Brian Korb - The Trout Group, IR Karen Zaderej - President and CEO Pete Mariani - CFO.

Dave Turkaly - JMP Securities Tao Levy - Wedbush Chris Lewis - ROTH Capital Partners Bruce Jackson - Lake Street Capital Markets.

Greetings and welcome to the AxoGen Incorporated First Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Brian Korb. Please begin Mr. Korb..

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for the AxoGen Incorporated conference call to discuss the financial results for the first quarter ended March 31, 2017. Today’s call is being broadcast live via webcast, which is available on the AxoGen website.

Within an hour following the end of the live call, a replay will be available on the Company’s website at www.axogeninc.com, under Investors. Before we get started, I would like to remind you that during the course of this conference call, the Company will make projections and forward-looking statements regarding future events.

We encourage you to review the Company’s past and future filings with the SEC, including without limitation, the Company’s forms 10-K and 10-Q which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements.

These factors may include, without limitation, statements regarding product acquisition and/or development, product potential, regulatory environment, sales and marketing strategies, capital resources and operating performances. And with that, I would like to turn the call over to Karen Zaderej, President and Chief Executive Officer of AxoGen.

Karen?.

Thanks, Brian and good afternoon, everyone. Welcome to our first quarter 2017 conference call. Joining me today is AxoGen’s Chief Financial Officer, Pete Mariani. I would like to begin today’s call with a review of our first quarter highlights, a brief Company overview and an update on our key strategic initiatives.

Pete will then provide a review of our first quarter financial results and 2017 financial guidance after which time we will open up the call to Q&A. We are pleased to report a successful first quarter and start to 2017. First quarter revenue grew 51% to a record $12.2 million.

As with prior quarters, our revenue growth is continuing from both active and new accounts as we continue to build and strengthen our commercial team.

These efforts along with the continued development of our certain education events, market awareness activities and further development of clinical data are allowing us to help surgeons develop confidence in the adoption of the AxoGen portfolio of products.

Additionally, our new Avive Soft Tissue Membrane was fully launched, and initial surgeon response has been encouraging. We also continued our new market development activities in Breast reconstruction neurotization and the repair of lower limb total joint replacement nerve injuries.

We’re pleased with the star of 2017 and believe we are demonstrating our ability to successfully execute our strategy and continue to drive awareness and growth in the emerging peripheral nerve repair market.

We are building awareness of peripheral nerve repair and expanding usage of our products with innovator and early adopter surgeons and are excited to be moving toward developing the middle adopters who are the majority segment of the nerve repair market. We conducted three national education courses in the quarter.

One of these events was a fellows course where we train the next generation of nerve surgeons. This is meaningful, because these new surgeons are learning the benefits of the AxoGen product portfolio as part of their initial training in nerve repair. We find surgeons are initially cautious adopters for nerve repair products.

They typically start with a few cases and then wait and see their results. Active accounts are usually past this week period and have developed some level of products reorder.

These accounts have typically gone through the committee approval process, have at least one surgeon who has converted a portion of his or her treatment algorithms of nerve repair to the AxoGen portfolio and are ordering AxoGen products at least six times in the last 12 months.

In the first quarter, the number of active accounts increased 37% to 465, up from 340 in Q1 of 2016. The growing number and penetration of active accounts is driven by increased adoption of our nerve repair products across the surgeons’ treatment algorithms.

Accounts ordering of Avance Nerve Graft, AxoGuard Nerve Connector, and AxoGuard Nerve Protector continued to generate approximately five times more revenue than an account ordering just one of the products.

With the addition of Avive, our objective is to continue expanding the treatment algorithms of surgeons to now include all four of our surgical implants across the full continuum of nerve repair.

For those of you who are new to our story, AxoGen is a global leader innovative surgical solutions for peripheral nerve injuries and the only company focused solely on its nerve repair market. We currently have four surgical implants in our portfolio.

Avance Nerve Graft is the only commercially available processed nerve allograft used for the bridging of nerve gaps of 5 millimeters to 70 millimeters. AxoGuard Nerve Connector is a minimally processed porcine extracellular matrix implant for connector-assisted direct repair of transected nerves with gaps of 5 millimeters or less.

