Axogen says its longtime plan to transition its anchor marketed product, Avance® Nerve Graft, into a biologic product—and, over time, expand its production of biologic products—will begin to come to fruition by the end of 2021 when it completes construction on a $50-million processing center in Dayton, OH.
The developer of products for peripheral nerve regeneration and repair is expanding a 70,000-square-foot building on an 8.6-acre site it acquired in 2018. Axogen plans to process only human nerve tissue for Avance and other products at the new facility, which is being built to cGMP standards, and is intended to support a future Biologics License Application (BLA) for Avance Nerve Graft to the FDA.
Axogen restarted construction in January 2021 after suspending work as part of pandemic-related cost-cutting. When construction is completed, Axogen plans to start a validation process expected to take a year, with processing shifted to the new facility by the end of 2022.
The new site is a 15-minute drive from Axogen’s current Dayton nerve tissue processing facility leased from Community Tissue Services, which specializes in recovery, processing, and distribution of tissue grafts.
“As we looked out long term, we were going to outgrow that space. We were able to find a much larger facility in Dayton so that we can preserve the talent that we’ve developed. We have an outstanding team there,” Peter J. Mariani, Axogen’s executive vice president and CFO, told GEN Edge.
That team now numbers 53, with another 12 employees overseeing the work being carried out by about 80 construction workers. Mariani said Axogen’s Dayton staff is expected to grow to more than 200 people over the next five years.
“It has an enormous ceiling height, which allows us to put in a second-floor mezzanine over part of it, so now we’ll have over 100,000 square feet of usable space in this facility,” Mariani said of the new Dayton facility. “There’s plenty of room for us to expand out and continue to add capacity over the long term, so this will be a very long-term investment for us and something we’re very excited about.”
Axogen focuses on developing and commercializing technologies for peripheral nerve regeneration and repair. Axogen’s “platform” or portfolio is anchored by Avance Nerve Graft, an active off-the-shelf, biologically active processed human nerve allograft. Avance is designed to bridge severed peripheral nerves by revascularizing and remodeling into a patient’s own tissue similar to autologous nerve, without infection or other the comorbidities associated with a second surgical site.
Avance is sold in 16 size options in various lengths up to 70 mm and diameters up to 5 mm.
Transition to biologic
The FDA allows Axogen to market Avance Nerve Graft under controls applicable to Human Cellular- and Tissue-based Products while it transitions Avance to regulation as a biological product subject to a BLA, pursuant to an enforcement discretion the agency granted in 2015. Three years later, the FDA granted Avance Nerve Graft its Regenerative Medicine Advanced Therapy (RMAT) designation, designed to streamline development of regenerative medicine therapies intended for the treatment of serious diseases and life-threatening conditions.
“We already had clinical data and a good safety track record, so the FDA decided that this would be an appropriate path to continue to allow the product to be available at the same time, while we’re running our pivotal study and completing the BLA,” Axogen chairman, CEO, and president Karen Zaderej told GEN Edge. “It opens up some next-gen development pathways for us to continue to develop the product for the future.”
Because Avance is regulated as a tissue product, she explained, it cannot be combined with a therapeutic drug, a biologic, or a device. “If we have the ideal scaffold down the road, you can imagine that we might want to do things with that scaffold. We might want to add to it and anytime you add anything, it’s no longer a tissue,” Zaderej said.
Axogen has disclosed it is actively working on a second-generation version of Avance, and a third-generation version in its development process, without furnishing details. “There are opportunities to expand the existing portfolio of products in new applications of peripheral nerve repair in lower extremity surgery, head and neck surgery, urology, and the surgical treatment of pain,” the company stated in its Form 10-K annual report for 2020.
As part of Avance’s transition to a biologic, Axogen is carrying out the Phase III RECON trial (NCT01809002). The pivotal multicenter prospective randomized study, designed to compare Avance Nerve Graft to hollow tube conduits in digital injuries 5–25 mm, completed its target enrolment of 220 patients last year and is set to release preliminary data in Q2 2022. Should the data prove positive, Axogen expects to file a BLA in 2023.
In another clinical study, RANGER® (NCT01526681), under enrollment, Avance showed overall “meaningful” recovery rates of 82–84%, comparable to autograft outcomes without associated donor site comorbidities in outcomes from 110 participants reported last year in Journal of Hand Surgery. Of the participants’ 162 nerve injuries, 113 were repaired with Avance, the other 49 with manufactured conduits.
For gaps up to 25 mm, the study showed an overall meaningful recovery rate for Avance of 88%, compared with 61% for conduit. As of June 1, more than 2,400 Avance nerve repairs had been enrolled to date in RANGER, the largest multi-center clinical study in peripheral nerve repair. (Meaningful recovery is defined as a grade of 3 or above (“movement against gravity over almost full range of motion) on the Medical Research Council muscle power scale.)
