Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 05, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-36046 | |
Entity Registrant Name | Axogen, Inc. | |
Entity Incorporation, State or Country Code | MN | |
Entity Tax Identification Number | 41-1301878 | |
Entity Address, Address Line One | 13631 Progress Blvd., Suite 400 | |
Entity Address, City or Town | Alachua | |
Entity Address, State or Province | FL | |
Entity Address, Postal Zip Code | 32615 | |
City Area Code | 386 | |
Local Phone Number | 462-6800 | |
Title of 12(b) Security | Common Stock | |
Trading Symbol | AXGN | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 39,761,940 | |
Entity Central Index Key | 0000805928 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 35,894 | $ 35,724 |
Restricted cash | 6,000 | 6,000 |
Investments | 47,145 | 60,786 |
Accounts receivable, net of allowance for doubtful accounts of $619 and $1,092, respectively | 13,020 | 16,944 |
Inventory | 14,563 | 13,861 |
Prepaid expenses and other | 3,730 | 1,706 |
Total current assets | 120,352 | 135,021 |
Property and equipment, net | 20,063 | 14,887 |
Operating lease right-of-use assets | 2,788 | 3,133 |
Finance lease right-of-use assets | 82 | 87 |
Intangible assets | 1,598 | 1,515 |
Total assets | 144,883 | 154,643 |
Current liabilities: | ||
Accounts payable and accrued expenses | 17,689 | 19,130 |
Current maturities of long term obligations | 1,785 | 1,736 |
Contract liabilities, current | 14 | 14 |
Total current liabilities | 19,488 | 20,880 |
Long term obligations, net of current maturities | 1,189 | 1,595 |
Contract liabilities | 12 | 15 |
Total liabilities | 20,689 | 22,490 |
Commitments and contingencies - see Note 12 | ||
Shareholders' equity: | ||
Common stock, $0.01 par value per share; 100,000,000 shares authorized; 39,738,767 and 39,589,755 shares issued and outstanding | 397 | 396 |
Additional paid-in capital | 311,850 | 311,618 |
Accumulated deficit | (188,053) | (179,861) |
Total shareholders' equity | 124,194 | 132,153 |
Total liabilities and shareholders' equity | $ 144,883 | $ 154,643 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Condensed Consolidated Balance Sheets | ||
Accounts receivable, allowance for doubtful accounts | $ 619 | $ 1,092 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 39,738,767 | 39,589,755 |
Common stock, shares outstanding | 39,738,767 | 39,589,755 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Condensed Consolidated Statements of Operations | ||
Revenues | $ 24,261 | $ 23,285 |
Cost of goods sold | 4,816 | 3,714 |
Gross profit | 19,445 | 19,571 |
Costs and expenses: | ||
Sales and marketing | 17,838 | 16,434 |
Research and development | 4,614 | 4,139 |
General and administrative | 5,502 | 9,201 |
Total costs and expenses | 27,954 | 29,774 |
Loss from operations | (8,509) | (10,203) |
Other income (expense): | ||
Investment income | 311 | 716 |
Interest expense | (31) | (14) |
Other expense | 37 | (3) |
Total other income (expense), net | 317 | 699 |
Net Loss | $ (8,192) | $ (9,504) |
Weighted average common shares outstanding - basic and diluted | 39,697,790 | 38,933,984 |
Loss per common share - basic and diluted | $ (0.21) | $ (0.24) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (8,192) | $ (9,504) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 307 | 211 |
Amortization of right-of-use assets | 470 | 437 |
Amortization of intangible assets | 36 | 26 |
Provision for bad debt | 22 | 16 |
Provision for inventory write-down | 924 | 444 |
Changes in investment gains and losses | (49) | (294) |
Share-based compensation | 556 | 2,315 |
Change in operating assets and liabilities: | ||
Accounts receivable | 3,902 | 112 |
Inventory | (1,626) | (1,582) |
Prepaid expenses and other | (2,024) | (1,783) |
Accounts payable and accrued expenses | (1,903) | 1,161 |
Operating lease obligations | (472) | (423) |
Cash paid for interest portion of finance leases | (1) | |
Contract and other liabilities | (3) | (2) |
Net cash used in operating activities | (8,052) | (8,867) |
Cash flows from investing activities: | ||
Purchase of property and equipment | (5,021) | (478) |
Purchase of investments | (11,760) | (48,914) |
Proceeds from sale of investments | 25,450 | 57,171 |
Cash payments for intangible assets | (119) | (9) |
Net cash provided by investing activities | 8,550 | 7,770 |
Cash flows from financing activities: | ||
Payments for repurchase of common stock for employee tax withholding | (639) | |
Cash paid for debt portion of finance leases | (5) | (7) |
Proceeds from exercise of stock options | 316 | 332 |
Net cash provided by /( used for) financing activities | (328) | 325 |
Net increase / (decrease) in cash, cash equivalents, and restricted cash | 170 | (772) |
Cash, cash equivalents, and restricted cash, beginning of period | 41,724 | 30,294 |
Cash, cash equivalents and restricted cash, end of period | 41,894 | 29,522 |
Supplemental disclosures of cash flow activity: | ||
Cash paid for interest | 11 | 14 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Acquisition of fixed assets in accounts payable and accrued expenses | 3,674 | 946 |
Right-of-use asset and operating lease liability (Adoption of ASC 842) | $ 120 | $ 618 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Beginning Balance at Dec. 31, 2018 | $ 389 | $ 297,319 | $ (150,726) | $ 146,982 |
Increase (Decrease) in Stockholders' Equity | ||||
Net Loss | (9,504) | (9,504) | ||
Stock-based compensation | 2,315 | 2,315 | ||
Exercise of stock options | 2 | 948 | 950 | |
Ending Balance at Mar. 31, 2019 | 391 | 300,582 | (160,230) | 140,743 |
Beginning Balance at Dec. 31, 2019 | 396 | 311,618 | (179,861) | $ 132,153 |
Beginning Balance (in shares) at Dec. 31, 2019 | 39,589,755 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Net Loss | (8,192) | $ (8,192) | ||
Issuance of restricted and performance stock units | 1 | (1) | ||
Stock-based compensation | 556 | 556 | ||
Shares surrendered by employees to pay tax withholdings | 639 | 639 | ||
Exercise of stock options | 316 | 316 | ||
Ending Balance at Mar. 31, 2020 | $ 397 | $ 311,850 | $ (188,053) | $ 124,194 |
Ending Balance (in shares) at Mar. 31, 2020 | 39,738,767 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2020 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company as of March 31, 2020 and December 31, 2019 and for the three-month periods ended March 31, 2020 and 2019. The Company’s condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and therefore, do not include all information and footnotes necessary for a fair presentation of consolidated financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2019, which are included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2019. The interim condensed consolidated financial statements are unaudited and in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of results for the periods presented. Results for interim periods are not necessarily indicative of results for the full year. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full fiscal year due primarily to the impact of the continued uncertainty of general economic conditions that may impact our markets for the remainder of fiscal year 2020. Specifically, we are uncertain of the extent to which the Coronavirus Disease 2019 (“COVID-19 ”) |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Credit Losses On January 1, 2020, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for loans and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model replaces the multiple existing impairment models previously used under U.S. generally accepted accounting principles, which generally require that a loss be incurred before it is recognized. The new standard also applies to financial assets arising from revenue transactions such as contract assets and accounts receivables. The adoption did not have a material impact on our condensed consolidated financial statements. Credit losses for trade receivables is determined based on historical information, current information and reasonable and supportable forecasts. We have concluded that the adoption of the standard was not material as the composition of the trade receivables at the reporting date is consistent with that used in developing the historical credit-loss percentages. Further, the risk characteristics of the Company’s customer and composition of the portfolio have not changed significantly over time. Fair Value Measurements On January 1, 2020, the Company adopted ASU 2018-13, Fair Value Measurements (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 changes the fair value measurement disclosure requirements of ASC 820, “Fair Value Measurement” by adding, eliminating, and modifying certain disclosure requirements. The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements. Cloud Based Arrangements On January 1, 2020, the Company adopted ASU No. 2018-15, Guidance on Cloud Computing Arrangements. ASU 2018-15 provides guidance on implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract and aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software. More specifically, the ASU 2018-15 provides guidance on accounting for implementation, set-up and other upfront costs incurred in a CCA hosted by a vendor. As of January 1, 2020, this standard did not have a material impact on the Company’s consolidated financial statements. Revenue Recognition The Company enters into contracts to sell and distribute products and services to hospitals and surgical facilities for use in caring for patients with peripheral nerve damage or transection. Revenue is recognized when the Company has met its performance obligations pursuant to its contracts with its customers in an amount that the Company expects to be entitled to in exchange for the transfer of control of the products and services to the Company’s customers. In the case of products or services sold to a customer under an international distribution or purchase agreement, the distributors are granted exclusive distribution rights to sell the products or services in an international territory defined by the contract. These international distributor agreements contain provisions that allow the Company to terminate the distribution agreement with the distributor, and upon termination, the right to repurchase inventory from the distributor at the distributor’s cost. The Company has determined that its contractual rights to repurchase international distributor inventory upon termination of such distributor agreement are not substantive and do not impact the timing of when control transfers; and, therefore, the Company has determined it is appropriate to recognize revenue when: i) the product is shipped via common carrier; or