Q4 2022 Myomo Inc Earnings Call
Good morning, and welcome to the Myanmar, Inc, fourth quarter and full year 2022 earnings conference call.
All participants will be in listen only mode should you need assistance. Please signal corporate expenses My personal star key followed by zero.
After today's presentation there'll be an opportunity to ask questions.
To ask a question you May press Star then one of your telephone keypad.
To withdraw your question. Please press Star then two.
Nothing that is being recorded.
Now ill turn the conference over to Kim <unk>.
Please go ahead.
Thank you operator, and good morning, everyone. This is Kim Collins with L. E K welcomed into Miami fourth quarter 2022 conference call.
Earlier today, Miami issued a news release announcing financial results for the three months and year ended December 31st 2022, if you would like to be added to the company's email distribution list to receive future announcement. Please register on the Companys website at my Jamar Dot com or call L. O J in New York at two one.
283837, and 77 and speak with Carolyn Curran.
With me on today's call from Myanmar, Paul go down as Chief Executive Officer, and Dave Henry Chief Financial Officer.
Before we begin I'd like to caution listeners that statements made during this conference call by management other than historical facts are forward looking statements. The words anticipate believe estimate expect intend guidance outlook confidence target project and other similar expressions are typically used to.
Amplify such forward looking statements.
These forward looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties and other factors that may affect my alma business financial condition and operating results.
These and additional risks uncertainties and other factors discussed in Myanmar filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31st 2022 which is expected to be filed today and subsequent filings.
Actual outcomes and results may differ materially from what is expressed in or implied by these forward looking statements.
Except as required by law <unk> undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this call.
It is now my pleasure to turn the call over to Miami CEO , Paul go down that path. Please go ahead.
Thanks, Kim and good morning, everyone and thanks for joining us.
I'll start my remarks with a brief review of our fourth quarter results then discuss how the changes we implemented over the past year have had a positive impact on the business followed by a look forward to the opportunities in 2023.
Revenues in Q4, 2022 were 4 million, which is in line with our expert lactation and during the quarter. We added nearly 400, new Micropro candidate from our pipeline of 75% increase compared with the fourth quarter of 2021, despite marketing competition from the elections in the half.
Today's.
We ended the year with a record number of patients in the pipeline over 1100, 50, who are interested in obtaining micropro and who have cleared our medical screening neither I. They are appropriate candidates for the device.
Early in 2022, we shifted some of our advertising dollars from social media to TV for the first time.
I'm pleased to report that this approach educating patients and their families about the bio pro is working.
Our call Center in Texas processing these inquiries.
Cost per pipeline that has gone down by about 50% from its peak back in 2021.
Product revenues for 2022 grew by 5%, which reflected the size of the pipeline going into the year.
As we stated in previous calls the pipeline is a good leading indicator of future revenue.
We had challenges growing the pipeline back in 2021 due to apples privacy changes experienced increased cost of marketing as the pandemic was waning and more consumer oriented companies restarted advertising and social media.
Our overall pipeline was up 43% at the end of 2022, reflecting this new media mix.
And at the end of the year, we completed a comprehensive review of our bio pro insurance reimbursement and we made the decision only to serve patients who had health insurance plans with a history of covering the cost of the bioprocess.
As you May recall, we had put in the effort to win Micropro cases, with new Payors and while we had some success the resources to do so just didn't justify the results of.
Of revenue created from those efforts.
So in January of this year, we reduced our workforce related to these reimbursement activities.
Since focused on patient cases, with payers, who have recognized the value of the micropro for their beneficiaries.
We also adjusted our patient pipeline and informed several hundred candidates that we are not going to pursue reimbursement for them at this time.
That brought down the pipeline to 794 candidates with good insurance as of December 31, 2022.
In 2022, we generated authorizations and orders for approximately 10% to 15% of the patients.
Starting pipeline in any given quarter.
Assuming the reimbursement landscape does not change materially we expect a higher authorization rate in 2023, when we compare the quality of the pipeline at this time with the payer mix a year ago, our adjusted pipeline is actually up 50% year over year.
As a result of the increased number of high caliber patients in the pipeline, we expect to grow product revenues at a greater rate than we achieved in 2022 had.
