NEXGEL, Inc. Q2 FY2025 earnings call

• Contract manufacturing has seen growth led by increased demand from existing customers and new global corporations, with revenue up 103% YOY. Relationship with Cintas remains strong with SilverSeal in their wound care kits, and reorders began in late Q2. A clinical trial on hydrogels for laser hair removal is complete, waiting for final data. Signed agreement with iRhythm to supply hydrogels for Zio® ECG heart monitor.
• Consumer branded products saw 95% YOY growth. Silly George had new product launches, including 5 new lip gloss shades, lip and eye masks, etc. Kenkoderm expanding product portfolio into eczema solutions. MEDAGEL launched new offerings like SilverSeal wound and burn kit and received Health Canada approval. Expanded partnership with STADA, with $1 million non-dilutive funding and upcoming product launches, including digestive enzyme formulas and skin care solutions.

For the second quarter of 2025, revenue was approximately $2.9 million. Contract manufacturing revenue increased to $863,000 from $425,000 in Q2 2024, a 103% year-over-year increase. Consumer branded products revenue increased 95% year-over-year. Contract manufacturing contributed around 29.76% of total revenue ($863,000 / $2.9 million), while consumer branded products contributed the remaining percentage.

• Remains confident in previously issued guidance for 2025 of $13 million in revenue and achieving positive EBITDA during the year.

• Mild negative impact on margins from tariffs in some products. Concerns about global recession, high interest rates, and their potential impact on the business. Uncertainties regarding delays in projects like AbbVie's.

Q: Congrats on the progress. Just a few. I wanted to just start on the STADA partnership and the additional capital you got. Could you talk a little bit about what you think the market opportunities are for the upcoming launches? And I guess, how does that compare to Histasolv?

A: Yes, so Histasolv is a digestive enzyme targeting histamine sensitivity. The upcoming enzymes, like gluten, dairy, fructose, are in larger markets. Histamine sensitivity affects a smaller percentage of the population. The go-to-market strategy is to build a suite of solutions to enter retail.

Q: I wanted to just start on the STADA partnership and the additional capital you got. Could you talk a little bit about what you think the market opportunities are for the upcoming launches? And I guess, how does that compare to Histasolv?

A: Yes, so Histasolv is a digestive enzyme targeting histamine sensitivity. The upcoming enzymes, like gluten, dairy, fructose, are in larger markets. Histamine sensitivity affects a smaller percentage of the population. The go-to-market strategy is to build a suite of solutions to enter retail.

Q: Congrats on the progress. Just a few. I wanted to just start on the STADA partnership and the additional capital you got. Could you talk a little bit about what you think the market opportunities are for the upcoming launches? And I guess, how does that compare to Histasolv?

A: Yes, so Histasolv is a digestive enzyme targeting histamine sensitivity. The upcoming enzymes, like gluten, dairy, fructose, are in larger markets. Histamine sensitivity affects a smaller percentage of the population. The go-to-market strategy is to build a suite of solutions to enter retail.

Q: I was just going to ask about the AbbVie partnership, but you sort of covered that as kind of waiting for their product to come out because you guys have been talking about that for a while and didn't know where the status was on that.

A: We have. They had some delays in their process with a different vendor. They brought it all in-house. They are pushing ahead with the project and assure me that it is coming out. But those are the opportunities, AbbVie and a couple of others in the pipeline that could be really impactful revenue, millions and millions of dollars.

Q: You mentioned a new product from Silly George that started selling this quarter. Can you tell us more about it?

A: Sure. So Silly George has a line of -- we actually released in Q2 at the very end, a couple of variations on our lashes, a 75 Lash, which is really a Pop-On Lash, but it almost covers the entire eye and then you accent it with the smaller lashes. We also made Focus Packs. The 60 Pack sales are only down about 4%, and we added about 17% or 18% new sales from these packs, plus they have better margins. So that's been very successful.

Q: This is Kirtan. My question is, I know earlier you kind of touch up on the capacity for the manufacturing. So my question is, what is the company currently operating at in terms of both the contract manufacturing as well the branded products?

A: So a lot of our branded products are made by us, so that would be part of our capacity. The capacity down in Texas, they have lots of room to expand because we are waiting for AbbVie. So we obviously are overbuilt down there. And we're probably still below -- well below 20% up in Langhorne to manufacture gel. So capacity is not the issue right now. We just need to keep filling the pipeline and having the business grow as it's been growing.

Q: My next question is regarding the cash position. So I've been noticing that the company is running very close to the operating expenses and been raising cash very diligently through dilution. And I admire that you're not doing any significant dilutions over the years. But my question is, let's say, in case of like a global recession or something like that, given that current events surrounding tariffs and long-term high interest rates, do you -- have you been taking into consideration in case of something like that were to happen? How would the company would be able to survive through that?

A: Yes, you're always thinking about that. I mean, in some ways, I always think a recession is the best time to build the business because you don't -- you're not living in a fantasy world of everything being great. You'd have to cut back your cost, you'd have to reexamine your margins. There's a lot that you have to do if we start to see that slow down, fortunately, we're not seeing that yet. But yes, that is something that we do think about all the time. Fortunately, our consumer products are fairly high margin. So when you have a fairly high-margin business, things like the tariffs, and we've had this discussion when the tariffs first came into play, obviously, 145% tariff with China would be a problem. But when you start talking about 25%, 30% and your cost of goods is about 17%. So you're really kind of raising that 17% up to 21%. You might have to pass a little bit of that on, but it isn't super destructive to the business that has 85% or 83% gross margins. The real cost is in advertising.

Q: If you were to rank maybe a top 3 or top 5 of your partnerships, could you give that to us? Is it something that's already been only things that have been announced? Or are there some things that you're working on that would make your top 3 or 5?

A: Well, there's definitely a couple of things working on, one in particular that would definitely make the top 3. So we always have big fish in the pipeline, whether they come through or not is something that we work on and we hope for, but we definitely have some potential opportunities there. A couple of them that would be in the top 7 and certainly one that would be in the top 3 or 4. So yes, those are there. As of the ones we have right now, they're different. Cintas is a wonderful partnership, very steady, replenishment, a terrific partner. You may have noticed that we just got -- I think we announced that we just got cleared in Canada with SilverSeal. So we'll be having discussions about expanding that relationship, there's a lot to be done there. AbbVie obviously still has huge potential, been disappointing with the delays, but that doesn't mean it's not one of the biggest opportunities, if not the biggest opportunity that's out there. And then there's a lot of steady customers like the Owens & Minor and the iRhythm, and those are all great companies. And we're very excited about STADA. STADA has a wealth of products that if we do well with these first 9 that are coming out or so, then the entire catalog is open to us, and that's pretty exciting, too. So there's a lot of good stuff on the horizon.

Q: Quick question, of the $13 million you project for revenue this year, what percentage of that revenue will be Silly George?

A: Probably $6, $6.5 million.