Axogen, Inc.

Officer and Director, and Nir Naor, Chief Financial Officer. Michael will discuss third quarter 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 Axiogen'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.axogeninc.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. Forward-looking statements include but are not limited to all statements relating to financial guidance, including revenue, margins, cash flow, and future profitability, the availability to fund ongoing operations, the availability to expand markets and revenue, expectations for growth, marketing opportunities within existing and new nerve repair markets and applications, and the expected approval of the biologic license application for advanced nerve graft, including the anticipated approval timeline the assumption that advanced nerve graft will be designated as a reference product for any future biosimilar nerve graft and that such designation will provide marketplace exclusivity. 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 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 except as required by applicable law, the company assumes no responsibility to publicly update or revise any forward-looking statements. In addition, for a reconciliation of non-GAAP measures, please refer to today's press release and the corporate presentation on the investor section of the company's website. Now I'll turn the call over to Michael.

Thanks, Operator, and thanks, everyone, for joining us today. I'll begin our call by providing a brief overview of our third quarter performance. Then, since this is my first call as the CEO of Axigen, I'd like to take time to address a few of the more common questions I get as Axigen's new leader. What compelled me to join Exygen? What have I been doing since joining the business in August? And what are our plans for the business going forward? Following this, I will also provide some additional color on our quarterly performance, after which Nir will provide a review of our financial results, followed by a question and answer. So let's begin. We are pleased with the quarter's top line revenue and EBITDA growth. Revenue was $48.6 million, an increase of approximately 18% compared to last year, while adjusted EBITDA was $6.5 million versus $2.4 million last year. Notably, revenue performance in the quarter was broad-based, reflecting growth across our portfolio. Both revenue and EBITDA were positively impacted by improved sales productivity and commercial execution of our present growth strategy. Regarding the most common questions I'm asked, I'll begin with why Axigen? Very simply, Axigen as a business opportunity fulfills all three of the most important elements required for success in my estimation. Firstly, the purpose of the business is credible and relevant. Secondly, the clinical problem is numerous enough to justify the allocation of time, capital, and people to build a business. And finally, There is clear and compelling evidence the solution to the business purpose is distinctively advantage relative to the existing standards of care. Everything I've observed and experienced since joining the organization reaffirms this estimation. While our future is obviously dependent upon execution of our future plan across business functions, these are mechanics I understand and have confidence in how to apply by function. I learned many years ago, however, that good mechanics can't overcome an irrelevant purpose or undifferentiated product solutions. I've had the privilege to test this thesis on numerous occasions over the last 30-plus years in both public and private companies, leading and bringing to market numerous transformative products and therapies in the cardiovascular, neuromodulation, diabetes, and electrophysiology markets. I love what I do, which is why I'm still doing it, and I believe oxygen is a very important business, with significant undeveloped potential. As for the remaining two questions, what have I been doing since joining the company and what is the plan for the business going forward? On day one, we established three priorities for the remainder of the year. Number one, successfully complete the submission of our BLA application. Number two, meet our established revenue guidance for the year. And lastly, develop a new strategic operating plan for the business. engaging all employees and key external stakeholders in the process. Consistent with the purpose of strategic planning and relative to the mission underlying our business purpose, our aim is understanding what are the necessary objectives, strategies, and processes required to achieve standard of care status for the company's products by market opportunity. While we have one primary product, Avance, upon which the business was founded, respective applications for events are numerous and constitute in many instances distinctly different market opportunities characterized by different physician call points and requiring therefore different business models how we prioritize the development of these different opportunities based on return on time and ability to impact standard of care are critical choices to answer therefore the last question I look forward to to providing details on our strategic plan on our fourth quarter call in early 2025, at which time we will describe in detail what we believe will be the most attractive market opportunities for the business and the required business models and timelines for their development. Returning to our quarterly results, as described in our earnings release, overall we had a solid quarter, achieving several major milestones. We are pleased with the positive trends in revenue growth, bottom line performance, and importantly, the completion of the rolling submission process and the acceptance by the FDA of the filing of the BLA IV Advanced Nerve Graph. Our strategy remains focused on deepening our presence in high potential accounts, which are primarily characterized by the following criteria. Larger hospitals, including level one trauma centers and or academic affiliated hospitals, with a high number of nerve repair procedures, and lastly, already trained microsurgeons. We aim to drive growth in these types of accounts through targeted expansion of nerve repair indications by building on the existing experience in nerve repair in the account, the inherent potential of the account to grow based on size and procedure volume, and expanding adoption of our nerve repair algorithm to other surgical specialties within these accounts. We believe our focus on these high potential accounts is the reason for our recent improvements in sales productivity in our extremities trauma and head and neck business in particular. Regarding revenue mix, we saw broad base growth across the portfolio, including an increase in nerve reconstruction cases in our targeted clinical applications, such as upper extremity trauma, mandible reconstruction, and breast neurotization, as well as growth from nerve protection procedures. Our growth in nerve protection is driven by adoption of our newest solutions, AxiGuard HA Nerve Protector and Avive Plus Soft Tissue Matrix, which gives Axigen the most comprehensive portfolio to address these common non-transsected nerve injuries. Other key events and programs during the quarter include our continued commitment to leadership in professional education, During the quarter, we sponsored a national resensation breast program as well as numerous regional surgeon education programs in extremities and head and neck. These programs are a key driver of new surgeon activation and broader adoption of our nerve repair portfolio. In Q3, we also attended the American Society for Surgery of the Hand in Minneapolis. Nerve was an important topic at this meeting, and we continue to see a growing interest in incorporating nerve repair among the hand surgeon community. This year, we presented novel data on the extent of nerve damage that occurs in common injuries, the importance of protection of the nerve coaptation site, and the growing role of advanced nerve graft in sensory, mixed, and motor nerve repair. The data presented characterized the extent of nerve damage from common trauma injuries and was generated in collaboration with a leading group of hand surgeons. This involved quantifying the extent of damage from common traumas using micro CT and other advanced imaging modalities. Importantly, these findings will help further the understanding of how these common traumatic lacerations lead to a more extensive zone of injury than previously appreciated as compared to a surgeon's traditional methods of visual estimation. We also saw presentation of data from a recently published meta-analysis comparing meaningful recovery rates of suture-only direct repair to connector-assisted repair. The study findings reported significantly greater proportion of patients achieving meaningful recovery and higher levels of meaningful recovery when connector-assisted repair was performed compared to suture-only direct repair. These data and publications highlight the growing understanding of nerve injury and the important role our products play in nerve repair. Turning to the BLA for advanced nerve graft, in September, we completed the rolling submission process. On November 1st, we were informed by the FDA that they have completed our filing review and have determined our application is sufficiently complete to permit a substantive review. which allows for a timeline and approval with a review goal date of September 5, 2025. Additionally, they informed us that they are not currently planning to hold an advisory committee meeting. As a reminder, a BLA approval will complete the regulatory process to transition advanced nerve graft to a 3-5-1 biological product. Importantly, we believe Avance will be designated as a reference product for potential biosimilars, providing at least 12 years of market exclusivity from the approval date. In conclusion, we are pleased with our third quarter results, which reflect the successful execution of our current growth strategy and commitments to science-based education and market development. Looking ahead, we remain focused on completing the BLA application process, meeting our revenue guidance for the year, and completing our new strategic operating plan. I will now hand over the call to Nir, who will provide further details on our financials and full-year guidance. Nir? Thank you, Mike.

