Myomo Inc. Q1 2023 Earnings Call

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Good afternoon and welcome to the Mayomo First Quarter 2023 Ernie's Carfins call. All participants will be in a listen only mode. Should you use assistance, please signal a Carfins specialist by pressing the star key followed by zero.

After today's presentation, there will be an opportunity to ask questions.

To ask a question you may press start then want on your telephone keypad. To withdraw your question, please press start then too. Please note this event is being recorded. I will now turn the conference over to Kim Goldes. Please go ahead.

Thank you, Operator. Good afternoon, everyone. This is Kim Goliath with LHA. Welcome to the Mayama First Quarter 2023 Conference Call.

Earlier today, Mayama issued a news release announcing financial results for the three months centered March 31st, 2023. If you would like to be added to the company's email distribution list to receive future announcements, please register on the company's website at mayama.com or call LHA at 212-838.

3777 and speak with Carolyn Curran.

With me on today's call from my own, I'll go down as chief executive officer and Dave Henry, chief financial officer.

Before we begin, I'd like to caution listeners at statements made during this conference called by management, other than historical facts or forward-looking statements.

The words anticipate, believe, estimate, expect, intend, guidance, outlook, confidence, target, project, and other similar expressions are typically used to identify such forward-looking statements.

These forward-looking statements are not guarantees of future performance and may involve in our subjectures, certain risks and uncertainties and other factors that may affect my almost business, financial condition and operating results.

These and additional risks on certain fees and other factors are discussed in my almost filing with the Securities and Exchange Commission, including the Form 10Q for the quarter Endured March 31, 2023 and subsequent filings. Actual outcomes and results may differ materially from what's expressed in or implied by these towards looking statements.

Acceptors required by law, myOmO undertakes no obligation to revise or update any for the statement's drift-elect events or circumstances after the date of this call. It's now my pleasure to turn the call over to myOmOCEO, Paul Goudonis. Paul, please go ahead.

Thanks Tim, good afternoon everyone and thanks for joining us.

As demonstrated by our two-on-financial results, we have very strong start to the year.

In decisions we made about advertising and reimbursement strategies, along with the actions to control costs, have begun to pay off while positioning a swell for both top line growth and improved bottom line in 2023.

5 revenue Q1, 2023 was 3.4 million, which met our expectations at 20% year-over-year growth and myelpro sales.

We increased our patient pipeline with more than 400 new candidates entering the process about Taney and Myo Pro.

We expanded the use of new digital technologies in the front end of our patient conversion cycle, and we now use an online waiting room where interested patients can be screened via telehealth by our licensed clinicians.

Compared with the first quarter of 2022, this pipeline growth represents a 54% increase in the number of patients with previous payers, those that are reimbursed for the mild growth of the past, and we did this while spending 33% less on direct consumer marketing.

In turn, our cost for pipeline ad is down 53% from the first quarter of 2022 and down 50% from the fourth quarter of 2022.

These metrics are all-frened in the right direction.

As you may recall, lower this year we modified our pipeline focus to patients who are insurance for carriers that have paid for the myelphrolin of past.

We receive 122 authorizations in order to the quarter, which is up 30 percent from a year ago. The backlog also increased to 176 units, representing over $7 million in potential revenue as we complete the deliveries and receive payment for these devices.

We were able to accomplish these additions to the pipeline, the insurance authorizations, and deliveries with a 12% lower headcount, which resulted in improved operational efficiencies. Our international business generated record revenues in the quarter as we continued to add O&P provider locations in Germany.

and obtain insurance reimbursement, which is largely due to the favorable social court rulings over the past year.

We also achieved a major significant milestone in Australia where the National Disability Insurance Scheme, or NDIS, began paying for myoprol. We expect this will lead to future sales in that country.

The other major international development occurred in April when our China joint venture paid the remaining 1.7 million of the initial license fee.

As the COVID-19 lockdowns were lifted across China, our partners Ryzer Medical and China Leventures were able to move forward and launch the JD started activity for Junxi, Maio Mo. We've begun the process of providing technical documentation and know-how so that the JD staff can establish its local manufacturing and distribution operations.

to begin offering my own or pride line to re-impost those entertainations.

As a reminder, the JP contract calls from more than $10 million in additional license payments over the next decade. And my almost shareholder has a 19.9% equity stake in Joshi Myomo with our Chinese partners putting up all the capital to fund this business. Here in the US, we continue to work toward our goals securing Medicare.

making around defining the benefits for neck, arm, leg, and back braces and newer technologies.