AxoGuard Nerve Protector is a minimally processed porcine extracellular matrix implant for wrapping and protecting injured peripheral nerves. And Avive Soft Tissue Membrane is minimally processed human umbilical cord that may be used as a resorbable soft tissue covering to separate tissue layers and modulate inflammation in the surgical bed.

Along with these core surgical products, we also offer the AcroVal Neurosensory & Motor Testing System. AcroVal and our AxoTouch Two-Point Discriminator are evaluation and measurement tools.

Healthcare professionals use these tools in detecting changes in sensation, assessing return of sensory, grip and pinch function, evaluating effective treatment interventions and providing feedback to patients on nerve functions prior to and following nerve repair.

Our products are used primarily by plastic surgeons, hand surgeons and oral maxillofacial surgeons in a wide variety of nerve repair surgeries, including upper extremity trauma, iatrogenic injuries from dental procedures such third molar extraction as well as nerve compression surgeries including recurrent carpal tunnel syndrome.

AxoGen is generating strong and consistent revenue growth in a nerve repair market that remains largely untapped. There are approximately 900,000 nerve repair surgeries annually in the U.S., pointing to a market opportunity of over $1.8 billion for AxoGen’s products.

The vast majority of these procedures are being performed in approximately 5,100 centers. In the first quarter, 465 of these centers were active AxoGen accounts. Most of these active accounts are still at an early stage of penetration and provide additional opportunities for growth.

As a result, we believe we are just scratching the surface of our available market potential. We continue to develop this market through the execution of our strategic initiatives, which we believe will allow us to build long-term sustainable growth.

We refer to these strategic initiatives as our five pillars of growth, building market awareness; educating surgeons and developing advocates; growing the body of clinical evidence; executing on our sales plans; and introducing and expanding new products and applications in nerve repair.

I will now comment on our progress over the quarter in each of these areas. First, we’ve continued to build market awareness of AxoGen and our products by engaging with surgeons at hospitals, clinical conferences and promotional events.

We’ve developed strong relationships with many well-known surgeons who are innovators and early adaptors of our products. They have been extremely helpful sharing their experiences, using our products with the clinical community and publishing the outcomes they have achieved around nerve injuries and repair solutions. We’re also fortunate to have Dr.

Ivica Ducic as our Medical Director. Dr. Ducic is a renowned nerve surgeon and very respected in the nerve repair community. Dr.

Ducic and the other leaders and innovators in nerve repair regularly engage with their peers and the developing specialty of nerve repair, publishing their clinical findings and share the clinical benefits associated with using the AxoGen product portfolio.

We’re pleased with the increasing presence of nerve repair topics within the professional society meetings and conferences. We believe this is an indication of a broader surgeon awareness regarding the importance of peripheral nerve injuries and repair.

For example, at the combined meeting of the American Association for Hand Surgery, American Society for Peripheral Nerves and the American Society for Reconstructive Microsurgery, AxoGen hosted an educational symposium, entitled the evolving algorithm in nerve repair and interactive case-based exercise with the experts.

This symposium focused on current concepts in peripheral nerve repair followed by a hands-on experience with AxoGen’s innovative products and peripheral nerve repair. This interactive session was very-well received with more than 100 surgeons in attendance.

Our second pillar of growth is focused on surgeon education and the development of surgeon advocates. We conducted a total of three national education events in the first quarter These courses are surgeon-led and focus on the review of clinical data and emerging best practices in nerve repair, including these of AxoGen products.

These courses allow surgeons to gain additional confidence in nerve repair best practices and they drive adoption and increased utilization of our portfolio of products.

In fact, this increased utilization is driving average annualized revenue and accounts for surgeons have completed these courses to increase over 100% six months following completion of the course.

Because of the positive surgeon response of these courses, we will continue to expand our educational efforts and we expect to complete 15 national courses during 2017. We will also continue to host educational symposia at professional conferences as well as smaller regional events throughout the year.

