Innovate November 2017

AxoGen Growing Fast, Moving into New Areas of Nerve Repair

Written By: Chris Eversole

AxoGen, the Alachua-based company that provides innovative grafts of nerve scaffolding, is growing rapidly.

Revenue for the second quarter of 2017, ending June 30, grew 46 percent over the second quarter of 2016, the company reported. That was an increase to $15.2 million from $10.4 million.

“We’re in the upper echelon of companies in our field,” said President and CEO Karen Zaderej. “We’ve had double-digit growth over our six years, and we have a high margin – the difference between our costs and the selling price for our products.”

The company’s move into a new market – oral and maxillofacial procedures – is contributing to the growth, Zaderej said. Patients need these procedures if they suffer nerve damage during surgery on the mouth, teeth, jaws or face – includng extraction of the wisdom teeth, dental implants and removal of tumors.

“These are the ‘oops’ cases,” Zaderej said. “The patients lose feeling in part of their face after surgery. These cases are rare, but they represent an important market opportunity for us.”

The company isolates material from donor tissue that serves as the framework for nerves and processes and sterilizes the graft to prepare it for implant by a surgeon.

Before the oral and maxillofacial market developed, AxoGen’s nerve scaffolding was used primarily in repairing nerve damage in the arms, hands, legs and feet due to traumatic injuries.

Patients receiving the company’s products include members of the armed services injured on the battlefield, people injured in accidents and people suffering repetitive motion damage.

AxoGen’s approach has an advantage over the traditional approach of taking a nerve graft from one part of the body to repair a damaged nerve, Zaderej said in a 2016 interview on the PBS Show “American Health Journal.”

“That meant that, at a bare minimum, the patient was going to lose function in one place to fix something that was more important someplace else,” she said on the show. “Today, with our innovative solutions, they don’t have to have that deficit.”

AxoGen’s expansion into oral and maxillofacial surgery came about organically. Surgeons on an online forum the company hosts began talking about the need to help patients whose nerves were damaged following surgery to their teeth and mouth.

“It became the highest trending topic in the forum, so we explored it,” Zaderej told Business in Greater Gainesville.

Moving into the oral and maxillofacial market was relatively seamless because the nerve scaffolding works the same in the mouth and face as it does in the the arms, hands, legs and feet – with the graft providing a framework to remodel into the patient’s own nerves, she said.

Moving Forward

As is typical of young biomedical companies, AxoGen is still losing money, having not yet recouped its research and development costs. Its loss for the second quarter was $2.1 million – an improvement over the $2.8 million loss in the second quarter of 2016.

“We have enough cash,” Zaderej said. “We could be profitable now, but we’ve chosen to continue to invest in our existing and new markets to fuel our growth.”

AxoGen is exploring two potential new markets – enhancing sensation in breasts that are reconstructed following a mastectomy and treating pain down the leg that sometimes follows hip-replacment surgery.

The need is great in both areas. “Improving sensation in reconstructed breasts can help patients feel more normal,” Zaderej said. “Treating chronic pain for some of the patients who develop it after hip replacement also is important.”

The company plans to move into one of those markets next year, but it’s not sure which one, she said.

AxoGen projects a market of $2 billion annually if it were serving all the patients who could benefit from its products.

Zaderej puts the potential in perspective: Only 510 of 5,100 hospitals and clinics doing nerve repair surgery are using AxoGen’s products. Even there, surgeons are proceeding cautiously in their use of the products.

The company’s staff has reached 164, with 60 at its Alachua headquarters, and the remainder split among its manufacturing plant in Ohio, its distribution center in Texas and its sales force.

“Our distrution center is very important,” Zaderej said. “When surgeons contact us, we have our product to them at 8 o’clock the next morning.”

Among its new employees is Jon Gingrich, a veteran in the biomedical field, who is in the new position of chief commercial officer.

“I’ve split my position in two,” Zaderej said. “Jon has taken over the hands-on sales and marketing work so I can focus more on operations and strategic planning as we scale up. He has a great personality, and he fits well in our close-knit group.”

For Zaderej, the biggest satisfaction in her job is getting to know about patients who have benefitted from the company’s products.

One of those patients was featured on “American Health Journal.” The patient, identified as Matthew, severely cut his foot on glass, leaving a one-inch gap in the nerves at the bottom of his left foot, leaving him with no feeling from the arch to the end of the toes.

Surgeons at Johns Hopkins Medicine implanted a nerve graft that restored sensation in the damaged area.

“You wouldn’t even know he had an injury if you look at him running around outside,” the show quoted his mother, Teresa, saying. “Anything he’s doing, you can’t tell that he’s had such a traumatic injury.”

“Treating chronic pain for some of the patients who develop it after hip replacement also
is important.”
— Karen Zaderej, President and CEO AxoGen


CHRIS EVERSOLE has been a keen observer of business, government and culture in the Greater Gainesville Area while living here over the past two decades. His experience includes work with the University of Florida and Alachua County Government. He also has been a journalist and public relations professional in the Tampa Bay and Sarasota-Bradenton areas, as well as in Michigan, Ohio and New York.





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