Good afternoon, ladies and gentlemen. Welcome to Elutia's Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Matt Steinberg with Finn Partners. Thank you. You may begin.

Thank you, operator, and thank you all for participating in today's call. Earlier today, Elutia released financial results for the quarter ended June 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 description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our public filings within the SEC, including Elutia's annual report on Form 10-K for the year ended December 31, 2024, 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. The conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 14, 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 in the company's financial results release for the second quarter ended June 30, 2025, which is accessible on the SEC's website and posted on the Investor page of the Elutia website at www.elutia.com. And with that, I will turn the call over to Elutia's CEO, Randy Mills.

Thank you, Matt, and welcome one and all to our second quarter 2025 earnings call. Let me start with a rundown of today's topics. And first and foremost, I want to provide some color on the success we continue to have with our EluPro launch and the commercial success we continue to have there. Then I'm going to switch gears and I'm going to talk a little bit about the tremendous work our development teams are doing in the reconstruction pipeline that we have underway. I'm then going to turn it over to Matt, who's going to provide an update, which we have some pretty significant updates on the litigation front. And then lastly, Matt will also do, as he always does, a rundown of our financial progress. Lastly, as I indicated in the press release, on the business development front, we have a number of strategic opportunities that we're sort of in the middle of that we're driving towards conclusion, and we anticipate having more to say on those in the near future here. But let's just jump right in with a review of EluPro's first year and what a year it was. On the commercial side, 49% sequential growth this quarter over last quarter built on the back of 7 national GPO contracts that the team has secured. As we've said all along, the key to revenue growth has to do with the number of hospital systems we can get into. We're currently at 161 hospital systems actively ordering. And then lastly, a lot of this growth has been facilitated by the tremendous partnership that we've developed with our friends at Boston Scientific. But it's great commercial success that has been built really on a great scientific foundation that we have at Elutia. Our drug-eluting technology, particularly our…

Okay. Thank you, Randy. So first off, the litigation update, which is a new section for our conference calls, but it's not a new situation that we have been working on here. As a little bit of background, this stems from a product recall that we had over 4 years ago, and it was in a part of the company that we actually sold 2 years ago. So it really relates to history of the company as opposed to anything that we're doing right now. But what we have been left with based on that product recall is quite a large number of lawsuits, and many of you are aware of that already. But we had 110 individual lawsuits that stemmed from this event in the long ago. It has been a really a substantial weight on the company both from a value point of view and from a personal point of view. And I'm glad to say that we are now very close to the end of that process. We've made really substantial progress recently, and it has been a real focus for a small number of people in the company for some time. So what has happened? We've really started making a concerted effort at least a couple of quarters ago to get these cases behind us, to get them all settled. And just in the last quarter, we settled 27 of these cases, and cumulatively now we've settled 97 out of that original 110. And with the remaining 13 cases, they -- on an individual basis, they should actually be easier to settle than much of what we've had to deal with over the last few years and even in the last quarter. No single trial attorney is handling more than 3 of those. So in a…

Thank you, Matt. Okay. So let's just conclude the call here with providing you some guidance and clarity on where it is we are going as a company. It's probably not going to come as a surprise to anyone to find out that a lot of our focus is dedicated exactly where it should be to EluPro. EluPro is now at the stage where it's about scaling. We know exactly how to grow revenue in EluPro. It's simply to get more VACs on contract. So we are going to continue to scale revenue in EluPro by expanding the number of VACs and GPO coverage that we have. We're going to be leveraging both the momentum that we've developed with our own direct sales channel as well as our partners at Boston Scientific to help drive this process. And those 2 things really shouldn't come as a surprise to anyone. Third, we're going to continue to increase the production capacity and continue to lower COGS. We've already seen a tremendous job being done in our gross margin by our operations team. And as we like to say, that product doesn't make itself. The team in Roswell, Georgia does a phenomenal job growing with this product and continuing to meet product orders, and we're incredibly proud of the work that they do. So you can expect to see more of that going on. Fourth, you've heard about it now. Our NXT-41 platform is now just about here. It is proven technology, drug-eluting biologics technology through a proven regulatory pathway, going into a much bigger market, with a much bigger unmet medical need. And we are really excited to not just bring that to market from a business standpoint, but also when you're in this business, being able to develop a product like that for people and for an indication where there is such an outstanding medical need, we are not only excited, but we are passionately pursuing that and driving that forward at full speed. And then lastly, as Matt said and as I said at the beginning of my comments, we are working on a number of strategic opportunities and expect to drive one or more of those to conclusion in the relatively near future, and we'll have more on that when developments warrant. With that, I will conclude my comments and turn the call over to the operator for your questions.