ii) the product is delivered to the customer or distributor, depending on the terms of the agreement. Determining the timing of revenue recognition for such contracts is subject to significant judgment, because an evaluation must be made regarding the international distributor’s ability to direct the use of, and obtain substantially all of the remaining benefits from, the implants received from the Company. Changes in these assessments could have a significant impact on the timing of revenue recognition from sales to distributors. A portion of the Company's product revenue is generated from consigned inventory maintained at hospitals and domestic independent sales agencies, and also from inventory physically held by field sales representatives. For these types of product sales, the Company retains control until the product has been used or implanted, at which time revenue is recognized. The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of the underlying products is transferred to the customer. The related shipping and freight charges incurred by the Company are included in the cost of sales. The Company operates in a single reportable segment of peripheral nerve repair, offers similar products to its customers, and enters into consistently structured arrangements with similar types of customers. As such, the Company does not disaggregate revenue from contracts with customers as the nature, amount, timing and uncertainty of revenue and cash flows does not materially differ within and among the contracts with customers. The contract with the customer states the final terms of the sale, including the description, quantity, and price of each implant distributed. The payment terms and conditions in the Company’s contracts vary; however, as a common business practice, payment terms are typically due in full within 30 to 60 days of delivery. Since the customer agrees to a stated price in the contract that does not vary over the contract term, the contracts do not contain any material types of variable consideration, and contractual rights of return are not material. The Company has several contracts with distributors in international markets which include consideration paid to the customer in exchange for distinct marketing and other services. The Company records such consideration paid to the customer as a reduction to revenue from the contracts with those distributor customers. In connection with the Acroval ® The opening and closing balances of the Company’s contract receivables and liabilities are as follows: Contract Balances Net Receivables Contract Liabilities, Current Contract Liabilities, Long-Term Opening, January 1, 2019 $ 15,321 $ 18 $ 42 Closing, March 31, 2019 15,193 24 34 Increase (decrease) (128) 6 (8) Opening, January 1, 2020 $ 16,944 $ 14 $ 15 Closing, March 31, 2020 13,020 14 12 Increase (decrease) (3,924) - (3) Loss Per Share of Common Stock Basic and diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Since the Company has experienced net losses for all periods presented, options and awards of 1,479,463 and 2,766,909 shares which were outstanding as of March 31, 2020 and 2019, respectively, were not included in the computation of diluted net loss per share because they are anti-dilutive. |
Recently Issued Standards to be
Recently Issued Standards to be Adopted | 3 Months Ended |
Mar. 31, 2020 | |
Recently Issued Standards to be Adopted | |
Recently Issued Standards to be Adopted | 3. Recently Issued Standards to be Adopted The Company’s management has reviewed and considered all other recent accounting pronouncements and believe there are none that could potentially have a material impact on the Company’s consolidated financial condition, results of operations, or disclosures. |
Inventory
Inventory | 3 Months Ended |
Mar. 31, 2020 | |
Inventory | |
Inventory | 4. Inventory Inventories are comprised of unprocessed tissue, work-in-process, Avance ® Nerve Graft, Axoguard ® Nerve Connector, Axoguard ® Nerve Protector, Axoguard ® Nerve Cap, Avive ® Soft Tissue Membrane, Acroval ® Neurosensory and Motor Testing System, Axotouch ® Two-Point Discriminator and supplies and are valued at the lower of cost (first-in, first-out) or net realizable value and consist of the following: March 31, December 31, 2020 2019 Finished goods $ 11,061 $ 10,403 Work in process 833 730 Raw materials 2,669 2,728 Inventories $ 14,563 $ 13,861 The Company monitors the shelf life of its products and historical expiration and spoilage trends and writes-down inventory based on the estimated amount of inventory that may not be distributed before expiration or spoilage. For the three months ended March 31, 2020 and 2019, the Company had inventory write-downs of $924 and $444, respectively. |
Fair Value of Investments
Fair Value of Investments | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value of Investments | |
Fair Value of Investments | 5. Fair Value of Investments The Company has elected the Fair Value Option for all investments in debt securities. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for classification and disclosure of fair value measurements as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company classifies cash equivalents and investments according to the hierarchy of techniques used to determine fair value based on the types of inputs. The following table represents the Company’s fair value hierarchy for its financial assets measured at fair value on a recurring basis as of March 31, 2020: (Level 1) (Level 2) (Level 3) Total March 31, 2020 Assets: Money market funds $ 28,728 $ — $ — $ 28,728 U.S. government securities 4,579 — — 4,579 Corporate bonds — 14,833 — 14,833 Commercial paper — 22,629 — 22,629 Asset-backed securities — 5,104 — 5,104 Total assets $ 33,307 $ 42,566 $ — $ 75,873 (Level 1) (Level 2) (Level 3) Total December 31, 2019 Assets: Money market funds $ 26,812 $ — $ — $ 26,812 U.S. government securities 4,544 — — 4,544 Corporate bonds — 17,754 — 17,754 Commercial paper — 24,679 — 24,679 Asset-backed securities — 13,808 — 13,808 Total assets $ 31,356 $ 56,241 $ — $ 87,597 There were no changes in the levels or methodology of the measurement of financial assets or liabilities during the three months ended March 31, 2020. The maturity date of the Company’s investments is less than one year. |
Prepaid Expense and Other
Prepaid Expense and Other | 3 Months Ended |
Mar. 31, 2020 | |
Prepaid Expense and Other | |
Prepaid Expense and Other | 6. Prepaid Expense and Other Prepaid and other assets consist of the following: March 31, December 31, 2020 2019 Prepaid Insurance $ 1,616 $ — Prepaid events 176 110 Prepaid marketing 341 227 Prepaid software license 294 209 Prepaid professional fees 501 433 Other Prepaid items 802 727 Prepaid and Other Assets $ 3,730 $ 1,706 Our policy year for our insurance runs on a calendar year and as such a significant portion of the policy payment is made at the beginning of the new year and amortized to expense throughout the remaining year. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2020 | |
Property and Equipment | |
Property and Equipment | 7. Property and Equipment Property and equipment consist of the following: March 31, December 31, 2020 2019 Furniture and equipment $ 2,209 $ 2,059 Leasehold improvements 2,209 2,203 Processing equipment 2,822 2,772 Land 731 731 Projects in process 16,163 10,886 Property and equipment, at cost 24,134 18,651 Less: accumulated depreciation and amortization (4,071) (3,764) Property and equipment, net $ 20,063 $ 14,887 Depreciation expense for the three months ended March 31, 2020 and 2019 was $307 and $211, respectively. The significant increase in projects in process is related to our Axogen Processing Center (“APC”) facility (See Note 12). |
Intangible Assets
Intangible Assets | 3 Months Ended |
Mar. 31, 2020 | |
Intangible Assets | |
Intangible Assets | 8. Intangible Assets The Company’s intangible assets consist of the following: March 31, December 31, 2020 2019 License agreements $ 1,074 $ 1,067 Less: accumulated amortization (672) (647) License agreements, net $ 402 $ 420 Trademarks 341 334 Patents 950 845 Less: accumulated amortization (95) (84) Patents, net $ 855 $ 761 Intangible assets, net $ 1,598 $ 1,515 License agreements are being amortized over periods ranging from 17 - 20 years . Patent costs are being amortized over periods up to 20 years . Amortization expense was approximately $36 and $26 for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, future amortization of license agreements and patents are as follows: Year Ending December 31, 2020 (excluding three months ended March 31, 2020) $ 114 2021 152 2022 151 2023 103 2024 52 Thereafter 685 TOTAL $ 1,257 License Agreements The Company has entered into multiple license agreements (together, the “License Agreements”) with the University of Florida Research Foundation and the University of Texas at Austin. Under the terms of the License Agreements, the Company acquired exclusive worldwide licenses for underlying technology used in repairing and regenerating nerves. The licensed technologies include the rights to issued patents and patents pending in the United States and international markets. The effective term of the License Agreements extends through the term of the related patents and the agreements may be terminated by the Company with 60 days ’ prior written notice. Additionally, in the event of default, licensors may terminate an agreement if the Company fails to cure a breach after written notice. The License Agreements contain the key terms listed below: ● Axogen pays royalty fees ranging from 1% to 3% under the License Agreements based on net sales of licensed products. One of the agreements also contains a minimum royalty of $12.5 per quarter, which may include a credit in future quarters in the same calendar year for the amount the minimum royalty exceeds the royalty fees. Also, when Axogen pays royalties to more than one licensor for sales of the same product, a royalty stack cap applies, capping total royalties at 3.75% ; ● If Axogen sublicenses technologies covered by the License Agreements to third parties, Axogen would pay a percentage of sublicense fees received from the third party to the licensor. Currently, Axogen does not sublicense any technologies covered by License Agreements. The Company is not considered a sub-licensee under the License Agreements and does not owe any sub-licensee fees for its own use of the technologies; ● Axogen reimburses the licensors for certain legal expenses incurred for patent prosecution and defense of the technologies covered by the License Agreements; and ● Currently, under the University of Texas at Austin’s agreement, Axogen would owe a milestone fee of $15 upon receiving a Phase II Small Business Innovation Research or Phase II Small Business Technology Transfer grant involving the licensed technology. The Company has not received either grant and does not owe such a milestone fee. A milestone fee to the University of Florida Research Foundation of $125 is due if Axogen receives FDA approval of its Avance Nerve Graft, a milestone fee of $25 is due upon the first commercial use of certain licensed technology to provide services to manufacture products for third parties and a milestone fee of $10 is due upon the first use to manufacture products that utilize certain technology that is not currently incorporated into Axogen products. Royalty fees were approximately $492 and $449 during the three months ended March 31, 2020 and 2019, respectively, and are included in sales and marketing expense on the accompanying condensed consolidated statements of operations. |
