Elutia Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 14, 2025

Key Takeaways

  • Positive Sentiment: Elupro revenue grew 49% sequentially and 33% year‐over‐year, now accounting for 68% of Bio Envelope sales and on pace for a ~$20 M annualized run rate.
  • Positive Sentiment: Gained active ordering status in 161 hospital systems with a 95% VAC approval rate, adding 12–15 new institutions monthly toward a 1,600‐center US target.
  • Positive Sentiment: Settled 97 of 110 legacy litigation cases from a prior product recall, significantly reducing future legal expenses and removing a strategic overhang.
  • Positive Sentiment: Advancing the NXT 41X breast reconstruction platform with base matrix FDA submission planned for 2026 and antibiotic‐eluting version in 2027, targeting a $1.5 B market.
  • Negative Sentiment: SimpliDerm sales declined to $2 M in Q2 versus prior periods, leading management to explore growth initiatives or potential partnerships.
AI Generated. May Contain Errors.
Earnings Conference Call
Elutia Q2 2025
00:00 / 00:00

There are 6 speakers on the call.

Operator

Good afternoon, ladies and gentlemen. Welcome to Euluthia's Second Quarter twenty twenty five Financial Results Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Matt Steinberg with Fin Partners. Thank you.

Operator

You may begin.

Speaker 1

Thank you, operator, and thank you all for participating in today's call. Earlier today, Aleutia released financial results for the quarter ended 06/30/2025. 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.

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 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 Aleutia's Annual Report on Form 10 ks for the year ended 12/31/2024, accessible on the SEC's website at www.sec.gov. Such factors may be updated from time to time in Aleutia'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, 08/14/2025. Aleutia disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward looking statements for the purpose 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 06/30/2025, which was successful on the SEC's website and posted on the Investor page of the Aleutia website at www.aleutia.com. And with that, I will turn the call over to Aleutia's CEO, Randy Mills.

Speaker 2

Thank you, Matt, and welcome one and all to our second quarter twenty twenty five 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. And then I'm gonna turn it over to Matt, who's gonna provide an update, which we have some pretty significant updates on the litigation front.

Speaker 2

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. Well, let's just jump right in, with a review of LUPRO'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 seven national GPO contracts that the team has secured. As we've said all along, the key to, revenue growth has to do with hospital systems we can get into.

Speaker 2

We're currently at a 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 Aleutia. Our drug eluting technology, particularly our biologics drug eluting technology, think is the best in the world. In this first year, I think we've done a good job of validating that.

Speaker 2

Five peer reviewed publications in the first year alone, not just the product, but the base technology. We won the Edison Award. I was, got to, actually go and and receive at what I would call the nerd Oscars, for innovation in medical technology. Two medical device network excellent awards, one for product innovation, which isn't a surprise, another for product launch, really combining what the two teams, working together are able to accomplish. And then lastly, our innovator in chief, doctor Michelle Williams, won medical device innovator of the year award, and we think that was certainly well deserved.

Speaker 2

Okay. Turning to the scoreboard. Really, the numbers say it all. First half performance bioenvelope revenue for the quarter up 33% year over year. That puts us at about a $14,000,000 run rate, now.

Speaker 2

Why is that? Well, that's really being driven by Elupro growth almost exclusively by Elupro growth up 49% sequentially for the quarter. Elupro now makes up 68% of our Bio Envelope revenue and it continues to grow. Why is that? Well, that's all driven by our VAC approvals.

Speaker 2

So we now have over a 160 hospitals that we've gotten through the VAC process. When we say through the VAC process, we don't just mean on contract and able to order. We don't actually count these hospitals until they are actively ordering, and we are shipping, them, the product. So that breaks down sort of at a high level what's going on, with the product. Let's get in a little drive a little bit more, detail here.

Speaker 2

So looking at, the revenue, it's kind of amazing. We sold the first unit of Eleupro last September and we experienced some very modest revenue recognition in the 2024. But since then this product has been on a tear. You could see the quarterly growth continues. We now expect to end the year at a revenue rate approaching $20,000,000 and that really is due to the tremendous work the commercial team is doing.

