Elutia (ELUT) Q1 2026 Earnings Transcript

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DATE

May 14, 2026

CALL PARTICIPANTS

• Chief Executive Officer — C. Mills
• Chief Financial Officer — Matthew Ferguson
• [Investor Relations — Bernadine Cherniak]

TAKEAWAYS

• Total Net Sales -- $3.1 million, up approximately 6% year over year, reflecting growth from continuing operations excluding the divested BioEnvelope business.
• SimpliDerm Revenue -- $2.1 million at a 57% gross margin, compared to $2.6 million the previous year, representing a product line currently under divestiture discussions.
• Cardiovascular Revenue -- $1.0 million at an 85% gross margin, up from $300,000 in the prior year; company attributed this to a return to direct distribution and better procedural volume.
• GAAP Gross Margin -- 58%, an improvement from 47% year over year, attributed to favorable product mix and price improvements.
• Adjusted Gross Margin -- 67%, compared to 56% in the previous year, excluding amortization of acquired intangible assets.
• Total Operating Expenses -- $8.2 million, nearly flat compared to last year, with $2 million lower litigation expenses redeployed to R&D and commercial initiatives for NXT-41x.
• Net Loss -- $7.5 million, compared to a net loss of $3.9 million in the previous year; increase mainly due to non-cash items like revaluation of warrant liabilities rather than business deterioration.
• Adjusted EBITDA -- Loss of $4.4 million, up from a $2.8 million loss year over year.
• Cash Position -- $28.5 million cash on hand and $8 million in escrowable receivables, totaling $36.5 million, with anticipated release of escrow in Q4 2026.
• Shares Outstanding -- Approximately 44.2 million common shares, plus 3.2 million prefunded warrants, totaling 47.4 million common equivalents.
• NXT-41/NXT-41x Regulatory Timelines -- Anticipated FDA clearance for NXT-41 in Q4 2026 and for NXT-41x in the first half of 2027, with soft launch expected in the second half of 2027.
• Automated Manufacturing Platform -- Brought online this quarter, designed to enable a targeted gross margin of above 80% at scale for the upcoming NXT-41x product.
• Market Concentration Insight -- 585 U.S. hospitals account for 75% of breast reconstruction procedure volume, with the top 50 centers representing over $300 million of the $1.5 billion market opportunity.
• Strategic Initiatives -- Active divestiture process underway for SimpliDerm and inbound acquisition interest for the Cardiovascular line; company confirmed both would sharpen focus and improve the balance sheet.

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RISKS

• Net loss increased to $7.5 million from $3.9 million due in part to "noncash items and other expense," rather than core operational issues.
• SimpliDerm revenue declined to $2.1 million from $2.6 million, indicating negative sales trend in this product segment during the quarter.

SUMMARY

Elutia (NASDAQ:ELUT) emphasized ongoing progress in its NXT-41/NXT-41x regulatory programs, with FDA interactions described as highly productive and expected clearance milestones articulated for both products. Management reported the operational launch of an automated manufacturing platform, targeting significant gross margin expansion for future product commercialization. Executives highlighted active strategic efforts, including the divestiture of SimpliDerm and potential Cardiovascular product line sale, aimed at concentrating resources on the core drug-eluting biomatrix business opportunity.

• Company described breast reconstruction as a $1.5 billion U.S. market, referencing a lack of meaningful innovation and a high concentration of market volume among select hospitals.
• Direct surgeon engagement and market assessment by the Chief Commercial Officer revealed high complication rates—including "30% complication rates at these high-volume centers"—broadly validating the company’s clinical and commercial assumptions.
• C. Mills said, "The clinical need is real and it is significant." in breast reconstruction, with infection rates costing hospitals over $48,000 per case and impeding ongoing cancer therapy.
• Company confirmed prior successful commercialization and sale of its first-generation bioenvelope product to Boston Scientific for $88 million, highlighting proven execution capabilities.

INDUSTRY GLOSSARY

• Drug-eluting biomatrix: A biologically derived scaffold embedded with controlled-release pharmaceuticals, designed to deliver sustained therapy at a surgical site.
• SimpliDerm: Elutia’s acellular dermal matrix product used for tissue repair and reconstruction, currently in the process of potential divestiture.
• NXT-41x: Elutia’s lead next-generation drug-eluting biologic matrix in regulatory review for breast reconstruction indications.

Full Conference Call Transcript

Bernadine Cherniak: Thank you, operator, and thank you all for participating in today's call. Earlier today, Elutia released financial results for the first quarter ended March 31, 2026. 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. Any statements contained in this call that do not relate to matters of historical facts or relate to expectations or predictions of future events, results or performance are forward-looking statements.

