Q1 2024 Elutia Inc Earnings Call

Operator: Good afternoon, ladies and gentlemen. Welcome to the Elutia 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, of Finn Partners. Please go ahead.

Good afternoon, ladies and gentlemen, welcome to the Alicia first quarter 'twenty 'twenty four financial results conference call.

Matt Steinberg: If you know you would like to ask a question. Please press star one on your telephone keypad to join the queue.

Matt Steinberg: Please be advised that today's conference call is being recorded.

Operator: I would now like to hand, the conference call over to Matt Steinberg Finn partners. Please go ahead.

Operator: Yeah.

Matt Steinberg: Thank you, Operator, and thank you all for participating in today's call. Earlier today, Elutia 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 are 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.

Matt Steinberg: Thank you operator, and thank you all for participating in today's call.

Matt Steinberg: Earlier today, Alicia released financial results for the quarter ended March 31st 2024.

Matt Steinberg: A copy of the press release is available on the company's website.

Matt Steinberg: Any statements contained in this call that do not relate to matters of historical fact 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.

Matt Steinberg: 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.

Matt Steinberg: 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 Elutia's annual report on Form 10-K for 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 Elutia's other filings with the SEC. The conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 9th, 2024.

Matt Steinberg: 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. All 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.

Matt Steinberg: 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.

Matt Steinberg: Accordingly, you should not place undue reliance on these statements or listen description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our public filings with the FCC.

Matt Steinberg: <unk> annual report on Form 10-K for the year ended December 31st 2023, that's accessible on the Sec's website at Www SEC.

Matt Steinberg: C C dot Gov.

Matt Steinberg: Such factors may be updated from time to time and Lucius other filings with U S. D C.

Matt Steinberg: The conference call contains time sensitive information and is accurate only as of the live broadcast today may nine 2024.

Matt Steinberg: Elutia 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 to 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 Elutia website at www.elutia.com. And with that, I will turn over the call to Elutia's CEO, Randy Mills.

Matt Steinberg: Alicia 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.

Randy Mills: Also during this presentation, we refer to gross margin, excluding intangible asset amortization, which is a non-GAAP financial measure.

Randy Mills: Reconciliation of this non-GAAP financial measure 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 looser website at Www Dot Alicia Dot com.

Matt Steinberg: That I will turn over the call to Alicia's CEO Randy Mills.

Matt Steinberg: Okay.

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.

Randy Mills: Alright, Thank you, Matt and it's hard to imagine that any part of this presentation could get better than our forward looking statements slide, but I'm going to give it a shot here.

Randy Mills: 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.

Randy Mills: Just put out but we will be going through that matter will be taking us through some of the financial components and then at the end obviously, we will be happy to take your questions. So Alicia our mission and humanizing medicine. So that patients can thrive without compromise we are a commercial stage company now with a $27 million revenue run rate.

Randy Mills: Matt will be taking us through some of the financial components, and then, obviously, we'll be happy to take your questions. So Elutia, our mission, is 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.

Randy Mills: And growing on the backs of two proprietary product platforms our kangaroo.

Randy Mills: Our product platform, which is used to protect implantable pacemakers and electronic devices and are simpler to arm our product line, which is used in breast reconstruction, but very excitingly. We are pioneering the drug eluting bio matrix and we use that to solve very serious problems with them.

Randy Mills: But very excitingly, we are pioneering the drug-eluting biomatrix, and we use that to solve very serious problems with implantable devices that are currently 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. And I'll go over this, but that gives us the ability to jump into a $600 million device protection market within pacemakers that is really ripe for disruption.

Randy Mills: <unk> devices that currently are not addressed by the state of the art technology.

Randy Mills: Importantly, we expect FDA clearance of our first drug Eluting biologics Kangaroo our am jus in June are coming off right now and I'll go over this but that gives us the ability to jump into a 600 million dollar device protection market within pacemakers that really is ripe for disruption.

Randy Mills: So let's jump into it. Okay, so 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. Simpleterm, 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 coming quarter. A little bit of background.

Randy Mills: So, let's let's jump into it okay.

Randy Mills: Okay. So from a business highlight for the first quarter, we had another exceptional first quarter, but this one was really quite a stand out a $6 7 million in revenue for the quarter. It puts us at a run rate of about $27 million.

Randy Mills: Simple from a revenue standpoint was the real star with sales surging 55.

Randy Mills: Percent AR in the quarter and then obviously all eyes are on our Kangaroo R. M product line and we expect clearance for that now in June of this quarter coming up.

Randy Mills: 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 of the best of both worlds, being able to have an implant that incorporates and regenerates your own healthy tissue but also delivers active pharmaceutical agents that are able to impact things such as post-operative infections. And we're really excited about what that technology brings us.

Randy Mills: A little bit of background. So what we do at this.

Randy Mills: This company is we are pioneering the drug eluting biologic and we do that by taking natural biological matrices and adding a pharmaceutical payloads to that by combining those two things we are able to create products that have a regenerative.

Randy Mills: Component as well as a pharmaceutical components. So it's really the idea is the best of both worlds being able to have an implant that incorporates in regenerate and your own healthy tissue, but also deliver active pharmaceutical agents that are able to impact things such as post operative infections, and we're really excited about what that technology.

Randy Mills: Brexit so with that said, let's jump into our first application of this which is on our kangaroo.

Randy Mills: So 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. So Kangaroo is a product, and the Kangaroo line is a product that's used in the CIED, or basically pacemaker and internal defibrillator space. So each year, there are about 500,000 pacemakers that are placed. But there are really only four significant players in the pacemaker field.

Randy Mills: Product line and in Kangaroo R. M. The next one coming up so.

Randy Mills: This is kangaroo is a is a product in the Kangaroo line is a product that's used in the C. I E D or basically pacemaker and internal distributor later space. So each year there are about 500000 pacemakers.

Randy Mills: That are placed there's really only four significant players in the pacemaker field Medtronic has 40% market share in that space.

Randy Mills: 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%. 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 KangarooM?

Randy Mills: The other 60% divided between Boston scientific and Abbott at about 25% each and then and then bio tronic a bit of a distant fourth at at 10% and so this is the market place in which we are able to not compete with but instead actually.

Randy Mills: <unk> didn't make these implantable pacemakers performed better than the patients that they are intended to help.

