On Thursday, Elutia (NASDAQ:ELUT) discussed second-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Elutia secured $26 million in additional capital without an equity offering, sufficient to fund operations through NXT41X's commercial launch in 2028.

The company is focusing on the NXT41X commercialization opportunity, divesting non-core assets like Simpliderm for up to $11 million and progressing with a cardiovascular transaction.

A survey of 50 surgeons showed strong interest in NXT41X, with 96% willing to adopt it and 92% ready to advocate for it at their hospitals.

Regulatory progress is on track with FDA clearance for NXT41 expected in Q4 2026 and NXT41X in H1 2027; manufacturing readiness is advancing with targeted gross margins above 80%.

Q2 financials showed net sales of $2.4 million, with an improved gross margin of 59.6% and a net loss of $7.6 million, but with significant future cash inflows anticipated from various transactions.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to the Elutia Q2 2026 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bernadine Cherniak. Please go ahead.

Bernadine Cherniak

Thank you, operator, and thank you all for participating in today's call. Earlier today, Elutia released financial results for the second quarter ended June 30, 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 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 lists 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 in our subsequent periodic reports on Forms 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, August 13, 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 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 second quarter ended June 30, 2026, which 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 the call over to Elutia CEO Randy Mills.

Randy Mills, CEO

Thank you, Bernardine, and thank you, everyone, for joining us today. The second quarter was another solid quarter of execution for Elutia, so let's get right into it. Here's how we'll spend our time today. I'll start with why we are concentrating the company's efforts on the reconstruction opportunity. I'll walk through the highlights of the quarter, including our strengthened balance sheet and some exciting new survey data. Matt will take you through the financials and capital position.

Then we'll open the lineup for questions. Four things defined this quarter. First, we're funded up to $26 million of additional capital with no equity offering. We believe that carries us through the NXT41X clearance decision and the first full year of commercial launch in 2028 and beyond. Second, the company is becoming more focused as our strategic divestitures are being completed. We signed a definitive agreement to sell Simpliderm for up to $11 million, and the cardiovascular process is progressing well.

The purpose of this activity is to align the company's capital and attention on the one thing that will drive the greatest value for patients and shareholders: the commercialization of NXT41X. Third, we now have real data on surgeon demand for NXT41X. In an independent, blinded survey of 50 board-certified plastic and reconstructive surgeons, 96% expressed interest in adopting NXT41X and 92% said that they would champion it at their hospital's value analysis committee.

I'm going to spend some time on this study today because it's important. And fourth, our regulatory and manufacturing teams continue to advance towards launch on schedule. This quarter we had a productive meeting with FDA, and the NXT41 program remains on track for what we believe will be a favorable clearance decision in the fourth quarter. Perhaps more importantly, we believe NXT41X, the ultimate goal, is well positioned for clearance in the first half of 2027.

In preparation, our automated manufacturing process has been qualified for commercial production of NXT41X at scale. For those newer to the Elutia story, here is a short version of what we are uniquely great at. We combine a biological matrix with sustained local antibiotic delivery at the surgical sites. The objective is straightforward: create a surgical implant that can prevent bacterial colonization before it has the chance to become an infection.

And importantly, we have done this before. Our first-generation drug-eluting product, Lupro, was the first FDA-cleared antibiotic-eluting bio envelope. We developed it, we cleared it, we commercialized it, and last October we sold that business to Boston Scientific for $88 million. We are now applying that same technology to solving the very real problems that exist in plastic and reconstructive surgery. The United States market for breast cancer surgery is valued at $1.5 billion.

And importantly, it is an established market. Surgeons already use biological matrices in breast procedures. Today we do not have to create a new category. At the same time, the clinical problem is substantial. Published data show postoperative infection rates remain between 15% to 20% following mastectomy. So the opportunity for us comes from the combination of three things: a large existing market, a significant unresolved clinical problem, and a technology platform that directly addresses it.

