axgn-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to______________

Commission file number: 001-36046

Axogen, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Minnesota

(State or other jurisdiction of

incorporation or organization)

13631 Progress Blvd., Suite 400 Alachua, FL

(Address of principal executive offices)

41-1301878

(I.R.S. Employer

Identification No.)

32615

(Zip Code)

386-462-6800

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	AXGN	The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 1, 2022, the registrant had 42,286,590 shares of common stock outstanding.

Table of Contents


Part I - Financial Information
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheet as of September 30, 2022 and December 31, 2021 (Unaudited)	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (Unaudited)	4
	Condensed Consolidated Statements of Cash flows for the nine months ended September 30, 2022 and 2021 (Unaudited)	5
	Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 30, 2022 and 2021 (Unaudited)	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	29

Part II - Other Information

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 3.	Defaults Upon Senior Securities	30

Item 4.	Mine Safety Disclosures	31

Item 5.	Other Information	31

Item 6.	Exhibits	31

	Signatures	32

Forward-Looking Statements

From time to time, in reports filed with the U.S. Securities and Exchange Commission (the “SEC”) (including this Quarterly Report on Form 10-Q), in press releases, and in other communications to shareholders or the investment community, Axogen, Inc. (including Axogen, Inc.’s wholly owned subsidiaries, Axogen Corporation, Axogen Processing Corporation and Axogen Europe GmbH, the “Company,” “Axogen,” “we,” “our,” or “us”) may provide forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, concerning possible or anticipated future results of operations or business developments. These statements are based on management's current expectations or predictions of future conditions, events, or results based on various assumptions and management's estimates of trends and economic factors in the markets in which the Company is active, as well as its business plans. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “projects,” “forecasts,” “continue,” “may,” “should,” “will,” “goals,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Actual results or event could differ materially from those described in any forward-looking statements as a result of various factors, including, without limitation,, the impact of the COVID-19 and any and all variants thereof on our business, including but not limited to global supply chain issues; hospital staffing challenges and its impact on our business; statements regarding our growth, our financial guidance and performance; product development; product potential; Axogen Processing Center renovation timing and expense; sales growth; product adoption; market awareness of our products; anticipated capital requirements, including the potential of future financings; data validation; expected clinical study enrollment, timing and outcomes; our visibility at and sponsorship of conferences and our educational events; regulatory process and approvals; and other factors, including legislative, regulatory, political, geopolitical and economic developments, including record inflation and global business disruption caused by Russia’s invasion of Ukraine and related sanctions, not within our control. The forward-looking statements are and will be subject to risks and uncertainties, which may cause actual results to differ materially from those expressed or implied in such forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q should be evaluated together with the many risks and uncertainties that affect the Company’s business and its market, particularly those discussed in the risk factors and cautionary statements set forth in the Company’s filings with the SEC, including as described in “Risk Factors” included in Item 1A and "Risk Factor Summary" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from those projected. 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, whether as a result of new information, future events, changed circumstances or otherwise.

PART 1 — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

Axogen, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(In Thousands, Except Share and Per Share Amounts)


	September 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	14,318	$	32,756
Restricted cash	6,251		6,251
Investments	38,792		51,330
Accounts receivable, net of allowance for doubtful accounts of $606 and $276, respectively	21,363		18,158
Inventory	19,116		16,693
Prepaid expenses and other	2,614		1,861
Total current assets	102,454		127,049
Property and equipment, net	74,867		62,923
Operating lease right-of-use assets	14,751		15,193

Intangible assets, net	3,448		2,859

Total assets	$	195,520	$	208,024

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	22,017	$	22,459
Current maturities of long-term lease obligations	1,530		1,834
Total current liabilities	23,547		24,293

Long-term debt, net of debt discount and financing fees	45,487		44,821
Long-term lease obligations	20,634		20,798
Debt derivative liabilities	4,407		5,562

Total liabilities	94,075		95,474

Commitments and contingencies - see Note 12

Shareholders’ equity:
Common stock, 0.01 par value per share; 100,000,000 shares authorized; 42,272,223 and 41,736,950 shares issued and outstanding	423		417
Additional paid-in capital	355,187		342,765
Accumulated deficit	(254,165)		(230,632)
Total shareholders’ equity	101,445		112,550
Total liabilities and shareholders’ equity	$	195,520	$	208,024

See notes to condensed consolidated financial statements.

Axogen, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(In Thousands, Except Per Share Amounts)


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021

Revenues	$	36,959	$	31,204	$	102,420	$	95,821
Cost of goods sold	6,176		5,239		18,006		17,503
Gross profit	30,783		25,965		84,414		78,318
Costs and expenses:
Sales and marketing	19,792		18,370		60,349		55,594
Research and development	7,050		6,404		20,347		17,875
General and administrative	8,796		7,880		27,817		24,912
Total costs and expenses	35,638		32,654		108,513		98,381
Loss from operations	(4,855)		(6,689)		(24,099)		(20,063)
Other (expense) income:
Investment income	186		17		172		80
Interest expense	(61)		(417)		(664)		(1,427)
Change in fair value of derivatives	469		(46)		1,155		(152)
Other expense	(57)		(6)		(97)		(137)
Total other expense, net	537		(452)		566		(1,636)
Net loss	$	(4,318)	$	(7,141)	$	(23,533)	$	(21,699)

Weighted average common shares outstanding — basic and diluted	42,220,519		41,467,596		42,008,013		41,087,568
Loss per common share — basic and diluted	$	(0.10)	$	(0.17)	$	(0.56)	$	(0.53)

See notes to condensed consolidated financial statements.

Axogen, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(In Thousands)


	Nine Months Ended
	September 30, 2022		September 30, 2021
Cash flows from operating activities:
Net loss	$	(23,533)	$	(21,699)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,182		2,059
Amortization of right-of-use assets	1,303		1,418
Amortization of intangible assets	198		148
Amortization of debt discount and deferred financing fees	667		384
Provision for bad debt

SEC Form 10-Q filed by Axogen Inc.