Our third pillar is to grow the body of clinical evidence. Our sponsored clinical projects RECON and RANGER are active and enrolling.

RECON, our Phase 3 pivotal study comparing Avance Nerve Graft to manufacture conduits in digital nerve injuries continues to enroll and is the long-term study to support the transition of Avance Nerve Graft to a biologic.

Our sponsored RANGER study is the largest multi-center registry in peripheral nerve repair with over 1,100 Avance nerve repairs enrolled to-date. We have supplemented this study with our MATCH study, which provides contemporary controls of both autograft and manufactured conduits.

These studies continue to produce important data that assists in clinical decision-making and support the adoption of our surgical portfolio. There were nine presentations of clinical data in our surgical portfolio in the first quarter. The presentations included five from the RANGER registry and four from independent clinical investigators.

To-date in 2017, we’ve seen six new clinical publications and we now have a total of 50 separate peer-reviewed publications, which continue to reinforce both the importance of peripheral nerve repair and the growing body of evidence for AxoGen’s products in nerve repair. Our fourth pillar is sales execution.

Our sales organization is solidly executing on driving strong revenue growth. We had 465 active accounts in the first quarter, which is up 37% compared to a year ago. We ended the quarter with 49 direct sales reps and currently have 50 direct sales reps of which 31 have now been with us for at least 12 months.

In addition to our direct sales force, we have 20 independent distribution partners supporting the execution of our sales strategy. We expect to end the year with at least 60 direct sales reps with most of that growth to occur in the second quarter half of the year.

Our fifth pillar of growth is the introduction of new products and applications in nerve repair. AxoGen believes there are many additional unmet needs in the surgical repair peripheral nerves. And we, as the leading company in this space, are positioned to develop new solutions for these needs.

Avive Soft Tissue Membrane is an example of our deep understanding of nerves and nerve repair. Chronic inflammation can impair tissue regeneration and result in scarring and fibrosis that in turn can irritate and compress the nerve.

Trauma and surgical interventions can trigger the body’s repair response, which can result in inflammation in the surgical arena. When this occurs, it can compromise the surgical outcomes of nerve repair. Our research led us to the study of amniotic membranes as a potential biomaterial for this application.

Amniotic membranes have been used for decades as a topical wound dressing to help produce the risk of chronic inflammation and provide a protective covering to the area. Historically, these materials have absorbed too quickly and have been chosen [ph] and friable for surgical applications.

To overcome these limitations, we identified the properties of the amniotic layer of the umbilical cord as the robust source of human amniotic membrane. Like placental membrane, this material has the beneficial properties of amnion.

However, it has the longer resorption time and is a mechanically robust biomaterial, making it easy to handle, suture or secure during a surgical procedure. We reported the first clinical implant of our Avive Soft Tissue Membrane in November.

We are pleased with Avive’s progress and are receiving positive feedback from surgeons related to Avive’s handling properties and ease of use.

Although our existing products in the upper extremity and oral and maxillofacial markets are a prime revenue sources today, expansion opportunities in nerve repair and breast reconstruction, lower extremity surgery, head and neck surgery, urology and the surgical intervention for pain offer AxoGen new and expanded revenue opportunities in the future.

We have prioritized two of these areas where the accident portfolio of products could bring meaningful solutions to current clinical challenges. Breast reconstruction neurotization and the repair of iatrogenic injuries associated with lower limbs total joint replacements.

We began market development activities in these applications late last year with an expectation that we will launch with one of these new applications later this year. Breast reconstruction neurotization provides an exciting opportunity for women following a mastectomy.

Currently when a woman undergoes the breast reconstruction, she gets the shape of a breast, and does not recover sensory feeling. This forfeiture of sensation can have a profound effect contributing to quality of life issues such as depression and other emotional challenges.

We first met with a group of key opinion leading reconstructive breast surgeons in November to discuss patient, surgeon and healthcare stakeholder perspectives and needs as well as how the AxoGen portfolio of products may help surgeons overcome the current clinical challenges related to restoring breast sensation for women who choose autologous reconstruction following a mastectomy.

