Thank you for joining us here with our interim results. First ones for our company as a public company. So obviously, we have our regular disclaimers, which I'm sure everybody likes to read, so I'll leave them there for about half an hour. Let's move on a little bit. For those who don't know me, I'll give you a bit of my background. I'm Mike Griffiths . I'm the CEO and one of the founders of AOTI. I've been about thirty-seven years in the med tech field. Started off in respiratory and critical care ventilation. Obviously from the U.K. here, but actually moved back in nineteen ninety. Was relocated to the States, with Puritan Bennett in the ventilator field. Worked my way up that company as it got acquired various times.
And then ultimately left and formed eVent Medical , which was a startup venture based in Galway, Ireland, in the intensive care and critical care ventilator field. So I have a broad background working with, you know, larger companies, working my way, you know, marketing, market releases, and then doing my own startup with eVent Medical , that we exited in 2006, prior to getting involved with AOTI. Jayesh, would you like to introduce yourself?
Thanks, Mike.
Yeah.
Hi, everyone, I'm Jayesh Pankhania . I'm CFO of AOTI. I've been a finance professional for over 25 years, with most of my experience gained in large listed and private businesses in the industrial space. About seven years ago, I started to help smaller companies scale, and my most relevant experience was CFO of Horizon Discovery PLC, which was also a listed business about the same size as AOTI, where I helped redevelop that strategy and prepared the business for a NASDAQ listing, but then ultimately sold the business to PerkinElmer for about GBP 300 million. I joined AOTI about three months ago, and really have enjoyed it here in that time.
What attracted me to the business was its strong track record of growth, its really supportive and experienced board, and had dinner with this fella, and he seemed like a fun guy to work with.
Yet to be seen, yeah? Okay, thanks, Jayesh. We're gonna do just a little corporate overview of the company and what we do, because it may be somewhat new to some of you. Obviously, then, the bulk then will be focusing on the financial review with our mid-year results, and then some conclusions and the opportunity for some Q&A. We are in the field of helping all people with chronic disease, and particularly chronic wounds, get back to living their life to the fullest. What's unique about our therapy is, we're not just another wound care management, we're a wound healing company that focuses on sustained, durable healing. It's somewhat of a differentiator.
Our product, our leading product, our Topical Wound Oxygen therapy, is the only multimodality therapy, and we'll explain in a second what we mean by multimodality, that utilizes oxygen to help heal these non-healing wounds, and that uniqueness has a lot of IP protection around it and barriers to entry. It consists predominantly of a controller unit that takes the oxygen and controls the delivery of the therapy, a disposable chamber that goes either over the limb or over the wound on the body, and what's unique about this is all these therapies are both CE marked and FDA 510(k) for the same indications, and pretty much everywhere else around the world, which is all acute and chronic wounds. Now, when we talk about chronic wounds, our focus predominantly at this point has been on diabetic foot ulcers.
Sadly, as you know, diabetes is growing at alarming rates around the world, with a vast, you know, majority of the world population having a prevalence of about 10%. About a third of all diabetics in their lifetime, due to the disease and the ravages it has on your cardiovascular system and your nerves, result in developing diabetic foot ulcers. These are ulcers predominantly on the feet. About half of those get infected, and actually the number one reason for a hospitalization of someone with diabetes is a diabetic foot ulcer that has become infected. About 20%, sadly, don't heal and lead to amputation because infections get worse.
If you have a diabetic foot ulcer, if you looked at your mortality like we measure cancer, the five-year mortality for someone with a diabetic foot ulcer is about the same as the average of all cancers. If that leads then to a minor amputation, which is half your foot or a major amputation, that increases to up to about 50% mortality in five years. So it really has an incredible effect, both on patients' quality and quantity of life, obviously on healthcare resources, because of hospitalizations, and even on their length of life. The most alarming stat there is at the bottom, we spend in diabetic foot care in the U.S., about $80 billion, which is nearly exactly what we spend on cancer care.
