Elutia - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 revenue was $5.47M, down 7% year-over-year; BioEnvelope sales rose 18% to $2.70M on the pilot launch of EluPro, while SimpliDerm fell 23% to $2.27M and Cardiovascular declined 20% to $0.50M. GAAP gross margin improved to 42.5% (from 36.2% YoY); adjusted gross margin rose to 58.1% (from 50.6% YoY).
• Net loss from continuing operations narrowed to $(9.06)M (vs. $(15.22)M YoY) and adjusted EBITDA loss improved to $(3.75)M (vs. $(4.45)M YoY), reflecting mix and non-GAAP adjustments.
• EluPro pilot generated strong traction: ~100 actively ordering accounts, 67 VAC approvals, EluPro accounting for ~30% of BioEnvelope sales, and same-center sales +65% after EluPro adoption; GPOs include Premier and S3P.
• Liquidity bolstered post-quarter by ~$15M gross proceeds via a registered direct offering (Feb 4, 2025), a catalyst alongside anticipated Boston Scientific distribution rollout and continued VAC/GPO additions.

What Went Well and What Went Wrong

What Went Well

• Strong EluPro uptake and commercial readiness: ~100 actively ordering accounts, 67 VAC approvals; EluPro already ~30% of BioEnvelope sales in Q4, with same-center sales +65% post-switch. “We are having a lot of success... obtaining hospital and GPO approvals”.
• Margin progress: GAAP gross margin up to 42.5% (from 36.2% YoY) and adjusted gross margin to 58.1% (from 50.6% YoY) on mix and amortization-excluded non-GAAP metrics. CFO emphasized improved device protection margins (60%) and SimpliDerm at 55% in Q4.
• Distribution leverage: planned initiation of Boston Scientific’s ~900 rep network (“Shortly”), expected to accelerate access beyond Elutia’s direct/1099 coverage.

What Went Wrong

• SimpliDerm softness: Q4 net sales fell 23% to $2.27M amid distributor transition (Sientra bankruptcy and integration at Tiger Aesthetics), with management working through “growing pains” and building proprietary distribution.
• Cardiovascular decline: Q4 Cardiovascular sales decreased 20% to $0.50M as LeMaitre’s transition continues; annual Cardiovascular down 42% to $2.92M.
• Cash usage elevated by litigation settlements; management highlighted resolving trial-risk 2025 cases and reducing outstanding case count, though forecasting remains difficult.

Transcript

Operator (participant)

I would now like to hand the conference call over to David Carey, Finn Partners. Please go ahead.

David Kerry (Head of Investor Relations)

Thank you, Operator, and thank you all for participating in today's call. Earlier today, Elutia released financial results for the quarter and full year ended December 31, 2024. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws, which are pursuant to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that do not relate to matters of historical facts or relate to expectations or predictions of future events, results, or performance are forward-looking statements. Our forward-looking statements, including without limitation, those relating to our operating trends and future financial performance, are based upon our current estimates and various assumptions.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our public filings with the SEC, including Elutia's annual report on Form 10-K for the year ended December 31, 2024, to be filed with the SEC, accessible on the SEC's website at www.sec.gov. Such factors may be updated from time to time in Elutia's other filings with the SEC. The conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 6, 2025.

Elutia disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. Also, during this presentation, we refer to gross margin excluding intangible asset amortization, which is a non-GAAP financial measure. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure is available in the company's financial results release for the fourth quarter ended December 31, 2024, which is accessible on the SEC's website and posted on the investor page of the Elutia website at www.elutia.com. With that, I will turn the call over to Elutia CEO Randy Mills.

C. Randal Mills (CEO)

Thank you, David. Good afternoon. Welcome, one and all, wherever you might be joining us from today. Since we pre-announced so much of this, I'll do my best to keep my remarks short and brief. Like the preacher said, once I get started, I often get too lazy to stop. We are really on a tear here at Elutia. Our mission, humanizing medicine so that patients can thrive without compromise. We do that by pioneering the drug-eluting biomatrix. We're able to take really complex, highly engineered biological matrices and couple that with the power of active pharmaceutical agents to come up with products that we think offer really significant and unique value propositions to some of the most challenging procedures that exist in medicine.

