Q3 2025 Elutia Inc Earnings Call
Speaker #2: Good day everyone , and welcome to ELUTIA INC. . Third quarter 2025 Financial Results . Call . At this time , all participants are in a listen only mode .
Speaker #2: After the speakers presentation , there will be a question and answer session . To participate , you will need to press star one one on your telephone .
Speaker #2: You will then hear a message advising your hand is raised . To withdraw your question , simply press star one one again . Please note this conference is being recorded .
Speaker #2: Now it's my pleasure to turn the call over to Matt Steinberg with Finn partners . Please proceed .
Speaker #3: Thank you . Operator and thank you all for participating in today's call . Earlier today , Alicia released financial results for the quarter ended September 30th , 2025 .
Speaker #3: A copy of the press release is available on the company's website . Before we begin , I would like to remind you that management will make statements during this call that include forward looking statements within the meaning of the federal securities laws , which are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 .
Speaker #3: 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 .
Speaker #3: 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 .
Speaker #3: 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 .
Speaker #3: Accordingly , you should not place undue reliance on these statements . For a list and descriptions of the risks and uncertainties associated with our business , please refer to the Risk Factors section of our public filings with the SEC , including Alicia's Annual Report on Form 10-K for the year ended December 31st , 2020 .
Speaker #3: Four , accessible on the SEC website at WWE Loc.gov . Such factors may be updated from time to time in Alicia's other filings with the SEC .
Speaker #3: This conference call contains time sensitive information and is accurate only as of the live broadcast today , November six , 2025 . Alicia 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 .
Speaker #3: 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 on the company's financial results release for the third quarter ended September 30th , 2025 , which is accessible on the SEC website and posted on the investor page of the website at w-w-w dot com .
Speaker #3: And with that , I will turn the call over to Alicia's CEO , Randy Mills .
Speaker #4: Thank you very much , Matt . And welcome , one and all , to our third quarter 2025 conference call . I'm excited to be here with you today .
Speaker #4: Matt Ferguson , our chief Financial officer , is also with us today on this call . We're going to be going over a couple of things .
Speaker #4: One is the basics of Alicia . Just a couple of things that I think everyone should know about the company . We're going to talk .
Speaker #4: I'm going to spend a lot of time talking about where we're headed and not just where we're headed , but why we're going , where we're going .
Speaker #4: Matt's going to give us an update on finance and litigation status, and then lastly, we'll close and take your questions.
Speaker #4: So let's get into it . With some of the basics . So Alicia , we are a mission based company . I think that's an important thing for investors to know .
Speaker #4: And I think that's a good thing too , because we have a great mission . Our mission at Alicia is humanizing medicine so that patients can thrive without compromise .
Speaker #4: And , you know , today we're going to talk a lot about breast reconstruction . And I hope that you can appreciate that our work in this space is so necessary because there's a patient population right now , women experiencing and making their way through their breast cancer journey , who really are faced with a lot of compromise in their care and in their treatment .
Speaker #4: And that's holding them back from thriving . And we are applying our talents , our resources , our efforts , and our mission to overcome that .
Speaker #4: So these women are able to thrive without compromise . I think it's really important for a company to know what they're good at .
Speaker #4: What are their strengths , and then , Alicia , we are really great at combining biological matrices with powerful antibiotics that create this sustained antibiotic release in implants .
Speaker #4: That's able to prevent infectious complications from , from from happening . We started in this with Leuprolide , our first antibiotic eluting product that we got on the market .
Speaker #4: And and really did a great job in the initial commercialization with we sold that . As you guys know , to Boston Scientific for $88 million .
Speaker #4: And now we're taking that technology into NXT 41 , X , which is our next generation matrix for breast reconstruction . So if you're new to the story , and I see there are a lot of new callers on the call today , three sort of things that that that are probably worth keeping in mind .
Speaker #4: One is this is a validated technology platform . What do I mean by that ? Well , we've already done it . We've already developed the first FDA approved drug eluting bio envelope for pacemakers , which we sold to Boston Scientific .
Speaker #4: Now they're we're talking about a much smaller market . So only a $600 million market with a much smaller unmet medical need . We're talking about infection rates on the order of about 3% .
Speaker #4: We're taking that same technology platform, and we're moving it into a much bigger market with this blockbuster 41X that we have coming.
Speaker #4: So it's the same technology platform , but applied to the $1.5 billion breast reconstruction market . And as you're going to see coming up there , we're talking about an unmet medical need where women are facing post-operative infection rates between 15 to 20% .