Accounts Payable and Accrued Ex
Accounts Payable and Accrued Expenses | 3 Months Ended |
Mar. 31, 2020 | |
Accounts Payable and Accrued Expenses | |
Accounts Payable and Accrued Expenses | 9. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following: March 31, December 31, 2020 2019 Accounts payable $ 7,184 $ 8,262 Accrued expenses 5,200 3,237 Accrued compensation 5,305 7,631 Accounts Payable and Accrued Expenses $ 17,689 $ 19,130 |
Stock Incentive Plans
Stock Incentive Plans | 3 Months Ended |
Mar. 31, 2020 | |
Stock Incentive Plans | |
Stock Incentive Plan | 10. Stock Incentive Plan At the 2019 Annual Meeting of Shareholders held on August 14, 2019, the shareholders approved the Axogen 2019 Long-Term Incentive Plan (the “New Axogen Plan”), which allows for issuance of incentive stock options, non-qualified stock options, performance stock units (“PSUs”) and restricted stock units (“RSUs”) to employees, directors and consultants at exercise prices not less than the fair market value at the date of grant. The number of shares of common stock authorized for issuance under the New Axogen Plan is (A) 3,385,482 shares, comprised of (i) 3,000,000 new authorized shares and (ii) 385,482 unallocated shares of common stock available for issuance as of August 14, 2019 pursuant to the Company’s 2010 Stock Incentive Plan, as amended and restated (the “Prior Axogen Plan”), that were not then subject to outstanding awards; plus (B) shares under the Prior Axogen Plan and the New Axogen Plan that are cancelled, forfeited, expired, unearned or settled in cash, in any such case that does not result in the issuance of common stock. Following shareholder approval of the New Axogen Plan, no future awards will be made under the Prior Axogen Plan. As of March 31, 2020, 2,109,787 shares of common stock were available for issuance under the New Axogen Plan. The options granted to employees prior to July 1, 2017 typically vest 25% one year after the grant date and 12.5% every six months thereafter for the remaining three-year period until fully vested after four years . The options granted to employees after July 1, 2017 typically vest 50% two years after the grant date and 12.5% every six months thereafter for the remaining two-year period until fully vested after four years . The options granted to directors and certain options granted from time to time to certain executive officers have vested ratably over three years , 25% per quarter over one year or had no vesting period. Options typically have terms ranging from seven to ten years . Performance stock units generally have a requisite service period of three years and are subject to graded vesting conditions based on revenue goals of the Company. The Company expenses their fair value over the requisite service period. Restricted stoc units have a requisite service period of four years. The Company expenses the fair value of restricted stock awards on a straight-line basis over the requisite service period. In February 2020, the Company issued PSUs relating to a 2017 grant with performance metrics tied to 2019 revenue. The award was issued at 72.3% of achievement and therefore, 27.7% of the stock compensation, or $536 relating to this grant was forfeited or reversed in the first quarter 2020. In addition, as a result of COVID-19 and the expected decline in revenue for 2020, it was determined that the 2018 PSU grant with performance metrics tied to 2020 revenue would not be awarded and therefore stock compensation related to these grants of $1,161 was also forfeited. The New Axogen plan allows an immediate share repurchase feature for tax withholding. The Company has a statutory obligation to withhold taxes on the employee’s behalf and the tax withholding is limited to the maximum statutory tax rates in the employees’ applicable jurisdictions. In the three months ended March 31, 2020, employees surrendered 36,970 shares of RSU and PSU to the Company. As a result, the Company paid $639 of tax withholdings for the employees. The Company also maintains the Axogen 2017 Employee Stock Purchase Plan (the “2017 ESPP”), which allows eligible employees to acquire shares of the Company’s common stock through payroll deductions at a discount to market price. A total of 600,000 shares of the Company’s common stock are authorized for issuance under the 2017 ESPP, and, as of March 31, 2020, 450,305 shares remained available for issuance. The Company recognized stock-based compensation expense, which consisted of compensation expense related to employee stock options, PSUs, RSUs and the 2017 ESPP based on the value of share-based payment awards that are ultimately expected to vest during the period, as well as the adjustment mention above, of approximately $556 and $2,315 for the three months ended March 31, 2020 and 2019, respectively. The Company estimates the fair value of each option award issued under such plans on the date of grant using a Multiple Point Black-Scholes option-pricing model which uses a weighted average of historical volatility and peer company volatility. The Company determines the expected life of each award giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. The Company uses the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. The Company used the following weighted-average assumptions for options granted during the periods indicated: Three months ended March 31, 2020 2019 Expected term (in years) 5.88 5.76 Expected volatility 56.48 % 53.61 % Risk free rate 0.57 % 2.59 % Expected dividends — % — % The Company granted stock-based awards for 1,212,927 and 161,723 shares of its common stock pursuant to the New Axogen Plan during the three months ended March 31, 2020 and 2019, respectively. The weighted average fair value of the awards granted at market during the three months ended March 31, 2020 and 2019 was $8.93 and $12.45 per award, respectively. At March 31, 2020, the total future stock compensation expense related to non-vested awards is expected to be approximately $23,493. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Taxes | |
Income Taxes | 11. Income Taxes The Company has not recorded current income tax expense due to the generation of net operating losses. Deferred income taxes are accounted for using the balance sheet approach, which requires recognition of deferred tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. A valuation allowance is provided when it is more-likely-than-not that a deferred tax asset will not be realized. A full valuation allowance has been established on the deferred tax asset as it is more-likely-than-not that a future tax benefit will not be realized. In addition, future utilization of the available net operating loss carryforward may be limited under Internal Revenue Code Section 382 as a result of changes in ownership. The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company’s remaining open tax years subject to examination by the Internal Revenue Service include the years ended December 31, 2017 through 2019. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies | |
Commitments and Contingencies | 12. Commitments and Contingencies Leases The Company determines whether or not a contract contains a lease at the inception date and determines the lease classification, recognition and measurement at commencement date. The Company classifies a lease based on whether the arrangement is effectively a purchase of the underlying asset. Leases that transfer the control of the underlying asset are classified as finance leases and all others are classified as an operating lease. Interest and amortization expense are recognized for operating leases on a straight-lined basis. If a change to the lease term leads to a reassessment of the lease classification and remeasurement, assumptions such as the discount rate and variable rents based on a rate or index will be updated as of the remeasurement date. If an arrangement is modified, the Company will reassess whether the arrangement contains a lease. Any subsequent changes in lease payments are recognized when incurred, unless the change requires a remeasurement of the lease liability. The Company made an accounting policy election to not recognize right-to-use assets and lease liabilities that arise from short term leases, which are defined as leases with a lease term of 12 months or less at the lease commencement date. We lease office space, medical lab and research space, a distribution center, a tissue processing center and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Certain of our leases include options for the Company to extend the lease term. None of the options were reasonably certain of exercise and therefore are not included in the measure of our lease obligations and right-to-use assets. Certain of our lease agreements include provisions for the Company to reimburse the lessor for common area maintenance, real estate taxes, and insurance, which the Company accounts for as variable lease costs. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of total lease expense for the three months ended March 31, 2020 were as follows: 2020 2019 For the Three Months Ended March 31, Finance lease costs Amortization of right-to-use assets $ 5 $ 5 Interest on lease liabilities 4 0 Operating lease costs 482 489 Short term lease costs 10 12 Variable lease costs 1 1 Total lease cost $ 502 $ 507 The short-term lease cost shown above reasonably reflects the Company’s ongoing short-term lease commitment. Supplemental balance sheet information related to leases as of March 31, 2020 and December 31, 2019 was as follows: March 31, 2020 December 31, 2019 Operating Leases Operating lease right-of-use assets $ 2,788 $ 3,133 Current maturities of long-term obligations $ 1,768 $ 1,719 Long term obligations $ 1,163 $ 1,565 Finance Leases Finance lease right-of-use assets $ 82 $ 87 Current maturities of long-term obligations $ 17 $ 17 Long term obligations $ 26 $ 30 Other information related to leases was as follows: For the Three Months Ended March 31, 2020 2019 Cash paid for amounts included in the measurement of operating lease liabilities $ 506 $ 477 Right-to-use assets obtained in exchange for new finance lease liabilities $ 16 $ 15 Weighted-average remaining lease term - finance leases 2.74 3.22 Weighted-average remaining lease term - operating leases 1.61 2.53 Weighted-average discount rate - finance leases 7.28% 6.88% Weighted-average discount rate - operating leases 5.99% 6.29% The weighted-average discount rate for the majority of the Company’s leases is based on the Company’s estimated incremental borrowing rate since the rates implicit in the leases were not determinable. The Company’s incremental borrowing rate is based on Management’s estimate of the rate of interest the Company would have to pay to borrow on a fully collateralized basis over a similar term an amount equal to the lease payments. Future minimum lease payments under non-cancellable leases as of March 31, 2020 were as follows: Operating Finance Year Ending December 31, Leases Leases 2020 (excluding three months ended March 31, 2020) $ 1,468 $ 15 2021 3,167 19 2022 2,531 10 2023 2,539 3 2024 2,601 — Thereafter 29,018 — Total Future Minimum Lease Payments $ 41,324 $ 47 Less future payments for leases that have not yet commenced (38,246) — Less imputed interest on commenced leases (147) (4) Total Lease Liability $ 2,931 $ 43 The lease for office space in Tampa, Florida with Heights Union, LLC, a Florida limited liability company, has not commenced and is therefore not included in the measurement of right-to-use assets and lease liabilities. The Company anticipates occupying the premises by the fourth quarter of 2020. Service Agreements On August 6, 2015, the Company entered into a License and Services Agreement (the “CTS Agreement”) with Community Blood Center (d/b/a Community Tissue Services) (“CTS”), Dayton, Ohio, an FDA registered tissue establishment. Processing of the Avance Nerve Graft pursuant to the CTS Agreement began in February 2016. The CTS Agreement initially had a five-year term ending August 31, 2020. On February 22, 2019, the agreement was amended to extend the term through December 31, 2021 and then on April 22, 2020 was further amended to extend the term through December 31, 2022. See Note 14. The amendment also gives the Company the right to terminate the agreement on or after March 1, 2021 with six-months advance notice. Under the CTS Agreement, the Company pays CTS a facility fee for use of clean room/manufacturing, storage and office space, which the Company accounts for as an embedded lease in accordance with ASC 842, “Leases”. The Company also pays CTS for services in support of its manufacturing process such as for routine sterilization of daily supplies, providing disposable supplies, microbial services and office support. During the three months ended March 31, 2020 and 2019, the Company paid fees to CTS of approximately $506 and $488, respectively, which are included in cost of goods sold In August 2008, the Company entered into an agreement with Cook Biotech to distribute the Axoguard products worldwide in the field of peripheral nerve repair, and the parties subsequently amended the agreement on February 26, 2018. Pursuant to the February 2018 amendment, the agreement expires on June 30, 2027. The Cook Biotech agreement requires certain minimum purchases, although, through mutual agreement, the parties have not established such minimums; and, to date, have not enforced such provision, and establishes a formula for the transfer cost of the Axoguard products. Under the agreement, Axogen provides purchase orders to Cook Biotech, and Cook Biotech fulfills the purchase orders. In December 2011, the Company also entered into a Master Services Agreement for Clinical Research and Related Services. The Company was required to pay $151 upon execution of this agreement and the remainder monthly based on activities associated with the execution of Axogen’s phase 3 pivotal clinical trial to support a biologics license application (“BLA”) for Avance Nerve Graft. In September 2019, the Company entered into an amendment to this agreement. The amendment extends the end of the study timeline from December 2019 to December 2021. It also increases the total number of subjects enrolled and the number of sites used in the studies. Payments made under this agreement were $516 and $237 for the three months ended March 31, 2020 and 2019, respectively. In June 2017, the Company entered into the Nerve End Cap Supply Agreement with Cook Biotech whereby Cook Biotech is the exclusive contract manufacturer of the Axoguard Nerve Cap and both parties have provided the other party the necessarily licenses to their technologies for operation of the Supply Agreement. The Supply Agreement has a term through August 27, 2027, provided, however, that after June 27, 2022, either party may terminate the Supply Agreement upon 90 days written notice. Under the Supply Agreement the Company provides purchase orders to Cook Biotech and Cook Biotech fulfills the purchase orders. Certain executive officers of the Company are parties to employment contracts. Such contracts have severance payments for certain conditions including change of control. Concentrations Vendor Substantially all of Axogen’s revenue is currently derived from four products, Avance Nerve Graft, Axoguard Nerve Protector, Axoguard Nerve Connector and Avive Soft Tissue Membrane. Axogen has an exclusive distribution agreement with Cook Biotech for the purchase of Axoguard which expires June 30, 2027. The agreement with Cook Biotech requires certain minimum purchases by Axogen, although, through mutual agreement, the parties have not established such minimums and to date have not enforced such provision and establishes a formula for the transfer cost of the Axoguard products. The agreement allows for termination provisions for both parties. Although there are products that Axogen believes it could develop or obtain that would replace the Axoguard products, the loss of the ability to sell the Axoguard products could have a material adverse effect on Axogen’s business until other replacement products would be available. Processor Axogen is highly dependent on the continued availability of its processing facilities at CTS in Dayton, Ohio and could be harmed if the physical infrastructure of this facility is unavailable for any prolonged period of time. In addition, disruptions could lead to significant costs and reductions in revenues, as well as a potential harm to Axogen’s business reputation and financial results. In the event of disruption, Axogen believes it can find and make operational a new leased facility in less than six months, but the regulatory process for approval of facilities is time-consuming and unpredictable. Axogen’s ability to rebuild or find acceptable lease facilities could take a considerable amount of time and expense and could cause a significant disruption in service to its customers. Although Axogen has business interruption insurance, which would cover certain costs, it may not cover all costs nor help to regain Axogen’s standing in the market. In July 2018, Axogen purchased a facility (the “APC”) in Vandalia, Ohio, located near the CTS processing facility where Avance Nerve Graft and Avive Soft Tissue Membrane are currently processed. The APC, when and if operational, will be the new processing facility for Avance Nerve Graft and Avive Soft Tissue Membrane to provide continued capacity for growth and to support the transition of Avance Nerve Graft from a 361 HCT/P tissue product to a biologic product. The APC is comprised of a 70,000 square foot building on approximately 8.6 acres of land. The Company paid $731 for the land and this is recorded as Land within our property and equipment account on our balance sheet. The Company paid $4,300 for the building and this is recorded as projects in process as part of the property and equipment on the balance sheet. On July 9, 2019, Axogen 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. The Design-Build Agreement contains several design phase milestones that began in July 2019 and sets the date for Substantial Completion (as defined in the Design-Build Agreement) in the third quarter of 2020, subject to adjustment in accordance with the terms of the Design-Build Agreement. The estimated cost pursuant to the Design-Build Agreement is $29,000. Additional costs associated with the renovation, purchasing of furniture and equipment, validation and certification of the APC are estimated to be $13,000. As of March 31, 2020, the Company has recorded $4,457 in the current year and $10,523 to date related to renovations and design build in construction in progress. These items are recorded as projects in process as part of the property and equipment in its consolidated balance sheet. Litigation Einhorn v. Axogen, Inc., et al., No. 8:19-cv-00069 (M.D. Fla.) (the “Einhorn Litigation”) (the “Court”). On January 9, 2019, Plaintiff Neil Einhorn, on behalf of himself and others similarly situated, filed a putative class action complaint in the United Stated District Court for the Middle District of Florida alleging violations of the federal securities laws against Axogen, certain of its directors and officers (“Individual Defendants”), and (i) the several underwriters (the “2017 Offering Underwriters”) named in that certain Underwriting Agreement, dated November 16, 2017, by and between the Company and Leerink Partners LLC, as representative of the several underwriters named therein, and (ii) the several underwriters (the “2018 Offering Underwriters”) named in that certain Underwriting Agreement, dated May 8, 2018, by and between the Company and Jefferies LLC and Leerink Partners LLC, as representatives of the several underwriters named therein (the 2017 Offering Underwriters and 2018 Offering Underwriters, collectively, with the Individual Defendants, the “Defendants”), captioned Einhorn v. Axogen, Inc., et al., No. 8:19-cv-00069 (M.D. Fla.). Plaintiff asserts that Defendants made false or misleading statements in connection with the Company’s November 2017 registration statement issued regarding its secondary public offering in November 2017 and May 2018 registration statement issued regarding its secondary public offering in May 2018, and during a class period of August 7, 2017 to December 18, 2018. In particular, Plaintiff asserts that Defendants issued false and misleading statements