We see this as a good sign that CMS recognizes the value of new technology-driven braces, and we believe that this new rule, when published next summer, will provide CMS's official response to our benefit category change request.

A change in the best of category if made could lead to lots of reversions.

In the meantime, we move forward as recommended by CMS staff to make the MyoPro accessible to Medicare Part B patients.

Last month, we met with the medical directors and staff of the CMS billing contractors, referred collectively as the DME MAX, and we presented new clinical evidence contained in two studies to minute for publication to support the reimbursement of the myoprol for Medicare beneficiaries. While I came to details regarding the research until publication, I was very excited to

Both studies add to the body of research that supports the safety and the effectiveness of the myoprop. We also filed two claims for devices provided to Medicare Part B beneficiaries, and we're now going through the process of having these claims reviewed for payments.

To increase this chances for success, these claims are for reversing myoprosis and rentals that are being processed by the DME MAX.

The claims are being evaluated for Medicare's policy for individual consideration and may result in the payment of the claim. Or if the initial submission is denied, we file an appeal for triggers a manual review of the patient's medical necessity criteria and their chart notes.

In addition, we're the process of identifying and evaluating for additional Medicare Part B patients and we plan to submit additional claims in the coming weeks covering all four of Medicare's billing regions.

When we have definitive information on a few of these claims and we begin to see a pattern among the DME-MAX or if there's publicly available information from CMS, we will use this to update investors. As I stated during our last call, we expect to have some clarity on reimbursement for Part B patients by the end of June . While there's no specific timeline for the actions by CMS or its billing contract, we

Now let's turn the call over to Dave Henry, my almost-deaf phone for more detailed discussion on our financial results. Dave.

Thank you, Paul, but I can do it everyone.

Let me start with a remarkable review of our first quarter financial results. Total revenue for the first quarter of 2023, the $3.4 million and the surprise sole way of product revenue. This was down 11% from the prior year quarter, which included the $1 million partial payment of the technology of license fee from our joint venture partner in Shedna. This was down 11% from the prior year quarter, which included the $1 million partial payment of the financial

Excluding that payment, product revenue increased 20% year over year. This growth was driven by a higher number of revenue units and a higher average selling price or ASP.

We recognize revenue on 80 units in the quarter, which is an increase of 13% over the prior year.

The AST was approximately $43,000 up from approximately $40,000 in the fourth quarter of 2020.

The direct billing channel represented 70% of revenue in the first quarter compared to 65% in the prior year quarter and 70% in the quarter of 2022.

We realize the record international revenue in the quarter, but represents a 20% product revenue.

remaining 10% of revenues from the VA and domestic OMP channels.

Backwater, which represents insurance authorizations in orders received but not yet converted to revenue, was 176 units at quarter end, 10 percent compared with the prior year quarter, and up 7 percent sequentially.

Our patient pipeline increased to 855 candidates in the first quarter, 28% from a year ago quarter, which has been revised to reflect only previous pairs.

As Paul mentioned, a record 438 patients were added to our pipeline in the first quarter and increased the 54% over the prior year. The year-ago pipeline additions have also been revised to reflect only previous payers.

Our pipeline was more volatile than usual in the first quarter as a large number of patients admitted to the pipeline.

Our new virtual waiting room certainly increased pipeline additions and decreased the cycle time from lead to initial evaluation. But it's unclear if it's also contributed to the higher number of pipeline rise. We'll be posting monitoring this metric in the coming months.

For a margin for the first quarter of 2023, the 67%.

compared with 66.7% for the prior year quarter. This increase was driven by a higher ASP and lower warranty reserves.

I should also note that first order Euro goes first margin. It was also benefited by the million dollar partial license payment.

Operating expenses for the first quarter of 2023 were $5 million.

A decrease of 6% compared with the first quarter of 2022.

The improvement was primarily driven by a head count reduction in January as well as global advertising expenses.

which decreased 33% compared with the prior year quarter.

We're on pace to spend roughly $1 million less on advertising in 2023, which is part of the $2 million in annual operating expense savings we're expecting for the year.

As a result of the improved efficiency of our marketing efforts, our costs for pipeline have decreased to $1,579.

which is down 53% compared to the greater your quarter and down 55%. One, sorry.

