Perfect. We're going to get going here. Welcome to the 2025 Piper Sandler Healthcare Conference. My name is Adam Maeder, and I'm one of the Med Tech analysts here at Piper Sandler. Very pleased to introduce the management team from Tactile Medical. With us, we have Sheri Dodd, CEO, and Elaine Birkemeyer, CFO. Thank you so much for joining us.
Thank you, Adam.
I wanted to start with a big picture question here on Q3, which was a great print all the way around, beats and raises, both for the lymphedema and airway clearance businesses. Margin performance was good too. Sheri, just high level, what's worked well since you've taken over? I guess, you know, on the other side of things, what are some areas that you're still looking to improve?
Yeah, we were really pleased with our last report out, and they're expecting more. It's a nice position to be. If I think about what's working well, I just want to remind everyone that things that we have going for us is first the market. It is an under-penetrated market, both for the chronic swelling business as well as for that chronic inflammatory lung disease business, or as we think about lymphedema and our bronchiectasis airway clearance business. Bad for patients, great for us, right? It's untapped and it's been that way for a while. We also have really healthy business fundamentals. When you think about we're growing, we're profitable, we continue to expand our margin. Even though we didn't take our margins, EBITDA, up this year, we've already been able to show some leverage.
As we reported out, we've got cash, we retired our debt, and we funded some stock buybacks. In a very healthy position from a business fundamental standpoint. I think where we're really seeing everything shine is just strategy and execution coming together. It's a strategy we've been talking about for the past couple of quarters. We're focusing on improving access to care, we're focused on product innovation, and we're focused on lifetime value. What we've seen is those investments are translating into business performance, and we continue, and that's going to continue, and I don't see any changes happening there. In terms of what we're working on, I mean, time to value is always something that I know the street's looking for. You made this investment, when is the return going to happen? That's not an unexpected ask.
We're always looking for ways that we can show that. We're on this transformation journey, not just transformation for the purposes of transforming, we're transforming for scale, transforming for our future. That does take time. It's like laying the tracks of the railroad, and we're not going to go backwards, but we have to continue to invest so we can get to the other side to a more streamlined, seamless, scalable platform. Those aren't headwinds necessarily, they're just business things that we need to do, and I always wanted to go faster, but we also have to do it in a smart way.
Sure. Great color. Maybe just a follow-up, CRM implementation, I think that was earlier this year. What is the status of that? Is that kind of fully integrated? Is that behind us? Salesforce, because you've made a lot of progress in terms of rebuilding the Salesforce. I think you're well ahead of kind of expectations at this point. Maybe just touch on those two things.
Sure. For the CRM, we launched in February, and that was a hard cutover. Before, we did not really have a CRM tool, a little bit homegrown, and we moved over to Salesforce. We are embracing that not just as a documentation tool, but as a tool that the sales team uses every single day. We have added data and analytics on top of that. It actually tells them, we added market data, it tells them, in this provider group, they are diagnosing lymphedema, and yet you are not having a lot of sales coming through. Competitive potential. The teams use that, and we inspect how often they go into it, what they are documenting in terms of their visits. It is not just a checkbox, we have one.
On the Salesforce, just to recall that we did, I think, the hard thing, and a lot of things companies do not like to do, which is assess your current sales organization and decide, are people where they need to be based on the business, and do you have the right types of people, role clarity for what you want to get done? We did a reset, and it was a hard reset, and it was a difficult one because it did hurt us in Q1. We did that reset, we consolidated some territories, we have a playbook and a map of exactly where do we need account management and where do we need product specialists. We did a great job of hiring. We actually filled those positions faster than we had expected.
We set a Q2 target for sales rep and an end-of-year target for more than 300, and we are more than 300. It happened a little bit faster than we had originally thought, but it was great. We wanted more of those sales reps in their chair, out on the street as early as possible to drive revenue.
