Q1 2025 Axogen Inc Earnings Call
David Koopman, David Colfort, Nat Kelley, Bert Rubinstein Thanks for watching!
Speaker Change: Michael Kratky, David Turkaly, Michael Dale, Michael Dale, Michael Dale, Michael Dale, Michael Dale, David Turkaly
Speaker Change: Good morning everyone. Joining me on today's call is Michael Dale, AxoGen's Chief Executive Officer and Director, Nir Naor, Chief Financial Officer, and Jens Kemp, Chief Marketing Officer. Michael will discuss first quarter 2025 financial results and corporate highlights.
Nir Naor: 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 broadcast live via webcast, which is available on the invested section of AxiGen's website.
Nir Naor: 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
Nir Naor: Before we get started, I'd like to remind you that during the conference call, the company will make projections and for the statements [inaudible]
Nir Naor: for the statements which are usually identified by the use of words such as [inaudible]
Nir Naor: Objectives, targets, will, believe, expect, estimate, should, guidance, intent, projects, or other similar phrases include but are not limited to statements relating to financial guidance including revenue margins cashflow
Nir Naor: Future for profitability, ability, expectations for growth, estimated market opportunities, timing for future product and application launches.
Nir Naor: and the company's expectations for approval of the Biologics License Application for Advanced Nerve Graph.
including the anticipated timing.
Nir Naor: of approval and assumption that advanced nerve graft will be designated as a reference product for any feature by a similar nerve graft and that such designation will provide marketplace exclusive exclusivity.
Nir Naor: For the new statements are based on current beliefs and assumptions and are not guarantees of future performance in our subject to risk and uncertainties including without limitation, the risk and uncertainties reflected in the company's SEC violence, including its forum 10K and 10K
and Jens Kemp.
Nir Naor: The further statements are representative on the eyes of the date that they are made.
and accept as required by it.
Nir Naor: At Lookable Law, the company assumes no responsibility to publicly update or revise any four-looking statements.
2025, first quarter financial results.
Speaker Change: As you know, we announced a leadership transition this morning with Nir Naor stepping down as Chief Financial Officer who want to thank Nier for his contributions to the company and wish him all the best in his future endeavors.
Nir Naor: I'm delighted to announce that succeeding Nir will be Lindsey Hartley.
Nir Naor: Lindsay will formally assume her new responsibilities as Chief Financial Officer on May 12th.
Nir Naor: Lindsay has served as Vice President and Corporate Controller at Axogen since 2021 and brings a wealth of experience and we are confident in her ability to lead our financial operations.
Nir Naor: Nir will remain in an advisory capacity through July 1, 2025 to ensure they smooth transition
Thank you. Thank you.
I'm sorry, I'm sorry, I'm sorry, I'm sorry, I'm sorry
Speaker Change: I will begin today's call with a financial and corporate overview. Thank you.
Nir Naor: 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 date.
Nir Naor: In addition, I will provide an update on the Biologic License Approval often referred to it as VLA process.
Nir Naor: for our Advanced Nerve Graph. I will then turn the call to Nier who will provide a summary of the quarters financials and update on full year 2025 guidance for the business.
David Turkaly, David Turkaly, David Turkaly, David Turkaly,
Nir Naor: So, how did we do for the quarter? I'm pleased to report we kicked off the year with broad base growth across our entire portfolio to include double-digit growth performance in all markets.
Thank you for watching!
Nir Naor: 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 and the high potential accounts central to our growth strategies.
Zaderej, Harold Tamayo, Jens Kemp, Michael Dale, Nir Naor
Nir Naor: Said another way, Crap's more simply, we are focusing our customer facing sales and clinical resources [inaudible]
Nir Naor: 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.
Nir Naor: This basic strategy continues to show promise in the form of increasing productivity per head count and account
Nir Naor: 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 care for all patients.
and Jens Kemp. Thank you. Thank you.
Nir Naor: Revenue in our first quarter increased to $48.6 million, up 17.4% compared to last year.
Nir Naor: Driven by continued adoption of accidents near repair algorithm across each of our target markets and applications including extremities, oral, oral, Maxwell facial and head neck and breast [inaudible]
Nir Naor: Per our plan for 2025, we started the work to expand our commercial infrastructure during the quarter, completing multiple strategic cars across our sales, marketing and market access teams to strengthen our capabilities in capacity. Thank you very much.
