Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report, as well as the audited financial statements and the related notes thereto, and the discussion under Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 Annual Report. This discussion contains forward-looking statements reflecting our current expectations, estimates, plans and assumptions concerning events and financial trends that involve risks and may affect our future operating results and financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Forward-Looking Statements” and Part II, Item 1A. “Risk Factors” of this Quarterly Report and in the section entitled “Risk Factor Summary” and in Part I, Item IA. “Risk Factors” of our 2025 Annual Report.
Overview
At Elutia, our mission is to humanize medicine so that patients can thrive without compromise. We develop proprietary drug-eluting biomatrix products for use in surgical reconstruction and related applications. These products are designed to improve the interaction between implanted medical devices and patients. Our focus is on addressing unmet medical needs and reducing complications associated with surgery, including infection, migration, erosion, implant rejection, and fibrosis. Our operations span research and development through the commercial distribution of biologic matrix products used in plastic and reconstructive surgery.
We have applied these capabilities to develop and commercialize products for specific surgical applications. As more fully described below, on October 1, 2025, we divested one such product family through the sale of substantially all of the assets related to our business of developing, commercializing, manufacturing, selling and marketing our cardiac implantable electronic device (“CIED”) products, EluPro™ and CanGaroo®, to Boston Scientific Corporation (“BSC”) and Cardiac Pacemakers Inc (“CPI”) for an aggregate purchase price of up to $88.0 million in cash. EluPro was the first antibiotic-eluting biologic matrix envelope for use with CIEDs. This transaction reflects the technical and commercial value of solutions developed using our biologic matrices and local drug delivery capabilities.
Following the sale of the CIED business, we are focused on advancing our drug-eluting biomatrix (“DEB”) platform. This platform builds on our biologic matrix and local drug delivery capabilities to address complications that lead to poor outcomes in reconstructive procedures and surgical repair. EluPro demonstrated the commercial potential of combining a biologic scaffold with antibiotic drug delivery to reduce device-related complications. We believe the same foundational technology can be applied to reconstructive and soft tissue repair markets where biologic matrix products are widely used, but where outcomes remain suboptimal due to complications such as infection, inflammation, and fibrosis.
The clinical and economic need in the reconstructive and soft tissue repair markets is substantial, reflecting both the volume of reconstructive surgery and the persistence of high complication rates. For example, in implant-based breast reconstruction and complex abdominal wall repair, infection rates approximate 15% to 20%, leading to frequent reoperations and hospital readmissions. Each year, in the United States, there are approximately 168,000 post-mastectomy breast reconstruction procedures, and roughly one in three experiences a serious complication such as infection, capsular contracture, or implant loss. We believe biologic matrices represent an estimated $1.5 billion U.S. market opportunity and account for more than 60% of reconstruction spending, yet meaningful innovation has been limited and significant unmet medical need remains.
Our lead development programs comprise NXT-41, a next-generation biologic matrix, and NXT-41x, which builds on the NXT-41 matrix by incorporating local antibiotic delivery. NXT-41 is an advanced biomatrix designed to provide consistent handling and incorporation while enabling scalable manufacturing. In NXT-41x, antibiotics are incorporated into the matrix and released locally over extended periods, offering broad-spectrum antimicrobial protection against common causes of post-surgical infection.
Elutia continues to market and sell its proprietary biologic matrix products, including its cardiovascular repair portfolio, comprising ProxiCor, VasCure, and Tyke, and SimpliDerm®, a human acellular dermal matrix (“hADM”) used
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in soft tissue reconstruction. The cardiovascular products reside in our Cardiovascular segment and SimpliDerm is the primary commercial product in our Women’s Health segment. These products are sold directly to healthcare facilities through independent sales agents. See “Agreement to Divest SimpliDerm Business” below for a discussion regarding the pending disposition of our SimpliDerm Business.
SimpliDerm was historically processed at our former Richmond, California facility, which was included in the divestiture of the Orthobiologics Business in 2023. SimpliDerm is now supplied to Elutia through a long-term supply agreement with Berkeley, the acquiror of our Orthobiologics Business. The porcine SIS-ECM for our Cardiovascular products is supplied by Cook Biotech Incorporated (“Cook”), now owned by Evergen, through a long-term supply agreement. Both Berkeley and Cook are currently our sole sources of supply within the respective product offerings, and we cannot guarantee that an interruption in supply will not occur.
In March 2025, we signed a lease for 26,598 square feet of production, laboratory and administrative space in Gaithersburg, Maryland, which now serves as our headquarters and primary operations site. This facility supports administrative functions as well as the development of NXT-41 and NXT-41x and, subject to obtaining the necessary FDA marketing authorizations, is expected to support the commercial production of NXT-41x, to the extent marketing authorization is obtained.
