NEXGEL, Inc. Q4 FY2025 earnings call

• Announcement of closing the transaction to acquire Celularity's degenerative wound segment, a transformational step tripling revenue run rate and immediately accretive to profitability. - Formation of new division BioNX Surgical focused on advanced biomaterials for various areas. - Secured capital led by Sequence LifeScience with $5.5 million investment, convertible notes at $0.60 conversion price and 50% warrant coverage. - Gaining an experienced commercial and scientific team from the acquisition. - Focus on executing and integrating assets to drive commercial growth.

The acquired Celularity's degenerative wound segment triples NEXGEL's revenue run rate. The portfolio includes 6 established regenerative biomaterial products in areas like tendon repair, soft tissue reconstruction, bone regeneration, and wound care. On a pro forma basis, it's expected to approximately triple annual revenue to roughly $35 million. The products are commercial stage with over a decade of clinical use, approved in ~500 hospitals. There are 3 existing 510(k) devices in pipeline with $4.6 million in paid-in capital scheduled for 2026 - 2028. The contribution margin is ~52%, with fixed overhead around $6 - $6.5 million range.

• Pro forma basis expects to approximately triple annual revenue to ~$35 million and be immediately accretive to profitability upon closing. - Company will be profitable on an EBITDA basis in the third quarter (second quarter owning these products). - The deal's convertible note conversion depends on company performance; if above conversion price, it will convert, else need to find a way to repay. - Stock buyback may be considered if company is on solid financial footing and generating cash flow with right circumstances.

• Convertible note can turn ugly if company doesn't perform well and can't maintain profitability, leading to having to repay the money. - Seasonal nature of the product line could impact performance. - Royalties on some new products, like 5% on SPARK project, 3% on ORCHID, and 1% on FUSE, which could affect margins if not managed properly.

Q: Clarify the structure of the deal, including terms of the note.

A: Paid $5.3 million at closing to Celularity, assumed and will pay $2.9 million in back commissions to sales reps who reinvest. Gave Celularity $5 million convertible note, they gave $2.5 million of it to Sequence to settle pre-existing debt, Sequence wrote $3 million cash into the deal. Note is 18-month, 10% coupon convertible note.

Q: How long to integrate assets?

A: Most operations move over seamlessly as it was a separate segment with its own people in Celularity.

Q: Gross margins and EBITDA for 2026?

A: Models show $22 - $23 million revenue could result in $4 - $4.5 million EBITDA, contribution margin ~52%.

Q: 1Q outlook?

A: Seeing recovery in Q1, not a drop off especially in consumer.

Q: Where does NexGelRx play?

A: It's a separate drug delivery program spun out, NEXGEL owns 20% but not affected by the transaction.

Q: Dilutive outstanding shares?

A: About every $1 million, ~2.4 million shares, deal in $12 - $14 million range total raised, around 30 million share area.

Q: Revenue outlook 2 - 3 years out?

A: Hope to get back to pre-2025 levels and beyond with new products like Project SPARK.

Q: Royalties on acquired products?

A: 5% on SPARK, 3% on ORCHID, 1% on FUSE, sunset after 7 years.

Q: Profitability in third quarter?

A: Company will be profitable on an EBITDA basis.

Q: Contribution margin explanation?

A: Contribution margin is COGS plus sales commissions, covering fixed overhead.

Q: R&D for division?

A: NEXGEL will develop new products, with some done in own offices, some with strategic partner Sequence.

Q: Stock buyback contemplation?

A: May be considered if company on solid financial footing and right circumstances.

Q: When do Celularity products start having sales under NEXGEL banner?

A: Effective date was Monday, so as of Monday, sales begin.

Q: Convertible note conversion gaming?

A: Depends on company performance; if above conversion price, converts, else need to repay.

Q: Branding and synergies?

A: Branded as BioNX, existing brands like BIOVANCE and Interfyl recognized. Synergies exist to distribute other products using the sales force.