Speaker #4: And then lastly , the company is now fully resourced . We have the right team in place . We have a state of the art GMP manufacturing facility , and we have a commercial platform already in place with our derm , with our derm product that we already have , and we're already distributing in this space .
Speaker #4: And then very importantly , we now have the cash to fund the company , not only through product development and product approval , but all the way through commercialization of this technology as well .
Speaker #4: So let's get into it and let's talk about where we're headed and more importantly , why we're headed there . So why breast reconstruction and why is breast reconstruction such a transformational opportunity for Alicia ?
Speaker #4: Well , it's really the convergence of three factors that make this a very special opportunity for us . One , as I've mentioned , breast reconstruction is a large market billion and a half dollar market .
Speaker #4: But two , it's an unusual opportunity in that it's this large market that still has this this really significant unmet medical need , post-operative infectious complications of 15 to 20% , despite our best efforts in this , for the last 30 or 40 years , we just haven't been able to crack .
Speaker #4: Crack this . And then lastly , our technology , our proven technology platform works in this space and we're going to be able to solve this significant problem for these patients by applying our technology to this area .
Speaker #4: So let's go through these three different parts right . The start with the large market and you know I get out and I talk to a lot of different investors about this .
Speaker #4: And I , I think this is actually one of the pieces of our , of our story that most investors already appreciate . The breast reconstruction , breast reconstruction market is a really big market .
Speaker #4: It's a addressable market of about a billion and a half dollars . Why ? There's 162,000 breast reconstructions performed in the United States annually .
Speaker #4: These are brand new 2024 numbers from from ASPs that are out biological meshes are already used in 90% of these reconstruction cases . So there's not like there's a market here that has to be retrained on how to use a biological mesh .
Speaker #4: And in fact , not only are our biological meshes , the dominant modality , treatment modality in these cases , they're also incredibly expensive .
Speaker #4: So we're talking about per breast on the order of $9,000 , breast for the biological matrix alone . And if you look at that as the percentage of implant spend .
Speaker #4: Right . So you take the you take the permanent breast implant , you take the expander that has to go in there and you take the biological matrix .
Speaker #4: You put all that together . The biological mesh is 65% of of the implant spend . Here's the problem . The outcomes are abysmal .
Speaker #4: Despite the high cost . The status quo here isn't addressing the problem . Now , I want to be really clear . I'm not suggesting the biological matrices are causing the problem .
Speaker #4: I'm not suggesting the implants are causing the problem . I'm certainly not suggesting that the surgeons are causing this problem , but they're not fixing the problem .
Speaker #4: And what we're left with here is 1 in 3 women that go through breast reconstruction suffer a serious complication . After that reconstruction .
Speaker #4: Fully 15 to 20% of that is driven by infectious complications . What about serious post-operative infections coming out of this case ? And and we are probably understating this this problem in this in this case , ultimately , we're looking at up to 21% of the implants end up being lost .
Speaker #4: The procedure ends up being a failure and has to be abandoned . That , as you can imagine , leads to this very significant economic burden that the hospital that the hospital faces .
Speaker #4: We're looking at $48,000 . The average economic cost to the hospital of a of an infected breast reconstruction . So here's a real , real significant problem .
Speaker #4: So like I said , when I go out and I tell the story , I think people appreciate that the breast reconstruction market is large .
Speaker #4: I think they even appreciate that . Hey , I believe you guys are going to get this approved . You did a pretty good job with that .
Speaker #4: With lipo . You got that there . You seem like you know what you're doing . They struggle to believe that this problem could be this bad in this big of a market for so long , and they really want to know sort of why .
Speaker #4: How could that how could that be ? Why is that ? And so I want to explain to you why this , why this is the case .
Speaker #4: So here we go . So there are some very unique challenges that are presented by mastectomy . So an in mastectomy all of the breast tissue has to be removed .
Speaker #4: And this is done by the oncologic breast surgeon that comes in and does the removal of the breast tissue . Why is this happening .
Speaker #4: This tissue has to come out . Because if any of it , if any of it remains , then there is still a risk for breast cancer redeveloping in that woman .
Speaker #4: And then there needs to be further monitoring . There needs to be mammograms . And so the whole purpose of having a mastectomy sort of goes out , goes out the window .
Speaker #4: And so the breast surgeon comes in here and there , very aggressive with with this removal . Right . And so they need to take out all of this breast you all the way to the margins of the skin , all the way down to the chest wall .
Speaker #4: The problem with that is , is you can see in this diagram here is that the vasculature for the breast runs through this very tissue .
Speaker #4: That all has to come out . Again . The vasculature of the breast runs through the tissue . That has to come out .
