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What changed in Axogen, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Axogen, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+472 added−427 removedSource: 10-K (2024-03-05) vs 10-K (2023-03-14)

Top changes in Axogen, Inc.'s 2023 10-K

472 paragraphs added · 427 removed · 334 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

166 edited+66 added−22 removed172 unchanged
Biggest changeThe ongoing studies are: • “A Multicenter Retrospective Study of Avance Nerve Graft Utilization, Evaluations, and Outcomes in Peripheral Nerve Injury Repair (“RANGER”)," • "A Matched Autograft and Tube Conduit Case Control Cohort Arm of RANGER ("MATCH")," • "Breast Neurotization Outcomes for Women: A Registry Study of Recovery Outcomes, Quality of Life and Patient Satisfaction in Post-Mastectomy Autologous Breast Reconstruction ("Sensation-NOW")," • "A Multicenter, Prospective and Subject Blinded Comparative Study of Axoguard Nerve Cap and Neurectomy for the Treatment of Symptomatic Neuroma and Prevention of Recurrent End-Neuroma Pain ("REPOSE")," • "Tolerability and Feasibility Pilot Clinical Study of a Large-Diameter Nerve Cap for Protecting and Preserving Terminated Nerve Ends ("REPOSE-XL")," and • "An Ambispective, Multicenter, Observational Registry Study of Patients Considering Surgical Treatment for Chronic Neuropathic Pain ("Rethink Pain")." 22 Table of Content Our completed studies are "A Multicenter, Prospective, Randomized, Patient and Evaluator Blinded Comparative Study of Nerve Cuffs and Avance Nerve Graft Evaluating Recovery Outcomes for the Repair of Nerve Discontinuities (“RECON”)," “A Multicenter, Prospective, Randomized, Comparative Study of Hollow Nerve Conduit and Avance Nerve Graft Evaluation Recovery Outcomes of the Nerve Repair in the Hand (“CHANGE”)” published by Means et al and a pilot study to evaluate the use of Avance Nerve Graft in the reconstruction of nerves following prostatectomy.
Biggest changeThe ongoing studies are: • “A Multicenter Retrospective Study of Avance Nerve Graft Utilization, Evaluations, and Outcomes in Peripheral Nerve Injury Repair (“RANGER”) - enrollment complete in parent protocol with analysis ongoing," • "A Matched Autograft and Tube Conduit Case Control Cohort Arm of RANGER ("MATCH"), - enrollment in Addendum 1 complete with analysis ongoing" • "Breast Neurotization Outcomes for Women: A Registry Study of Recovery Outcomes, Quality of Life and Patient Satisfaction in Post-Mastectomy Autologous Breast Reconstruction ("Sensation-NOW"), - enrollment ongoing" P26 Table of Conten t • "Nerve Protection Evaluation: Revision Cubital Tunnel Syndrome Decompression ("COVERED"), - enrollment ongoing" • "Tolerability and Feasibility Pilot Clinical Study of a Large-Diameter Nerve Cap for Protecting and Preserving Terminated Nerve Ends ("REPOSE-XL"), - enrollment ongoing" and • "An Ambispective, Multicenter, Observational Registry Study of Patients Considering Surgical Treatment for Chronic Neuropathic Pain ("Rethink Pain"). - enrollment ongoing." Our completed studies are "A Multicenter, Prospective and Subject Blinded Comparative Study of Axoguard Nerve Cap and Neurectomy for the Treatment of Symptomatic Neuroma and Prevention of Recurrent End-Neuroma Pain ("REPOSE")," "A Multicenter, Prospective, Randomized, Patient and Evaluator Blinded Comparative Study of Nerve Cuffs and Avance Nerve Graft Evaluating Recovery Outcomes for the Repair of Nerve Discontinuities (“RECON”)," “A Multicenter, Prospective, Randomized, Comparative Study of Hollow Nerve Conduit and Avance Nerve Graft Evaluation Recovery Outcomes of the Nerve Repair in the Hand (“CHANGE”)” published by Means et al, pilot study to evaluate the use of Avance Nerve Graft in the reconstruction of nerves following prostatectomy, and "Registry of Avive Soft Tissue Membrane Utilization in Selected Applications of Acute Trauma of the Upper Extremity ("ASSIST"), As Avive Soft Tissue Membrane is no longer on the market, the registry closed with no planned analysis.
Traditionally, the standard has been to either suture the nerve ends together directly without tension or to bridge the gap between the nerve ends with a less important nerve surgically removed from elsewhere in the patient’s own body, referred to as nerve autograft. More recently, synthetic or collagen conduits have been used for the repair of short gaps.
Traditionally, the standard has been to either suture the nerve ends together directly without tension or to bridge the gap between the nerve ends with a less important nerve surgically removed from elsewhere in the patient’s own body, referred to as a nerve autograft. More recently, synthetic or collagen conduits have been used for the repair of short gaps.
This abnormal section of the nerve can, under certain circumstances, be surgically removed and the nerve managed by capping, burying or repairing the nerve.
This abnormal section of the nerve can, under certain circumstances, be surgically removed and the nerve managed by capping, burying, or surgically repairing the nerve.
Cook Biotech’s ECM material is pliable, capable of being sutured, translucent and allows the patient’s own cells to incorporate into the ECM to remodel and form a tissue similar to the nerve’s epineurium. Cook Biotech has its own source of the raw material for the ECM material and manufactures Axoguard products from such sources.
Cook Biotech’s ECM material is pliable, capable of being sutured, and translucent and allows the patient’s own cells to incorporate into the ECM to remodel and form a tissue similar to the nerve’s epineurium. Cook Biotech has its own source of the raw material for the ECM material and manufactures Axoguard products from such sources.
Our current development focus is to expand clinical data in peripheral nerve repair surgical applications, to develop product line extensions of the Avance and Axoguard products and new technologies/products for peripheral nerve repair.
Our current development focus is to expand clinical data in peripheral nerve repair surgical applications, to develop product line extensions of the Avance and Axoguard products, and to develop new technologies/products for peripheral nerve repair.
REPOSE XL REPOSE-XL is a prospective, multi-center clinical pilot study evaluating the tolerability and feasibility of the Axoguard Large-Diameter Nerve Cap (sizes 5-7 mm) for protecting and preserving terminated nerve endings after limb trauma or amputation when immediate attention to the nerve injuries is not possible. Enrollment in REPOSE-XL started in 2022.
REPOSE XL REPOSE-XL is a prospective, multi-center clinical pilot study evaluating the tolerability and feasibility of the Axoguard Large-Diameter Nerve Cap (sizes 5-7 mm) for protecting and preserving terminated nerve endings after limb trauma or amputation when immediate attention to the nerve injuries is not possible. Enrollment in REPOSE-XL started in 2022 and is underway.
Sales and Marketing Overview We are focused on developing the peripheral nerve repair and regeneration market, committed to improving awareness of new surgical peripheral nerve repair options and is building additional scientific and clinical data to assist surgeons and patients in making informed choices with respect to the repair of peripheral nerve injuries.
Sales and Marketing Overview We are focused on developing the peripheral nerve repair and regeneration market, committed to improving awareness of new surgical peripheral nerve repair options and building additional scientific and clinical data to assist surgeons and patients in making informed choices with respect to the repair of peripheral nerve injuries.
Avance Nerve Graft is stored frozen and utilizes packaging that maintains the graft in a sterile condition. The packaging is typical for medical products so the surgical staff is familiar with opening the package for transfer of Avance Nerve Graft into the sterile surgical field.
Avance Nerve Graft is stored frozen and utilizes packaging that maintains the implant in a sterile condition. The packaging is typical for medical products, so the surgical staff is familiar with opening the package for transfer of Avance Nerve Graft into the sterile surgical field.
After processing, Avance Nerve Graft is flexible and pliable, and its epineurium can be sutured in place allowing for tension-free approximation of the proximal and distal peripheral nerve stumps.
After processing, Avance Nerve Graft is flexible and pliable, and its epineurium can be sutured in place allowing for a tension-free approximation of the proximal and distal peripheral nerve stumps.
In addition to these clinical research programs, we are developing additional clinical trials in peripheral nerve repair, including mixed and motor nerve repair, breast neurotization and pain. Clinical trials are subject to extensive recordkeeping and reporting requirements.
In addition to these clinical research programs, we are developing additional clinical trials in peripheral nerve repair, including mixed and motor nerve repair, breast neurotization, protection, and pain. Clinical trials are subject to extensive recordkeeping and reporting requirements.
RECON results demonstrated statistical superiority for return of sensory function, as measured by static two-point discrimination, as compared to conduits in gaps greater 20 Table of Content than 12 mm (p-value • We continue to comply with the regulations and standards under 21 CFR Part 1271. ◦ We were audited by the FDA at the Avance Processing Facility in March 2013, March 2015, October 2016 and September 2022 and at the Avance Distribution Facility in October 2015 with respect to its Human Tissue Quality System under 21 CFR Part 1271 and in July 2022 with respect to Level 1 Quality System Inspection Technique ("QSIT") Medical Device Inspection under 21 CFR 820.
RECON results demonstrated statistical superiority for return of sensory function, as measured by static two-point discrimination, as compared to conduits in gaps greater than 12 mm (p-value • We continue to comply with the regulations and standards under 21 CFR Part 1271. ◦ We were audited by the FDA at the Avance Processing Facility in March 2013, March 2015, October 2016 and September 2022 and at the Avance Distribution Facility in October 2015 with respect to its Human Tissue Quality System under 21 CFR Part 1271 and in July 2022 with respect to Level 1 Quality System Inspection Technique ("QSIT") Medical Device Inspection under 21 CFR 820.
Sensation-NOW is a clinical study cohort designed to assess breast sensation following reconstruction with or without neurotization. We resumed enrollment in 2021 at select centers after pausing enrollment due to COVID-19 in 2020. The follow-up for the RANGER study is standard of care with a target of up to 36 months post peripheral nerve repair.
Sensation-NOW is a clinical study cohort, currently enrolling, designed to assess breast sensation following reconstruction with or without neurotization. We resumed enrollment in 2021 at select centers after pausing enrollment due to COVID-19 in 2020. The follow-up for the RANGER study is standard of care with a target of up to 36 months post peripheral nerve repair.
AdvaMed is one of the primary voluntary U.S. trade associations for medical device manufacturers. PhRMA is another global trade association focused on the pharmaceutical industry.
AdvaMed is one of the primary voluntary U.S. trade associations for medical device manufacturers. PhRMA is another trade association focused on the pharmaceutical industry.
In 2022, we trained more than three-quarters of hand and microsurgery surgeon fellows in the U.S. through such courses and training.] We have historically provided education on peripheral nerve repair through in-person national programs, including its “Advances and Best Practices in Nerve Repair” as well as local and regional educational events.
In 2023, we trained more than three-quarters of hand and microsurgery surgeon fellows in the U.S. through such courses and training. We have historically provided education on peripheral nerve repair through in-person national programs, including its “Advances and Best Practices in Nerve Repair” as well as local and regional educational events.
Failure by us or our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or other federal or state authorities, which may include any of the following sanctions, among others: • Warning letters, fines, injunctions, consent decrees and civil penalties; • Customer notifications, repair, replacement, refunds, recall or seizure of our products; • Operating restrictions, partial suspension, or total shutdown of production; • Suspension or termination of our clinical trials; • Refusing our 501(k), de novo classification request, PMA or BLA for new products, new intended uses, or modifications to existing products; • Withdrawing or suspending pre-market approvals that have already been granted; and • Criminal prosecution.
Failure by us or our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or other federal or state authorities, which may include any of the following sanctions, among others: • Warning letters, fines, injunctions, consent decrees and civil penalties; • Customer notifications, repair, replacement, refunds, recall or seizure of our products; P29 Table of Conten t • Operating restrictions, partial suspension, or total shutdown of production; • Suspension or termination of our clinical trials; • Refusing our 501(k), de novo classification request, PMA or BLA for new products, new intended uses, or modifications to existing products; • Withdrawing or suspending pre-market approvals that have already been granted; and • Criminal prosecution.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements - Note 14 - Commitments and Contingencies - Service Agreements." Tissue Packaging After processing, the packaging operation is performed in a controlled environment at the CTS facility. Each Avance Nerve Graft is visually inspected and organized by size into finished product codes.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements - Note 14 - Commitments and Contingencies - Service Agreements." Tissue Packaging After processing, the packaging operation is performed in a controlled environment at the APC Facility or the CTS facility. Each Avance Nerve Graft is visually inspected and organized by size into finished product codes.
In the second quarter of 2014, Axogen’s Quality System became registered to ISO 13485 for Receipt, Handling, Storage and Distribution of Axoguard Nerve Connector and Axoguard Nerve Protector and we will maintain the registration through 2023. Cook Biotech is responsible for all regulatory filings for the Axoguard Nerve Connector and Axoguard Nerve Protector products, including international registrations.
In the second quarter of 2014, Axogen’s Quality System became registered to ISO 13485 for Receipt, Handling, Storage and Distribution of Axoguard Nerve Connector and Axoguard Nerve Protector and we will maintain the registration through 2024. Cook Biotech is responsible for all regulatory filings for the Axoguard Nerve Connector and Axoguard Nerve Protector products, including international registrations.
Expand Clinical and Scientific Data Regarding the Performance of Our Products Generating clinical data is an important component of our marketing strategy. As of December 31, 2022, there have been over two hundred peer reviewed clinical publications related to our products. Certain of these publications contain data on multiple products.
Expand Clinical and Scientific Data Regarding the Performance of Our Products Generating clinical data is an important component of our marketing strategy. As of December 31, 2023, there have been over two hundred peer reviewed clinical publications related to our products. Certain of these publications contain data on multiple products.
The FDA will end the period of enforcement discretion upon a final determination of our future BLA submission or if prior to the BLA submission, the FDA finds that we do not meet the conditions for the enforcement discretion terms or are not exercising due diligence in executing the transition plan.
The FDA enforcement discretion letter states the FDA will end the period of enforcement discretion upon a final determination of our future BLA submission or if prior to the BLA submission, the FDA finds that we do not meet the conditions for the enforcement discretion terms or are not exercising due diligence in executing the transition plan.
Axoguard Nerve Protector Axoguard Nerve Protector is a product used to protect and wrap damaged peripheral nerves and reinforce reconstructed nerve gaps while preventing soft tissue attachments. It is designed to protect and isolate the peripheral nerve during the healing process after surgery by creating a barrier between the nerve tissue and the surrounding tissue bed.
Axoguard Nerve Protector Axoguard Nerve Protector is a product used to protect and wrap damaged peripheral nerves and reinforce reconstructed nerve gaps while minimizing soft tissue attachments. It is designed to protect and isolate the peripheral nerve during the healing process after surgery by creating a barrier between the nerve tissue and the surrounding tissue bed.
It could also subject us to enforcement actions or sanctions, such as agency refusal to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution of products, injunctions, or civil monetary penalties or criminal prosecution.
It could also subject us to enforcement actions or sanctions, such as agency refusal to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution of products, injunctions, consent decrees or civil monetary penalties or criminal prosecution.
During the healing process, the body revascularizes and gradually remodels the graft into the patient’s own tissue while allowing the processed peripheral nerve allograft to physically support axonal regeneration across the peripheral nerve transection. Avance Nerve Graft does not require immunosuppression for use.
During the healing process, the body revascularizes and gradually remodels the graft into the patient’s own tissue while allowing the processed peripheral nerve allograft to physically support axonal regeneration across the peripheral nerve discontinuities . Avance Nerve Graft does not require immunosuppression for use.
With lengths up to 70 mm and diameters up to 5 mm, Avance Nerve Graft allows surgeons to choose and trim the implant to the correct length for repairing the relevant peripheral nerve gap, as well as to match the diameter to the proximal and distal end of the severed peripheral nerve.
With lengths up to 70 mm and diameters up to 5 mm, Avance Nerve Graft allows surgeons to choose and trim the implant to the correct length for reconstructing the relevant peripheral nerve gap, as well as to match the diameter to the proximal and distal end of the severed peripheral nerve.
