Q4 2023 Elutia Inc Earnings Call
Operator: Greetings. Welcome to Elutia's fourth quarter and full year 2023 financial results call. At this time, all participants are in a listen only mode.
Greetings and welcome to lose share fourth quarter and full year 2023 financial results call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Matt Steinberg of FIN Partners. Thank you. You may begin.
Note. This conference is being recorded I will now turn the conference over to Matt Steinberg with Finn partners. Thank you you may begin.
Matt Steinberg: Thank you, Operator, and thank you all for participating in today's call. Earlier today, Elutia released its financial results for the quarter and full year ended December 31st, 2023. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of the federal securities laws, which are pursuant to the State Public 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.
Thank you operator, and thank you all for participating in today's call.
Earlier today, a looser released financial results.
Or is it just.
31st 2023.
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.
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 95.
Any statements contained in this call that do not relate to matters of historical facts may to expectations or predictions of future events results or performance are forward looking statements.
All forward looking statements include without limitation those relating to our operating trends and future financial performance are based upon our current estimates and various assumptions.
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.
Matt Steinberg: 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 filings with the SEC, including Elutia's annual report on Form 10-K, year-ended December 31, 2023, to be followed by the SEC, accessible on the SEC's website at www.sec.gov. Such factors may be updated from time to time in Lishan's and other filings with the FCC.
Accordingly, you should not place undue reliance on these statements.
A description of the risks and uncertainties associated with our business I just refer to the risk factors section.
Other filings with the SEC.
Alicia I know.
Our Form 10-Kt year ended December 31, 2023 to follow that yes, you see it first.
On the <unk> website at.
Ww.
<unk> Dot com.
Such factors may be updated from time to time solutions and other filings with the FCC.
Matt Steinberg: The conference call contains concepts of information and is accurate only as of the live broadcast tonight, March 7th, 2024. Elutia 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 margins, excluding intangible asset amortization, which is a non-GAAP financial measure.
The conference call for today.
Formation and is accurate only as of the LIBOR rate.
March seven 2024.
<unk> disclaims any intention or obligation except as required by law.
Revise any financial projections or forward looking statements.
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 measures.
Randy Mills: 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 fourth quarter ended on September 31st, 2023, which is accessible on the SEC's website and posted on the investor page of the Elutia website at www.elutia.com. And with that, I will turn the call over to Elutia's CEO, Randy Mills. Thank you, Matt
A reconciliation of this non-GAAP financial measure most directly comparable GAAP financial measure is available on the company's financial results released fourth quarter ended December 31, 2023, which is accessible on the Sec's website and posted on the investor.
Page of the Arista website at Www <unk> <unk>.
<unk> dot com and with that I will turn it over to Alicia CEO Randy Mills.
Thank you Matt.
Randy Mills: I am super excited to be with you today and to share the story of Elutia. Our mission is to humanize medicine so that patients can thrive without compromise. We're going to talk about that word compromise today and what that means, particularly with our flagship product that we're in the process of getting ready to launch, Kangaroo RM. But what we're really trying to do is we're trying to take away those instances in patient care where patients and physicians are forced to choose between two options when, in fact, we could actually give them both.
I am Super excited to be with you today and to share the story of Lucia our mission Humanizing medicine, so that patients can thrive without compromise, where I talked about that were compromised today and what that means, particularly with our flagship product that we are in the process of getting ready.
<unk> grew RM, but what we're really trying to do is we're trying to take away those instances in patient care, where patients and physicians are forced to choose between two options. When in fact, we could actually give them both.
Randy Mills: So, Elutia is a commercial stage company. We have two proprietary product platforms, Kangaroo, which is for our pacemaker and internal defibrillator space, and SimpliDerm, which we use in breast reconstruction. But more importantly, and I think a lot of people on the call today, we are pioneering the drug-eluting biomatrix to solve some of the most complex problems that exist. I'm going to be giving an update on this, and I'm super excited to do it, where we're going to be talking about our regulatory progress that we've made. We're really excited about that. We're really excited about moving on and watching this product. So, let's just jump right into it. For the year, we had an exceptional year. We had a transformational year at Elutia, and I couldn't be more proud of this team.
So Alicia commercial stage company, we have two proprietary product platforms Kangaroo, which.
Which is for a pacemaker internals later phase and simpler nerve, which we use in breast reconstruction, but more importantly, and I think what a lot of people are on the call. Today, we are pioneering the drug eluting bio matrix to solve some of the most complex problems that exist I'm gonna be giving an update in this and up super.
Excited to do it where we're going to be talking about our regulatory progress that we've made we're really excited about that and we're really excited about moving on and are watching this product. So that let's let's just jump right into it more.
For the year, we had an exceptional year in a transformational year at evolution and I am I couldn't be more proud of.
This team our commercial teams kept their eye on the ball delivered three 4% growth in Ken grew in a 38% growth in simple terms all the while we were making these rather significant strategic shifts within the company, but everybody kept.
Randy Mills: Our commercial teams kept their eye on the ball, delivered 3.4% growth in Kangaroo and a stunning 38% growth in SimpliDerm. All the while, we were making these rather significant strategic shifts within the company, but everybody kept focused and kept their eye on the ball and really did a beautiful, beautiful job commercially and operationally. From a development standpoint, as many people on this call know, we submitted our 510K pre-market notification in December. The FDA accepted that application, and that review is progressing really pretty much exactly the way we expected. We have not had any requests for any new data yet.
Focus kept their eye on the ball it really did a beautiful beautiful job commercially and operationally from a development standpoint as many people on this call know we submitted our five 10-K premarket notification in December the FDA accepted that application and that review is progressing.
