Small-Cap Institute’s Amanda Gerut interviews Axogen Corporation’s Karen Zaderej. Ms. Zaderej is chairman, CEO, and president of Axogen Corporation (NASDAQ:AXGN).

Axogen (AXGN) is the leading company focused specifically on the science, development and commercialization of technologies for peripheral nerve regeneration and repair.

Karen served as Chief Executive Officer and as a member of the Board of Directors of Axogen Corporation since May 2010 and as Chief Operating Officer from October 2007 to May 2010 and as Vice President of Marketing and Sales from May 2006 to October 2007.

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Transcript:

Amanda Gerut:       
Today, we’re talking with Karen Zaderej, from AxoGen Inc. Karen is the chairman, president, and CEO of AxoGen, which is a company specifically focused on the science, development, and commercialization of technologies that heal peripheral nerve injuries.

Peripheral nerves are the conduit for motor and sensation signals in your body, and when they’re injured you can lose function in your muscles, organs, and even sensory feeling. It can initiate pain when pain isn’t there. So, breast cancer patients who have gone through a mastectomy, people who have had their wisdom teeth removed and have suffered lingual nerve damage, and now have difficulty eating, drinking, and talking, nerve damage as a result of car accidents, or other trauma. That can all be a source of peripheral nerve damage. And AxoGen’s products have been used in thousands of surgeries at this point, including for soldiers injured in battle in Iraq, Afghanistan, and their use has expanded from 200 to more than 400 hospitals in the past two years alone.

Thank you for being here, Karen.

Karen Zederej:     
Great. Well thank you, Amanda.

Amanda Gerut:       
I think where I want to start is, you’ve been CEO at this company for nearly ten years, and before that you were COO, and VP of Sales and Marketing. Can you step back and talk about how you got into this field, and how you got to AxoGen, and to your role today?

Karen Zederej:   
I have been in medtech and biotech, all surgical related products for… goodness, many, many years, almost since college. I have a passion around helping patients with new therapies to really change their lives. And I found I could do that in healthcare. I got a lot of experience at J&J. They were just a wonderful training ground to learn, so everything from, I had run a worldwide business unit, I’d been in marketing, sales, business development, strategic marketing. But I also had experiences in product development and manufacturing. So, then a nice rounded background in healthcare and all the things it takes to both commercialize and the backend of how you get products to market. So, it’s a wonderful place to learn, but I really like doing new and different innovations in healthcare, and most of those happen in smaller companies, not so much organically in the bigger companies. So, I decided I would go ahead and leave J&J, although fabulous, fabulous company, but because I wanted to try something smaller and more independent.

So, I left and worked for a while as a consultant, which builds credibility with the venture capital groups that I would be with as a risk for them to bring into a small company to help run it. I did get introduced to AxoGen. I didn’t found AxoGen, but I was the sixth employee, so I joined before we even had a lab, to be honest. It was more of a concept, some patent applications and some early research done at the university. I saw the tremendous potential of helping patients and peripheral nerve injuries, and just saw it as a need, so I was excited to join the company. Called my very understanding husband and said “Hey, I think we need to move to Florida and join this company” after I’d met them and talked to them about consulting, and decided I would come down and join them. So that’s how I got started.

Amanda Gerut:       
So, you were at J&J, you were at Johnson and Johnson, for more than ten years am I right?

Karen Zederej:   
Yes, it was about 17 years. Yes. Yes.

Amanda Gerut:       
So, the decision to leave Johnson and Johnson at that point and start your own consulting firm, what made you make that leap?

Karen Zederej:   
Well, I don’t think it was difficult for me because, maybe how I’m wired? I’m not particularly risk-adverse. I know I had an awful lot of friends who called me from Johnson and Johnson as I was deciding to leave and then announced it, then gosh, what’s it like out there, away from J&J? And I would ask them what’s most important. If they mentioned pension in their top three things, I told them they should really stay. You know, it’s a great, great company with about as secure a growth path from a career progression standpoint as I think you can probably get. It’s perfect for the right person, but for me, I get motivated by changing things and really building things. You can see the direct impact of what you do in these small and midcap companies much more. That was more motivating to me, so for me, it wasn’t a point I came to and decided it was the right thing for me. Both for me an J&J frankly. We worked out a timeline that was good for me to go.