Competitive aspects of our products focus on their overall value proposition and suitability for specific applications and can include composition and structure of the material, ease of use, clinical evidence, handling, and price. Our major competitors for off-the-shelf repair options in hollow-tube conduits and bio-absorbable wraps are Integra LifeSciences Holding Corporation, Baxter International, Inc., and Stryker Corporation.
Competitive aspects of our products focus on their overall value proposition and suitability for specific applications and can include composition and structure of the material, ease of use, clinical evidence, handling, and price. Our major competitors for off-the-shelf repair options in hollow-tube conduits and bio-absorbable wraps are I ntegra LifeSciences Holding Corporation, Baxter International, Inc., and Stryker Corporation.
Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving, or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for or recommending a good or service for which payment may be made in whole or part under federal healthcare programs, such as the Medicare and 25 Table of Content Medicaid programs.
Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving, or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for or recommending a good or service for which payment may be made in whole or part under federal healthcare programs, such as the Medicare and Medicaid programs.
Nerves that are not repaired or heal abnormally may result in a permanent loss of function and/or sensation. Additionally, abnormal healing can form a neuroma that may send altered signals to the brain resulting in the sensation of pain.
Nerves that are not repaired or heal abnormally may result in a permanent loss of motor and/or sensory function. Additionally, abnormal healing can form a neuroma that may send altered signals to the brain resulting in the sensation of pain.
We believe a competitive processed peripheral nerve allograft would need to successfully complete BLA Phase I, II and III clinical studies prior to clinical release, the completion of which we believe would take at least eight years.
We believe a competitive processed peripheral nerve allograft (non-biosimilar) would need to successfully complete BLA Phase I, II and III clinical studies prior to clinical release, the completion of which we believe would take at least eight years.
Axoguard Nerve Connector Axoguard Nerve Connector is a coaptation aid used to align and connect severed peripheral nerve ends in a tensionless repair. The product is in a tubular shape with an open lumen on each end where the severed peripheral nerve ends are placed.
Axoguard Nerve Connector Axoguard Nerve Connector is a coaptation aid used to align and connect severed peripheral nerve ends in a tensionless repair. The product is in a tubular shape with an open lumen on each end where the severed peripheral nerve ends are inserted.
Axoguard Nerve Connector has the following advantages: • Processed intact porcine ECM with an open, porous structure that allows for cell infiltration and remodeling; • Designed as a coaptation aid for tensionless repair of transected or severed peripheral nerves; • Alleviates tension at the repair site; • Remodels into the patient’s own tissue; • Reduces the number of required sutures (versus direct repair with suture); • Allows surgeon to move sutures away from the repair site which may minimize inflammation and aid nerve regeneration; • Reduces potential for fascicular mismatch; • Allows visualization of underlying peripheral nerve ends; • Available in seven different diameters and two different lengths to address a variety of nerve repair situations; • Strong and flexible, easy to suture; and • Stored at room temperature with a minimum of 18-month shelf life.
Axoguard Nerve Connector has the following advantages: • Processed intact porcine ECM with an open, porous structure that allows for cell infiltration and remodeling; • Designed as a coaptation aid for tensionless repair of transected or severed peripheral nerves; • Alleviates tension at the repair site; • Remodels into the patient’s own tissue; • Reduces the number of required sutures (versus direct repair with suture); • Allows surgeon to move sutures away from the repair site which may minimize inflammation and aid nerve regeneration; • Reduces potential for fascicular mismatch; • Allows visualization of underlying peripheral nerve ends; • Available in seven different diameters and two different lengths to address a variety of nerve repair situations; • Strong and flexible, easy to suture; and • Stored at room temperature with a minimum of 18-month shelf life for the sizes with 6-layers and 24-month shelf life for those with 5-layers.
Pursuant to the Nerve End Cap Supply Agreement dated June 27, 2017 (the “Supply Agreement”), as amended on April 6, 2020 (the "Amended Supply Agreement"), Cook Biotech is the exclusive contract manufacturer of the Axoguard Nerve Cap and both parties have provided the other party the necessary licenses to their technologies for operation of the Amended Supply Agreement.
Pursuant to the Nerve End Cap Supply Agreement dated June 27, 2017 (the “Supply Agreement”), as amended on April 6, 2020, and August 4, 2023, (the "Amended Supply Agreement"), Cook Biotech is the exclusive contract manufacturer of the Axoguard Nerve Cap and both parties have provided the other party the necessary licenses to their technologies for operation of the Amended Supply Agreement.
We are highly dependent on the continued availability of our facilities and could be harmed if the facilities are unavailable for any prolonged period of time. • Delays, interruptions, or the cessation of production by our third-party suppliers of important materials may prevent or delay our ability to manufacture or process the final products. • Surgical technique evolution, technological change and competition could reduce demand for our products. • We must maintain high quality processing of our products. • Our revenue depends upon prompt and adequate reimbursement from public and private insurers and national health systems. • Negative publicity concerning methods of donating human tissue and screening of donated tissue may reduce demand for our products and negatively impact the supply of available donor tissue. • The failure of third parties to perform many necessary services for the commercialization of our products, including services related to recovery/acquisition, distribution and transportation, would impair our ability to meet commercial demand. • We are dependent on our relationships with independent agencies to generate a material portion of our revenue. • If we do not manage product inventory in an effective and efficient manner, it could adversely affect profitability resulting in significant fluctuations in our operating results. • Our operating results could be adversely impacted if we are unable to effectively manage and sustain our future growth or scale our operations. • We may be unsuccessful in commercializing our products outside the U.S.
We are highly dependent on the continued availability of our facilities and could be harmed if the facilities are unavailable for any prolonged period of time. • Delays, interruptions, or the cessation of production by our third-party suppliers, including products supplied by single suppliers, of important materials may prevent or delay our ability to manufacture or process the final products. • Surgical technique evolution, technological change and competition could reduce demand for our products. • We must maintain high quality processing of our products. • Our revenue depends upon prompt and adequate reimbursement from public and private insurers and national health systems. • Negative publicity concerning methods of donating human tissue and screening of donated tissue may reduce demand for our products and negatively impact the supply of available donor tissue. • The failure of third parties to perform many necessary services for the commercialization of our products, including services related to recovery/acquisition, distribution and transportation, would impair our ability to meet commercial demand. • We are dependent on our relationships with independent agencies to generate a material portion of our revenue. • If we do not manage product inventory in an effective and efficient manner, it could adversely affect profitability resulting in significant fluctuations in our operating results. • We may be unsuccessful in commercializing our products outside the U.S.
The researchers evaluate the treatment’s safety, determine a safe dosage range, and identify side effects. 21 Table of Content • In Phase II trials, the experimental drug or treatment is given to a larger group of people to see if it is effective and to further evaluate its safety. • In Phase III trials, the experimental study drug or treatment is given to large groups of people.
The researchers evaluate the treatment’s safety, determine a safe dosage range, and identify side effects. • In Phase II trials, the experimental drug or treatment is given to a larger group of people to see if it is effective and to further evaluate its safety. • In Phase III trials, the experimental study drug or treatment is given to large groups of people.
See "Risk Factors - Clinical trials can be long, expensive and results are ultimately uncertain, which could jeopardize our ability to obtain regulatory approval and continue to market our Avance Nerve Graft product." RANGER The RANGER study is an observational study currently in enrollment and is a utilization registry of Avance Nerve Graft.
See "Risk Factors - Clinical trials can be long, expensive and results are ultimately uncertain, which could jeopardize our ability to obtain regulatory approval and continue to market our Avance Nerve Graft product." RANGER The RANGER study is an observational study and is a utilization registry of Avance Nerve Graft.
We utilize an Environmental Health and Safety committee that meets monthly to analyze potential issues, review any incident data, and implement necessary process or procedural changes that can minimize the work-related injuries and occupational exposure to chemicals, bio-hazards, or illnesses, and eliminate any potential from serious injuries and fatalities.
We utilize an Environmental Health and Safety committee that meets monthly to analyze potential issues, review any incident data, and implement necessary process or procedural changes that can minimize the work-related injuries and occupational exposure to chemicals, biohazards, or illnesses, and eliminate any potential from serious injuries and fatalities.
See “Government Regulations – Clinical Trials.” The pilot phase of REPOSE, a multicenter, prospective, randomized, and subject blinded study of Axoguard Nerve Cap as compared to neurectomy alone for the treatment of symptomatic neuroma, has published and the comparative phase has completed enrollment and is currently in follow-up.
See “Government Regulations – Clinical Trials.” The pilot phase of REPOSE, a multicenter, prospective, randomized, and subject blinded study of Axoguard Nerve Cap as compared to neurectomy alone for the treatment of symptomatic neuroma, has published and the comparative phase has completed enrollment and follow-up.
We believe that any future, competitive peripheral nerve allograft would be required to follow the standard pathway for biologic licensing, which typically entails multiple clinical trials and takes many years. The FDA provided updated guidance, "Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use" in November 2017, which it revised in July 2020.
We believe that biologic licensing, which typically entails multiple clinical trials and takes many years, would be required for any future competitive peripheral nerve allograft. The FDA provided updated guidance, "Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use" in November 2017, which it revised in July 2020.
The activities the FDA regulates include the following: • Product design, development, and manufacture; • Product safety, testing, labeling, and storage; • Pre-clinical testing in animals and in the laboratory; • Clinical investigations in humans; • Pre-marketing clearance, approval, or licensing; • Record-keeping and document-retention procedures; • Advertising and promotion; • The import and export of products; • Product marketing, sales, and distribution; • Post-marketing surveillance and medical device reporting, including reporting of deaths, serious injuries, communicable diseases, device malfunctions, or other adverse events; and • Corrective actions, removals and recalls.
The activities the FDA regulates include the following: • Product design, development, and manufacture; • Product safety, testing, labeling, and storage; • Pre-clinical testing in animals and in the laboratory; • Clinical investigations in humans; • Pre-marketing clearance, approval, or licensing; • Record-keeping and document-retention procedures; • Advertising and promotion; • The import and export of products; • Product marketing, sales, and distribution; P21 Table of Conten t • Post-marketing vigilance, surveillance and medical device reporting, including reporting of deaths, serious injuries, communicable diseases, device malfunctions, or other adverse events; and • Corrective actions, removals and recalls.
We are subject to unannounced inspections by the FDA to determine compliance with the GTP, GMP, and other regulations, and these inspections may also include suppliers' manufacturing facilities.
We are subject to unannounced inspections by the FDA to determine compliance with the GTP, cGMP, and other regulations, and these inspections may also include suppliers' manufacturing facilities.
We, through our licensing efforts and research, developed the Avance Method TM , a proprietary method for processing recovered human peripheral nerve tissue in a manner that preserves the essential structure of the ECM while cleansing away cellular and noncellular debris.
We, through our licensing efforts and research, developed the Avance Method ® , a proprietary method for processing recovered human peripheral nerve tissue in a manner that preserves the essential structure of the extracellular matrix (ECM) while cleansing away cellular and noncellular debris.
We have estimated the portion of these nerve repair procedures due to trauma that would require Gap Repair, Primary Repair and/or Nerve Protection and applied, as we believed was appropriate in each procedure segment, the number of units and average sales price of Avance Nerve Graft and the average market price for nerve connectors, and nerve protectors to determine the probable Total Addressable Market.
We have estimated the portion of these nerve repair procedures due to trauma that would require gap repair, primary repair and/or nerve protection and applied, as we believed was appropriate in each procedure segment, the number of units and average sales price of Avance Nerve P8 Table of Conten t Graft and the average market price for nerve connectors, and nerve protectors to determine the probable Total Addressable Market.
We believe the Axoguard Nerve Cap can address these painful neuroma and address nerve pain without the complications of traditional methods, including pharmacotherapy and chemical injections, among others. Axoguard Nerve Cap can be used to reduce the development of symptomatic or painful neuroma formation.
We believe the Axoguard Nerve Cap can address these painful neuromas and address nerve pain without the complications of traditional methods, including pharmacotherapy and chemical injections, among others. Axoguard Nerve Cap can be used to reduce the development o f symptomatic or painful neuroma formation.
In addition, we safeguard our trade secrets and other confidential know-how, and carefully protects these and other IP rights when engaging with third parties.
In addition, we safeguard our trade secrets and other confidential know-how, and carefully protect these and other IP rights when engaging with third parties.
Our products are used by surgeons during surgical 6 Table of Content interventions to repair a wide variety of physical nerve damage or transection throughout the body, which can range from a simple laceration of a finger to a complex brachial plexus injury (an injury to the network of nerves that control the movement and sensation of the shoulder, arm, and hand) as well as nerve injuries caused by dental, orthopedic, and other surgical procedures.
Our products are used by surgeons during surgical interventions to repair a wide variety of physical nerve damage throughout the body, which can range from a simple laceration of a finger to a complex brachial plexus injury (an injury to the network of nerves that control the movement and sensation of the shoulder, arm, and hand) as well as nerve injuries caused by dental, orthopedic, and other surgical procedures.
The safety of Avance Nerve Graft is supported by donor screening, process validation, process controls, and validated terminal sterilization methods. The Axogen Quality System has built in redundancies that are meant to control the release of each product for implantation only after such product meets our quality control and product requirements.
The safety of Avance Nerve Graft is supported by donor screening, process validation, process controls, and validated terminal sterilization methods. The Axogen Quality System has built in redundancies that are meant to ensure product release only after such product meets our quality control and product requirements.
The following regulations apply to the IND application process: • 21CFR Part 201 Drug Labeling • 21CFR Part 312 Investigational New Drug Application • 21CFR Part 314 IND and NDA Applications for FDA Approval to Market a New Drug (New Drug Approval) • 21CFR Part 316 Orphan Drugs • 21CFR Part 50 Protection of Human Subjects • 21CFR Part 54 Financial Disclosure by Clinical Investigators • 21CFR Part 56 Institutional Review Boards • 21CFR Part 58 Good Lab Practice for Nonclinical Laboratory [Animal] Studies Biological Product License Application (BLA) Pathway The Biologics License Application (BLA) is a request for permission to introduce, or deliver for introduction, a biological product into interstate commerce (21 CFR 601.2).
The following regulations apply to the IND application process: • 21CFR Part 201 Drug Labeling • 21CFR Part 312 Investigational New Drug Application • 21CFR Part 314 IND and NDA Applications for FDA Approval to Market a New Drug (New Drug Approval) • 21CFR Part 316 Orphan Drugs • 21CFR Part 50 Protection of Human Subjects • 21CFR Part 54 Financial Disclosure by Clinical Investigators • 21CFR Part 56 Institutional Review Boards • 21CFR Part 58 Good Lab Practice for Nonclinical Laboratory Studies Biological Product License Application ("BLA") Pa thway Th e BLA is a request for permission to introduce, or deliver for introduction, a biological product into interstate commerce (21 CFR 601.2).
Axoguard Nerve Protector has the following advantages: • Processed porcine submucosa ECM used to reinforce a coaptation site, wrap a partially severed peripheral nerve or protect peripheral nerve tissue; • Creates a protective layer that isolates and protects the peripheral nerve in a traumatized wound bed; • Remodels into the patient’s own tissue; • Easily conforms and provides 360-degree wrapping of damaged peripheral nerve tissue; • Allows the body's natural healing process to repair the nerve; • Minimizes the potential for soft tissue attachments and peripheral nerve entrapment by physically isolating the nerve during the healing process; • Allows peripheral nerve gliding; • Strong and flexible, plus easy to suture; • Is available in five different widths and two different lengths to address a variety of peripheral nerve repair situations; and • Stored at room temperature with a minimum of 24-month shelf life.
Axoguard Nerve Protector has the following advantages: • Processed porcine submucosa ECM used to reinforce a coaptation site, wrap a partially severed peripheral nerve or protect peripheral nerve tissue; • Creates a protective layer that isolates and protects the peripheral nerve in a traumatized wound bed; • Remodels to form a new soft tissue layer; P11 Table of Conten t • Easily conforms and provides 360-degree wrapping of damaged peripheral nerve tissue; • Allows the body's natural healing process to repair the nerve; • Minimizes the potential for soft tissue attachments and peripheral nerve entrapment by physically isolating the nerve during the healing process; • Allows peripheral nerve gliding; • Strong and flexible, plus easy to suture; • Is available in five different widths and two different lengths to address a variety of peripheral nerve repair situations; and • Stored at room temperature with a minimum of 24-month shelf life.