Operating loss for the first quarter of 2023 was 2.7 million compared with an operating loss of 2.7 million for the first quarter of 2022, which included the benefit of the partial payment of the initial technology license fee. That loss for the first quarter of 2023 was 2.6 million or 11 cents per share.

compared with a net loss of 2.8 million, or 41% per share, for the first quarter of 2022. Net loss in the first quarter of 2023 includes the impact of the shares issued in our offering in January .

Note that the 6.8 million pre-funded warrants issued in that offering are considered common stock equivalent under gap and are included in our weighted average shares outstanding. None of the pre-funded warrants have been exercised as of today.

Adjust the deepest off of the first quarter of 2023 with a negative 2.5 million compared with the negative 2.4 million in the first quarter of 2022, which again also included the benefit of the partial license fee.

We're going to go our cash position, cash and cash equivalence of the March 31, 2023 for 9.3 million.

As used in operating activities was 1.8 million for the first quarter of 2023.

Looking ahead, as Paul mentioned, we received the remaining initial technology license fee of $1.7 million in April .

This amount will be recorded as license revenue in the second quarter. From form up to the license repayment, we entered the second quarter with a approximately 11 million cash.

As a result of this payment, you expect record second quarter toll revenue.

With the increase in backlog in the first quarter, and the rain conditions that rose second quarter product revenues, hope zero over year is plentially.

We continue to believe that product revenue growth for the full year between 20% and 30%

with that financial order, but you will turn the call back to Paul. Next day, while as I outlined in my recent shareholder letter, this year marks 10 consecutive years of revenue growth for my own.

Expect another year's growth based on the size of our patient's type line. We plan to be throwing demand with increased operational efficiency and lower cash firm.

Our actions earlier this year to focus on the highest yield candidates in the pipeline, throw over the cost of throwing the pipeline and reduce our operating expenses should able us to reach these national goals for the course of the year.

So if that business is a 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 start then one on your telephone keypad.

If you are using a speaker phone, 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 our roster.

And before we take the first question, I want to mention that we'll be participating in the AGP MedTech Conference on May 23rd and 24th and the Maxim MedTech Conference on June 20th and 21st and we're available for virtual and in-person investor meetings, so please contact LHA Invest Relations to set up a time.

Okay, out flavor, we're ready for the first question whenever you are.

Our first question comes from Ben Hainer from Alliance Global Partners. Please go ahead.

Good afternoon, gentlemen. Thanks for taking the question. First off, for me, can you talk a little bit more about the implementation of the virtual waiting room? And maybe if I heard you right, you think that there may be some impact to the pipeline drops. Can you kind of explain why or speculate on why that may be? So we've been implementing this new technology.

free no obligation screening right then. If they say yes, we can send them a link and then on their laptop or on their cell phone they can immediately be put into this we call an online waiting room and we'll have an available clinician, one of our certified process orthodysp. We can immediately conduct a telehealth screening.

We found that that was very convenient for patients. It's been convenient for our clinical staff as well. And it's always having to try to set up an appointment, which might be the next day, might be a week or two later. But people can immediately be evaluated, consider whether or not they'd like to be extended for the myopro.

We explain the process that we go through, that we have to go get an appointment with their doctor face to face, they have to get their chart notes, say written order and so on in order to trust and move forward with the insurance. So a lot of people, candidates, have taken advantage of this really convenient approach.

So we added a lot of candidates to the pipeline. We're trying to assess whether or not people need more time to consider the process. We have to rely on additional information. So we're seeing the tradeoff of the convenience of it versus the effectiveness of having people in the pipeline. And then maybe other factors that we're just not aware of. If people may have other health.

And what we're asking ourselves is whether that decrease in cycle time was really time that a patient might use to, you know, the favor of using maybe a quarter, two quarters, three quarters ago to think about really want to go forward, talk to the families, things like that. Because patients always grow up out.

We used to be able to not get a hold of many patients after their initial contact, and they ended up being pipeline drops that way.

And so we wonder if we've now just sort of kind of increased pipeline effort that each increased growth because patients that haven't had to do it at time to speak to their families before that initial tele-healthy value ratio. Okay, that's helpful and that all makes sense. And have you seen any difference in the mix of the...

you know the patient's diagnosis that uh... or diagnosis that have come through with the virtual waiting room versus previously or is that kind of

Debt would change. Yeah, Ben, is there free stable in the majority of the candidates who reach out to us at FOP? Any free shots? I do.

