Q2 2023 Myomo Inc Earnings Call
[music].
Good afternoon, and welcome to the Mimo set.
Second quarter 2023 earnings conference call.
All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
I would now like to turn the conference over to Kim Cola debts. Please go ahead.
Thank you operator, and good afternoon, everyone. This is Kim Collins with L. A today welcome to the Myanmar second quarter 2023 conference call.
Earlier today in Myanmar issued a news release announcing financial results for the three months ended June 30th 2023 if you would like to be added to the company's email distribution list to receive future announcements.
Register on the company's website at my Yamana Dot com or call L. A J at 21283837, and 77 and speak with Carolyn Curran.
With me on today's call from my own MAU are Paul <unk>, 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 fact are 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 and are subject to risks and uncertainties and other factors that may affect my amas business financial condition and operating results.
These and additional risks uncertainties and other factors are discussed in Miami filings with the Securities and Exchange Commission, including the Form 10-Q for the quarter ended June 30th 2023 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 my ammo undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this call.
My pleasure to turn the call over to my almost CEO Paul get on this call. Please go ahead.
Thanks, Tim Good afternoon, everyone and thanks for joining us.
As we reported in our earnings press release, we had a very solid quarter with year over year growth in revenue and in all of our key operating metrics.
Specifically, we continue to increase shipments of all wired device and to build our patient pipeline for future revenue growth now, including Medicare part D patients.
We received the final license payment for our joint venture in China, which has enabled the launch of the business there and most importantly, we had a significant positive development in our efforts to secure Medicare part D coverage for our Colorado based solar we began serving this large patient population.
I'll start by reviewing the operational highlights during Q2.
Front end to the pipeline to get deliveries and revenue.
Our direct to consumer marketing strategy of using television advertising and social media good for patients and family members about the buyer pool to restore movement and paralyzed ours is working very well.
We added more than 400 qualified patients to the patient pipeline in the second quarter and these Kansas are all covered by insurance clients have paid for micro in the past.
Earlier this year, we began focusing our payers have had a track record of reimbursing for the micro <unk>.
And what we believe is a higher quality pipeline that in the past.
And we're building it more efficiently with a smaller staff this year.
We obtain authorizations and orders for 125 devices during the quarter, which is up 43% from the year ago quarter.
The shipments as patients who received our product revenues were up 50% year over year.
In addition to the strike revenue we're paid the final installment of the China joint venture initial license fee of just over $1.7 million, bringing our Q2 total revenue to $6 million.
We've been working on this joint venture for several years now.
The COVID-19, pandemic winding down and the resumption of economic activity in China, Our joint venture partners why is your medical and China Adventures, we're able to move constantly forward to find geographies my elbow.
Now in the process of setting up manufacturing and sales operations to serve the greater China market.
With an estimated 14 million people paralyzed firms in two and a half million new stroke, each year, China represents the world's largest market opportunity for the microprobe.
The joint venture project team, that's assisting in preparing and the fracturing infrastructure, establishing the supply chain of components and engaging rehab hospitals for distribution of the bio products to patients with <unk>.
A couple of our clinical specialist to China.
Two trains that Jamie staff.
To demonstrate the technology to rehab hospitals airports.
We've also received a total of about $300000 in orders the clinical version of our pilot called mobile arm really have kids to be used for demos and training. After the Micropro control system chips and software, which will be used to begin the initial production run by the JV.
Micro control system order represents the initial purchase commitment under the guaranteed minimum payments provision of the JV contract. This contract provides for a total of $10 $75 million and Microcap control unit purchases over the next 10 years I also want to note that these components are manufactured.
In the U S and a IP firmly with Miami.
And then on June 30th centers for Medicare and Medicaid services known as CMS issued a proposed rule that if adopted would reclassify the micropro as a covered benefit embraced category with a lump sum payments in.
In addition, CMS stated its intention to post a fee for the microprobe and upcoming public meeting.