Our clinical advisory panel continued this discussion in the second meeting in March and we made progress towards understanding the opportunity in this market.

The group remains enthusiastic about the potential of neurotizing the breast, and we will continue to meet with plastic surgeons to discuss this exciting application for our nerve repair products. We are also assessing the repair of nerve injuries that involve damaged nerves as a result of total joint replacements.

In accessing the joint, the orthopedic surgeon has to transect a number of nerves. Periodically, these transected nerves form a painful tangle of nerve fibers called the neuroma. Unfortunately, the patient had surgery because of painful joints and now they have pain again.

Recent clinical data has shown that with proper patient selection, a nerve surgeon can cut out the painful neuroma to reduce the pain and repair the resulting gap in the nerve to restore function. Our current customer base of orthopedic hand and plastic surgeons are equipped to address these injuries in ways that orthopedic surgeons are not.

We believe we have an opportunity to develop referral patterns [ph] and awareness and bring these patients to our current customers. We intend to fully assess these new nerve repair applications and potentially create additional revenue opportunities for 2018 and beyond.

Before I turn the call over to Pete, I want to highlight again that Q1 was a great quarter for AxoGen. We continued to execute against our strategic initiatives and by doing so we increased revenue by 51% to $12.2 million, with gross margins of 84.4%.

We Began 2017 with a solid capital structure and a team in place to execute our plan; we continued our focus on nerve repair education and awareness experiencing successful interactions at professional society meetings and at educational programs for surgeon and fellows.

Surgeons are demonstrating an increasing awareness and adoption of the AxoGen portfolio of products in our current applications and we are making investments towards important expansion markets in breast reconstruction neurotization and the repair of symptomatic nerve injuries related to total joint replacement.

We are pleased with our progress and with the opportunity to continue to develop the emerging nerve repair market and drive long-term sustainable growth. Now, I’ll turn the call over Pete.

Pete?.

Thanks, Karen. First quarter revenue grew 51% to $12.2 million. The growth in revenue was primarily the result of increases in unit volume as well as the net impact of price increases and changes in product mix. As in prior quarters, the majority of our revenue growth is driven by growth in active accounts.

Additionally, we continue to see growth in our pipeline of new accounts as surgeons become familiar with our products and begin to develop their treatment algorithms. Gross profit in the first quarter was $10.3 million, an increase of 54% compared to the prior year’s first quarter.

Gross margin for the first quarter was 84.4% compared to 82.7% in the prior year. The year-over-year increase was driven by growth in unit volume, operational efficiencies and the net impact of price increases and changes in product mix. Total operating expenses in the first quarter were $13.5 million, up 45% over the prior year.

The increase includes continued investment in our sales force, market development and awareness activities, clinical, R&D and general corporate expenses. These investments are driving growth in the Company’s operating expenses, but importantly at a lower rate than sales growth, demonstrating the continued operating leverage of our business model.

Sales and marketing expenses in the first quarter were $8.6 million, up 39% over the prior year. As a percentage of revenue, sales and marketing expenses in the quarter improved to 70% compared to 77% in the prior year’s first quarter. As Karen mentioned, we currently have 50 direct sales reps, up from 44 at this point last year.

We completed three national education events in the quarter and four year-to-date, and anticipate conducting 11 additional courses this year for a total of 15. Research and development spending in the first quarter was $8.4 million compared to $978,000 in the prior year’s first quarter.

Our R&D spending in the first quarter was $1.4 million compared to $978,000 in the prior year’s first quarter.

R&D costs included product development and expenditures for clinical efforts associated with our RANGER registry and RECON study in support of our biologic license application for the Avance Nerve Graft, as well as support of additional clinical development of activity.

As a percentage of revenue, R&D expenses for Q1 were 11.5% compared to 12.1% in the prior year first quarter. In the first quarter, general and administrative expenses were $3.5 million, up 63% over the prior year’s first quarter.

