Axogen Inc.

10/29/2025 | Press release | Distributed by Public on 10/29/2025 14:07

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes thereto appearing elsewhere in this report and our consolidated financial statements for the year ended December 31, 2024, included in our 2024 Annual Report on Form 10-K. All dollar amounts in the discussion and analysis, unless noted otherwise, are presented in thousands.
Unless the context otherwise requires, all references in this report to "Axogen," the "Company," "we," "us" and "our" refer to Axogen, Inc., and its wholly owned subsidiaries Axogen Corporation ("AC"), Axogen Processing Corporation, Axogen Europe GmbH and Axogen Germany GmbH.
Overview
We are the leading company focused specifically on the science, development and commercialization of technologies for peripheral nerve regeneration and repair. We are passionate about providing the opportunity to restore nerve function and quality of life for patients with peripheral nerve injuries. We provide innovative, clinically proven and economically effective repair solutions for surgeons and healthcare providers. Peripheral nerves provide the pathways for both motor and sensory signals throughout the body. Every day people suffer traumatic injuries or undergo surgical procedures that impact the function of their peripheral nerves. Physical damage to a peripheral nerve or the inability to properly reconnect peripheral nerves can result in the loss of muscle or organ function, the loss of sensory feeling, or the initiation of pain.
Product Portfolio
Our platform for peripheral nerve repair features a comprehensive portfolio of products, including:
•Avance®Nerve Graft, a biologically active off-the-shelf processed human nerve allograft for bridging severed peripheral nerves without the comorbidities associated with a second surgical site.
•Axoguard Nerve Connector®, a porcine (pig) submucosa extracellular matrix ("ECM") coaptation aid for tensionless repair of severed peripheral nerves.
•Axoguard Nerve Protector®, a porcine submucosa ECM product used to wrap and protect damaged peripheral nerves and reinforce the nerve reconstruction while minimizing soft tissue attachments.
•Axoguard HA+ Nerve Protector™, a porcine submucosa ECM base layer coated with a proprietary hyaluronate-alginate gel, a next-generation technology designed to enhance nerve gliding and provide short- and long-term protection for peripheral nerve injuries.
•Axoguard Nerve Cap®, a porcine submucosa ECM product used to protect a peripheral nerve end and separate the nerve from the surrounding environment to reduce the development of symptomatic or painful neuroma.
•Avive+ Soft Tissue Matrix™, a multi-layer amniotic membrane allograft used to protect and separate tissues in the surgical bed during the critical phase of tissue healing.
Our portfolio of products is currently available in the U.S., Canada, Germany, the United Kingdom, Spain, South Korea and several other countries.
We derive substantially all of our revenues from sales of our nerve repair products to customers in the U.S.
Our strategy remains focused on deepening our presence in high-potential accounts, specifically Level 1 trauma centers and academic-affiliated hospitals with a high number of trained microsurgeons. We will drive growth in these accounts through targeted expansion of nerve repair indications and driving deeper adoption of our nerve repair algorithm across multiple surgical specialties.
Axogen, Inc.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
Business Outlook
We are subject to risks and exposures from the evolving macroeconomic environment, including financial market volatility, geopolitical tensions and escalating trade disputes with U.S. trading partners. While our direct exposure to current tariffs is limited, risk lies in the potential for these disputes to cause a broader trade war, resulting in general economic instability and uncertainty that could cause our net revenue to fluctuate. We are actively assessing steps to mitigate potential adverse effects; however, if these measures are not effective in addressing wider economic disruption, our business, financial condition, results of operations and liquidity could be materially adversely affected.
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act ("OBBBA"). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act of 2017, including 100% bonus depreciation, domestic research and development cost expensing, and the business interest expense limitation. The new legislation did not have a material impact on our effective tax rate in 2025.
On October 1, 2025, the U.S. government entered a shutdown, introducing additional uncertainty across the FDA regulatory environment. We do not anticipate a material impact on our near-term operations as a result of the shutdown. Our Biologics License Application ("BLA") for Avance®Nerve Graft is funded through the Prescription Drug User Fee Act ("PDUFA") program, which is generally exempt from short-term shutdown disruptions. To date, we have maintained ongoing communication with the FDA regarding the BLA for Avance®Nerve Graft and expect agency action by the December 5, 2025 PDUFA target date.
