Axogen, Inc.

Good morning. Joining me on today's call is Michael Dale, Axel Jentz, Chief Executive Officer and Director, and Lindsay Hartley, Chief Financial Officer. Michael will discuss third quarter 2025 financial results and corporate highlights. Lindsay will then provide details on financial performance, guidance, and overall outlook for the year. This will be followed by a question and answer session. Today's call and presentation is being webcast live via being broadcast live via webcast, which is available on the investor section of Axogen'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 the conference call, the company will make projections and forward-looking statements. Forward-looking statements include, but are not limited to, statements relating to financial guidance, market development priorities, 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 in December 2025, 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. 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 SEC filings, including its most recent Form 10-K and 10-Q. 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 short presentation with highlights from today's call and the corporate presentation on the investor's section of the company's website. I'll now turn the call over to Michael.

Thank you, Operator, and welcome to everyone joining us this morning as we discuss our 2025 third quarter financial results. I will begin today's call with a financial and corporate overview highlighting our progress through the third quarter and year-to-date implementing our strategic plan, followed by an update on the biologics license application, or BLA, for our advanced nerve graft. I will then pass the call to Lindsay to review the quarter's financials and outlook for the remainder of 2025, and then we will open the lines for question and answer session. As remarked in this morning's earnings release, we are delighted with our third quarter performance and progress year to date for the business. Our strong revenue growth and notable milestone achievements during the quarter further validate our strategic plan objectives and market development strategies, and importantly, Actogen's ability to operationally execute our plans. Indeed, I am proud of our executive team in each of the respective operating functions at Actogen for the performance year-to-date that is at or above plan. Looking ahead, we will continue to optimize our business models based on experience and have confidence in our ability to continue delivering growth consistent with the guidance we have provided for our strategic plan in both the near and longer term. Regarding the quarter, Q3 sales increased to $60.1 million, growing 23.5% compared to the same period last year. This performance reflects double-digit growth across all of our nerve repair target markets, including extremities, oral, maxillofacial, and head, neck, and breast. Consistent with prior quarters, our growth is driven by expanding adoption of nerve care using Atchigen's nerve algorithm for the treatment of all types of peripheral nerve injuries, including traumatic, iatrogenic, and chronic nerve injuries. The advanced nerve graft is the primary growth driver, often complemented based on the clinical situation by one or more of our nerve repair connection, protection, or termination products. In extremities, we continue to execute our high potential account strategy with solid growth in both traumatic and chronic nerve injury procedures in the quarter. In OMF and head and neck, surgeon adoption of the action algorithm during the quarter was strong across all products, excuse me, all procedures, but particularly in mandible reconstruction procedures. And likewise in breast, we continue to see strong adoption of our breast resensation techniques supported by new surgeon activation, increased procedure volume in implant-based reconstruction cases, and the expansion of our commercial infrastructure. In summary, we are encouraged by the broad-based adoption of our nerve care portfolio and momentum across each of our three target markets. To assess our progress, we continue to monitor key metrics tied to our plan and 2025 strategic priorities, including high potential accounts, commercial expansion, professional education, new product development, clinical research, and prostate market development. I'll begin with an update on our performance and growth in high potential accounts. We continue to focus on expanding our presence in these accounts to drive more consistent customer creation, algorithm adoption, and improvements in Salesforce productivity. Our goal for 2025 is to generate at least 66% of total revenue growth from high potential accounts and average account productivity of 21%. Through the first three quarters, approximately 64% of revenue growth was driven by high potential accounts based on an average account productivity of 19%. These results are slightly below our planned target, but notably the result of the fact that we are also seeing double digit revenue growth and account productivity growth year-to-date in our non-high potential designated accounts as well. Growth in all account types was amplified in the quarter by the discontinuation of our case stock sales program for advanced nerve graft in preparation for the anticipated BLA approval. This sales program previously allowed for advanced nerve grafts to be shipped for a case for an unused product to return to AxiGEN. With the discontinuation of the K-Stock program, previous K-Stock customers are transitioning to either order by direct sale or consignment. This shift in purchasing behavior contributed to our top line performance and reduced revenue growth from high potential accounts by an estimated 4%. To be clear, high potential account growth was actually quite strong on an absolute basis, while it appears lower than last quarter. it's really just a function of the denominator getting larger because of the nine high potential base is performing better as well. The underlying fundamentals in all account types remains very positive, and after accounting for the case stock impact in the third quarter, we continue to realize that our focus on high potential accounts is enabling broader, more enduring adoption of nerve care, and as such, more predictable growth. During the first three