Nexgel: Questions to Adam Levy | Value Bridge

Archieve - Everything Adam Levy Said

Business Summary

NEXGEL develops and manufactures advanced hydrogels, supplying both branded consumer products and medical-grade contract manufacturing. Its gels are 90% water, biocompatible, and uniquely adhesive, which makes them the default choice for large partners like AbbVie, STADA, and Cintas. Consumer beauty subsidiary Silly George generated $380k in one month on Shopify, with consumer product gross margins of 70–75% and contract manufacturing targets of 35–50%. Cash burn improved from $1.1m in Q2 2024 to $350–400k in Q4, supported by cash reserves of $3.3m. Plant utilization remains in the high teens, leaving significant excess capacity to support growth. Management projects $13m revenue in 2025, with about half from Silly George, while AbbVie’s delayed launch could meaningfully expand scale in 2026.

Catalysts & Milestones

2023 - Halion supply agreement established with meaningful revenue potential

2023 - Strong amblyopia patch adoption following APOS Conference exposure

2024 - MDR compliance in Europe expected, enabling Class 1 device sales and later Class 3 clearance

2024 - Haleon product launch targeted toward year-end

2024 - Cintas revenues expected to begin in Q4 with reorder potential

2025 - Innovative Optics sales to begin mid-year

2025 - STADA second enzyme launch scheduled in Q4

2025 - AbbVie Acoustic device shipments expected Q2, with launch still pending

2026 - AbbVie console launch delayed into early 2026, major revenue inflection if successful

Investment Highlights

• Consumer brands achieve 70–75% gross margins, supporting profitability

• Silly George posted $380k July revenue, nearly half of 2025 projections at $6–6.5m

• Cash burn reduced from $1.1m in Q2 to $350–400k in Q4

• STADA contributing $500k–700k annually with additional enzyme launches ahead

• Contract manufacturing margins range 35–50%, with utilization below 20% allowing scale-up
  
  

Future Growth Drivers

• AbbVie RESONIC and Acoustic device launches, with recurring gel pad usage

• Expansion of STADA enzyme portfolio across multiple digestive indications

• Cintas rollout with nationwide distribution and strong reorder visibility

• Silly George retail expansion into Sephora, Ulta, and large pharmacy chains

• European commercialization enabled by MDR compliance and regulatory approvals
  
  

Risk Factors

• AbbVie launch delayed twice, now targeted for 2026, creating execution risk

• Consumer product growth volatile despite strong $380k monthly sales

• Tariffs at 30–35% manageable, but 150% escalation would force costly relocation

• Cash burn still $350–400k quarterly, requiring continued margin improvement

• Retail expansion risk from poor sell-through or returns hurting brand equity

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Capital Allocation

13/11/2023 Do you still confirm you will not need additional cash to reach profitability next year?

Yes, we do not expect to need cash to reach profitability. Our cash loss last quarter was well below $500,000, and we still have $3.3 million. With our large-company partners, we avoid the long payment terms typical of retail, which helps cash flow.

We project profitability before cash runs out, with a solid cushion. However, if a compelling acquisition or opportunity arose, we might raise financing directly tied to it. As things stand, we do not need cash unless tied to a strategic reason we would announce.

01/04/2024 Have there been revenue synergies from the Kenkoderm acquisition, and has it been accretive?

It has been accretive because we bought a profitable business and improved margins by optimizing advertising. The bigger benefit will come from cross-promotion, which awaits the launch of our updated website, scheduled for early June.

So far, we have also seen interest in Kenkoderm in Europe and among certain U.S. retailers. You may not see revenue from those synergies until later this year, but they are developing.

13/11/2024 What initiatives will you pursue once cash flow positive?

Well, hi Naz, good to hear from you again. That churn is always important. When you're running a public company and you're not cash flow positive, you're playing defense. Becoming cash flow positive allows you to switch over to offense. So there are a lot of things we can do, like thinking about additional acquisitions or expansion. We've always been opportunistic.

We're partly a roll-up strategy, trying to grow our consumer products, while also working with some very large customers right now. Continuing to develop products with them and bringing them on board is really our focus.

12/08/2025 How did the $1 million non-dilutive financing work?

It was structured as an advance against future profits, with no recourse if the partnership is not profitable. It’s similar to how record labels advance artists money to record albums. If the album sells, the label recoups; if not, the artist keeps the advance. Our partner wanted to invest in our nine-product launch without burdening NEXGEL’s profitability. Repayment is capped at a minimum of 5% of profits, with no interest or other obligations. The terms are very favorable.

13/05/2025 Is equity still your primary financing option, or are you considering other instruments like convertible notes?

I do not favor convertible notes, and I avoid debt until we are EBITDA positive. We expect to cross that line soon, and once profitable, financing options open up, such as revolvers. For now, I am focused on reaching EBITDA positive before taking on debt.

13/05/2025 Can current cash reserves sustain operations until you reach EBITDA positive?

Yes, we believe so. If an acquisition or other opportunity arises, we would consider raising money, as we have done before, to support both growth and the balance sheet. For now, we do not see an immediate need for financing.

Competitive Advantage

23/04/2025 What differentiates your hydrogels and why do large companies rely on you?

High water content, biocompatible gel has no real competition, making us the default choice. When AbbVie partnered with us, they admitted they had no plan B. All we needed to do was pass inspections and deliver consistent quality.

Applications are expanding beyond medical uses into areas like body monitoring, aerospace, and even laser hair removal. We are approached with ideas we never anticipated. For example, maintaining cooler airplane wing temperatures during laser treatment or trapping carcinogenic fumes during disinfection are early-stage opportunities we are exploring.