Randy Mills: So why would we need kangaroo our kangaroo around what this is this is what it can look like for somebody who are receiving a pacemaker and so some of the co morbidities and problems that that these patients.

Randy Mills: Well, this is what it can look like for somebody receiving a pacemaker. And 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, 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.

Randy Mills: And their physician space things like thin skin.

Randy Mills: You can see in the picture on the left there.

Randy Mills: No problem identifying the pacemaker and the lead wire, even coming off of it. If you look closely you might even be able to see the serial number on the pacemaker, but this idea of a patient with with thinner skin and having this pacemaker place directly underneath that skin really sets off a cascade of events and so one of them.

Randy Mills: Its migration so the next big picture over to the right you can see an arrow, where the actual decision wasn't the pacemaker, which places and you can see that this pacemaker is is rotating laterally towards towards the arm pit and that starts.

Randy Mills: So in the next 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 micro motion against the skin, and that can lead to pacemaker erosion, which is the next picture over.

Randy Mills: 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 can dislodge but another thing that you can see happen here. It's the pacemaker can move and have micro motion against the skin and that can lead to pace maker.

Randy Mills: Erosion, which is the next picture over and so if you're not sure how big of a problem pacemaker erosion can be will the third picture over you can see pacemakers literally dangling.

Randy Mills: And so if you're not sure how big of a problem pacemaker erosion can be, well, in the third picture up, you can see the pacemaker is literally dangling from this patient outside of his body. That's obviously not a sustainable picture.

Randy Mills: From this patient outside outside of his body. That's obviously not a sustainable picture that somebody that's going to have to go back into the operating room and have that have that fixed in the meantime, it's pulling on those leads which are supposed to be placed firmly in the right ventricle AR and that can lead to obviously failure to pace and then lastly.

Randy Mills: 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 failure to pace. And then lastly, this idea of infection. So anytime you're putting a 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.

Randy Mills: Is this idea of infection, so anytime you're you're putting a youre, putting a long term implantable device into a patient, particularly those that have comorbidities, such as things like smoking or obesity or or type two diabetes youre at a significant ROI.

Randy Mills: For postoperative infection and that can be a really catastrophic event in patients, who who need patriarch 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 fail.

Randy Mills: 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.

Randy Mills: 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 RF. 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, and 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 different rifampin and minocycline.

Randy Mills: <unk> with pacemakers occur at the device host interface, just just like I've shown here and that's actually what we're trying to address with Kangaroo in Kangaroo RM.

Randy Mills: 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. Since Tyrex was acquired by Medtronic back in 2014 for about $200 million, they have really taken this market and created a market where there was none. We estimate they make about $250 to $300 million a year in this space with this product.

Randy Mills: The first real entrant into this into the space that we're now playing in is a it's a product called Pyrexia was introduced originally by a company called Pyrex that shortly after their product was approved.

Randy Mills: The product was acquired by Medtronic entire acts as a fully synthetic polymer that you place the pacemaker inside of it dissolves and as it dissolves it alludes off a different path than minocycline and the thing here that that that tier acts and ultimately Medtronic got.

Randy Mills: Was this idea of having antibiotic protection.

Randy Mills: Round, a pacemaker implantation procedure was something that resonated with the electrophysiologist that are putting these in and.

Randy Mills: Since <unk> was acquired by Medtronic back in 2014 for about $200 million.

Randy Mills: They have really.

Randy Mills: Taken this market and they have created a market where there was none we estimate they do about $250 million to $300 million a year.

Randy Mills: 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 right path in a minutes cycling, but instead of the synthetic pouch moving over to one that's a more natural regenerative biologic may.

Randy Mills: 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.

Randy Mills: So you're getting all the benefits of having antibiotic solution, but in one that's able to address some of the complications of thin skin in migration in fibrosis and inflammation in all of these other things in fact, we did a market survey when we go out and talk to Electrophysiologist that we're using a tire access part of their cases, 88%.

Randy Mills: In fact, we did a market survey, and 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 some or all of their business to a biologic envelope like HangarORM 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 launched.

Randy Mills: <unk> of them, an overwhelming majority said they would move some or all of their business.

Randy Mills: Q, a biologic envelope like hanger our M. When it came out and 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.

Randy Mills: And we're super excited about about getting it approved and launching it so with that said lets give you an update on where we are.

Randy Mills: So with that said, let's give you an update on where we are on our path towards FDA clearance. So we submitted our combination product filing in December of this year. It's gone through a pretty significant review with FDA. All of our interactions to date have been very positive.

Randy Mills: In our in our path towards FDA clearance. So we submitted our combination.

Randy Mills: Product.

Randy Mills: Filing in December of this year. It has gone through a pretty significant review with FDA all of our interactions to date have been very positive. We are now working through our I would say the very final details.

Randy Mills: 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. Where we stand right now, we fully expect that to be favorable.

Randy Mills: We expect to close out all of those details.

Randy Mills: Within the month.

Randy Mills: And that would then put us on track for an FDA decision in June and and where we stand right now we fully expect that to be a favorable decision.

Randy Mills: Yeah.

Randy Mills: After that, we've got to take this product to market. And so just a little bit of an overview of 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

Randy Mills: 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 too.

Randy Mills: Flipping those centers into Kangaroo RM and going after existing sales there would provide us with 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 Tyrex, a Medtronic product, around that. So 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 really our first-year approach.

Randy Mills: Groups of customers as our first really our first and second tier that first here are those customers in those centers that are currently using a kangaroo our base product. We have 356 centers right now that currently have kangaroo on formulary.

Randy Mills: And we think flipping those centers into Kangaroo, RM and going after existing shelter would provide us about $25 million of revenue opportunity that we see is fairly low hanging fruit right behind that though are those those electrophysiologist that are.

Randy Mills: Currently using Abbott and Boston Pacemakers, but theyre, putting a tie rexam had chronic products around that.

Randy Mills: About $75 million, a tire X business, we estimate there. So you put those two together and we think fairly low hanging fruit is 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 tire X customers and also.

Randy Mills: 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 that are on the sidelines that aren't using an envelope in their procedures. So we think there's a 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 the launch on the. So that's where we are with our Kangaroo and a Kangaroo M product line.

Randy Mills: Theres currently right now that are on the sidelines.