Speaker 2

Dig in here and see what's really going on though. It's really driven by our sales per account. So as we said before, if we can get, on contract, with the hospital, what we're seeing is a 130% higher revenue in those accounts for Eleupro than we're seeing with Kangaroo, and this is reflecting greater utilization of the product. Kangaroo is a great biologic envelope. It was able to hold the pacemaker in place, keep it stable, prevent erosion, from taking place and migration from taking place and ultimately a fibrotic capsule forming.

Speaker 2

But if you add the powerful protection of rifampin and minocycline, you really get the full benefit of a drug eluting biologic. And that's why we're seeing this 130% higher utilization rate with Eliupro than with, Kangaroo. We couldn't do this, not only without our own direct sales team, which is doing a great job, but also with our, ten ninety nine distributor network, is now making up about 33% of our total sales, enabling us, to very efficiently move across the the country and and, gain new territories, but also with our partnership with Boston Scientific. Now, Boston actively involved in Elupro sales in 98 distinct hospitals ordering. They are currently, facilitating and participating in about 30% of of LU Pro LU Pro cases.

Speaker 2

So if you just start just do the math and you sort of extrapolate this out, we're targeting something along the lines of 1,600 or so hospital centers that would ultimately use, Elupro that are active in planners of pacemakers. That, if it just sort of scales the way it's going, makes this a $150,000,000 product in just The US, in just pacemakers alone, and we think the neuro market is, at least as big of an opportunity for us there. So from a revenue standpoint, really strong work so far. Again, we've said all along, our revenue if you want to know what our revenue is going to do, look at what our VAC approvals are doing. And here, this just shows the great work of our team continuing to grind out those approvals.

Speaker 2

A 101 61, institutions, you can see, you can see there the monthly progress we're making. We add somewhere between 12 to 15 new institutions a month. We have something along the lines of 90, submissions in in progress, and we have about a ninety five percent success rate. So when we submit to a VAC, we have a very, very, strong likelihood of gaining approval. Facilitating, that great work with the VACs the work we've done with our GPO contracts.

Speaker 2

And so we are on contract now with seven major GPOs including Premier, S3P, Adventist, and we have several others under the work and believe we will be reporting on a few more successes there as as the year concludes as we get through the second half. So all in all, what an incredible first year for Ellipro, and I wanna thank the entire Aleutia crew. It really was a team effort from science to operations to commercial everybody working together, the way our culture says, that we should. Okay. Eliupro has a tremendous amount of fun and it's a great commercial success, but we are just getting started.

Speaker 2

Our mission is to humanize medicine so that patients can thrive without compromise and there is no bigger need than in the breast reconstruction space. This year alone three hundred and seventeen thousand women will be told that they have an invasive form of breast cancer. Many of those are going to go on and require mastectomies and need reconstruction and a staggering one in three women going through breast reconstruction are going to suffer serious complications from that reconstruction procedure. And that is something we can fix and that is something that we have resolved to change. Taking a look at the breast reconstruction, market, it is a very big market and it is a very big market that already has, a dominance of biologics in it.

Speaker 2

So biologics represents a $1,500,000,000 addressable market in The US alone and biologics accounts for 65% of the device related spend in reconstruction. Breaking down the numbers, there are a one hundred and fifty one thousand mastectomies annually in The United States. Two thirds of those involve bilateral procedures that generates somewhere between 200,000 to 225,000 individual breasts that are being reconstructed. Biologics account for eighty percent of the reconstruction cases at a cost of somewhere between 7,500 and $9,500 per case. Therefore biologics are about 65% of the implant related costs, but they do not address the primary cause of implant failure.

Speaker 2

So this is a market where we see biologics as the standard of care and that standard of care is currently failing. Despite the high costs biologics alone don't address the problem. And these numbers don't lie. As I said one in three women going through the breast reconstruction procedure suffer a serious complication. Why is this?

Speaker 2

It's driven almost exclusively by persistent bacterial contamination. So ten percent to fourteen percent of women will experience a significant infection. Nineteen to twenty nine percent will suffer capsular contracture, which is most often a direct result of the inflammatory process from colonization of bacteria, and up to twenty one percent of women will actually have an implant loss. And there's significant and very real economic costs associated with these two. We're looking at almost $50,000 in economic burden to the hospital, which because it's a postoperative infection, the hospital must bear alone.