13/05/2025 How does your hydrogel compare to competition in cosmetics?

Our hydrogel is mildly adhesive, not goopy like traditional masks. It is 90% water with hyaluronic acid and vitamin C, delivering moisture for hours while staying in place. This creates a very different user experience. With Silly George’s 300,000 active customer list, we now have a ready channel to introduce hydrogels to the beauty market.

Operations

27/03/2023 Who is responsible for commercialization and supply costs for the Halion product?

They are responsible for all commercialization costs. We simply supply the product.

27/03/2023 Will the CGM Labs joint venture enable more large partnerships like Halion?

I cannot speak for Halion, though we hope to work with them on more projects. Nothing is on the table right now, so we will first focus on delivering successfully. An order of Halion’s size was beyond our previous converting and packaging capacity. While gel production capacity has never been a bottleneck, our operations before the CG deal were too manual and costly for orders of that size.

The CG deal lets us handle large customers, which is key to our growth strategy. Even products like Silverseal and TurfGuard, which we currently outsource for packaging, will flow through CG once upgrades are complete. This JV strengthens our ability to serve larger orders and capture more margin.

27/03/2023 What are your promotional and launch plans for the amblyopia product?

We are fortunate to have Dr. Leonard Nelson, editor of the Journal of Pediatric Ophthalmology and Director of the Wills Institute, as co-developer and spokesperson. The first public presentation is this week at the APOS conference in New York, where we will meet many pediatric ophthalmologists.

Our model is to show them the product, demonstrate its superiority, and enable them to offer it to their patients, effectively becoming our distribution channel. We believe this model can achieve strong market penetration.

27/03/2023 What metrics will you use to evaluate the amblyopia launch?

To clarify, you are asking how we would evaluate the launch of the amblyopia patch. Yes, that is correct.

27/03/2023 How will you evaluate the amblyopia launch?

We will evaluate it like any other product, but we already have many practices lined up through Dr. Nelson’s introductions. The key factor will be patient feedback once the product is offered and used. If parents report positive results, such as children being more comfortable and looking better, that will drive continued use.

We expect to see reorder patterns emerge within 60 to 90 days in early adopting practices. Once that template for success is established, it becomes a matter of execution and scaling the rollout.

13/11/2023 Can you provide an update on development progress for the 510(k) devices?

The main issue delaying 510(k) devices was our inability to manufacture them at scale and low cost with our existing dies and pumps. We have now tested new prototype dies that performed very well, and we are ordering production units. We expect to be manufacturing within 60 to 90 days, after which we will submit for testing and move forward.

Despite delays, we have had many other projects to focus on, but we still consider this an important initiative and will resume as soon as manufacturing is effective.

01/04/2024 How has the amblyopia product launch gone, and are you seeing reorders from doctors

It has been growing, but slowly. We have seen reorder patterns, but one mistake we made was assuming doctors wanted profit margins from in-office sales. Many preferred a simpler model, suggesting patients buy on Amazon.

In the next 10 days, the product will be available on Amazon, allowing doctors to direct patients there. This should improve margins and distribution efficiency, speeding adoption.

01/04/2024 What products will you include in your retail strategy?

At retail, you want to lead with hero products because the wrong product or poor timing can be costly. Initially, we will focus on Kenkoderm, SilverSeal, and hexogels, as they are specialized and have strong traction. Other products may follow later.

01/04/2024 What is the status of the 510(k) medical devices, and what are your 2024 plans for them?

We have pushed those slightly down the priority list because our first mechanization priority is meeting AbbVie and STADA product demand. The equipment needs are clear, but delivery for those partners takes precedence.

That said, we are continuing experiments on sterilization protocols and exploring new opportunities, such as a cataract surgical drape. Development continues, but it is roughly fifth in priority given our current workload.

13/05/2024 After construction and equipment validation, will there be an FDA inspection and what is the timing?

No, probably not. That would be very unlikely. We are a 13485 medical device facility, so ISO inspections are required. The FDA usually only comes sporadically and only if there is a problem. The FDA does not inspect equipment like that for a non-drug facility such as ours.

13/05/2024 Will AbbVie or other partners conduct plant inspections regarding the expansion?

They will conduct their normal yearly inspections. They are required to inspect us just as we inspect them. For example, we recently completed our inspection of STADA’s manufacturing facility for the product they will be shipping to us. Inspections are a regular part of the business and occur all the time. The exact timing varies, but you can always count on regularly scheduled ISO inspections.

13/11/2024 What are the regulatory steps for the laser hair removal study?

That study really has no regulatory requirement. Its main purpose is to show that it suppresses the plume and allows us to commercialize. We'll be able to make claims about plume suppression, reduced patient pain if that endpoint is met, and potentially greater efficacy, which has been a pleasant surprise in early data. We’ll see the full results later this quarter when we release the data.

13/11/2024 Have you started funding the laser hair removal study?

No, the study is being funded by Vanalay. We did not pay anything for it. They are funding it because they want to be our marketing partner and distribute to laser hair removal companies.

10/12/2024 Does Nextel own the Pennsylvania property?

No, we do not own it. One of the first things I did as CEO was negotiate a 20-year lease extension. We now have about 19 or 20 years remaining, so our position is secure. We are not going anywhere in the near future.

23/04/2025 Can you explain how the electron beam accelerator works for hydrogel production?

Electron beam accelerators are widely used, for example in vulcanizing rubber. For hydrogels, we mix polymer, water, and additives in a vat, let it aerate depending on viscosity, then extrude the gel onto a liner with scrim and a top liner. The sheet passes through the accelerator, where energy cross-links the water and polymer. In about one second, the gel goes from liquid to solid without chemical initiators.

