AxoGen Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2023

There are 9 speakers on the call.

Operator

Greetings. Welcome to the AxoGen, Inc. Reports Second Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Operator

As a reminder, this conference is being recorded. At this time, I would like to hand the call over to Odonna Alexander, Investor Relations Consultant. Thank you. You may begin.

Speaker 1

Thank you, Daryl. Good evening, everyone. Joining me on today's call is Karen Zadary, AxoGen's Chairman, Chief Executive Officer and President and Pete Mariani, Executive Vice President and Chief Financial Officer. Karen will discuss the quarter and our outlook for the year, and Pete will provide an section of the company's website at www.axogeninc.com. Before we get started, I'd like to remind you that during This conference call, the company will make projections and forward looking statements, including our 2023 financial outlook And longer term revenue and growth expectations, timing of our BLA submission, anticipated growth for revenue categories, penetration of core accounts, Marketing opportunities with nerve applications associated with emergent trauma, breast, OMS and the surgical treatment of pain and new products Timing for the start of processing at our APC facility, launch of our flush protector, optimism associated with key strategic pillars and our balance sheet.

Speaker 1

Forward looking statements are based on current beliefs and assumptions and are not guarantees of future performance and are subject to risks and uncertainties, including without limitation, the risks and uncertainties reflected in the company's annual and periodic reports such as hospital staffing issues, regulatory process and approvals, APC renovation, timing and expense, The forward looking statements Our representatives only as of the date they were made and except as required by applicable law, we assume no responsibility to publicly update or revise any forward looking In addition, for a reconciliation of the non GAAP measures included including adjusted core and active account numbers, Excluding the impact of Avaya's Purchases, please reference today's press release and our corporate presentation on the Investors section of the company's website. Now I'd like to turn the call over to Karen. Karen? Thank you, Adana,

Speaker 2

And thank you all for joining us today as we discuss our Q2 2023 financial results. We're pleased to report another quarter of solid performance and growth. Our revenue for the quarter came in at $38,200,000 representing an 11% increase compared to last year's Q2. As we begin today's comments, I wanted to share some additional insights on our revenue and growth that we'll review today and continue to provide going forward. Our business was originally anchored in emergent trauma.

Speaker 2

And over the past several years, we've introduced a number of new nerve repair applications that utilize our Avance and AxoGuard product lines. These new applications share common characteristics That now lead us to think about our business along 2 primary categories scheduled non trauma procedures and emergent trauma procedures. Scheduled procedures are generally characterized as procedures where a patient is seeking Nerve reconstruction following the surgical removal of painful neuromas, oral and maxillofacial procedures and nerve decompression. The nature of scheduled procedures affords patients the opportunity to actively search for treatment options and advocate for solutions that may improve quality of life following the procedure. For example, in breast reconstruction, This may include prioritizing neurotization as a part of their treatment plan.

Speaker 2

These procedures lend themselves to standardization of surgical techniques and more consistent nerve repair algorithms. In addition, these patients are likely to engage in extended follow-up evaluations with their physicians. Emergent procedures generally result from injuries that initially present into an emergency room. These procedures are typically referred to and completed by a specialist either immediately or within a few days following the initial injury. Given the emergence and diverse nature of traumatic injuries, the required repair algorithm and procedure scheduling can be highly variable and follow-up evaluations are generally inconsistent.

Speaker 2

While the various applications can have unique surgeon customers, The procedures are often performed in the same accounts and use the same family of AxoGen products. Scheduled procedures typically have a higher value of AxoGen products used per procedure as compared to routine trauma. And given the planned nature of these procedures, there's a higher level of predictability. In addition, these procedures are generally additive to our sales rep productivity. Reporting by application is challenging.

Speaker 2

However, we've recently developed of our revenue by application. Our estimates are based on available data received from hospitals and sales reps and assumptions regarding specific surgeon practice and account information and as such are subject to the limitations of the data received and our assumptions. Going forward, we'll be sharing these insights on the split of the categories to provide an improved understanding of the growth trajectories of scheduled and emergent procedures. Currently, revenue from scheduled procedures represents approximately half of total revenue. During the quarter, we estimate that this category grew over 20% versus the prior year.