We're a commercial-stage company, and we have two platforms that we're growing off of: EluPro, which is our flagship product, our flagship drug-eluting biologic for pacemakers and internal defibrillators and neurostimulators. Behind that, we have our emerging SimpliDerm product that's often used in breast reconstruction. We're a company with a lot of focus and a lot of discipline. Even though we have a technology that can be broadly used across a number of different platforms, we have a very focused strategy for growth. It goes like this: one, prove out the commercial value of our drug-eluting biologics technology on our EluPro product platform. Two, drive continued growth with our SimpliDerm product line.

Three, really explode the value of this technology by taking our drug-eluting biologics and adding it to other product lines, including our Simplerderm product line specifically for use in breast reconstruction and other surgical repairs. That is the high-level strategy for the company. Today, I'm going to spend really all of my time focusing on EluPro and the amazing work that we're doing there because that is really a tremendous value driver for the company. Launching EluPro, it's going on right now. We are now FDA-cleared for EluPro to be used in cardiac implantable electronic devices as well as neurostimulators. While it took a while to get here, we've got a real winner on our hands, as I think I hope I'll be able to communicate to you through these upcoming slides.

A little bit about the market dynamics that we have underlying this field of using EluPro to protect a pacemaker that's getting implanted into somebody. Each year, there's about 600,000 pacemakers and internal defibrillators that are placed in the United States. Up until now, Medtronic had the only antibiotic-eluting envelope that's been available to electrophysiologists for use. It's TYRX, a synthetically-based antibiotic-eluting envelope that does about $200 million a year. Like I said, that was up until now. Medtronic, from a market dynamic standpoint, they have about 40% of the pacemaker market. That means they're in about 40% of pacemaker cases. They had actually a really nice platform in which to introduce TYRX. They've done a nice job creating the market for device protection and this concept of an antibiotic-eluting envelope going around a pacemaker.

That leaves 60% of the market, Boston Scientific, Abbott, and Biotronik, that do not have an antibiotic-eluting envelope and that really do not like the idea of having a Medtronic TYRX envelope going around their pacemakers. This is not something that happens sort of as a one-off. We estimate now that there is about $85 million a year of TYRX that goes around pacemakers of either Boston Scientific or Abbott. I will just share with you, you know, when I say things like, you know, a rep, just the last thing they want to see is a piece of TYRX around one of their pacemakers. I will share with you, this is an actual quote I got from a rep. He came up and said, "I do not want TYRX on my cans. It is like ketchup on turkey. It just does not go." I could not agree more.

We don't want TYRX on their cans either. Now we actually have a product that we can offer to them that we think isn't just as good as TYRX, but is actually a much, much better product. Let me sort of explain why. We have done this marketing survey in the past. It's at 88% basically of TYRX users that were polled said they would switch some or all of their business over to EluPro once it was released. Now that we're out in the field, right, we're actually getting to engage with these electrophysiologists on a day-to-day basis with an antibiotic envelope and really with a different offering and a different approach to delivering the same powerful antibiotics, rifampin and minocycline, but in a completely different envelope that's not a synthetic base, but instead it's a natural biologic base that fully conforms to the can.

We actually get to understand why they're so interested in a different solution, where this 88% comes from. These are actual direct quotes from electrophysiologists. They talk about this surface of TYRX being a very rough surface. It's so rough, in fact, that it doesn't slide easily into the pocket. Imagine you're making an incision into a patient. You take your envelope, you put it, or you take your pacemaker, you put it inside an envelope, and then you're trying to put that into this incision, but it's got this really rough texture. It doesn't slide easily into the pocket. One of the quotes that really sort of stuck out to me was like, "It reminds me of the no-slip coating you sometimes see on garage floors." You know what? We think we can do better than that.

We think that patients should be able to have access to an antibiotic envelope that delivers these powerful antibiotics that protects them from infection, but it does it in a way that enables them to thrive without compromise. That is what we do at Elutia. We are humanizing medicine so that patients can thrive without compromise. ELUPRO, we think, is a really great example of doing that. In the fourth quarter, which I guess technically we're reporting on now, in the fourth quarter, that was our initial pilot launch of ELUPRO. We had just received clearance from FDA, and we needed to basically crawl before we walk, before we run. That is what our pilot launch was about in the fourth quarter. We had three main goals that we wanted to demonstrate in the fourth quarter pilot launch. One, we wanted to demonstrate operational excellence.