23/04/2025 How do you manage marketing and ad spend?

We do much of the analysis internally because profitability in direct-to-consumer products comes from understanding advertising effectiveness. On Shopify, we try to keep spend below 35%, and on Amazon below 15–20%. We constantly refine campaigns, eliminate poor keywords, and adjust targeting.

We also work with agencies that buy media, using specialized teams for each platform. If I find an ad buyer who performs well, I stick with them. Each platform is different: Amazon aggregates audiences and charges access fees, while Meta requires casting a wide net. For niche products like Histosolve with only 3–4% incidence, Meta is less effective. TikTok, meanwhile, requires entirely different strategies.

23/04/2025 How do affiliate platforms differ in promoting your products?

Affiliate platforms place your product in front of potential customers, and their algorithms are strong at identifying the right audience. Each has unique nuances, but success comes from making all of them work together.

13/05/2025 If tariffs increase, would you shift manufacturing to Texas and would it impact other business lines?

Much of the eyelash manufacturing process is manual. We built a new clean room with space for our needs, AbbVie, and other large customers, so we could expand if required. With tariffs now at a more manageable level and cost of goods only 16–17% of the selling price, a 35% tariff is likely manageable. However, if tariffs rise back to 150%, moving production to Texas is an option.

13/05/2025 Would shifting manufacturing to Texas require hiring additional staff or changing the operating base?

Yes, expansion would require more labor for assemblies and related tasks. That cost would offset savings from not paying for cheap labor in China. It is not ideal, but we are planning for different scenarios. Shifting to Texas is currently plan C if tariffs escalate to untenable levels.

13/05/2025 Can you discuss the magnitude of Silly George inventory build following tariffs?

The inventory build happened during the quarter, mainly on pop-on lashes from China, our most popular product. We built enough inventory to buy time and evaluate options. At 30–35% tariffs, we are comfortable. It was only at 145% that we seriously considered alternatives. Hopefully the situation does not escalate again.

12/08/2025 How much manufacturing capacity do you currently have to support more partners?

Driving gel sales is critical to profitability, but plant utilization is still only in the high teens, although much improved from the 4% level when I joined. We can make a lot more gel, so capacity is not the issue. The bottleneck is onboarding new customers, a process that can take 1.5 to 2 years. We continue to feed the pipeline, and as the year progresses, we expect to announce more partnerships. For example, iRhythm recently became a customer. Although we could not issue a press release, we did file an 8-K and can now use their logo in our materials. Several more customers are in the pipeline.

12/08/2025 What is current operating capacity for contract manufacturing and branded products?

Many branded products are produced internally. In Texas, we have substantial excess capacity as we await AbbVie, and in Langhorne, gel manufacturing remains well below 20% utilization. Capacity is not the issue; the focus is on filling the pipeline and continuing growth.

12/08/2025 Do you have plans to expand capacity if growth continues?

Yes. Our Texas facility sits on ample land, and we already expanded there once. There is plenty of acreage for further build-out. Our clean room was also overbuilt with additional space for new equipment. If two or three larger customers ramp within two to three years, we have a plan to expand capacity. It would be a good problem to have, and we know how to build these plants.

12/08/2025 What is the status of NEXDrape and NEXDerm?

We added Kip Crecca to our Scientific Advisory Board to focus on the Drape Program. Initially, we considered developing a surgical incision drape, but it required costly new pumps and dyes. Instead, we pivoted to opportunities like cataract surgical drapes, where we can supply adhesives for elderly patients. This makes us a material supplier, avoiding 510(k) hurdles, and leverages existing markets. We also see strong potential for NEXDerm as a gentle adhesive for IVs, potentially with silver impregnation to reduce MRSA and staph infections. It’s a great idea, but we can only pursue so many projects at once, so resources are focused elsewhere for now.

Competiton

12/08/2025 Are you mainly targeting bigger companies for contract manufacturing?

We serve customers of all sizes, but the larger companies offer the best opportunities because they need medical-grade biocompatible hydrogels for devices undergoing FDA 510(k) review. That’s where our strengths align.

Growth

27/03/2023 What is the market opportunity and future potential of the Halion supply agreement?

There is always a possibility of additional projects, and we have a very strong relationship with their team, but nothing is certain yet. They first approached us in January 2022, and the onboarding process was long, with difficult audits and intense testing. This represents a huge opportunity, though it depends on the product’s success in the consumer market.

We will see a meaningful revenue increase from their first order and projections. The long-term impact depends on commercial success, which is never guaranteed in consumer products. The fact that Halion, a large company, chose us over many alternatives speaks volumes about our platform, and we are very proud of that.

15/05/2023 What feedback are doctors and patients giving on the amblyopia patch?

Feedback from doctors’ offices has been phenomenal. They have thanked us, requested more samples, and told us their patients really like the patches. It is still too early to say whether children are consistently sticking with our patch compared to existing alternatives, but practitioner response has been overwhelmingly positive.

15/05/2023 Are sales concentrated among a few practices or spread across many? Have you received bulk orders?

Yes, depending on practice size, preorders have ranged from 5 boxes to as high as 200. Pediatric ophthalmologists are the key prescribers, and they are the ones choosing between traditional patches and ours. At the APOS Conference in March, 20% to 30% of doctors said this product was exactly what they needed, even describing how they currently use Milk of Magnesia to reduce irritation. For them, our patch would be a godsend. These doctors form our key opinion leaders and distribution base, and we have already taken preorders in anticipation of a June launch.