But I wouldn’t say that’s right for everyone. On the other hand, I have a lot of small company people say should they ever go to a big company, and I actually do think it’s good to go back and forth. At a big company, you get the fundamentals and the training that small companies don’t always have the bandwidth to be able to do. So I appreciate the time I was there, and I certainly learned a tremendous amount. But for me the small company is where I love, and I want to stay forever. I don’t really want to go back to being at J&J. I want to be in these smaller midcap companies.

Amanda Gerut:       
So, what was it about AxoGen? Was it the technology, was it the people?

Karen Zederej:   
Definitely both. First was the technology. And I had looked at nerve repair at J&J. When I was in business development, one of the things we did was assess new products to bring in and purchase. To bring in to Johnson and Johnson. And I had done a pretty broad assessment of peripheral nerve repair. I couldn’t really find anything that met the need to really solve the problems that surgeons were facing. So, we sort of wrote a report like you do, and you put it on the shelf, and said well, this isn’t just something for someday, but we’re not going to go forward in it.

Many years later, I see the lab results from what AxoGen had first developed. So again, a very small scale. But this is ground-breakingly different than anything I’d seen and was going to be able to solve this problem that surgeons had in peripheral nerve repair, where when there’s a gap between the two nerve ends, they don’t really have a way to repair that, and what they end up doing is they do a transplant]. They take a nerve from somewhere else in the body, and they transplant it. And that means you always have to lose something to get something. Some function back that’s more important to you. That’s kind of a fundamental problem in medicine, is that they’re doing harm to fix something else. And the first premise of medicine is do no harm.

And so when I saw these amazing results for AxoGen, I thought this would be great opportunity to really change healthcare. But the fit in the culture and with the team is I think equally important. Actually that very first dinner with the founders, we sat at a restaurant and hit it off. And actually it was a restaurant that had these paper tablecloths, which I wish we’d saved. We drew all over the tablecloth. And kind of mapped out the future of the company over dinner. But it was in that dinner that we realized that we just had a like-mind about both what the potential was, but also we have a very strong data-driven premise that we believe that certain decisions be grounded solidly in the science and clinical evidence, as you want to change healthcare. And from that dinner, we had a partnership. So, it was really just an instant connection in terms of how we would go forward.

Amanda Gerut:       
Okay. So, when you started at the company, was your role sales and marketing, or was it broader than that, given the fact that the company was small and looking to grow?

Karen Zederej:   
When you’re a tiny company, people have titles. Because my title was VP of Sales and Marketing, but I worked in the lab and washed glassware, and prepared nerves, and shipped things. You do whatever you need to do when you’re a company of six or eight or 10 people. It isn’t about the title, it’s about making sure that we achieve our milestones and continue to move forward. We were venture capital milestone-based, and so everybody was really focused together on achieving them. I started with my title as VP of Sales and Marketing. Like I said, did everything from our commercialization plans to paying bills and emptying the trash. Then as we grew, took on the title of Chief Operating Officer, and then ultimately CEO.

Amanda Gerut:       
It would be great to talk a little bit about how AxoGen became public through the merger. And why the company decided to go that route versus any of the other options on the table.

Karen Zederej:   
Sure. So, I need to go back and say in the time period this is happening. We were venture capital-backed. We received our first venture capital funding in 2006, and were really ready for our big, more commercial product launch to a selective group of surgeons in 2008, just as the recession hit. And so unfortunately, our VCs recognized the recession was going to take a while, and decided they were going to prioritize their funds going to their companies that were already commercial. Which meant we thought we had committed tranches as we commercialized, and there was no money. So we had to do some serious cost-cutting during the recession. We basically tightened our belts and said we’re just going to keep on going to try and build our of proof of principal on very limited capital. With a few territories that we set up with sales associates, so we can then show investors in the future that we have a model that will work.

Obviously everything about raising money is about reducing risk for the investors. We also brought in some independent agencies and distributors to help us in selected territories where we had clinical studies going. And we managed the company that way for several years. Then towards the end of the recession, in 2010, we thought we’d see if we could raise money. What we found is we were a really interesting company for the VCs. We’d raise money in creative ways through the recession, predominantly going to high net-worth individuals, and asking them to make a direct investment in the company. But honestly, I was running out of high net-worth individuals I could talk to about investing in the company. So, we really had to find some sort of funding. We already had venture debt in place, so we used that avenue.