and failed to disclose to investors: (1) that the Company aggressively increased prices to mask lower sales; (2) that the Company’s pricing alienated customers and threatened the Company’s future growth; (3) that ambulatory surgery centers form a significant part of the market for the Company’s products; (4) that such centers were especially sensitive to price increases; (5) that the Company was dependent on a small number of surgeons whom the Company paid to generate sales; (6) that the Company’s consignment model for inventory was reasonably likely to lead to channel stuffing; (7) that the Company offered purchase incentives to sales representatives to encourage channel stuffing; (8) that the Company’s sales representatives were encouraged to backdate revenue to artificially inflate metrics; (9) that the Company lacked adequate internal controls to prevent such channel stuffing and backdating of revenue; (10) that the Company’s key operating metrics, such as number of active accounts, were overstated; and (11) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects, were materially misleading and/or lacked a reasonable basis. Axogen was served on January 15, 2019. On February 4, 2019, the court granted the parties’ stipulated motion which provided that Axogen is not required to file a response to the complaint until thirty days after Plaintiff files a consolidated amended complaint. On June 19, 2019, Plaintiff filed an Amended Class Action Complaint, and on July 22, 2019, Defendants filed a motion to dismiss. Plaintiff filed opposing papers on August 12, 2019. The Court held a status hearing on September 11, 2019 and stayed all deadlines regarding the parties’ obligations to file a case management report. On December 4, 2019 the parties’ presented oral arguments and are currently awaiting the court’s ruling. On April 21, 2020, the Court dismissed the Complaint without prejudice, finding the Plaintiff failed to state a claim upon which relief could be granted. The Plaintiff has 60 days to file an amended Complaint or the action will be dismissed with prejudice. Plaintiff is seeking compensatory damages, reimbursement of expenses and costs, including counsel and expert fees and such other relief as the court deems just and proper. The Company and Individual Defendants continue to dispute the allegations and intend to vigorously defend against any amended Complaint, if filed. The amount of loss, if any, cannot be reasonably estimated at this time. Jackson v. Zaderej, et al., No. 8:19-cv-01976 U.S. District Court (M.D. FL) (“District Court”). On August 12, 2019, Plaintiff Harvey Jackson (“Plaintiff Jackson”), derivatively on behalf of Axogen, filed a verified shareholder derivative complaint for violations of securities laws, breach of fiduciary duty, waste of corporate assets and unjust enrichment against Quentin S. Blackford, Gregory G. Freitag, Mark Gold, Jamie M. Grooms, Alan M. Levine, Peter J. Mariani, Guido Neels, Robert J. Rudelius, Amy Wendell, and Karen Zaderej (the “Jackson Individual Defendants”) and Nominal Defendant Axogen, Inc. (“Axogen”) (collectively, “Jackson Defendants”). Plaintiff Jackson asserts that the Jackson Individual Defendants, who are current or former Axogen officers or directors, issued a false proxy statement for the election of directors in violation of Section 14(a) of the Securities Exchange Act of 1934, breached their fiduciary duties, wasted corporate assets and were unjustly enriched by allowing Axogen to make false public statements to investors based on the same claims in the report issued December 18, 2018 by Seligman Investments (the same allegations that form the basis for the Einhorn matter)). Plaintiff Jackson demands judgment in the Company’s favor against all Jackson Individual Defendants as follows: (A) declaring that Plaintiff Jackson may maintain this action on behalf of Axogen, and that Plaintiff Jackson is an adequate representative of Company; (B) declaring that the Jackson Individual Defendants have breached and/or aided and abetted the breach of their fiduciary duties to Axogen; (C) determining and awarding to Axogen the damages sustained by it because of the violations set forth above from each of the Jackson Individual Defendants, jointly and severally, together with pre- and post-judgment interest thereon; (D) directing Axogen and the Jackson Individual Defendants to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable laws and protect Axogen and its shareholders from a repeat of the damaging events described therein, including, but not limited to, putting forward for shareholder vote the following resolutions for amendments to the Company’s Bylaws or Articles of Incorporation and the following actions as may be necessary to ensure proper corporate governance policies: (i) a proposal to strengthen the Board’s supervision of operations and develop and implement procedures for greater shareholder input into the policies and guidelines of the Board, (ii) a provision to permit the shareholders of Axogen to nominate at least six candidates for election to the Board; and (iii) a proposal to ensure the establishment of effective oversight of compliance with applicable laws, rules, and regulations; (E) awarding Axogen restitution from Jackson Individual Defendants, and each of them; (F) awarding Plaintiff Jackson the costs and disbursements of this action, including reasonable attorneys’ and experts’ fees, costs, and expenses; and (G) granting such other and further relief as the District Court may deem just and proper. The Jackson Defendants filed a motion to dismiss on October 22, 2019. In response, Plaintiff Jackson voluntarily withdrew his complaint and the matter was dismissed without prejudice by the court on November 5, 2019. Novitzki v. Zaderej, et al, 19-CA-11745 DIV L (13th Judicial Circuit, Hillsborough Cnty., Fl.) (“Circuit Court”). On November 11, 2019, Plaintiff Joseph Novitzki (“Plaintiff Novitzki”), derivatively on behalf of Axogen, filed a verified stockholder derivative complaint for breach of fiduciary duty, waste of corporate assets and unjust enrichment against Karen Zaderej, Gregory G. Freitag, Peter J. Mariani, Amy Wendell, Robert J. Rudelius, Mark Gold, Guido Neels, and Jamie M. Grooms (the “Novitzki Individual Defendants”) and Nominal Defendant Axogen, Inc. (“Axogen”) (collectively, “Novitzki Defendants”). Plaintiff Novitzki asserts that the Novitzki Individual Defendants, who are current or former Axogen officers or directors, breached their fiduciary duties, wasted corporate assets and were unjustly enriched by allowing Axogen to make false public statements to investors based on the same claims in the report issued December 18, 2018 by Seligman Investments (the same allegations that form the basis for the Einhorn and Jackson matters referenced above). Plaintiff Novitzki demands judgment in the Company’s favor against all Individual Novitzki Defendants as follows: (a) against all of the Novitzki Defendants and in favor of the Company for the amount of damages sustained by the Company as a result of the Novitzki Defendants' breaches of fiduciary duties, waste of corporate assets, and unjust enrichment; (B) directing Axogen to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable laws and to protect Axogen and its stockholders from a repeat of the damaging events described herein, including, but not limited to, putting forward for stockholder vote, resolutions for amendments to the Company's Bylaws or Articles of Incorporation and taking such other action as may be necessary to place before stockholders for a vote of the following corporate governance policies: (1) directing Axogen to employ an independent, third-party expert to calculate the Company's market size (including the dollar values of Axogen's total addressable market and portion of the market relating to extremity trauma and OMF); (2) a provision to control insider selling; (3) a proposal to strengthen Axogen's oversight of its disclosure procedures; (4) a proposal to strengthen the Company's controls over financial reporting; (5) a proposal to strengthen the Board's supervision of operations and develop and implement procedures for greater stockholder input into the policies and guidelines of the Board; and (6) a provision to permit the stockholders of Axogen to nominate at least three candidates for election to the Board; (C) extraordinary equitable and/or injunctive relief as permitted by law, equity, and state statutory provisions sued hereunder, including attaching, impounding, imposing a constructive trust on, or otherwise restricting the proceeds of Novitzki Defendants' trading activities or their other assets so as to assure that Plaintiff Novitzki on behalf of Axogen has an effective remedy; (D) awarding to Axogen restitution from Novitzki Defendants, and each of them, and ordering disgorgement of all profits, benefits, and other compensation obtained by the Novitzki Defendants, including all ill-gotten gains from insider selling by Novitzki defendants; (E) awarding to Plaintiff Novitzki the costs and disbursements of the action, including reasonable attorneys' fees, accountants' and experts' fees, costs, and expenses; and (F) granting such other and further relief as the Circuit Court deems just and proper. After Novitzki Defendants’ counsel had multiple discussions with Plaintiff Novitzki ’s counsel pointing out that its complaint was deficient for the same reasons argued in Jackson, the Plaintiff Novitzki agreed to voluntarily dismiss the complaint without prejudice, which the Court so ordered on January 24, 2020. Michael Bach v. Karen Zaderej, Peter J. Mariani, Gregory G. Freitag, Jamie M. Grooms, Robert Rudelius et al, 27-CV-20-5997 (District Court, 4th Judicial District, Hennepin County, MN). On October 3, 2019, the Company received a shareholder demand sent on behalf of shareholder Michael Bach requesting that the Board of Directors take action to remedy alleged breaches of fiduciary duties related to the claims in the report issued December 18, 2018 by Seligman Investments (substantially the same allegations that form the basis for the Einhorn, Jackson and Novitzki matters referenced above). On February 14, 2020 the Company sent a written response and does not intend to take any further action. On April 21, 2020, Bach filed a shareholder derivative complaint in Hennepin County, Minnesota, alleging breach of fiduciary duty, insider selling, corporate waste, and unjust enrichment. The Board intends to vigorously defend itself in this matter. The amount of loss, if any, cannot be reasonably estimated at this time. These matters are subject to various uncertainties and it is possible that one or more may be resolved unfavorably to the Company. However, while it is not possible to predict with certainty the outcome of a matter, the Company and the Individual Defendants dispute the allegations, intend to vigorously defend themselves and as provided above various dismissals have been obtained in all but the Bach matter. |