To do so with little growth in head count or operating expenses.
We are continuing to serve patients with certain Medicare advantage plans, which represents a large portion of our patient population and the good news here is that more seniors are opting for Medicare advantage plans over traditional Medicare in fact, it's now increased to 50% of all Medicare eligible beneficiaries in patients with Medicare advantage plans.
<unk> represented 60% of our product revenues in 2022.
Over the past year, we made good progress with our efforts to obtain coverage where traditional Medicare part b patients back in June we presented our case for coverage of the Micropro is embrace.
The CMS public hearing.
Fall, we were advised to meet with the do you mean, Mac medical directors and submit Myope proclaims for payments under the individual consideration rules in our hick picks coach.
We expect to meet with the D V Mac medical directors in the near future to review the newest research on patient success with my approach, including Medicare age beneficiaries. Since this is an important consideration for CMS.
Within a few months, we should understand whether Medicare part b patients will be eligible for a mile problem under the current coding guidelines.
On a parallel path CMS announced that it is undertaking a new rulemaking process for the brace benefit category, including newer technologies, which we see as a very good sign that CMS recognizes the value that powered braces like tomorrow pro can offer to paralyzed individuals.
Importantly, although we move patients from our pipeline, who didn't have reliable insurance coverage. These patients and those with Medicare part D coverage may be in a better position to receive of microprobe should see them start paying the claims that we submit and achieve the goal of more equitable access to the biofuel by seniors who have Medicare part D insurance.
On the international front, we've made significant reimbursement progress the German social court has ruled that the mile pro is reasonable and necessary for patients covered by statutory health insurance companies and further in Australia, a patient won the first approval the micropro by the National disability insurance scheme, which opens the door to few.
Sure my elbow deliveries in that country.
As to our joint venture in China. There has been little progress Covid has had a severe impact on the country's since restrictions were lifted in the fall and where touch with our partner to determine when operations can get started there, but we'll keep you posted on this situation as things move forward.
Now I'll turn the call over to Dave trying to read my almost CFO for more detailed discussion of our financial results and an update on our banking relationships, including Silicon Valley Bank Dave.
Thank you Paul and good morning, everyone.
Let me start with the.
My remarks, with a review of our fourth quarter financial results.
Revenue for the fourth quarter of 2022, which was comprised solely of product revenue was 4 million. This was up slightly from the prior year quarter and was up 2% over the third quarter of 2022.
Sequential growth was driven by a higher number of revenue units offset by a lower average selling price or ASP.
As a percentage of revenues from direct billing decreased to 73% in the fourth quarter compared with 77% in the third quarter.
This was due in part to a record VA channel revenues, which comprised 11% of revenue in the fourth quarter.
Recall that we anticipated this channel shift during our third quarter call.
We recognized revenue on 101 mile CRO units in the fourth quarter of 2022 down 6% from the same period, a year ago and up from 87 units in the third quarter.
Our record VA revenue resulted in a sequential 12% decline in asps to approximately $40000 in the fourth quarter.
International sales were 11% of revenue in the quarter with the remainder from the U S. So in Pizza U S O N P channel.
Backlog, which represents insurance authorizations in orders received but not yet converted to revenue was 164 units at quarter end up 6% compared with 154 units at the end of 2021.
Gross margin for the fourth quarter of 2022 was 65% compared with 77, 4% for the fourth quarter of 2021.
Decrease was driven by higher product costs due to continuing inflationary pressures, partially offset by a higher ASP.
Operating expenses for the fourth quarter of 2022 were $4 9 million a decrease of 17% compared with the fourth quarter of 2021, driven primarily by lower product development expenses incentive compensation and advertising costs.
Advertising cost of $1 million decreased 3% over the fourth quarter of 2021, and we're consistent with the third quarter.
Our cost per pipeline add increased sequentially to $2665 in the fourth quarter, but was down 45% compared with the fourth quarter of 2021 as the number of pipeline ads was up 75% year over year.
Recall that we expected a lower sequential number of pipeline adds in the fourth quarter.
Number of pipeline adds did decreased 8% sequentially to 387 in the fourth quarter.
Very pleased with our results versus the prior year.