This is a very significant development because it allows us to serve patients in the U S were covered by standard Medicare.
Fee for service.
While the <unk> reimbursement, a lump sum basis the way all the other payers in the U S. Currently pay for my approach.
We currently provide the milestones seniors a certain Medicare advantage plans that have the seniors that you watch it covers my part D. So our addressable market is poised to increase substantially.
For those of you who are new to bio Here's a quick summary on Medicare in January 2019, CMS made unique product billing codes referred to our shipping codes effective for the Maia trial.
However, CMS classified the Bayou Bell as durable medical equipment, or <unk>, which classified it as a device to pay a monthly rental with coverage on a case by case basis. While this opened up the large Medicare advantage patient population to us our position has been that the micro is a custom fabricated brace.
The long term views and then it should be classified in this benefit category.
Discussions with the CMA SaaS got delayed due to Covid and then we were invited to make our case with Cmos of public hearings in June of 2022.
At that presentation.
We made that presentation I've got some follow up meetings with the team of staff and with the medical directors of the D V backs the Medicare administrative contractors.
Recently these meetings was this past April already presented compelling new research about the patient outcomes and the value of the microprobe to individuals of Medicare age. We're encouraged to file claims for part D. Patients. So we've now got six patients and submitted six claims for payment.
Claims are under review at this time.
Clear how the proposed rule now come out with effective processing. These claims are submitted to do you mean, Max before the publication of the proposed rule.
What's next.
Your math is accepting public comments, how this proposed rule until the end of August and then they'll hold a public hearing on this topic as well is proposed to be a viable for our devices.
While there is no specific timeline for implementing the new rule or holding a public hearing next hearing is usually in the fall and then coverage and pricing go into effect sometime after that.
Although I'd love to have a definite answer for you at this time the process to the myocardium covered is powered on race is closer than ever to the golar.
Meantime, we're not sitting still cause many part D patients contact us each month, the bottom EIOPA, the paralyzed or the proceedings to screen. These patients for medical eligibility I was building a pipeline of part D. Patients. So that we can serve them after coverage in a fee or establish that.
With that overview I'll now turn the call over to Dave Henry our CFO for more detailed discussion of our financial results and operational metrics.
Thank you Paul and good afternoon, everyone.
And to Paul's comments regarding coverage by CMS.
Rules adopted in my approach reimbursed by CMS on a lump sum basis, but working capital required to grow our business to a level that supports cash flow breakeven is expected to be less than if the mild provost reimbursed as a rental.
The reason for that is is because under the proposed rule, we wouldn't have to wait 13 months to be fully paid by the manufacturing and patient provision costs that we would expect.
Turning now to our second quarter financial results total revenue for the second quarter of 2023 was $6 million that includes revenue from the payment of the remaining initial license fee by our joint venture partner in China.
As a result total revenue was up 62% compared with the prior year quarter excluding.
Excluding that payment product revenue was $4 2 million increased 15% year over year. This growth was driven by a higher number of revenue units offset by a lower average selling price or a S. T E.
We recognized revenue on 97 units in the quarter, which was an increase of 21% over the prior year.
ASP was approximately $43700 down 5% from the prior year due to payer and channel mix.
A direct billing channel represented 79% of revenue in the second quarter compared with 83% in the prior year quarter.
International revenue represented 12% of product revenue in the second quarter, the remaining 9% of revenue lift from the VA and domestic OTT channels.
Bulk represents insurance authorizations in orders received but not yet converted to revenue our backlog at the end of second quarter 2023 was 179 units up 10% compared with the.
The second quarter of 2022.
We received 125 authorizations and orders for my approach.
For the quarter, an increase of 23% compared with the prior year quarter.
Patient pipeline increased to 969 candidates.
Most of the second quarter up 27% from a year ago quarter.
This is all which has been revised to reflect only known payers 408 patients were added to our pipeline during the second quarter, an increase of 28% over the prior year.