It consumes as much healthcare resources as cancer care, and most people have never heard of a diabetic foot ulcer. Now, on the right-hand side, we have the other types of wounds we're focused on at the moment, which are venous leg ulcers. These are ulcers on the leg, nothing to do with diabetes, due to the venous side, many cases due to older age and lifestyle. When these ulcers occur, they tend not to move to acute stages of infection as quickly, but they do not heal, and these patients suffer in pain for decades. And as I said, about 60% of them only 60% heal at 12 weeks, but they have a 75% reoccurrence. So a very devastating disease that consumes enormous resources and suffering for the patients over longer periods of times.
So these areas we're focused on today. So what does our therapy do? Well, Topical Wound Oxygen, it's in the name. It provides oxygen under pressure to the wound, and all wounds that aren't healing are what they call hypoxic. They're lacking oxygen for various reasons, but that low levels of oxygen means the body's immune functions can't take on locally any burden, any infection, and the wounds get stuck in that inflammatory phase. So what we do is we take oxygen under pressure, and in the chamber that I just showed you, that goes around the limb or on the body, we have pressurized oxygen that diffuses oxygen into the wound tissue, overcoming these oxygen deficits. We combined it then, and this is the multimodality, with non-contact cyclical compression. So we cycle the pressure of that gas up and down.
That compresses and relaxes the limb, which helps reduce swelling and edema and mobilize fluids up and down the limb. And then we also add humidity to maintain an ideal moist wound healing environment. And those are the things we have protected for our IP, and it creates enormous barriers of entry. And as I said, we're cleared for all acute and chronic wound types, although we're focused very much on DFUs and VLUs at the moment. The other thing that separates us is our therapy elicits such strong healing, such durable healing, that we're able, in state-of-the-art clinical trials, and our randomized trial here on the left, was published in the leading journal in diabetes in the world, Diabetes Care.
It showed we're not only six times more likely to heal the wounds, which is great, but we kept them healed, so they had sixfold less reoccurrence at 12 months, and that's due to the quality of the tissue, the collagen, and the blood supply feeding it, so we followed up with a large real-world study to see what does that mean? You know, what impact does that have long term? And the impact we showed was if they utilized our therapy, that they would have over 80% reduction in those patients being hospitalized and over 70% reduction in the patients being amputated, which has obviously profound impact on the patient, the caregivers, resources, but also on the payers, because the largest costs obviously are related to hospitalizations and amputations.
This really is unique as a product, the only product proven to reduce hospitalizations and amputations in DFUs. The other thing that's unique about our product is, unlike everything else in wound care, that these are applied, or pretty much everything else, is these are applied in clinic or in the hospital or in a facility. Ours is ordered, but then we set up the patients, and the patients apply the therapy at home to themselves. So it's an at-home therapy. And this allows us to do a number of things. The vast majority of patients tend to be comorbid, and many of them are in low socioeconomic minority populations. This helps improve access to care, and by doing that, improves health equity. We, as a company, are very patient-centric.
When we get orders to set up a patient, we go to the house, we train them, we stay with them to encourage them to use the therapy, because obviously, compliance or engagement is critical. And we've expanded that more recently with our Eyes on the Wound engaged outcome. That allowed us to actually monitor patients at home to show that they're using the therapy, engage with them proactively if they're not, so they're compliant, and more importantly, provide that information back to payers, who only want to pay for things if the patients use them. That's quite logical. So we're able to close that loop, with a home care therapy applied by the patients. And if we do that, if the patients use it and the physicians do basic standard care, this is an adjunctive therapy to standard care, then we get these longer, more sustainable healing outcomes.
So we're trying to prove to patients outcomes, both patients and payers, not just wound management. Now, just at the end of 2022 and going into 2023, we made a bolt-on acquisition of a unique negative pressure device that really is quite differentiating. We added to this to our portfolio because it really was complementary to our story and allowed us to open doors and improve access to providers, because as we all know, negative pressure is the leading used modality in all chronic wound care. This is a unique and differentiated product because it really crosses the border between a hospital-type negative pressure and what exists now in the disposable markets, you know, for the home care environment. So it has most of the horsepower of a hospital device, with much better horsepower than the existing home care devices.