As Paul mentioned, we resized our pipeline at the beginning of 2023 to focus only on patients with insurers with reimbursable mile problem in the past.
Out of the 387 pipeline additions in total 294 patients represented pipeline additions known payers in the fourth quarter of 2022.
This compares to an adjusted number of 160 in the fourth quarter of 2021, an increase of 84%.
Restated for that besides pipeline cost per pipeline add in the fourth quarter of 2022 was approximately $3500 compared with approximately $6600 in the fourth quarter of 2021.
Operating loss for the fourth quarter of 2022 was $2 2 million. This has improved from an operating loss of $2 7 million for the fourth quarter of 2021, and an operating loss of $2 8 million for the third quarter of 2022.
Net loss attributable to common stockholders for the fourth quarter of 2022 was $2 2 million or 29 cents per share compared with net loss attributable to common stockholders of $3 4 million or <unk> 52 per share for the fourth quarter of 2021.
Net loss available to common stockholders for the 2021 fourth quarter and full year includes a deemed dividend on the discounting and repricing of certain warrants about $600000.
Adjusted EBITDA.
For the fourth quarter of 2022 was a negative $1 9 million compared with a negative $2 4 million for the fourth quarter of 2021.
Hitting our full year financial results revenue for 2022 was $15 6 million up 12% compared with 2021 exclude.
Excluding license revenue of $1 million in 2022 product revenue of $14 6 million increased 5% compared with 2021.
Gross margin in 2022 was 65, 9%.
Paired with 74, 4% in 2021.
As I mentioned earlier inflationary cost increases impacted our 2022 gross margin.
Operating expenses in 2022 were $20 9 million, an increase of 2% compared with 2021.
Operating loss for 2022 was $10 7 million compared with an operating loss of $10 3 million in 2021.
Net loss attributable to common stockholders for 2022 was $10 7 million or $1 52 per share compared with a net loss attributable to common stockholders of $11 million or $1 89 per share for 2021.
Adjusted EBITDA was negative $9 3 million for 2022, compared with a negative $9 million for 2021.
Turning briefly to our balance sheet cash and cash equivalents as of December 31, 2022 for $5 3 million.
Cash used in operating activities was $2 5 million for the fourth quarter of 2022 and was $10 2 million for the full year 2022.
In January 2023, we completed an equity offering for an aggregate of 20 million shares of common stock and pre funded warrants net proceeds from the offering were approximately $5 7 million.
Pro forma for the offering we entered 2023 with approximately $11 million in cash.
Our objective is to make this cash last as long as possible.
CNS in the Dnb mass time to provide some clarity on coverage and reimbursement.
That is the major growth catalyst for the company.
We're executing on our plans to reduce the burn rate, including the reduction in force. We completed in January that action combined combined with other planned actions is expected to reduce 2023 expenses by $2 million compared with 2022.
Finally, the FDIC closed Silicon Valley Bank on March 10, 2023, our commercial banking was conducted through Silicon Valley Bank.
Last night, the FDIC announced that all depositors have access to all of their funds today.
Working expeditiously to open new bank accounts, we'd like to thank the banks, we've been in contact with them for moving so quickly to get new accounts established.
Looking ahead, given our backlog entering the first quarter and our progress quarter to date, we're on track to grow product revenue between 15, and 20% compared with the first quarter of 2022.
So total revenue is expected to be lower due to the partial payment of the China JV license fees last year.
With the growth in the 2022 with the growth in the patient pipeline in 2022, we believe that 2023 product revenue growth of between 20% and 30% is attainable.
With that financial overview ill turn the call back to Paul.
Thanks, Dave.
You may have heard our key themes for this year are increased operational efficiency and lower cash burn.
I've described how we fine tuned our marketing strategy to generate a record number of candidates and our patient pipeline.
We've done so at a lower cost per candidates.
Trading on the highest yield patients with the right insurance coverage and we expect to have a year of record revenues, while we're able to reduce our head count at the beginning of the year. These actions in total should enable us to reduce our cash utilization as these efficiencies kick in.
So with that business and financial review, we're now ready to take your questions operator.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you're using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
And before we take the first question I wanted to mention that Dave Henry is representing myeloma at the 35th annual Roth Conference, which started today condition. Both of US are available for virtual and in person Investor meeting. So please contact <unk> Investor Relations decided at the time.