Can we make and ship and distribute this product? Right? Sounds simple and like blocking and tackling, but if you can't do that, you can't win the game. Second, we needed to obtain hospital and GPO approvals. You can't sell a product inside a hospital if you can't get through the value analysis committees, and you can't get through the contracting organizations that make it available to the physicians to use. Third, we wanted to drive clinical uptake of the product. Can you actually turn it into sales? Will the physicians use the product? And not just once, but will they use the product over and over again? We are really thrilled. As I think you will see, our pilot launch exceeded all of our expectations across all three of these. I want to thank the team for doing such an exceptional job with this.

In the background of this, and I know I don't talk much about it, but we have a lot of ongoing business development activity, and we are engaged in strategic discussions right now with multiple partners. In time, we will have more to say about those. Right now, we don't. I hope you understand. Okay. Let's dig into what we do talk about and what is so important is that we demonstrate the value of ELUPRO. The first thing we needed to do is demonstrate operational excellence. Now, fortunately, we had a bit of a head start here. We're manufacturing ELUPRO in the same facility that we've been manufacturing our base Kangaroo product since 2013. We had a good head start there with that team in place.

That's a facility that has a capacity to do about $140 million of EluPro sales without needing much in the way of additional configuration or expansion. We've got a nice base facility to grow off of. We're also scaling up and growing into what ultimately we believe we will get to, which is a gross margin north of 70% with this product. Super important was that we completed our FDA site inspection of this facility with no deficiencies noted and were able to commence commercial production and did that in full compliance with the regulatory standards. We're really proud of the organization down there for not just running an operationally efficient organization, but one that puts the quality of product above everything else. Okay.

Moving forward from an operational excellence standpoint, we are in a situation of demand where we are needing to significantly increase our production capacity earlier than we had originally anticipated. One of the ways that we're going to be doing this with specificities, we're going to be adding to the work that we bring in-house the ability to manufacture the actual drug-eluting disc technology itself. That will actually help us not just lower our cost of goods fairly significantly, but it will also increase our overall capacity, which it is every day it becomes more and more apparent that we need that in order to meet customer demand. We're also increasing our testing lab capacity.

This actually has to do with reducing cycle time, again, all in service of making sure we can get the product manufactured within perfect quality standards and then hit service level so all of our sites and all of our physicians have the product available to them when they need it. Okay. Moving on now to obtaining hospital and GPO approvals. We had a goal in, just to give you an idea of this, we had a goal in the fourth quarter of 25 VACs. We wanted to be able to get through 25 VACs and on contract. We actually ended the quarter with 67 up and running, about 15 new approvals a month. The reason we're having such significant success getting through the VAC process right now has really been driven by two separate things. One of them we actually expected, and that was physician support.

We have a lot of physicians out there, right? 88% of TYRX users are saying, "Hey, I'd like to be using EluPro." It needs to get through the VAC doc in order to be able to have this product on the shelf. Tell me what I need to do. Who do I need to talk to? We've been getting a lot of support navigating the product through the VAC process, and that's been helpful. The other thing, and we saw this both with the VACs as well as with the GPOs, is that the hospitals and the GPOs really like the idea of having EluPro on contract so that they have an alternative to TYRX. Purely, they just don't like having a sole source for any product. That's really been gratifying, and that's frankly been helpful.

It's been a bit of a tailwind in this whole process. As we look today, not just updating for the quarter, but getting sort of real-time up to speed, we're at about 100 centers that aren't just through VACs because we don't count that. That's too easy. They actually have to get through the Value Analysis Committee and actively be ordering the product. We have about 100 centers that are already through that that are actively ordering the process. We are also through four GPOs, including Premier and S3P. We have others, and we have others coming in that. We expect that our conference call coming up for the first quarter, we'll be able to have several new announcements about that. All that to say, we are having a lot of success on this second goal, which was obtaining hospital and GPO approvals.