Really pretty much exactly the way we expected we have not had any requests for any new data. We have had some requests for clarification, but we are looking squarely at a clearance decision expected in the first half of 'twenty 'twenty. One we believe actually this is really going to be a may June timeframe, but for us.
Randy Mills: We've had some requests for clarification, but we are looking squarely at a clearance decision expected in the first half of 2024. We believe, actually, this is really going to be a May-June timeframe, but from us, from our standpoint, where we are, everything is, we believe, right on track. In preparation for that launch, we have established a strategic advisory committee to help us prepare and get the most value out of the Kangaroo RM launch. Kangaroo RM is a very transformational event.
Where our standpoint, where we are everything is right on track in preparation for that once we've established a strategic advisory committee to help us prepare and get the most value out of can grow our avalanche came around was a very transformational event. We think this is this.
Randy Mills: We think this is a transformational product for the company, and we need to make sure that we're able to position it in a way such that we can realize not just the most value for the product but the most value for the company. So, to that end, we've established a strategic advisory committee that really has the best, been there, and gotten the minds from the space. We're talking about leading executives in the pacemaker and implantable defibrillator space, people that have led significant marketing and commercial launches of sophisticated biologic products. Obviously, business development is in there as well as reimbursement and hospital penetration. So, a really first-class group of advisors to help us make sure we get this launch right. And then, lastly, one of the things that I'm very proud that we do at Ellucia is execution, and we continue to execute. We announced last year that we divested our orthobiological business, but the group handling that kept their eye on the ball, and they actually closed that divestiture, bringing in gross cash proceeds of $14.6 million. So, thank you to the team all around for an exceptional year.
This is.
A transformational product for the company and we need to make sure that we're able to position it in a way such that we could realize not just the most value for the product with the most value for the company so with that and we've established a strategic Advisory Committee there really has.
The best.
Been there done that minds from the space, we're talking about leading executives from the pacemaker and implantable defibrillator space people that have led significant marketing.
The commercial launches of sophisticated biologic products, obviously business development is in there as well as reimbursement and hospital penetration. So it really first class group.
<unk> to help us make sure we get this launch right and then lastly, you know one of the things that I'm very proud that we do at Alicia is execution and we continue to execute we announced last year that we divested our work the biologic business, but the group handling that kept our eye on the ball and they actually close that divestiture, bringing in gross cash.
Six of $14 $6 million. So thank you to the team all around Brook, an exceptional year.
Just a quick overview on what we do so Alicia is developing the drug eluting biologic really to reduce and remove the complications that exist at the device post interfaces. So when a surgeon implants, a device into a patient that is going to be there for a long period of time there were a number.
Complications that arise quite predictably things like device migration erosion of the device through particularly in skin patient, obviously infection and pathologic fibrosis, which can lead to things like capsular contracture and when you look at the two markets that we're in pacemakers were seeing complication rates Youre seven two.
Randy Mills: Just a quick overview of what we do. So Elutia is developing the drug-eluting biologic really to reduce and remove the complications that exist at the device host interface. And so when a surgeon implants a device into a patient that's gonna be there for a long period of time, there are a number of complications that arise quite predictably. Things like device migration, erosion of the device through particularly thin skin patients, obviously infection, and pathologic fibrosis, which can lead to things like capsular contracture.
11% breast reconstruction and a stunning 20%. So we think this is an area, where we can go and add really significant value and improve outcomes for our patients. So how do we do that when we do that with the drug Eluting Biologics again, which is able to solve these problems without compromise.
Randy Mills: And when you look at the two markets that we're in, pacemakers, we're seeing complication rates here of seven to 11% for breast reconstruction, and a stunning 20%. So we think this is an area where we can go and add really significant value and improve outcomes for our patients. But how do we do that?
Don't think a patient and a physician should have to decide hey should I should I go with the with the device that offers pharmaceutical payload and drug efficacy or should I go with the natural biologic that will re model into the patient's own natural tissue and have a lower byproduct response, we look at that.
Randy Mills: Well, we do that with drug-eluting biologics, which are able to solve these problems without compromise. We don't think a patient and a physician should have to decide, hey, should I go with the device that offers a pharmaceutical payload and drug efficacy, or should I go with the natural biologic that'll remodel into the patient's own natural tissue and have a lower fibrotic response? We look at that, and we say both should be the answer. And so that's why we've developed the drug-eluting biologic that provides all of those benefits of an active pharmaceutical payload but on a regenerative scaffold that enables it to regenerate into the patient's own healthy tissue. So let's get into kangaroos and kangaroo RM.
We say both both should be the answer and so that's why we've developed the drug Eluting biologic that provides all of those benefits of of of an active pharmaceutical payload, but on our regenerative scaffold that enabled it to regenerate patients.
Healthy tissue.
So let's get into Kangaroo in Kangaroo program, so a little bit of a landscape overview here from a commercial standpoint. Each year. There are about 500000 CAE is a term we use for pacemakers and internal defibrillators that are placed in the patients in the United States alone when you look at that market.
Space Medtronic has 40% approximately of that space.
Boston scientific and Abbott have another 50% is <unk> a distant fourth at about at about 10%, but this is a really some really interesting market dynamics that this sets up because only one of these players actually has an app.