Speaker 2

These are not insured costs. So if you think about this and just about everyone I know knows a woman going through a procedure like this. You've been diagnosed with breast cancer. Horrible news. You have the courage to go and face a mastectomy, radiation oftentimes very frequently chemotherapy and instead what do you face?

Speaker 2

You face multiple surgeries, delays in your underlying cancer treatment and the pain and suffering of a failed reconstructive procedure. This is something that the drug eluting biologic technology that we've developed was made to fix. You might be wondering so how bad is it? Well, how's this for bad company? Breast reconstruction ranks among iest procedures in medicine despite being performed over a 150,000 times a year.

Speaker 2

It falls just between major limb amputation and colorectal resection with an ostomy for serious complications. So it's not really surprising that women when faced with the option for breast reconstruction, sixty percent of women opt to not have their breast reconstruction. Friends, this is a market that needs a revolution and that is exactly what Aleutia is bringing to the table. We have built on our award winning technology from LU Pro to bring you what's next. NXT 41 X is a fully engineered next generation biological matrix that brings both the handling and the biological remodeling of a biologics matrix.

Speaker 2

But to that, we've added powerful antibiotics with sustained antibiotic release to prevent infection that is associated with these types of procedures. Our team have been hard at work on this for the past three years and we are in a position now to where it's actually just around the corner. So we've been hard at work leveraging our proven development experience both from a technological standpoint as well as a regulatory standpoint to rapidly gain market access. And so as you guys know, we've submitted and gotten approval for LU Pro, but we haven't talked about we spent a tremendous amount of time during those last three years developing and perfecting a great base biological matrix and our development of that matrix is complete. Our animal data supporting the use of that matrix is complete.

Speaker 2

We have already held pre submission meetings with the Food and Drug Administration and our teams are now preparing submissions for approval. So we anticipate having the next 41 base matrix approved, now and launching in the 2026 and, the antibiotic matrix in the '27. We will obviously be providing more detail on this in the coming months, but I wanted to give you a good sense of not just where we are in the development program, but more importantly, why the NEXT 41 program for breast reconstruction has been so high on the development teams, priority list for, the last three years. With that, I will conclude my comments and turn the call over to Matt, who will discuss where we are from a litigation standpoint and then do his financial review.

Speaker 3

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 four years ago and it was in a part of the company that we actually sold two years ago. So it really relates to history of the company as opposed to anything that we're doing right now.

Speaker 3

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.

Speaker 3

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, on any 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 three of those. So in a lot of ways that actually makes it a little bit easier for us to deal with them one by one.

Speaker 3

The implications of this for the company are there are two big ones. One is that it substantially reduces the expense that we incur going forward. And then the other one is that it really removes an overhang that made it very difficult. We've been talking to other companies about any kind of strategic transaction, and I think we have really addressed their concerns now. And like I said, I think we're very close to putting this entirely behind us.

Speaker 3

So with that, I will move on to the financial update. And there, it really integrates very directly with everything that Randy talked about. The, I won't go through all of the the bullet points on this page, but just hitting a few highlights really at the top of the list is the performance of Elupro. We saw 49% growth on a sequential basis for Elupro from Q1 of this year to Q2 of this year. That drove really substantial growth even in the overall Bio Envelope business even though a lot a fair amount of that business is still kangaroo.

Speaker 3

So we saw $3,500,000 in sales in the Bio Envelope business versus $2,600,000 from a year ago. And as Randy indicated, we expect that growth to continue and we expect more and more accounts to convert over to Eliupro and to bring on new accounts based on having this really exciting product in our portfolio right now. Just touching briefly on our other two main product areas in the cardiovascular patch products. We took control back of those products from an exclusive distributor last quarter in Q2. We only have them for a portion of the quarter.

Speaker 3

But even just in that portion of the quarter, we were able to generate over $700,000 of revenue from those products and that's more than double what we're able to do through the distributor just the quarter before. And we expect to also see continued growth there. And then for SimpliDerm, which is a product with a lot of opportunity, we didn't do as well last quarter. And we generated $2,000,000 of revenue there versus what we had done previously, which was higher. I do believe that there are multiple ways that we can generate value from that franchise, whether it's by driving additional sales or by partnering with another company in order to bring value to our shareholders.

