This one's folded?
Yep.
Good morning. Now presenting Adam Levy, with NEXGEL.
Hi, everyone, and thank you for attending the presentation. At NEXGEL, our core technology is we are a hydrogel manufacturer. The facility for 20 years made very specific medical-grade hydrogels, for large companies like J&J and B. Braun, for very specific medical device applications. Today, we have three basic divisions in consumer products, contract manufacturing, as well as medical device. We have customers that have grown and include companies such as STADA, Cintas, AbbVie, Owens & Minor, and Medtronic, and that has fueled the company's growth over the last three years. When I got to the company, this company had never had a biz dev guy, had never made an outbound phone call, never had any salespeople. I saw the potential for three areas to grow.
First was medical device, which was we were already making components to other people's medical devices, and we believed that we could start to develop our own. We call those our aspirational programs, and we'll talk a little more about those. What I thought was the biggest opportunity, and probably still is, was custom and white label. That is manufacturing. Think about a company that has a successful product, a lotion, a cream, a gel, but they can never have a patch because all of the other cured hydrogels, contain chemicals that mean dermatology, beauty, and cosmetics. Large markets, drug delivery are closed to them, so we could offer an expansion or a line extension for those companies. We got a great response to that when we went out. Branded products, was further down on the list. Brands, are difficult to build, very risky.
That was not part of our initial strategy. However, that changed with the advent of the pandemic. A little bit about the facility. We have two facilities. One is in Langhorne, Pennsylvania, where the electron beam accelerator exists. There are only two companies in the world that make electron beam hydrogels, and have an accelerator like this. We have one. Medtronic, owns the other. Medtronic, does not compete with us. They do not do contract manufacturing, and in fact, they are one of our customers. They make one kind of gel. They never want to come offline, and they buy from us for some smaller gel runs that they need. We are an FDA ISO cGMP facility, again, located in Langhorne. We also have a converting and packaging facility, which is a joint venture, a subsidiary in Granbury, Texas, called CG Converting and Packaging.
We can make lots and lots of gel at our facility. I was always asked about our capacity. The one constraint we had was that we could not effectively package both on a cost basis and on a volume basis, larger orders. This was a perfect opportunity to join with an existing customer that is expert in packaging our gel, and we now run that facility down in Granbury. We recently completed a 12,000 sq ft, expansion with a 6,000 sq ft, clean room because we need that kind of capacity for the orders that we anticipate in the near future. Hydrogels, have a number of medical applications. These are some of the problems with regular acrylic adhesive. We've talked about this before, deterioration of skin integrity, tearing of the skin, particularly relevant to older patients, older people with crepey or fragile skin.
Anywhere that a medical device comes in long-term contact with the human skin is really where we shine. First, our current medical device pipeline. Again, these are aspirational programs. We did a proof of concept study using diclofenac and compared ourselves to Voltaren cream. Voltaren, requires four hours to get to full dose. We got there in two and a half hours. It has to be reapplied every four hours. We had a patch that could stay on for two days and deliver the medication with time release. We also are now working on an Apremilast patch. On my board of directors is Dr. Jerry Zeldis, who was the Chief Medical Officer, at Celgene, when they developed Apremilast. His idea was that if you're on one of the biologics or on Apremilast itself orally, you get very good results, usually 80-90%, clear up of your lesions.
What about the remaining stubborn lesions? We've started a human trial in Canada. We completed our first 10 patients with very promising results. We're going to be doing another 10 patients, to further get the protocols in order, and then we'll try to see if we can monetize that. This is not a program that we're going to take through the clinic. We're not a company set up for that. I am not a biotech CEO, but this is, and we believe there is enough potential value here that for the little bit of money that we're spending on pursuing some good data, it's definitely well worth it. Consumer health and beauty, and these are just our general products. We basically have three brands that dominate. MediGel, is the first brand. These are the MediGel products.
The first product that we released in 2020, during the pandemic were the HEXAGELS. We now have our flagship product, which is SilverSeal. We will talk a little bit more about SilverSeal, and the growth of that in future slides. MediGel, is sort of the health and wellness brand. We also have a deal with MediGel with STADA, and we will talk about that a little bit further in there as well. For the two brands, Kenkoderm, is a line of skin products, lotions, two soaps, a lotion, shampoo, and a conditioner for people with psoriasis, very gentle to the skin, 3%, salicylic acid, in the cream and the shampoo. That business has been a very nice acquisition for us.
We will be expanding Kenkoderm, in the third quarter of this year, releasing, basically doubling the amount of SKUs, we have as we create a line for people with eczema, which is actually an even larger market. Kenkoderm has been doing very, very well. In May of last year, we acquired a brand called Silly George. At the time, it was doing about $2 million a year in sales. We announced that to the street. We began to work on it, and it is now at a run rate of over $5 million. It continues to grow. We will be expanding that as well with seven new products, starting actually next month will be the first one. As we move into becoming a true beauty company, Silly George, is known for eyelashes. We will now be releasing lines including lip gloss, under eyes, utilizing our hydrogel technology.