Randy Mills: So a little bit of a landscape overview here from a commercial standpoint. Each year, there are about 500,000 CIDs, this is a term that we use for pacemakers and internal defibrillators, that are placed in patients in the United States alone. When you look at that market space, Medtronic has 40%, approximately of that space. Boston Scientific and Abbott have another 50%, and then Biotronic is worth about 10%. But this is some really interesting market dynamics that this sets up because only one of these players actually has an antibiotic eluting pouch, and that's obviously Medtronic, but all of them have really, really significant pacemaker businesses. And so we should talk about Medtronic a little bit and their product Tyrex. So Tyrex was actually developed by the Tyrex company back in the early 2010s. It is a synthetic polymer envelope that as it dissolves in the body, it releases antibiotics.
Antibiotics, alluding pouch and that's obviously.
That tronic, but all of them have really really significant pacemaker business.
And so we start about Medtronic, a little bit and they are in their product the tyre neck. So Tiger X was actually developed but as Pyrex company.
Back in the early 2000 tens and it is a synthetic polymer envelope that as it dissolves in the body.
Releases antibiotic and this product took a while to develop but it eventually got it Scott it's clearance from FDA in 2014 and shortly after clearance Medtronic was able to acquire this product for about 200 $200 million again. This is in 2014 numbers.
And they have just knocked it out of the park. So they've grown this product to about $250 million to $300 million by our estimates.
And they've really done a great job, they're going to choose six year Joe first.
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They were able to have foresight pay $200 million 2014, when there was no market for this technology and to create the market. The second thing that they did was they actually proved out that this market could exist and that's the value proposition to physicians and particularly.
Randy Mills: This product took a while to develop, but it eventually got its clearance from FDA in 2014. And shortly after clearance, Medtronic was able to acquire this product for about $200 million. Again, this is in 2014 dollars, and they have since just knocked it out of the park.
Allergist about local antibiotic delivery really work these positions like the idea of having a local antibiotics resin with their surgery. So that they don't have to worry about a postoperative infection, but medtronic did a great job here, but.
But <unk> is a perfect product and that's why we developed Kangaroo RM.
Randy Mills: So they've grown this product to about $250 to $300 million, by our estimates. And they've really done a great job. They've really done two things here.
Iraq is doesn't really great job of looting antibiotics rexam can administer icon, but it doesn't have any of the benefits of a biologic or you said it is a polymer that do that.
Randy Mills: So, you know, first, they were able to have Forsythe pay $200 million in 2014 when there was no market for this technology. They had to create the market. The second thing that they did was they actually proved that this market could exist and that the value proposition to physicians and, particularly, electrophysiologists about local antibiotic delivery really worked. These physicians like the idea of having a local antibiotic resident during their surgery so that they don't have to worry about a post-operative infection. Medtronic did a great job here, but Pyrex isn't a perfect product. And that's why we developed Kangaroo RN. Tyrex does a really great job of eluting antibiotics, rifampin, and minocycline, but it doesn't have any of the benefits of biologics.
And the body, we like the idea of using biologics scaffold.
For a couple of reasons one is a biologic scaffold around this pacemaker fits in forums really like a glove.
It gives the physician great fit and feel there is less information inflammation. Therefore, there's less pathological remodeling change outs easier and that's better for the patient.
In the long run and it all remodels into the patient's own tissue. So again. This was an example, where we looked and said there is an opportunity where a patient and physician are having to make a compromise and we can remove that compromise. We can help patients thrive without compromise and we've done a pretty good job of that with <unk>. We went out and we talk to the electrophysiology is about this.
Not that they are studying 88% of electrophysiology cities or tie ratio to 88% of electrophysiologist that used higher ex which start using kangaroo once the product became available 88% and we think that gives us a really really great opportunity to move into the $600 million market and actually.
Randy Mills: Like you said, it's a polymer that dissolves in the body. We like the idea of using biological scaffolds because of a couple of reasons. One is that a biological scaffold around this pacemaker fits and forms really like a glove. It gives the physician a great fit and feel. There's less inflammation, therefore, there's less pathological remodeling, and change out is easier, and that's better for the patient in the long run
So really great penetration.
Go back to our market are favorable market dynamics slide at sort of the pay off of it. So when you look at when you overlay the drug Eluting envelope on top of this you have medtronic sitting there with pyrex <unk> $250 million to $300 million.
Randy Mills: And it all remodels into the patient's own tissue. So, again, this was an example where we looked and said, there is an opportunity where a patient and a physician are having to make a compromise, and we can remove that compromise. We can help patients thrive without compromise.
It's higher dose and then you have Boston Abbott and bio tronic and they don't have a couch between them now here's what we found was really a market. We started doing our own internal market research 50 to 75, but it's probably more like 70% to 75% of tyre neck is actually used on.
Medtronic pacemakers, so a lot of directions going on at Boston scientific or an Abbott.
Randy Mills: And we've done a pretty good job of that with Kangaroo RN. We went out, and we talked to electrophysiologists about this concept. It was stunning.
Pacemaker and we think when you sort of when you look at this all together. This does two things one is it creates a great opportunity for us to go out and launch this product.
Randy Mills: 88% of electrophysiologists, and these are Tyrex users, 88% of electrophysiologists that use Tyrex would start using Kangaroo once the product became available. 88%. And we think that gives us a really, really great opportunity to move into the $600 million market and actually have some really great penetration. So back to our market, our favorable market dynamics slide here, sort of the payoff of this. So when you look now, you overlay the drug-eluting envelope on top of this. You have Medtronic sitting there with Pyrex, right, and they do about $250 to $300 million in tire sales. And then you have Boston Abbott and Biotronic, and they don't have a pouch between them. Now, here's what we found was really remarkable. When we started doing our own internal market research, 50% to 75%, and it's probably more like 70% to 75% of Pyrex is actually used on non-Medtronic pacemakers.
Our view is kind of like Switzerland here.