Randy Mills: Arent using an envelope in their procedures, we think theres significant benefit for them to switch over and use Kangaroo R. M. As such we are we have started scaling our production at our manufacturing site in Atlanta, Georgia in preparation of our launch in the second half of the year.

Randy Mills: So that's where we are with our kangaroo on a kilogram product line.

Randy Mills: Next, it would be almost impossible for us to go through this call and not mention the standout performance of our Simpliderm product. So as a little bit of background on 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.

Randy Mills: It would be almost impossible for us to go through this call I cannot mention the standout performance of our simple term.

Randy Mills: Product, so there's a little bit of background the role of a bio matrix 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 151000 mastectomies each year somewhere else.

Randy Mills: In between.

Randy Mills: A 50% to 60% of those will actually be bilateral mastectomies, you put all that together.

Randy Mills: If 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. Let me show you a little bit what we mean here with Simpliderm.

Randy Mills: Breast reconstruction market in the United States alone is about a $1.6 million addressable.

Randy Mills: Market and that is a market that really hasn't seen a whole lot of improvement where innovation and that's really what we're looking to do again, just like just like we are executing.

Randy Mills: In in the pacemaker protection space, where we've had some good technology, but it's frankly, it's gotten a little stale and we think we can go in there and disrupted 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.

Randy Mills: Outcome.

Randy Mills: Can you say a little bit what we mean here with simple denim is getting some questions about why why why it is simply <unk> is performing so well in the marketplace.

Randy Mills: I was getting some questions about why it is that Simpliderm is performing so well in the marketplace, so I'm going to sort of take you through a bit of a story here. But it starts out first with the first thing the surgeon sees. They're looking for a conforming and flexible product. You see Simple 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.

Randy Mills: Sort of take you through a bit of a store here, but it starts out first with the first thing the surgeon C's, they're look they're looking for a conforming and flexible product you see simpler draped over a curved con towards surface and how well, it's able to comply with that surface imagine.

Randy Mills: Going around the complex surfaces.

Randy Mills: All of our breast implant and 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's already it comes a terminally sterilized sterility assurance level of 10 to the minus six.

Randy Mills: 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 6. And so 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, except this one is a fully compatible biologic product. And so as we were making this product, and 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 We think we did a pretty good job with it.

Randy Mills: And so right away the survey surgeons able to open up this product directly onto the surgical field and use it like any other surgical if any other surgical tool used in the procedure. So this one is a fully.

Randy Mills: Compatible biologic product.

Randy Mills: Product and so as we were making this product we are developing this product one of the most important things. We were doing was we were we were trying to develop a proprietary process processing methodology that would minimize the inflammatory response and therefore minimize the potential foreign body in fibrotic response that.

Randy Mills: Sometimes happen and we think we did a pretty good job with it. So I'll show you. Some now some some pretty impressive data. This is data that was published.

Randy Mills: So I'm going to show you now some pretty impressive data. This is data that was published from a non-human primate model. So these are primates having a simple derm implanted into them. And we use, actually, as a control here the market leader is this Alloderm. And so the first thing you're looking at in the graph at the left is that you're looking at TNF-alpha responses in this non-human primate model at two weeks, four weeks, and six weeks.

Randy Mills: From a nonhuman primate model. So these are primates, having a simple derm implanted into them and we use actually its patrol here the market leaders as al <unk> and so the first thing you're looking at the graph at the left is that you are youre looking at TNF Alpha response.

Randy Mills: And you can see a statistically significant reduction in TNF-alpha. So what is TNF-alpha? Steinberg, Unknown Executive, Lishan Aklog, Elutia Steinberg, Ross Osborn, Unknown Executive. So you look at that and say, OK, so that's kind of interesting. What does that mean?

Randy Mills: In our in the nonhuman primate model at two weeks four weeks and six weeks and you can see statistically significant reduction in TNF Alpha So what does TNF alpha.

Randy Mills: Uh huh.

Randy Mills: He must keep it came at a time.

Randy Mills: Marker of inflammation, that's seen in all different kinds of inflammatory responses.

Randy Mills: When you look at it and say okay. So that's kind of interesting what does that mean well if you look on the histology from this on the right you can see where the hours or the hours are stained for CD 68, <unk> 68, as a marker that we use to depict.

Randy Mills: Well, if you look at the histology from this on the right, you can see where the arrows are. The arrows are stained for CD68, a marker that we use to depict different types of inflammatory cells.

Randy Mills: Depict different types of inflammatory cells is what happens to be looking at macrophages that would be attacking foreign body substantive and so you put these two things together and what this is showing us that there is significantly less foreign body response and inflammation.

Randy Mills: This one happens to be looking at macrophages that would be attacking foreign body substances. 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, OK, Randy. I understand it. Why should I care?

Randy Mills: In the animals that are receiving simple versus those that are receiving Alabama 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. When you go to the next slide sort of taste. This all up because at the patient level. This is where this matters. This is a publication.

Randy Mills: 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 atrial 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 postoperative inflammatory response and have so much inflammation that it becomes very painful and unacceptable, and frankly, for the patient, they have to go back in, and they have to change out.

Randy Mills: Looking at.

Randy Mills: What's called Red breast syndrome, with acellular dermal matrix and so sometimes when you're doing these change outs and it can be up to 10% of the time when youre doing a breast reconstruction procedure. The patient can have a significant post operative inflammatory response and have so much inflammation it becomes very painful.

Randy Mills: And and unacceptable frankly for the patient and I could 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.

Randy Mills: 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, so the patient had to go back into the operating room.

Randy Mills: Intolerable for the patient because you need to go back into the operating room, they changed it out for simpler derm and the Red best sitting here was able to go away. This is a direct result of that of that less immunogenic.

Randy Mills: 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 simploderm in these breast reconstruction procedures, and then you can see it pay off commercially for us. So absolutely a stellar quarter again for simploderm, growing 55% in the quarter. We distribute simploderm in two ways.

Randy Mills: Product that causes less inflammatory response.

Randy Mills: Oh, a reduced cellular inflammatory response, and ultimately a better outcome for the patient so that's what.

Randy Mills: The science behind why everyone's so excited about our simpler arm in these breast reconstruction procedures and then you can see it pay off commercially.

Randy Mills: For us so absolutely stellar quarter again.

Randy Mills: For a simple derm growing 55% are in.

Randy Mills: In the quarter, we distribute similar in two ways one is through our highly trained proprietary.