Perfect. I know the rep productivity has been really good. Maybe we'll come back to that in the conversation. As we think about headcount for 2026, what does that look like? Will you continue to add heads, or are you at a kind of a good level?
I think we're in the zip code of where we need to be. Certainly, if any of our territories split, we'll do the appropriate headcount, but we have a map of what it is that we need to do. There may be plus a few, but we've essentially done our big hiring, and we're seeing the product, the returns on that investment in terms of revenue per territory, referrals that are coming per territory. We are right in the ballpark of where we want to be.
Perfect. Let's touch on reimbursement. You talked about some of the different kind of fundamentals, and I think you called them tail ends, hopefully I'm not putting words in your mouth. The LCD was retired. We now have an NCD. Feels like that's less restrictive. I think you guys talked about kind of finally having your arms wrapped around it. Is it a tailwind going forward? Is it a tailwind in Q4, or how do we think about the reimbursement change for your business?
Yep. I'll share this with Elaine. It's actually been about a year now since the LCD was retired. Just as a reminder, CMS announced that they were going to retire the LCD, they were going to go to the NCD, which was already in place, and then they did not provide any training, any insight until January. Had some training in January, February, they reversed some of their decisions. It was a bit rocky in the beginning, and we learned a lesson that just because it's written one way on paper, you have to really do the inspection to make sure you understand how it'll be interpreted. We have understood a lot more now as we have gone through.
I think it went from a headwind to a neutral, and then it will start to become a tailwind now that we understand that they really are going to take the position, this is what they mean by medical oversight, this is what they mean by, I'm trying to think of something else that they're so specific about.
Measurement.
Measurement. This is what they mean by that. Yeah, we'll see more of that as a tailwind. We only recently started to expand and lean into that policy more recently, because we wanted to not get bit. We're expecting to see that a little bit in Q4, mostly in. That tailwind is really having direct access to the advanced pump, like our Flexitouch product, which has been really difficult for those patients who need it. They had to do a trial of the basic pump for at least 30 days to show failure, that it did not resolve their symptoms before they could progress, and many patients just never made it fully through that journey.
That is really, I think, the big win for patients, as well as we have got a great advanced pump product, so we are excited to have that help be a tailwind for that part of the business.
Sure. And higher ASP as well.
Sure. Yep.
Okay. I think we've talked about Salesforce, we've talked about kind of end market and reimbursement. Maybe we can spend a little bit of time on the product portfolio. I guess Nimbl, so we're talking basic pumps here for the audience. I think you've had that for several quarters. What's the feedback been like for that product? How much more runway is there? On the advanced pump side, Flexitouch Plus, do we have an innovation kind of roadmap behind that? Just tell us maybe what's kind of in the works or coming down the pike.
Sure. Nimbl has been incredibly successful. We launched originally around this time last year of the upper extremity, then we did the full launch of the lower extremity in the first quarter of this calendar year. It has been incredibly successful. It has grown faster than the market growth. We know that is both growing the market as well as taking share. Just as a reminder, in that category, it is a larger category, and while we had our Entre pump and had been there for quite a while, it was getting crowded, and certainly we had strong share, but we did not have dominant share. Since we launched Nimbl, we are now market leader in both the basic pump category as well as the advanced pump category. It is not just growing the market, but it also was in taking share.
We're really pleased with that adoption. When we couple that up with Parachute ePrescribing, it was a seamless experience for the physicians as well as the patient could see themselves in it. They can travel with it. They can move around in different places in their home to do their therapy, where Entre Plus wasn't as Nimbl, and so therefore it has been really wildly successful. As it relates to Flexitouch, definitely what is going to be our next generation advanced pump, we'll be sharing more of that when we have our Q4 call, sorry, in Q1 of next year. We'll talk more about the roadmap, but we are actively working on what is the update to that product. We want to be innovating in both the basic pump category, happy with Nimbl, and we'll continue to fine-tune that.
Our next big swing is to really drive innovation in the advanced pump.
