Earnings call transcript: Elutia Q4 2024 misses forecasts, stock drops

Elutia Inc. (ELUT), with a market capitalization of $106.42 million, reported its fourth-quarter 2024 earnings, revealing a miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of -$0.26, below the expected -$0.24, and revenue of $5.47 million, falling short of the anticipated $6.3 million. Following the earnings release, Elutia’s stock fell by 9.25%, closing at $2.55, moving closer to its 52-week low of $2.28. Notably, analysts maintain a Strong Buy consensus on the stock, with price targets ranging from $8 to $10.

InvestingPro analysis reveals several key insights about Elutia’s current situation. Subscribers can access 6 additional ProTips and comprehensive metrics to better understand the company’s position.

Key Takeaways

• Elutia missed both EPS and revenue forecasts for Q4 2024.
• Stock dropped by 9.25% in post-earnings trading.
• Revenue declined by 7% year-over-year for the quarter.
• Positive developments include the launch of EleuPro and a partnership with Boston Scientific.

Company Performance

Elutia’s performance in Q4 2024 was marked by a revenue decline of 7% year-over-year, reaching $5.5 million. The company operates with a moderate level of debt totaling $23.13 million and maintains a current ratio of 0.94, indicating tight liquidity. Despite the revenue drop, the company maintained its operating loss at $8.4 million, consistent with the previous year. The launch of EleuPro, a drug-eluting biologic envelope for cardiac devices, and a strategic partnership with Boston Scientific were key highlights, potentially positioning the company for future growth.

Financial Highlights

• Revenue: $5.5 million, down 7% year-over-year.
• Full Year 2024 Revenue: $24.4 million, down 1% year-over-year.
• Earnings per share: -$0.26, missed forecast by $0.02.
• Gross Margin: 43% GAAP, up from 36% last year.

Earnings vs. Forecast

Elutia missed its EPS forecast by $0.02, reporting -$0.26 against an expected -$0.24. Revenue also fell short, coming in at $5.47 million compared to the forecasted $6.3 million, a significant deviation that contributed to the stock’s decline.

Market Reaction

Following the earnings announcement, Elutia’s stock experienced a 9.25% drop, closing at $2.55. This decline reflects investor disappointment in the company’s failure to meet expectations, with the stock now nearing its 52-week low. The stock has declined 34.04% over the past six months, though InvestingPro analysis suggests the stock is currently fairly valued based on its proprietary Fair Value model.

Outlook & Guidance

Looking forward, Elutia aims to capitalize on its new product, EleuPro, and expand its market reach through its partnership with Boston Scientific. The company is focused on increasing its manufacturing capacity and securing more Value Analysis Committee approvals to drive growth.

Executive Commentary

CEO Randy Mills emphasized Elutia’s commitment to innovation, stating, "We think we have a winner here," in reference to EleuPro. CFO Matt Ferguson highlighted the company’s progress in overcoming past challenges, noting, "We’re making really significant progress putting all this behind us."

Risks and Challenges

• Continued operating losses may strain financial resources.
• Competitive pressures from established market players like Medtronic.
• Macroeconomic factors could impact healthcare spending and device adoption.
• Potential delays in expanding distribution networks.

Q&A

During the earnings call, analysts inquired about the distribution partnership with Boston Scientific and potential collaborations with other pacemaker manufacturers. Concerns were also raised about ongoing litigation settlements and the impact of Sientra’s bankruptcy on SimpliDerm distribution.

Full transcript - Elutia Inc (ELUT) Q4 2024:

Conference Operator: I would now like to hand the conference call over to David Carey, Fin FIN Partners. Please go ahead.

David Carey, Fin FIN Partners, Fin FIN Partners: Thank you, operator, and thank you all for participating in today’s call. Earlier today, Eleusia released financial results for the quarter and full year ended 12/31/2024. 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 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 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 Aleutia’s annual report on Form 10 ks year ended for the year ended 12/31/2024, to be filed with the SEC, accessible on the SEC’s website at www.sec.gov. Such factors may be updated from time to time in Allulcia’s other filings with the SEC.

The conference call contains time sensitive information and is accurate only as of the live broadcast today, 03/06/2025. Alluja 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 in the company’s financial results release for the fourth quarter ended 12/31/2024, which is accessible on the SEC’s website and posted on the investor page of the Allucia website at www.allucia.com. And with that, I will turn the call over to Allucia’s CEO, Randy Mills.