A platform we created. And the magnitude of the problem is hard to ignore. These are published data, not Elutia estimates. Approximately one in three women experiences a serious complication following reconstruction. Fifteen to twenty percent experience postoperative infection. Up to 21% experience an implant loss. And the average hospital cost of a reconstruction with an infection is more than $48,000. That is a patient problem, a hospital problem, and it is a surgeon problem.

Now, we've shown you infection statistics before. What this slide shows are the consequences. Let's start with the patient. She's fighting cancer. That's why she's in the operating room. When an infection takes hold, chemotherapy stops, radiation stops, and she's looking at pain, fear, and more trips to the operating room. And if she loses the implant? More than half of the women in that situation never go back and finish the reconstruction process.

It ends. The hospital incurs an added cost, mostly without reimbursement. It gives up revenue-generating operating room time slot and hospital bed. And it takes the reputational hit regarding its infection rate. But the surgeon pays a unique price, and they pay it over and over again. Keep this in mind, because they are the ultimate decision makers regarding what gets used in the operating room. Let's look at a surgeon who does 140 cases a year and has the average infection rate of 17%.

That means they are getting called back into the hospital every 15 days, irrespective of the time of day, the day of the week, or whether it's a holiday. That significantly impacts their quality of life. If you don't think so, think about this: the reconstructive specialty in plastic surgery is by itself an independent risk factor for burnout among plastic surgeons. And when those surgeons walk away, women lose access to reconstruction. So now that you understand what we are doing and why, let me turn to how we funded the plan.

This quarter we secured up to $26 million of additional capital without an equity offering. It comes from two places. First, a $15 million credit facility with Avenue Capital Group, $10 million of which is already in the bank, and another $5 million that is available to us upon NXT41X clearance. That is not only a substantial infusion of cash, but also an unequivocal endorsement of our plan by a sophisticated health care lender who conducted extensive due diligence.

The second is the Simpliderm transaction, which provides for up to $11 million in consideration. That includes $8 million in cash at closing and up to $3 million in tech transfer and commercial milestone payments. On top of that, at the start of the fourth quarter, we anticipate receiving the full $8 million in escrow from Boston Scientific. Now look at the bottom of the slide because the timing is the point. We believe this capital will take us through the NXT41 clearance decision in the fourth quarter of this year, the anticipated NXT41X clearance in the first half of 2027, and the full-year launch in 2028 and beyond.

We are now fully funded. The divestitures are a key part of the strategy. We made a deliberate decision to stop spreading capital and management attention across multiple businesses and concentrate Elutia where we can create the greatest value. The Simpliderm transaction is now signed, with closing expected in the third quarter. And the previously announced strategic process for cardiovascular continues to advance with a potential transaction in 2026.

When that work is complete, Elutia will be solely focused on one primary opportunity: NXT41X and the approximately $1.5 billion plastic and reconstructive surgery market. That was intentional and we are nearly done. Now to the part of the quarter I'm most excited about. For two years we've been telling you the demand for NXT41X is out there. This quarter we quantified it. We hired an independent market research firm to run a blinded survey: 50 board-certified plastic and reconstructive surgeons, 8 states, averaging 11.6 years in practice and about 140 implant-based reconstructions a year.

Forty-two percent practice in academic hospitals and the group is split about evenly between east and west of the Mississippi. These are exactly the surgeons who will decide whether NXT41X is ultimately adopted. A quick word about method: it was blinded. These are not our friends. We did not pick the respondents. Elutia was never named. Nobody was being nice to a sponsor because nobody knew who the sponsor was. Interest was measured using the standard Wilson 95% confidence intervals.

The first question was whether surgeons themselves see infection as a significant unresolved problem. They estimated the surgical site infection rate at 17%, and that's right in the range of what the published literature says it is. The more striking result is on the right side: 86% of surgeons surveyed said the matrices they use today actually increase the risk of surgical site infection. And I want to be precise about that. That is not Elutia making a comparative claim about another company's product.