Perfect. Indications. Head and neck, the company's been talking about this for many years now, but we're getting closer and closer, it feels like. I think you had the six-month data in October, which was positive. Where do we go from here? What are next steps in terms of conversations with payers? How do you reach these patients? Just kind of give us some framework to kind of go off of.
Sure. Just as a reminder, we've had the indication for head and neck, so indication hasn't been the problem. It's been the insurance coverage for head and neck. The garment, everything has been for a while. The data has really helped bring more awareness, the fact that the patients have an option. We have to work the reimbursement side, of course. Just update on the clinical trial. Actually, as of, I think the day before Thanksgiving, we submitted the six-month manuscript into a journal for review for publication.
I'm really pleased that this year we will have submitted our two-month data as well as our six-month data, as well as we've had the poster presentations of both two and six months, which show that patients who receive Flexitouch immediately versus having to fail manual lymphatic kind of drainage, when you put them side to side, both patients do very well, but the Flexitouch population does slightly better in some areas. It is a great alternative to manual lymphatic drainage. There simply are not enough lymphatic therapists out there to see all these patients. As a reminder, the head and neck cancer patient, 90% likely after you've had head and neck cancer therapy, you are going to have lymphedema. That lymphedema is going to inhibit your ability to swallow, speak, and range of motion. It has an incredible quality of life detriment.
By having the actual product, that improvement in reducing swelling is allowing people to come off of trach tubes, be able to swallow, be able to range of motion. Huge benefit. The challenge is that the NCD for the Medicare population allows this, because there is no basic pump that covers this area of the body, so they need to get it. It's the commercial payers that currently have experimental investigational designation coverage for the therapy. That's what we're working on. We've had progress with many payers, just making them aware that their current policy has E&I, and we're continuing to drive that both with the data and just with awareness that their policy is not even consistent with the NCD. Even with the absence of clinical data, they are having a more restrictive policy on NCD. Anything else?
No, I would just say that we've been really happy with the reception we're getting from them, that they're listening but they're waiting for this data. We are encouraged that with that information, we'll start to see some progress for patients there. We're hoping to start to see more progress there next year.
They're on their own timeline, unfortunately, when they do their coverage reviews. We're trying to ask for off-cycle reviews. In many cases, they're willing for that. We're trying to drive it with patient advocacy, clinician advocacy, and data.
Sure. You talked about, Sheri, the six-month data. The manuscript was submitted just before Thanksgiving. Publication Q1, Q2 of next year?
We're hoping for Q1. That's what my expectation is. You have to go back and forth on some of the revisions, but it was a very strong submission. My hope is that it will be in Q1 or early Q2 by the time it gets accepted and in publication.
Is that kind of a potential impetus or something that could drive the commercial payers to adopt more quickly? Is that kind of how you're thinking about it?
Yeah. I mean, definitely when you have the data and you say it's peer-reviewed and here it is published, they have a decision to do an off-cycle review or wait for their normal cycle review. Of course, we would like them to do an off-cycle review based on the strength of the data. We're not hitting them cold. We're already warming them up, letting them know that the data is coming. Many are anticipating it and waiting to hear. We're not just waiting till we have it and then running in. We're working that channel really actively.
Sure. In terms of head and neck, as you think about kind of competitive dynamics, you have the data, you have a really good product for the advanced pump. Is Tactile the primary beneficiary? Are you the only beneficiary?
We're the only beneficiary. We are the only pump that has coverage in the head and neck area. We have very strong IP in this area. There is no other pump out there that actually has the same coverage. It is 100% ours. That is why, while it could be a smaller population, 90% of them are going to have lymphedema, and we will capture 100% of that market. For those that choose to go to pump, some physicians may still want to use manual lymphatic drainage, or a patient may not want to use the pump. If they are going to have a pump, we would be the only pump available to them.