Randy Mills, CEO, Aleutia: Thank you, David, and good afternoon. Welcome, one and all, wherever you might be joining us from today. Since we pre announced 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 Allucia.

Our mission, humanizing medicine so that patients can thrive without compromise, and we do that by pioneering the drug eluting biometrics. We’re 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’re a commercial stage company and we have two platforms that we’re growing off of, Eleupro, which is our flagship product, our flagship drug eluting biologic for pacemakers and internal defibrillators and neurostimulators. And behind that, we have our emerging Symploderm product that’s often used in breast reconstruction. But we’re 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 looting biologics technology on our EleuPro product platform. Two, drive continued growth with our Simplederm 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 Simplederm 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 going to spend really all of my time focusing on EleuePro and the amazing work that we’re doing there, because that’s really a tremendous value driver for the company.

So launching LU Pro, it’s going on right now. We are now FDA cleared for LU Pro to be used in cardiac implantable electronic devices as well as neurostimulators. And while it took a while to get here, we’ve got a real winner on our hands as I think, I hope I’ll be able to communicate to you through these upcoming slides. A little bit about the market dynamics that we have underlying this field of using EleuPro to protect a pacemaker that’s getting implanted into somebody. So each year, there’s about 600,000 pacemakers and internal defibrillators that are placed in The United States.

Up until now, Medtronic had the only antibiotic eluting envelope that’s been available to electrophysiologists for use. It’s TYRX synthetically based antibiotic eluting envelope that does about $200,000,000 a year. And like I said, that was up until now. Medtronic from a market dynamic standpoint, they have about 40% of the pacemaker market. So that means they’re in about 40% of pacemaker cases.

And so they had actually a really nice platform in which to introduce TYRX and they’ve done a nice job creating the market for device protection and this concept of an antibiotic eluting envelope going around a pacemaker. But that leaves 60% of the market, Boston Scientific, Abbott and BIOTRONIK, that don’t have an antibiotic eluting envelope and that really don’t like the idea of having a Medtronic TYRX envelope going around their pacemakers. And this isn’t something that happens sort of as a one off. We estimate now that there’s about $85,000,000 a year of TYRX that goes around pacemakers of either Boston Scientific or Abbott. And I’ll just share with you, when I say things like a rep, just the last thing they want to see is a piece of TYRX around one of their pacemakers.

I’ll share with you, this is an actual quote I got from a rep. He came up and said, I don’t want TYRX on my cans. It’s like ketchup on turkey, it just doesn’t go. And I couldn’t agree more. We don’t want TYRX on their cans either.

And now we actually have a product that we can offer to them that we think isn’t just as good as TYRX, but is actually a much, much better product. And let me sort of explain why. So, we have done this marketing survey in the past. It said 88% basically of TYRX users that were polled said they would switch some or all of their business over to EluPro once it was released. But now that we’re out in the field, right, we’re actually getting to engage, with these electrophysiologists on a day to day basis with an antibiotic envelope and with a really with a different, offering and a different approach to delivering the same powerful antibiotics, rifampin and minocycline, but in a completely different envelope that’s not a synthetic base, but instead the natural biologic base that fully conforms to the can, we actually get to understand why they’re so interested in a different solution, where this 88% comes from.

These are actual direct quotes from electrophysiologists and they talk about this surface of TYRX being a very rough surface. It’s so rough in fact that it doesn’t slide easily into the pocket. So imagine you’re making an incision into a patient, you take your envelope, you put it or you take your pacemaker, you put it inside an envelope and then you’re trying to put that into this incision, but it’s got this really rough texture. It doesn’t slide easily into the pocket. And one of the quotes that really sort of stuck out to me was like, it reminds me of the no slip coating you sometimes see on garage floors.

And you know what? We think we can do better than that. We think that patients should be able to have access to an antibiotic envelope that delivers these powerful antibiotics that protects them from infection, but it does it in a way that enables them to thrive without compromise. And that is what we do at Aleutia. We are humanizing medicine so that patients can thrive without compromise.

And Eleupro, we think, is a really great example of doing that. So in the fourth quarter, which I guess technically we’re reporting on now, in the fourth quarter, that was our initial pilot launch of ValuePro. We had just received clearance from FDA, and we needed to basically crawl before we walk, before we run. And so that’s what our pilot launch was about in the fourth quarter. And we had three main goals that we wanted to demonstrate in the fourth quarter pilot launch.

