AxoGen,
Inc. (AXGN, $19.46): “Axo Gen(eral) of the Industry”
By:
Jacob Schwister, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• AxoGen, Inc. (NASDAQ:AXGN) is a medical technology company focused
on the science, development, and commercialization of peripheral nerve
regeneration technologies.
• AXGN maintains and
develops a portfolio of nerve repair technologies that cover all surgical
peripheral nerve reconstruction aspects and needs. They are the only company competing
in the field.
• For FY 2016, the company
had sales of $41.1M, EBIT of -$8.1M, and a net loss of $13.8M, mainly
attributed to increasing SG&A expenses.
• In July 2017, the
company hired Jon Gingrich as Chief Commercial Officer. Gingrich has an extensive
resume including 20 years of experience in medical device sales and marketing.
• The company is
continuing to attend conferences and build awareness of their products as much
as possible.
Key
points: AxoGen, the sole company providing peripheral nerve
repair technology, has been seeing annual revenue growth from 40-60% over the
past five years, and the large $2B untapped peripheral nerve repair market
provides AXGN with a significant opportunity to continue capitalizing. Their portfolio
of products covers all needs of the peripheral nerve repair market.
At the end of 2Q 2017,
AxoGen’s products were used in 510 hospitals and surgical centers across the
US, which is a 36% increase from the 2Q 2016. There are over 5,000 accounts in
the United States, and the company has continued its focus on sales and
marketing to continue adding new accounts to grow revenues. The growth of
accounts is limited because most surgeons are cautious when it comes to using
nerve repair products. They usually start out with a few cases and review the
results before they fully adopt the products.
With the $2.0B market
opportunity on the horizon, AXGN could see continued revenue growth of 30% well
into the future. They also have been maintaining gross margins greater than
80%, which should help them reach profitability in the next few years.
Profitability will be determined by the company’s ability to grow the customer
base at a significant level and maintain SG&A expenses. The product
portfolio is well positioned and there are significant barriers to enter the
market, thus creating an optimistic future for AXGN.
If AXGN can put all the
pieces of the puzzle together and continue capturing the market the company
will continue to grow. With the addition of Jon Gingrich, the companies new
Chief Commercial Officer, AXGN is better positioned to grow marketing and sales
objectives. They are spreading the word about their products through Healthcare
conferences and surgeon meetings.
What
has the stock done lately?
Over the past month
Axogen has been floating between $18 and $19.72 per share. The stock has
increased $0.95 or 5.14% over the past month. AXGN reached its 52-week high of
$19.72 on October 13, 2017. Of the analysts covering the stock, five recommend AXGN
as a buy and one recommends a hold rating.
Past
Year Performance: Over the past year, AXGN has performed
extremely well increasing 124.20%, or $10.83 in value. The stock price’s
increasing trend has been fairly steady with only one short period of decline
at the end of July. Despite AXGN’s lack of earnings growth, the stock has grown
steady showing investors’ confidence.
 |
| Source: FactSet |
My
Takeaway
Currently, AxoGen is not
facing competition in a market they believe to be near $2B. They have a
successful portfolio of products that they plan to continue capturing the
market with. With the right strategic direction and continual marketing at
healthcare conferences and surgeon meetings, they have the potential to grow
their product base to more hospitals and surgical centers. The stock has seen
strong growth over the past year, and this is attributed to strong revenue
growth in the untapped market. It will be important to watch how potential
healthcare reform could affect this company in regards to its growth in the
market.