Nir Naor: 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 relationship to growth.
Nir Naor: We will begin providing updates on these KPIs during each quarterly earnings release starting today [inaudible]
Nir Naor: 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.
Nir Naor: I'll begin with an update on our performance and growth in high potential accounts.
Nir Naor: As a reminder, high potential accounts are primarily characterized by the following criteria, larger hospitals, including level 1 trauma centers and or academic affiliated hospitals with a high number of nerve repair procedures.
and lastly, already trained micro surgeons. [inaudible]
Nir Naor: 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.
Nir Naor: In first quarter, we exceeded this target, driven by an increase in average count productivity of 24% versus our plan of 21%.
Nir Naor: As a reminder, we have identified approximately 780 accounts that meet high potential criteria.
Nir Naor: 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.
Nir Naor: Next, I will provide updates on the expansion of our commercial infrastructure and professional education initiatives by market.
Nir Naor: Beginning with extremities, we enjoy double-digit growth during the quarter and continue to adoption of our nerve protection portfolio in both trauma and chronic nerve injury procedures.
Nir Naor: Our plans to expand our customer-facing field footprint in extremities and raise the awareness of the need to treat non-transacted nerve injuries includes adding five additional sales representatives in high potential territories in 2025.
Nir Naor: We intend to add these territories before the end of the third quarter.
Nir Naor: Key Extremities, Market Development Activity, during the quarter included the completion of one upper extremity professional education fellows program involving 30 surgeons.
Nir Naor: For 2025, we intend to conduct at least four upper extremity fellows programs, three attending physician-level programs, and training at least 105 surgeons.
Nir Naor: We also completed one International Extremity Focus Professional Education program in Spain involving 22 surgeons [inaudible]
Thank you.
Nir Naor: In Brest, we continue to experience double-digit growth and new customer creation from adoption of our recensation technique
and implant-based reconstruction procedures. Thank you.
Nir Naor: Regarding our plans to expand our customer facing footprint from 12 to 22 sales specialist in 2025, we have initiated the recruitment in hiring process and expect to complete the expansion of the sales team before the end of third quarter.
Nir Naor: We ended first quarter with one regional sales director and 13 breast recensation sales specialists trained in in territories
Nir Naor: 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 [inaudible]
Nir Naor: We also executed on two professional education programs and trained 35 surgeon pairs and are on track to complete five national programs and trained 75 surgical pairs by year end.
Nir Naor: We've finished the first quarter with 119 active breast recensation programs which represents an increase of 4% versus the first quarter of 2024.
Nir Naor: Each program has multiple hospital accounts and we are working to increase adoption in these accounts [inaudible]
Nir Naor: In first quarter, we had 229 active accounts, which represents an increase of 6% over 2024 34
Nir Naor: We had an estimated 254 surgeons who performed a breast recensation procedure in the first quarter, which represents a 16% increase versus the first quarter of 2024.
Thank you for watching!
in our oral, Maxwell Facial and Head and Neck Markets. [inaudible]
Nir Naor: We saw a strong continued momentum in growth from adoption of our nerve algorithm and mandible reconstruction procedures as well as other head and neck procedures
Nir Naor: To accelerate growth and manageable 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 a complete hiring by the end of the second quarter.
Nir Naor: 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.
Nir Naor: 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.
Nir Naor: 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 [inaudible]
Nir Naor: The clinical pilot will support the development of a scalable training and education program by the end of the third quarter
Nir Naor: We expect to be able to meet the goal of having ten pilot sides running by the end of the year We have confirmed three clinical pilot sides and an advance discussions with other sides
We have already started support cases in our pilot sites.
Nir Naor: Reveasantly 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 prostitutectomy and unmet clinical needs.
Nir Naor: nerve injury related outcomes continue to be a significant challenge and we believe AxoGen is well positioned to address these challenges just in a clinical meaningful way with our portfolio
Nir Naor: 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
Nir Naor: As a reminder, we have KPIs related to advancing our clinical research priorities.
Nir Naor: For Breast Neurotization, we are advancing efforts on the design of our Level 1 Study Protocol and our in detail discussions with health economics now comes research and surgeon advisors on the study design and expect to complete the protocol design by year end.