In a disposable platform, it has a unique pump, so it can actually be used on multiple patients, potentially, so a longer life disposable, and it really allows us to open up access, but as you can imagine, has potential in that disposable market segment to grow as well. We bought the company, we incorporated the manufacturing into our Galway facility, we did some pilot launches, and we were waiting primarily on FDA clearance to include indications into the home, because originally it only had facility clearance, which was what we already had on the CE Mark. Once we received that, we then was able to proceed earlier this year with our full launch into the U.S. marketplace and the international marketplace. This is a really good product to transition patients quicker from facilities to home or to less acute settings.
So obviously, it has a strong health economic value proposition as well. So where we are today, we have what we feel are our key pillars in place for success. You know, we are a high-growth, highly profitable med tech company in a $12 billion advanced wound care segment, so an established segment. Our outcomes from our topical wound oxygen therapy are transformative. You know, the sustained outcomes with clinical trials demonstrating reduction in recurrence, hospitalizations, and amputations do not exist in any other product in the space. We have a complementary, best-in-class, disposable negative pressure that helps open doors, but also, you know, on itself is a great product to have. An exceptional level of clinical evidence that allows us to have a strong health equity proposition and help make a meaningful difference on the inequalities that exist today.
We have established and keep building on our experienced team in chronic care, and also very uniquely, unlike most companies in the wound care space, again, are selling to various facilities or wound care centers. We are in the patient's home, and in the U.S., that means what we call a durable medical equipment provider. So when we receive orders from the providers, from the physicians, we go to the patient's home, we set them up, we manage the patients, and we bill the insurers. So we own the whole value chain. It also gives us opportunities then to do more data capture and to do more outcome management for these patients.
So when we talk to a payer, to insurance, we're talking about how we can manage outcomes and reduce costs, not just another service or another product they pay for, not knowing what the impact it may have. As you know, it's just under three months ago that we went for our IPO successfully here on the AIM market. The logic here was to allow us to accelerate and continue building out our sales teams and our go-to-market channels domestically and internationally, to invest in raising awareness at conferences, trade shows, et cetera, et cetera, about to drive adoption of the product.
We also want to expand the evidence on the broader indications, particularly in VLUs, where we have good controlled studies, but wanted to do another state-of-the-art RCT, and then also to pay down debt and allow us then to have the ability, if we wanted to look at future merger and acquisition opportunities. From a market access and commercialization, we really broke down our business into phases. Phase one is complete. This is our traditional business in the U.S. For a number of years, we've shown consistent growth, predominantly in the Veterans Administration, and that's a sector of about nine million enrollees under the veterans care, an integrated network, a little bit like a mini NHS in some ways.
But also in New York State Medicaid, and for those of you, Medicaid is a sector of U.S. healthcare, for people of lower income or disabilities, and it accounts for close to 100 million enrollees at any one time. The number of patients is way bigger than Medicare, to the over 65. We focus on that sector predominantly because it's managed care. We can now go to those payers state by state, insurer by insurer, and build up awareness of our therapy, of the cost savings and the outcome benefits, and then build coverage from state by state across the U.S.
Phase three is where we will ultimately gain broader coverage with CMS, which is Medicare, once CMS make their determination for coverage, which is a process we can't control, but we are confident with the level of evidence it should be a positive process, so we are now in the middle of phase two, expanding the business, growing with expansion into more Medicaid states, which will only be accelerated when Medicare comes down the pike, so just a few operational highlights before we pass it over to Jayesh, who will get into the details of the finances, so as we outlined in our announcement, we had robust performance, and I think we've progressed very well towards our strategy. Increasing market penetration. We've seen growth across all areas of the business, and particularly proportionately more in the managed Medicaid sector.