Perfect. Wanted to also just ask about the penetration of the category. It is a very under-penetrated space. You talked about that earlier, Sheri. Maybe just help educate the audience. Where is penetration today? What is being done to drive awareness of lymphedema? How do you see the penetration of the space kind of evolving going forward?
Yep. We show the iceberg slide, but if you just take lymphedema, which chronic swelling is even broader than lymphedema, but if you just look at lymphedema, there are 20 million people in the U.S. today that have lymphedema that are not yet diagnosed. Trust me, you will see them when you start looking for them. You will look at ankles, you will look at legs, you will look at individual arms and swelling in the hands, and this person will have lymphedema. Of the 20 million people with lymphedema, only 2 million of them have been diagnosed. Of the 2 million of them diagnosed, less than 10% of them are currently on medical device therapy. There is a huge opportunity here. The question is, what is getting in the way? These patients, especially if it is on the vascular side, are going through a process of elimination.
Do they have DVT? Do they have heart failure? Are they just obese? Do they have lipedema? Do they have chronic venous insufficiency? They're going through this trial of trying to figure out what it is that they don't have. Then you get to a place where, okay, now you have lymphedema. From a clinician standpoint, very rarely will you have a surgical intervention. It's like, well, what can they do for you? They could put you on a pump or send you to a lymphatic therapist. It's just a really long process. A lot of patients drop out. They just get worn out. They don't have a diagnosis. They don't know what's wrong, and they just live with suffering.
A little bit different on the oncology side, because at least on the oncology side, you would have had an intervention like radiation or surgery where there would be a probable cause of why you have lymphedema. Even in patients that come through the oncology channel, many of them have lymphedema and are not getting treated. They're just using garments and wraps. We have to create physician awareness. We have to create patient awareness. I would say a big aspect of this is also the diagnosis, unfortunately, is a clinical diagnosis. It's a visual diagnosis. If that patient isn't going back into the doctor, they can't do a visual diagnosis of the patient. They have to take the measurements. They have to look at the skin. There is a lot of work that needs to be done in this continuum on awareness.
Diagnostic would be really helpful in bringing more awareness here. We have to create the demand, and then we have to clear the reimbursement landscape as well. By the time that someone finally gets diagnosed of the 20 million to the 2 million to that 10% that's coming through, that they don't end up with their insurance denying and saying, "I'm sorry, we don't cover this." There's just a lot of work along the way. We're a market leader. We have to do that work, but we're doing it, and I know that we're going to make it more of a clear path for patients.
Okay. Perfect. I think that's a good place to stop on lymphedema. Maybe pivoting to the other part of the business, airway clearance. Your AffloVest product has been doing really well, consistently outperforming expectations this year. Maybe just talk about what's gone right this year. I think on the Q3 earnings call, you talked about bronchiectasis awareness improving. That's a hard word to say.
It is.
That might have been the first time I think I had heard those remarks from you all. Maybe just talk about kind of why the business is performing so well and just broader thoughts on the airway clearance category.
Sure. This is also a great example of just strategy and execution. Our strategy had been to partner up with the top 10 DMEs, respiratory DMEs, secure partnerships with those individuals, and then we have a great product. How do we launch that? That had been our strategy. It's an indirect play for us, of course. What we found last year was, even though we had the strategic partnerships, there was not a full alignment between the supply chain team as well as the finance team. The finance team carries on their balance sheet as capital. They have to have a plan for the 13 months of the rental. If there is not a good tie-off, then it is going to be a shock for the finance team. We worked really closely with the finance teams as well as their operations teams.
This year, all the stars were aligned. We have a great product. We have the partnerships. Many of those DMEs, we're a preferred product. Those reps have a differential compensation attached to selling AffloVest. The patients are there. Again, underserved market. That has worked incredibly well. What also has helped, I would say, is that broader awareness of the disease. There was a pharmaceutical entrant that has come in in August, launched a product for therapy for helping the inflammation aspect of bronchiectasis. There are multiple aspects of bronchiectasis: inflammation, mucus. You have to move the mucus out. That has brought more awareness. Some pharma money never hurts. Having come from pharma does not hurt. Bringing awareness of your product. That has helped just bring more disease awareness. Patients have always been there. That is just helping the lift as well.