Nir Naor: In extremities, we are on track to complete study design for a comparative level one study of advanced nerve graft versus autographed in mixed and motor nerve.
Nir Naor: Derbs by Year N. In addition, we are on track to develop our clinical evidence plan for oral Maxwell Facial and Head Neck by Year N.
Nir Naor: In the first quarter, we continued 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.
Nir Naor: 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.
For more information, please visit www.FEMA.gov
Nir Naor: Consistent with our investor-day comments in align with our product development strategy, we continue to make meaningful progress across our three core innovation pillars .
Nir Naor: We advanced our therapeutic reconstruction program, focused on enhancing overall functional recovery following your repair.
Nir Naor: Our easy co-aptation initiative is progressed towards developing milestones aimed at simplifying nerve co-aptation and making it more predictable for surgeons.
Nir Naor: And finally, as part of our protection expansion efforts, we initiated early stage pre-clinical design work, exploring our next generation, new applications for protection technologies.
Nir Naor: From a development perspective, we're actively progressing all product and application initiatives outlined in our 2025 Innovation Roadmap.
Nir Naor: Finally, I would like to address the status of our biologics license approval, often referred to as BLA for Mance Nurgrap.
Nir Naor: The BLA remained on track and continued to progress his plan. 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.
Nir Naor: 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.
Nir Naor: These important regulatory milestones further reinforce our confidence and strength and completeness of our BLA submission and align with prior guidance that we expect BLA approval in September .
Nir Naor: Overall, AxeGen is excited to reach this next milestone with BLA approval.
Nir Naor: securing 12 years of market exclusivity with respect to biosimilar nerve alligrapes and established advanced nerve graft as the only implantable biologic indicated for the repair of functional deficits in peripheral nerves.
Nir Naor: I will now hand over the call to Nir to discuss the financials and our guidance, Nir.
Nir Naor: Thanks Mike. For the squatter, a 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 in a 3% increase in price.
Nir Naor: Our gross profit for the quarter was $34.9 million in increase from the $32.6 million recorded in the first quarter of 2024
Nir Naor: This presents gross margin of approximately 71.9% down from 78.8% in the same period last year.
Nir Naor: The year of year decline was driven by two factors. The first was the year of a year impact from a growing proportion of a event sold which was processed at a higher cost at our new facility in Dayton, Ohio.
Nir Naor: We expect that a vast cost of goods will reduce over time as capacity utilization increases and as we start recognizing additional efficiencies following planned process improvements.
Thank you for watching!
Nir Naor: The second impact on the gross margin, this quarter was due to increased inventory reserves and related write-offs.
Nir Naor: 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.
Nir Naor: 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.
Nir Naor: Artola operating expenses for the quarter decreased to 36.6 million dollars down slightly from 37.2 million in the first quarter of 2024
Nir Naor: 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
Nir Naor: 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 5-plus soft tissue matrix in Q1 of 2024 as well as by reduction of clinical trial expenses.
Nir Naor: As a percentage of dole-driven news tool, R&D expenses were 12.5% down from 17.9% in the first quarter of the par year.
Nir Naor: General Administrative Expenses, or $9.5 million in the Q1 of 2025, down 5% from the $10 million in the Q1 of 2024 [inaudible]
Thank you for watching!
Nir Naor: The squatter ended with a net loss of 3.8 million dollars or 8 cents per share compared to a net loss of 6.6 million dollars or 15 cents per share in the first quarter of 2024 [inaudible]
Nir Naor: I just in that loss for the quarter was 0.9 million dollars or 2 cents per share compared to an adjusted net loss of 2.7 million dollars or 6 cents per share in the first quarter of 2024 .
Nir Naor: Adjusted first quarter EBITAT with $2.9 million compared to an adjusted EBITAT of $1 million in the part of year.
Nir Naor: As a reminder, accident definition for adjusted EBITDA is EBITDA excluding stock-based compensation.
Nir Naor: As of March 31, our balance of cash cash equivalence and investments was $28.1 million, compared with $39.5 million at the end of the fourth quarter.
Nir Naor: Turning now to our guidance, we are maintaining our full year 2025 revenue growth guidance in the range of 15 to 17 percent.
Nir Naor: In addition, we continue to expect full year 2025 gross margin to be in the range of 73 to 75 percent.