The managed Medicaid sector is reimbursed at a higher rate in the U.S. and the VA. So as we move more of the business into Medicaid and non-VA business over time, proportionately, then that has obviously a direct impact on our net margins and our EBITDA. We were there in the process, every five years with the Veterans Administration, we have a contract. We're in the middle of the process of renewing that contract, and because it takes a while, the VA gave us a six-month extension through the end of the year, and we are working along the line to complete that renewal for the remainder of those five years, and that should be forthcoming pretty soon. We were able, in the background, also to secure a contract with one of the largest providers of services company for workers' compensation .
It's another sector we won't particularly focus on, but a significant amount of wounds there, and another sector of expansion that is even built into our models. We did enter into a paid evaluation for over 250 patients with one of the leading insurers in the Northeast. So this is us proving for them, in their network, outcomes relative to our therapy in a fully paid and opening up access in those two states that we'll be working in. We've made good progress on launching Nexa, as I touched on already, after receiving the FDA clearance to include home care. It meant we could really move forward with the broader part of our strategy, and we also signed a distribution agreement with the largest distributor of wholesale medical supplies products in the U.S.
So additional to our direct sales force in the VA and some of the other sectors, we also have this large entity focused on skilled nursing facility and long-term care, where we currently don't have our own sales force. We do feel there's clear upside there for the future. We continue to further and strengthen our organization and predominantly expanding our sales force and our sales management and our CFO team and our board of directors. We're so proud to have the team we have now from the top down, and are seasoned, experienced people in all the required specialties, but also seeing good momentum in growing the sales force with talented and experienced sales reps.
Obviously, we completed our IPO, which was critical to allowing us to continue on this journey of independence, as a company that can grow in the marketplace for our full potential. After this, I will now pass you over to Jayesh, who's gonna give you a walk through the finances. Jayesh. Thanks, mate.
Hi, everyone. I'm gonna take you through the financials for this half of the year. Great news. Revenues were up 26.4% against the same period last year. That's growth across all of our segments, with the VA making up $16.9 million, growing at around about 7%, Medicaid making up $8.9 million, growing at a huge 84%. And our other segment, which comprises mainly Nexa and International, growing at about 139%, although albeit small numbers. As per our strategy, the mix has moved away from the VA, so our reliance on a single contract has gotten less.
The VA represents about 64% of our revenues in this period, versus seventy-five percent of our revenues in the last period. Overall, as you can see, you know, the business has demonstrated and continues to demonstrate sustainable growth and margin improvement. You can see there the business experienced a CAGR of 38% between 2021 and 2023, and you can see that light blue bar of H1 2024 is already in excess of what we did for the full year in 2021, so you can see that growth. The business has reasonably stable margins, you know, in the high 80s, almost to the 90s, you know, so that's a really great characteristic of the business.
And as the business scales, you'll expect to see Adjusted EBITDA improve. And indeed, you know, we're at, in the first half of the year, we're at about almost 13% Adjusted EBITDA, compared to 3.4% Adjusted EBITDA in the first half of last year. On to the statement of operations. I've talked about revenue and margin, but really just to give you a bit of color on the OpEx. Included in these numbers for H1 2024 is about $5.2 million of costs in relation to the IPO, of which the majority of that $5.1 million were non-cash, share-based payment charges. Which were exceptional because they were accelerated as a result of the IPO.
And, on a going-forward basis, although that charge will exist at a much smaller level, we won't be adjusting it in future. When you look at OpEx, you know, the reported numbers show quite a sharp increase in OpEx, but if you adjust for those non-cash and one-off items, the underlying OpEx would be $20.5 million in this half and $18.2 million in the last half, and that, that represents a growth in OpEx of about 12.6% compared to a growth in revenue of 26.4%. So you can see that operational leverage, you know, impacting, as, as that top line grows.
Okay, this shows how we get to our Adjusted EBITDA, and you can see there are two adjustments: the share-based compensation, which is $5.1 million this year, and $0.8 million last year, and strategic advisory and IPO preparation cost of about $100,000 this year and about $445,000 last year. Adjusted EBITDA itself outturned $3.4 million this year, compared to $700,000 last year, again, demonstrating that operating leverage that I said before. Okay. Then just to trot you through the key items on the balance sheet. Obviously, with the benefit of the IPO, it's a much, much healthier balance sheet.
