AxoGen, Inc.: Initiation of Research Coverage

Monday, February 5, 2018

William Blair & Company initiated research coverage of AxoGen, Inc. (AXGN $26.65), a global leader in the peripheral nerve repair and regeneration industry that sells a portfolio of solutions to treat patients with nerve injuries.

Analyst Kaila Krum estimated the company would generate revenue of $59.7 million in 2017, $83.2 million in 2018, and $116.4 million in 2019. While AxoGen is not yet profitable, Krum believes full-year profitability is likely in 2020.

“AxoGen’s flagship product, Avance, is the only commercially available substitute, off-the-shelf human nerve allograft to repair severed nerves and offers surgeons an effective solution to avoid a secondary surgical site when repairing a severed nerve,” Krum said. “In addition to Avance, AxoGen is recognized for its collection of differentiated nerve repair solutions, including the AxoGuard NerveConnector, AxoGuard NerveProtector, and Avive Soft Tissue Membrane. Collectively, AxoGen’s portfolio addresses an opportunity of more than $2.2 billion in the United States alone, where it is only low-single-digit penetrated today. The majority of its opportunity is in the extremity trauma segment, although the company recently expanded into the $250 million breast neurotization market with a solution for women to recover lost sensation after undergoing a mastectomy.”

Krum continued, “We estimate AxoGen has about 600 active hospital accounts today and has been rapidly expanding its salesforce, essentially doubling the size of its direct presence in the last three years. Given the substantial opportunity today, the ability to grow in both new and existing accounts, and potential to eventually expand into incremental pipeline opportunities, we believe the company should be able to grow 40%-plus in 2018 and durably in the mid-30% range over the next three to five years.”

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William Blair or an affiliate expects to receive or intends to seek compensation for investment banking services from AxoGen, Inc. or an affiliate within the next three months.

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Current Ratings Distribution (as of 2/4/18)

Coverage Universe
Outperform (Buy): 64%
Market Perform (Hold): 34%
Underperform (Sell): 1% 

Inv. Banking Relationships*
Outperform (Buy): 21%
Market Perform (Hold): 8%
Underperform (Sell): 0%

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