When we were talking to the VCs, it became apparent that timing might be an issue. While they were interested, they couldn’t guarantee a time period that they would close, because they had to close their fund first in that process. I was introduced to the CEO of the company. It was a public company. They felt that their intellectual property was being infringed on. They litigated, and they ended up with settlements and awards. They were a public company with no products. We were a private company with great product, but no money. And it just seemed like a solution that we should merge. Which is how we came to doing our reverse merger. It was a funding event. But while I’d like to say it was a grand strategy, it was more opportunistic than it was a grand strategy. To say this is a way that we can get capital and move to the next level.

Now in hindsight, I would say that there is some strategy. But when you’re VC-funded, you also have to think about the life of their fund. And I’ve seen a lot of companies get into a bind where the VCs need to exit, and if the company is not in a position where it can go public, the only other viable exit is to sell the company. And they try and drive that sale price, but they may not be able to wait until you’re able to maximize that sales price. Without forcing a sale of the company, allowing us to build the value of the company and continue to grow.

Amanda Gerut:       
So there’s a lot there that I just want to flush out a little bit more, Karen. Going back to 2008, what was that like?

Karen Zederej:   
Painful. The direct conversation with the VCs went something like at our milestone, we’re ready for the next tranche of money. We’ve built our inventory for launch, so that’s actually how we got into building a manufacturing process and the VC said yup you’ve done everything that we asked, and there will be no money. So we’re already at a low point in cash. Finding out that there is no next influx of capital. We had to make some very tough, very, very tough decisions. We’re a small, close-knit team, and I laid half the people off. We closed the manufacturing facility we had just qualified. Because we built all this inventory and I had nobody to sell it. So we said well, we’ve just put money on the shelf. I can’t maintain the manufacturing operation. So we actually shuttered that, decided to, and actually with a partner who actually very nicely agreed to store our equipment for a while. So they did do that. So that was nice.

But we were still in a situation where we had to pick only the very most important things to keep the business going. And then it was a lot of again, a team of people who banded together to say, nope this is something that’s worth doing. And we’re going to stick it out. And I was very transparent and up front with the team. And regularly talked about how much cash we had until we’d be bankrupt. That was actually a conversation we would openly talk about in the office. Because I knew everybody was speculating on it, so we might as well just talk about it. And people stuck by the team. I only asked to say if you are thinking about leaving because you feel you need to, to protect your family and your house, then just please tell me. So that we’ve got a little bit of a lead time and we can plan. But almost everybody stayed. They felt again that it was something worthwhile that they were willing to do. We all worked really, really hard, in an environment of lots of uncertainty. But at the same time, I think built the foundation for the work that we’re doing today, and did it. An amazing feat that we accomplished.

We didn’t have very much money, but I gave the clinical team, I think it was $250,000 and said okay, I need you to go out and start a clinical study. Now for those of you who do clinical studies, that sounds like a lot of money until you realize clinical studies usually cost millions of dollars. They figured out a way to put together what is now one of our most foundational data sources. We call it the Ranger study. That now has over 1,700 nerve repairs that we tracked outcomes, and looking how surgeons utilize the implants that we have in various types of nerve injuries. And it’s been an extremely strategically important part of our building our business. And it’s something we actually started during that time period. 2008 and we had no cash, but we felt that was important enough we’d invest in it.

Amanda Gerut:       
How were they able to magically make the $250,000 turn into a clinical study?

Karen Zederej:   
Yeah, it is, so it’s some really, really hard work thinking about clinical trial design. And working with investigators where we went and said you really have no data here. And we want you to partner with us. Especially in the early days, we would not, we basically paid for data management, which meant that the people that house the data and manage it and make sure that it’s secure, and nobody’s playing with the data. But we didn’t pay for data collection, which meant at the site, the hospital and the surgeons basically had to do it on their own time. They also were very interested in this unmet need, and were willing to chip in and basically partner with us to see if we could create something, and so it was a shared partnership of building something that everybody needed.

Amanda Gerut:       
When did the company decide to take the step of going to high net-worth individuals to help finance what the company was doing?

