Elutia Q1 2024 Earnings Call Transcript

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Provided by Quartr
May 9, 2024

There are 6 speakers on the call.

Operator

Good afternoon, ladies and gentlemen. Welcome to the Allusia First Quarter 2024 Financial Results Conference Call. Please be advised that today's conference call is being recorded. I would now like to hand the conference call over to Matt Steinberg, Fin Partners. Please go ahead.

Speaker 1

Thank you, operator, and thank you all for participating in today's call. Earlier today, Alucia released financial results for the quarter ended March 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.

Speaker 1

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 listen 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 Alucia's Annual Report on Form 10 ks for the year ended December 31, 2023, that's accessible on the SEC's website at www.sec.gov. Such factors may be updated from time to time in Lucia's other filings with the SEC.

Speaker 1

The conference call contains time sensitive information and is accurate only as of the live broadcast today, May 9, 2024. Alucia disclaims any intention or obligation, except as required by applicable 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 release for the Q1 ended March 31, 2024, which is accessible on the SEC's website and posted on the Investor page of the Allusia website atwww.alusia.com. And with that, I will turn over the call to Allusia's CEO, Randy Mills.

Speaker 2

All right. Thank you, Matt. And it's hard to imagine that any part of this presentation could get better than our forward looking statements slide, but I'm going to give it a shot here. We have some new people on our call with us today. So we're going to go over a little bit of the background and history of the company, but we've got a whole lot of exciting stuff to talk about.

Speaker 2

I hope you got a chance to see the earnings release that was just put out. But we'll be going through that. Matt will be taking us through some of the financial components. And then at the end, obviously, we'll be happy to take your questions. So, Aleutia, our mission in humanizing medicine so that patients can thrive without compromise.

Speaker 2

We are a commercial stage company now with a $27,000,000 revenue run rate and growing on the backs of 2 proprietary product platforms, our Kangaroo product platform, which is used to protect implantable pacemakers and electronic devices and our Simploderm product line, which is used in breast reconstruction. But very excitingly, we are pioneering the drug eluting biometrics and we use that to solve very serious problems with implantable devices that currently are not addressed by the state of the art technology. Importantly, we expect FDA clearance of our first drug eluting biologic, kangarooorm, in June coming up right now. And I'll go over this, but that gives us the ability to jump into a $600,000,000 device protection market within pacemakers that really is ripe for disruption. So let's jump into it.

Speaker 2

Okay. So from a business highlight for the Q1, we had another exceptional Q1, but this one was really quite a standout. Dollars 6,700,000 in revenue for the quarter puts us at a run rate of about $27,000,000 Simplidderm from a revenue standpoint was the real star with sales surging 55% in the quarter. And then obviously all eyes are on our Kangaroo RM product line and we expect clearance for that now in June of this quarter coming up. A little bit of background.

Speaker 2

So what we do at this company is we are pioneering the drug eluting biologic, and we do that by taking natural biological matrices and adding a pharmaceutical payload to that. By combining those two things, we are able to create products that have a regenerative component as well as a pharmaceutical component. So it's really the idea is the best of both worlds, being able to have an implant that incorporates and regenerates in your own healthy tissue, but also deliver active pharmaceutical agents that are able to impact things such as post operative infections. And we're really excited about what that technology brings us. So with that said, let's go jump into our first application of this, which is on our Kangaroo product line and Kangaroo RM is the next one coming up.

Speaker 2

So this is Kangaroo is a product and the Kangaroo line is a product that's used in the CIED or basically pacemaker and internal defibrillator space. So each year, there are about 500,000 pacemakers that are placed. There's really only 4 significant players in the pacemaker field. Medtronic has 40% market share in that space, with the other 60% divided between Boston Scientific and Abbott at about 25% each and then Biotronic, a bit of a distant 4th at 10%. And so this is the marketplace in which we are able to not compete with, but instead actually facilitate and make these implantable pacemakers perform better in the patients that they're intended to help.

