Axogen, Inc. Common Stock M&A announcement

Michael, please go ahead. Thank you, operator, and good morning, everyone.

Today's call will start with an overview of the transaction we announced this morning. Lindsey will then walk through the financial terms. Following our prepared remarks, we will open the call to questions. AxoGen will provide additional details regarding the financial impact of the transaction when we report results post-closing of the acquisition, which is expected in the fourth quarter of 2026. Earlier today, we announced that AxoGen and BioCircuit Technologies have entered into a definitive agreement under which AxoGen will acquire 100% of BioCircuit's outstanding equity for a total price of $200 million in cash, subject to customary adjustments for cash indebtedness, transaction expenses, and net working capital. The cash portion will be financed with the equity offering that we announced today.

This transaction is a strong strategic fit for us, with NerveTape currently selling in the exact same markets as AxoGen and is expected to strengthen our own existing financial profile. It is financially accretive to our revenue growth and adjusted EBITDA margin in 2027, assuming the transaction closes by year-end 2026. In addition, we expect to remain free cash flow positive. Strategically, we believe BioCircuit is as close to an ideal fit as one could find. It aligns with our mission to make restoration of peripheral nerve function an expected standard of care, and it advances our innovation agenda by adding a differentiated technology that simplifies one of the most challenging aspects of nerve surgery. NerveTape is the first FDA-approved device for suture-less nerve repair. Most of the work we do in nerve care is addressing one problem, reconnecting two severed nerve ends.

Historically, that's been the exclusive domain of microsurgery. Using sutures under a microscope, surgeons painstakingly align and connect the nerve, either directly or using a connector or a graft. This is a slow and technically demanding procedure, so it has been limited to a small population of microsurgeons trained to perform this work, which we see as one of the barriers to more patients receiving appropriate nerve care. NerveTape has the potential to change that equation for many applications. It is faster and stronger than traditional microsuturing. Because it's so easy to use, surgeons in many applications no longer need the same level of microsurgical training to perform nerve repair. That means we're not just improving how existing nerve surgeons operate, we're also enabling the expansion of the universe of surgeons who can perform nerve repair.

That's why we see NerveTape as critical in unlocking the total addressable market of nerve repair. We believe it allows us to address new indications that our current portfolio does not serve, and it lowers the barrier to entry on the current indications for our portfolio. We've been following BioCircuit and NerveTape for some time as the technology, commercial adoption, and clinical evidence have developed. As clinical data accumulated, the product gained commercial traction, and surgeons have gained experience with the product. We've become increasingly confident in the technology's performance and safety profile. That growing confidence in our strategic goal to be at the forefront of innovation in nerve repair is what brings us to this transaction today. The company's commercial traction is impressive in its short period of commercialization.

In just over two years, over 14,000 NerveTape implants have been sold to date, mostly in breast and extremity procedures across more than 400 hospitals and ambulatory surgery centers. BioCircuit has achieved $24 million of run rate revenue based on an annualized second quarter 2026 revenue, which is a considerable growth from its $11 million in 2025 revenue, with a gross margin of approximately 80% and positive EBITDA year to date on a standalone basis. Our plan is to introduce NerveTape into our commercial organization, leveraging our existing direct sales force, surgeon relationships, and hospital contracting infrastructure to accelerate adoption. We are acquiring a high-growth product in a market we already serve, calling on surgeons we already know, using a sales force that is already in place. We anticipate minimal integration risk and no meaningful commercial disruption.

As with any acquisition, our near-term priority is a smooth transition for BioCircuit's customers, employees, and surgeon partners. We are truly excited about what this acquisition means for surgeons and for the patients they treat. This transaction checks the box for us by every metric. Strategically, it is a great fit. It pushes our innovation frontier and enhances our ability to unlock our under-penetrated total addressable market opportunities. Financially, it is expected to strengthen our existing profile and the integration risk is low. I want to thank the entire BioCircuit team for building NerveTape, a truly novel, simpler, faster, more effective alternative to microsuturing in nerve repair. We cannot think of a more natural synergistic fit with AxoGen, and we look forward to welcoming NerveTape and the entire BioCircuit organization to AxoGen.

Finally, I want to end my comments by reiterating our confidence in our performance and other strategic priorities, particularly in prostate and breast. As discussed in our last earnings call, our clinical development work remains on plan, and we expect to share more in the next phase of our prostate strategy during our third quarter earnings call. This quarter to date, we are pleased with the continued momentum of our business, and we expect this transaction to be additive to our current trajectory. I would like now to turn the call over to Lindsey.

Thanks, Mike, and good morning, everyone. Under the terms of the agreement with BioCircuit, AxoGen will acquire 100% of BioCircuit's outstanding equity at a total price of $200 million in cash, subject to customary adjustments for cash, indebtedness, transaction expenses, and networking capital. At closing, $1 million of the estimated merger consideration will be withheld pending determination of the post-closing purchase price adjustment. We anticipate funding the purchase price with the proceeds from the public offering of our common stock announced today. The BioCircuit transaction is expected to close in the fourth quarter of 2026, subject to customary closing conditions, including completion of the spin-out of BioCircuit's electronics business. As Mike highlighted earlier, this transaction is financially compelling.

BioCircuit has achieved $24 million of run rate revenue based on annualized second quarter 2026 revenue, which is considerable growth from its $11 million 2025 revenue, with gross margin of approximately 80% and positive EBITDA year to date on a standalone basis. We are not providing 2026 guidance for the partial year impact at this point. We will provide updated full year 2026 guidance, including the BioCircuit contribution, once the transaction closes. Also, assuming a close of the transaction in 2026, AxoGen anticipates the acquisition to be additive to 2027 revenue, with accretion to gross margin and adjusted EBITDA margin. We will provide full year 2020 guidance in the first quarter of 2027. The impact of this acquisition is equally exciting to unlocking our under-penetrated TAM as the impact on our financial profile of our business. In summary, we are very excited about the significant opportunity this transaction represents.

With that, we will now open the line for questions.