quarters of 2025, there were 668 active high potential accounts of the approximately 780 accounts that meet our high potential criteria, which represents an increase of eight accounts or 1.2% as compared to the first three quarters of 2024. Regarding our 2025 commercial infrastructure expansion goals, as of the end of third quarter, we are now at or ahead of our high-end plan for each target market. And press we ended the quarter with 22 breast resensation sales specialists and two regional sales directors. We have met our goal to double the breast sales force in 2025 by the end of the year. To support broader adoption in non-breast markets, we ended the quarter with 125 sales professionals, including 15 regional sales directors. In OMF and head and neck, we ended the quarter with four field-based market development managers. Surgeon training remains a core component of our customer creation and nerve repair algorithm adoption. Execution of our 2025 professional education programs are on track, and we fully expect to meet our 2025 surgeon training targets. In breast, we have trained 62 surgeon pairs year-to-date with one program planned in the fourth quarter. We are confident we will meet our 2025 target of 75 surgeon pairs trained. Active breast resensation programs increased 7% from the third quarter of 2024, from 113 to 121. We estimate 281 surgeons performed a breast resensation procedure in the third quarter, which represents a 20% increase versus third quarter of 2024. In extremities, we have trained 97 surgeons year to date, of which 30 were trained in the third quarter With three additional programs planned in the fourth quarter, we expect to meet our 2025 target of 105 surgeons trained. In OMF and head and neck, we have trained 57 surgeons year to date, up 16 from second quarter 2025, exceeding our 2025 target of 45 surgeons trained. Next, I will provide an update on our clinical research priorities. We continue to advance our 2025 initiatives and are on track to complete a Level 1 study protocol for implant-based neurotization, a clinical evidence plan for advanced versus autograft inviction motor nerves, and a clinical evidence plan for oral, maxillofacial, and head and neck. Regarding research and development, as we have outlined in our strategic plan, innovation remains critical to our long-term growth. Through the first three quarters of the year, we continue to progress and advance our innovation platform across three pillars. Those include therapeutic reconstruction, ease of coaptation, and protection expansion. Consistent with our clinical research objectives to build evidence in support of nerve care, in the third quarter, we received meaningful external validation of Axigen's differentiated technologies and leadership in peripheral nerve repair. Ten new peer-reviewed publications cited clinical use or discussion of our products bringing our total nerve repair-related literature body to 339 publications. This growing body of evidence underscores the clinical relevance and impact of our solutions. Notably, there has been a 70% increase in the number of nerve repair publications in the last five years, reflecting in part the growing experience and interest in nerve repair. For those interested, all peer-reviewed studies are available on our website. During the third quarter, we also saw significant validation from medical societies. Both the American Association of Hand Surgery and the American Society for Reconstructive Microsurgery released official position statements recognizing nerve allograft as a non-experimental and medically necessary standard medical practice option for the treatment of peripheral nerve defects. These position statements add to the previously released clinical practice guidelines from the American Association of Oral and Maxillofacial Surgeons. Together, these endorsements mark a critical step towards establishing peripheral nerve repair with Allograft as a recognized standard of care, and we believe this support will be helpful in our efforts to expand coverage. On the coverage and reimbursement front, we continue to see non-coverage policies removed within the Blue Cross Blue Shield network and within Medicare Advantage for NerveCare, resulting in an estimated $1.1 million newly covered lives in the third quarter. Year-to-date, we estimate 18.1 million additional lives are now covered for nerve repair for peripheral nerve injuries using synthetic conduits or allografts. This expansion brings coverage amongst commercial payers to more than 64%, reflecting continued momentum in expanding access. And finally, I will provide an update on our prostate clinical and market development plan. We remain enthusiastic about the opportunity to improve nerve function outcomes in robotic-assisted radical prostatectomy and are actively collaborating with key opinion leaders to advance surgical technique development. During the third quarter, our clinical development team provided field-based support to surgeons in clinical sites incorporating nerve repair into the robotic-assisted prostatectomy cases. We added four new clinical sites during the third quarter bringing our total to 10 active sites meeting our year end goal. Procedures are ongoing and we remain on track to complete 100 cases by year end. Before I hand it over to Lindsay, I would like to address the status of our biologics license application for advanced nerve graft. In August, the FDA extended the PDUFA goal date from September to December 5th, 2025. In the communication from the FDA, it stated that a recent submission by Oxygen of facility and manufacturing information provided in a response to an FDA information request constituted a major amendment to our BLA for the advanced nerve graft submission, which resulted in the three-month extension. Since our last public update, interactions with FDA have expanded to all elements of the BLA application. Based on these interactions, We remain confident we will successfully complete the application process consistent with the new December 5th PDUFA date. The BLA approval will secure 12 years of market exclusivity from biosimilar nerve allografts and establish advanced nerve graft as the only implantable biologic indicated for the repair of functional deficits in peripheral nerves. With this, I will now turn it over to Lindsey.

