For the past year, I have followed AxoGen Inc. (AXGN), a regenerative medicine company focused on the repair of peripheral nerves, which has been positioning its self as a formidable player in the regenerative medicine space. Most recently, the company completed a $20.8 million financing with PDL Bio Pharma (PDLI) a trasaction that I believe, has further validated the company's market potential for its products and it's continued growth.
AxoGen continues to solidify its market position in regenerative medicine with its portfolio or peripheral nerve repair products. Its portfolio includes the Avance® Nerve Graft, which AxoGen believes is the only commercially available allograft nerve for bridging nerve gaps that occur when the nerve is severed. The AxoGuard® Nerve Connector and the AxoGuard® Nerve Protector are also apart of its portfolio.
AxoGen's products are being hailed as surgical advances that are helping people recover from nerve damaging injuries. This bodes well for the company as the opportunity to repair peripheral nerve injuries are estimated to exceed $1 billion. As AxoGen continues to penetrate this $1 billion market, it will benefit from having the only regenerative product for peripheral nerve repair that is commercially available.
A material overhang on the company's valuation had been its anemic balance sheet and concern with its ability to raise capital. This transaction with PDL addresses this issue. The proceed will be used to eliminate it's existing covenant ladened bank debt and will allow management to focus on operating and growing the business. As noted by company CEO Karen Zaderej, the deal allows the company to strike the best balance to fund its continued growth and increase value to shareholders.
With this infusion of capital, AxoGen plans to hire more sales representatives, which is crucial considering the increasing competitiveness in the regenerative medicine space. It will also be able to expand its pipeline.
"We were able to raise significant capital without diluting our outstanding share-base while maintaining a clean capital structure. Furthermore, our agreement provides extensive flexibility for future financing and business development activity."
AxoGen's most recent earnings report was for the second quarter and revenues totaled roughly $2 million, a 64% increase over 2011's second quarter. Its gross profit rose 89% to a record $1.5 million. Its gross profit margins improved to 75% compared to 65% for the same period in 2011.
AxoGen will also gain from having an addition to its board. As part of this transaction, John McLaughlin, president and chief executive officer of PDL, will join the board. He brings an extensive background in regenerative medicine to AxoGen.