Agreement to Divest SimpliDerm Business
On July 16, 2026, we entered into an Asset Purchase Agreement (the “SimpliDerm APA”) with Cellution Biologics Inc. (“Cellution”). Subject to the terms and conditions of the SimpliDerm APA, at the closing of the transactions contemplated by the SimpliDerm APA, Cellution will purchase from us substantially all of the assets related to our business of commercializing, manufacturing, distributing, selling and/or marketing human acellular dermis (hADM) products for use in the field of breast reconstruction under the SimpliDerm brand (the “SimpliDerm Business”). The assets of the SimpliDerm Business constitute substantially all of the assets currently held in our Women’s Health segment. Cellution is only assuming certain liabilities related to performance of the contracts transferred in the SimpliDerm APA. Subject to the satisfaction or waiver of the conditions to closing, we expect the closing of the transaction to occur in the third quarter of 2026. Following the sale of the SimpliDerm Business, we intend to remain focused on advancing our DEB platform.
The SimpliDerm APA provides for aggregate consideration payable to us of up to $11 million, consisting of: (i) a base purchase price of $8 million in cash, payable at closing of the transaction, subject to adjustment for any inventory shortfall; (ii) a contingent payment of up to $2 million, payable upon completion of certain technology transfer and manufacturing transition milestones within an 18-month period following the closing of the transaction, subject to reduction for sales shortfalls against monthly SimpliDerm sales targets during such transition period; and (iii) contingent payments of up to $1 million, in the aggregate, in the form of earn-out payments, payable for any four of the first five quarters following the closing of the transaction in which SimpliDerm sales exceed a specified quarterly revenue target.
New Loan Agreement
On August 11, 2026 (the “Loan Agreement Closing Date”), the Company entered into a loan and security agreement, and supplement to loan and security agreement (collectively, the “Loan Agreement”), with Avenue Venture Opportunities Fund II, L.P., as administrative agent and collateral agent for the lenders (in such capacities, the “Loan Agent”) and as lender (“Avenue 2”), and Avenue Growth Lending Fund III, L.P., as a lender (“Avenue 3”; together with Avenue 2, the “Lenders”), which provides for a senior secured term loan facility of up to $15 million in the aggregate that matures on March 1, 2030, consisting of (i) an initial term loan of $10 million (the “First Tranche Term Loan”), which was fully funded on the Loan Agreement Closing Date, and (ii) a $5 million delayed draw term loan (the “Second Tranche Term Loan”), which will be made available between May 1, 2027 and September 30, 2027, subject to the satisfaction of certain regulatory approvals and liquidity conditions (the “Second Tranche Term Loan”, which together with the First Tranche Term Loan, the “Term Loans”). See Note 13 to the condensed consolidated financial statements for further discussion of the new Loan Agreement and the 2026 Warrants issued to the lenders in connection with the new Loan Agreement.
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Discontinued Operations - Sale of CIED Businesses
On September 8, 2025, we executed an Asset Purchase Agreement (the “CIED APA”) with Boston Scientific Corporation (“BSC”) and Cardiac Pacemakers Inc. (collectively with BSC, the “CIED Buyers”). On October 1, 2025, at the closing of the transactions contemplated by the CIED APA, the CIED Buyers purchased from Elutia substantially all of the assets related to its business of researching, developing, administering, operating, commercializing, manufacturing, selling and marketing CIED products, including the CanGaroo®, CanGaroo® RM, EluPro™ and CIED envelope products, including next generation CIED envelope products (collectively the “CIED Business”).
The CIED APA provided for an aggregate purchase price, subject to certain adjustments pursuant to the terms of the CIED APA, of up to $88 million in cash, with $80.4 million (which included an inventory adjustment of $0.4 million) that was paid in cash to Elutia at the closing of the transactions, and $8.0 million that was deposited at the closing of the transactions in escrow for a period of twelve months, which is subject to potential reduction in the event of certain post-closing breaches of representations and warranties within the CIED APA by Elutia. The assets of the CIED Business constituted substantially all of the assets previously held in Elutia’s Device Protection segment. The CIED Buyers only assumed certain liabilities related to performance of the contracts transferred in the CIED APA.
As described in Note 2 to the condensed consolidated financial statements, the sale of the CIED Business was accounted for as Discontinued Operations for all periods presented in accordance with Accounting Standards Codification (“ASC”) 205-20, Discontinued Operations . Consequently, the results of operations from the CIED Business are reported as discontinued operations in the condensed consolidated statements of operations for the three and six months ended June 30, 2025.
Prior to the divestiture, we marketed EluPro and CanGaroo in the United States through our direct sales force, supported by a commercial partner, BSC. As part of the divestiture, the sales organization supporting the CIED business transferred to the CIED Buyers.
Payoff and Termination of SWK Loan Facility
On October 1, 2025, in connection with and through the proceeds of the sale of the Company’s CIED Business described in Note 2 to the consolidated financial statements, we fully repaid the SWK Loan Facility as required by the terms of the credit agreement. As of such date, the outstanding principal, including the accrued exit fee, and accrued interest totaled approximately $26.9 million. The total payment by the Company to SWK in full satisfaction of the debt and termination of the credit agreement was $27.8 million.
