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AxoGen Still In The Doghouse, But The Opportunity Is Compelling

Dec. 03, 2018 10:14 AM ETAxoGen, Inc. (AXGN)BAX, IART, SYK4 Comments
Stephen Simpson profile picture
Stephen Simpson


  • In addition to a second-quarter disappointment, concerns have started to grow regarding potentially competitive new products from established nerve repair players.
  • AxoGen's core product still appears to offer superior performance, and usage in its established base is growing at a strong pace.
  • AxoGen looks undervalued below $40 even as larger competitors seem to be getting more active in nerve repair.

The going hasn’t gotten any easier for AxoGen (NASDAQ:AXGN). This up-and-coming med-tech company specializing in nerve repair has spooked growth investors with regard to its revenue growth rate and investors have also grown more concerned over the possibility of more intense competition from companies like Integra (IART) and Baxter (BAX) in the nerve repair market. While all that’s been going on, there seems to have been a general shift away from higher-growth (and higher-risk) stories in the med-tech space.

I’m still bullish on AxoGen, as I believe it addresses a large and under-served market with better products, but sentiment won’t turn around overnight. The 30%-plus long-term revenue growth I expect from AxoGen is hardly conservative, but I do believe these shares can outperform as surgeons become more familiar and comfortable with the procedure/products and increase their orders in the coming years.

Competition Was Always Going To Be A Factor

AxoGen has always had to contend with competition, and future competition was always a part of my underlying modeling assumptions. Integra, Stryker (SYK), and Baxter have been in the market for some time with various conduit and wrap products, and those are the products that most surgeons know best. While AxoGen’s RANGER study continues to support the thesis that Avance allograft offers meaningfully better results, surgeons are generally a cautious bunch and it’s going to take more time for them to shift their procedures toward Avance.

More recently, investors have been factoring in the risk of newer products from Integra and Baxter. The mid-September meeting of the American Society for Surgery for the Hand (or ASSH) saw Integra talking up its NeuraGen 3D collagen-filled conduit. Not only is this product likely to target markets that aren’t core to AxoGen (gaps of less than 5mm), the product has been FDA-cleared for years now and the company has yet to

This article was written by

Stephen Simpson profile picture
Stephen Simpson is a freelance financial writer and investor. Spent close to 15 years on the Street (sell-side, buy-side, equities, bonds); now a semi-retired raccoon rancher. That last part isn't entirely true. Probably.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (4)

I sold my 2,000 shares the day after earnings. I think the downtrend here is compelling enough to try to pick a bottom, but I dont have any funds I am willing to pay to do it. Good luck.
I bought 200 shares at 19.70. If we were not at the tail end of a bull market, I would buy more. Recommend others look into entry with options.
zoralsurgeon profile picture
Long holder here as well... While obviously I wish I had sold some in the $50’s I still believe in the company. Only one doing it this well... however I am starting to think it may become more of a buyout target the longer it stays at these levels
smallcap sleuth profile picture
I’m a stockholder for awhile joe. More than a double. I’m not troubled by the growth rate I’m more concerned about the growth of overhead. The competitive environment is not a great concern. The fact that the company is super well funded is great but I fear they may become a bit lavish with the spending. They are smartly managed and very focused not like the competition. The breast resensation should be a very large winner as it take hold in the women’s world and the outlets producing this widens to meet the demand.

They hold a nice place with the FDA which will assist them with becoming dominant in nerve repair and associated procedures.
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