Speaker #4: And so what happens is when you remove this tissue from the breast , you have to tie off these vessels that that get cut .
Speaker #4: Right . And so when you tie off these vessels , then you basically create an area of hyperperfusion right where you don't have .
Speaker #4: Adequate amounts of , of , of blood flow . What's the consequence of that ? Well , the consequence of that is , generally speaking , the way we deal with and the way we prevent post-operative infection is by antibiotic therapy .
Speaker #4: We can give the patient oral antibiotics , or we can give the patient IV antibiotics . But the idea is that you give these patients antibiotics and they , they they circulate all through the body and go to the parts of the body that you're looking to protect .
Speaker #4: And prevent infection . But when you remove the blood supply , you also remove the route in which systemic antibiotic therapy needs to reach the surgical pocket .
Speaker #4: So no blood supply means no antibiotic therapy can reach where it needs . And there's lots of studies that show this . There's a the the plastic surgeons refer to post-operative antibiotic therapy often as voodoo .
Speaker #4: It it makes everyone feel good that they're taking these antibiotics . But it does not prevent post-operative infection . And the reason why it doesn't prevent it is this very real anatomical challenge .
Speaker #4: That's that's created it also , by the way , if if antibiotics can't get there because there's no blood , it also makes it for a real challenge for even the patient's own immune system to get there and our natural cellular components of our immune system have a far more difficult time .
Speaker #4: So after we've done this procedure , we've done the mastectomy . Now , a plastic surgeon , this is a different surgeon now , a different surgeon and a different surgical team comes into the operating room to to do the reconstruction of this , this area where they have this really thin skin , you have this pocket of tissue that doesn't have any vasculature .
Speaker #4: And now in there , they need to put an implant of some sort , either either the permanent implant or oftentimes an expander .
Speaker #4: And then the other thing they'll also put in there is to go ahead and they'll put in surgical drains. And these are drains.
Speaker #4: If you've never seen them . These are literally plastic tubes that port directly to the outside . And they allow excess fluid that normally would accumulate there to drain out of out of these spaces .
Speaker #4: And so you're adding this large foreign body and you're adding these drains that communicate with the outside and create a portal for , for contamination to enter .
Speaker #4: And then lastly there's a mesh . Right . And this mesh then goes around this entire construct to hold the implant in place and to create a bit of a barrier between the skin and the implant .
Speaker #4: And the reason that's done is because the the skin here , that's left after this radical mastectomy is so thin that you need you need something .
Speaker #4: And so that's what this that's what meshes are used for in , in , in in these types of procedures . And this is all done in a surgical procedure that's taking somewhere on the order of four to 6 to 8 hours in order to do so , if you wanted to create the perfect recipe for post-operative infection , it would be difficult to come up with a better recipe than the one we have here in breast reconstruction .
Speaker #4: You have long surgical times 4 to 6 hours , multiple different surgical teams creating an ischemic area in the body that is hypoperfused doesn't have as much blood flow as it would need on top of that , you put a large foreign body .
Speaker #4: And then , just for good measure , you throw a drain in that ports directly to the outside . And so the question isn't , how do we end up with post-operative infection rates of 15 to 20% ?
Speaker #4: The question is , how is it not 100% ? I mean , it's almost miraculous that you could you could do this procedure and not have not have more infectious complications .
Speaker #4: And I think that actually is really a testament to the surgeons and the professionalism of the surgeons and the operating teams in this case , because this is just almost the perfect storm for an infectious complication .
Speaker #4: But we think about this differently . We look at this and we say , what if we flipped the script here ? What what if we turned things over and instead of having those antibiotics delivered systemically and hoping some trickle in to this avascular necrotic space , what if instead we delivered them locally ?
Speaker #4: So what would happen in that case ? Well , in that case , you would have local concentrations of antibiotic that were much higher , that were at therapeutic or even super levels .
Speaker #4: And then just to boot , you would you would have systemic levels of antibiotic that were essentially in . So you would have antibiotic .
Speaker #4: Exactly where you needed it being very effective at preventing infection . And you would completely avoid side effects that can come along with prolonged antibiotic and antimicrobial use .
Speaker #4: And so this is the fundamental basis behind what we do at Alucia . This idea of drug eluting biologics and local antibiotic delivery .
Speaker #4: And this is what we did with Leupro . And it worked very successfully there . And it's what we're doing here with with with with 41 .
Speaker #4: And the good news is we're not alone here . It's not like we thought of this and like , hey , aren't we brilliant ?
Speaker #4: And I wonder and I hope this works really resourceful , inventive , creative plastic surgeons out there who are doing the best they can for their surgeons have already been looking into this , and they've actually already demonstrated proof of concept and what they've discovered is that local antibiotic delivery in breast reconstruction works .