Year ago pipeline additions have also been revised to reflect only the government payers.
Gross margin for the second quarter of 2023 was 71, 8% compared to 65, 3% for the prior year quarter.
Excluding the impact of the license revenue gross margin on product revenue was 65% a decrease of nearly 500 basis points compared with the prior year quarter. The decrease was due to a lower ASP.
The higher inventory and warranty reserves.
Operating expenses for the second quarter of 2023, or $5 4 million, an increase of 2% compared with the second quarter of 2022.
The modest increase was driven primarily by higher incentive compensation accrual offset by lower advertising expenses, which decreased 18% compared with the prior year quarter.
<unk> pays to spend roughly $1 million less on advertising in 2023 versus 2022, which is part of the $2 million in annual Opex savings, we're expecting for the year.
Cost per pipeline add decreased to $2074, which is down 57% compared with the prior year quarter.
As a result of the license revenue operating loss for the second quarter of 2023 was $1 1 million compared with an operating loss of $2 9 million in the second quarter of 2022.
Net loss for the second quarter of 2023 was $1 million or four cents per share. This compares with a net loss of $2 9 million or 42 cents per share for the second quarter of 2022.
Note that the $6 8 million pre funded warrants issued in our January 2023 offerings are considered common stock equivalents under GAAP.
Put it in our weighted average shares outstanding.
No not the pre funded warrants have been exercised as of today.
Adjusted EBITDA for the second quarter of 2023 was a negative <unk>.
<unk> 8 million compared with a negative $2 5 million for the second quarter of 2022.
To summarize our year to date results revenue for the first six months ended June June 30 of 2023 was $9 4 million up 25% compared to the same period, a year ago, while year to date product revenue of $7 7 million was up 17%.
Year to date gross margin was 71% compared with 66% in the year ago period year to date gross margin on product sales for Q2 or second of 2023 63, 4%.
Operating expenses for the first half of 2023 were $10 4 million a decrease of 2% compared with the same period a year ago.
Operating loss for the first six months of 2023 was $3 8 million compared with an operating loss of $5 6 million for the same period a year ago.
Net loss for the first six months of 2023 was $3 7 million or <unk> 14 per share compared with a net loss of $5 7 million or <unk> 83 per cent per share for the same period a year ago.
Adjusted EBITDA was a negative $3 2 million for the six months first six months of 2023.
The negative $4 9 million in the year ago period.
Turning to our cash position cash cash equivalents and short term investments as of June 32020 349 million.
Cash used in operating activities was 300000 for the second quarter 2023, compared with $2 6 million for the prior year quarter.
The reduction was driven by the license payment and cash generated by changes in working capital primarily due to an increase in incentive compensation liabilities.
Looking ahead, our backlog entering the third quarter as higher compared with the prior year quarter and is slightly higher sequentially. The potential ASP in the backlog was lower due to payer mix.
As a result, we believe that slight year over year revenue growth is attainable for sequential revenue growth will be challenging.
Our ability to deliver product revenue in 2023 that meets our targeted 12% to 30% year over year growth will depend on the number of insurance authorizations in orders we've received over the next few months.
With that financial overview, I'll turn the call back to Paul.
Thanks, Dave.
Hope, we have conveyed our readiness to spring into action once Medicare part D becomes a reality for us.
I'll continue to demonstrate excellent progress with the business in the meantime.
So with that overview, we are 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 Touchtone phone.
If you're using a speakerphone please pick up your handset before pressing the keys.
To withdraw from the question. Please press Star then two.
The first question comes from Ben Hayner of Alliance Global Partners. Please go ahead.
Good afternoon, gentlemen, thanks for taking the questions and congrats on the.
Development over at CMS.
First off for me, if ive done the math correctly it looks like the pipeline drops improved pretty impressively problem. The prior quarter or is there anything that you attribute that to is it just noise.