Nir Naor: As a reminder, this includes approximately $2 million, one of costs related to the BLA approval which would impact full-year growth margin by approximately 1% of the cost.
Nir Naor: The timing of most of those costs would be around the anticipated BLA approval date, currently expected to be in September
Nir Naor: Notably, we estimate the two-thirds of those costs are non-cassulated and pertain to the
Nir Naor: 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.
And now we'd like to open the line for questions.
Operator
Thank you.
Nir Naor: Thank you. We will now be conducting a questioning as a session. If you would like to ask a question, please first star one on your telephone keypad. A confirmation tone will indicate your line is in the question
Nir Naor: You may first start to remove yourself from the queue, for participants using speaker equipment, it may be necessary to pick up the handset before pressing this dark ease [inaudible]
One moment please, while we pull for questions.
Thank you.
Speaker Change: Our first question comes from the line of Michael Sarcone with Jeffries, please proceed with your question.
Michael Sarkoen: Good morning and thanks for taking our questions. Also near it's been great working with you and best of luck on your new opportunity.
Thank you.
Speaker Change: and Jens Kemp. Thank you. Thank you. Thank you. Thank you.
Speaker Change: Just wanted to start maybe around events and the the BLA approval, great to hear that everything is tracking the plan. I did want to know, you know, right now I guess you sell that product as regulated as as a tissue based product, but you're working to get this biologics license application was wondering if you had any insight to, you know, for the different customer accounts. [inaudible]
You know, once this product gets approved as a biologic...
Speaker Change: Do accounts have to go through another back process or a recertification to kind of recertify the product as a new category before they can continue to use it? Would love to get any sense of what you found there and what you're expecting. Thank you.
Speaker Change: I'm going to ask Jens to respond to that. It's clearly a question that we've anticipated, and I think we're ready for Jens, go ahead.
Speaker Change: Yes, thanks Mike. So based on our research to date and conversations with customers, we do not expect any major changes to ordering or shipment for events, stories of events, or the reimbursement pathway.
Speaker Change: As an implantable biologic with an already stateless CPT-1 coat, the reimbursement pathway will remain unchanged, and we will continue to be reimbursed as an implant using CPT code 64912.
Speaker Change: While some institutions may require approval from P&T committees, AxoGen does not anticipate any major disruptions to hospital access or product availability.
Thank you for watching!
Kind of well below what we were expecting. Just wanted to get a sense for, you know...
Speaker Change: How severe were the kind of one-time inventory write-offs and then you are maintaining your gross margin guidance. Just wanted to get a sense for you know, do we see a full rebound in 2Q? Just kind of would look to get a sense for the cadence of gross margin through the rest of the year. [inaudible]
Speaker Change: Yeah, so yeah, we don't break out the exact impact of those rados, but yeah, then we're significant for Q1 and
Speaker Change: They were also driven by various process improvements that we were making to allow us a better and earlier detection of the need for such write-offs.
Speaker Change: So we definitely expect to improve in the course of the year, in addition to that as we mentioned, Grossmargin also supposed to be impacted by process improvements which we intend to put in place after the BLA.
Speaker Change: Regarding cadency, we do expect to improve subject to what we said before regarding the BLA-related expenses to be hit in Q3.
Speaker Change: So that is basically the guy. So yeah, we do expect to improve with those around 2 million of one-off BLA approval related expenses in Q3.
Michael Sarkoen: Got in, sorry, just to sneak one more follow up in there. I mean, how quickly do those, do you think those process improvements?
Speaker Change: Could take place following the BLA approval, just really trying to get a sense for how much of a step up we could see in 4Q after the BLA approval.
Speaker Change: It won't be a stepwise improvement, Michael. It'll be through the next 12 months thereafter. More or less, a more oversimplifying or complex.
Speaker Change: Situation, but the BLA is moving from one quality and operation systems to another. It's the same product.
Speaker Change: The day before and the day after, this event transpires but the quality systems are different and we are not, we are in a position now where we're navigating to an approval of an existing quality system and significant changes and operations and systems and quality systems.
Speaker Change: Can't Change is part of a normal course of continuous improvement between now and then and so anything we want to do based upon looking at workflow and natural efficiency improvements
Speaker Change: Unfortunately, can't really take place until after we close the chapter on the approval of the plant.