Speaker 2

The growth in our scheduled category is reflective of the opportunity to provide improved quality of life outcomes for patients. We have built the success with compelling solutions backed by clinical data and supported by effective patient activation programs that educate patients and connect them with trained surgeons. Strength in our scheduled procedures is continuing to deliver on the company's underlying goals of gaining deeper surgeon adoption and expanded use cases of our products across our core and active accounts. Revenue from Emergent procedures also currently represents approximately half of total revenue. During the quarter, We estimate that revenue from these procedures grew in the low single digit percent range versus the prior year.

Speaker 2

Although we saw high single digit sequential growth in the category, we continue to see near term headwinds as hospitals continue to prioritize resources and address operating challenges. More recently, as hospitals continue to focus on improving profitability, We're also seeing an increasing interest in moving routine nerve repair procedures into more cost efficient ambulatory surgery center settings. The near term transition of these procedures creates gaps in procedure predictability. However, we believe that this Demonstrating the clinical effectiveness, cost and surgical time efficiencies of allograft nerve repairs We'll support continued surgeon adoption and expansion of the trauma category. We expect to return to more normalized revenue growth rates of High single digits to low double digits in the trauma category over time.

Speaker 2

Our growth continues to be driven through the improved penetration of our Core accounts represent more penetrated accounts defined as those with greater than $100,000 in revenue in the trailing 12 months. Core accounts have increased to 347 this quarter, an increase of 16% year over year and down 1% sequentially. Approximately 60% of our revenue is derived from core accounts, which usually consists of at least one surgeon who has adopted the AxoGen nerve repair algorithm for a significant portion of the nerve injury patients. Our focus is on leveraging the success of these early surgeon adopters with our products to gain more cases within that account and to encourage additional surgeons to adopt our products. We continue to believe that our greatest opportunity for growth lives was deepening our penetration in our The number of our active accounts increased to 974 in the quarter, representing growth 4% year over year and down 1% sequentially.

Speaker 2

Revenue from the top 10% of active accounts represents approximately 35% of total revenue. We ended the 2nd quarter with 115 direct sales representatives, down 1 from the end of the Q1 and a year ago. We believe our revenue growth can continue to be driven primarily by increased productivity of our sales force, And we will evaluate and add additional sales reps as their territories approach targeted levels. Our direct Sales force is supplemented by independent sales agencies that represent approximately 10% of our total revenue. Last quarter, we were pleased to provide an update on our key strategic pillar of product and procedure innovation.

Speaker 2

And we expect that this will continue to be a driver of long term growth. As a summary, we announced 3 specific across our offering, including an expansion of our resensation technique for women who choose an implant based reconstruction, which we believe could apply to an additional 10% to 15% of all breast reconstruction patients. We continue to see strong surgeon interest in offering resensation in implant based reconstructions to their patients, And we're on track to exceed our goal of training at least 20 surgical teams this year. Most of our trained teams have begun completing procedures And we have additional training sessions scheduled in the second half of this year and early twenty twenty four. We also announced innovation in our nerve protection portfolio.

Speaker 2

The category of nerve protection covers a wide range of injuries and defects, including compression, crush injuries and complex traumatic injuries. We believe that the diversity of these entry to adequately address the specific aspects of the injury and healing process. We're happy to announce We successfully initiated the pilot launch of the first of these new products, AxoGuard plus nerve protector, And we'll fully launch this extension of our nerve protection platform later this month. Initial surgeon feedback from usage applications in anatomical locations across our targeted surgical specialties has been positive. Given the positive feedback, We believe AxoGuard Plus will continue to expand the adoption of nerve protection products and help more patients with nerve injuries.

Speaker 2

Additionally, we also announced last quarter that we expect to have a resorbable nerve protection product that provides temporary protection and tissue separation during the critical phase of healing for nerve injuries. This application was previously addressed by Avaya soft tissue membrane. We are continuing the development of a replacement solution to address this important market opportunity and expect this will further As I mentioned earlier, the success of our scheduled procedures has been supported by our patient activation initiatives, primarily for breast and pain applications. Our marketing initiatives are designed to engage patients and direct them and for individuals suffering from chronic neuropathic pain. We believe the patient engagement strategy we have developed in breast can be used to accelerate and expand our pain and other scheduled procedures where patients are seeking solutions to their nerve conditions.