One, we wanted to demonstrate operational excellence. Can we make and ship and distribute this product, right? Sounds simple and like blocking and tackling, but if you can’t do that, you can’t win the game. Second, we needed to obtain hospital and GPO approvals. You can’t sell a product inside a hospital if you can’t get through the value analysis committees and you can’t get through the contracting organizations that make it available to the physicians to use.

And then third, we wanted to drive clinical uptake of the product. Can you actually turn it into sales? Will the physicians use the product and not just once, but will they use the product over and over again. And we are really thrilled. As I think you will see, our pilot launch exceeded all of our expectations across all three of these.

And I want to thank the team for doing such an exceptional job with this. In the background of this, and I know I don’t talk much about it, but we have a lot of ongoing business development activity, and we are engaged in strategic discussions right now with multiple partners. And in time, we will have more to say about those. But right now, we don’t, and I hope you understand. Okay.

So let’s dig into what we do talk about and what is so important is that we demonstrate the value of LUPROS. So the first thing we need to do is demonstrate operational excellence. Fortunately, we had a bit of a head start here. So we’re manufacturing Eleupro in the same facility that we’ve been manufacturing our base Kangaroo products since 2013. So we had a good head start there with that team in place.

That’s a facility that has a capacity to do about $140,000,000 of Eleutro sales without needing much in the way of additional configuration or expansion. So we’ve got a nice base facility to grow off of. We’re also scaling up and growing into what ultimately we believe we will get to, which is a gross margin north of 70% with this product. Super important was that we completed our FDA site inspection of this facility with no deficiencies noted and were able to commence commercial production and did that in full compliance with the regulatory standards. And we’re really proud of the organization down there for not just running an operationally efficient organization, but one that puts the quality of product above everything else.

Okay. So moving forward from an operational excellence standpoint, we are in a situation of demand, where we are needing to significantly increase our production capacity earlier than we had originally anticipated. One of the ways that we’re going to be doing this with specificity is we’re going to be adding to the work that we bring in house the ability to manufacture the actual drug eluting disc technology itself, and that will actually help us not just lower our cost of goods fairly significantly, but it will also increase our overall capacity which it is every day it becomes more and more apparent that we need that in order to meet customer demand. We’re also increasing our testing lab capacity and this actually has to do with reducing cycle time, again, all in service of making sure we can get the product manufactured within perfect quality standards and then hit service levels, so all of our sites and all of our physicians have the product available to them when they need it. Okay.

Moving on now to obtaining hospital and GPO approvals. We had a goal in just to give you an idea of this, we had a goal in the fourth quarter of twenty five VAX. We wanted to be able to get through ’25 VAX and on contract. We actually ended the quarter with 67, up and running, about 15 new approvals a month. And the reason we’re having such significant success getting through the VAC process right now has really been driven by two separate things.

One of them we actually expected and that was physician support. So we have a lot of physicians out there, right? 88 of TYRX users are saying, hey, I’d like to be using Elliot Pro. Well, it needs to get through the VAC doc in order to be able to have this product on the shelf. Well, tell me what I need to do.

Who do I need to talk to? And we’ve been getting a lot of support navigating the product through the VAC process and that’s been helpful. But the other thing and this we saw this both with the VAX as well as with the GPOs is that the hospitals and the GPOs really like the idea of having EleuPro on contract so that they have an alternative to TYRX purely they just don’t like having a sole source for any product. And that’s really been gratifying and that’s frankly been helpful. It’s been a bit of a tailwind in this whole process.

So as we look today, not just updating for the quarter, but getting a sort of real time up to speed, we’re at about 100 centers that aren’t just through VAX, because we don’t count that that’s too easy. They actually have to get through the value announce committee and actively be ordering the products. We have about 100 centers that are already through that that are actively ordering the process. We are also through four GPOs, including Premier and S3P and we have others and we have others coming in that we expect that our conference call coming up for the first quarter, we’ll be able to have several new announcements about that. All that to say, we are having a lot of success on this second goal, which was obtaining hospital and GPO approvals.