It is the surgeons describing the product they currently use as an infection risk factor. Taken together, postoperative infection is a real problem that needs a better solution. The next topic was whether the NXT41X concept made sense to them. Ninety-six percent rated the combination of rifampin and minocycline effective at reducing surgical site infection. Sixty-four percent said it was extremely effective. And not a single surgeon rated the antibiotic combination as ineffective.

And 98% view NXT41X as new and different from products on the market today. The specific product characteristics they found most compelling were also telling: local antibiotic concentrations above the minimum inhibitory concentration for 30 days; a bactericidal antibiotic combination directed against known surgical site pathogens; and prevention of bacterial colonization ranked 1, 2, and 3, respectively. Those are not branding attributes. They are fundamental mechanisms of how our product works.

And remember, there was no Elutia brand attached to any of the survey. They were reacting to the actual product specifications. The third question is the one that matters commercially. Would you use it for high-risk patients, including diabetic patients and those with high BMI? One hundred percent. All 50 surgeons indicated they would use NXT41X. Those two groups together represent approximately one-third of reconstruction patients—an enormous opportunity in itself.

But a full 96% said they were interested in incorporating NXT41X into their general practice. And then there's the number on the right: 92% indicated a willingness to approach their hospital's value analysis committee in support of NXT41X. I think that number deserves particular attention. Hospital adoption is not simply a matter of a surgeon liking a product or a product getting approved. Someone has to be willing to make the case internally and move the product through the hospital's VAC process.

Forty-six out of 50 surgeons indicated they were willing to do that for this product. So let me put the whole study on one slide. We asked if the problem was real: 86% said the matrices they use today increase infection risk. We asked if our approach would work: 96% rate the antibiotic combination as effective. We asked if they would use it: 96% expressed interest in incorporating it into their practice. We asked if they would fight for it: 92% said they would champion it at their own hospital's VAC.

Fifty surgeons, blinded and independent—demand for NXT41X is no longer theoretical. Turning to regulatory, I am very happy to say that for both programs they remain on track and on schedule. NXT41, the underlying biologic surgical matrix without drug, is currently under FDA review. We recently had a productive meeting with the agency, and we continue to expect a favorable FDA clearance decision for NXT41 in the fourth quarter of 2026. That dialogue has also increased our confidence in our preparation of the NXT41X submission.

We expect FDA clearance for NXT41X in the first half of 2027. Those remain the key regulatory milestones in front of us. Manufacturing readiness is advancing in parallel with the regulatory work. This quarter we completed installation and operational qualification of the Automated Drug Coating System. That system has already produced NXT41X. For NXT41X, we deliberately chose to own the manufacturing process ourselves. There is no contract manufacturer, license, or sole source supplier.

The product is ours end to end. We also developed proprietary quality control assays and test methods to meet the FDA's very specific release criteria. The process is designed for scale, consistency, and efficiency, and we continue to target gross margins greater than 80% at scale, and it is now up and running at our GMP facility in Gaithersburg, Maryland. All in all, a very solid quarter for the Elutia crew, and I thank each and every one of them for their remarkable efforts.

And with that, let me turn the call over to Matt.

Bernadine Cherniak

Okay, thank you, Randy. Great to be here. I'll be hitting the highlights of our second quarter results and financial position. As a reminder, the impact of our BioEnvelope business, which we divested in October 2025, shows up as discontinued operations in prior periods. However, the contribution of our Simple Derm business in the second quarter still shows up in continuing operations even though we entered into a definitive agreement to sell that business on July 11th.

Assuming the closing of that transaction proceeds as expected, Simple Derm will also move to discontinued operations at future reports. Now moving to our actual results. Total net sales for the second quarter were $2.4 million compared to $2.7 million in the prior year period. There were two offsetting drivers. Simpliderm was down $0.7 million due to a production disruption at the product's contract manufacturer, but that was largely offset by an increase in cardiovascular, which was up $0.4 million on our transition back to direct sales.