Thanks, Mike. I'm pleased to report our third quarter results. We reported strong growth with revenue of 60.1 million, reflecting a 23.5% growth compared to the third quarter of 2024 and a 6% sequential increase over the second quarter of 2025. Revenue growth continues to be fueled by strong sales of advanced nerve grafts and the adoption of our comprehensive product algorithm across our target market, with unit volume and mix serving as the primary driver of our performance, revenue performance. As Mike noted, during our third quarter, we successfully ended our case stock sales program for advanced nerve graft in preparation of the anticipated BLA approval. We estimate our revenue for the third quarter was positively impacted by 1.6 million, or 3%, as the result of customers transitioning away from purchasing advance through the case stock program and ordering through direct sales. Our gross profit for the quarter came in at $46 million, up from $36.4 million in the third quarter of 2024 and $42 million in the second quarter of 2025. This represents a gross margin of 76.6%. up from 74.9% in the same period last year, and up from 74.2% in the second quarter of 2025. The year-over-year increase and sequential increase from second quarter were primarily driven by lower inventory write-offs and reduced shipping costs on products sold. These gains were partially offset by modestly higher product costs which had a minimal impact of less than half a percentage point on gross margin compared to both periods. Gross margin for the first three quarters of 2025 was 74.4%, 1.3% less than the first three quarters of 2024. The decrease of gross margin for the first three quarters of 2025 was driven by a 1.9% increase and year-over-year product costs. Product cost increased is the result of the transition of processing advanced nerve grafts to our Axigen Processing Center and costs related to additional steps and tests required as we approach the transition to processing as a biologic anticipated in December. We expect the cost of our advanced product to decrease over time as we gain economies of scale at the Axigen Processing Center And once the BLA is approved, we can begin implementing more significant continuous improvement programs. Our operating expenses increased to 44.1 million, up from 36.8 million in the third quarter of 2024. And as a percentage of revenue decreased, 2.2 million percent, highlighting our ability to increase our operating leverage. Sales and marketing expenses as a percentage of total revenue were up nearly 4% to 42.7% from 38.9% in the third quarter of 2024. Research and development expenses increased 8.1% to 7.6 million from 7 million in the third quarter of 2024 as a percentage of total revenue research and development expenses were down 1.8% to 12.6% from 14.4% in the third quarter of 2024. General and administrative expenses remained flat quarter over quarter at 10.8 million. As a percentage of total revenues, general and administrative expenses were down 4.2% to 18.1% from 22.3% in the third quarter of 2024. Net income for the quarter was 0.7 million or 1 cents per share compared to a net loss of 1.9 million or 4 cents per share in the third quarter of 2024. Adjusted net income for the quarter was 6.1 million or 12 cents per share compared to an adjusted net income of 3.1 million or $0.07 per share in the third quarter of 2024. Adjusted EBITDA for the quarter was $9.2 million compared to an adjusted EBITDA of $6.5 million in the same period last year. Adjusted EBITDA margin improved 210 basis points to 15.4% from 13.3% in the same period last year driven by revenue growth and increased operating leverage. As of September 30th, our balance of cash, cash equivalents, restricted cash and investments increased $3.9 million to $39.8 million from $35.9 million at the end of the second quarter of 2025. I am pleased to report that for the first three quarters of 2025, our balance of cash cash equivalents, restricted cash, and investments increased 0.3 million from a balance of 39.5 million at December 31 of 2024, demonstrating our ability to be free cash flow positive for the year. Now turning to our full year financial guidance for 2025. We are raising our revenue growth guidance to at least 19%. or revenue of at least $222.8 million. We reiterate our gross margin in the range of 73 to 75%, inclusive of one-time costs related to the BLA approval for advanced nerve grafts, which we are expecting to impact gross margin by approximately 1% or $2 million. As a reminder, these costs will be incurred around the anticipated BLA approval date, currently expected in December. Also, we estimate that two-thirds of these costs relate to the vesting of our BLA milestone-related stock compensation awards and are non-cash. We continue to expect to be net cash flow positive for the year. In summary, we are very pleased with our third quarter performance and the progress we have made. We remain focused on executing our strategy, investing in innovation, optimizing our resource allocation, and driving towards profitability. With that, we will now open the line for questions. Operator? Thank you.