Speaker 2

So why would we need kangaroo or kangaroo RM? Well, this is what it can look like for somebody receiving a pacemaker. And so some of the comorbidities and problems that these patients and their physicians face, things like thin skin, you can see in the picture on the left there, you have no problem identifying the pacemaker and the lead wire even coming off of it. If you look closely, you might be able to see the serial number on the pacemaker. But this idea of a patient with thinner skin and having this pacemaker placed directly underneath that skin really sets off a cascade of events.

Speaker 2

And so one of them is migration. So the next picture over to the right, you can see an arrow where the actual incision was and the pacemaker was placed and you can see that this pacemaker is rotating laterally towards the armpit. And that starts in motion a series of events that can lead to problems. One is you can have tension and pulling on the leads and those leads could dislodge. But another thing that you can see happen here is the pacemaker can move and have micro motion against the skin and that can lead to pacemaker erosion, which is the next picture over.

Speaker 2

And so if you're not sure how big of a problem pacemaker erosion can be, well, the 3rd picture over, you can see pacemaker is literally dangling from this patient outside of his body. That's obviously not a sustainable picture that somebody is going to have to go back into the operating room and have that fixed. In the meantime, it's pulling on those leads, which are supposed to be placed firmly in the right ventricle and that can lead to obviously failure to pace. And then lastly it's this idea of infection. So anytime you're putting a long term implantable device into a patient, particularly those that have comorbidities, such as things like smoking or obesity or Type 2 diabetes, you're at a significant risk for post operative infection and that can be a really catastrophic event in patients who need pacemakers.

Speaker 2

So the problem that we're trying to address is the most common type of failure that you see with pacemakers. Pacemakers themselves generally don't fail very often. They don't spontaneously break. Most failures with pacemakers occur at the device host interface, just like I've shown here. And that's actually what we're trying to address with Kangaroo and Kangaroo RM.

Speaker 2

The first real entrant into this space that we're now playing in is a product called Pyrex. It was introduced originally by a company called TYRX that shortly after their product was approved, the product was acquired by Medtronic. And TYRX is a fully synthetic polymer that you place the pacemaker inside of, it dissolves. And as it dissolves, it elutes off different rifampin and minocycline. And the thing here that TYRX and ultimately Medtronic got right was this idea of having antibiotic protection around a pacemaker implantation procedure was something that resonated with the electrophysiologists that are putting these in.

Speaker 2

And since TYRX was acquired by Medtronic back in 2014 for about $200,000,000 they have really taken this market and they have created a market where there was none. We estimate they do about $250,000,000 to $300,000,000 a year in this space with this product. That's a market we think we can do better in. And it's a market that we think we can disrupt by having powerful antibiotics like ripamp and minocycline, but instead of the synthetic pouch moving over to one that's a more natural regenerative biologic matrix. So you're getting all the benefits of having antibiotic pollution, but in one that's able to address some of the complications of thin skin and migration and fibrosis and inflammation and all of these other things.

Speaker 2

In fact, we did a market survey when we went out and talked to electrophysiologists that were using TYRX as part of their cases. 88% of them, an overwhelmed majority, said they would move some or all of their business to a biologic envelope like Kangaroo RM when it came out. And so we view this not as a competitive product in this $600,000,000 market with only one player, But we actually view it as a superior product, and we're super excited about getting it approved and launching it. So with that said, let's give you an update on where we are in our path towards FDA clearance. So we submitted our combination product filing in December of this year.

Speaker 2

It's gone through pretty significant review with FDA. All of our interactions to date have been very positive. We are now working through, I would say, the very final details. We expect to close out all of those details within the month, and that would then put us on track for an FDA decision in June. And where we stand right now, we fully expect that to be a favorable decision.

Speaker 2

After that, we've got to take this product to market. And so just a little bit of an overview on our commercialization strategy following approval. We see 2 groups of customers as our first really our first and second tier. That first tier are those customers and those centers that are currently using Kangaroo, our base product. We have 356 centers right now that currently have kangaroo on formulary.