Discontinued Operations - Sale of Orthobiologics Businesses
On November 8, 2023, we completed the sale of substantially all of the assets relating to our former Orthobiologics Business to Berkeley. The Orthobiologics Business was comprised of assets relating to researching, developing, administering, insuring, operating, commercializing, manufacturing, selling and marketing our Orthobiologics products, and the business of contract manufacturing of particulate bone, precision milled bone, cellular bone matrix, acellular dermis, soft tissue and other products. The assets sold represented the entirety of our Orthobiologics segment. We received approximately $14.6 million, and we may earn up to an additional $20.0 million, in the aggregate, in the form of earn-out payments. The earn-out payments are equal to 10% of the actual revenue earned by Berkeley in each of the five years after the closing of the sale from sales of specified Orthobiologics products under the purchase agreement (including improvements, modifications, derivatives and enhancements related to those products). There have been no earn-out payments made to date. Pursuant to the purchase agreement, we retained the liabilities arising out of the viable bone matrix (“VBM”) and FiberCel recall matters, as described in Note 10 to the condensed consolidated financial statements, both of which products were part of the Orthobiologics Business. We recognized a gain of $6.0 million on the sale of the Orthobiologics Business in 2023 and an additional gain of $0.2 million in the second quarter of 2024 from an adjustment payment related to the final working capital received by Berkeley at the sale date. Additionally, the purchase agreement provided for a customary indemnity holdback in the amount of $1.5 million to be retained by Berkeley for 24 months after closing of the transaction. In March 2026, the indemnity holdback was resolved with Berkeley remitting $0.4
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million to Elutia. Such amount was recognized as additional gain in the first quarter of 2026. Should we receive incremental proceeds in the future through an earn-out payment, an additional gain will be recorded upon the receipt of such amounts.
Components of Our Results of Operations
Net Sales
We recognize revenue from the sale of our products. Our Women’s Health products are sold directly to hospitals and other healthcare facilities through independent sales agents, and until its termination in October 2025, through our distribution agreement with Tiger. From April 2023 through April 2025, our Cardiovascular products were sold through a distribution agreement with LeMaitre Vascular. In April 2025, this agreement with LeMaitre Vascular terminated, and, in May 2025, we resumed selling these products directly to hospitals and other healthcare facilities through independent sales agents.
Expenses
In recent years, we have incurred significant costs in the operation of our business. We expect that our recurring operating costs will largely stabilize, or increase at modest rates, in the near future through the identification of efficiencies as we grow. We may, however, still experience more significant expense increases to the extent we expand our sales and marketing, product development and clinical and research activities. As a result, we will need to generate significant net sales in order to achieve profitability. Below is a breakdown of our main expense categories and the related expenses incurred in each category:
Cost of Goods Sold
Our cost of goods sold relates to the purchase costs of the SimpliDerm finished goods and the purchased raw materials and minor finished good conversion costs required for the Cardiovascular products. Cost of goods sold also includes the amortization of intangibles related to the Cardiovascular products generated from the CorMatrix Acquisition in 2017.
Sales and Marketing Expenses
Sales and marketing expenses are primarily related to the sales commissions of our SimpliDerm and Cardiovascular independent sales agents. Additionally, this expense category includes distribution and customer service costs as well as market research, trade show attendance, advertising and public relations related to our products.
General and Administrative Expenses
General and administrative (“G&A”) expenses consist primarily of compensation, consulting, legal, human resources, information technology, accounting, insurance (including directors’ and officers’ liability premiums), SEC compliance, and general business expenses.
Research and Development Expenses
Research and development (“R&D”) expenses consist primarily of salaries and fringe benefits, laboratory supplies, clinical studies and outside service costs. Over the last several years, our product development efforts have primarily related to activities associated with the development of EluPro, our initial DEB product offering, which gained FDA clearance in June 2024 and was sold in connection with the divestiture of the CIED Business in October 2025. Since then and in the future, our development efforts and associated internal and external costs are expected to focus on next-generation biologic scaffolds combined with local antibiotic delivery.
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Litigation Costs, net
Litigation costs, net consist primarily of legal fees and the estimated and actual costs to resolve the outstanding FiberCel and VBM litigation cases offset by the estimated and actual amounts recoverable or recovered under insurance, indemnity and contribution agreements for such costs. Such expenses also include the FiberCel-related Medtronic litigation, which has been dismissed pursuant to the terms of a settlement agreement reached in June 2026. See Note 10 to the condensed consolidated financial statements for further discussion of all litigation proceedings.
