Axogen, Inc.

Greetings, and welcome to the Oxygen, Inc. Report's 2024 Second Quarter Financial Results Call. At this time, all participants are in a listen-only mode. A brief 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Harold Simeo. Vice President of Finance and Investor Relations. Thank you, Harold. You may begin.

Thank you, Maria. Good morning, everyone. Joining me on today's call is Karin Zetterich, Excellence Chairman, Chief Executive Officer, and President. And Nir Naur, Chief Financial Officer. Karin will discuss the second quarter of 2024 financial results. And Nir will provide an analysis of our financial performance and 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 the 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 financial guidance, our expectations regarding our ability to expand our markets, and expand revenue from core accounts, anticipated growth for revenue categories, marketing opportunities with nerve repair applications associated with breast OMF protection, and the surgical treatment of pain and new products. Our expectations regarding the commercial performance of Avive Plus soft tissue matrix, our statements regarding the timing of the complete biologics license application submission for advanced nerve graft, as well as statements regarding the timing for approval of the BLA Our expectations that, assuming approval of the BLA Advanced Nerve Graft, will be designated as a reference product and the expected market exclusivity of such designation. And our expectations around cash flow, including that we'll continue trending toward cash flow break-even and profitability. Forward-looking statements are based on current beliefs and assumptions and are guarantees of future performance and are subject to risk and uncertainty, including Not without limitation, the risk 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 day they are made, and except 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'd like to turn the call over to Karen. Karen?

