I serve as an equity research analyst here at Sidoti & Company. Today, we're pleased to be in conversation with CEO Dr. Randy Mills of Elutia, ticker ELUT. During the presentation, please feel welcome to submit questions using the Zoom Q&A interface at the bottom of your screen. After the presentation, we'll open to your questions. With that, Randy, I'll turn it over to you.
Great. Thank you, Alex, and thank you all for joining us today. I do love questions, and so if you're going through the presentation and you have any that pop into your mind, I'd love to take and answer any questions I can for you. Before I get started, here's a forward-looking statement slide. It just says, "Please evaluate our risk factors on file with the Securities and Exchange Commission." All right, let's just sort of jump into it here. Elutia, starting with first things first, our mission: humanizing medicine so patients can thrive without compromise. What do we mean by humanizing medicine? Well, humanizing for us is a little bit of a code word for biologics. We like biomaterials that are able to turn into and regenerate human tissue.
We don't leave it alone there. We think most of the biomaterials market has actually become a little bit stagnant. What we've done is we've taken it to the next level by combining it with active medicines, pharmaceutical agents, drugs. When we talk about humanizing medicine, we're talking about really pioneering this new class of drug-eluting biologics. Why? So that our patients can thrive without compromise. This is what we're great at. We really think actually we're probably the best in the world at this, and that's combining these optimal biological drug matrices with these powerful antibiotics. We've been at this now a little while and we have gotten good at it. EluPro, this was our first product where we attempted this.
It's an envelope that holds pacemakers in place, and what we were able to add to that is rifampin and minocycline. These are two powerful antibiotics that elute over time and prevent postoperative infection in pacemaker implantation. This was a product that we launched in January of last year. We had tremendous commercial success with it and eventually sold it actually just nine months after launch to Boston Scientific for $88 million. That really set us up for the thing we've been working on since 2022, and which I'm going to spend really the entire entirety of the rest of the presentation talking about, and that's NXT-41.
NXT-41 is again same type of biological matrix, same antibiotics, rifampin and minocycline, same regulatory pathway designed really specifically to address the very serious complications that exist when a woman has breast cancer and needs to go through mastectomy and breast reconstruction surgery. An investment highlight, if you wanna know, okay, why am I listening to this today? Why would I consider buying Osiris stock? One is it's insanely cheap right now. Jump on if you'd like. Here's from a background standpoint. One, we have a validated technology platform. We're not hoping this technology works. We know it works. We developed it successfully already. We've already gotten it successfully through FDA. We've already commercialized it successfully. We're talking about surgeons. The surgeons loved EluPro in the pacemaker space.
From a commercial standpoint, we went from zero to a $18 million run rate on that product in nine months. A big piece of validation is that Boston Scientific, you know, actually acquired it for $88 million. Sell something to Boston Scientific and you'll see how difficult it is for them to incorporate a product line into their own brand and their own reputation. We have a validated technology platform. What we're doing with that platform now is we're aiming it at a much bigger market with a much more serious unmet medical need. Right. This is breast reconstructions in the breast cancer space.
This is a $1.5 billion market, and it has a huge unmet medical need that we're gonna talk about, and there's nothing right now available for these women going through breast cancer treatment and recovery. We have a solution, and we're gonna use our solution in order to fix that problem. Lastly, and this is probably differentiating for this conference, we're fully resourced. So we already have a team in place. We're not new at this. This isn't our first rodeo. This isn't our first company, or this isn't our second company at this. We have a history of success, and we're here to do it again to solve this really significant unmet medical need.
We also have a state-of-the-art GMP manufacturing facility already in place, and we have, you know, super important, we have the money. Because we sold the specific product to Boston Scientific, we have the money in order to do this without it picking up any additional dilution through approval and commercialization. I'm gonna dig into this and really help you understand why it is we're so excited. Let's start off with the reconstruction space, and why this is such a transformational opportunity. Really three reasons. One, very big market, right? It's a $1.5 billion breast reconstruction market. Two, it's a big market with a really big problem.
Despite this being 162,000 breast reconstructions procedures performed in the United States every year, 15%-20% of these surgeries end up in serious infection. It's one of the highest infection rates that currently exists. The third thing that makes this so compelling is our solution actually addresses this problem almost perfectly and really directly and head-on. We're gonna be talking about these sort of three elements to the story for the rest of today. Breast reconstruction, I said it's a big market. There are 162,000 breast reconstructions performed each year. Those implant-based reconstructions, 85% of those are already using a biological matrix as part of that reconstruction procedure.
