statements. In addition, for a reconciliation of non-GAAP measures, please reference today's press release and our corporate presentation on the investor section of the company's website. Now, I would like to turn the call over to Karen. Karen?

Thank you, Donna. And thank you all for joining us today as we discuss our third quarter 2023 financial results. We're pleased with the quarter, led by revenue of $41.3 million, representing 12% growth year over year. Our performance reflects improvement in emergent trauma, as well as continued strength in scheduled procedures. This improvement was the result of stabilization in the hospital operating environment and improved commercial execution. As you may recall, last quarter we began reporting estimated revenue and growth across two primary procedure categories, emergent trauma and scheduled procedures. These estimates are based on available data received from hospitals and sales reps, and assumptions regarding specific surgeon practice and account information, and as such, are subject to the limitations of the data received and our assumptions. During the quarter, we estimate that emergent trauma procedures represented approximately 50% of revenue and grew in the mid-single digit percent range versus the prior year. As a reminder, emergent trauma generally results from injuries that initially present in an ER. These procedures are typically referred to and are completed by a specialist either immediately or within a few days following the initial injury. During the quarter, we began to see stabilization of staffing and procedure scheduling in hospital compared to the first half of 2023. Although we continue to see growth of certain routine procedures in lower-cost settings, such as ASCs, access to these procedures within hospitals also improved in the third quarter compared to the first half of the year. Scheduled procedures also represent approximately half of total revenue. During the quarter, we estimate that this category grew approximately 20% versus the prior year. As a reminder, scheduled procedures are generally characterized as procedures where a patient is seeking relief of a nerve condition caused by a nerve defect or surgical procedure. These include breast reconstruction following a mastectomy, nerve reconstruction following the surgical removal of a painful neuroma, and oral and maxillofacial procedures such as a mandible reconstruction. and nerve decompression. The growth in this category is reflective of the opportunity to provide improved quality of life outcomes for patients. We have built the success with compelling solutions backed by clinical data and supported by surgeon education and effective patient activation programs that educate patients and connect them with trained surgeons. Our growth strategy continues to be focused on going deeper into core accounts, where we believe there's tremendous opportunity to expand our footprint. Core accounts are defined as those with greater than $100,000 in revenue in the trailing 12 months. During the quarter, core accounts totaled 372, an increase of 12% over the prior year of 331, and an increase of 7% sequentially. Revenues from core accounts now represent approximately 65% of total revenues, up from 60% in prior quarters, demonstrating the strength of our commercial execution and ability to gain deeper search and adoption and expanded use cases of our products. We ended the third quarter with 116 direct sales representatives, up one from the end of the second quarter and five from a year ago. We believe our revenue growth can continue to be driven primarily by increased productivity of our sales force, and we will evaluate and add additional sales reps as their territories approach targeted levels. Our direct sales force is supplemented by independent sales agencies that represent approximately 10% of our total revenue. Earlier in the year, we were pleased to provide an update on our key strategic pillar of product and procedure innovation, and we expect this will continue to be a driver of long-term growth. As a summary, We announced three specific innovations across our offering, including an expansion of our resensation technique for women who choose an implant-based reconstruction, which we believe could apply to an additional 10 to 15% of all breast reconstruction patients. We had initially set a goal of training 20 additional surgical teams by year end, but now expect to have more than 30 new teams trained and performing procedures. and we will continue to train additional teams in early 2024. We also announced innovation in our nerve protection portfolio. The category of nerve protection represents approximately 800 million of the overall nerve repair market and covers a wide range of injuries and defects, including carpal and cubital tunnel syndromes, crush injuries, and other non-transsected traumatic nerve injuries. We believe that the diversity of these injury types and their anatomical locations present some unique challenges. Optimizing outcomes for these patients requires a targeted portfolio of solutions to adequately address the specific aspects of both the injury and healing process. Following a successful pilot release, we're happy to announce that in August we had a national launch for the first of these new products, AxiGuard HA Plus Nerve Protector. We're very pleased with the initial search and engagement and feedback as they began to integrate AxiGuard HA Plus into their nerve protection algorithm. We're confident that AxiGuard HA Plus will expand the adoption of nerve protection products and will help more patients with nerve injuries. Additionally, we're continuing the development of a resorbable nerve protection product that functions as a barrier providing temporary protection and tissue separation during the critical phase of healing for nerve injuries. This new product will be branded a Vive Plus Soft Tissue Matrix and will be regulated as a Section 361 tissue product. We expect the Vive Plus will further strengthen our position in nerve protection, supporting emergent trauma and the surgical treatment of pain. We remain on track to launch this product in Q1 2024. Moving on to updates in our growing body of clinical evidence. Over the years, we've made significant investments to develop quality clinical evidence to demonstrate the safety, performance, economics, and utility of our nerve repair solution. Our active clinical programs are progressing as expected. As of the end of the quarter, we have over 200 peer-reviewed publications across trauma, breast, OMF, and pain. In the quarter, the RECON study was published online in the Journal of Hand Surgery and was recently presented in the 78th Annual American Society for Surgery of the Hand Conference. Both events included the author's analysis of the results, which found that advanced returned a greater degree of functional recovery than conduits, and superiority was demonstrated as gap length increased. We're excited to see the addition of this level one evidence supporting the efficacy of advanced nerve graft. in published literature and being discussed by surgeons. This data was supplemented by the findings in the meta-analysis and premier all-payer publications. These publications demonstrated that allograft and autograft sensory and motor outcomes, as well as procedure costs, were comparable. Notably, the allograft group reduced OR time and reduced patient morbidity as compared to autograft. We believe that these publications will continue to play an important role in surgeon clinical decision-making, especially with middle adopter surgeons. Turning to our new production facility and our BLA for advanced neurographs. During the third quarter, we began processing tissue in the new state-of-the-art APC facility, which provides for up to three times our current capacity and was designed for long-term growth and expansion. This represents a key milestone in preparation for our BLA submission. We continue to anticipate a pre-BLA meeting with the FDA in early first quarter 2024, where we will request utilization of a rolling submission process. We plan to begin filing the modules in the first quarter and complete the submission in the second quarter. We believe this process will support BLA approval in the first half of 2025. As a reminder, A BLA approval will complete the regulatory transition of Avance NeuroGraph from a 361 tissue-based product to a 351 biological product. And importantly, we believe Avance would be designated as the reference product for potential biosimilars, providing 12 years of market exclusivity. Looking ahead, we remain focused on executing our strategic initiatives anchored in the strength of our clinical data, innovation, market development, and commercial execution, to continue to drive surge in adoption and growth. Importantly, we're also delivering operating leverage across the business and believe our balance sheet will continue to be sufficient as we bridge through to cash flow break even and longer term profitability. Now, I will turn the call over to Pete to provide a review of our financial highlights and guidance. Pete?