Speaker #4: It effectively . It statistically significantly reduces post-operative infection . Now , the problem with it is they had to borrow techniques from orthopedic surgeons in order to pull this off .
Speaker #4: And there's just two different examples here . This first one on the left , these are PMMa plates polymethyl methacrylate plates said differently .
Speaker #4: They are plates of cement like a bone cement hard big rigid disks and basically what they do with these places , they're able to mix this stuff up in the operating room .
Speaker #4: And while they're mixing it up, they'll mix in a powdered antibiotic into the aggregate and make that a part of this bone cement.
Speaker #4: And they will literally put this bony plate up into the breast . Now the problem is a permanent it's not resorbable . It deforms the rib cage .
Speaker #4: It's but you know what ? It does really effectively . It prevents post-operative infection . So decreased infection . This is a study with 360 patients .
Speaker #4: Right . This decreased infection a bout 62% from 12.6 to 4.8% P value less than .01 . Really beautiful statistical data that shows that if you have local delivery of these antibiotics , that they will effectively address this post-operative compensation .
Speaker #4: Another version of this same thing is instead of making a big disk , what happens if you made little beads out of it and sort of sprinkled them in their in there and again , the same , the same thing .
Speaker #4: Now this was a case or this was a study that was , if you're wondering why the infection rates are so high , this was actually looking at salvage cases where the patients were already being brought back to the operating room for tissue necrosis .
Speaker #4: Now , normally what would happen is that procedure , the implant procedure would just be considered a failure . Here . They wanted to see if they could salvage these cases .
Speaker #4: And so they tried with and without this local antibiotic delivery . And again , 35% post-operative infection rate dropped to 6.3% post-operative infection rate .
Speaker #4: This is 75 patient study p value 0.017 . So so highly statistically significant in the point of all of this is if you deliver local antibiotics , it doesn't just conceptually work .
Speaker #4: It works in practice. And so that is why we created NXT 41. But we did it in a way that the ortho or that the plastic surgeons are excited about using.
Speaker #4: And so Doctor Williams and her team has , has made a beautiful biological matrix . It's one of the things we're really we're really good at doing .
Speaker #4: That's purpose built for plastic and reconstructive surgery . And then onto that . They've added powerful antibiotics , rifampin and minocycline . And they've done this in a way where they formulate it so they have a greater than 30 day release of these antibiotics .
Speaker #4: That's that's putting therapeutic levels of antibiotic into the space for greater than 30 days . Why is this 30 day number so important ?
Speaker #4: Because most drains come out by day 17 . And so you want to make sure that once the portals close to the outside , that you still have antibiotic delivery going on in there , able to address infections .
Speaker #4: So this is NXT 41 . And that's the rationale why we came up to this . That's why it was so important for us to get Leupro done .
Speaker #4: And commercialized . And then ultimately in the hands of Boston Scientific , who are going to knock the cover off the ball with that , with that product so we can move on and , and , and bring this product to market to the women who are going through breast cancer , who are battling breast cancer .
Speaker #4: And so desperately need this technology . Let's talk a little bit about how the plan on how we're going to get there . Right now we have simple Durham , which is which is our biological matrix that doesn't have antibiotic antibiotics is very analogous for those of you who remember are kangaroo product that we had on the market before we introduced Leupro .
Speaker #4: Just the biological matrix by itself . So that's our that's our simple product . And what it enables us to do , just like kangaroo enabled us to do , is build out our commercial infrastructure , our sales team , our contracting team , the team that the teams that work with the value analysis or the VAC committees build out that whole infrastructure , that whole infrastructure .
Speaker #4: So it's up and functioning and ready to go . When NXT 41 comes , comes to market , right ? Second step , you'll see this in the in the second half of of next year .
Speaker #4: You'll see the first step is approval of NXT 41 . Now what we're doing here NXT 41 is NXT without the antibiotic . So you think about the X as RX prescription , right ?
Speaker #4: So the NXT 41 is just the base matrix . We're doing that for regulatory purposes . We want to get just the matrix cleared through the FDA before we add the combination of the drug to be able to separate a combination device drug review into its component parts , and then then the last piece you'll see in the first half of 27 is the approval of NXT , 41 x .
Speaker #4: And then lastly , before I turn the call over to Matt , just a little bit about what's going on inside the company .
Speaker #4: And when we when we talk next about this , what I'll be providing updates . There are these three really essential work streams going on .
Speaker #4: Obviously the most important one is the development . And we're looking for the development and approval of a highly differentiated product significantly improves outcomes in plastic and reconstructive surgery .