The increase includes higher compensation expenses including higher non-cash stock compensation and increased professional fees in the quarter compared to the prior year. As a percentage of revenue, G&A expenses increased to 28.6% in the first quarter compared to 26.4% in the prior year first quarter.

Net loss in the first quarter was $3.8 million or $0.11 per share and includes non-cash stock compensation expenses of $849,000. Net loss in the first quarter of 2016 was $3.7 million or $0.12 per share and includes non-cash stock compensation expense of $183,000.

Adjusted EBITDA loss in the quarter was $2.2 million compared to an adjusted EBITDA loss of $2.3 million in the prior year’s first quarter. The Company is reporting adjusted EBITDA for the first time this quarter, which excludes the impact of non-cash stock compensation expenses.

Our earnings release includes a table that provides historical quarterly adjusted EBITDA amounts for 2016. Cash at the end of Q1 was $25.9 million compared to $30 million at the end of Q4 2016. Total cash burn in Q1 was $4.1 million and includes $1.2 million payment of the 2016 all employee annual performance bonus.

As Karen mentioned, we’re pleased with our commercial, clinical and strategic execution in Q1. From a financial perspective, we reported 51% growth. Our gross margins continue to expand and continue to be above 80%, and we demonstrated the continued leverage of our business model.

We will continue to make investments to drive growth and we will do so in a manner that demonstrates the annual efficiency of our business model with improved margins and cash burn as revenue increases.

We continue to believe we have sufficient cash to achieve profitability, while continuing to invest in our growth initiatives in this emerging peripheral nerve repair market. Finally, we are reiterating our 2017 full year guidance. We expect 2017 revenue will grow at least 40% over 2016 revenues and gross margins will continue to be above 80%.

And with that, I’ll hand the call back over to Karen..

Thanks, Pete. Before we close, I would like to highlight a few investor events in the coming months that we will be participating in, the Jefferies Global Healthcare Conference on June 6th in New York City and the JMP Securities Conference on June 21st and 22nd, also in New York City.

Information about these events will be available on the AxoGen website.

In closing, our efforts to execute against our strategic initiatives focused on building market awareness, educating surgeons and developing advocates, growing the body of clinical evidence, executing on our sales plans, and expanding new products and applications in nerve repair.

We continue to produce record revenues and position AxoGen to lead and grow the emerging peripheral nerve repair market during the year ahead. We are building awareness and expanding usage of our products with innovator and early adopter surgeons and are excited to be moving towards developing the middle adopter segment of the nerve repair market.

We are introducing our product portfolio to fellows, allowing us to train the next generation of nerve repair surgeons. And we will continue to expand our portfolio of products and develop new nerve repair applications where we believe we can bring meaningful solutions to current clinical challenges.

Before taking questions, I want to welcome our new investors and thank all of the members of the AxoGen team for their commitment to helping patients with nerve injuries. At this point, I would like to open up the line for questions.

Operator?.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Dave Turkaly with JMP Securities. Please proceed with your question..

I’ve got a quick one or two on Avive. I’m just curious how it fits sort of in the treatment algorithm here.

I mean, are there procedures where the AxoGuard lines, Protector and Avive could be used? And then, sort of how does it fit, I know you’re just kind of early on in the launch her but from an ASP or margin profile?.

So, there are procedures where Avive might uniquely be used, for example in a situation where there is a blood trauma. The surgeon may recognize that the nerve is knocked out and not functioning, so preoperatively, they know they need to do something to intervene.

But when they go in to look at the nerve, the nerve is intact, so it doesn’t make sense at that point to cut it out and repair it with Avance; that would another option that they would have had. I think traditionally, those surgeons would have done nothing.

They’d open up the nerve, make sure that it’s not a scar tissue or anything tethering it, and they would than free-up the nerve and close up the patient and then follow them to decide if they want to try and do something in the future, either again go back later and cut out the nerve or go on to other types of treatment.

This gives them a chance to do something in that moment to try and address the inflammations causing that nerve to be inflamed and use something to modulate that inflammation. So, that’s an example where in the past we would have had no opportunity for a product to be used and now we have an opportunity.

