Good afternoon, everyone. I'm Anthony Vendetti, the Director of Research at Maxim Group. Welcome to day two of our 5th annual Maxim Virtual Healthcare Conference. We have 85 companies, over 85 companies, as well as three industry panels over the three days. Like I said, today is day two. The conference concludes tomorrow. With us today, we have Arjan Haverhals, the CEO of Milestone Scientific. Symbol is MLSS. We have a buy rating on the stock and a $3 twelve-month price target. And I'm gonna turn it over to Arjan. Give about a 5-minute or so company update, and then we'll spend 20 minutes with Q&A. I have some prepared questions, and then if the audience has questions, I'll intersperse those questions in. So with that, let me turn it over to Arjan.
Thank you, Anthony, and thank you for the invitation and having me at this conference. As a company update, I think I've expressed that several times in the past months, we are facing very exciting times for the company. You know, this summer has been short and long at the same time, but a lot of activities. First and foremost, of course, on July 23rd, when we got the pricing assignment granted for our technology for private practitioners. Very exciting for us. We are very proud as a company which allows clinicians to use our technology for the Medicare reimbursement rate that was set at $325 in addition to the primary rate.
Now, at that time, the challenge that we were having, of course, was that is where first commercialization started. So in the aftermath, a month later, by August 10th, I think, we are able to announce our partnership with Axial Biologics, because as you can understand from a financial point of view, the choice that you have, you either invest in a direct sales force yourself, or you contain your cash situation and you partner with a distributor or an entity that has the knowledge in that space. Historically, we have not been in the pain segment for a long period of time, and Axial Biologics is actually bringing then the relationships on the pain institutions in the three jurisdictions, which is New Jersey, Florida, and Texas.
And then we started really the commercialization, you know, in the early days of September, and now we are in the midst of, you know, a high level of activity in terms of piloting. I would call it piloting our technology, because even if you have the reimbursement, you still have, of course, to get in front of the clinicians and to explain the clinical benefits and the advantages of our technology compared to the old-fashioned loss of resistance technique out of eighteen hundred and sixty, early nineteen hundred. So as we speak, I'm very pleased with the level of activities. I'm pleased with the in-depth discussions we had with clinicians.
That has also resulted that we announced a week ago, as a first introduction, one of the first clinics that came on board from a commercial perspective. And the whole focus for our company in the next couple of months is to create a baseline of then... of clinics that are using the medical equipment and the medical technology. And we have priced it at such a way that we are looking at clinics that are committed to a minimum annual purchase volume on the consumables, which creates then a baseline for revenues in the year of 2025, from which we can build further, right?
So, the game plan for me in the fourth quarter is definitely the ambition, having that we can show revenues coming from the medical business, build further from that, setting that as a baseline for 2025, and then add on, as we speak, additional clinics. That's more on the commercial side. Of course, we should not forget the continuation of our dental business, of which we have a solid performance in the U.S. market or the domestic market, and also the Canadian market. We have had some challenges with the international markets, but it was more related to, I would say, logistics, freight forwarding challenges than a saturation in the international marketplaces.
And thirdly, of course, we still continue to focus on our international expansion, both on the medical business as well as the dental business. And then, you know, what we have said all the time, we are still expecting a positive answer. When that will happen, I don't know. But definitely the governmental and the military and the VA, DOD is of course an important, yeah, building block, I would say, for our company to establish the technology, what we believe is going to be the standard of care in epidural analgesia. And the main reason why we're focusing now on the pain segment is, of course, it's a gigantic market of nine million procedures a year. It's you know a total addressable market of $2 billion if you look at those procedures.
even if you deduct, let's say 40% of Medicare that we are currently targeting at, you know, that's then the equivalent of an eight hundred million dollar market, right? So we are doing whatever we can. We have added people, as 1099, so we expanded to sales force. Through Axial Biologics, we have an additional 27 people that are active in all these markets. So, yeah, it's full steam ahead, I would say.
That's a good, that's a good overview, Arjan, thank you so much. Maybe, maybe, you know, just talk about, like you said, this is literally a major milestone for Milestone Scientific. So, you know, you're getting-- you got the favorable Medicare Part B determination. You know, this is a major opportunity to now expand the medical side of your business. You have the agreement with Axial Biologics, which is 27 salespeople, the 1099s. And I don't wanna spend too much time actually talking about the technology itself, 'cause hopefully most investors know about it at this point.
But I think it is important just to spend one or two minutes talking about, because you have the studies out there, you know, whether it's in the epidural setting or elsewhere, where, you know, like you said, you know, using very old, outdated technology, which is just a standard needle from the 1860s-
Yeah
... or the early 1900s, there's a lot of risk that you're not gonna hit the right spot. There's gonna be pain, not just on the injection itself, but actually, you know, the risk of puncturing the cerebral spinal fluid and causing that to leak. You know, that's the percentage of that happening is much greater than zero, and it's, you know, with your studies, it's zero. That causes, you know, overnight stays, headaches, maybe prolonged migraines for patients that are, you know, that are giving birth.