The team really knocked the cover off the ball on this one and we’re super happy about it. Okay. None of that would matter, if the physicians didn’t trust the product, if the physicians didn’t think it was the best thing for their patients, and there wasn’t the corresponding clinical up take with it. But we’ve been seeing a tremendous amount of success here, expanding our Eleupro nation. There’s a lot of pride in putting EluPro on.

Our team is obviously very excited about it. But our physician partners in this have been also very excited. The operating room team is coming together and say, hey, do we get our Eleupro picture? We want our Eleupro picture to show that we’re the first. And the one in the middle there, a really gratifying picture.

That’s actually the first usage of Eleupro in a pediatric patient. And if you think about that, there could be no more meaningful, higher value, more precious life than that of a trial than the group down at Joe DiMaggio entrusting their patients, their pediatric patients with LEPRO was really a super meaningful event for us as a team. As I said before, we’re now being used not just with Abbott and Boston Scientific and BIOTRONIK, but actually across all of the major cardiac implantable electrical devices. Yes, even Medtronic pacemakers are going in with eluPro around it and we’re happy to do that. It’s we think obviously the best thing for the patients.

We’re also being used now in neurostimulator device protection as well. That’s not a market that we’re actually doing a lot of active outreach in yet. We’re trying to stay focused in the cardiac space, but we’re actually getting a lot of pull into that space and so that’s gratifying as well. When we go and we look at the actual numbers here, uptick, we’re seeing this strong adoption. So, in the fourth quarter, our bio envelope sales, right, this includes Kangaroo, as well as Eleupro, up 18% for the quarter.

That had been stagnant actually for now a number of years. So that’s a pretty significant uptick for us just in that quarter. You think we probably didn’t have for most of that quarter, we didn’t have that many sites activated. So that was a pretty significant uptick. Eleutro during the quarter accounted for about 30% of bio envelope sales.

So that’s going from 0% to already accounting for about 35%. But what we thought was really an important and interesting statistic. We can obviously we know the accounts that we have sold Kangaroo into for quite a long time, right, sort of same centers sales. And when we flip that center over to an Alupro center and those centers, sales increase 65% when we flip into a new center. And that’s a big deal.

And it’s what we would have expected, right? It’s a better, more useful product that you might be thinking, well, maybe that’s a stocking order. Actually, it’s the opposite. We saw that the initial stocking orders were actually only about 25% higher. It’s actually the repeat orders that are driving it up to this 65% and growing level.

So we really think we have a winner here. We’ve got a product that’s going into a market where there was only one dominant player doing it was doing $200,000,000 but it was really kind of a skewed thing because since it’s Medtronic’s product and Medtronic makes a pacemaker, the other companies don’t feel all that great about having a Medtronic product around their pacemaker. And so we think if we just had a Me too product with EleuPro, we’d be able to go into this $200,000,000 of existing business and be able to take a fair share. But we don’t think we have a Me too product. We think we actually have a significantly better product, and we think our initial data is bearing that out.

And so we’re really, really excited about the way this is going. We’ve also done a little bit of work on the sales model. So as you guys might remember, we have a hybrid model. We have 12 experienced Aleutia territory managers that manage the different territories in the country, as well as 35 independent reps. And we think that blend gives us the ability to cover the entire country, but in a pretty efficient way.

We’ve seen that that actually is also playing out. So if we look in the if we look actually in the quarter, how our ten ninety nine or our independent reps performed, they accounted for 50% of the Alupro sales in the quarter. And what that’s showing us is why that statistic was important is, we can use the ten ninety nine rep model to go in and efficiently penetrate these accounts. For us, it’s an economically very efficient way of generating these sales. We think it speaks to the value proposition that the product has that we’re able to do that with our outstanding group of ten ninety nine reps.

So driving clinical uptake, the third piece and we’re really super excited about how that one as well. So, what are we doing moving forward? Here’s the plan for the coming quarter or the quarter that we’re in right now. One, continue to drive top line growth of LU Pro. That shouldn’t come as a shock to anyone.

Two, keep driving our VAC approvals, our value analysis committee approvals and our GPO coverage. We have seen that VAC approval is a really, really good surrogate to top line growth. If we can get on contract with a hospital, if we can get into a hospital, they’ll buy the product. So number two, drive VAC and GPO coverage. Three, we’re going to be initiating we’ve done all of this on our own, little bitty, Lucia all by ourselves.

