Sunday, June 30, 2019

The Street Still Highly Skeptical On AxoGen's Growth Story

It’s rough for investors when institutions change their mind about growth sectors, and the performance of some smaller high-growth med-techs over the past year illustrates that, with Abiomed (ABMD), AxoGen (AXGN), Avanos (AVNS), Inogen (INGN), and Nevro (NVRO) among some of the names that are down substantially from a year ago as the market has shifted away from what was at the time a long-term peak valuation for the sector.

Of course, it’s not just sector allocation that matters, and AxoGen has had some of its own challenges, including a late 2018 short report that rattled investors, a miss in Q4, an enrollment expansion in a key clinical study, and ongoing uncertainty about the real size of the peripheral nerve repair market and AxoGen’s ability to emerge as a long-term winner.

I’ve chosen to shift to much more conservative modeling assumptions, including lower sales force productivity, more competitive pressure, and a slower path toward converting surgeons into active users of nerve conduit products. Even with those changes, though, I still believe AxoGen can generate better than 20% long-term revenue growth and support a fair value in in the $30’s.

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The Street Still Highly Skeptical On AxoGen's Growth Story

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