Thank you. Thank y'all for joining me today. I am C. Randal Mills. I am the CEO of Elutia. It is my great honor to be here with you all. This is my favorite slide. I thought I'd read it. Not really. What I'd like to talk about is what we're doing at Elutia, the meaningful work that we're doing there. I've been involved in a number of pretty special things throughout my career, and I can honestly say that I think the impact that we're going to make at Elutia ranks up there with any of them. At Elutia, we really decided to focus and specialize on just one thing. We really believe strongly in focus, and that was this idea of getting great at combining antibiotic delivery with implantable biological matrices, and I'll talk more about that.
Our first attempt at this was a product called EluPro, and it's there on the left. What EluPro did was, it was an envelope that went around the outside of implantable pacemakers. When a patient was getting a pacemaker, that envelope by itself would stabilize the pacemaker in place. What we did to that was we added the powerful antibiotics rifampin and minocycline, and we added them in a way where they would come off that, and they would deliver into that surgical site over the next couple of weeks. What that essentially did was completely prevent infection. We launched that product January of last year. It was a tremendous commercial success. Boston Scientific came in and bought it by October for $88 million.
What that's enabled us to do is go on and repeat the same cycle, same kind of antibiotics, slightly different matrix, a little bit more sophisticated coating technology, take this into breast reconstruction, and that's really what I'll be talking about today. Why should you care about whether or not we can put antibiotics on biological matrices? Surgical site infection is the number one hospital-acquired infection in the U.S., 300,000 cases a year. The average incidence is about 2% to 5%. That's in fact exactly what we saw in pacemakers. Before we introduced EluPro, the likelihood that you would get an infection having your pacemaker implanted was 3%. That has a tremendous cost associated with it.
$10 billion in the U.S. alone, and that cost comes from taking care of the patient after they've developed this infection. It adds almost another 10 days to your length of hospital stay. Here's the thing that's really kind of important to keep in mind. That is non-reimbursable, right? All of these procedures are all paid for under DRGs. The hospital get is one payment to whether it's implant a breast implant or implant a pacemaker. They get one payment for that. If the patient develops a serious infection, and they have to come back to the operating room, and they have to have a second surgery and a third surgery, and they have to spend another 9.7 days in the hospital, the hospital eats that cost.
Not only do they lose the margin that they would get on that, they also lose the revenue 'cause there's gonna be a patient taking up their operating room time that they're not gonna be getting any money for. It's a problem I think that we can all sort of gather around that's real, and it's big, and it's worth fixing. Just a little bit to highlight, orient you why you might be interested in Elutia. Three things. One is our technology platform isn't new. We've done this. We developed the first FDA-cleared drug-eluting biologic envelope, again, for pacemakers. We launched it commercially. It had great success. Clinically, it had great success. Boston Scientific came in and bought it for $88 million. We're now applying that same technology to breast reconstruction.
The difference between pacemakers and breast reconstruction, pacemakers was about a $300 million market. Breast reconstruction is a $1.5 billion market. The postoperative infection rate in pacemakers was 3%, in breast reconstruction it's 15% to 20%. It is unacceptable. It's unacceptably high, we have technology that we've already proven can address it. The last thing is, it's a little unusual for this conference, I get that, we're fully resourced, right? We already have the team in place that knows how to do this. We have a beautiful GMP facility that's already manufacturing the product, we have a balance sheet with 36 and a half billion dollars on it and no debt. We have the money we need to be able to get from here to there and make all this happen.
This is why we think breast reconstruction is such a transformational opportunity for us. There's three things. One is it's an enormous market, right? Big market, $1.5 billion . Two, it's a big market that still has an enormous problem. 15%-20% of patients develop serious infections following breast reconstruction. Third, we have a proven solution for it. When you put all of that together, that's a pretty cool opportunity for us. Just a little bit about the market and what makes up that $1.5 billion market. It's kind of interesting because it's an existing market. Each year, there's about 320,000 new cases of breast cancer diagnosed in the U.S.
