Axogen, Inc.

Good morning, everyone. Joining me on today's call is Michael Dale, Axiogen's Chief Executive Officer and Director, Nir Naur, Chief Financial Officer, and Jens Kemp, Chief Marketing Officer. Michael will discuss first quarter 2025 financial results and corporate highlights. Nir will then 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 broadcasted live via webcast, which is available on the Investors section of Axogen's website. Following the end of the live call, a replay will be available in the Investors section of the company's website at www.axogeninc.com. Before we get started, I'd like to remind you that during the conference call, the company will make projections and forward-looking statements. Forward-looking statements, which are usually identified by the use of words such as Objectives, targets, will, believe, expect, estimate, should, guidance, intend, projects, or other similar phrases include but are not limited to statements relating to financial guidance, including revenue, margins, cash flow, future profitability, expectations for growth, estimated market opportunities, timing for future product and application launches, and the company's expectations for approval of the biologics license application for advanced nerve graft, including the anticipated timing of approval and 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. Forelinking 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 SEC filings, including its Form 10-K and 10-Q. The forelinking statements are representative only as of the date that they are made and accept as required by applicable law, the company assumes no responsibility to publicly update or revise any forward-looking statements. In addition, for reconciliation of non-GAAP measures, please refer to today's press release and the corporate presentation on the Investors section of the company's website. Now, I'll turn the call over to Michael.

2025 first quarter financial results. As you know, we announced a leadership transition this morning with Nir Noor stepping down as Chief Financial Officer. We want to thank Nir for his contributions to the company and wish him all the best in his future endeavors. I'm delighted to announce that succeeding Nir will be Lindsay Hartley. Lindsay will formally assume her new responsibilities as Chief Financial Officer on May 12th. Lindsay has served as Vice President and Corporate Controller at AxiGEN since 2021 and brings a wealth of experience, and we are confident in her ability to lead our financial operations. Lindsay will remain in an advisory capacity through July 1, 2025, to ensure a smooth transition of responsibilities. I will begin today's call with a financial and corporate overview highlighting our progress to date against plans for the business through the quarter, which will include the quarterly key performance indicators relevant to our growth strategies for each of the four markets as identified at our March 4th Investor Day. In addition, I will provide an update on the biologic license approval, often referred to as BLA process, for our advanced nerve graft. I will then turn the call to Nir, who will provide a summary of the quarter's financials and update on full year 2025 guidance for the business. So, how did we do for the quarter? I am pleased to report we kicked off the year with broad-based growth across our entire portfolio to include double-digit growth performance in all markets. This growth was driven in each instance by good overall execution of the customer creation initiatives we described during our March Investor Day, generating continued adoption of our nerve repair algorithm in the high potential accounts central to our growth strategies. Said another way, perhaps more simply, we are focusing our customer facing sales and clinical resources on the highest potential hospital providers and physicians to maximize our ability to teach and establish nerve care as an expectation as part of their patient care. This basic strategy continues to show promise in the form of increasing productivity per headcount and account. Progress with our strategic work to develop additional clinical evidence, societal support, coverage and payment, and new product research and development will naturally leverage and further improve our objective to make nerve care standard of care for all patients. Revenue in our first quarter increased to $48.6 million, up 17.4% compared to last year, driven by continued adoption of Axigen's nerve repair algorithm across each of our target markets and applications, including extremities, oral, maxillofacial, and head and neck, and breast. Per our plan for 2025, we started the work to expand our commercial infrastructure during the quarter completing multiple strategic hires across our sales, marketing, and market access teams to strengthen our capabilities and capacity. As we mentioned at our investor day last quarter, we will begin disclosing specific key performance indicators to help everyone better understand and measure our progress against plans and their relationships to growth. We will begin providing updates on these KPIs during each quarterly earnings release starting today. These KPIs describe performance or progress across the following areas, high potential accounts, commercial infrastructure, professional education and societal support, and prostate market development preparations. I'll begin with an update on our performance and growth in high potential accounts. As a reminder, high potential accounts 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. As of the end of first quarter, we are on track relative to our productivity targets in high potential accounts. As we said during our investor day, we are targeting to generate approximately 66% of our growth in 2025 from high potential accounts. In first quarter, we exceeded this target driven by an increase in average account productivity of 24% versus our plan of 21%. As a reminder, we have identified approximately 780 accounts that meet high potential criteria. Average account productivity is the average revenue generated per high potential account. The first quarter had 566 active high potential accounts which represents an increase of 5% versus first quarter of 2024. Next, I will provide updates on the expansion of our commercial infrastructure and professional education initiatives by market. Beginning with extremities, we enjoyed double-digit growth during the quarter and continued adoption of our nerve protection portfolio in both trauma and chronic nerve injury procedures. Our plans to expand our customer-facing field footprint in extremities and raise the awareness of the need to treat non-transsected nerve injuries includes adding five additional sales representatives in high potential territories in 2025. We intend to add these territories before the end of the third quarter. Key extremities market development activity during the quarter included the completion of