We had net proceeds of $19.9 million, and you can see our cash is, cash balance at the, at the period end was about $19.8 million. The fixed assets of $12.6 million represents, you know, two big items. The largest item of about $9 million is the intangible asset on the acquisition of Nexa for the Nexa product. And most of the remaining is our home care controllers, the actual product that produces the oxygen and pumps it into the boot, will be capitalized, and then rent out to our customers. The other main movements are, you'll notice that trade receivables have gone up a little bit.
That really is a result of the greater proportion of Medicaid and International, whereas the VA pays, you know, pretty much almost immediately. Medicaid tends to be around ninety days, you know, payment terms, and so as that proportion of Medicaid increases, you'd expect trade debtors to increase as well. Non-current liabilities consist mainly of a loan from SWK Funding of around about $14.2 million, of which $6 million was repaid in July post-period end. The remaining items in non-current liabilities are deferred tax and some operating lease liabilities.
In current liabilities, really, the reduction there is a reduction in accruals and trade creditors as a result of paying a lot of the IPO costs post the fundraise, and therefore, you know, that's coming back down to a normal level of payables, and there's some deferred revenue in that current liabilities as well. Looking at net cash, this just represents the movement in net cash from the end of the year last year. You'll see that there's a negative operating cashflow, which is that unwinding of the creditors and that increase in the debtors, mainly, and you can see the share proceeds of $19.9 million , leaving us with a net cash balance of around about $5.5 million.
Then, the outlook and expected news flow over the next twelve months. I mean, I'd group these in sort of four buckets. You know, if you think about contracts and customers, we're expecting a five-year extension from sort of a Veterans Affairs contract. We're looking to open additional Medicaid states, one state, over the next twelve months. Then on the product side, we're expecting the rollout of Nexa in the US, particularly with signing up a huge distributor in the US, as well as getting FDA 510(k) approval, and launching our Eyes on the Wound products across all states. Geographically, we're looking to expand in Germany, Saudi, and make some headway with the NHS as well.
Then finally, on the clinical side, we'd expect to commence our study into the clinical trial into venous leg ulcers to give us that same level evidence that we have for diabetic foot ulcers as well. Then just to reiterate, you know what? We're maintaining our guidance, so we're on track to meet market expectations for the year, delivering greater than 30% revenue and Adjusted EBITDA margins of between 15% and 20%. I'll now hand over back to Mike for conclusions, and then we're going to go into Q&A.
Thanks, Jayesh. Okay, thanks, Jayesh. So as you can see, I think we have some strong financials and importantly improved financials. To conclude, you know, we as AOTI are a high growth profitable med tech business, but we're different. We're in the wound care space, but we're not wound management, we're wound healing, and we're also by providing sustained healing with a therapy that's powered by the patient at home, so we're a little different to what you may be used to. We're leveraging, you know, our best-in-class platform, which is now TWO2, obviously, but also our Nexa negative pressure therapy. We are the market leader with over 80% of the rapidly expanding topical oxygen market segment, so you know, it's an at-home segment, but it's growing, and we're certainly leading the charge because of our multimodality approach and outcomes.
We have the second to none extensive peer-reviewed evidence base, which supports significant clinical but also health economic benefits, and that's a differentiator. If you can go to payers around the world, and we're seeing this as we talk in different countries to payers, not just in the U.S., the fact that we have the clinical evidence, empirical evidence is so strong, but the fact that we can articulate a strong cost-saving model to all of them, is obviously something that gets you to the table and makes them interested. We have an experienced founder-led management team and a seasoned board. I think both of those are acronyms for old, but I think experience is a better way of saying it. Yeah, no, mature but experienced.
Then we have gone through an IPO, which was certainly a positive experience and happy to be on the AIM market. But it's allowing us then, you know, the firepower to continue to expand on our strategy, to roll out on our expansion plans in the U.S., and continue to even more profitable growth as our business moves proportionately more from the VA and more to then the non-VA sectors, where our net margins are even higher. And, you know, what we do? I mean, we're very serious about what we do with patients. We're helping all these people with these chronic wounds, giving them back to living their life to the fullest. And that means either extending their life or having better quality of life, so they can enjoy time with their families, et cetera, and that's what it's all about.
