Okay, I think we can get started. Apologies everyone for the delay. My name is Mike Kratky. I'm our senior med tech analyst and very thrilled to be hosting AxoGen, which is 1 of our 3 top picks for 2026. Mike, Lindsey, great to see you both. You know, maybe we can kick it off. You know, Mike, I'll start with you. You know, in terms of your perspective, how this business has evolved over the last 12 months, and as you look out over the next 12 months, you know, how has it evolved and what gets you most excited?
Sure. Important question. We, above and beyond perhaps the obvious, it's evolving according to plan. Explicitly what I'm referring to is when I joined the team, the first step that we took was to engage in a traditional strategic planning process, for the obvious purpose to understand ourselves as well as we could so that we could set priorities and then processes by which to create customers. 'Cause fundamentally, that's the big question for our company that had a chronological age as long as AxoGen, is that when will we start fulfilling the promise? Relative to that plan, if you ask me to answer your question, it's all going according to plan.
The priorities we set, the business models that we developed and have now tested with almost 2 years behind us now, are showing proof positive relative to the assumptions and good elasticity. What's exciting about that is that's very suggestive that the growth opportunities we projected out over multiple years, are probably true.
Mm-hmm.
T o add to that, we just improved our balance sheet through our recent raise. Raised $142 million. We netted $133 million. We eliminated our debt with $68 million of that. We will have a loss of $17 million in Q1, but with these funds, our P&L will look better. We'll generate more cash going forward onto our balance sheet, and we have a beautiful balance sheet now. We can use this cash opportunistically going forward, so we're really excited about that.
Yeah. Certainly a lot to be excited about. you know, you exited 2025 with significant commercial momentum, over 20% top line growth in 3Q and 4Q. Can you talk through some of the highlights there? You know, what have been some of the most important drivers of some of that recent momentum?
Sure. The most important takeaway is literally all the businesses have responded to the new plans and the new sales management focus, such that they're all growing double digits. There is no 1 single part of the business in terms of our overall performance that's de-dependent, or the, or determinant of the, of the success we've enjoyed. They've all contributed greatly. Fortunately, they all have a profitability profile, which is very handsome. It's really mostly all going according to plan.
Excellent. Well, you know, I think that that broad-based growth is really important. You know, historically, you've talked about certain areas like breast that have been growing really well. As you think about 2026, are there any areas or therapeutic verticals to call out that you expect to have outsized growth in terms of your overall business?
Sure. While they're all growing double digits, breast is growing at a very high level of a growth to use that expression. And we expect that to continue long into the future. It's still for all of the markets, we're under-penetrated on a relative basis to the potential market. And take breast for example. 1 reason you can get excited about it is that of the 1,200 sites that provide this kind of care, we have only opened and established about 200. When you look at the opportunity to continue this growth, it's tremendous. And what's also very exciting is this growth is very durable.
Once you start providing Resensation as part of your care practice, you continue to provide that on a going-forward basis. That awareness builds upon all the other local sites within a metropolitan area and then as well as patients in general. We sure are very excited about that particular vertical.
Understood. I guess as you think about the business broadly, how would you characterize in terms of what's been driving the growth behind just overall market adoption, you know, market share shifts, or any of the other factors there?
It's all volume really driven by conventional market development there. One of the most important things in nerve care, and this is really reflective in how we evolved our business purpose. Our business purpose explicitly states that the objective is to establish the expectation of the restoration of peripheral nerve function as a standard of care. It is not today in any of the areas in which we work. I'd like to use an example of aortic stenosis. If you are diagnosed, and you have a gradient of approaching 50, it is an expectation that you counsel and evaluate treatment. That is not the case for nerve dysfunction.
Part of that's simply historical, is that there haven't been remedies or solutions that are adoptable or usable such that they would justify that. That's where we are today, is we're at the point where that's changing. There's a growing recognition that this very serious health condition can be remedied, can be mitigated, in practical ways. That's really the substance of our work across all of the various care pathways that we engage in.
Understood. Well, maybe we turn to 2026 in terms of deconstructing your at least 18% top-line growth. You know, built into your guidance, can you just talk through some of the puts and takes of what's factored in versus not factored into that, and maybe just a little bit about your guidance methodology?
Sure. Well, the number 1 presumption is that we're still very early stages in terms of penetration. In any of the areas, whether it be emergent trauma extremities or whether it be the elective procedures, oral maxillofacial, breast, head and neck, these individual areas all have opportunity. Patients go untreated every single day. The general assumption is that there's growth to still be generated. The drivers of that are with each customer creation model are pretty basic stuff. Which accounts we'll be targeting and why, i.e., some accounts you target with preference versus others.