All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and 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 Elutia's annual report on Form 10-K for the year ended December 31, 2025. and our subsequent periodic reports on Form 10-Q and 10-K 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. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 14, 2026. Elutia disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements because of new information, future events or otherwise. Also during this presentation, we refer to gross margin, excluding intangible assets, 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 released for the first quarter ended March 31, 2026.

This is accessible on the SEC's website and posted on the Investors page of the Elutia website at www.elutia.com. And with that, I will turn over the call to Elutia's CEO, Randy Mills.

C. Mills: Thank you, Bernadine, and thank you, everyone, for joining us today. The first quarter of 2026 was an important quarter for Elutia. We continued to sharpen our strategic focus. We advanced our NXT-41 regulatory program. We brought our automated manufacturing platform online, and we further strengthened our confidence in the commercial opportunity ahead of us in breast reconstruction. Here's how we'll spend our time today. I'll walk you through the headlines of the quarter and where we're headed. Matt will take you through the financials and close with a few thoughts on what's ahead. Then we'll open the line up for questions.

Today, Elutia is increasingly becoming a pure-play drug-eluting biomatrix company focused on one of the largest and most underserved opportunities in reconstructive surgery. Four things I would like to highlight from the quarter. First, our FDA review of NXT-41 is progressing through productive interactions with the agency, and the dialogue has increased our confidence in the planned NXT-41x submission. We continue to anticipate NXT-41 clearance in the fourth quarter of 2026 and NXT-41x clearance in the first half of 2027. Second, we brought our automated manufacturing platform online this quarter. That platform supports a target gross margin in excess of 80% at scale, enabling a differentiated value proposition at competitive pricing.

Third, direct surgeon engagement by our commercial team is confirming what we have believed all along, a $1.5 billion U.S. market, postoperative infection rates of 15% to 20% and no meaningful innovation in standard of care. And fourth, we ended the quarter with a strong balance sheet, $36.5 million in cash and escrow, and we are actively engaged in 2 strategic processes, the SimpliDerm divestiture we previously announced and a newly disclosed inbound acquisition interest in our Cardiovascular product line. It is increasingly clear that within the $1.5 billion breast surgery market, NXT-41x has the potential to be a blockbuster and to meaningfully improve outcomes for women with breast cancer.

For anyone new to the Elutia story, here is the short version of what we do. Our approach is simple but differentiated. We combine a proven biologic matrix platform with sustained local antibiotic delivery designed to prevent bacterial colonization and the cascade of complications like infection that can follow. Importantly, we have done this before. Our first-generation drug-eluting product, EluPro, was the first FDA-cleared antibiotic-eluting bioenvelope. We developed it, we cleared it, we commercialized it. And last October, we sold that business to Boston Scientific for $88 million. That prior success gives us confidence not only in the technology itself, but also in our ability to develop, make and commercialize differentiated drug-eluting products.

NXT-41x takes that same validated platform into a much larger market with a much larger unmet medical need. We believe the opportunity in front of us is transformational for 3 reasons: One, it's a big market, a $1.5 billion in the U.S. alone. Two, it's a big problem. 15% to 20% of patients develop postoperative infection after mastectomy. And if anything, that number is conservative. And three, we already have a proven solution. The $88 million that Boston Scientific paid for our first-generation product tells you that it works. Let me put the market into concrete numbers. Approximately 168,000 breast reconstruction procedures last year were performed in the United States.

Biologic mesh is utilized in more than 85% of those implant-based reconstructions. Biologics account for roughly 65% of the total procedural spend and human biologic mesh today sells for somewhere between $7,500 and $9,500 per breast. Put that all together, and you have $1.5 billion U.S. market opportunity. This is not a market we have to create. It already exists. Biologic matrices are already deeply embedded into the standard of care. Surgeons use them in the vast majority of these procedures. Our job is simpler than building a new category. We just have to give them a better version of what they're already using. In breast reconstruction, the unmet need for this is severe.

One in 3 women suffer a serious complication after reconstruction. 15% to 20% develop a postoperative infection, up to 21% experience implant loss and the average hospital cost of a single infection ends up being more than $48,000. But remember why this woman is in the operating room in the first place. She was diagnosed with cancer. Her #1 goal is to beat that cancer. And when infection takes hold, chemotherapy stops, radiation stops, everything stops until the infection is resolved. This is not a minor complication. This is a cancer treatment derailing event and the standard of care today does not solve it. NXT-41x is not a passive support mechanism. It is an active partner in recovery.