Karen Zederej:   
As soon as I heard the VCs that currently were investing in the company really couldn’t put money going forward into the company. To continue to fund us. You have to look around and think of where can I get capital? You know, it’s not an exhaustive list. You can go to angel networks, you can go to high net-worth individuals, if you’re wealthy, you can go to your own bank account, your friends and family. You can do different types of debt. In particular venture debt in the very early stages. So we did venture debt. That was one thing we did and made sure we had right away, some terms that would give us some money to move forward. And then I also had checked down the list and said well, environmentally, my hypothesis was that high net-worth individuals were probably not really happy with their money managers right then, because they’d all lost money in the market, and that they were taking a more active role in their management of their funds. So they would be receptive to talking to me.

And I wanted to make sure that I also went to people who were interested in healthcare and somewhat knowledgeable about healthcare. This was as much about doing something that was good for patients as it was making an investment in an emerging company. And at that time, again going back to what was happening then, the Iraq and Afghanistan wars were going on, and wounded warriors were coming home with devastating nerve injuries, and no options for repair. And because of the extent of their injuries, there weren’t enough nerves to transplant to even fix what they had. The military was finding the solutions that we had just a game-changer for these wounded warriors.

And so that was also impactful for these high net-worth individuals, who really felt that they were doing something both to help and make an investment in a growing company, and to help the advancement of this in healthcare, but also more specifically to advance the medical treatments for these wounded warriors. So, they were receptive to that. That was the approach that we ended up taking. I tried to get introduced to as many people as I could. I in particular had some board members who were very helpful introducing us to a number of people who then introduced us to more people. And that’s how we ended up doing a lot of the funding of the company.

Amanda Gerut:       
So did you ever have doubts during that period? Did you ever have any emotional exhaustion or did you just keep your head down and plow through?

Karen Zederej:   
I am more of the personality type that just says nope, we’re just going to get it done. We’re going to go in and fight and survive. And so I didn’t dwell on doubts. I was more concerned about making sure that I resolved the doubts of our team. So that’s why I said my style was to be very transparent, very open, very clear on our direction. Very clear on what we could and couldn’t do. Again, we were really structured on where we spent money, because every penny had to be useful. We didn’t have any pennies that were extra. Every penny had to be useful. But I really didn’t have doubts. I really, truly believed that we had something distinct and unique, that would be successful in the end. And that it was on me to just find the path and solve it.

It’s interesting. I’m an engineer by training. I’ve never, to be honest, been an engineer. But I think still engineering teaches you a thought process and a belief that every problem has a solution. There was a solution. I just had to find it. So I didn’t dwell on doubts. I was more focused on where’s the solution.

Amanda Gerut:       
So then fast forward to September 2011, with the merger. You’re now a public company. Did you have any previous experience with the capital markets or running a public company?

Karen Zederej:   
No. I just knew, from talking to everybody I talked to, they said, wow, public companies, those are really hard. But I didn’t even know what hard was. So to try to educate myself, I called about a dozen CEOs of small-cap public companies who’d recently moved into the public markets. And asked them about what they had learned in that transition. What they would have wished they could have done differently. And what were the watch-outs. It was very helpful to me. I first of all really appreciate peoples’ generosity. I’ve always found people are willing to teach and help the next generation behind them. And so these folks were just really generous to give me a little bit of their time and tell me things to think about. And informative. I think some of the things that they said was you have been really focused on building your business and surviving. Now you’re going to need to be thinking about quarterly results. About telling people what you’re going to do, and then doing what you told them.

And that’s just a different cadence of how you operate than what you’ve done, a private company. They also said that there will be a change for you as a CEO, but it’s also a change for your whole staff. And not everyone will make that journey and that leap. That’s actually what we found as well, was that is great for some people, very comfortable, and other people come back and go you know, I don’t like this. People have to decide whether they fit. And not everybody who’s been in the private market is going to survive.

So those were all changes that we had to weather through. Now I had one tremendous benefit in that the CEO of the company we merged with, was an SEC attorney. So a huge leg-up for me because he basically taught me the rules of being a CEO of a public company. Because I really had just no idea what you could and couldn’t do. I sort of, you know, the layman’s perspective of things you could and couldn’t do. But then there weren’t really the understanding of what you really have to do or how things get done. And so Greg Freitag was originally going to do this merger and then go off to some other deal, and I asked him to stay on as our general counsel. So even as a very small company, he joined our team as an in-house general counsel, which I think … and would advise other people following down this path. If you don’t have the public market experience, have in-house SEC general counsel who can help you make that transition and teach what that means.

