<SEC-DOCUMENT>0001193125-13-308176.txt : 20130930
<SEC-HEADER>0001193125-13-308176.hdr.sgml : 20130930
<ACCEPTANCE-DATETIME>20130729215858
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001193125-13-308176
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20130729

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AxoGen, Inc.
		CENTRAL INDEX KEY:			0000805928
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845]
		IRS NUMBER:				411301878
		STATE OF INCORPORATION:			MN
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		13859 PROGRESS BLVD.
		STREET 2:		SUITE 100
		CITY:			ALACHUA
		STATE:			FL
		ZIP:			32615
		BUSINESS PHONE:		(386) 462-6817

	MAIL ADDRESS:	
		STREET 1:		13859 PROGRESS BLVD.
		STREET 2:		SUITE 100
		CITY:			ALACHUA
		STATE:			FL
		ZIP:			32615

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	LECTEC CORP /MN/
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
<TEXT>
<HTML><HEAD>
<TITLE>Response Letter</TITLE>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">July&nbsp;29, 2013 </FONT></P>  <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>VIA EDGAR AND HAND DELIVERY </B></FONT></P>  <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amanda Ravitz </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Assistant Director </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">United States Securities and
Exchange Commission </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Division of Corporate Finance </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">100 &#147;F&#148; Street, N.E. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Washington, D.C. 20549 </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Re:</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>AxoGen, Inc. </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Amendment No.&nbsp;2 to Registration Statement on Form S-1 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Filed July&nbsp;15, 2013 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>File No.&nbsp;333-188597 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Form 10-K for Fiscal Year
Ended December&nbsp;31, 2012 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Filed March&nbsp;12, 2013 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>File No. 000-16159 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Dear Ms.&nbsp;Ravitz: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">On behalf of our client, AxoGen, Inc. (the
&#147;Company&#148;), set forth below is the Company&#146;s response to the letter dated July&nbsp;25, 2013 (the &#147;July 25 Comment Letter&#148;) from the staff (the &#147;Staff&#148;) of the Securities and Exchange Commission (the
&#147;Commission&#148;), which relates to the Company&#146;s Amendment No.&nbsp;2 to the Registration Statement on Form S-1, File No.&nbsp;333-188597 (the &#147;Registration Statement&#148;) filed with the Commission on July&nbsp;15, 2013 (the
&#147;Amended Filing&#148;) and the Company Form 10-K for the fiscal year ended December&nbsp;31, 2012 (File No. 000-16159). The Company is filing Amendment No.&nbsp;3 to the Registration Statement (&#147;Amendment No.&nbsp;3&#148;), which includes
revisions made to the Amended Filing in response to the July&nbsp;25 Comment Letter. An electronic version of Amendment No.&nbsp;3 has been filed concurrently with the Commission through its EDGAR system. The enclosed copy of Amendment No.&nbsp;3
has been marked to reflect changes made to the Registration Statement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The numbered paragraphs and headings below correspond
to the headings set forth in the July&nbsp;25 Comment Letter. Each of the Staff&#146;s comments is set forth in bold, followed by the Company&#146;s response to each comment. The page numbers in the bold captions refer to pages in the Amended
Filing, while the page numbers in the Company&#146;s responses refer to page numbers in Amendment No.&nbsp;3. Capitalized terms used in this letter but not defined herein have the meaning given to such terms in Amendment No.&nbsp;3. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amanda Ravitz, Assistant Director </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">United States Securities and Exchange Commission </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">July&nbsp;29, 2013 </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Page 2 </FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>Prospectus Summary, page 2 </U></B></FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Please reconcile your disclosure here that your agreement with Cook Biotech excludes the use of AxoGuard products in the oral cavity with your statements on page 41
about the need for nerve damage repair in oral surgery and on page 47 that you are expanding into oral surgery.</B> </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><U>Response</U>: </FONT></P>  <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%;padding-bottom:0px; "><FONT STYLE="font-family:Times New Roman" SIZE="2">In response to the Staff&#146;s
Comment, the Company proposes to revise the disclosures referenced above on pages 2, 46 and 47, of Amendment No.&nbsp;3 to include the following language in order to clarify that the Company&#146;s agreement with Cook Biotech provides that any
expansion by AxoGen into certain areas of the oral surgery market will be limited to the Company&#146;s Avance<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>
Nerve Graft product and the Company will not be permitted to market its AxoGuard<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> product in the oral cavity for