Okay, operator, we're ready for the first question.
Our first question will come from Jim Sidoti with Sidoti and co.
You May now go ahead.
Hi, Good morning, Thank you for taking the questions first one on revenue.
It seems like the key.
The key catalyst for revenue will get well.
We'll be getting some.
Some clarity from CMS.
What things could see you most do that would really help drive the revenue.
Well the best thing you do is right now start paying claims were going to be filing a few claims here.
Meet with the C D E and back medical directors do justify their payment under the individual consideration and that would enable us to then to start serving other medically qualified part b patients.
And then if we can get a correct coding guidelines published.
And from CMS.
Putting us into the brace category with a lump sum payments being issued.
Rates clarity.
Four of patients that they can get access to this end it plus it.
Reopens, the Oh, two channel for us because then they'll be confidence in providing the mile pro to their patients knowing that they can get reimbursed for medically qualified patients that meet the criteria from part B Medicare.
Okay. So it sounds like you could begin right away due to.
While claims with CMS for the first part as far as the coding guidelines go I think I heard you say that it.
Should happen in the next few months do you have any meeting scheduled with them prior to that.
So we've asked for meeting with the D V Max Medical directors.
And so we're planning to have that hopefully within the next month or so.
As far as timing on any correct coding guidelines, that's entirely up to them. So Jim I really can't forecast when they might do sell or if they would do so.
Got it and then on the expense side it looks like both R&D and SG&A came down in the fourth quarter.
And then assuming you.
As a result of your cost cutting initiatives that you've implemented should we see that trend continue should we see those.
It was too expensive I would continue to come down in Q1 of 2023.
Yeah Yeah.
Fourth quarter was a bit unusual in terms of blah blah blah blah blah.
Susan.
In the.
The incentive compensation was lower you know about that.
Bonus payouts for the company.
For the company's employees are going to be down.
Down.
This year.
Because revenues and the operating results for Werent, where we wanted them to be so.
So we reverse some bonus accrual in the fourth quarter as a result of that we also had a oh.
Shutdown for all nonessential employees at the end of the year that that reduced the vacation liability, which also.
The operating expenses.
Those things aren't going to recur.
As we move into the first quarter. So I would so I would expect that our.
More realistic annualized rate is probably you know between.
Five five to $5 5 million a quarter somewhere in that ballpark.
With the expenses.
Got it and then just to confirm share count as a result of the offering.
Around 27, and a half million dollars is that a good number for 2023.
Yeah.
It's about right now.
As of the beginning of March.
From when we filed the 10-K.
About $27 million or $20 9 million shares somewhere in that ballpark. There were $13 2 million shares issued of common in the offering.
About 6.8 million pre funded warrants.
So.
Pre funded warrants as of as of now they have done of the Capex.
Size, yet so the common shares outstanding were about 20 points.
You say 29, or so with that but on a fully diluted basis, including the pre funded warrants you know add at $6 8 million to those.
Got it alright, thank you.
Our next question will come from Edward Woo with <unk> capital.
May now go ahead.
Yeah. Thanks for taking my question I just want to have a clarifying question do you see that revenues product revenues this quarter will be 15% to 20% higher but for the year will be 20%, 30% higher.
That's correct, but remember.
Our first quarter a year ago had.
1 million of license revenue, so when we say, 10% to 15% higher what were you referring to the product revenue.
The product revenue last year was about.
When you say $2 $8 million to $9 million.
And so we would be.
Yeah.
The increase would apply to that number not the full quarter revenue that includes the license fee.
Great and then my next question would be on you know you mentioned that gross margins were impacted by inflation and higher product costs. This year are you still seeing the same inflation impacting this year and are you able to raise your prices to be able to protect your margin.
Yes, I think.
Comparable is on gross margin should improve.
In 2023.
But Ah Ah.
The cost pressures haven't abated, I would say, but that they haven't they don't continue to increase at the rate that they did.
In 2022.
And we actually have we have.
You know raise to raise prices, where we can remember insurers yeah, we can.
We can raise our usual and customary fees will ensure but they're only going to pay what they pay.
And.