Speaker Change: Got it. Thanks, Blake. Thanks. Of course, Margin for this year is that we knew it would be noisy as we ramped production and went through the inventories that we initially started to plant with as well as identified work process improvements.
Thank you very much.
Great, thank you. Sure.
Speaker Change: Thank you. Our next question comes from the line of Caitlin Cronin with Canacord. Please
Thank you.
and Jens Kemp. Thank you. Thank you.
Speaker Change: Hi, thanks for taking the questions and near wish you the best.
Nir Naor: Yes, we can, so that's the simple answer is yes, so we have as part of the approval process the existing inventories that were produced under the tissue designation will still be available for sale.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: That's great. And then, you know, just put the moving parts with the BLA and also the new segment initiatives, just the cadence of OpEx for this year.
Thank you very much. Thank you. Thank you.
Um, um, [inaudible]
Speaker Change: We are already started to invest in hiring and other investments throughout the year.
So, Arpex is expected to grow gradually.
pursuant to that [inaudible]
Speaker Change: That said, again as we mentioned in the past, once we passed the BLA, there are some costs that are expected to roll off. Again, BLA is of September of this year.
and Jens Kemp.
For more stories, visit nyseagrant.org
Speaker Change: Great. And then just one more. I appreciate the team's specific updates. Just an update overall and where you are now from a sales team standpoint in terms of count and then where you plan to be by the end of the year, just broadly across, you know, all the different call points and segments.
and Jens Kemp. Thank you.
in terms of...
Speaker Change: True Sales People in Territories by the end of the year that we should have a proximate neck 20. In addition to that, there are various marketing support staff, clinical staff, there are also added that will be added during that timeframe. But in terms of truth, actual sales, territory expansions, it will be approximately 20 by the end of the year.
Speaker Change: You know, I have to get pesky and I don't have that number off top of my head. Okay, you'll come.
For more information, visit www.FEMA.gov
That's it for me. Thanks so much.
Thanks, Caitlin.
Jens Kemp, Harold Tamayo, Jens Kemp, Michael Dale, Nir Naor
Speaker Change: Thank you. Our next question comes from the line of Chris Pasquale with Neffron Research, LLC. Please receive a short question.
Chris Pasquale: Thanks. I wanted to ask about the high potential accounts initiative if I've heard correctly.
Speaker Change: Do you think they're about 780 of those nationwide and 566 were active in 1Q?
Speaker Change: We'll just let you know where you stand with the other 215 or so.
Speaker Change: Are those accounts that you don't have a relationship with today or are they just ordering sporadically and part of the goal here is to get them to a consistent cadence of reordering where they would be considered active in each period? Good.
Speaker Change: Great question. So, it's actually a mix. So, we do have accounts that have different ordering patterns, so not all of our hypertensile accounts order each month or each quarter, so we do have on a...
Speaker Change: But we also do have accounts that we are not currently pressing in and we see that as a great opportunity to continue to...
Speaker Change: to expand our present in this cohort. So there's plenty of opportunity to expand within our existing customer base, and there are still high potents like counts where we need to establish a footprint.
Go to www.Flydreamers.com to purchase a license.
Speaker Change: and many more. Thank you for watching. We hope you enjoyed this video. If you did, please like, comment, and subscribe. We'll see you next time.
Great.
Speaker Change: and then I think the leaning in on clinical data is a really interesting and I think important part of the strategy here.
Speaker Change: You talked about wanting to run another comparative study of advanced autographed in the core extremities segment, you know the trial to support the BLA submission took a long time to enroll. I'm curious one sort of your view on the need for a second.
Speaker Change: Randomized Study in that indication, or is this trial answering a different question? And then the feasibility of completing that work in a timely fashion given the history here.
Speaker Change: Yeah, fair questions. Chris, the mixed motor trial against autographed, that's different than what was done with Recon specifically. So it's intended to answer narrowly that question. We, in terms of planning standpoint, we don't believe that it would take as long to enroll as
Speaker Change: some of the historic studies. We look at this in terms of...
Trial Recruitment, and in terms of patient recruitment and enrollment.
Speaker Change: Something that should transpire over a period of a year and then followed by the follow-up. So these are still two to three years.
Programmed,
Speaker Change: at minimum in terms of activity, but there are also that's what's required to complete these platform evidence data sets.
