Elutia, Inc.

Good afternoon, ladies and gentlemen. Welcome to the ILLUSIA First Quarter 2024 Financial Results Conference Call. If you know you would like to ask a question, please press star 1 on your telephone keypad to join the queue. Please be advised that today's conference call is being recorded. I would now like to hand the conference call over to Matt Steinberg, FinPartners. Please go ahead.

Thank you, operator, and thank you all for participating in today's call. Earlier today, Alusha released financial results for the quarter ended March 31st, 2024. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws, which are pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that do not relate to matters of historical facts or relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including without limitation, those relating to our operating trends and future financial performance, are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our public filings with the SEC, including Alusha's annual report on Form 10-K, the year ended December 31, 2023, that's accessible on the SEC's website at www.sec.gov. Such factors may be updated from time to time in Alusha's other filings with the SEC. The conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 9, 2024. Alusha disclaims any intention or obligation, except as required by applicable law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. Also during this presentation, we refer to gross margin, excluding intangible asset amortization, which is a non-GAAP financial measure. A reconciliation of this non-GAAP financial measure, the most directly comparable GAAP financial measure is available in the company's financial results release for the first quarter ended March 31st, 2024, which is accessible on the SEC's website and posted on the investor page of the Ellucian website at www.ellucian.com. And with that, I will turn over the call to Alicia's CEO, Randy Mills.

All right, thank you, Matt, and it's hard to imagine that any part of this presentation could get better than our forward-looking statement slide, but I'm going to give it a shot here. We have some new people on our call with us today, so we're going to go over a little bit of the background and history of the company, but we've got a whole lot of exciting stuff to talk about. I hope you got a chance to see the earnings release that was just put out, but we'll be going through that. Matt will be taking us through some of the financial components, and then at the end, obviously, we'll be happy to take your questions. So, Alusha, our mission, humanizing medicine so that patients can thrive without compromise. We are a commercial stage company now with a $27 million revenue run rate and growing on the backs of two proprietary product platforms, our Kangaroo product platform, which is used to protect implantable pacemakers and electronic devices, and our Simpliderm product line, which is used in breast reconstruction. But very excitingly, we are pioneering the drug-eluting biomatrix, and we use that to solve very serious problems with implantable devices that currently are not addressed by the state-of-the-art technology. Importantly, we expect FDA clearance of our first drug-eluting biologic, Kangaroo RM, in June coming up right now. I'll go over this, but that gives us the ability to jump into a $600 million device protection market within Pacemakers that really is ripe for disruption. Let's jump into it. From a business highlight for the first quarter, we had another exceptional first quarter, but this one was really quite a standout $6.7 million in revenue for the quarter puts us at a run rate of about $27 million. Simpliderm, from a revenue standpoint, was the real star with sales surging 55% in the quarter. And then, obviously, all eyes are on our Kangaroo RM product line, and we expect clearance for that now in June of this quarter coming up. A little bit of background. So what we do at this company is we are pioneering the drug-eluting biologic, and we do that by taking natural biological matrices and adding a pharmaceutical payload to that. By combining those two things, we are able to create products that have a regenerative component as well as a pharmaceutical component. So it's really The idea is the best of both worlds, being able to have an implant that incorporates and regenerates in your own healthy tissue, but also deliver active pharmaceutical agents that are able to impact things such as post-operative infections. We're really excited about what that technology brings us. With that said, let's jump into our first application of this, which is on our Kangaroo product line and Kangaroo RM is the next one coming up. Kangaroo is a product and the Kangaroo line is a product that's used in the CIED or basically pacemaker and internal defibrillator space. Each year, there are about 500,000 pacemakers that are placed. There's really only four significant players in the pacemaker field. Medtronic has 40% market share in that space. with the other 60% divided between Boston Scientific and Abbott at about 25% each, and then Biotronic a bit of a distant fourth at 10%. And so this is the marketplace in which we are able to not compete with, but instead actually facilitate and make these implantable pacemakers perform better in the patients that they're intended to help. So why would we need Kangaroo or Kangaroo RM? Well, this is what it can look like for somebody receiving a pacemaker. And so some of the comorbidities and problems that these patients and their physicians face, things like thin skin. You can see in the picture on the left there, you have no problem identifying the pacemaker and the lead wire even coming off of it. If you look closely, you might be able to see the serial number on the pacemaker. But this idea of a patient with thinner skin and having this pacemaker placed directly underneath that skin