Speaker 3

So overall, those three things add up to sales of $6,300,000 for the quarter, which we expect to see growing going forward. That was essentially comparable to what we did in the year ago quarter. The other areas I'd like to touch on are gross margin where we're seeing really nice efficiency in terms of our operations and we saw a substantial improvement in our adjusted gross margin reaching 62.4% for Q2, up about four full percentage points or more than four full percentage points from a year ago. And we're seeing that largely based on the efficiency that we're getting in the bio envelope business as we start to scale that up a little bit more. And then also with the really high margins that we generate in cardiovascular, those gross margins are actually over 80% for that business and that does a nice job of dropping money towards our bottom line.

Speaker 3

So on a bottom line basis, are different ways of looking at it whether it's an operating or a net or an EBITDA basis. Really I think the most instructive metric is adjusted EBITDA here which takes out the non recurring and non cash expenses. There we had a $3,800,000 loss for the quarter. But when I think about that for where the company is with a really high growth top line franchise in the form of Eliupro and then also with the product development investments that we've been making, which are going to yield really exciting results in the near future. I'm actually really pleased with the efficiency that we're seeing there and the ability to move this company towards profitability.

Speaker 3

And then lastly, I just mentioned that we ended Q2 with $8,500,000 of cash. And I think the important thing to mention there is that we do have a number of business development transactions that we are evaluating and we won't say too much more about that here, but we do expect to be able to say more in the very near future and we do expect those to have an impact in a very positive way on our cash position. With that, I will turn it back to Randy.

Speaker 2

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 gonna come as a surprise to anyone to find out that, it's a lot of our focus is dedicated exactly where it should be to Eleupro. Elupro is now at the stage where it's about scaling.

Speaker 2

We know exactly how to grow revenue in Elupro. It's simply to get more, VACs on on contract. So we are going to continue to scale, revenue in LU Pro by 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 partner, our partners at Boston Scientific to help drive this process. And those two things really couldn't shouldn't come as a surprise to anyone.

Speaker 2

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, you know, that product doesn't make itself. The team in in Roswell, Georgia does a phenomenal job, growing with this product and continuing to meet product orders, we're incredibly proud of the work that they do. So you can expect to see more of that going on.

Speaker 2

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, you know, 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, is such an outstanding medical need. We are, not only excited, but we are passionately, pursuing that and driving that forward, at at full speed.

Speaker 2

And then lastly, as as as Matt said, and as I said at the beginning into 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

Thank Our first question is from Frank Takatin with Lake Street Capital Markets. Please proceed.

Speaker 4

Thanks for taking the questions and congrats on all of the exciting progress. I wanted to start first with one on LU Pro. Obviously, you've had very strong market receptivity. And just curious when obviously when a product is launching as quickly and successfully as LU Pro has, there's always bottlenecks along the way. So just curious what those bottlenecks are, whether that's still Vax 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?

Speaker 2

Yeah. 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 there were some people sweating being able to keep up with production as as we first got that started, but but, they have done that. They have really mastered that.

Speaker 2

You're starting to see that efficiency show up in the gross margin. We've you know, we we don't like any 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 they've done a great job there.

Speaker 2

I wish it were more exciting, and then and maybe I don't wish it was more exciting, than than the opportunity that we see, but really it's about scaling back. It the ordering is now so predictable. When we turn a hospital on, they order and they're ordering at this really significant rate over when, you know, over what they want, you know, a 130% of what, they were ordering Kangaroo at, a good account for us. We'll do some you know, actually, we expect actually just an average account for us to do about a $100,000 a year. So those accounts are are are just scaling.

Speaker 2

So as we get through the back process, revenue scale. So, I don't know if you call it a bottleneck or just the work we have to do, but we have a 160, we have a 160 vax through approval right now. It's kind of interesting it lines up. We have 1,600 centers, that we are targeting in in total. It takes us on average about six months to do that.

Speaker 2

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. Actually we had a lot pull through, but we add new filings, every day, and our partners at Boston Scientific are are are being tremendously helpful, in in opening up those new doors. They certainly have accounts that they have a high interest and high need in. So it's not really much of a a mystery anymore what drives, the revenue.

Speaker 2

With, with Ellupro, it really is if we get through the backs, back, you know, we we we're seeing the ordering just scale.