Thank you, Harold, and thank you all for joining us today to discuss our 2024 second quarter financial results. Before discussing the quarter, and as we announced earlier today, I'd like to welcome Michael Dale to Axigen. Effective August 9th, Mike will be stepping in as Axygen's chief executive officer. Mike recently served as the president of Abbott Structural Heart and has a long history of successfully leading, building, and scaling commercial stage life science companies. With his extensive experience, Mike is well equipped to lead Axygen through its next phase of growth and innovation as I retire. Turning now to the quarter. We had a solid second quarter achieving a number of major milestones. We're pleased with our positive trends in revenue growth, bottom line performance, and the launch of Avive Plus Soft Tissue Matrix, and the progress of our BLA submission for Advanced NeuroGraft. Our achievements highlight the strides we're making towards reaching our growth targets, driving towards profitability, and generating positive cash flow. During today's call, I will review our accomplishments and the advancements we've made across our business. We're pleased with the quarter's top-line revenue and EBITDA growth. Revenue was $47.9 million, an increase of 25.6% compared to last year, while adjusted EBITDA was $5.6 million versus a loss of $.2 million last year. Notably, revenue growth was broad-based across our products and applications. During this quarter, Our results were driven by improved sales productivity and solid commercial execution of our growth strategy. Our strategy remains focused on deepening our presence in high potential accounts, specifically level one trauma centers and academic affiliated hospitals with a high number of trained microsurgeons. Our goal is to continue to penetrate the nerve repair business within these accounts across all of our targeted nerve repair applications. In addition to the strong execution in the quarter, and as we mentioned in our Q1 earnings call, we saw a shift in some procedures from March to early Q2. We believe this shift positively impacted our results for this quarter, approximately $1.5 million. As a result of our strong performance and momentum in the first half of the year, we are raising our revenue guidance for the full year, and Nir will provide more detail in a few moments. In this quarter, our core accounts increased to 412 versus 347 at the end of the second quarter of the prior year and 400 at the end of the first quarter of this year. As a reminder, core accounts are defined as those generating more than $100,000 in revenue over the trailing 12 months and currently represent approximately 65% of our total revenue. Our largest core accounts are over $1 million in annualized sales. We ended the second quarter with 117 direct sales representatives, an increase of two reps sequentially and compared to a year ago. We believe our revenue growth will continue to be driven primarily by increased productivity of our sales force, and we will evaluate and add additional sales reps as needed. Our direct sales force is supplemented by independent sales agencies that represent approximately 10% of our total revenue. As the leader in the nerve repair market, driving innovation through new products and expanded applications to provide advanced solutions for surgeons and their patients is a key pillar of our growth strategy. We previously announced three new innovations to our portfolio, which included resensation for implant-based breast neurotization and two new products in the nerve protection space. In the quarter, we continue to see strong surgeon and patient interest in implant-based breast neurotization. We completed an additional surgical education program, training new teams of both breast and reconstructive surgeons in the resensation procedure, a nerve repair technique providing the opportunity for the return of sensation to the breast. These immersive training programs are surgeon-led and prepare the surgical team to incorporate the resensation procedure into their breast reconstructions. We're pleased with the response from the two programs we've completed this year. and are on track to complete an additional education program in the third quarter. In addition to our surgeon education programs, we continue to invest in driving awareness and education on the quality of life impact of numbness after mastectomy. We work with patient advocacy groups to build awareness and support the right of mastectomy patients to receive breast neurotization as a part of their reconstructive procedure. We're pleased with the increasing number of patients who are connecting with surgeons who perform breast neuritization through our Resensation website. We've also expanded our innovation and focus on protecting injured nerves. The category of nerve protection covers a wide range of diverse nerve injuries and defects, including compression, nerve crush injuries, and complex traumatic injuries. In these injuries, the nerve is still intact, but could have damage to its internal structure or surrounding tissue bed, which drives the need for protecting the nerve during the critical phase of healing. The nerve protection market, which we estimate to have a potential market opportunity of above $800 million, represents a significant growth opportunity for Actigen, and we see a need for multiple solutions to address these diverse types of non-transsected nerve injuries. Our first portfolio addition in the nerve protection category was AxiGuard HA Plus Nerve Protector, which continues to be well-received by surgeons and an important growth driver. We're continuing to expand our offerings for nerve protection, and in June of 2024, we announced the full launch of our newest product, Avive Plus Soft Tissue Matrix. Avive Plus is intended for use as a soft tissue barrier and is a resorbable, multi-layer amniotic membrane allograft. that provides temporary protection and tissue separation during the critical phase of peripheral nerve healing. We are pleased with the initial positive surgeon feedback, and we believe that Avive Plus will have use cases in multiple nerve repair applications. With these additions, we believe we offer the most comprehensive protection portfolio for nerve repair, which addresses the diverse needs in the protection market. 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, healthcare economics, and utility of our nerve repair solutions. Our active clinical programs are progressing as expected. As of the end of the quarter, we had 275 peer-reviewed publications, including applications in trauma, breast, OMF, and pain. In July of 2024, a new study evaluating nerve coaptation approaches was published in the Journal of Plastic and Reconstructive Surgery Global Open. The study, titled Comparative Effectiveness, Systematic Review, and Meta-Analysis of Peripheral Nerve Repair Using Direct Repair and Connector-Assisted Repair, assessed differences in outcomes between nerves repaired with suture-only direct repair and connector-assisted repair techniques. This level one evidence found that the connector-assisted repair group had significantly more patients achieve meaningful recovery and significantly fewer patients experienced cold intolerance than those in the direct repair group. A suture direct repair is considered a historical standard of care and is one of the most common nerve repair methods. This evidence supports the benefits of protecting the nerve coaptation site with implants like our AxiGuard connectors and protectors as compared to direct repair alone. Similar to the meta-analysis previously published for nerve gap repair, we believe that these findings will play an important role in surgeon clinical decision-making and in the adoption of connector-assisted repair techniques for transected nerves. Turning to the BLA for advanced nerve graft. We're excited that we completed an important milestone with the submission of the first wave of data to FDA in May. We plan to provide the remaining modules in the third quarter. We believe the submission timeline will allow for a potential approval in mid-2025. As a reminder, a BLA approval will complete the regulatory process to transition advanced nerve grafts to a 351 biological product. Importantly, we believe Avance will be designated as the reference product for potential biosimilars, providing at least 12 years of market exclusivity from the approval date. Another key component of our transition to a biologic was the construction and validation of our new Axigen Processing Center near Dayton, Ohio. By the end of 2023, we had fully transitioned all of Avance processing to this new facility, and in June of 2024, We celebrated the official ribbon-cutting event supported by many esteemed community leaders. This new center not only enhances our processing capabilities and capacity, but it also underscores our commitment to quality and innovation. It demonstrates our investment in the local community, fostering strong relationships with local leaders, and showcasing our dedication to creating high-quality jobs and contributing to this regional economy. As often seen in the ramp-up of new facilities, we have incurred some startup costs that were of greater magnitude than we initially expected and have impacted our gross margin in the near term. We have resolved these early challenges, and we're confident in our ability to execute moving forward. During the startup process, we've also gained some insight into incremental operating costs of running this state-of-the-art biologics facility. We expect to see higher capacity utilization and other improvements that will help offset these costs over time. In conclusion, we're pleased with our strong second quarter results, which reflect the successful execution of our growth strategy and commitment to innovation. Looking ahead, we remain focused on delivering on our revenue growth and profitability as we advance our mission to revolutionize the science of nerve repair. I'll now hand the call over to Nir, who will provide further details on our financials and provide the updated financial guidance for the full year 2024. Nir?