Retirement Plan
Retirement Plan | 3 Months Ended |
Mar. 31, 2020 | |
Retirement Plan | |
Retirement Plan | 13. Retirement Plan Axogen 401(k) Plan The Company sponsors the Axogen 401(k) plan (the “401(k) Plan”), a defined contribution plan covering substantially all employees of the Company. All full-time employees who have attained the age of 18 are eligible to participate in the 401(k) Plan. Eligibility is immediate upon employment and enrollment is available any time during employment. Participating employees may make annual pretax contributions to their accounts up to a maximum amount as limited by law. The 401(k) Plan requires the Company to make matching contributions of 3% on the first 3% of the employee’s annual salary and 1% of the next 2% of the employee’s annual salary as long as the employee participates in the 401(k) Plan. Both employee contributions and Company contributions vest immediately. Employer contributions to the 401(k) Plan for the three months ended March 31, 2020 and 2019 were approximately $295 and $217, respectively. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events | |
Subsequent Events | 14. Subsequent Events COVID-19 Pandemic In January 2020, there was an outbreak of COVID-19, which the World Health Organization declared as a “pandemic” on March 11, 2020. The pandemic presents significant and unforecastable new risks to the Company and its business plan. The outbreak and any preventative or protective actions that the Company or its customers are taking in respect of this virus will result in a period of some level of disruption. In response to COVID-19, many United States hospitals have had to: 1) reallocate their medical teams and resources to prepare for, and treat, increased COVID-19 patients; 2) defer or limit elective and non-emergency procedures; 3) restrict hospital access to non-essential personnel, including sales and clinical representatives not directly required for a specific procedure; and 4) temporarily discontinued clinical research not related to COVID-19. Accordingly, the Company had advised all field-based teams to enter hospitals or clinics only at the request of a surgeon or hospital staff member (which mandate has since been lifted) and to complete all tasks occurring in hospitals or clinics in a manner that minimizes human interaction (which mandate has since been lifted) and maintains social distancing. Additionally, the Company believes that the incidence of traumatic injuries is likely being reduced by “shelter-in-place” orders that have been issued across the United States. In response to the current restrictions in hospitals and community activity, as well as the anticipated reduction of revenue caused by these factors, on April 23, 2020 the Company announced its cost mitigation initiative designed to defer and reduce certain expenses and capital expenditures. More specifically, the Company has: ● Reduced executive cash compensation and board fees by 20% , and reduced cash compensation for all other exempt salaried employees by 10 to 15% . ● Completed an employee layoff of approximately 10% of its workforce and implemented a hiring freeze; ● Temporarily suspended recovery and processing of tissue in order to utilize existing inventory, and preserve personal protective equipment. ● Deferred completion of its new biologics processing center in Vandalia, OH by up to one year , which defers approximately $25,000 of expected 2020 capital expenditures to 2021, and extended its current production facility License and Services agreement with CTS by one year ; and ● Reduced certain discretionary spending, including travel, conference participation, surgeon education (as a result of surgeon travel restrictions), certain clinical trials (excluding our Multicenter, Prospective, Randomized, Subject and Evaluator Blinded Comparative Study of Nerve Cuffs and Avance ® Nerve Graft Evaluating Recovery Outcomes for the Repair of Nerve Discontinuities (“RECON ℠ ”), our A Multicenter Retrospective Study of Avance ® Nerve Graft Utilization, Evaluations and Outcomes in Peripheral Nerve Injury Repair (“RANGER ® ”), our Multicenter, Prospective, Randomized and Subject Blinded Study of Axoguard ® Nerve Cap as Compared to Neurectomy for the Treatment of Symptomatic Neuroma (“REPOSE ℠ ”) and selected projects across the organization. Employees were notified of the initiatives on April 22, 2020 and the Company will record the severance related to these layoffs in the second quarter of 2020. The CTS agreement was extended through December 31, 2022 and provides the Company the right to terminate the agreement after February 28, 2022, with six-months advance written notice. The CTS agreement has an embedded lease within the agreement and as such, a remeasurement of the lease under ASC 842 will also be performed in the second quarter of 2020. At this date, the Company cannot predict the extent or duration of the impact of the COVID-19 pandemic on its financial results but believes the current environment will negatively impact its revenues for the second quarter of 2020 and potentially longer. The Company’s future capital requirements depend on a number of factors: primarily the point at which our revenues stabilize during the height of COVID-19, the rate at which these revenues increase post this period and our ability to adjust expenses to these revenues, and including, without limitation, cost of future office and manufacturing facilities, products and acquisition and/or development of new products. The Company will face increasing capital needs. Such capital needs could be substantial depending on the extent to which the Company is unable to increase revenue or manage costs. If the Company needs additional capital in the future, it may raise additional funds through public or private equity offerings, debt financings or from other sources. The sale of additional equity would result in dilution to the Company’s shareholders. There is no assurance that the Company will be able to secure funding on terms acceptable to it, or at all. The increasing need for capital could also make it more difficult to obtain funding through either equity or debt. Should additional capital not become available to the Company as needed, the Company may be required to take certain actions, such as slowing sales and marketing expansion, delaying regulatory approvals or reducing headcount. On April 21, 2020, the Court dismissed, without prejudice, the Einhorn Litigation, a class action complaint filed January 9, 2019, finding Plaintiff failed to state a claim upon which relief could be granted. The Plaintiff has 60 days to file an amended complaint or the action will be dismissed with prejudice. On April 23, 2020, the Company received a Small Business Administration (“SBA”) loan under the Paycheck Protection Program (“PPP”) in the amount of $7,820 . The loan obtained pursuant to the original guidance of the SBA to preserve positions in the Company by providing necessary economic relief during this period of reduced surgical procedures because of the negative business effects of COVID19. The Company believed it correctly applied for the loan, meets the initial intent of the PPP program to preserve jobs and believed it complied with the representations provided in the loan documents. However, subsequent to obtaining the loan, the United States Treasury Department issued guidance, which the Company believes contradicts the original intent and language of the PPP, providing that public companies are unlikely to be able to meet the standards for receiving the PPP loan . As a result of this change, the Company believed it was in its best business interests to repay the loan on May 5, 2020 As a result of returning the PPP loan, the Company will take additional cost reduction measures as required based upon recovery of surgical volumes and explore other non-dilutive financing alternatives volumes and explore other non-dilutive financing alternatives . |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Summary of Significant Accounting Policies | |
Fair Value Measurements | Fair Value Measurements On January 1, 2020, the Company adopted ASU 2018-13, Fair Value Measurements (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 changes the fair value measurement disclosure requirements of ASC 820, “Fair Value Measurement” by adding, eliminating, and modifying certain disclosure requirements. The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements. |
Cloud Based Arrangements | Cloud Based Arrangements On January 1, 2020, the Company adopted ASU No. 2018-15, Guidance on Cloud Computing Arrangements. ASU 2018-15 provides guidance on implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract and aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software. More specifically, the ASU 2018-15 provides guidance on accounting for implementation, set-up and other upfront costs incurred in a CCA hosted by a vendor. As of January 1, 2020, this standard did not have a material impact on the Company’s consolidated financial statements. |
Recent Accounting Pronouncements | The Company’s management has reviewed and considered all other recent accounting pronouncements and believe there are none that could potentially have a material impact on the Company’s consolidated financial condition, results of operations, or disclosures. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Summary of Significant Accounting Policies | |
Schedule of balances of contract receivables and liabilities | Contract Balances Net Receivables Contract Liabilities, Current Contract Liabilities, Long-Term Opening, January 1, 2019 $ 15,321 $ 18 $ 42 Closing, March 31, 2019 15,193 24 34 Increase (decrease) (128) 6 (8) Opening, January 1, 2020 $ 16,944 $ 14 $ 15 Closing, March 31, 2020 13,020 14 12 Increase (decrease) (3,924) - (3) |
Inventory (Tables)
Inventory (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Inventory | |
Schedule of inventories | March 31, December 31, 2020 2019 Finished goods $ 11,061 $ 10,403 Work in process 833 730 Raw materials 2,669 2,728 Inventories $ 14,563 $ 13,861 |
Fair Value of Investments (Tabl
Fair Value of Investments (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value of Investments | |