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Results of Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
Three Months Ended June 30,
2026
2025
Change 2025 / 2026
% of Net
% of Net
(in thousands, except percentages)
Amount
Sales
Amount
Sales
$
%
Net sales
$
2,427
100.0
%
$
2,747
100.0
%
$
(320)
(11.6)
%
Cost of goods sold
980
40.4
%
1,294
47.1
%
(314)
(24.3)
%
Gross profit
1,447
59.6
%
1,453
52.9
%
(6)
(0.4)
%
Sales and marketing
1,366
56.3
%
1,273
46.3
%
93
7.3
%
General and administrative
3,454
142.3
%
3,552
129.3
%
(98)
(2.8)
%
Research and development
2,527
104.1
%
989
36.0
%
1,538
155.5
%
Litigation costs, net
2,057
84.8
%
4,004
145.8
%
(1,947)
(48.6)
%
Total operating expenses
9,404
387.5
%
9,818
357.4
%
(414)
(4.2)
%
Loss from operations
(7,957)
(327.9)
%
(8,365)
(304.5)
%
408
(4.9)
%
Interest income, net
(35)
(1.4)
%
(491)
(17.9)
%
456
(92.9)
%
Gain on revaluation of warrant liability
(226)
(9.3)
%
(2,233)
(81.3)
%
2,007
NM
Other (income) expense, net
(58)
(2.4)
%
1,442
52.5
%
(1,500)
NM
Loss before provision for income taxes
(7,638)
(314.7)
%
(7,083)
(257.8)
%
(555)
7.8
%
Income tax expense
8
0.3
%
8
0.3
%
—
—
%
Net income (loss) from continuing operations
(7,646)
(315.0)
%
(7,091)
(258.1)
%
(555)
7.8
%
Loss from discontinued operations
—
—
%
(2,519)
(91.7)
%
2,519
(100.0)
%
Net loss
$
(7,646)
(315.0)
%
$
(9,610)
(349.8)
%
$
1,964
20.4
%
NM = not meaningful
Net Sales
Net sales information for our products is summarized as follows:
Three Months Ended June 30,
2026
2025
% of Net
% of Net
Change 2025 / 2026
(in thousands, except percentages)
Amount
Sales
Amount
Sales
$
%
Products:
Women's Health
1,283
52.9
%
2,011
73.2
%
(728)
(36.2)
%
Cardiovascular
1,144
47.1
%
736
26.8
%
$
408
55.4
%
Total Net Sales
$
2,427
100.0
%
$
2,747
100.0
%
$
(320)
(11.6)
%
Total net sales were $2.4 million in the three months ended June 30, 2026, a decrease of $0.3 million compared to $2.7 million in the three months ended June 30, 2025. The decrease was due to lower sales of Women’s Health compared to the three months ended June 30, 2025, partially offset by growth in Cardiovascular. With respect to Cardiovascular, our former exclusive distribution agreement with LeMaitre Vascular terminated in April 2025, and we resumed selling these products directly through independent sales agents in May 2025. The sales increases in the three months ended June 30, 2026 were generated by both volume growth and higher unit prices as such sales are now at end-user pricing versus contracted prices (which are lower than end-user pricing). The decrease in Women’s Health was caused by a disruption in product supply from our contract manufacturer as well as our termination of the Tiger distribution agreement as noted above. Sales of SimpliDerm generated by Tiger totaled $0.5 million in the three months ended June 30, 2025.
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Cost of Goods Sold
Cost of goods sold and gross margin percentage information for our products is summarized as follows:
Three Months Ended June 30,
2026
2025
Gross
Gross
Change 2025 / 2026
(in thousands, except percentages)
Amount
Margin %
Amount
Margin %
$
%
Products:
Women's Health
538
58.1
%
895
55.5
%
(357)
(39.9)
%
Cardiovascular
172
85.0
%
129
82.5
%
43
33.3
%
Cost of goods sold, excluding intangible asset amortization
710
70.7
%
1,024
62.7
%
(314)
(30.7)
%
Intangible asset amortization expense
270
(11.1)
%
270
(9.8)
%
—
—
%
Total Cost of Goods Sold
$
980
59.6
%
$
1,294
52.9
%
$
(314)
(24.3)
%
Total cost of goods sold decreased by $0.3 million to $1.0 million for the three months ended June 30, 2026, compared with $1.3 million for the three months ended June 30, 2025. Gross margin increased to 59.6% for the three months ended June 30, 2026, from 52.9% for the three months ended June 30, 2025. Excluding intangible asset amortization, gross margin increased to 70.7% from 62.7% during the respective periods. The improvement between years was due to both Women’s Health and Cardiovascular, for which, in mid to late 2025, we resumed selling these products only directly to hospitals and other healthcare facilities through our independent sales agents where end user pricing (versus contracted prices with distributors) yields higher margins.
Operating Expenses
Sales and Marketing
Sales and marketing expenses increased $0.1 million, or 7.3%, to $1.4 million in the three months ended June 30, 2026 compared to $1.3 million in the three months ended June 30, 2025. As a percentage of sales, sales and marketing expenses increased to 56.3% in the three months ended June 30, 2026 from 46.3% in the three months ended June 30, 2025. The increase was largely attributable to sales commission expense growth commensurate with the resumption in the direct selling of our Cardiovascular products as well as the entirety of SimpliDerm sales occurring through our commissioned independent sales agents in 2026.
General and Administrative
G&A expenses decreased $0.1 million, or 2.8%, to $3.5 million in the three months ended June 30, 2026 compared to $3.6 million in the three months ended June 30, 2025. The decrease in expense was primarily driven by slightly lower legal fees compared to the prior year.
Research and Development
R&D expenses increased $1.5 million, or 155.5% to $2.5 million in the three months ended June 30, 2026 compared to $1.0 million in the three months ended June 30, 2025. The increase in expense reflects our heightened development activity in the 2026 period as we aggressively pursue the development of NXT-41 and NXT-41x, our next-generation biologic matrices, which in the case of NXT-41x, is combined with local antibiotic delivery.
