Elutia, Inc.

Good afternoon, ladies and gentlemen. Welcome to the ILLUSIA first quarter 2025 financial results conference call. If 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 over to Matt Steinberg with 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, 2025. A copy of the press release is available on the company's website. Before we begin, I would like to make, 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 factor section of our public discussions with the SEC, including Alicia's annual report on Form 10-K, the year ended December 31st, 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 8, 2025. Alusha disclaims any intention or obligation, except as required by 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, including intangible asset amortization, which is a non-GAAP financial measure. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure is available in the company's financial results release for the first quarter ended March 31st, 2025, which is accessible on the SEC's website and posted on the investor page of the Alusha website at www.alusha.com. And with that, I will turn the call over to Alusha's CEO, Randy Mills.

Thank you, Matt. And hello, and welcome, all of you joining us today to our first quarter 2025 conference call. I'll start off like I always do, just briefly describing our mission. Our mission, our true north, the thing that guides us in this company, humanizing medicine so patients can thrive without compromise. We're interested in, believe strongly in this intersection of biological materials being superior to then metals or synthetics, and then combining those with active pharmaceutical agents. That is what humanizing medicine means to us. All right, so let's get into it. We've got a lot of time to talk about it. I know we're starting a little later than normal today, so I'll try to be pithy in my comments. We had a fantastic quarter, and there's a lot we need to get you up to speed on, so let's jump into it. Looking at an overview of what we're going to be talking about today, first, we couldn't start this conversation without talking about the success of Eliapro and its start to the full launch, exceeding expectations far and away. We're also going to talk a little bit about the future growth that we see coming through our new partnership, with Boston Scientific that starts up this quarter, the second quarter that we're currently in right now. We're also been out there doing some really significant and targeted marketing efforts, and we're going to talk through some of those scientific and marketing recognition that we're getting. I do want to make a few quick comments on regaining our cardiovascular portfolio from LeMaitre. And then obviously, Matt's going to talk to you about our finances and our financial position, which we were also able to materially strengthen during the quarter. So with that, let's jump right into it. LU Pro first quarter launch. This is the priority for the company that's the most important thing going on in the organization. and during our first full quarter launch of the product, we really experienced some tremendous performance. So, BioEnvelope, this combines our Legacy Kangaroo product with our LU Pro product, up 31% year-over-year to $3.1 million for context. It is also up 16% sequentially. And that was off of a really strong, in fact, our best quarter that we had for bio envelope. So really, really strong overall results for our bio envelope franchise. But this was all driven by LU Pro. In fact, all driven by LU Pro offset by some cannibalization of That was expected going on in kangaroo. LU Pro jumped 84% from the fourth quarter to the first quarter and now constitutes 52% of our bio envelope revenue. And as it's climbing out, will become far and away, we think, the dominant revenue. factor in bio envelope revenue. How did we do that? How was that possible? Well, that was all made possible by the outstanding performance turned in by our team in securing VAC approvals. We said this from the beginning that our work with value analysis committees and getting through the value analysis committees and on contract with the hospitals was the essential prerequisite. It has to happen before any sale can happen. And we are currently through 125 hospitals that are now actively ordering the product. And I want to take a moment to thank the team for such a tremendous effort there. So digging a little bit deeper into the value analysis committee approval process and also what we have going on with our GPOs. So as I said, 125 institutions currently through VAC and actively ordering the product. You can see here, this is actually, so since September, how we've done month to month by adding VAC hospitals through contract and through the Value Analysis Committee on a monthly basis. I will say we do not add an institution merely by getting through the Value Analysis Committee process or even getting on contract. For us to add them and for them to make this chart and to make this graphic, they actually have to be actively ordering the product as well. So 125 institutions through that process. Another 130 VACs in process. We're currently adding about 10 to 12 VACs a month. Again, just so everyone understands the universe, so we're in 125. We're targeting about 1,000 hospitals to ultimately run this process out through with. We get there by taking only hospitals, so not ambulatory surgery centers, and then gating on those hospitals that do greater than 125. pacemaker or defibrillator cases a year. So absolutely outstanding work going on here with our value analysis committee efforts. And really what we think this does is we think this reads on our second half of this year, and we think this sets us up in a very, very strong position for us, a very strong second half to 2025. Okay, other work we've done in here, though, so value analysis committees are great to have. Another thing that really helps us along is having these GPO agreements in place, and we were able to add two more. to the list in the first quarter, so we're super excited about that. We also have a lot more work going on with GPOs and hope to be adding to this list of seven within the year 2025. So a lot of great stuff going on from a VAC standpoint, from a contracting standpoint. The back office machine at Osiris is really really starting to come into its own and work. All right. Now I want to talk about how we are planning on supercharging that with our Boston Scientific relationship. Now, we've been talking to our friends over at Boston Scientific for some time now on some bigger ways of working together. And we are still doing that. We're still working through that. But while we were going through that process, we said, you know what? This product is too important. We need to get this thing launched and we need to get it into the hands of our reps. And so our two organizations came together. We decided to put this construct in place to be able to do that right now. So this is a distribution agreement. that is able to leverage the Boston Scientific Reps. Basically, the way it works is Boston Scientific Reps get paid a direct commission for keeping Medtronic out of their cases. I mean, what could be better than that? You're already in the case. You're already there putting in the pacemaker. Why not get some money keeping Medtronic out of your case? And so, That's basically what this deal does. It gives us a combined commercial footprint of over 900 sales professionals coast to coast. Now, for context, we have 12 territory managers, another 35 1099s of our own. We