What kind of surgeons should we add to the repertoire in terms of nerve care capability and association so that you can capture the patients that would be appropriate to match therapies to. Exactly how much resources do we want to apply relative to capacity potential. Basic math, basic sales cycles, processes, each of these are a little bit different across each spectrum that we work under. Sales management is key to maintaining your focus and timing in terms of your investments and management and intervention whenever something's off schedule. These are the things that we looked at and relative to the guidance, we think that growth exists and that these business models are elastic.
That's probably the 1 unknown we have. We're building off of a whole new base, which is much larger. While we think it can continue apace as the way we ended the year, from a prudent standpoint, we're trying to be realistic about saying, "Okay, well, we still need to prove it in a new quarter ahead of us and a new year ahead of us." That's why we ultimately settled on the guidance of at least 18%.
Understood. I'd say the number 1 question that I get from investors that are new to the story or kicking the tires is, you know, you just got the long-awaited BLA approval in December for AVANCE. you know, how do you think about what that means for the story from a fundamental standpoint? What have been some of the preliminary observations since December from a commercial standpoint?
Sure. Well, as part of our plan, the original plan, there was always a presumption that we would succeed, in other words, we would achieve a successful Biologics License Application and with no diminishment of scope of work. That was attained. Unlike some major regulatory milestones like that, this is not a light switch event for AxoGen. We are already in the marketplace. There are no new patients that have been unlocked as a result of this that we weren't previously servicing. In that sense, it's not the kind of classic regulatory milestone catalyst. Obviously, it's a very positive event.
The way we use it is more to go back and revalidate and reengage with people who are already users, thanking them, reminding them of what it means to be the first biologic therapeutic for the treatment of nerve discontinuities in the world as a reference. We use that as a proof positive reference. For anyone who's sitting on the fence, we do that. From a commercial standpoint, otherwise, it's not a catalyst, you know, event. It's an affirmation and 1 that we use to support our general selling effort.
Got it.
Where it is material in terms of events for the company are with regards to our operational activities. For example, in preparation and to finally achieve the biologic, we had to stand up essentially 2 quality systems. We ran under one, which is the tissue, which is what the company historically was approved upon and then had discretionary approval to operate under for many, many years. In parallel, we had to stand up the biologics quality system. That kind of cost and division of mind share and management and attention was very absorptive of resources. Now that we have 1 quality system that we operate under on a going-forward basis, the efficiencies that we'll enjoy from that will be significant in the future.
It also allows us now to invest in the capital infrastructure that most good businesses would be doing to further gain efficiencies of scale and cycle times and so on, which will ultimately translate into improvements in gross margin in the future. The other element that we use as part of the Biologics license approval is to reengage with the payers who, of which there are 3 significant payers who looked at AxoGen as an experimental product or therapy and therefore denied coverage. With the achievement of the Biologics license applications, we are able to satisfy that expectation and that we're no longer experimental and we are an approved benefit risk under the biologics regulatory framework. That is significant.
We'll see how quickly that light switch in that, in that sense, moves forward. That was the other one. The last element is now that we have a codified benefit risk proposition, we're able to engage in future large clinical studies to further burnish the evidence portfolio for nerve care.
Excellent. I mean, I'd love to drill down just in terms of that payer dynamic there.
Right.
You've talked about from a commercial coverage standpoint, it's been about 65%, and you expect to be able to bridge that gap to closer to full coverage by the end of the LRP. Can you give any update on where you stand with engaging with those payers, you know, without saying how quickly or when you expect the first win, just the sequence of, you know, how the cadence of when that could be bridged over the next couple years?
Certainly. Each payer has their own distinct, while some similar, they have their own distinct requirements to satisfy, coverage eligibility, with the achievement of the Biologics License Application and the work that's been going on the last 2 years in terms of upgrading the evidence dossiers by which they make judgments upon and the societal statements. All those elements together have allowed us to now go for each individual payer and satisfy, at least technically, the requirements to justify coverage. We have done that, and we have engaged and submitted formally for requests to reevaluate their positions based upon the fact that we've satisfied all those requirements. Now we're in the process of waiting to see what those responses will be on an official public basis.
Understood. just remind me, is any incremental wins on that side factored into the 2026 guidance, or how should we think about any, you know, commercial impact that could come on the back of that?