Summary of Operational and Business Highlights
•Revenues were $60,082 for the quarter ended September 30, 2025, an increase of $11,438 or 23.5% compared to the quarter ended September 30, 2024.
•Gross profit was $45,993 for the quarter ended September 30, 2025, an increase of $9,555 or 26.2% compared to the quarter ended September 30, 2024.
•The American Association of Hand Surgery ("AAHS") and the American Society for Reconstructive Microsurgery ("ASRM") released official position statements recognizing nerve allograft as a standard medical practice option for the treatment of peripheral nerve defects during the third quarter 2025. Including the previously released clinical practice guidelines from the American Association of Oral and Maxillofacial Surgeons ("AAOMS"), the number of societies with positional statements or clinical practice guidelines increased to three.
•Expanded coverage and reimbursement for nerve repair for peripheral nerve injuries using synthetic conduits or allografts, increasing the total number of new lives covered in 2025 to approximately 18.1 million and bringing coverage amongst commercial payers to more than 64%.
•The FDA accepted the filing of our BLA for Avance®Nerve Graft on November 1, 2024, and assigned a PDUFA goal date of September 5, 2025. On August 22, 2025 we received a communication from the FDA stating that our submission of facility and manufacturing information, provided in response to an FDA information request, constituted a major amendment to our BLA for Avance®Nerve Graft. The FDA indicated that the submission contained a substantial amount of new manufacturing or facility information not previously submitted to or reviewed by the Agency. As a result, the FDA extended the PDUFA goal date to December 5, 2025. FDA approval of the BLA for Avance®Nerve Graft is now anticipated by December 5, 2025.
Axogen, Inc.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
Results of Operations
Comparison of the Three Months Ended September 30, 2025 and 2024
The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts and percentage of total revenue:
Three Months Ended September 30,
2025 2024
(dollars in thousands) Amount % of Revenue Amount % of Revenue
Revenues $ 60,082 100.0 % $ 48,644 100.0 %
Cost of goods sold 14,089 23.4 12,206 25.1
Gross profit 45,993 76.6 36,438 74.9
Costs and expenses:
Sales and marketing 25,680 42.7 18,924 38.9
Research and development 7,565 12.6 6,996 14.4
General and administrative 10,836 18.1 10,834 22.3
Total costs and expenses 44,081 73.4 36,754 75.6
Income (loss) from operations 1,912 3.2 (316) (0.6)
Other income (expense):
Investment income 319 0.5 296 0.6
Rental income - - 90 0.2
Interest expense (1,757) (2.9) (1,893) (3.9)
Change in fair value of debt derivative liabilities 209 0.4 13 -
Other income, net 25 - (48) (0.1)
Total other expense, net (1,204) (2.0) (1,542) (3.2)
Net income (loss) $ 708 1.2 % $ (1,858) (3.8) %
Revenues
Revenues for the three months ended September 30, 2025 increased $11,438, or 23.5%, to $60,082, as compared to $48,644 for the three months ended September 30, 2024. The increase in revenues was primarily driven by an increase in unit volume and mix, as well as the impact of changes in price.
During the three months ended September 30, 2025, we discontinued our case stock sales program for Avance®Nerve Graft, which previously allowed for multiple Avance®Nerve Grafts to be shipped to a sales representative for delivery to a surgeon and for unused product to be returned. Under this program, revenue was recognized only upon product use or implantation. With the discontinuation of the case stock program for Avance®Nerve Graft and the transition of some customers to direct orders, where revenue is recognized upon shipment or delivery, we estimate our revenue for the three months ended September 30, 2025 was positively impacted by $1.6 million, or approximately 3%, reflecting the shift in customer ordering behavior and timing of revenue recognition.
Gross Profit
Gross profit for the three months ended September 30, 2025 increased $9,555, or 26.2%, to $45,993, as compared to $36,438 for the three months ended September 30, 2024. Gross margin as a percentage of revenues was 76.6% and 74.9% for the three months ended September 30, 2025 and 2024, respectively. Higher margins, driven by lower inventory write-offs and shipping costs on products sold, increased gross margin by 1.7%, partially offset by higher product costs that lowered gross margin by 0.4%.