[Operator Instructions] Our first question is from Frank Takkinen with Lake Street Capital Markets.

Congrats on all the exciting progress. I wanted to start first with one on EluPro. Obviously, you've had very strong market receptivity. And just curious, obviously, when a product is launching as quickly and successfully as EluPro has, there's always bottlenecks along the way. So just curious what those bottlenecks are, whether that's still VACs and just the process there and the variability of timing, inventory or anything like that and anything you need to address to continue this growth trajectory.

Yes. Thanks, Frank. So bottlenecks, I would say at first, the commercial team really did give the operations team a run for their money. There were some people sweating being able to keep up with production as we first got that started. But they have done that. They have really mastered that. You're starting to see that efficiency show up in the gross margin. Like any good company, we don't like to build crazy amounts of inventory. But we have the inventory in place there to be able to have 100% service level. That's our goal, deliver exactly what the customer wants, exactly when the customer expects to receive it. And they've done a great job there. I wish it were more exciting than -- and maybe I don't wish it was more exciting than the opportunity that we see. But really, it's about scaling VACs. The ordering is now so predictable. When we turn a hospital on, they order and they're ordering at this really significant rate over what they -- 130% of what they were ordering CanGaroo at a good account for us, will do some -- we expect actually just an average account for us to do about $100,000 a year. So those accounts are just scaling. So as we get through the VAC process, revenues scale. So I don't know if you call it a bottleneck or just the work we have to do, but we have 160 VACs through approval right now. It's kind of interesting, it lines up. We have 1,600 centers that we are targeting in total. It takes us, on average, about 6 months to do that. We always keep a really strong number of those accounts in the pipeline. Like I said, I think right now, we happen to have 90 because actually we had a lot of pull-through, but we add new filings every day, and our partners at Boston Scientific are being tremendously helpful in opening up those new doors. They certainly have accounts that they have high interest and high need. And so it's not really much of a mystery anymore, what drives the revenue with EluPro. It really is if we get through the VAC, we're seeing the ordering just scale.

Great. That's good color. Maybe one on the NXT-41, exciting to hear that advancing along. First, maybe just a little clarification and help us understand the 2-step process. I think we read in the press release that the first one is expected second half of '26 and then the drug-eluting version in the first half of '27. So some additional background there would be interesting to understand. And then just a clarification. Is there any linkage to NXT-41 to SimpliDerm as you think about business development activities?

Sure. So the first centers around regulatory strategy, right? And you know Dr. Williams, she doesn't just deliver great science, she also knows that the product won't help people until it can get through the FDA. And we are taking what you might call a conservative or a derisked approach by uncoupling the regulatory clearances of: first, the matrix by itself; and then the matrix with the antibiotic attached to it. And so the first approval that you'll see is the matrix by itself. This is not a derivative of SimpliDerm. This is a brand new matrix for a lot of different reasons. We went with what we call a fully engineered matrix. And so this is a -- it starts with a porcine extracellular matrix base that we treat with a number of different procedures that chemical and enzymatic that Michelle and her team have developed. We optimized it not just for handling, but we also optimized it for incorporation. And because this is an engineered matrix, what we were looking to do there, Frank, was one of the [ knocks ] on sort of biologics and particularly human tissue that's used in biologics is the donor-to-donor variability. And we wanted to take that out. We wanted to make a base matrix where the physician would say, I know exactly how this thing is going to perform. And I know this base matrix is engineered in such a way to where it's going to incorporate biologically in an absolutely optimal state. And so that's what we did with that base matrix. And so you'll see that come on the market in the second half of '26 now. And then shortly after that, the antibiotic delivery version attached and that we've been able to develop really, we think, the expertise from the process with EluPro and what the FDA wants to see from a drug-eluting standpoint. We are using the same drugs, different delivery system, but we really actually love rifampin and minocycline in this space. We'll have more to talk about that. But we actually have some really powerful, not just antimicrobial effects, but actually pro-regenerative effects that we've been able to prove out in the lab with that. So we're really excited about that. And then your second question centered around how this is related to SimpliDerm. This is going into the same markets as SimpliDerm is, obviously using a biologic mesh in breast reconstruction, but we think really with a second-generation sort of technology. And so what we like about having SimpliDerm is we have our key accounts, we have our KOLs established these great surgeon relationships. And SimpliDerm is, as we say, simply a great product. Physicians love SimpliDerm. We think it is the best biologic on the market today. But ultimately where we're going is we think that NXT-41 really gives a more complete solution than any human-derived matrix could give.