Speaker Change: So I hope that answers your question. We feel pretty good that we can do this.
Thank you for watching!
Yeah, that's great. Thanks, Mike
and Jens Kemp. Thank you. Thank you.
Speaker Change: Thank you. Our next question comes on the line of Dave Turkaly with citizens. Please proceed with your question.
Hey, good morning, and yeah, good luck out here.
Speaker Change: Mike, you know, I know you've had some track records, some really differentiated technologies in the space and
Speaker Change: Accidents, got a history of sort of nice price increases, I think you call that 3%. I was curious, you know, how sustainable do you think that is? You know looking back at some of your prior? [inaudible]
Speaker Change: Companies, and then comparing it to this. Do you think that's a consistent factor moving forward?
Thank you for watching!
Speaker Change: It's a fair question. I don't have a specific answer. When I can tell you, we evaluate it on an annual basis. And to your question, I think there will be a point at which that may not be, but we don't have a date for that. We have a...
Speaker Change: There's not a specific plan assumption at the moment, so I don't, regrettably, I don't have a perfect answer for you.
Speaker Change: That's fine, no worries. And he did say a lot, so thanks for all the detail. When you look at all the
Speaker Change: clinical efforts you have ongoing, I guess, I don't know, outside of obviously, you know, your BLA and maybe this new mixed nerve, but would you look at any of them to call out that could have, you know, maybe the most near term impact on let's say maybe even your financial results.
Speaker Change: Fortunately, these studies do not incur costs like that, for example, purposes like that of Structural Heart, for example.
Speaker Change: So it's one of the reasons why we are able to guide that we believe over the course of the strategic plan that we'll be able to fund all of our operations.
Speaker Change: So hopefully the answers, if your question is about cost, can we actually afford to do this?
The simple answers, yes, we believe we can't. [inaudible]
Speaker Change: We believe that this evidence generation is necessary. We have a lot of clinical experience, a lot of individual paper publications, a lot of individual surgeon hospital experience.
But fundamental number one evidence needs to be increased.
Speaker Change: because outside of Recon in one other study over the years we haven't engaged in other studies.
Speaker Change: And so with our new plan, what we identified as gaps and opportunities was to do that and that's what we're going to do.
and many of these individuals are physician scientists. [inaudible]
Speaker Change: And while they may believe in something, the more evidence we can add to that equation, the better. And then finally, of course as everyone can appreciate in this world.
Speaker Change: goes directly to the heart of coverage and payment. And so, if we don't start this stuff, it never gets done and in the bottom line, we're going to get it done.
Thank you.
Thank you.
Speaker Change: Thank you. Our next question comes with a line of Mike Kratky with the Erick partners. Please receive with your questions.
Speaker Change: Hey guys, this is Brett on from Mike, thanks for taking the questions, and Nir best of luck to you and your next role has been great work with you so far.
Speaker Change: So, I want to go back to breast. You obviously mentioned that the, you know, the hiring and sales specialist is running a bit behind plan. You know, obviously this is one of your fastest growing segments. So, just want to get a sense for, if there's anything contemplated within the original guide for breast, and if that was reliant on the pacing of that hiring, and then obviously if anything is shifted with the, with the delay. Bye.
Speaker Change: We still believe that we will be able to catch up on time in terms of the footprint. Now, be very blunt if we don't, which I don't expect to be the case, but if we didn't, yeah, that would affect absolutely the cadence of the market development.
Speaker Change: I hope that answers the question. We will be on track by the end of this quarter.
Speaker Change: Understood, yeah, that's helpful. And just one more on on prostate. Obviously, you said the pilot they're launching in 3Q, but you know that it seems to imply that a lot of that pilot will be in 4Q, at least the ramp to 10.
Speaker Change: So is there anything again similar line of questioning implied has done the guide for 4Q that is factoring that in obviously, you know, probably a small portion of revenue, but just the extent to which the guide relies on that pilot yet we have no the guide does not rely on prostate market development from a revenue standpoint. [inaudible]
Speaker Change: We're doing our best to go slow with prostate, just to make sure that we, I mean, just tremendous enthusiasm, but we want to make sure that that enthusiasm is channeled into
Speaker Change: A standardized surgical approach so that the outcomes that we generate we can make and draw conclusions from in terms of how to go forward with market development.