It doesn't matter, where the Boston or Abbott or bio tronic, if theyre going to ask them food drug Eluting envelope would you rather have your case <unk> or medtronic, they're going to say Alicia every single time, why it's simple we don't make a pacemaker and Medtronic does.
And so that's a real great opportunity for us to go out and take this this really low hanging fruit of $70 million to $75 million contract sale, but really 60% of the market. That's essentially uncontested right now in this space, but if you also look at it from the company's point of view Youre talking about a plug and play product here.
<unk>.
Could be 100 $150 million, we're estimating gross margins in the 70% no additional selling cost like disease. These are players are already in every one of these cases anyway.
And so you do the sort of the math on that you're dropping something like $90 million a year two earnings look at their pte somewhere between $25 60, and you are talking about a product that could add two and a half the $5 billion.
Randy Mills: So a lot of Pyrex is going on to a Boston Scientific or an Abbott pacemaker. And we think when you sort of, when you look at this all together, this does two things. One is it creates a great opportunity for us to go out and launch this product. We are viewed kind of like Switzerland here.
Value to.
These companies. So we are really really can't test. We are really really excited about can grow around coming to market, but we also understand its value and we will have the discipline and the patience to methodically roll this thing out.
Randy Mills: It doesn't matter whether you're Boston or Abbott or Biotronic; if you ask them which drug-eluting envelope you would rather have in your case, Aleutia's or Medtronic's, they're going to say Aleutia every single time. Why? It's very simple. We don't make pacemakers, and Medtronic does. And so that's a really great opportunity for us to go out and take this really low-hanging fruit of $70, $75 million Pyrex sale, but really 60% of the market that's essentially uncontested right now in this space. But if you also look at it from the company's point of view, you're talking about a plug-and-play product here, could do $100, $150 million, we're estimating, gross margins in the 70% range, there's no additional selling cost, right, because these players are already in every one of these cases anyway.
Take it to market launch it so that we get the right value for both the product and the company.
Okay.
Now, let's move on to our clearance and our clearance strategy and activities. So we filed as you guys know we filed a 500 10-K December 18, 2023, if we did that after meeting with the FDA to pre submission meeting the interactions since that that we've been having with the <unk>.
I've actually been very positive and Theyre going exactly as we thought as we stated on this call a number of times. We expected we were going to be asked a question and we havent asked questions. Fortunately they've all been really a clarification variety and importantly, the FDA asked actually from no new data.
So we believe we are in a really really good shape here as I said.
Lining up what we think will be a favorable clearance decision in the second quarter May June timeframe, if youre, scoring at home and we are.
Randy Mills: And so, you know, you do the sort of the math on that, you're dropping something like $90 million a year in earnings, look at their PDEs, somewhere between $25 to $60, and you're talking about a product that could add $2.5 to $5 billion in value to these companies. So we are really, really, can't tell you how excited we are about Kangaroo RM coming to market, but we also understand its value, and we'll have the discipline and the patience to methodically roll this thing out and take it to market and launch it so that we get the greatest value for the product and the company. Okay.
Therefore internally preparing accordingly for the launch of this product in the second half the year. That's why we have strategic Advisory Committee. We're also doing work with reimbursement getting ready to get on value added committees pulling up manufacturing and all of those other things and then just as a reminder, we're not done with it.
Pacemaker space, we actually expect to get approval in indications like neuro stem Parkinson's sleep apnea and the like and so there is a bigger future here for Kangaroo RF.
Just that just the pacemaker market, but we're going to make sure. We don't we don't trip over to go in Germany is going to do our best to do that okay.
Randy Mills: Now let's move on to our clearance strategy and activities. So we filed, as you guys know, we filed this 510K on December 18, 2023. We did that after meeting with the FDA at a pre-submission meeting. The interactions since then we've been having with the FDA have actually been very positive, and they're going exactly as we thought, as we stated on this call a number of times. We expected we were going to be asked a question, and we haven't been asked any questions. Fortunately, they've all been really of the clarification variety.
Turning now just quickly to simpler I will not for you guys going over breast construction 101 again just to point out. This is a really huge market with a really big unmet medical need there is about 151000 mastectomy in the United States each year that are out of the variety that.
Our required restreak construction, that's where we come in with.
With our <unk> products and so we look at how this is going here. So when we say, it's just simply a great product. It has better handling characteristics. It is pre hydrated what that means is it actually comes to the surgeons. They opened it up and it is ready to go it's already voiced it doesn't require stoking or anything like.
Randy Mills: And importantly, the FDA has actually asked for no new data in this. So we believe we are in really, really good shape here. As I said, we are lining up for what we think will be a favorable clearance decision in the second quarter of May, June timeframe, if you're scoring at home. And we are therefore internally preparing accordingly for the launch of this product in the second half of the year. That's why we have a strategic advisory committee. We're also doing work with reimbursement, getting ready to get on value-added committees, pulling up manufacturing, and all of those other things. And then, just as a reminder, we're not done with the pacemaker space. We actually expect to get approval for indications like Neurostim, Parkinson's, sleep apnea, and the like. And so there is a bigger future here for Kangaroo RM than just the pacemaker market. But we're going to make sure we don't trip over the goal line here.
That if all sorts of apparel. This is a product that's been terminally sterilized and we've been able to demonstrate that invokes a lower income.
Laboratory, therefore fibrotic response, so the surgeons that use this product love this product and they keep using so that's why we've seen growth of this product quarter after quarter after quarter.
And this year being no exception, 38% growth. So we distribute this product two different ways. One is through our own proprietary network of distributors. The other is with <unk>, which owns 23% of the breast reconstruction place in between these two they are crushing it.