Speaker 2

Our surgeon education programs on nerve repair remain a top priority for AxoGen and continue to generate interest in the surgical community. Our education initiatives encompass a wide range of learning events, including hands on best practices training, educational conferences and presentations. Moving on to updates in our growing body of clinical evidence. We continue to develop quality clinical evidence to demonstrate the safety, performance and utility of our nerve repair solutions. Our sponsored clinical programs remain on track.

Speaker 2

As of the end of the quarter, we have over 200 Peer reviewed publications across trauma, breast, OMF and pain. On August 2, the RECON study was published online in the Journal of Hand Surgery. The publication includes the author's analysis of the results, which found that Avance returned a greater degree of functional We're excited to see the addition of this Level 1 evidence supporting the efficacy Advanced Nerve Graft in the published literature. We believe this data will play an important role in surgeon clinical decision making, especially with middle adopter surgeons. We continue to be pleased with the interest we're seeing from surgeons on the recently published meta analysis that reported positive clinical and cost outcomes for Avance.

Speaker 2

In addition, the Premier publication also reported positive procedural cost outcomes Both publications provide strong evidence in support of advanced nerve repairs compared to alternative techniques. Turning to our new production facility and our BLA for Avance Nerve Graft. I want to provide an update on timing for these key First, we completed construction of the AxoGen processing center and in the 2nd quarter placed into service the warehouse and office spaces. Final validation of the tissue processing center was delayed in the quarter and we now expect to be in processing tissue in the new facility later this month. This facility provides for up to 3 times our current capacity and was designed for long term growth and expansion.

Speaker 2

Processing information from the APC will be included in the CMC portion of our submission of the BLA for Avance Nerve Graft. We will be requesting to utilize a rolling submission process with the FDA at a pre BLA meeting that is expected to occur early Q1 of 2024. If the FDA agrees, we expect to begin the submission in the Q1 of 2024 and complete the submission in the Q2 of 2024. The company believes this process would support BLA approval in the first half of 2025. A BLA approval will complete the regulatory transition of Avance Nerve Graft from a 3 61 tissue based product to a 351 biological product.

Speaker 2

And importantly, we believe Avance would be designated as the reference product, which would in turn provide 12 years of exclusivity with regard to potential biosimilars. Looking ahead, we remain focused on executing our strategic initiatives and driving long term sustainable growth. We believe that we've set a firm foundation for growth anchored in our investment in clinical data, which has recently produced 3 significant publications that will be Our investment in innovation has produced new applications and products that we are launching this year and next. We have also demonstrated success with our patient activation programs in resensation and are extending and expanding these programs to other scheduled procedures where patients are seeking improved quality of life solutions for nerve related challenges. Finally, we're excited to open our new APC processing center later this month, which will provide longer term capacity and support our filing of the BLA for Avance in 2024.

Speaker 2

Now I'll turn the call over to Pete to provide a review of our financial highlights and guidance. Pete?

Speaker 3

Thank you, Karen. Revenue for the quarter was $38,200,000 representing an 11% increase compared to the Q2 of 20 Growth was driven by increases in unit volume of 6% as well as a 4% increase in price and a 1% increase from changes in product mix. We estimate that revenue from scheduled procedures represented about half of total revenue and grew over 20% year over year, while emergent procedures also represented about half of our total revenue and grew in the low single digit range versus last year. Additionally, we estimate the mix Scheduled and emergent procedures for fiscal 2022 was 45% scheduled and 55% emergent compared to the current fifty-fifty mix. In the longer term, we expect the scheduled procedure category We'll continue to grow above 20% and continue to represent a growing portion of our revenue mix, underscoring its upside potential as we continue to leverage the improved predictability and productivity of these applications.