There is nothing explicitly baked into the forecast for this year.
Got it. you know, another side of the story that we get questions on is just in terms of the inpatient versus outpatient procedure volumes, especially in the context of the recent reimbursement wins that you got. you know, how can you frame kind of what that means for the story in terms of where you stand today and how much that reimbursement could shift the commercial dynamics moving forward?
Very positive for the future in general, and just another barrier that's now been removed, and to speak explicitly, that's the site of service. The prior construct in terms of payment for APC or outpatient, was based upon a bundling of products and procedures, many of which had nothing to do with one another. There was no commonality. Some of these procedures which were not consistent with nerve repair, were also very numerous and very low low cost. The result was you had an average total global payment for that site of service, which was insufficient to cover the costs and activity that transpired there. Very little as a result, transpired there in the way of nerve care.
We observed this, we made the official appeal to CMS through the process that exists. They ultimately concurred, and hence they set aside a specific, now code for nerve care with a plain payment rate that is representative of what's cost to be viable. Very, very positive. In terms of a catalyst, it will take time for this to be socialized across the various hospitals in the country, because 1, they need to be aware that the change has even taken place, and then 2, they need to negotiate with their own payers, for Medicare, for their contracts for those sites of service, and then they need to make lastly the decision to allocate physician resources to that site.
We fully expect that this will move procedures into that setting, but the actual timing of that will probably be more to the end of the year.
Understood.
Okay.
Just as we think about which therapeutic or verticals of your business might be more amenable to be moved to the outpatient setting, are there any particular that you would call out?
Yes. Your smaller procedures, the non-inpatient DRG events, so, you know, any kind of hand injuries, any kind, but many hand injuries, will probably be a viable setting there. A lot of chronic nerve treatments, where you could see the physician in that setting would be applicable. The really big procedures, those will remain inpatient.
Understood. In terms of expanding your commercial footprint, I mean, that was something that I thought was a great initiative that you implemented and part of your expanding the presence of these under-penetrated markets. Can you provide any color on what you've seen from the progression of sales rep productivity since the start of 2025, and how is that influencing your outlook for 2026 and beyond?
Again, fortunately, just reassuring of the original plan assumptions. The original plan assumptions was a better customer creation models would be appropriate, and the management of those would yield improved productivity through the focus that provides, i.e., the high potential accounts and the people who work within those types of accounts. Then simply expanding the footprint, so you can knock on more doors and say hello to more people. Guess what? It works. Biggest opportunity in nerve care is awareness.
Mm-hmm.
The second opportunity is, know-how and understanding, you know, how to approach the procedures. You can't do that unless you have people out, bringing forth those value propositions. That's what we're doing. This is basic stuff. That's the exciting thing about the AxoGen opportunity. There's nothing esoteric about what we're doing.
Mm-hmm.
This is old-fashioned customer creation, market development, just very rigorous work. You got to get your near-term tactical management of your most important resources, which is your customer-facing footprint, expanding that, and then working in parallel strategically on societal awareness, care guideline developments, and then coverage and payment. Then down the future, new product development to further replenish that, make nerve care even more adoptable through better ease of use and further enhancing effectiveness. All the classic levers, we're working, and knock on wood, so far they're all working well.
Excellent. Yeah, glad to hear it. You know, certainly coming off the back of a big year of expansion, 2025, you outlined more hiring for 2026. Were there any specific learnings that you came away with last year to help guide your strategy for this year and where you expect to get the most ROI from?
Sure. Constant recognition professionally in my career is that scaling is an easy word to use. It's a skill set that you need to develop in any organization, because it requires a different approach in terms of the planning effort, a different rigor. If you get behind, real simple, your math is off. Okay? Whatever multiples you had meant that you now everybody else needs to increase their productivity to make up for what you didn't add on time. And so, those kind of learnings and just reminders, I mean, of how important the rigor in terms of execution is. Otherwise, it's all for naught. And no one cares about how hard you tried, right? So you gotta deliver what you promised.
The whole organization is learning that. Beyond just that protect perhaps obvious statement, no particular unique learnings.
Understood.
Assurance that you know what? When you show up, there's plenty of nerve work to do.
Yeah. Going back to one of your comments, I think you characterized the 2026 guidance of 18% as, you know, kind of prudent. As we think about some of the growth drivers that we just outlined, what do you see as kind of the most important points of sensitivity where if you were gonna land above or below that range, what do you see as kind of the most likely factors that would drive that?