The team really knocked the cover off the ball on this one, and we're super happy about it. None of that would matter if the physicians didn't trust the product, if the physicians didn't think it was the best thing for their patients, and there wasn't the corresponding clinical uptake with it. We've been seeing a tremendous amount of success here, expanding our ELUPRO nation. There's a lot of pride in putting ELUPRO on. Our team's obviously very excited about it. Our physician partners in this have been also very excited. The operating room teams come in and say, "Hey, did we get our ELUPRO picture? We want our ELUPRO picture to show that we're the first." The one in the middle there is a really gratifying picture. That's actually the first usage of ELUPRO in a pediatric patient.

If you think about that, there could be no more meaningful, higher value, more precious life than that of a child. The group down at Joe DiMaggio, entrusting their patients, their pediatric patients with EluPro, was really a super meaningful event for us as a team. As I said before, we're now being used not just with Abbott and Boston Scientific and Biotronik, but actually across all of the major cardiac implantable electrical devices. Yes, even Medtronic pacemakers are going in with EluPro around it. We're happy to do that. We think, obviously, it's the best thing for the patients. We're also being used now in neurostimulator device protection as well. That's not a market that we're actually doing a lot of active outreach in yet. We're trying to stay focused in the cardiac space, but we're actually getting a lot of pull into that space.

That is gratifying as well. When we go and we look at the actual numbers here, we're seeing this strong adoption. In the fourth quarter, our bio-envelope sales, right? This includes Kangaroo as well as EluPro, up 18% for the quarter. That had been stagnant actually for now a number of years. That is a pretty significant uptick for us just in that quarter. You think we probably did not have for most of that quarter, we did not have that many sites activated. That was a pretty significant uptick. EluPro during the quarter accounted for about 30% of bio-envelope sales. That is going from zero to already accounting for about 35%. What we thought was really an important and interesting statistic. Obviously, we know the accounts that we have sold Kangaroo into for quite a long time, right? Sort of same center sales.

When we flip that center over to an EluPro center, those centers' sales increase 65% when we flip into a new center. That is a big deal. It is what we would have expected, right? It is a better, more useful product. You might be thinking, "Maybe that is a stocking order." Actually, it is the opposite. We saw that the initial stocking orders were actually only about 25% higher. It is actually the repeat orders that are driving it up to this 65% and growing level. We really think we have a winner here. We have got a product that is going into a market where there was only one dominant player.

It was doing $200 million, but it was really kind of a skewed thing because since it's Medtronic's product and Medtronic makes a pacemaker, the other companies don't feel all that great about having a Medtronic product around their pacemaker. We think if we just had a me-too product with EluPro, we'd be able to go into this $200 million of existing business and be able to take a fair share. We don't think we have a me-too product. We think we actually have a significantly better product. We think our initial data is bearing that out. We're really, really excited about the way this is going. We've also done a little bit of work on the sales model. As you guys might remember, we have a hybrid model.

We have 12 experienced Elutia territory managers that manage the different territories in the country, as well as 35 independent reps. We think that blend gives us the ability to cover the entire country, but in a pretty efficient way. We've seen that that actually is also playing out. If we look actually in the quarter, how our 1099 or our independent reps performed, they accounted for 50% of the EluPro sales in the quarter. What that's showing us is why that statistic was important is we can use the 1099 rep model to go in and efficiently penetrate these accounts. For us, it's an economically very efficient way of generating these sales. We think it speaks to the value proposition that the product has, that we're able to do that with our outstanding group of 1099 reps.

Driving clinical uptake, the third piece, and we're really super excited about how that went as well. What are we doing moving forward? Here's the plan for the coming quarter or the quarter that we're in right now. One, continue to drive top-line growth of EluPro. That shouldn't come as a shock to anyone. Two, keep driving our VAC approvals, our value analysis committee approvals, and our GPO coverage. We have seen that VAC approval is a really, really good surrogate to top-line growth. If we can get on contract with a hospital, if we can get into a hospital, they will buy the product. Number two, drive VAC and GPO coverage. Three, we're going to be initiating, we've done all of this on our own, little bitty Elutia all by ourselves.

