Q1 2025 Tenon Medical Inc Earnings Call
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Speaker Change: Greetings and welcome to the Tenon Medical First Quarter 2025 Financial Results and Corporate Update Conference Call. As a reminder, this call is being recorded.
Speaker Change: Your host today are Steve Foster, President and Chief Executive Officer and Kevin Williamson, Chief Financial Officer. Mr. Foster and Mr. Williamson will present results of operations for the first quarter and did March 31, 2025 and provide a corporate update.
Speaker Change: Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, and other information that might be considered forward-looking.
Speaker Change: You are caution not to place undue reliance on these four looking statements which reflect our opinions only as of the date of this presentation.
Speaker Change: Please keep in mind that we are not advocating ourselves to revise or publicly release the results of any revision to these four looking statements in light of new information or future events.
Speaker Change: Throughout today's discussion we will attempt to present some important factors relating to our business that may affect our predictions.
Speaker Change: For a more complete discussion of these factors and other risks, you should review our quarterly and annual reports on file with the Securities and Exchange Commission at www.sec.gov.
Speaker Change: At this time, I'll turn the call over to Tenon Medical's Chief Executive Officers, Steve Foster.
Steve Foster: Thank you, Seth. Good afternoon, everyone. I'm pleased to welcome you to today's first quarter 2025 financial results and corporate update conference call for Tenon Medical.
Steve Foster: The first quarter was highlighted by continued progress in building evidence to support the Cadamaran approach and technique while adding versatility via the upcoming full launch of the new SE platform in the mid-year.
Steve Foster: During the quarter, revenue improves steadily by 1% over the prior year quarter, partially impacted by reimbursement pre-authorization headwinds that we believe to be transient in nature.
Steve Foster: We expect future coding clarity combined with a recently published clinical data will positively impact these issues going forward.
Steve Foster: As we move forward to sustainable revenue growth, our stable cost structure is expected to maintain a gross margin performance at recent levels and improve with increases in revenue.
Steve Foster: With the completion of the Alpha Clinical Review of our new Cadamaran SE platform, a second generation and smaller version of our implant and access profile, we are now preparing for its full commercial launch in the mid-year.
Steve Foster: The SC extends the line of implant offerings for physicians, preferring a smaller cadamer and implant and access profile while performing SI joint fusion procedures.
Steve Foster: During the Alpha Clinical Review, we found that the features of SE are well-received across physician specialties and applications. In particular, the low profile of SE provides significant flexibility for the physician when doing SI revision surgery.
Steve Foster: In March, the FDA cleared the Cadmora and SI joint fusion system for an extended indication for use in augmenting thoracolumbar fusion.
Steve Foster: With this approval, the Catamaran is now indicated to treat the SI joint as either a standalone treatment or to augment a spinal fusion. We believe this can be an important tool in the complex spine surgeon arsenal to support the base of a multi-level fusion.
Steve Foster: Recognition from the FDA of the catamaran's use to augment spinal fusion has been a long-term goal and further expands the platform's versatility. This new indication also opens the door to a previously untapped market and the potential for increased adoption.
Steve Foster: Underscrolling our technical advances, we received two European patents during the first quarter, directed to the novel, Cadamer and SI Joint Fixation Device.
Steve Foster: This continued development of our intellectual property portfolio improves our competitive position in the industry and protects the overall portfolio.
Steve Foster: The Cayman RNSI Joint Fusion System, Intellectual Property Portfolio, now includes 12 issued US and foreign patents along with 31 pending US and foreign patent applications.
Steve Foster: Tenon is committed to funding and executing clinical research that reinforces the safety and effectiveness of our technologies.
Steve Foster: Our post-market study, we call main fail, is Tenon's prospective multi-center single-arm study that evaluates clinical outcomes of patients with sick or early act joint disruption or degenerative circular ligaments, treated with the Tadamaran SI joint fusion system.
Steve Foster: Patients will be evaluated for a period of up to 24 months, reviewing various patient-reported outcomes, radiographic assessments, and adverse events. In short, the data collected aims to show the Cadamaran system delivers sinus prompts.
Steve Foster: Tenon announced the first peer-reviewed publication of our interim analysis from the Baby Sale Study in the 3rd quarter of 2024.