Above and beyond the 18%?
Yeah.
A catalyst unexpected, for example, payer events that could further improve things depending upon the scope and quantity that comes with that. The other events are just execution above and beyond the averages.
Mm-hmm.
Got it. The other side of the story that I think is interesting is really your expansion into prostate. Yeah, any key takeaways from your initial pilot program and what clinical signals you're going to be looking for later this year to really guide your commercial strategy moving forward?
S ure. Well, we're very, very hopeful for prostate, but we must maintain and remind everybody that we need to demonstrate that we can teach the procedure so that any outcomes that would result from that would be predictable and within the expectations. Now, the nice thing about nerve care is you essentially introduce no risk. The question is with the extra time that you spend on it, can you offer quantitatively with some level of predictability?
Mm.
Above and beyond what the patients enjoy? What we're looking for is if you have a situation where you're unable to spare the nerves, okay, during the prostatectomy, with an autograft, are you able to mitigate that obvious deficit, and provide a level of return of function and quality of life, that we know today does not exist? Because if the nerve is gone, it's gone. Okay. It does not function. We know exactly what the benchmark is, and we're looking for results that are demonstrably superior.
Mm-hmm.
That translates into quality of life and functional benefit. Pretty simple in terms of the measure, but we need to make sure it's more than the anecdote or the one-off situation and that it's reproducible. In the event that it is, we will invest very significantly in developing the prostate market, just like we have for breast or any other markets.
Got it. Is it too early to think about in the next 3-5 years if everything looks good and according to plan, you know, what portion of your commercial operations or total revenue prostate could account for, or still maybe too early?
A little too early to go there. How does this work? It'll be big.
I like it. Sounds good. You know, maybe just turning to the gross margin side. You know, would love to kind of hear some of the puts and takes just in terms of what's driving, you know, your gross margin progression throughout the year and how investors should think about that over the next few quarters.
Yes. We will start selling our biologic labeled AVANCE product in Q2. With that, the initial lots that we produce, they carry a higher cost than our traditional tissue product. There's more touch points because the regulatory environment is more rigorous as a biologic. We will experience some gross margin pressure beginning in Q2. With that said, at the same time in Q1 right now, we're implementing new manufacturing execution systems, lab management systems, Electronic Batch Records, all the things Mike kind of mentioned earlier, what can we do now with the BLA, as well as implementing Lean, like more Lean process improvements. We should start to see a good increase in our gross margin starting in 2027, as we start to sell the products that we're making this year.
Just to build on to what Lindsey says. Some of these the terminology we've just used, you might kind of say, "Well, that's kind of basic stuff." You're right. It is basic.
It is basic.
it was not historically part of AxoGen's manufacturing processing. while we always did a fantastic job of maintaining quality.
Mm-hmm.
The efficiency by which we delivered that product did not represent best practices. With these recent milestones, we're now able to implement things that many people might say, "Well, that's kind of normal stuff," but is not simply was not part of the work. A product at AxoGen. The potential impact is very significant in the future. We are very positive and confident that it will yield.
Understood. I know we're up on time, Mike, Lindsey, you know, this stock's coming off a major stretch of outperformance, was the top performer in my coverage in 2025. Would there be one thing that you'd highlight as still being maybe underappreciated by investors looking out moving forward?
Absolutely. I've said this before, I'll say it again, I consider this one of the most significant new market development opportunities in med tech. I say that because it's pretty simple. 1, nerve care is either important or it's not. Your peripheral nerve function's a genuinely important clinical consideration for a good life or it's not. 2, it's either a very numerous problem or it's not. Okay, these are all verifiable elements that you can challenge and take a decision on. 3, AVANCE represents a distinctive advantage solution to those problems as a vehicle to build nerve care awareness around or it doesn't. If you get to yes, yes, then the rest of it is a functional execution exercise.
To that end, when you're the only literal leader within the entire space of an opportunity that large, when I say that this business can grow double digits for years to come, it's a factual statement. When you look at that and the ability to do that in a profitable basis, I don't think there's too many business opportunities in healthcare that offer that potential. People always ask me all the time, "Hey, Mich, do you like this new space you're working in?" I always say, "Yes." Because it's pretty cool. You're doing really good things for people, and then able to do it in such a way that you make for a very, very good business as well. Everybody wins. That's the exciting thing.
Great to hear. Well, Mich, Lindsey, thank you both so much for coming.
Thank you.
Really appreciate it.
Mm-hmm.
Thanks everyone for joining us.