AxoGen, Inc. (NASDAQ:AXGN) Q2 2023 Earnings Call Transcript

And a lot of that is attributed to, again, the growth in these scheduled procedures as well as growth in mixed and motor trauma procedures, a more complex trauma procedures. And again, stemming from – as we get more surgeon uptake on the Meta analysis, which really called out that an Avance Nerve Graft repair performs just as well as an autograft regardless of the length up to 70 millimeters, and regardless of if it was a sensory nerve or mixed and motor nerve. And we think as surgeons are beginning to understand that data, we’re seeing surgeons who were very good adopters of ours, and the sensory nerves are now recognizing that they have an opportunity to offer this same benefit for their patients in mixed and motor category as well. All right.

Ross?

Ross Osborn: Yep. All set. Thanks very much.

Pete Mariani: Okay, great.

Operator: Okay. Thanks so much. Our next questions come from the line of Kyle Rose with Canaccord Genuity. Please proceed with your questions.

Caitlin Cronin: Hi. This is Caitlin on for Kyle Rose and thanks for taking the questions.

Pete Mariani: Hi, Caitlin.

Karen Zaderej: Hi, Caitlin.

Caitlin Cronin: Hi. Just to start off, why was validation delayed at the facility in the quarter? And is this something that really affects the margin cadence in the back half of the year? And then also, given what other companies have called out, are you guys seeing any sort of supply challenges?

Karen Zaderej: The supply challenges, I can touch on real quickly. I think our operations team has done a phenomenal job of really trying to de-risk our supply chain and make sure that they’ve looked ahead and worked with suppliers to make sure that we have a steady and sturdy supply chain. And so at this point, no, we’re not seeing any supply challenges that will affect production. They certainly have worked through, you name it, interesting things over the last a year and a half, but nothing that I think is an interruption in what we’re doing or going forward. In terms of the facility, this is a big, complex project. There were a lot of moving parts, and it just took a little longer than what we had originally anticipated.

We’re excited to get started in the facility here in the next couple of weeks. And everything is going to be a quick go here, so happy with that. And in terms of the gross margin impact, it will kind of roll over both Q3 and Q4. Just given the timing of when we’re starting, it’ll have some effect in Q3, Q4. But again, for the full year, it’ll end up still being around 80%.

Caitlin Cronin: Awesome. Thank you so much.

Pete Mariani: All right, thank you.

Operator: Thank you. Our next questions come from the line of Chris Pasquale with Nephron Research.

Chris Pasquale: Thanks. Hey guys. Karen, a question around the scheduled side of the business. I’m a little surprised that it’s half the business, frankly. I think it’s bigger than we would have guessed. In the past, when you’ve leaned into really trying to maximize the growth opportunities in those scheduled categories, you’ve had some bandwidth issues with reps maybe taking your eye off the ball on core trauma a bit and having a hard time balancing those two. Do you think that you have the proper resources to really maximize both at this point? And how do you maybe avoid trauma getting the short end of the stick given some of the exciting opportunities in the scheduled piece?