Speaker 2

And we think flipping those centers into Kangaroo RM and going after existing sales there would provide us about $25,000,000 of revenue opportunity that we see as fairly low hanging fruit. Right behind that though are those electrophysiologists that are currently using Abbott and Boston pacemakers, but they're putting a TYRX, a Medtronic product around that. There's about $75,000,000 of TYRX business, we estimate there. So you put those 2 together and we think fairly low hanging fruit, there's about $100,000,000 of revenue opportunity for us to go after first. And that's really our 1st year approach.

Speaker 2

Beyond that, we do think we have a superior product. And so we are going to go after those Medtronic TYRX customers. And also those currently right now that are on the sidelines that aren't using an envelope in their procedures, we think there's significant benefit for them to switch over and use Kangaroo RM. As such, we are we have started scaling our production at our manufacturing site in Atlanta, Georgia in preparation of launch in the second half of the year. So that's where we are with our Kangaroo and a Kangaroo M product line.

Speaker 2

Next, it would be almost impossible for us to go through this call. As John mentioned, the standout performance of our simpliderm product. So as a little bit of background, the role of a biometrics in breast reconstruction, there are about 13% of women unfortunately that will develop some form of invasive breast cancer in their lifetime. In the United States, that leads to about 151,000 mastectomies each year, somewhere between 50% to 60% of those will actually be bilateral mastectomies. You put all that together, the breast reconstruction market in the United States alone is about a $1,600,000 addressable market.

Speaker 2

And that is a market that really hasn't seen a whole lot of improvement or innovation. And that's really what we're looking to do. Again, just like we're executing in the pacemaker protection space, where we've had some good technology, but it's frankly, it's gotten a little stale and we think we can go in there and disrupt it. We see the same opportunity here in the breast reconstruction space to come along with 2nd generation and next generation products and really provide the patients with superior outcome. Let me show you a little bit what we mean here with Simplederm.

Speaker 2

I was getting some questions about why it is that Simplederm is performing so well in the marketplace. Sort of take you through a bit of a story here, but it starts out first with the first thing that the surgeon sees, They're looking for a conforming and flexible product. You see Simpler draped over a curved contoured surface and how well it's able comply with that surface. Imagine that going around the complex surfaces of a breast implant or an expander implant. It's the right look, fit and feel.

Speaker 2

It's pre hydrated, so that means the surgeon is able to open it up directly onto the operating field. It's already it comes terminally sterilized at a sterility assurance level of 10 to the minus 6. And so right away, the surgeon is able to open up this product directly onto the surgical field and use it like any other surgical any other surgical tool used in the procedure. This one is a fully compatible biologic product. And so as we were making this product, we were developing this product, one of the most important things we were doing was we were trying to develop a proprietary processing methodology that would minimize the inflammatory response and therefore minimize the potential foreign body and fibrotic response that could sometimes happen.

Speaker 2

We think we did a pretty good job with it. So I'm going to show you some now some pretty impressive data. This is data that was published from a non human primate model. So these are primates having a simploderm implanted into them. And we use actually as a control here, the market leaders is alloderm.

Speaker 2

And so the first thing you're looking at the graph at the left is that you're looking at TNF alpha response in this non human primate model at 2 weeks, 4 weeks and 6 weeks. And you can see statistically significant reduction in TNF alpha. So what is TNF alpha? It's a chemokine marker of inflammation that's seen in all different kinds of inflammatory responses. So you look at that and say, okay, so that's kind of interesting.

Speaker 2

What does that mean? Well, if you look in the histology from this on the right, you can see where the hours are. The hours are stained for CD 68. CD68 is a marker that we use to depict different types of inflammatory cells. This one happens to be looking at macrophages that would be attacking foreign body substances.

Speaker 2

And so you put these two things together and what this is showing is that there is significantly less foreign body response and inflammation in the animals that are receiving simploderm versus those that are receiving AlloDerm. And that comes from that proprietary processing methodology that we developed. So you might look at all of that and say, okay, Randy, I got it. Why do I care? When you go to the next slide, it sort of pays this all up because at the patient level, this is where this matters.