Randy Mills: 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 that disruption with Cientra. They were recently acquired by Tiger. That could be beneficial. I would say it still remains to be seen, but we have our own network of distributors that are just crushing it.

Randy Mills: Our internal distributors, we also last year.

Randy Mills: Syn <unk>.

Randy Mills: Non exclusive partnership with C intra.

Randy Mills: They went through some disruption in the first quarter and I would say this is 55% growth.

Randy Mills: Is despite of that disruption with Sandra they were recently acquired.

Randy Mills: By Tiger that could be beneficial sort of I would say its 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.

Randy Mills: So we are super excited about what's going on with both our kangaroo product and our simploderm product in the breast reconstruction space, and it's really starting to show in everything about how this company is evolving into a really 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.

Matthew B. Ferguson: With both our Kangaroo product and are simply an arm product.

Randy Mills: In the breast reconstruction space, and it's really starting to show and in everything about how this company is evolving into a real serious commercial company. So that I will stop for a minute or two and allow our CFO Matt Ferguson.

Matthew B. Ferguson: Walking through some of the financials Matt.

Matthew B. Ferguson: Okay, thanks Randy. I'm just going to hit a few of the highlights from our financial performance for the quarter. As Randy mentioned, net sales of 6.7 million dollars for the quarter. That compares to 6.4 million for the first quarter of 2023.

Matthew B. Ferguson: Okay. Thanks, Randy.

Matthew B. Ferguson: I'm just going to hit a few of the highlights from our financial performance for the quarter.

Matthew B. Ferguson: As Randy mentioned sale.

Matthew B. Ferguson: Sales of $6 $7 million for the quarter that compares to $6 4 million from the.

Matthew B. Ferguson: The first quarter of 2023.

Matthew B. Ferguson: So that was led, as Randy mentioned, by Simpliderm with 55% growth. But we're also really pleased with our performance with Kangaroo, our other main proprietary product line, where we were able to maintain roughly consistent revenue with last year but with a much smaller commercial organization. So it's really showing the leverage we're getting in our operating model, and we are extremely pleased with that and really excited about what that area of the company can do once we get Kangaroo RM clearance.

Matthew B. Ferguson: So that was that was something that as Randy mentioned by simply <unk> with 55% growth, but we're also really pleased with our performance with Kangaroo our other main proprietary product line.

Matthew B. Ferguson: We were able to maintain roughly consistent revenue was last year, but with a much smaller commercial organization. So it's really showing the leverage we are getting at or and our operating model and we are extremely pleased with that and really excited about what that that area of the company can do once we get 10 grew RM clearance.

Matthew B. Ferguson: Moving down the P&L, our gross margin on an adjusted basis, so this is the non-GAAP version which excludes non-cash amortization expense, was 55% in Q1 versus 66% a year ago. And again, we're very pleased with this. Both are proprietary product lines in the range that we have been expecting and looking for. The real driver of the decline was our cardiovascular business, which has been partnered exclusively in the U.S. with Lamate Vascular.

Matthew B. Ferguson: Moving down the P&L.

Matthew B. Ferguson: Our gross margin on an adjusted basis. So this is the non-GAAP version, which excludes.

Matthew B. Ferguson: Noncash amortization of noncash.

Matthew B. Ferguson: Noncash amortization expense was.

Matthew B. Ferguson: 55% in Q1 versus 66% a year ago and again, we are very pleased with this both our product proprietary product lines in the range that we had been expecting and looking for the real driver of the decline was our cardiovascular business, which has been partnered exclusively in the U S with limit.

Matthew B. Ferguson: Vascular we're very pleased with how that's going but the result of that from a financial point of view is selling the product there at a transfer price versus the end user price. So it kind of distorts. The overall gross margin that was the main driver. There overall, we're very pleased with how we're performing operationally and we do expect.

Matthew B. Ferguson: We're very pleased with how that's going, but the result of that from a financial point of view is selling the product there at a transfer price versus the end user price. So it kind of distorts the overall gross margin. That was the main driver there.

Matthew B. Ferguson: Overall, we're very pleased with how we're performing operationally. And we do expect, as we continue to scale up, we'll see good positive gains in our gross margin. Both of our proprietary product lines should ultimately get into the 70% range or so.

Matthew B. Ferguson: As we continue to scale up we'll see good positive gains in our gross margin.

Matthew B. Ferguson: Both of our proprietary private times, ultimately should get into the 70% range or so.

Matthew B. Ferguson: From an operating expense perspective, we were at $11.3 million for the quarter, down slightly from $11.7 million a year ago. However, again, there's some non-cash expenses going on a little bit behind the scenes that mask what is really very positive progress there in terms of how we're operating. namely, about $2 million of that expense was non-cash, stock-based compensation expense, so when you exclude that, we're really looking at a pretty significant decline year over year.

Matthew B. Ferguson: From an operating expense perspective, we were at $11 3 million for the quarter down slightly from $11 7 million a year ago.

Matthew B. Ferguson: Never again Theres some noncash.

Matthew B. Ferguson: <unk> is going on a little bit behind the scenes that masked what is really.

Matthew B. Ferguson: Very positive progress there in terms of how we're operating.

Matthew B. Ferguson: Namely about $2 million of that expense was noncash stock based compensation expense. So when you exclude that.

Matthew B. Ferguson: Looking at a pretty significant decline year over year.

Matthew B. Ferguson: Uh huh.

Matthew B. Ferguson: Jumping down all the way to adjusted EBITDA, which is a non-GAAP but probably a more instructive metric than net loss or operating loss, we saw an improvement there as well to $3.6 million for the quarter versus $4.8 million last quarter. And that's where you're really starting to see some of the gain associated with lower cash operating expenses, particularly in the sales and marketing line, and then the reduced expenses in our R&D area as we're getting to the end of the development process for kangaroo RM, as we've discussed.

Matthew B. Ferguson: Jumping down all the way to adjusted EBITDA, which is a non-GAAP, but probably more instructive metric then.

Matthew B. Ferguson: Net loss or operating loss.

Matthew B. Ferguson: And improvement there as well to $3 6 million for the quarter versus $4 8 million last quarter, and Thats, where youre really starting to see some of the the gain associated with lower cash operating expense, particularly in the sales and marketing line and then the reduced.

Matthew B. Ferguson: Expense in our R&D areas, we're getting to the end of the development process for four Kangaroo R&M as we've discussed so those are the.