So we see really really good things ahead for simpler going forward. Our end goal here is to obviously combined our RM technology with this base scaffold simpler and simpler RM to be able to go after it and help those women who experienced postoperative infections following by street construction.
Randy Mills: We're going to do our best to do that. Okay. Turning now just quickly to Subramaniam.
With that I will inhale Jacob.
And turn the call over to our Chief Financial Officer, Matt <unk>.
Randy Mills: I will not bore you guys going over Breast Construction 101 again. Just to point out, this is a really huge market with a really big unmet medical need. There are about 151,000 mastectomy surgeries in the United States each year that are of the variety that require breast reconstruction.
Alright, Thanks Randy.
Siting stuff and we really are excited about all of the the progress being made in kingdom, RM and simple Durham and all of them the value driving catalysts that we see in the near future and continuing for the medium to long term here and Alicia.
As a financial update I'm, just going to touch on a few of the highlights we've provided a lot of information in our earnings release and we will.
Aiming to file our 10-K tomorrow, so there will be tons more there as well, but let's just sending out a couple of the highlights here are net sales were $24 $7 million for 2023.
Randy Mills: That's where we come in with our Subramaniam products. And so we look at how this is going here. Similar, we say it's just simply a great product. It has better handling characteristics.
Modestly growing from $23 8 million in 2022, but that.
Randy Mills: It is pre-hydrated. What that means is it actually comes to the surgeon. They open it up, and it is ready to go. It's already moist. It doesn't require soaking or anything like that.
It's actually Matt what really is going on underneath which was the really significant growth of our proprietary products Kangaroo in simple terms if you.
You just look at those two growth was about 19% year over year.
Randy Mills: It's also sterile. This is a product that has been terminally sterilized. And we've been able to demonstrate that it provokes a lower inflammatory and, therefore, fibrotic response. So the surgeons that use this product love it, and they keep using it. So that's why we've seen growth of this product quarter after quarter after quarter, and this year being no exception, 38% growth. So we distribute this product in two different ways. One is through our own proprietary network of distributors. The other is with Cientra, which owns 23% of the breast reconstruction place. And between these two, they are crushing it.
And what was going on in cardiovascular, which as you probably recall, we've partnered with lemaitre vascular as the exclusive distributor in the United States for that so for most of 2023, we were selling at a transfer price for that product.
With half of end user pricing.
So while we're selling similar amounts of the product.
We.
We are not generating as much revenue so that that affects the optics of our top line also affects our gross margin.
At the operating level Thats actually a positive thing for us and it also has allowed us to really focus on the two main growth drivers for the company, which has been a very positive thing overall.
<unk>.
And adjusted gross margin as I mentioned.
It may look like it's down a little bit year over year of 58% versus 63% on an adjusted basis again, we provide a reconciliation in the earnings release.
Randy Mills: So we see really, really good things ahead for Simpliderm going forward. Our end goal here is to obviously combine our RM technology with this base scaffold of Simpliderm and create Simpliderm RM to be able to go after and help those women who experience post-operative infections following breast reconstruction. With that, I will inhale, take a breath, and turn the call over to our Chief Financial Officer, Matt. All right. Thanks, Randy
And in our presentation online.
Really pleased with the operational performance for the company and we actually see room to continue to see those numbers grow as we go into 2024.
The only other point that I'll touch on here are a couple of other points I'll touch on year, adjusted EBITDA, which really allows us to cut through a number of the noncash and nonrecurring and discontinuing operations within the company.
We had adjusted EBITDA of $14 6 million for 2023 compared to $22 9 million for the year. So that reflects not just the revenue growth, but also really really good expense control that we had over the course of the year and we would see as we continue to scale. We would see those numbers is also continuing to prove improve.
Matt: Exciting stuff, and we really are excited about all of the progress being made in KINGRU-RM and Simpliderm and all of the value-driving catalysts that we see in the near future and continuing for the medium to long term here at Elutia. As a financial update, I'm just going to touch on a few of the highlights. We provided a lot of information in our earnings release, and we're aiming to file our 10K tomorrow. So there will be tons more there as well.
Going forward.
And then last but not least from a cash perspective, we ended the year with $19 3 million in cash and that reflects the proceeds from the divestiture of our ortho biologics business that Randy mentioned previously.
We feel like we're in good shape, there, but on top of that.
Matt: But just hitting on a couple of the highlights here, our net sales were $24.7 million in 2023, modestly growing from $23.8 million in 2022. But that performance actually maps what is really going on underneath, which is the really significant growth of our proprietary products, KINGRU and Simpliderm. If you just look at those two, growth was about 19% year over year.
You probably also recall, we did a financing in Q3 that had cash exercise warrants attached to it.
Those warrants now are.
Our significantly in the money to the tune of about 150% and they expire 30 trading days after the clearance of Kangaroo Rins. So that's not only seminal event for us from a strategic perspective, but it also will be the trigger for bringing in about $16 million of additional cash if our expectation.
That's the overall picture from a financial perspective, we feel like 23 was a really strong year for us and we expect to see that continue to continuing to improve going forward.
Matt: And what was going on in Cardiovascular, which as you probably recall, we've partnered with Lamate Vascular as the exclusive distributor in the United States for that. So for most of 2023, we were selling at a transfer price for that product, roughly half of end-user pricing. So while we're selling similar amounts of the product, we're not generating as much revenue. And that affects the optics of our top line.
And before we.
Turn it over to your questions I would just say that.
From a strategic point of view, we feel like we're really well positioned for growth we have multiple value driving catalysts in the near future first and foremost the.