Although the Axoguard connector and protector product lines have had just nine adverse events reported to date, there may have been other incidents, including patient deaths, that may have occurred during procedures utilizing our products without us being aware of any such incidents.
Although the Axoguard Connector, Protector, Cap, and HA+ product lines have had just ten adverse events reported to date, there may have been other incidents, including patient deaths, that may have occurred during procedures utilizing our products without us being aware of any such incidents.
We have incorporated these principles into our relationships with healthcare professionals under our consulting agreements, payment of travel and lodging expenses, research and educational grant procedures and sponsorship of third-party conferences. In addition, we have conducted and will continue to conduct training sessions on these principles.
We have incorporated these principles into our relationships with healthcare professionals under our consulting agreements, payment of travel and lodging expenses, research and educational grant procedures and sponsorship of P30 Table of Conten t third-party conferences. In addition, we have conducted and will continue to conduct training sessions on these principles.
Specifically, all medical devices placed into the UK market had to be registered, subject to applicable grace periods, with the Medicines and Healthcare products Regulatory Agency ("MHRA"), will need to 27 Table of Content appoint a UK Responsible Person, and comply with additional product marking and conformity assessment requirements.
Specifically, all medical devices placed into the UK market had to be registered, subject to applicable grace periods, with the Medicines and Healthcare products Regulatory Agency ("MHRA"), will need to appoint a UK Responsible Person, and comply with additional product marking and conformity assessment requirements.
Subject follow-up was completed in August 2021with topline study data read-out completed during the second quarter of 2022. Topline results showed that this pivotal study met its primary endpoint for the return of nerve function 23 Table of Content as measured by static two-point discrimination. It also demonstrated that the safety profile was consistent with previously published data.
Subject follow-up was completed in August 2021 with topline study data read-out completed during the second quarter of 2022. Topline results showed that this pivotal study met its primary endpoint for the return of nerve function as measured by static two-point discrimination. It also demonstrated that the safety profile was consistent with previously published data.
Manufacturing of Our Medical Device Classified Products Manufacturing for the Axoguard Product Line The Axoguard product line is manufactured by Cook Biotech Incorporated, in West Lafayette, Indiana (“Cook Biotech”), which was established in 1995 to develop and manufacture implants utilizing porcine ECM.
P15 Table of Conten t Manufacturing of Our Medical Device Classified Products Manufacturing for the Axoguard Product Line The Axoguard product line is manufactured by Cook Biotech Incorporated, in West Lafayette, Indiana (“Cook Biotech”), which was established in 1995 to develop and manufacture implants utilizing porcine ECM. .
We cannot provide any assurance that regulatory or enforcement authorities will view our relationships with physicians or policies as being in compliance with applicable regulations and laws. 26 Table of Content Regulation Outside of the U.S. Distribution and sales of medical products outside of the U.S. are subject to foreign governmental regulations that vary substantially from country to country.
We cannot provide any assurance that regulatory, or enforcement authorities will view our relationships with physicians or policies as being in compliance with applicable regulations and laws. P31 Table of Conten t Regulation Outside of the U.S. Distribution and sales of medical products outside of the U.S. are subject to foreign governmental regulations that vary substantially from country to country.
License Agreements We have entered into license agreements with University of Florida Research Foundation (the “UFRF”) and the University of Texas at Austin (“UTA”). Under the terms of these license agreements, we hold exclusive worldwide licenses to underlying technologies used by us in our Avance Nerve Graft.
License Agreements We have entered into license agreements with the University of Florida Research Foundation (the "UFRF") and the University of Texas at Austin ("UTA"). Under the terms of these license agreements, we hold exclusive worldwide licenses to underlying technologies used by us in our Avance Nerve Graft.
Cook Biotech has obtained a 510(k) pre-market clearance for Axoguard Nerve Connector from the FDA for the use of porcine small intestine submucosa for the repair of peripheral nerve transections where gap closure can be achieved by flexion of the extremity.
Cook Biotech has obtained a 510(k) pre-market clearance for Axoguard Nerve Connector from the FDA for the use of porcine small intestine submucosa for P20 Table of Conten t the repair of peripheral nerve transections where gap closure can be achieved by flexion of the extremity.
Because a sponsor often 18 Table of Content needs to ship an investigational drug or biological product to clinical investigators in many states, it must seek an exemption from that legal requirement. The IND is the means through which the sponsor obtains this exemption from the FDA.
Because a sponsor often needs to ship an investigational drug or biological product to clinical investigators in many states, it must seek an exemption from that legal requirement. The IND is the means through which the sponsor obtains this exemption from the FDA.
In addition, compression on a nerve, blunt force trauma or other physical irritations to a nerve can cause nerve damage that may alter the signal conduction of the nerve, result in pain, and may, in some instances, require surgical intervention to address the resulting nerve compression.
P7 Table of Conten t In addition, compression on a nerve, blunt force trauma or other physical irritations to a nerve can cause nerve damage that may alter the signal conduction of the nerve, result in pain, and may, in some instances, require surgical intervention to address the resulting nerve compression.
The primary objective of the study is to evaluate the safety and efficacy of Avance Nerve Graft for non-inferiority and if met, superiority, of static two-point discrimination, a measure of sensory function, at twelve months as compared to nerve cuffs.
The primary objective of the study is to evaluate the safety P27 Table of Conten t and efficacy of Avance Nerve Graft for non-inferiority and if met, superiority, of static two-point discrimination, a measure of sensory function, at twelve months as compared to nerve cuffs.
Axoguard Nerve Connector and Nerve Protector In August 2008, we entered into an agreement with Cook Biotech, amended in February 2012 and February 26, 2018 (the “Distribution Agreement”), to distribute its ECM technology in the form of the Surgisis ® Nerve Cuff, the form of a nerve wrap or patch, or any other mutually agreed to configuration.
Axoguard Nerve Connector and Nerve Protector In August 2008, we entered into an agreement with Cook Biotech, amended in February 2012, October 10, 2014, and February 26, 2018, and August 4, 2023 (the “Distribution Agreement”), to distribute its ECM technology in the form of the Surgisis ® Nerve Cuff, the form of a nerve wrap or patch, or any other mutually agreed to configuration.
As of December 31, 2022, eleven publications and more than 70 scientific conference presentations have been generated to date from the study. RANGER is designed to allow up to 2,500 subjects. An additional 500 subjects are allowed to be enrolled in Addendum 1, MATCH, and 2,000 enrolled in Addendum 2, Sensation-NOW.
As of December 31, 2023, eleven publications and more than 70 scientific conference presentations ha ve been generated to date from the study. RANGER is designed to allow up to 2,500 subjects. An additional 500 subjects are allowed to be enrolled in Addendum 1, MATCH, and 2,000 enrolled in Addendum 2, Sensation-NOW.
Overall enrollment is designed to target 101 subjects with 15 in the first pilot phase followed by up to 86 in the randomized, comparative phase. The study will assess pain scores, quality of life, neuroma recurrence, and health outcomes over a 12-month follow-up period. Subject follow-up is expected in the third quarter of 2023.
Overall enrollment is designed to target 101 subjects with 15 in the first pilot phase followed by up to 86 in the randomized, comparative phase. The study will assess pain scores, quality of life, neuroma recurrence, and health outcomes over a 12-month follow-up period.
For tissue and biological products, the regulatory requirements include: the FDA’s registration and listing requirements, donor eligibility requirements and compliance with GTP in 21 CFR Part 1271 for human tissue products, compliance with the FDA’s cGMP in 21 CFR Parts 210, 211, and 600 for licensed biological products, and post-market BLA requirements (21 CFR Part 601), including The Drug Supply Chain Security Act (DSCSA).
For tissue and biological products, the regulatory requirements include: the FDA’s registration and listing requirements, donor eligibility requirements and compliance with GTP in 21 CFR Part 1271 for human tissue products, compliance with the FDA’s cGMP in 21 CFR Parts 210, 211, and 600 for licensed biological products, and post- P28 Table of Conten t market BLA requirements (21 CFR Part 601), including The Drug Supply Chain Security Act (DSCSA).
Our follow-up indicated that there was no delay in procedure and we filed information with the FDA and no further action is required. We have not had to submit any Medical Device Reports (“MDRs”) or tissue adverse reaction reports to the FDA.
Our follow-up indicated that there was no delay in procedure, and we filed information with the FDA and no further action is required. We have not had to submit any tissue adverse reaction reports to the FDA.
Avance Nerve Graft thaws in less than 10 minutes, and once thawed, it is ready for implantation. 8 Table of Content Avance Nerve Graft provides the following key advantages: • A three-dimensional bioscaffold for bridging a peripheral nerve gap; • A biologically active nerve therapy with more than 10 years of comprehensive clinical evidence; • No patient donor-nerve surgery, therefore no comorbidities associated with a secondary surgical site; • Available in a variety of diameters up to 5mm to meet a range of anatomical needs; • Available in a variety of lengths up to 70mm, to meet a range of gap lengths; • Decellularized and cleansed ECM; • Implanted without the need for immunosuppression, remodels into patient’s own tissue; • Structurally supports the body’s own regeneration process; • Handles similar to an autograft, and is flexible and pliable; • Alleviates tension at the repair site; • Three-year shelf life; and • Supplied sterile.
Avance Nerve Graft provides the following key advantages: • A three-dimensional bioscaffold for bridging a peripheral nerve gap; • A biologically active nerve therapy with more than 10 years of comprehensive clinical evidence; • No patient donor-nerve surgery, therefore no comorbidities associated with a secondary surgical site; • Available in a variety of diameters up to 5mm to meet a range of anatomical needs; • Available in a variety of lengths up to 70mm to meet a range of gap lengths; • Decellularized and cleansed ECM; • Implanted without the need for immunosuppression, remodels into patient’s own tissue; • Structurally supports the body’s own regeneration process; • Handles similar to an autograft, and is flexible and pliable; • Alleviates tension at the repair site; • Three-year shelf life; and • Supplied sterile.
Our Product Portfolio Avance Nerve Graft Avance Nerve Graft is a biologically active nerve implant with more than ten years of comprehensive clinical evidence and more than 75,000 implants since launch. Avance Nerve Graft is processed nerve allograft (human) intended for surgical repair of peripheral nerve discontinuities to support regeneration across the defect.
Our Product Portfolio Avance Nerve Graft Avance Nerve Graft is a biologically active nerve implant with more than fifteen years of comprehensive clinical evidence and more than 100,000 implants since launch. Avance Nerve Graft is processed nerve allograft intended for the surgical repair of peripheral nerve discontinuities to support regeneration across the defect.
Avance Nerve Graft provides the natural peripheral nerve structure of a nerve, including the native laminin to guide the regenerating nerve fibers. The nerve ECM is additionally processed to remove a natural inhibitor to regeneration called chondroitin sulphate proteoglycan. We believe that Avance Nerve Graft is the first off-the-shelf human nerve allograft for bridging nerve transections.
Avance Nerve Graft provides the natural peripheral nerve structure of a nerve, including the native laminin, to P9 Table of Conten t guide the regenerating nerve fibers. The nerve ECM is additionally processed to remove a natural inhibitor to regeneration called chondroitin sulphate proteoglycan. We believe that Avance Nerve Graft is the first off-the-shelf nerve allograft for bridging nerve transections.
We work with academic institutions in the expansion of treatments for peripheral nerve and are involved in a number of grants from government agencies related to nerve repair or use of our products and/or technologies.
P18 Table of Conten t We work with academic institutions in the expansion of treatments for peripheral nerve and are involved in a number of grants from government agencies related to nerve repair or use of our products and/or technologies.
In that case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. Therefore, submission of an IND may not result in the FDA allowing clinical trials to commence.
In that case, P22 Table of Conten t the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. Therefore, submission of an IND may not result in the FDA allowing clinical trials to commence.
For the year ended December 31, 2022, we spent approximately $24.2 million on total research and development expenses for product and clinical development, including expenses related to the transition of Avance Nerve Graft to a biological product. Competition The medical device and biotechnology industries are characterized by rapidly advancing technologies, intense competition, and a strong emphasis on proprietary products.
For the year ended December 31, 2023, we spent approximately $28.3 million on total research and development expenses for product and clinical development, including expenses related to the transition of Avance Nerve Graft to a biological product. Competition The medical device and biotechnology industries are characterized by rapidly advancing technologies, intense competition, and a strong emphasis on proprietary products.
We believe that there is an opportunity to 13 Table of Content improve current approaches to peripheral nerve repair and that our approach will solidify our position as a leader in the field of peripheral nerve repair products. The following provides the key elements of our sales and marketing strategy.
We believe that there is an opportunity to P16 Table of Conten t improve current approaches to peripheral nerve repair and that our approach will solidify our position as a leader in the field of peripheral nerve repair products. The following provides the key elements of our sales and marketing strategy.
Axoguard Nerve Cap Axoguard Nerve Cap is a proprietary 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.
P12 Table of Conten t Axoguard Nerve Cap Axoguard Nerve Cap is a proprietary 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.
Risk Factors – Our operations must comply with FDA and other governmental requirements." 15 Table of Content Research and Development We believe that we provide the most extensive product portfolio for peripheral nerve injuries available.
Risk Factors – Our operations must comply with FDA and other governmental requirements." Research and Development We believe that we provide the most extensive product portfolio for peripheral nerve injuries available.
We procure and process our tissue for the Avance Nerve Graft and Avive Soft Tissue Membrane in the U.S. and markets the Avance Nerve Graft in Canada, the UK, and certain other countries under compliance with the individual country regulations. We conduct a regulatory review at the time of submission of the product dossier.
We procure and process our tissue for the Avance Nerve Graft in the U.S. and market the Avance Nerve Graft in Canada, the UK, and certain other countries under compliance with the individual country regulations. We conduct a regulatory review at the time of submission of the product dossier.
We believe any current or future competitors face the following important barriers to market entry as it relates to its peripheral nerve repair products. Our intellectual property (“IP”), and that of our partners, including patents, patents-pending, trade secrets, and know how, is believed to be an important barrier for our Avance Nerve Graft and Axoguard products.
We believe any current or future competitors face the following important barriers to market entry as it relates to its peripheral nerve repair products. Our intellectual property (“IP”), and that of our partners, including patents, patents-pending, trade secrets, and unique, internal subject matter expertise, is believed to be an important barrier for our Avance Nerve Graft and Axoguard products.
We took corrective action to correct these observations and the FDA has accepted the corrective action plan. ◦ In November 2018, we were audited again by the FDA at our Distribution Facility with respect to our Human Tissue Quality System under 21 CFR Part 1271. Such audit resulted in one Form 483 observation on tissue tracking.
We took corrective action to correct these observations and the FDA accepted the corrective action plan. ◦ In November 2018, we were inspected by the FDA at our Texas Distribution Facility with respect to our Human Tissue Quality System under 21 CFR Part 1271. Such inspection resulted in one Form 483 observation on tissue tracking.
Our Avance Method is depicted as follows: Tissue Processing Our Avance Method consists of several steps, including peripheral nerve tissue recovery/acquisition and testing, donor medical review and release, processing, packaging, and sterilization to meet or exceed all applicable FDA, state, and international regulations and American Association of Tissue Banks (“AATB”) standards.
Our Avance Method is depicted as follows: Tissue Processing Our Avance Method ® comprises peripheral nerve tissue recovery/acquisition and testing, donor medical review and release, debridement and other processing steps, packaging, and sterilization to meet or exceed all applicable FDA, state, and international regulations and the American Association of Tissue Banks (“AATB”) standards.
Axoguard Nerve Connector can be used: • As an alternative to direct suture repair; • As a peripheral nerve coaptation; Connector-Assisted Repair ® ; • To aid coaptation in direct repair, grafting, or cable grafting repairs; and • To reinforce the coaptation site.
Axoguard Nerve Connector can be used: • As an alternative to direct suture repair; • As a peripheral nerve coaptation; Connector-Assisted Repair ® ; P10 Table of Conten t • To aid coaptation in direct repair, grafting, or cable grafting repairs; and • To reinforce the coaptation site.
Reference to our website, or any other website, does not constitute incorporation by reference of the information contained on the site and should not be considered part of this Annual Report on Form 10-K. 29 Table of Content RISK FACTOR SUMMARY Below is a summary of our risk factors.