I would put it primarily against our strategy of just great product and alignment with our top 10 DMEs who are preferring our product.
Fantastic. A couple of follow-ups there. It certainly sounds like you're on the offensive taking market share. Just remind us, underlying market growth. How do we think about the growth of this category? Is it healthy double digits going forward? Just any color of view there.
Yeah. We recently talked about how fast the market was growing. We said that it was growing at about 10%. In the advanced pump category, kind of we are the market. It kind of does not grow in the absence of us growing it. We think that there is opportunity, especially with the NCD, of helping that aspect of the business. Of course, it is a smaller component of those that are going to advanced pump than the basic pump.
Sorry. On the AffloVest side.
Oh, AffloVest. I'm sorry. AffloVest.
No, no problem.
I switched on you. On the AffloVest side, we do believe that that is a very healthy business. It's harder to get the data in this area, but we believe that we're not going to see probably this type of growth next year, but certainly we believe that it should be in that double digit. It should be higher than a single digit growth, for sure. We don't see that changing.
Maybe, I guess, tying all that together, you think both categories growing double digits? Is that lymphedema and airway clearance?
Yeah, we do. There is no reason to think that if the business is growing double digits, and this is not a question you asked, but I'll offer it, then there is no reason why we should not also be growing at the rate of the market as well. In areas where we are the market, the more we can put towards growing that market, we will receive the direct benefit of that.
Good color there. A couple more on AffloVest before we hit on the P&L. You have a next-generation product coming down the pike. I think you've already submitted for that with FDA. Anything you can share at this point in time regarding features, enhancements, improvements, and presumably that hits in 2026?
Yes. That should hit in 2026. With the government shutdown, I do not know. I cannot say anything around the timing. The benefits of the product are we were already the lightest vest as well as the only one that is portable. It is battery. The patient can move around with it. It is even lighter. We changed some of the sizing so it is more adjustable so it could fit a bit better without having as many SKUs on the sizing. The aspect that we did not have that some of our competitors had was connectivity, the Bluetooth connectivity. Not everyone is going to use it, but certainly it is a good thing to have. When we launch this next-generation vest, we will be the lightest, still the only portable, and then Bluetooth connectivity. We definitely are in a market leadership position with that product.
Perfect. Let's spend the last couple of minutes on the financials. I have to ask this, Elaine. 2026, I have consensus revenue, $347 million. That's a touch under, I think, 9% growth year- over- year. I just heard some of the commentary around end markets. Any reaction to that figure or broader comments you want to provide around 2026?
I think when you think about, obviously, that number and that growth rate, it's clearly aligning with where Sheri talked about the market growth at that kind of 10%. Again, us not seeing a reason why we wouldn't grow, at least that there with the market. Obviously, can't give you any specifics at this point. We'll share much more of that next year. Hopefully, that puts a little bit of context, just connecting what Sheri said and that guidance there.
Perfect. Let's talk about leverage. The company was showing really good leverage the past couple of years. 2025, strategically, was an investment year for the company. Maybe taking a little bit of a pause there from a leverage standpoint. 2026, is it another investment year, or do we kind of get back to the cadence of driving good leverage on the P&L?
I would say it's a both. It is going to be investment, and we are going to have leverage. The investment doesn't come all in one. While we had big investments, the Salesforce platform was a really big investment. Now we rolled out the CRM tool. We're rolling out our order operations. We've talked about the AI work that we're doing. We're continuing to make those investments. To your first question about what are we still working on, it's that transform from a more inflexible system that was designed for the business when it was smaller, and we need to move to a system that's more flexible, designed for the future of where we want to go. We will continue to see investments, but we are expecting to see continued opportunity for leverage. Less leverage probably next year than, no, for sure.