But this quarter, we’re initiating our LU Pro rollout with our distribution partner Boston Scientific that you guys know we’ve had for a while. We want to make sure we do an orderly rollout of Eleutro through the Boston Scientific team and there are 900 reps that could easily vary us in demand if we’re not careful. And so, we are initiating the Eleupro rollout with them this quarter and we’re really, really excited about the impact that they’re going to be having on these sales as well. Because of all of that, we need to keep increasing our production capacity. This is ahead of the schedule that we thought we would need.

We are out pacing what we thought we would need from a production capacity standpoint. It’s a good problem to have. The operations people gladly take on the challenge. And in doing that, we’ll naturally be lowering the cost of goods as we scale up. There’s just a lot of natural absorption that takes place there.

And then lastly, initiating our registry for the data collection of our clinical subjects for other usage that we’re going to have. And then lastly, and I’ll turn it over to Matt after this, I promise, come visit us at HRS. It’s in my hometown of San Diego this year. We’re going to be having an event out there. We’d love to see you at the booth.

And if not at the booth at one of the events we’re holding and talking to you and maybe get a chance to speak with some of our electrophysiologist physician partners and learn more about why LU Pro is such a home run product for us. And with that, I’ll turn it over to Matt Ferguson, our Chief Financial Officer for some financial updates.

Matt Ferguson, Chief Financial Officer, Aleutia: All right. 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, $2,700,000 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 $10,000,000 9 point 9 million dollars for the year, which was also solid growth at about 5% for the full year, but really more than anything what we’re doing 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 Simploderm and our women’s health division. There, it was a lighter quarter, dollars 2,300,000.0, 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 $11,600,000 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 U.

S, that was at $500,000 for the quarter. And that compares to $600,000 in the twenty twenty three fourth quarter. So down there, that leaves us overall at $5,500,000 in revenue for the quarter, down about 7% for the comparison to the same quarter of the prior year. On the full year basis, we were at about $24,400,000 for the year. That’s down just about 1% from $24,700,000 in the prior year.

Moving into gross margin, our GAAP gross margin was 43% for the quarter versus 36% in the prior year, so nice increase there, but probably more importantly backing out the non cash amortization expense, we were at 58 percent for the quarter versus 51% for the year before quarter. And so that was nice growth that we saw in our gross margin year over year. And just breaking that down a little bit further, it’s all in a relatively close range between our three different product lines, but just breaking that down for you, it was 60% for the device protection portion of our business, 55% for Simplederm and 64% for Cardiovascular. Operating expense very consistent year over year, $10,800,000 in the fourth quarter versus $10,600,000 a year ago. That all leads us to a loss from operations of $8,400,000 versus $8,500,000 So again, very consistent year over year.

And then again, a better indicator probably of just the operating portion of our business, the adjusted EBITDA, which we have a breakdown of in our press release, that was $3,800,000 as a loss for the quarter versus $4,500,000 for the year ago quarter. So, a good improvement year over year as we continue to grow the business. From a cash point of view, we ended the quarter at $13,200,000 in cash. So larger cash usage during the quarter than what we have seen in some of the recent quarters. But there was a good reason for that and that’s that we were actually able to settle a number of the outstanding lawsuits that we had during the quarter and get those resolved.

And so that contributes to the cash usage, but it also is a positive thing and that we are very much getting our arms around that remaining set of cases there. And then very importantly, after the end of the quarter, so it doesn’t show up in our financial results, but in early February, we did a registered direct offering where we raised $15,000,000 in gross proceeds. And so, again, while that doesn’t show up in our year end cash balance, that has a nice addition to our overall cash balance in terms of where we currently sit. So with that, I will pause there, turn it back to the operator to tee up any questions that may be out there. Thank you.

Conference Operator: Thank And our first question comes from Ross Osborne with Cantor Fitzgerald. Please state your question.

Ross Osborne, Analyst, Cantor Fitzgerald: 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 ElePro in terms of the amount of reps switching your envelope and any marketing equity?

Matt Ferguson, Chief Financial Officer, Aleutia: Yes, Ross.

Randy Mills, CEO, Aleutia: So, the way I’ll answer that is, so we have 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 sometimes there’s even more higher concentration of reps than that, sometimes it’s less. But let’s just say 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 100. There’s actually 1,400 centers in The United States that are hospital based that implant one hundred or more pacemakers a year, right? So even though we’re in 100, we still have a fairly long way to go.

