All right, good morning, everyone, and welcome to Myomo's Investor and Analyst Day event. I'm Tirth Patel with Alliance Advisors IR. We're delighted to have you join us today in person and via the webcast, and we have a lot to share with you over the next few hours. We'll spend a lot of the morning going into the direct provider business: lead gen, field ops, reimbursement, post-delivery support, then we'll go for the manufacturing tour, after which, we'll have lunch served. We'll spend the afternoon discussing international business, the O&P channel, product development, finance, and we'll wrap up with a Q&A. Before we begin, I'd like to caution that statements made during today's event by management other than historical facts are forward-looking statements that are covered by the safe harbor provision of federal securities laws.
These forward-looking statements are not guarantees of future performance and may involve and are subject to risks, uncertainties, and other factors that may affect Myomo's business, financial condition, and operating results. These risks, uncertainties, and other factors are discussed in Myomo's filings with the Securities and Exchange Commission. Actual outcomes and results may differ materially from what's expressed in or implied by these forward-looking statements. Furthermore, except as required by law, Myomo undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this event, June 18th, 2025. It's now my pleasure to turn the podium over to Myomo's Chairman and Chief Executive Officer, Paul Gudonis.
Thank you, Tirth, and thank you, everyone, for attending here in person to our first-ever Investor and Analyst Day and for all those of you that are watching online. Just a little bit about background by myself, on myself, and I also asked all of our senior executives who you'll meet today to give you a little bio of themselves. You know, I've got 40 years of plus experience in bringing new technologies to market. You know, from the first cell phone network in the country, that was spun out of AT&T, a couple of smaller enterprise software companies, one was acquired by EDS, and then took and built that into a $0.25 billion business in 20 countries around the world. When the internet was being commercialized in the mid-1990s, I joined the company BBN that really did invent the internet.
We took a little $5 million regional network and turned that into a billion-dollar global supplier of internet services, about 5,000 staff. I ran with inventor Dean Kamen the global robotics competition, with a 250,000 students, 100,000 volunteers, corporate sponsors like NASA, Google, Medtronic, Boston Scientific, IBM, and others. Through that, I met the team from MIT that had this really big idea to conquer paralysis, a big unmet need, some key patents from MIT, but they really needed a CEO to come in and commercialize it. I joined the company initially as an investor.
I figured out, okay, how do we build the team here to get the right product-market fit, totally redesigning the product, targeting all these individuals with paralysis, raise capital, and you can see today is the team that we've got here at Myomo, as well as this new facility to continue to expand the business. I've got an MBA from Harvard Business School, got my engineering degree at Northwestern University, you know, where I serve on the Dean's Advisory Board for the engineering school, for Biomedical Engineering Council. I've been an advisor to the Northwestern Medical Device Development Course and also for Design for America. What we want to accomplish today is I really want to give you a deeper dive into Myomo's operations, meet members of our senior leadership team, tour our new headquarters here, especially those of you who might have been at the old Portland Street office.
You know, we've got this space now to really grow this company. You'll have a chance to test your EMG signal with one of our MyoPro demo units. We'll provide details regarding our long-term business plan, which is really the focus of today, is how are we gonna scale this business from where we are today. We won't be updating Q2 or 2025 guidance today 'cause we're really focused on, you know, how are we gonna build the business and your questions on that. Also, one of my goals is to listen to you and learn from our guests today. You know, over the last several years, the strategic context here is, you know, we are so well-positioned in this marketplace. We've created a new product category with the MyoPro of myoelectric orthosis.
We have the first-mover advantage in meeting a large unmet need of people with chronic arm paralysis and one that grows every year. Last year, we finally received CMS reimbursement, which opens up the market to all the Medicare age population here in the U.S. We established a direct provider business, which Micah Mitchell, our Chief Commercial Officer, will present to you today to basically bring this product directly to the patients. Now we're developing a new orthotics and prosthetics clinical channel, and we've got an attractive margin profile, 70% gross margins, and opportunities to improve that with scale.
You know, our go-to-market model in our channel is, and if you look at just Q1 results here, our direct billing channel with our own certified prosthetist orthotist, our own reimbursement operations, 79% of our revenue in Q1, the VA about 3%, and we've served many veterans across the country with the VA medical centers. Our international business, which you'll hear from John Frijters, who heads up international from Germany today, was about 13% of revenue, and that sets growth year after year. There they sell through in-country orthotics and prosthetics clinics that are in network with these insurance companies that are licensed in Germany. With the U.S. O&P clinics, just 5% of our revenue in the first quarter, but we see that as an important increasing part of our business going forward here.
The next big milestone, and I've talked to some of you about this, is, you know, we've been growing the company now 10 years of revenue growth year- after- year. You know, and our aspiration is to get to a $100 million company, and do that within the next three years by 2028. That's what we have set our sights on as a milestone to pass through and can keep going from there. You're gonna hear our plans about how do we get to that position here, in the next several years. The team of people you'll meet today, you know, I report as Chairman CEO to the board of directors. Our commercial operations team is headed up by Micah Mitchell, and then we've got marketing, Joe Chacoskie. Field operations is headed up by Peter Young.
Unfortunately, Peter had a family medical issue to deal with today, so Peter isn't here with us today, but Micah will fill in for him. Kathy Sawyers heads up our clinical services team. Then we've got medical affairs, Dr. Harry Kovelman heads up that operation, which is really around our research as well as all of our reimbursement operations. Our engineering and product strategy head is Malcolm Bock. Our manufacturing operations, and you'll get a tour from Colin personally this afternoon. Colin heads up manufacturing, John Frijters international, and then our CFO is David Henry. With that, let me turn it over to Micah, and of course, we'll be looking for your questions all along the day, and then a more extensive Q&A session at the end of the day. Thanks again, and Micah, it's all yours.
Thank you. Okay, thanks, Paul, and thanks to all of you for being here, those that are in here in person as well as those that are streaming the event. My name's Micah Mitchell. I'm the Chief Commercial Officer. I've been with Myomo for about eight years. A little about me. Big green button. It's giving me a laser. Oh, there we go. Okay. A little bit about me. I've spent my whole career working in home medical equipment space, some small companies and medium companies that were rapidly growing, some large companies as well. I've worked on the provider side where we're helping the patient individually as well as on the manufacturing side. Interestingly enough, Myomo is not my only stop for a company that has done both. I'll kinda rewind 30 years. My capstone economics project was at Baylor University.
We were trying to determine if there was a correlation between the time spent in inpatient rehab and long-term health for those that had spinal cord injuries. I personally talked to several hundred patients who had spinal cord injuries where they took me through their journey from what their life looked like before the injury, what it looked like right after the injury, and then what it looked like long-term. I immediately learned that I wanted to dedicate my career to helping disabled people. Many things have changed in the past 30 years. For example, back then, patients would have inpatient rehab for months, two, three months inpatient to learn how to live with your disability. Unfortunately, today, for a lot of reasons, that is measured in weeks and sometimes even days. Shortly after finishing undergrad, I got straight into the home medical equipment.
I personally went into thousands of patients' homes to learn how they survive, being physically disabled. Our whole job all along the way has been to come up with assistive technology devices and products to help them do more with the physical limitations that they were facing. How to get from point A to point B, how to get in and out of bed, how to breathe easier in your own home, how to adjust yourself in bed. All of these assistive devices have always been designed to accept someone's ability that day and to give them devices to help them improve. I never would've believed back then had somebody told me that soon there will be a product that helps people move more than they're able to at the time.
Here we are today with the MyoPro, which you'll learn much more about later today, that helps someone with a paralyzed arm to immediately move the arm and grasp things and gain movement. What we're doing to me is meaningful. It's exciting. I think you guys will appreciate the business that you will learn about today, but I hope you also appreciate the humans that we are helping each day to improve their quality of life. I'm gonna briefly right now take you through the patient journey. About 80% of our revenue is the direct billing business, so we're gonna spend about an hour talking about that. Right now, I'll kinda briefly take you through the journey. We'll have other leaders come up and get into some of the more specific details of each step of the way.
As you can see, we kind of think about it starting with lead gen. and that's not only sort of getting leads, it's also educating the community, getting awareness among patients, therapists, physicians as well. It all starts with that, our marketing efforts to generate some demand. Then we have to do some things to make sure that clinically they're a good patient and to get funding in place. It's an expensive product, and so there is a health insurance component, and you'll learn quite a bit about that as well. It's a custom fabricated device. We don't stock these things in the field and take them off and put them on. There is quite a bit of work required to make this perfectly fit each patient's arm, the distance from the pivot on the elbow to the hand. Every hand is different.
We'll kinda take you through the fulfillment process, and you'll get a sneak peek of how we do it here. Once we deliver the product, many home medical equipment, orthotics, and prosthetics, you can deliver the product, and not a lot of training is involved. Our product is different. If you haven't moved your arm in a while, there's a process to learn how to move the arm again. It requires therapy and post-delivery protocols, and you'll hear a little bit more about that as well. Briefly on the lead gen, we're educating through a few different methods. We lean heavily on TV advertisements, social media because they work very well for our demographic.
What we've learned is not only are we reaching out to and educating patients, we're also educating family members, others in the circle of care, such as physicians and therapists as well. Once we've kind of generated the awareness and interest and have someone to talk to, they go into the intake and telehealth screening. Intake is really the first time we talk to someone on the phone. A lot of times folks have done quite a bit of research. Other times they've done no research. The phone calls can vary. Once we sort of check that first phone call box, the next step for efficiency and a lot of reasons is a telehealth screening. Not a lot different than a Zoom call.
We use a platform where the patient is able to see a clinician face-to-face through a video call to make sure that we're all moving in the right direction. A few of the metrics that we publish, so one is obviously pipeline add. Once a patient has completed a telehealth screening with a clinician so that we validated that they are a clinical candidate and that they have a payer that might pay for the device, it graduates from the telehealth screening to the next stage, and that's a pipeline add, which is one of the metrics that we publish. At that point, we need to get funding in place and make sure the physician understands the product and wants their patient to have it and then orders the product. While we are doing these things, the patient sits in the pipeline.
Once we have funding in place and a physician's order in place and it's ready for us to move forward into the fulfillment, that's when it exits the pipeline and enters the backlog. Where it sits in the backlog is where we do the heavy clinical lifting, fabricating the product, finding therapists, training therapists, delivering, and then usually at delivery is where the patient exits the backlog and turns into revenue. Kinda high level and just brief reminder, generate demand, talk to the patient, do sometimes a telehealth screening, sometimes an in-home eval during that telehealth screening middle phase. Once we have confirmed they're a good clinical candidate and they have an insurance that might cover the product, they enter the pipeline. While we're trying to get funding in place and talking to their physicians, they're sitting in the pipeline.
Once funding's in place, they exit the pipeline and enter the backlog where they sit until we deliver the product. In most cases, revenue is recognized at the time of delivery. As we get into a little more detail, I'd like to bring Joe Chacoskie, our Director of Marketing, up, who will take us through the marketing lead gen aspect.
Okay. Great. Thank you. Good morning. My name's Joe Chacoskie. I'm the director of marketing here at Myomo. Originally from Pittsburgh, PA. Currently, I live in Dallas, Texas. So die-hard black and gold live behind enemy lines. I started my career at the JCPenney corporate office in Plano, Texas. Great opportunity. A few years later, I went across the street to EDS. Oh, there we go. Sorry about that. Went across to EDS, also across the street in Plano, Texas. Great experience right out of the gate, two world-class corporate organizations. From there, I went on to Vertis Communications, which is a $1.2 billion marketing communication company. JCPenney was a client of Vertis. That's how I got over there. Five years prior to coming to Myomo, I was working for a boutique agency in Dallas, and I was focused on my client's direct-to-consumer for a medical device.
When I saw this opportunity, it was a really good fit. While I've been here at Myomo, we've been working to refine our marketing efforts. I'm responsible for lead gen, and I'm focused on getting the cost per pipeline acquisition down. Here's looking at we primarily get leads from three sources. The first one is TV. The next one is digital advertising and social media. Then the third is clinical referrals and organic. With our TV advertising, we do utilize an agency for consulting, for ad placement, and for pricing. Additionally, as part of the Q1 meta situation, we have also partnered with a digital agency that has proven to be effective. With TV, we track our performance using about 50 TFN, toll-free phone numbers, with each station. You know, with TV, we have a call center in Fort Worth, Texas.
If somebody calls during the day, they could talk to the CXD team. If we have availability in a telehealth, we call it a walk-in, and they can go right in. With digital advertising and social media, we get instant results on a daily basis, and we're looking at the campaigns in real time. TV is good because it makes the phone ring, and we have an excellent call center. With social, a lot of leads come in in the evening. Patients are, you know, 1:00 A.M. seeing our ad on TV. They go to our website. They fill out the form. Those are outbound calls made by our call center during the day. For clinical referrals, which are increasing, you know, we tend to get better clinical patients, particularly if the referring source is knowledgeable and has been trained by Kathy's RCS team.
We are constantly working to increase referrals. It's a priority for the company. And then lastly, organic. You guys may be familiar with AOPA coming up in September. We're really excited about having two speaking opportunities this year there. We're gonna be at the PM&R later this year. We are actively engaging the O&P community. Also, we are at AOTA in Philadelphia engaging therapists, OTs, and PTs. We are also looking into local events. All right. The next two slides, we're just gonna look at quickly some Facebook creative. You know, patients, users, appreciate a brand that appears dynamic and relevant. This is the MyoPro 2x. This is all new photography that we recently taken. So, you know, fresh campaigns applies, you know, active engaging. We're also doing a lot of attention-grabbing videos, which have been highly effective. We are also using AI to scale.
Go to the next slide. You could see we have very different, you know, ad copy, very different images. Each morning, I could see which got the most clicks, which needs to be optimized. You can also see ad fatigue in real time. If the cost per lead is increasing, increasing, increasing, we'll switch the creative out. Here's taking a look at advertising spend. Advertising spend is pretty much digital, primarily Facebook and on TV. We're looking at this on a weekly basis. You know, for example, with TV, we can test multiple stations. On the digital side, we have Instagram. We have Facebook. We're determining our specific strategy on the creative and placement on a weekly basis.
You know, for example, you could see on this slide, you know, we did have a hiccup, I would call it, with Meta in Q1. You could see in April, you could see in Q1 that we really spent more on TV, which historically we spend more on digital advertising. In April, we brought on an ad agency earlier in the year. We rebounded in April. You could see, you know, cost per lead coming up next. Yeah. Our cost per lead is better than it has been in 2024 in April. This is increasing our budget, drastically increasing our budget. We are really in a good position. I get the question all the time, you know, is there a saturation point, for, you know, our digital advertising and direct-to-consumer for stroke patients?
You know, based upon this data, you know, we're not experiencing saturation at this time.
Okay. Now we'll kinda talk about our advertising cost per pipeline add. I'll even kinda go back to the previous slide. We're spending so much more, spent so much more on advertising in April than we did any quarter in 2024. As you spend more, even when you're well below a saturation point, you still can have rapid increases in your spend. You can see some increases in your cost per lead even when you're below a saturation point. Part of that is timing with social media spend and TV spend and whatnot. What we're experiencing is our cost per lead in April, even with the more significant spend, with leads 2.5+ times what we were getting sort of in just a few months before, not only is our cost per lead not rising, but it's getting better.
You know, I would kind of say if there is a saturation point for advertising, we're nowhere near it at this point. That's it. Advertising cost per pipeline add, which is a metric that we publish, is a function of two things: our cost per lead and our lead conversion. Each of those are a function of some other things. When I think about cost per lead, is there competition? For example, at the end of the year, Medicare Advantage plans tend to advertise in the same space that we're advertising, which on the good news is that that kind of confirms that we are advertising in the right places. Also end of year, we're competing with other advertisers for sort of end-of-year holiday shopping and those things.
Competition is a factor, and we try to account for that when we're planning our spend throughout the year. Also, it's performance, and it's how well are our teams doing converting those things. When I think about lead conversion, some of the things that we're doing today, for example, the telehealth screening, was a good guy for us because it became much more efficient. We could take a patient from the phone directly into a telehealth screening, and that was a good guy for our ratios. Some of these sort of factors we control, some we don't control, but we do the best that we can to control all of those things. That kind of leads to an advertising cost per pipeline add, which, as you guys know, we do publish.
The patient decision-making process is not always straightforward, probably similar to many of us when we have a significant purchase. Sometimes you sort of go through the process quickly, and other times it can take a lot of time. You begin to get interested in some things. You begin to seek information. In our case, sometimes it's a patient may be seeking information from family, friends, from therapists, from physician, from the internet. Sometimes they want to go through that process. Also, with our patient population, things happen. It's not straightforward for a disabled person or someone with hemiparesis to get out of bed. They're generally not going to work to make their lunch to kinda get through the day. There are other comorbidities and health issues.
We do see a lot of those things sort of pause the patient's journey where they need to take a break, focus on other things, and/or learn about the product only to come back and re-engage with us later. There is sort of a cycle time aspect of our pipeline adds as well, from, you know, generating leads to getting them into the pipeline to navigating the process. Of that timeline, some things we control, some things we partially control, and there are other things that we don't control. What I want to demonstrate here is kind of how long that actually takes. What we've known, or what I'll share, is of the pipeline adds each month, the patients who pass the clinical telehealth screening, generally about half of those pipeline adds are from sort of new leads that we got within the last month.
About half of those pipeline adds were older leads. Patients who engaged with us needed to pause and take some time and figure some things out and then came back to us. You can see we're very strong the first week. We generally, when a lead comes in, they're contacted immediately, and we have a pretty good surge those first two days from the lead date until the date that they become a pipeline add. Due to our messaging, we have plenty of success sort of that first 10 days. We see a drop-off where patients need time. They want to be put on hold. They're thinking. They're talking to the circle of care. We reactivate leads through direct campaigns and a lot of different efforts.
In some cases, separate from our efforts, patients just come back to us. Some patients are ready to move immediately. Other patients need time, which is not really measured in weeks. It is in years, from the time that they first engage with us until they are ready to proceed with the process. Marketing efficiency, there is some good news in here and some old news in here as well. Our cost per lead is the orange bar. Obviously, January, February, we had a hiccup there where the cost per lead increased on us for a short period of time. That was due to some meta changes. We have that situated. That is way behind us. The April cost per lead is as good, if not slightly better, than what we were experiencing a year ago.
The white line is sort of our ad spend per pipeline add. These are two different axes, by the way. Clearly, as we were spending more for leads, our advertising cost per pipeline add increased through Q1. We are beginning to see that decrease. That said, due to the long cycle times, if we are getting 2.5 , three times more leads today than we were getting in Q4 and months at the beginning of the year, we would expect our cost per lead to decrease at a more rapid rate than our cost per pipeline add, because so many of our leads are new. Many of these new leads will convert to pipeline adds in a short period of time. Other of these new leads, of which we are getting many more than we did in the past, will need time to mature. Okay.
Now I'm gonna go into field operations and dig into a little bit more. Peter Young is our Senior Director of Field Operations. He has 20 years of experience in home medical equipment. He's been a great addition to the team. He has three departments sort of that he handles that take us from the intake to the telehealth screening and then all the clinical work that our CPOs do. The intake, we have an intake center in Fort Worth, Texas. It's about a 20-seat call center. We really do more than your typical call center. It's a wonderful team that we've grown from, I guess, two or three folks seven years ago up to about 20 today. When I first joined the company, I was actually living in Ohio.
Paul and I began talking about sort of what the future of the company may look like. We really knew that we would need a strong, robust call center. As it turns out, Cambridge, which is where we were based at the time, and Boston are not ideal locations for a rapidly growing call center, partly due to the cost of labor. We went through a process that many similar companies go through to determine what is the best place for a call center that could grow to 100 heads in a short period of time. There is a handful of locations. Cleveland, Ohio is a popular spot. Nashville was more popular, I think, than it is today. Then you have a couple cities in Texas, kind of Austin and the Dallas-Fort Worth area.
We chose the Dallas-Fort Worth area. We've really zoned in on the profile of the intake coordinators. We would love to have some home medical equipment experience, maybe some insurance experience, doctor's office experience. What we've learned is even more important than that is someone who's a good listener, who wants to help and talk to disabled people. Sometimes the conversations can take some time, with slight cognitive deficits, with speech issues. We want a good team of intake coordinators that are patient, kind, and caring, but also smart enough to do the job and handle the sort of unique complexities that we have that not all call centers do have.
We are able to, with this particular department and where it is, we're able to rapidly scale it up and down, which is a huge benefit to us. Today we handle about 25,000 inbound/outbound phone calls with this team. When we think about the phone calls, there's inbound and outbound. One great thing about a TV ad, a lot of patients will see a TV ad, go do some research, fill out a form. If a form is filled out, then we are an outbound call center trying to call the phone number to get the patient on the phone. On the other hand, if it's a TV ad and our phone number is on the screen and they call us directly, we love those because it's an inbound call. We say hello.
The patient on the other end is already mentally ready to have the conversation. With an outbound call, we don't know what we're catching them doing. Are they trying to get out of bed? Are they about to, you know, go to the bathroom? We have to help the patient mentally, you know, get into the state for the conversation that we're about to have. We are always looking at incoming and outgoing calls and our success rates on those as well. Once we've talked to the patient and we've clarified that they have a paralyzed arm and that they have an insurance that might cover the product, then we flip them to the next clinical screening stage. We began testing centralizing telehealth screenings about a year ago.
Before we centralized telehealth screenings, our CPOs were the licensed clinicians out in the field that I'll elaborate on in a minute, where they would travel, they would go to a patient's home, they may go to a therapy clinic, they may go do a shape capture, and then maybe they're home a day or so a week. When they're home, they would go into our waiting room and handle pre-scheduled telehealth screenings. We wanted to be more efficient as a company. That's one of our, it's one of our, the CPOs are a unique resource and a limited resource for us and an expensive resource for us. We thought, can we centralize this function so that our field CPOs can do more patient contact product things for which they're trained to do?