We're excited about our results for this quarter. We have seen a lot of progress in our strategy and our commercial execution continues to yield solid results. Turning to our financials, For this quarter, our revenue was $48.6 million, representing 17.9% growth from the third quarter of 2023. This growth is attributed to a 13.7% increase in unit volume and mix and a 4.2% increase in price. Higher unit volumes were driven by broad strengths across the existing product portfolio and momentum from new product introductions. Our gross profit for the quarter was $36.4 million, an increase from the $31.7 million recorded in the third quarter of 2023. This represents a gross margin of 74.9%, down from 76.8% in the same period last year, driven by product mix. Notably, we saw a sequential increase from the prior quarter gross profit margin of 38%. of 73.8% as we continue to make improvements in our operating processes at the APC facility. Our total operating expenses for the quarter increased by 2.9% to $36.8 million, up from 35.7 million in Q3 of 2023. Our sales and marketing expenses for the third quarter decreased by 1.3% to $18.9 million, partly driven by the advance royalty fee, which we see paying as of the end of last year. As percentage of total revenue, our sales and marketing expenses for the third quarter decreased to 38.9% from 46.4% in the third quarter of 2023, also reflecting improved Salesforce productivity. Research and development expenses increased by 4.5%, to $7 million from $6.7 million in the third quarter of 2023. As percentage of total revenues, total R&D expenses decreased to 14.4% from 16.2% in the same quarter of the previous year. General and administrative expenses increased by 9.8% to $10.8 million in the third quarter of 2024, compared to $9.9 million in the same quarter of 2023, driven by stock-based compensation expense related to the departure of the former CEO. The quarter ended with a net loss of $1.9 million, or 4 cents per share, compared to a net loss of $4.1 million, or 10 cents per share, in the third quarter of 2023. Adjusted net income was $3.1 million for the quarter, or $0.07 per share compared to an adjusted net income of $0.7 million or $0.01 per share in the same period last year. Adjusted third quarter EBITDA was $6.5 million compared to an adjusted EBITDA of $2.4 million in the prior year. Lastly, we generated positive cash flow in the third quarter. As of September 30th, our balance of cash, cash equivalents and investment was $30.5 million compared to $27.1 million at the end of the second quarter of 2024. These improvements in our bottom line profitability metrics, such as adjusted EBITDA and cash flow, reflect our ongoing efforts to focus to improve our operational efficiencies across the organization and our ability to leverage economies of scale. We believe these improvements will enable us to fund our ongoing operations. Turning now to our guidance. As outlined in today's press release, we're maintaining our revenue guidance for the full year 2024 in the range of $182 to $186 million. We're pleased with our performance year to date and are optimistic going into 2025. With regards to our full year gross margin guidance, we now expect to be at the high end of the 74% to 76% range we provided earlier. Additionally, we're reaffirming that we expect to be net cash flow positive cumulatively for the period from April 1st through year end. In summary, we're pleased with our performance in the third quarter. We will continue to execute our strategies, invest in innovation, drive revenue growth, and optimize resource allocation and focus on profitability. At this time, we'd like to open the line for questions. Operator?