Woman develops breast cancer. Very often they need to have a mastectomy, and that mastectomy is what leads to the reconstruction procedure. When I use the term breast reconstruction, just to be clear, I'm not talking about aesthetics. I'm talking about the use in patients with breast cancer that have had a mastectomy and need to have their breast reconstructed. 162,000 breast reconstruction surgeries in the United States, 2/3 of which are bilateral, okay? A biological mesh that's used to hold this implant in place, similar to the envelope that we used for the pacemaker. That's already standard of care in 85% of breast reconstructions, right? It's not cheap. This has an ASP of about $8,500 per breast. This is an established $1.5 billion market.
The only problem is the surgical mesh that they're using, the biological mesh that they're using, is just inert. It doesn't cause the problem, but it doesn't solve the problem. The problem is really big. As I said, one in three patients will develop a serious complication from breast reconstruction. 15%-20% will be a direct result of infection. 21% implant loss, which means the whole thing's gotta start again. It is expensive. $48,000 in added cost to the hospital that they are not getting paid for, 'cause Medicare doesn't pay you any more if you have a surgical site infection that results from the primary surgery. I get asked a lot, "How could that be?
How could you possibly have a 15%-20% infection rate in breast reconstruction? It's not trauma. You know, it doesn't involve the bowel, which is obviously associated with infection. I think it's worth pointing out, it's not bad patients, it's not bad surgeons. It's actually the anatomy and physiology of the site, and it starts with the mastectomy. Again, when I talk about breast reconstruction, the first thing that has to happen is the woman's been diagnosed with breast cancer, and she needs to have a mastectomy. When you have a mastectomy, you need to remove the entirety of the breast tissue. That sounds fairly obvious, but if you leave any breast tissue behind, you leave the possibility to, once again, redevelop breast cancer. It all has to come out.
As part of that, you can see in the diagram, blood vessels run from the posterior side of the chest wall all the way out to the anterior side of the breast. That's how the front side of the breast gets its blood supply. When you do a mastectomy, all of that comes out, and all of the blood supply for the front side of the breast comes out. All of those different blood vessels have to get ligated off. The consequence of that is, what do we normally do in surgery? After surgery, you get a big bolus of antibiotics, or you're sent home with oral antibiotics. Those go all through your bloodstream, and they end up at the surgical site where you need it.
Not in breast reconstruction, because once you've removed those blood vessels, there's no way for those systemic antibiotics to actually reach the front side of the breast. This has been shown again and again and again in the literature. There is literally no difference in the rates of infections whether somebody's given really high doses of antibiotics or whether they're given no antibiotics after breast reconstruction. The only difference that shows up is the organisms, when somebody's treated with antibiotics systemically, the organisms that they get infected with tend to be much more resistant. That's the mastectomy, right? Actually what we get involved with is in the reconstruction. This is a second surgery that's all taking place in the same sort of continuum.
Woman comes into the operating room, one surgeon takes out the breast tissue, a second surgeon, a plastic surgeon, and their surgical team comes in, they implant this big, giant implant into the breast cavity there. This is, again, standard of care. They use a non-drug-eluting biologic envelope over the top of it, right? That's basically to hold it down and to stabilize it in place. If you were trying to create the perfect environment for a postoperative infection, this would actually be it, right? It's a very long surgery, four to six hours. There's multiple surgeons and multiple surgical teams. You put this really large foreign body in there. We didn't even talk about it. There are those drains that go in, so two drains per breast are put in place.
They stay in place for 17 days. These are big ports that basically go to the outside world. You have no meaningful blood supply to the front, to the front side of the breast. Antibiotics can't get there. Frankly, your own immune system can't even effectively get there. You've created this breeding ground for potential infection. If you look at it's kind of amazing the infection rate is only 15%-20%. We ask the question: What if you put the antibiotics directly into the breast vault along with this matrix? That's what we did, and that's what this technology we developed on the right side, right, is called 41X. It's basically the same type of biological matrix that they currently use on the left.
