Okay, good morning, everyone. This is Anthony Vendetti. I'm the director of research at Maxim Group. Welcome to day two of our virtual conference, spanning three days. It kicked off yesterday, concludes tomorrow. We have over 85 companies and three panels. Today with us, we have both the CEO and CFO of Myomo. Symbol is MYO. We have a buy rating and a $6, 12-month price target. So with us, like I said, we have both the CEO, Paul Gudonis, David Henry, the CFO. And, Paul will kick it off with about a five-minute company update, and then we'll open it up to questions from the audience, interspersed with some prepared questions I have. So with that, let me turn it over to Paul.
Thanks, Anthony, and good morning, everyone. Myomo is a wearable medical robotics company whose mission is to conquer paralysis for the millions of people who suffer from upper limb impairment due to a stroke, a spinal cord injury, or other type of neurological disease or condition. And after going to occupational therapy, so many individuals are told, "You've plateaued, you're not gonna get any better. Get used to it, you're not gonna use that arm and hand again for the rest of your life," which is really devastating news. There's been nothing for these individuals with chronic arm paralysis. Myomo is a company spun out of MIT and Harvard Medical School. We're commercial stage. We've shipped thousands of devices already to patients in the U.S. and selected European markets.
What we have is a myoelectric orthosis, which is the clinical term for a powered arm brace. Individuals who have got this chronic arm paralysis, they wear our powered arm brace, a lightweight device that fits over the arm. It has non-invasive sensors that listen to the body's own electromyogram signal. These are the electrical signals your muscles emit any time you try to move. For individuals that are healthy, we've got 100% signal strength, so we can easily, you know, move our arms, pick up a cup of coffee, feed ourselves. For these impaired individuals, they're basically left with either a flaccid arm or one that's tightly spastic and uncontrollable, painful, and there's been, as I said, nothing for them.
So you wear our powered arm brace, and it has these sensors that sit on the bicep and the tricep and on the wrist, and as you think about moving your arm, even though you have an attenuated signal, maybe less than 1% of what a healthy individual has, we pick up those signals, we amplify them. There's a microprocessor on board that controls a few small motors, and you can conduct these activities of daily living. So that has really improved the quality of life for numerous individuals. As I said, we've already had several thousand reimbursed by private payers, the VA, and the big news is, we finally got Medicare, standard Medicare Part B coverage, which went into effect as of April 1st, just over six months ago.
And that's had a significant influence on our business trajectory, because we can now serve these Medicare patients, and as we'll talk about, you know, we are expanding rapidly now, showing record results in terms of our pipeline, revenues, backlog, and so on, because we're now able to expand and serve these patients we had to turn away in the past, so a lot of good news here at Myomo in the last six months.
That's great, Paul. Thank you so much for providing that overview. That was great. You know, I think it's quite remarkable. I mean, if people have not seen or investors have not seen the video, the ability for the brain to send a signal to that brace, and for you to be able to move your arm where you couldn't move it at all, is a pretty powerful testimonial. So, if you haven't seen the video, you should go to Myomo's website and check it out. It is pretty impressive. So this was a big—
This, you know, you touched on it, CMS reimbursing as a brace, and publishing the reimbursement rates, which I think, you know, you were pleased with the number that they put out there, supporting your business. I think in the second quarter, you had record backlog and pipeline. Maybe talk a little bit about, you know, what you were charging before the reimbursement rate, what the rate is now, and then, I don't know if David wants to get into a little bit of the pipeline and the backlog and how that's grown to record levels, and what that means for the go-forward business.
Well, as I mentioned earlier, you know, we have had several thousand braces covered by insurance companies. You know, these are Medicare Advantage plans, commercial plans like Blue Cross Blue Shield, and so on. And we bill these plans, and we've reported that our average selling price, the revenue we received for this work is, and the brace, has been about $42,000 on average. And we also provide these in what we call our direct billing business. So we are not only the manufacturer, but we have our own licensed clinicians across the country that provide these devices directly to the patients, and we bill the payers ourselves.
So that direct provider business has been growing over the last 10 years, and now with Medicare doing their what they call their gap analysis and their published fees for the MyoPro Motion G , which includes the grasp, over 90% of our volume is this the unit the ASP for that is $65,000, is their published fee. So we've seen our ASP climb as a result of that. And then we are going back to the Medicare Advantage plans and saying, "Look, Medicare covers this. You should be covering this, and you should be paying against that fee schedule." So those discussions are underway. Maybe Dave could address, you know, some of the other financial metrics that we provide to investors.