It is easy to use. It fits the surgical workflow the surgeon already knows. It's cost neutral to the hospital. It replaces legacy products that they're already buying and it delivers powerful, sustained uniform antibiotic coverage right at the surgical site where systemic antibiotics struggle to reach. Unlike legacy biologic matrix with -- that have little functional differentiation, our goal is to deliver differentiated functionality at a competitive economic profile. We believe that matters. With that backdrop, let me walk you through the work we did this quarter to advance the program. Let me first start with the FDA review. We continue to have productive interactions with the FDA regarding the NXT-41 submission.

As a reminder, NXT-41 is the base biologic matrix, and it serves as the foundation for NXT-41x drug-eluting version that will follow. While we're not going to comment on every detail of the review process, what I can say is that our dialogue with FDA has increased our confidence in the planned NXT-41x submission strategy. The discussions have helped clarify what FDA views as important from a submission standpoint. We continue to anticipate NXT-41 clearance in the first quarter of 2026 and expect NXT-41x clearance in the first half of 2027. The point I want you to take from this slide is our confidence has increased. Let me shift to manufacturing.

One of the most important accomplishments this quarter was bringing our automated manufacturing platform online. We have now installed and operationalized the core automated production equipment intended to support NXT-41x manufacturing at scale. This is strategically important for several reasons: First, the robotic coating system enables precise and reproducible application of the drug-eluting layer onto the biologic matrix. Second, the integrated in-house approach is designed to support scalability, efficiency and quality control. And third, we believe this process creates a meaningful competitive advantage.

The integrated process supports a targeted gross margin of above 80% at scale and an 80% plus gross margin gives us real pricing room against incumbent products that sell for between $7,500 to over $9,500 per breast while still delivering best-in-class margins. Said differently, NXT-41x is designed to compete both on outcomes and cost. That is a hard combination for an incumbent to respond to. Now let me turn to commercialization, which I'm particularly excited about. Our commercial readiness work continues to increase our confidence in the market opportunity.

Since joining Elutia, our Chief Commercial Officer, Pete Ligotti, has spent a substantial amount of time in the field speaking directly with surgeons and hospital stakeholders and the feedback has been remarkably consistent. The clinical need is real and it is significant. Surgeons describe postoperative infection in downstream complications as one of the most frustrating challenges they face in breast reconstruction. Second, there remains a clear lack of meaningful innovation anywhere within this category. And third, the commercial opportunity appears to be highly concentrated. Look at this funnel. As we discussed, the U.S. breast reconstruction market is $1.5 billion, and there are about 168,000 procedures performed last year.

About 1,800 U.S. hospitals perform reconstruction, but only 585 of those hospitals account for 3/4 of the entire market and the top 50 centers alone represent over $300 million in spend. Here's the insight. This is a $1 billion-plus U.S. market, but the real volume is concentrated at a few hundred hospitals, this is not a market that requires thousands of accounts or a massive sales infrastructure to establish meaningful penetration. We believe targeted engagement with high-volume centers can create substantial leverage, and that is exactly the team Pete is putting together. Before Matt walks you through the financials, let me briefly address our strategic process.

As we have previously discussed, we continue to evaluate opportunities to further focus the company around NXT-41x in its platform. With SimpliDerm, interest is strong and the process is going well. SimpliDerm is a high-quality business, $2.1 million in revenue in this quarter at a 57% gross margin. We have strong reimbursement coverage with approximately 100 million covered lives across UnitedHealthcare, Anthem and 9 regional plans, and it has a differentiated patent-protected manufacturing process. But separately, we have received inbound acquisition interest in our related Cardiovascular product line. For context, that business did $1 million in revenue this quarter at an 85% gross margin, and that's up from $300,000 just a year ago.

These are strong products with differentiated clinical profiles and attractive gross margins. However, as we evaluate the company strategically, our priority is ensuring that capital, resources and management attention are aligned with the largest long-term opportunity for value accretion, which is NXT-41x. So we are going to provide further updates on both processes as appropriate. Now with that, I'd like to turn the call over to Matt.

Matthew Ferguson: Okay. Thanks, Randy. I'll begin with a review of our first quarter financial results from continuing operations, which exclude the divested BioEnvelope business that we sold to Boston Scientific in October of last year. Total net sales for the first quarter were $3.1 million compared to $3.0 million in the prior year period, growth of approximately 6% year-over-year. SimpliDerm revenue was $2.1 million compared to $2.6 million a year ago. Cardiovascular revenue was $1.0 million compared to $300,000 in the prior year period. The increase in Cardiovascular was primarily driven by a return to direct distribution, but also to improved procedural volume. Turning to profitability.