What I mean by that is when you put the implant in, if you don't have something that holds it in place, the implant moves around, so you really can't do the procedure without the mesh. What people tend to be surprised about, though, is how expensive this biological mesh that's used in these surgeries really is. $7,500-$9,500 is the ASP for a biological mesh that holds the implant in place. If you sort of think about that in relative context, it is 65% of the total spend that's going on in the procedure. The implant itself is actually only 15% of cost.
The surgeons are already used to using a matrix, and they're already the hospitals are already used to spending a really significant amount for this implant. The problem is, despite those high costs, the outcomes are absolutely abysmal. One in three women suffer serious postoperative complications from breast reconstruction, and 15%-20% are experiencing infection, and this is really serious. This obviously leads to really significant economic costs for the hospital, and that has big implications for adoption for us. Average cost to fix a breast reconstruction complication because of infection is about $48,000. If you look at what's going on, the hospital has to pay for that because there isn't additional reimbursement for infections that occur within 30 days of the procedure.
This is a huge economic cost to the hospital, but I want us to humanize medicine here for a minute and actually think a little bit about the woman. This is a woman who started out this journey because she's been diagnosed with breast cancer, and the whole premise here is treating and curing her of this breast cancer, and that's why she had the mastectomy. There's usually radiation involved. There's usually chemotherapy that'll go along with that. Then you have this surgery, and an infection happens, and all of the other treatment for cancer has to stop and be put on hold while you deal with this infection because you can't be subjecting yourself to things like chemotherapy when you have a really significant and severe infection going on.
That really makes it a compelling unmet medical need, not just for the surgeon, not just for the hospital, probably most importantly for the woman that's involved. Okay. I wanna explain, though, a little bit why this is 'cause when I say, "Hey, this is a, you know, 162,000 procedures a year, and there's a 15%-20% postoperative infection rate," people look at me like there's no way that could be true. That and by the way, if you're ranking them, that makes breast reconstruction actually more risky than having a piece of your colon removed. This is very, very risky surgery, and it doesn't seem to make a lot of sense why, but when you understand really the anatomy and the physiology of what's going on, you can kinda see where the problem comes from.
I'm gonna take a little bit of time, and I'm gonna explain the mastectomy and reconstruction procedures and specifically how that relates to the actual complications that show up. The first thing that happens, and I think probably the first thing to appreciate is when we talk about breast reconstruction with a mastectomy, we're talking about two individual surgeries taking place in one very long operative course. The first surgery is the mastectomy. This is where we are removing all of the breast tissue here. You've gotta get rid of all of the breast tissue because if you don't, the woman has a potential for recurrence of breast cancer and that's not good. The whole premise here was to get rid of that.
All of that breast tissue, all of that you can see in sort of the yellow and the purplish, glandular material, all of that, needs to get removed. That's done by an oncologic breast surgeon. This is surgeon one. Now, I want you to appreciate here there's something else going on. It's not just breast tissue. There are blood vessels that are, that traverse the entire anterior portion of the breast, and it's actually where the blood flow to the anterior portion of the breast comes from. Well, when you do a mastectomy, as a consequence of that. You end up with, a compartment, a pocket that has really no good vasculature left. When you remove the breast tissue, you actually have to ligate off all of these different blood vessels, that are in there, right?
You don't have uncontrolled bleeding, and when you do that, you don't have any meaningful appreciable blood flow to the anterior or the front, the nipple, portion of the breast. Now you maybe start to see the problem here. If you don't have any blood flow, then the things that we would normally do to treat an infection or prevent an infection, we would give somebody some IV antibiotics or even some oral antibiotics, right? Those would get into your bloodstream, and they would travel across your body, and they would end up at the surgical site. Well, here we can't do that because those antibiotics get right up to the breast where they need to be, and they're sort of dead ends. They're met with a dead end.