Speaker #4: That is next 41 . But alongside all of that is our manufacturing team that are that are building out this robust production platform that's able to achieve really , really significantly low cost of goods through our own proprietary in-house manufacturing process .
Speaker #4: We have this manufacturing facility in Gaithersburg , Maryland . If you're ever in the area , stop by . We'd love to . Love to give you a tour about it .
Speaker #4: But we have this really great facility and this really great team . There . That's building out this process that will enable us to produce this at a low cost of goods .
Speaker #4: And then lastly , the commercial teams and the commercial teams working on simpler and and doing a great job with simple derm , but also building out the clinical advocacy and the commercial infrastructure that we need to have in place so that when 41 gets approved , we're able to do as good a job , if not a better job commercializing that product as we were able to do with Lupron .
Speaker #4: So that is what we're doing . That is why we're doing it . And our plan in order to get from here to there .
Speaker #4: And with that , I'll turn the call over to Matt and he'll tell you about our operations . Okay .
Speaker #5: Thanks , Randy . And , you know , it's a very exciting time to be at Alucia . And the future that Randy just described for everyone is is really built on the great work that has been done over the past several years , and the work that's been done more recently to to build the foundation , to make this future possible , that that we are all so excited about .
Speaker #5: And so with that , I'm going to just take us back briefly to what Randy talked about at the very beginning of the call and the big event for the third quarter of 2025 was the transaction of the sale of the bio envelope business within Alucia to Boston Scientific .
Speaker #5: It was a sale for $88 million in cash sold to a tier one company . That really put us through our paces , digging under the covers not just for the the the assets that they were acquiring , but really the whole company .
Speaker #5: And , you know , we came through that process , you know , very nicely , you know , with with the technology and the company validated for work that had been going on , really for years .
Speaker #5: So that that transaction validates the the technology platform that that will be transformed in the coming quarters into an NXT 41 and 41 X and capture this big opportunity .
Speaker #5: And it also transforms our balance sheet . Importantly . And so it brings in a significant amount of cash . And then it also streamlines our operations .
Speaker #5: So going forward , we'll be more nimble and we'll be more efficient and will be more productive . So the assets that were sold were the Lupron and Kangaroo products .
Speaker #5: Along with that , our main operational facility was in Roswell , Georgia that also went with the transaction . About about half of the people in the company also went with that transaction .
Speaker #5: So that is going to make a big difference in our operating expense going forward . And and also should lead to , you know , improved bottom lines for the company .
Speaker #5: The transaction was announced in early September , but it didn't close until Q4 . But it actually closed on the first day of Q4 .
Speaker #5: So , you know , while the financial results , the balance sheet that we show as of the end of the quarter doesn't yet reflect the the infusion of cash and the other associated payoff of debt and that sort of thing that occurred with the transaction that happened just the day after the end of the quarter .
Speaker #5: And we'll talk a little bit more about that in a second . So from a financial point of view , when you look at our financials going forward , the business of the bio envelope division that will now be shown just as a single line in discontinued operations .
Speaker #5: So starting with Q3 , this quarter , we are no longer reporting on the sales and and and expenses associated with with that part of the business , except during that one line , which is below our operating line .
Speaker #5: At this point . So just moving forward , talking a little bit about the results for the quarter of the continuing operations really breaks down into our two other product lines that are commercial right now .
Speaker #5: That simple derm and cardiovascular simple derm . We saw a nice uptick from the prior quarter in revenue . We we generated $2.4 million of revenue , which was up about 18% from Q2 of this year .
Speaker #5: It was down granted from a year ago , but there are a variety of factors that that cause that over time , a lot of it , we believe , had to do with the contributions from the distribution partner that we've had over time .
Speaker #5: And I can say that we've actually now ended that relationship as of October . And we now have full control over that product line .
Speaker #5: And it is unencumbered from a strategic point of view . But just as important , we now have full operational control over it .
Speaker #5: And as we rebuild the commercial footprint associated with that part of the business , it will do a couple things . One , it will lead to to renewed growth of that part of the business , but it will also very importantly , lay the groundwork , which Randy talked about a little bit for the products and X41 41 , X , which are sold into the same customer base and into the same types of procedures that that simple derm has sold into .
Speaker #5: So you could think of it a little bit similar to what we did with with Eleopra , where we had the kangaroo product before we had the pro drug eluting version of the product , having that sales organization and commercial footprint for kangaroo really allowed us to hit the ground running .
Speaker #5: And , you know , by the time that we were three quarters into our launch , we had we had ramped up to about an $18 million run rate with Pro .