Speaker 3

While we are measured in our near term growth expectations for emergent trauma, we anticipate returning to high single digit to low double digit growth in was approximately $30,900,000 compared to a gross profit of approximately $28,200,000 for the Q2 of 2022. Gross margin for the quarter was 81.1%, down slightly from 81.8% year over year. Total operating expenses for the quarter increased 5% to $37,800,000 compared to $36,100,000 in the Q2 of 'twenty 2. The increase was primarily the result of increased compensation. Sales and marketing expense in the 2nd quarter increased 6% to $20,800,000 compared to $19,700,000 in prior year.

Speaker 3

The increase was primarily due to compensation, marketing programs and other services costs. As a percentage of total revenue, sales and marketing expense decreased to 55% compared to 57% in the Q2 of 'twenty 2. Research and development expense increased 5% to $7,400,000 compared to $7,000,000 in the prior year. Product development expenses represented approximately 58% Total R and D compared to 51% in the prior year and include costs for a number of specific development programs along with the non clinical spend on the BLA for Avance Nerve Graft. Clinical expenses As a percent of total revenues, research and development expense decreased to 19% in the Q2 compared to 20% in the prior year.

Speaker 3

General and administrative expenses increased 2% to $9,600,000 in the 2nd quarter as compared to $9,400,000 in the prior year. The slight increase was primarily due to an increase in net compensation of $1,600,000 which was mostly offset by lower insurance, Professional services and merchant fees. G and A as a percent of revenue decreased to 25% in the quarter compared to 27% in the prior year. Net loss for the quarter was $6,700,000 or $0.16 per share compared to net loss of $7,700,000 or $0.18 per share in the Q2 of 'twenty 2. Adjusted net loss improved to $1,300,000 or approximately $0.03 per share in the 2nd quarter compared to a loss of $2,600,000 or $0.05 per share last year.

Speaker 3

Adjusted EBITDA loss in the quarter Also improved to $250,000 compared to an adjusted EBITDA loss of $1,600,000 in the prior year. The balance of all cash, cash equivalents and investments on June 30, 2023 was $40,800,000 compared to a balance of $44,100,000 at the end of Q1. The net change includes capital expenditures $3,600,000 related to the construction of the company's new processing facility in Dayton, Ohio, partially offset by $300,000 of net positive other operating cash flow in the quarter. The remaining spend on the APC facility is primarily attributable to interest which we now anticipate being later this month. We expect to continue trending towards cash flow breakeven driven by leverage over our fixed cost infrastructure and our focus on thoughtful operating expense management.

Speaker 3

We believe this trend combined with normalized capital expenditures will allow us to maintain our strong balance sheet position, providing ample support as we continue our path to profitability. In today's press release, we are maintaining our full year guidance with 2023 revenue in the range of $154,000,000 to $159,000,000 which represents growth of 11% to 15%. At the midpoint of this range, the guidance assumes growth of our scheduled procedures of revenue in the low to mid-twenty percent range and growth in our emergent procedure revenue in the low single digit range. Additionally, we anticipate the gross margin will be reduced with the transition to the new processing facility in The 3rd and 4th quarters and that gross margins for the full year 2023 will be approximately 80%. In summary, we are pleased with the 2nd quarter performance and remain confident in delivering sustainable growth.

Speaker 3

We will continue to execute our strategies, Invest in innovation and leverage our market position to create long term value for our shareholders. At this time, I'd like to open the line for questions.

Operator

The confirmation Our first questions come from the line of Michael Sarcone with Jefferies. Please proceed with your questions.

Speaker 4

Good afternoon and thanks for taking my questions.

Speaker 3

Hi Mike.

Speaker 4

Hi. Just The first one, just on the Emergent trauma procedures, they grew low single digits in the quarter. Can you just Talk a little bit more about what you think is impeding the return to growth there? Give us some more detail on that front.

Speaker 2

Yes. So in the back half of last year, we saw sort of high single digit growth in this section and thought we were coming into the target range that we expected it to be. And in the first half of this year, we've seen as hospitals are really focusing on Really thinking about the resources and profitability that what I would call routine trauma, so these are the simple things like a kitchen knife cut Or sort of small gap injuries are in many places being moved to a lower cost of Care setting like an ambulatory surgery center. And while we have some great tools in place in the long term to be able to deal with that with the work that we've put And so we're working actively with the ambulatory surgery centers to continue to get those changes rolled through their Contracts. And so ultimately, we think that's actually a good thing for AxoGen.