Litigation Costs, net
Litigation costs, net decreased to $2.1 million in the three months ended June 30, 2026 compared to $4.0 million in the three months ended June 30, 2025. The decrease in expense was primarily due to significant reductions in our FiberCel activities and related contingent liability fluctuations with nearly all cases having been settled as of June 30,
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2026. As of June 30, 2026, insurance remains available to cover the cost of the VBM Litigation and related defense costs; however, we have no more insurance to cover the cost of the FiberCel Litigation and the related defense costs. See further discussion in Note 10 to the condensed consolidated financial statements.
Interest Income, net
Interest income, net was less than $0.1 million in the three months ended June 30, 2026 and $0.5 million in the three months ended June 30, 2025. The decrease was primarily due to the error correction related to the January 2024 Ligand amendment described in Note 8 to the condensed consolidated financial statements.
Comparison of the Six Months Ended June 30, 2026 and 2025
Six Months Ended June 30,
2026
2025
Change 2025 / 2026
% of Net
% of Net
(in thousands, except percentages)
Amount
Sales
Amount
Sales
$
%
Net sales
$
5,541
100.0
%
$
5,698
100.0
%
$
(157)
(2.8)
%
Cost of goods sold
2,292
41.4
%
2,863
50.2
%
(571)
(19.9)
%
Gross profit
3,249
58.6
%
2,835
49.8
%
414
14.6
%
Sales and marketing
2,846
51.4
%
2,268
39.8
%
578
25.5
%
General and administrative
7,545
136.2
%
7,273
127.6
%
272
3.7
%
Research and development
4,500
81.2
%
1,860
32.6
%
2,640
141.9
%
Litigation costs, net
2,663
48.1
%
6,576
115.4
%
(3,913)
(59.5)
%
Total operating expenses
17,554
316.8
%
17,977
315.5
%
(423)
(2.4)
%
Loss from operations
(14,305)
(258.2)
%
(15,142)
(265.7)
%
837
5.5
%
Interest income, net
(143)
(2.6)
%
(307)
(5.4)
%
164
(53.4)
%
(Gain) loss on revaluation of warrant liability
1,429
25.8
%
(7,420)
(130.2)
%
8,849
NM
Other (income) expense, net
(129)
(2.3)
%
1,547
27.1
%
(1,676)
NM
Loss before provision of income taxes
(15,462)
(279.0)
%
(8,962)
(157.3)
%
(6,500)
72.5
%
Income tax expense
78
1.4
%
16
0.3
%
62
387.5
%
Net loss from continuing operations
(15,540)
(280.5)
%
(8,978)
(157.6)
%
(6,562)
(73.1)
%
(Income) loss from discontinued operations
425
7.7
%
(4,565)
(80.1)
%
4,990
(109.3)
%
Net loss
$
(15,115)
(272.8)
%
$
(13,543)
(237.7)
%
$
(1,572)
(11.6)
%
NM = not meaningful
Net Sales
Net sales information for our products is summarized as follows:
Six Months Ended June 30,
2026
2025
% of Net
% of Net
Change 2025 / 2026
(in thousands, except percentages)
Amount
Sales
Amount
Sales
$
%
Products:
Women's health
3,372
60.9
%
4,636
81.4
%
(1,264)
(27.3)
%
Cardiovascular
2,169
39.1
%
1,062
18.6
%
$
1,107
104.2
%
Total Net Sales
$
5,541
100.0
%
$
5,698
100.0
%
$
(157)
(2.8)
%
Total net sales were $5.5 million for the six months ended June 30, 2026, a decrease of $0.2 million, or 2.8%, compared with $5.7 million for the six months ended June 30, 2025. The decrease was attributable to lower Women’s
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Health sales resulting from a disruption in product supply from our contract manufacturer as well as the termination of the Tiger distribution agreement, partially offset by growth in Cardiovascular sales, as discussed above.
Cost of Goods Sold
Cost of goods sold and gross margin percentage information for our products is summarized as follows:
Six Months Ended June 30,
2026
2025
Gross
Gross
Change 2025 / 2026
(in thousands, except percentages)
Amount
Margin %
Amount
Margin %
$
%
Products:
Women's health
1,428
57.7
%
2,068
55.4
%
(640)
(30.9)
%
Cardiovascular
324
85.1
%
253
76.2
%
71
28.1
%
Cost of goods sold, excluding intangible asset amortization
1,752
68.4
%
2,321
59.3
%
(569)
(24.5)
%
Intangible asset amortization expense
540
(9.7)
%
542
(9.5)
%
(2)
(0.4)
%
Total Cost of Goods Sold
$
2,292
58.6
%
$
2,863
49.8
%
$
(571)
(19.9)
%
Total cost of goods sold decreased $0.6 million to $2.3 million in the six months ended June 30, 2026 compared to $2.9 million in the six months ended June 30, 2025. Gross margin was 58.6% in the six months ended June 30, 2026 compared to 49.8% in the six months ended June 30, 2025. Gross margin, excluding intangible asset amortization, was 68.4% in the six months ended June 30, 2026 compared to 59.3% in the six months ended June 30, 2025. The improvement between years was due to both Women’s Health and Cardiovascular, for which, in mid to late 2025, we resumed selling these products only directly to hospitals and other healthcare facilities through our independent sales agents where end user pricing (versus contracted prices with distributors) yields higher margins.