endodontic and periodontal applications and oral and maxillofacial surgery solely as they relate to dental, soft or hard, tissue repair or reconstruction: </FONT></P>  <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><U>Page 2 </U></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%;padding-bottom:0px; "><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;The exclusion results in certain areas
of AxoGen&#146;s market expansion into the oral surgery market being limited to the Avance<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> Nerve Graft.&#148;
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Page 46 </U></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%;padding-bottom:0px; "><FONT
STYLE="font-family:Times New Roman" SIZE="2">&#147;The exclusion results in certain areas of AxoGen&#146;s market expansion into the oral surgery market being limited to the Avance<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> Nerve Graft.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Page 47
</U></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%;padding-bottom:0px; "><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;In select hospital accounts and in conformity with AxoGen&#146;s agreement with Cook Biotech
restricting certain use of the AxoGuard<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> products, AxoGen is also expanding into the market for the
reconstruction of nerve injuries in oral surgery.&#148; </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Please include a discussion of PDL&#146;s put option in your added paragraph describing the PDL arrangement.</B> </FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Response</U>: </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In response to the Staff&#146;s Comment, the Company proposes to revise the disclosure referenced above on page 2 of the Amendment
No.&nbsp;3 to include the following: </FONT></P>  <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Further, on October&nbsp;5, 2016, or in the event of the occurrence of a
material adverse event, our transfer of revenue interest or substantially all of our interest in the products or our bankruptcy or material breach of the Royalty Contract, PDL may require us to repurchase the Assigned Interests, referred to herein
as the Put, at the Put Price which is equal to the sum of (i)&nbsp;an amount that, when paid to PDL, would generate a 20% internal rate of return to PDL, called the Put Rate, on the Funded Amount, taking into consideration payments made to PDL by
us, and (ii)&nbsp;any Delinquent Assigned Interests Payment, as defined in the Royalty Contract, we owed to PDL.&#148; </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amanda Ravitz, Assistant Director </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">United States Securities and Exchange Commission </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">July&nbsp;29, 2013 </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Page 3 </FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>Management&#146;s Discussion and Analysis, page 32 </U></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>Critical Accounting Policies, page 33 </U></B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>We note your response to our prior comment 8. Please revise to further clarify your basis for using the interest rate of the put option as the best estimate of the
effective interest rate of the PDL arrangement.</B> </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Response</U>: </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In response to the Staff&#146;s Comment, the Company proposes to revise the disclosure referenced above on page 33 of Amendment No.&nbsp;3
to include the following: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Effective Interest Rate on Note Payable </U></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;The PDL Royalty Contract is accounted for as long-term debt. The Company records interest using its best estimate of the effective
interest rate. This estimate takes into account both the internal rate of return (IRR) of the PDL agreement and the rate of return as the result of exercise of the Put option. The IRR of the PDL Royalty Contract is based on the actual payments to
date, projected future revenues and required minimum payments, and is calculated at 19.85%. The PDL Royalty Contract Put option provides PDL a 20% return, if exercised. As a result of the return of the Put option being higher than the IRR of the PDL
agreement, management believes the best estimate of the effective interest rate on this instrument would be the Put rate. As a result, the Company is accruing interest using the specified internal rate of return for the Put which is 20%. We
currently have no knowledge of PDL&#146;s intent to exercise the Put, but will monitor this on an ongoing basis. From time to time, the Company will reevaluate the expected cash flows and may adjust the effective interest rate. Since inception of
the Royalty Contract, if the interest rate utilized were to change by 1% the effect on interest expense through March&nbsp;31, 2013 would increase or decrease by approximately $110,000. Determining the effective interest rate requires judgment and
is based on significant assumptions related to estimates of the amounts and timing of future revenue streams and PDL&#146;s ultimate decision to exercise the Put. Determination of these assumptions is highly subjective and different assumptions
could lead to materially different outcomes.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>Cash Flow Information, page 38 </U></B></FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>As your commitments to PDL will increase substantially in September 2014, please discuss your need for greater capital resources at that time and the potential
