Business Overview and History:
Elutia Inc. is a commercial-stage medical technology company that is revolutionizing the way implantable medical devices interact with the human body. The company has developed a unique portfolio of drug-eluting biomatrix products that aim to improve compatibility between implants and patients, reducing the risk of complications such as infection, device migration, and scarring.
Elutia was founded in 2015 with the mission of “humanizing medicine so that patients can thrive without compromise.” The company leverages its unique understanding of biologics combined with local drug delivery to improve the interaction between implanted medical devices and patients. Elutia has developed a portfolio of products using both human and porcine tissue that are designed to be as close to natural biological material as possible.
In 2015, the company established the Elutia Inc. 2015 Stock Option/Stock Issuance Plan, which provided for the granting of incentive and non-qualified stock options to employees, directors and consultants. On October 7, 2020, in connection with the company’s initial public offering, Elutia adopted the Elutia Inc. 2020 Incentive Award Plan.
The company’s initial focus was on the development of its CanGaroo bioenvelope product, a biologically-derived matrix designed to secure implanted cardiac and neurostimulation devices. In 2017, Elutia completed an asset purchase agreement with CorMatrix Cardiovascular, Inc. and acquired all CorMatrix commercial assets and related intellectual property. As part of this acquisition, Elutia assumed a long-term obligation to Ligand Pharmaceuticals Incorporated. This acquisition added products like ProxiCor and Tyke to its cardiovascular portfolio.
In June 2021, Elutia announced a voluntary recall of a single lot of its FiberCel Fiber Viable Bone Matrix product, after learning of post-surgical infections reported in several patients treated with the product. Additionally, in July 2023, the company announced a voluntary recall of a single lot of one of its viable bone matrix (VBM) products and the market withdrawal of all of its VBM products produced after a specified date, due to post-surgical tuberculosis infections in two patients treated with product from a single donor lot.
The company divested its Orthobiologics segment in November 2023, selling substantially all of the assets relating to that business to Berkeley Biologics, LLC. This transaction allowed Elutia to focus on its priority markets of Device Protection and Women’s Health, while retaining the liabilities arising out of the FiberCel and VBM matters.
The company’s breakthrough came in June 2024 with the FDA clearance of its EluPro antibiotic-eluting bioenvelope. EluPro combines Elutia’s proprietary biomatrix with the powerful antibiotics rifampin and minocycline, providing sustained antimicrobial protection to reduce the risk of post-operative infections. This landmark approval marked Elutia’s transition into the lucrative $600 million cardiac implantable electronic device (CIED) protection market, where it has already gained significant traction.
Elutia’s other key product is SimpliDerm, a human-derived acellular dermal matrix used in breast reconstruction and other soft tissue repair applications. SimpliDerm has seen steady growth, with revenues increasing 19% year-over-year in the third quarter of 2024 to $3.1 million.
Financials and Operational Metrics:
Financials:
In the third quarter of 2024, Elutia reported total net sales of $5.9 million, a slight decrease from $6.1 million in the prior-year period. However, this was driven by the company’s strategic transition from its legacy CanGaroo product to the newly launched EluPro, which now accounts for 25% of bioenvelope sales.
Gross margin, excluding intangible asset amortization, was 61% in Q3 2024, up slightly from 60% in the same quarter last year. The company’s device protection segment, which includes both EluPro and CanGaroo, achieved a strong gross margin of 68%, while the SimpliDerm product line maintained a 56% gross margin.
Operating expenses increased to $13.0 million in Q3 2024, compared to $10.2 million in the prior-year quarter. This was largely due to a rise in non-cash stock-based compensation. On an adjusted EBITDA basis, the company reported a loss of $2.9 million for the quarter, up from a $1.7 million loss in Q3 2023.
For the full fiscal year 2023, Elutia reported revenue of $24.75 million and a net loss of $37.66 million. Operating cash flow for 2023 was negative $21.76 million, and free cash flow was negative $22.11 million.
The company’s year-over-year revenue growth in Q3 2024 showed a slight decrease of 3.3% compared to Q3 2023. This decline was primarily driven by decreases in the Device Protection and Cardiovascular segments, partially offset by the 19% growth in the Women’s Health segment.
Liquidity:
Elutia ended the third quarter with a healthy cash balance of $25.7 million, bolstered by the $13.8 million in proceeds from the exercise of warrants earlier in the year. This strong liquidity position provides the company with the resources to continue investing in its commercial expansion and product development initiatives.
As of September 30, 2024, the company’s debt-to-equity ratio stood at -0.72. Elutia has a $25 million senior secured term loan facility with SWK Funding LLC, of which $22.64 million was outstanding at the end of Q3 2024. The facility also allows for a separate $8 million asset-based revolving loan facility, which has not been utilized. The company’s current ratio was 0.94, and its quick ratio was 0.85, indicating a tight but manageable liquidity position.