It'll be less leverage next year than we expect to have in 2027. I would definitely call next year another investment year with leverage.
Good color there. Thank you. I guess just a bigger picture question around capital allocation as I see the clock winding down here. I think you've recently paid down some debt. You also have the share repurchase program. Use as a capital going forward. How do we think about that?
Yeah. I think the good news is we're in a very different position than we were even when I was here a couple of years ago. It's given us a lot of good optionality here. Paying down the debt just made sense. We still have great debt capacity if needed for opportunities in the future. I think the share repurchase has been something that's been important to us as far as making sure we're getting a good ROI on our investment. We still have sufficient capital to make sure that we are able to continue to fund internal growth as well as if there is a strategically aligned external opportunity for us to take a look at as well. We remain really open to all different options to continue to grow our business. Again, very strategically focused.
We're not looking, we've said before, to be a holding company and just sort of bring things in that are just to build revenue versus really being integrated in our core business.
Perfect. I think that's a great place to stop. I know we're out of time here, but want to say thanks again, Sheri and Elaine, for joining us.
Thank you. Thanks, Adam. Really appreciate it.
All right. Why don't we get started? I'm Jason Bednar. I cover Med Tech here at Piper. Next fireside chat is with KORU Medical. Very happy to have with us today, CEO Linda Tharby and CFO Tom Adams. Thanks a lot for being here, both of you. Really appreciate it. Glad to have you back at the conference. We'll get right into Q&A. There's a lot of progress that's been made at KORU this year. You've executed on a number of strategic priorities. You made me look completely wrong with my rating. Congrats to you on that. Can you talk about what's gone right, Linda? What do you see as the major successes from 2025 that you can build upon when you look forward?
Yeah. Thank you, Jason, for the compliment.
We do not like proving you wrong, but in this case, I am happy with that. Talking about 2025, obviously, what we have been heading towards at KORU for several years now is a strategy that takes our growth level above that 20% level. Year- to- date, growing above 20%, driven by a few key factors. I would say the biggest one that has really propelled our growth this year has been our international expansion. We have more than doubled our international business this year. That is on the strength of prefill expansion, which is a technology where KORU was one of the first to have that device platform approved with our pump. We are able to see that. We converted our first market in Europe, and we see many more ahead of us as we move forward. Great opportunity.
We took our share position from about 10 to 20, so lots of legroom there. Second has been our U.S. business, where we have a much stronger share position. We've just been outperforming the market. We've seen the market come back. The strongest patient diagnosis, primary immune deficiency, is our biggest patient population. We're seeing that population grow 8%-10%, and our U.S. business is growing about 10%-15%. That has been a huge lever for us this year. I would say, as we look ahead, what's to come? It's exciting. We're above 20% without these additional milestones. One is four new drugs that we anticipate adding to our label. More drugs flowing through our pumps, more patients using our system. We anticipate doing that over the course of early 2026 into mid-2026.
Finally, we released the results of our pilot study in oncology clinics where nurses preferred our platform 97% of the time, completed our U.S. sites, and anticipate launching into the market in the second half of 2026 with a 510(k) submission expected at the end of this year. A lot of things are working really well: international expansion, U.S. patient diagnosis, and the new drugs coming onto the label. Excited for what we have built and what is to come.
Yeah. You kind of preempted my next question, but I'll ask it anyways and maybe summarize what you said. I was going to ask, what's going to make for a successful 2026? You were just hitting on some of the new drugs coming on label and launching those, that moving into your U.S. business. Sounds like more international expansion and then just continuing to execute in the U.S. Is there anything that I guess I'm missing in that, or is that maybe a good summary of how you see next year unfolding?
Yeah. I would say it's a good summary, those three key points that we hit. The international expansion, the U.S. expansion, the new drugs. The only other one I would say is we've got.
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