Can we also allow them to not have to worry about going into this waiting room with a side benefit for the patient? The side benefit is the patient does not have to schedule the appointment. They would have that option, but if they want to have their telehealth screening now, they could immediately hop into the waiting room. We tested this about a year ago. It was successful, and we built a team. We have a handful of patient eligibility specialists. These are also clinicians, but they are like a physical therapist assistant or a COTA-occupational therapy assistant. They understand how a stroke patient presents. They have been trained on our product so that through a telehealth screening, they can quickly determine green light, yellow light, red light. The yellow light band is fairly narrow. Some patients clinically cannot use our product, some can.
We'll talk about more ratios as we go along. We've learned just to be more efficient. Let's do that through a quick telehealth screening. To even be more efficient, let's centralize the telehealth screenings so that anytime someone wants to come into the waiting room, they can immediately hop in. One of our clinicians is there to see them on demand. I'll rewind one step to our intake coordinators in the call center. Now, as they're talking to patients again, they don't have to schedule you for next Monday or Tuesday. If the patient's ready, willing, and able, they send them a link and they hop right into the waiting room immediately. We'll see a brief telehealth screening here shortly.
We are always trying to make sure we have the right number of people doing the right things at the right time, and so we're kind of managing the process flow all the way through. Among other metrics, we want to make sure that the telehealth screens that are completed sort of match the increase in leads. The gray bar here is kind of the increase in leads. You see the term workable leads. For example, there are some insurances that do not cover the MyoPro yet, like state Medicaid plans and things like that. That is not a workable lead for us, okay? Of the leads that have a chance to get a MyoPro, that is sort of a workable lead. As the telehealth screens are completed, you can see we are generally following the same path. That is good news.
You can probably visually also tell that the percent of telehealth screens completed, so the blue bar, that are good, which is the orange bar, which are pipeline adds, the percent is, that are good has decreased over time. What we found is as our clinicians get more experience and know better clinically and better outcomes, as we've narrowed the yellow band, we've generally narrowed it to more or sort of red light than green light, because we want, we wanna maximize clinical outcomes. Today, when we complete the telehealth screening with a patient with a paralyzed arm with an insurance that might cover the MyoPro, about 40% of the time we move to the next step, and that's a pipeline add. About 60% of the time it's either, sometimes it's not yet if they have some clinical conditions that they can work on through therapy.
And sometimes it's, sometimes they're overqualified, and sometimes, you know, it's just not gonna work for them. Okay. Kind of a few of our hold reasons. The most common, there's kind of two big buckets of why patients don't get the product. One is they're too bad off clinically. We have tone and spasticity, which tend to get worse over time with a stroke patient. Those are kind of the primary reasons someone won't get it due to tone, which Kathy will speak to in a little bit. The other reason is some patients are overqualified. You do have some patients who just have a deficit in the hand but not in the elbow, and a hand-only device might benefit them. Kind of tricky. Then we have some patients who can move better than they think they can.
and our product would not help them do more activities of daily living. Of the 60% of the time that we say no, most of the time it's either they're clinically too bad or clinically too good. Okay. This is a telehealth screening.
Okay. I think we're ready. I'm Megan with Myomo. I'm gonna ask you some questions, get some medical history from you, take a look at your arm, kinda see what you can do with it. Based on that, we'll determine if we think the MyoPro will be a good fit for you, okay?
Okay. Thank you.
All right. Just to confirm, you're James Ford.
Yes, ma'am.
Perfect. Okay. Tell me what's going on with your arm. What happened?
Christmas Eve, I had a stroke, ended up with a subluxation in my left arm.
Last I heard, it was still at one finger.
Okay.
I want to find out if this machine will help me.
Yeah. Was that Christmas Eve of this past year of 2024?
Yes, ma'am.
Okay. Any pain in that left arm?
Only if I lift it above a certain point.
Okay. When you lift it up high, when you do lift it up kinda high, how high does the pain get on a scale of one to 10?
Seven.
A seven. Okay. No pain otherwise?
No.
Okay.
My arm.
What's your dominant side, the right or the left?
My right.
Right side. Okay. All right. We're gonna do some stretches just to see how flexible that arm is. You can use the right to help you. We're gonna kinda start at the shoulder and work our way down.
Let's put both hands together, and let's start with a nice big shoulder stretch. Let's pull that left arm up about to there. We don't want to go too high if we've got a subluxation. Any pain when you go that high?
It hurts a little bit.
Okay. Let's go back down. What about pulling your arm out to the side, like you're trying to show me your armpit? Can you lift it up? Good. Any pain there?
Not much.
Good. All right. You can relax. Let's move down to the elbow. Go ahead and grab onto that left wrist, and I want you to reach towards the camera. Good. Then get that elbow as straight as you can. Great. Good. Can you bring your hand to your mouth? Very good. Let's move down to the wrist and hand.
Can you pull your fingers open and give that wrist a good stretch? Good. And then can you push your wrist down? Very good. And then what about your thumb? Can you pull your thumb away from the palm of your hand? Let's.
I can actually move my thumb a little bit.
Oh, okay. Can we move the camera down just a little bit so I can see that thumb? Okay. Pull the thumb away. Very good.
It's interesting. We began testing telehealth screenings in Q4 of 2019. Kinda tested it. It began to work. We sort of began to roll it out to all of our CPOs at the time. Again, we were not centralizing it.
There were some technological challenges that our patients mostly faced because they do not work on Zoom all day like the rest of us. When COVID happened, that really helped us with the technical issues because patients were doing telehealth with a whole lot of healthcare providers. That was definitely a good guide for us. About 85% of our digital leads come in through a smartphone. It appears with this person, they actually used a smartphone. It is in their hand. They talk to us, intake coordinator. We do get some on laptops and other things, but then they are able to, on the same phone, click it. In this case, he had a family member helping him with the phone, which is always helpful. Okay.
Once we're through the telehealth screening, and they're in the pipeline, then we need to get funding in place for the backlog. Dr. Kovelman will speak to that in a minute. Once we have it off and it's time for our certified prosthetist orthotist to do their work, we call that kind of the fulfillment stages for us. Today, I think there's 13 on the screen. We have 14 full-time CPOs. Obviously, with healthcare, everything is regulated. For a custom fabricated orthosis, for the most part, you need to be a certified orthotist CO, certified prosthetist CP, or certified prosthetist orthotist CPO. This kind of depends on what you get is what you thought you wanted to do when you went to grad school.
It is two years of graduate school, followed by, sort of a, a year-ish of internship, and then an exam, and then you become certified. And then, of course, every year, a certain number of continuing education units to maintain your certification. The way I think about it, the CPOs is they're, they're almost a therapist, and they're almost an engineer, and they're really good with their hands. What I have also found, working in this space is that, and, and we will just kind of lump CP, CP, CP, CO, CPO. We just kind of call them all CPOs. What I found, my opinion, is that the CPOs care more about their patients than anyone else I have been around in healthcare, more so than physicians. They really care about helping their patient and improving the quality of life.
and working for us is unique, because our patients are able to focus on one product that's cool and exciting, and they get to travel and see a whole lot of different patients. A typical CPO job is you drive to a clinic or office. You're there from 8:00 A.M. to 5:00 P.M. You have a few referral sources built in, physicians that are doing amputations or refer for braces and orthotics. Patients come to you. You do your work. The patients go home. The CPOs that work for us, it's a little bit different. They're home-based. They travel a lot 'cause we cover the country with 14 of them. As we're growing, we believe a lot of efficiency gains and interesting things will happen when we get to 30 CPOs, and particularly when we get to 40.
is kind of a magic number with sales territories where you're kind of done with airplanes and hotels, which sort of helps with the expenses. It also allows the CPOs to see more patients and be more efficient and sort of increase their annual revenue number per clinician. The fulfillment process, so once we have an auth and we know this patient, funding is in place, and this patient is going to get a MyoPro. For us, that's a heck of a lot of work to get to this point. In most cases with a lot of healthcare, so if my son, for example, this happened, we thought he broke his arm. We called the pediatrician who has an X-ray machine there, and he said, "Come on in.
I'll do an exam." He immediately, behind the scenes, went to our insurance and received a prior auth for an X-ray. Now, he couldn't do the X-ray unless he did a physical exam first, but the prior auth was sort of automatic because an X-ray for a broken arm is standard of care. We do a heck of a lot of work to get to that point because we're not quite standard of care yet. Once we show up at the doctor's office, that's kind of the fulfillment stage. He's gonna do his physical exam, do an X-ray, and treat the patient. That's where we finally get into this fulfillment stage. We get to do the heavy clinical lifting that everyone wants to happen. That starts with getting a perfect shape capture of the arm.
Similar during COVID, we felt that it would be much more efficient to have a sort of digital shape capture kit where, if needed, we can do it remotely. This kit can be mailed to a patient, where they can get help maybe from their therapist or a family. In the kit, as you open it up, you can see the kit on the left side. There is a screen where we can pipe in with a telehealth right there, help them take pictures, help them place things on the arm so we get that perfect shape of their arm. Once we have the perfect shape of the arm, that is where the magic happens, over here, which we will get a walkthrough later where we fabricate that custom device to specifically fit the patient's measurements.
I will say upper arm and lower arm, all fairly similar, but the pivot from the elbow to the wrist within a millimeter, the shape of each hand is so different, and we have to get it just perfect. It takes time to get those measurements, and then it takes time to build the product. Then after the product has been fabricated, we show up for the delivery. Occasionally, a delivery can take an hour. More common is a three-hour delivery, which is a lot of time to be face-to-face with the patient, doing the tweaking on the product, doing the initial training. After the delivery is where additional heavy lifting from a clinical standpoint takes place, which Kathy will speak to that later as well. I talked a little bit about territory management.
All the creamy sales territories is not unique to us. It's a little more complicated on our end 'cause not only are we looking at where do the stroke patients live, where are our leads coming from, but there is a state licensure aspect as well, that each state can do their own way. Most states have it. Some states do not. In addition, CPOs are a limited resource. And as the O&P industry grows, we're all competing for the limited resources. And we believe as we grow and kinda get to that magic 30 number and then up to 40, we will see significant efficiency gains for our clinicians in the field. Okay. Do we wanna pause for Q&A, Dave? Okay.
Before I pass over to Dr. Kovelman, we've kinda gone through the way that we sort of generate awareness and interest in our lead generation and marketing, kind of a little bit of the process flow. We'll open it up for any questions about that part.
Thank you. Scott Henry with Alliance Global Partners. There was a lot of talk about cost per lead, and how that's changing. How do you measure quality of the lead? I mean, we can add more patients to the top of the funnel, but we wanna make sure they're equally as strong of candidates as the one before. How does one measure that?
Great question. We look at every metric that we can.
For example, a patient with Medicare is a much higher quality lead than a patient that has a state Medicaid plan that will not cover the product. For things such as payer, even geography, we can think about quality of lead. We have been asked a lot about clinical quality of lead. Is there a way or can we determine if there is a difference in the clinical quality of lead? Our belief is that we cannot. If someone is contacting us with a paralyzed arm from a stroke a certain number of months or years ago, it is hard for us. We do not believe that that changes over time.
If you give me a bucket of 100 stroke patients that contacted us six months ago or a bucket of 100 stroke patients that contacted us today, we believe that because of the way that we advertise and what we know clinically, the clinical quality, those would be the same.
Okay. Okay. Fair enough. I assume you verify that over time to track it.
We do. Yes.
Yeah. Perfect. The second question, I just had a final question. You know, you mentioned cost per lead gets higher during periods of rapid growth. I guess, is there a reason why you can't have the benefits of scale? Meaning a lot of times when business goes up, costs go down. Is it just a trailing?
Yeah. I think over long periods of time, we will. Yeah. It's a great question.
I'll use TV as an example. When we first began using TV ads, it was local advertising. We would go into certain MSAs, and we would advertise that way. We quickly got to where we could handle the country nationwide and have enough CPOs. When we went from local advertising to national advertising, there was a huge cost per lead gain because we were at scale. The reason it goes up over short periods of time has to do with our money not getting us as far. If I triple my TV budget next week, I'm not gonna get as many ads run per dollar as I would this week. With TV, we're doing sort of a remnant reverse bidding, which really works well for our demographic. The companies that we're competing with were very zoned in.
If I wanna triple my budget and clear that money, I have to be a little more aggressive on the amount that I'm willing to spend for that 30, 60, or 120-second ad. The ad still performs just as well. I just have to spend a little bit more money for the same airtime if I increase the budget significantly over short periods of time. It's not really the quality of lead. It's that my advertising dollars don't quite go as far during times of rapid growth. It also seems that some of the social media platforms, Facebook, for example, they're paying attention. If a company likes what they're getting from Facebook and is rapidly increasing their spend, we believe that Facebook, understandably so, takes advantage of that a little bit and sort of charges us a little bit more per lead.
We think we can correct that over long periods of time or with slow growth. Over rapid growth, it's a little bit less efficient.
Okay. Yeah. A little bit of front-end loaded cost.
That's right.
Thank you.
Yea h. Okay.
This is Ryan Colligan. Thank you for hosting us today. Regarding lead generation on Facebook, can you just kind of specify how many different creatives you have on Facebook? I.e., is it one sort of banner ad, video ad that you're showing to everyone, or are there five different ones, and what sort of efforts you're making if you, let's say, have a best-performing control to constantly be experimenting and trying to find new, even better-performing creative?
Sure. Great question. I'll speak to that at a high level, and I may need Joe to help me.
I don't know exactly how many. You saw a couple of, you know, slides of ads. I don't know exactly how many are running today. I know, let me even back up before I talk about performance and how we measure it. With strokes, we have incidence and prevalence. Incidence is, you just had your stroke. You're going through the stroke journey from the beginning. That's the new incidence. And then you have prevalence, right? So your stroke was in the past, and you're dealing with life as a stroke patient. Whether your stroke was last week or 10 years ago, other than the few patients who are receiving a MyoPro, your arm's still paralyzed. You can still benefit from our product.
As we think about advertising, to get in front of the incident pre population, which we do some and will do more in the future, it's costly, because it doesn't magically happen. To go to trade shows and talk to physicians and do lunch and learns and all of those things, there's a cost associated with those things. That said, stroke patients who've had the stroke a long time in the past, they begin to do similar things. They watch similar things on TV. Their digital footprint starts to look similar. And frankly, it's not an appealing demographic for most companies. We're not competing with Apple or GM to get in front of that demographic. As we've focused on the prevalence, that's where we've really gone heavy with the social media and the TV.
Another benefit of social media and TV is we get almost instant results. TV, I'm kind of delayed about a week or so, but, you know, I run an ad. I don't know how much money is gonna clear this week. By Friday, I know what cleared and what ads ran. By Friday, I know how many times the phone rang, and we can see exactly how each TV show is performing with TV, and we can tweak it weekly. Facebook digital is the same. Digital, though, our budget, the amount we want to spend, we're more likely to hit that on the target, and then we're able to look at the results in real time as well. I personally review it every week, and the agencies are going through all the things you would expect them to go through. Okay? This station's performing well.
Let's spend more money on this station. This 90-second is outperforming the 120-second ad. Let's focus on the 90-second ad. With Facebook, kinda the, the what happens behind the scenes is what our agency does, where he's constantly looking at what does that picture like? Is it the blue background or the green background? Is it the new creative or the old creative so that we're looking at dollars per views and dollars per clicks? Joe, how many different Facebook ads are we running at any point in time?
Anywhere from 40-50. We're looking at this every morning, and we're making real-time adjustments. Like you said, if it's the blue or the red, different demographics of MyoPro patients. We spend a lot of time and energy specifically making adjustments to Facebook to get the best return on our investment.
That's how we also identify ad fatigue. If we have 20 campaigns running and three of them, the cost per lead is exceeding $17, then we know we have a little bit of ad fatigue here. We'll change up the copy or change up the imagery.
Yeah. Just to clarify, Joe, 30 of the 15 slightly different, creative ads, how many of them actually involve rich media, meaning there's video, there's voice, you know, there's other sorts of things to somehow try and engage with the target audience more effectively versus just something that would be?
Yeah. We're going into a lot of short video on Facebook and both Instagram. We're also partnering with YouTube, and we're gonna have some more ads on YouTube. Dynamic, engaging, you know, everyone's—our demographic's not on TikTok, but they do, you know, look at their phone.
They're engaging with the grandchildren on Facebook, and we are gonna go with more video ads. When it's a static ad, we can make changes more quickly. We don't rely on assets to, you know, edit the ad or have a different, you know, 15 seconds or 20 or, or 25 or 30. We're doing both.
What portion of your advertising spend today is on static ads versus, you know, ads with motion that demonstrate for the MyoPro?
Yeah. I would say on Facebook, 80/20, 80% static, 20% is in video, and we'll gradually see that increase.
Yeah.
If you're looking at Facebook and you're seeing some of our ads, the distribution you see should, you know, fairly match up with what everyone else is seeing as well.
I had a few related questions.
You mentioned 2.5 to three times increase in, was that pipe , leads? Did you mention a number on that?
Yes. That's correct.
What's the timeframe of that?
When I think about April, I'll use April as an example, versus January and before, probably February and before, so April, kind of look at it weekly or monthly, even now, 2.5 to three times as many leads as we were receiving a few months before and six months before and nine months before. To 2024, we were fairly flat on advertising spend and leads.
Okay. The April number was 2.5X to 3X on leads versus the fourth quarter 2024 normalized?
Correct. With the lower cost per lead.
Without this Facebook HIPAA issue, right? That's not an issue.
Once we got beyond the issue in April. Yeah.
Why did you say I was a little confused on your comment that Scott asked about. You said ROI, you're not saturated. ROI is good. Why would there be this drop-off in cost per lead then? Same at right question.
What I'm trying to demonstrate is the hiccup that we experienced in January and February is behind us at this point. You know, if we did not have a hiccup and everything was steady and then we tripled, sort of, our spend, you would expect that immediately your cost probably goes up a little bit. Like I said, it costs me more to run a TV ad if I increase it really, really sharply. A little hiccup January, February, recovery in March, April, I'll kind of compare April to before the hiccup.
I'm spending a lot more money, and my cost per lead is lower. That indicates to me that we're not near a saturation point, among other things that indicate that to me. Yes.
Okay. Just to finish the thought, I mean, if you the ads are supposed to translate to leads and then at pipeline adds, right?
That's correct.
Do you believe you are at least same ROI or better now as compared to what you were before?
Sure. I think over long periods of time, the same cost per lead is gonna result in the same revenue due to the patient's personal process, right, where a whole lot of them are ready to act right now, and others want to wait.
Today, I have a higher percent of new leads 'cause we're spending so much more and getting a lot more leads than I did six months ago, right? Six months ago, my percent of new leads and percent of old leads were remaining kinda steady, and we kinda, you know, saw the pipeline adds. As I'm getting a whole lot of new leads, the percent of pipeline adds that are new leads is, would expect to be greater 'cause I have more new leads. The ROI on all the new leads long-term, I would expect to be the same. Over short periods of time, the advertising cost per pipeline add, I would expect to be a little higher because some of these leads will need time
to mature. Okay. That's just a measurement issue though.
Correct.
Last question. What is a lead?
What's the definition of a lead, and what's the conversion to an ad?
I'll answer the lead part, and I might need you to clarify the conversion to an ad. A lead is a name and phone number of someone who has a paralyzed arm or a family member or friend with a paralyzed arm. If it's a form fill, sort of online, they fill out the name, phone number, email address, that's a lead. If it's TV, if we say hello and talk to a human long enough to get a name, you know, then that's a lead.
What's the typical conversion from a lead to a pipe line add?
In time or in ratios?
In ratio.
We don't share the specific conversion pieces.
Okay. But spend constantly?
We see nothing short-term that cannot be explained from sort of rapid increases or decreases in spending or leads.
Yep.
Chase Knickerbocker, Craig-Hallum. Just kind of to build on that, if we think about kind of post algo change at Facebook and now, you know, it is clear the cost per lead has stabilized, even gotten a little bit better. Has there, is there anything different about the quality of these leads? And I would imagine at this point, you have had a couple months to kind of see that. Right. Should we think of there being any difference in quality? And is it still kind of that 40% is progressing to pipeline that you kind of shared earlier in the presentation?
Yeah. So, quality of leads are the same. For example, of the workable leads, 45% of them have historically been Medicare and are still Medicare, right? And it can be 44%-46%.
We're not seeing any difference in sort of the quality of leads that we can measure. Now, clinical quality, what we are seeing is fewer patients clinically go through our screening. We believe that has to do with our clinicians learning, and the patients learn as well. The product is exciting. We had a patient come visit with us last week, and she even stated, "In spite of everything that you told me and prepared me for, I had a hard time listening because I was viewing getting my full arm back." If you were a guitar player before your stroke, you are not going to be a guitar player with our product. Even when we say that, they do not always hear it. It was the same for me when I joined the company.
I thought everyone with a paralyzed arm, we were gonna cure them all and off we would go. Our clinicians are the same. It's exciting. It's fun. When they first start, they have a hard time saying no to a patient who really wants the product. Over time, they learn, as they're doing the follow-up and the deliveries, that, "Oh, gosh, the cognitive ability," or they were in a wheelchair, and they just ended up not being able to use it as much as we would want to or not using it at all. Our clinicians, we believe, with experience, become more clinically deliberate. Not significant, but over time, that's the trend that we're seeing. That kinda sor- sorry. We don't believe that's a quality of lead.
We think that's just a clinician learning our product and being more clinically deliberate.
That kind of timeline, from a standpoint of the kind of percentage of patients that convert to the pipeline that do convert to the pipeline, 50% being within 30 days?
During times of no growth, about half of our pipeline adds are leads from the same month, and about half of the pipeline adds are older leads. Call them reactivated leads. Yeah.
