Axogen (AXGN) Slid on a Weaker Than Expected Gross Margin

Meridian Funds, managed by ArrowMark Partners, released its “Meridian Small Cap Growth Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here.  During the quarter, equity markets experienced a significant rebound, increasing by 23% from their lowest points within the period to reach new record highs. In this environment, the fund returned 6.96% (net) in the second quarter compared to the Russell 2000 Growth Index’s 11.97% return. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, the Meridian Small Cap Growth Fund highlighted stocks such as Axogen, Inc. (NASDAQ:AXGN). Axogen, Inc. (NASDAQ:AXGN) is a healthcare company focusing on developing and commercializing technologies for peripheral nerve regeneration and repair. Axogen, Inc. (NASDAQ:AXGN) stock gained 14.12% over the past month, and its shares appreciated 18.89% in value over the last 52 weeks. On August 19, 2025, Axogen, Inc. (NASDAQ:AXGN) stock closed at $15.36 per share, with a market capitalization of $706.754 million.

Meridian Small Cap Growth Fund stated the following regarding Axogen, Inc. (NASDAQ:AXGN) in its second quarter 2025 investor letter:

“Axogen, Inc. (NASDAQ:AXGN) is a leader in the development of technologies focused on peripheral nerve regeneration and repair. The company’s biologically active nerve graft platform reduces procedural risks by eliminating the need for secondary surgical sites. During the quarter, Axogen reported top-line growth of 17% and reaffirmed its full-year guidance for both revenue growth and gross margin. Despite this positive momentum, shares declined following a weaker-than expected Q1 gross margin of 72%, which came in below the company’s guided range of 73–75%. The shortfall was attributed to a one-time inventory adjustment and ongoing manufacturing transition. We believe the ramp-up of Axogen’s new manufacturing facility positions the company for long-term margin expansion, with the potential to exceed 80% gross margins. Given our conviction in the operational improvement expected in the second half of the year, we added to our position during the period.”

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An orthopedic surgeon connecting peripheral nerves with AxoGuard Nerve Connector, showing the precision and care of AxoGuard’s products.

Axogen, Inc. (NASDAQ:AXGN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 27 hedge fund portfolios held Axogen, Inc. (NASDAQ:AXGN) at the end of the first quarter, which was 24 in the previous quarter. In the second quarter of 2025, Axogen, Inc.’s (NASDAQ:AXGN) sales increased 18.3% year-over-year to $56.7 million. While we acknowledge the risk and potential of Axogen, Inc. (NASDAQ:AXGN) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Axogen, Inc. (NASDAQ:AXGN) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered Axogen, Inc. (NASDAQ:AXGN) and shared the list of best medical device stocks to buy according to analysts. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.