GAAP gross margin for the quarter was 58% compared to 47% in the prior year period. Adjusted gross margin, which excludes amortization of acquired intangible assets, was 67% compared to 56%. The year-over-year improvement reflects favorable product mix and price improvements. Total operating expenses were $8.2 million, essentially flat year-over-year. Inside that number, we reallocated meaningfully. Litigation costs declined by approximately $2 million as we work through legacy matters, and we redeployed that capacity to achieve the substantial R&D progress and commercial readiness for NXT-41x. Net loss for the quarter was $7.5 million compared to a net loss of $3.9 million in the prior year period.

Adjusted EBITDA was a loss of $4.4 million compared to a loss of $2.8 million a year ago. Importantly, the increase in net loss was driven primarily by noncash items and other expense, specifically the revaluation of warrant liabilities and not by any deterioration in the underlying operating business. From a liquidity perspective, we ended the quarter with $28.5 million in cash on hand, plus the $8 million escrow associated with the BioEnvelope divestiture, which we expect to be released in the fourth quarter of this year. Combined, that represents approximately $36.5 million in cash and escrowed receivables. We believe our current capital position provides the resources necessary to support our planned regulatory and operational milestones.

For shares outstanding at quarter end, the company had approximately 44.2 million common shares outstanding and 3.2 million prefunded warrants, representing 47.4 million common equivalents outstanding. Now let's look ahead at the catalyst calendar. We continue to actively work towards our strategic transactions, the SimpliDerm and Cardiovascular processes that Randy discussed. Each of these would further bolster the balance sheet. We continue to anticipate NXT-41x FDA clearance in the fourth quarter of 2026. And in the first half of 2027, we anticipate FDA clearance of NXT-41x. In the second half of 2027, we anticipate commercialization and a focused NXT-41x soft launch. Overall, we believe the first quarter reflects continued execution against our strategic priorities.

We are maintaining financial discipline while investing in the core capabilities required to support the NXT-41x opportunity. Now taking a step back, we believe Elutia today represents a unique combination of attributes. We have an established drug-eluting biomatrix platform. We have prior experience successfully commercializing and monetizing products developed on this technology, most notably the sale of EluPro to Boston Scientific for $88 million. We have existing GMP manufacturing infrastructure that is now online. We have growing regulatory clarity from our productive dialogue with FDA, and we are pursuing a large market opportunity, $1.5 billion in the U.S. with a meaningful and well-documented unmet medical need. All the pieces are coming together.

And most importantly, we have a company capable of creating meaningful value for surgeons, for hospitals, for shareholders and most importantly, for patients. We have the platform, we have the market, we have the team, and we have the resources to make it happen. Operator, we're now ready to open the line for questions.

Operator: [Operator Instructions] First question comes from the line of Frank Takkinen of Lake Street Capital Markets.

Frank Takkinen: Congrats on all the progress. I was hoping to start with one on the follow-up. I know you said you wouldn't divulge too much detail on it, but I'd be remiss if I didn't ask. So maybe how I will ask is, if I heard you correctly, you said incrementally more confident. So maybe the way for us to understand it is no surprises with perhaps a more detailed roadmap for 41x. Is that a fair way to think about it? And any other detail you would provide?

C. Mills: Yes. The way I would describe it is, one, any time that you submit something to FDA, you submit to a particular group. And so while it's the same regulatory pathway that we use with EluPro, we went from cardiovascular with EluPro over to plastic and reconstructive surgery. And what we found with the review team in plastic reconstructive surgery, which is unique than the one in cardiovascular is a group that is significantly more collaborative and engaging and very proactive in the review process.

And so given how sort of early on we are in the review, we've had a tremendous amount of dialogue back and forth, substantive communication, direct communication with the agency on this, not just the perfunctory type of letters and initial things that might go back and forth to the state, but real serious meaningful conversations in a productive and collaborative fashion. And that's obviously been helpful in 41 and 41 is moving along the way we anticipated 41 would move along. But sort of keep in mind, as we do, I would hope, Frank, that our eye is actually on the prize and the price is 41x.

And what we're really doing with 41 is making sure that our 41x submission is the highest quality submission we can have it, that it's on time and most importantly, that 41x gets approved when we anticipate. And the interactions we've had so far in the 41 process has given us a lot of confidence in where we're going with 41x. I hope that adds sort of the color and commentary around what's going on.