Is it fair for us to think about kind of currently that still remaining true?
Here's how
the sense of growth has happened.
Great question. Here's how we try to explain this. If I were to stop advertising today and spend $0 on advertising for all of July, I would continue to have pipeline adds.
They would all be old leads. So then it's not 50/50 anymore. It's a very low percent new leads and a very high percent old leads if I'm not advertising at all. Similarly, if I crank up the volume on advertising, which we recently did, and leads increased 2.5%-3%, then the percent of my pipeline adds that are new leads goes up above 50% a little bit 'cause I have all these new leads to work with. So during, during times of rapid growth or even steady growth, the 50/50 will change a little bit. If we were to keep advertising spend the same for the next two years, then it would revert back to 50/50 pretty soon. Did I answer your question?
Okay.
Yeah. I'm, I'm curious, Mike.
Are you had the graph that showed the percent of total workable leads and the pipeline add, which was decreasing over time as a total percentage? If there's no fewer good leads or no, for example, more bad quality leads, what would explain the discrepancy there?
Say that again. I'm sorry.
Yeah. There's a graph you prior showed that had the percent of total screening leads and what percent of those were pipeline adds at that one? This one?
Yeah. This is the number of screens that were completed, a telehealth screening in our telehealth waiting room charted against leads. We're trying to make sure these are generally going in the same direction to make sure that we're getting patients through the phone call and into the telehealth screening. Let's see if I need to do this.
The delta between the orange and the blue is slowly growing over time. Over here, about 60% of patients pass the telehealth screening. Today, about 40% pass the telehealth screening.
One explanation for that could be that there's lower quality leads coming in, but you just argued that that's not the case. What explains why the delta is increasing?
I don't believe that fewer patients pass the telehealth screening because there's a change in clinical quality. What we believe is that our clinicians get more clinically deliberate or clinically strict as they have more experience with patients using our product, which is appropriate, we believe. It's probably the same with lots of med device and even surgical interventions and pharmaceuticals as well over time.
You are trying to better zone in on who's gonna get the appropriate and best clinical outcome.
Putting payers aside in the pipelines, is it fair to assume that you think the percent of pipeline adds that will result in total sales will increase because they're higher quality pipeline adds?
I think a couple things could happen. One is fewer patients who get the product are gonna use it more minutes or more hours a day and more days a week. I think that will happen. I think fewer patients will drop out of the backlog, because there have been times where we get to the shape capture and we really see the patient and do a full clinical evaluation and learn then that they're not a good candidate. I would expect both of those things to happen.
Yeah. Hi.
Just a clarification on something you just said about patients and even doctors sometimes being overexcited and coming in with the expectation that they're gonna maybe get full recovery of their capabilities and reality hitting. In terms of making it from a lead to a pipeline add, is that a binary process where it's either will benefit or will not benefit? Obviously, will benefit makes it. Or is this a gray or is there a big gray area of marginal benefit, you know, medium benefit, good benefit, high benefit? In that gray area, is there a decision process that patients and doctors make as to whether they opt to move on or not?
Great question.
Is that clear?
Yeah. Great question. I'm, I'm gonna instead of using the word gray area, I'm gonna use the word yellow light.
We talk about green light, yellow light, red light. We also talk about where the yellow light needs to shift, okay? This is for the telehealth screening. We have green light. We know they will benefit from it, no question. We have red light. We know that they will not. Then we have yellow light. What we kind of do is we've expanded the yellow light into the red light to say, "Hey, we're not sure. The telehealth screening clinician thinks that they're not a good candidate." Then the yellow light, we send a clinician into the home to put a MARK kit, which you guys will see, to put a demo kit on them. At that time, we kind of narrow—they're still a yellow band, right? Sometimes we know green, sometimes we know red, we still know yellow.
At that point, if it's yellow, then we wanna get the circle of care involved in the patient to let them know, "Okay, this will move your arm." If you don't have shoulder movement, for example, you may not be able to get to your mouth to feed yourself, or, you know, your arm's too big, you may only be able to get to go here. We try to explain clearly to everyone clinically what we believe is going to happen. In addition, we explain the work they're going to have to do to even get to that point. Therapy multiple times a week, right, for multiple weeks. We try to allow the circle of care to decide.
As it turns out, interestingly enough, when I've been around these conversations, generally, the circle of care wants to do anything and everything they can to help this patient get better at all. Usually, the one who does not want to move forward is the patient after thinking about it. That has at least been my experience.
Is that because they do not want to do the work? Is that typically the issue, or?
I would be speculating. Do they, you know, is the juice worth the squeeze? You know, is all the work going to benefit them? Sometimes I think the patient is thinking, "Is all the work that I'm about to ask my spouse and family to do to help me, is it worth it for everybody as well?"
We have one last question from somebody on the webcast.
Are there major differences between cost per lead for TV versus social media advertising? And do you see differences between conversion rates of patients who come from these two channels?
The cost per lead is a little bit different. I will say with TV, there's an overall lift across the board. If I stopped doing TV ads, my social media cost per lead would, our experience has been, it would increase. TV is beyond the how much I paid for the ad and how many times the phone rang. TV does convert a little better just for the simple fact that we get them on the phone. They're making that outbound call. We say hello. There's no phone tag, right? When someone fills out a form, they don't answer the first time we call them.
When we get them on the phone, as mentioned, they're not ready for the conversation. Sometimes it's, "I'm on the way out the door. Can you call me back later?" We do like TV for the overall lift and because when we're an inbound call center, it's just a lot quicker and easier through the front of the process. Good question. Okay. Harry.
Yep. What's your buzz? The big green one. Big one. Okay. Now over to the exciting stuff, all right? My name's Harry Kovelman. I am an MD. I'm the Chief Medical Officer at Myomo. I have about 25 years of experience in the rehab and orthopedic world. Been at different companies, as you can see on the slide. I've been at Myomo almost five years. The hockey picture, there is a message here.
That was a picture of me when I was about 14 playing in Canada, junior hockey. How many people are familiar with the 1980 Olympic hockey team that won the gold medal? Raise your hand. Okay. Their journey was really nice, right? Herb Brooks, coaching them, college kids, the journey was really nice. If they did not win the gold medal, we probably would not be talking about them. My journey here at Myomo, our journey has been really fantastic. We got operating efficiencies. We got CMS approval. We are getting some in-network provider agreements. To get to the pinnacle, to the milestone of $100 million, it is all about the win. I need to make sure that every one of the patients that walk in the door that qualify for everything Micah has said, we can facilitate getting a pre-auth or an authorization from the payer.
That's my goal, and I'm here till we achieve that, okay? I'm gonna talk about my department. My department works on after they come over the wall, okay? They've been screened successfully. They come over the wall. My department is really responsible for collecting the medical records and the physician's order, proceeding, submitting all the documentation to the payer, okay? That's what my department does. It's been really good in some aspects when I look at it in my 25 years, and in other aspects, there's been a lot of headwinds . The tailwinds is we got Medicare Part B. We're doing really well on our appeals at the ALJ. We're getting some in-network provider contracts. What's heading us off, right, what's causing us to be a little stagnant is we are working with these MAOs or Medicare Advantage Organizations that are providing an obstacle for us.
I'm gonna go into why it's an obstacle and why I think we're gonna overcome the obstacle, and I'll show you some reasons. How big is my department? What goes on here? We have 15 patient navigators. These navigators have one director and two leads. It's very hierarchical, and everybody's managed to the best of their ability. They guide patients through the Myomo journey. They call the patient. They help them set up the doctor's appointment. They communicate with the doctor. They get all the documentation, and they really provide and facilitate the journey. The journey doesn't end there. There is specific documentation that needs to be collected in order for us to submit the pre-authorization request. There is a checklist by CMS, by traditional Medicare, and by me, okay? At the end of the day, we need to document medical necessity.
Once all that paperwork comes in, it goes down the hallway and it goes to the clinical appeal specialist. They write the pre-auth and/or the appeal depending on if it's a first-time submission or we got denied, okay? Now, they have been trained excessively, okay, on the documentation of medical necessity by Medicare guidelines, by the Medicare program integrity manual. I cannot review 150 submissions every month or 130 submissions. So I have to have a team that's responsible. They're mostly OTs. They know what the rules are, and they follow it. Not only do they review it, they have to sign a document to show that they reviewed it, and they agree that it is medically necessary to submit. Once they get that done, it goes back over a wall, and it goes to the insurance coordinators.
The insurance coordinators submit the documents to the payer. Not in the case of Medicare. We don't need to do that. We don't need a pre-auth. They work with the payers to obtain either the authorization or the denial, and they continue to verify, calculate out-of-pocket costs, and obtain single case agreements if we need it, okay? Last but not least is research. We have three people in the research department. I'll talk about that, in general as we go on. This is my department as a whole. Where are we today versus where we were prior to receiving Medicare approval, okay, or CMS reimbursement? If you look at Q1 2023, you'll see that most of what was coming in from the revenue side—I'm doing this for our CFO. I usually don't talk about this, okay—the revenue side was Medicare Advantage plans, okay?
Medicare Advantage plans. 47% was the VA, okay? Excuse me, was our channels, our O&P channels, right? And then others, okay? Now what happened in 2025? A huge difference. A huge difference. 59% is Medicare. 18% is now Medicare Advantage, and 23% is other. It has been a huge shift in the business, and there are reasons for that. Why? What has happened, right? What is the headwind to us? The headwind is really the Medicare Advantage Organizations. It is not just us that experience it. I speak to colleagues. I speak to people in medical device, CMOs. Everybody is experiencing it. I am sure as investors, you see it in the news, okay? The MAOs, their profitability is on a decline. They have really tightened up what they are approving. Even when we appeal it, they are tightening up. The pre-authorization rates are low.
The denial rates are high. It really is costly to take these people all the way down, and do the appeals. As you can see here—oh, sorry, sorry. Let me go back. As you can see here, the MAO, the Medicare Advantage Organization auth rate in 2023 was about 37%. Out of every 100%, 37% were, we were getting off. Now it's about 15%. Huge difference. Absolutely really tough headwinds. What are we doing? What can we do about it? Here's how we overcome the denials. They're usually in three groups. I see this all the time. They come on the denials, and here are the three reasons. The first bucket is experimental and investigational. What is an investigational device or a drug? An investigational device or a drug is one that's waiting for an authoritary regulatory body to approve it.
Can't check that box. We've already been, we have 510(k) exempt. We're in the EU, so we really can't be considered investigational. What about experimental? You see that all the time. Yes, we do. The classic definition of an experimental device or a drug is one that's awaiting to be to show its safety, efficacy, or effectiveness. Can't check that box for us. We have over 25 peer-reviewed publications with impact factors ranging from 1.4-5.7. Does everybody know what an impact factor is or? Okay. An impact factor is like the strength of the journal, right? 10 is really high. Like New England Journal of Medicine is up there. one is average in medicine. We're ranging anywhere from 1.4-5.7. Very, very well-established peer-reviewed journals. I already went over the definition of E&I, and again, we are 510(k) exempt.
FDA knows about us, and we have a device listing. We really do not fit that definition of experimental and investigational. Harry, what is the next bucket? What are you seeing? Not medically necessary. My God, I spend every day going over medically, the patient being fitting the criteria. When you look at being medically necessary, there are certain programs, manuals, guidelines out there that give us this guidance. Number one is the Medicare program integrity manual. There are some specific rules that give you the guidance. Are you fitting the definition? In the section of 13.5.4, there are seven foundational statements. I am not gonna go through each and every one of them. If you want to know them, please send me an email. I will be more than happy to go over it with you.
We make sure when our writers get the information that we fit that criteria. If I go to an administrative law judge hearing, I can say, "Hey, Your Honor, we fit this," and they can't consider us medically necessary. We make sure the chart notes from the physician have every detail point about when they had the stroke, what is their range of motion, documentation of spasticity and/or tone, prior treatment, have they failed it, they need to improve their ADLs. It is a very, very thorough process, and that really takes a lot of time. The last bucket that we really do not see anymore, occasionally somebody will try to fit it in, and this is where I know they are just templating it. They are really not looking at it, is they will put in there, "You are not covered by original Medicare." That is an easy one to overcome.
We are covered by original Medicare. You all know that. So I get all this information. We submit. How long does the process take from getting the information to getting an approval or a denial and taking it all the way to an, what we call an Administrative Law Judge hearing, which is specifically for Medicare Advantage enrollees? On average, on average, it can take anywhere from 5-10 months in the process. Remember, they gotta be screened. They gotta get to the physician. Physician has to write the notes. We gotta submit. We gotta wait for the first denial or the auth. Then we gotta submit for the second denial. Then it goes up to Maximus, which is the qualified independent contractor for CMS that reviews it.
Maximus, 97% of the time—not, it's actually 96.9%, but 97% of the time—they agree with the lower court decision, so to speak. I have to wait for that denial to take it to an Administrative Law Judge hearing. It is a very, very long, complicated process, and it takes—the patients can get frustrated. That is why we have the patient navigators. They are constantly calling these people and communicating with them. Okay. What is an Administrative Law Judge hearing? An Administrative Law Judge hearing is the Office of Medicare Hearing and Appeals. I get all the documentation together, and we go to this Administrative Law Judge hearing. It is telephonic. I appear with outside legal counsel who is representing the patient. I give the medical testimony. I give the medical testimony. I am gonna go into the legal argument in a minute, okay?
All those notes that I told you about are somehow given to the judge, and I have a summation of it that I give to the judge. Basically, we wanna stay on the phone for no longer than 20 minutes, okay? Also, when you go to these Administrative Law Judge hearings, a lot of it is the luck of the draw, right? There is X amount of ALJ judges, some more favorable than others, as is in with any court system. What are we doing to date? As of yesterday, as of yesterday, we are winning 58% of our cases that go to ALJ. So, Harry, what is that? Good? Is that bad? Where does that sit in?
When I speak to peers, legal counsel, and others attending, even John Neff, who's in the audience, they will tell you in the absence of an NCD or an LCD, which we do not have, their win rate is about 30%. 30%. We're almost doubling that. Is the process and the demand of gathering the paperwork and everything we need working? My answer is it is. It is working, and we're gonna continue to take all these MAOs to ALJs as long as the documentation is correct and as long as they continue to deny us. You remember I said I present the medical testimony. Here's where outside counsel, we work with an individual who I have learned so much from. I can't give enough kudos to. They present the legal part of it.
Remember I told you there's codes, okay, and there's a Medicare program integrity manual. This is what our position is, and obviously, it's working. There are three rules, laws, statutes, whatever you wanna call them, that we make a point of to the Administrative Law Judge. Number one, number one is CFR 422.101(a). It's the Code of Federal Regulations. It specifically states, specifically states that MAOs must cover everything, everything that is reasonably and medically necessary for Medicare beneficiaries and must cover all services and devices covered by original Medicare. Original Medicare doesn't pay for investigational experimental devices. End of conversation. They have to pay for our device. Our device is reasonably and medically necessary. We get the paperwork to document that. We have a very strong argument. The second reason, experimental or investigational devices are excluded from Medicare coverage. CFR 411.105.
Like I said, we're not an experimental or investigational device, or else Medicare won't be covering it. Check that box. The last one is a unique one. What we believe per 422.101(b), plans do have the right to come up with a policy. Plans do have the right to come up with a policy, but it can't be an exclusional policy. It has to be an inclusional policy, or else they're denying access to care for the Medicare Advantage beneficiaries, which Medicare would give them. They can't take a commercial policy and say, "That's it. We're not covering." What they should be doing is say, "Hey, here's our inclusional, coverage criteria for the MyoPro. If you meet A, B, C, and D, we will authorize it." Again, I just wanna emphasize, there's a medical portion, and then there's the legal portion.
What's the plan? How do we move forward? Where are we going from here? We're gonna continue to write our appeals. We're gonna increase the number of ALJ hearings. We're gonna continue to take them. We're gonna review, and we're gonna keep on going. I was averaging five to six a month last year. I'm doing about 12 a month now, okay? Even with the legal fees, our outside counsel, it's still a good contribution margin activity. You can tell I'm the medical guy. I really don't understand all that stuff, but that's okay. We're gonna publish an MAO review paper and submit a one-year outcome follow-up manuscript, again, adding to the publications. We're gonna continue our research efforts. Last but not least, we're gonna enter into network contracts to become an in-network provider.
Harry, what is that, and what is it doing for us? Here's what I wanna show you. As of yesterday, this is where we sit with in-network provider contracts. We have access to about 27.2 million lives as an in-network provider, okay? That can lead to a policy change. Remember, you have to have a contract, and then you have to have a policy on it, okay? Not always do both entities talk to each other. When I submit that pre-auth, the first thing they look at, they look at the submission, Myomo, MyoPro, in-network provider, yes or no. That determines whether it even moves to the next step.
While we've signed all these, and we're working on geofencing to these areas, right now, most of these were signed in the last half of last year and the beginning of this year. I suspect we will see some return on this. That's where we are as of today. With that, I think I'm going to entertain questions. Any questions? Yes.
A few questions.
Yes.
Number one, do you think your total, your total cost, people, time, etc., for this entire review process being denied, and you divide that by the number of cases demanded over the course of the year, what are the actual costs for the incident pieces where the final approval and the.
Yeah.
Okay.
I'm gonna defer to our CFO for that. I kinda keep the blinders on from the medical perspective, try to keep it a separation of church and state. I hope you can appreciate that, David.
No, I think, you know, Harry, Harry mentioned the contribution margin. It's,
The real variable activity is the legal cost. If you take the appeals legal cost and you spread it out over all of the appeals that we undertake, it's only about a few thousand dollars of incremental legal costs. If you get an authorization at, you know, $50,000, it's a good activity to continue to do. You know, he's going to bring on—he talked about increasing the number of appeals. He's gonna have one additional person to help him with that. That original person was already here, so it's not even really an incremental cost. It's a good activity for us to continue to pursue.
Yeah.
Just a final question.
Yeah, sure.
Just a possible silly thought. I'm sure you know how many of these administrative law judges there are that you see. We asked.
Yeah.
Is there an ability, since you only have a phone relationship today, somehow having a meeting in person, people who actually get MyoPro, having a meeting with the judges that will all experience, humanly, human judges, and they see the benefits these people get from the device, it's gonna hopefully help them get more approval for the.
I would love to do that, right? Each administrative law judge hearing is a de novo hearing. We submit prior auths if we got that payer and we are taking to them, but it is a de novo. We also have the ability to submit to the portal, showing them a video without the device and with the device. I believe you are not allowed to contact them in person in this process. I rarely see the same judge twice in a year. Sometimes I do. Again, a lot of it has to do with the submission, right? There are some judges that are more favorable than others, but we cannot touch them in person as of today. Yes? Hi.
Thank you. Scott Henry, A.G.P. With regards to the MAO authorization rate, it, as you mentioned, it went from 37% to, I think, around 15%. And you're doing all of these different things to improve that. Where do you see the end game? Is it to get it back to 37%? Is it to stop the decline or, or maybe even get it higher than 37%?
The end game is win, right? I think it's incremental. I think what you're seeing now, there's an association called MDMA, Medical Device Manufacturers Association. They're working a lot with CMS to kind of send a message to all these MAOs that, "Hey, you have to follow the rules and regulations." We are part of that. As we win more ALJs, it's costly for them to come, okay? Sometimes they'll submit a positional statement to the judge. Then there's other times where I've been on the administrative law judge hearing, and there's four people from the payer there, which can include the CMO, the vice president of compliance, their Medicare Advantage person, their contract person. It can really go an hour and 20 minutes, right?
I suspect that as these other plans who are, I guess, willing to work with us more, as the tide rolls and we start to change, I would expect to go from 15 back to where it was with an end game, an end game that, "Hey, we are in network. We are a provider, and we have a change on the policy." That, to me, would be the end game.
Perfect. Thank you. And then just one final question. You know, obviously, Medicare has been a big boom for the business. Not trying to predict the future, but if you think out just one, two years out from today.
Yes.
Do you think that environment, which has become more favorable, is likely to continue to improve, to stay the same, or could it pull back? How should we think about that category if we can, you know, think about it at all?
I don't know if I can, I don't know if I'm the right person to answer that question, right? Because remember, when they come over the wall to me, so to speak, I am looking at papers and documentation. Are they an appropriate candidate? That's what I look at every day. According to our fitting criteria, according to tone specificity, are they appropriate? If more appropriate patients come in, more appropriate patients will be fit, right? Do I hope it increases over time? I do, but I don't know if I'm really the right person to answer that. I'm sorry. I'm not trying to get around it. I hope that happens. Yes, I want it to happen. I'm sorry.
That was fair enough, but I appreciate your perspective.
Okay. I think there was one more. Oh, face.
Harry,
Yeah.
How has the ALJ win rate kinda progressed over time?
Yeah. Great question. Nobody, I did not even think anybody was gonna ask that. Three years ago, three years ago when, I, we really started to get into it, we were at about 28%. It progressed to 34% to 42%, and now it is upwards of 56%-58%. It has progressed. You know what? I have got, we have gotten smarter, right? We hired, we have the right people working with us. We are using the right tactics now, and it has been really a learning process for me as well.
In the case of the ALJ denials, do they give you kinda rationale as to why? To go back to, like, the initial denial, what the percentages are the different reasons what that the Medicare Advantage players give you?
Yeah. I wanna laugh, but it's really not funny, okay? 'Cause when we go to the hearings, we are basically saying it's the same dialogue every time, right? 'Cause we get the same denials every time. We're gonna have one judge who favors, rules in our favor, and the other one doesn't. It's like, or he or she doesn't. Your question is, when I look at it, did they even read it? Because what they'll say is, "No, your device is still experimental and investigational," right?
Yeah.