Speaker 2

But in the short term here, it's caused some disruption And with that simple nerve repair moving to an alternate setting.

Speaker 4

I see. I got it. Thank you. That's helpful. And then just Just a follow-up on that, I mean, so does that mean the crux of the work to get to that high single digit, low double digit Normalized growth over time is primarily just getting these private payers on board.

Speaker 4

And Do you have resources working on that? Are you growing more investment at that? And are there any other impediments Outside of the private payers that you have to overcome?

Speaker 2

Well, we want to continue to see the strength we've seen in leveraging the meta analysis This is in the Premier data. The recent publications that we have, have shown some nice growth on the more Complex nerve repairs and we want to continue to see that. And then yes, in the ambulatory surgery center setting, we're working with Sure is there with the way CMS has set it up and we can do this today with CMS. But in trauma, the majority of the injuries are private payers.

Speaker 4

Got it. Okay. Thank you.

Operator

Thank you. Our next questions come from the line of Dave Cherkalay with JMP Securities. Sorry about that. Please proceed with your questions.

Speaker 5

That's a comment, miss Dave. No worries. Hey, how are you guys?

Speaker 2

Good. Hi, Dave.

Speaker 5

Karen, thanks a lot for the breakout, the non trauma and the emergent. I think I'll make you regret that fairly quickly. I'm teasing a little bit. As you look at the 2 buckets, I was wondering if you may give us any color on sort of The mix there in the non trauma component and then maybe the growth, I'm imagining breast is Doing the best, but any color on sort of what's doing well there? And I was hoping to ask about procedural ASPs like I'm imagining that AxoGuard is probably used in I don't know if it's in the other areas.

Speaker 5

Any color you might give us on sort of What the ASP for AxoGen is in those two categories?

Speaker 2

Sure. I'm happy to. Well, the scheduled procedures have been growing at a faster rate than trauma has for a number of years. And at least as we've seen the information, but it's been very hard for us to break that data out With clear specificity because there's a significant overlap in our core accounts. The majority of our core accounts are both Emergent and scheduled procedures.

Speaker 2

And so we've put together some aided tools here that we can now break it out and give you some And the growth is actually multiple areas of scheduled procedures, but it is led by breast In OMF, those are both areas that we have, frankly, a little more history and longevity. And in particular, in breast, We've highlighted the tools that we've built that help with patient activation that we're now looking to expand into other areas of scheduled procedures And that we think that it will be impactful in those procedures. Other benefits actually of these scheduled procedures as compared to emergent trauma. And we're still very dedicated to emergent trauma. I don't want anybody to think that we're not.

Speaker 2

But there are some benefits that we've seen in the Don't drop in on the day or the day after an injury occurs or something that's scheduled weeks in advance. Patients have time to think about what's important to them. Surgeons can think about the algorithm that they're going to do and typically have a more repeatable algorithm of repair once they make a change. As you noted, they also typically have a higher average selling price of AxoGen products used in the procedures, A total case mix than what again a routine trauma would. Absolutely, the ExoGuard products are used in these We see multi unit sales in many of these procedures.

Speaker 2

So for example, in a breast reconstruction, There would typically be a long advanced graft as well as typically these surgeons do a connector assisted repair to So we do see AxoGuard and Avance used in our scheduled procedures.

Speaker 5

Great. Thank you for that. And I guess if we look at the new product, I think that was protected, but should we assume that that's again higher ASP and that Over time that that would be your core product, there wouldn't be a reason ever to, let's say, not use the one with Over time, Wither?

Speaker 2

Right now, we see that surgeons may have an application choice that they may We think plus is particularly targeted in areas where you need to have a lot of excursion of the nerve relative to the tissue around it, so around major joints. So an example would be a cubital tunnel repair, that's a decompression of the nerve right over your elbow. And obviously, you have a lot of movement as you move your arm in that situation. So the provides a nice gliding surface in the early stages of recovery as well as helping to separate the tissues. And then over time, just like in our classic AxoGuard nerve protector, The ActuGuard remodels into a sleeve around the nerve.