For the first half of 2026, net sales were $5.5 million compared to $5.7 million in the comparable prior year period. Margins expanded meaningfully in Q2. GAAP gross margin was 59.6% compared to 52.9% a year ago. Adjusted gross margin, which excludes non-cash amortization of intangibles, was 70.7% compared to 62.7%, an improvement of 8 percentage points year over year. Total operating expenses were $9.4 million, down from $9.8 million. Within that number, we continue to shift spend towards the future.

Net litigation costs came down $1.9 million, while research and development increased $1.5 million in support of the continued progress in NXT41 and 41X. Loss from operations improved to $8.0 million from $8.4 million a year ago. Net loss was $7.6 million compared to $9.6 million in the prior year period, an improvement of $2.0 million that primarily reflects the absence of losses from the divested BioEnvelope business. Net loss from continuing operations was $7.6 million compared to $7.1 million, and adjusted EBITDA was a loss of $4.6 million compared to a loss of $3.0 million a year ago.

The change was driven primarily by the increase in R&D expense. On the balance sheet, we ended the quarter with $19.9 million in cash, but we expect that position to be augmented by up to an additional $34 million from signed transactions. Going through those in a bit more detail, we received the initial $10 million this week from our deal with Avenue Capital, and in the fourth quarter we expect to receive the full $8 million escrow from last year's BioEnvelope deal.

The new Simpliderm deal adds up to $11 million, with $8 million of that $11 million coming at closing, and next year, upon FDA clearance of NXT41X, another $5 million becomes available under the Avenue Capital facility following the NXT41. So putting this all together, between our cash balance at the end of last quarter and the deals I just walked through, total cash sources, both current and projected, for the company add up to $54 million. This puts Elutia in its best financial position in a very long time.

As Randy mentioned, this provides runway through at least 2028, and between now and then, this funding covers multiple expected catalysts. First, the closing of the Simple Derm sale this quarter. Second, a potential cardiovascular transaction. Third, the $8 million escrow release. Fourth, the FDA clearance decisions for NXT41 in the fourth quarter of this year and for 41X in the first half of 2027. In addition, the soft launch of NXT41X in the second half of 2027 and, finally, the full commercial launch of NXT41X in 2028.

So, stepping back, we believe the investment case for Elutia rests on three things. First, we have a validated platform. We have developed, cleared, and commercialized this technology once already in the form of Elupro, sold that business. Second, a blockbuster pipeline comprised of a $1.5 billion U.S. reconstruction market, an unmet medical need based on exceedingly high infection rates, and now measured surgeon demand behind our product. Third, and finally, we now have a fully resourced company with a proven team, a built-out GMP production facility, and the cash to fund the company through anticipated clearance and full commercial launch.

The demand is real, the capital is secured, the regulatory path is on track, and the entire company is focused on success. And with that, operator, I'll turn it back to you and we can open the line for questions.

OPERATOR

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Frank Takinen with Lake Street Capital Markets. Your line is open.

Frank Takinen, Analyst at Lake Street Capital Markets

Great. Thank you for taking the questions and congratulations on all the progress. I wanted to start with one on FDA interactions, maybe talk a little bit more about some of the conversations you've had, obviously that you're comfortable sharing in a public setting, and then maybe detail what part of the process you're in with that clearance on 41. So with respect to 41,

Randy Mills, CEO

I won't talk about too much of the inner workings of what we do, frankly. But I will say that Michelle and her team expected questions on 41. They received questions on 41, and they wanted to meet with FDA before submitting those responses to FDA to make sure that their answers to them would be what we hope are fully responsive. And so that was the nature and the reason of the meeting. And we came out of that meeting feeling very good about where we were, where we are going forward with NXT41.

Frank Takinen, Analyst at Lake Street Capital Markets

Okay, very helpful. And then on the concept of manufacturing, appreciate the new color today. Curious if you could outline some capacity goals that you're thinking about as you prepare for launch. Maybe what level of capacity would you hope to have secured for the first full year of commercialization? And then what level of capacity might be required to achieve that 80% gross margin goal you laid out?