were in, before this arrangement, we were already in 35 states, not bad. But with this Boston Scientific arrangement, it's game-changing for us. It gives us 900 sales reps covering coast to coast. It also gives us really great economics under this model. So this model allows us to recognize end market revenue and actually pay a fairly modest commission to the Boston Scientific reps each time they actually sell LU Pro in a case. So they're incentivized to make LU Pro more successful. The Boston reps actually help us in two ways, right? So one way that they help us is Boston Scientific actually helps us drive the VAC process by introducing us and making those essential connections with the physicians and with the purchasing people Inside these hospitals, they can actually help us get VAC approvals more efficiently. And when we talk about going from where we are now, really to scale, this becomes essential for us. The other way they help us is just actually case coverage and adoption within the procedure. So the Boston rep is in every single case right there with the pacemaker when the pacemaker is going in. And it's just super easy for them to say, hey, how about we also protect this pacemaker and this patient by putting the best antibiotic-eluting envelope available on the market around this and getting paid to do it. So with that, our sales training of the organization, the initial sales training and rollout has already been completed. Kimberly and her team are doing a fantastic job. And get this, Boston Scientific reps, have already gone out and started generating sales at over 52 hospitals as of today where Boston Scientific reps are actively selling Elioproat. So a lot going on with Boston Scientific. We have a great partnership. We're fully engaged with them talking about what we're doing now and talking about bigger ways of working together. But in the meantime, we have really put together a tremendous package that helps us get the most of LU Pro and get the most out of the launch of this product okay with all that great work going on commercially from an operational standpoint we need to make sure that we can keep up and we need to make sure we can keep getting more and more efficient so our production of LU Pro takes place at our Roswell Georgia facility that also supports our kangaroo manufacturing process as well and It has capacity to do about $140 million in revenue of LU Pro at about a 70 plus percent gross margin. But we were finding ourselves a little constrained by the production of the antibiotic component of it. So our team in Roswell, Georgia can actually crank out LU Pro all day long provided that that they have the subcomponents necessary. And one of those critical ones is the antibiotic disc that we use. And so we have actually expanded and opened a new facility in Gaithersburg, Maryland, that adds GMP manufacturing capacity to it that allows us to make the antibiotic discs. That's an important one because it removes a bottleneck. But the other reason that's important is it's actually a pretty significant component of the cost of the product. And so by making that antibiotic disc directly ourselves, we remove the supply constraint and the bottleneck on it and significantly reduce the cost of goods of the product. So we're super thrilled to have that facility. We're moving into that facility right now and getting that up and running. We hope to have that site manufacturing and contributing by the end of the year. We were also able to get really exceptional lease terms for this facility, and so we were able to gain all of this space and this capacity from existing GMP space in really favorable economic terms. All right. And then certainly a fun thing to do is to get out and spend time with physicians and other partners that we have and market the product. And we had a phenomenal kickoff of LU Pro at a Heart Rhythm Society meeting in San Diego just a few weeks ago. where we launched our ad campaign, Putting an End to Unnecessary Roughness, Feel the Difference Biology Makes. And I'll just tell you, you can see here is a photograph of our booth, I would say, rather strategically placed in the middle of this conference center next to our partners of Austin Scientific and in real serious proximity to some of our competitors. And it stood out. It was very eye-catching, and we had a tremendous presence at our booth. It was great getting to speak with our physician partners who were stopping by and engaging with us, and I want to thank many, actually, investors and other partners of you who stopped by and said hello at HRS. I hope you enjoyed the experience as much as we did, but it was a great kickoff to Eliupro, and it was a great kickoff to this marketing campaign, where we think really underscores the value proposition that we add. The same phenomenal antibiotics, rifampin and minocycline, proven to protect patients from postoperative infections, combined with a biological envelope that makes it easier for the physician to use and more comfortable for the patient to have. So a great kickoff. And, you know, adding right to that, it was my extreme honor to be present at the 2025 Edison Awards to accept an Edison Award on behalf of the entire Alusha crew for innovation in post-surgical recovery. Eliapro already starting to win awards, the word's getting out. And it was fantastic. The science team wants to know that they will not be left out of this conference call. They have enrolled the first patients in our real-world clinical study going on. Our first patients were enrolled at UCSD. We're enrolling patients in this study across the country, gaining the kinds of clinical outcome data that physicians care about, And then lastly, they were able to notch another win with a peer-reviewed publication confirming the broad-spectrum antibacterial effect of Alupro against all different kinds of bacteria and showing just how robust the antibacterial properties of Alupro are when implanted. Okay, so those are my comments about LU Pro. Lastly, I will just make a few comments on our reacquisition of our cardiovascular products from Linnate. This was a process that really went as seamless as it possibly could. There was really minimal customer disruption. We were able to assemble a team. So far, 26 1099 sales reps that are out there. selling the product. Direct sales are now underway. And this has already begun. And again, this one, we think, really has a possibility of adding and contributing from a financial standpoint right away. So I want to make a couple of these points really clear because I got some questions about it. One is, yes, it's going to help our top line revenue because we are capturing top line revenue. Our gross margins, we expect, will go up predictably to about 80%. But here's the important thing. We expect this to essentially immediately contribute positively on the cash flow line. So this isn't a change that will cost us money. This isn't a change where we will have to make an investment. This is something that contributes right away to the bottom line. And then lastly, it does increase our strategic flexibility with this product line, having this backbone. from Lomate and fully in our control, lets us make other strategic decisions with it. This is a product line where we've been approached from other strategics about, and so it gives us that opportunity to consider a lot of different options with this cardiovascular line. So with that, I will pause my comments. I'll turn it over to Matt. I'll be back after Matt's rundown of our financial update with a few parting comments.