Speaker Change: Could we also intend to run clinical studies in prostate as well next year? And so hopefully [inaudible]
Speaker Change: That's the easy part. The hard part, the real work is making sure that we develop a surgical approach that are teachable, so that we can...
Understood. Thanks, guys.
Sure.
Speaker Change: Thank you. Our next question comes with a lot of Ross Osborn with Cantor Fitzgerald. Please
Speaker Change: Hey guys, this is Matt Park on for Ross today. Thanks for taking questions. Going back to the question asked earlier on reimbursement. I guess outside of continued evidence generation are there specific commercial player targets are policy barriers. You're looking to address this here.
Speaker Change: Sure, you know, I will ask Rick Ditto, who now leads that part of our program and he can speak to his impressions.
Rick Ditto: Thanks for the question. Yeah, following the BLA, we're working with evidence intermediaries. These are the health benefit managers and groups that summarize evidence for payers.
Speaker Change: and we'll start in queue for tackling some of the regional non-coverage policies that are out there for advanced nerve graft and then we'll as we develop a winning formula, we'll start tackling the national pairs next year.
Thank you.
Zaderej, Harold Tamayo, Jens Kemp, Michael Dale, Nir Naor
Speaker Change: Got it, the tuple. And then just one more for me on OMF and head and neck. You said continue strong momentum here. Are there specific referral pathways or procedure types that are helping drive the strong performance. And then how do you see this growth in this segment trending relative to extremities and press as you continue to penetrate the market here. Thanks.
and Jens Kemp. Thank you. Thank you.
Jens Kemp: Thanks for the question. Yes, so the focus is on driving growth in mandible reconstruction procedures. We have a very good position in
Benine, Lane of All Reconstruction Procedures, and are making inroads to start.
Jens Kemp: with Melignan Pathology as well. So the primary growth driver is mandible reconstruction, but then as we start engaging more with head and neck surgeons, there are multiple other procedures that we're targeting, including radical neck dissections and heartectomies. So there's a lot of opportunity in the head and the next patient that's...
Jens Kemp: Why we're adding five-field-based market development managers to really accelerate brand awareness and adoption with that surgeon group.
Zaderej, Harold Tamayo, Jens Kemp, Michael Dale, Nir Naor
Jens Kemp: I know we've talked about in the past, but just to build upon Jens' comments. It's still a not uncommon, not infrequent situation where we meet the specialists within these
Various Centers
who are either unaware of Axogen. [inaudible]
Jens Kemp: And as a result, I don't appreciate that the alternatives even exist. So this is still very immature market development and therein lies the opportunity.
Got it. Super helpful, Colin. Thanks for taking the questions.
Thank you.
I'm sorry, I'm sorry, I'm sorry, I'm sorry, I'm sorry
Speaker Change: Thank you. Our next question comes from the line of Jason Bedford with Raymond James. Please for see with your question.
Good morning.
Jason Bedford: So a few questions. On gross margin, you came in a bit below our estimate for the quarter. I'm guessing you came in a bit lower than your internal maybe not.
Jason Bedford: You still have the one time cost related to the BLA that we'll hit in the third quarter. So by maintaining the guide, it kind of implies a higher exit rate. So is it fair to assume the exit 25 north of 75% on the gross margin line?
Speaker Change: You mean in Q4, Jayson? Correct. Well, we don't give quarter to quarter guidance and don't want to do that, but I think that would be too high.
Speaker Change: Yeah, I would suggest in general, yes, we do expect, you know, as I think I answered to one of the other analysts, the other quarters to be higher than thank you one, again subject to those one off BLA approval related costs in Q3.
Bye.
Speaker Change: Okay, maybe just on the top line, I'll ask the high potential account question a little differently. Have you seen much of a drop off in those accounts that are not high potential, meaning I think there's a few hundred of accounts out there that aren't necessarily a focus, but have you seen the business with those accounts fall off at all? [inaudible]
Well, our focus is on these counts, so by definition, yes, because I'll...
and Jens Kemp. Thank you. Thank you.
Speaker Change: Technically, we have touched more than 3,000 accounts over recent years.
and I use the word touch because...
Speaker Change: You're in and out, and you're not maintaining constant market development and physician development in those accounts. So yes, we have some accounts.