Clearance of Kangaroo, RM, which will.
Leading into the launch of the product and we're really excited about all the plans that are coming into place. There and then the continued development of our drug Eluting biologic platform with additional products in the pipeline. So.
Matt: It also affects our gross margin. But at the operating level, it's actually a positive thing for us. And it also has allowed us to really focus on the two main growth drivers for the company, which has been a very positive thing overall. As an adjusted gross margin, as I mentioned, may look like it's down a little bit year-over-year, 58% versus 63% on an adjusted basis. And again, we provide a reconciliation in the earnings release and in our presentation online.
With that I.
We'll turn it over to you and your questions. Thank you.
Thank you we will now be conducting a question and answer session. If he would like.
If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, how our first question is from Frank <unk> with Lake Street Capital markets. Please proceed.
Matt: I'm really pleased with the operational performance for the company, and we actually see room to continue to see those numbers grow as we go into 2024. So the only other point that I'll touch on here, or a couple of other points I'll touch on here, is adjusted EBITDA, which really allows us to cut through a number of the non-cash and non-recurring and discontinuing operations within the company. We had an adjusted EAPS out of $14.6 million for 2023 compared to $22.9 million for the year.
Great. Thanks, taking my questions. Congrats on all the progress and I appreciate all of the background of the Kangaroo RM market was hoping to start by following up on some of the FDA interactions I was curious if you're comfortable divulging any more about some of the requests they made I heard loud and clear that they were not.
Matt: So that reflects not just the revenue growth but also really good expense control that we had over the course of the year. And we would see as we continue to scale, those numbers also continue to improve going forward. And, last but not least, from a cash perspective, we ended the year with $19.3 million in cash.
Not new data requests, which I think is most important to understand but anything else you could divulge and then maybe bridge us to the expectation of a may June timeframe, and how you got to that.
<unk>.
Yes, Frank.
So basically no we're not going to go too much into the details of your question that is not for a lack of transparency is actually centers around some of the intellectual property that we have.
Matt: That reflects the proceeds from the divestiture of our orthobiologics business that Randy mentioned previously. So we feel like we're in good shape there. But on top of that, as you probably also recall, we did a financing in Q3 that had cash exercise warrants attached to it. Those warrants are now significantly in the money to the tune of about 150%, and they expire 30 trading days after the clearance of Kangaroo RN.
The technology.
You can imagine super important to us.
What I can tell you about the questions or clarify clarifying variety right. So they were also completely contained within the scope of what we have responded.
Two FDA from the NSE letter so they had only we only had four issues.
We provided them the data for that so none of the questions were outside of that so they're not as good as they are not.
Matt: So that's not only a seminal event for us from a strategic perspective, but it also will be the trigger for bringing in about $16 million of additional cash, which is our expectation. So, that's the overall picture from a financial perspective. We feel like 23 was a really strong year for us, and we expect to see that continuing to improve going forward.
Doing anything else there.
And then.
These equations as they said, we're all sort of of this of this clarifying variety.
Two of them pretty substantial package when we when we answered these questions. When you have validation and all kinds of other scientific reports, we submitted to them are pretty substantial package. So we'd be in that as you would expect as we expected and as we.
Matt: And before we turn it over to your questions, I would just say that from a strategic point of view, we feel like we're really well-positioned for growth. We have multiple value-driving catalysts in the near future.
We said actually on our last call, we fully expected them to ask some of these types of questions. We do have what we would have answered them ahead of time, but they've asked us they are.
Asset these kinds of questions.
Operator: First and foremost, the clearance of Kangaroo RM, which will lead to the launch of the product. And we're really excited about all the plans that are coming into place there. And then the continued development of our drug-including biologic platform with additional products in the pipeline. So with that, I will turn it over to you and your questions. Thank you. Thank you. We will now be conducting a question and answer session. If you would like to, you can press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
About tell.
Tell us more about this method.
This underlying report for this.
Where that like that that kind of that that kind of.
Stop as I said.
And importantly, they didn't say this isn't sufficient youre going to need to provide a support here, we got to do a request.
For any additional data there with regards to.
<unk>.
With regards to the timeline with me being really conservative the May June timeframe, and I don't mean just conservative.
And telling the street our expectations.
The most important thing for our company right now is to get this clearance over the goal line.
And so we have a very positive as interactive relationship right now going with the FDA. Our R&D teams are in back and forth with them on a collaborative basis.
Operator: And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question is from Frank Takkinen with Lake Street Capital Markets. Please proceed. Great. Thanks for taking the questions. Congratulations on all the progress and appreciate all of the background on the kangaroo RM market. I was hoping to start by following up on some of the FDA interactions.
The idea is to make sure the FDA has exactly what they want.
Before we.
Before we tell them to go and it's a race in the last 30 days, so we're not going to do anything.
We're not going to do anything.
To stave off a week or two weeks here or there that would in any way in any way jeopardize that so I'm being really conservative.
I'm being really.
We're being really careful with very methodical, but it's the most important thing for US right now and so in my view, that's the only responsible ways.
Frank James Takkinen: I was curious if you're comfortable divulging any more about some of the requests they made. I heard loud and clear that they were not new data requests, which I think is most important to understand, but if there's anything else you can divulge and then maybe bridge us to the expectation of a May or June timeframe and how you got to that estimation. Yeah, Frank.
Got it that's helpful that makes sense to me and then maybe extending on some of the comments you made around me.
Committee you put in place for under trying to understand how you're going to launch the product and whatnot. How quickly could you have supply up and running and should we assume it's more of a limited launch in the second half and a full launch in 'twenty five or how do you think about that assuming it gets cleared in the May June timeframe.