And so 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 and what the biologics can ultimately do. And you don’t really need to be there in absolutely every case to make sure that there’s consistent use of AluPro because it’s a fairly easy product to use. You take the pacemaker and you put it into the envelope and then you take all that and you implant it into the patient.

That actually makes it easier to do. It really kind of glides in nicely. But what their reps will do is help in remembering, hey, I’d like to I need to use an antibiotic envelope on this because there’s something about this patient that’s high risk. Hey, you know, we should use one of those EluPro envelopes. Yeah, okay, great.

And the Boston Rep can actually facilitate the use of that product. And when they do that, what they’ll do is they sort of scan that product into the system and then that enables us to then compensate them on a per usage basis. So we pay them a really nominal commission on every time an LU Pro gets used. And so the system really works really well for both parties because they don’t want anything to do with the TYRX envelope being used in their procedure and we like the idea of VeluPro being used. And so it’s kind of a way of us being able to pay them and their reps for keeping Medtronic out of their cases.

So that’s how overall that arrangement works or at least the arrangement I would say we have in place today. Because LU Pro is a new product, you could imagine we are going through, there’s training and a very specific rollout plan and all of that other kind of stuff. I’m not going to go into more of right now. We’ll have more details on that coming up on our next our first quarter conference call. We’ll have a lot more detail about all this kind of stuff on that.

But that gives you a sort of a picture on what’s in place right now and then any updates to that we’ll have coming up in the first quarter.

Ross Osborne, Analyst, Cantor Fitzgerald: Sounds great. That was perfect. And when will Boston commence distribution?

Randy Mills, CEO, Aleutia: Shortly.

Ross Osborne, Analyst, Cantor Fitzgerald: Okay, fair enough. And then realize you’re not providing guidance

Randy Mills, CEO, Aleutia: that’s I think what’s important there, Ross. 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, was able we were able to do with just little old Aleutia. And I think that talks to the value of having a really good product that physicians want to use mixed in with frankly the Switzerland strategy, which is we don’t make a pacemaker.

So we’re not a threat to anybody. We’re not going to 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.

Ross Osborne, Analyst, Cantor Fitzgerald: Yes, absolutely. And then realize you’re not providing guidance, but how should we be thinking about utilization at accounts? Maybe it would be helpful to relay how you view a high volume account versus a low volume account?

Matt Ferguson, Chief Financial Officer, Aleutia: Maybe I could jump in there a little bit, Ross. This is Matt. 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 there are kangaroo accounts and as we just reported today, we’re up at about 100 that are now ordering EleuPro. So, I mean that and then we also talked about how pretty it’s we’re certainly seeing more of the growth coming from EleuPro as you would expect in the current quarter. And based on where we are in Q1, that will just accelerate in Q1.

We already know that that’s going to be the case as we sit here in early March with just a few more weeks left in Q1. So, 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 U. S, so well beyond what we’ve gotten into already with Kangaroo that are over, say, 100 pacemaker and defibrillator procedures for the year. And another cut at that is we think there are about 500 accounts in The U. S.

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 feedback from the market that there are a lot of TYRX Medtronic users that are very interested in and are already switching some of their usage, and in some cases, all of their envelope usage over to EluPro. 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.

Ross Osborne, Analyst, Cantor Fitzgerald: Yes, that’s exactly what I was looking for. And then last one for me and I’ll jump back in the queue. Realizing excitement around Ele Pro, but as you know, we are big fans of Sempoderm as well. Could you spend a little bit more time going over what occurred during the fourth quarter in terms of the de acceleration and growth and the game plan there for 2025? Thank you.

Randy Mills, CEO, Aleutia: Yes. So, SimpliDerm is a product that we distribute through two different mechanisms. One is our independent our network of our independent distributors. The other one was or is a relationship, a distribution relationship that we developed with Sientra and that was like I can’t remember now, that 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 twenty three percent 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, we think, a market leading biologic and for us, we would have access to. It’s about $125,000,000 of potential usage there. And so that was the rationale behind creating that partnership. And it’s a non exclusive partnership in that we maintained our own distribution network and we allowed them to distribute the product. But it’s also 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, the construct of that agreement doesn’t allow us to sort of quickly expand into territories that aren’t being adequate covered by one of us or the other. Instead, we try to do it we try to under this agreement 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, we’re not having success in these accounts, maybe you guys want to go in there or vice versa, right? And that agreement was really, really working out well. And then, unfortunately, Santoro went into bankruptcy.