I'm like, "Okay. No, per CFR, whatever. You don't fit into that criteria." I find it motivates me to get better, right? How do we overcome these? It still goes back to remember when they send the denial, not medically necessary and investigational and experimental. The judge either finds for it or they find against it. Over the last three months, the CFR, those ones that I put up there, you know, every judge recently has been quoting that, "No, you, you know, you have to do this," okay? Yes, it's medically necessary. I know John is here in the audience. I know John goes to a lot of ALJ hearings. He could comment on that as well, but that's what I'm seeing.
What percentage of patients are dropping out kinda through the process, right, after the initial denial to not get kinda all the way to the ALJ hearings?
Oh, is Micah here or yeah? No? Micah, what percentage are dropping out?
Sorry.
What percentage as they come in and go through our, go through the process, drop out before all the way through? They get, we submit the pre-auth, maybe we get a denial, and then they're dropping out from that point on?
We hadn't shared that, so we.
Yeah. Sorry, Micah.
Yeah. So the,
The question is, how many, you know, when you get to the point of having an authorization, how many ultimately drop out and do not continue with the process? They enter the backlog at that point. You know, at the point where we have an authorization, they enter the backlog, and about 20% of the backlog will drop generally each quarter. Did I get the question?
In the process of the ALJ hearing, like, as they're going through the appeals, that would be before the authorization, right?
There's even a step before that because we, you know, even before they, you know, we get the final denial from Maximus, they will, you know, Harry's team will actually triage and see which of those patients might be appropriate to move forward to the ALJ hearing. Some won't even drop out and even go to the ALJ hearing.
Yeah, that's what I thought.
Yeah. So, and that can be a good number of them. I mean, I don't have a, I don't have a metric off the top of my head of exactly how many that is, but, you know, Harry, he talked about his objectives. I think, I think last year we took about, was it 50 patients too.
50 we won. Yeah.
We took 50 patients to ALJ hearing. There is a weeding out process, and we're looking to then increase that. He's looking that, you know, we're adding more resources because we're seeing more success, and we're gonna be taking more people to ALJ hearings to try to get more Medicare Advantage authorizations. I'm gonna turn this off. I think, you know, to keep things on schedule.
Okay.
We'll go ahead and introduce Kathy Sawyers.
Oh, yeah. Sorry.
Oh, of course. There's something there. Thank you very much. Yep. Gotcha. Thank you.
Hi, everyone. I'm Kathy Sawyers. I'm the Senior Director of Clinical Outcomes here at Myomo, and I'm a physical therapist and also an assistive technology professional. I've been with Myomo about five years. Before I came to Myomo, I spent many years in the clinic, doing multiple things. I was a director of skilled nursing. I was a director of clinical operations for the Heart Institute, and I've done many things in healthcare leadership. I have a lot of clinical experience. Throughout that time, I've kinda kept my hands in patient care. My primary focus at Myomo is to enhance our clinical outcomes. I also manage our training team, and I manage our MyoCare team, which is the team I'm gonna tell you about here in just a little bit. I also collaborate, myself and my team.
We collaborate with the engineering team and the product management team to ensure that our products are usable for our clients. I also collaborate with the business development team so that we get the MyoPro name out there so that therapists know about the MyoPro. What problem are we trying to solve with the MyoPro? Basically, we are trying to give those patients with neurological deficits from a stroke, a brain injury of some sort, a brachial plexus injury, or spinal cord injury. We are trying to give them their own motion, and we are trying to give them more function. 800,000 people have a stroke per year, approximately. Out of those 800,000, only 250,000 of those people have a chronic arm weakness. I mentioned some other diagnoses that are appropriate for the MyoPro.
Again, traumatic brain injury, brachial plexus injury, and spinal cord injury. What is a MyoPro and what does it do? The MyoPro is a myoelectric brace or orthosis that uses myoelectric, prosthetics, robotics, and neuro rehab, and it wraps it all into one device. The difference between using a prosthesis myoelectrically and using a brace myoelectrically is a big difference. When you have a prosthesis, you do not have a limb to put it on, right? You are using a robot, basically. When you use a brace, you have an arm. You have a weak arm, a heavy arm, an arm that may have neurological effects. Like, does anyone know what spasticity is here? Okay. Spasticity is that resistance to motion, and it is abnormal tone. People do not control it well. We are using the MyoPro to help, again, control that.
We use our sensors that listen to the EMG signal. We use our software that magnifies the signal so that it allows the arm to move and power the motors for that. Also, the MyoPro teaches that brain and muscle connection so that we get muscle memory back and neuroplasticity. Micah was saying that not everyone is a MyoPro candidate, which is absolutely true. What do we do to ensure that we have the right people? We do a full medical history. We do a cognitive screen because cognition is extremely important for the MyoPro. We also do range of motion, like passive range of motion, active range of motion. We check their spasticity and tone level. We check to see if they have caregiver support, and we also use our MARK unit. What is a MARK unit?
We use the MARK unit to test the EMG signal, and I have one right here. The MARK unit is basically our test unit. Our clinicians use this in the field to test the MyoPro on the patient. You can get the EMG level that the patient can create, and then we use, again, our software to magnify that signal. It's an adjustable brace, so it fits most everyone that can fit into a MyoPro. The patient gets to put it on their arm. They get a feel for it. They get to see how it's gonna feel, how it's gonna look. Although I will say that the MARK unit isn't a great depiction of what the MyoPro really looks like, it gives the patient an idea.
By the way, when someone puts this MARK unit on, most of the time, it's the first time they move their arm in years. It's pretty impressive. We have two different MyoPro devices. One is the MyoPro Motion W. Stands for wrist. We have the wrist, it's supported, and then the elbow motor functions in the Motion W. The MyoPro 2x Motion G is the device that we just released in April, at the end of April. This is a version of that. It comes in pretty colors, too, like the purple one you see on the screen. The Motion G is for grasp. Stands for grasp. You have the elbow motion and the open and close of the grasp. The clinical team really has a finger on the pulse of what's going on with our patients.
In doing so, we want to share that information, collaborate with our product management team and our engineers to make sure that we, again, are getting a product that's usable for our clients. The MyoPro 2x, one of the goals was to simplify the donning experience and promote greater independence of donning for the patient. If you take a look at the screen here, on your left, we have a dorsal hand strap. Patients who present with their forearm and their palm down usually are able to use this dorsal strap for donning. They place their hand in the MyoPro on the hand shell, and they secure the strap over the top of their hand. Some patients present with their palm up, okay? That spasticity does not allow them really to get their palm down well.
We created a hand strap that allows patients to put their hand in neutral to get into the MyoPro. This is a way that we can serve more patients with the MyoPro. We understand their presentation, and we know that it's not a one-size-fits-all. We know it is not the same. Not everyone is the same. What is MyoCare? MyoCare is our post-delivery program that Micah talked about. We have several therapists, OTs and PTs alike, who we have recruited that have a heavy neurological background, and they've been out in the field, out in the clinic, and their expertise is in stroke management or neurological disease management. Basically, we've kind of set them up into different groups of people. The clinical coordinator is the role that starts the process after the MyoPro's been ordered. The clinical coordinator contacts patients.
They give them a call. They talk to them about their baseline goals. They talk to them about going to therapy, and they gather information about do they have a therapist locally available to them. If they do, we try and train that local therapist on the MyoPro if they're not trained already. If they don't, we go look for a therapist in their area. We have to be particular about this. It needs to be a neurotherapist. They need to be able to take the patient's insurance, and it has to be within distance so that the patient can get there. This is a fair amount of work. We have two people doing this job, and they split the United States into north and south.
This person is not on this screen, but there is a clinical trainer, and you're gonna meet Stefanie here in just a minute. She's kind of our sole clinical trainer. Once we get the therapist information, she goes to work, and she offers them a 90-minute live webinar, or she offers our Myomo Academy, which is our clinical modules that are online. Then she can follow up with them thereafter as needed. Once the MyoPro, once the RMO or the regional manager, sorry, we just changed their name, regional MyoPro orthotist, delivers the device, they pass it off to the regional clinical specialist. The regional clinical specialists are PTs and OTs. They are boots on the ground that go and help train the therapist and spend time in the clinic with the therapist doing that hands-on training with the patient as well.
They follow the patient for about six months, and then they hand off to the MyoCare coach. The MyoCare coach carries on sort of like a telephonic case manager, if you will, but they can also do telehealth. Just to back up for a second, we have 12 regional clinical specialists and a couple of managers in that role, and then we have two MyoCare coaches. So here's the layout of our region map, and you can see that they cover a fair amount of territory. There's a lot of travel to get to in-person visits, and we supplement that, our efficiency, to improve our efficiency. We supplement that with telehealth. In the future, we prefer to shrink these territories so that they are a drivable distance.
We also want to continue to get the MyoPro socialized out to those therapists who are neurotherapists, and we want to create a certification program for therapists. Right now, we have a certification program for CPOs and our internal therapists, but we don't have a certification for therapists. Therapists like to have certifications behind their name. We wanna roll that program out, and in addition to that, we'd like to be part of the core curriculum of the OT programs in the U.S. This is a map showing our 1,600 or more trained therapists that we have. You can see we have a fair amount of trained therapists in the east side of the country, but these therapists have been trained. Just like everybody else, they change jobs, they retire, they go home and have a baby and never come back to work.
We're constantly training people. I would say that 70% of the MyoPros we deliver every month, we train new therapists for. We're trying diligently to make these therapists experts on the MyoPro. When you train people new, new, it's a challenge. Stefanie Dunaway is gonna come in here in just a little bit and talk to you, show you a demo of the MyoPro, but she is kind of the sole OT that has been leading the charge for training. We have a P.E.R.L Program, which is a protocol that we share with therapists, and this is a protocol that we share that we try and get the MyoPro integrated into the regular therapy sessions. We recommend 10-12 weeks of therapy at twice a week, and then one-on-one therapy sessions, 45-60 minutes.
That's a lot of therapy, folks, and that's just the minimum. I told you we have a certification program for our CPOs. We do, and we have a certification program for our internal, regional clinical specialist or therapist. This is just a little snippet of what they learn, for the MyoPro 2x. We have an online version so that they can do some prerequisites. Then we train them hands-on in all the MyoPro devices, and we have a hands-on lab test as well as a certification test that's written. We ask, why do we put all this effort into our patients and our clinical outcomes? You need to meet Sandra. She's kind of a superstar. She's 62 years old. She had a stroke at age 37. She had right arm weakness.
For 25 years, she has not been able to use her right arm. She's one of those people who had minimal tone and spasticity, and so she's done very, very well. Let's see what she has to say. Her dog looks nervous, doesn't he?
I'm sorry, but I haven't been able to fold like that for 25 years.
You're doing amazing. That was amazing.
It's just.
You can hear the RCS in the background, there with the patient.
Look. Look what Mommy did. Mommy didn't drop you on the floor like I usually do.
Sandra has gotten her life back with the MyoPro. I spoke with her just recently, and she is doing really well. She's so happy that she can move her arm and use her arm for function. She actually works at Chick-fil-A, and she was able to wear her MyoPro to work the other day. I'd like to introduce you to Stefanie Dunaway. She is our Clinical Services Manager. She has created all this content for our training, and she does a phenomenal job. Stefanie is going to demo the MyoPro. Do we have anybody here who has on a short sleeve shirt? Anyone? Oh, do I have—oh, sir. Excuse me. Yeah. Would you mind being our demo person for the MyoPro, please? Yeah. We're not gonna put—so the MyoPro is custom fabricated, particularly for patients.
Yeah, if you can stand right here, that's great. The MyoPro, as you know, is custom fabricated for patients. So we don't have one your size, and we're not gonna take the time to put the MARK unit on you, but Stefanie is gonna use a tethered device, to kind of show you how the MyoPro works, okay?
Just a matter of putting a couple of cuffs on your arm and the thumbs out. We do this setup for demonstrations like this as well as in-services and training purposes. What I'll be doing instead of putting your whole arm into this, I'll just be wrapping these bands around your arm. We've got four sensors, and since you've got short sleeves, we'll start with the upper arm. These two sensors are going to wrap around your bicep and tricep. They are color-coded. Oops, just beg your pardon. Blue sensor will go over your bicep. Red sensor will go over your tricep. The information from these muscle groups will drive the motor at the elbow. You can shimmy these around if you need to. Okay. To the other cuff. This will go on your forearm.
Just slide that in. So you've got two additional sensors here. One's that will be listening to your wrist and finger muscles that close, and another group will listen to the muscles that open. If you had your own MyoPro, the sensors would be embedded inside, and we would just be teaching you to put the whole thing on. Okay. I will power this on. Nothing's gonna happen. I'm going to connect to our software, so you can just relax your arm. Just take a minute. Okay. When we turn it on, it's in standby mode. This gives us a chance to assess sensor position and make sure everything is comfortable for the patient. There are different modes that we can access depending on what muscles are working well for the patient, what we want to work on in therapy.
We'll go through a couple of those here. I can control the modes by using the power buttons here, or if a clinician is using the software, they can control it via the software. We'll start with the hand. I'm gonna put you in the first mode. This is called Close mode. This is going to be working on the muscles that you use to close your fingers. For this motion, you're going to bend your wrist towards your body, and then the hand motor closes the fingers. As soon as you relax, the motor will reset into an open position. The hand, beg your pardon, the hand design is a three-jaw chuck. We're using the thumb, index, and middle finger.
If you bend your wrist, and again, that closes the fingers. As he rests or relaxes, the motor opens the fingers back up. We can focus on this single muscle group to get grasp and release, or we can focus on your extensors. For this movement, you're going to move your wrist away from your body. Let me adjust it. I can change the sensitivity of the sensor. Maybe try again. That opens the fingers. As he relaxes it, it closes it again. It's the same movement, the same grasp and release pattern, but we can focus on different muscle groups. Eventually, as part of our training, the goal would be for someone to use both muscle groups together. That's what we would be looking at, to progress to over time.
Can I ask a question?
Of course.
Is this the G?
This is the Motion G rasp, yes.
The other one, you wouldn't have this.
You wouldn't. You would have everything here up to the hand shell. You would not have the hand motor or the finger or thumb supports, but everything else is included. Yep. Okay. That's the hand. I'll put the hand back in standby. We'll look at the elbow. This is set up the same way. We can do one muscle at a time or both. For this one, this is biceps mode. We're going to bend. Whenever you're ready, bend up. The elbow motor responds. As you relax, it resets into extension. It will only move when it detects a signal from you. It's not gonna move your arm for you. It's not gonna, yeah, stimulate him with electrical stimulation or anything like that. The sensors will pick up that intent to move.
Even if it's really weak, we can magnify his muscle activity with the software and make sure that we're getting the desired response.
If I'm wanting to move and thinking about moving, you.
Sorry.
Was that?
That was me. That was me.
Even if the transmission of the signal is not really there because the arm is paralyzed, you amplify it and okay.
Yeah. Yeah. We can work with patients who don't have any visible motion at all, and that's part of the evaluation process, to, you know, do an evaluation with our sensors and make sure that they've got a usable signal that can power it. Yeah. This last mode here is tricep mode. For this one, this starts with the elbow bent, and for this one, you're going to engage your tricep. You're just gonna push down to the floor.
I'll start up here.
Sure. That moves into extension. When you rest, it moves back into flexion. Just like with the hand, we can work on individual muscle groups, but the goal is to reach a point where you can use both muscles together for different functional tasks. That is how it works. All right. Thank you very much.
That was great. Thank you.
All right. Thank you. We've come up on noon. For those that are on the webcast, we're going to break here for a tour, and Colin is standing up. Raise your hand, Colin. He will take you over to the next building at 45 and do a tour for you. For those of you that are on the webcast, we have a video of that same tour that we will launch here momentarily. After that, we'll be on break until around, I would say, 12:35 P.M., maybe 12:40 at the latest, and we'll start back up again. We'll see you in a few, about a half hour or so. By the way, for those outside or here, lunch is right outside.
When you finish the tour, come back, just grab it, and then we'll begin the presentations again.
Welcome to Myomo headquarters in Burlington, Massachusetts. This is where engineering, craftsmanship, and patient-first care converge to create the MyoPro, our powered orthotic brace that restores upper limb movement. Step inside and follow the journey every device takes from first measurement to final shipment. This is our office space on the second floor of our new headquarters. As we briefly move through, you will notice that we have plenty of new workstations and collaboration spaces for our various growing teams. Quality, IT, human resources. As we round the corner, we have space for our operations teams, including fulfillment and supply chain. We then come to finance, product, and project management and engineering. We start with the shape capture because every patient's arm is unique. In the past, that meant mixing plaster, wrapping the limb, and thermoforming braces around a heavy cast, a very manual and labor-intensive process.
Today, we've replaced the casting process with a remote shape capture kit. We overnight the kit to the patient's home, then guide the patient and a family helper over a secure video call. High-resolution photos and a quick hand scan capture every critical landmark.
Here at Myomo, we're working to bring ourselves up to the future in state-of-the-art, bringing in 3D scanning technologies to perform shape captures of our patients and potential users. Utilizing 3D scanners, we're able to accurately capture the entirety of the arm and hand and then be able to generate models for our devices to be able to be rendered from. Now, this is a big step forward from the old days when we used to actually cast the arms. The future is here. The future is with Myomo.
Today, we are piloting handheld 3D scanning systems that will allow our O&P channel partners to utilize the equipment that they already have on site. Back at headquarters, our fulfillment team opens those images, draws digital reference lines, and extracts the exact dimensions. By reducing the need for a clinician to travel to each user's home, this is a cost-effective and accurate way to collect the necessary measurements. With dimensions in hand, the manufacturing team runs an automated script that generates custom orthotic shells in seconds. The files go to our additive manufacturing partner, who 3D prints each shell in medical-grade PA12 nylon. Those parts arrive at Myomo in just three to five business days after the order is released. Production begins at first station. Laser cutters process custom liners, padding, and other components. Sewing machines stitch liners and straps.
Our technicians cut tubing, extruded bars, and rivet various subassemblies together. Each step is guided by a device history record tailored to that single user. Finished subassemblies move to in-process inspection. Our inspectors verify every dimension and bench test the motor assemblies supplied by our third-party contract manufacturer. They also inspect the shells. Quality is built into our processes. The recently verified subassemblies arrive at final assembly, where technicians integrate the motor, sensors, and electronics, transforming a bin of parts into a functioning MyoPro. We kit together the MyoPro, a pre-configured laptop, manuals, and accessories. At final inspection, we run a full functional test. We check sensor response, motor performance, and verify that the MyoGames and MyConfig software launch flawlessly so the user can begin using their device on day one. Finally, the kit is sealed, labeled, and scheduled for shipment.
Whether it travels across town or across the world, every MyoPro leaves this dock ready to give its new owner the power to move again. We are currently expanding our manufacturing footprint at our Burlington headquarters. We will be adding new offices and space for additional manufacturing, coming soon in July 2025. From remote shape capture to rigorous inspection, every step you've seen is engineered for safety, comfort, and speed. Thank you for touring Myomo manufacturing. All right, we're back on. All right, so I'll go through our manufacturing and operations processes. I'm Colin Anderson. I'm our Director of Global Operations. My background is a little over 15 years in the medical device industry, primarily in orthopedic implant manufacturing, and then kind of moved over to Myomo.
Been in a lot of different operations and engineering roles, streamlining production, reducing costs, kind of scaling with small and large companies, depending on what we were doing. My educational background is I have a Master's in Mechanical Engineering and also an MBA from Darden. I'll go through, again, I know we just did a tour, but we'll go through high level what that process was again with a little bit more detail. For those of you online, you'll get a little bit more information than maybe the video had. We'll go through, make you a MyoPro. You can see there's a lot of different components. These are high level, the various things that are on our 2x device. You can see a humeral cuff, finger saddles, things like that.
Those are the orthotic shells, and then motors and various sub-assemblies that we put together as well. This is what our manufacturing process map looks like. You can see starting on the left, we start with the shape capture, which we've talked about a few times, and then we go all the way to shipping to the user on the right side. We go through shape capture, model generation. We saw that. That's where we're customizing the design. Then we go to first station where we're making the sub-assemblies. At model generation, we sent the file over to our 3D printing supplier out near Worcester. We're also receiving in our motor kit assemblies. Sorry, motor kit assemblies come from near Worcester and then 3D print suppliers in the Boston area. All that stuff gets united at first station.
We move through our in-process inspection steps, final assembly. We kit all the various ancillary goods that the users will need, go through a final inspection, we ship it out to the user. Like I mentioned before, we have a three-year warranty on the device. If there are any issues, users can contact technical customer support. We can bring the device back if we need to for service and repair. We can go back through our outgoing inspection process and ship the device back to the user. As you saw, we have our remote shape capture kits. We have a whole bunch of them on the shelf. They go through a process of their own. They go through a sanitization process and a maintenance and calibration process after they come back from the user. Then they get ready to go out on the shelf.
Once we ship them out, the user engages in that shape capture process with our clinician. Then they come back to us. They are in an ever-going cycle. We have probably like 35-50 of them just kind of going in and out of the building. After we get all the measurements, we go through generation where we create those shells, like I mentioned. We also create all of the user-specific dimensions. We move to first station. A lot of tabletop equipment, so low capital investment, a lot of labor in this process. We have laser cutters, which I did not show on the tour, but they were in the video. We also have the shells that come in from an outside supplier. We go through in-process inspection. We benchtop test the motors, verify dimensionally everything.
We make sure our liners are the right size, sewn properly, everything fits okay. We move to final assembly where we build the finished device. Right now we have four different workstations set up. Like I mentioned, we have a capacity of about 120 units per month on one shift. As we build a device, we route the cables, we glue things together, we put different pins in, we rivet different things. We kit the device. They get spare batteries, a charger, manuals, laptop, carrier bag. That's all put together and it moves to final inspection. At final inspection, we go through a full functional test. We didn't get to see it on the tour, but they'll do exactly what we did in the demo today.