Commercial Execution and Growth Drivers:
Elutia’s successful launch of EluPro has been a key driver of the company’s recent performance. In the third quarter, the company achieved its first commercial implants of EluPro, with the product being utilized across all major CIED brands. Notably, EluPro has already captured 25% of Elutia’s total bioenvelope sales, demonstrating strong initial adoption.
To support the EluPro launch, Elutia has been strategically expanding its commercial footprint, adding key sales representatives in target markets. The company has also made significant progress in securing pricing and access through value analysis committees (VACs) and group purchasing organizations (GPOs), with 36 accounts now actively ordering EluPro just six weeks after the initial launch. Elutia has completed over 100 submissions to VAC accounts and added 12 direct sales representatives, 34 independent representatives, and 9 product consultants to support the commercial rollout.
In addition to the CIED market, Elutia sees opportunities to leverage its drug-eluting biomatrix technology in other high-risk device applications, such as neurostimulation. The company was pleasantly surprised to receive its first EluPro order for a neurostimulator implant, underscoring the product’s potential beyond its cardiac applications.
Product Segments:
Device Protection Segment:
The Device Protection segment focuses on products designed to secure implanted medical devices and mitigate complications such as migration and erosion. EluPro, the flagship product in this segment, is a unique bioenvelope with a biomatrix comprised of extracellular matrix that supports healthy wound healing and facilitates re-operative procedures by reducing scar formation and fibrosis. EluPro is embedded with the antibiotics rifampin and minocycline, which are gradually released into the surrounding tissue to provide antimicrobial protection.
EluPro was cleared for marketing by the FDA in June 2024 and is indicated for use with implantable electronic devices including cardiac and neurostimulator devices. It is the only drug-eluting biomatrix offering in the U.S. implantable electronic device protection market, which comprises approximately 600,000 procedures per year. Elutia also continues to market its first-generation CanGaroo bioenvelope product, which uses the same biomatrix but does not contain antibiotics.
In the nine months ended September 30, 2024, the Device Protection products generated revenue of $7.3 million. Elutia produces all of its Device Protection and Cardiovascular products at its manufacturing facility in Roswell, Georgia.
Women’s Health Segment:
In the Women’s Health segment, Elutia’s primary product is SimpliDerm, a novel biological matrix that leverages natural healing processes. SimpliDerm uses human acellular dermal matrix with heightened structural integrity and superior handling capabilities, which may mitigate inflammation and enhance tissue incorporation, leading to improved healing compared to other acellular dermal matrix products.
SimpliDerm is primarily used in breast reconstruction surgeries, of which approximately 150,000 are performed each year in the United States. It is sold through both independent sales agents and Elutia’s distributor, Tiger Aesthetics Medical. In the nine months ended September 30, 2024, SimpliDerm generated revenue of $9.2 million.
Following the sale of the Orthobiologics Business, SimpliDerm will be provided to Elutia through a long-term supply agreement with Berkeley Biologics, LLC. Elutia also intends to develop its own in-house capability for the production of SimpliDerm.
Cardiovascular Segment:
Elutia’s Cardiovascular segment includes the sale of specialized porcine small intestine submucosa, which is the biomatrix used in EluPro and CanGaroo, for use as an intracardiac and vascular patch as well as for pericardial reconstruction. The segment also includes Elutia’s TYKE product, designed for use in the neonatal patient population.
These cardiovascular products are sold in the United States through an exclusive distribution agreement with LeMaitre Vascular. This agreement also provided LeMaitre with an option to acquire the Cardiovascular product line through March 2026. During the nine months ended September 30, 2024, the Cardiovascular products generated revenue of $2.4 million.
Risks and Outlook:
While Elutia’s recent progress is encouraging, the company continues to face several key risks. The ongoing FiberCel and VBM litigation matters, related to past product recalls, remain a significant overhang, with the company recording a $24.3 million contingent liability on its balance sheet as of September 30, 2024.
Additionally, Elutia’s ability to achieve profitability has been hampered by its elevated operating expenses, which have been driven in part by non-cash stock-based compensation. The company’s management team will need to carefully balance investments in commercial expansion and product development with maintaining a disciplined cost structure.
Looking ahead, Elutia is focused on executing a successful full commercial launch of EluPro in the first quarter of 2025. The company’s growing pipeline of VAC approvals and GPO contracts, combined with the initial enthusiasm from physicians, suggests that EluPro could be a significant growth driver in the coming years. Elutia’s leadership team remains confident in the company’s ability to continue pioneering innovative solutions that address unmet needs in the medical device market.
Conclusion:
Elutia’s transition from a development-stage company to a commercial leader in the drug-eluting biomatrix space has been marked by several important milestones. The approval and initial adoption of EluPro, along with the steady performance of SimpliDerm, position Elutia for potential growth in the years ahead. However, the company must navigate the ongoing legal challenges and maintain disciplined cost management to achieve sustainable profitability. Investors will want to closely monitor Elutia’s commercial execution, product pipeline, and ability to manage its risks as the company continues its mission of “humanizing medicine” for patients in need.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.