If you pull back and you look at the underside of it, the side that actually faces the implant, we've coated it with the powerful antibiotics rifampin and minocycline. This has some pretty significant advantages. One is It's no difference in practice for the surgeon, right? The surgeon is doing what they normally do in these procedures, nothing new. They don't have to learn a new technology or adapt in any way. Secondly, for the hospital, it's cost neutral because we're not adding a product. We're actually just replacing a legacy product that doesn't elute antibiotics that leads to really dismal outcomes. Third, it actually provides this really powerful antibiotic coverage that's sustained not only after the local procedure, but actually for about four weeks after the surgery. Why is that important?
Well, those big drains that I mentioned, those big drains, they stay in there on average for 17 days. As long as you have a drain that's porting to the outside world, you have the opportunity for an ascending infection to come up and colonize that breast implant. This is our solution, the drug-eluting biomatrix for surgery's number one problem. This is sort of how we've gotten here and give you a timeline of where we're going. As I said, we started with pacemakers, and the first thing we did was we made a non-drug-eluting matrix for the pacemaker, just an envelope that the surgeon could implant, and it would stabilize that pacemaker. We that was the product we called CanGaroo.
We got that product through FDA, and that was a fairly simple thing to do, we launched it. After that, we started working on the drug-eluting version, and that was EluPro, as I mentioned. We launched EluPro in the first quarter of last year, as I said, that had a tremendous commercial launch from a success standpoint, it was acquired by Boston Scientific for $88 million in the fourth quarter. We're doing the same thing, right? We know this works clinically, we know this works from a regulatory standpoint.
If you've spent as long in med tech and biotech as I had, you know that when you have something that works in both of those two arenas simultaneously, you don't mess with it. We've really done everything we can to largely keep the process the same. The first thing we're doing is we're getting approval for the base underlying matrix. That's already been submitted to FDA. We expect approval for that base matrix in the fourth quarter of this year. We call the base matrix NXT-41x. These are obviously development names, not commercial names. The version with the antibiotic you can see on the right side of the picture. That's NXT-41x. When we add the x designation to it, that's referring to, like, drug Rx prescription.
The x designation means that it has the drugs rifampin and minocycline. We expect approval of that, and that's the important one, in the first half of 2020. About a year from now. This is all happening pretty quick, so it's pretty neat. As I mentioned, we have a beautiful GMP manufacturing facility in Gaithersburg, Maryland. It is up and running. It makes all the product that we use in clinical testing and different things that we do with FDA. It is an automated robotic process, and that enables us to get some really significant efficiencies out of this.
When we look at commercializing this product and bringing it out to market, we're looking at a gross margin in excess of 80%, and that's still with a cost-neutral solution to the hospitals, right? The hospital's not going to have to. One of the big things when you commercialize one of these products is going through something called the Value Analysis Committee or the VAC. You can kind of think of them as, like, gatekeepers to the hospital. A surgeon might want a product, but if you can't get it through the Value Analysis Committee, it's not on formulary at the hospital, and so you can't order it or buy it. From an adoption standpoint, we like the idea of keeping it cost neutral.
They're already using a really expensive biologic matrix in that surgery. We're just gonna change that inert non-drug-eluting biologic matrix out for one that solves this really big postoperative infection rate. To be able to do so at margins in excess of 80%, is pretty good. Our commercial confidence in this is growing well, there's two reasons for that. One is the market is fantastic. The second reason is we just did it worked really well. Again, it's one of those things, if it works, right, don't change too much on it. This is a really big market, as I said. The other thing about this market is not only is it really big, it's also really, really concentrated.
A $1.5 billion in the current U.S. breast reconstruction, driven by 168,000 breast reconstructions at 1,800 hospitals. 75% of those surgeries are actually done at just 585 hospitals. The top 50 of those hospitals, mostly the academic centers, do 38,000 cases a year by themselves. If you think about just looking at that bottom piece of it, as a market, that bottom piece, those 50 centers, make up about a $300 million market opportunity. As I said, the rate-limiting factor for the adoption of any new medical device or product that you bring to market is your ability to actually have that product available in the hospital through the Value Analysis Committee or the VAC.
I thought it'd be interesting to show. This is the actual Value Analysis Committee adoption curve that we had with EluPro. This is, you know, this is going through last year. If you wanna know where 50 is on this map, our third month in, we were already through 50 Value Analysis Committees and on shelf. We were at 172 at the end of a one-year period. This is a nice, really concentrated market for us, enables us to go after it not with some big elaborate sort of crazy spending money like drunken sailor sales force, but instead actually a really small focus team.