Randy Mills: So basically, no, we're not going to go too much into the details of the questions. That is not for lack of transparency. It actually centers around some of the intellectual property that we have in the technology that's, you can imagine, super important to us. What I can tell you about the questions is that they were of the clarifying variety, right? So they were also completely contained within the scope of what we had responded to FDA from the NSC letter. Thus, they only had four issues.
Yeah, So right now our and we are right now we are I can't emphasize this enough right now we are exactly on track with where we thought we would be.
And so right now we are looking for a soft launch of our limited launch.
Particularly in the third quarter most of that has to do with.
Randy Mills: We provided them with the data for that, so none of the questions were outside of that. So they're not, that's good. They're not doing anything else there. And then the equations, as I said, were all sort of this clarifying variety.
Getting into hospital backs getting through hospital vacs on formulary.
<unk>.
Fluid milk supply.
Although we have a pretty good manufacturing team.
Thats ready to go.
With this but really doing the underlying things that we need to do to get the launch right. Most of it has to do with reimbursement getting on formulary.
Randy Mills: We submitted a pretty substantial package to them. You know, when we answered these questions and you have validations and all kinds of other scientific reports. We submitted a pretty substantial package to them. So within that, as you expect, as we expected, and as we said, actually, on our last call, we fully expected them to ask some of these types of questions. If we knew what they were, we would have answered them ahead of time.
I'll also be expanding the sales team.
As well during that time there'll be training and the like.
Associated with that so that's largely third quarter, our expectation at this point right now is going into the fourth quarter.
Would be.
We can take the training Boston.
That'd be ready.
Got it.
Got it that makes sense and then maybe just transitioning for my last one talking about simply aren't great to see that continue to grow at an impressive clip how should we be thinking about a growth expectation in that line item for 2024.
Randy Mills: But they've asked us these kinds of questions, you know, about, tell us more about this method or submit us this underlying report for this, for that, like that kind of stuff. But, really importantly, they didn't say, this isn't sufficient. You're going to need to provide us more data. We got no requests for any additional data there.
I can speak to that a little bit Frank I think we are.
Our continuing to see some of them.
So really strong performance, even as we're going through the current quarter.
As you are aware we have.
Our distributor in that space Sandra.
Some restructuring right now we actually have seen them continue to perform well even do that process and we are optimistic that they will come out of that.
Randy Mills: With regard to the timeline with NAICS, that's me being really conservative, the May-June timeframe, and I don't mean just conservative in telling the street our expectations. The most important thing for our company right now is to get this clearance over the goal line, and so we have a very positive and interactive relationship right now with the FDA. Our R&D teams are back and forth with them on a collaborative basis. The idea is to make sure the FDA has exactly what they want before we, you know, before we tell them to go, and it's a race of the last 30 days. So we're not going to do anything; we're not going to do anything, you know, to save off a week or two weeks here or there that would, in any way, jeopardize that.
Even stronger than they were when they are they went into it so.
We really expect that we can continue to see the same type of growth that we saw in 2023 continue in 2024 as we as we move forward.
Perfect.
Good question.
Color commentary to that Frank.
Obviously with that news came out we thought about it.
The interest in San Jose.
We havent seen and in fact, they've done a nice job.
With their team.
Still the.
Bulk of the vast majority of our product is sold through our online.
But both of them have been performing really really really well so.
We are.
Excited about how can grind.
Simply I got a lot going on right now.
Similar nerve is performing.
Randy Mills: So I'm being really conservative. We're being, you know, really careful, very methodical, but it's the most important thing for us right now. And so, in my view, that's the only responsible way to behave.
Right now.
Got it perfect I appreciate the color commentary thanks, taking my questions.
Our next question is from Ross Osborne with Cantor Fitzgerald. Please proceed.
Hey, guys congrats on the progress thanks for taking questions.
Randy Mills: That makes sense to me. And then maybe extending on some of the comments you made about the committee you put in place for trying to understand how you're going to launch the product and whatnot. How quickly could you have the supply up and running?
We have a very transformative year for the company.
Got it.
Well, it's actually background noise correlate to that.
But starting off.
Randy Mills: And should we assume it's more of a limited launch in the second half and then a full launch in 25? Or how do you think about that, assuming it's cleared in the May-June timeframe? Yeah, so right now we are, and we are, I can't emphasize this enough, right now we are exactly on track of where we thought we would be. And so right now, we are looking for a soft launch or a limited launch, particularly in the third quarter. Most of that has to do with, you know, getting into hospital VACs, and getting through hospital VACs on formulary.
Andrew number for the quarter came in a little bit below where we were expecting and realized sorry, it's really all about oriental share, but anything to call out from a market standpoint there.
Yes.
No I mean, we are.
We have shifted our focus now from Kangaroo to Kangaroo RF.
We still have our sales reps in our accounts in place, but Kangaroo RM.
Is it a successful product if its doing anything like what <unk> done. So this is a product that literally.
In order of magnitude.
Or more.
Randy Mills: Spooling of Supply, although we have a pretty good manufacturing team that's ready to go with this, but really doing the underlying things that we need to do to get the launch right. Most of it has to do with reimbursement, getting on formula, and we'll also be expanding the sales team as well during that time. There'll be training and the like associated with that.
Bigger than that and so while our reps are.
Crushing it.
From a from an internal marketing standpoint from an internal leadership standpoint, we have really focused our energy now on the product they are about to sell.
And.
We haven't seen any softness in any of the underlying.
Market.
Our belief in fact.
Was blown away that.