Speaker 2

This is a publication done looking at what's called red breast syndrome with acyloiddermal matrix. And so sometimes when you're doing these change ups and it can be up to 10% of the time, when you're doing a breast reconstruction procedure, the patient can have a significant postoperative inflammatory response and have so much inflammation, it becomes very painful and unacceptable, frankly, for the patient that go back in and they have to change out. So this was a case study that was done where another acellular dermal matrix was used in the reconstruction procedure. It led to this red breast syndrome. It was intolerable for the patient.

Speaker 2

Patient had to go back into the operating room. They changed it out for simploderm and the Red Breast syndrome was able to go away. This is a direct result of that less immunogenic product that causes less inflammatory response, less a reduced cellular inflammatory response and ultimately a better outcome for the patient. So that's what's that's the sort of the science behind why everyone is so excited about simpliderm in these breast reconstruction procedures. And then you could see it pay off commercially for us.

Speaker 2

So absolutely stellar quarter again for Semplederm growing 55% in the quarter. We distribute CybilDerm 2 ways. 1 is through our highly trained proprietary internal distributors. We also, last year, signed a nonexclusive partnership with Sientra. They went through some disruption in the Q1.

Speaker 2

And I would say this 55% growth is despite of that disruption with Sientra, they were recently acquired by Tiger that could be beneficial, sort of I would say it still remains to be seen. But we have our own network of distributors that are just crushing it. So we are super excited about what's going on with both our Kangaroo product and our Cipladerm product in the breast reconstruction space, and it's really starting to show in everything about how this company is evolving into a real serious commercial company. So with that, I will stop for minute or 2 and allow our CFO, Matt Ferguson to walk you through some of the financials. Matt?

Speaker 3

Okay. Thanks, Randy. I'm just going to hit a few of the highlights from our financial performance for the quarter. As Randy mentioned, net sales of $6,700,000 for the quarter that compares to $6,400,000 from the Q1 of 2023. So that was led as Randy mentioned by simploderm with 55% growth.

Speaker 3

But we're also really pleased with our performance with Kangaroo, our other main proprietary product line, where we were able to maintain roughly consistent revenue with last year, but with a much smaller commercial organization. So it's really showing the leverage we're getting in our operating model and we are extremely pleased with that and really excited about what that area of the company can do once we get TANGU RM clearance. Moving down the P and L, our gross margin on an adjusted basis, so this is the non GAAP version, which excludes non cash amortization non cash amortization expense was 55% in Q1 versus 66% a year ago. And again, we are very pleased with this both our proprietary product lines in the range that we have been expecting and looking for. The real driver of the decline was our cardiovascular business, which has been partnered exclusively in the U.

Speaker 3

S. With LeMaitre Vascular. We're very pleased with how that's going. But the result of that from a financial point of view is selling the product there at a transfer price versus the end user price. So it kind of distorts the overall gross margin.

Speaker 3

That was the main driver there. Overall, we're very pleased with how we're performing operationally. And we do expect, as we continue to scale up, we'll see good positive gains in our gross margin. Both of our proprietary project lines ultimately should get into the 70% range or so. From an operating expense perspective, we were at $11,300,000 for the quarter, down slightly from $11,700,000 a year ago.

Speaker 3

However, again, there's some non cash expenses going on a little bit behind the scenes that mask what is really very positive progress there in terms of how we're operating, namely about $2,000,000 of that expense was non cash stock based compensation expense. So when you exclude that, we're really looking at a pretty significant decline year over year. Jumping down all the way to adjusted EBITDA, which is a non GAAP, but probably more instructive metric than net loss or operating loss, we saw an improvement there as well to $3,600,000 for the quarter versus $4,800,000 last quarter. That's where you're really starting to see some of the gain associated with lower cash operating expense, particularly in the sales and marketing line and then the reduced expense in our R and D area as we're getting to the end of the development process for Kangaroo RM as we've discussed. So those are the main points from our P and L or our statement of operations.

