What happened

Shares of AxoGen (AXGN 6.35%), a company recycling cadaverous nerve tissue, fell 24.1% during Monday's session. The company issued a preview of the year to come, and it wasn't what investors wanted to hear.

So what 

AxoGen released a preview of its fourth-quarter and full-year 2018 earnings report. More than a decade after launching its nerve graft products, they're still a tough sell. The company expects to report $83.9 million in total revenue for 2018. That's a 39% gain over 2017, which is a bit embarrassing when you consider the company also increased its number of direct sales reps by 42% in 2018.

Downward sloping chart hovering over a hand.

Image source: Getty Images.

In 2019, management expects total revenue to grow by at least 35% over the 2018 figure, but that failed to soothe investors because the company also plans to increase the number of direct sales reps by at least 35% in 2019 to get there.

During the first nine months of 2018, sales and administrative expenses worked out to 96% of revenue during the period, which doesn't leave anything for the bottom line. The company lost $17 million during the first nine months of 2018, and it looks like investors can expect further losses ahead. 

Now what

The Avance Nerve graft is cadaverous nerve tissue that's been modified enough that the Food and Drug Administration should require it to pass the same review process undergone by all biologic drugs, but it's essentially been grandfathered in while AxoGen runs the necessary clinical trials. The company began enrolling patients in the Recon study in May 2015, and investors were expecting results within three years. 

Instead of outcome results, AxoGen included another open-ended delay in its earnings preview. The company set out to enroll 150 patients in the Recon study when it began in 2015. Investigators have since raised the target enrollment number to 170, and they're still two subjects shy of complete enrollment. The study will follow patients for an entire year, so we won't be seeing Recon study results until 2020 or later.

An FDA approval could make it a lot easier for AxoGen to sell its products. Until the company appears serious about making it happen or shows signs of moving toward profitability, this stock is best avoided.

Check out the latest AxoGen earnings call transcript.