So that remains our number one diagnosis. The next one would be brachial plexus injuries. That's the shoulder nerve. And maybe third would be spinal cord injuries. OK, got it. And then, Leslie, for me, on your discussions with the DME max, any

Any additional feedback, any color that you can share on how those meetings went? I understand we're waiting for a month, month and a half or so for the potential category change but on the DMA Max side, any more color that you can provide there?

Well, I would say I thought we had a very good meeting. It was a number of participants from the DVMAC medical director staff, from what's called the PDAC, some of their professional staff, including certified prosthesis orthotist, medical director. We had quite a long discussion. We reviewed the research that I mentioned here.

because we wanted to make sure that they understood that this which is one of criteria is that will this device be beneficial for Medicare age beneficiaries?

And in our patient registry, retrospective research that is underway to be published, we plan out that these patients did improve the relevant endpoints by having my own program. These are patients who are seniors, who have Medicare Advantage plans. So they fit in that over 65 category, which is important for the DNA mask.

A couple questions.

I'm starting to look at the model through...

the new funnel of pairs with the history of making payment. And you know I'm seeing some different trends, and I'm curious if it's just noise or your thoughts, not unexpectedly you're seeing a higher percent of

new funnel of pairs with a history of making payment. You know, I'm seeing some different trends, and I'm curious if it's just noise or your thoughts. Not unexpectedly, you're seeing a higher percent of authorizations.

which would make sense if it's a higher quality group. But I'm also seeing, at least in the first quarter, I saw a higher, assuming I'm looking at these numbers correct, but it looks like I saw a higher percent of backlog dropouts.

in a higher percent of your lost patients who were in the cumulative reimbursement pipeline. What are your thoughts on those numbers?

I'll be very early at this point. I just got to say, how are you? Yeah, you're right. The authorization rate did increase and it was expected to increase and we'll see how that trend continues as we move through the other quarters. We were just having a conversation with Ben about...

sort of the pipeline of why we thought that the turn in the pipeline was higher than normal in the first quarter. And so that's something again that we'll probably be looking to validate ourselves in the coming months here to see if that trend continues.

In terms of the back cloth, you know, we did have a higher percentage of people dropped out of the back bone in first quarter. We did have a large number of people from the sample, their medical conditions changing, which was a reason for the dropouts. We had a few, I won't say with that many, if I call it a handful, that dropped out as a result of the change we made in the pipeline because we had a few patients.

In the backlog, there were more older patients in the backlog that were with payers that were considered good payers anymore. And we decided that to discontinue many efforts, more people were just spending resources trying to spend their time.

trying to collapse. So we dropped a few of those. So those are the primary reasons for the change in the back law. But aside from that, those handful that drop that I would say that are directly related to are.

Our strategy to only focus on previous pairs, the rest of the change was just really due to a higher number of people with medical.

things going on medically than we've seen in prior quarters. So I guess, Dave, just to follow up on that, it sounds like a lot of these numbers, once you get used to this new virtual rating room...

should sort of revert back to where they were before. Because the patients you pick up this quarter because they were shorter throughput, well, next quarter they're not gonna fall in because it was longer throughput. It sounds like it should normalize. Is that fair? And probably all of these metrics should...

With the exception, I would expect authorization to be higher, but it sounds like pipeline ads should kind of be where it would be regardless over time. I mean, how do you think about those?

Yeah, and I think...

I think that's correct. It would also depend on the continued success of the regeneration if we are trying to appear to a budget. We're trying not to spend more than we need to generate leads. That will be a constraining factor, which I think will help keep the cost of pipeline out of down, but the question will be those.

Well, another of that continues to be, you know, where they fit. So they set up. What kind of learning has we go with this new methodology, but we're encouraged by the results so far in first place.

Okay, great. And then, Dave, I think you said you're looking for 20 to 30 percent revenue growth in 2023 off of, I assume, a base pulling out the one-time events last year. Does that reflect any benefit from CMS or is that more of a 20-20-40?

Yeah, no, we're not assuming anything regarding the

Okay, great. I think that should do it for me right now. Thank you for taking the questions. So, thanks Scott.

Great, I think that should do it for me right now. Thank you for taking the questions. So, thanks Scott.

The next question comes from Jim Sadoti from Sadoti & Company. Please go ahead.

All right, good afternoon. Thanks for taking the questions. So it seems like you're attacking the reimbursement issue on multiple fronts. With the DME MAX, if you are approved as a DME MAX, do you have any sense how much it...