Improvement in AR and the metrics from the virtual waiting room that you implemented or what would you ascribe that to.
Well then thank.
Thanks for your comments.
Our department of patient advocacy, we now roll called patient navigator.
And these individuals are working with these patients following work with their physicians therapist.
Acquiring.
The necessary medical documentation I think.
Creased engaging with these patients is paying off by having more patients continue to go through the process to obtain a microphone.
Okay got it sounds interesting and then on the 30th Medicare part B patients you've added to the pipeline.
Are those kind of light.
We acquired patients or are you kind of reactivating. Some there's some folks that may have contact with you in previous periods and they expressed interest in the in the micro.
Yeah. Most of these are new prospect to contact us.
It does.
Our advertising, we've got a lot of calls or a lead.
Lead forms get filled up on our website and we certainly have hundreds of Medicare part D patients. The capex that's been in the past we've had to put them on hold so I won't give you an update when we have more information from CMS.
But now we can tell these patients so if youre interested lets do a telehealth screening.
It goes to a physician.
Written orders so that when we do get coverage by Medicare we can start with certainty. So these patients are contacting us every month and now we can start to build this pipeline.
Dissipation.
<unk> put into baby, that's correct classic category.
And to be clear.
Patients that are in the.
The Medicare pipeline that's separate from the.
969 patient pipeline, we're keeping track of that separately for now and we're looking to grow obviously grow the size of that pipeline in the third quarter.
Is that something you intend to break out in the future or will that kind of come together as you know it's been a benefit category change occurs.
Yes.
Essentially it but for now.
Alright.
Come together potentially but for now we'll keep it separate.
Yeah Okay.
Actually all Medicare part D becomes another good payer likes the other plans that we're working with.
Okay, Perfect and then lastly for me a kind of a clarification you mentioned the 300000.
Orders for the Mark clinical units and maybe I missed this did.
Did those ship in Q2 or is that something that's going to occur later this year or has occurred in Q3.
That will occur during the second half of this year.
Okay got it.
Well thanks for taking the question guys. That's it for me.
Alright, thank you.
The next question comes from Scott Henry of Roth Capital. Please go ahead.
Thank you and good afternoon, I am just going to dig in a little deeper on the CMS situation too to get a better understanding of exactly what it means and how it could impact the model I guess for starters.
When if you convert CMS to being a a lump sum payment.
Versus rental over a period of time do you expect the total amount to.
Could be significantly higher the same I wouldn't expect it to be less but yeah. How should we think about that amount and when will we know and do you have a sense of what direction that amount it will be.
I would I mean.
All depends on the fee that they charge, but just speaking in general terms.
There is a roughly 5% after that.
That the GMP Max will apply to cat rental payments to account for that time value of money as compared to pay on a lump sum basis, but however under Medicare rules.
You're not allowed to.
You know bill the patient for a rental if the patient for whatever reason is it use it and so there could be situations. If we were a rental were you know a patient could have helped the balance or something like that and then they wouldn't use.
Stop using the mile per hour and we couldn't bill for it and then in that particular case it could be in a situation where you couldn't get your entire 13 months survival payments. So I think overall when you look at it qualitatively I hate lump sum is.
As better financially obviously for us Dan.
That'd be reimbursed on a cat rental basis.
Okay. So it sounds like conceptually, it's the same but significantly better terms.
Is there a way to get higher payments from this process.
Or is that something or time or sometimes they go lower over time, just trying to see about that.
Yes.
Yeah, we expect.
Our expectation would be that.
The fee that Medicare ultimately, it's going to be lower than our ESP now how much lower we have no idea.
Other than that anything else that would be just pure speculation on my part Okay. Alright. That's that's fair now what is the difference between L. 80, 701 in L 80 702.
Two different models.
Yeah.
Scott.
701 is the Micropro W, which is just the overall and the rich.
702.
Although risks and the hand, the grass unit, so that is reimbursed at a higher rate.
Okay.