But thank you very much. We will conclude and pass it over for some Q&A. From me? Yeah. Okay.
Hi, Seb Jantet with Panmure Gordon. Just a few questions, if I can start off with. Just want to understand for a patient receiving treatment for a diabetic foot ulcer, how long do they typically are they being treated for? And what's the treatment regimen during the day? Are they plugged into the boot and kind of ventilated all day? How does that work?
Very good question. So this is an adjunctive therapy, so it's not ... You know, you do standard wound care on all wounds. You know, so they go to clinic, you know, to get debridement, you know, get rid of dead tissue. If they, for the diabetic foot ulcer, you know, appropriate offloading if needed, if it's weight-bearing, appropriate dressings and antibiotics. So that's standard. But as you know, the vast majority of the wounds don't heal, or if they do, they'll reoccur with that. With our therapy, once the therapy is ordered, they do it for ninety minutes at home, five days a week. So they're only using it intermittently, so it really doesn't impact their lifestyle. They do it whilst they're sitting there. We set them up in the most convenient spot.
So if they're sitting there watching television, which most people are doing, they sit there with their leg up and do the therapy ninety minutes, five days a week.
How many-
How many hours duration?
Yeah.
There's no magic number, because it's based on the severity and the type of wound and their physiology. But on average, our patients are on our therapy for about four months.
The second question is just to understand the cost base a little bit better. Obviously, I'm kind of wondering where I'm presuming that your costs to do with the service centers, you've got the process, the devices when they come back to you, and the costs of the people that are out in the field actually working with the patients are below the gross margin line, or were they included in gross margin?
They're below the line.
So how much would those equate to, as perhaps a percentage of sales?
So I think about OpEx as around about you know 77%-78% I think for this half year. But because you're getting that operating leverage you'd expect that to reduce you know over time as the revenue base increases, and you know as the business grows we'll be adding new salespeople to help drive that top line which is also included in that OpEx line as well.
I guess what I was asking for was a split of OpEx, but
I don't have that in front of me. Okay.
Okay. Let me come back on that.
I think of it.
Then last question, and I'll hand over to others. Just, I'm looking through the prospectus. The patents seem to run out, kind of, as we hit 2025 and 2028. So I'm just wondering what you're doing to extend the patent life beyond that.
Yeah, we do. We have some continuation patents in process, and we're working on new IP, and you know, the IP to us is important. We want to continue to build our portfolio, but it's one of the barriers to entry. You know, because obviously, what we're doing with our delivery models, our unique outcomes, and the way we manage those patients is an enormous barrier and something that no other folks in the wound care space, you know, have. So absolutely, we're looking to have new patents in the future. Yeah.
Could I just follow up on that question from Seb? If a competitor did develop a similar product-
How long would it take them to replicate the clinical trial and real world evidence data?
That's a good question, 'cause the way I look at this is, obviously, you know, like, quite honestly, KCI did earlier in the day, the patents create the first barrier. You make it difficult for people to enter. But, you know, reality is, over time, people can engineer around patents and devices. If you then come up with a development, you then need to run the clinical trial to have a body of evidence, and hopefully the product works well enough to give you the outcomes similar to ours. And those trials can from, you know, starting through, you know, completion, you know, three to five years is probably a realistic timeframe to run the clinical trials. Because it's not just based on randomized trials, which everybody wants, it's a ticket to play.
If you do a randomized trial that's showing twelve-month outcomes, like, oh, you have to go another twelve months out than what you would normally do. But then what they want to say is, the payers are now saying, "That's great, but does that represent the real patients in the real world?" And the problem is, the ones in the trials are generally not as comorbid, because it's difficult to do trials then. So they want to see real-world evidence, you know, real-world experience, and, and we were able to do that because we've treated so many patients in the VA, and we could do a very strong real-world evidence trial retrospectively from their database. And again, you know, then you're looking going out multiple years. So you've got five-plus, you know, maybe seven years, I think, of barriers, even someone could really be in the market.