Operating Expenses
Sales and Marketing
Sales and marketing expenses increased $0.6 million, or 25.5%, to $2.8 million in the six months ended June 30, 2026 compared to $2.3 million in the six months ended June 30, 2025. As a percentage of sales, sales and marketing expenses increased to 51.4% in the six months ended June 30, 2026 from 39.8% in the six months ended June 30, 2025. The increase was largely attributable to sales commission expense growth commensurate with the resumption in the direct selling of our Cardiovascular products as well as the entirety of SimpliDerm sales occurring through our commissioned independent sales agents in 2026.
General and Administrative
G&A expenses increased $0.3 million, or 3.7%, to $7.5 million in the six months ended June 30, 2026 compared to $7.3 million in the six months ended June 30, 2025. The increase in expense was primarily driven by the incremental facility costs associated with our Gaithersburg headquarters to which we moved in May 2025.
Research and Development
R&D expenses increased $2.6 million, or 141.9% to $4.5 million in the six months ended June 30, 2026 compared to $1.9 million in the six months ended June 30, 2025. The increase in expense reflects our heightened development activity in the 2026 period as we aggressively pursue the development of NXT-41 and NXT-41x, our next-generation biologic scaffolds combined with local antibiotic delivery.
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Litigation Costs, net
Litigation costs, net decreased to $2.7 million in the six months ended June 30, 2026 compared to $6.6 million in the six months ended June 30, 2025. The decrease in expense was primarily due to significant reductions in our FiberCel activities and related contingent liability fluctuations with nearly all cases having been settled as of June 30, 2026. As of June 30, 2026, insurance remains available to cover the cost of the VBM Litigation and related defense costs; however, we have no more insurance to cover the cost of the FiberCel Litigation and the related defense costs. See further discussion in Note 10 to the condensed consolidated financial statements.
Interest Income, net
Interest income, net was interest income of $0.1 million in the six months ended June 30, 2026 and interest income, net of $0.3 million in the six months ended June 30, 2025. The decrease was primarily due to the error correction related to the January 2024 Ligand amendment described in Note 8 to the condensed consolidated financial statements.
Non-GAAP Financial Measures
This Quarterly Report presents our gross margin, excluding intangible asset amortization, for the three and six months ended June 30, 2026 and 2025. We calculate gross margin, excluding intangible asset amortization, as gross profit, excluding amortization expense relating to intangible assets we acquired in the CorMatrix Acquisition, divided by net sales. Gross margin, excluding intangible asset amortization, is a supplemental measure of our performance, is not defined by or presented in accordance with U.S. generally accepted accounting principles (“GAAP”), has limitations as an analytical tool and should not be considered in isolation or as an alternative to our GAAP gross margin, gross profit or any other financial performance measure presented in accordance with GAAP. We present gross margin, excluding intangible asset amortization, because we believe that it provides meaningful supplemental information regarding our operating performance by removing the impact of amortization expense, which is not indicative of our overall operating performance. We believe this provides our management and investors with useful information to facilitate period-to-period comparisons of our operating results. Our management uses this metric and the results of the segments in assessing the health of our business and our operating performance, and we believe investors’ understanding of our operating performance is similarly enhanced by our presentation of this metric.
Although we use gross margin, excluding intangible asset amortization, as described above, this metric has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may use other measures to evaluate their performance, which could reduce the usefulness of this non-GAAP financial measure as a tool for comparison.
The following table presents a reconciliation of our gross margin, excluding intangible asset amortization, for the three and six months ended June 30, 2026 and 2025, to the most directly comparable GAAP financial measure, which is our GAAP gross margin (in thousands).
Three Months Ended
Six Months Ended
June 30,
June 30,
2026
2025
2026
2025
Net sales
$
2,427
$
2,747
$
5,541
$
5,698
Cost of goods sold
980
1,294
2,292
2,863
Gross profit
1,447
1,453
3,249
2,835
Intangible asset amortization expense
270
270
540
542
Gross profit, excluding intangible asset amortization
$
1,717
$
1,723
$
3,789
$
3,377
Gross margin
59.6
%
52.9
%
58.6
%
49.8
%
Gross margin, excluding intangible asset amortization
70.7
%
62.7
%
68.4
%
59.3
%
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Seasonality
Historically, we have experienced seasonality in our first and fourth quarters, and we generally expect this trend to continue but may also see quarter-to-quarter fluctuations that are inconsistent with this trend. We have experienced and may in the future experience higher sales in the fourth quarter as a result of hospitals in the United States increasing their purchases of our products to coincide with the end of their budget cycles. Satisfaction of patient deductibles throughout the course of the year also results in increased sales later in the year, once patients have paid their annual insurance deductibles in full, which reduces their out-of-pocket costs. Conversely, our first quarter generally has lower sales than the preceding fourth quarter as patient deductibles are re-established with the new year, which increases their out-of-pocket costs.