Speaker 3

Just finally from a cash point of view, we ended the quarter at $12,600,000 in cash and that does not include about $15,000,000 in warrants, which are now nearly 100% in the money and those warrants expire 30 trading days after the clearance of Kangaroo RM. So we are looking forward to that cash coming in, in the not too distant future. And that end of the quarter number also does not include about $4,000,000 in reduction in our debt and revenue interest obligation. So we are improving our balance sheet and our operating performance and feel really good about where we are from an overall financial perspective. With that, I will hand it back to Randy before we take questions.

Speaker 2

Thank you, Matt. Hey, I do want to mention, we are going to be at the Heart Rhythm Society, May 16th 19th, so next week, booth 1,443. It would be awesome if you are interested in seeing what we're working on, meeting some of the team. I know I'll be there and Matt will be there and our CSO, Doctor. Michelle Williams, as well as a bunch of our sales team.

Speaker 2

So we'd love to see you. If you stop by, that'll be, as I said, next week at the Heart Rhythm Society meeting in Boston. So just to finish up and get to any questions, I think this is a recap of what I hope you know, fully integrated company from R and D all the way through commercial with $27,000,000 and counting revenue run rate. We are pioneering the field of drug eluting biometrics. We have 2 products that we are building on our kangaroo product line and our Simplederm product line, but we think there's a tremendous future in this entire field of drug eluting biologics.

Speaker 2

We think we are well, we're the only ones in it right now and we think that's a position for us to own going forward. As I said, we now expect not just an approval decision in June, but we expect approval of Kangaroo RM in June. That will put us squarely in a $600,000,000 market with really favorable dynamics and only one competitor. And we think unashamedly, we think with a superior product. And we are really excited about putting that on the market and giving the physicians and the patients that opportunity.

Speaker 2

Right behind that, we have simploderm at a $14,300,000 run rate growing at 55% and an exceptional team that I would be remiss if I did not profusely thank today for another exceptional quarter. They are the most talented group I have ever worked with and have the resources and abilities to execute this plan ahead. So with that, I will end my comments and turn it back to the operator and take any questions you might have.

Operator

Thank you. Our first question comes from the line of Frank Tannen with Lake Street Capital. Please proceed with your question.

Speaker 2

Great. Thanks for

Speaker 4

taking the questions. Congrats on all the progress. I was hoping to start with 1 on Kangaroo RM as I figure you can guess. Any update on some of the conversations with the FDA? And I'm looking for you to discuss what you're talking about specifically with the FDA in the public domain, but just positive, negative, in line, different from your expectations and then close that up with how we expect the clearance to come in June and the confidence behind that?

Speaker 2

Yes. Hey, Frank. So thanks for that. I won't get into the specific I won't get into the specific details. Obviously, some of it actually deals with some proprietary things that we're going through.

Speaker 2

But you're asking for where are we in the process? As I said in the call and I think we put in the release too, we expect to close out any last details that we need to get in with the FDA this month, in the next really week or 2. With regards to positive, I would say, yes, very positive. With regards to in line with expectations, yes, again, in line with expectations because we expected it to be positive. We've done we've really taken what we would say is a belt and suspenders kind of approach to this.

Speaker 2

We didn't want to leave a lot to question. It's an enormous file. A combination drug device is a really, really sophisticated thing and involves review at 2 centers. And so I know there's some how come the review might be taking so long. It's a really serious review.

Speaker 2

It's going on at the Center For Drugs and the Center For Biologics, but it's proceeding very positively. And I'm kind of proud to say as expected, it's proceeding as well. So those two things are going together. From a timing standpoint, we are still anticipating to be fully submitted with FDA in the next, as I said, weeks or 2 and that would put us on track for a June clearance decision. We think that clearance decision is going to be positive.

Speaker 2

And when I said Center For Biologics, I didn't mean that. It's Center For Drugs and the Center For Devices or CDRH. I've spent a lot of time with the Center For Biologics as well. So they're always not too far out of my mind.

