Axogen, Inc.

Hello, and welcome to the Axogen Inc. 2023 Fourth Quarter and Full Year Financial Results Conference Call and Webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Harold Tamayo, Vice President, Finance, and Investor Relations. Harold, you may now begin.

Thank you, Kevin, and good morning, everyone. Joining me on today's call is Karen Zadarik, Accident's Chairman, Chief Executive Officer, and President, and Nir Naur, Chief Financial Officer. Karen will discuss the quarter and full year 2023, and Nir will provide an analysis of our financial performance, guidance, and discuss our outlook for the year, 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 Axiogen website. Following the end of the live call, a replay will be available in investor section of the company's website at www.axiogeninc.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, including our expectations regarding our ability to expand our footprint expand core accounts, anticipate growth for revenue categories, penetration of core accounts, marketing opportunities with nerve applications associated with emerging trauma, breast, OMF, and surgical treatment of pain and new products. Our expectations regarding the timing of a launch for Avive Plus are statement regarding the timing of the complete biologics license application submission for advanced nerve graft, as well as statements of the timing of the approved BLA. Our expectation is that assuming approval of the BLA advanced NERF graph will be designated as a reference product and expect the market exclusivity of such designation. Our belief that our balance sheet will continue to be sufficient to bridge through to cash flow breakeven and longer-term profitability. Our expectation is that we will continue trending towards cash flow breakeven and our belief that trend-source operating leverage will allow us to maintain a strong balance sheet position and provide ample support as we work towards profitability. 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 processes 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 are set as required by applicable law. We assume no responsibility to publicly update or revise any forward-looking statements. In addition, for reconciliation of no-gap 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, Harold. And thank you all for joining us today as we discuss our 2023 fourth quarter and full year financial results. 2023 was a solid year of key accomplishments, and we enter 2024 with a strong commercialization strategy fueled by innovation and focused execution by our sales team. Full year 2023 revenue was $159 million, a 14.7% increase compared to 2022. In the back half of 2023, we saw improved commercial execution, and during this period, we estimate that revenue from our emergent trauma procedures grew in the mid-single digits, and revenue from scheduled procedures grew above 25% as compared to the same period in 2022. As a reminder, these estimates of procedure categories are based on available data received from hospitals and sales reps. and assumptions regarding specific surgeon practices and account information, and as such, are subject to the limitations of the data received and our assumptions. We're pleased with our progress and execution as we drive long-term growth leveraging innovation, clinical data, surgeon education, and patient activation. We're appreciative of our ongoing surgeon engagement and feedback as they continue to integrate AxiGuard HA Plus into their nerve protection algorithm, finding differentiated applications as compared to AxiGuard Classic. 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 to expand our offering for nerve protection with a Vive Plus soft tissue matrix. which we anticipate will be commercially available in the second quarter of 2024. Avive Plus is 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. We believe Avive Plus will be regulated as a Section 361 tissue product and will further strengthen our position in nerve protection. supporting emergent trauma, and the surgical treatment of pain. In 2023, we also launched our Resensation Breast Neurotization Technique for women who choose an implant-based reconstruction. We believe this innovative technique could apply to an additional 10% to 15% of all breast reconstruction patients. We're pleased with the surgeon engagement, positive feedback from our educational programs, and the early adoption of this new technique. This approach will allow more patients to have the opportunity for sensory restoration following their mastectomy and reconstruction. In August, the RECOM study was published in the Journal of Hand Surgery. The publication includes 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 believe that this edition of Level 1 evidence supporting the efficacy of advanced nerve graft in published literature continues to play an important role in surgeon clinical decision making, especially with middle adopter surgeons. This study adds to a strong pool of clinical evidence supporting advanced nerve graft. In combination with the recent publications of the META analysis, the premier all-payers cost comparison study, and the U.S. cost effectiveness analysis, These four studies provide a package of compelling evidence for both clinicians and payers. During the year, we completed the validation and transitioned into our new processing facility near Dayton, Ohio. This facility was designed for long-term growth and expansion, providing three times our previous capacity. This new facility will also support our BLA for advanced nerve graft. Now turning to our fourth quarter results. We're pleased with our performance during the quarter. Revenue from the quarter increased by 18.7% to $42.9 million compared to last year. We estimate that revenue from the emergent trauma represented approximately half of total revenue and grew mid-single digits compared to last year. As a reminder, emergent trauma generally results from injuries that initially present in an ER. These procedures are typically referred to and completed by a specialist either immediately or within a few days following the initial injury. We believe scheduled procedures also represented approximately half of total revenue. During the quarter, we estimate that this category grew more than 25% 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, nerve decompression, and oral and maxillofacial procedures such as a mandible reconstruction. Strength in this category reflects the opportunity to provide improved quality of life outcomes for patients, compelling clinical data, effective surgeon education, and implementation of patient activation programs. As mentioned in today's press release, our growth strategy continues to be focused on going deeper into core accounts where we see significant opportunity to expand our footprint. As a reminder, Core accounts are defined as those generating more than $100,000 in revenue over the trailing 12 months. Revenues from core accounts represent approximately 65% of total revenue. Growth was primarily driven by increased productivity of our direct sales force as they gained deeper surge in adoption and expanded use cases of our products within these core accounts. We ended the fourth quarter with 116 direct sales representatives, up one from a year ago and flat sequentially. We will continue to evaluate and add sales reps as their territories approach targeted levels. Our direct sales force is supplemented by independent sales agencies that represented approximately 10% of our total revenue. In Q4, growth was broad-based across all applications and products. We were pleased by the contributions from innovations in new products and new applications. We continue to raise awareness of the need for nerve protection and saw expanded use of AxiGuard HA Plus across both emergent and scheduled procedures. We also saw strong surgeon and patient interest in neuritization and implant-based breast reconstruction and expanded the number of surgical teams trained in this important new application. 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 solutions. Our active clinical programs are progressing as expected. At the end of the quarter, we have 245 peer-reviewed publications, including trauma, breast, OMF, and pain. This January, we announced positive top-line results from the REPOSE clinical study, comparing the standard-of-care neurectomy of symptomatic neuroma to neurectomy and protection of the terminated nerve end with Axigard nerve tap. This post-marketing study met its primary endpoint for reduction of pain as measured by the visual analog scale. In addition, The study investigators found that over the full 12-month course of follow-up, Axigard nerve cap demonstrated statistical superiority for reduction in total pain reported by the subjects as compared to the standard of care anorectomy. We believe that these findings will play an important role in surgeon clinical decision-making. Now turning to the BLA for advanced nerve graft. We've recently completed our productive pre-BLA meeting with the FDA. We're encouraged by the positive interactions and have aligned with the FDA on a rolling submission process and the content of the modules for submission. We now anticipate the filing to be completed in Q3 of 2024 with potential approval in mid-2025. As a reminder, a BLA approval will complete the regulatory transition of advanced nerve graft from a 361 tissue product to a 351 biological product. Importantly, we believe Avance will be designated as the reference product for potential biosimilars, providing 12 years of market exclusivity. With over 100,000 Avance nerve grafts implanted since launch, we are well positioned to continue to lead and innovate in the large and developing peripheral nerve repair market. I'm proud of our team, and I look forward to continuing our mission of revolutionizing the science of nerve repair. Now I'll turn the call over to Nir to provide a review of our financial highlights and guidance. Nir?