15/05/2023 Are strong order pools concentrated in certain geographies?

So far, demand is broadly distributed across the U.S. based on contacts from APOS. We came back with about 150 practices showing strong interest, some of them international, including Israel and Italy. Right now, our focus is the U.S., with interest spread across the Midwest, West Coast, and Northeast. It is still too early to identify one region as strongest.

15/05/2023 Are you considering selling hydrogel products in retail pharmacies?

Yes, that is our next focus. We are in discussions about distribution deals with large pharmacies and foreign companies for Europe and beyond. I was deliberately cautious about retail, since moving too early risks poor sell-through and returns that can damage a brand. Now, with three proven hero SKUs that deserve retail placement, and with partners pleased the products are fresh to shelves, we are ready to move into that channel.

13/11/2023 What feedback have you received from physicians on the amblyopia patch, and are patients mainly new or switching?

Feedback so far has been very positive. Doctors are mostly giving it to existing patients, particularly those with severe irritation from other patches, such as red rings or blistering. These patients are now reordering steadily, and adoption is expanding.

The open question is what percentage of patients will switch. The patch is roughly 50% more expensive than cheaper Amazon alternatives. We are studying whether broad adoption occurs because of comfort or whether only patients with the worst irritation drive demand. That will define the market size, and we are gathering physician and patient input before deciding how to allocate resources.

13/11/2023 Have you received inquiries for very large wholesale orders of the amblyopia patch?

Not yet, aside from some large practice orders of around 100 boxes at a time. That is still small overall until many practices adopt. Before hiring an expensive professional sales force, we need to refine our product pitch and strategy. When ready, that will be a key next step.

13/11/2023 SilverSeal showed strong growth, but overall sequential revenue growth was limited. Did any parts of the business decline?

Sequential revenue did not grow much, but SilverSeal grew strongly. Some products are discontinued if they fail to perform, especially those tested on Amazon, which often start with high advertising costs and limited profitability. We monitor advertising ratios and drop products that fail to reach thresholds.

This constant weeding is part of our process. Going forward, SilverSeal’s growth will rely less on Amazon, which is a limited market. The next stage will be retail and international expansion, which is coming soon.

13/05/2024 How has Kenkoderm progressed under NEXGEL compared to 2023 when it was private label?

The main thing is that there have only been pleasant surprises. We thought we could help optimize the advertising, and that has been going very well, with optimization ongoing. As mentioned earlier, we now also have interest in smaller territories and distribution in Europe. These are incremental additions to something we already own.

In addition, we have not yet begun cross-promotion. We are working on an update to our retail website, and once that is completed in June, we will announce to Kenkoderm’s 35,000 e-mail subscribers and 9,000 Facebook followers that we have a sister company. We will offer a 15% discount code and begin cross-promoting between the two companies.

13/05/2024 What feedback are you receiving from trade shows regarding NEXGEL’s technology and possible new verticals?

We have been getting great feedback. There are very interesting companies at early stages for which we are making test rolls, with applications across medical devices. These are not big customers yet, as they order $5,000 to $15,000 worth of gel to run experiments and develop projects.

There seem to be many promising applications for our technology. While most opportunities are still very early stage, a few could end up being very significant.

13/11/2024 What is the status of retail and European distribution expansion?

We have partners in Europe now who are interested in taking products, and I expect some European deals to come through in the first half of 2025, pending regulatory steps. In the U.S., we are in discussions with Walgreens and other large retail operators. Once their planograms are set, I expect SilverSeal to be the first product in U.S. stores sometime in 2025

We are also very close to getting approval for Canada, a smaller market, but it will allow us to sell SilverSeal both on Amazon and at retail there.

13/11/2024 What is the size of the laser hair removal opportunity, and update on the drape project?

As for the drape project, we brought Kip on specifically to advance it. He has interesting ideas for using our adhesive in other drapes that could be simpler to bring to market. Our patented gel application for surgical drapes was one of the reasons he joined, and it’s an early-stage but promising area.

Regarding laser hair removal, I’m embarrassed to say I don’t know the exact size. I do know it’s a very large and growing market, but I don’t have access to precise U.S. data.

10/12/2024 What new platforms is Silly George expanding to?

The first is TikTok and the TikTok Shop, which we recently had approved. We are cautious given the ongoing controversy around TikTok, but if it survives, it is quickly becoming the third core platform. Other beauty and lash brands, including some that sell less than us on Amazon and Shopify, are seeing large volumes there, so it is a place we need to be.

Beyond TikTok, the next logical step is retail. Ultimately, this product should be in stores like Sephora and Ulta, supported by television advertising and co-op marketing. Those are costly commitments, and we will only move forward once we know more about the product’s performance and feel fully confident in that direction.

24/03/2025 How large and broad is your customer pipeline?

We usually work on four or five large opportunities at a time. Right now, we have four progressing well. The onboarding process is long, involving design iterations, testing, and validation runs. Some opportunities have been in the pipeline for over a year, while others are just a few months old. Simpler devices, such as with Innovative Optics, can move faster, while diagnostic applications take longer due to stricter performance requirements and the 510(k) clearance process. Overall, we believe the pipeline is strong.

24/03/2025 How big is the market for Innovative Optics and what is your strategy?

We are partnering with Innovative Optics, who already have relationships with major laser hair removal companies and access to key opinion leaders. Feedback from dermatologists and laser cosmetic practitioners has been very positive. Beyond the primary product, there is strong interest in related items such as a cooling mask for post-procedure care. This product is sterile, gentle, high in water content, and could be sold both in doctors’ offices and used by practitioners immediately after procedures.