Perfect. Helpful. And then maybe just one last one, and I'm guessing you can't say too much on it, but related to the comments of very soon when we should hear some business development commentary, would you characterize very soon as weeks, months, or quarters?

Nothing's done, Frank, until it's done. And so I would expect it to be in weeks, months, or quarters in one of those. It's just one of those things. It's like it reminds me of that Billy Crystal line in Princess Bride, you rush miracles, you get lousy miracles. Well, you rush business development, you get lousy business development. And so we have a number of transactions that we're contemplating right now. We would expect at least one of them to come to fruition, but nothing's done until it's done. So I don't want to really provide any more time frame on that because I don't want to have to negotiate against ourselves with regards to time. And if I set an unrealistic expectation, really, it's only us that would bear the consequence of that.

Our next question is from Ross Osborn with Cantor Fitzgerald.

This is Matt Park on for Ross today. I guess just starting with gross margins, that was a good step up this quarter with cardiovascular coming back in the mix. As we think about the path forward, how should we frame your ability to not just maintain but potentially expand gross margins from here?

Matt, it's Matt Ferguson. Good to talk to you again. I think I got your whole question. I know it's centered around gross margin and opportunities for growth in the future. And I would say, absolutely opportunities across really all segments of our business to improve gross margin going forward. Certainly, in the case of EluPro, we've got a lot of scaling that we're doing, and we will see the benefits of that over time. And I think you'll see them as pretty substantial and significant, and they shouldn't take too long. In the case of cardiovascular, that's a little more straightforward. We're now selling at a higher gross margin. I mentioned that in the prepared remarks that that's over 80%. So the more we can grow that business, and I think there's a lot of opportunity there, that will contribute positively to the overall gross margin. And in the case of SimpliDerm, there are some things that we can do there to improve efficiency as well. So I think there are opportunities there as well. Probably a little less so than the other two, but substantial nonetheless. Did I get your entire question there? Or was there another part?

Yes, that was great. And then I guess just moving on to NXT-41X. This may have been answered already on the call, but can you just walk us through what level of clinical evidence or study design you believe is needed to support FDA approval for both the base matrix as well as the drug-eluting version?

Yes. So we are taking both the base matrix and the antibiotic delivery matrix through the same regulatory platform that we took EluPro through. And so from a regulatory standpoint, we will be able to do that with exactly the same playbook that we used for EluPro, with the exception of there are -- when you get into surgical meshes for different things, there are different specific requirements for those that the team will be following the well-established standards on. From a clinical standpoint, one of the reasons that we're staggering the launch of the base matrix is actually so we can go and generate the clinical data, not from a regulatory standpoint, but actually from a marketing standpoint because we're looking to win this thing not in the short term, but actually in the long term. We think 41X has the opportunity -- we actually think will be by far the first antibiotic-eluting matrix to market. But we care about the matrix that it's on. And so not to overly pick on TYRX, but we're not looking to just rush first with a synthetic or a plastic matrix, but here really a proven biologics matrix, which the surgeons have gotten used to and frankly, expect, and they should expect a great biologics matrix, and then prove that and then add to that the drug-eluting component. But from a regulatory standpoint, it's actually pretty -- I say pretty straightforward, and I know our regulatory team would laugh at me for that, but a pretty straightforward combination development pathway that involves the Center for Devices and Radiological Health, combined with the Center for Drugs. You put all that together and you have the same pathway that we got EluPro through, and we feel pretty confident we'll be able to do that expeditiously with 41X.

There are no further questions at this time. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.