Summary of fair value financial assets measured on a recurring basis | (Level 1) (Level 2) (Level 3) Total March 31, 2020 Assets: Money market funds $ 28,728 $ — $ — $ 28,728 U.S. government securities 4,579 — — 4,579 Corporate bonds — 14,833 — 14,833 Commercial paper — 22,629 — 22,629 Asset-backed securities — 5,104 — 5,104 Total assets $ 33,307 $ 42,566 $ — $ 75,873 (Level 1) (Level 2) (Level 3) Total December 31, 2019 Assets: Money market funds $ 26,812 $ — $ — $ 26,812 U.S. government securities 4,544 — — 4,544 Corporate bonds — 17,754 — 17,754 Commercial paper — 24,679 — 24,679 Asset-backed securities — 13,808 — 13,808 Total assets $ 31,356 $ 56,241 $ — $ 87,597 |
Prepaid Expense and Other (Tabl
Prepaid Expense and Other (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Prepaid Expense and Other | |
Summary of prepaid and other assets | March 31, December 31, 2020 2019 Prepaid Insurance $ 1,616 $ — Prepaid events 176 110 Prepaid marketing 341 227 Prepaid software license 294 209 Prepaid professional fees 501 433 Other Prepaid items 802 727 Prepaid and Other Assets $ 3,730 $ 1,706 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Property and Equipment | |
Schedule of property and equipment | March 31, December 31, 2020 2019 Furniture and equipment $ 2,209 $ 2,059 Leasehold improvements 2,209 2,203 Processing equipment 2,822 2,772 Land 731 731 Projects in process 16,163 10,886 Property and equipment, at cost 24,134 18,651 Less: accumulated depreciation and amortization (4,071) (3,764) Property and equipment, net $ 20,063 $ 14,887 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Intangible Assets | |
Schedule of intangible assets | March 31, December 31, 2020 2019 License agreements $ 1,074 $ 1,067 Less: accumulated amortization (672) (647) License agreements, net $ 402 $ 420 Trademarks 341 334 Patents 950 845 Less: accumulated amortization (95) (84) Patents, net $ 855 $ 761 Intangible assets, net $ 1,598 $ 1,515 |
Schedule of future amortization | Year Ending December 31, 2020 (excluding three months ended March 31, 2020) $ 114 2021 152 2022 151 2023 103 2024 52 Thereafter 685 TOTAL $ 1,257 |
Accounts Payable and Accrued _2
Accounts Payable and Accrued Expenses (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounts Payable and Accrued Expenses | |
Schedule of accounts payable and accrued expenses | March 31, December 31, 2020 2019 Accounts payable $ 7,184 $ 8,262 Accrued expenses 5,200 3,237 Accrued compensation 5,305 7,631 Accounts Payable and Accrued Expenses $ 17,689 $ 19,130 |
Stock Incentive Plans (Tables)
Stock Incentive Plans (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Stock Incentive Plans | |
Schedule of weighted-average assumptions for options granted | Three months ended March 31, 2020 2019 Expected term (in years) 5.88 5.76 Expected volatility 56.48 % 53.61 % Risk free rate 0.57 % 2.59 % Expected dividends — % — % |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies | |
Schedule of total lease expense | 2020 2019 For the Three Months Ended March 31, Finance lease costs Amortization of right-to-use assets $ 5 $ 5 Interest on lease liabilities 4 0 Operating lease costs 482 489 Short term lease costs 10 12 Variable lease costs 1 1 Total lease cost $ 502 $ 507 |
Schedule of supplemental balance sheet information related to leases | March 31, 2020 December 31, 2019 Operating Leases Operating lease right-of-use assets $ 2,788 $ 3,133 Current maturities of long-term obligations $ 1,768 $ 1,719 Long term obligations $ 1,163 $ 1,565 Finance Leases Finance lease right-of-use assets $ 82 $ 87 Current maturities of long-term obligations $ 17 $ 17 Long term obligations $ 26 $ 30 |
Schedule of other information related to leases | For the Three Months Ended March 31, 2020 2019 Cash paid for amounts included in the measurement of operating lease liabilities $ 506 $ 477 Right-to-use assets obtained in exchange for new finance lease liabilities $ 16 $ 15 Weighted-average remaining lease term - finance leases 2.74 3.22 Weighted-average remaining lease term - operating leases 1.61 2.53 Weighted-average discount rate - finance leases 7.28% 6.88% Weighted-average discount rate - operating leases 5.99% 6.29% |
Schedule of future minimum lease payments | Operating Finance Year Ending December 31, Leases Leases 2020 (excluding three months ended March 31, 2020) $ 1,468 $ 15 2021 3,167 19 2022 2,531 10 2023 2,539 3 2024 2,601 — Thereafter 29,018 — Total Future Minimum Lease Payments $ 41,324 $ 47 Less future payments for leases that have not yet commenced (38,246) — Less imputed interest on commenced leases (147) (4) Total Lease Liability $ 2,931 $ 43 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Allowance for doubtful accounts, addition | $ 22 | $ 16 |
Anti-dilutive securities excluded from computation of net loss per share | 1,479,463 | 2,766,909 |
Minimum | ||
Age of doubtful accounts | 30 days | |
Maximum | ||
Age of doubtful accounts | 60 days |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Contract Balances (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Summary of Significant Accounting Policies | ||
Net Receivables, Opening balance | $ 16,944 | $ 15,321 |
Net Receivables, Closing balance | 13,020 | 15,193 |
Increase/(decrease) | (3,924) | (128) |
Contract Liabilities, Current, Opening balance | 14 | 18 |
Contract Liabilities, Current, Closing balance | 14 | 24 |
Increase/(decrease) | 6 | |
Contract Liabilities, Long-Term, Opening balance | 15 | 42 |
Contract Liabilities, Long-Term, Closing balance | 12 | 34 |
Increase/(decrease) | $ (3) | $ (8) |
Inventory (Details)
Inventory (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Inventory | |||
Finished goods | $ 11,061 | $ 10,403 | |
Work in process | 833 | 730 | |
Raw materials | 2,669 | 2,728 | |
Inventories | 14,563 | $ 13,861 | |
Inventory write-downs | $ 924 | $ 444 |
Fair Value of Investments (Deta
Fair Value of Investments (Details) - Recurring - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | $ 75,873 | $ 87,597 |
Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 28,728 | 26,812 |
U.S. government securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 4,579 | 4,544 |
Corporate bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 14,833 | 17,754 |
Commercial paper | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 22,629 | 24,679 |
Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 5,104 | 13,808 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 33,307 | 31,356 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 28,728 | 26,812 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. government securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 4,579 | 4,544 |
Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 42,566 | 56,241 |
Significant Other Observable Inputs (Level 2) | Corporate bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 14,833 | 17,754 |
Significant Other Observable Inputs (Level 2) | Commercial paper | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 22,629 | 24,679 |
Significant Other Observable Inputs (Level 2) | Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | $ 5,104 | $ 13,808 |
Prepaid Expense and Other (Deta
Prepaid Expense and Other (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Prepaid Expense and Other | ||
Prepaid Insurance | $ 1,616 | |
Prepaid events | 176 | $ 110 |
Prepaid marketing | 341 | 227 |
Prepaid software license | 294 | 209 |
Prepaid professional fees | 501 | 433 |
Other Prepaid items | 802 | 727 |
Prepaid and Other Assets | $ 3,730 | $ 1,706 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Property and equipment | |||
Property and equipment, at cost | $ 24,134 | $ 18,651 | |
Less: accumulated depreciation and amortization | (4,071) | (3,764) | |
Property and equipment, net | 20,063 | 14,887 | |
Depreciation expense | 307 | $ 211 | |
Furniture and equipment | |||
Property and equipment | |||
Property and equipment, at cost | 2,209 | 2,059 | |
Leasehold improvements | |||
Property and equipment | |||
Property and equipment, at cost | 2,209 | 2,203 | |
Processing equipment | |||
Property and equipment | |||
Property and equipment, at cost | 2,822 | 2,772 | |
Land | |||
Property and equipment | |||
Property and equipment, at cost | 731 | 731 | |
Projects in process | |||
Property and equipment | |||
Property and equipment, at cost | $ 16,163 | $ 10,886 |
Intangible Assets - Components
Intangible Assets - Components of Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Intangible assets consist of: | |||
Intangible assets, net | $ 1,598 | $ 1,515 | |
Amortization of intangible assets | 36 | $ 26 | |
Future amortization of patents and license agreements | |||
Intangible assets, net | 1,598 | 1,515 | |
License Agreements | |||
Intangible assets consist of: | |||
Finite-lived intangible assets, gross | 1,074 | 1,067 | |
Less: accumulated amortization | (672) | (647) | |
Intangible assets, net | 402 | 420 | |
Future amortization of patents and license agreements | |||
Intangible assets, net | $ 402 | 420 | |
License Agreements | Minimum | |||
Intangible assets consist of: | |||
Amortization period of intangible assets | 17 years | ||
License Agreements | Maximum | |||
Intangible assets consist of: | |||
Amortization period of intangible assets | 20 years | ||
Trademarks | |||
Intangible assets consist of: | |||
Intangible assets, net | $ 341 | 334 | |
Future amortization of patents and license agreements | |||
Intangible assets, net | 341 | 334 | |
Patents | |||
Intangible assets consist of: | |||
Finite-lived intangible assets, gross | 950 | 845 | |
Less: accumulated amortization | (95) | (84) | |
Intangible assets, net | 855 | 761 | |
Future amortization of patents and license agreements | |||
Intangible assets, net | $ 855 | $ 761 | |
Patents | Maximum | |||
Intangible assets consist of: | |||
Amortization period of intangible assets | 20 years | ||
Patents And License Agreements | |||
Intangible assets consist of: | |||
Intangible assets, net | $ 1,257 | ||
Future amortization of patents and license agreements | |||
2020 (excluding three months ended March 31, 2020) | 114 | ||
2021 | 152 | ||
2022 | 151 | ||
2023 | 103 | ||
2024 | 52 | ||
Thereafter | 685 | ||
Intangible assets, net | $ 1,257 |
Intangible Assets - License Agr
Intangible Assets - License Agreements (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Sales and Marketing Expense | ||
Intangible assets | ||
Royalty fees included in sales and marketing expense | $ 492,000 | $ 449,000 |
License Agreements | ||
Intangible assets | ||
Notice period for termination of license agreements | 60 days | |
Minimum royalty of agreements | $ 12,500 | |
Milestone fee upon receiving a Phase II Small Business Innovation Research | 15,000 | |
Milestone fee upon FDA approval | 125,000 | |
Milestone fee upon first commercial use of certain licensed technology | 25,000 | |