Now, there are other cases where they are concerned about soft tissue attachments and they might have used an AxoGuard Protector in that case, so that’s a trade off that you are talking about. Is there a change in pricing and gross margin, they are all within the range of what we have talked about in terms of projections.

From a price point, it depends obviously on the size that they use but in this case the Avive would likely be a slightly higher price point.

If they use one of the larger sizes, compared to the larger size of AxoGuard form a gross margin standpoint, they’re all in the range of what we have talked about in terms of giving us a blended average in excess of 80%. So, we don’t see a downside.

What we think is actually the best opportunity for the surgeons, it will reflect what is the best material to use, given the surgical situation..

And then, maybe one follow-up for Pete. It looks like second quarter is typically strong one, last year there was a nice sequential increase.

And I know you guys aren’t giving sort of quarterly guidance but given the sales reps you now have on board, their productivity, the number of the active accounts, it looks like people are expecting the similar bump up this year.

And I guess just curious, starting at 51% growth, 40 for the year, how you feel about those expectations, given some of those factors, the sales force and the productivity to-date?.

Yes. Dave, we still feel very good about the market itself and our ability to continue to drive growth. And we’ve talked about before that historical sequential patterns that we have seen over the last three years, we have seen no reason why that wouldn’t continue.

So, I think we are feeling very good about where we are to start the year and very good about our guidance for the year..

Our next question comes from Tao Levy with Wedbush. Please proceed with your question..

So, maybe a couple of questions here.

The number of sales reps, I know it’s just nitpicky here, but went down sequentially, any reason why people would have left from such a high growth exciting company?.

Sure. One thing I guess we haven’t spent a lot of time talking about is that the same time we have been increasing the sales team. We have also been increasing our sales management structure, so that we have a good reporting relationship in terms of the number of reps reporting into our regional sales director.

And we’ve had a couple of our direct associates who were promoted into sales management positions, and we are currently recruiting for two open positions. So, again, we have not seen a significant regrettable loss issue. But we do have opportunities for growth within the Company and we’ve been managing that..

The increase that you are expecting this year when you said you are going end the around with 60 reps, it’s certainly a healthy increase.

Are the new reps -- you are thinking about this more as you’ll continue to split the territories or you started thinking about bringing in dedicated reps for specific indication, now that you’re starting to broaden the different applications..

This question and at this point, we’ve been talking about continuing to focus territories whether they are from making territories smaller or splitting territories or replacing some of our direct -- or independent distributors with direct reps.

That’s what we think about with the 60 versus having a specialty sales team, for example with either breast or the total joint nerve injury repair. Now that’s not to say, down the road, we wouldn’t think about those, but this is really built on our existing market and our plans in those.

And down the road, if we think specialists are the right way to approach one of those markets, then that would be in our 2018 thinking for our sales team..

And then just lastly for Pete on the G&A side of things, obviously the first quarter -- again, maybe this is seasonal thing, was little bit higher. Is that something we expect as stays at these level start the year or was Q1 just a little bit higher than the rest of year will be....

Some of it is just additional comp expense and additional headcount that we’ve had. But remember, we did make a stock option grants or stock awards were granted at the end of December. So, you’re seeing the full impact of that. And much of this is the impact of non-cash stock comp coming through.

But then, we also had in the first quarter the normal seasonality of increase from audit expenses, professional fees associated with that and other things that you would typically see in the first quarter of a company.

So, Q1 is probably a little high but it is going to stay in the higher than what it’s been as we came out of 2016, simply because of the increased compensation expense..

Our next question comes from Chris Lewis with ROTH Capital Partners. Please proceed with your question..

Can you just talk about where you are in terms of penetration within each of your active accounts? And may be just elaborate on the strategies you’re implementing to drive people penetration within those active accounts, I guess both, in terms surgeries and additional surgeons within those practices..

So, that is -- our strategy is really we see that we’re just scratching the surface of this large market and we have the opportunity to grow and increasing the number of active accounts. The 465; there is 5,100 potential active accounts. We’re also seeing the opportunity to continue to drive penetration in the accounts where we’re already active.