They'll actually actuate the sensors and make the arm move, make sure the motors are responding properly. They make sure it connects to the laptop that goes out with it. They make sure everything's on the laptop that we need. We then pack it up into a box and it goes on the shelf waiting for shipment for when the user needs the device. Now, kind of shifting gears a little bit, recap on the manufacturing process. What have we done over the past year? One of our main things is we've been scaling our capacity proportionately with demand. As you can see, this is the total number of shipments that we've had over the past 12 months ending at the end of Q1. We have a capacity right now of about 120.
The main way of increasing capacity is through hiring additional labor. We have increased headcount on the assembly floor. We moved here in January of 2025. That was an interesting process. As you can see, volume was a little bit higher than it had been previously in the year. Moving with a higher volume coming over here, that was a good exercise. We were able to lay the floor out really nicely here to get much better process flow. As I have mentioned a couple of times, the quickest way to increase capacity on the manufacturing side is really just adding a second shift and bringing in more labor. We have all the equipment we need. We have the floor space. That is the quickest way to grow. What did we do when we moved here? We outgrew our headquarters in Boston.
For those of you who have seen it, it was a very small space. We have much more space here. What we did was we laid out our floor and we are only occupying half of the first floor in a much more efficient way for the material to flow. As you can see, we kind of have a little loop that everything runs through. It comes in our dock on the bottom part there. Then it comes through, raw materials get inspected. They then work their way over to first station. We make all our sub-assemblies. We process everything through just the way that I showed you on the tour. It goes back out the door. We are continuing to expand. We are growing into the second half of the building. We are expecting to be in there in July.
We're about a month away from having that space open to us. There are three main things we were doing. We're increasing office space. Some of our operational folks are up on the second floor. We want to move them down closer to manufacturing. We're increasing our production capacity. We're increasing floor space. We're also increasing our engineering development space. We're building out a larger model shop, kind of prototyping area. The overall goal here is that three-year objective. We need to get to 250 units a month. That will help us hit that $100 million a year goal. Streamline the product and process flow, as I mentioned. Make more space for product transfer. We do not want to introduce new products into our cramped existing area. We want a new spot to put MyoPro 3 into. Continuing our insourcing and continuous improvement projects.
Those are focused on cost reductions and efficiency. Also, mitigate supply chain risk with increased safety stock. How do we do that? That means that we need to have a larger area for our stockroom. Right now it occupies about half the space that you see here. We occupy the top half right now and we're taking over the bottom half. We'll increase the size of our stockroom. That'll help mitigate issues where you have a sudden supplier closure or something like that. We need to make sure we have enough materials on hand to mitigate that risk and keep production flowing. We'll enable ourselves to insource some of our core sub-assemblies, which I'll go into a little bit more on the next slide.
Like I mentioned, give us flex production space to introduce new products, increase our R&D area, and then also, again, increase that stockroom capacity. Cost reductions and risk mitigation. We're targeting about 200 basis points of gross margin improvement on a quarterly basis by the end of 2026. Q4 to Q4. How are we doing that? Here are three kind of primary examples. With our new space, we'll have room to insource some things. We're really good at assembly, as you saw. We do a lot of assembly operations. One of the components that we do not assemble in-house right now is that elbow motor and that grasp motor. We can bring the assembly operations of those in-house, reduce costs approximately about 15% is what we have right now as our target.
The FE and SP joints as well, they're parts that are on the wrist area of the device. Insourcing those assembly operations. One further thing is eliminating the laptop that goes out with the device. That's a large piece of COGS. We're doing that through the introduction of a companion app, which Malcolm will talk about when he comes up here. Then labor optimization. We're really focused on implementing lean manufacturing on the manufacturing floor. That's going through a lot of different training, teaching people the various tools, how to streamline things and eliminate waste in our various processes. One of the big things here that we noticed recently was we spend about an hour cutting Velcro to put the liners on the device. How can we automate that process? It's a custom device. That's kind of difficult.
We did figure out we could use our laser cutter. We could write some code and we could generate these patterns that we need to have for each device. We can cut that Velcro out and basically reduce manufacturing time by an hour. We are working on projects like that. Like I said, about 2% gross margin improvement is what we are looking for. With that, I think any questions? All right. I will hand it off to John Frijters, and he will go through international operations.
One question.
Oh, sure.
When you talked about one shift today, is that basically 40 hours a week or 35 hours a week? Or how do you manage?
Yeah. So we're five days a week, roughly 40 hours working a little overtime with the fluctuations in demand. It is one shift, varying people from the manufacturing side, fulfillment side, and then all the inspectors as well.
Would the employees be willing to take necessary to work a shift and a half or work on a Saturday or a Sunday if there happen to be specific months where demand is higher than it has been before?
We have done that in the past. We have a really good workforce here. They're pretty dedicated to the mission. They like the product. They do come in overtime. We work on weekends if necessary, depending on demand fluctuations. We have that core team already.
I'm just looking to understand order flow. From kind of point where, you know, you're shipping a device, you've got the order, payment's confirmed. How long is before actual delivery do you start making the device here?
Yeah. Our overall manufacturing lead time varies a little bit, but on average, we're around 10 business days. If we get the order in, we need the measurements, we'll ship it within 10 business days. We can expedite on occasion. Typically, the turnaround time can be a little bit longer than that, but we'll finish the device. I showed that picture where there was a bunch of devices on the shelf. Like I said, we finish typically before we need to ship it. It'll sit there and go out once the patient's ready to receive the device.
It'll sit there for a couple of days.
Yep.
Yeah. So it's pretty efficient.
Just broadly speaking, it's a very high-margin business, but any impact from the tariff environment? How do you think about that? How could that impact you guys?
Yeah. So obviously.
Thank you.
Constantly monitoring that. It changes daily, weekly. We really haven't seen much of an effect. We think maybe up to about 1% gross margin impact on that one. I think we published guidance on that in April. It's really not much of an effect. We have a lot of local suppliers. I mentioned the motors come from here. Their suppliers, obviously, if it's an electronic, come from overseas. We have dual sources in there. Things are pretty efficient on that side of it. Textiles are really the only thing that's affected. The bag or maybe the liner materials, they come from overseas, may be affected by tariffs. That's not a very large cost in the product. Not a big impact.
I was just wondering, from an R&D perspective, what is the.
From an R&D perspective, what is the competitive landscape out there? And do you have IP protection to ensure that this device is not going to jump in the market?
I'm going to pass that question to Malcolm, and he's going to present on it later. Maybe hold your question, and then you can ask again when he's up here. Any other questions?
Where do you see yourself getting to?
Where do you see yourself getting to like a year or two from now from a manufacturing standpoint on a monthly basis?
In terms of volume?
Yeah.
Like I mentioned before, we're shooting for that 250 units a month target in about three years. We'll be scaling proportionately as demand comes in. I mean, you saw kind of some of the projections of how we're getting there. It's kind of linear, a little bit more than linear, but.
Okay. Thank you.
All right. I'll pass it off to John Frijters, and he'll go through our international operations.
Thank you, Colin.
You can start.
You can start.
I do not see what you see. I only see myself in the screen, which is a great picture, but I do not know which slide you see in front of you. If you could show that up here, it would be awesome. I do not want to hold this up too long, but I kind of have to guess where we are.
Colin won't see the slides on the screen.
Unmute for one.
You won't see the slides on the screen.
I will not. Okay.
You will not.
I will not see the slides on the screen.
I'm doing this as good as I can. It's good afternoon from Germany. It's almost 7:00 P.M., and we had a very nice and hot day, 90 degrees Fahrenheit plus, which is, without climate, obviously a warm day in Germany. My name is John Frijters. I'm assigning responsible for international operations, which is basically the business we have in Europe, a little bit in Australia. I'll show you around it. The first slide you're going to see is slide number 86, I believe. I joined Myomo in 2020. Before that, I did some consulting work as in-between jobs and then joined Myomo as Managing Director for Myomo Europe GmbH. GmbH is Gesellschaft mit beschränkter Haftung, is equivalent to Inc. We're a wholly owned subsidiary of Myomo based here in Germany.
The city we're based in is Göttingen, and Göttingen is actually in the bullseye of Germany. We got the north, south, east, west autobahn connections here, pretty decent drives for all directions. Berlin is as far away as Munich as it is the rural area. From a sales and business development position, well established to do business in Germany. I've always been more or less the last 30 years of my career in this alike environment. Orthotics, prosthetics, DME equipment, wheelchairs, mobility solution, neurological rehab, and also most of my career with Ottobock, but also some startup experience with the previous company, ReWalk, that actually made exoskeletons for paraplegic individuals and joined that due. From education, I have a biomechanical engineering background and an MBA from Kellogg in Northwestern. With all we do, next slide, please. That shows 87 to me.
Our focus has been on international, but specifically on Germany. The slide you should see in front of you shows $4.7 million in revenue in 2024. That kind of 96% of that is revenue in Germany. We do have some business in the U.K. We have some incidental business in Australia. We're trying to grow that too. There is a lot of opportunity in other markets, but our focus really has been on Germany and building a team and a business here that is sustainable and can grow accelerated in the years to come. Next slide, please. That has to do with the reimbursement environment in Germany, which is favorable for MyoPro. We have about 82 million people living here in Germany, and everyone without exception has health insurance.
That means that if you qualify and you're insured by a German health insurance, specifically statutory health insurance, your odds are close to 100% that you will be eligible for a MyoPro device. If you consider that there's 150,000 stroke survivors in Germany and that those stroke survivors have likely statutory health insurance and those are eligible for a MyoPro fitting, we were well advised to focus to build our business in Germany first. So far, we've been successful with launching MyoPro here in Germany and had over 50 statutory health insurances covering for a MyoPro. That means those patients that had a stroke, had a brachial plexus injury, a traumatic brain injury that actually went through the funding process, got approved in MyoPro. That's 50 out of the 96.
We're close to over 50% of insurance companies that actually have had a funding experience and helped us to build the process. We've had insurance companies that said, "This is new and innovative. We've never funded it before, and we don't know if we have to or can pay for it." They decided to reject the application and go to what we call the social court appeal process. Now, you have a round of appeals where you do it in a dialogue with your insurance company. If you continue to deny, not open for your argument, you can then actually take it to social court. The social courts actually look at what you're entitled to under the rules of the statutory insurance rules, so the lawmakers. We've had 100% success rate so far.
Actually, we filed claims on behalf or in cooperation with insured people that actually then eventually, or at the end of the process, got approved for the MyoPro. That means that not only can we get paid for it, but then they can do it voluntarily following the rules or will be forced and arm twisted by the social courts to actually pay for a MyoPro. That means that if we go out and talk to patients, qualify those, we can give the statement that if you are technically, physically, cognitively qualified, you have the EMG, there are no contraindications, you are eligible for a MyoPro, you stick to the process, you will end up with receiving your MyoPro, which is a good statement we can make. Next slide, please.
It means that the patient journey in Germany is that we have to reach out to the percentage of the 150,000 stroke survivors that we see in Germany that have insurance. A lot of those actually find us through social media, Facebook, Instagram, but also through Google search. We've been feeding with artificial intelligence lookup guides like ChatGPT or other AI channels that write about MyoPro, and more and more people show up online. Also through prescriptions, therapists, the O&P industry, the orthotics and prosthetics industry, the CPOs that we see actually start providing us patients. Once we are in contact with a candidate, so a potential MyoPro user, we'll see them in a live in vivo testing.
That means our clinical team and also business development managers go out and meet with the patients either in a clinic, at their physiotherapist or occupational therapist, or at their CPO's office or at the doctor's office. Actually, we do a screening with the patient. That means we want to make sure that we're really certain that's an eligible patient, that there's no contraindication, that they're physically capable, that they can actually do something, get the best functionality out of a MyoPro. That screening is also used to produce the evidence that we need to actually get the funding process started. Once these patients are tested and screened, considered suitable, they actually step up to the next step, and that means they get a prescription. I'm looking at slide 89 right now that shows the patient journey, as I don't see the slides, just checking.
You get a prescription for your doctor, that's bullet number three, a letter of medical necessity. The doctor has also seen videos of the screening that they do. It's an informed decision by a medical professional to prescribe a MyoPro. They also then actually learn about the MyoPro, so they're aware of the product that is out there, and they can start considering to stop Botoxing and start prescribing MyoPros in the future. That package goes out to the insurance company. That insurance company has to review it. Eventually, it leads to an approval, as we've just learned. Once the approval is there, the scanning is done, the measurement is done, the device is fabricated. It goes to the O&P clinic, and the O&P clinic, by law, fits the patient. In Germany, we have a touch on that.
We are not allowed to fit the patients directly. We're kind of a licensor state. We have to work through the CPO's office, who also holds the contracts with the insurance company. They'll eventually fit the patient, and they get funded for that. Once the patient is fitted with a MyoPro, it actually comes to a very important stage. This is where the user or the candidate with the MyoPro has to learn to use the device to eventually be able to use it in everyday situations by themselves, become independent, and restore functionality, can be able to use both hands again. That means that in some cases in 0.4, though, and that's the next slide, we do not always get a direct fitting from a funding application. Only 10% of our applications go directly from the funding process into a direct approval.
A direct fitting does not mean that we fit the patient direct as MyoPro. It means that we get a definitive fitting without the trial, without a longer period test session. The application goes out to the insurance. The insurance said there's enough evidence. We fund for a bespoke device. In 65% of the funding applications, though, the insurance companies have reasons to believe it might not be a suitable product because it's new to them. They're not aware of it. They might think it's not something that the patient is actually willing or capable of using. They go through a trial period. The trial period is a six-month window where the user has to show progress.
Without capabilities of doing anything without the MyoPro, at the end of that six-month trial course, education, training, they have to show progress, but they also have to show that it can actually do activities of daily living with a MyoPro. Now, to ensure that in that relatively short period, it maybe sounds long to you, but most of the patients we see are six or eight years after their stroke, after their incident, and have shown a track record that everything else has failed. We get a kind of a difficult patient population to fit with a MyoPro, and we have to show an acceptable and positive outcome in six months. That is why we have installed MyoCare.
MyoCare is in our program in Germany where we work with the therapists, we work with the end user, we see the person on a screen, on a video, but also in live sessions every three or four weeks. We will go out there, reach out to the therapists, educate them, support them, and help them to actually get the results that we need in that six-month window. From that, we get the definitive fitting. We get the approval by the insurance company that the user can continue. It is not as easy. It is a lot of touching and work time with the user, but it also gives us a competitive advantage. It is unique in the industry. It is unique to this product. As this product is new, we are kind of setting the stage.
We're kind of raising the bar because we're making something that is difficult, very possible. We also show to the insurance companies that whilst we do it with the price tag that we have, we actually prove the evidence and we produce the outcomes that they see that they get money for their investment, and it's worth spending time. We're also building trust. That means that this is unique and gives us also a competitive advantage. When you go to the next slide, it shows the revenue distribution in Germany. We've currently talked about the direct fitting of 10%. This is where between the application that goes out to the statutory health insurance, there's an average of 200 days. We get the approval. The user receives their MyoPro. That will not be taken away from them. It's not a test. It's something they can keep for life.
We still support it with our MyoCare program so they get the results and the ADL outcomes that they're expecting. The 65% goes to a trial. Out of the 65% of trial patients, we get currently a 35% conversion rate. That means 70% of our revenue currently relies on the combination of trials and conversions. That is something that we have to actually work on, improve on, and continue to grow. That also shows that on the next slide, what we're going to do to make sure that that number continues to grow, our total revenue, but also the importance of our trials and our conversions. The next slide, the slide number 92 on my sheet, is we're going to enhance or enlarge the team. This is still a country where people buy from people.
People want to be having a positive experience to actually expand and invest in the activity that we see. The PTs, the OTs, the CPOs, the insurance company, they are following results. To make sure that we're doing this handheld with the patients, with the new therapists, with the CPOs, with the new partners we sign up in this market, we have to cover some open areas. We have to hire more people, specifically CDMs. We have to cover more areas. We have to make sure that we can keep up with the growing number of inquiries, that we can keep up with the number of trials, that we can keep up and secure and even improve our conversion rates by being there more often, and also at the same time building our pipeline for 2026 as well as the years to come.
Scaling the team, managing the user connection, training new therapists, reaching out to medical professionals, that's where we currently actually are investing time and effort to hire more people. When you look at the next slide, our development and growth initiatives are really starting with scaling the team. We need qualified and skilled people. We need to find them, recruit them, hire them, and train them. The majority of our team members have not had a field travel experience. They're clinicians from a clinic, and actually we put them in a car, put them on the road, and have to work them in a sales-style, business-development-style organization, which is a bit different than patient care. That's where you need a specific type of person, and you also need a specific training program to make sure we can do that exceptionally well.
Our past years have shown that we're on the right track to find the talent that we need, recruit them, hire them, and also keep them. Once we have a larger team, our areas get smaller, our frequency of contact can increase, our downtime of driving—Germany is a large country—goes down, and we believe we can do more contacts and produce more results. That also means we can reach out more to the medical professional direct. We're doing a lot about social media, which is digital advertising, which has been successful, but we also want to be in the doctor's office, spend more time with the therapists, build our pool of key opinion leaders, go out to the neurologist that has prescribed the MyoPro in the past and ask them to do more in the future.
That means that we want to work on MyoPro becoming a standard of care for stroke patients where traditional therapies and medication have not shown the results and the outcome that restores functionality of the affected site. Once we have a larger team, we can intake more inquiries. We can up our marketing, advertising, congresses, symposia, and actually do more. We're currently on hold because our team size is the bottleneck to grow. When we have more people, actually we can spend more money and grow and scale faster. A part that we're doing is we'd like to keep the company lean as digital. Everything is field-based. It's digital. It's remote office-based, but also our processes, we want to make sure that they're smooth and slick and lean. A part that we've done last year is we've installed an online screening.
We do not have to do a lot of phone calls upfront to find out that the user is not suitable. The user goes through the website. They go through a self-screening process. Only when they actually are qualified on a certain level, they can sign up to be contacted. That means that our hit rate of the inquiries that we get has improved, and we do not have a lot of downtime. We are not spending a lot of time, everybody's time, on contacting, calling, and following up with candidates that actually eventually show up that they are not a suitable MyoPro candidate. The last slide, if we continue to do what we did in the past, we really believe that by 2028, we can do $15 million in revenue or more in the future.
If we're on the momentum as we are, continue to scale and grow the team and be as successful as we were in the past, we think that's a bright future for Germany and beyond. That's it in a nutshell from International.
We're going to take some questions from the audience if they have any, and we'll hand you the mic if you have some. Just a second while there is a question, John, so we'll get that for you.
Okay. John, thank you. I hope you're able to get dinner and we haven't interrupted you too much.
Actually, you did. That's okay. Yeah.
One question about patient follow-up after the MyoPro is delivered. Can you start in Germany, do patients get a therapist on a weekly basis to help support and train them on how to use the MyoPro?
Because I was surprised that the conversion rate after the trial is only about 35%, which would suggest that many of the German recipients have not learned how to use the device properly.
That's a fair question. What do we do and why do we have the results? That's your question, correct? We do follow up with each individual, and it's independent if they get a definitive fitting where there's no risk of the device being taken away or if it's a six-month trial. In reality, it means that within a frequency of every three to four weeks, our clinical trainers see the user because in most cases, it's new to the user. They've not done this before. It's very often, also almost in every case, it's new to the therapist. They haven't worked with a MyoPro.
We've got a combination of two people who've not done this before. We've also seen that for some patients, it's difficult to learn. In Germany, most of our users are at the end of their therapy options. They've really gone a long way of trying everything else to restore functionality of their hand and of their arm. We really get the difficult ones. That means we're on top of things here as good as we can. Train them, educate them, coach them. In between the three and four weeks, there's always a follow-up by phone, a video call. People can always contact us, either the CDM direct, the BDM direct. There's always somebody in the team available to support that and give them the coaching and the guidance. That means that there's reasons why it's 35% for now.
One reason is some patients are good on paper. They're good in the screening. They're good in the submission. When it comes to actually doing something, it fails. Reasons are they get a second stroke. Reasons are some circumstances in private life made the MyoPro less of a priority. It was harder than they thought it was. The therapist wasn't as good. Sometimes it's us. We were a small team last year. We did not have enough people, so we couldn't do the quality of training or be there more often as we should have been or could have been. Our results of $4.5 million could and should have been better if we had more people. Unfortunately, we also had people from a second or a third stroke and also dying during the program. We lose those too. Fortunately, that's only a small size.
We also have candidates that get so well and get so good that we've seen that they kind of don't need the MyoPro after six months anymore. They walk out with a restorative function without the MyoPro. Curing and healing is actually the MyoPro has helped them to recover and gave them a lot less bit of shove in the direction of where it needed to be. The 35% has upside potential for us in outcomes if we can do it better, more with a higher frequency. You'll still have a patient population that will stop using the MyoPro as it is, as they've learned it's too difficult, too hard, too fatiguing, or secondary circumstances prevent them to continue to use the MyoPro. Does that answer your question?
It does. Thank you. There is a question that came from online.
The question was, and I'll go ahead and answer it, is International profitable? It is a question that there's a business answer, and then there's a statutory answer. When you're doing business in a foreign country, the objective is that they want you to be profitable because they want you to pay taxes. There's only so much that you can of headquarters type of costs that you're allowed to allocate to a different country before they say, "Time out. We're going to audit you." Yes, International is profitable on a statutory basis today, which is why when you look at the income tax line of our P&L, you see that there's income tax expense, and that comes from Germany. That is because they are generating a statutory profit.
If we were to allocate headquarters costs and other costs to Germany, as we do the direct billing business here, we lose, we're in a loss position in the U.S., and Germany would be in a loss position if we did that. We are physically unable to allocate a lot of those costs because of transfer pricing rules. There's another question, just a second, John.
Oh, thank you. When the 35% or 37% are returned, when the—sorry. The ones that do not continue after the six-month trial, is MyoPro compensated in any way for those devices? Is there rental or leasing or?
