Good afternoon, ladies and gentlemen. Welcome to the Elutia Inc. Fourth Quarter and Full Year 2024 Financial Results Conference Call. Please be advised that today's conference call is being recorded. I would now like to hand the conference call over to David Carey, Fin Partners. Please go ahead.

Thank you, operator, and thank you all for participating in today's call. Earlier today, Elutia Inc. released financial results for the quarter and full year ended December 31, 2024. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that do not relate to matters of historical facts or relate to expectations or predictions of future events, results, or performance are forward-looking statements. Forward-looking statements, including without limitation those relating to our operating trends and future financial performance, are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our public filings with the SEC, including Elutia Inc.'s annual report on Form 10-K for the year ended December 31, 2024, to be filed with the SEC and accessible on the SEC's website at www.sec.gov. Such factors may be updated from time to time in Elutia Inc.'s other filings with the SEC. The conference call contains time-sensitive information and it is accurate only as of the live broadcast today, March 6, 2025. Elutia Inc. disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. Also, during this presentation, we refer to gross margin excluding intangible 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 fourth quarter and December 31, 2024. It is accessible on the SEC's website and posted on the investor page of the Elutia Inc. website at www.elutia.com. And with that, I will turn the call over to Elutia Inc.'s CEO, Randy Mills.

Thank you, David, and good afternoon. Welcome, one and all, wherever you might be joining us from today. Since we preannounced so much of this, I'll do my best to keep my remarks short and brief, but like the preacher said, once I get started, I often get too lazy to stop. We are really on a tear here at Elutia Inc. Our mission is humanizing medicine so that patients can thrive without compromise, and we do that by pioneering the drug loading biometrics. We are able to take really complex, highly engineered biological matrices and couple that with the power of active pharmaceutical agents to come up with products that we think offer really significant and unique value propositions to some of the most challenging procedures that exist in medicine. We are a commercial stage company, and we have two platforms: EluPro, which is our flagship product, our flagship drug loading biologic for pacemakers and internal defibrillators and neurostimulators, and behind that, we have our emerging Simpliderm product that's often used in breast reconstruction. But we are a company with a lot of focus and a lot of discipline. And so even though we have a technology that can be broadly used across a number of different platforms, we have a very focused strategy for growth, and it goes like this. One, prove out the commercial value of our drug loading biologics technology on our EluPro product platform. Two, drive continued growth with our Simpliderm product line, and then three, really explode the value of this technology by taking our drug eluting biologics and adding it to other product lines, including our Simpliderm product line specifically for use in breast reconstruction and other surgical repairs. That's the high-level strategy for the company. But today, I'm gonna spend really all…

Alright. Thanks very much, Randy. And I'll just give you a summary of our financial results for the quarter and a few of the highlights for the year. And then we'll get into your questions. So, really, top of the list, as Randy mentioned, $2.7 million for bio envelope or device protection sales as we call it. In the year, in the quarter, that is. That was an 18% growth over the same quarter of the prior year. Just under $10 million, $9.9 million for the year, which was also solid growth at about 5% for the full year. But really more than anything, what we're doing is, as Randy spoke to, we're really laying the groundwork for what we believe will be a great 2025 for this product line and for the whole company. The other category of sales, main category of products that we have is Simpliderm and our women's health division. There, it was a lighter quarter, $2.3 million, which was down year over year. But there, that product line is somewhat concentrated in where the sales come from, and so we do see some ups and downs in the quarter. But for the full year, we actually were at $11.6 million, which was up 12% year over year. So that also is expected to be a strong growth driver for 2025. Rounding it out, cardiovascular, which we have partnered with LeMaitre for the complete distribution of that in the US. That was at half a million dollars for the year for the quarter. And compares to $600,000 in the 2023 fourth quarter. So down there, that leaves us overall at $5.5 million in revenue for the quarter. Down about 7% on a full year basis, the comparison to the same quarter of the prior year. We're…

Thank you. And at this time, we'll conduct our question and answer session. To ask a question, press star one on your telephone keypad. Participants using speaker equipment, we'll pause for a moment while we pull for questions. Thank you. And our first question comes from Ross Osborn with Cantor Fitzgerald. Please state your question.

Hi, guys. Congrats on the quarter and really successful pilot launch. Thanks for taking our questions. So starting off, can you spend some time discussing to what extent Boston will be involved with EluPro in terms of the amount of registered in your envelope? And any marketing equity.