Speaker 2

And so we think there's a real application in places Like the cubital tunnel, but we think surgeons may choose to have the classic AXAGuard in places where they don't need that much excursion. And so for example, we see AxoGuard used frequently in our oral maxillofacial cases where there's not a lot of excursion of the Tissue and ExoGuard will be a fine application for that. The traditional ExoGuard protector.

Speaker 5

Got it. Thank you.

Operator

Thank you. Our next questions come from the line of Ryan Zimmerman with BTIG. Please proceed with your questions.

Speaker 6

Hi, this is Sam on for Ryan and thank you for taking our questions. You reaffirmed 2023 guidance at around 11% to 15%. What do you expect the overall market to grow into 2024? I know you're not providing formal guidance, but any color would be much appreciated. Thank you.

Speaker 6

Then I have a follow-up as well.

Speaker 3

Well, good question. But keep in mind for us, the trauma is really A function of human activity. It's not as if the number of traumatic procedures is going to increase any more Yes, then population growth. The real opportunity for us in this is not so much How much trauma might grow? It's the opportunity for us to utilize the data that we have in these new product launches that we have to capture more procedures And convert surgeons from direct repair or autograft repair to the AxoGen Algorithm.

Speaker 3

So it's less about the market and more about our ability with our data and products and our sales execution to convert that activity. And then on the scheduled procedures, look, I think we do see increases In breast reconstruction year over year, the number of mastectomies and reconstruction are growing at that rate. And but again, that's The overall population of those is going to grow, but our growth is really based on converting surgeon procedures, Training new surgeons, identifying patients and connecting patients with surgeons for these procedures.

Speaker 6

Thank you. That's really helpful. Then I would appreciate if you could provide some updates on the sales force Productivity and you indicated that independent sales agencies represented approximately 10% of revenues in the quarter. How should we expect that to trend over time? Thank you.

Speaker 2

Yes. We would expect about 10% for the independent agencies, and the primary growth will be the increased Productivity of our direct sales team. And we continue to see that. As we've continued to grow, we continue to be able to see Through execution, improved productivity of the sales reps.

Speaker 5

Okay.

Operator

Brian, were you all finished?

Speaker 6

Yes, those are all the questions for me. Thank you again.

Speaker 5

Okay. Thank you.

Operator

Thank you. Our next questions come from the line of Ross Osborne with Cantor Fitzgerald. Please proceed with your question.

Speaker 7

Hi, congrats on the quarter. Thanks for taking our questions for the incremental data points. So I'll just go and ask 2 quick ones. Would you be able to parse out price and volume growth in the quarter? And Are there any pricing dynamics we should be thinking about in the back half?

Speaker 7

And then my second question is, are you still seeing a trend toward the use of long

Speaker 3

Yes. First of all, on price, we've been running about, call it, 3% to 4% increase on price every Quarter and I think that range is probably appropriate in the near term. We do take We took a price increase in April of this year and we're seeing good uptake from that. We take a price increase every year. So we think as that increase annualizes and customers' accounts annualize, We'll continue to see that 3% to 4% range.

Speaker 3

And then your second question was about increase in AVANCE and Trauma. Yes, we're I think that's something we talked about last quarter where we said that Avance had gotten to the point where it was about 60% of our revenue, total revenue and previously it was slightly over 50% And a lot of that is attributed to again growth in these scheduled procedures as well as Growth in mixed and motor trauma procedures and more complex trauma procedures. And again stemming from As we get more surgeon uptake on the meta analysis, which really called out that an advanced Nerve Graft repair performs just as well as an autograft regardless of the length up to 70 millimeters and regardless of if it was a Sensory nerve or mixed and motor nerve. And we think as surgeons are beginning to understand that data, we're seeing surgeons who were Very good adopters of ours in the sensory nerves are now recognizing that they have an opportunity to offer this same benefit For their patients in mixed and motor category as well.

Operator

Okay, great. Okay. Thanks so much. Our next questions come from the line of Kyle Rose with Canaccord Genuity. Please proceed with your

Speaker 8

Hi, this is Caitlin on for Kyle Rose and thanks for taking the questions. Hi Caitlin. Hi. Just to start off, Why was validation delayed at the facility in the quarter? And is this something that really affects the margin cadence in the back half of the year?