Axogen, Inc.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
Costs and Expenses
Following is a summary of the change in costs and expenses for the three months ended September 30, 2025:
(dollars in thousands) Total costs and expenses Sales and marketing Research and development General and administrative
For the three months ended September 30, 2024 $ 36,754 $ 18,924 $ 6,996 $ 10,834
Change from:
Compensation costs 4,723 4,886 781 (944)
Marketing program costs 1,123 1,123 - -
Travel costs 759 641 66 52
Professional services fees and expenses 400 34 (75) 441
Occupancy related costs (259) (49) (79) (131)
Research and development project costs (1)
(138) - (138) -
Other costs and expenses 719 121 14 584
Total change 7,327 6,756 569 2
For the three months ended September 30, 2025 $ 44,081 $ 25,680 $ 7,565 $ 10,836
Percentage change 19.9 % 35.7 % 8.1 % - %
__________
(1)Product development costs and expenses represented approximately 53% and 52% of total research and development costs and expenses for the three months ended September 30, 2025 and 2024, respectively. Clinical trial costs and expenses represented approximately 47% and 48% of total research and development costs and expenses for the three months ended September 30, 2025 and 2024, respectively.
Other Expense, Net
Other expense, net for the three months ended September 30, 2025 decreased $338, or 21.9%, to $1,204, as compared to $1,542 for the three months ended September 30, 2024. The decrease in total other expense, net was primarily due to increases of (i) $196 in the change in fair value of the debt derivative liabilities and (ii) $73 in other income and a decrease of $136 in interest expense. These decreases were partially offset by a decrease of $90 in rental income.
Income Taxes
We had no income tax expense or benefit during the three months ended September 30, 2025 and 2024 due to the incurrence of fiscal year net operating losses in both periods, the benefits of which have a full valuation allowance. From time to time, we receive notices of examination of prior tax filings from federal and state authorities. The Internal Revenue Service is currently examining our 2021 federal income tax return. We do not believe that there are any material additional tax expenses or benefits.
Axogen, Inc.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
Comparison of the Nine Months Ended September 30, 2025 and 2024
The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts and percentage of total revenue:
Nine Months Ended September 30,
2025 2024
(dollars in thousands) Amount % of Revenue Amount % of Revenue
Revenues $ 165,304 100.0 % $ 137,933 100.0 %
Cost of goods sold 42,360 25.6 33,531 24.3
Gross profit 122,944 74.4 104,402 75.7
Costs and expenses:
Sales and marketing 70,529 42.7 58,437 42.4
Research and development 20,509 12.4 21,063 15.3
General and administrative 29,983 18.1 30,206 21.9
Total costs and expenses 121,021 73.2 109,706 79.5
Income (loss) from operations 1,923 1.2 (5,304) (3.8)
Other income (expense):
Investment income 816 0.5 816 0.6
Rental income - - 90 0.1
Interest expense (5,984) (3.6) (6,405) (4.6)
Change in fair value of debt derivative liabilities 531 0.3 542 0.4
Other income (expense), net 167 0.1 (153) (0.1)
Total other expense, net (4,470) (2.7) (5,110) (3.7)
Net loss $ (2,547) (1.5) % $ (10,414) (7.6) %
Revenues
Revenues for the nine months ended September 30, 2025 increased $27,371, or 19.8%, to $165,304, as compared to $137,933 for the nine months ended September 30, 2024. The increase in revenues was primarily driven by an increase in unit volume and mix, as well as the impact of changes in price.
During the nine months ended September 30, 2025, we discontinued our case stock sales program for Avance®Nerve Graft, which previously allowed for multiple Avance®Nerve Grafts to be shipped to a sales representative for delivery to a surgeon and for unused product to be returned. Under this program, revenue was recognized only upon product use or implantation. With the discontinuation of the case stock program for Avance®Nerve Graft and the transition of some customers to direct orders, where revenue is recognized upon shipment or delivery, we estimate our revenue for the nine months ended September 30, 2025 was positively impacted by $1.6 million, or approximately 1%, reflecting the shift in customer ordering behavior and timing of revenue recognition.
Gross Profit
Gross profit for the nine months ended September 30, 2025 increased $18,542, or 17.8%, to $122,944, as compared to $104,402 for the nine months ended September 30, 2024. Gross margin as a percentage of revenues was 74.4% and 75.7% for the nine months ended September 30, 2025 and 2024, respectively. Lower margins on products sold, driven by higher product costs, lowered gross margin by 1.9%. This decrease was partially offset by increases of 0.4% from lower shipping costs on products sold and 0.2% from lower inventory write-offs.