Speaker 4

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 kind of the two step process.

Speaker 4

I think we read in the press release that the first one is expected 2026 and then the drug eluting version in the 2027. So some additional background there would be interesting to understand. And then just a clarification, is there any linkage to NXT-forty one to Simpladerm as you think about business development activities?

Speaker 2

Sure. So the first centers around regulatory strategy, right? So, and you know Doctor. Williams, she she doesn't just deliver great science. She also knows that the product won't help people until it can get through the FDA.

Speaker 2

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 is the matrix by itself. This is not a derivative of Sympoderm. This is a brand new matrix for a lot of different reasons. We went with what we call a fully engineered matrix.

Speaker 2

And so, this is a, it starts with a poor sign extracellular matrix base, that we treat with a number of different 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 on sort of biologics and particularly human tissue that's used in biologics is the 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 gonna perform.

Speaker 2

And I know this, this base matrix is engineered in such a way to where it's gonna incorporate biologically in an absolutely optimal state. And so that's what we did, with that base matrix. And so that's, that will, you'll see that, come on the market in the '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 Lupro and drug what 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.

Speaker 2

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 sort of centered around how this, related, to SimpleDerm. This is, going into the same markets, as SimpleDerm is obviously using a biologic mesh in, in breast reconstruction, but we think really with a with a second generation, sort of technology. And so what we like about having SimpleDerm is, we have our our key accounts.

Speaker 2

We have our KOLs established these great surgeon relationships. And SimpleDerm is, as we say, simply a great product. Physicians love SimpleDerm. We think it is the the the best biologic on the market, today. But ultimately, where we're going is we think, we think, that NXT 41, really gives a more complete solution, than, than than any human derived matrix could give.

Speaker 4

Perfect. Helpful. And then maybe just one last one and I'm 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?

Speaker 2

It's nothing's done, Frank, until it's done. And so, I would expect it to be in weeks, months, or quarters in in one of those. You know, it's just one of those things that's like it reminds me of that, Billy Crystal line in in Princess Bride, you know, 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.

Speaker 2

We would expect at least one of them to come to fruition, but nothing's done until it's done. So I don't, I don't wanna really provide, any more time frame on that because I don't wanna have to negotiate against ourselves with regards to time. And if I set an unrealistic expectation, really, it's it's it's only us that would bear the consequence of that.

Speaker 4

Perfect. Fair enough. Thanks for taking the questions.

Speaker 2

Thanks, Frank.

Operator

Our next question is from Ross Osborne with Cantor Fitzgerald. Please proceed.

Speaker 5

Hey guys, this is Matt Park on for Ross today. Thanks for taking the questions. I guess just starting with gross margin, it was 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?

Speaker 3

Hey, Matt. It's Matt Ferguson. Good to talk to you again. I I think I got your whole question. I know it's centered around gross margin and opportunities for growth in the future.

Speaker 3

And I would say absolutely opportunities across really all segments of our business to improve gross margin going forward. Certainly in the case of Eleupro, 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.

Speaker 3

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 point?

Speaker 5

Yep. That was great. And then I guess just moving on to Annex C41x. This may have been answered already on the call, but can you kind of 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?

Speaker 2

Yeah. So we are, we are taking both the base matrix and, the antibiotic delivery matrix to the same regulatory platform that we took that we took, LU Pro through. And so, from a regulatory standpoint, we will be able to do, that with, you know, exactly the same, playbook that we use, for LU Pro with the exception of there are, when you get into surgical meshes for different things, are different, you know, there are different specific requirements for those that the, you know, 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, you know, we're looking to win this thing not in the short term, but actually, but actually in in the long term. We think 41X has the opportunity we we actually think we'll be by far, the first, antibiotic alluding matrix to market, But we care about the matrix that it's on.

Speaker 2

And so, you know, sort of not to pick on, overly pick on TYRX, but we were not looking to just rush first with, you know, 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, well, 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 Device and Radiologic Health combined with the Center for Drugs. You put all that together and and you have the same pathway that we got LU Pro through and we feel pretty confident we'll be able to do that expeditiously with 41x.

Speaker 5

Got it. That was super helpful. That's it for me. Congrats on the quarter and thanks for taking the questions.

Speaker 2

Thank you so much.

Operator

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. Goodbye.

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