Liquidity and Capital Resources
As of June 30, 2026, we had cash and cash equivalents of approximately $19.9 million. Since inception, we have financed our operations primarily through amounts borrowed under our credit facilities, proceeds from our initial public offering (“IPO”), sales of our products and more recently, the sale of our Orthobiologics and CIED Businesses and proceeds from follow-on offerings and private placements of our common stock and warrants. Our historical cash outflows have primarily been associated with manufacturing and administrative costs, sales and marketing, research and development, clinical activity, purchase of property and equipment used in our production activities, litigation defense and settlement costs and investing in our commercial infrastructure. We expect to incur operating losses and negative cash flows from operations for the foreseeable future as we advance our development and commercialization of NXT-41 and NXT-41x. Because of the numerous risks and uncertainties associated with our development and commercialization efforts, we are unable to predict when we will become profitable, and we may never become profitable. Our inability to achieve and then maintain profitability would negatively affect our business, financial condition, results of operations and cash flows. The future viability of Elutia is dependent on our ability to generate cash flows from current or future product sales and/or raise additional capital to finance its operations. We may seek to raise capital through the issuance of common stock or debt such as the offerings described below and in Note 13 to the condensed consolidated financial statements or pursue asset sales or other transactions, such as the sale of the Orthobiologics and CIED Businesses and the pending sale of the SimpliDerm business described above. However, such transactions may not be successful, and we may not be able to raise additional equity, refinance our debt instruments, sell assets or obtain waivers or amendments to our obligations on acceptable terms, or at all.
On February 4, 2025, we sold, in a registered direct offering (“2025 Registered Offering”) an aggregate of (i) 5,520,000 shares of our Class A common stock and (ii) prefunded warrants (“2025 Prefunded Warrants”) to purchase up to an aggregate of 480,000 shares of Class A Common Stock. The public offering price for each share of Class A Common Stock was $2.50, and the public offering price for each 2025 Prefunded Warrant was $2.499 , for aggregate gross proceeds of approximately $15.0 million, before deducting offering expenses. The 2025 Prefunded Warrants have an exercise price of $0.001 per share of Class A Common Stock, are exercisable immediately and will expire when exercised in full.
On June 16, 2024, we sold, in a registered direct offering (“2024 Registered Offering”) an aggregate of (i) 3,175,000 shares of our Class A common stock and (ii) prefunded warrants (“2024 Prefunded Warrants”) to purchase up to an aggregate of 725,000 shares of Class A Common Stock. The public offering price for each share of Class A Common Stock was $3.40, and the public offering price for each 2024 Prefunded Warrant was $3.399 , for aggregate gross proceeds of approximately $13.3 million, before deducting offering expenses. The 2024 Prefunded Warrants have an exercise price of $0.001 per share of Class A Common Stock, are exercisable immediately and will expire when exercised in full.
On September 21, 2023, we sold, in a private offering (“Private Offering”) an aggregate of (i) 6,852,811 units (“Common Units”), each comprised of (a) one share of our Class A common stock and (b) a warrant (“Common Warrant”) to purchase one and one half shares of Class A Common Stock, and (ii) 503,058 units (the “Prefunded Units”), each comprised of (a) a prefunded warrant (“2023 Prefunded Warrant”) to purchase one share of Class A Common Stock, and (b) a Common Warrant. The Common Units were sold at a purchase price of $1.4275 per unit, and the 2023 Prefunded Units were sold at a purchase price of $1.4265 per unit, for aggregate gross proceeds of approximately $10.5 million, before deducting offering expenses. Each Common Warrant was exercisable until July 31, 2024, the date which was 30 trading days after the clearance by the FDA of EluPro, at an exercise price per share of $1.4275. All Common Warrants
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were exercised by such date yielding exercise proceeds of $15.7 million in 2024. Certain of these exercises ultimately resulted in their conversion to 2023 Prefunded Warrants. Each 2023 Prefunded Warrant is exercisable at any time at a nominal exercise price per share of $0.001 (with the remainder of the exercise price per share of Class A Common Stock having been prefunded to us).
On October 1, 2025, in connection with and through the proceeds of the sale of the Company’s CIED Business described in Note 2 to the condensed consolidated financial statements, we fully repaid the SWK Loan Facility as required by the terms of the credit agreement. As of such date, the outstanding principal, including the accrued exit fee, and accrued interest totaled approximately $26.9 million. The total payment by the Company to SWK in full satisfaction of the debt and termination of the credit agreement was $27.8 million.
Cash Flows for the Six Months ended June 30, 2026 and 2025
Six Months Ended
June 30,
2026
2025
(in thousands)
Net cash provided by (used in):
Operating activities
$
(16,292)
$
(17,109)
Investing activities
(125)
(392)
Financing activities
(37)
12,762
Net decrease in cash and cash equivalents
$
(16,454)
$
(4,739)
Cash Flows From Operating Activities
Net cash used in operating activities for the six months ended June 30, 2026 was $16.3 million compared to $17.1 million for the six months ended June 30, 2025. The decrease was primarily due to a lower operating loss in the current year.
Cash Flows From Investing Activities
Net cash used in investing activities for the six months ended June 30, 2026 was $0.1 million compared to $0.4 million for the six months ended June 30, 2025. The decrease was primarily due to proceeds received from the sale of our Orthobiologics Business during the first quarter of 2026.
Cash Flows From Financing Activities
Net cash used in financing activities for the six months ended June 30, 2026 was less than $0.1 million compared to net cash provided by financing activities of $12.7 million for the six months ended June 30, 2025. The prior year’s cash generation was primarily through the 2025 Registered Offering.