This quarter, we're initiating our ELUPRO rollout with our distribution partner, Boston Scientific, that you guys know we've had for a while. We want to make sure we do an orderly rollout of ELUPRO through the Boston Scientific team, and there are 900 reps that could easily bury us in demand if we're not careful. We are initiating the ELUPRO rollout with them this quarter, and we're really, really excited about the impact that they're going to be having on these sales as well. Because of all that, we need to keep increasing our production capacity. This is ahead of the schedule that we thought we would need. We are outpacing what we thought we would need from a production capacity standpoint. It's a good problem to have. The operations people gladly take on the challenge.

In doing that, we'll naturally be lowering the cost of goods as we scale up. There's just a lot of natural absorption that takes place there. Lastly, initiating our registry for the data collection of our clinical subjects for other usage that we're going to have. Lastly, and I'll turn it over to Matt after this, I promise, come visit us at HRS. It's in my hometown of San Diego this year. We're going to be having an event out there. We'd love to see you at the booth. If not at the booth, at one of the events we're holding and talking to you and maybe get a chance to speak with some of our electrophysiologists, physician partners, and learn more about why EluPro is such a home run product for us.

With that, I'll turn it over to Matt Ferguson, our Chief Financial Officer, for some financial updates. All right. Thanks very much, Randy. I'll just give you a summary of our financial results for the quarter and a few of the highlights for the year. Then we'll get into your questions. Really, top of the list, as Randy mentioned, $2.7 million for bio-envelope or device protection sales, as we call it, in the quarter. That was an 18% growth over the same quarter of the prior year. Just under $10 million, $9.9 million for the year, which was also solid growth at about 5% for the full year. Really, more than anything, what we're doing, as Randy spoke to, we're really laying the groundwork for what we believe will be a great 2025 for this product line and for the whole company.

The other category of sales, main category of products that we have is SimpliDerm and our women's health division there. It was a lighter quarter, $2.3 million, which was down year over year. There, that product line is somewhat concentrated in where the sales come from. We do see some ups and downs in the quarter. For the full year, we actually were at $11.6 million, which was up 12% year over year. That also is expected to be a strong growth driver for 2025. Rounding it out, cardiovascular, which we have partnered with LeMaitre for the complete distribution of that in the U.S., that was at $500,000 for the quarter. That compares to $600,000 in the 2023 fourth quarter.

Down there, that leaves us overall at $5.5 million in revenue for the quarter, down about 7% for the comparison to the same quarter of the prior year. On the full year basis, we were at about $24.4 million for the year. That's down just about 1% from $24.7 million in the prior year. Moving into gross margin, our GAAP gross margin was 43% for the quarter versus 36% in the prior year. Nice increase there. Probably more importantly, backing out the non-cash amortization expense, we were at 58% for the quarter versus 51% for the year before quarter. That was nice growth that we saw in our gross margin year over year. Just breaking that down a little bit further, it's all in a relatively close range between our three different product lines.

Just breaking that down for you, it was 60% for the device protection portion of our business, 55% for Simplerderm, and 64% for cardiovascular. Operating expense, very consistent year over year, $10.8 million in the fourth quarter versus $10.6 million a year ago. That all leads us to a loss from operations of $8.4 million versus $8.5 million. Again, very consistent year over year. A better indicator probably of just the operating portion of our business, the adjusted EBITDA, which we have a breakdown of in our press release, that was $3.8 million as a loss for the quarter versus $4.5 million for the year-ago quarter. A good improvement year over year as we continue to grow the business. From a cash point of view, we ended the quarter at $13.2 million in cash.

Larger cash usage during the quarter than what we have seen in some of the recent quarters. There was a good reason for that. That's that we were actually able to settle a number of the outstanding lawsuits that we had during the quarter and get those resolved. That contributed to the cash usage, but it also is a positive thing in that we are very much getting our arms around that remaining set of cases there. Very importantly, after the end of the quarter, so it does not show up in our financial results, but in early February, we did a registered direct offering where we raised $15 million in gross proceeds. Again, while that does not show up in our year-end cash balance, that has a nice addition to our overall cash balance in terms of where we currently sit.