You can't get meaningful concentrations of antibiotics into the front part of this breast. By the way, you also, if you can't get blood flow in there, you can't get a meaningful participation from your immune system in there. Now you're talking about a very, very compromised area. It's immunologically compromised, and it's also compromised for our ability to actually help prevent infection the way we normally would with the delivery of antibiotics. We're not done, 'cause that's just surgery one. Surgery two is now a plastic surgeon comes into the operating theater. A different surgeon, different surgical team, right? And his or her job is to reconstruct this breast, right? Now the oncologic surgeon just takes the tissue out. The plastic surgeon is responsible for putting it all in.
The plastic surgeon will implant into this breast pocket an implant. It can be the implant itself, or it can be an expander done initially. It doesn't really matter which one's done first in this particular case. Either way, it's important to know this is placing a very large foreign body in the cavity. Foreign bodies, if you may remember from sort of early biology, provoke foreign body response, the same way our body would react to if we had a splinter. Your body doesn't like things in it that aren't natural, and a synthetic implant certainly meets that, and that further exacerbates infection.
In order to hold that implant in place, you can't just put it there, otherwise it would move around, and there wouldn't be enough coverage, right? In order to hold it in place, the plastic surgeon tents over that, a surgical mesh. This is usually a biological material that will regrow and incorporate into the patient's own healthy tissue. They implant this biological mesh, and that holds it all in place, and it holds it up against the chest wall. This is done in like 90% of the procedures today. It accounts for between 65%-80% of the implant spend.
This tent that goes over this ends up being the most important thing that's going on, or this most expensive thing, I should say, that's going on, in this surgery. Now, if that all wasn't enough, finally a drain is placed, or drains, multiple drains usually per breast are placed. This is to eliminate serous fluid or the creation of what's called a seroma. Because all of the basically the trauma that goes on to the breast when you cut all of this tissue out, that trauma will sort of create almost like a blister-like material, and if you don't remove that, well then for sure you'll get an infection. The way you have to do that is you have to put these big drains in there.
Not to gross everybody out, but these drains communicate with the outside world, right? There's two of them per breast. They sit down there in that inferior gutter of the breast, and they create tubes to the outside world. The opportunity for an infection and contamination actually doesn't end when the surgery's over. These drains stay in for another, on average, 17 days, when you're having these drains in there, and that's one of the reasons that you can have postoperative infections popping up so much later.
Just sort of to recap this, if you almost wanted, like, a perfect recipe for an infection, you have a very long surgery, 4-6, sometimes longer, hours. You have two different surgeons and two different surgical teams. You have a very large foreign body going in there in the implant itself, and then you have these external drains that communicate to the outside. The thing that would normally protect us from all of that, our blood supply providing us our immune system and providing us with powerful antibiotics, that doesn't exist 'cause we've cut all of that out.
When you think about that, all of a sudden it goes from thinking, "Hey, how in the world could you have a 15%-20% infection rate?" to, "How in the world is this not 100% of the time an infection rate?" Really actually shines a light on what an incredibly great job the oncologic and the breast surgeons actually do with this procedure, 'cause this is a very, very complicated and a very, very compromised procedure to do. Now. Sort of flip this around when you think now about what we do. What we do is we put antibiotics directly in the surgical site. We don't depend on the body and the blood flow to deliver to the site.
We deliver those sites directly to the surgical site, and we know this works, and we know this work from real world experience. What we did with EluPro in the pacemaker space. Just to give you an idea of how powerful this is, we could take EluPro, we could eliminate 80% of the antibiotic on EluPro, and then we'd have to obviously do this in animals. But implanted into animals with six-log, like that's a fancy word for greater than 1 million pathogens, bacteria, right? That 20% of antibiotic remaining on the EluPro was enough to completely kill all of the bacteria and prevent infection. That translated exactly into what we saw clinically.
Clinically, these patients just did not develop postoperative infection, and that was really great to see. In breast reconstruction though, right? 'Cause this is a new area and say, "Well, Randy, breast reconstruction's a different thing." Not so fast. Maybe we don't know. Actually, in 2025, so just last year, two studies came out. Now they were sort of experimental types of things done that you could really only meaningfully do at academic research institutions. These were things like UCSD and Stanford, right? These are some high-end institutions. They looked at what happens if you deliver antibiotic locally in the breast reconstruction space. They looked at two different models. One of them was just in the pure prevention space, like we talk about.