For example, what we did with the EluPro, we did that with 12 direct and 20 1099 reps, was able to do all that. We brought that to an $18 million run rate in nine months. From a Catalyst standpoint, what's coming up for us, we actually have two, I didn't talk about these, but we have two non-core commercial products that we have. They don't elute any drugs, so they don't sort of fit our mission of drug-eluting technologies. We're gonna be divesting those. We think those will happen in the next couple of months you know, we could add, I don't know, another $10 -20 million to our already pretty solid balance sheet with those.
Behind that, NXT-41, the base matrix clearance, we anticipate in the 4th quarter of this year. Immediately following that will be the submission of NXT-41X, that's the drug-eluting one. Around this time next year we would expect clearance of 41X, that's a really important milestone for us obviously. Lastly, in the second half of next year we'll be starting our targeted launch of the product. I'll just end here and take questions. You know, our investment summary really centers around these key platforms. One is this is not new technology for us. We've already developed it, we've already gotten it through FDA, we've already shown when you do that it's a commercial success. Hospitals love it and physicians love it, and it's effective.
It actually does meaningfully take care of postoperative infections. We're using that same technology to go after breast reconstruction, billion and a half dollar market with 162,000 surgeries. That is a big market with a big problem. Whether or not you're the surgeon, you're the patient, or you're the hospital, you can agree that that 15%-20% postoperative infection rate is something that everyone would love to see solved. Lastly, we're fully resourced. We have a great team. I've been with the team a long time, some of them over 20 years. We have a great manufacturing facility. We have $36.5 million on the balance sheet with no debt, which is plenty of money for us to get the product from here through launch. With that, I'm happy to take any questions. Yeah.
I have a question. Two. How do you keep the market between what we know, the augmentation market versus your clinical market of breast augments?
Yeah.
I mean, it's I think the average individual is confused.
Right
As to cosmetic versus need.
Yeah. Right.
One is qualified and one's not?
No, it's one has a much bigger need than the other, right? If you think about this from a clinical need standpoint, right? If you think about what sets up the pathology that we see in breast reconstruction, it's the mastectomy that causes the problem, right? It's the removal of the blood supply. When you're doing augmentation, it's not that you couldn't use NXT-41x in that, you certainly could, you just usually wouldn't need to because they're not taking that blood supply out. They're only adding an implant to it. The postoperative infection rates in augmentation actually look much more normal the way you would expect them to. That's the real difference.
Second question. Does Boston Scientific have a piece of the action here?
No, they're, I mean, they have a fantastic product. It is EluPro is still crushing it for them. It's a great product. That's all they got.
You signed off?
They're, they got one product. We did not sell them the rest.
Okay. Is that how you capitalize this effort?
Yeah, exactly. Another question? Yeah.
What is your biggest market right now that you have to tap into?
You know, we look at the markets in terms of the things that we can add the greatest value to, right? For us, that's breast reconstruction, and the reason it's breast reconstruction is because of how significant the need is. It also happens to be pretty big in terms of size, but the physiology of the mastectomy then rolling into the reconstruction just creates a situation where local antibiotic delivery is particularly effective. We've worked with a number of researchers at different academic institutions across the U.S., and the evidence is really clear. When you put antibiotics into the breast cavity following breast reconstruction, postoperative infection rates plummet. They don't go to zero because there's a blood flow issue, but they drop between 65%-85%.
It's a really effective mechanism. Could you use this in orthopedic trauma where you have open wounds? Absolutely. Could you use it in ventral hernias or sometimes contaminated abdominal wounds? Absolutely. We will get to all of those things, but as I said in the beginning, we are a very, very focused company, and we know if we do this and we do this well and we do this with the patient in mind and we do this with the blessing of the FDA, we win.
This is only in the U.S. market. You're not looking at Latin America.
We're looking at other countries. I'm only talking about U.S. market right here. Yeah. I have six seconds left, and I know Kate's gonna hold me to that. Thank you, guys. I'll be around though.
Thank you.