Payoff and Termination of SWK Loan Facility
O n August 10, 2022, we entered into a senior secured term loan facility with SWK Funding LLC (“SWK”), as agent, and other lenders party thereto (as amended and modified subsequent to August 10, 2022, the “SWK Loan Facility”) for an aggregate principal amount of $25 million. On October 1, 2025, in connection with and through the proceeds of the sale of the Company’s CIED Business described in Note 2 to the condensed consolidated financial statements, Elutia fully repaid the SWK Loan Facility as required by the terms of the credit agreement. As of such date, the outstanding principal, including the accrued exit fee, and accrued interest totaled approximately $26.9 million. The total payment by the Company to SWK in full satisfaction of the debt and termination of the credit agreement was $27.8 million.
Ligand Revenue Interest Obligation
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We are also a party to a royalty agreement with Ligand Pharmaceuticals Incorporated (“Ligand”) pursuant to which we have incurred a long-term obligation to Ligand (the “Revenue Interest Obligation”). The Revenue Interest Obligation, as amended in January 2024, requires us to pay Ligand 5.0% of future sales of our CanGaroo, ProxiCor, Tyke and VasCure products, and substantially similar products, such as EluPro, through May 31, 2027, subject to annual minimum payments of $4.4 million.
Effective May 8, 2025, we entered into a subscription agreement and further amendment to the Revenue Interest Obligation with Ligand. Through the amendment, $2.2 million in outstanding royalty obligations (royalty obligations for the fiscal quarters ended December 31, 2024 and March 31, 2025) owed by Elutia to Ligand under the Revenue Interest Obligation as amended were satisfied by the issuance of 1,105,528 shares of Elutia’s Class A common stock to Ligand in a transaction registered with the Securities and Exchange Commission.
On October 1, 2025, in connection with sale of the CIED Business described in Note 2, Ligand and the Company further amended the Amended Revenue Interest Obligation. Such amendment primarily consisted of a consent to the sale of the CIED Business and a release by Ligand of its security and royalty interest in the assets of the CIED Business including EluPro and CanGaroo.
Funding Requirements
As of June 30, 2026, we had cash and cash equivalents of approximately $19.9 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we further expand our product development and clinical and research activities. In addition, we expect to continue to incur significant costs and expenses associated with operating as a public company.
If our available cash balances and cash flow from operations are insufficient to satisfy our liquidity requirements, we may seek to raise additional capital through equity offerings, debt financings, substitution of cash payment obligations with equity or asset sale or other transactions. In the future, we may also seek to preserve existing capital by obtaining waivers, amendments or similar accommodations from our lenders and other obligees. However, such transactions may not be successful, and we may not be able to raise additional equity or debt, sell or license assets or obtain waivers or amendments on acceptable terms, or at all. We may also consider raising additional capital in the future to expand our business, pursue strategic investments or take advantage of financing opportunities. Our present and future funding requirements will depend on many factors, including, among other things:
● the cost of our research and development activities and the cost and timing of commercializing new products or technologies, including NXT-41 and NXT-41x;
● the costs of defending against, or the damages payable in connection with the FiberCel Litigation and VBM Litigation, associated litigation related to indemnity claims by other defendants to the FiberCel Litigation and any other ongoing or future litigation that we are or may be subject to (to the extent above the applicable insurance coverage);
● continued patient, physician and market acceptance of our products;
● the scope, rate of progress and cost of our current and future pre-clinical and clinical studies;
● the cost and timing of expanding our sales and marketing capabilities;
● the cost of filing and prosecuting patent applications and maintaining, defending and enforcing our patent or other intellectual property rights;
● the cost of defending, in litigation or otherwise, any claims that we infringe, misappropriate or otherwise violate third-party patents or other intellectual property rights;
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● the cost and timing of additional regulatory approvals;
● costs associated with any product recall that may occur;
● the effect of competing technological and market developments;
● the expenses we incur in manufacturing and selling our products;
● the extent to which we acquire or invest in products, technologies and businesses in the future, although we may currently have no commitments or agreements relating to any of these types of transactions;
● the costs of operating as a public company; and
● unanticipated general, legal and administrative expenses.
In addition, our operating plans may change as a result of any number of factors, including those set forth above and other factors currently unknown to us, and we may need additional funds sooner than anticipated. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming shares of our common stock and/or declaring dividends. If we raise funds through collaborations, licensing agreements or other strategic alliances, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay the development or commercialization of our products, license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize and reduce marketing, customer support or other resources devoted to our products or cease operations. See our 2025 Annual Report Part I, Item 1A. “Risk Factors — Risks Related to Our Business — Our future capital needs are uncertain and we may need to raise funds in the future, and such funds may not be available on acceptable terms or at all .”
Critical Accounting Policies and Estimates
The preparation of our unaudited condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed the policies and estimates that we believe are critical and require the use of complex judgment in their application in our 2025 Annual Report, and, during the six months ended June 30, 2026, there were no material changes to those previously disclosed.
Recent Accounting Pronouncements
See Note 3, “Recently Issued Accounting Standards,” to our condensed consolidated financial statements included elsewhere in this Quarterly Report for information regarding recently issued accounting pronouncements.