- Company Name
- AxoGen, Inc.
- Stock Symbol
- Class Period
- Purchasers of AxoGen securities between August 7, 2017 and December 18, 2018, including purchasers in the November 2017 and May 2018 secondary public offerings
- Motion Deadline
- March 10, 2019
- Middle District of Florida
The complaint charges AxoGen, certain of its executive officers and directors, and the underwriters of the Company’s November 16, 2017 secondary public offering (the “November 2017 SPO”) and/or May 9, 2018 secondary public offering (the “May 2018 SPO”) with violations of the Securities Exchange Act of 1934 and/or the Securities Act of 1933. AxoGen provides surgical solutions for physical damage or discontinuity to peripheral nerves. Its products include nerve allografts and extracellular matrices.
On November 15, 2017, AxoGen commenced the November 2017 SPO, in which it offered 805,000 shares of common stock at $21.00 per share, with the Company reaping net proceeds of approximately $15.4 million. On May 7, 2018, AxoGen commenced the May 2018 SPO, in which it offered 3.45 million share of common stock at $41.00 per share, with the Company reaping net proceeds of approximately $132.46 million.
The complaint alleges that throughout the Class Period, and in the offering materials for the November 2017 SPO and May 2018 SPO, defendants made materially false and misleading statements and/or failed to disclose adverse information regarding AxoGen’s business, operations, and prospects. Specifically, defendants failed to disclose that: (1) the Company was aggressively increasing prices to mask lower sales; (2) the Company’s pricing was alienating customers and threatening the Company’s future growth; (3) ambulatory surgery centers, which form a significant part of the market for the Company’s products, were especially sensitive to price increases; (4) the Company was dependent on a small number of surgeons that the Company paid to generate sales; (5) the Company’s consignment model for inventory was reasonably likely to lead to channel stuffing; (6) the Company offered purchase incentives to sales representatives to encourage channel stuffing; (7) the Company’s sales representatives were encouraged to backdate revenue to artificially inflate metrics; (8) the Company lacked adequate internal controls to prevent such channel stuffing and backdating of revenue; and (9) the Company’s key operating metrics, such as the number of active accounts, were overstated. As a result of this information being withheld from the market, AxoGen securities traded at artificially inflated prices of more than $56 per share during the Class Period.
On December 18, 2018, Seligman Investments published a report documenting allegations by former AxoGen employees regarding the Company’s business and operations, including that the Company had engaged in channel stuffing and backdating of revenue, that the Company’s payments to physicians relative to revenue created “elevated risks relating to pay-to-play and anti-kickback laws,” that a number of the Company’s active accounts may be overstated by a factor of ten, and that its “growth [w]as driven by unsustainable aggressive price increases.” On this news, the Company’s share price fell $6.17 per share, or nearly 22%, to close at $21.36 per share on December 18, 2018.