And they went into bankruptcy at a time that they were becoming a pretty meaningful part of our sales. Now fortunately, the assets of Sientra were acquired in that, through those bankruptcy procedures or the procedure. And out of it, that agreement has now been taken over by Tiger Aesthetics. And I would say just very candidly, we’ve had some growing pains, right? We’ve had, first of all, they had a very difficult job to do, taking over the assets of Sientra and holding that together and then figuring out how they wanted to run that business and what model they wanted to use.

When a company experiences a bankruptcy, you can imagine there’s obviously some changes that are going to need to take place and there’s some very obvious disruption that’s also going to take place. And then for us learning how to work together, they going through different personnel changes that they’re trying to make and our people getting to know them and working with them has taken some time. And so naturally we saw some of that disruption flow through into the end user market in terms of volumes for us. Now with that said, we were still able to have that product grow 12% over the year. I know the fourth quarter wasn’t great, but we’re hoping the fourth quarter was actually a little bit more of an anomaly there than anything we would expect to see repeat.

But certainly the product’s backed away from the growth trajectory that it used to be on. We are working our way through that agreement. We have some milestones coming up in this agreement. We have some decisions to make there. But we’re also trying to be as constructive as we can with the team we have right now, from our side and with Tigram.

Like I said, I think we actually are making some pretty nice and significant progress there. So, it all remains to be seen, exactly what we’re going to do. Obviously, it can’t stay the way it was for the second half of the year. Some things have to change, but we are also seeing some changes already take place there.

Ross Osborne, Analyst, Cantor Fitzgerald: Sounds great. Congrats again on the really strong Stark Valley Trail. Excited for 2025.

Conference Operator: Thank you. And our next question comes from Frank Tackanan with Lake Street Capital Markets. Please state your question.

Frank Tackanan, Analyst, Lake Street Capital Markets: 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?

Randy Mills, CEO, Aleutia: It is, Frank.

Frank Tackanan, Analyst, Lake Street Capital Markets: 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?

Randy Mills, CEO, Aleutia: 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.

Frank Tackanan, Analyst, Lake Street Capital Markets: Okay. That’s helpful. And then from an active ordering account perspective, we’ve got a couple of goalposts. Obviously, you’ve got 100 active now, 400 Kangaroo, 500 getting over 500 implants and then the broader market of 1,400 over 100 implants per year. Maybe talk through the cadence of expectations around how new account additions will occur throughout 2025?

Randy Mills, CEO, Aleutia: Yes. 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 the 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, 100 of those are going to be less than six months.

They’re going to be faster than the average, but 100 of those are going to be longer than six months. And so, we will just be running into vacs that take longer. We said sort of all along, we thought this would be the gating item, and they’re not all going to go as fast as certainly we would like them to move and as the fish positions would like to move. So that will be something that we’ll be sort of tugging on how fast we can get them signed up. The thing that’s going to be pulling in the other direction is 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 that’s a lot of help, to be able to bring to the problem.

And so we think that will be helping on the plus side. But in general, it will probably back down a little bit off the pace we started on, but maybe that’s just being conservative. We’ll see how it goes.

Frank Tackanan, Analyst, Lake Street Capital Markets: 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? Thanks.

Matt Ferguson, Chief Financial Officer, Aleutia: Yes, sure. Well, I’ll tell you I’ll share with you what I can. A lot of that is, one, hard to forecast and also something that we don’t want to get into too much detail for all these cases are ongoing, some of them more active than others. But 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 retained some of that legacy litigation associated with it. So we had a liability of a little over $20,000,000 at that stage and at the end of the year it was down at about $15,900,000 was the number. And so, 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, really, I think, we’re making really significant progress putting all of this behind us. There is still more work to be done, but 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 I think is 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 and then others that are further out that don’t have anything scheduled. So So I guess the last quarter was particularly active.

There will still be some activity in 2025 certainly, but it should be declining I think from where it was in Q4.

Frank Tackanan, Analyst, Lake Street Capital Markets: Okay, that’s helpful. Thanks and congrats on all the progress.

Matt Ferguson, Chief Financial Officer, Aleutia: Thanks, Frank. Okay, thank you, Frank.

Conference Operator: 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.

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