Speaker #5: And we think we can likely do even better when we have an XT 41 on the market . Moving on to cardiovascular , that also had a nice quarter , again , with the theme of us regaining control over the product completely , we we returned to full operational control of that product after having a distribution partner there as well .
Speaker #5: In the second quarter . And in May , we started selling that directly ourselves . And we generated in the third quarter , the first full quarter where we had only direct sales .
Speaker #5: We generated just a little under a million , $900,000 of sales . With that . And that actually compares to both the prior year and the prior quarter quite nicely .
Speaker #5: It was up 68% from the prior year , up 28% sequentially . So , so we're we're doing nicely there . That product also has very high gross margins .
Speaker #5: So the more we sell there , the more it drops to our bottom line . And funds the really strategic opportunities that we have in front of us .
Speaker #5: Moving on to a few other financial highlights in our statement of operations . Overall sales were $3.3 million . Comprised of those two product lines that I just talked through , compared to 3.6 million from a year ago quarter .
Speaker #5: The GAAP gross margin was 55.8% versus about 49% a year ago . So we've seen a nice uptick in our gross margin there .
Speaker #5: Again , we're we're actually benefiting from the margin profile of these products that we're now selling compared to the the full portfolio portfolio that we had previously .
Speaker #5: And I think we'll see . See continued gains there . Our adjusted gross margin , which excludes non-cash amortization expense , that was even better at about 64% versus 56% in the year ago quarter .
Speaker #5: And and then also we saw improvements both from an operating expense point of view and a loss from operations perspective . So we were at 7.1 million and overall operating expense , down from 11 million a year ago .
Speaker #5: And our loss from operations was $5.2 million versus about $9 million a year ago . All of that nets out to what is probably more important metric .
Speaker #5: When you back out the non-cash items and non-recurring items , our adjusted EBITDA was 2.7 or , excuse me , adjusted EBITDA loss for the quarter was $2.7 million .
Speaker #5: And I think that's a pretty good indication of where we expect to be in the near future from a balance sheet , balance sheet perspective .
Speaker #5: Again , as I mentioned , the transaction had not closed yet . By the end of the quarter . So we ended the quarter with 4.7 million in cash .
Speaker #5: But again , one day later we closed the transaction that resulted in $80 million coming in at closing , $8 million is in escrow and interest bearing escrow account that will receive in 2026 that $80 million was then deployed to pay off about $28 million of debt , and then , after paying off deal expenses and the like , we ended up with about $49 million of actual cash that came into our account in early October .
Speaker #5: That puts us in a great position as we move forward and think about our development plans going ahead . So we believe that gives us the the runway to get us .
Speaker #5: Completely through the development and approval of NXT . 41 and NXT 41 X and the actual commercial launch of those products out in 2026 and 2027 .
Speaker #5: And then finally , for people who've been watching the company for some time , you know that we have been working very diligently to to put behind us some legacy litigation from a part of the company that we sold off a couple of years ago .
Speaker #5: That's generally referred to as the fiber cell litigation . I can report there that we were able to resolve another seven of those cases in the quarter , and now when we started with 110 of those cases , we're now down to only six remaining .
Speaker #5: So I can say we are very , very close to putting that completely in the rearview mirror for us . We're very glad to have that almost behind us .
Speaker #5: And from a financial point of view, it's a relatively small number that those remaining six cases account for. The estimated liability of those is less than $1 million, at about $700,000.
Speaker #5: So with those highlights , just before we take your questions , I would say if you think about it from a big picture .
Speaker #5: Why , as an investor , would you own a Lucia ? Well , it goes back to the the opportunity really , that we've been talking about here for the last half hour or so .
Speaker #5: We like to say that it's a biotech like upside with the risk profile and timeline of medtech . So it's something that is very unique in the marketplace .
Speaker #5: We have a validated technology platform that physicians will adopt and that Strategics will value . We have De-risked path to be first in class in a $1.5 billion market with a significant unmet medical need , and we have the team and the capital to get there without dilution .
Speaker #5: And so with that , we'll take your questions .
Speaker #2: Thank you so much . And as a reminder , to ask a question , simply press star one one and wait for your name to be announced .
Speaker #2: To remove yourself , press star one one again , please stand by for our first question . Please , and is from Frank Takanini with Lake Street Capital Markets .
Speaker #2: Please proceed .
Speaker #6: I agree this is Nelson Cox on the line for Frank . Thanks for taking the questions . Congrats on all the progress . So exciting to see the story developing .