That's been a longer sales cycle, even though it's obvious to me and to some other investors that that should be the standard of care. It's changing protocol, you know, so that takes time, so the focus now is on the pain centers, which, as you pointed out, is a huge market opportunity. You can go directly to these pain doctors that wanna make sure that when the patients come in, they, you know, they don't feel the pain of the injection because you're using your CompuFlo system, which is very, you know, it's using pressure-sensing technology so that, right there on the screen, they could see exactly how it's going in.
So, maybe just talk a little bit about that technology, maybe spend a little bit of time as we discussed, as to why it's been a little bit of a hurdle on the epidural side, and then the progress you're making on the pain side.
Yes, absolutely. So, I will start a little bit at the end, just talking about the benefits first or actually, you know, stating what is it-- what is the problem today, right? The problem today with epidural analgesia or epidural steroid injection is actually needle placement and verification. So to your point, it's an old technique out of the 1900s. It's a very manual, subjective procedure. Now, the challenges that you are facing, first, it takes a pretty long time to know and to get acquainted and feel comfortable of placing those injections as they are performed per day. It's just a needle placed in the back of the patients. You advance the plunger, you feel a lot of resistance against your thumb, and you might think that you are in the epidural space.
So first time is, it takes a long time for a resident to get used to the technology. In our studies, when you use our technology, the time is significantly reduced, so normally up to a hundred procedures or two years for a resident to become acquainted with the loss of resistance technique. If you would use our technology, it's two procedures. So then you get the correlation and the verification that you have the right needle placement. Secondly, because it is manual and very subjective, 17%, so 17% of all these procedures are false positive. So that means that the drug is administered at a place where it doesn't exert any effect. In other words, the clinician believes that he or she is in the epidural space-
Wow
... but actually it's not, right? And then 17%, that's pretty high. So again, in our clinical studies, it's the only system that shows you a true positive result, i.e., high level of efficiency is more than 99.9% on the first attempt.
Right.
Then thirdly, if you go further, you know, then you hit the dura, you hit a membrane, you breach some membrane, you get leakage of cerebrospinal fluid in the epidural space, and that causes migraine, paralysis, or mortality. Now, in the lower parts where the company initially had the approval, that morbidity rate, we call it, is 5%. The thoracic and the cervical part, it goes from 5% to 17% to 30%.
Wow!
In other words, the higher you get up in the spinal column, the 30% is the equivalent of, you know, every one injection out of three injections, right? Has the risk to damage the spinal cord. So that was the reason why, two years ago, I made the decision that we needed to get the thoracic and the cervical spine from a clinical perspective, to get that approved by the FDA. Secondly, to get a reimbursement code, which resulted then in the approval of a CPT code, a tracking code. But thirdly, from a company perspective, our TAM, you know, it increased our accessibility to the total addressable market being 11 million procedures, and I want to take away one thing: it is not that we forget epidural analgesia during labor and delivery. Not at all.
It goes in parallel, but it gives now the company an opportunity to spread the risk or to have some risk mitigation, because on the one hand, you have a long decision-making process at the hospitals. On the other hand, you have a faster process, which is also fueled then by the reimbursement process and the price setting or the price assignment that we receive for private physicians from the Medicare jurisdictions in Florida, Texas, and New Jersey, right? So that is important. Now, there are more benefits, of course, because if you go further from a health economy point of view, we have been able to document and demonstrate that in an independent study, in labor and delivery-
Right
... there is a $400 or $504 average savings per average patient stay at the hospital. Not to mention, a fifth example and benefit, the avoidance of the cost of litigation, because the cost of litigation is gigantic. It can be everything from $500,000 up to $20 million, depending on, you know, if there is mortality involved or, you know, we have seen cases two years ago and also, over the course of all the years where, for example, during labor and delivery, there are mortalities, either, you know, the mother and the child, the mother passes away or the child passes away.
It's terrible, and we, to your point, we cannot understand what is the difficulty to really embrace and say, "Okay, in this era where you live with digitalization and new technologies, why do you still trust a manual subjective methodology when you have a non-biased, very objective, computer-controlled way to have needle placement and needle verification for these procedures?" So I think that's took a little bit longer than perhaps the one or two minutes-
No, it's okay.
But that's in a nutshell what we are doing.
Okay.
So overall, there's a lot of cost efficiency gains, but at the end of the day, and that is, I strongly believe also why we have been able to get the approval for the reimbursement in the discussions with with the Medicare jurisdictions, in particular, in the Medicare patient population, where anatomy is more complicated, where you have narrower spaces, a technology like ours is much needed, and that resulted, I do believe, in the approval and the other grant, so to say, of the price assignment for private physicians in the epidural space. So it's both epidural analgesia. We both are delivering in the neurosurgery departments at the hospitals for complicated cases, like spinal cord stimulators. We're focusing on the epidural steroid injection side, just to be able to cater for the entire market.
The benefits is increased efficiencies, increasing economies, increasing safety, increasing predictability. So in other words, it's, it's really, improving healthcare outcome at a lower cost when it is for epidural anesthesia during labor and delivery, and it is more predictable for epidural steroid injection and safer. I think that's in a nutshell-
Yeah. No, no, it-
boils down to.