Oh, absolutely. What happens with the ones that do not convert out of the 65% that we do? Some of those users are not counted as conversion because some of those go into an appeal stage. They have a functional outcome. They've shown progress.
The insurance company denies or does not recognize that, and they say, "No, it is not good enough. It is not enough of what we see." We appeal for those. They may come into the bucket of a conversion at a much later stage. It can take two years till you actually get a court approval. They will be later on added to revenue, but they are not recognized as conversion. That is one. Second of all, we are using a fleet of inventory, which consists of motors and parts that are refurbished. It is refurbishing, it is ecological and economical. In our trial sessions, we do not use new equipment all the time.
We're using the custom-made parts that are new and individual, but we're still using the motors and the parts to refurbish those that are returned to the U.S., then are actually brought back into the fleet, and they're used for the next trial. Yes, we do get paid for our trials. Our trials consist out of paying for the device, but also the insurance pays for the training. The device costs, our cost of our MyoPro support are included. That is covered by insurance. It's not something we do for free.
Yeah. Just to elaborate a little bit about that a little bit more, generally, a trial will be around $20,000, depending on the exchange rate for that six months. That fee is non-refundable. That allows us to take revenue when that trial commences.
If there is a conversion after that, as John mentioned, that device is returned to the U.S. We are not going to have them keep a device that has used motors on it. We will ship them a brand new device, and then there will be another charge for the final cost for that conversion. Right. Are there any other questions? All right. John, thank you very much. Go have dinner and a beer, and appreciate your time.
You're very welcome. Enjoy the rest of the day, everybody. Bye-bye.
Okay. Again, Micah Mitchell.
I want to talk about the O&P channel now. For many of you who may not know, we had an experience with the O&P channel in the past. I am going to first rewind to talk about what happened in the past, so about eight years ago.
We'll talk about what is an O&P provider and what do they look like today. We'll go into the things that we're doing and what the future may look like. When we first had the MyoPro to dispense, had to choose a channel coming from manufacturers. The first thought is generally not to go direct to the end user with a custom fabricated orthotic. There was no decision-making process. If we wanted a channel to sell through, it was going to be the orthotic and prosthetic providers who employ the CPOs who are required to dispense a custom fabricated orthotic. We had a team of about 10 clinical sales reps. These were fantastic professional sales reps that were really good at cold calling, outbound calls, having conversations. They came to us with many relationships within the O&P community.
The idea was to meet with an O&P provider, help them understand our product, the reimbursement, the technology, the patient, how to generate referrals, and then sign them up to be a center of excellence. On the one hand, we had great success signing up centers of excellence. On the other hand, sales were not following. At that time, as a one-product company, to help the centers of excellence that had chosen to carry our product, to help them actually sell more units, we began to help them. We began to do some social media advertising and some other things like that so that they could generate some patient flow so that they could sell MyoPros. That worked well. We would have screening days.
We would schedule them at the O&P clinic or at a local hospital or rehab facility, have multiple patients show up. We would be there along with the CPOs that work for the COEs, and we would help them evaluate the patients so they could build their pipeline. Sales did not follow. We heard things like, "I'm getting denials. The funding is a challenge." We brought on our previous Chief Medical Officer, and we built kind of a team of funding experts so that then we could also help the O&P channel with some of the funding challenges. We were doing a good job supporting them. While they were trying to navigate the MyoPro journey, they had another business to tend to as well. They had other patients coming in the door.
Ultimately, we did not feel like we could control our growth as much as we wanted to at this point as a one-product publicly traded company. We made the decision to also start our direct billing channel. We did not totally put the O&P channel on pause. We continued supporting those that we were working with, but we were not out recruiting new centers of excellence O&P providers to dispense our product. As it turns out, we learned so much from our direct billing channel. We learned a heck of a lot about the product, a lot about how stroke patients present. Clinical protocols, we learned a lot about the funding process. We learned so much more than we even thought we could while at the same time we controlled our own destiny and were able to grow sales and all of those things.
Now that we've had Medicare has begun to cover the product, and with all of the things that we've learned, we have recently relaunched heavily into the O&P space to sign up more centers of excellence. Now let's kind of talk about what does an O&P provider look like. It wasn't that many decades ago when healthcare was all centralized. You'd go downtown, you'd have the medical district with all the hospitals and rehab facilities all in one location. A patient could leave a facility after a stroke or spinal cord injury, go across the street to a company that probably was a full-demisposed provider, durable medical equipment, prosthetic orthotic supplies.
They could get a cane or a walker or a hospital bed or diapers or a wheelchair or a scooter or a respiratory oxygen machine, prosthetic orthotic, and oftentimes there was even a pharmacy in the back. Mom-and-pop shop where a patient could sort of go across the street from the hospital and receive everything they needed. Again, that's not very many decades ago. A lot of things have changed over the years. One is there's generally not just a hospital district, right? We have hospitals all sort of spread out at this point due to sort of clinical expertise required for new products due to reimbursement where some products are profitable and many are not due to private equity roll-ups, a lot of other reasons. The industry looks a little different today. You tend to have sort of, for example, a respiratory or oxygen provider.
That's 90%+ of their business. They may do a few other things here and there to please a referral source or a patient. Home medical equipment and orthotics and prosthetics, for the most part, sort of split. The expertise to know all of the orthotics and prosthetics is hard to do a whole lot of other things as well as referral sources and whatnot. Today, the providers that we deal with almost across the board focus on prosthetics and orthotics. The prosthetics part of their business has grown quite a bit lately. Those are the folks that we sell through. Whether they are part of a national company or a local mom-and-pop shop, usually each individual clinic looks about the same. These are not as large as our facility that you just toured. They may have anywhere from 3-13 employees at the facility.
They have patient rooms where patients are coming in. They do have a fab shop in the back where they are fabricating some of their own prosthetics and other devices right there. We think that about half of the industry are sort of national companies, and there's a handful of them. The rest is kind of split between your regionals, maybe 20 or fewer locations, and then your locals as well. A few key things for them is one is they tend to have in-network contracts, which is something, as Harry mentioned, we've begun working on with our direct channel as well. They have that in place. If they're a local provider, it's probably state-specific. If they're a national, it could be a national contract as well. We have recently restarted going into the O&P market.
With Medicare began last April, we hired a handful of people, a couple of sales reps, and a few clinical trainers, and then began to engage with the O&P community. Last year, I would—sorry, let me look at a few videos here.
Hi, my name is Aaron Sorensen, and I'm the owner of Restorative Health Services Group. We have locations in Middle and East Tennessee as well as in Northwest Georgia. Over the next year, we have some expansion, kind of some lofty goals to continue our growth throughout Georgia as well as continued growth through Tennessee. We are looking to also expand into Alabama and Louisiana. We have practices currently in the pipeline for those acquisitions, and we think by the end of the year, we should be well over 20 offices, probably more in the mid to upper 20 area.
One of the things we're looking to do in 2025 is to have some initiatives where we are looking to expand some of our technology offerings, both in prosthetics and orthotics. Obviously, the MyoPro fits right into that initiative.
Aaron is a good example. Family-owned business, although he's growing quite rapidly. He was exposed to the MyoPro with our first iteration eight, nine years ago, and he chose not to pursue it at that time. We've reengaged with him, and he is very excited, and he's early in the certification process, and we'll kind of go through that process here in a minute. Initially, we did a soft launch last year. There were a few things that were happening. Medicare had begun to approve the product. The MyoPro 2x, which we just launched a couple of months ago, we knew was right around the corner.
The certification training is intensive. It's multiple days. I'll elaborate on that shortly. We felt like it wasn't appropriate to go through a full certification process sort of at the end of last year when we began to launch this and then have to do it again. We did create an opportunity for O&Ps to get the first part of training, which is a couple of hours of remote training to learn indications, contraindications, and basically learn how to evaluate a patient to know if it's green light, yellow light, red light. They could sort of build their pipeline. However, we were required to come do the clinical work with them. If they had a patient where they got a prior auth and were ready to move forward, we would be involved with that.
We had great success with that in that we learned that we could recruit COEs. They were even more interested this time than they were eight years ago in the MyoPro, the funding situation, the reimbursement. As we have relaunched it in full force, we have immediately gone to those that did the sort of initial training last year so they could start the formal certification process, and I will show the details for that. We are still very early, but there are a few questions that we have been trying to answer along the way. The first is, can we get a commitment from these O&P owners, managers, decision-makers to carry our product? It is more than just a, "Yeah, ship it to me. We will put it on a patient." It is a full commitment to, first of all, have their clinicians come out of the clinic for multiple days to train.
Out of the clinic means no revenue for the local clinics. There's a commitment there. Our post-delivery protocols are extensive. A lot of orthotics and prosthetics, you can sort of deliver, and then you do not have to put as much time into it after you've sort of been paid. For our product, we're requiring them to commit to a Myocare-type program where they will continue to provide clinical services and not get reimbursed for them for each MyoPro patient that has been delivered. We've had success getting the commitment from a sales standpoint where, I do not want to say we're batting a thousand, but almost. They really are interested in our product and doing what we want them to do. Committing to the clinical aspects, yes, they were all making that commitment. We're very, very happy.
What we have learned is our funding is not the same as all of the products. Kind of all the things that we've learned that Dr. Kovelman mentioned, we are teaching them as well. They are learning that. We've proven that we can teach them the funding aspects. Kind of the bottom two things on the screen are those that the jury is sort of still out on those. For example, we have some small orthotic and prosthetic providers, think $1 million, a couple million dollars a year in revenue, who then have to get to a point to commit to purchase our product for around $30,000. Sometimes that's a big financial risk to a mom-and-pop shop. In some cases, they are hesitant to do that, which we understand.
Even for some of the well-funded larger O&Ps, there is a sort of a financial risk aspect that we are having to help them navigate. Finally, as we think long-term, where every stroke patient early in the stroke journey, obviously the first week or so, you're trying to stabilize and figure things out. If you end up with hemiparesis, the next few months is a fairly intensive therapy regime. It's kind of the beginning of the sort of stroke journey. As we look into the future, and we want every stroke patient to be introduced to the MyoPro very early in the stroke journey, that's a big step to take. Can the COEs take that on their own? Do they have sort of the marketing ability, willingness, and salesmanship to help us get to that point? We don't know. We will get there.
The question is, along that path to get there, how much of the lifting are we doing? How much are we doing with the COEs, and how much are they able to do on their own? We're so early in this that we do not know exactly what that's going to look like yet. High level, for an O&P to get certified on our product, it starts with several meetings and them needing to commit. In almost all cases, they do, although we have had a handful of O&Ps who've chosen not to proceed even after the initial conversations. After that, they do an initial remote eval training, same thing we began offering last year, where they kind of begin to understand a little bit more about how a stroke patient presents and what it would involve working with our product.
After that, when we kind of get to the top row far right, that's when their time commitment really—when we come to their site, we're going to be there for a couple of days. We require that they have multiple patients with good payers, so it might get funded, ready for us before we get to their facility. We also ask, since we're going to be there, line up some in-services. Something like a room like this, but full of therapists, so that while we are there, we can also do an in-service for their current referring therapist to help them. That's our eval certification day one. The idea is we let a lot of therapists know about this local clinic that's carrying the MyoPro.
We are with them there, by the way, so that they can continue getting referrals from those therapists, build their pipeline even above the few patients that we're seeing together when we're with them. We leave. They go back to their regular work. Once they have authorizations and they're ready to deliver the MyoPros, we come back for fitting day one. Now, fitting day one, there's training before, training during the fitting, training after. Fitting day one, we kind of do most of the work. Fitting day two, we sort of share the work. Fitting day three, they do most of the work while we are observing, followed by a test. It is likely that in most cases, fitting day one is a month before fitting day two, a month before fitting day three.
Sort of this journey from a COE committing to us going with them each patient—and again, we're investing to make sure that their clinical care is appropriate for the MyoPro—this journey is going to take some time. Now, fitting day one, we're selling them a product, and they're getting reimbursed. Fitting day two and three, they are also buying the product from us. Once they're fully certified, that's when we're hands-off, and they are placing orders, and we're shipping product. That's when it starts to get exciting for us when we have more and more certified COEs. We began this process just when we launched the 2x, end of April, early May. We found that most weeks, we are initiating the certification process for multiple O&Ps each week as our clinical team has grown as well.
Hello, my name is Jason Auyer, and I'm a licensed and certified prosthetist orthotist. My wife and I, we own Alliance Prosthetics and Orthotics here in Gainesville, Georgia. I just wanted to talk real briefly about the MyoPro and what Myomo is doing. A couple of weeks ago, we had our training to become a center of excellence for the MyoPro device and had five patients that were here. This is life-changing stuff. I've been excited about this since 2013 when I was first exposed to the MyoPro. Now with Medicare having a code for this, this is going to be able to provide really life-changing orthotic care for patients that we really have not been able to do in the past.
We are excited to partner with Myomo, not only because we believe that it's a great technology, but again, there's patients that we work with each and every day that are going to be able to do things now that they hadn't been able to do in the past. I think the last thing I'd say with it is that in the O&P industry, prosthetics and orthotics, high-end neuromuscular style orthotics is really the future of the industry. There is such a large patient population who have gone through some neuromuscular deficit, whether from a stroke or a traumatic brain injury or incomplete spinal cord injury. We have now the ability to restore some functionality that we hadn't in the past. I would highly recommend people to partner with Myomo because they're on the forefront of this technology. Thank you.
Okay.
When we chose to go direct to our direct model business, it's interesting. We could kind of see our O&P revenue just kind of slowly decrease, which we understood and expected at the time. As we began to launch this last year and this year, we're looking at $20 million in revenue in 2028. We have the infrastructure in place. We have the reporting in place. We have the people in place. Obviously, as we grow, we may need to add more people to this program. Right now, with a couple of business account managers, which are sales reps, and I think we have four clinical trainers on our way to five and six, we are getting great early traction and very pleased with the metrics. How do we get to the $20 million?
There are still a few things we don't know because we're early on this. Sort of the X-axis, the certified CPOs indicates our ability to recruit and train and let these folks get certified. We're very pleased with what's happening there. We think we will continue to grow with several thousand sort of facilities and I don't know, about 10,000 CPOs out there and the early success that we're having. Again, these numbers are well within reach. If we think about sort of the middle of the yellow, kind of if we have 200—let me use my little pointer here. If we have 200 CPOs trained, what we don't know yet is how many units per year, MyoPro units per year, will each CPO do.
When we go to a clinic, if they have a handful of clinicians, they're generally giving us their best clinician, the one who's clinically the best, not their worst. The best clinicians also handle other complex products. It's unlikely that any clinician will only handle a MyoPro. However, I do think there will be many CPOs who dispense one or more MyoPros every month. There will likely also be folks who go through the full certification process and fail to launch. They decide that it's not for them or something else happens. We land on, which is hopefully a conservative number, four MyoPros per year. Frankly, if you're doing fewer than that, you're probably not doing enough to stay good at it. You really need to do four or more per year.
If we have 200 certified clinicians each doing four units per year, 800 units per year, a couple million dollars a month. From here to 2028, that's sort of the plan to get to $20 million. As time goes by, similar to our direct billing channel, we are dialed into every metric. We showed some stages from intake to telehealth screening. There are a dozen or more metrics between each stage, and we're very dialed in. We're just learning the metrics for this channel. We are measuring them and watching them. We're very confident in their trajectory. As time goes by, we can sort of narrow the chart down a little bit to be a little bit more specific. Okay. Of the three folks you've heard, the first gentleman who spoke, Aaron, he's kind of what I would call a regional.
He's sort of a family-owned O&P practice with kind of in the 15-20 locations. The second video, the one you just saw, was a family-owned practice with one location. Now we're going to hear from one of the national providers.
Hey, Myomo. It's Roger Mermelstein with Eqwal Group. Just a little bit about us. We're about three years old in the U.S. We've got about 13-14 entities, about 80 locations in 18 states, and a big pipeline of acquisitions in the O&P space. We're excited about the MyoPro. We have delegated the responsibility to promote this with one of our previous owners of one of the entities we've bought. His plan in the Mid-Atlantic is to focus on two of the adjacent companies we've bought to drive referrals from our existing relationships.
Our goal is to get 20 referrals over the next three to four months that turn into five to seven patients. The technology is great. The support is great. We are just really excited about partnering with you guys. Hope you have a great meeting and look forward to great results. Take care.
Yeah. A couple of things to highlight from what Roger said there is, first of all, they are a national company. Kind of their stance, which we encourage, is that he does not want all of their clinicians to handle the MyoPro. It does not make sense. They have chosen one clinician to handle the MyoPro who will be sort of the clinical expert and the evangelist.
That clinician's job will be to go to their other branches that Eqwal owns, help them understand the MyoPro to where they will sort of, at least for this first phase, become a referral source internally, and then they'll parachute in the clinician who's the expert. The clinician who's the expert, they expect him to also be the evangelist. His job is to kind of go to the other clinics and then let the other CPOs generate referrals. Another interesting thing, they have a lot of locations, a lot of employees. He's thinking 20 or so pipeline adds and about five deliveries. I think Roger is an experienced industry person, and that seems like a reasonable number to us.
Some people may feel like that's sort of a low number, but I think we do think as someone's beginning to carry our product and they understand the funding environment and sort of how the pipeline works, that that is a reasonable number. With that, I'll pause and take questions.
I believe there's a fair number of CPOs that you had trained and/or certified. I'm going to be mixing up where they were on the journey. At least so far, the training that they've gone through has not led to them bringing in patients and fitting them. I'm just trying to understand here in the early part of this O&P channel development, why is it, I guess, that the CPOs are not embracing this opportunity more proactively and fitting more patients?
It seems as if, to repeat what I just said, basically, you're introducing CPOs to the device and what it can do for their patients. They're excited. Three, six months down the road, you're not seeing four or five fittings per CPO. You're seeing zero in many cases.
Yeah. Yeah. Great question. I'm going to try to rewind some slides without starting a video to sort of address that. We'll do what I call a soft launch over the O&P program last year. We had Medicare coverage. We quickly hired a team. We developed an infrastructure with contracts and websites and training and all of those things and then began to train the field. There were a few issues for us. Again, one is we had a better product launching this year, so we were hesitant to fully certify with multiple days on the other product.
In addition, we were fabricating product in a basement in Boston, and our capacity to manufacture more MARK 2 units, more demo devices was limited. So we're prioritizing all of the different business things. We chose to do sort of a soft launch, which is really the COE commits and the initial eval training. Some would then follow through and say, "Hey, I have five patients. Come out and help us." We would come out and help them. Others would not follow through. In addition, there is a national provider, probably the largest in our space, who has 15 certified clinicians already on the MyoPro 2x, on the new product. They had over 100 clinicians go through the eval training.
I think when we shared this many people went through the eval training, there was a national provider that accounted for more than 100 of those. Those 100 clinicians were not allowed to sell a MyoPro. They just went through the initial eval training. As they were fitting ankle braces for stroke patients or other things, they could sort of look up and then become a referral source for the 15 certified clinicians, again, for that particular national provider. There were a handful of reasons why the sales did not follow. Some of those reasons we understood going into it. We feel like this full launch with the 2x, with our hands-on in the clinic, with our follow-up, ensuring that the in-services are being scheduled, and if they will not schedule them, we will help schedule them for them. We believe that we will have more success this time.
The only question that we can't answer this time is, will they have so much fun or enjoy it enough that they'll keep doing it? Will they get reimbursed once they deliver it? Will they appreciate the clinical outcomes? Will they enjoy working with stroke patients and all of those things? We don't know that yet. Sort of the lack of pipeline growth in Q4 when we began doing the eval training, we think that's going to look a lot different with the full certification launch.
Maybe just on kind of respect the kind of 28 number you gave us for O&P, but maybe on kind of in the interim, how are you kind of comping or what's your expectation of your people running this channel as far as what is success this year? How are you defining success? Is it number of CPO s certified?
Is there a certain amount of units per the ones you've had onboarded for a quarter or two? Maybe just help us.
Yeah. From a broad level, macro level, the way we handle it, similar to our other businesses, we get the right leaders in the room, and together we develop a plan using reasonable metrics. Our main measurement now is those that are in this process. They've initiated the certification process. That's our primary metric today. We have an operating plan with the revenue units where we all sat down and thought through all of the math: how many calls, how many began the process, how many in the process, how many referrals to kind of land on our quarterly delivery number. The leaders of those two teams are very in tune to those metrics. Separate from the leaders, the others are not.
Kind of from a high level with this plan is if our hypotheses that went into the operating plan are correct, and if the leaders control the things that they can control and we get enough people to sign up for the certification, then everything else will take care of itself.
I'm curious, of the certified O&P, what percentage or what proportion of those were original MyoPro certified O&Ps back in the day prior to the Medicare coverage?
Great question. There are two aspects. One is they're going through the certification process, and two is they're fully certified. No one has made it through this full certification process since we launched the 2x. There were a few O&Ps that were certified before this that still are. There was a national provider where we certified 15 of their clinicians with 2x before we launched the 2x.
Fewer than 20 are through the finish line and able to order on their own. Fewer than 20 humans, right, clinicians can order on their own without our help. Those that are in the certification process, we have not shared in the past, but I will share the first few weeks of this. We were making multiple visits per week, and we had different people going to different clinics to where we expect that to continue. For those weeks that we want to be in the field certifying O&Ps, we think we can certify multiple per week. Yeah. Now, again, that is the eval training. And then a month later, we go back to the same clinic. And then a month or two later, we go back to the same clinic, right? This whole process is going to take months.
Yeah. One more.
You had mentioned that some of the big national providers have certain contracts themselves with payers.
Correct.
Could that at all be a help when it comes to getting coverage for something like MyoPro? Or is that generally on a payer-by-payer basis?
