Axogen, Inc.AXGN
Axogen, Inc. Fair Value Disclosure
Fair Value Measurement
The following tables represent the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of the periods presented:
| December 31, 2025 | |||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market funds | $ | 28,255 | $ | — | $ | — | $ | 28,255 | |||||||||||||||
| U.S. Treasuries | 5,980 | — | — | 5,980 | |||||||||||||||||||
| Total assets | $ | 34,235 | $ | — | $ | — | $ | 34,235 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Debt derivative liabilities | $ | — | $ | — | $ | 3,886 | $ | 3,886 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market funds | $ | 19,399 | $ | — | $ | — | $ | 19,399 | |||||||||||||||
| U.S. Treasuries | 5,928 | — | — | 5,928 | |||||||||||||||||||
| Total assets | $ | 25,327 | $ | — | $ | — | $ | 25,327 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Debt derivative liability | $ | — | $ | — | $ | 2,400 | $ | 2,400 | |||||||||||||||
The changes in Level 3 liabilities measured at fair value on a recurring basis are as follows for the periods presented:
| (in thousands) | Debt Derivative Liabilities | ||||
| Balance, December 31, 2023 | $ | 2,987 | |||
| Change in fair value included in net loss | (587) | ||||
| Balance, December 31, 2024 | 2,400 | ||||
| Change in fair value included in net loss | 1,486 | ||||
| Balance, December 31, 2025 | $ | 3,886 | |||
There were no changes in the levels or methodology of the measurement of financial assets or liabilities during the years ended December 31, 2025 and 2024.
The debt derivative liabilities are measured using a ‘with and without’ valuation model to compare the fair value of each tranche of the credit facility the Company has with Oberland Capital and its affiliates, TPC Investments II LP and Argo LLC (“Credit Facility”) including the identified embedded derivative feature and the fair value of a plain vanilla note with the same terms. The fair value of the Credit Facility including the embedded derivative features was determined using a probability-weighted expected return model based on three potential settlement scenarios for the Credit Facility included in the tables below. The estimated settlement value of each scenario, which would include any required make-whole payment (see Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees), is then discounted to present value using a discount rate that is derived based on the initial terms of the Credit Facility at issuance and corroborated utilizing a synthetic credit rating analysis.
The significant inputs, as of the periods presented, that are included in the valuation of the debt derivative liability - first tranche include:
| Input | December 31, 2025 | December 31, 2024 | |||||||||||||||
| Remaining term (years) | 1.5 years | 2.5 years | |||||||||||||||
| Maturity date | June 30, 2027 | June 30, 2027 | |||||||||||||||
| Coupon rate | 9.5% - 13.0% | 9.5% - 13.0% | |||||||||||||||
| Revenue participation payments | Maximum each year | Maximum each year | |||||||||||||||
| Discount rate | 11.23% | (1) | 12.22 | % | (1) | ||||||||||||
| Probability of mandatory prepayment after 2025 | 10.0% | (1) | 15.0% | (1) | |||||||||||||
| Estimated timing of mandatory prepayment event after 2025 | March 31, 2026 | (1) | March 31, 2026 | (1) | |||||||||||||
| Probability of optional prepayment event | 80.0% | (1) | 5.0% | (1) | |||||||||||||
| Estimated timing of optional prepayment event | January 31, 2026 | (1) | December 31, 2025 | (1) | |||||||||||||
Probability of note held-to-maturity (2) | 10.0% | (1) | 80.0% | (1) | |||||||||||||
__________
(1)Represents a significant unobservable input.
(2)See Maturity date in table.
The significant inputs, as of the periods presented, that are included in the valuation of the debt derivative liability - second tranche include:
| Input | December 31, 2025 | December 31, 2024 | |||||||||||||||
| Remaining term (years) | 2.5 years | 3.5 years | |||||||||||||||
| Maturity date | June 30, 2028 | June 30, 2028 | |||||||||||||||
| Coupon rate | 9.5% - 13.0% | 9.5% - 13.0% | |||||||||||||||
| Revenue participation payments | Maximum each year | Maximum each year | |||||||||||||||
| Discount rate | 14.49 | % | (1) | 15.48 | % | (1) | |||||||||||
| Probability of mandatory prepayment after 2025 | 10.0% | (1) | 15.0% | (1) | |||||||||||||
| Estimated timing of mandatory prepayment event after 2025 | March 31, 2026 | (1) | March 31, 2026 | (1) | |||||||||||||
| Probability of optional prepayment event | 80.0% | (1) | 5.0% | (1) | |||||||||||||
| Estimated timing of optional prepayment event | January 31, 2026 | (1) | December 31, 2025 | (1) | |||||||||||||
Probability of note held-to-maturity (2) | 10.0 | % | (1) | 80.0 | % | (1) | |||||||||||
__________
(1)Represents a significant unobservable input.
(2)See Maturity date in table.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Mar 5, 2024 | |
| 2022 | Mar 14, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 24, 2020 | |
| 2018 | Feb 26, 2019 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.