With that, I will pause there, turn it back to the operator to tee up any questions that may be out there. Thank you. Thank you. At this time, we'll conduct our question-and-answer session. To ask a question, press Star 1 on your telephone keypad. A confirmation tone will indicate that your line is in a question queue. You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. Once again, to ask a question, press Star 1 on your phone. We'll pause for a moment while we pull for questions. Thank you. Our first question comes from Ross Osborne with Cantor Fitzgerald. Please state your question. Hey, guys. Congrats on the quarter and really successful pilot launch. Thanks for taking our questions.

Starting off, can you spend some time discussing to what extent Boston will be involved with EluPro in terms of the amount of reps pushing your envelope and any marketing activities? Yeah, Ross, the way I'll answer that is we have an agreement with them right now for the distribution of the product where we basically partner with them to leverage their 900 reps to distribute the product into the electrophysiology CRM space across the United States, right? It's limited specifically to the United States there. The way that arrangement works is when their reps basically partner with our territory managers, keeping in mind, they might have a rep, and I'm kind of making this up, but they might have a rep for roughly, let's just call it three hospitals for every rep. Sometimes there's even more higher concentration of reps than that.

Sometimes it's less. Let's just say they have a rep for every three hospitals. Our territory managers will be partnering with multiple Boston Scientific reps. The first thing they do is they partner to get access into the hospital. We talk about VAC approvals and the number of VACs we're on contract with. We're on contract now with 100. There's actually 1,400 centers in the United States that are hospital-based that implant 100 or more pacemakers a year, right? Even though we're in 100, we still have a fairly long way to go. The first thing that their reps really help us do is get in and get through those less frequently visited centers that we otherwise wouldn't be in. The second thing they do is it's a real top-of-mind kind of thing.

Now, our reps are really good at demonstrating the value of using a biologic envelope and why a drug-eluting product has significant advantages and what the biologics can ultimately do. You don't really need to be there in absolutely every case to make sure that there's consistent use of EluPro because it's a fairly easy product to use. You take the pacemaker and you put it into the envelope. You take all that and you implant it into the patient. It actually makes it easier to do. It really kind of glides in nicely. What their reps will do is help in remembering, "Hey, I'd like to I need to use an antibiotic envelope on this because there's something about this patient that's high risk. Hey, we should use one of those EluPro envelopes." Yeah, okay, great.

The Boston rep can actually facilitate the use of that product. When they do that, what they'll do is they sort of scan that product into the system. That enables us to then compensate them on a per-usage basis. We pay them a really nominal commission on every time an EluPro gets used. The system really works really well for both parties because they do not want anything to do with a TYRX envelope being used in their procedure. We like the idea of EluPro being used. It is kind of a way of us being able to pay them and their reps for keeping Medtronic out of their cases. That is how overall that arrangement works, or at least the arrangement we have in place today.

Because EluPro is a new product, you could imagine we are going through, there's training and a very specific rollout plan and all of that other kind of stuff. I'm not going to go into more of that right now. We'll have more details on that coming up on our first quarter conference call. We'll have a lot more detail about all this kind of stuff on that. That gives you sort of a picture on what's in place right now. Any updates to that we'll have coming up in the first quarter. Sounds great. That was perfect. When will Boston commence distribution? Shortly. Okay. Fair enough. I realize you're not providing guidance. I think what's important there—sorry, I need to step on you, Ross—I think what's important there is they haven't yet, right?

Everything that we've done here, which is frankly all we could handle, was able, we were able to do with just little old Elutia. I think that talks to the value of having a really good product that physicians want to use mixed in with, frankly, the Switzerland strategy, which is we don't make a pacemaker. We're not a threat to anybody. We're not going to put our envelope around your product and then come in and then try to steal your underlying pacemaker business away the next day. Those two factors team up to make a pretty attractive launch. Yes, absolutely. I realize you're not providing guidance. How should we be thinking about utilization at accounts? Maybe it'd be helpful to relay how you view a high-volume account versus a low-volume account. Maybe I could jump in there a little bit, Ross.