Milestone fee upon first use to manufacture products that utilize certain technology not currently incorporated into AxoGen products | $ 10,000 | |
License Agreements | Minimum | ||
Intangible assets | ||
Royalty fees range under the license agreements | 1.00% | |
License Agreements | Maximum | ||
Intangible assets | ||
Royalty fees range under the license agreements | 3.00% | |
Royalty stack cap for royalties paid to more than one licensor for sales of the same product | 3.75% |
Accounts Payable and Accrued _3
Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Accounts Payable and Accrued Liabilities | ||
Accounts payable | $ 7,184 | $ 8,262 |
Accrued expenses | 5,200 | 3,237 |
Accrued compensation | 5,305 | 7,631 |
Accounts Payable and Accrued Expenses | $ 17,689 | $ 19,130 |
Stock Incentive Plans - Narrati
Stock Incentive Plans - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | Aug. 14, 2019 | Feb. 29, 2020 | Mar. 31, 2020 | Mar. 31, 2019 |
Stock Option Disclosures | ||||
Proceeds from exercise of stock options | $ 316 | $ 332 | ||
Share-based compensation expense | $ 556 | $ 2,315 | ||
Granted | 1,212,927 | 161,723 | ||
Weighted average estimated grant date fair value per share | $ 8.93 | $ 12.45 | ||
Directors and Officers Stock Options [Member] | Per Quarter, Over One Year | ||||
Stock Option Disclosures | ||||
Vesting percentage | 25.00% | |||
Vesting period (in years) | 1 year | |||
Stock Options | ||||
Stock Option Disclosures | ||||
Unrecognized compensation costs related to non-vested stock options and restricted stock awards | $ 23,493 | |||
2017 PSU | ||||
Stock Option Disclosures | ||||
Achievement of award issued (as a percent) | 72.30% | |||
Percentage of stock compensation | 27.70% | |||
Share-based compensation expense | 536 | |||
2018 PSU | ||||
Stock Option Disclosures | ||||
Share-based compensation expense | $ 1,161 | |||
AxoGen 2010 Stock Incentive Plan [Member] | Minimum | ||||
Stock Option Disclosures | ||||
Vesting period (in years) | 7 years | |||
AxoGen 2010 Stock Incentive Plan [Member] | Maximum | ||||
Stock Option Disclosures | ||||
Vesting period (in years) | 10 years | |||
AxoGen 2010 Stock Incentive Plan [Member] | Stock Options | ||||
Stock Option Disclosures | ||||
Vesting period (in years) | 4 years | |||
AxoGen 2010 Stock Incentive Plan [Member] | Stock Options | One Year After Grant Date | ||||
Stock Option Disclosures | ||||
Vesting percentage | 25.00% | |||
Vesting period (in years) | 1 year | |||
AxoGen 2010 Stock Incentive Plan [Member] | Stock Options | Every Six Months | ||||
Stock Option Disclosures | ||||
Vesting percentage | 12.50% | |||
Vesting period (in years) | 3 years | |||
AxoGen 2017 Employee Stock Purchase Plan [Member] | ||||
Stock Option Disclosures | ||||
Shares authorized for issuance | 600,000 | |||
Number of additional shares authorized for future issuance | 450,305 | |||
AxoGen 2017 Employee Stock Purchase Plan [Member] | Directors and Officers Stock Options [Member] | ||||
Stock Option Disclosures | ||||
Vesting period (in years) | 3 years | |||
AxoGen 2017 Employee Stock Purchase Plan [Member] | Stock Options | ||||
Stock Option Disclosures | ||||
Vesting period (in years) | 4 years | |||
AxoGen 2017 Employee Stock Purchase Plan [Member] | Stock Options | Every Six Months | ||||
Stock Option Disclosures | ||||
Vesting percentage | 12.50% | |||
Vesting period (in years) | 2 years | |||
AxoGen 2017 Employee Stock Purchase Plan [Member] | Stock Options | Two Years After Grant Date | ||||
Stock Option Disclosures | ||||
Vesting percentage | 50.00% | |||
Vesting period (in years) | 2 years | |||
New Axogen Plan [Member] | ||||
Stock Option Disclosures | ||||
Shares authorized for issuance | 3,385,482 | 2,109,787 | ||
Number of unallocated shares available for issuance | 385,482 | |||
Number of additional shares authorized for future issuance | 3,000,000 | |||
Number of shares of RSU and PSU surrendered | 36,970 | |||
Company paid tax withholdings for employees | $ 639 |
Stock Incentive Plans - Summary
Stock Incentive Plans - Summary of Weighted-Average Assumptions Used (Details) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Weighted-average assumptions | ||
Expected term (in years) | 5 years 10 months 17 days | 5 years 9 months 3 days |
Expected volatility (as a percent) | 56.48% | 53.61% |
Risk free rate (as a percent) | 0.57% | 2.59% |
Commitments and Contingencies -
Commitments and Contingencies - Lease Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Finance lease costs | ||
Amortization of right-of-use assets | $ 5 | $ 5 |
Interest on lease liabilities | 4 | 0 |
Operating lease costs | 482 | 489 |
Short term lease costs | 10 | 12 |
Variable lease costs | 1 | 1 |
Total lease cost | $ 502 | $ 507 |
Commitments and Contingencies_2
Commitments and Contingencies - Supplemental Balance Sheet Information Related to Leases (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Operating Leases | ||
Operating lease right-of-use assets | $ 2,788 | $ 3,133 |
Current maturities of long-term obligations | $ 1,768 | 1,719 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Long-term Debt, Current Maturities | |
Long term obligations | $ 1,163 | 1,565 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Long-term Debt, Excluding Current Maturities | |
Finance Leases | ||
Finance lease right-of-use assets | $ 82 | 87 |
Current maturities of long-term obligations | 17 | 17 |
Long term obligations | $ 26 | $ 30 |
Commitments and Contingencies_3
Commitments and Contingencies - Other Information Related to Leases (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Commitments and Contingencies | ||
Cash paid for amounts included in the measurement of operating lease liabilities | $ 506 | $ 477 |
Right-to-use assets obtained in exchange for new finance lease liabilities | $ 16 | $ 15 |
Weighted-average remaining lease term - finance leases | 2 years 8 months 26 days | 3 years 2 months 19 days |
Weighted-average remaining lease term - operating leases | 1 year 7 months 9 days | 2 years 6 months 10 days |
Weighted-average discount rate - finance leases | 7.28% | 6.88% |
Weighted-average discount rate - operating leases | 5.99% | 6.29% |
Commitments and Contingencies_4
Commitments and Contingencies - Future Minimum Lease Payments (Details) $ in Thousands | Mar. 31, 2020USD ($) |
Operating Leases | |
2020 (excluding three months ended March 31, 2020) | $ 1,468 |
2021 | 3,167 |
2022 | 2,531 |
2023 | 2,539 |
2024 | 2,601 |
Thereafter | 29,018 |
Total Future Minimum Lease Payments | 41,324 |
Less future payments for leases that have not yet commenced | (38,246) |
Less imputed interest on commenced leases | (147) |
Total Lease Liability | 2,931 |
Finance Leases | |
2020 (excluding three months ended March 31, 2020) | 15 |
2021 | 19 |
2022 | 10 |
2023 | 3 |
Total Future Minimum Lease Payments | 47 |
Less imputed interest on commenced leases | (4) |
Total Lease Liability | $ 43 |
Commitments and Contingencies_5
Commitments and Contingencies - Service Agreements (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | |
Dec. 31, 2011 | Mar. 31, 2020 | Mar. 31, 2019 | |
Service Agreements | |||
License fee amount | $ 506 | $ 488 | |
Payments made under agreement | $ 516 | $ 237 | |
Master Services Agreement For Clinical Research and Related Services [Member] | |||
Service Agreements | |||
Service agreement amount paid upon execution of agreement | $ 151 |
Commitments and Contingencies_6
Commitments and Contingencies - Concentrations (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | ||||
Jul. 31, 2018USD ($)ft²a | Mar. 31, 2020USD ($)item | Mar. 31, 2019USD ($) | Dec. 31, 2020USD ($) | Jul. 09, 2019USD ($) | Sep. 30, 2018ft² | |
Concentrations | ||||||
Size of building space | ft² | 70,000 | |||||
Area of land where building resides | a | 8.6 | |||||
Payments to acquire Land | $ 731 | |||||
Payments to acquire Building | $ 4,300 | |||||
Estimated cost relating to design build agreement | $ 4,457 | $ 29,000 | ||||
Additional costs associated with design build agreement | 13,000 | |||||
Construction in progress. | 10,523 | |||||
Acquisition of fixed assets in accounts payable and accrued expenses | 3,674 | $ 946 | ||||
Heights Union | ||||||
Concentrations | ||||||
Area of land where building resides | ft² | 75,000 | |||||
Expenses related to improvements | 494 | $ 935 | ||||
Design build agreement | ||||||
Concentrations | ||||||
Proceeds from grants | $ 238 | |||||
Maximum | Design build agreement | ||||||
Concentrations | ||||||
Receivable economic development grants from state and local authorities | 2,685 | |||||
Cash grants | $ 1,250 | |||||
Expected | Maximum | Heights Union | ||||||
Concentrations | ||||||
Expenses related to improvements | $ 7,800 | |||||
Vendor | ||||||
Concentrations | ||||||
Number of products from which revenue is derived | item | 4 |
Commitments and Contingencies_7
Commitments and Contingencies - Litigation (Details) - item | Feb. 04, 2019 | Nov. 30, 2019 | Aug. 12, 2019 |
Loss Contingencies [Line Items] | |||
Threshold period for not filing response to complaint | 30 days | ||
Case of Novitzki vs Zaderej | |||
Loss Contingencies [Line Items] | |||
Minimum number of candidates elected to board | 6 | 3 |
Retirement Plan (Details)
Retirement Plan (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)item | Mar. 31, 2019USD ($) | |
Defined Benefit Plan | ||
Age limit for eligibility to participate in the plan | item | 18 | |
AxoGen 401K Plan | ||
Defined Benefit Plan | ||
Employer contributions | $ | $ 295 | $ 217 |
Axogen 401K Plan, employer's contribution on first 3% of employee contribution | ||
Defined Benefit Plan | ||
Employer matching contributions | 3.00% | |
Employee contribution matched, percent | 3.00% | |
Axogen 401K Plan, employer's contribution on next 2% of employee contribution | ||
Defined Benefit Plan | ||
Employer matching contributions | 1.00% | |
Employee contribution matched, percent | 2.00% |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event - USD ($) $ in Thousands | Apr. 23, 2020 | Apr. 21, 2020 |
Subsequent Event [Line Items] | ||
Percentage of decrease in executive cash compensation and board fees | 20.00% | |
Percentage of reduction in compensation for salaried employees | 15.00% | |
Percentage of employee layoff | 10.00% | |
Deferred completion term | 1 year | |
Capital expenditure deferred | $ 25,000 | |
Extension term of current production facility and service agreement | 1 year | |
Term to file amended complaint by plaintiff | 60 days | |
SBA Loan under PPA | ||
Subsequent Event [Line Items] | ||
Loan amount | $ 7,820 | |
Minimum | ||
Subsequent Event [Line Items] | ||
Percentage of reduction in compensation for salaried employees | 10.00% |