Speaker 4

Perfect. All right. Thank you for that. Maybe switching over to the commercial preparation you're doing for Kangaroo RM, what are some of the things you're doing to prepare for that? I heard your comments around, obviously, 356 centers and the Tier 1, dollars 100,000,000 opportunity you're going after.

Speaker 4

But what are you thinking about today to set yourself up for success in the second half of this year?

Speaker 2

Right. So there's a couple of things that we need to do. One is, we need after we clear it, we need to be able to make it. And so you're hearing us talk about operationally gearing up and preparing from a production standpoint for the launch of the product. Just after we make it doesn't mean we can go ahead and sell it.

Speaker 2

Before that, we actually need to introduce it to the different hospitals and centers and get on formulary there. That involves going through what is a center to center VAT process, the value added committees to get the product on formulary. We cannot submit those to the VAX until we get the clearance decision, but what we can do is prepare the VAX packages. And so that's a big part of what's going behind going on right now behind the scenes. It's the clinical data, the preclinical data that all of the different value proposition data that the VAC needs in order to make favorable decisions.

Speaker 2

Ultimately, we think the initial sales trajectory of the product won't be constrained by supply and it won't be constrained by demand. We actually think the rate limiting step for adoption is going to be with these different VACs in the hospital and getting on formulary. That's why the idea of starting with these 356 makes so much sense. We're already on formulary with the base Kangaroo product at these 356 centers. Kangaroo RM for sure is a different product and so I don't want to create a misleading expectation there.

Speaker 2

But it's 356 centers that have familiarity with the base biologic kangaroo product. And should we think there's already a tremendous amount of excitement and enthusiasm at these centers for the drug eluting version of the product. And then lastly, it's a new day for our sales team, right? So they've got to learn and be prepared to articulate the benefits of not just a fully biologic envelope, but one that also alludes rifampin and minocycline, all the intricacies that go along with the drug eluting product. So behind the scenes, that's what we have going on right now.

Speaker 2

Production being prepared to introduce it and get it on formulary through the VAX and getting the VAX packages up and ready to go. And then lastly, making sure our sales force is fully geared up and trained and ready to talk about the product effectively.

Speaker 4

Got it. That's helpful. And maybe just one last one on simploderm, obviously continues to grow very robustly. Maybe talk through some of the investments you're contemplating making in that organization. Maybe it's nothing given how well it's executing, but is there thoughts around additional sales reps there, different commercial support personnel, anything of that nature to keep up that growth rate and maybe accelerate it?

Speaker 2

Yes. We continue to make investments in growing the commercial side of that infrastructure. We have been exceptionally pleased and proud of how well our proprietary distributors there are doing our own network of distributors. They are knocking the cover off the ball and we are investing in expanding there. That is turning out to be an investment that is paying tremendous dividends.

Speaker 2

There's also some back office work we're doing. We're also investing in improving our coverage with that. We recently got another favorable coverage decision and continue to work through. We have another, I don't know, 79,000,000 lives right now that we are currently submitted for coverage decisions. So there's a fair amount going on through the commercial side, as Matt talked about though too.

Speaker 2

We're also making investments in on all sides of our business and improving as we scale up the gross margins of our product as we think both of these products can and will be in the 70% plus gross margin range.

Speaker 4

Perfect. I'll stop there. Thanks for taking the questions.

Speaker 2

All right. Thanks, Frank.

Operator

Our next question comes from the line of Ross Osborne with Cantor Fitzgerald. Please proceed with your question.

Speaker 5

Hi, guys. This is Matt on for Ross. Congrats on all the progress and thanks for taking the question. I just want to start off with Kangaroo RM and following up on a previous question asked. Are you able to provide some more insight into what the VAC process will look like upon RM approval and how long you anticipate the sales process to be with getting into those

Speaker 2

hospitals? Yes. So here, the VAC process is going to be a very variable event depending on whether or not it's one of our 356 centers or whether or as we go into these new centers. From a cycle standpoint, where we have existing Kangaroo on formulary and where we have surgeon champions there, we can be looking at back times as low as a month. We are modeling conservatively though when you look at sort of the average of all of them.