This is Matt. I think I would go back to some of the numbers that we provided in the past where we have about 400 accounts that have ordered that are Kangaroo accounts. I mean, as we just reported today, we're up at about 100 that are now ordering EluPro. I mean, that, and then we also talked about how pretty—we're certainly seeing more of the growth coming from EluPro, as you would expect, in the current quarter. Based on where we are in Q1, that will just accelerate in Q1. We already know that that's going to be the case as we sit here in early March with just a few more weeks left in Q1. I guess when I think of a high-volume account, I would say it would be annual usage in the hundreds.

We know that there are about 1,400 accounts in the U.S., so well beyond what we've gotten into already with Kangaroo that are over, say, 100 pacemaker and defibrillator procedures for the year. Another cut at that is we think there are about 500 accounts in the U.S. that are over 500 procedures per year. As Randy mentioned, at least 60% of that is not touched by Medtronic so far. We actually have feedback from the market that there are a lot of TYRX Medtronic users that are very interested and are already switching some of their usage, and in some cases, all of their envelope usage over to EluPro. It's hard to put exact numbers on it. What we would say is a high-volume account, but hopefully that gives you some sense of what we think is achievable.

Yes, that's exactly what I was looking for. The last one for me, and I'll jump back into queue. Realize the excitement around EluPro. As you know, we are big fans of SimpliDerm as well. Could you spend a little bit more time going over what occurred during the fourth quarter in terms of the deceleration in growth and the game plan there for 2025? Thank you. SimpliDerm is a product that we distribute through two different mechanisms. One is our network of independent distributors. The other one was or is a distribution relationship that we developed with Sientra. I can't remember now, that was a couple of years ago or so that we put that relationship in place. That was a relationship that was just getting off the ground.

The idea there was Sientra was in about 23% of breast reconstruction cases where a biologic is used almost every time, and they did not have a biologic offering. We thought that would just sort of make sense, give them access to a really, we think, a market-leading biologic. For us, we would have access to about $125 million of potential usage there. That was the rationale behind creating that partnership. It is a non-exclusive partnership in that we maintained our own distribution network, and we allowed them to distribute the product. It is also a non-exclusive partnership where we go to pretty significant lengths to not step on each other's toes. We are not competing against ourselves in the same accounts.

It makes it—the construct of that agreement does not allow us to sort of quickly expand into territories that are not being adequately covered by one of us or the other. Instead, we try to do it—we try to, under this agreement, do it a little bit in a little bit more planned and methodical way where we meet on a periodic basis and we say, "Okay, we are not having success in these accounts. Maybe you guys want to go in there or vice versa," right? That agreement was really, really working out well. Unfortunately, Sientra went into bankruptcy. They went into bankruptcy at a time that they were becoming a pretty meaningful part of our sales. Now, fortunately, the assets of Sientra were acquired in those through those bankruptcy procedures or, yeah, procedure.

Out of it, that agreement has now been taken over by Tiger Aesthetics. I would say, just very candidly, we've had some growing pains, right? We've had, first of all, they had a very difficult job to do taking over the assets of Sientra and holding that together and then figuring out how they wanted to run that business and what model they wanted to use. When a company experiences a bankruptcy, you can imagine there's obviously some changes that are going to need to take place. There's some very obvious disruption that's also going to take place. For us, learning how to work together, going through different personnel changes that they're trying to make and our people getting to know them and working with them has taken some time.

Naturally, we saw some of that disruption flow through into the end-user market in terms of volumes for us. Now, with that said, we were still able to have that product grow 12% over the year. I know the fourth quarter was not great, but we're hoping the fourth quarter was actually a little bit more of an anomaly there than anything we would expect to see repeat. Certainly, the product's backed away from the growth trajectory that it used to be on. We are working our way through that agreement. We have some milestones coming up in this agreement. We have some decisions to make there. We are also trying to be as constructive as we can with the team we have right now from our side and with Tiger.

Like I said, I think we actually are—I think we are making some pretty nice—some pretty nice and significant progress there. It all remains to be seen exactly what we're going to do. Obviously, it can't stay the way it was for the second half of the year. Some things have to change. We are also seeing some changes already take place there. Sounds great. Congrats again on the really strong start for EluPro. Excited for 2025. Thank you. Our next question comes from Frank Tachanan with Lake Street Capital Markets. Please state your question. Great. Hey, Randy. Hey, Matt. Thanks for taking the questions. I was hoping to start with one around kind of distribution partners. Obviously, you have the agreement with Boston that we've talked about on this call.