So we know in healthcare, it takes long to change protocol, standard care. You know, you have a very compelling product, the CompuFlo system. Maybe just talk about, you know, how you put that into the workflow. What does that look like, for a, you know, OB-GYN room? What does that look like in a pain center? You know, what's your, you know, the size of your device, that you need, that screen that you have, and then, you know, the cost, to the physician/hospital that's employing the system?
Yeah. So, well, the device is rather small. It's transportable. It's about this size, so it is not that big. There's a screen, and there's an individual consumable to be used, but for each and every patient case. Now, knowing that the cost of capital equipment is high for hospitals in general terms or for clinicians, what we have done as a pricing strategy, we make the instruments available at a reasonable price. In a way, the price below our cost of the instrument. So, what we are doing now is, clinicians can get access to the instrument for $1,000, but then versus a price on the consumables, which is dependent on volume or the number of procedures that they are doing.
And we price the products now in the range between, let's say, $200 and $250, for the hospitals, as well as the clinicians or the private pain practices. And the difference, of course, between the two segments is it's all volume, right? Because in the pain clinics, the volume and the throughput of patients is much higher than, for example, if you look at the volume and the number of treatments for delivery, epidural analgesia during labor and delivery. i.e., if you look at the pie of the 11 million procedures, it's about 2 million procedures in the hospital environment for labor and delivery, and the 9 million is more in the private pain clinic.
Price-wise, we want to help and to assist the clinicians so that we take the financial hurdles away, that it's not going to perceive that it is a high upfront capital investment that these institutions have to make. And also, you know, if we and when we offer our pricing on the consumables at a $200-$250 range, that's still, it's still below what the reimbursement or what Medicare, in this case, is granting for these procedures when the clinicians are delivering the right documentation and show the medical necessity when they perform these cases. It is a win-win for everybody involved.
Yeah, that's great. We have about five minutes left. You know, like you said, your base business is the dental business. This, the huge opportunity in the medical field is just starting to come into focus. Maybe talk about, you know, where the base business is. It's you know, last year you did over $9 million in sales in dental. What's the breakout between domestic, international? And then on the medical side right now, obviously, the focus is here in the U.S. Do you see the same channels of potential expansion internationally over time that you already have opened up through the dental business as a way to expand the medical business over time?
Yeah. No, so the dental business is, of course, for obvious reasons, remains very important to the company because it generates revenues, it generates profits, right? Very pleased that we have been able to. If you look at the total year results last year, we have been able to post a net profit of the dental business of $2.2 million as a standalone business. So that's important, it's cash positive on the standalone business. Very happy with the development of the domestic market. That's growing, it's solid, higher prices, higher margins, also helping our balance sheet. You know, we are in a credit card business, so the money is in the bank much faster than the normal terms of net 30 or net 60 days with distributors.
So that model works pretty well in the dental business because there's already an established recurrent use of the technology, right? And that's where medical is a little bit different than dental. In the medical business, we still are in that phase of what I call new customer acquisitions, because-
Right
... that's the establishment that we are currently into. Now, you can talk about the sales channels. Is it distributor? Is it private? Is it direct? On purpose, I was looking for a distributor and a partner that is small, that has one or two products in the pipeline, to which our product would be complementary. Because I didn't want to have a large distributor where you have to fight to get your products on the front row, and that's what we have found with Axial Biologics, and a good example is a distributor in Spain that has been very successful for us. You're not talking about millions, but significant revenues that they brought to us in the first year, where they also have been able to get reimbursement or discussions and agreements with the local insurers.
The challenge with Europe is, of course, it's a very fragmented market. Each country has its own healthcare policies, its own healthcare insurance policies, et cetera, et cetera. The beauty for us here is, in the U.S., of course, that you have a very strong Medicare population, where there is a general pricing principle, which is different than from the commercial payers or the private payers to that extent, because everybody has its own individual insurance plan. So what I do foresee for the international expansion, in particular, for the medical business, the Brazilian market is very important for us. We are continuously having discussions with a conglomerate of different companies, of which I hope that we can finalize these discussions, the sooner, the better. You know, you never know what the outcome is going to be.
But Brazil is an important market.
Sure
... similar size as the U.S. So I'm more looking at opportunities where we can get in, understanding the healthcare, finding the right partners, not necessarily the distributors, but having access to influencers, to decision makers in these markets that will facilitate and generate, and accelerate the penetration and adoption in those markets.
Okay, great. Great, we have about a minute left, Arjan, so I think that was a great overview. If there's anything in this next minute you'd like to leave investors with before we sign off?
Yeah, no. First of all, thank you for the invitation and the attention. I think, you know, we are a typical company. We used to be very research and development-driven, now we're in the full commercialization. We have revenues, we have sufficient cash and cash equivalents at hand. We don't have any debts, so it's pretty healthy, and we are in a good momentum, and yeah, more than welcome anybody that would be interested in our company.
Okay, great. Great, thank you so much, Arjan. I think this was very informative. Appreciate, appreciate the time. If investors have any questions, we're available, and I know Arjan is always willing to talk about Milestone Scientific, MLSS. Thank you, everyone.
Thank you.
Have a good rest of the day.
Have a good conference. Thank you, Anthony.