Reference to our website, or any other website, does not constitute incorporation by reference of the information contained on the site and should not be considered part of this Annual Report on Form 10-K. P34 Table of Conten t Item 1A. RISK FACTOR SUMMARY Below is a summary of our risk factors.
OMF We estimate that the OMF portion of the Total Addressable Market is approximately $300 million annually, based upon research indicating that approximately 56,000 PNI occur in the U.S. each year related to third molar surgeries, anesthetic injections, dental implants, orthognathic surgery, and mandibular resection procedures.
OMF We previously estimated the OMF portion of the Total Addressable Market and presently believe it is at least $300 million annually, based upon research indicating that approximately 56,000 PNI occur in the U.S. each year related to third molar surgeries, anesthetic injections, dental implants, orthognathic surgery, and mandibular resection procedures.
The CTS facility provides a cost effective, quality controlled and licensed facility. Our processing methods and process controls have been developed and validated to ensure product uniformity and quality. Pursuant to the CTS Agreement, we pay license fees on a monthly basis to CTS. See "Item 8.
Our processing methods and process controls have been developed and validated to ensure product uniformity and quality. Pursuant to the CTS Agreement, we pay license fees on a monthly basis to CTS. See "Item 8.
Tissue Recovery and Processing Facility We partner with other FDA registered tissue establishments and AATB accredited recovery agencies or recovery agencies in compliance with FDA, state and international regulations and AATB standards for human tissue recovery.
P14 Table of Conten t Tissue Recovery and Processing Facility We partner with other FDA registered tissue establishments and AATB accredited recovery agencies or recovery agencies in compliance with FDA, state and international regulations and AATB standards for human tissue recovery.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeTo the extent that our customers continue to face such financial pressures, it could impact their willingness to spend on our products and services, which could adversely affect our business, financial condition and results of operations. 51 Table of Content Although, to date, our business has not been materially impacted by Russia's ongoing invasion of Ukraine and illegal annexation of Ukrainian territories, geopolitical tensions, or record inflation, it is impossible to predict the extent to which our operations could be impacted in the short and long term, or the ways in which such matters may impact our business.
Biggest changeAlthough, to date, our business has not been materially impacted by Russia's ongoing invasion of Ukraine and illegal annexation of Ukrainian territories, geopolitical tensions between China and the U.S. geopolitical tensions between China and Taiwan, the escalation of the conflict between the State of Israel and Hamas, or record inflation, it is impossible to predict the extent to which our operations could be impacted in the short and long term, or the ways in which such matters may impact our business.
Approximately 60% of our total revenues are from sales of Avance Nerve Graft, which the FDA considers to be a biological product subject to BLA approval requirements. The product is currently distributed pursuant to a transition plan with the FDA.
Approximately 60% of our total revenues are from sales of Avance Nerve Graft. Approximately 60% of our total revenues are from sales of Avance Nerve Graft, which the FDA considers to be a biological product subject to BLA approval requirements. The product is currently distributed pursuant to a transition plan with the FDA.
Moreover, negative macroeconomic conditions could adversely impact our ability to obtain financing in the future on terms acceptable to us, or at all. In addition, the geopolitical instability and related sanctions could continue to have significant ramifications on global financial markets, including volatility in the U.S. and global financial markets.
Moreover, negative macroeconomic conditions could adversely impact our ability to obtain financing in the future on terms acceptable to us, or at all. In addition, the geopolitical instability and related sanctions could continue to have significant ramifications including volatility in the U.S. and global financial markets.
We have not consistently experienced positive cash flow from our operations, and have a history of net losses and our ability to achieve consistent, positive cash flow from operations will depend on increasing revenue from distribution of our products, which may not be achievable.
We have a history of net losses and have not consistently experienced positive cash flow from operations, and our ability to achieve consistent positive cash flow will depend on increasing revenue from distribution of our products, which may not be achievable.
We could experience an adverse impact on operating results due to increased pricing pressure in the U.S. and in other markets. Governments, hospitals, pharmacy benefit managers (“PBMs”), and other third-party payors could reduce the amount of approved reimbursement for our products, deny coverage altogether, or impose new requirements on manufacturers to justify their prices.
We could experience an adverse impact on operating results due to increased pricing pressure in the U.S. and in other markets. Governments, hospitals, pharmacy benefit managers, and other third-party payors could reduce the amount of approved reimbursement for our products, deny coverage altogether, or impose new requirements on manufacturers to justify their prices.
Any disruption in the supply caused by these publicity issues could have a material impact for our business, results of operations, financial condition, and prospects. The failure of third parties to perform many necessary services for the commercialization of our products, including services related to recovery/acquisition, distribution, and transportation, would impair our ability to meet commercial demand.
Any disruption in the supply caused by these publicity issues could have a material impact for our business, results of operations, financial condition, and prospects. The failure of third parties to perform many necessary services for the commercialization of our products, including services related to recovery/acquisition, sterilization, distribution, and transportation, would impair our ability to meet commercial demand.
The FDA regulates the development, pre-clinical and clinical testing, requirements for commercial marketing and distribution, manufacturing and quality, safety, labeling, and promotion of medical products including human cells, tissues and cellular and tissue-based products (HCT/Ps), medical devices, and biological products. The FDA requires the approval of a biological product, like Avance Nerve Graft, through a BLA prior to marketing.
The FDA regulates the development, pre-clinical and clinical testing, requirements for commercial marketing and distribution, manufacturing and quality, safety, labeling, and promotion of medical products including human cells, tissues and cellular and tissue-based products (HCT/Ps), medical devices, and biological products. The FDA requires the pre-market approval of a biological product, like Avance Nerve Graft, through a BLA, prior to marketing.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, Russia's ongoing invasion of Ukraine and illegal annexation of Ukrainian territories, and record inflation and could materially and adversely affect our business, financial condition and results of operations.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability and tensions, Russia's ongoing invasion of Ukraine and illegal annexation of Ukrainian territories, and record inflation and could materially and adversely affect our business, financial condition and results of operations.
The inability to meet foreign regulatory requirements could materially affect our future growth and compliance with such requirements could place a significant financial burden on us. As a result of Brexit, we cannot be sure what changes could occur or the cost of regulatory compliance with the UK.
The inability to meet foreign regulatory requirements could materially affect our future growth and compliance with such requirements could place a significant financial burden on us. As a result of Brexit, we cannot be sure what changes could occur or what the cost of regulatory compliance with the UK would be.
Our success will be dependent on continued acceptance of our products by the medical community. Our success is dependent on continued acceptance of our products by the medical community, which will depend on our ability to demonstrate that our products are an attractive alternative to existing or new nerve reconstruction treatment options, including both surgical techniques and products.
Our success is dependent on continued acceptance of our products by the medical community, which will depend on our ability to demonstrate that our products are an attractive alternative to existing or new nerve reconstruction treatment options, including both surgical techniques and products.
The IRA includes several provisions to lower prescription drug costs for people with Medicare and reduce drug spending by the federal government, including allowing Medicare to negotiate prices for certain prescription drugs, requiring drug manufacturers to pay a rebate to the federal government if prices for single-source drugs and biologicals covered under Medicare Part B and nearly all covered drugs under Part D increase faster than the rate of inflation (CPI-U), and limiting out of pocket spending for Medicare Part D enrollees.
The IRA includes several provisions to lower prescription drug costs for people with Medicare and reduce drug spending by the federal government, including allowing Medicare to negotiate prices for certain prescription drugs, requiring drug manufacturers to pay a rebate to the federal government if prices for single-source drugs and biologics covered under Medicare Part B and nearly all covered drugs under Part D increase faster than the rate of inflation (CPI-U), and limiting out of pocket spending for Medicare Part D enrollees.
Additionally, our ability to access capital markets and other funding sources in the future may not be available on commercially reasonable terms, if at all. Impacts from inflationary pressures, such an increasing costs for research and development of our products, administrative and other costs of doing business, could adversely affect our business, financial condition and results of operations.
Additionally, our ability to access capital markets and other funding sources in the future may not be available on commercially reasonable terms, if at all. Impacts from inflationary pressures, such as increasing costs for research and development of our products, administrative and other costs of doing business, could adversely affect our business, financial condition and results of operations.
The trading price of our common stock has experienced volatility and is likely to continue to be volatile in response to a number of factors including, without limitation, the following: • Fluctuations in price and volume due to investor speculation, including short sales, social media speculation and other factors that may not be tied to our financial performance; • Our performance in the execution of our business plan; • Financial viability; • Actual or anticipated variations in our operating results; • Announcements of developments by us or our competitors; • Market conditions in our industry; 48 Table of Content • Announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; • Adoption of new accounting standards affecting our industry; • Additions or departures of key personnel; • Introduction of new products by us or our competitors; • Sales of our common stock or other securities in the open market; • Regulatory developments in both the U.S. and foreign countries; • Performance of products sold and advertised by licensees in the marketplace; • Economic and other external factors; • Period-to-period fluctuations in financial results; and • Other events or factors, including the other factors described in this “Risk Factors” section, many of which are beyond our control.
The trading price of our common stock has experienced volatility and is likely to continue to be volatile in response to a number of factors including, without limitation, the following: • Fluctuations in price and volume due to investor speculation, including short sales, social media speculation and other factors that may not be tied to our financial performance; • Our performance in the execution of our business plan; • Financial viability; • Actual or anticipated variations in our operating results; • Announcements of developments by us or our competitors; • Market conditions in our industry; • Announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; P53 Table of Conten t • Adoption of new accounting standards affecting our industry; • Additions or departures of key personnel; • Introduction of new products by us or our competitors; • Sales of our common stock or other securities in the open market; • Regulatory developments in both the U.S. and foreign countries; • Performance of products sold and advertised by licensees in the marketplace; • Economic and other external factors; • Period-to-period fluctuations in financial results; and • Other events or factors, including the other factors described in this “Risk Factors” section, many of which are beyond our control.
We believe our Axotouch product is regulated as a Class I exempt medical device under the FD&C Act and not subject to pre-market notification and clearance requirements under section 510(k) of the FD&C Act, 21 CFR Part 820 (Quality System Regulation) and other FDA regulations.
Our Axotouch product is regulated as a Class I exempt medical device under the FD&C Act and not subject to pre-market notification and clearance requirements under section 510(k) of the FD&C Act, 21 CFR Part 820 (Quality System Regulation) and other FDA regulations.
We are seeking a biologics license through the BLA process for specific uses of Avance Nerve Graft under specific circumstances. Our promotional materials and training methods must comply with FDA requirements and other applicable laws and regulations, including the prohibition against off-label promotion.
We are seeking a biologics license through the BLA process for specific uses of Avance Nerve Graft. Our promotional materials and training methods must comply with FDA requirements and other applicable laws and regulations, including the prohibition against off-label promotion.
In June 2020, we entered into a seven-year $70 million credit facility (the "Credit Facility") with Oberland Capital, from which we drew proceeds of $50 million, which were used and will continue to be used for working capital, capital expenditures and general corporate purposes.
In June 2020, we entered into a seven-year $75 million credit facility (the "Credit Facility") with Oberland Capital, from which we drew proceeds of $50 million, which were used and will continue to be used for working capital, capital expenditures and general corporate purposes.
Payments commenced on September 30, 2021 with the royalty structure resulting in approximately 1.0% per year of additional payments on the outstanding principal amount of the loans. The credit facility and RPA could have important negative consequences to the holders of our securities.
Payments commenced on September 30, 2021, with the royalty structure resulting in approximately 1.5% per year of additional payments on the outstanding principal amount of the loans. The credit facility and RPA could have important negative consequences to the holders of our securities.
We cannot ensure that: • We, or our licensors, were the first to make the inventions covered by each of our patents; • We, or our licensors, were the first to file patent applications for these inventions; • Others will not independently develop similar or alternative technologies or duplicate any of our technologies; • Any of our pending patent applications will result in issued patents; • Any of our issued patents or those of our licensors are valid and enforceable; • Any patents issued to us or our collaborators will provide any competitive advantages or will not be challenged by third parties; • We will develop additional proprietary technologies that are patentable; • The patents of others will not have a material adverse effect on our business rights; or 45 Table of Content • The measures we rely on to protect our IP underlying our products are adequate to prevent third parties from using, disclosing, or misappropriating that IP, all of which could harm our ability to compete in the market.
We cannot ensure that: • We, or our licensors, were the first to make the inventions covered by each of our patents; • We, or our licensors, were the first to file patent applications for these inventions; • Others will not independently develop similar or alternative technologies or duplicate any of our technologies; • Any of our pending patent applications will result in issued patents; P50 Table of Conten t • Any of our issued patents or those of our licensors are valid and enforceable; • Any patents issued to us, or our collaborators will provide any competitive advantages or will not be challenged by third parties; • We will develop additional proprietary technologies that are patentable; • The patents of others will not have a material adverse effect on our business rights; or • The measures we rely on to protect our IP underlying our products are adequate to prevent third parties from using, disclosing, or misappropriating that IP, all of which could harm our ability to compete in the market.
We distribute the Axoguard Nerve Connector and Axoguard Nerve Protector for Cook Biotech, and Cook Biotech is the contract manufacturer for our Axoguard Nerve Cap.
We distribute the Axoguard Nerve Connector and Axoguard Nerve Protector for Cook Biotech, and Cook Biotech is the contract manufacturer for our Axoguard HA+ Nerve Protector and Axoguard Nerve Cap.
Compliance with such changes can be costly to implement or result in non-compliance, thus restricting the ability to distribute tissue or sell products, which could have a material adverse effect on our business, results of operations, financial condition, and prospects. 38 Table of Content Our products are also subject to regulation by the FDA in the U.S.
Compliance with such changes can be costly to implement or result in non-compliance, thus restricting the ability to distribute tissue or sell products, which could have a material adverse effect on our business, results of operations, financial condition, and prospects. Our products are also subject to regulation by the FDA in the U.S.
We have obtained a 510(k) pre-market clearance for Axoguard Nerve Cap to protect a peripheral nerve end and separate the nerve from the surrounding environment and to prevent or to reduce the development of symptomatic or painful neuroma.
We have obtained 510(k) pre-market clearance for Axoguard Nerve Cap, indicated to protect a peripheral nerve end and to separate the nerve from surrounding environment to reduce the development of symptomatic or painful neuroma.
If we fail to comply with applicable regulatory requirements, the FDA could require a 510(k) for the product, or impose civil penalties, including fines, product seizures or product recalls and, in certain cases, criminal sanctions, which may adversely affect our business, results of operations, financial condition, and prospects.
If we fail to comply with applicable regulatory requirements, the FDA could require a 510(k) for the product, or impose civil penalties, including fines, product seizures or product recalls and, in certain cases, criminal sanctions, which may adversely affect our business, results of operations, financial condition, and prospects. Our operations must comply with FDA and other governmental requirements.
In addition, many members of the medical community will continue to prefer the use of hollow-tube conduits due in part to their familiarity with these products and the procedures required for their use. Also, steady improvements have been 34 Table of Content made in synthetic human tissue substitutes, which could compete with our products in the future.
In addition, many members of the medical community will continue to prefer the use of hollow-tube conduits due in part to their familiarity with these products and the procedures required for their use. Also, steady improvements have been made in synthetic human tissue substitutes, which could compete with our products in the future.
Accordingly, the cost of regulatory compliance for sales outside the U.S. can be significant and time consuming. Finally, regulations in both the U.S. and other countries are subject to constant change.
Accordingly, the cost of regulatory compliance for sales outside the U.S. can be significant and time consuming. Finally, regulatory expectations in both the U.S. and other countries are subject to constant change.
Any disruption in our ability to generate revenue from the processing, distribution, and sale of products will have a material adverse impact on our business, results of operations, financial condition, and prospects. Axoguard Nerve Connector and Axoguard Nerve Protector are only available through the Cook Biotech Distribution Agreement.
Any disruption in our ability to generate revenue from the processing, distribution, and sale of products, especially Avance Nerve Graft, will have a material adverse impact on our business, results of operations, financial condition, and prospects. Axoguard Nerve Connector and Axoguard Nerve Protector are only available through the Cook Biotech Distribution Agreement.