Yeah. Ross, so the way I'll answer that is so we have an agreement with them right now for the distribution of the product where we basically partner with them to leverage their 900 reps to distribute the product into the electrophysiology CRM space across the United States. Right? So it's limited specifically to the United States there, and the way that arrangement works is when their reps basically partner with our territory managers. Keeping in mind, right, they might have a rep and I'm kind of making this up, but they might have a rep for roughly, let's just call it three hospitals for every rep. Sometimes it's, you know, there's even more higher concentration reps than that. Sometimes it's less. But let's just say that they have a rep for every three hospitals. So our territory managers will be partnering with multiple Boston Scientific reps, and the first thing they do is they partner to get access into the hospital. So we talk about VAC approvals and the number of VACs we're on contract with. We're on contract now with the hundred. There's actually 4,000 centers in the United States that are hospital-based that implant a hundred or more pacemakers a year. Right? So even though we're in a hundred, we still have a fairly long way to go. It's the first thing that their reps really help us do is get in and get through those less frequently visited centers that we otherwise wouldn't be in. And then the second thing they do is it's a real top-of-mind kind of thing. Now our reps are really good at demonstrating the value of using a biologic envelope and why a drug eluting product has significant advantages in what the biologics can ultimately do. And you don't really need…

Sounds great. That was perfect. And when will Boston commence distribution?

Shortly.

Okay. Fair enough. And then realize you're not providing guidance there, Ross? You know, I think what's important there, sorry. I didn't mean to step on you, Ross. I think what's important there is they haven't yet. Right? So everything that we've done here, which is frankly all we could handle, you know, was able, we were able to do it just, you know, little old Elutia Inc. And I think that talks to the value of having a really good product that physicians wanna use mixed in with, frankly, the Switzerland strategy, which is we don't make a pacemaker. So we're not a threat to anybody. You know, we're not gonna put our envelope around your product and then come in and then try to steal your underlying pacemaker business away the next day. And those two factors team up to make a pretty attractive launch.

Yep. Absolutely. And then realizing not providing guidance, but how should we be thinking about utilization at accounts? Maybe it'd be helpful to relay how you view a high volume account versus a low volume account.

Maybe I could jump in there a little bit, Ross. This is Matt. You know, I think I would go back to some of the numbers that we provided in the past where we have about 400 accounts that have ordered, you know, there are Kangaroo accounts, and as we just reported today, we're up at about a hundred that are now ordering EluPro. So, I mean, that and then we also talked about how it's, we're certainly seeing more of the growth coming from EluPro, as you would expect, in the current quarter. And, you know, based on where we are Q1, that will just accelerate in Q1. We already know that that's gonna be the case as we sit here in early March with just a few more weeks left in Q1. So, you know, I guess when I think of a high volume account, I would say it would be annual usage in the hundreds, and we know that there are about 1,400 accounts in the US. So, you know, well beyond what we've gotten into already with Kangaroo that are over a hundred pacemaker and defibrillator procedures for the year, and, you know, another cut at that is we think there are about 500 accounts in the US that are over 500 procedures per year. So, and as Randy mentioned, at least 60% of that is not touched by Medtronic so far, and we actually have, you know, feedback from the market that there are a lot of TYRX Medtronic users that are very interested and are already switching some of their usage, and in some cases, all of their envelope usage over to EluPro. So, you know, so it's hard to put exact numbers on it, what we would say is a high volume account, but hopefully that gives you some sense of what we think is achievable.

Yes. That's exactly what I was looking for. And then last one for me, and I'll jump back in the queue. Realized the excitement around EluPro. But as you know, we are big fans of Simpliderm as well. Can you spend a little bit more time going over what occurred during the fourth quarter in terms of the deceleration in growth and the game plan there for 2025? Thank you.

Yeah. So Simpliderm is a product that we distribute through two different mechanisms. The one is our independent network of our independent distributors. The other one is a relationship, a distribution relationship that we developed with Sientra. And, you know, that was, like, can't remember now. It was a couple of years ago, or so that we put that relationship in place. And that was a relationship that was just getting off the ground. But the idea there was Sientra was in about 23% of reconstruction cases, breast reconstruction cases, where a biologic is used almost every time. And they didn't have a biologic offering. And we thought that would be our, it would just sort of make sense, give them access to a really, you know, we think a market-leading biologic. And for us, we would have access to it's about $125 million of potential usage there. And so that was the rationale behind creating that partnership. And it's a non-exclusive partnership that, where we also, we go to pretty significant lengths to not step on each other's toes. So we're not competing against ourselves in the same accounts. And so it makes it, you know, the construct of that agreement doesn't allow us to sort of quickly expand into territories that aren't being adequately covered by one of us or the other. Instead, we try to do it, we try to, under this agreement, to do it a little bit in a little bit more planned and methodical way where we meet on a periodic basis and we say, okay, you know, not having success in these accounts. Maybe you guys wanna go in there or, you know, vice versa. Right? And that agreement was really, really working out well. And then, you know, unfortunately, Sientra went into…

Sounds great. Congrats again on the really strong start of EluPro. Excited for 2025.