one upper extremity professional education fellows program involving 30 surgeons. For 2025, we intend to conduct at least four upper extremity fellows programs, three attending physician level programs, and training at least 105 surgeons. We also completed one international extremity focused professional education program in Spain involving 22 surgeons. In breast, We continue to experience double-digit growth and new customer creation from adoption of our resensation technique. In implant-based reconstruction procedures, regarding our plans to expand our customer-facing footprint from 12 to 22 sales specialists in 2025, we have initiated the recruitment and hiring process and expect to complete the expansion of the sales team before the end of third quarter. We ended first quarter with one regional sales director and 13 breast resensation sales specialists trained in territories. Although we made good progress generating a significant talent pool for expansion of the sales team, we are running behind our original hiring and training plan, but believe we will be on track by the end of the second quarter. We also executed on two professional education programs and trained 35 surgeon pairs and are on track to complete five national programs and train 75 surgical pairs by year end. We finished the first quarter with 119 active breast resensation programs, which represents an increase of 4% versus the first quarter of 2024. Each program has multiple hospital accounts, and we are working to increase adoption in these accounts. In first quarter, we had 229 active accounts, which represents an increase of 6% over 2024. We had an estimated 254 surgeons who performed a breast resensation procedure in the first quarter, which represents a 16% increase versus the first quarter of 2024. In our oral, maxillofacial, and head and neck markets, We saw strong continued momentum and growth from adoption of our nerve algorithm and mandible reconstruction procedures, as well as other head and neck procedures. To accelerate growth in mandible reconstruction, increase our brand awareness, and key opinion leader engagement in head and neck, we have started the hiring process to add the planned five field-based market development managers and expect to complete hiring by the end of the second quarter. We also conducted one professional education fellows training program where we trained 26 surgeons and we are on track to conduct two more professional education programs and train at least 45 surgeons by year end. Finally, an update on prostate. Our prostate clinical and market development plan is on track and we are excited about the opportunity to improve nerve function outcomes in robotic assisted radical prostatectomies. In first quarter, We hired a new director of marketing and are in the process of hiring a clinical support team. Our initial focus is on surgical technique development and onboarding sites for our clinical development pilot. The clinical pilot will support the development of a scalable training and education program by the end of the third quarter. We expect to be able to meet the goal of having 10 pilot sites running by the end of the year. We have confirmed three clinical pilot sites that are in advanced discussions with other sites. We have already started support cases in our pilot sites. We recently attended the American Urological Association Conference in Las Vegas, where we had an opportunity to get an update on the latest developments in robotic-assisted radical prostatectomy and unmet clinical needs. Nerve injury-related outcomes continue to be a significant challenge, and we believe Axigen is well-positioned to address these challenges in a clinical, meaningful way with our portfolio. We also had an opportunity to engage with multiple globally recognized key opinion leaders during the quarter and can report there is high interest to partner with Accident to address the challenge of nerve-related injuries in prostatectomy. As a reminder, we have KPIs related to advancing our clinical research priorities. For breast neurotization, we are advancing efforts on the design of our Level 1 study protocol and are in detailed discussions with health economics and outcomes research and surgeon advisors on the study design and expect to complete the protocol design by year end. In extremities, we are on track to complete the study design for a comparative level one study of advanced nerve graft versus autograft in mixed and motor nerves by year end. In addition, we are on track to develop our clinical evidence plan for oral, maxillofacial, and head and neck by year end. In the first quarter, we continue to see strong external validation of accident differentiated technologies in leadership and peripheral nerve repair, with eight new peer-reviewed publications citing clinical use or discussion of our products. For those interested, these peer-reviewed studies are available on our website. This growing body of literature supports surgeon confidence in adopting our technologies and aligns with our strategic objective of becoming a standard of care option. Consistent with our investor day comments and aligned with our product development strategy, we continue to make meaningful progress across our three core innovation pillars. We advanced our therapeutic reconstruction program, focused on enhancing overall functional recovery following nerve repair. Our easy coaptation initiatives progressed towards developing milestones aimed at simplifying nerve coaptation and making it more predictable for surgeons, and finally, As part of our protection expansion efforts, we initiated early-stage preclinical design work exploring our next-generation new applications for protection technologies. From a development perspective, we're actively progressing all product and application initiatives outlined in our 2025 Innovation Roadmap. Finally, I would like to address the status of our biologics license approval, often referred to as BLA, for advanced nerve graft. The BLA remains on track and continues to progress as planned. We held a mid-cycle meeting with the FDA in March and have our late-cycle meeting with the agency scheduled for later this month. We are pleased to report successful clinical trial site inspections, as well as a successful sponsor inspection of accident under the FDA's bioresearch monitoring, also known as BIMO program. These important regulatory milestones further reinforce our confidence in the strength and completeness of our BLA submission and align with the prior guidance that we expect BLA approval in September. Overall, Accogen is excited to reach this next milestone with BLA approval, securing 12 years of market exclusivity with respect to biosimilar nerve allografts and establishing advanced nerve graft as the only implantable biologic indicated for the repair of functional deficits in peripheral nerves. I will now hand over the call to Nir to discuss the financials and our guidance.