And then additional to that, they would have to have the delivery system and be able to prove outcomes to the payers. And that's where the Eyes on the Wound platform is so important, because we're not just saying, "Believe our evidence," which is strong, "that we can save you money." We're gonna prove it to you on your real payers basis. And the evaluation we're doing in the Northeast was initiated by the insurer. They came to us and said, "We wanna prove with our numbers and our network, that this actually... This is so intriguing to us." And, you know, and for us, that's a very, you know, great endorsement on what we're doing. Yeah.
And then, when you worked early on with the VA.
Yeah
You were very clearly able to quantify the benefit to the payers and the network.
Yeah.
Is that getting more difficult as you move into various other Medicaid states, or are they working with you just as closely to share that information?
Yeah. I think, you know, the VA is great for research and capturing data, because it's an integrated network, and every time you see a VA physician be an outpatient, that is all in one database. Actually, for research, it couldn't be better. It's like real world, you know. It's not as integrated outside the VA, so we're having to capture ourselves, and part of the Eyes on the Wound platform is currently monitoring compliance, which means we can engage with the patients for better outcomes, or if they're not gonna be compliant for some reason, you know, discontinue them sooner rather than later with the, you know, approval of the physician and the payer. But we can also capture data on outcomes.
So we're building our own internal registry, and we have access to the health exchange as a provider, because we're entitled to capture real-time data from the patient's chart. So we are building a whole database to able to prove this, you know, more succinctly to payers outside of the VA.
Got it, and just one more from me on them. Excuse me. On CMS-
Yeah.
Once the application's gone in, how frequently do you get any feedback? Can you give us any more on the potential timeline? What's the mood music, etc ?
Yeah, I mean, CMS is a wonderful beast. You have the ability to interact with them before you submit. Once you submit, then they don't formally interact with you until they start the process to review. So it's called, you know, a local and national coverage determination. They decide when they wanna start and do that review. They haven't said anything yet, but we expect it won't be too long. But we have no control over the process of when that will happen. I think some of the things we've seen in the marketplace, in the wound care space, particularly, you know, the activity around cellular tissue-based products gives us good indications where CMS's head is relative to what they consider as good evidence, you know, and the requirements for coverage, because they've made it very clear they want to see randomized trials.
Obviously, we have state-of-the-art randomized trials with long-term data, health economics, which none of these other type of companies have. We feel confident we have a strong application, and it should be positive for a review, but sadly, we can't predict any more than that. I wish we could. Yeah.
Hi, good morning. Christian Glennie with Stifel. Just to follow up, I guess, on that point, you know, the issues around LCDs and the tissue-based products. To what extent is your product sort of complementary to those technologies in the market? Then as you think about potential coverage, I mean, would you maybe consider a head-to-head... You know, maybe some sort of a head-to-head element that may be required? You know, the bar seems to be constantly being raised-
Yeah
... in that market.
Yeah, I think, quite honestly, I mean, CTP, the LCD approach that's happening now is really a sort of normalization of what was a little bit of a free-for-all in the past, that CMS allowed to happen. And I think what they're saying is some guidelines, and as you said, the bar is being raised, but probably to reasonable levels in our opinion, that you should have good randomized trial and good outcome data to prove your therapy works. Otherwise, why should payers pay for it? I mean, that's what we did. That's why we spent the time, invested the money, and did that all along. So for that perspective, can I use complementary? Yes. I mean, our therapy you know, CTPs are applied in clinic, you know, our therapy only makes them potentially more effective.
I mean, that has trials to show that. We have plenty clinicians, particularly in the VA, that have used our therapy in combination with CTPs and feel like they get even better outcomes, but it's anecdotal, it's not proven by any trials. So could we, you know, potentially do head-to-head or combined studies in the future? Possibly. But CMS to date, and payers to date, have always wanted to see, again, optimal standard care as a benchmark. Otherwise, you know, you have apples to oranges comparisons.
