Small-cap med-tech AxoGen (AXGN) already had plenty of long-running challenges to deal with before the pandemic, and the decline in elective pressures has only added to the challenges and pressures. While AxoGen’s core product offers what I believe to be meaningful advantages over autografts and synthetic conduits, the company’s sales effort became too aggressive and too unfocused too early, and the company has had to retrench around its core opportunities in trauma – a process that was already wearing out investors’ patience before COVID-19 came onto the scene.
AxoGen is a good case-in-point regarding the risks and challenges of a small company trying to disrupt established surgical practices. I don’t want to push the similarities too hard, but investors can look at AtriCure (ATRC) as an example of how long it can take for these stories to work. I do believe AxoGen’s products are superior, though, and I believe that clinical data will eventually win over more surgeons. These shares look undervalued today on both discounted free cash flow and EV/revenue, but AxoGen is going to need time to win back investor confidence.
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