Great question. There's two types, two things on the payer. There's policy, and then there's network. I'll use a Medicaid plan. It doesn't matter if you're a—for most state Medicaids, they do not cover our product yet. If you're a provider in a state, you have a contract with Medicaid. Your contract with Medicaid doesn't help you provide a MyoPro because there's a coverage issue. Them having contracts is unlikely to help with the coverage issue. Dr. Kovelman's, we're making progress along those. However, there's in-network, out-of-network.
Insurance companies are trying to hit a certain number of sort of patients who are in-network versus out-of-network for a whole lot of reasons. It's not even uncommon for our direct provider business. Occasionally, a provider wants to send them to someone who's in-network. That will absolutely help them. Good questions.
Wondering if you've considered rehabs as a potential channel. There are some very large national players th at are growing very quickly.
Absolutely. I'll kind of go back to the stroke journey. Someone has a stroke. We would like them to be exposed to the MyoPro at the right time, but early in that journey. First two weeks is too early. One year is too late. When is the right time? Through that journey, they make a lot of stops, right? Maybe there's an outpatient rehab facility.
Maybe there's a skilled nursing facility for many. Our plan is to do the right things and go to the right facilities so that every patient that passes through has an opportunity. Frankly, if one of the large hospital chains called today and says, "Hey, I have 100 hospitals every Tuesday. I want somebody in my hospital for a stroke clinic," we really can't handle it today. Now, as we make progress with the COEs and the O&P channel, we have more certified people throughout the country so that we are getting into a better opportunity to accept those calls or to do our own work to make things like that happen.
Do you view the channel as a purely incremental opportunity, or is it a way to shift some of the—kind of as a strategy to shift some of the business consciously to the channel from the direct business?
Our direct business, again, from a marketing standpoint, we focus on the prevalence for a whole lot of reasons. There is also a channel conflict conversation that happens from time to time. We have chosen to focus on the prevalence. I think the right choice is at the right time, and we have learned a lot about that. As we ease into the incidents where we really want every stroke patient to be exposed to our product early in the process, really, the O&P channel is a significant part of that plan. We think it needs to happen all together as we get to that point.
Got it.
Can you elaborate on the channel conflict process that you have or may put in place?
Yeah. When I think about what we do not want to happen for channel conflict, we do not want to take a whole lot of Myomo employees into a well-known stroke rehab facility to do an in-service. While we are on the way out, one of our customers—or while we are on the way in, a customer is on the way out having just done the same in-service. That is an easy example of channel conflict. Among other things, we consciously chose to—when I think about the big rehab hospitals and clinics, we made a conscious decision to delay those relationships. Again, we are still young and growing, but that was also channel conflict was a part of the equation to delay that.
Now that we're taking the next steps, we want to continue to manage channel conflict the best that we can. We've had, for our O&P customers, we hear more concerns about channel conflict before they begin the process and begin working with us. Once they begin and begin working with us and understand how we handle all of these things, the concerns tend to go away for the most part.
Just somewhat of a follow-up to a couple of the earlier questions on this. How should we gauge progress towards reaching this $20 million revenue goal? Because we have got legacy CPO agreements. You've got ones in progress. What metrics can we look at, or should we just look at revenues, assuming those will be broken out on a quarterly basis?
Yeah. Let me tell you the metrics I'll be looking at.
I think the decision hasn't been made yet on what metrics we will choose to share. For what we're looking at today is how many are in the certification process. To summarize a few other metrics, how far am I scheduling out to start the certification? If someone calls today and wants me to show up next week for the eval day, that's a problem with my pipeline. If someone calls me and I can't get to them for three months because I'm so busy, that's a problem with my pipeline, right? I'm measuring how quickly I can get to them and how many initiate this process and are in this process. We haven't chosen yet what we will choose to share with you all on this channel yet.
Right now, we currently disclose revenue by channel.
At a minimum, we will continue to do that. If there are other metrics that we feel as this continues to grow and things that we end up looking at to help us forecast the business, we may look at sharing that with you in the future. We are in a learning process right now ourselves with that channel because we are really in the beginning stages of trying to grow it.
Thank you.
Just to repeat the question I had earlier, I understand you are going to certify a fair number of CPOs going forward. The part that I still do not—I am not convinced about is that after they are on their own, they are going to be productive and, let's say, fit five patients a year or 10 patients a year. Because as you mentioned earlier, with the first soft launch last year, the answer was zero, effectively.
The question is going forward, what more can you tell about the launch in 2025 that would give me confidence that you're going to get much more traction with these CPOs? Because I've heard in the past that many of these CPOs are kind of lifestyle employees where they're doing good, they're helping patients, but this is not their priority in their life, and they may not follow through as much as you'd like in terms of being adopters.
Yes. Last year, it was for them to go through the eval training, they could sit at home and fire up their screen and go through our two-hour webinar, okay? Now it's a full commitment, multiple days, multiple patients. We won't even come to their facility unless they have at least three patients with good insurances teed up, ready to do evaluations.
We push for the in-services as well. We are getting a little more commitment on their end. We have a stronger team in place also to not only follow up with them and nudge them, but to help them with insurances and generating demand and all of those things. Will the sales follow like we want them to? We do not know, right? We will dial into more metrics as we go. From what I am seeing now, to have 200 certified CPOs by 2028 seems like something that we could potentially achieve a year ahead of time, right? We are having no issues getting them certified. Again, can they get the patient flow? We hope so, but we do not know. Now, when I think about referrals and channel conflict, there are some things you can dip your toe in and other things you cannot.
This is, I think, the right time to put this program in place through our journey to, again, the big goal of every stroke patient being exposed to the MyoPro very early in their post-stroke journey.
Are there any early adopters that have really embraced this and done well with it that are not affiliate CPOs like John Neff? I'm thinking a third party that really sees, "I can make a lot of money with this, way more than I do in my day job, and I've perfected it." That's question one. If so, are you leveraging that person or their tactics for peer-to-peer education?
Yeah. Sort of yes and no. We had a lot of early adopters eight years ago who had mostly a bad experience because they could not get reimbursed, okay?
Those, for the most part, have been slower to come back around, although we're beginning to see some orders come through, which is nice. Most of the early adopters are the small clinics that I'm seeing. They're super excited about the technology, and frankly, they're excited about the money. The challenge is the smaller the clinic, the less capacity of the owner who's probably the salesman and the top clinician, and do they also have the experience and ability to really generate a lot of referrals from a clinic? Some of our most excited people are COEs. They tend to be smaller facilities that are not ordering a whole lot of MyoPros.
I think as they get larger and more clinically deliberate and more comfortable with expensive products like ours and comfortable with sort of the weight gain, like, "This is going to take time," even some of the nationals, "Let's deliver a lot. Let's track their clinical outcomes," kind of their own internal tracking, make sure they're comfortable with clinical outcomes. I think the regional and larger players that are potentially a little more sophisticated on average are being slow and deliberate about the process.
Can you maybe just speak to, in the last couple of quarters, those kind of 20 that you do have ordering on their own, 15 being from that large provider you mentioned? Can you speak to any sort of ramp kind of in their volumes or how they've initially onboarded that can maybe?
I will say orders are coming in from many that are not certified yet. Kind of the certification process is built around orders coming in. When I look at the orders that we've received Q2 to date, I see a lot of company names that I don't know because they're new to the process. They're bringing eval patients, and we're beginning to order. I don't know that the order will change a lot once they're fully certified than when they're not. It's just we don't have to show up and help them kind of thing. I think for the large companies that were not aggressive in the past, and I'm just thinking of one, they felt like they would double the units this year versus last year. I think that's separate from certification. I think that's an existing O&P COE provider.
I think that has more to do with Medicare. Now, what's hurting the COEs is the same thing that's hurting us. Medicare Advantage plans are not covering it like they used to. To double this year does not show significant commitment or significant growth, but it does show commitment and growth.
They are able to be fairly selective with patients. I mean,
The particular provider I'm talking about is very clinically deliberate as well. We really encourage them to be clinically deliberate. We have tough conversations sometimes with a clinician and business owner and patient about whether or not everyone should move forward.
Thank you.
Oops.
There you go.
This one?
Yeah.
Okay. Welcome. My name is Malcolm Bock. I'm the VP of Engineering and Product Strategy here at Myomo. I joined the company in 2023, so I've been with the team for about two years.
When I joined the team, we had a pretty small group. It was about eight engineers, more on the line of a startup than actually a full medical device company. One of the things that I came on board with is to come and grow the group and build our capability moving forward. I come to Myomo with 30 years' experience in electromechanical medical device product development across small startups as well as medium and large medical companies, including Respiratory Motion, Bionic Labs, Covidien, which is now part of Medtronic. I span the full range from diagnostic to monitoring, therapeutic, and just general medical products. I specialize in building strong cross-functional teams in the development of medical products. At Myomo, it's actually a very challenging environment because exoskeleton-based brace includes many different technologies from software to hardware to clinical integration.
We're doing cloud-based, so sensing technologies, and they all have to come together to meet the clinical need. One of the key aspects when I came to the team was really to develop at Myomo a cross-functional team that works together. One of my responsibilities as the VP of Product Strategy is really to manage three groups. That includes product management, project management, and engineering. As part of the engineering, I grew out the team and developed a systems engineering team as well as a mechanical team. I'm trying to build a foundation that the company can work on moving forward. I have a track record of innovation with 52 patents, 33 that have been issued, and 19 that are pending. Here's an overview of our product roadmap. It's sort of a history plus sort of where we're going in the future.
If you can see at the top, you have the MyoPro 1, 2, 2 +, and the recently launched 2x platform, and then the MyoPro 3, which we're in active development at this time. The enabling technology, which is really the MARK unit, which you saw a demo of today, really allows our clinicians to do an evaluation of the user to see if they're going to be successful with the MyoPro. We have the enabling technologies that consist of the laptop, which is going to move to be more of a mobile app configuration. You have the remote measurement kit and some training games that we have as part of the platform. At the top, I've sort of slipped in sort of where the resources were at Myomo when I joined the team.
It was around 10 people for cross-functional product development. We grew last year to 23, and now we're at 42. That supports all aspects of product development, including manufacturing engineers, quality, all product management, project management, and all the engineering functions. One thing that we grew out as part of the past three years is really most of the staff was mechanical engineers. We've grown the systems team, including electrical, software, and system integration. It's been a really interesting journey the past two years just building out the team. I feel very confident moving forward with the group that I have. You've heard about this. We launched the MARK 2 device in January of 2025. This was the first time that Myomo has actually manufactured this product in-house.
When we launched the product in January of this year in Burlington, it was really a testament to Colin and his team's efforts, but also the whole project team to be able to get that to market. We've been asked to do a lot of things at Myomo over the past two years. Usually, any one of those things would be difficult, but we've been able to grow volumes, move manufacturing facilities, and launch new products all at the same time. In addition to the 3D-printed shells, we also provided a one-size-fits-all solution with a more user-friendly adjustable for changing the sizes. As I said, we now make it in Burlington. The next project that we launched just recently in April is really what most of the work's been done over the past year, year and a half around the MyoPro 2x.
The improvements that we put in were sort of key to making the product more usable, more comfortable, more easy to don. One of the challenges of this platform, it is about the technology, but it's also about meeting the users where they are and being able to provide that solution so that the clinician and the whole clinical team that works to drive the product and drive the successes, that the product is there to help them be successful. We also improved the forearm and humeral shell design for ease of donning. We provided a better, more reliable sensor suspension system, which helped people use the device. We incorporated sort of a poka-yoke, easy step-by-step procedure for putting on the product. Here's a training video that is only 80 seconds that will give you an idea of what the MyoPro 2x is.
This video shows you how to done the MyoPro by yourself with the dorsal hand strap configuration. This strap secures on top of the hand. The MyoPro 2x was designed to make donning a reasonable and realistic goal for a majority of MyoPro users. The MyoPro comes with a donning guide and uses colors and numbers to help you learn and remember how to put it on. We also have short phrases to help you remember, like grab the green, kiss the wrist, blue goes through, find the line.
Okay. Next, we'll talk about the MyoPro companion app. This will serve as a key communication platform for the future. At the top of it is really it's a way of reducing the COGS, leveraging the patient's existing mobile device as opposed to supplying a new laptop with each device delivery.
It also, though, will provide better reliability and really get us away from providing a laptop with each user because this is a very, I mean, this patient population really needs an easy, more friendly communication tool. A laptop, it's bulky. It's difficult to deal with. This patient population, even though they're older, they're much more, it's much easier for them to use a mobile phone than it is a laptop. We're going to prize ease of use through the easier accessibility and reliable and consistent data access. Having the app on the phone will allow us easier access to the data from the device. It's really a platform for future features and launches to support device adoption and functional outcomes. You can see just some early visual images of possible screens that we'll be launching with the MyoPro companion app.
A quick review of our main competition. This competition is mainly in Germany. What we say is it's slimmer but more limited in the industrial market. This is the Vincent Systems neo 1. The product does have some key advantages. It has a much sleeker look. It's lighter, but it also has a smaller motor and a smaller battery. It has adjustable buckles that add a more modern look and ease of use. Its simplified hand donning and fingerpiece can be donned independently. There are some unique features incorporated in the Vincent Systems that have advantages. On the other hand, the MyoPro brings unique advantages itself with a more powerful and customizable design for broader market adoption and greater functionality.
With that higher torque, we're able to handle a larger breadth of patients and both higher tone patients as well as larger builds and really being able to do tasks where you need to lift bigger things. We can individually configure the sensor in a specific location, which the Vincent Systems does not. We also provide EMG visualization through our GUI interface on the laptop. We do provide a wrist location that allows rotation of the wrist and allows for locking that wrist in place where the Vincent Systems does not. Now moving forward, our big effort right now, as we've launched the last two products, we're putting most of our energies into the companion app and the MyoPro 3. The key objective is to continue to maximize the patient outcomes and specifically around function.
As you saw many videos even today that show that each patient has unique challenges, and we need to provide that next-generation device that meets those patients where they are and moves them forward to get better functional outcomes. Where are we going to get those? The whole idea is to still maintain a focus on donability, so provide intuitive design with more comfortable cuff materials, reliability to increase the patient utilization, and satisfaction with reliable, consistent, predictable, and smoother device movements, and functional activities. Improved grasp design will be optimized for meaningful patient and support validated outcome studies. Our competitive edge, we are going to go more into data. Right now, we do not really have total access of all the data that's generated on the MyoPro. In the future, we want to take more advantage.
We have a unique advantage in that we're with the patient on a weekly basis, and we have access to the data, and we want to learn and make a better product. Here is a sort of very simplistic view of the MyoPro and our key technologies. This has been simplified some, not to give away any secrets. Essentially, what this says is we're going after all of the elements of the MyoPro. It is not going to be a 2x and a 2z and a 2z+ . It is a MyoPro 3. We are going to tackle every part of the product. We are not going to leverage electronics from the past, but we are going to bring in new technology and new efforts. As Kathy said in her presentation, we partner directly with all of the clinical key stakeholders at Myomo.
One of the biggest benefits working at Myomo is that you have these very deep, knowledgeable people that are in the field, and they can provide that clear direction and understanding on what are the challenges out there and how we can work together to resolve them. The MyoPro 3 is expected to, obviously, provide competitive edge, provide a platform technology to support future new product releases and enhancements, design for subjective and objective tests. We want to be able to provide a product that will surpass the expectations for functional activities, both for the end user and as well in clinical outcome studies. From a reliability point of view, we want to provide monitoring and state-of-the-art technology base and be able to monitor the reliability.
From donability, we want to leverage the latest technology, embrace design and AI to enable real-time device customization. That's it.
Any questions for Malcolm or? I think right there.
I'm curious. I know you mentioned the German neo 1 device. Have you guys been actively looking at any patents or anything else in the pipeline that you see, whether it's automotive manufacturer or smaller manufacturer?
That's a good question. As part of the MyoPro 3 development effort, and as you launch new products, you're always looking at upcoming patents. There is not that much activity in the patent landscape in this category. There has been a little bit, but Myomo has the most patents around this technology. I do not want to get into too detail, but of all the different categories that I've been in, this is still relatively nascent in its patent coverage.
One more is.
Thanks. One more is, is there a timeline roughly for when we expect the MyoPro 3 to be?
Not at this time.
Malcolm, thank you again for your presentation. One question. If you had 100 stroke victims, people recovering and living with the impact the stroke has had on them, and they were given the option of being fitted with a neo 1 from Vincent or your product, everyone's different. If you had a very sophisticated CPO, do you have a sense for what percentage of patients the neo 1 would be the more appropriate device for them, given what they're living with and their abilities versus people potentially getting a MyoPro?
Yeah, I'm probably not the best to answer that question, but I think the summary that I put out, that the slide that I put out pretty much represented sort of the strengths of the product and the weaknesses. I think for the patient population that Myomo is trying to meet, I think the MyoPro is superior.
I think one of the earlier presenters today mentioned that when you're screening patients, a whole bunch drop out of the eligibility category because their issue is hand, not complete arm. I was wondering if articulation and control of fingers, so that we're talking about finer motor control, is something that would be on the horizon in terms of your roadmap, or are there technical issues that make that infeasible?
Yeah, I won't get into details, but the goal is to provide better functional outcomes, and grasp is a key functional outcome for the product.
Yeah, hi. Is there any percentage of the current target population that's not eligible for the MyoPro because of limitations in the current technology? And is there any potential to address that and increase that population by further future additions of the MyoPro?
Yeah. I mean, it's the same basic answer. We do see an opportunity in the MyoPro 3 to do better on functional outcomes across the board. So inherently, that will support a bigger population.
All right. Thank you.
I've got to come down here. Oh, yeah, you can get a quicker answer. Thank you. It's all good with Micah. So my name is Dave Henry. Many of you know me. I'm the CFO of the company.
You may not know a whole lot about me. Just in terms of background, I joined the company in 2019. Prior to Myomo, I was CFO of a company, EOS Energy Storage. They made batteries to support solar arrays. So it's an energy storage company. They went public after I left, so it was sort of pre their SPAC public offering. Prior to that, I was 10 years at American Superconductor Corporation as their CFO over in Devons. That was products for the power grid and alternative energy, primarily wind. And then AMI Semiconductor Company, which is a semiconductor manufacturer. I was three years their CFO there. And prior to AMI, I spent a couple of decades in the semiconductor industry. So I have a lot of technology background, a lot of background helping smaller companies raise capital, and really enjoyed my time so far at Myomo.
I've got pretty much a very broad background when it comes to finance. If you can do it in finance, I've done a lot of it, all the way from controllership to financial analysis to internal audit. Lots of things that I've done, and there's a lot of knowledge that I'm able to impart as we go. My education, I was a bachelor's from UC Berkeley and with an MBA from Santa Clara University. Sad to see the Pac-12 go away, but now we're in the ACC, and we'll see what happens from there. Just a bit of a historical snapshot of our financials. We were $9.8 million of revenue in the first quarter. First quarters are typically a seasonally low quarter because we're not advertising as much in the fourth quarter because of competition from advertising. That's a large reason.
Those first quarter revenues also were largely in line with what we typically see in seasonality. Gross margin was a little over 67% in the first quarter. Again, the drivers of gross margin are going to be what the ASP is. Then also, when you look specifically at first quarter, there were some fixed costs that we added, like this space. We moved into this space here in January. The volumes need to grow so that we can absorb some of the incremental fixed costs that are hitting gross margin. We do expect that we will be absorbing more of those costs over time. As Colin mentioned, 250-unit capacity per month is what we think we can do. This is a very low CapEx business. You saw the operation over there. Not a lot of capital equipment that has to be invested.
There is opportunity to really leverage and get incremental operating leverage from higher gross margin. Operating expenses were about $10.2 million in the first quarter. That was on purpose because we said we were going to take the proceeds from the offering that we did in January, invest in R&D, invest in more advertising to grow the direct billing channel because that is what we control. As compared to the O&P channel, which we think is a great growth opportunity, but it is something that they have got to go through their training. They have got to build up their pipelines. That is just going to take time to do. To get to where we wanted to go, we said we are going to take some of the proceeds and invest those in the direct billing channel and get ourselves to a higher jumping point for 2026 and beyond.
Pipeline adds were record in the first quarter. You can see they've been growing continuously. We continue to invest, as I mentioned, in the direct billing channel to grow the pipeline adds. The backlog was at 249 patients. One of the things that you're seeing with Medicare coverage is there is a greater velocity of patients that move through our process. That means they might enter the pipeline, they might then leave the pipeline, enter the backlog, and then leave the backlog. Oftentimes now, we're getting a larger number of patients that are entering the backlog and then leaving the backlog in the same quarter. We call those fill units. In the last couple of quarters now, we've had about more than 80 fill units in each quarter. That was significantly higher than what it had been in the past.
We would expect that to continue as we go forward, certainly as we try to grow the number of patients that we're serving that have Medicare Part B. This is new disclosure that we're required to do with segment reporting. I thought some of you might not see it. I'll show you now what the components of our operating expenses are. 52% of our operating expenses, this was first quarter, so the $10.2 million I talked about, 52% were payroll and benefits. 16% was advertising. Those two combined, 68% of our first quarter operating expenses were those two things. The next largest things are travel. A lot of that is driven by the regional orthotists that are out in the field visiting patients. 7%, which was, I believe that was consulting.
Again, 68% of first quarter revenue was operating expenses, or 68% of operating expenses were advertising and payroll. Looking at the components of cost to goods sold, on a percentage basis, 6% of COGS in the first quarter was material, and 74% was everything else, labor and overhead. You can see the components there, payroll and benefits being the largest component of that other amount of overhead. Everything's fixed as it is right now. As Colin mentioned, you add labor, there'll be incremental direct labor that would go along with that. The contribution margin is still very good for our product. In terms of cash, we burned $2.7 million in the first quarter. That was purposeful because we are investing the proceeds from the offering, growing the advertising, growing the direct billing channel, investing in R&D.
