2026 H.C. Wainwright 28th Annual Global Investment Conference. My name is Dr. Katherine Degen, an associate research analyst at H.C. Wainwright. It's my pleasure to introduce Dr. Randy Mills, President and CEO of Elutia, a company pioneering drug-eluting biomatrix technologies. With that, I'll go ahead and hand it over to you.
Good morning, and thank you for joining us today. I'm Randy Mills, CEO of Elutia. We have a lot of great progress to share, so let's get right into it. Resist the temptation of doing a dramatic reading of our safe harbor statement, but for anyone looking for a little light reading, there it is. For those newer to the Elutia story, here's a version of what we are uniquely great at. We combine a biological matrix with sustained local delivery of powerful antibiotics directly at the surgical site. The objective is straightforward, create a surgical implant that can prevent bacterial colonization before it becomes an infection. Importantly, we have done this before. Our first generation drug-eluting product, EluPro, was the first FDA-cleared antibiotic-eluting BioEnvelope. We developed it, we cleared it, and we successfully commercialized it. Most importantly, the product worked clinically and physicians loved it.
We recently sold that business to Boston Scientific for $88 million. Why does this capability matter? Because surgical infection is the most costly healthcare-associated infection in the United States. There are 300,000 of them a year. Each one adds an average of 9.7 days to a hospital stay, and the annual cost to our healthcare system is a staggering $3.3 billion. Elutia was built to tackle this exact problem, and the story rests on three pillars. A validated platform. We developed it, cleared it, and commercialized this technology once already and sold that business for $88 million. A blockbuster product nearing approval. We are applying the same platform to the $1.5 billion breast cancer surgery market, where the unmet need is significantly greater than our first product, EluPro.
We are a fully funded company, a proven team, an operational GMP facility, and the capital secured to drive NXT-41x through clearance and full commercialization, and I'll come back to each of these. The U.S. market for breast cancer surgery is valued at $1.5 billion, and importantly, this is an established market. Surgeons already use biological matrices in these procedures today. We do not have to create a new category. We do not have to change surgeon behavior. We have to give them a better version of something they already use. At the same time, the clinical problem is substantial. Published data show postoperative infection rates of 15%-20% following mastectomy, and we have the proven solution. It's the same technology platform we have already commercialized, and that Boston Scientific paid $88 million for. The magnitude of the problem we are addressing is hard to ignore.
Again, these are published data, not Elutia estimates. About one in three women experiences a serious complication following reconstruction. 15%-20% experience a postoperative infection. Up to 21% result in loss of implant, and the average hospital cost of a reconstruction with an infection is more than $48,000. That is a patient problem, a hospital problem, and a surgeon problem, and nothing on the market today effectively addresses it. Why is the infection rate so high following mastectomy? Walk through it with me, because once you understand the pathophysiology, you will understand why the technology platform is so effective. It starts with the mastectomy. The oncologic breast surgeon must remove all of the breast tissue. That is the operation where the cancer is removed, and it is not optional.
Note that the breast tissue also carries the blood vessels, and removing it means removing blood vessels, which are then closed off. The result is compromised vasculature. The tissue that remains has lost its blood supply. Here is the key point of the entire story. Without adequate perfusion, systemic antibiotics cannot reach the surgical site. You can put all the antibiotic you want into the IV, it's not going to get there. There is no conduit anymore. On top of this, then comes surgery number two, which is the reconstruction. A plastic surgeon places an implant. That implant is a large foreign body, and it can provoke a foreign body response, which is a problem by itself.
The surgeon will then reinforce the soft tissue around the implant with a surgical mesh, after which they will place multiple surgical drains that communicate with the outside environment and remain in place for an average of 17 days. Every day those drains are in place, bacteria can enter and contaminate the wound. If you add it all up, you have a four to six hour surgery, multiple surgeons, a really large foreign body, external drains, and compromised blood supply. Together, these factors create an environment where the risk of infection is just really hard to escape. What if we flip the script? What if instead of trying to deliver them through the bloodstream, the antibiotics were instead delivered locally, directly into the breast? That's exactly what NXT-41x does. It's not a passive support, it's an active partner in recovery.
Powerful antibiotic coverage that is local, uniform, and sustained, delivered right where the surgeon needs it. It uses existing surgical techniques, so there's nothing new to learn in the operating room, and it's cost neutral for the hospital because it replaces the expensive non-antibiotic-eluting matrix that they're already using. That's the problem and an overview of our proven solution. What do surgeons think about it? For two years, we've been telling investors the demand for NXT-41x is out there. This summer, we quantified it. We hired an independent market research firm to run a blinded survey, 50 board-certified plastic and reconstructive surgeons averaging more than a decade in practice and about 140 reconstructions a year. 42% practice in academic hospitals, and the group splits about evenly, east and west of the Mississippi. These are exactly the surgeons who will decide whether NXT-41x ultimately gets adopted.
The first topic we explored was whether surgeons themselves see infection as a significant unresolved problem. The surgeons estimated postoperative infection rate at 17%. That is right in the middle of the published literature you saw nine slides ago. The more striking result is the big number. 86% of surgeons said the matrices they use today actually increase the risk of surgical site infection. I want to be precise about that. That is not Elutia making a comparative claim about another company's product. It is the surgeons themselves describing the products they currently use as an infection risk factor. The people closest to the problem are telling us the current standard of care is part of the problem. The next topic was whether NXT-41 as a concept made sense to them. 96% rated the combination of rifampin and minocycline effective at reducing surgical site infection.