Matthew B. Ferguson: So those are the main points from our... P&L, or our Statement of Operations, just finally, from a cash point of view. We ended the quarter at $12.6 million in cash, and that does not include about $15 million in warrants, which are now nearly 100% in the money, and those warrants expire 30 trading days after the clearance of Kangaroo RM, so we're looking forward to that cash coming in in the not-too-

Matthew B. Ferguson: Main point from our.

Matthew B. Ferguson: You know our statement of operations to finally from a cash point of view.

Matthew B. Ferguson: We ended the quarter at $12 6 million and $12 6 million in cash.

Matthew B. Ferguson: And that does not include about $15 million in warrants, which are now nearly 100% in the money.

Matthew B. Ferguson: And those warrants expire 30 trading days after the clearance of Kangaroo RM. So we're looking forward to that cash coming in in the not too distant future.

Matthew B. Ferguson: And that end-of-the-quarter number also does not include about $4 million in reduction in our debt and revenue interest obligation, so we're improving our balance sheet and our operating performance and feel really good about where we are from an overall financial perspective. With that, I will hand it back to Randy before we take questions.

Matthew B. Ferguson: And that ended the quarter number also does not include about $4 million in reduction in our debt and revenue interest obligations. So we are improving our.

Randy Mills: Our balance sheet.

Randy Mills: And our operating performance and feel really good about where we are from an overall financial perspective.

Matthew B. Ferguson: With that I will hand, it back to Randy before we take questions.

Randy Mills: Thank you, Matt. Hey, I do want to mention we are going to be at the Heart Rhythm Society from May 16th to 19th, so next week, booth 1443. It would be awesome if you were interested in seeing what we're working on and meeting some of the team. I know I'll be there, Matt will be there, and our CSO, Dr. Michelle Williams, as well as a bunch of our sales team. So we'd love to see you. If you stop by, that'll be, as I said, next week at the Heart Rhythm Society meeting in Boston.

Randy Mills: Thank you, Matt Hey.

Randy Mills: I do want to mention we are going to be at the heart Rhythm Society may 16th to 19th So next week Booth 1443, it would be awesome. If you are interested in seeing what working on being some of the team I know I'll be there and that will be there and.

Randy Mills: Our CSO, Dr. Michelle Williams as well as a bunch of our sales team. So we'd love to see you do you stop by that'll.

Randy Mills: That'll be as I said next week at the Heart Rhythm Society meeting in Boston.

Randy Mills: So just to finish up and get to any questions, I think this is a recap of what I hope you know, a fully integrated company from R&D all the way through commercial with $27 million and counting in revenue and run rate. We are pioneering the field of drug-eluting biomatrix. We have two products that we are building on, our Kangaroo product line and our Simple Derm product line, but we think there's a tremendous future for this entire field of drug-eluting biologics.

Randy Mills: So just to finish up and get to any questions. I think this is a recap of what I Hope you know fully integrated company from R&D, all the way through commercial with a $27 million and counting revenue run rate.

Randy Mills: Our pioneering the field of drug Eluting biome matrix, we have two products that we are building on our Kangaroo, our product line and our simple derm product line, but we think theres a tremendous future.

Randy Mills: This entire field of drug Eluting Biologics, we think we are well we are the only ones in it right now and we think Thats a position.

Randy Mills: We think we are, well, we're the only ones in it right now, and we think that's a position for us to own going forward. As I said, we now... and Lishan. We expect not just an approval decision in June, but we expect approval of Kangaroo RM in June. That will put us squarely in a $600 million market with really favorable dynamics and only one competitor. And we think unashamedly; we think with a superior product.

Randy Mills: For us to own going forward as I said, we are now.

Randy Mills: Expect a not just an approval decision in June, but we expect approval of Kangaroo RM in June that will put us squarely in a $600 million market with really favorable dynamics and only one competitor and we.

Randy Mills: We think unashamedly, we think with a superior product and we are really excited about putting that on the market and giving the physicians and the patients that opportunity.

Randy Mills: And we are really excited about putting that on the market and giving physicians and patients that opportunity. Right behind that, we have Simpliderm at a $14.3 million run rate, growing at 55%. And an exceptional team that I would be remiss if I did not profusely thank today for another exceptional quarter. They are the most talented group I have ever worked with and have the resources and abilities to execute this plan. So with that, I will end my comments and turn it back to the operator and take any questions you might have.

Randy Mills: Right behind that we have a simple term at a $14 $3 million run rate growing at 55% and.

Randy Mills: And an exceptional team that I would be remiss, if I did not profusely think.

Randy Mills: Today for another exceptional quarter. They are the most talented group I have ever worked with and have the resources and abilities to execute this plan ahead, so with that I will.

Randy Mills: My comments and turn it back to the operator and take any questions you might have.

Operator: Thank you. Once again, if you'd like to ask a question, please press star one on your telephone keypad; a confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Frank Takkinen with Lake Street Capital. Please proceed with your question.

Speaker Change: Thank you once again, if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.

Speaker Change: You May press star two if he would like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.

Frank James Takkinen: Our first question comes from the line of Frank <unk> with Lake Street Capital. Please proceed with your question.

Frank James Takkinen: Great, thanks for taking the questions. Congratulations on all the progress. I was hoping to start with one on kangaroo RM, and I figure you can guess any update on some of the conversations with the FDA. I'm looking for you to discuss what you're talking about specifically with the FDA in the public domain, but just positive and negative in line, different from your expectations, and then close that up with how we expect the clearance to come in June and the confidence behind that.

Frank James Takkinen: Great. Thanks for taking my questions. Congrats on all the progress was hoping to start with one on Kangaroo RM and I figure you can guess.

Frank James Takkinen: Any update on some of the conversations with the FDA and not looking for you to discuss what Youre talking about specifically with the FDA in the public domain, but just positive negative in line that's different from your expectations and then.

Frank James Takkinen: Was that up with how we expect the.

Frank James Takkinen: The clearance to come in June and the confidence behind that.

Randy Mills: Yeah, hey, Frank. So thanks for that. I won't get into the specific details, but obviously, some of it actually deals with some proprietary things that we're going through. But you're asking where we are in the process? As I said in the call, and I think we put in the release so we expect to close out Any last details that we need to get in with the FDA? This month, you know, in the next really week or two.