They saw a 62% reduction in postoperative infections. This is an N of 593 patients, so this is not a small study. Then they also went and looked at high-risk patients with something called MSN. This is mastectomy-induced skin necrosis. This is when you really don't have any blood flow. Infection rates just go through the roof here. 82% in infection reduction. Again, another 75 patients. We know local delivery of antibiotic works. Our job is to get this product to those patients and those surgeons, and that's why we created NXT-41x. Very powerful antibiotics, rifampin and minocycline designed really beautifully to match the pathogens that we see inside these infections with this sustained delivery greater than 30 days.
Now, a lot of times I'd say sustained delivery greater than 30 days, people wouldn't understand why. Now that you understand the drains stay in there for 17 days, that means the infection process really isn't over until those drains come out, so that 30-day coverage really, really matters. We put all around that a really great biological matrix that does exactly what plastic surgeons expect that matrix to do in terms of holding the implant in place and protecting that implant in the future. This addresses surgery's number one product. This is sort of the slide that shows you how simple and easy this solution that we've created is, right? It's almost exactly the same slide I showed you before.
If you just pick up the edge of it, that same matrix that goes into every other breast reconstruction surgery, you see that a peek underneath the hood says this is a little bit different. That orange on there, on the implant side, that's rifampin and minocycline. That keeps that breast protected. It really targets the problems that antibiotics just can't address systemically. Because it's covering the whole implant, it's giving this beautiful, sustained, uniform release over the entire site. It doesn't require the surgeons to do anything different. They're just doing exactly what they would normally do in their normal technique, in their normal workflow, just without their number one complication being a part of the equation two, three days later.
From a payer standpoint, 'cause we gotta be very practical about this replaces very expensive legacy products that are already being used without any additional new product spend. It's not like, "Hey, we've got a new thing, and we're adding it onto your procedure." We are trading out something that you use every day but frankly just isn't getting the job done. Pretty good solution. You're probably wondering, "So that's great. When are we gonna see it?" I wanna show you a little bit about what we're doing on this development timeline and how we get from here to there. As I said before, our first version of this was EluPro. We didn't start with EluPro.
We actually started with a product called CanGaroo, and CanGaroo was a biological envelope that stabilized pacemakers, and it didn't have any antibiotic. The reason it's important in the story is our development team was able to get that product on the market through with FDA and then use it as the predicate for EluPro. We introduce EluPro. We file EluPro with the FDA. The only addition we've made to CanGaroo is we've added rifampin and minocycline, and now we can launch that product. Our team did that. We got that product launched in the first quarter of 2025, as we talked about, and we were off to the races.
Now as we think about doing this for NXT-41 and NXT-41x in breast reconstruction, we're following the same playbook. The first thing that's going on is the approval of the base matrix without the antibiotics. That's NXT-41. That's already been submitted to the FDA. We expect approval for that in the second half of this year. Now don't expect anything for us to do commercially with that. That's that exists really for us from a regulatory efficiency standpoint, 'cause what we're gonna do is we're gonna immediately turn around and use NXT-41x as the predicate, or sorry, NXT-41 as the predicate for NXT-41x, and that's the drug-eluting version. That's the really big deal. And we anticipate having that approved by FDA in the first half of next year. Boom, boom, things are happening here.
It's the same team, right? They've done it. It's the same porcine matrix, it's the same rifampin and minocycline, and it's the same regulatory pathway. We're really getting kind of good at it. That just sort of brings me around to this last slide, and I'll stop talking after this. To just sort of drive home, validated technology, we've already done it. It works. We can get it through FDA. It works clinically. We can sell it. Much more important and bigger market, $1.5 billion opportunity with a 15%-20% postoperative infection rate and no competitor on the market for this. There is no other solution out there.
Lastly, you know, we have the team, we have the resources, we have what it takes in order to get us from here to there. $44 million on the balance sheet, and significant milestones expected in the second half of this year and the first half of next year. Alex, with that, I will stop talking. I didn't leave a ton of time, but boy, if there's any questions, I'd love to take them.
Randy, great presentation. Thanks for sharing. I think, you know, just building on that last slide, which showed how each was a predicate for the next, could you talk a little bit about, you know, what approval pathway NXT-41 and NXT-41x are under? Given there are no other competitors on the market, you know, whether that sort of is favorable in terms of timing for you guys.