Thank you. And then on Nexa, just trying to understand a bit more the sort of maybe differentiating features or things that might be attractive versus, you know, the incumbents with, you know, whether it's Smith & Nephew's PICO and-
Yeah, I think-
KCI, I think.
I think the biggest difference is, as I said, it's got more horsepower. So it's a device that has, you know, a larger capacity. It removes the fluid, it doesn't retain it in the dressing. So it can move more fluid, so you can treat wounds with more exudate, more fluid that's being generated. It's a disposable, but it has much longer life, you know, so it can go up to 58 days. It uses a peristaltic pump that doesn't create a vacuum by sucking on the tube as a suction pump. It actually squeezes the tissue a bit like a, you know, dialysis machine or a heart-lung machine. So by doing that, you don't contaminate the device.
So if they're using it in a facility, they can actually use the same device if a patient, you know, you're finished with it, you know, and doesn't need it, as long as the lifetime on more than one patient. So it has an enormous flexibility for long-term care, skilled nursing. So it really allows, I think, you if you're in a hospital also, and you're making that decision, "I wanna DC the patient home," well, at the moment, you have to decide that the exudate level, the wound has reduced in severity enough that a PICO or a SNAP or something else would be adequate to keep it going. In our case, you can potentially release that patient sooner because it can take more capacity and more exudate from the wound. So I think it sort of bridges...
It's a disposable with a lot of features that bridge the gap between hospital and home care.
Thank you. And then maybe for Jayesh, on the, you know, the continuing to hire sales reps and things, what are you sort of looking for optimal sort of sales force numbers? And then, you know, what should be their sort of medium-term EBITDA margins for this business then?
Yeah. I think on the sales side, I think we are looking to have 20 new, net new reps a year. Okay, we're on target to do that this year. And on Adjusted EBITDA, you know, we're targeting, you know, between 15% and 20%, you know, in the near term, okay, including this year.
All right.
Hi, Sean Conroy, Shore Capital. Just in thinking about the expansion plans in the U.S. and expanding Medicaid, Medicare coverage, hopefully down the line, what sense do you have of political risk? You know, the election's coming. Trump's been quite vocal around-
Yeah
- the Affordable Care Act. Is there, you know, any sense of risk and uncertainty that you see in the distance there?
We're quite concerned about what's going on in Springfield, Ohio, where apparently the cats and the dogs are being eaten. You know, we're obviously looking into that, but no. I mean, what's interesting about our therapy is in all cases, we improve outcomes and save money for the payer. I think irrespective of what side of the fence you sit on politically, that's something that people want to see, and we have enormous impact on quality of life for people, disadvantaged populations, which are disproportionately affected by these wounds. Certainly, you know, sides of the bench, that's very important, too, as well. I think we resonate on all of it. I do believe it's really immaterial to us which way it goes.
Yeah. Then just sort of, on the M&A side of things, so you mentioned there might be a view to do bolt-ons. I mean-
- What sort of timeframe are you looking there? Are you seeing stuff, you know, assets that are distressed, that could-
Yeah, we see lots of stuff, but our focus is really execution at the moment on our core products. You know, the Nexa product was very, you know, opportunistic because it really was such a unique product that helped us. You know, by having that on, in our portfolio, it helps us open doors to providers that may know nothing about our therapy yet, because they all use negative pressure. And as we grow with our distribution partners internationally, there's tenders that exist with negative pressure, so they can start business before they even have tenders on the books for our therapy. We always are looking out there, but we have no strategy that's bolt-on things for the sake of it.
They have to be differentiated, they have to have a value proposition, and there's certainly things I think that could fit in our portfolio in the future. So we're definitely looking, but no plans at the moment.
Thank you.
Yeah.
Shall we? Nobody else in the room? Shall we go to the telephones, or whatever what?
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Okay. If anybody else has questions, it looks like we've covered the bases. We thank you all for joining us, and hopefully we'll see you again as we have our next set of financials, which hopefully will be continuing this story in the right direction. Thank you very much.
Thank you, everyone.