64% described it as extremely effective, and not a single surgeon rated the combination as ineffective. 98% view NXT-41x as new and different from anything on the market today. Remember, there was no Elutia brand attached to any of this. They were reacting to the actual product specifications. The science was what sold the product, not a marketing campaign. The third question is the one that really commercially, would they use it? For high-risk patients, including diabetic patients and patients with high BMIs, 100%, all 50 surgeons said they would use NXT-41x. Those two groups alone represent about one out of every three reconstructions performed. 96% expressed an interest in incorporating NXT-41x into their general practice. Then there is the number on the right, which is the strongest signal in the entire study. 92% indicated a willingness to champion NXT-41x at their hospital's value analysis committee.
Surgeons avoid the value analysis committee the way the rest of us avoid the DMV. Nine out of 10 of them volunteering to walk in there on behalf of the product tells you how bad they want this product to exist. Now to the regulatory path, and let me take a moment here because we have two products with similar names on this slide. NXT-41 is the biological matrix by itself without the antibiotics. NXT-41x is that same matrix plus our sustained release antibiotic coating. Our strategy is to clear the matrix first. That gets the foundation of the product through FDA and de-risks the platform and really paves the way for the drug-eluting version, which is our ultimate goal. NXT-41 is already submitted and remains on track for what we believe will be a favorable clearance decision in the fourth quarter of this year.
Our dialogue with FDA has been collaborative and productive and is increasing our confidence in NXT-41 and the NXT-41x submission with an expected clearance for that product in the first half of 2027. One final reminder. What we are trying to do with NXT-41 and NXT-41x, we have already done successfully before. The same antibiotic combination, same regulatory pathway we used with EluPro, and we think that this experience really matters. Manufacturing readiness is advancing in parallel with the regulatory work. We completed installation and operational qualification of the automated drug-coating system, and that system is actually already producing NXT-41x. We deliberately chose to own the manufacturing process end to end. There is no contract manufacturer, no license, no single source supplier. The sustained release formulation is our proprietary formulation. We even invented the quality control assays that the FDA requires to meet release criteria.
This is an automated process, and it is designed for scale and consistency, and we believe will target greater than an 80% gross margin at scale. It's already up, and it's already running at our Gaithersburg facility. Now, let me show you why this market sets up so well commercially. At the top, you can see there's roughly 162,000 breast reconstruction procedures in the year, in the U.S. performed every year. That's sort of the full market. Those cases are not spread across 5,000 hospitals. They are concentrated. The top 50 centers alone represent 38,000 cases, and those cases translate into a revenue opportunity by themselves of more than $300 million. That market concentration facilitates efficient commercialization. We do not need hundreds of reps blanketing the country. We need to win the right buildings, and the gate to each one of those buildings is the value analysis committee.
We ran this exact play with EluPro, so we know how the VAC process works, and this time we're not going in alone. Remember, 92% of surgeons surveyed already told us they are willing to stand up in front of the Value Analysis Committee on our behalf. That is really what the soft launch in the second half of 2027 is all about. Planting those seeds with the VACS, building by building, so that when we move into full commercial launch in 2028, the doors are already opening. One more thing before we do a financial slide. Everything I've shown you today so far has really been about breast cancer surgery, but that's only the beginning of the story for NXT-41x. That same biology, compromised tissue that systemic antibiotics cannot reach, shows up all across tissue reconstruction.
High risk hernia repair, 120,000 cases a year with infection rates up to 21%. Contaminated abdominal wall reconstruction, where infection rates run 30%-42%, esophageal and pharyngeal repairs, stoma creation and closure. The same problem exists, roughly 300,000 additional procedures a year, and we plan to go into and expand into these markets that also have a need for the product. Now, let me close with the financial picture, and the headline here is simple: The plan is funded without an equity offering. We have secured up to $54 million in capital, and here's where it comes from. Our cash position at the end of the second quarter was $20 million. To that, we added a $15 million credit facility with Avenue Capital Group, with $10 million of which we've already received and another $5 million available following NXT-41x clearance.
We have completed a divestiture of SimpliDerm, which has now closed, and we have received the additional $8 million of the upfront payment and have up to $3 million more in tech transfer and commercial milestones. The full $8 million held in escrow from the sale of EluPro is scheduled to release in the fourth quarter. You add all of that up and you get $54 million, and the company has the cash to commercialize its technology. Now look at the catalyst column on the right, because the timing is really the point here. SimpliDerm is done. A potential cardiovascular transaction in the second half of the year is on the table. The escrow release is scheduled in the fourth quarter. NXT-41 clearance decision also in the fourth quarter. NXT-41x clearance decision in the first half of 2027.
Soft launch in the second half of 2027, and full commercial launch in 2028. Every one of these catalysts is covered by the capital we have already secured. Stepping back, the investment thesis case rests on three things. One, a validated platform. We have developed this technology, we have cleared it, and we have commercialized it once already, and we can do it again. Behind that, we have a blockbuster pipeline that is about to hit the market. A $1.5 billion market with 162,000 surgeries a year, and 15%-20% infection rate with clear evidence of surgeon demand for our product. And we are a fully resourced company with a proven team, a built-out GMP facility, and the cash to fund the company through commercial launch.
We have the demand, which is real, the capital, which is secured, and the regulatory path that is on track. Thank you very much, and we look forward to meeting with each of you. Good day.
Thank you, Randy, for that overview of Elutia's progress and the development of NXT-41 for breast reconstruction and beyond. As we close this session, I also want to thank all the speakers and participants attending this year's conference, and I hope you all enjoy the rest of the speakers and conference presentations.