really sets off a cascade of events. And so one of them is migration. So the next picture picture over to the right, you can see an arrow where the actual incision was and the pacemaker was placed. And you can see that this pacemaker is rotating laterally towards the armpit. And that starts in motion a series of events that can lead to problems. One is you can have tension and pulling on the leads and those leads could dislodge. But another thing that you can see happen here is the pacemaker can move and have micromotion against the skin And that can lead to pacemaker erosion, which is the next picture over. And so if you're not sure how big of a problem pacemaker erosion can be, well, the third picture over, you can see pacemaker is literally dangling from this patient outside of his body. That's obviously not a sustainable picture. That's somebody that's going to have to go back into the operating room and have that fixed. In the meantime, it's pulling on those leads, which are supposed to be placed firmly in the right ventricle, and that can lead to, obviously, failure to pace. And then lastly is this idea of infection. So anytime you're putting long-term implantable device into a patient, particularly those that have comorbidities, such as things like smoking or obesity or type 2 diabetes, you're at a significant risk for postoperative infection, and that can be a really catastrophic event in patients who need pacemakers. So the problem that we're trying to address is the most common type of failure that you see with pacemakers. Pacemakers themselves generally don't fail very often. They don't spontaneously break. Most failures with pacemakers occur at the device host interface, just like I've shown here, and that's actually what we're trying to address with Kangaroo and Kangaroo RM. The first real entrant into this space that we're now playing in is a product called Tyrex. It was introduced originally by a company called Tyrex that shortly after their product was approved, the product was acquired by Medtronic. And Tyrex is a fully synthetic polymer that you place the pacemaker inside of. It dissolves, and as it dissolves, it elutes off different rifampin and minocycline. And the thing here that Tyrex and ultimately Medtronic got right was this idea of having antibiotic protection around a pacemaker implantation procedure was something that resonated with the electrophysiologists that are putting these in. And since Tyrex was acquired by Medtronic back in 2014 for about $200 million, they have really taken this market, and they have created a market where there was none. We estimate they do about $250 to $300 million a year in this space with this product. That's a market we think we can do better in, and it's a market that we think we can disrupt by having powerful antibiotics like rifampin and minocycline, but instead of the synthetic pouch, moving over to one that's a more natural, regenerative, biologic matrix. So you're getting all the benefits of having antibiotic elution, but in one that's able to address some of the complications of thin skin and migration and fibrosis and inflammation and all of these other things. In fact, we did a market survey when we went out and talked to electrophysiologists that were using Tyrex as part of their cases. 88% of them, an overwhelming majority, said they would move all of their business to a biologic envelope like Kangaroo RM when it came out. So we view this not as a competitive product in this $600 million market with only one player, but we actually view it as a superior product and we're super excited about getting it approved and launching it. So with that said, let's give you an update on where we are in our path towards FDA clearance. So we submitted our combination filing in December of this year. It's gone through pretty significant review with FDA. All of our interactions to date have been very positive. We are now working through, I would say, the very final details. We expect to close out all of those details within the month. And that would then put us on track for an FDA decision in June. And where we stand right now, we fully expect that to be a favorable decision. After that, we've got to take this product to market. And so just a little bit of an overview on our commercialization strategy following approval. We see two groups of customers as our first, really our first and second tier. That first tier are those customers and those centers that are currently using Kangaroo, our base product. We have 356 centers right now that currently have Kangaroo on formulary, and we think flipping those centers into Kangaroo RM and going after existing sales there would provide us about $25 million of revenue opportunity that we see as fairly low-hanging fruit. Right behind that, though, are those electrophysiologists that are currently using Abbott and Boston pacemakers, but they're putting a Tyrex, a Medtronic product, around that. There's about $75 million of Tyrex business, we estimate, there. So you put those two together and we think fairly low-hanging fruit. There's about $100 million of revenue opportunity for us to go after first, and that's That's really our first-year approach. Beyond that, we do think we have a superior product, and so we are going to go after those Medtronic Tyrex customers and also those currently right now that are on the sidelines that aren't using an envelope in their procedures. We think there's significant benefit for them to switch over and use Kangaroo RM. As such, we have started scaling our production at our manufacturing site in Atlanta, Georgia, in preparation of launch in the second half of the year. So that's where we are with our Kangaroo and a Kangaroo M product line. Next, it would be almost impossible for us to go through this call if not mention the standout performance of our SimpliDerm product. So as a little bit of background, the