Speaker Change: which have done nothing beyond that original experience. And it's because we've moved all of our resources towards...
Speaker Change: It doesn't mean we never step outside of a high potential account, but fundamentally the focus has been reframed.
Speaker Change: And the expectations are to build recurring and enduring revenue in these accounts. So,
Speaker Change: Long wind way of saying yes, there are places that have not done an action procedure because we don't go there any longer [inaudible]
Speaker Change: It's really just a resource allocation question and this is the decision that we believe is best for driving growth and standard of care.
Speaker Change: Okay, that's helpful. Thank you. Yeah, 600 people, you know, it'd be very different equation, but, but it's, it's literally why we just to be clear about why, why are we doing this is the, those individuals in terms of time and duration working with a physician have to make choices. And so the high potential account is what we think is most practical. Thank you Michael.
Speaker Change: No, this strategy makes sense. I'm just looking at it, you grew well, right? 17% is quite strong. And either it's the high potential accounts doing really, really well, or the non-high potential actually hanging in there a bit better than maybe expected. That was kind of the genesis of the question.
Got it.
Thank you.
and Jens Kemp. Thank you. Thank you.
Thank you, Jason.
Speaker Change: Thank you. Our next question comes from the line of Frank Tackin with Lake Street Capital Market. Please proceed with your questions.
Frank Takian: All right, thanks again to the questions. You're at some of the first quarter. I was hoping to start with one just kind of growth rates across businesses I know you're not going to disclose too much specifics, but my assumption is some of the businesses grew faster than 17% and then maybe some were still in the devil digits, but below that 17% rate any kind of goal post you can provide on growth rates between breast, OMF and extremities. [inaudible]
Speaker Change: Yeah, a fair question of Frank, but we don't want to get into that level of detail at this point in the future perhaps, but not today.
Thank you for watching!
Sorry.
Speaker Change: Fair enough. I was going to follow up on the breast comment you made. I think you said 254 active surgeons plus 16% year over year. Most curious where you feel you currently stand in those active accounts from a percent of surgeons currently offering recensation any approximation of how much growth you still have to just inside of your same accounts with new surgeons.
Thank you for watching!
Speaker Change: Well, I think if you look at kind of the growth in programs and account versus the growth in number of surgeons during breast recitation,
Speaker Change: We can see that we are still activating new surgeons within those accounts and we believe there's still a lot of surgeons within our existing programs that we can continue to develop so we do believe there's still a significant opportunity within existing programs.
Speaker Change: Okay, and then maybe just the last one on the BLA process. What's left between now and September any major checkpoints that you feel that are most important to successfully receiving the BLA?
Speaker Change: Sure, one of the most important things is to keep answering the questions that we receive timely, so we've...
We've I think the number is And so this ...
Speaker Change: When they asked a question, it's called an IR Information Request, and it's a very formal process.
Speaker Change: So we've we've fielded I think 200 of these thus far through the process
once they began the, once they accepted our application. The, the, the, the,
Speaker Change: and that's gone very well. We've been able to answer timely the intercourse between FTA and our staff.
Speaker Change: is a very professional and very cordial and so the work is going well.
Speaker Change: The next major milestone will be the late cycle meeting and that's where we all sit down to kind of review and kind of take stock of where we are. So we'll learn more there. All we can see at this stage is there's lots of work going on and so far we're getting the work done, but it's just part of the process.
Thank you for watching!
Speaker Change: Thank you for watching. Don't forget to like and subscribe! See you in the next video.
Speaker Change: Perfect. That's helpful. Thanks for taking the questions. Sure. Thanks, Frank.
and Jens Kemp. We'll see you next time.
Thank you [inaudible]
Speaker Change: We have reached the end of the questioning as a session. I would like to turn the floor back to Michael Dale for closing remarks.
and Jens Kemp. Thank you. Thank you.
Thank you, operator.
Speaker Change: On behalf of the action team, I want to thank everyone for their time and interest in our work to fulfill the promise and potential for all stakeholders in our business purpose to restore health and improve quality of life by making restoration of peripheral nerve function and expected standard of care
Speaker Change: We look forward to updating you on our continued progress and our plans for the earnings called next quarter. Thank you very much Thank you very much.
Speaker Change: Thank you and this concludes today's conference and you may disconnect your line at this time. Thank you for your participation.
[music]