Delays, interruptions, or the cessation of production by our third-party suppliers of important materials may prevent or delay our ability to manufacture or process the final products. Most of the raw materials used in the process for Avance Nerve Graft are available from more than one supplier.
Delays, interruptions, or the cessation of production by our third-party suppliers, including products supplied by single suppliers, of important materials may prevent or delay our ability to manufacture or process the final products. Most of the raw materials used in the process for Avance Nerve Graft are available from more than one supplier.
Additionally, the credit facility and 47 Table of Content RPA contain complex provisions, which, if interpreted differently, could materially increase the amount of the payments due to Oberland Capital. Our future operating performance is subject to market conditions and business factors that are beyond our control.
Additionally, the credit facility and RPA contain complex provisions, which, if interpreted differently, could materially increase the amount of the payments due to Oberland Capital. Our future operating performance is subject to market conditions and business factors that are beyond our control.
Any failure by us to maintain or protect our information technology systems and data integrity could result in the unauthorized access to 52 Table of Content patient data and personally identifiable information, theft of intellectual property or other misappropriation of assets, or otherwise compromise our confidential or proprietary information and disrupt our operations.
Any failure by us to maintain or protect our information technology systems and data integrity could result in the unauthorized access to patient data and personally identifiable information, theft of intellectual property or other misappropriation of assets, or otherwise compromise our confidential or proprietary information and disrupt our operations.
If any of the third parties that we rely upon in our recovery/acquisition, distribution or transportation process fail to comply with applicable laws and regulations, fail to meet expected deadlines, or otherwise do not carry out their contractual duties, experience delays due to macroeconomic factors, such as the ongoing COVID-19 pandemic, or encounter physical damage or natural disaster at their facilities, our ability to deliver product to meet commercial demand may be significantly impaired, which could have a material adverse impact on our business, results of operations, financial condition or prospects.
If any of the third parties that we rely upon in our recovery/acquisition, distribution or transportation process fail to comply with applicable laws and regulations, fail to meet expected deadlines, or otherwise do not carry out their contractual duties, experience delays due to macroeconomic factors, or encounter physical damage or natural disaster at their facilities, our ability to deliver product to meet commercial demand may be significantly impaired, which could have a material adverse impact on our business, results of operations, financial condition or prospects.
Due to our resource allocation, size, and relatively early stage, we may face competitive challenges from these new products or existing products and barriers that are difficult to overcome and could negatively impact our growth. We must maintain high quality processing of our products.
Due to our resource allocation, size, and relatively early stage, we may face competitive challenges from these new products or existing products and barriers that are difficult to overcome and could neg atively impact our growth. We must maintain high quality processing of our products.
These delays may limit our ability to meet demand for our products and delay our clinical trials, which would have a material adverse impact on our business, results of operations, financial condition, and prospects. Technological change and competition for newly developed products could reduce demand for our products. The medical technology industry is intensely competitive.
These delays may limit our ability to meet demand for our products and delay our clinical trials, which would have a material adverse impact on our business, results of operations, financial condition, and prospects. Technological change and competition for newly developed products could reduce demand for our products. P39 Table of Conten t The medical technology industry is intensely competitive.
For example, a portion of our cash flow from operations will be needed to make payments to Oberland Capital and will not be available to fund future operations. Additionally, we may have increased vulnerability to adverse general economic and industry conditions. Payment requirements under the credit facility and RPA will increase our cash outflows.
For example, a portion of our cash flow from operations will be needed to make payments to Oberland Capital and will not be available to fund P52 Table of Conten t future operations. Additionally, we may have increased vulnerability to adverse general economic and industry conditions. Payment requirements under the credit facility and RPA will increase our cash outflows.
We are highly dependent on our ability to recover human peripheral nerve tissue from tissue donors for our Avance Nerve Graft product. The availability of acceptable donors is relatively limited, and this availability is impacted by regulatory changes, general public opinion of the donation process, and our reputation for handling the donation process.
We are highly dependent on our ability to recover human peripheral nerve tissue from tissue donors for our Avance Nerve Graft product. The availability of acceptable donors is relatively limited, and this availability is impacted by regulatory changes, P41 Table of Conten t general public opinion of the donation process, and our reputation for handling the donation process.
If any of these actions were successful, in addition to any potential liability for damages, we could be required to obtain a license to continue to manufacture or market the affected product, in which case we may be required to pay substantial royalties or grant cross-licenses to our patents.
If any of these actions were successful, in addition to any P51 Table of Conten t potential liability for damages, we could be required to obtain a license to continue to manufacture or market the affected product, in which case we may be required to pay substantial royalties or grant cross-licenses to our patents.
For example, although our Avance Nerve Graft follows stringent safety standards, including sterilization by gamma irradiation, we believe that a small portion of the medical community has lingering concerns over the risk of disease transmission through the use of allografts in general.
For P38 Table of Conten t example, although our Avance Nerve Graft follows stringent safety standards, including sterilization by gamma irradiation, we believe that a small portion of the medical community has lingering concerns over the risk of disease transmission through the use of allografts in general.
Avance Nerve Graft is distributed in Canada, the UK, and certain other countries. We received approval to distribute 37 Table of Content Avance Nerve Graft in Germany in December 2019. Avance use in Spain currently requires approval for each case to be approved by tissue authorities under an alternative therapies designation.
Avance Nerve Graft is distributed in Canada, the UK, and certain other countries. We received approval to distribute Avance Nerve Graft in Germany in December 2019. Avance use in Spain currently requires approval for each case to be approved by tissue authorities under an alternative therapies designation.
Additionally, approximately 60% of our total revenues are from sales of Avance Nerve Graft, any change in position by the FDA regarding its use of enforcement discretion to permit the sale of Avance Nerve Graft or a negative BLA resolution will have a material negative impact on our revenues and our operations.
Additionally, approximately 60% of our total revenues are from sales of Avance Nerve Graft, any change in position by the FDA regarding its use of enforcement discretion to permit the sale of Avance Nerve Graft or a negative action on the BLA could have a material negative impact on our revenues and our operations.
Substantially all of our revenue is currently derived from four products, Avance Nerve Graft, Axoguard Nerve Protector, Axoguard Nerve Connector, and Axoguard Nerve Cap for the treatment of peripheral nerve damage. Of these four products, Avance Nerve Graft represents approximately 60% of our total revenue.
Substantially all of our revenue is currently derived from five products, Avance Nerve Graft, Axoguard Nerve Protector, Axoguard Nerve Connector, Axoguard HA + Nerve Protector, and Axoguard Nerve Cap for the treatment of peripheral nerve damage. Of these five products, Avance Nerve Graft represents approximately 60% of our total revenue.
If one or more of our executives or other key personnel are unable or unwilling to continue in their present positions, or if we are unable to attract and retain high quality executives or key personnel in the future, our business, results of operations, financial conditions, and prospects may be adversely affected.
If one or more of our executives or other key personnel P55 Table of Conten t are unable or unwilling to continue in their present positions, or if we are unable to attract and retain high quality executives or key personnel in the future, our business, results of operations, financial conditions, and prospects may be adversely affected.
We rely upon third parties for certain recovery/acquisition, distribution, and transportation services for our products. For example, the Avance Nerve Graft processing consists of several steps, and we use a number of recovery and/or acquisition 36 Table of Content agencies to supply the human tissue needed for these products.
We rely upon third parties for certain recovery/acquisition, sterilization, distribution, and transportation services for our products. For example, the Avance Nerve Graft processing consists of several steps, and we use a number of recovery and/or acquisition agencies to supply the human tissue needed for these products.
We believe that near-term growth can be supported first through expanded productivity of our existing sales force with existing accounts and second by adding additional customers. We expect the number of direct sales professionals to increase over time.
We believe that near-term growth can be supported first through expanded productivity of our existing sales force with existing accounts and second by adding additional customers. We expect the number of direct sales professionals to increase P36 Table of Conten t over time.
If we do not invest or apply our cash and cash equivalents in ways that enhance shareholder value, we may fail to achieve expected financial results, which could cause our stock price to decline. Furthermore, the most reputable financial institutions may fail, as evidenced by SVB.
If we do not invest or apply our cash and cash equivalents in ways that enhance shareholder value, we may fail to achieve expected financial results, which could cause our stock price to decline. Furthermore, the most reputable financial institutions may fail.
Significant quarterly fluctuations in our results of operations may be caused by, among other factors, our volume of revenue, seasonal changes in nerve repair activity, timing of sales force expansion, unforeseen restrictions on our ability to access healthcare providers such as during the COVID-19 pandemic, inflationary pressures, competitive factors and general economic conditions.
Significant quarterly fluctuations in our results of operations may be caused by, among other factors, our volume of revenue, seasonal changes in nerve repair activity, timing of sales force expansion, unforeseen restrictions on our ability to access healthcare providers such as inflationary pressures, competitive factors and general economic conditions.
While to date we have not experienced a significant data loss, significant compromise or any material financial losses related to cybersecurity attacks, our systems, those of our customers, and those of our third-party service providers are under constant threat.
While to date we have not experienced a significant data loss, significant compromise or any material financial losses related to P58 Table of Conten t cybersecurity attacks, our systems, those of our customers, and those of our third-party service providers are under constant threat.
If our products cause or contribute to a death, a serious injury, or any adverse reaction involving a communicable disease, or malfunction in certain ways, we will be subject to reporting regulations, which can result in voluntary corrective actions or agency enforcement actions. See “Business — Regulation — Education Grants, U.S.
P47 Table of Conten t If our products cause or contribute to a death, a serious injury, or any adverse reaction involving a communicable disease, or malfunction in certain ways, we will be subject to reporting regulations, which can result in voluntary corrective actions or agency enforcement actions. See “Business — Regulation — Education Grants, U.S.
We are exposed to the risk of changes in social, geopolitical, legal, and economic conditions. The global economy has been, and may continue to be, negatively impacted by Russia’s invasion of Ukraine and illegal annexation of Ukrainian territories.
We are exposed to the risk of changes in social, geopolitical, legal, and economic conditions. The global economy has been, and may continue to be, negatively impacted by Russia’s invasion of Ukraine and illegal annexation of Ukrainian P56 Table of Conten t territories.
Finally, we can provide no assurance that we can keep inventory costs within our target levels, particularly in light of overall cost increases due to global inflation. Failure to do so may materially and adversely impact our business, results of operations, financial condition, and prospects.
Finally, we can provide no assurance that we can keep inventory costs within our target levels, particularly in light of overall cost increases due to global inflation. Failure to do so may materially and adversely impact our business, results of operations, financial condition, and prospects. There may be significant fluctuations in our operating results.
Cyber-attacks, intrusions, or other breaches could adversely impact our business, results of operations, financial condition, and prospects. In the U.S., federal and state privacy and security laws require certain of our operations to protect the confidentiality of personal information, including patient medical records and other health information.
Cyber-attacks, intrusions, or other breaches could adversely impact our business, results of operations, financial condition, and prospects and potentially subject us to fines and penalties. In the U.S., federal and state privacy and security laws require certain of our operations to protect the confidentiality of personal information, including patient medical records and other health information.
Together, the three basic requirements of 21 CFR Part 1271 are designed to ensure that sound, high quality practices are followed to reduce the risk of tissue contamination and of communicable disease transmission to recipients.
Together, the three basic requirements of 21 CFR Part 1271 are P48 Table of Conten t designed to ensure that sound, high quality practices are followed to reduce the risk of tissue contamination and of communicable disease transmission to recipients.
Subject to the FDA’s enforcement discretion, we can commercially distribute Avance Nerve Graft until the FDA makes a final determination on an Avance Nerve Graft BLA submission, assuming we remain in compliance with the transition plan and exercise due diligence in executing the transition plan.
Subject to the FDA’s enforcement discretion, we can commercially distribute Avance Nerve Graft until the FDA makes a final determination on an Avance Nerve Graft BLA submission, assuming we remain in compliance with the transition plan and exercise due diligence in executing the transition P43 Table of Conten t plan.
As of December 31, 2022, approximately 34.9% of our outstanding shares of common stock was held by our officers, directors, beneficial owners of 5% or more of our securities and their respective affiliates, which adversely affects the liquidity of the trading market for our common stock, in as much as federal securities laws restrict sales of our shares by these shareholders.
As of December 31, 2023, approximately 28.1% of our outstanding shares of common stock was held by our officers, directors, beneficial owners of 5% or more of our securities and their respective affiliates, which adversely affects the liquidity of the trading market for our common stock, in as much as federal securities laws restrict sales of our shares by these shareholders.
Internal Revenue Service and by foreign tax jurisdictions. Although we believe that our tax estimates are reasonable, due to the complexity of our corporate structure, the multiple intercompany transactions and the various tax regimes, we cannot assure you that a tax audit or tax dispute to which we may be subject will result in a favorable outcome for us.
Although we believe that our tax estimates are reasonable, due to the complexity of our corporate structure, the multiple intercompany transactions and the various tax regimes, we cannot assure you that a tax audit or tax dispute to which we may be subject will result in a favorable outcome for us.
In this regard and in light of the CCPA’s implementation, we expect that there will be other proposed laws, regulations and industry standards relating to privacy and data protection in the U.S., the E.U. and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business results of operations, financial condition, and prospects.
Additionally, we expect that there will be other proposed laws, regulations and industry standards relating to privacy and data protection in the U.S., the E.U. and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business results of operations, financial condition, and prospects.
When Avance Nerve Graft and Axoguard Connector are used in an outpatient setting where the nerve repair is the primary reason for the procedure, facilities may use a Category I CPT code to facilitate payment.
When Avance Nerve Graft and Axoguard P40 Table of Conten t Connector are used in an outpatient setting where the nerve repair is the primary reason for the procedure, facilities may use a Category I CPT code to facilitate payment.
We have historically incurred net losses and operated with negative cash flow from our operations and may continue to incur losses and operate with negative cash flow from operations for the foreseeable future. We have incurred net losses of $28.9 million, $27.0 million and $23.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.
We have historically incurred net losses and operated with negative cash flow from our operations and may continue to incur losses and operate with negative cash flow from operations for the foreseeable future. We have incurred net losses of $21.7 million, $28.9 million and $27.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.
If we are not able to comply with the applicable regulatory requirements or produce product that meets our requirements and specifications, we will be subject to the same risks that we would be subject to should third parties be unable to comply with the applicable regulatory requirements or produce product meeting our requirements or specifications, as described above.
If we are not able to comply with the applicable regulatory requirements or produce product that meets our requirements and specifications, it could delay or disrupt our BLA approval and we will be subject to the same risks that we would be subject to should third parties be unable to comply with the applicable regulatory requirements or produce product meeting our requirements or specifications, as described above.
As of December 31, 2022, we had an accumulated deficit of approximately $259.6 million. If revenue does not increase as anticipated, then we will continue to incur net losses and experience negative cash flows and adverse operating conditions.
As of December 31, 2023, we had an accumulated deficit of approximately $281.3 million. If revenue does not increase as anticipated, then we will continue to incur net losses and experience negative cash flows and adverse operating conditions.
The Distribution Agreement was amended February 26, 2018 to extend the termination date to June 30, 2027. However, there are conditions for continuation of the agreement, including payment terms and minimum purchase requirements, that if breached could result in an earlier termination of the agreement.
The Distribution Agreement was amended February 26, 2018, to extend the termination date to June 30, 2027 and on August 4, 2023, to extend the termination date to December 31, 2030. However, there are conditions for continuation of the agreement, including payment terms and minimum purchase requirements, that if breached could result in an earlier termination of the agreement.
At this time, we cannot predict the specific extent, duration or full impact that recent events associated with SVB and the aftermath thereof, inflationary conditions, supply chain disruptions, geopolitical instability will have on our ongoing and planned clinical trials, our ability to operate, results of operations, financial condition, liquidity, and capital investments.
At this time, we cannot predict the specific extent, duration or full impact of inflationary conditions, supply chain disruptions, geopolitical instability will have on our ongoing and planned clinical trials, our ability to operate, results of operations, financial condition, liquidity, and capital investments.
We are dependent on our relationships with independent agencies to generate a material portion of our revenue. We derive material revenue through our relationships with independent agencies. In 2022, approximately [10%] of global product revenue was generated through independent agencies.