Axogen, Inc.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
Costs and Expenses
Following is a summary of the change in costs and expenses for the nine months ended September 30, 2025:
(dollars in thousands) Total costs and expenses Sales and marketing Research and development General and administrative
For the nine months ended September 30, 2024 $ 109,706 $ 58,437 $ 21,063 $ 30,206
Change from:
Compensation costs (1)
7,648 8,372 304 (1,028)
Marketing program costs 2,290 2,290 - -
Travel costs 1,647 1,374 162 111
Professional services fees and expenses 441 81 408 (48)
Research and development project costs (2)
(1,143) - (1,143) -
Occupancy related costs (1,010) (208) (287) (515)
Other costs and expenses 1,442 183 2 1,257
Total change 11,315 12,092 (554) (223)
For the nine months ended September 30, 2025 $ 121,021 $ 70,529 $ 20,509 $ 29,983
Percentage change 10.3 % 20.7 % (2.6) % (0.7) %
__________
(1)The increase in sales and marketing compensation costs is primarily due to higher: (i) sales commissions and salaries, due to higher sales volume and headcount, (ii) share-based compensation and (iii) employee benefits.
(2)The decrease in research and development costs and expenses was primarily due to product development and clinical expenses. Product development costs include spending for a number of specific programs, including the non-clinical expenses related to the BLA for Avance®Nerve Graft. Product development costs and expenses represented approximately 42% and 54% of total research and development costs and expenses for the nine months ended September 30, 2025 and 2024, respectively. Clinical trial costs and expenses represented approximately 46% of total research and development costs and expenses for the nine months ended September 30, 2025 and 2024.
Other Expense, Net
Other expense, net for the nine months ended September 30, 2025 decreased $640, or 12.5%, to $4,470, as compared to $5,110 for the nine months ended September 30, 2024. The decrease in total other expense, net was primarily due to a decrease of $421 in interest expense and $167 of Other income, net during the nine months ended September 30, 2025 as compared to $153 of Other expense, net during the nine months ended September 30, 2024. These decreases were partially offset by decreases of $90 in rental income and $11 in the change in fair value of the debt derivative liabilities.
Income Taxes
We had no income tax expense or benefit during the nine months ended September 30, 2025 and 2024 due to the incurrence of net operating losses in both periods, the benefits of which have a full valuation allowance. From time to time, we receive notices of examination of prior tax filings from federal and state authorities. The Internal Revenue Service is currently examining our 2021 federal income tax return. We do not believe that there are any material additional tax expenses or benefits.
Critical Accounting Estimates
In preparing our financial statements in accordance with generally accepted accounting principles, there are certain accounting policies, which may require substantial judgment or estimation in their application. We believe our accounting policies for Inventories, Derivative Instruments and Stock-based Compensation, as well as the others set forth in Note 2 - Summary of Significant Accounting Policiesin the Notes to the Consolidated Financial Statements in our 2024 Annual Report on Form 10-K, are critical to understanding our results of operations and financial condition. See Critical Accounting Estimates in our 2024 Annual Report on Form 10-K. Actual results could differ from our estimates and assumptions, and any such differences could be material to our results of operations and financial condition. During the quarter covered by this report, there have been no material changes to the accounting estimates and assumptions previously disclosed.
Axogen, Inc.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
Liquidity and Capital Resources
As of September 30, 2025, our principal sources of liquidity were our cash and cash equivalents and investments totaling $35,791. Our cash equivalent is comprised of a money market mutual fund and our investments consist of U.S. Treasuries. Our cash and cash equivalents and investments increased $2,309 to $35,791 from $33,482 at December 31, 2024, primarily as a result of an increase in proceeds from the exercise of stock options and the release of $2,000 of restricted cash under the contractual terms of a lease agreement, partially offset by cash used for the payment of annual bonuses and expenses incurred in connection with conducting our national sales meeting during the first quarter of 2025.
On September 30, 2025 and December 31, 2024, our current assets exceeded our current liabilities by $86,448 and $68,607, respectively, and we had a current ratio of 4.1x and 3.2x, respectively. Based on current estimates, we believe that our existing cash and cash equivalents and investments, as well as cash provided by sales of our products, will allow us to fund our operations through at least the next twelve months from the date of issuance of the accompanying financial statements.