The length of that rental would be or what the monthly payment would be. With our Deemee rentals, those are paid on a monthly basis for a total of 13 months. At the end of the 13 months, the patient owns the device.

We have to make sure the patient continues to use the device during that period of time and then we build them monthly. So we don't know how much they would take. So as far as we've submitted a couple of claims, we're going to submit a couple more to see what the results are. Okay. And you'll under the list. Sorry.

Sorry, go ahead. Yeah, I was going to say that according to Medicare, you know, for their billing manual, what they do under a cap rental program is they're, you know, if you look at the sum total of 13 months of rentals compared to a lump sum payment, they do give, you know,

a little bit of a bump up around 5% for rental payments because they try to take into account the time value of money. But what you might get in terms of a benefit in terms of the patient, if they go through all through 13 months, you just have to, we have to work to make sure that the patient.

continues to use the device, but that's why we have our mild care coaches and things like that. And we have people on our staff that follow up with patients posted delivery to try to make sure that their outcomes are maximum. Okay, that makes sense.

Is there a could there possibly a situation where you could get approved in one region, but not another? Yes, that can happen because there are four regions. You should have their own medical director and that's why we met with all four medical directors, was serving the same data

And we're filing claims in all four regions to see if we'll get approved in each one of those regions.

And do they coordinate with regard to the William Wilson amount or could that those vary from region to region as well? They could vary from region to region. I know that I understand these medical directors regularly conference with each other, but I don't know if they may make distinctions between each different region. Thank you.

Okay, and if you do start getting reimbursed from one of the regions, will that help you with the private payers? I think it would be a good demonstration to the private payers, especially Medicare Advantage plans that may not be covering the mile pro today.

says, look Medicare standard fee for services covering this, you're obligated to cover this as well. Although we continue to be listed as individual consideration. But we do think that having some payments under Part B coverage would be a real positive with Medicare Advantage funds. Okay. All right. And then switching to the internet.

We did a sail to another European country. It was more from the research standpoint. So it's not what we're expecting to continue, at least in the near term. The bulk of the sail's income from Germany. We've been extending our...

a team of business development managers and clinical trainers and O&P locations that build a myo probe in Germany. That's been working well. And do you think Australia could be...

Could ramp up similar to the way Germany did or do you think Australia would be a smaller piece of the pie? I think well, Australia is a smaller country than Germany. We don't have staff on the ground in Australia like we do in Germany. And I think that presence that we have both business development and clinical support.

has been a big part of why the German market has grown so well. Got it. Got it. And were you surprised at all to receive the 1.7 million payments from the Chinese joint venture? I know on the last call you seemed a little hesitant regarding that one.

I believe that they needed the government just to, it needs the conditions to be right, I think, for them to start up a new business venture. Right, okay. All right, well, it seems like revenue is going up, expenses are going down, so I mean, things are moving in the right direction.

question comes from Edward Wu from Ascendant Capital. Please go ahead. Yeah, thank you for taking my question. On the China Joint Venture, is there any timeline for the next process and when will you possibly get additional revenue from the joint venture? So we are having weekly.

establish especially the manufacturing operations and the supply chain. So we are working with them to identify the equipment they need to purchase, like 3D printers, test fixtures, assembly equipment, and then they have to order the various parts, including the motors, the electronics, the batteries, and so on.

So that's what's underway. We don't have a timeframe when production will start yet because it's only been about 30 days since we've kicked off this joint venture project.

The key gating item is the NMPA approval. We don't expect that they'll be getting risk of manufacturing before knowing that they're going to get NMPA approval to proceed.

Great, and my last question is, as a reminder, where does the joint venture have their distribution rights? Is it only in China? What do you think needs to happen in China?

It's China, Hong Kong, Taiwan and Macau. Great. Well, thanks for answering my question, then. I wish you guys good luck. Thank you.

Thanks Ed. This concludes our question and answer session. I would like to turn the call back to Paul Gedonis.

for closing remarks. Please go ahead. All right, thanks operator. Well, I'm closing. I just want to highlight what makes my own more a special company. We have a large, I met market opportunity. There's just these individuals with upper extremity paralysis. And there's a growing awareness among clinicians of the myoprosi utopia. We've combined use of digital technology with the targeted marketing approach, the lower the cost that provides

from other health plans in the U.S. and we continue to innovate and thrive design in our business processes to operate more efficiently as we scale the business.

Again, thanks for your continued interest in myOMO, and have a good rest of your day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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