We are dependent on our relationships with independent agencies to generate a material portion of our revenue. We derive material revenue through our relationships with independent agencies. In 2023, approximately 10% of gl obal product revenue was generated through independent agencies.
The use, misuse or off-label use of our products may harm our reputation, the image of our products, result in injuries leading to product liability suits, which could be costly to our business, or result in FDA sanctions.
P46 Table of Conten t The use, misuse or off-label use of our products may harm our reputation and the reputation of our products, which could result in injuries leading to product liability suits, and could be costly to our business, and/or result in FDA sanctions.
For the CE Mark, the Axoguard Nerve Protector indication is the same; however, for Axoguard Nerve Connector, the indication is more specific - “The Axoguard Nerve Connector is indicated for the repair of peripheral nerve discontinuities with gaps up to 5 mm.” We are responsible for the regulatory compliance of the Axoguard Nerve Cap.
For the CE Mark, the Axoguard Nerve Protector indication is the same; however, for Axoguard Nerve Connector, the indication is more specific - “The Axoguard Nerve Connector is indicated for the repair of peripheral nerve discontinuities with gaps up to 5 mm.” We are the authorization holder of the Axoguard Nerve Cap and Axoguard HA+ Nerve Protector.
Economic conditions, such as recent events associated with SVB and the aftermath thereof, rising inflation, higher interest rates, increasing labor costs, supply chain pressures, changes in regulatory laws and monetary exchange rates, and government fiscal policies, can also have a significant effect on the cost of operations including the cost of materials and labor, as well as the interest on our debt.
Economic conditions, such as rising inflation, higher interest rates, increasing labor costs, supply chain pressures, changes in regulatory laws and monetary exchange rates, and government fiscal policies, can also have a significant effect on the cost of P37 Table of Conten t operations including the cost of materials and labor, as well as the interest on our debt.
Although we believe we could develop or obtain products that would replace the Axoguard products obtained through the Cook Biotech agreements, the loss of the ability to sell the Axoguard products could have a material adverse effect on our business, results of operations, financial condition, and prospects. Approximately 60% of our total revenues are from sales of Avance Nerve Graft.
Although we believe we could develop or obtain products that would replace the Axoguard products obtained through the Cook Biotech agreements, the loss of the ability to sell the Axoguard products could have a material adverse effect on our business, results of operations, financial condition, and prospects.
Section 302A.675 does not apply if a committee of our Board of Directors consisting of all of its disinterested directors (excluding its current and former officers) approves the proposed acquisition before any shares are acquired pursuant to the earlier tender offer.
Section 302A.675 does not apply if a committee of our Board of Directors consisting of all of its disinterested directors (excluding its current and former officers) approves the proposed acquisition before any shares are acquired pursuant to the earlier tender offer. P54 Table of Conten t We are subject to legal proceedings from time to time.
Our business and financial performance could be adversely affected, directly or indirectly, by natural or man-made disasters or other similar events. 50 Table of Content Neither the occurrence nor the potential impact of risks such as earthquakes, hurricanes, floods and other natural disasters, fire, power shortages, geopolitical unrest, war, terrorist attacks and other hostile acts, epidemics or pandemics such as COVID-19 pandemic, outbreaks of RSV and the flu, nuclear disasters, international hostilities or other criminal activities and other events beyond our control and the control of the third parties on which we depend can be predicted.
Neither the occurrence nor the potential impact of risks such as earthquakes, hurricanes, floods and other natural disasters, fire, power shortages, geopolitical unrest, war, terrorist attacks and other hostile acts, epidemics or pandemics such as COVID-19 pandemic, outbreaks of RSV and the flu, nuclear disasters, international hostilities or other criminal activities and other events beyond our control and the control of the third parties on which we depend can be predicted.
If we or Cook Biotech fail to comply with applicable regulatory requirements, the regulatory bodies in each country could deny or withdraw regulatory clearance/approval for the Axoguard products, or impose civil penalties, including fines, product seizures or product recalls and, in certain cases, criminal sanctions. Defective products could lead to recall or other negative business conditions.
If we or Cook Biotech fail to comply with applicable regulatory requirements, the regulatory bodies in each country could deny or withdraw regulatory clearance/approval for the Axoguard products, or impose civil penalties, including fines, product seizures or product recalls and, in certain cases, criminal sanctions. Our Axotouch product is subject to FDA and other regulatory requirements.
Anti-kickback, False Claims and Other Healthcare Fraud and Abuse Laws — Fraud, Abuse and False Claims." Enforcement actions could impair our ability to produce products in a cost-effective and timely manner to meet customer demands.
See “Business — Government Regulations — Education Grants, U.S. Anti-kickback, False Claims and Other Healthcare Fraud and Abuse Laws — Fraud, Abuse and False Claims." Enforcement actions could impair our ability to produce products in a cost-effective and timely manner to meet customer demands.
A determination that we are in violation of such regulations could lead to imposition of civil penalties, including fines, product recalls or product seizures and, in certain cases, criminal sanctions.
A determination that we are in violation of such regulations could lead to imposition of civil penalties, including fines, product recalls or product seizures and, in certain cases, criminal sanctions. Our Axoguard products are subject to FDA and international regulatory requirements.
Our operations require us to comply with the FDA’s and other governmental authorities’ laws and regulations on the topics including the manufacture and production and sales and marketing of medical products, and compliance efforts related to such laws is costly, and failure to comply could subject us to enforcement action. See “Business — Government Regulations — Education Grants, U.S.
P45 Table of Conten t Our operations require us to comply with the FDA’s and other governmental authorities’ laws and regulations on topics including the manufacture and production and sales and marketing of medical products, and compliance efforts related to such laws is costly, and failure to comply could subject us to enforcement action.
If we raise funds, this could dilute the interests of our shareholders. Moreover, the availability of additional capital, whether debt or equity from private capital sources (including banks) or the public capital markets, fluctuates as our financial condition and industry or market conditions in general change.
Moreover, the availability of additional capital, whether debt or equity from private capital sources (including banks) or the public capital markets, fluctuates as our financial condition and industry or market conditions in general change.
Although there may be other suppliers that have equivalent materials that would be available to us, if FDA review is required, it could take several months or years to obtain, if approval is able to be obtained at all.
FDA review of a new supplier may be required if these materials become unavailable from our current suppliers. Although there may be other suppliers that have equivalent materials that would be available to us, if FDA review is required, it could take several months or years to obtain, if approval is able to be obtained at all.
Further, there can be no assurance that we would be able to obtain additional financing on acceptable terms, if at all. There may be significant fluctuations in our operating results.
Further, there can be no assurance that we would be able to obtain additional financing on acceptable terms, if at all.
Finally, Avance Nerve Graft is subject to certain state and local regulations, as well as compliance with the standards of the tissue bank industry’s accrediting organization, the AATB. 43 Table of Content The procurement and transplantation of allograft nerve tissue is also subject to federal law pursuant to the National Organ Transplant Act (“NOTA”), a criminal statute that prohibits the purchase and sale of human organs used in human transplantation, including nerve and related tissue, for “valuable consideration.” NOTA only permits reasonable payments associated with the removal, transportation, processing, preservation, quality control, implantation, and storage of human nerve tissue.
The procurement and transplantation of allograft nerve tissue is also subject to federal law pursuant to the National Organ Transplant Act (“NOTA”), a criminal statute that prohibits the purchase and sale of human organs used in human transplantation, including nerve and related tissue, for “valuable consideration.” NOTA only permits reasonable payments associated with the removal, transportation, processing, preservation, quality control, implantation, and storage of human nerve tissue.
The FDA enforces these regulations through periodic inspections of trial sponsors, principal investigators, CROs and trial sites. If we or our CROs fail to comply with applicable FDA regulations, the data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our applications.
If we or our CROs fail to comply with applicable FDA regulations, the data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our applications.
Although none of our operations are in Russia or Ukraine, further escalation of geopolitical tensions could have a broader impact that expands into other markets where we do business, which may adversely affect our business, financial condition and results of operations.
Although we do not have material operations in Russia, Ukraine, China, Taiwan, Israel, or other countries in the Middle East and North Africa, further escalation of geopolitical tensions could have a broader impact that expands into other markets where we have material operations, which may adversely affect our business, financial condition and results of operations.
The loss of accreditation or registration could keep us from selling and distributing our products, which may have negative effects on our business, results of operations, financial condition, and prospects. Our Axoguard products are subject to FDA and international regulatory requirements.
The loss of accreditation or registration could keep us from selling and distributing our products, which may have negative effects on our business, results of operations, financial condition, and prospects. Defective products could lead to recall or other negative business conditions.
If the FDA does not approve our BLA or limits use of our Avance Nerve Graft product it would have a significant impact on our revenues and thus would have a material adverse effect on us. The FDA considers our Avance Nerve Graft product to be a biological product, subject to BLA approval requirements.
If the FDA does not approve our BLA, approves a narrower indication than Avance Nerve Graft’s current use or otherwise limits use of our Avance Nerve Graft product it would have a significant impact on our revenues and thus would have a material adverse effect on us.
There can be no assurance that we can meet the requirements of future regulations or that compliance with current regulations assures future capability to distribute and sell our products. 42 Table of Content Clinical trials can be long and expensive, and results are ultimately uncertain.
There can be no assurance that we can meet the requirements of future regulations and guidance or that compliance with current regulations and guidance assures future capability to distribute and sell our products.
As a result, if future revenue is below expectations, net income or loss may be disproportionately affected by a reduction in revenue, as any corresponding reduction in expenses may not be proportionate to the reduction in revenue. We may be unsuccessful in commercializing our products outside the U.S.
As a result, if future revenue is below expectations, net income or loss may be disproportionately affected by a reduction in revenue, as any corresponding reduction in expenses may not be proportionate to the reduction in revenue. We may not be successful in our efforts to build a pipeline of additional product candidates.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES Our material physical properties consisted of the following as of December 31, 2022: Location General Character Total Square Feet Square Feet Utilized Expiration Alachua, Florida (1) Headquarters - General office, warehousing and distribution 19,000 19,000 10/31/2026 Tampa, Florida (1) Headquarters - General office, medical laboratory, and meeting space 75,000 62,500 10/31/2034 Burleson, Texas (1) Facility - Raw material and finished goods warehousing and distribution 15,000 15,000 4/30/2027 5,000 2,500 9/30/2027 Vandalia, Ohio (2) Facility - Currently under renovation and retrofit: clean-room, manufacturing, warehousing, and office space. 107,000 _ N/A Dayton, Ohio (3)(4) Facility - Clean-room/manufacturing, warehousing, and office space Varies Varies 12/31/2023 (1) Property is encumbered by a lease agreement and is collateral to our Credit Facility.
Biggest changePROPERTIES Our material physical properties consisted of the following as of December 31, 2023 Location General Character Total Square Feet Square Feet Utilized Expiration Alachua, Florida (1) Headquarters - General office, warehousing and distribution 19,000 19,000 10/31/2026 Tampa, Florida (1) Headquarters - General office, medical laboratory, and meeting space 75,000 62,500 10/31/2034 Burleson, Texas (1) Facility - Raw material and finished goods warehousing and distribution 15,000 15,000 4/30/2027 10,000 5,000 9/30/2027 Vandalia, Ohio (2) Facility - Clean-room, manufacturing, warehousing, and office space. 107,000 82,500 N/A Dayton, Ohio (3)(4) Facility - Clean-room/manufacturing, warehousing, and office space Varies Varies 12/31/2026 (1) Property is encumbered by a lease agreement and is collateral to our Credit Facility.
LEGAL PROCEEDINGS Information required by this item is set forth in Note 14 - Commitments and Contingencies of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K and is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES None. 55 Table of Content PART II
LEGAL PROCEEDINGS Information required by this item is set forth in Note 14 - Commitments and Contingencies of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K and is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES None. P62 Table of Conten t PART II
We believe that our facilities will be sufficient to operate our business for the next 12 months and that current lease obligations will not change materially. 54 Table of Content ITEM 3.
We believe that our facilities will be sufficient to operate our business for the next 12 months and that current lease obligations will not change materially. ITEM 3.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe intend to retain any earnings to finance the growth and development of our business. Our Board of Directors may declare dividends at its discretion. ITEM 6. [RESERVED] 56 Table of Content
Biggest changeWe intend to retain any earnings to finance the growth and development of our business. Our Board of Directors may declare dividends at its discretion.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers We did not repurchase any of our securities in the fourth quarter of 2022. Recent Sales of Unregistered Securities We had no sales of unregistered securities in 2022.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers We did not repurchase any of our securities in the fourth quarter of 2023. Recent Sales of Unregistered Securities We had no sales of unregistered securities in 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the Nasdaq Capital Market under the symbol “AXGN.” On March 10, 2023, the last reported closing sale price of our common stock on the Nasdaq Capital Market was $7.58 per share.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the Nasdaq Capital Market under the symbol “AXGN.” On March 1, 2024, the last reported closing sale price of our common stock on the Nasdaq Capital Market was $10.69 per share.
Shareholders As of March 10, 2023, we had 42,601,918 shares of common stock outstanding, and approximately 226 common shareholders of record, based upon information received from our stock transfer agent. However, this number does not include beneficial owners whose shares were held of record by nominees or broker dealers. We estimate that there are approximately 11,343 individual owners.
Shareholders As of March 1, 2024, we had 43,206,246 shares of common stock outstanding, and approximately 226 common shareholders of record, based upon information received from our stock transfer agent. However, this number does not include beneficial owners whose shares were held of record by nominees or broker dealers. We estimate that there are approximately 11,343 individual owners.
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Performance Graph The following graph compares the cumulative total shareholder return on our common stock for the period from December 31, 2018, to December 31, 2023 with (i) the Nasdaq Stock Market Biotechnology Index and (ii) the Nasdaq Stock Market Composite Index.
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The graph assumes an investment of $100 in our common stock and the respective indices for the period of December 31, 2018, to December 31, 2023.
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The comparisons set forth in the graph are provided pursuant to SEC rules and are not intended to forecast or be indicative of the future performance of our common stock or either of the included indices.
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The performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this annual report into any filing under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended, except to the extent we specifically incorporate this information by reference and shall not otherwise be deemed filed under such acts.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThis data will be used to support our Biologics License Application ("BLA") submission. • We anticipate submitting our BLA for Avance Nerve Graft by the end of 2023. • We expect that the renovation and validation of our Axogen Processing Center facility ("APC Facility") will be complete in mid-2023 and anticipate transition to the new facility in mid-2023 This facility will be included in our BLA for Avance Nerve Graft and is expected to provide processing capacity that will meet our expected sales growth. 58 Table of Content Results of Operations Comparison of the Years Ended December 31, 2022 and 2021 The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts and as percentages of total revenue: Year Ended December 31, 2022 2021 % of % of Amount Revenue Amount Revenue (dollars in thousands) Revenues $ 138,584 100.0 % $ 127,358 100.0 % Cost of goods sold 24,147 17.4 % 22,931 18.0 % Gross profit 114,437 82.6 % 104,427 82.0 % Costs and expenses: Sales and marketing 80,228 57.9 % 73,328 57.6 % Research and development 27,158 19.6 % 24,177 19.0 % General and administrative 36,758 26.5 % 32,338 25.4 % Total costs and expenses 144,144 104.0 % 129,843 102.0 % Loss from operations (29,707) (21.4) % (25,416) (20.0) % Other (expense) income: Investment income 569 0.4 % 93 0.1 % Interest expense (624) (0.5) % (1,356) (1.1) % Change in fair value of derivatives 1,044 0.8 % (28) — % Other expense (230) (0.2) % (278) (0.2) % Total other (expense) income, net 759 0.5 % (1,569) (1.2) % Net loss $ (28,948) (20.9) % $ (26,985) (21.2) % The following table sets forth, for the periods indicated, our revenues excluding the impact of Avive: Year Ended December 31, 2022 2021 (dollars in thousands) Revenues $ 138,584 $ 127,358 Revenues from Avive — (4,075) Revenues excluding Avive $ 138,584 $ 123,283 Revenue s Revenues for the year ended December 31, 2022, increased, $11,226 or 8.8%, to $138,584 as compared to $127,358 for the year ended December 31, 2021.