23/04/2025 What are AbbVie, Cintas, and Stada contributing to growth?

We projected little from AbbVie in 2025 because their console launch has been repeatedly delayed, now likely by another six months. We maintain biweekly meetings but only expect a few hundred thousand dollars from them this year.

Cintas is significant. We previously made a product called Cool and Soothe, basically our gel without silver, which had strong demand. We expect steady revenue here, though I cannot disclose precise projections. Stada remains at a $500,000–$700,000 run rate with one product, but growth will come as new products launch. A second product is scheduled for October or November, so real revenue impact begins in Q1 2026. Additional five products should follow in Q1 and Q2 2026.

23/04/2025 What role does your small cancer ablation customer play?

They sell a cancer ablation device popular in Japan and China, now FDA approved in the U.S. They are a small customer, generating $200,000–$300,000 annually. They prefer outsourcing gel production to us rather than making it themselves.

13/05/2025 Can you provide more details on the STADA product launch in 4Q and its market opportunity?

The first product was Histasolv, a digestive enzyme. The strategy with STADA is to build a line of digestive enzymes for different indications. Another enzyme will launch in Q4, a third in Q1, and additional products with synergies to Medagel are planned for Q1 and Q2 of 2026.

13/05/2025 Is Histasolv still growing or plateauing, and what strategies are in place to accelerate sales?

Histasolv has grown every month, with last month being the strongest. Meta’s broad targeting is less effective due to low overall incidence of histamine sensitivity. Platforms like Amazon work better since audiences are more targeted. TikTok was identified as a major opportunity, but we paused due to regulatory uncertainty. Alternatives like WebMD are underway, and we will revisit TikTok once there is clarity.

13/05/2025 After owning Silly George for about a year, are there optimizations left to grow margins or is it mainly about launches?

Margins will continue to grow. In Q1 we saw the largest margin increase despite lower sales than Q3 or Q4. Early on we tested different strategies, some effective and some wasteful. Now, optimizations are showing results. Silly George’s profitability potential is significant, and we are only scratching the surface.

13/05/2025 What is the market opportunity for the laser hair removal application,w and what is your strategy?

It is a large and growing market, though I cannot give an exact size since detailed data is costly. Major players like Removery have shown interest. The carcinogenic plume is a serious hazard, especially for practitioners. OSHA is starting to mandate plume control. Our study should demonstrate that we are the most effective and cost-efficient solution, which presents a significant opportunity.

13/05/2025 Did Silly George’s Q1 revenue decline reflect broader market seasonality, and is it still gaining share?

We saw only a modest seasonal decline from Q4 to Q1, less than in prior years. It was also the most profitable quarter despite not being the largest. We are not seeing consumer weakness at this point, though future macroeconomic conditions could change that.

13/05/2025 Should Silly George improve seasonally in Q2–Q4, and what new products are planned?

Yes, historically sales strengthen into Q2, Q3, and the holiday season. Last year was boosted by pop-ons, and we now have new launches lined up: focus packs of lashes, three-quarter lashes, five lip gloss shades, a lip mask, and our own hydrogel under-eyes. These products should drive further growth in Q3 and Q4.

12/08/2025 What are the market opportunities for upcoming enzyme launches compared to Histasolv?

Histasolv is a digestive enzyme targeting histamine sensitivity, a condition that affects about 2.5% to 3% of the population. It is already a large product in Europe, generating over $25 million annually, and it is growing nicely for us here. However, the bigger opportunities lie ahead with enzymes for gluten, dairy, and fructose, along with an extra-strength vegan version of Histasolv. These represent much larger markets. Building out a suite of solutions also strengthens our ability to pursue retail distribution, as it is difficult to contemplate retail with only one product.

12/08/2025 What new Silly George products have been launched this quarter?

At the end of Q2, we released new lash variations, including a 75 Lash that nearly covers the full eye, and Focus Packs of 24 lashes of the same size, based on customer feedback. These have been very successful, adding 17% to 18% in new sales, with only about a 4% decline in 60 Pack sales. Focus Packs also carry higher margins. Looking ahead, we will launch five shades of lip gloss, a lip and eye mask, under-eye masks made from our hydrogel, and a new mascara. These products will roll out through Q3 and Q4, and we are excited about their potential.

Financials

27/03/2023 Why did gross margins decline nearly 20% from 3Q to 4Q despite only a 4% drop in consumer branded sales?

We need to dig into that because you are talking about smaller size numbers compared to the aberrations that could occur. Some of the contract manufacturing margins differ by product type, which contributed to the decline, along with reduced Amazon sales. Amazon has become a very high margin business for us, much more than it was in the first and second quarter. We have optimized our advertising spend there to where we are approaching 74–75% margin on our hero Amazon products.

So while a decline in Q1 would not have caused a dramatic margin shift, in Q3 and Q4 it did, since those products now represent our most profitable part of the business.

12/03/2024 What are margins in the 3 segments and how will mix affect gross margins?

In contract manufacturing, our target gross margin is 45% to 55%, averaging around 50%. The main constraint has been operating at very low capacity, which historically skewed fixed costs and at times resulted in negative margins. At CG Labs, our converting and packaging business, margins range from 25% to 40%, depending on whether the product is medical device or consumer.

In our branded consumer products, gross margins are typically 70% to 75%. This is before marketing costs, but reflects cost of goods relative to our Amazon selling price.

01/04/2024 Do you have enough cash runway to fund large orders from AbbVie and STADA Health given your balance sheet?