Excellent now the other question I had is you know obviously you you you're going through the CMS path.
And one Avenue, but you're also talking to the D and me Max.
Yeah are those separate processes or you know how do those two events tied together.
Yeah, well the linked in that.
D&A Mac contractors.
Medical directors basically worked for CMS.
CMS staff directed us to go meet with the medical directors, which we did in April presenting new research that is in the process of being published from a patient registry several clinical studies showing the value of the device for Medicare aged population.
And the CMS takes those recommendations from the JV back medical directors and making their assessment of whether to cover their device or not.
It's an integral part of the process.
And we had a good meeting in April and then in June CMS came out with this rule that says there is value in powered devices.
And these should be included in the.
Brace category, which is a covered benefit category.
Okay. So so those six specific filed claims.
Can they get paid out before as rental or do they wait in the queue until all of this plays out at the end of the year.
We're not sure.
All of those claims with the medical documentation.
They might start getting paid now perhaps as a rental and then when CMS puts out the war fought and pricing is a lump sum they may shift at that point.
I don't know until we see what happens on that Scott.
Okay.
Yeah, there's a lot of moving parts here. So I'm just trying to understand at all and then as far as timeline I mean, it sounds like lets say they published this at the end of 'twenty two 'twenty three.
When does the spigot get opened up when when when can you start getting patients in this category.
Yeah. So.
We have no specific timeline, but if they do publish the worldwide at the end of the yards, it's combined with the home health rule, which usually is.
If you go effective by January one.
It probably at the earliest and then the question is when do they published allowable feet typically what CMS does is they have these meetings twice a year hick picks coding meetings.
And they will if theres going to publish a price they usually publish a price.
And the meeting agenda, a couple of weeks ahead of the meeting and the meeting probably take place. If you have ever go back early December should they publish a place we'll be able to comment on it as well as others can and then they can make their decision to publish it in the Alpha numeric code set and it could go effective.
January 1st or could be effective up 90 days later at the next quarterly updates.
Okay. Alright. So you know this is something we'll continue to track in and I guess my understanding is.
The benefit is among seniors.
It potentially you doubled the market.
Without any additional effort from you.
From a selling perspective, so it it brings some economies to the business model is that is that a fair way to think about it.
Yeah, that's a good way to look at it because again the advertising the other regeneration activities we're doing.
He is already encouraging those part D patients to contact us So theres no additional advertising cost there is other costs, though.
To follow up with these patients talk to their physicians gathered their medical documentation because you have to have that in place to deal with these patients.
The other side benefits to this is many other commercial plans.
Plans will often follow what Medicare does.
And also Medicare advantage plans some plans pay per mile growth today, others are going to require us to go through an appeal process.
As covered by part B, they will be required by law to also cover with my approach to other Medicare advantage seniors will have access to the milestone for the first time, so it's a significant increase in our addressable market.
Okay, great that should do it for me congratulations on that.
And thank you for taking the time to walk through it.
Thanks Pat.
The next question comes from Anthony Vendetti from Maxim Group. Please go ahead.
Thank you.
So at the end of the second quarter or right at this point in time, how many sales reps do you have right now.
Well, we don't have sales reps as you might think of for entities like I can implantable medical device. So we have a I'll call center about 10 people based in Texas.
Following up with that.
Prospects for a family member that contact US and then we have another 10 to certify possible shortages clinical professionals licensed professionals around the country, who then follow up with the patients to conduct evaluations to measure that fit them. When we've got an authorization. So we don't have the typical say.
Sales force that you might think of it like a Boston scientific.
Lifestyle company.
So these these 10.
These 10 people that arent call centers and the 10 or statistics are they are they full time employees or 10, 90 nines or how does that work.
They are full time employees.
Okay.
Any of them added during the second quarter or is this is this is already staffed for the anticipated ramp this year.
We added one new.
Certified sources, the Midwest in the second quarter.