Greg is still with us as our general counsel, but he’s been my partner since the merger in understanding the capital markets and really training the team on the aspects of the market-facing activities.

Amanda Gerut:       
Can you talk a little bit about Greg’s lessons or tips that he gave you? Or the things that he was sort of pointing out to you and the team?

Karen Zederej:   
One of the things that I struggled with is like well, I don’t know, there’s all these rules about what I can and can’t say to educate the investment community about us. We’re in a market they’ve never heard of, in a company they’ve never heard of, and they want to know more about us. Yet, I don’t understand what I can and can’t say. It was a good schooling to think about obviously talking about results that have already happened, so the prior quarter that you’ve already talked about. Or enthusiasm and emotions about the future. But not, you know, think about very specific guidance and no other numerical comments. Which is different than the way you talk with VCs. With VCs, they’re very forward-looking, and you’re giving almost a strategic plan overview with them. And so I had to adjust how I communicated to the potential investment community to what the public markets would expect and what would be the norm.

So that was very helpful for Greg to do that. We also spent time talking about what’s the right level in tiers of investors that we should be talking to. At that time, again we’re a sub-three-dollar stock. So many firms, their compliance office doesn’t want them to provide equities for their below three dollars and below a hundred million dollar market cap. So you have to understand who you’re interacting with, and whether they’re actually just interested for someday in the future, or they’re able to be involved and trade in the stock now, and whether that’s going to fit into their investment plans. And so, just from a use of time standpoint, Greg when having us think about who are we interacting with and are they short-term, are they long-term, and what’s the right mix.

Amanda Gerut:       
Was this sort of on-the-job kind of learning? Or was there anything else that you had, anyone that you maybe had in your corner who really sort of helped you hit your stride?

Karen Zederej:   
I think a lot of people have helped along the way. There have been several people I think that were helpful to help me frame in my mind what we should be positioning to the marketplace. One of the early investors, he left and went to another firm, and actually a quant-fund, so it’s not something that would invest in AxoGen. Ultimately, he became an advisor to us to help me, I’m more of a marketing person, so I want to know, how does my audience think? What is it that is a motivator or drives them? I think like a marketing person, but in the public markets you can’t always go ask that question. Well now I had a real-life person. I could go say well, I think like this, things like that. Don’t say that, that just sounds risky. Oh realized it sound risky. So he would give me real feedback about how investors, again at different levels of funds, how they think and how they hear information when you communicate it. It’s really helped us own our messaging.

And then another person who came in, one of our analysts. Joined our firm as our VP of IR, Kaila Krum, and Kaila was very helpful because she could take that perspective of someone who’s with lots and lots of companies, has talked to lots of companies, has written about lots of companies, and can help again, help us shape our message and our context so that people will hear what we want them to understand.

Amanda Gerut:       
Okay I want to get into some more nuts and bolts. Specifically about sort of small-cap life sciences companies. Obviously a key issue is the fact that it costs a lot of money to get a treatment or a drug approved. Which usually means a lot of financings that can really impair the capital structure. Can you talk about specifically what helped you avoid this fate?

Karen Zederej:   
I think it does take, healthcare in particular, takes a lot of capital to get to cash flow break-even because of all of the work they have to do on the development side. And then a fairly long tail in commercialization and change in particular in surgery and surgeons’ behavior. And so you have to think about your capital usage, and first of all, internally be very structured in prioritization. Good, creative small-cap companies often have many more ideas than they actually execute on. And so you’ve got to make sure that as a company, you’re clear on your goals, and what you’re trying to accomplish, and that you invest internally your activities, both head count and dollars, in the things that support those goals. Rather that interesting things that may suck capital.

And then I think it is understanding and thinking about how you’re going to raise money so that you are continuing to do this in a way that adds value to your existing investors. So you’re really thinking about evaluation raise as you go along. And for us, our real inflection point was in 2015. We were pretty cash-starved. So we did the reverse merger in 2011. We up-listed to NASDAQ in 2013. So it’s sort of pseudo-IPO. And we did that in 2013. But it was still a very small raise overall. And in 2015, a couple of things happened. We did a public raise. But we had couple of investors that came in that I would consider to be more signal investors to the rest of the investment community. Deerfield in our public raise then also brought in the public market. And then Essex Woodlands came in and did a pipe in the latter part of the year. Both of those are firms that I think a lot of other healthcare investors want. And look to see what they’re investing in because they do a tremendous amount of due diligence. They’ll print you what the technology is and the risks are, and the management team, and the market opportunity. They interview surgeons, they do market research. And when they’ve done all of that, I think it gave confidence to much of the other investment community that there’s something real here.