Biggest changeResults of Operations Comparison of the Years Ended December 31, 2023, and 2022 The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts and as percentages of total revenue: Year Ended December 31, 2023 2022 % of % of Amount Revenue Amount Revenue (dollars in thousands) Revenues $ 159,012 100.0 % $ 138,584 100.0 % Cost of goods sold 31,138 19.6 % 24,147 17.4 % Gross profit 127,874 80.4 % 114,437 82.6 % Costs and expenses: Sales and marketing 86,060 54.1 % 80,228 57.9 % Research and development 28,333 17.8 % 27,158 19.6 % General and administrative 34,943 22.0 % 36,758 26.5 % Total costs and expenses 149,336 93.9 % 144,144 104.0 % Loss from operations (21,462) (13.5) % (29,707) (21.4) % Other (expense) income: Investment income 1,487 0.9 % 569 0.4 % Interest expense (2,835) (1.8) % (624) (0.5) % Change in fair value of derivatives 1,531 1.0 % 1,044 0.8 % Other expense (437) (0.3) % (230) (0.2) % Total other (expense) income, net (254) (0.2) % 759 0.5 % Net loss $ (21,716) (13.7) % $ (28,948) (20.9) % Revenue s Revenues for the year ended December 31, 2023, increased, $20,428 or 14.7%, to $159,012 as compared to $138,584 for the year ended December 31, 2022.
The number of PSU's that will ultimately be earned is based upon our performance as measured against specified targets over the measurement period. Expectations related to the achievement of performance goals associated with PSU grants is assessed as of each reporting period and is used to determine whether PSU grants are expected to vest.
The number of PSU's that will ultimately be earned is based upon our performance as measured against specified targets over the measurement period. Expectations related to the achievement of performance goals associated with PSU grants is assessed at each reporting period and is used to determine whether PSU grants are expected to vest.
Derivative Instruments We review debt instruments to determine whether there are embedded derivative instruments, which are required to be bifurcated and accounted for separately as a derivative financial instrument.
Derivative Instruments Description We review debt instruments to determine whether there are embedded derivative instruments, which are required to be bifurcated and accounted for separately as a derivative financial instrument.
These active accounts have typically gone through the committee approval process, have at least one surgeon who has converted a portion of his or her treatment algorithms of peripheral nerve repair to our portfolio and have ordered our products at least six times in the last twelve months.
These active accounts have typically gone through the Value Analysis Committee approval process, have at least one surgeon who has converted a portion of his or her treatment algorithms of peripheral nerve repair to our portfolio and have ordered our products at least six times in the last twelve months.
Contractual Obligations and Commitments See Note 8 - Leases and Note 14 - Commitments and Contingencies in the Notes to the Consolidated Financial Statements Part II, Item 8 of this Form 10-K, for further information.
See Note 8 - Leases and Note 14 - Commitments and Contingencies in the Notes to the Consolidated Financial Statements Part II, Item 8 of this Form 10-K, for further information.
Embedded derivatives that are not clearly and 62 Table of Content closely related to the debt host are bifurcated and are recognized at fair value on the consolidated balance sheet with changes in fair value recognized as either a gain or loss on the consolidated statement of operations each reporting period.
Embedded derivatives that are not clearly and closely related to the debt host are bifurcated and are recognized at fair value on the consolidated balance sheet with changes in fair value recognized as either a gain or loss on the consolidated statement of operations each reporting period.
Our portfolio of products is currently available in the U.S., Canada, Germany, United Kingdom ("UK"), Spain and several other European, Asian and Latin American countries.
Our portfolio of products is currently available in the United States "(U.S."), Canada, Germany, United Kingdom, Spain and several other European, Asian and Latin American countries.
Revenue from the distribution of our nerve repair products, Avance ® Nerve Graft, Axoguard Nerve Connector ® , Axoguard Nerve Protector ® , and Axoguard Nerve Cap ® , in the United States ("U.S.") is the main contributor to our total reported sales and have been the key component of our growth to date.
Revenue from the distribution of our nerve repair products, Avance ® Nerve Graft, Axoguard Nerve Connector ® , Axoguard Nerve Protector ® , Axoguard HA+ Nerve Protector™, and Axoguard Nerve Cap ® , in the U.S. is the main contributor to our total reported sales and have been the key component of our growth to date.
If performance-based milestones related to PSU grants are not met or not expected to be met, any compensation expense recognized associated with such grants will be reversed. We recognize compensation expense related to the Employee Stock Purchase Plan (“ESPP”) based on the estimated fair value of the options on the date of grant.
If performance-based milestones related to PSU grants are not met or not expected to be met, any compensation expense recognized associated with such grants will be reversed. P71 Table of Conten t We recognize compensation expense related to the Employee Stock Purchase Plan (“ESPP”) based on the estimated fair value of the options on the date of grant.
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, 61 Table of Content we may be required to take certain actions, such as slowing sales and marketing expansion, delaying regulatory approvals, or reducing headcount.
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, P69 Table of Conten t we may be required to take certain actions, such as slowing sales and marketing expansion, delaying regulatory approvals, or reducing headcount.
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.
Liquidity and Capital Resources 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.
Actual results could differ from our estimates and assumptions, and any such differences could be material to our results of operations and financial condition. Inventories Inventories, consisting of purchased materials, direct labor and manufacturing overhead, are stated at the lower of cost or net realizable value, as determined by the first-in, first-out method.
Actual results could differ from our estimates and assumptions, and any such differences could be material to our results of operations and financial condition. P70 Table of Conten t Inventories Description Inventories consist of purchased materials, direct labor and manufacturing overhead, are stated at the lower of cost or net realizable value, as determined by the first-in, first-out method.
A discussion of net cash provided by investing activities during the year ended December 31, 2020 can be found in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed on February 25, 2022.
A discussion of net cash provided by investing activities during the year ended December 31, 2021, can be found in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed on March 14, 2023.
A discussion of net cash provided by financing activities during the year ended December 31, 2020 can be found in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed on February 25, 2022.
A discussion of net cash provided by financing activities during the year ended December 31, 2021, can be found in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed on March 14, 2023.
A discussion of net cash used in operating activities during the year ended December 31, 2020 can be found in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed on February 25, 2022.
A discussion of net cash used in operating activities during the year ended December 31, 2021, can be found in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed on March 14, 2023.
As previously announced, we suspended the market availability of Avive ® Soft Tissue Membrane ("Avive") on June 1, 2021 and we continue discussions with the U.S. Food and Drug Administration ("FDA") to determine the appropriate regulatory classification and requirements for Avive. The suspension was not based on any known or reported safety or product performance issues or concerns with Avive.
As previously announced, we suspended the market availability of Avive ® Soft Tissue Membrane ("Avive") on June 1, 2021, to have discussions with the U.S. Food and Drug Administration ("FDA") about the appropriate regulatory classification and requirements for Avive. The reported safety or product performance issues or concerns with Avive.
Revenue growth, excluding the impact of Avive in 2021, was driven by an increase in unit volume of approximately 7.3%, as well as the net impact of changes in price and product mix of approximately 3.7%. and 1.7%, respectively. The unit volume increase was attributed to growth in our core and active accounts.
Revenue growth was driven by an increase in unit volume of approximately 8.6%, as well as the net impact of changes in price and product mix of approximately 3.7% and 2.5%, respectively. The unit volume increase was attributed to growth in our core and active accounts.
In connection with the Credit Facility, we recognized total interest charges of $6,721 and $5,503 for the year ended December 31, 2022, and 2021, respectively, and of this interest we capitalized to the construction of the APC Facility, interest charges of $6,155 and $4,277 for the year ended December 31, 2022, and 2021, respectively.
In connection with the Credit Facility, we recognized total interest charges of $8,083 and $6,721 for the years ended December 31, 2023, and 2022, respectively, and of this interest we capitalized to the construction of the APC Facility, interest charges of $5,285 and $6,155 for the years ended December 31, 2023, and 2022, respectively.
Cash Flow Information The following table presents a summary of our cash flows from operating, investing and financing activities: Year Ended December 31, (in thousands) 2022 2021 Net cash (used in) provided by: Operating activities $ (16,066) $ (13,405) Investing activities (3,200) (23,649) Financing activities 1,794 20,452 Net (decrease) increase in cash and cash equivalent $ (17,472) $ (16,602) Net Cash Used in Operating Activities Net cash used in operating activities was $16,066 and $13,405 during the years ended December 31, 2022 and 2021, respectively.
Cash Flow Information The following table presents a summary of our cash flows from operating, investing and financing activities: Year Ended December 31, (in thousands) 2023 2022 Net cash (used in) provided by: Operating activities $ (5,716) $ (16,066) Investing activities 19,253 (3,200) Financing activities 1,954 1,794 Net increase (decrease) in cash and cash equivalent $ 15,491 $ (17,472) Net Cash Used in Operating Activities Net cash used in operating activities was $5,716 and $16,066 during the years ended December 31, 2023, and 2022, respectively.
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.
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.
The change in net cash used in investing activities was due to the decrease in the net purchase and sale of investments totaling $14,252 and capital expenditures, primarily related to the renovation of the APC Facility, of $7,733.
The change in net cash used in investing activities was due to the increase in the net purchase and proceeds of the sale of investments totaling $16,118 and net decrease in the capital expenditures, primarily related to the renovation of the APC Facility, of $6,206.
Revenue participation payments are calculated as a percentage of our net revenues, up to $70,000 in any given year, adding approximately 1.0% per year of additional interest payments on the outstanding indebtedness.
Interest is calculated as 7.5% plus the greater of the Adjusted SOFR or 2.0% (12.99% as of December 31, 2023). 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.
Research and development expenses increased $2,981, or 12.3%, to $27,158 for the year ended December 31, 2022 as compared to $24,177 for the year ended December 31, 2021. The increase was primarily due to product development and clinical expenses.
Research and development expenses increased $1,175, or 4.3%, to $28,333 for the year ended December 31, 2023, as compared to $27,158 for the year ended December 31, 2022. The increase was primarily due to product development and clinical expenses.
In addition, we measure stock options granted to employees at a premium price based on market conditions, such as the trading price of our common stock, using a Monte Carlo Simulation option-pricing model in estimating the fair value at the grant date. The fair value of the PSU grants is based on our closing stock price on the grant date.
In addition, we measure stock options granted to employees at a premium price based on market conditions, such as the trading price of our common stock, using a Monte Carlo Simulation option-pricing model in estimating the fair value at the grant date. Key assumptions in determining fair value include volatility, risk-free interest rate, dividend yield and expected term.
The fair value of embedded derivatives are measured based on equity markets and interest rates, as well as an estimate of our nonperformance risk adjustment. This estimate includes an option adjusted spread and an estimate of our risk-free rate.
Judgements and Uncertainties The fair value of embedded derivatives are measured based on equity markets and interest rates, as well as an estimate of our nonperformance risk adjustment. This estimate includes an option adjusted spread and an estimate of our discount rate. Sensitivity of Estimate to Change As of December 31, 2023, we recorded a derivative liability of $2,987.
Net Cash Provided by Financing Activities Net cash provided by financing activities was $1,794 as compared to $20,452 for the years ended December 31, 2022, and 2021, respectively, a decrease of $18,658 or 91%.
Net Cash Provided by Financing Activities Net cash provided by financing activities was $1,954 as compared to $1,794 for the years ended December 31, 2023, and 2022, respectively, an increase of $161 or 9%.
Dollar amounts referenced in this Item 7 are in thousands, except per share amounts. 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.
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.
Product Portfolio • 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 preventing soft tissue attachments; • 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; • Axotouch ® Two-Point Discriminator, used to measure the innervation density of any surface area of the skin.
Product Portfolio • 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 preventing soft tissue attachments; • Axoguard HA+ Nerve Protector™, is comprised of a processed porcine submucosa ECM base layer with a hyaluronate-alginate gel coating designed to provide short- and long-term protection for peripheral nerve injuries.
Other Income and Expense Total other income increased $2,328, or 148.3% to income of $759 for the year ended December 31, 2022, as compared to an expense of $1,569 for the year ended December 31, 2021.
Other Income and Expense Total other (expense) income decreased $1,013, or 133.5% to expense of $254 for the year ended December 31, 2023, as compared to income of $759 for the year ended December 31, 2022.
Sales and marketing expenses increased $6,900, or 9.4%, to $80,228 for the year ended December 31, 2022 as compared to $73,328 for the year ended December 31, 2021.
Sales and marketing expenses increased $5,833, or 7.3%, to $86,060 for the year ended December 31, 2023, as compared to $80,228 for the year ended December 31, 2022.
Net Cash Used in Investing Activities Net cash used in investing activities was $3,200 as compared to $23,649 of for the years ended December 31, 2022 and 2021, respectively, a decrease $20,449 or 86%.
Net Cash Provided by Investing Activities Net cash provided by investing activities was $19,253 as compared to cash used in investing activities of $3,200 for the years ended December 31, 2023, and 2022, respectively, an increase of $22,453 or 702%.
The change was primarily due to the decrease in the fair value of the derivative liability of $1,072, the increase in investment income of $476 and decrease in interest expense of $732.
The change was primarily due to the increase in interest expense of $2,211 and other expenses of $208, partially offset by the increase in investment income of $918 and the fair value of the derivative liability of $488.
Income Taxes We had no income tax expense or benefit for the years ended December 31, 2022, and 2021, due to the incurrence of net operating losses in both years, the benefits of which have been fully reserved. We do not believe that there are any additional tax expenses or benefits currently available.
The increase in investment income was primarily related to the Federal Reserve raising interest rates 100 basis points throughout 2023. Income Taxes We had no federal income tax expense or benefit for the years ended December 31, 2023, and 2022, due to the incurrence of net operating losses in both years, the benefits of which have been fully reserved.
As of December 31, 2022, we had 968 active accounts, an increase of 2.9% from 941 one year ago. Active accounts are approximately 85% of our revenue. The top 10% of these active accounts continue to represent approximately 35% of our revenue.
As of December 31, 2023, we had 1,006 active accounts, an increase of 3.9% from 968 one year ago. Active accounts are approximately 87% of our revenue. The top 10% of these active accounts continue to represent approximately 40% of our revenue. Core accounts are defined as accounts that have purchased at least $100 in the past twelve months.
As of 59 Table of Content December 31, 2022, we had 968 active accounts, an increase of 2.9% from 941 from the prior year and 332 core accounts, an increase of 17.7% from 282 at December 31, 2021, excluding the impact of revenues from Avive.
As of December 31, 2023, we had 1,006 active accounts, an increase of 3.9% from 968 from the prior year and 376 core accounts, an increase of 13.3% from 332 at December 31, 2022.
The unfavorable change in net cash used in operating activities of $2,661 or 19.9% was due to the following: (i) the net unfavorable change of $3,282 in working capital accounts and (ii) the increase in net loss of $1,963.
The favorable change in net cash used in operating activities of $10,350 or 64.4% was due to the following: (i) the net favorable change of $5,172 in working capital accounts and (ii) the decrease in net loss of $7,232.
Product development costs include spending for a number of specific programs including the non-clinical expenses related to the BLA for Avance Nerve Graft, a next generation Avance product, as well as product and application innovations across our nerve repair portfolio.
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 expenses represented approximately 60% and 52% of total research and development expense for the years ended December 31, 2023, and 2022, respectively.
Surgeons typically start with a few cases and then wait and see the results of these initial cases. Active accounts are usually past this wait period and have developed some level of product reorder.
Active accounts are usually past this wait period and P65 Table of Conten t have developed some level of product reorder.
Share-Based Compensation Share-based compensation is in the form of stock options, restricted stock units ("RSU"), performance stock units ("PSU"), and recognized at, or above, the fair market value of our common stock on the date of grant. We estimate the fair value of each stock option award on the date of grant using a multiple-point Black-Scholes option-pricing model.
The estimated fair value of the options related to the Employee Stock Purchase Plan are based on the Black-Scholes option pricing model. Judgments and Uncertainties We estimate the grant date fair value of each stock option award on the date of grant using a multiple-point Black-Scholes option-pricing model.
The change in net cash provided by financing activities was primarily due to no additional proceeds from draws on the Credit Facility during 2022 compared to a $15,000 drawdown of the Credit Facility in the second quarter of in 2021, and a decrease of $3,661 in proceeds from the exercise of stock options year-over-year.