And we're trying to you know, we're looking at that where we can't or some other non.
The non insurance payers in the other channels.
Just see if you know what we can do to try to increase prices. So yes actions like that are already in progress.
Great well, thanks for answering my questions and I wish you guys. Good luck. Thank you alright. Thank you.
Thanks, Ed.
Our next question will come from Ben Hayner with Alliance Global partners.
No go ahead.
Good morning, guys. Thanks for taking my questions.
First off for me on the besides pipeline you gave a handful of figures in terms of what it would be.
Re size versus the prior methodology.
Counting in those patients and then also the.
The additions.
Yeah, Youre kind of in the range of 65 to maybe 75% of whatever the prior numbers were.
Right.
Yes, the resize number does that sound about right. If we're just thinking about kind of historically, how those numbers would've track.
Yes, we will have more information for you in the next quarter.
Those results in terms of the comparable for the for the other quarters of the year.
Just to reiterate for for the fourth quarter of this year.
Out of the.
Part of the full pipeline of $11 50 377.
794.
Was the.
The number of the restated number if you will for the for the ending of fourth quarter 2022 that compares to $5 28 at the end of last year and then.
Just I gave you some changes some.
Some breakdown of the additions out of the 387 pipeline additions 294 represented additions from known payers.
Fourth quarter of 2022, and then that compares to 160 in the fourth quarter of 2021, we had about 220 or so adds in the fourth quarter of 2021.
Okay. Okay. That's helpful and then.
Presumably with the new criteria, you're going to have.
Lower drop off of the pipeline, but do you expect any impact on the.
On the backlog drop outs as well.
There'll be no in Paris.
There'll be there might be some slight impact to the backlog.
And particularly with there is a a patient that might have an insurance from one of those payers and it has been maybe old and we've been trying to work on getting payment from without success.
There could be some slight impact there but on.
On the whole though.
The impact is more on the on the pipeline, but on the backlog.
That makes sense I guess would be expected.
Just a quick clarification on the <unk>.
On the calculation for the Cogs per pipeline addition.
Under the old methodology not the.
No one payer methodology the new one.
Yeah, and I restated that or you're too so for the <unk>.
For the fourth quarter of 2022 under the <unk>.
For the 294, we added that pipeline cost per pipeline add was about $3500.
That same number for fourth quarter of 2021 was $6600.
Okay, I apologize I missed that and then lastly for me on the on the.
The kind of <unk>.
CMS strategy or it sounds like you're kind of a dual track you know to go on the deal.
Mac route, but then also hoping for the reclassification.
And then the one time payment.
I guess do you and then one of the things that we've talked about previously as the study you said.
You'll be bringing to a.
CMS and to support those those Uh huh.
Those changes that you are looking for.
All of those studies published.
So one study from the Cleveland V. A randomized controlled trial for clinic and home use has already been published last year.
Second one which is from our patient registry of patients success.
In the home environment has been written and submitted for publication and the third one is which is a retrospective study of Medicare age beneficiaries, which is very important to CMS I is being finalized this week and we expect to submit it to pump for publication here. This.
Months.
Okay.
Great well, thanks for the update guys.
Luckily CMO.
Great. Thank you very much.
Our next question will come from Jeremy Pearlman with Maxim Group you.
You May now go ahead.
Hi, Good morning, two questions number one the Medicare part B, how do you look at that opportunity versus your current opportunity of the payers. The high caliber of patients that are that you have seen coverage from insurers now what's that is that.
The incremental increase was actually a really significant well that really expand your addressable patient population.
Well with the high quality pipeline, we have now that's for near.
Near term revenue over the next year, because that's usually the conversion cycle for the part B patients.
We have to turn away many individuals who do have part D coverage, who may qualify for my Oprah So that would open up my approach to that patient population, which is important because it's about half of all Medicare beneficiaries arent part B as I mentioned earlier the other half are on Medicare.
Vantage plants, so it opens up more addressable market.
And number two.
Many insurance plans, whether their Medicare advantage or commercial players, who often followed Medicare part b lead with Medicare part B covers it more likely that our commercial plans will follow suit so that would make it easier for patients that have these other insurance plans that we made.
I'd be getting reliable coverage on to have access. So it's very significant in terms of an inflection point for the company.
