Good day, everyone, and welcome to Elutia Third Quarter 2025 Financial Results Call. Please note, this conference is being recorded. Now it's my pleasure to turn the call over to Matt Steinberg, with FIN Partners. Please proceed.

Thank you, operator, and thank you all for participating in today's call. Earlier today, Elutia released financial results for the quarter ended September 30, 2025. 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 provision of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that do not relate to matters of historical facts or relate to expectations or predictions of future events, results or performance, are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. 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, 2024, accessible on the SEC's website. 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, November 6, 2025. Elutia disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements whether because of new information, future events or otherwise. Also during this presentation, we refer to gross 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 30, 2025. With that, I will turn the call over to Elutia's CEO, Randy Mills.

Thank you very much, Matt, and welcome to our third quarter 2025 conference call. I'm thrilled to be here with you today. Matt Ferguson, our Chief Financial Officer, is also on the call with us. We'll cover a few important topics today, including an overview of Elutia, our direction, and the reasons behind it. Matt will provide updates on our financials and litigation status, and we will conclude with a Q&A session. To begin, let me share some basics about Elutia. We are a mission-driven company, which is crucial for our investors to know. Our mission is to humanize medicine, enabling patients to thrive without compromise. Today’s discussion will focus on breast reconstruction, highlighting the essential nature of our work in this area for women navigating breast cancer. This patient population faces substantial compromises in their care and treatment, which inhibits their ability to thrive. We are committed to using our expertise and resources to eliminate these compromises. At Elutia, we excel at combining biological matrices with powerful antibiotics for sustained release in implants, preventing infectious complications. We launched our first product, EluPro, which was successfully commercialized and sold to Boston Scientific for $88 million. Now, we are utilizing that technology in our next-generation breast reconstruction matrix, NXT-41x. For those who may be new to our story, it's important to recognize three key points. First, we have a validated technology platform. We developed the first FDA-approved drug-eluting bio-envelope for pacemakers, sold to Boston Scientific. That market was smaller, worth $600 million with a 3% infection rate. We’re now applying our platform to the larger $1.5 billion breast reconstruction market, where the unmet need is significant with postoperative infection rates between 15% to 20%. Secondly, our company is fully resourced. We have a competent team, a state-of-the-art GMP manufacturing facility, and a commercial platform in place with our existing SimpliDerm product. Most importantly, we have sufficient funding to support the company through product development, approval, and commercialization. Now, let's discuss why we are focusing on breast reconstruction. This market is ripe for transformation due to three converging factors. It is a large market, with a significant unmet need of 15% to 20% for postoperative infections, and our proven technology is poised to address this issue effectively. To elaborate on the market size, there are 162,000 breast reconstructions performed annually in the U.S., with biological meshes used in 90% of these cases. Despite the high costs associated with biological matrices—around $9,000 per breast—the outcomes are disappointing, with serious complications affecting 1 in 3 women. Post-surgery, up to 21% of implants may fail due to infections, imposing an economic burden of approximately $48,000 per infected case on hospitals. Addressing why the infection rates are so high is critical. Unique challenges arise post-mastectomy when all breast tissue, including critical blood vessels, is removed, leading to compromised blood supply that hinders systemic antibiotic delivery. Studies indicate that conventional postoperative antibiotic therapy is ineffective in preventing infections due to this anatomical challenge. At Elutia, we propose a different approach, delivering antibiotics locally rather than systemically, allowing for higher concentrations at the site of surgery and mitigating systemic side effects. This local delivery has shown promise in reducing infection rates effectively, as demonstrated by existing research. NXT-41x will harness this local antibiotic delivery, combined with a biological matrix specifically designed for breast reconstruction. Our formulation will release therapeutic levels of antibiotics for over 30 days, ensuring effective infection prevention, particularly as surgical drains are typically removed around day 17. Looking ahead, we have plans to launch SimpliDerm, our biological matrix without antibiotics. Following that, we aim to get NXT-41 approved, paving the way for the introduction of NXT-41x. In summary, Elutia is on a clear path to utilize our expertise to address significant healthcare challenges in breast reconstruction, and we are poised for success. With that, I’ll turn the call over to Matt to discuss our operational updates.