Actually, the opposite of your concern is true. Our biggest challenge with cash flow is retail, where payment terms can be slow. With multinationals like AbbVie, Medtronic, and Owens & Minor, payment is extremely fast since they have financing arms. We have even been offered early payment on deposits.

So, for a point or two, these companies are eager to pay quickly. The real concern arises with retail partners, not with these large multinational accounts.

13/11/2024 How will gross margins evolve in 2025 as volumes increase?

That is a great question. Thank you for the compliment on gross margin improvement, though it is not entirely accurate in Q3. The margins you see are skewed by the explosion in Silly George, and much of that improvement is offset by higher sales and marketing spend that pushed SG&A up.

Consumer products report gross margins of 85% to 87% because direct-to-consumer marketing is below the line as advertising. Contract manufacturing is different. The real improvement will come in Q4 as underutilized facilities like ours generate revenue with little added expense beyond materials. Salaries and facilities are already paid, so bringing Cintas and AbbVie on board in Q4 and Q1 will drive larger effects in reducing losses and improving cash flow.

13/11/2024 What contract manufacturing margins do you expect in 2025?

Segregating gross margins, we project a range of 35% to 45% at our Texas facility and 40% to 50% at Langhorne on the medical device side. These ranges assume we are covering facility and personnel costs. Since those are already in place, every incremental dollar of revenue in 2025 should contribute more strongly to reducing losses. That is why we are bullish on achieving cash flow positive.

23/04/2025 What was Q4 cash burn and how is it trending?

Our Q4 EBITDA cash burn was about $350,000 to $400,000, down from $1.1 million in Q2 last year. As the company grows, cash burn continues to decline. The pace depends partly on acquisitions. Last year, we did three raises: after acquiring KencoDerm, after acquiring Silly George, and again when Silly George’s growth accelerated. We can reach breakeven without another raise, but we will weigh opportunities carefully, so I am not ruling it out.

23/04/2025 How do margins vary across product lines?

Margins differ between contract manufacturing and consumer products. We posted about 47% gross margin in Q3 and Q4, but that was skewed by Silly George, where cost of goods is only 16% and most expenses sit below the line in advertising and marketing.

For contract manufacturing at Langhorne, our target is 40–50% margin. In Texas, for converting and packaging, we aim for 35–45% depending on whether it is a medical device or consumer product. Consumer products are managed by contribution margin, including marketing and advertising, with a target of 15–20%, ideally 25%. To offset skew, we reclassified Amazon sales commission fees above the line as cost of goods. Ultimately, margins will depend on which side grows faster.

Outlook & Guidance

27/03/2023 How confident are you in the 2023 fifty-fifty revenue split between branded products and contract manufacturing?

That mix is more relevant to Q1 and perhaps the first half of Q2. With new higher margin products like amblyopia launching in Q3 and Q4, we expect the mix to improve beyond fifty-fifty. It could move toward sixty-forty as the year progresses. We are confident in that because our product release schedule supports it.

15/05/2023 What drives confidence in $1 million Q2 guidance, and do CG Labs contracts contribute?

We are very confident because we are already halfway through the quarter and see strong trends on Amazon as well as existing contracts and orders. Sales with CG Labs no longer count toward our revenues. The $1 million includes consolidated sales from CG, plus a substantial increase in our own sales. However, we also back out one of NEXGEL’s two largest customers, since those sales no longer count for us.

15/05/2023 How will COGS and gross margin improve across Q2–Q4?

You will see costs improve dramatically starting in Q2, and the impact will really accelerate in Q3 and Q4. One driver is our strategy of giving away higher-priced samples, especially for amblyopia, to generate doctor and patient interest. We also seed Amazon sales with free samples. As a result, we manufactured a lot of product in Q1, some of which will be reflected in Q2 as cost of goods without revenue. That investment should pay off in stronger adoption and margins later in the year.

13/11/2023 Can you discuss the market opportunity and potential economics from the AbbVie RESONIC supply agreement in 2024?

We are under NDA with AbbVie, so I cannot share their forecast, nor are we in control of their launch. What I can say is you could not ask for a better partner for this type of product. If AbbVie is successful, it represents extremely significant and impactful revenue for us.

13/11/2023 Any updates or timelines on the Haleon product launch announced earlier this year?

That product is further off than AbbVie’s. Expect an update around mid-2024, with their target launch still toward the end of 2024, which has always been our guidance.

13/11/2023 With such a transformative 2023, what do you see as the most significant strategic growth driver in 2024?

Unquestionably AbbVie. There will be other good developments, but AbbVie is clearly the most important and visible driver.

13/11/2023 How much of your revenue could AbbVie represent?

It could be very significant. AbbVie paid about $550 million for this product. While I have no direct knowledge due to NDA, I cannot imagine them launching weakly with that level of investment. If they execute as expected, it is by far our biggest opportunity.

13/11/2023 When could retail launches for SilverSeal and other products occur?

It is reasonable to expect mid-summer. Retailers follow their own process, but our meetings have gone extremely well, and interest is strong across three to four hero products, not just SilverSeal. As we gain more clarity, we will provide updates on the next quarterly call about timing for market entry.

13/11/2023 Given rising accounts receivable and inventory investment, should we expect sequential growth in Q4?

We do not provide quarterly guidance. You will continue to see very strong growth overall, but large customers come in periodically, so growth looks more like a staircase than a flat line. This quarter was relatively flat, but as new customers and products are added, you will see large jumps. That is the pattern you should expect going forward.

12/03/2024 Which segment will drive the biggest revenue impact in 2023–2025?