The change in net cash provided by financing activities was primarily due to an increase of $159 in proceeds from the exercise of stock options and ESPP purchases year-over-year.
Liquidity and Capital Resources As of December 31, 2022, our principal sources of liquidity were our cash and cash equivalents and investments totaling $48,789. Our cash equivalents are comprised of a money market mutual fund and our investments are comprised of short-term commercial paper and U.S. Treasuries.
Our cash equivalents are comprised of a money market mutual fund and during the year ended December 31, 2022, we had investments comprised of short-term commercial paper and U.S. Treasuries. Our cash and cash equivalents and investments decreased $17,766 from $48,790 at December 31, 2022, primarily as a result of the renovations of our APC Facility, and general operating activities.
See Note 8 - Leases in the Notes to the Consolidated Financial Statements Part II, Item 8 of this Form 10-K. Credit Facilities As of December 31, 2022, we had $50,000 outstanding in indebtedness under a credit facility; $35,000 maturing on June 30, 2027 and $15,000 maturing on June 30, 2028.
Credit Facilities As of December 31, 2023, we had $50,000 outstanding in indebtedness under a credit facility; $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.
Gross Profit Gross profit for the year ended December 31, 2022, increased $10,010 or 9.6% to $114,437 as compared to $104,427 for the year ended December 31, 2021. Gross margin as a percentage of revenue increased to 82.6% for the year ended December 31, 2022. as compared to 82.0% for the year ended December 31, 2021.
Gross margin as a percentage of revenue decreased to 80.4% for the year ended December 31, 2023, as compared to 82.6% for the year ended December 31, 2022. Costs and Expenses Total costs and expenses increased, $5,192 or 3.6%, to $149,336 for the year ended December 31, 2023, as compared to $144,144 for the year ended December 31, 2022.
Clinical trial expenses represented approximately 48% and 46% of total research and development expense for the years ended December 31, 2022, and 2021. General and administrative expenses increased $4,420, or 13.7%, to 36,758 for the year ended December 31, 2022 as compared to $32,338 for the year ended December 31, 2021.
General and administrative expenses decreased $1,816, or 4.9%, to $34,943 for the year ended December 31, 2023, as compared to $36,758 for the year ended December 31, 2022.
We refer to these as core accounts which we define as accounts that have purchased at least $100 in the past 12 months. As of December 31, 2022, we had 332 core accounts, an increase of 17.7% from 282 one year ago.
As of December 31, 2023, we had 376 core accounts, an increase of 13.3% from 332 one year ago. These core accounts represented approximately 65% our revenue in 2023, which increased approximately 60% ov er the past two years.
We seek to return Avive to the market, although we are unable to estimate the timeframe or provide any assurances that a return to the market will be achievable. We have experienced that surgeons initially are cautious adopters for peripheral nerve repair products.
We seek to launch Avive+ in the second quarter of 2024. We have observed that surgeons initially are cautious adopters for peripheral nerve repair products. Surgeons typically start with a few cases and then wait and review the results of these initial cases.
It is expected that costs associated with the BLA will continue to increase as we continue to invest in completing the license application. Product development expenses represented approximately 52% and 53% of total research and development expense for the years ended December 31, 2022, and 2021, respectively.
Clinical trial expenses represented approximately 40% and 48% of total research and development expense for the years ended December 31, 2023, and 2022, respectively. The increase in research and development included increases in compensation costs of $1,635; $331 in professional fees; $287 in occupancy costs; and $98 in travel costs to support these clinical and non-clinical expenses.
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As our business continues to grow, we have transitioned to reporting a new account metric that we believe demonstrates the strength of adoption and potential revenue growth in accounts that have developed a more consistent use of our products in their nerve repair algorithm.
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Dollar amounts referenced in this Item 7 are in thousands, except per share amounts. 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.
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These core accounts represented approximately 60% of our revenue in 2022, which has remained consistent over the past two years. 57 Table of Content Summary of Operational and Business Highlights • Net revenue excluding Avive was $138,584 for the year ended December 31, 2022, an increase of $15,301 or 12.4% compared to the year ended December 31, 2021. • Gross profit was $114,437 for the year ended December 31, 2022, an increase of $10,010 or 9.6% compared to the year ended December 31, 2021. • We ended the year with 115 direct sales representatives consistent with 2021.
Added
The gel layer facilitates enhanced nerve gliding to aid in minimizing soft tissue attachments, while the base layer is remodeled into a long-term protective tissue layer. • 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; • Axotouch ® Two-Point Discriminator, used to measure the innervation density of any surface area of the skin.
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We also have independent sales agencies supplementing our direct sales team, and those agencies represent approximately 10% of our total revenue. • During 2022, we surpassed 75,000 Avance Nerve Graft implants since launch. • During 2022, we added an additional 26 peer-reviewed clinical publications bringing our total to 215 from 181 at the end of 2021, which included the following topics extremity trauma, breast, oral maxillofacial and pain. • We continue to train approximately 75% of the U.S. hand- and micro-surgery fellows each year, a top priority for Axogen in support of improved nerve repair techniques. • In May 2022, RECON Phase 3 Study of Avance met its primary endpoint.
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Based on preliminary feedback from FDA on the product classification and regulatory pathway, we have decided not to continue discussions with FDA and will not pursue regulatory approval for Avive. Therefore, we will not seek to return Avive to the market.
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This study provided the first ever Level 1 clinical evidence in support of Avance Nerve Graft for peripheral nerve repairs.
Added
We are working on developing a replacement product called Avive + that we believe would not require a BLA and would fall under the criteria set forth in 21 CFR 1271.10(a) for regulation solely under Section 361 of the Public Health Service Act and the regulations in 21 CFR Part 1271.
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In 2022, our revenues continued to recover from the impact of the COVID-19 pandemic that began in early 2020 and negatively impacted hospital procedure volumes, as well as contributed to staffing and resources challenges. We saw improvements in revenues during 2022 as hospitals addressed resource and staffing challenges which improved the capacity and consistency of surgical procedure schedules.
Added
Our business was originally anchored in emergent trauma and over the past several years we have introduced a number of new nerve repair applications that utilize our Avance and Axoguard product lines. These new applications share common characteristics that now lead us to think about our business along two primary categories, scheduled non-trauma (“Scheduled”) procedures, and emergent trauma (“Emergent”) procedures.
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Revenues excluding Avive for the year ended December 31, 2022, increased $15,300 or 12.4% to $138,584 as compared to $123,284, for the year ended December 31, 2021.
Added
Scheduled procedures are generally characterized as procedures where a patient is seeking relief of a condition caused by a nerve defect or surgical procedure. These include breast reconstruction following a mastectomy, nerve reconstruction following the surgical removal of painful neuromas, oral and maxillofacial procedures, and nerve decompression.
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In 2021, we recorded a $1,429 charge reflecting the write-down of inventory and related production costs due to the suspension of Avive, which resulted in a 1.1% decrease in our gross margin.
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The nature of Scheduled procedures affords patients the opportunity to actively search for treatment options and advocate for solutions that may improve quality of life following the procedure. For example, in breast reconstruction, this may include prioritizing neurotization as a part of their treatment plan. These procedures lend themselves to standardization of surgical techniques and more consistent nerve repair algorithms.
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Costs and Expenses Total costs and expenses increased, $14,301 or 11.0%, to $144,144 for the year ended December 31, 2022, as compared to $129,843 for the year ended December 31, 2021.
Added
In addition, these patients are likely to engage in extended follow-up evaluations with their physicians. Emergent procedures generally result from injuries that initially present in an emergency room. These procedures are typically referred to and completed by a specialist either immediately or within a few days following the initial injury.
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The increase in total operating costs was primarily attributable to the following (i) $8,980 in compensation costs of which $4,627 was non-cash stock compensation; (ii) $1,877 in research and development costs; (iii) $1,602 in travel costs; and (iv) $1,475 in occupancy cost and certain other cost.
Added
Given the emergent and diverse nature of traumatic injuries, the required repair algorithm and procedure scheduling can be highly variable, and follow-up evaluations are generally inconsistent. While the various applications can have unique surgeon customers, the procedures are often performed in the same accounts and use the same family of Axogen products.
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The increase in sales and marketing was due to an increase in compensation costs of $4,694 and $1,118 in travel costs, due to resumed in office and hospital visits during 2022 as the pandemic related restrictions in hospital access were lifted and travel normalized .
Added
Scheduled procedures typically have a higher value of Axogen products used per procedure as compared to routine trauma; and, given the planned nature of these procedures, there is a higher level of predictability and are generally additive to our sales rep productivity. Reporting by application has historically been challenging.
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The increase was primarily due to non-cash stock compensation of $4,475, $241 of travel costs and $463 of occupancy costs, partially offset by lower professional and consulting fees of $1,608.
Added
However, we have recently developed improved analytical tools that we believe allow us to better monitor product utilization data within accounts and generate improved estimates of our revenue by application. We estimate revenue by application using the information received from hospitals and sales representatives based on assumptions regarding specific surgeon practice and account information.
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The increase in interest charges related to the Credit Facility was primarily due to our additional borrowings of $15,000 under the Credit Facility in June of 2021 and the increase in investment income was primarily related to the Federal Reserve raising interest rates 425 basis points throughout 2022.
Added
Accordingly, the accuracy of our estimates is subject to the limited data we receive and the accuracy of those assumptions. We estimate that revenues from emergent trauma procedures represented approximately half of total revenues during the year ended December 31, 2023 and grew mid-single digits versus the year ended December 31, 2022.
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Our cash and cash equivalents and investments decreased $35,297 from $84,086 at December 31, 2021, primarily as a result of continuing renovations of our APC Facility. On December 31, 2022 and 2021, our 60 Table of Content current assets exceeded our current assets liabilities by $74,322 and $102,756, respectively.
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Summary of Operational and Business Highlights • Net revenue was $159,012 for the year ended December 31, 2023, an increase of $20,428 or 14.7% compared to the year ended December 31, 2022. • Gross profit was $127,874 for the year ended December 31, 2023, an increase of $13,437 or 11.7% compared to the year ended December 31, 2022. • In August 2023, we began processing tissue in the new, state-of-the-art APC facility, which provides for up to 3x the previous capacity and was designed for long-term growth and expansion. • During 2023, we surpassed 100,000 Avance Nerve Graft implants since launch. • We are continuing to expand our offering in the nerve protection market with the national launch of Axoguard HA+ Nerve Protector™ during 2023 and expect to launch Avive+ Soft Tissue Matrix™ second quarter of 2024.
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Capital expenditures was a significant use of cash in investing activities due to the renovation of the APC Facility, which we are scheduled to complete in the first half of 2023. Following the completion of the APC Facility renovation, we expect a decrease in capital expenditures, and thus in the cash used in investing activities.
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P66 Table of Conten t • We completed a Pre-BLA meeting with the FDA during the first quarter of 2024 where we aligned with the FDA on a rolling submission process and the content of the modules for the BLA submission for Avance ® Nerve Graft. We anticipate completing the submission in the third quarter of 2024.
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Contractual Obligations and Forward-Looking Cash Requirement • On July 9, 2019, we entered into a Standard Form of Agreement Between Owner and Design-Builder (the “Design-Build Agreement”) with CRB Builders, L.L.C., a Missouri limited liability company (“CRB”), pursuant to which CRB will renovate and retrofit the APC Facility. We anticipate spending between $3,500 and $4,500 in 2023.
Added
Subject to ongoing engagement with the FDA, we believe this submission timetable will allow for a potential BLA approval in the middle of 2025. • We have exceeded our initial goal of training 25 additional surgical teams on techniques in implant-based Resensation ® and have more than 39 teams trained during the year ended December 31, 2023. • Ended the year with 245 peer-reviewed clinical publications featuring Axogen’s nerve repair product portfolio. • Ended the year with 116 direct sales representatives as compared to 115 for the year ended 2022.
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See Note 14 - Commitments and Contingencies. in the Notes to the Consolidated Financial Statements Part II, Item 8 of this Form 10-K. • In addition to the APC capital expenditures, other capital expenditures on an annual basis generally range from $4,000 to $5,000 as a use of cash. • We lease facilities in Florida, Ohio and Texas, as of December 31, 2022, our total remaining obligation related to operating and financing lease payments was $37,352, of which $3,519 is due in 2023.
Added
P67 Table of Conten t Gross Profit Gross profit for the year ended December 31, 2023, increased $13,437 or 11.7% to $127,874 as compared to $114,437 for the year ended December 31, 2022.
Removed
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 London Interbank Offered Rate ("LIBOR") or 2.0% (11.24% as of December 31, 2022).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeCertain of our cash and cash equivalents balances exceed Federal Deposit Insurance Corporation ("FDIC") insured limits or are invested in money market accounts with investment banks that are not FDIC-insured. As of March 14, 2023, we have approximately $8.0 million of cash at SVB, which funds are available to us. On March 12, 2023 by the U.S.
Biggest changeCredit Risk Financial instruments that potentially subject us to credit risk consist of cash and cash equivalent balances, investments in commercial paper and accounts receivable. Certain of our cash and cash equivalents balances exceed Federal Deposit Insurance Corporation ("FDIC") insured limits or are invested in money market accounts with investment banks that are not FDIC-insured.
We have not entered into derivative transactions related to cash and cash equivalents. We do not expect changes in interest rates to have a material adverse effect on our income or our cash flows in 2023. However, we give no assurance that interest rates will not significantly change in the future.
We have not entered into derivative transactions related to cash and cash equivalents. We do not expect changes in interest rates to have a material adverse effect on our income or our cash flows in 2024. However, we give no assurance that interest rates will not significantly change in the future.
We also have interest rate exposure as a result of the Credit Facility. As of December 31, 2022, the outstanding principal amount of our loans under the Credit Facility was $50,000.
We also have interest rate exposure as a result of the Credit Facility. As of December 31, 2023, the outstanding principal amount of our loans under the Credit Facility was $50,000.
Interest on our loans under the Credit Facility is payable quarterly during the term of the loans and is calculated as 7.5% plus the greater of LIBOR or 2.0% (11.24% as of December 31, 2022); provided that the interest rate shall never be less than 9.5%.
Interest on our loans under the Credit Facility is payable quarterly during the term of the loans and is calculated as 7.5% plus the greater of Adjusted SOFR or 2.0% (12.99% as of December 31, 2023); provided that the interest rate shall never be less than 9.5%.
The revenue from the distribution of our products in our international markets through independent distributors is denominated in U.S. dollars. As a result, we have minimal exposure related to foreign exchange rate fluctuations.
The revenue from the distribution of our products in our international markets through independent distributors is denominated in U.S. dollars. As a result, we have minimal exposure related to foreign exchange rate fluctuations. Our portfolio of products is currently available in the U.S., Canada, Germany, United Kingdom ("UK"), Spain and several other European, Asian and Latin American countries.
We invest our cash primarily in commercial paper, money market accounts, and U.S. government securities.
As of December 31, 2023, $30,524 of the cash and cash equivalents balance was in excess of FDIC limits. We invest our cash primarily in commercial paper, money market accounts, and U.S. government securities.
An increase of 100 basis points in interest rates would increase expense by approximately $500 annually based on the amounts currently outstanding and would not materially affect our results of operations. 63 Table of Content Credit Risk Financial instruments that potentially subject us to credit risk consist of cash and cash equivalent balances, investments in commercial paper and accounts receivable.
Changes in the Adjusted SOFR rate may therefore affect our interest expense associated with the loans. An increase of 100 basis points in interest rates would increase expense by approximately $500 annually based on the amounts currently outstanding and would not materially affect our results of operations.
Removed
Changes in the LIBOR rate may therefore affect our interest expense associated with the loans.
Removed
Treasury, Federal Reserve, and FDIC announced that SVB depositors will have access to all of their money starting March 13, 2023, including those funds exceeding the FDIC insured limits. Our investment portfolio currently does not contain any securities of SVB. As of December 31, 2022, $15,034 of the cash and cash equivalents balance was in excess of FDIC limits.
Removed
Our portfolio of products is currently available in the U.S., Canada, Germany, United Kingdom ("UK"), Spain and several other European, Asian and Latin American countries. 64 Table of Content

Other AXGN 10-K year-over-year comparisons