Sure. Great.
Well, I think the important ones that go along with that are our, you know, pipeline and backlog, you know, and what we've seen, our pipeline was focused really for the last 18 months prior to Medicare, was only serving those patients who were with insurance that had been reimbursing for the device in the past. And so, what Medicare has done is we've, you know, we've now basically. Our addressable market has, you know, roughly doubled because, you know, half of seniors are on Medicare Advantage Plans, half of seniors are on Medicare Part B. And so what that means is that our pipeline has been growing. You know, at the end of the second quarter, we had nearly 1,200 patients in the pipeline.
We added 550 patients in the second quarter. Those were both, you know, record numbers, and that's translated over to our backlog. So, you know, just for people that don't know what pipeline and backlog are, pipeline are those patients where we have completed a successful initial evaluation of that patient, primarily through telehealth means. But so we're still waiting for either insurance authorization or, in the case of a Medicare patient, appropriate medical documents that meet our inclusion criteria. Once we have those things, and the patient wants to move forward, they move from the pipeline into the backlog, which it represents those patients that have those things, but we haven't taken revenue yet.
So, backlog at the end of the second quarter was, you know, 2 82 patients, which is a record as well. And we had a record number of authorizations and orders or additions to the backlog of 213 patients. That was up 70%. So, we're seeing that our metrics are taking off, and that should, that is beginning to find its way into the financials. We had a record quarter in the second quarter of $7.5 million of revenue. We've guided to $8 million -$8.5 million of revenue in the third quarter, and we're looking for, you know, roughly 60%-70% product revenue growth for full year 2024.
That's great. Maybe talk a little bit about the internal operations and how you're supporting all of this growth, right? Your pipeline's growing, your backlog's growing. Are you increasing marketing, are you increasing the sales force to meet the increased demand?
So we have been investing across what we call the entire revenue cycle. You know, from increasing our spend on advertising, this is the way we educate patients and their families about the MyoPro. We've increased the size of our intake coordinators in the call center down in Fort Worth, Texas. We've increased the number of people in our reimbursement department that will work with these patients and their physicians and other clinicians to get all the medical documentation that Dave talked about, and we've added more licensed, certified prosthetist orthotists in the field to go and fit these patients. We've increased our manufacturing operations as well. So overall, we started the year with about 100 people, and we're at 170 people right now, and we're continuing to hire. And we've also are scaling up our manufacturing capacity.
By the end of the year, we'll be moving into a new facility, you know, outside of Boston, we're headquartered, which will give us more floor space to again continue to expand the number of units we can put out to patients.
When you're talking about increasing the manufacturing capacity, are you doing the full assembly internally? Are you outsourcing any of that, you know, to a contract manufacturer?
Yeah, well, it's a combination of those, Anthony, where we get the most efficiencies. So a lot of the common robotic elements are put together by Cogmedix in Worcester, Massachusetts, as a contract manufacturer. And then a couple of years ago, we moved to 3D printing of the shells that go over the arm, because these are all custom-made for individuals, because everyone's arms and hand sizes are different. So we subcontract to ABCorp here in the Boston area for those shells, and then we do the final assembly and testing here before we ship them out, either to our own clinicians or to orthotics and prosthetics clinics in the US and in Europe for them to fit them.
Okay, great. So, are these custom-made? How long, you know, from an order getting placed to manufacture and get shipped out to the customer?
So it depends on how soon we can do what we call the shape capture, the measurements.
Yeah.
But once we get an order, we will then contact the patient and look to measure their arm, either in person, or we have a remote measurement system where we send a briefcase to the patient's home, opens up a tablet, they put their arm in front of it, we scan the hand. And so that might take a week to set that up. Usually, we can turn around the manufacturing units within two to three weeks, and then we arrange for a shipment to the patient, and then Dave can take revenue depending on the type of payer it is.
Okay. And, you know, right now, it's an arm brace. That's what you're focused on. Is there opportunity to expand beyond that? And then maybe just talk about the competitive landscape, because there's obviously some companies out there that also have, like, full-body robotics and also stuff for the leg. So maybe talk about— Obviously, the current opportunity is fairly large, but maybe, you know, just the general sort of three-plus-year plan, as you look to continue to grow the business.