Frank Takkinen: No, that's perfect. I appreciate that very much. Maybe on the -- some of the new commercial comments, thanks for that color. It was very educational. I was hoping to ask about maybe a question that's a little bit too far out right now to be thinking about, but I'm sure you're starting to sketch it up. How do you think about rep hiring? Obviously, a very concentrated call point. I think in the past, you've used a hybrid of kind of internal as well as 1099s. Maybe talking about that split and when you start to maybe bring on some of that early talent.

C. Mills: Right. So it's certainly a little too early to lay out the full plan. We'll be doing that more now that Pete's on, but I do have a couple of comments on it. So the first, one of the things Pete is doing is Pete is doing a really nice job of going out and assessing the market both qualitatively and quantitatively, Frank. And I mean when you bring a sophisticated guy in-house, right, this is what they do. Quantitatively, it's great to know, hey, what's the actual infection rate? Where are all the procedures done? How -- what are the kinds of infections and complications are they seeing at different hospitals and centers and things like that.

The qualitative side of it is what do the surgeons think is going on? I mean the -- anyone to spend any time with the surgeon is their perception of the problem can oftentimes be very different than the actual problem. And the gap between those 2 is actually where the real marketing plan and genius and opportunity come about and take shape. So what we're seeing and what Pete's already uncovered is when you start looking for -- when you start looking at the high concentration in centers, so I think it was 585 accounts for 75% of the market.

And then even that ends up being super concentrated, we have $300 million of market opportunity in just 50 accounts. But I mean, let's put that into perspective with what we did with EluPro. We took 12 direct reps with EluPro, pair them up with a handful of 1099s and in 9 months, they activated 193 VAC accounts, right, for submission in 193 accounts. That would be like, I don't know, $0.5 billion of market opportunity in breast reconstruction, right? It's absolutely incredible what's going on here. And then just to go on, I get really excited about this, as you could tell, Frank.

But another thing that Pete uncovered is if you look at the postoperative complications that are happening, we mentioned in the press release that he's confirmed the sort of the market size and this concentration effect that we're seeing, but also the severity, it's really interesting because when you look at the complication rates of these high-volume centers, they are really high. You're looking easily at 30% complication rates at these high-volume centers. And so it's kind of nice that the earliest places to go to get some big wins are actually also the ones that need the most help.

And intuitively, if you sort of think about it, that's not too surprising because these are the big centers where people are getting referred with the more complicated cases that are -- that have the comorbidities that lead to infection that require the more radical mastectomies and all of those factors that lead to postoperative infection. But it's really, really gratifying to see it come together. So we will have more -- just to go back to your actual question, Frank, we will have more on the launch structure coming up. I think probably by the next conference call, we'll be laying that out a little more clearly with a little more sophistication.

But boy, in 60 days, the man has hit the ground running and has confirmed what we know and then has taken it really to the next level with this, and it's super exciting, particularly when you put it in the context of what we were able to accomplish with Little old EluPro. And now you talk about game-changing 41x, and we can't wait.

Frank Takkinen: Very helpful. Maybe just my last one. How do you think about maybe time lines around SimpliDerm and Cardiovascular understanding. It's always challenging to predict, but any wise goalposts you provide?

C. Mills: Well, we started the SimpliDerm process. We announced that on our last call. Interest was very robust. I think we had something like 38 targets engaged in it. I would say we have confidence -- we have pretty good confidence that a transaction is coming together. Frank, I just -- it's like trying to pick the final 4 or enrollment in the clinical trial, like trying to time when a deal like a divestiture is going to happen, just leads to bad promises and expectations. I will say we are very pleased with how the SimpliDerm process is going. We're looking for a high-quality deal, and we think we're on track to get one.

But until it's done, it's not done. And then on the Cardiovascular side, the air was pretty much just a lot of surprise from the upside because we got actually a number of inbound requests on the Cardiovascular side, and there's high-quality interest in that product as well. And as we think about strategic positioning of the company, you could probably tell, right, we are really, really convinced in the 41x opportunity that lies ahead, not just the capital that this would add to our balance sheet and strengthen our balance sheet even further than where it is, but also the strategic focus and the alignment and the management attention and all of those other things.

These are 2 great product lines that are used surgically every day and patients benefit from them every day. But they're just not where we're going as a company. And it will -- I think both of these will have a meaningful impact to our balance sheet and to our strategic focus. So did that help?

Frank Takkinen: Yes. Very helpful.

Operator: Thank you. Ladies and gentlemen, that does end our Q&A session and concludes today's conference call. Thank you for participating. You may now disconnect.

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