Our next fireside chat is with Myomo, ticker MYO, with a market cap of roughly $35 million. Myomo is a medical technology company with an orthotic arm brace known as the MyoPro that supports function to that limb. We cover the company here at Alliance Global Partners with a buy rating and a price target of $3 a share. Trades currently around $0.85. Presenting for the company is Chief Executive Officer, Paul Gudonis, as well as Chief Financial Officer, David Henry. David or Paul, would one of you like to take a couple minutes to tell the audience a bit about yourself and the company, Myomo? Thank you.
Sure. Well, thanks, Scott. Myomo is a medical robotics company that has created a whole new product category to solve a huge unmet need. There are millions of stroke survivors here in the U.S. who, after going through the standard of care after their stroke, are often left with hemiparesis, half paralysis of the side of the body, chronic arm paralysis where they can't use that arm or hand again. They've typically gone through 6 to 12 months of therapy for rehabilitation, and it works for some people, but hundreds of thousands each year, just in the U.S., are told after 6 to 12 months, "If you've plateaued, get used to it. You'll never use that arm and hand again for the rest of your life." We're showing that that's no longer the case with our device, as you can see here behind me.
You wear it on the arm. You just think about moving your arm and hand, you can feed yourself, you can go back to work in some cases, you can do household chores and so on. It's a really big breakthrough for these individuals. It's millions of people here in the U.S. and millions more globally. We have a technology that's developed at MIT and Harvard Medical School, commercial stage at about $40 million in revenue last year. We've delivered over 3,000 devices to patients so that they can, again, restore that function to do these activities of daily living. A couple of years ago, we got Medicare coverage, with increasing number of in-network payer contracts, we serve a larger population.
Really at the early stage of market penetration of a huge unmet need, and we've got a proprietary technology with the patents that we have, FDA registered, that's really making a difference in a lot of people's lives.
Okay, fantastic. When we think about the MyoPro, it's a fantastic device. I've seen it in use. Very impressive. How much does it typically cost, who do you sell the device to? Do you sell it to directly or through groups? Thank you.
The device is designed for the patient who's the user, and we provide it either through an orthotics or prosthetics practice because these are licensed clinicians who then deliver these types of orthotic devices to patients. We also established our own direct provider business ourselves. Myomo is also an accredited Medicare provider, in which case we will bill insurance companies, whether it's Medicare, whether it's commercial payers, whether it's the VA, and they'll pay for it. Medicare established a fee of $68,800 for the primary device, which we have, we call the MyoPro Motion G. It moves the elbow. It has a wrist component as well as the hand, and that's over 95% of our volume. Commercial insurance and Medicare will pay usually some 80% of that, plus secondary insurance or patient co-pays will cover some part of the rest as well.
Okay. Fantastic. You just reported first quarter 2026 results and a trend really jumped off the page, and that was your shift to recurring sources of revenue. If I recall, I think it went up to about 49% from 25% a year ago. Tell us about that shift and what it could mean for your cost of customer acquisition.
Sure. As we commercialized the product, we went directly to the, I'll call the prevalence population, the 3+ million people in the U.S. who'd had a stroke but didn't know about our device. They're not going back to the rehab hospital. They're not seeing their neurologist because they were told years ago, "You won't be able to use your arm again." We had to reach out to these patients directly with our direct-to-consumer marketing, mostly on Facebook, also TV, other social media, search engines. That's the way we were growing our business, so we've had 10+ years of revenue growth. However, we shifted the business last year and decided to start to address what we call the incidence population. As you may know, there's 800,000 strokes every year just in the U.S.
Of those, about a half a million will survive and go through rehab therapy, of which a quarter million will succeed in their therapy. The other quarter million, who are in these outpatient rehab facilities, are trying to get restoration, but they're failing at it because of their medical condition. Now they could be eligible for MyoPro. Now we started what we call our MyoConnect program, where we have our clinical field team going into rehab hospitals all across the country, and they are basically showing our device to patients, to therapists, to physicians, and we're getting these referrals. As a result of that, we've expanded our market for not just the prevalence, but also the incidence population. What we like about the rehab facilities is we get referrals on an ongoing basis, and that's what we call our recurring patient sources.