Yeah. So first of all, we think first mover in here is very favorable, is strongly favorable, and that the reason for that is because the problem is so massive and so real and so acute. When we go out and talk to plastic surgeons, they are very enthusiastic for this solution. It doesn't exist. They need it. They want it. So being first mover out there, we think we're really in a perfect opportunity to create standard of care. From a regulatory standpoint and how we get, and how we go through this, it's actually one of the reasons that we are first mover and why we'll actually stay first mover for a little while. The 41 matrix, just like the CanGaroo matrix, is a pretty standard, straightforward 510(k).
It's not particularly challenging, you know, not particularly flashy. It goes to the Center for Devices for review. We answer their questions, and we get that product approved, right? That happens all the time out there, and the 85%-88% approval rate of those types of products. The second part, the drug-eluting biologics, that is a 510 pathway, right? We're not under the same obligation to do clinical trials as a PMA, but it's a combination product. That means, while the review is led by the Center for Devices, really the bulk of the review is over with our friends at Center for Drugs. If you haven't done review for the Center for Drugs, it's fun.
It's a really comprehensive review, and it really takes things to the next level. That's the reason that we broke those two products. Like, we could have just taken 41x directly to FDA, but we would have had initial reviews going on at both the Center for Devices and the Center for Drugs simultaneously, and that can cause problems. That really can cause issues. We're taking care of the device review first, and then going over and doing, you know, the drug review second.
Great context. Thank you. As a follow-up, you know, could you talk a little bit about, given the standard of care and the infection rates for that, like, what are the potential economics here with, you know, bonus or add-on payments for reducing the risk of complications? Is this something you're thinking about, you know, distributing in-house or sort of outsourcing?
Yeah. This one for us, this one we keep. This is... There's reasons why. With EluPro, we made a $1,000 accessory to a $15,000 pacemaker. We would have needed literally 900 reps to cover the pacemaker implantation market, the way that surgery is done, the need to be in every case. That's exactly the opposite in breast reconstruction. We're talking about will you make a $7,500-$9,500 implant that goes around a $1,000 or a matrix that goes around a $1,000 implant. It's a nice concentrated number of surgical centers that 600 of these centers do the bulk of reconstruction.
It's a nice targeted group for us. Lastly, we're not fixing a 3% infection rate. We're fixing a 15%-20% infection rate. Yes, add-on payments and the like, Pete Ligotti, who's our new Chief Commercial Officer, and the reimbursement team are working on that as part of the entire VAC process. VACs kind of dominate everything. You can't sell a product into a hospital until you get it through Value Analysis Committee. We got a pretty good value analysis story. We're gonna, without adding any new products, take away your number one complication, which is very expensive and which you have to pay for.
Makes sense. Maybe as the last question, just to sum things up, you know, for investors who are newer to the Elutia story, what would you highlight, you know, as the key reasons that now is a great time to, you know, get more engaged or start paying more attention and maybe make an investment in the company?
Yeah. You know, I hope from all of this you could sort of see the value proposition of the technology. I would expect people would dig in and really say, "Is that really true?" and look and please do. The problem is real. The market size is real. What we've already done sort of speaks for itself with regards to EluPro and the success of that product, the continued success of that product. Now Boston Scientific has it, selling it to Boston Scientific. Anyone that's been sort of around something like this knows that you... That doesn't just happen. It's because of the quality of the team. We have an exceptional team together.
Our Chief Scientific Officer, who's able to pull all of this stuff off with the Food and Drug Administration and makes it look easy, somebody I've worked with personally for 22 years. Our Chief Financial Officer, you know, has been with the company now and been with me for more than five years. This is not my first company. This is my second. I was very fortunate to be a Co-founder right out of college of a company called RTI, which went public, you know, five years later, $180 million in revenue, 600 employees. It exists today as a company called Evergen, another great company that continues.
I was fortunate enough to be CEO of Osiris Therapeutics for 10 years. Took that company public. You know, commercialized a bunch of best-in-class products. It gets eventually sold to Smith & Nephew for $660 million. Finding a team that's competent and passionate and committed, you know, that's a great thing and that's really why we're having the success we're having. It's a super cheap stock right now if you wanted to buy it. If you don't want to buy it, that's fine 'cause like I said we have cash and we know where we're going. Anyway, sooner or later, the world will catch on.
Glad to hear it. You know, with that, we are at time, so I'd like to thank you, Randy, for sharing the Elutia story with us and also thank everybody listening for spending time with us today.
Great. Thank you, Alex. Thanks, everybody. It was a lot of fun.