sources of those resources. See Instruction 5 to Item&nbsp;303(a) and Release No.&nbsp;33-8350.</B> </FONT></TD></TR></TABLE>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amanda Ravitz, Assistant Director </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">United States Securities and Exchange Commission </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">July&nbsp;29, 2013 </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Page 4 </FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Response</U>: </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In response to the Staff&#146;s Comment, the Company proposes to revise the disclosure referenced above on page 38 of Amendment No.&nbsp;3
to include the following: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;In particular, if revenue does not increase by fourth quarter 2014 to a level whereby the
9.95% royalty owed to PDL on AxoGen&#146;s gross revenues exceeds the PDL minimum royalty payments at such time of approximately $1.3 million, and such differential continues, or grows larger as the PDL minimum royalty payments increase, AxoGen
would face increasing capital needs. Such capital needs could be substantial depending on the extent to which AxoGen is unable to increase revenue.&#148; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">&#147;The increasing need for capital as the PDL transaction matures could also make it more difficult to obtain funding through either equity or debt.&#148; </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>PDL Biopharma, Inc. Revenue Interests Purchase Agreement, page 65 </U></B></FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>We note your response to our prior comment number 13; however, we are unable to agree with your conclusion that no offer occurred because the company was only
obligated to make an offer when the company proposed to offer new securities. There does not appear to be any meaningful difference between a contractual obligation to make an offer and an offer for these purposes. In addition, it is unclear how the
fact that the right is not tied to a specific offering is relevant to the analysis. Please provide additional analysis supporting your conclusion that you did not commence the offer of securities privately to PDL. Alternatively, if the offer did
commence privately, please revise to reflect your intent to complete the sale privately.</B> </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Response</U>:
</FONT></P>  <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In response to the Staff&#146;s comment, we have amended the PDL Royalty Contract to clarify that, due to the condition
that the preemptive right is subject to compliance with applicable securities laws, the preemptive right will not apply to any &#147;issuance of securities in a registered public offering of securities by the Company.&#148; Additionally, we have
revised our disclosure regarding the preemptive right included in the PDL Royalty Contract on page 66 of the Amendment No.&nbsp;3 to now state: </FONT></P>  <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>Preemptive Rights </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Under the Royalty Contract, PDL has preemptive
rights with respect to new issuances of AxoGen&#146;s equity securities and securities convertible, exchangeable or exercisable into such equity securities, subject to certain restrictions, including restrictions regarding issuance of securities in
a registered public offering by the Company. Therefore, due to such restrictions, the preemptive right does not apply to this offering.&#148; </FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amanda Ravitz, Assistant Director </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">United States Securities and Exchange Commission </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">July&nbsp;29, 2013 </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Page 5 </FONT></P> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>Financial Statements </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><U>Consolidated Statements of Cash Flows, page F-6 </U></B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>We note your response to our prior comment 14. Please revise to explain the non-cash activity and indicate that a portion of the proceeds were paid to Mid Cap Bank
directly by PDL, similar to your response.</B> </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Response</U>: </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In response to the Staff&#146;s Comment, the Company proposes to revise the disclosure referenced above on page F-6 of the Amendment
No.&nbsp;3 to include the following description of the non-cash item of $4,838,706: </FONT></P>  <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;(this amount represents a
payment made by PDL directly to MidCap Financial SBIC, LP)&#148;. </FONT></P>  <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Please contact the undersigned at (609)&nbsp;919-6633
if you have any questions regarding the foregoing. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:54%; text-indent:-2%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sincerely, </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:54%; text-indent:-2%"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Emilio Ragosa </FONT></P> <P STYLE="font-size:24px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">cc:</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Karen Zaderej </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Gregory G.
Freitag </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Fahd M.T. Riaz </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>

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