Randy Mills, CEO

Yeah, so we expect to have at least $300 million of revenue capacity at launch of the product. Being able to expand it from there will not be a particularly significant challenge. It will mostly involve additional personnel and additional shift adding, not additional space, not additional equipment or production lines. So right out of the gate, we expect to be able to meet a very sizable amount of demand. And frankly, we hope to be in a race to keep up with it.

With regards to gross margin, the process for producing NXT41X, Michelle and her team had the ability of designing 41X with the experience of LUPRO under their belts. They were able to look at the process and parts of the process and things that were inherent to the design of the product that made that product more expensive and more challenging to make and drove up cost of goods of that product. So when they designed 41X, they did that with that in mind and really have come up with a very elegant process for manufacturing NXT41X.

And so some of that will depend ultimately on pricing decision. When we talk about gross margins, one of the reasons we're just giving a rough estimate on range, but I think we would expect gross margins to be in an acceptable rate not too long into the commercial cycle. It wouldn't be something that we would be measuring in years before we got there.

Frank Takinen, Analyst at Lake Street Capital Markets

Got it. Very helpful. Maybe on the commercial launch, maybe talk to what the limited launch might look like in 2H27. And then some of the most important items you'll be looking to check the box off, so to speak, before flipping to the full commercial launch in 2018.

Randy Mills, CEO

This is one of the great things, Frank, about getting older and having experience. This isn't our first rodeo. And so as we prepare to launch NXT41X, we get to look back at the Lupro launch, which was a drug eluting biologic going into a surgical procedure in modern times today, where we had to face value analysis committees. And value analysis committees, Frank, as you know, are the gating item on how fast the product has even the potential to get adopted.

And so with regards to what we're thinking about soft launch activities in the second half of 2027, it is value analysis committee, value analysis committee, value analysis committee. We know that the more seeds that we plant early on with the VACs, the more revenue opportunity we will have as the year continues and throughout 2028. With Lupro, we developed a pretty sophisticated process for being able to go after those VACs. And I would say Pete Ligati, and in the work his team has done more recently with some more sophisticated targeting data, complication data, procedure volume data, will actually allow us to take, I think, what was some pretty sophisticated VAC machinery, and target it even further. And what I mean by that is being able to go into a value analysis committee and literally show them their own hospital data and their own hospital's problem and how much we will be able to help them, not just from a patient standpoint, from an economic standpoint as well. So that's what the soft launch for us is all about, is getting that done. We don't expect to be blowing the doors off of anything with regards to revenue because we still need to get through the front door of the VAC before anything happens.

So that's what we would expect to happen there. And then, Frank, into 2028, I think come January 1st, if everything goes according to schedule, we'll be ready to cut it loose.

Frank Takinen, Analyst at Lake Street Capital Markets

Very helpful. Maybe last one, if I may, for Matt. Once the Simplerm divestiture is complete, how should we think about an OPEX run rate if you're excluding the litigation costs?

Matt

Yeah, you know, I think you could look at the various components of our operating expense, and certainly sales and marketing will come down significantly, really in proportion, I would say, to the revenue that we're taking out of the P&L. And, you know, potentially not far behind the Simple Derm transaction, we could also be looking at something for the CV transaction, and that would actually put us for a short period into a situation where we would not be commercial, and that would potentially allow for greater opportunities for streamlining and savings.

But until then, we need to really maintain all the capability that we generally have now from an overhead perspective. But, you know, we're working hard on that. And stay tuned. We're hoping to have something done there before too long.

Frank Takinen, Analyst at Lake Street Capital Markets

Got it. Very helpful. Thanks for taking the questions. Appreciate it.

Randy Mills, CEO

Okay. Thank you, Frank. Thank you.

OPERATOR

I'm showing no further questions at this time. This concludes the question and answer session and today's conference call. Thank you for participating. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.