Thank you. And our next question comes from Frank Takkinen with Lake Street Capital Markets. Please state your question.

Great. Hey, Randy. Hey, Matt. Thanks for taking the questions. I was hoping to start with one around kind of distribution partners. Obviously, you have the agreement with Boston that we've talked about on this call. Is that agreement structured as such that you could establish agreements with some of the other pacemaker players and expand your distribution capability that route?

It is, Frank.

Okay. And is that something you've considered pursuing, or at this point, is it Boston first and then see how the demand comes from that and maybe think about that at a later date and time?

Right now, we have a tremendous amount of demand from our own team, and now we're adding on Boston. And so from a business development standpoint, we're in a number of different discussions. But for right now, that certainly fills our dance card with regards to demand that we think we can appropriately handle. There's also different strategic reasons on why we might do one versus the other. But we have the flexibility to do it, but it's a more complicated series of questions than just that. But from a distribution standpoint, from a caring about growing the product and really establishing it, we think we're in really, really good shape with us partnering with Boston Scientific right now to do that.

Okay. That's helpful. And then from an active ordering account perspective, we've got a couple goalposts. Obviously, you've got a hundred active now, 400 Kangaroo, 500 getting over 500 implants, and then the broader market of 1,400 over a hundred implants per year. Maybe talk through the cadence of expectations around how new account additions will occur throughout 2025.

Yeah. You know, so we were clicking along or we are clicking along at about 15 a month right now. I do think it's unrealistic to think it will probably keep that pace up for the whole year, but there's sort of two things that are going on. One is there's just the sort of the law of averages. So if you go submit 200 VAC applications, and there's a six-month cycle time for a VAC, a hundred of those are gonna be less than six months. You know, they're gonna be faster than the average. But a hundred of those are gonna be longer than six months. And so we will just be running into VACs that take longer. We, you know, we said sort of all along, we thought this would be the gating item. And they're not all gonna go as fast as certainly we would like them to move and as the physicians would like to move. So that will be something that will be sort of tugging on how fast we can get them signed up. The thing that's gonna be pulling in the other direction is, you know, having a partner like Boston Scientific pulling us into those accounts where their reps are actively engaged in helping and doing that. We'll obviously, you know, that's a lot of help to be able to bring to the problem. And so we think that'll be helping on the plus side. But in general, it will probably back down a little bit off the pace that, you know, we started on, but maybe that's just being conservative. We'll see how it goes.

Okay. That's helpful. And then just last one from me, one for Matt. I was hoping you could talk a little bit about the cash burn in the quarter. Could you parse out kind of operational cash burn from the business versus litigation pay down and then maybe update around litigation expectations for 2025 would be helpful as well.

Yeah. Sure. Well, I'll tell you, you know, I'll share with you what I can. A lot of that is, one, hard to forecast and also something that, you know, we don't want to get into too much detail for, you know, all these cases are ongoing, some of them more active than others. But, you know, what you'll see even just looking at our balance sheet, you'll see that at the end of the third quarter, we had a liability related to the fiber cell litigation. And, again, for those people who aren't familiar with it, this is part of our company that we sold off in 2023. But we, you know, we retained some of that negative fee litigation associated with it. So we have a liability of a little over $20 million at that stage, and at the end of the year, it was down at about $15.9 million was the number. And so, you know, some pretty healthy reduction in the overall liability in terms of the number of cases. We had 79 outstanding at the end of Q3. Some of those were settled, but not yet paid for. At the end of the year, we were actually down to 43 that have not yet been settled. So we're really, I think, you know, we're making really significant progress putting all of this behind us. There is still more work to be done, but, you know, a lot of what we did in the fourth quarter was resolve cases that had trial dates that would otherwise have been coming up at some point during 2025, which, you know, I think it's probably a good thing for everyone, both us and the people on the other side of those cases that we didn't have those actual trials take place. Very costly and just not productive to go through that. And there are a few of those still remaining in the year that we'll try to go through a similar process with, and I expect we'll be successful with that. Then others that are, you know, further out that don't have anything scheduled. So I guess the last quarter was particularly active. You know, there will still be some activity in 2025, certainly. But, you know, but it should be declining, I think, from where it was in Q4.

Okay. That's helpful. Thanks, and congrats on all the progress.

Thanks, Frank.

Thank you. And ladies and gentlemen, that was our last question for today. So with that, we will conclude today's conference call. All parties may now disconnect and have a great evening. Thank you.