As you mentioned, if you go back a little over one year ago, only 24% of our business was from these recurring sources, meaning VA hospitals, orthotics and prosthetics practices in the U.S. and Germany. Now that we started calling on the rehab hospitals directly, we reached 49%. It's a huge increase just in the first nine months of the program.
Yeah, that is a significant increase. As analysts or investors, when we try to gauge the progress as far as building that pipeline, when a referral customer comes in, does that show up as a lead in at just a higher percent probability lead to convert? Or how should we think about that when we look at your revenue metrics and try to make sense of that?
Yeah. Well, over the last several months, we've gotten hundreds of referrals from these rehab hospitals. We have to evaluate them to make sure that they're medically qualified as a candidate, and then if they want to proceed and they're qualified for the device, they enter our patient pipeline. We have patients entering what we call our pipeline. We had over 700 in the last quarter, some from these referrals, others were coming in from our direct-to-consumer advertising. What we find is that the referral patients tend to be more highly qualified medically because we've already educated therapists and physicians on what makes for good candidates for the device. Also, we advise them on what insurance plans, such as Medicare, that will cover the device. We have really good patients coming in from these rehab hospitals.
As I said, then after the device gets delivered to them, those rehab facilities' staff then will train the patients on how to use it, and then we expect that they will provide more patients to us in the future. That really reduces our customer acquisition cost after you've established that referring relationship.
Okay.
Just real quick, just to elaborate on what Paul said. The MyoConnect program, we view it as being very important to our future growth, but also to demonstrating the operating leverage we're looking for. We did break out, for example, in the first quarter, we broke out the number of pipeline adds or the percentage of pipeline adds that were generated by referrals, and the number of orders that were generated by referrals in the first quarter. That was 11% of pipeline adds were referrals in the first quarter, and 16% of authorizations and orders.
Okay, fantastic. Thank you, David, for that. We'll have some more finance questions for you shortly. Before we kick it over in that direction, Paul, reimbursement tends to be very important for this product, and I know the company's made significant strides in reimbursement. Can you talk about how those have impacted growth and how we should expect reimbursement to change going forward in the next one-two years? Thank you.
If you go back to the beginning of 2024, a little over two years ago, it was just the VA that was paying for our device on a regular basis. That covered about 9 million veterans. We were getting case-by-case authorization under a miscellaneous code by various commercial plans. Based on the clinical research that we presented through the Medicare medical directors, we got Medicare coverage starting in April of 2024, that was really an inflection point for our business because 2/3 of strokes happen to people 65 and older, the typical Medicare population, and the Medicare Part B plans cover about half of the Medicare population.
Since then, on the strength of that Medicare coverage, we've been going to commercial payers, plans like Elevance Health, which runs a number of Anthem Blue Cross Blue Shield plans and others around the country. We've signed contracts between Medicare and the VA and other contracts. We have 158 million covered lives where Myomo is the in-network provider. We've seen with that is where we're the in-network provider, we're getting much higher authorization rates than having to go through the typical pre-authorization process with some of the other Medicare Advantage plans. It's opened up our market significantly and reduced some of the friction a patient might have in trying to get our device.
Okay, great. Thank you, Paul. A couple questions for David Henry, no relation. David, could you talk about your current revenue guidance, and how we should think about the break-even run rate?
Sure. Our guidance for second quarter was in the range of $10.3 million, excuse me, to $10.8 million. That was on top of first quarter's $10.1 million. Our full year guidance, which we reaffirmed in our last call, which is for revenue of $43 million-$46 million. In terms of the break-even point, recall back at our Analyst Day, we talked about a break-even point of around $17 million-$18 million a quarter in revenue. Since that time, we did a headcount reduction last July. We reorganized things, particularly in our commercial operations group. We're reorienting towards having people deal with these recurring patient sources. We're lowering the growth of advertising. Our intention is to keep advertising spending flat this year.
So you add those things all together, we're bringing down our break-even revenue point, and I would say that's around $15 million a quarter and about $60 million on a full year basis.