We make an amazing under eye that we wouldn't want to market as a brand new beauty brand, but with the customer base we have at Silly George, and the mailing list we have, it's an excellent way for us to introduce our hydrogels into the beauty space. We look to take over kind of the whole face and offer a suite of solutions for our customers. On SilverSeal, we have tremendous data on SilverSeal. It has antimicrobial properties. It reduces scarring. It is a wound and burn product. We now have a partnership with Cintas. If you're not familiar, Cintas, has the third largest truck fleet in the United States. They supply businesses with all sorts of products and services. Cintas, has now put SilverSeal, in all of their kits. That revenue, began in Q4 of last year and continues.
We have already received our first reorders from Cintas. We think that this is a very important deal for us, not only for the revenue, which will be significant, but also for the brand recognition. You have got folks that are at work, hopefully not too often, but once in a while they will burn themselves or cut themselves. They go in the cabinet, they pull out the product. It is labeled as SilverSeal. They use it. They like it. The next time they are looking for something at home, there is a familiarity there that is very important to us as a brand. We also have an arrangement with STADA. STADA is the, I believe, fourth largest consumer healthcare company in Europe. We released our first product with them in August of last year.
From zero to a run rate, that is probably in the $700,000-$800,000 range, now and continues to grow. That is beating our projections, and they are very happy. We just signed an extension that we announced when we reported our K, that we have added an amendment to put out more products. STADA, is looking to us as a platform to release more and more products here in the U.S. We will have another enzyme for gluten sensitivity, that will be coming out in October. That is obviously a larger market than histamine sensitivity, as well as five or six more products in Q1 and Q2 of 2026. We also have an arrangement with AbbVie, to supply gel pads for their RESONIC cellulite treatment. They bought a company called Soliton, that had their RESONIC machine, for $550 million.
The machine is a cellulite treatment that is FDA cleared, and reduces the appearance of cellulite and has a long-term label on it, so for more than a year. The machine works with two of our gel pads. It's a razor-razor blade situation. You must use at least two of our pads with every treatment. As AbbVie, rolls that out, we think that will be a very significant source of revenue for us. The project has been delayed a couple of times by AbbVie, working on, nothing to do with us, working on their control panel, but we expect that once they get this machine out and launched, the numbers could be quite significant. We also currently are involved with a company doing an IRB study, for the reduction of carcinogenic plume during laser hair removal.
When you have laser hair removal, there is a plume of carcinogens that goes up into the air. OSHA, is now starting to regulate in many states that you must begin to try to figure out a way to suppress that plume. The most common way is using a vacuum, which is maybe at best 50-55% effective. What we do is we take our gel, we make a very, very clear gel for this particular study. They actually shoot the laser through the gel. The study results will be out probably in the next few weeks. They are just waiting for publication before we can announce it. The primary endpoint is the reduction of the plume. The other two endpoints are reduction in pain for the patient.
One thing that's amazing about any of these gels is that they completely reduce burn pain, and the mechanism of action is very simple. If you've ever burned your finger badly and you put it in a glass of water, the throbbing goes away, the pain goes away. Take it out of the glass of water and the water starts to evaporate, the throbbing returns. These products are between 94% and 95% water, so it's like leaving your finger in the jar the entire time the product is on you. The final endpoint of the study is greater efficacy. We believe that the data will show that you can actually get better efficacy from the laser hair treatment because you can use the lasers at a slightly higher power because you have the cooling pad that maintains skin temperature as well as reduces pain.
We've already gotten some commercial orders from this company as they're going out to market. We have them as a marketing partner for us. They have contacts with all the big laser companies that do this. We're pretty excited about the potential for this particular project. A little bit just in general about us as a company. We've gotten more than 100% growth for the last three years, year over year. This is driven by increases across the board. All of our consumer brands are increasing sales quarter over quarter in general. There's a little bit of seasonality to it, but in general, every year is stronger than the year before. We're seeing a great demand for the actual gel. I'm sure there'll be some questions about tariffs, and I'll get into that a little bit as to what that's doing.
It's a little bit of a double-edged sword for us. On the one hand, we do get some of the Silly George products, from China. As we think about the tariff situation there, at first, it really wasn't significant at even 34%. This is because in a prestige brand like Silly George, cost of goods, is probably no more than 16-17%. So if you add 30% to that, while it's not enjoyable, it's certainly manageable from a cost of goods standpoint. 145%, might be a different story. Because of the fluidity of the entire tariff situation, we're looking at possibly using our brand new clean room to maybe assemble here if the tariffs stay there. We have plenty of stock. We took in a lot of inventory right before the tariffs.