role of a biomatrix in breast reconstruction, there are about 13% of women, unfortunately, that will develop some form of invasive breast cancer in their lifetime. In the United States, That leads to about 151,000 mastectomies each year. Somewhere between 50 to 60% of those will actually be bilateral mastectomies. You put all that together, the breast reconstruction market in the United States alone is about a $1.6 million addressable market. And that is a market that really hasn't seen a whole lot of improvement. or innovation, and that's really what we're looking to do. Again, just like we're executing in the pacemaker protection space where we've had some good technology, but frankly it's gotten a little stale and we think we can go in there and disrupt it, we see the same opportunity here in the breast reconstruction space to come along with second generation and next generation products and really provide the patients with superior outcomes. Let me show you a little bit, what we mean here with SimpliDerm. I was getting some questions about why it is that SimpliDerm is performing so well in the marketplace. Sort of take you through a bit of a story here, but it starts out first with the first thing that the surgeon sees. They're looking for a conforming and flexible product. You see SimpliDerm draped over a curved, contoured surface and how well it's able to comply with that surface. Imagine that going around the complex surfaces of a breast implant or an expander implant. It's the right look, fit, and feel. It's pre-hydrated, so that means the surgeon is able to open it up directly onto the operating field. It comes terminally sterilized at a sterility assurance level of 10 to the minus six. right away the surgeon is able to open up this product directly onto the surgical field and use it like any other surgical tool used in the procedure. This one is a fully compatible biologic product. And so as we were making this product, we were developing this product, one of the most important things we were doing was we were trying to develop a proprietary processing methodology that would minimize the inflammatory response and therefore minimize the potential foreign body and fibrotic response that could sometimes happen. And we think we did a pretty good job with it. So I'm gonna show you some now, some pretty impressive data. This is data that was published from a non-human primate model. So these are primates having Simpliderm implanted into them. And we use actually as a control here, the market leaders is Alloderm. And so the first thing you're looking at the graph at the left is that you're looking at TNF-alpha response in the non-human primate model at two weeks, four weeks, and six weeks. And you can see statistically significant reduction in TNF-alpha. So what is TNF-alpha? It's a chemokine marker of inflammation that's seen in all different kinds of inflammatory responses. So you look at that and say, okay, so that's kind of interesting. What does that mean? Well, if you look in the histology from this on the right, you can see where the arrows are. The arrows are stained for CD68. CD68 is a marker that we use to depict different types of inflammatory cells. This one happens to be looking at macrophages that would be attacking foreign body substances. And so you put these two things together, And what this is showing is that there is significantly less foreign body response and inflammation in the animals that are receiving simploderm versus those that are receiving alloderm. And that comes from that proprietary processing methodology that we developed. So you might look at all of that and say, okay, Randy, I got it. Why do I care? Well, you go to the next slide and it sort of pays this all off because at the patient level, this is where this matters. This is a publication done looking at what's called red breast syndrome with ACL or dermal matrix. And so sometimes when you're doing these changes, and it can be up to 10% of the time, when you're doing a breast reconstruction procedure, the patient can have a significant post-operative inflammatory response and have so much inflammation it becomes very painful. and unacceptable, frankly, for the patient. They have to go back in, and they have to change out. So this was a case study that was done where another acellular dermal matrix was used in the reconstruction procedure. It led to this red breast syndrome. It was intolerable for the patient. The patient had to go back into the operating room. They changed it out for simploderm, and the red breast syndrome was able to go away. This is a direct result of that less immunogenic product that causes less inflammatory response, a reduced cellular inflammatory response, and ultimately a better outcome for the patient. So that's sort of the science behind why everyone's so excited about SimpliDerm in these breast reconstruction procedures, and then you can see it pay off commercially. for us, so absolutely stellar quarter again for Simpliderm growing 55% in the quarter. We distribute Simpliderm two ways. One is through our highly trained proprietary internal distributors. We also last year signed a non-exclusive partnership with Cientra. they went through some disruption in the first quarter. And I would say this 55% growth is, despite of that disruption with Centra, they were recently acquired by Tiger. That could be beneficial. Sort of, I would say, it still remains to be seen. But we have our own network of distributors that are just crushing it. So we are super excited about what's going on with both our Kangaroo product and our Simpliderm product in the breast reconstruction space. And it's really starting to show in everything about how this company is evolving into a real serious commercial company. So with that, I will stop for a minute or two and allow our CFO, Matt Ferguson, to walk you through some of the financials, Matt.