Nir? Thanks, Mike. For this quarter, our revenue reached $48.6 million, representing 17.4% growth from the first quarter of 2024. This growth is attributed to an approximately 14% in unit volume and mix and a 3% increase in price. Our gross profit for the quarter was $34.9 million, an increase from the $32.6 million recorded in the first quarter of 2024. This represents a gross margin of approximately 71.9%, down from 78.8% in the same period last year. The year-over-year decline was driven by two factors. The first was the year-over-year impact from a growing proportion of advanced sold, which was processed at a higher cost at our new facility in Dayton, Ohio. We expect that advanced cost of goods will reduce over time as capacity utilization increases and as we start recognizing additional efficiencies following planned process improvements. The second impact on the gross margin this quarter was due to increased inventory reserves and related write-offs. Looking beyond this quarter, as we progress through the BLA process, which is not expected to conclude before September, Our ability to make significant improvements to our processes and procedures is limited. Once we receive approval, we will be able to implement continuous process and quality system improvement, which we expect to positively impact our gross margin. Our total operating expenses for the quarter decreased to $36.6 million, down slightly from $37.2 million in the first quarter of 2024. So the marketing expenses, the percentage of total revenue decreased to 43.3% from 47.9% in the first quarter of 2024, as we saw an increase in our sales productivity and solid execution of our strategy focusing on high potential accounts. Research and development expenses decreased by 17.8% to $6.1 million from $7.4 million in 2024, driven primarily by the completion of the development of a five-plus soft tissue matrix in Q1 of 2024, as well as by reduction of clinical trial expenses. As a percentage of total revenues, total R&D expenses were 12.5% down from 17.9% in the first quarter of the prior year. General and administrative expenses were $9.5 million in Q1 of 2025, down 5% from the $10 million in Q1 of 2024. This quarter ended with a net loss of $3.8 million or $0.08 per share compared to a net loss of $6.6 million or $0.15 per share in the first quarter of 2024. Adjusted net loss for the quarter was $0.9 million or $0.02 per share compared to an adjusted net loss of $2.7 million or $0.06 per share in the first quarter of 2024. Adjusted first quarter EBITDA was $2.9 million compared to an adjusted EBITDA of $1 million in the prior year. As a reminder, Exigent's definition for adjusted EBITDA is EBITDA excluding stock-based compensation. As of March 31st, our balance of cash cash equivalents and investments was $28.1 million compared with $39.5 million at the end of the fourth quarter. Turning now to our guidance. We are maintaining our full-year 2025 revenue growth guidance in the range of 15% to 17%. In addition, we continue to expect full-year 2025 gross margin to be in the range of 73% to 75%. As a reminder, this includes approximately $2 million one-off costs related to the BLA approval, which would impact full-year gross margin by approximately one percentage point. The timing of most of those costs would be around the anticipated BLA approval date, currently expected to be in September. Notably, we estimate that two-thirds of those costs are non-cash related and pertain to the vesting of our BLA-related stock competition. From a cash perspective, we continue to expect to be cash flow positive for the entire year and expect to self-fund our new strategic plan with cash from operations. In summary, we're pleased with our first quarter performance. We will continue to execute our strategies, invest in innovation, improve our resource allocation, and strive towards greater bottom line profitability. And now we'd like to open the line for questions. Operator?