Okay understood and then one more what's what do you have the average time it takes but they convert a patient once it's in the pipeline after insurance to actual convert to revenue and is there any opportunity to shorten that process.
Sure so.
We've stated in the past that the typical revenue cycle from when we get a lead to actually collecting the insurance payments and so that we can recognize revenue has typically been from nine to 12 months.
So that's why this pipeline is really a leading indicator there are things that we have done over the last couple of years to accelerate that for example, we do telehealth screening.
Usually with patients instead of having to organize it in person screening day, that's saved several weeks, we now can do.
Remote measurements of the patient's arm rather than having to do it in person.
Measurements and take a cast as in the past with our new version of the Micropro two plus so we've taken those steps and we've seen some cycle times are these loans are 30 days from when that patient.
It's interesting.
We evaluate them quickly through our telehealth screening and then they have to go to the Doctor and get their prescription we submit the notes we've seen some turnarounds as I said within 30 days. So that's our goal is always to accelerate that cycle time, so patients could get access sooner.
Okay.
Alright.
Yes, sorry.
Sorry.
Yeah. When you have part B coverage to when you start submitting to Medicare part D payers.
The reimbursement process accelerates because you don't need to file a pre authorization request. So that will take a lot of time once that all happens and so.
There was a beat to the business in the future that includes servicing part b patients.
There should be a you know.
A good reduction in the in the revenue cycle time from that as well.
Okay, great. Thank you for taking my questions.
Mhm.
And then if you have a question. Please press Star then one.
Our next question will come from Paul Nori with noble equity.
You May now go ahead.
Hey, good morning.
Do you have an update on <unk>.
Yes, so we have restarted the development efforts on mono Pal.
After Covid, we had we've progressed the development of the product.
Had some patients come in for.
For various testing and so on.
And we're now.
Focusing our attention on enhancements to the Micropro two plus now we've got several hundred of our flagship product out in the marketplace.
Wanted to continue to keep improving that product.
And then we plan to go back to Michael Pal.
I plan right now is to have myopia all out in the market in calendar year 2024.
Okay and.
Any update on the China adventure.
No as I mentioned in my remarks, and maybe Dave can jump in too we've been in touch with a raise your medical which is our partner there Covid has certainly disrupted.
Disrupted business operations trying to get into government offices to a wire funds and so on.
We had a visit from David ran this year.
Ryzen medical back in August .
He was able to visit our facilities here in Boston went back in and of course, you saw what happened in China for Chevron was locked down and everyone.
It was allowed back out and that created a huge spike in cases.
That's all I can tell you right now and maybe Dave you could you may have some other updates from the financial side.
Yeah, I think it's a it's just hard for us to know at this point I mean I mean.
What they tell us.
It's COVID-19 and bureaucracy, but I have to believe with what we're what we've been hearing the news reports about the number of cases and things like that and.
Although the Lockdowns and things named the business environment to start up a new business in China is probably not ideal.
So.
That has had an impact as well, but we are we.
We are pushing very hard in the audits and at some point here.
Riser.
To Fisher cut bait on that journey.
Adventure here, because you know we have a.
We would you know theres other opportunities that maybe we can pursue over there as well.
And any comments for the quarter on.
You know how much of the performance came from a domestic versus international.
Yes International was about 11% of revenues in the fourth quarter.
Direct billing channel was about 73% in the U S. And then VA VA revenues were a record of about 11% of revenue.
Alright, thank you.
Yeah.
This will conclude our question answer session I would like to turn the conference back over to Paul Thomas for any closing remarks.
Thank you operator, well in closing I will just highlight what makes <unk> special company, we have a large unmet market opportunity assist individuals with upper extremity paralysis.
Our mile Pro product line is gaining traction with a record number of patients and the process of obtaining one we've got more doctors prescribing it for their patients and more rehab therapists being trained on how to work with new Micropro users.
We've developed a track record of obtaining reimbursement from a set of payers here in the U S and several international markets and we're closer to obtaining coverage for Medicare part B patients and we continue to innovate and lead product design, but also in our business processes to basically operate more efficiently as we scale the business.
Thank you all for your continued interest in my elbow and have a good day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.