Randy Mills: So that's largely the third quarter. Our expectation at this point right now is going into the fourth quarter. We would be taking the training wheels off and be ready to go. Got it. That makes sense.
We did a restructuring at the beginning of lag.
Last year, we essentially cut the commercial team in half and at that time, we thought we.
If we hold 60% of our sales together there that would be really impressed with what our team not only did they hold it together that's the most revenue we've ever had.
Randy Mills: And then maybe just transitioning for my last one talking about Simpliter. I'm great to see that continue to grow. An impressive clip. How should we be thinking about growth expectations for that line item for 2024? I could speak to that a little bit, Frank.
In.
In Kangaroo.
It's just a it's a tighter leaner, but far more focused group.
Incredible professionals I cannot wait to.
Give them.
The product that frankly, they deserve to have and let them just go Terence.
Matt: I think we are continuing to see Simple Derm show really strong performance, even as we're going through the current quarter. As you are aware, our distributor in that space, Fiantra, is doing some restructuring right now. We actually have seen them continue to perform well even through that process, and we are optimistic that they'll come out of that even stronger than they were when they were there.
Okay sounds great and body here.
And then maybe one more.
So I put their arms suburb.
<unk> continues to exceed expectations at what point does it make sense to me, but our resources to that asset to reach its full opportunity.
Let me translate five story once you get all right now.
We think it's we think it's a great product.
Matt: They went into it. So we really expect that the same type of growth that we saw in 2023 will continue in 2024 as we move forward. Perfect. Yeah. Yeah. Call our commentary on that a little bit, Frank. We haven't seen an effect.
Two we're not holding anything back from it.
Uh huh.
It is.
It is performing really impressively and it's continuing to perform really impressively, we Oregon active work from an R&D standpoint on developing cylinder RM.
And we are.
Randy Mills: They've done a nice job with their team, still the Falk. The vast majority of our product is sold through our own line, but both of them have been performing really, really, really well. So we are excited and stoked about how Tango Rhyme is performing right now too. Got it. Perfect. Always appreciate the color commentary.
<unk> continued to have our own proprietary sales channel and the <unk> sales channel.
We actually feel really good about that product and how it is working and.
Okay.
We used to say how is it really small numbers. So the numbers are getting a little bigger.
And the growth rates stay up high.
Frank James Takkinen: Thanks for taking the question. Our next question is from Ross Osborn with Cantor Fitzgerald. Please proceed.
So we're pretty excited about that but we're not holding back from my boss.
Okay sounds great. Thanks for taking my questions and congrats again on Friday.
Ross Everett Osborn: Hey guys, congrats on all the progress and thanks for the questions. It's shaping up to be a very transformative year for the company, so congrats to you guys. Apologize for the background noise, which is quite disturbing today. But starting off, the kangaroo number for the quarter came in a little bit below where we were expecting. And realize that the story is really all about who I am this year.
You have reached the endeavor.
Friends call you may disconnect your lines at this time and thank you for your participation.
Goodbye.
Okay.
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Okay.
Randy Mills: But anything to call out from a market standpoint there? No, I mean, we've shifted our focus now from kangaroos to kangaroo RM. We still have our sales reps and our accounts in place, but Kangaroo RM isn't a successful product if it's doing anything like what Kangaroo does. This is a product that, you know, literally needs to be an order of magnitude or more, you know, bigger than that. So while our reps are and Lishan Aklog, Lishan Aklog, Lishan Aklog, Lishan, Markham, or Gleeport.
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Yes.
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Okay.
Yes.
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Okay.
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Randy Mills: In fact, I was blown away that, you know, we did a restructuring at the beginning of last year, and we essentially cut the commercial team in half. And at that time, we thought, you know, if we could hold 60% of our sales together there, that would be really impressive. Well, that team, not only did they hold it together, but that's the most revenue we've ever had in Kangaroo. And it's just a... It's a tighter, leaner, but far more focused group of really incredible professionals.
Sure.
Okay.
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Randy Mills: And I cannot wait to give them the product that, frankly, they deserve to have and let them just go terrible. Okay, sounds great. I'm glad to hear it. And then maybe one more, but on Swamplador, you know, that continues to exceed expectations. At what point does it make sense to put more resources into that ad set to reach its full potential?
Yes.
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Sure.
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Yes.
Uh huh.
Yeah.
Ross Everett Osborn: That's a 2025 story once you get RML. We think it's a great product, too. We're not holding anything back from it. It is performing really impressively, and it's continuing to perform really impressively. We are in active work, from an R&D standpoint, on developing Simplegerm RM, and we continue to have our own proprietary sales channel and the Teantra sales channel. We actually feel really good about that product and how it's working. You know, we used to say those were really small numbers, and the numbers are getting a little bigger, and the growth rate is staying high. So we're pretty excited about that, but we're not holding back from it. Okay, sounds great.
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Yes.
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Yes.
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Ross Everett Osborn: Thanks for taking my questions and congrats on the progress, you have reached the end of our, Conference call. You may disconnect your lines at this time and thank you for your participation. Goodbye. Steinberg, Frank Takkinen, Joshua Jennings, Matthew Ferguson, Ross Osborn, Unknown Executive, Lishan Aklog, Elutia, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Steinberg, Unknown Executive, Lishan Aklog, Elutia, Unknown Executive, Lishan Aklog, Unknown Executive, Lishan Aklog, Unknown Executive, Lishan Aklog, Unknown Executive, Unknown Executive, Unknown Executive, Lishan Aklog, Unknown Executive, Lishan Aklog, Unknown Executive, Lishan Aklog, [inaudible]
Yes.
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Yes.
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