And so we're staffed for right now and also we believe we can handle with this team.
And incremental volume increase for the part D patients, but it's actually as the part D bat volume ramps up we'll have to add more clinicians in the field as well as more people and our customer experience Department.
Okay.
So.
Maybe maybe you sort of answered this but maybe give.
What's your anticipated timeline in terms of hearing back.
From the Max on the timeline for it.
In terms of.
Win win.
The race will be sort of approved reimbursement.
As embrace.
Well that's a good question so right now.
Proposed rule was published at the end of June There was a 60 day comment period. So we're going to file comments as well as others in the industry. Your physicians patient groups and so on that closes on August 29th than CMS.
CMS staff Medicare's Apple review those comments.
And then they could issue.
Final rulemaking anytime you after that.
Could happen this fall, although they may push that out, but we are hoping that they will do it this fall.
As far as publishing the C as I've mentioned.
To the earlier question.
They will usually publish a proposed fee.
Big picture Semiannual agenda, and then after comments on that that fee should go live.
As early as January one there could be some time in 2024.
Okay. So if things go well they will review it after the comment period on August 29.
They'll.
Come up with a proposed fee in the fall, which could go live 124, but if it's not a.
124, then hopefully sometime in 'twenty four.
Yes, that's correct okay.
Okay.
Alright, great I will hop back in the queue. Thank you.
As a reminder, if you have a question please press star one.
The next question comes from Edward Wolfe.
Congratulations on the quarter.
Can you provide some comments on how your European business is doing is it's doing as well as the U S business and have you guys thought about you know.
Danny outside of Germany.
The international business is growing as they've reported a 12% of our revenues now we've been adding business development managers and a few critical traders are in Germany.
That's about 100, orthotics and prosthetics clinics that have signed on to distribute the micro in Germany, we focused on Germany, because making good progress on reimbursement with the payers statutory health insurance.
Coverage there.
We have to appeal that denial, we're getting good responses from the social courts in Germany that are directing the payers to pay for the biofuel.
Our advertising approach there is social media has been gaining traction as well.
<unk> focus in Germany, because again, it's a large market over 80 billion population good reimbursement a lot of need there as well so rather than.
The investment in opening up other markets, which could take two to three years to get reimbursement yet distribution channel going we said, let's double down and bring the buyer pro to more patients in Germany.
Yes, the other geography, we're seeing benefit to us is Australia.
It's certainly not as large in Germany that we have.
We're starting to have.
<unk> approved.
Through the National disability insurance scheme in Australia now for the first time so.
I think that has an opportunity to have a channel partner.
In Australia that we work with and so there's the opportunity there too.
You got to see more revenue out of that geography as well.
That sounds good are you guys in Canada at all.
We have a medical device license to distribute in Canada.
We've signed up a couple of OSP clinics, there I know they are evaluating some patients.
Working through the Canadian social insurance system to get their initial reimbursement. So no orders from there yet, but I know we have a couple of patients in the pipeline there.
Let's say, Dave doesn't move too far from the borders just send them over one of these days.
All the questions I have thank you.
Thanks, Ed.
This concludes our question and answer session I would like to turn the conference back over to Paul <unk> for closing remarks.
Well, thanks, operator, I just want to make sure everyone were available for virtual and in person investor meetings. So please contact <unk> investor relation to sit at the time of course, we'll keep you informed of developments at CMS.
Status for the Medicare part D patients.
Just before we sign off I want to remind you that we're very excited about <unk> future beyond the Medicare opportunity. We discussed today, you've got a compelling proven advanced technology product that addresses a large market opportunity.
You see we are improving our operational efficiencies across the board with the pipeline and revenue growth and managing our operating expenses. Our international sales are growing as we discussed we expect ongoing contribution from our joint venture in China.
We continue to innovate in product design business processes. So we operate more efficiently as we scale the business.
Thank you for your continued interest in my Yamal and have a good day everyone.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.