Speaker 8

And then also given what other companies have called out, are you guys seeing any sort of supply challenges?

Speaker 2

The supply challenges I can touch on real quickly. I think our operations team has done a Phenomenal job of really trying to de risk our supply chain and make sure that they've looked ahead and worked with suppliers to make sure that we have a steady and sturdy supply chain. And so at this point, no, we're not seeing any Supply challenges that will affect production. They certainly have worked through, you name it, interesting things over the last 1.5 years, but nothing that I think is an interruption in what we're doing going forward. In terms of the facility, This is a big complex project.

Speaker 2

There were a lot of moving parts, and it just took a little longer than We had originally anticipated. We're excited to get started in the facility here in the next couple of weeks, and everything's going to be a quick go here. So happy with that. And in terms of the gross margin impact, it will kind of roll over both Q3 and Q4, 4, just given the timing of when we're starting, it'll have some effect in Q3, Q4. But again, for the full year, it'll end up still being around 80%.

Speaker 8

Awesome. Thank you so much.

Speaker 5

All right. Thank you.

Operator

Thank you. Our next question has come from the line of Chris Pasquale with Nephron Research. Please proceed with your questions.

Speaker 7

Thanks. Hey, guys. Karen, question around the schedule side of the business. I'm a little surprised that it's half the business, Frankly, I think that's bigger than we would have guessed. In the past, when you've leaned into really trying to maximize the growth opportunities in those scheduled Categories, you've had some bandwidth issues with reps maybe taking their eye off the ball on core trauma a bit and having a hard time balancing those 2.

Speaker 7

Do you think that you have the proper resources to really maximize both at this point? And how do you maybe avoid trauma getting the short end of the stick given some of the exciting opportunities in the scheduled piece?

Speaker 2

Yes. And that's a great question. And I think a number of years ago, we did have Some challenges, in particular, in OMF, and we certainly learned from that. So today, if I can remind you that today, we have a Specialty team that addresses the breast neurotization. Given the complexity of that technique, we've decided it still needs to have Specialists who address that with the surgeons.

Speaker 2

And as far as the full line reps who deal with both trauma, OMF, the surgical treatment of pain And compressions, that means that their call pattern is really focused on hand and plastic surgeons and the oral maxillofacial surgeons. That's their primary So they still have a focused Callpoint within our core accounts. And so far, we've been really pleased with their ability to balance all of those and Make sure that they're both supporting the planned cases in their core accounts as well as being available for emergent trauma where a surgeon needs to move through That algorithm. And they've been actually quite successful at seeing growth both in again OMF and pain as well as continuing To move through the algorithm adoption of the mixed in motor nerves. And so I think we've got the right formula here, and the right balance Resources.

Speaker 7

Okay, that's helpful. And then the BLA timeline looks like it's been pushed out by about 6 months. I think last quarter you were targeting submission by year end. Now we're looking at completing the submission in 2Q of next year. Is that all the facility?

Speaker 7

Or are there other issues that came up?

Speaker 2

Yes. Well, first off, I'll just remind, we're a little different than any other submission in that we are commercializing at the Sure that we are doing things in a methodical way. And one of the options that's available for a BLA submission is to do what's called a rolling submission. So you take The various modules and submit them on different dates, which allows you to space out the interactive Q and A session that you have with the Q and A session that you have with the FDA, so that you're not dealing with all the topics at once, but you might be dealing with clinical In one time period and then CMC in another time period and your non clinical in a different time period. And Just given the workload of that Q and A session, we decided it was prudent to go ahead and ask for a rolling submission.

Speaker 2

We'll get confirmation from the Following the pre BLA meeting that we have in the early part of 2024, but anticipating that they are Going to accept that. It would extend out the submission period, because of doing that rolling submission.

Speaker 7

Okay.

Operator

Thank you. Thank you. There are no further questions at this time. I would like to I'll turn the floor back over to Karen Zaderej for any closing comments.

Speaker 2

Thank you, Daryl. And I want to thank the AxoGen team, We've remained committed to our mission of improving nerve function and quality of life for patients with peripheral nerve injuries. We're happy with our

Operator

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and enjoy the rest of your

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