In the short term, we believe white label will be the largest driver, primarily due to the AbbVie Brazonic machine opportunity. That said, consumer products can deliver explosive growth if a product gains traction or a market develops quickly. We plan to release Vistata products in the U.S. that we see as having strong potential.

We generally do not build significant new product contributions into our numbers because of the unpredictable nature of consumer products. Meanwhile, at CG converting and packaging, we have been approached by several customers with potentially very large opportunities. Overall, we see strong growth potential across all three segments, though it is hard to say which will ultimately dominate.

01/04/2024 When do you expect to be MDR compliant in Europe and start selling products overseas?

We have already gone through several pre-inspections, and the final inspection is scheduled for late May or early June. At that point, we expect to be MDR compliant, which will allow us to release all of our Class 1 devices as self-certified. Some Class 3 devices, like SilverSeal, might take longer, with clearance targeted by year-end.

That milestone will start the flow of products into Europe, where we are seeing significant interest from various parties.

01/04/2024 When can we expect the company to achieve positive cash flow?

That is one of our primary objectives. We have had to spend on MDR initiatives and expansion, but positive cash flow is coming. Stay tuned.

01/04/2024 Will there be revenue recognition in 2024 from AbbVie’s planned launch of the resonic device?

Delivery is set for the end of 2024, so there will be some revenue that year. The first full quarter of significant revenue should be Q1 2025, but preorders will bring revenue in Q4 2024.

14/08/2024 Silly George posted $380k Shopify revenue in July. Will this impact H2 if growth continues?

Consumer products are unpredictable, but right now the results are very strong. Our guidance was set when the run rate was lower, and that run rate continues to grow. We are increasing spend because we believe the product line has an excellent chance to keep expanding and become an outstanding acquisition.

Yes, if Silly George maintains its pace, we should perform very well in the second half. Consumer products always carry some risk, but momentum is clearly positive.

14/08/2024 When should revenues from Cintas begin, and what scale do you expect?

Revenue from Cintas will start in Q4. Orders for the gel required for CG converting and packaging have already been placed, and that gel is in production. Products will ship in Q4. This is critical for reaching cash flow breakeven because, while consumer revenues are strong, contract manufacturing dollars contribute nearly three times as much to the bottom line given our fixed cost structure.

The Cintas opportunity will begin in Q4 at multiple hundreds of thousands of dollars and continue with a reorder pattern. It will be significant revenue, alongside another large customer we recently onboarded.

14/08/2024 What is the status and expected timing of AbbVie revenues?

We communicate with AbbVie regularly, though less since the design lock was completed. Our initial expectation was Q3 revenue, but AbbVie delayed the console launch by six months. That shifts our start into Q1, with a soft launch then.

Revenues will begin in Q1, ramp further in Q2, and reach full launch in Q3. These revenues will be meaningful and accretive to our bottom line.

14/08/2024 How do you expect Silly George to evolve with Amazon, and what are the gross margin implications?

It is difficult to predict exactly how Amazon will affect Shopify sales, since I have never seen a product grow this large on Shopify before moving to Amazon. Overall, Amazon should be accretive, but we do not yet know if sales there will cannibalize Shopify by 25% or 50%.

We target similar margins on both platforms. The key lever is advertising cost. Amazon allows us to operate with a lower advertising cost structure, which offsets their commission. This makes margins comparable across both channels, leaving us agnostic to where customers purchase. The only uncertainty is the degree of cannibalization.

14/08/2024 Can you share baseline expectations for AbbVie RESONIC pricing and treatment volume?

We cannot disclose internal projections due to NDA restrictions, and treatment volumes will depend on machine adoption. Each procedure uses large 8x8 pads, at least two per treatment. Based on AbbVie’s packaging choice, pads are priced between $3.50 and $5 each, meaning $7 to $10 per treatment.

14/08/2024 What gross margins do you expect from AbbVie RESONIC sales?

Margins flow through two levels. CG converting and packaging will operate like a medical device contract manufacturer, with margins in the 30% to 40% range. Because they also purchase gel from us, we capture additional margin on that input.
It is reasonable to expect overall gross margin greater than 50%.

13/11/2024 What do you expect from Silly George during the holiday season?

On laser hair removal, we think revenues could start as soon as the first half of next year, once the study results are released. Regarding Silly George, this is our first season with the new products heading into Christmas. Historically, November has been their best sales month, and they’ve seen a strong holiday boost.

One reason I've been cautious on Q4 guidance is because we’ve never done this before. It could be very big, moderately big, or something in between. I'm not 100% sure, but we are gearing up for a very strong Black Friday and Christmas season.

13/11/2024 What is the rollout cadence for Cintas in 2025?

Cintas distributes to over 1 million businesses, so the reach is very broad. We already supply them with a different product for medical kits, so we have an idea of how it will sell. Revenue will be significant, and Cintas will likely become our largest or second-largest customer.

Beyond revenue, the visibility is valuable. If employees use SilverSeal at work and see its benefits firsthand, they are more likely to purchase it at home through Amazon. Both the distribution scale and the brand exposure are important benefits for us.

24/03/2025 When will you reach positive adjusted EBITDA?

On an adjusted EBITDA basis, which reflects actual cash outflows, we expect to get there quickly. We had a $240,000 one-time event in Q4, but otherwise we see growth ahead. Q1 is traditionally our weakest quarter, yet it should still be strong, with improvement over Q4 and Q3. By Q2, we expect new customers to ramp up and drive us closer to break-even.

24/03/2025 When will you start selling Innovative Optics products?

We expect to begin selling around mid-year. Regulatory requirements are minimal, so as long as we can present a strong value proposition, this should become accretive for us in 2025.