Cash Flow Information
The following table presents a summary of cash flows from operating, investing and financing activities for the periods indicated:
Nine Months Ended September 30,
(in thousands) 2025 2024
Net cash (used in) provided by:
Operating activities $ (2,226) $ (4,200)
Investing activities (9,359) (9,484)
Financing activities 5,933 1,320
Net decrease in cash and cash equivalents, and restricted cash $ (5,652) $ (12,364)
Net Cash Used in Operating Activities
Net cash used in operating activities was $2,226 and $4,200 during the nine months ended September 30, 2025 and 2024, respectively. The decrease in net cash used in operating activities of $1,974, or 47.0%, was due a decrease in net loss of $7,867, partially offset by the net unfavorable change of $5,666 in working capital accounts and noncash charges of $90.
Net Cash Used in Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2025 was $9,359 compared to $9,484 for the nine months ended September 30, 2024. The favorable change in net cash used in investing activities of $125 was primarily due to the sale of $8,000 of investments, offset by the purchase of $13,723 of investments during the nine months ended September 30, 2025, compared to purchases of $5,773 of investments during the nine months ended September 30, 2024, and a decrease in payments for intangible assets of $142, partially offset by an increase in purchases of property and equipment of $67.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $5,933 and $1,320 for the nine months ended September 30, 2025 and 2024, respectively, an increase of $4,613 primarily due to an increase in proceeds from the exercise of stock options.
Credit Facilities
As of September 30, 2025, we had $50,000 outstanding in indebtedness under the Credit Facility with $35,000 maturing on June 30, 2027 and $15,000 maturing on June 30, 2028. Quarterly interest only and revenue participation payments are due through each of the maturity dates. Interest is calculated as 7.5% plus the greater of the forward-looking term rate based on the secured overnight financing rate as set by the Federal Reserve Bank of New York plus 0.10% ("Adjusted SOFR")or 2.0%(11.89%as of September 30, 2025). Revenue participation payments are calculated as a percentage of our net revenues, up to $70,000 in any given year, adding approximately 1.5% per year of additional interest payments on the outstanding indebtedness. Upon each maturity date or upon such date earlier repayment occurs, we will repay the principal balance and provide a make-whole payment calculated to generate an internal rate of return to the lender equal to 11.5%, less the total of all
Axogen, Inc.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
(in thousands, except share and per share amounts)
quarterly interest and revenue participation payments previously paid. See Note 8- Long-Term Debt, Net of Debt Discount and Financing Feesand Note 13- Commitments and Contingencies in the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.
Sources of Capital
Our expected future capital requirements may depend on many factors including expanding our customer base and sales force and timing and extent of spending in obtaining regulatory approval and introduction of new products. Additional sources of liquidity available to us include issuance of additional equity securities through public or private equity offerings, debt financings or from other sources. The sale of additional equity may result in dilution to our shareholders. There is no assurance that we will be able to secure funding on terms acceptable to us, or at all. The increasing need for capital could also make it more difficult to obtain funding through either equity or debt. Should additional capital not become available to us as needed, we may be required to take certain actions, such as slowing sales and marketing expansion, delaying regulatory approvals, or reducing headcount.
Contractual Obligations and Commitments
(in thousands) 2025
Remaining
2026-2027
2028-2029
Thereafter Total
Credit Facility principal (1)
$ - $ 35,000 $ 15,000 $ - $ 50,000
Credit Facility interest(2)
1,486 9,810 892 - 12,188
Credit Facility revenue participation payments (3)
- 1,512 231 - 1,743
Operating and finance lease obligations (4)
1,054 7,404 6,306 15,385 30,149
Insurance financing agreement (5)
410 - - - 410
Total
$ 2,950 $ 53,726 $ 22,429 $ 15,385 $ 94,490
__________
(1)See Note 8- Long-Term Debt, Net of Debt Discount and Financing Feesand Note 13- Commitments and Contingencies in the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.
(2)Calculated using the forecasted interest rates used in the valuation of the debt derivative liabilities. See Note 6 - Fair Value Measurementsin the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.
(3)See Note 8- Long-Term Debt, Net of Debt Discount and Financing Fees in the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.
(4)See Note 7 - Leasesin the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.
(5)See Note 13- Commitments and Contingenciesin the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.
Axogen, Inc.
Axogen Inc. published this content on October 29, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 29, 2025 at 20:10 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]