As we mentioned in our guidance back in May, we said that the second quarter would be the largest operating cash burn quarter. That is because we had a very good year in 2024, so we paid all the employees incentive bonuses. There is also a higher second quarter expected operating loss, as we said, because of the fact that the revenue is not sequentially higher in the second quarter, as we said. That means a greater operating loss as we continue to invest. Those are the reasons why we expect to see a higher operating cash flow in the second quarter. We had $21.5 million of cash at the end of the first quarter. We also have a facility with Silicon Valley Bank. That consists of two things. There is a $4 million line of credit, up to $4 million.
As of most recently, about $1.9 million of that was available. We also have a $3 million term loan facility that's available at any time. Both of those facilities are undrawn. This facility expires in February of 2026. We have until then if we want to take any advances on the term loan facility. Otherwise, we'll need to re-up the facility with the bank. We've talked about our long-term model. You've heard about what we want to do in the O&P channel up to $20 million. By 2028, we want to get to around $15 million in our international business. Overall, we're trying to get to $100 million. A lot of you have heard that before, but we haven't put a date on it. We're putting a date on it today. We're trying to get there by 2028.
We have tried to give guidance, our target, I should say, our aspiration, however you want to call it. We have tried to give that in a means, something that we think is reasonable to achieve. For example, you saw Mike's sensitivity on the O&P channel. There is opportunity there to grow that. Now, out in 2028, we do not know what is going to happen. The Medicare Advantage rates, the authorization rates could continue to go down. We do not know. We have tried to balance things off with upsides and downsides factored in. We believe that this $100 million is something that we can achieve and try to get there by 2028. What are some of the other elements of that operating model? Gross margin is 70%-70%. We expect to be in the range of 70%-72%. What could affect that range?
How much will the O&P channel grow? If the O&P channel is greater than $20 million as we look out into 2028, the gross margin could be lower as a result of that because the ASP for the O&P channel is going to be roughly a rough approximation half of what it is in direct billing. As that channel grows, our blended ASP will decrease. Our gross margin will decrease. On the flip side, there's not as much investment in operating expenses, advertising, and other people that might support the direct billing business because we're just a manufacturer delivering a product and the expenses kind of stop at cost of goods sold. EBITDA margin is expected to be in the range of 15%-20%.
The factors that will affect that, again, the gross margin, what's the mix going to look like, and also how much advertising might be spending out in that time compared to what our plans were to generate the volume we need for the direct billing channel to hit our objective. Then based on what we're thinking right now and what our forecasts are, we believe that the cash flow break-even point, remember, we were cash flow positive fourth quarter a year ago. We invested more to grow the direct billing channel. That increased our break-even point. We think that new cash flow break-even point is around $17 million-$18 million of quarterly revenue. What does that look like by channel? Obviously, it can be very, there can be a wide distribution of things that could happen.
This is what our best guess is right now is what we think that model might look like. In first quarter, 79% of our revenue was direct billing, 13% was international, and 5% was the U.S. O&P channel, and then the rest was the VA. When we look out to 2028 and what the constituents of $100 million of revenue might look like, our view is that about 62% would be the direct billing channel in that model, 20% would come from the U.S. O&P channel, 15% from international, with the remainder coming from VA. Our end state, our desired end state is to see the O&P channel grow. We're limiting our growth in operating expenses as a result. The contribution margin between the two channels at any given point in time is generally comparable.
If we can grow the O&P channel, I think that would be our preference at the present time. That could change as circumstances change. This is a lot of variability here, but we wanted to give you a sense of what we were thinking about in terms of what this looks like. To also communicate that it is an aspiration, yes, and it is not something that we pulled out of the sky. There is a lot of thought that is going behind this in terms of our modeling, in terms of what we think the direct billing channel could grow to be, what we think the O&P channel could grow to be. There is a lot of thought that goes into this. When we are making this projection, it is not because we are hoping that we can get there.
It's because we think we have a plan to get there. How do we achieve those targets? We're going to continue the direct billing efforts. Approximately 25% annual revenue growth is sort of embedded into that model. That assumes that there's modest improvement in some of the conversion rates that we see. Some of those conversion rates, we've talked about those in the past. There's a number of conversion rates we're looking at: leads to pipeline adds, pipeline adds to authorizations submitted, authorizations submitted to what ultimately gets delivered. There's a lot of conversion rates that go through that process. We're only assuming modest improvement as we go. We're always thinking about ways that we can improve those conversion rates. As I mentioned, the U.S. O&P channel, that is a large growth driver. We think that's a middle of the fairway kind of estimate.
I think there's upside potential there. You talk to people internally. I think that people that are out there in the field, they would say that. We are trying to come up with a model that we think is realistic and it is achievable and can survive events that I know are going to happen at some point. I just do not know what those events are. Continuing to grow international revenue, as you saw from that chart that John showed earlier, his growth rate is actually expected to be, it is a compound 38% growth rate from 2024 to 2028. Prior to that, it was 52%. It is a reasonable expectation that we are putting for that business to continue to grow as they have been growing. If they continue to grow as they have been growing, there might be a little bit of upside to that number.
Modest manufacturing cost reductions are assumed. You heard earlier from Colin that we're targeting about 200 basis points of quarterly gross margin improvement by the fourth quarter of 2026. Some of the key drivers of that are going to be that companion app because that eliminates the laptop, which is about $600 or so of cost to goods sold in the device. There are other things that Colin is working on as well. As we grow our volumes, we would expect that there would be some material price reductions that would go along the way with higher volumes and then the fixed cost absorption benefit because we have a physical space we do not need to add on to generate those kinds of revenue. There will be additional absorption benefit from that as well. Modest R&D growth is assumed. 2025, as we said, is going to be a year of investment in R&D.
After that, we believe that we can sustain our existing products with that investment and deliver on the product roadmap, as Malcolm showed you earlier. There is a large number of people in this organization, not just his folks, but others in the company. 43 people now are supporting in some form or fashion product development. I think we have the infrastructure in place to deliver on the things that we have in front of us. We are already showing results from that as in the last several months, we have introduced the MARK 2 and we have introduced the MyoPro 2x. Things are going on, things are happening, and things are coming out of product development and moving into the marketplace.
We will spend the advertising necessary to make sure that that top of the funnel is full for the direct billing business because that is the part that we do control. We will make sure that we spend what we need to spend to make sure that we get there. Our model assumes an increase in advertising spending over the planned horizon. What do I want you to take away from some of the financial part of this? Our target is to achieve $100 million of revenue by 2028. We think we've got up there's plans and there is a lot of thought that has gone into that model. The O&P channel is targeted to be 20% of revenue by 2028. I talked about the break-even point of $17 million-$18 million of revenue per quarter.
We'll spend the advertising dollars necessary to continue growth in the direct billing channel. We'll reassess that if necessary. If events change, we're not going to just blindly spend at it, but we're always keeping an eye on the effectiveness of the advertising spending and then moderating growth in R&D over the planned horizon. I'll take any questions you might have.
Thank you. [Vikram Dooley] at Charleston Capital. One question I had is, what is the current cash runway? Do you have enough cash on hand to get to 2028 break-even?
There's a lot of things that can happen between now and then. I mean, I want to answer your question by not trying to update guidance. But I guess I'll answer the question this way. When we did the capital raise in December of 2024, our intention was for that to be the last raise. Now, things can happen. Things can change. I'll never say that we won't ever do an equity capital raise again, but it's not our first choice if it ever came to that. Those are our plans. But like I said, I can't tell you that never, never. You just don't know what will happen in the future. But that's our intent is to, if there is a capital requirement down the road, is to look for non-dilutive sources first before we think about diluting any further.
Understood. Then the second question I had is, based off the year Q1 reporting, I was a little confused on the number of units that are on back order. I believe it is 249. In the timing of a patient going through from a lead to the pipeline, pipeline to essentially delivery of the product, is this back order essentially they are through the pipeline, now they are just waiting for the device to be delivered to them, or is this in the pipeline phase? How should I think about this?
Yeah. So the pipeline, as we mentioned earlier, the pipeline is everybody that has completed a successful telehealth evaluation. We don't have an insurance authorization yet. In the case of Medicare, we don't have the medical documents necessary to consider them ready to be delivered. That's the pipeline. Once we have that information, it enters into the backlog. Once they enter the backlog, they're eligible to become revenue units. There's always people that will drop out of the backlog. Even if we have everything, they end up dropping out. Some of the reasons for that you heard earlier. Sometimes the fitting is the first time we see the patient. We're trying to maximize clinical outcomes. We don't want to fit the device on a patient that's not going to use it.
Oftentimes our CPOs will make a decision in the field to say, "This patient is not a candidate." They'll go out to the home and they'll take the device back with them because they're just not a good candidate. Maybe that doesn't mean that they'll never be a candidate, but they might be told, "Go see a therapist and get some more therapy. Try to relieve some of the spasticity you might have because we don't want to hurt you if we put the device on you.
Got it. Thank you.
Ultimately, this question is about the right level of investment and also about revenue targets and how they compare to the total addressable market. My premise is that if you have a first-mover advantage, you want to move fast so that fast followers do not come in and try and take advantage of the market that you have been creating. I think about the O&P channel, pardon me, and the strategy makes sense to focus them on new cases, on incident cases. It sounds like that is the lowest cost of customer acquisition. When I think about 2028 and the $20 million target, that is based on 200 centers trained by then and an assumption of four units per year. I am sorry, I could not see the sensitivities from back here because I need a new prescription.
That gets you to 800 units, which translates to that $20 million. 800 units, I think the number that was shared for incident cases was 200,000 a year. Even if I lop off half of those, making it 100,000, 800 units is less than 1% market penetration or market share, if you will. The question is, is that moving fast enough? Should you be investing more to capture more of the market now and grow that channel much faster? That certainly leaves a lot of market on the table for others to come in and go after. I think you want to just grab what you can while you can.
Yeah. There is a lot of factors to consider there, right? Because we want to grow at the pace that we're capable of growing, right? We're already doing a lot of the things you said. Our R&D expenses are going to double this year. That is the reason why, because we are trying to get new products out into the market faster. We know we have a first-mover advantage and we want to maintain it. The best way to maintain it is to have the best product out there for whenever somebody might come along. We do not see anybody yet. There is no competition still in the U.S. at the present time, but we are not sitting back. We are continuing to make those investments and to move as fast as we can.
Now, in terms of plowing a whole bunch of money into advertising and other people, it's not just advertising when we're growing the direct billing channel. You need people to take the calls. You need people to speak to the insurance companies and arrange to get the medical documents. You need people to file the claims. You need people to deliver the product. There is a lot of expenses that go along with that. Those expenses do not have an immediate return. You have to balance out the cash that you have with the ability to grow.
Yeah.
I was actually talking about spending more to grow the channel faster. That is an investment that pays for itself over time as opposed to direct, which is you have to spend it for each customer.
Yeah. I think Micah has mentioned that we are working as diligently as we can to, there's enough demand. I do not think that we are, I think we have a right balance between people that are looking to be certified versus the capacity that we have to certify people. We are not holding people back from becoming MyoPro certified. There are some things, as Micah mentioned, that they have to do as sort of a prerequisite to be certified. That means they have to go out and find some patients. That is an activity they are not necessarily used to doing. They have to do some things as well. We can invest all we want, but it takes them as well to do those same things. We just do not control the rate at which they do that.
It's a quick question, David. Putting the incentive bonus aside that you've mentioned, you expect in Q2, do you expect the OpEx to be similar in Q3, Q4, especially if in a quarterly Q4 we see higher revenues?
Yeah. We're not updating any guidance at this time, so I'll defer on answering that question. Yeah, I'll wait to answer that question until a later date.
Thank you. Just quickly, when you target the $100 million in revenues for 2028, what do you see as the biggest risk to that forecast? It could be reimbursement, Medicare, O&P. Just when you do it, what do you think of as the biggest potential thing?
I mean, I don't know if there's one risk that sticks out in my mind. I think there's several of them that could come into play. Will the O&P channel grow as we expect? We have some control over that. We can certify them. We can do everything. They've got to go out and prospect and want to grow their business. We don't necessarily control that. What will happen with Medicare Advantage plans in the future? Will they continue to have lower rates of authorization? We don't know. Could those rates go even further lower than 15%? It's a possibility, but we don't, that's something that's a risk. I don't know how much further down it can go. They're already not complying with what the laws are. We have a device that original Medicare covers.
They're not supposed to be denying it and excluding people from getting it. They need to be saying why someone should get it. They're not doing that. As long as they're continued to allow to do that, we're kind of in this situation we are with them until they decide to want to reimburse more. One good piece of news, I guess, is that I heard earlier this year that the reimbursement rates, so the amounts that the government was going to pay Medicare Advantage providers, was going to be increased for this year. Hopefully, we'll see if that becomes a benefit. You just never know what else might come down the road. Those are the things that are sort of at the top of my mind. All right.
I think we're to the point where if I could ask Paul and then Micah and Harry to come on up, grab a mic, or if you want to stand, or if you want to have a stool, we'll take a few minutes for questions here. We've got about 15 minutes or so. Some questions in some of these other sections you might not have been able to get to. I'll move this aside here.
Go ahead, Gudonis.
Before we get started in the Q&A, I just want to say thank you very much for coming here. One of my goals for this when I started out this morning was to listen to you, to learn from your questions and so on. I hope you saw that we are a learning organization. We're always doing the data analysis. We're doing course corrections. We've done pivots across our history over here. We're always trying to get better and better. It may not always be a straight line, but directionally, it's up and to the right. Also, I wanted to make sure that you got to see the team we've put in place here. Really good group of people that are leading this company going forward here. So pleased that they were able to join me in this journey.
One of the things that I took away from Harvard Business School was to hire people smarter than yourself. That's pretty easy. I'm really glad that we've got the team that you've seen here, plus all the other 200 people that are in the company that are really professional, whether it's people you saw on the production floor making high-quality devices, all the people that are in the field traveling to do patient care, the follow-up care, and so on. Just a terrific team of people. I really want to thank all of you for being part of this team here. We're ready for your questions.
Great. Thanks, Paul. I'll just get it started here. I imagine at Harvard Business School, they spoke a lot about scale, which every small company ultimately uses to become a large company, which typically at some point in time is accelerated with M&A. How do you think about Myomo from the standpoint of either acquiring assets to leverage your scale or being the acquiree to allow someone else to leverage their scale? Thank you.
There are a lot of interesting technologies, startup companies that are coming up with products. I'm actually having lunch with one fellow tomorrow. My take on this is I'd like to be the acquirer from a real position of strength. When I look at, I want to have strong revenue, strong profitability, good balance sheet, and also have enough bandwidth of our executive team to do the due diligence. Because to be able to go in and right now, as you can see, we're so busy growing the business. If I ask these folks that, "Hey, go spend two, three weeks digging deep into the IP and the technology and the operations and the compliance and the regulatory and so on," we'd get distracted from our current business. We've got so much to do, as was pointed out here.
We're still at the early stage of market penetration here. I want to make sure that we're just doing that. At some point, we can create a more formal business development process. We are certainly an interesting company for smaller startups that have got interesting products saying to us, "Gee, I've got something else for stroke patients," or, "I've got something else for spinal cord." We are looking at those, kind of staying in touch. Somewhere down the road, there might be some combination. Look, we're a growing, attractive company. We're the biggest, I'll call it, white space in the orthotics and prosthetics industry. This industry grows maybe 1%-3% a year overall. If you look at when some other public companies report their results, we've got the biggest opportunity. That may be attractive to somewhere in the future.
Right now, we got to focus on building this business.
Fair enough. Thank you.
Anything from our remote audience?
Just a quick one. You've got ambitious growth goals in Germany, which sound there's good reason for that. Besides Germany, are there any other European countries that have as favorable or something resembling Germany in terms of a promising environment to get approvals and sales?
Yeah. I mean, all these countries have stroke survivors who could benefit from our products. John Frijters and I, we've looked at the Scandinavian countries are probably the best. They're not the largest, but they've got very good reimbursements. Having North Sea oil helps. That could be a next target. We've looked at France, U.K., Italy, some other major markets. It requires a multi-year investment. When John Frijters joined us in 2020, it took a couple of years of working with initial insurance companies, developing our own O&P network, and so on. At this point, I'd rather do what's working, which is scale Germany faster versus hiring a couple of people to try to open up France or Italy or try to get the NHS to cover this in Europe. Right now, it's prioritizing what we get the biggest ROI on the next euro we spend.
Yeah, Chase.
Just to go back to your question for a second, anything you're watching that is kind of new outside of the competitor you mentioned today? On your IP, is there anything that you think can potentially prevent competitive entrance within your IP portfolio in the U.S. market?
I mean, we're always looking at, okay, who's out there. As Malcolm pointed out, there are a couple of small German companies. Of course, they're the big players in orthotics and prosthetics. Clearly, this is an attractive market, whether or not they will enter it at some point. We kind of expect that will happen. As Malcolm pointed out, we have some very strong blocking patents. We've got a total of 30-some patents that cover multi-joint myoelectric orthotic devices. Unless someone can engineer their way around it, and that happens in medical devices, we're certainly going to defend our territory here as the leader in myoelectric orthotics.
Is there anything new that you're specifically aware of, or is it still just kind of the risk of eventually those larger competitors potentially?
We go to all the trade shows. In Germany, we're going to be at AOPA, which is the big national O&P show coming up in just two and a half months. If anybody is interested in entering this space or trying to recruit the channel, they'll start displaying their wares. We will see if we see anything on the floor in AOPA in Orlando in September. You are all welcome to come down. I know a number of you did last year. You get to meet our team, get to meet some of the O&P partners. Just to mention about the O&P partners, I went out to Minneapolis to the Craig-Hallum Conference last month. I went a day early. I went to see Rochester, which is one of our new COE partners. They are in the process. They have six locations across Minnesota. I met with their owners.
Next week, I'm going down to Fairfax, Virginia to go through one of these evaluation days. As Micah said, there's a process that they go through. They're going to have a number of patients to evaluate. I'm getting out there to cheerlead and get these O&P providers excited because it is a huge opportunity for them. As you heard in the videos, they've got to devote the resources to make this happen. We certainly want to support them.
There's been a lot of good content today. I'm just going to connect kind of a bunch of dots to make sure I'm thinking about something correctly. You kind of had given the cost per lead in April. Things had clearly normalized. We've kind of talked about how those lead qualities remain strong, at least from what we've seen. We talked about those long-term targets where it's clear that that kind of gain is coming from kind of increased activity and not from improvement in the conversion metrics, right? We're putting more people into the pipeline, et cetera. I mean, it seems like it's fair to, with maybe a two to four week delay, that pipeline adds should kind of normalize from that impact.
Is that a fair assumption for me to make, or is there something else I should be considering as far as that recovery and pipeline adds in the near to midterm?
I think the recovery, I mean, I guess if we're calling the recovery from not hitting our objective.
Cost per pipeline adds.
Okay, cost per pipeline adds. As you spend more on advertising, I think there's a natural math that occurs that you, and given the timing of cycle time that Micah mentioned earlier, that you do not see an immediate sort of, you can see a short-term increase before it comes down because more leads come into the process and become pipeline adds after the initial contact. You could see that some kind of phenomenon like that. Overall, even if the cost per pipeline add grew to over where it was in first quarter, it's still a very attractive thing to continue to spend on advertising. It's still a pretty low customer acquisition cost.
When you yield that all the way down from a cost to pipeline add to actually spreading all the advertising dollars over the cost of a revenue unit, you're still talking about a very good incremental contribution margin. It is an activity that should continue regardless of what we end up reporting on cost per pipeline add.
No questions for the webcast. I'll add on briefly, Chase. I remember the way we measure advertising cost per pipeline add. It's the advertising spend during that period and the pipeline adds during that period. Separate from what we publish, we look at not only with pipeline adds, but other metrics. We call it cohort. So sort of the leads that came in during a period and what happened to those leads over long periods of time. The equation is a little complex, as they've mentioned. Cycle time is a component of the equation.
Just to follow up to that cohort point, have you noticed over the last year that there's been a distinguishing factor between cohorts? Are they generally consistent as far as timelines and lead conversions go?
Other than what Dr. Kovelman shared as far as insurance company behaviors, right? We've seen those change, which is kind of on the back end of the process. On the front end of the process, we're not seeing any significant changes that are unexpected to the cohort.
M&A was mentioned earlier. I was wondering about partnerships. Have you thought about whether there are any natural partners? This relates to the scale question. Whether there are any organizations which are potential natural partners that could expand your reach and whether there's enough money, there's enough meat on the bone for both of you to be happy in kind of a setup like that?
A couple of things. We have our joint venture in China because there are 14 million paralyzed arms in China. We will generate license fees as that venture starts to become commercialized. I've got a patent for Japan. There are 1.2 million stroke survivors in Japan. I've had some efforts in the past to try to find a local partner in Japan that would want to bring this technology to them. In all these international markets, the big question is always, will it be reimbursed? We have to find a partner that is going to be willing to make that reimbursement investment like we have here in the U.S., like we have in Germany, to be able to scale that business.
It's really a question of finding the right partner that has the long-term vision that says, look, this is a market that's going to grow for a very long time. Putting in a couple of million dollars upfront in a couple of years to create a reimbursement category like we did in the U.S. is really ultimately going to pay off. We have conversations. AOPA is always a good place to have those types of discussions. I'm going to OT World, which is the big orthotics and prosthetics conference in Germany in May. We'll be there again to have these discussions. I hope that I can find the right partner that wants to take these other markets.
Since you mentioned China, what's the update on the clinical trial in China? Once you have data, how long do you think until they can get approval there?
It is underway. Their best estimate right now, Norbert, is that they could start generating some revenue by the end of the year. That is kind of the current status from our last board meeting we had with our Chinese partners.
All right. Hearing no more questions, again, thank you very much for coming. Please stay in touch. Follow up with us. Also, we will have this webcast, which is recorded, available to yourselves, also to colleagues who might not have been here in person. Have a good trip home, everyone. Thanks.