As you point out, we have the only patented, commercially available myoelectric orthosis in the U.S. market. We're also the market leader in Germany. And this is all about the upper extremity, because that's the big unmet need in this space. There are lots of alternatives if you have lower body impairment, if you have foot drop, or you need an ankle-foot orthosis, or electrical stimulation, or the exoskeletons you might have been referring to, for paraplegics. So it's a pretty crowded space in the lower extremity, but it's a big white space. You know, 3 million+ people with prevalence just in the United States, 800,000 people in Germany and some of the key markets, 14 million people in China, where we have a joint venture. So we decided, "Look, we wanna—
We've got the market leadership, let's continue to be best-in-class with the upper extremity." So we've got a product roadmap that shows continued enhancements to the device. Every couple of years, we bring out a new version of the device. There's lots of other things we could be doing for that upper extremity, the hand, the shoulder, and so on. And in terms of the competitive landscape, the only thing we've seen is a couple of small startups in Germany. Don't have a lot of commercial traction, but they have, you know, come up with, you know, similar type devices. We're analyzing whether or not they're violating our patent protection in those countries. But, again, we're gonna be the best-in-class with a very large market opportunity here in the U.S. We're in Germany, because that's a big market.
We're looking at the perhaps selected expansion in Europe and our China joint venture, Jiangxi Myomo, where our shareholders have a 20% interest, and our partners there are putting up all the capital. They're recently getting NMPA approval, which is equivalent to the Chinese FDA, so we expect that, in the near future, they'll be starting operations, production, and sales of Myomo devices there in China.
Okay, great. So if we had a look at the percentage of revenue right now that's U.S.-based versus international, approximately what is that ratio?
It's about. You know, I think in the second quarter, international was, like, 14%, and the rest of it was in the U.S. And most of that, about, you know, I wanna say high 70, 78%, something like that, was our direct provider business. So the where we are, where we provide the device directly to the patient, either to a patient that has a Medicare Advantage or other insurance plan, or Medicare.
Okay, great.
And then Paul mentioned revenue recognition. In most cases now, for these Medicare Advantage plans, certainly the ones that we've been working with, and then Medicare, we're recording revenue at delivery. So that's, you know, probably, you know, 70%-80% of our direct billing revenue now is recorded at delivery.
At delivery, okay. And then if, you know, as you accurately pointed out, about half of all medical expenses and half of these devices are being issued slash delivered to Medicare patients. So this decision, obviously, that went into effect April 1st of this year was a major milestone for Myomo. And typically, private insurance follows pretty closely Medicare reimbursement guidelines, and so forth. So have the conversations with private insurers accelerated? Maybe, you know, talk about what that opportunity looks like, and how you intend to expand in the private insurance market.
So as we discussed earlier, many of the private insurers, Medicare Advantage plans, have already been paying for MyoPro, but other plans have been recalcitrant about that.
Right.
So our Chief Medical Officer, Dr. Coleman, is reaching out to these medical directors and pointing out that, Medicare Advantage plans are required to follow Medicare guidelines, as he pointed out.
Right
As long as medical necessity can be established. And clearly, someone who's got chronic arm paralysis, they've tried therapy, other interventions, this is the least costly, most functional option for them at this point, they should be following those guidelines. And so we are engaging with these plans. You know, this takes, you know, months to be able, you know, get those meetings, get medical policy changed, and so on. But we continue to chip away at that, and I expect that, you know, over the next, year or two, we'll see more of these Medicare Advantage plans, come around.
Yeah, that's, that's an interesting point, right? Because some of these insurance companies are offering Medicare Part B, and if they're— I, you know, I don't know exactly what the law is, but if you're offering Medicare Part B, and then your, the rest of your insurance, the other people that are on your insurance, you know, if you're required to be paying it as part of Medicare Part B, I would think that they have to.
But maybe like you said, you need to reach out to them and remind them that, "Hey, this was, this was approved, and therefore, you need to be reimbursing for it." Is it a combination of, A, they have to be doing it, or B, it's like you need to start doing this, or is it more of a soft sell from your Chief Medical Officer? I'm curious how those conversations go.
Well, sometimes we have to appeal on behalf of the patient, and we'll go to what are called the ALJ, Administrative Law Judge hearings, and we'll get judges to ruling that, "Okay, Medicare covers this. There's definitely. It's not experimental or investigational. There's HCPCS codes for this device, t here's research behind it, and it's a medical necessity," and so by having these wins, that gives us the backing to go to these medical directors and say, "Look, your plan should be covering this." Now, it's been widely reported in the press that Medicare Advantage plans are seeing their cost ratios go up, and so there, there's some pushback on that, but it's not just us. Hospital systems-
Everywhere, right.