Is that agreement structured as such that you could establish agreements with some of the other pacemaker players and expand your distribution capability that route? It is. It is, Frank. Okay. Is that something you've considered pursuing, or at this point, is it Boston first and then see how the demand comes from that and maybe think about that at a later date and time? Right now, we have a tremendous amount of demand from our own team. Now we're adding on Boston. From a business development standpoint, we're in a number of different discussions. For right now, that certainly fills our dance card with regards to demand that we think we can appropriately handle. There are also different strategic reasons on why we might do one versus the other. We have the flexibility to do it.

But it's a more complicated series of questions than just that. From a distribution standpoint, from caring about growing the product and really establishing it, we think we're in really, really good shape with us partnering with Boston Scientific right now to do that. Okay. That's helpful. From an active ordering account perspective, we've got a couple of goalposts. Obviously, you've got 100 active now, 400 Kangaroo, 500, over 500 implants, and then the broader market of 1,400 over 100 implants per year. Maybe talk through the cadence of expectations around how new account additions will occur throughout 2025. Yeah. We were clicking along, or we are clicking along at about 15 a month right now. I do think it's unrealistic to think it will probably keep that pace up for the whole year. There's sort of two things that are going on.

One is there's just sort of the law of averages. If you go submit 200 VAC applications and there's a six-month cycle time for a VAC, 100 of those are going to be less than six months. They're going to be faster than the average. 100 of those are going to be longer than six months. We said sort of all along we thought this would be the gating—this would be the gating item. They're not all going to go as fast as certainly we would like them to move and as the physicians would like to move. That will be something that will be sort of tugging on how fast we can get them signed up.

The thing that's going to be pulling in the other direction is having a partner like Boston Scientific pulling us into those accounts where their reps are actively engaged in helping and doing that will obviously—that's a lot of help to be able to bring to the problem. We think that'll be helping on the plus side. In general, it will probably back down a little bit off the pace we started on, but maybe that's just being conservative. We'll see how it goes. Okay. That's helpful. Just last one from me, one for Matt. I was hoping you could talk a little bit about the cash burn in the quarter. Could you parse out kind of operational cash burn from the business versus litigation paydown? Maybe an update around litigation expectations for 2025 would be helpful as well. Thanks.

Yeah, sure. I'll tell you—I'll share with you what I can. A lot of that is, one, hard to forecast and also something that we don't want to get into too much detail for because all these cases are ongoing, some of them more active than others. What you'll see, even just looking at our balance sheet, you'll see that at the end of the third quarter, we had a liability related to the fiber cell litigation. Again, for those people who aren't familiar with it, this is part of our company that we sold off in 2023, but we retained some of that legacy litigation associated with it. We had a liability of a little over $20 million at that stage. At the end of the year, it was down at about $15.9 million was the number.

Some pretty healthy reduction in the overall liability in terms of the number of cases. We had 79 outstanding at the end of Q3. Some of those were settled but not yet paid for. At the end of the year, we were actually down to 43 that have not yet been settled. I think we're making really significant progress putting all of this behind us. There is still more work to be done, but a lot of what we did in the fourth quarter was resolve cases that had trial dates that would otherwise have been coming up at some point during 2025, which I think is probably a good thing for everyone, both us and the people on the other side of those cases that we did not have those actual trials take place. Very costly and just not productive to go through that.

There are a few of those still remaining in the year that we'll try to go through a similar process with, and I expect we'll be successful with that, and then others that are further out that do not have anything scheduled. I guess the last quarter was particularly active. There will still be some activity in 2025, certainly, but it should be declining, I think, from where it was in Q4. Okay. That's helpful. Thanks. And congrats on all the progress. Thanks, Frank. Okay. Thank you, Frank. Thank you. Ladies and gentlemen, that was our last question for today. With that, we will conclude today's conference call. All parties may now disconnect and have a great evening. Thank you.