We’re really at the beginning stages with really single digit penetration, high single digit penetration on average in our active accounts.

Our threshold for active account, if you remember how I described it is a pretty low bar, where it is at least one surgeon using, and that’s may be using one of our products, so they have to be using something and ordering at least six times a year. That’s a very low bar.

And so, we think the lowest hanging fruit is driving penetration in our active accounts where we don’t have the administrative barriers and it really is expanding that first surgeon algorithm where they are using hopefully now all four of our surgical implants as well as expanding to the other surgeons who do surgery at that account, if it’s a large teaching institution could have plastic surgeons to do nerve repair, hand surgeons who are both in the plastic department and the orthopedics department who do nerve repair and oral maxillofacial surgeons who do nerve repair.

And so, obviously, we’ve got room to expand and continue to grow..

Okay, thanks. That’s very helpful.

And then, in terms of expletory markets, specifically for breast, can you elaborate the key findings you kind of took away from the advisory panel meeting you held? And kind of talk about what’s driving those discussions, what did you learn, and what work still needs to be done on your end before you commit to that or potentially another new market by the end of this year?.

Well, thanks. So, let me talk in general about what we are looking for in any market and then specifically answer your questions in breast. So, in any new market that we’re moving into, we are trying to balance the opportunities that we have in front of us with the opportunity in new markets.

And we have opportunities; we have the options to grow in multiple dimensions. We are really looking at any market that we want to -- or many new applications that we move into to see where we think we can get the fastest revenue attainment, while solving a significant clinical challenge for surgeons and patients.

And we think both of the opportunities in front of us meet that criterion. We think that they are areas that we can provide a clinically meaningful change in the way that the practice is done today and taking care of these nerve injuries.

Specifically in breast neurotization, I think this is a movement that is happening and that we are just contributing to that movement. I think that surgeons and patients are looking for that next threshold of better outcomes in breast reconstruction. And for many years, they haven’t talked about sensation.

Sensation was just one of those things that it was just considered an accepted complication of this procedure that you as woman would have numb breast. But what they are finding is that that contributes to the overall -- impact quality of life of these women. These women are trying to get back to being normal and normal includes feeling normal.

To feel like that tissue that they’ve had a reconstruction of feels like their own tissue. And so, one of the things I think I’ve really been struck by is a significant impact this has on the emotional well-being of the patients to not feel the tissue, to not normal.

And so, we think there is an opportunity to help provide supporting clinical information in that area that some of the things we’ve been talking with our key opinion leading surgeons is to really understand that patient impact.

And other things that we’ve done are some of the more practical things which is what’s a good reproducible and surgical technique that we can help teach if we are going to expand this. And I would like to commend Dr.

Ducic who has been instrumental in helping working with the key opinion leading surgeons who are experts in breast reconstruction, we’re combining that within expert and nerve repair construction and taking the best of their knowledge to come up with a surgical technique that we think will be again a more reproducible consistent technique.

And so, I think we’ve made some good strides with that both with cadaver [ph] work that’s been done and starting look at the practice of that technique. And then, lastly, there is a number of other things you do in any market assessment.

We want to make sure we understand the economics of the change understanding the impacts in reimbursement as well as making sure that we understand how patients will know about the changes and surgical repair and be able to move to the surgeons who are adopting this technique. And those are some of the last things that we are working on now.

And so, all of those are things that we’ve done but I would just end by saying I think this is an exciting opportunity.

I think this is a new growth area that again is -- it would probably happen with or without AxoGen, but I think AxoGen can really contribute to the change in healthcare here and providing better quality of life for these women with breast reconstruction..

And maybe, Pete, one for you.

Can you quantify the amount of the price increase that was taken and I guess when it was implemented and any impact it had on the quarter?.

We implement the price increase in March 1st every year. And historically, we’ve been able to get mid-single-digit price increases and we think that the impact of this will be about the same. But it’s part of March 1st. So, it’s a little bit of an impact on the quarter but not significant..