24/03/2025 What is the status of the AbbVie Acoustic device launch?

AbbVie is on schedule as previously discussed. We will ship product in Q2 to meet their initial orders, and we are already receiving Q1 orders as planned. Their actual launch has not yet started, and while we believe they have a solid plan, they do not include us in every detail of their go-to-market strategy. Our responsibility is to be ready to supply product according to their timeline.

13/05/2025 How much revenue was included from AbbVie and does the delay affect guidance?

We did not include a large amount from AbbVie since it is not under our control. The revenue tied to AbbVie was relatively minor and should not affect us meeting our $13 million projection.

13/05/2025 Is the EBITDA target for a quarter or the full year?

Yes, it is on a quarterly basis. Given our growth and the stickiness of our contract and white-label business, once we cross into EBITDA positive, I expect us to remain there. Fixed costs are covered, and I do not see us reverting to losses after achieving profitability.

13/05/2025 What is AbbVie’s baseline revenue run rate and your remaining water gel capacity?

AbbVie planned to follow a model similar to CoolSculpt, targeting 900 machines per year. The launch was delayed from July 2024 to early 2025, and now into early 2026. Each procedure requires at least two of our gel pads, so the math scales quickly if AbbVie deploys as planned. This would bring significant volume and improve our capacity utilization. For now, we have sufficient space, and needing more capacity would be a good problem to have.

12/08/2025 When could you enter the retail market, and will you consolidate brands?

Each brand has its own identity based on the solutions and markets it serves, so combining something like wound care or blister products with Silly George Beauty does not make sense. For example, STADA Health products are sold under the MetaGel brand store, which works in that context, but Silly George remains separate. On retail, we are in discussions with several large retailers, mainly on a private label basis. SilverSeal has drawn the most interest. However, entering retail with just one product is risky and requires heavy advertising support. Realistically, we are probably 8 to 10 months away from anything significant on shelves, given the length of the planogram process.

12/08/2025 What is the revenue opportunity from the iRhythm partnership?

While I cannot disclose unit numbers due to an NDA, I can say that most large medical device customer opportunities fall in the $300,000 to $800,000, or up to $1 million per year range. Companies like Owens & Minor and iRhythm fit that profile. Beyond that, some partnerships could be transformative, such as projects where we are effectively the razor blade in the device. The AbbVie project is one of those, although it has been delayed a few times. I am in regular contact with AbbVie, and they assure me the project is progressing. Those types of opportunities could generate millions of dollars in revenue.

12/08/2025 What is the status of the AbbVie partnership?

AbbVie experienced delays with a separate vendor working on their console, unrelated to us. They terminated that vendor and brought the work in-house. I remain in close contact, as this project is critical. Originally, we expected it to be in full swing by now, but we have not yet started. AbbVie assures us they are back on track with the revised timeline, and things are progressing. Fingers crossed.

12/08/2025 When do you expect AbbVie’s product launch?

AbbVie indicated a 10- to 12-month delay starting from Q1 last year, so I now expect the launch in Q1 2026. There may be small orders before then, but realistically this is a 2026 event. The timeline has already slipped twice. When they first approached us in 2022, the target was July 2024, and we even built a facility with that in mind. Despite the frustration, AbbVie has committed $550 million to the device, which gives me confidence the product will launch.

12/08/2025 How are Silly George sales trending this quarter?

Sales remain very strong. July was our biggest month of the year so far. We are not seeing consumer weakness despite broader economic concerns. While Q4 is our biggest seasonal period, back-to-school is also strong. We hope to carry this momentum through the rest of Q3 and into Q4 with the benefit of new product launches.

12/08/2025 How would NEXGEL handle a recession or long-term high interest rates?

A recession forces discipline, and I believe it can be the best time to build. We would cut costs and reexamine margins if needed. Fortunately, we are not seeing slowdown yet. Our consumer products have very high margins, typically 83% to 85%. Even a 25% to 30% tariff only raises cost of goods from 17% to about 21%. Some of that can be passed on without serious damage. The biggest expense pressure is advertising, not tariffs.

12/08/2025 Which partnerships rank in your top three to five?

We always have large opportunities in the pipeline, and at least one under development would rank in the top three if finalized. Among existing partnerships, Cintas is a strong, steady partner with replenishment demand. We recently gained Canadian clearance for SilverSeal, which could expand that relationship. AbbVie remains a major opportunity despite delays, and steady accounts like Owens & Minor and iRhythm are important. STADA is also exciting; if the first nine products perform well, their full catalog could open to us.

12/08/2025 What percentage of projected 2025 revenue will be from Silly George?

Out of the $13 million projected for this year, about $6 to $6.5 million, nearly half, will come from Silly George. The brand is performing very well.

Risks & Macro

23/04/2025 How resilient are your products in a downturn?

That is hard to predict, since our consumer products have only been out for about four years and we have not faced a recession. Contract manufacturing should be stable, as medical procedures continue even in downturns. Beauty and cosmetics, such as Silly George, have resilience, and products like bandages from Metagel should also remain steady.

I have been through recessions with previous companies, but not with these. Until it happens, you cannot know for certain, so I cannot claim full visibility.

12/08/2025 How have tariffs impacted NEXGEL?

The impact has been mixed. On the negative side, there has been some mild margin pressure on Silly George and other products sourced overseas, although not as bad as feared. On the positive side, we are seeing greater interest in our gels from domestic companies seeking alternatives. This interest began in Q1, so it has not yet translated into significant revenues for Q2, but we expect conversions from these customers to benefit us in Q3, Q4, and into Q1 of next year.

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Sources

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