Okay, thanks, Randy. And it's a very exciting time to be at Elutia and the future that Randy just described for everyone 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 build the foundation to make this future possible that we are also excited about. 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 Elutia to Boston Scientific. It was a sale for $88 million in cash, sold to a Tier 1 company that really put us through our paces digging under the covers, not just for the assets that they were acquiring, but really the whole company. And we came through that process very nicely with the technology and the company validated for work that had been going on really for years. So that transaction validates the technology platform that will be transformed in the coming quarters into NXT-41 and 41x and capture this big opportunity. 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. 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 EluPro and CanGaroo products, along with that, our main operational facility within Roswell, Georgia that also went with the transaction. About half of the people in the company also went with that transaction. So that is going to make a big difference in our operating expense going forward and also should lead to improved bottom lines for the company. The transaction was announced in early September, but it didn't close until Q4, but it actually closed on the first day of Q4. So while the financial results, the balance sheet that we show as of the end of the quarter doesn't yet reflect 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, 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. So starting with Q3 this quarter, we are no longer reporting on the sales and expenses associated with that part of the business, except in that one line, which is below our operating line 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, that's SimpliDerm and cardiovascular. SimpliDerm, we saw a nice uptick from the prior quarter in revenue. We generated $2.4 million of revenue, which was up about 18% from Q2 of this year. It was down, granted from a year ago, but there are a variety of factors that caused 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. 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, and it is unencumbered from a strategic point of view. But just as important, we now have full operational control over it. As we rebuild the commercial footprint associated with that part of the business, it will do a couple of things. One, it will lead to renewed growth of that part of the business, but we'll also very importantly, lay the groundwork, which Randy talked about a little bit for the products, NXT-41, NXT-41x, which are sold into the same customer base and into the same types of procedures that SimpliDerm is sold into. So you can think of it a little bit similar to what we did with EluPro, where we had the CanGaroo product before we had the EluPro drug-eluting version of the product. Having that sales organization and commercial footprint for CanGaroo really allowed us to hit the ground running. And by the time that we were 3 quarters into our launch, we had ramped up to about an $18 million run rate with EluPro, and we think we can likely do even better when we have NXT-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 returned to full operational control of that product after having a distribution partner there as well 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, we generated just a little under $1.9 million of sales with that. And that actually compares to both the prior year and the prior quarter quite nicely. It was up 68% from the prior year, up 28% sequentially. So we're doing nicely there. That product also has very high gross margin. 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. 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. 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, again, we're actually benefiting from the margin profile of these products that we're now selling compared to the full portfolio that we had previously. And I think we'll see continued gains there. Our adjusted gross margin, which excludes noncash amortization expense, that was even better at about 64% versus 56% in the year-ago quarter. 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 in overall operating expense, down from $11 million a year ago, and our loss from operations was $5.2 million versus about $9 million a year ago. All of that nets out to what was probably a more important metric when you back out the noncash items and nonrecurring items, our adjusted EBITDA was $2.7 million, and I think that's a pretty good indication of where we expect to be in the near future. From a balance sheet perspective, 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. But again, one day later, we closed the transaction that resulted in $80 million coming in at closing, $8 million in escrow and interest-bearing escrow account that we'll 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. 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 runway to get us completely through the development and approval of NXT-41 and NXT-41x and the actual commercial launch of those products out in 2026 and 2027. Then finally, for people who've been watching the company for some time, you know that we have been working very diligently to put behind us some legacy litigation from a part of the company that we sold off a couple of years ago. That's generally referred to as the FiberCel litigation. I can report there that we were able to resolve another 7 of those cases in the quarter. And now when we started with 110 of those cases, we're now down to only 6 remaining. 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. And from a financial point of view, it's a relatively small number that those remaining 6 cases account for. The estimated liability of those is less than $1 million at about $700,000. So with those highlights, just before we take your questions, I would say, if you think about it from a big picture, why as an investor, would you own Elutia? Well, it goes back to the opportunity really that we've been talking about here for the last half hour or so. We like to say that it's a biotech-like upside with the risk profile and timeline of med tech. So it's something that is very unique in the marketplace. We have a validated technology platform that physicians will adopt and that strategic will value. We have a derisked path to being 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. So with that, we'll take your questions.

It's Frank Takkinen from Lake Street Capital Markets.

This is Nelson Cox on the line for Frank. Congrats on all the progress. It's exciting to see the story developing. You walked through it during the prepared remarks, but maybe just to go a little deeper, maybe walk through some of the learnings with EluPro from a development to approval to commercial rollout perspective. Just want to give you a chance to maybe dive into that a bit more and any learnings that will translate to NXT.

Thank you, Nelson. First and foremost, the team is crucial to everything we do, including development, FDA approval, and commercial rollout. The submission for EluPro was made before I returned to the company, and we received a lot of feedback from the FDA regarding that submission, which unexpectedly led us to get a not substantially equivalent status. During that process, I brought in Michelle Williams, who I've collaborated with for 21 years and is highly regarded as the best Chief Scientific Officer for these situations. She efficiently addressed the FDA's concerns and also utilized that feedback to enhance our intellectual property, focusing on local antibiotic delivery methods and testing protocols to validate our approach to the FDA. This led to establishing a strong relationship with the agency, ensuring they had ample information to gain confidence in our product's quality. From a development perspective, this was a critical lesson for us. On the commercial side, we realized the importance of having some infrastructure set up beforehand. When we sold EluPro to Boston Scientific, it was achieving an $18 million run rate just nine months in, thanks to our commercial team and their effective value access package, which Michelle Williams’ team significantly contributed to. We had the necessary commercial infrastructure and contracting in place, enabling us to succeed. We believe that CanGaroo will similarly support EluPro, and we anticipate SimpliDerm will also make an impressive impact once we launch. Those are the key takeaways I would highlight.