Speaker Change: Yeah, Hey, Frank.

Speaker Change: So thanks for that.

Randy Mills: I won't get into the specific I won't get into the specific details.

Randy Mills: Obviously.

Randy Mills: Some of it actually deals with some some proprietary things that we're going through but you are asking for.

Randy Mills: Where are we in the process as I said in the call and I think we put it in the release too.

Randy Mills: We expect to close out.

Randy Mills: Any last details.

Randy Mills: That we need to get in with the FDA.

Randy Mills: This month, you know when the next really week or two.

Randy Mills: With regard to positive, I would say yes, very positive. With regard to in line with expectations, yes again in line with expectations because we expected it to be positive. We've done, you know, we've really taken what we would say is a belt and suspenders kind of approach to this. We didn't want to leave a lot to question. It's an enormous file.

Randy Mills: With regards to positive.

Speaker Change: I'd say.

Randy Mills: Yes.

Randy Mills: Positive.

Randy Mills: With regards to inline with expectations with a yes again in line with expectations, because we expected it.

Randy Mills: To be positive we've done we've you know we've really taken what we would say is a belt and suspenders kind of approach.

Randy Mills: To this we didnt want to leave a lot to question.

Randy Mills: A combination drug device is a really, really sophisticated thing. It involves review at two centers, and so I know there's some, you know, why is the review might be taking so long? It's a really serious review. It's going on at the Center for Drugs and the Center for Biologics, but it's proceeding very positively, and I'm kind of proud to say, as expected, it's proceeding as well. So those two things are going together.

Randy Mills: It's an enormous file a combination drug.

Randy Mills: Device is is a really really sophisticated thing and involves a review at two centers and so I know theres some how come.

Randy Mills: The review might be taken so long it's a it's a really serious review it's going on at the centre for drugs in the center for biologics, but its proceeding.

Randy Mills: Sure.

Randy Mills: Very positively and im.

Randy Mills: Im proud to say as expected it's perceived as well so those two things are going together from a timing standpoint.

Randy Mills: From a timing standpoint, we are still anticipating being fully submitted with FDA in the next, as I said, a few weeks or two, and that would put us on track for a June clearance decision. We think that clearance decision is going to be positive.

Randy Mills: And when I said Center for Biologics, I didn't mean that. It's Center for Drugs and the Center for Devices, or CDRH. I've spent a lot of time at the Center for Biologics as well, so they're always not too far out.

Randy Mills: From a timing standpoint, we are.

Randy Mills: Still anticipating.

Randy Mills:

Frank James Takkinen: Perfect. All right. Thank you for that.

Randy Mills: Ah to be fully.

Frank James Takkinen: With FDA.

Frank James Takkinen: In the next as I said few weeks or two and that would that would put us on track for a June clearance decision and we think that clearance decision is going to be positive and nobody said center for biologics I didn't mean that its center for drugs and the center for devices C. D. R. H I've spent a lot of time with the center for biologics as well. So there are always not too far out of my mic.

Frank James Takkinen: Maybe switching over to the commercial preparation you're doing for Kangaroo RM. What are some of the things you're doing to prepare for that? I heard your comments around, obviously, 356 centers and the tier one, 100 million opportunity you're going after, but what are you thinking about today to set yourself up for success in the second half of this?

Frank James Takkinen: Perfect Alright, thank you for that maybe switching over to the commercial preparation you're doing for Kangaroo RM or what what are some of the things you're doing to prepare for that and I heard your comments around capacity of 256 centers and tier $100 million opportunity.

Frank James Takkinen: Going after but what are you thinking about today to set yourself up for success in the second half of this year.

Randy Mills: Right. So there are a couple of things that we need to do. One is that we need, after we clear it, to be able to make it. And so you're hearing us talk about operationally gearing up and preparing from a production standpoint for the launch of the product. Just after we make it doesn't mean we can go ahead and sell it. Before that, we actually need to introduce it to different hospitals and centers and get it on the formulary there.

Frank James Takkinen: Alright. So there is a couple of things that we need to do one as we'd after we clear it we need to be able to make it.

Randy Mills: So you're hearing us talk about operationally gearing up and preparing from a production standpoint for the launch of the product just after we make it doesn't mean.

Randy Mills: We can go ahead and sell it before that we actually need to introduce it to the different the different hospitals and centers and get on formulary, there that didn't that didn't evolve going through.

Randy Mills: That involves going through what is a center-to-center VAT process, the value-added committees, to get the product on formulary. We cannot submit those to the VACs until we get the clearance decision, but what we can do is prepare the VAC packages. And so that's a big part of what's going on right now behind the scenes, the clinical data, the preclinical data, all of the different value proposition data that the VAC needs in order to make favorable decisions.

Randy Mills: What is.

Randy Mills: Our center to center.

Randy Mills: That process you know the.

Randy Mills: Value added committees.

Randy Mills: To get the to get the product on formulary, we cannot submit those to the box until we get the clearance decision, but what we can do is prepare the back packages and so that's a big part of what's going behind going on right now behind the scenes that the clinical data the preclinical data that Oh.

Randy Mills: All of the different value proposition data that the bank needs in order to make favorable decisions ultimately we think the.

Randy Mills: Ultimately, we think the initial sales trajectory of the product won't be constrained by supply, and it won't be constrained by demand. We actually think the rate-limiting step for adoption is going to be with these different VACs in the hospital and getting on the formulary. That's why the idea of starting with these 356 centers makes so much sense. We're already on formulary with the base Kangaroo product at these 356 centers. Kangaroo-RM is definitely a different product, and so I don't want to create a misleading expectation there, but it's 356 centers that have familiarity with the base biologic Kangaroo product, and we think there's already a tremendous amount of excitement and enthusiasm at these centers for the drug-eluting version of the product.

Randy Mills: Initial sales.

Randy Mills: Sales trajectory of the product won't be constrained by supply and it won't be constrained by demand, we actually think the rate limiting step for adoption.

Randy Mills: Is going to be.

Randy Mills: With with these different backs in the hospital and getting on formulary. That's why the idea of starting with these 356 makes it makes so much sense, where we're already on formulary with the base Kangaroo product at these 356 centers.

Randy Mills: <unk> for sure is a different product and so I don't want to create a misleading expectation there, but it's 356 centers that have familiarity with the base biologic Kangaroo product.