Importantly for Axogen, the FDA “enforcement discretion” arrangement allows the company to generate sales, which grew last year and early this year.
Axogen finished 2020 narrowing its net loss to $23.78 million from $29.13 million in 2019, on revenues that rose 5% year-over-year, to $112.3 million from $106.7 million. Axogen fared better in the first quarter as its net loss shrunk to $6.66 million from $8.19 million in COVID-19 impacted Q1 2020, thanks to a 28% jump in revenues, from $24.26 million to more than $31 million.
Since its launch in 2007, more than 50,000 Avance Nerve Grafts have been implanted in patients, according to Axogen.
This year’s Q1 revenue came in $3 million (11%) above SVB Leerink’s estimate—a result that prompted the firm to raise its revenue forecasts for Axogen to $134.8 million from $127.1 million in 2021 (up 6%), and to $156.1 million from $148.3 million in 2022 (up 5%).
The company’s investor guidance calls for between $133–136 million in revenue in 2021, with no guidance for 2022. “We expect that the incidence of trauma will increase as communities relax pandemic-related restrictions, which we believe will lead to increasing procedure volumes as we move through the year,” Axogen stated June 1 in an investor presentation.
Axogen’s projection sits well with one analyst.
“We now have higher confidence in AXGN’s recovery trajectory and [domestic demand revenue] growth potential in 2021+,” Richard Newitter, managing director, medical supplies and devices and a senior research analyst with SVB Leerink, wrote in a research note. Newitter reiterated the firm’s “outperform” or “buy” rating, concluding that the stock’s depressed price did not reflect what he projected as the company’s 15–20% growth prospects, and the potential of reaching a large, underpenetrated total addressable market.
Investors appeared to agree with Newitter, as Axogen’s shares zoomed 22% two days after the company reported its upbeat Q1 results, to a 52-week high of $23.94 before closing that day at $23.50.
Also part of Axogen’s portfolio:
- Axoguard® Nerve Connector, a porcine submucosa extracellular matrix (ECM) coaptation aid for tensionless repair of severed peripheral nerves.
- Axoguard® Nerve Protector, a porcine submucosa ECM product used to wrap and protect damaged peripheral nerves and reinforce the nerve reconstruction while preventing soft tissue attachments.
- Axoguard® Nerve Cap, a porcine submucosa ECM product created to protect a peripheral nerve end and separate the nerve from the surrounding environment, to reduce the development of symptomatic or painful neuroma.
$2.7 billion market
The company estimates a U.S. TAM for peripheral nerve injury of more than $2.7 billion or more than 900,000 patients for its current product portfolio, most of which is in trauma ($1.9 billion, 700,000+ patients), with the rest in oral maxillofacial, breast, and upper extremity compression. Axogen cannot say how much of that market is nerve repair, since there’s no simple data source tracking incidence of peripheral nerve issues, and because nerves can be injured in many traumatic and surgical injuries and can be impacted in patients anywhere from head to toe.
Headquartered in Alachua, FL, near Gainesville and the University of Florida (UF), Axogen began about 15 years ago as a university startup incubated at its globally-honored UF Innovate | Sid Martin Biotech incubator, a key catalyst of Gainesville’s sub-cluster of biotech companies and research activity.
The current Axogen was created in 2011 through a merger with LecTec, with the combined company moving its headquarters from Texarkana, TX, to Alachua, where Axogen leases 19,000 square feet at the Progress Park bioscience/tech/office campus after graduating from Sid Martin, also located there. Axogen expanded into Dayton in 2015, a year after the company opened a global distribution facility in the Fort Worth suburb of Burleson, TX.
Burleson’s location helps ensure that Axogen’s healthcare provider customers receive the products they ordered at the cold temperatures needed. “We’re shipping for procedures that are the next morning, so somebody comes in today and has a traumatic injury they’re put on the OR schedule for tomorrow to have their nerves fixed,” Zaderej said. “We needed to be centrally located to make sure that we could always reliably get to the West Coast.
Axogen opened its fourth U.S. location in Tampa, FL, in 2020, consisting of labs and a second office site situated about a 2.5-hour drive south of its headquarters. The four sites employ just under 400 people, Zaderej said.
The Tampa site emerged from a national search, Zaderej recalled: “While the Gainesville region has been just a wonderful place to incubate and grow the company, we found as we started to recruit a lot more scientists and engineers that for people in those middle stages of career path, moving to a college town in Florida was less attractive to them than other options.”
“We’re trying to pull talent from all over the United States, so we decided we needed to move our labs and find a location that we thought would be better for recruiting,” Zaderej added.
Looking ahead, she added, Axogen envisions additional growth for its product portfolio and development, but not looking to expand into grafting beyond the nerve.
“We want to stay in nerve,” Zaderej said. “We think that the area of peripheral nerve repair is vastly underserved and we can continue to provide both new applications and new technologies that will help to continue to improve patient outcomes in nerve repair.”