We have time to kind of wait and see how the dust settles, and then we'll create a strategy that we think will maintain all of our revenues. On the other side of the coin, we are seeing a huge increase in interest in our gels. Generally, our gels are great for wearable devices, anything that's a 510(k) product, where you have to have biocompatibility, dermatology, beauty, and cosmetics where the purity of the gel is really, really important. There are a lot of applications where cheaper Chinese and foreign manufactured UV gels, which is basically the same process, but in order to cross-link the water and polymer, they use UV light and chemical activators. What that does is it lowers the potential water content to 50% or below, and those chemical activators are invariably skin irritants. That doesn't matter if it's a very short-term use.
Think of electrostim, think of TENS electrodes. That business generally went almost entirely to cheaper gel manufacturers. All of a sudden now we're seeing a great interest in our gels because you might as well be able to have one label both for sensitive skin and for that. When you add these tariffs to it, our gels are now potentially the same price or cheaper than the UV gels. That's a great advantage for us being a U.S. manufacturer. We've seen a great increase. As of December 31, we had $1.8 million in cash. We've been working on lowering our burn every quarter. As our revenues grow, we are approaching EBITDA positive. We do have a considerable amount of depreciation and amortization expense, because of all the equipment associated with our business.
Real profitability, including amortization and depreciation, will come later, but EBITDA, is certainly something that is within our reach. As of March, we had 7.6 million shares. We have no debt. We are very debt-averse as a company. I'm a strong believer that a company that is not yet cash flow, positive should not carry any debt, so we don't have any. We continue to see growth. We expect the growth to continue, and we're very excited about the future. Do I have any questions? Yes. Our cash burn in Q4, EBITDA cash burn, was about $350,000-$400,000, and we're working on reducing that every quarter. It was as high, if you go back to second quarter of last year, it was $1.1 million, was the cash burn. As the company's growing, the cash burn is being reduced. Yes.
Yeah, it kind of depends on whether or not we tend to acquire things. If you look at last year, we did three raises. We did a raise after we bought Kenkoderm. We did a raise dfter we bought Silly George. When Silly George blew up, we did a raise to kind of handle that growth. As I said, we can get there without doing a raise, but we'll also have to look at opportunity. I'm not ruling it out. Yes. Okay, sorry. Yes.
I think I see a lot of margin numbers in the output 26.
Our margin number is a little bit tricky in the sense of because the two different product lines between the contract manufacturing side and the consumer products have very different structures in what you need.
Sometimes we'll put up a great, I think it was 47%, gross margin. in Q3 and Q4 because of Silly George. That's a little bit artificial because as I pointed out, our cost of goods is only 16%, on those products. Everything else is below the line, right? The real cost of those products is in your advertising, your marketing, and the teams that you need to do that. Those are all below the line items. It tends to skew it. The margin on the contract we think of as, and I'll give you the margins that we look at. On the contract manufacturing side at Langhorne for pure gel manufacturing, we want to be at about 40-50% margin.
Down in Texas, where we do the converting and packaging, we want to be between 35-45%, depending on the product, whether it's medical device or consumer. On the consumer products, we look at it more as contribution margin because it's so different. There, we want to be able to take, including our cost of advertising and marketing and everything associated with it, we want a contribution margin against fixed overhead of somewhere between 15-20%. 25%, would be nice, but we have to get to attain that. We kind of look at it as a blend. What'll happen to our margins? By the way, to offset some of this, we recently reclassified our Amazon fees, which are sales commission fees, from a below-the-line item.
We tried to push them up to above the line because the theory was that if you do not have any sales, you have no expense there. So we kind of treat it as a cost of goods just to try to stabilize that kind of discrepancy. It really is going to depend on which side grows faster. It is going to affect the margins. I hope that answered the question for you. That is a hard one to answer because we have not been through ups and downs in the economy, right? The consumer products have been out for about four years, and we really have not had a recession or anything serious like that. We do think that the medical device side, the contract manufacturing, because procedures do not go away in that sort of environment, would be very stable.
Beauty and cosmetics, certainly has some resiliency to it on the Silly George side. Band-Aids and bandages, which is pretty much what Medigel does, should be stable. I am not speaking from experience, right? I have been through recessions before in my previous companies, but not with these companies, and you just never know until it actually happens. I would kind of be lying to you if I told you I knew the whole story about that. Yes. Sure. AbbVie, we really did not project that much when I did my guidance for the year because AbbVie, was planning a soft launch. They have had continual delays with their console. They probably have another one now that will push them out for the hard launch another six months or so. I really cannot control that. Like I said, we have bi-weekly meetings, and they keep us up to date.