Again, in a market nobody’s heard of, and in a company nobody’s heard of. And so when Essex Woodlands did their investment shortly followed after the Deerfield investment, we went from this sort of three-dollar stock to above a five-dollar stock. And then started on a nice trajectory of growth, both delivering from results, so we continue to deliver good growth, but also with confidence from investors being able to look at some thought leaders.

Amanda Gerut:       
So can you talk about that period from 2011 until mid 2015 and sort of you know, what the company was working on during that period, and what your mentality was with regards to the capital markets and how to interact with investors?

Karen Zederej:   
Well we were pretty small in 2011. And so the most important thing in the 2011 timeframe was to show that we could get reproducible commercial results. So again, if you remember, I’d said we had literally three territories. So that’s really small. And so in 2011, we scaled up to 10 territories, which is still really small. It’s very hard to get consistent results when you have such a small number of territories. If somebody goes on vacation, you actually see it in the sales results. You really, you could get a little bit of scale and a little bit more consistent pipeline from a commercialization standpoint, to stop risk of ups and downs that are not representative of the overall curve. And so we focused 2011 to 2013 really zeroing in on that commercial execution and making sure that we were really hitting the ground running with that.

During that time period, we also added a couple of important products. We had recognized the advanced nerve graft, which is our flagship product, the one for the gaps between nerve ends; which is a phenomenal product, but there are times that surgeons have a different problem. They may not have a gap between the nerve ends. And we introduced the Axoguard Nerve Connector. We’d done some development work before that, but we finally have enough commercial capability to get that into the marketplace. As well as the Axoguard Nerve Connector. And those were important additions to the … now we have full algorithm as with commercializing, we’re not coming in just trying to sell them something. Help them solve whatever problem they may have. And we had a nice array of solution sets with the three products to be able to help surgeons with virtually all of the things they would run into in injured peripheral nerves.

And then 2013 to 2015, we started to think about now how do we scale not just our commercial activities, but the whole company. And as companies obviously grow, everything grows. Your manufacturing grows, you want to invest in product development, you start to think about clinical applications. And so we started to think about expanding into additional market applications. We made the choice to bias our emphasis initially in our pocket applications because it’s faster to market the new products. We now do both in our pipeline. But we could take our existing products and apply them to nerve injuries in areas beyond trauma.

So we started in oral maxillofacial surgery. That’s where a patient’s in oral surgery, like in a dental procedure where the nerves are injured and the patient is permanently numb on that half of the mouth. And it can happen in wisdom tooth extraction, in putting in dental implants, in mandible reconstruction, or a variety of other types of procedures. Very small percentage. I don’t want to scare everybody that it happens all the time. But often enough that there’s a real need to help these patients return to having sensation.

And so that was the first expansion area that we’ve moved into beyond the traumatic injuries. And we felt that it helped to stroke again a proof of principal that nerves are injured all over the body, and we started in one segment, but we could start to expand into other areas by taking our, again our existing products just to a new user-base. And teaching them nerve repair.

We also started to think about how do we cross the chasm? So crossing the chasm is a long process. But it’s a philosophy that markets change with innovators and early adopters first trying a product. But the big middle are hesitant to do something until that they know it’s proven. That the bugs are worked out. That there’s not going to be concerns. That’s it’s going to be paid for. That there is a reimbursement in healthcare, and that it will be reimbursed. And frankly that it’s not something experimental. It’s got to be normal. So we work to start to build the foundational elements to be able to be ready to cross the chasm to the middle adopters. And that was a big piece of work that we started to put in place, and frankly, we’re still working on. That’s a stage we’re at, is how do you get through the chasm and to the middle adopters.

Amanda Gerut:       
And one of the other issues that it seems that a lot of life sciences companies get stuck in is, you know, selling their product, ramping sales, getting into enough channels, while not blowing through cash. Can you talk about how you were able to avoid that?