Our next question is from Bruce Jackson with Lake Street Capital Markets. Please proceed with your question..

So, just a follow-up question on the adoption rate. You talked about with the early adopters in particularly you are making some progress and you have also in the past talked about characterizing the market.

So, can you just remind us when you look at the market, what percentage of early adopters, what percentage of middle adopters and then late adopters? And how do you feel your penetration rates are in the early adopter and middle adopter parts of the market? And when do you think you might be moving more heavily into the middle adoption piece of the market?.

SO, this is -- go back to a little bit about market change theory. And if you just think about people’s readiness to change, whether the surgeons or people adopting some new technology, there is bell shaped curve of adopters.

And the early adopters and innovators are sort of in the tail to the left and then the big middle -- of course the middle adopters and the laggers, the late adopters are on the far right of people who may change or may never change. And you can look at some different numbers as to what the statistics would be.

I can’t give you specific numbers in nerve repair because it’s somewhat of a qualitative assessment as to whether people are in early or middle adopter. But typically you are going to look in the range and say okay there is about 12% to 15% of the population that’s going to be in that early adopter and innovator segment.

The middle adopter is where the gold is in terms of there is a lot of volume in that middle adopters. And the Holy Grail question is how do you get into the middle adopters and when will that happen. I think the how is easier to answer. The timing of when is much harder.

And so, I’ll just tell you, I don’t think that you can time that in our med-tech market, maybe others that figure that away. But in my experience, the timing of when is challenging. So, I don’t want to tell you a time because I know I don’t believe you can time.

But what you can do is you start to look at signals that say, what are signs that middle adopters showing interest? And that’s of the things that I think we are seeing at the conferences when we have our symposium, at conferences we are obviously -- conferences are attended not just by early adaptors but by whole range of types of adaptors.

And we continue to get very high attendance and interest from surgeons that are not using our products that they are very likely middle adaptors that we see feedback from them at our booths where they come up and they say things like I saw your presentation, I can no longer ignore the data. I need to start to learn more about your product.

Those are signs that middle adaptors are showing interest in our product portfolio. I think at the same time, we’re doing thing in the market that will continue to make it easy for middle adaptors to adopt. We use a changed model that says that in order for it to be something that they want to do, it needs to be easy, normal and rewarding.

And those are things that we’re changing in the marketplace to make the adoption of the AxoGen products easy, normal and rewarding. And all those will contribute to allow the change to continue to occur..

Are there any other signals that you’re looking for in terms of that adoption?.

In terms of readiness for change, we continue to assess surgeons’ attitudes towards those. So, that is something that we do internally to understand that. I also look at some of things that we’re doing, again easy, normal and rewarding is I want to make sure that we have inventory stocked in accounts.

Early adaptors are completely happy to order products for each case but our middle adaptors want to make sure that we do things -- so the product is available already, so that they don’t have to plan for each case. I think one of the other things that we see as a signal, we have an online forum called Nerve Matters.

Nerve Matters is a HIPAA compliant discussion forum so that surgeons can talk about nerve injuries and cases and ask -- they can post information, they can ask questions of experts. And we sponsor this.

And we’ve seen significant increases in registration of the number of surgeons who are active in Nerve Matters; in fact, well above 1,000 at this point in terms of surgeons who are now actively engaged in that forum. And that’s interesting to me because that’s more than what I would think is the early adaptor surgeons in our total universe.

So, we’re clearly getting people who are interested and watching and engage there and learning. And so I think that helps reinforce what we’re doing..

Ladies and gentlemen, we’ve reached the end of the question-and answer-session. I would now like to turn the call back over to Karen Zaderej for closing comments..

Thank you. And I want to thank everyone for joining us on today’s call. I look forward to seeing many of you in person at one of our upcoming investor events. Also a quick reminder that our annual shareholders meeting is scheduled for May 24th at 4:00 pm in Orlando. We look forward to speaking with you all during our Q2 conference call in August.

Thank you very much..

This concludes today’s conference. You may disconnect your lines at this time. We thank you for your participation. And have a great day..