Other providers, we' ve seen that. In fact, OIG is even investigating these pre-authorization denials that some of these plans are making. Because we do have to get a pre-authorization with these Medicare Advantage and other commercial plans. As Dave pointed out, with Medicare Part B, as long as the medical documentation satisfies the medical criteria we established with the CMS medical directors, we can go ahead and fit that patient. So that's made the Medicare Part B processing much more efficient. It's faster revenue cycle, because I don't have to wait for a pre-authorization or an appeal. So you'll see that mix of Part B patients grow in our mix over time while we continue to work with these private payers.
Okay, great. Any metrics that you're using internally, whether it's a quarterly revenue number that you need to reach, you believe, to support the current infrastructure, and then you know turn profitable on a quarterly basis?
Yeah, o ur belief right now is that if we get to about $10 million a quarter, that puts us in range of becoming operating cashflow breakeven. That's at the current, you know, level of investment, of course. But that's the initial metric, or that's the primary metric we're focused on right now. As a management team, we're incentivized, you know, to do both. We're incentivized to reach that milestone, and, you know, it's an important quarterly milestone, you know.
Right
... revenue starting with $1.25 million . And it's also, you know, getting to, you know, stop burning cash on an operating basis, and so that's important metrics that we're focused on. And, you know, more on that to come. We'll be announcing results here in the next few weeks, but that's our primary focus.
Okay, great. And then maybe, you know, are there any upcoming conferences, whether it's orthopedic conferences, that Myomo's planning to attend to get you know, get the word out, right? Because one of the things we've learned in healthcare, I'm sure, you know, most investors that invest in healthcare are well aware, is healthcare is very, very fragmented, very regional, and it takes time to get the word out there, particularly for you know smaller companies in terms of market cap, and you know you obviously have a budget. So how do you continue to do that? I know there's some digital advertising you're doing and so forth in getting out to these patients, but are there other conferences that you attend, industry-wide conferences that help also?
Yeah, thanks for bringing that up. So, just last month in September, we attended the American Orthotic and Prosthetic Association Conference, because now that Medicare reimbursement is certain for, you know, patients that are medically qualified, the orthotics and prosthetics clinics, of which there are 3,000 in the country, are very interested in providing the MyoPro to their patients.
Perfect.
We already see these stroke survivors for a leg brace called an AFO. They have good relationships with the physicians and therapists at the local rehab hospitals. And so we had a very large meeting with these O&P clinics with a manufacturer's workshop. We have an O&P channel team now recruiting these clinics. We plan to have 100 of these CPOs, Certified Prosthetist Orthotists, trained by the end of this year, and so they can start evaluating patients and build that pipeline for orders in 2025. And then on the other clinical side, so we're attending conferences like ACRM, which is around rehab medicine, other one for physiatrists, physicians who see these types of patients. Next year AOTA, occupational therapists who serve patients with upper extremity impairment.
So we're getting that word out that way through these conferences to that very important population, as you point out, because they see these patients.
Right.
We make sure that they're aware of the MyoPro and that they can get this reimbursed for their patients, and so that will create a stream of referrals to us and to the O&P clinics.
That's great. Okay, excellent. So we have about a minute left, and if there's anything that I didn't ask or we didn't cover that you'd like to wrap up with, you know, let's use this opportunity to wrap up for investors. So I'll turn it back over to you.
Well, thanks, Anthony. I mean, what we've seen here is the opportunity to serve all these Medicare patients that we've talked about earlier. Because, as Dave said, it's doubled our addressable market. 'Cause I had to turn away thousands of people that would contact us every month, and now we can basically say to them, "Let's get you evaluated, see if you're a qualified candidate." And then we're also building this O&P channel, because these are licensed clinicians. They're in-network with a lot of the insurance companies in their local areas, and that should broaden our distribution dramatically to really set the stage for strong growth, not only in our direct provider business, but also the O&P channel in 2025.
That's great.
I would say, I would add to that, that, you know, CMS, by publishing these fees in April, has created a multi-billion dollar market opportunity where we have first-mover advantage, and we intend to work very hard to keep it, and to, and to, you know, grow the business and, you know, by having it take off from here.
That's great. Well, thank you very much, Paul, David, for sharing all this information with investors. Obviously, there's a lot of tailwinds behind your company now with this reimbursement that went into effect on April 1st. So we look forward to continuing to track your progress. Thanks so much for attending the conference. It was very informative, and well, we look forward to speaking with you soon and being on the conference call for your third quarter earnings coming up.
All right, great.
Thanks for the opportunity.
Thank you so much. Have a great rest of the day.