Speaker #6: You walked through it during the prepared remarks , but maybe just to go a little deeper , maybe walk through some of the learnings with Lu Pro from a development to approval to commercial rollout perspective , just want to give you a chance to maybe dive into that a bit more in any learnings that'll translate to NXT .
Speaker #6: Thanks .
Speaker #4: Yeah , thanks , Nelson . So you know , first I would say the team is everything and that that goes to development FDA approval and commercial rollout as well .
Speaker #4: The team is really the team is really everything here . And so with Lu Pro , we actually had a submission of Lu Pro that that was put in actually before before my time coming back into the company .
Speaker #4: And we got some comments back from the we got a lot of comments back from the FDA about that . And that led actually to getting an NSC on that .
Speaker #4: But through that Non-substantial equivalence process , I brought in Michelle Williams , who you guys know . I've worked with for 21 years now , and I would say best , chief scientific officer in the business for these kinds of things .
Speaker #4: And , you know , she was able to really not just respond to the NSC , but also but also learn from it .
Speaker #4: And , and , and develop , develop our own intellectual property around it . On , on not just delivery methods for local antibiotic delivery , but also around testing methods and how you prove it and how you demonstrate it to the FDA .
Speaker #4: And in doing so , developed a really good relationship with with the agency , giving them not just barely enough information to feel comfortable with the submission and the clearance , but actually making it through really confident that that we've made a real quality product here .
Speaker #4: And so I would say , you know , that is probably the single most important thing from a development standpoint that we learned commercially .
Speaker #4: You know , commercially , what we learned was , is really good to have some commercial infrastructure in place . Leupro , you know , by the time we sold Leupro to Boston Scientific , it was it was running at an $18 million run rate , nine months in .
Speaker #4: I mean , that thing shot out of a cannon . And and that was because we had a commercial team in place . They had a great vac package that that again , Michelle Williams and her team had helped put together .
Speaker #4: But we also had the commercial infrastructure and the contracting in place , and we knew how to do that . And so kangaroo helped Leupro and we think in the same way , Simple Derm is going to help .
Speaker #4: 41 X when we get out there . So I think those are the two things that come to mind . Nelson .
Speaker #6: Perfect . That's helpful . And then maybe just running off of that , you know , simply obviously gives you a big commercial presence like you were talking about ahead of NXT .
Speaker #6: Just frame that a bit more for us . On how you plan to leverage those already existing relationships .
Speaker #4: Yeah , so we're talking about when we have Simple derm , right ? We're talking about . Biological mesh . That's used in the same surgical procedures .
Speaker #4: It's used by exactly the same surgeons in pretty much exactly the same way . We expect NXT 41 X to get used . Right .
Speaker #4: So we're not talking about requiring the surgeons to do anything different from their current practices . One of the reasons that we just we really love this .
Speaker #4: We love this approach . All of it's already in place . They're already doing it . The problem they have is despite their best efforts , they're left with this post-operative complication rate .
Speaker #4: And so and so our our plans with simple derm is to just keep using that product to have this direct customer interaction that we have .
Speaker #4: Nobody between us . As Matt said , we now have full control back of our simple derm , of our simple derm product line .
Speaker #4: We go out and meet directly with the plastic and reconstructive surgeons. We talk with them about how simple it is going and their problems, and how we can be helpful and how we can help them get better outcomes.
Speaker #4: And then obviously , just from a commercial infrastructure standpoint , our contracting teams and our commercial teams from a customer service and distribution , all that stuff is in place and ready to go .
Speaker #4: And we'll keep building on . Right . So we think about this coming year , not in any way as an idle year for our commercial team , but it's actually one where they're going to be active as hell .
Speaker #4: Going out there and and continuing to expand this in just the same ways that we did with with kangaroo before the launch of Value Pro , every seed we planted there ended up being very , very valuable for the launch of that product .
Speaker #4: And we learned that lesson . And so that's what that's what we're going to that's what we're going to do with derm .
Speaker #6: Perfect . And maybe just sneak one more in . How are you thinking about clinical evidence and data generation within NXT . Do you envision kind of needing to invest their significantly to drive education and adoption ?
Speaker #4: So through the through the combination 510 K pathway , as you know , we actually don't have a requirement for clinical data for the approval process .
Speaker #4: Now we are a science based company . We do really exceptional quality work and we stand behind it . When we launched Leupro , we had no requirement for clinical data , but very quickly we were able to put together as part of our package and as part of our marketing package , a complete story that made the implanting surgeons not just comfortable , but enthusiastic about putting a pro in .
Speaker #4: And that worked really , really well . What we're doing the same thing here . And so preclinically , there is a tremendous amount of evidence that the team's building from things like Pharmaco kinetics , how long the antibiotics are there , the concentrations that they hang around in surgical sites from a preclinical efficacy standpoint .