Karen Zederej:   
Yeah. That’s the most important thing, you don’t run out of money. We’re very clear about that. That is how companies fail. And a lot of healthcare companies fail, frankly, because they run out of capital. So we were really cognizant of that. And said, actually our first priority is patient safety, and our second priority is don’t run out of money.

We planned. Again, I would say, I give credit to the team that we’ve learned to do without on a lot of things. Any anything that we do, we figure out what we want to do, and then we figure out what’s the most efficient way that we can get to that endpoint. So that’s a balance of spend and quality of output. So we don’t want to be so inexpensive that you don’t get a robust, for example, a robust clinical study, that doesn’t do any good. Or an education event that isn’t impactful. You’ve got to be able to spend enough money to do that, but without going over the top and spending money needlessly.

We also believe in certain things. We have a list of from a culture standpoint, we have a list of things we call our AxoGenic values. It is the how we work, and it is, it pretty much means head down, run in hard towards our objectives. Working together as a team, but also passionate debate to resolve issues so that we resolve them in the best way. But actually, then finally, one of our values is fun. So periodically, we actually shut everything down in the company and we have a fun day. Which is not particularly a lot of money, but it brings everybody together and reminds them that we’re still working together as a team cross-functionally and towards the same goal. And even though it at times feels like we’re in a dead run to get to that objective, we can still pause and interact together really as a group.

And I think that makes a difference. I think that keeps the team aligned and focused.

Amanda Gerut:       
Can you talk about your board, Karen, and the individuals that make up the board. I saw that there were a couple of new directors added. Can you talk about how you found them, and basically, how you just get the most out of this group of people?

Karen Zederej:   
The board’s an important part of our success and our business process. I use the board as our sounding board and advisors. They still have a fiduciary responsibility for the shareholders, but they are also an advisory to us. And we try to use their strengths both collectively and individually to help advise decisions that we’ll make. And so when we look at the board makeup, we as a board think about what are the skill sets that we want to make sure are there. So that a voice is represented. So for example, we’ve added Alan Levine as the CEO of the hospital system, to help bring that voice of the provider into our thinking and decision-making. Hospitals buy our products. They’re the ones who actually purchase them. Surgeons use them. But hospitals buy them.

And I think that will be a very helpful voice as we think about our trajectory forward. So I found the board to be a really wonderful sounding board. We want to make sure we have people with good operational experience. But also make sure that we bring in the governance perspectives so that we’re keeping a close eye on risk. From an operating company to be focused on what your goal is and not be thinking of extra things around you. We want to make sure that we have the right governance structure so that we’re thinking about the environmental risk and making sure that those thoughts are inserted into the operating strategies that my team is putting together. To just make sure we have a perspective on it and that we’re prepared where there might be things that could derail a plan. Things not of our making, right? The market could go south, what would we do? Do we have a plan?

And so those are the sorts of things that I’ve found the board to be very helpful in, is making sure that they have to think about things in a different way than we would and use their experience to make us better.

Amanda Gerut:       
Is there anything that you’ve done as a CEO that you would want a do-over on?

Karen Zederej:   
Yeah, there’s probably always those things. Little things that I would do over again. The hardest thing for me as a CEO has been hiring mistakes. When you hire somebody, especially at the senior level team, it’s a big decision. You’re really counting on them being able to integrate well and gel with the team and use their expertise to help the process forward. And that works great when it works great. Unfortunately, if you’ve made a mistake in hiring, it can really be disruptive to the team. And that’s probably the thing I find the hardest, is when we brought somebody who just doesn’t fit into the team. Fortunately we haven’t had a whole lot of that, so that’s been good. That we for the most part have had a phenomenal group of people that we’ve brought in. But where somebody hasn’t fit in, it’s something I wish we’d figured out ahead of time. That’s probably the biggest thing.

I think overall, I’m pretty happy with the trajectory that AxoGen has been on. Notwithstanding that we had to survive the recession. But that wasn’t of our making, and we survived it. But beyond that, I think we’ve really made some good, solid choices. I don’t think I have regrets on the choices we’ve made.

Amanda Gerut:       
With that note, Karen, thank you so much for being with Small-Cap Institute. It’s a pleasure talking with you.

Karen Zederej:   
Oh thank you very much. I enjoyed the conversation.

Amanda Gerut:       
For anyone who wants more background on these technologies, there’s a lot more information on the company website, www.axogeninc.com.