Randy Mills: And should we think there is already a tremendous amount of excitement and enthusiasm at these centers for the drug Eluting.

Randy Mills: The drug Eluting version of the product and then lastly.

Randy Mills: Then lastly, it's a new day for our sales team. They've got to learn and be prepared to articulate the benefits of not just a fully biological envelope but one that also eludes rifampin and minocycline, all the intricacies that go along with a drug-free product. So behind the scenes, that's what we have going on right now. Production, being prepared to introduce it and get it on formulary through the VACs, and getting the VAC packages up and ready to go. And then lastly, making sure our salesforce is fully geared up and trained and ready to... Do you talk about the product effect?

Randy Mills: It's a new day for our sales team so they've they've got to learn.

Randy Mills: And be prepared.

Randy Mills: To articulate the benefits of not just fully biologic envelope, but one that all through our Ruth rifampin and recycling all the intricacies that go along.

Randy Mills: With a with a drug eluting product so behind the scenes, that's what we have going on right now production.

Randy Mills: <unk> prepared.

Randy Mills: To introduce it and get it on formulary through the vacs and getting the back packages up and ready to go and then lastly, making sure. Our sales force is fully geared up and trained and ready to.

Randy Mills: Talk about the product.

Randy Mills: Effectively.

Frank James Takkinen: That's helpful. And maybe just one last one on SimpliDerm, which obviously continues to grow very robustly. Maybe talk through some of the investments you're contemplating making in that organization. Maybe it's nothing given how well it's executing, but are there thoughts around additional sales reps there, different commercial support personnel, anything of that nature to keep up that growth rate and maybe accelerate it?

Speaker Change: Got it that's helpful. And then maybe just one last one on simpler derm, obviously continues to grow very robustly, maybe talk through some of the investments you're contemplating making in that organization, maybe it's nothing given how well it's executing but is there thoughts around additional sales reps there.

Frank James Takkinen: Different commercial support personnel or anything of that nature to keep up that growth rate maybe accelerated.

Randy Mills: Yeah, we continue to make investments in growing the commercial side of that infrastructure. We have been exceptionally pleased and proud of how well our proprietary distributors there are doing in our own network of distributors. They are knocking the cover off the ball, and we are investing in expanding there. It is turning out to be an investment that is, you know, paying tremendous dividends.

Speaker Change: Yes, we are we continue.

Randy Mills: Two.

Randy Mills: Investments in growing the commercial side.

Randy Mills: Of that infrastructure.

Randy Mills: We have been exceptionally pleased and proud of.

Randy Mills: How well our proprietary distributors there are doing your own network of distributors. They are knocking the cover off the ball and we are investing in and expanding.

Randy Mills: There that is turning out to be an investment that is.

Randy Mills: As you know paying tremendous.

Frank James Takkinen: There's also some back office work we're doing. We're also investing in improving our coverage with that. We recently got another favorable coverage decision and continue to work through, we have another, I don't know, 79 million lives right now that we are currently submitting for coverage decisions. So there's a fair amount going on through the commercial side, as Matt talked about, though too. We're also making investments in, on all sides of our business, in improving as we scale up the gross margins of our product as we think both of these products can and will be in the future. 70 plus percent.

Randy Mills: Dividends Theres also some back office work, we're doing we're also investing in improving our coverage.

Frank James Takkinen: With with that and we recently got another favorable coverage decision in and continue to work through them. We have another I don't know 79 million lives right now that we are currently.

Frank James Takkinen: Submitted for coverage decisions.

Frank James Takkinen: Theres, a fair amount going on through the commercial side as Matt talked about though too.

Frank James Takkinen: We're also.

Frank James Takkinen: We're also making investments in on all sides of our business and improving.

Frank James Takkinen: As we scale up the gross margins of our product is we think both of these products.

Frank James Takkinen: And we'll be in the <unk>.

Frank James Takkinen: 70, plus percent gross margin range.

Frank James Takkinen: Yeah.

Frank James Takkinen: Herbert, I'll stop there. Thanks for taking the questions.

Speaker Change: I'll stop there thanks for taking questions.

Herbert: Alright, Thanks Frank.

Operator: Our next question comes from the line of Ross Osborn with Cantor Fitzgerald. Please proceed with your question.

Frank James Takkinen: Our next question comes from the line of Ross Osborne with Cantor Fitzgerald. Please proceed with your question.

Ross Everett Osborn: Hi guys, this is Matt on for Ross. Congratulations on all the progress and thanks for taking the questions. I just want to start off with Kangaroo R.M. and follow up on a previous question asked, are you able to provide some more insight into what the VAC process will look like upon R.M. approval and how long you anticipate the sales process to be with getting into those hospitals?

Operator: Hi, guys. This is Matt on for Ross Congrats on all the progress and thanks for taking the question.

Matt Steinberg: Wanted to start off a kangaroo RM and following up on a previous question to ask are you able to provide some more insight into what the back process will look like upon <unk> approval and how long do you anticipate the sales process to be with getting into those hospitals.

Randy Mills: Yeah. Um, so

Ross Everett Osborn: Yeah.

Randy Mills: So here it is, the VAC process is going to be a, you know, a very variable process, depending on whether or not it's one of our 356 centers or whether, or as we go into these, you know, as we go into these new centers. From a cycle standpoint, where we have existing Kangaroos on formulary, and where we have surgeon champions there, we can be looking at vac times as low as a month.

Speaker Change: So here it's.

Randy Mills: The you know the vac process.

Randy Mills: It's going to is going to be.

Randy Mills: You know a very variable.

Randy Mills:

Randy Mills: Event, depending on whether or not it's one of our 356 centers or weather.

Randy Mills: We go into these as we go into these new centers from a cycle standpoint, where we have existing kangaroo on formulary and where we have surgeon champions there we.

Randy Mills: Looking at back times as low as a month.

Randy Mills: We are modeling conservatively, though. When you look at sort of the average of all of them, we're modeling a six-month vac process across all of them. That might be a little conservative, but we've got a lot of centers to go after. You know, there's plenty of fertile ground.

Randy Mills: We are modeling conservatively, though when you look at sort of the average of all of them were modeling a six month.

Randy Mills: Vac process across all of them that might be a little conservative, but we've got a lot of centers to go after and and.

Randy Mills: There's plenty of.

Randy Mills: A fertile ground to go after.