Speaker #4: You know , one of the things you can't do with patients is you can't you can't go back into them . A month after the product's been implanted .
Speaker #4: And infuse them or inject them with large amounts of pathogenic bacteria . But we can do that in in the pre-clinical setting with animal models and demonstrate , like we did with Leupro , that we're able to get complete kill even at four weeks .
Speaker #4: At four weeks out . But once the product Nelson comes to market , one , we don't think we know they're strong demand for this product .
Speaker #4: Now , from from the interactions that we have from the relationships that we have now , just the same way . Leupro there is there is a first wave of users that are ready to be done with putting cement into breasts in order to fix this problem and have a professionally built and constructed product that fits in with their practice , and they'll adopt right away .
Speaker #4: But we're not leaving it there . We're running clinical programs on these so that we generate conclusive data . Our goal here isn't to take significant market share .
Speaker #4: Our goal here is to flip the entire market so that women have much, much better outcomes than they currently do. The current standard of practice is not okay to leave the way it is.
Speaker #4: It needs to get better and we know we'll have to generate clinical data to get all of that done . But that is our goal .
Speaker #4: All of it .
Speaker #6: Great . Awesome . Thank you for taking the questions all .
Speaker #2: Thank you . Our next question is from the line of Ross Osborn with Cantor Fitzgerald . Please proceed .
Speaker #7: Hey guys , this is Matt Park on for us today . Thanks for taking the questions . So I guess starting off with 41 and 41 x , can you just go back to any manufacturing plans you need to do ahead of time to I guess , like , are there any validation steps needed to ensure a smooth transition from simple Durham to 41 and then to 41 x .
Speaker #7: ?
Speaker #4: Great question Matt . So to be really clear , where we manufacture 4141 x is a completely different facility than we manufacture a simpler and simpler term is a human derived product .
Speaker #4: It has a host of regulations associated with it because human-derived products can carry human pathogens with them. And so we keep those two things.
Speaker #4: Completely separate and completely separate facilities . So the facility where where manufacturing 41 and 41 X is a GMP facility , we were really , really lucky here .
Speaker #4: You might say we were we were beneficiaries of the GLP one . Boon that that occurred in that we were able to get a space a great GMP space that was already built out and , and , you know , ready to go from a company that was acquired by Novo Nordisk .
Speaker #4: And because of that , we were able to get it at , you know , at , really great prices . But most importantly , it was , you know , it was just it was just really high quality facility that was ready to go looking for looking for somebody to manufacture something in it .
Speaker #4: So, we're really pleased with that facility. There's all kinds of tech transfer and process qualification, equipment qualification that goes on when you bring up a manufacturing process.
Speaker #4: We have all of our our teams there have a schedule for all of 2026 . They're running . They're running through that process right now .
Speaker #4: And we are underway. We don't anticipate manufacturing issues. We'll hold back or be the rate-limiting factor in anything that we're doing here.
Speaker #4: And by the way , the facility wise , this is all done out of our new facility in Gaithersburg , Maryland .
Speaker #7: Got it . That's super helpful . Color . And then maybe just one more on the cardiovascular business . You know , now that you've transitioned it back in-house , I guess , how should we think about the current run rate and sustainability of growth from here ?
Speaker #5: Yeah , Matt . So , you know , we've been really pleased with the the bounce back that we've seen now that we've been able to devote some more attention and some , some direct resources to that , that part of the business , you know , that is not the future of the company by any means .
Speaker #5: But it's a great little business that , you know , that has a pretty significant market out there . And great growth margins .
Speaker #5: And , you know , some really committed physicians out there that are using the products . And so , you know , we're you know , we're basically back at the million dollar quarter revenue level .
Speaker #5: And , you know , I think there's some growth that we can achieve from there . But but , you know , it's not going to be a rocket ship .
Speaker #5: It's going to be steady growth . But we're also not having to to invest money up front in order to achieve that . We've got really an exclusively contract sales organization that's out there .
Speaker #5: So it's completely variable expense . And with the high gross margins , over 80% that we've been achieving , there , it it , you know , a significant amount of revenue that we generate actually drops to the bottom line .
Speaker #5: So that's that's in general how I would think about the product there or the product and the future trajectory there .
Speaker #7: Got it . Thanks again for taking the questions and congrats on progress .
Speaker #5: Okay .
Speaker #2: Thank you so much. As I see no further questions in the queue, I will conclude the Q&A session of the conference for today.
Speaker #2: Thank you all for participating . You may now disconnect .