When I think about your revenues, it can be a little chunky. There's always different things that changing make one quarter grow faster than the other. How do you think about the organic revenue growth rate? What is the business growing at at sort of a steady state?
I think in terms of this year, like I said, I view this as a transition year, both Paul and I do, because we are trying to reorient the business toward these recurring patient sources, not relying so much on advertising-driven revenues. The reason we're doing that is because scaling the business and generating operating leverage is easier when more of our revenues are coming from these recurring patient sources, because we're not spending advertising dollars to try to generate these patients. Also, the prevalence population, it's a harder population to try to provide a device for than that incidence population, the people that are closer to the onset of their stroke because they don't have all those contraindications, spasticity and things that we often see in the prevalence population of people that are years at post-stroke when they're looking for the device.
This year's is this transition period, but as Paul says, as we get to a point where the referrals and the O&P channel in particular are larger portions of our revenue, we get these recurring revenue streams. If you have a few hundred rehab clinics, for example, that are referring a few patients a year, two, three patients a year, you can see how it could add up very quickly and generate really meaningful revenue growth. We think that 2027 should be, assuming that that program continues as it is going, we think the opportunity exists to see a higher revenue growth rate in 2027.
Okay, great. Thank you, David. Paul, one of these recurring customer sources has been the O&P channel. Can you tell us a little bit about that, and how much could that increase your business? As well, what metrics should investors focus on?
We launched this initiative with the O&P channel last year when we introduced the new version of our product called the MyoPro 2x, plus we had the Medicare reimbursement in place, which were important for the O&P channel to start to adopt this. We've conducted clinical training sessions of the certified prosthetist orthotist, CPOs, around the country. We've seen revenues almost double year-over-year on a quarterly basis, I see a growing pipeline. We have more and more of these clinical locations getting on board with the MyoPro. We're working with some of the national providers such as Hanger Clinic, which has 900 locations across the United States. Equal, ForMotion, which is part of Embla Medical, Össur. You've got Ottobock Care has 50 locations around the United States. We just made an announcement last week that we're doing a national rollout of the MyoPro with them.
I think what you'll see is increasing size of the pipeline, as well as increasing number of locations and orders over time through this O&P channel.
Okay, great. We're starting to wrap up the fireside chat. We've just got a couple minutes left. I'd like to close the loop for investors who can pick among a lot of different stocks, and one of the things they all like to know is what are the catalysts over the next 6 to 18 months? Paul or David, if you want to chime in, what should we focus on?
I announced that we have four success pillars during this go-to-market transition year. One is that shift to recurring revenue sources, and we've already seen that double within a year. Increased market access with more contracts with payers. That's increased significantly, which is increasing our authorization rate for patients. We said we're going to demonstrate operating leverage, as David's talking about. We've reduced our break-even point. We expect improvements in our gross margin and our operating revenues to grow faster than expenses. We continue to lead with product development. We've got a new RCT underway for more clinical research. You put all those together, and it really sets us up for that inflection point as we build up that base of these recurring patient sources over time.
Okay, great. David, we like to close the loop with the balance sheet. Could you talk about your current cash balance as well as the burn rate and how long of a runway that gives the company?
Yeah. Our cash balance at the end of the first quarter was about $15.8 million. We burned about $2.7 million in the quarter, which was down year-over-year. Our objective for 2026 is to cut the annual burn rate in half. Last year, we burned just under $18 million, so somewhere around $9 million or so of burn is our target for 2026. With $2.7 million having been burned in the first quarter, that would suggest maybe $6.3 million or so of burn for the rest of the year. Our burn is typically higher in the first half of the year and then lower in the second half of the year, particularly because we make incentive payments in the second quarter timeframe. That usually results, as I said, in a higher burn, and then that comes back down in the second half.
Our focus is on generating operating leverage and reducing the cash burn, and then continuing to reduce the cash burn as we move into 2027.
Okay. Thank you, David. We are out of time. I would say to investors, if you can get a chance to see a MyoPro demonstration, it's quite an impressive device doing a lot of great things for patients. It's good to see the company having this success. Paul, David, thank you very much for presenting, and we look forward to watching the company's progress.