Then maybe just running off of that, SimpliDerm obviously gives you a big commercial presence like you're talking about ahead of NXT. Can you just frame that a bit more for us and how you plan to leverage those already existing relationships.

Yes. When we discuss SimpliDerm, we are referring to a biological mesh utilized in similar surgical procedures by the same surgeons in much the same way we anticipate NXT-41x to be used. This means that surgeons won’t have to change their current practices, which is one of the reasons we are enthusiastic about this approach. Everything required is already in place, and surgeons are already using it. However, despite their best efforts, they are still facing postoperative complications. Our strategy with SimpliDerm is to continue engaging directly with customers. We have regained full control of our SimpliDerm product line, allowing us to meet directly with plastic and reconstructive surgeons to discuss their experiences with SimpliDerm, their challenges, and how we can assist in achieving better outcomes. Furthermore, our commercial infrastructure, including contracting, customer service, and distribution teams, is already operational and ready to develop further. We view this forthcoming year as an active period for our commercial team, during which they will work diligently to expand in ways similar to how we previously did with CanGaroo before EluPro's launch. Every effort made there proved invaluable for that product’s introduction, and we've learned from that experience, applying those lessons to our efforts with SimpliDerm.

Maybe just sneak one more in. How are you thinking about kind of clinical evidence and data generation with NXT? Do you envision kind of needing to invest there significantly to drive education and adoption?

Through the 510(k) pathway, we don’t require clinical data for the approval process. As a science-based company, we prioritize exceptional quality and stand by our work. When we launched EluPro, there was no requirement for clinical data, yet we quickly assembled a comprehensive marketing package that made implanting surgeons both comfortable and enthusiastic about the product. We are applying the same approach here. There is a substantial amount of preclinical evidence being developed, including pharmacokinetics and the antibiotic concentration levels at surgical sites. Unlike clinical settings where it’s unethical to inject patients with large amounts of bacteria post-implantation, we can conduct such experiments in animal models. Similar to our success with EluPro, we are able to demonstrate complete bacterial kill even after four weeks. Once Nelson reaches the market, we anticipate strong demand based on our ongoing relationships. Just like with EluPro, there is a group of early adopters eager to transition from using cement to a professionally designed product that aligns with their practices. However, we are also committed to conducting clinical programs to generate conclusive data. Our aim isn’t merely to capture market share; we seek to transform the entire market to ensure that women achieve significantly better outcomes than they do under the current standards. We believe the existing practices need improvement, and while we understand the importance of generating clinical data to support this transformation, that is our ultimate goal.

Our next question is from the line of Ross Osborn with Cantor Fitzgerald.

This is Matt Park standing in for Ross today. Can you discuss any manufacturing plans that need to be in place ahead of time? Specifically, are there any validation steps necessary to ensure a smooth transition from SimpliDerm to 41 and then to 41x?

Great question, Matt. So to be really clear, where we manufacture 41, 41x is a completely different facility than we manufacture SimpliDerm. SimpliDerm is a human-derived product. 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 completely separate in completely separate facilities. So the facility where we're manufacturing 41 and 41x is a GMP facility. We were really, really lucky here. You might say we were beneficiaries of the GLP-1 boon that occurred in that we were able to get a space, a great GMP space that was already built out and ready to go from a company that was acquired by Novo Nordisk. And because of that, we were able to get it at really great prices. But most importantly, it was this really high-quality facility that was ready to go looking for somebody to manufacture something in it. 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. We have all of our teams there have a schedule for all of 2026. They're running through that process right now and are underway. We don't anticipate manufacturing will hold back or be the rate limiting factor in anything that we're doing here. And by the way, facility-wise, this is all done out of our new facility in Gaithersburg, Maryland.

Maybe just one more on the cardiovascular business. Now that you've transitioned it back in-house, I guess, how should we think about the current run rate and the sustainability of growth from here?

Yes, Matt. We are very pleased with the recovery we have observed now that we can focus more attention and direct resources onto that segment of our business. While it is not the primary focus of the company, it remains a solid business with a substantial market opportunity and excellent gross margins, supported by dedicated physicians who utilize our products. We have returned to generating about $1 million in revenue per quarter, with potential for growth from that point. However, we expect steady growth rather than explosive growth, and we are not required to invest additional capital upfront to achieve it. Our sales force operates on a contract basis, resulting in entirely variable costs. Given the high gross margins exceeding 80% that we have been achieving, a significant portion of our revenue contributes directly to our profits. This is the general outlook I have regarding that product and its future trajectory.

Got it. Thanks again for taking the questions and congrats on progress.

As I see no further questions in the queue, I will conclude the Q&A session and conference for today. Thank you all for participating. You may now disconnect.