Randy Mills: So.

Randy Mills: That's what we have going on there.

Ross Everett Osborn: Okay, sounds great. And then maybe turning to SimpliDerm, I just wanted to get some more color on any initial conversations you've had with Tiger following the Sandra acquisition and how you view SimpliDerm growth for the remainder of 24.

Speaker Change: Okay sounds great and then maybe turning to simply.

Ross Everett Osborn: Just wanted to get some more color on any initial conversations you've had with Tiger following the <unk> acquisition and how you view as central to our growth for the remainder of 'twenty four.

Ross Everett Osborn: Okay.

Randy Mills: So we don't give guidance and tell Ross, nice try. But with regard to Tiger, there could be some upside for the Simpliderm product line. We had been very early in the relationship with Cientra, obviously, when they ran into their issues. Fortunately, the vast majority of our product sales are through our own distributor network, which has been crushing it. I happen to when you're old like me, and you've been around for a while, I happen to have gotten to know and work with a whole lot of people, and one of them is the CEO at Tiger, and we have a great working relationship.

Speaker Change: So we don't give guidance.

Randy Mills: And tell Ross nice try.

Randy Mills:

Randy Mills: But with regards to Tiger so.

Randy Mills: Tiger could be could be some some upside.

Randy Mills: For the simpler derm product line, we had been very early in the relationship with a C. Intra obviously when they ran.

Randy Mills: In into their issues, we are fortunately the vast majority of our product sales is through our own distributor network, which is which is which has been crushing it I happened to win when you're old like me and you've been around for a while.

Randy Mills: And to get have gotten to know and work with a whole lot of people and one of them is the CEO at Tiger and we have a great working relationship and so we are in the early discussions there, but tiger really could could could be beneficial certainly two to the team at <unk> bye.

Randy Mills: And so we are in the early discussions there, but Tiger could really be beneficial, certainly to the team at Cientra by, you know, bringing in a fresh balance sheet and the ability to invest more in their sales team. And if ultimately that's something that is, you know, makes good sense for both Tiger and Elutia, I would be happy to do that. From a personal standpoint, these are some quality people that I've known for a long time, and, and certainly would have a lot of trust in working with.

Randy Mills: Bringing a fresh balance sheet and the ability to invest more in their sales team and if ultimately that's something that.

Randy Mills: As you know.

Randy Mills: It makes good sense for both Tiger and de Lucia.

Randy Mills: I would be happy to do that from a personal standpoint is there some quality people that I've known for a long time and certainly.

Randy Mills: We'd have a lot of would that have a lot of trust and working with them.

Ross Everett Osborn: Got it. It's helpful.

Speaker Change: Got it that's helpful and then maybe one more for me.

Ross Everett Osborn: And then maybe one more from me. Turning to OpEx, assuming Kangaroo RM gets approval, how should we think about the size of your salesforce ahead of launch? And if you guys can shout out any incremental spend throughout the balance of the year? And if you guys see any tailwinds that you like to shout out?

Ross Everett Osborn: The opex, assuming kangaroo RM gets approval how should we think about the size of it yourself sales force ahead of launch and if you guys can shatter any incremental spend throughout the balance of the year.

Ross Everett Osborn: And if you guys see any tailwind that you'd like to shut up.

Matthew B. Ferguson: Yeah, so, you know, we're certainly evaluating the investments that we make in the commercial organization and operations. And I think, fortunately, we have a really well-established and highly effective organization in place already. So we can very much hit the ground running with the people and the processes and the systems that we already have in place and have been using for quite some time now. We do think that as we ramp up and we get manufacturing going and get through some of these processes like you were talking about before, it probably will make sense to add to the commercial organization, which could be through additional direct reps.

Speaker Change: Yeah. So.

Matthew B. Ferguson: We're certainly evaluating the investments that we make in the commercial organization and operations and I think Fortunately, we have a really.

Matthew B. Ferguson: It really well established and highly effective organization in place already so we can very much hit the ground running with the people and the processes and the systems that we already have in place and who have been using for quite some time now we.

Matthew B. Ferguson: We do think that as we as we ramp up and we get manufacturing going and get through some of these back processes. Like you were talking about before it probably will make sense to add to the commercial organization.

Matthew B. Ferguson: That both could be through additional direct reps that could also be through some <unk>.

Matthew B. Ferguson: It could also be through some independent distributors in the case of. So we think we will have more feet on the street, in the medium term or so. Probably won't rush to do that right away. But, but, you know, probably by the end of this year, we will be adding to that organization. That would be, Yeah, we're

Matthew B. Ferguson: Pendant distributors in the case of <unk>.

Matthew B. Ferguson: <unk>.

Matthew B. Ferguson: So we think we will have more feet on the street.

Matthew B. Ferguson: In the medium term or so probably wont rush to do that right away but.

Matthew B. Ferguson: Probably by the end of this year, we will be adding to that organization that would be my expectation.

Randy Mills: Yeah, we're, and just it's not a lack of willingness to make the investment in the rep, just, you know, to be super clear about it. As we get more clarity on the VAC process, we will start to aggressively add more reps. What we don't want to do is, obviously, add reps, you know, disrupt their lives and take on the expense of reps before they have something to do in the hospital for the products on formulary. So once we get a handle on how long the VACs are taking at the different locations, we will we will be increasing that sales team right now.

Matthew B. Ferguson: And just it's not a.

Randy Mills: It's not a lack of willingness to make the investment in the Rep. Just just to be super clear about it as we get more clarity on the vac process, we will start to aggressively add more reps, what we don't want to do is obviously add reps.

Randy Mills: You know disrupt their lives and take on the expense of reps.

Randy Mills: Before they have something to do with the hospital for the products on formulary. So once we get a handle on how long. The vacs are are taking at the different locations. We will we will be increasing increasing that sales team right now.

Ross Everett Osborn: Sounds great. Thanks for the update! Thanks again for taking our questions, and congrats again on the progress. Thank you. Thank you. We have reached the end of our question and answer session, and with that, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Sounds great. Thanks for the update thanks, again for taking our questions and congrats on the progress.

Operator: Thank you. We have reached the end of our question and answer session. And with that, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Ross Everett Osborn: Thank you.

Operator: Thank you.

Operator: We have reached the end of our question and answer session.

Operator: Todays teleconference. You may disconnect your lines at this time, thank you for your participation.

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