Axogen Shares Fall After Upsized $124 Million Stock Offering
The nerve repair specialist plans to use the proceeds to repay debt and fund growth, a move that will dilute existing shareholders.
Shares of Axogen, Inc. (NASDAQ: AXGN) declined in recent trading after the medical technology company announced the pricing of an upsized public offering of common stock. The company, which specializes in surgical solutions for peripheral nerve repair, priced 4 million shares at $31.00 each, raising gross proceeds to approximately $124 million before underwriting discounts and commissions.
The offering represents a significant capital raise for the Alachua, Florida-based firm and a dilutive event for its current shareholders. The newly issued shares account for a notable increase in the total shares outstanding, which stood at just over 46 million prior to the announcement. The stock, which had been trading near its 52-week high, saw a negative reaction as the market priced in the impact of the new supply of equity.
Axogen has outlined a clear strategic purpose for the infusion of capital. According to company announcements, the primary use of the net proceeds will be to repay and terminate a term loan facility with Oberland Capital. The remainder of the funds is earmarked for working capital, potential capital expenditures, and other general corporate purposes, providing the company with enhanced financial flexibility.
This move to shore up the balance sheet comes as Axogen is in a phase of significant growth. The company has seen its quarterly revenue grow by over 23% year-over-year. By eliminating its debt with Oberland Capital, Axogen can reduce interest expenses and improve its profitability profile, a move often favored by long-term investors. However, the immediate trade-off is the dilution for those currently holding the stock.
Prior to the offering, Wall Street had shown strong support for Axogen. Based on data from market providers, the company has a consensus 'Buy' rating from analysts, with nine analysts recently covering the stock giving it either a 'Buy' or 'Strong Buy' recommendation. The average analyst price target sits at $37.00, suggesting upside from its current levels even after the offering-related dip.
The offering is being managed by a team of investment banks, with Wells Fargo Securities and Mizuho Securities serving as lead book-running managers, indicating solid institutional interest in the deal. The company is capitalizing on a strong market position and a stock price that has more than tripled from its 52-week low of $9.22.
Investors will now watch to see how effectively Axogen deploys its strengthened balance sheet to further penetrate the market for nerve repair. The company's proprietary products, including the Avance® Nerve Graft, are used to treat injuries across the United States. The additional working capital and financial runway afforded by the offering could accelerate its commercialization efforts and research into new applications for its technology. While the offering creates short-term pressure on the share price, the long-term strategic benefits of a debt-free balance sheet could position Axogen for sustained growth.