Speaker 2

We're modeling a 6 month of that process across all of them. That might be a little conservative. But we've got a lot of centers to go after and there's plenty of fertile ground to go after. So that's what we have going on there.

Speaker 5

Okay. Sounds great. And then maybe turning to simpliderm, I just wanted to get some more color on any initial conversations you've had with Tiger following the Sinatra acquisition and how you view Simplederm growth for the remainder of 2024?

Speaker 2

So we don't give guidance and tell Ross nice try. But with regards to Tiger, so to Tiger could be some upside for the simploderm product line. We had been very early in the relationship with Sientra. Obviously, when they ran into their issues, we are fortunately, the vast majority of our product sales is through our own distributor network, which has been crushing it. I happen to when you're old like me and you've been around for a while, I happen to get have gotten to know and work with a whole lot of people and one of them is the CEO at Tiger and we have a great working relationship.

Speaker 2

And so we are in the early discussions there. But Tiger really could be beneficial certainly, to the team at Sientra by bringing in a fresh balance sheet and the ability to invest more in their sales team. And if ultimately that's something that is makes good sense for both Tiger and Duluthia, I would be happy to do that from a personal standpoint. These are some quality people that I've known for a long time and certainly would have a lot of trust in working with them.

Speaker 5

Got it. That's helpful. And then maybe one more for me. Turning to OpEx, assuming Kangaroo RM gets approval, how should we think about the size of your sales force ahead of launch? And if you guys can shout out any incremental spend throughout the balance of the year, and if you guys see any tailwinds that you'd like to shout out?

Speaker 3

Yes. So, we're certainly evaluating the investments that we make in the commercial organization and operations. And I think fortunately we have a really well established and highly effective organization in place already. So we can very much hit the ground running with the people and the processes and the systems that we already have in place and have been using for quite some time now. We do think that as we ramp up and we get manufacturing going and get through some of these fat processes like you were talking about before, It probably will make sense to add to the commercial organization.

Speaker 3

That both could be through additional direct reps. It could also be through some independent distributors in the case of Kangaroo RM. So we think we will have more feet on the street in the medium term or so. Probably won't rush to do that right away, but probably by the end of this year we will be adding to

Speaker 2

lack of willingness to make the investment in the rep, just to be super clear about it. As we get more clarity on the VAC process, we will start to aggressively add more reps. What we don't want to do is obviously add reps and disrupt their lives and take on the expense of reps before they have something to do in the hospital for the products on formulary. So once we get a handle on how long the VACs are taking at the different locations, we will be increasing that sales team right now.

Speaker 5

Sounds great. Thanks for the update. Thanks again for taking our questions and congrats again on the progress.

Speaker 2

Thank you.

Operator

Thank you. We have reached the end of our question and answer session. And with that, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Key Takeaways

  • Allusia reported Q1 revenue of $6.7 million, up from $6.4 million a year ago, reaching a $27 million annualized run rate driven by a 55% surge in Simploderm sales.
  • The company expects FDA clearance of Kangaroo RM, its first drug-eluting biologic for pacemaker and defibrillator pocket protection, in June, positioning it to disrupt a $600 million CIED protection market.
  • Commercial launch plans target conversion of 356 existing Kangaroo accounts and capture of TYRX business, representing a $100 million first-year opportunity, while scaling manufacturing and preparing hospital formulary submissions.
  • Simploderm’s proprietary processing demonstrated significantly lower inflammation and foreign-body response versus AlloDerm in preclinical and clinical data, reinforcing its role in the $1.6 billion US breast reconstruction market.
  • Operational leverage drove a 55% adjusted gross margin and improved adjusted EBITDA loss to $3.6 million, with $12.6 million in cash (excluding $15 million of in-the-money warrants), underpinning further commercial expansion.
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Earnings Conference Call
Elutia Q1 2024
00:00 / 00:00