We do not have much in 2025 for them, a few hundred thousand dollars maybe in the projections. Cintas, is a significant source of revenue for us. We have some familiarity with the product because we used to make a product called Cool and Soothe, that went in many of their kits. Cool and Soothe, was basically our gel without the silver, and it was very popular, and they had a very steady reorder pattern. We made it for a third party. It was a much cheaper product, and I do not think people are going to burn themselves less. We are pretty confident that that is going to be a significant source of revenue. I do not know that I want to go into the exact projections of it because I might be jumping ahead of what I am allowed to talk about, but that will be a significant number.
STADA, will probably be that same $500,000-$700,000 run rate we're on now. We'll continue to grow. Remember, we only have one product right now. The real growth in STADA, is going to come. We're going to launch the second product in October or November. You're not really going to see 2025 sales. That'll really start in Q1 of 2026. The rest of the products they're giving us, the other five, will be coming out in Q1 and Q2 of next year. It's a little bit longer out. Yes.
I was curious how you would be ahead of the market with all these different brands because there's going to be so many different brands. I'm just wondering whether it's early or extremely early.
We do have some firms that we work with in terms of the marketing.
We do a lot of it internally. I'm a little bit of a statistical math geek freak, so I really enjoy the analysis because really that's where profit comes from in direct-to-consumer products, right? It's how you analyze the effectiveness of your advertising and keeping your target advertising. We try to stay below 35%, on Shopify, and we try to stay below 15%-20%, on Amazon. You're constantly tweaking, eliminating bad keywords, looking at all the data to create better and better marketing strategies. We do a lot of that in-house along with advertising agencies that we work with as well that actually buy the media for us.
Can I just kind of follow up on that?
Do you have a dedicated team for each of the products you're working on, or is it more a team overall that kind of does different products at a different time?
We have different teams for different platforms because the different platforms require different strategies. Basically, we'll work with the same team. If I find a guy, and I'm very thrilled right now with our Amazon ad buyer. If I find a guy that's good, I'll use him on everything on that platform because he clearly understands the platform and he understands how to get us the best value. The platforms are different. Amazon, has aggregated your audience for you, and they charge you a fee. All you have to do is get in front of that audience and pitch that you are the one the person should select. Meta, is entirely different.
Meta, you're going out looking for your audience, right? Casting a wide net. Meta was not very effective on a product like HistaSolve, that only has 3-4%, incidence in the general population, right? Because it's too wide of a net. TikTok's a whole nother animal. There it's about affiliates who talk about your product and putting that in front of you. Their algorithm is very good at finding people. They all have their nuances, but getting them all to work is what makes it go. Any other questions? Yes. No, the electron beam accelerators are common. They're used for a lot of things like vulcanizing rubber, and there's a lot of uses for them. The setup is a little different for hydrogel.
Essentially, the process is we mix the polymer, water, and whatever else we want to put in the gel in a big vat. We then have to let it aerate for a period of time, depending on the viscosity of the gel. The time varies. The gel is then extruded onto a liner where the scrim is then put in the middle of it in a top liner. It goes into the accelerator, and the energy generated by the accelerator causes the cross-linking of water and polymer without the need for chemical initiators. It literally in one second goes from a liquid to a solid as it passes through the beam chamber. They have no interest. They're too big a company. This market did not exist until we started creating it three or four years ago. They basically only want to make one gel.
They do not even want to make their own gel. They have a product that is a, I think I mentioned it, a cancer ablation device that was pretty popular in Japan and China. They just got FDA approval here, so maybe they will do a little more business with us. They are a small customer, $2,000-$300,000 a year. They do not want to make their own gel. They would rather farm it out to us because they do not want to come offline. Anybody else? Oh, yes, sorry.
Who is your current biggest competitor? I guess what is the number one differentiating factor that your gel has that essentially is a trillion dollar? How does it scale? How do you see itself competing?
The biggest differentiator is that there is nothing that really competes with us.
When you make a high water content gel like this that's biocompatible, you suddenly become the default choice. People always say, "Well, how'd you land a big company like AbbVie?" To be honest with you, we just had to not be stupid. Two weeks in, their team told us, "Well, we don't have a plan B. We need the frequency that pure water generates. You're the only one that makes solid pure water at this level." All we had to do was pass the inspections, be competent. We were going to get that. There are lots of applications that we're finding in body monitoring, in aerospace, believe it or not. Obviously, laser hair was a new one. We have folks coming to us all the time now as we're becoming better known with applications that, quite frankly, we never thought of.
Yeah, I mean, this is very early stage stuff. This is just somebody that it's not material. Someone just kind of came in and had the idea. Apparently, if you are lasering an airplane wing and you can keep the temperature of that metal even a few degrees cooler, it is very beneficial. Also, there are disinfecting applications where it traps all of the fumes that come up. Carcinogenic fume trapping, is going to be something that I think was going to go beyond laser hair for us. Again, very early stuff. We're done? Okay, I think that's all the time we have. Thank you, everybody.