Steve Foster: This interim analysis presents early experiences in the first 33 consecutive patients treated with the Cadameran SI joint fusion system.
Steve Foster: across six U.S. clinical sites, with primary and secondary clinical endpoints, analysis at six months, and radiographic CT fusion assessment performed by independent reviewers at 12 months.
Steve Foster: Notable Outcomes from this inner analysis includes statistically significant reduction in SI joint pain and disability scoring at six months, a robust safety profile, and high patient satisfaction throughout all follow-up time points.
Steve Foster: Results provided definitive evidence of fusing response at 12 months and efficient surgical technique and procedure workflow.
Steve Foster: This peer-reviewed analysis reinforced that the catamaran systems minimal invasive inferior posture approach is safe and effective and the objective of relieving pain and reducing disability and adult patients diagnosed with SI joint disruption or degenerative sacralitis that fail non-surgical treatment.
Steve Foster: Early results and evaluations solidify our thesis that the catamaran's unique design and less invasive inferior posterer approach is functioning as intended to optimize patient outcomes.
Steve Foster: Well, note the interim data from our study and the over 1000 surgeries performed today the Cadameran System demonstrated its exceptional safety profile, bending, benefiting patients and the patients they treat.
Steve Foster: The second interim analysis will be published mid-year 2025. At the time of publication, approximately one half of the up to 50 targeted enrollments will have crossed the 12-month milestone in
Steve Foster: This 12-month milestone includes a CT scan to assess fusion of the SI joint, combining this radiographic data with ODI and VAS scores at predetermined time points will provide increasingly robust evidence to support catamaran technology.
Steve Foster: The importance of this clinical research for the company cannot be overstated. It will be compelling for treating physicians and payers alike with a market segment that is lacking peer-review data. While innovative technologies are exciting for treating physicians, clinical research is required to reinforce the value proposition.
Steve Foster: Additionally, these data sets are a foundation to achieve positive coverage throughout the
Steve Foster: Our ongoing workshop activities led by a network of valued physician faculty combined with the robust commercial infrastructure rebuild have paired us for rapid expansion. We hosted 34 physicians and catamaran workshops during the first quarter of 2025.
Steve Foster: During the quarter, we took the opportunity to strengthen our balance sheet to execute and these upcoming milestones and fund growth initiatives.
Steve Foster: In March, we received a total of $7.1 million gross proceeds from equity financing, which contributed to a cash balance of $10.3 million at quarter's end.
Steve Foster: Combined with a balanced financial discipline, we are confident that we have the cash runway to advance Tenon into our next phase of growth.
Steve Foster: Looking ahead, we are now focusing our investments on driving our top line, the commercial extension and focus on our workshop and training programs.
Kevin Williamson: In addition, we will be finishing investments in launching our Cad Moran FCE platform, as well as completing the vital main sale prospective trial. With that, I'll turn it over to Kevin to discuss our financials.
Kevin Williamson: Thank you, Steve. I will now provide a summarized review of our financial results. A full breakdown is available in our press release that crossed the wire this afternoon.
Kevin Williamson: Our revenue is 726,000 in the first quarter of 2025, an increase of 1% compared to 719,000 in the first quarter of 2024.
Kevin Williamson: The increase in revenue was primarily due to an increase in implants for surgical procedure, partially offset by a slight decrease in ASP driven by accountmex.
Kevin Williamson: We remain focused on investing in our growth initiatives and continue to see positive results building.
Kevin Williamson: We believe the upcoming Catamaran SE commercial launch paired with the publishing of our second interim analysis of our main sale study will be growth catalysts along with the continued expansion of our sales force throughout the remainder of 2025.
Kevin Williamson: Growth Profit in the first quarter of 2025 was 323,000 or 44% of revenue compared to 470,000 or 65% of revenue in the comparable year ago quarter.
Kevin Williamson: Gross Margin percentage varied from period to period driven by the absorption of production overhead costs into our standard costs with operating leverage created by lower 6 costs.
Kevin Williamson: Operating expenses totaled $4 million for the first quarter of 2025 as compared to expenses of $4 million in the first quarter of 2024.
Kevin Williamson: Operating expenses were flat due to increases in sales and marketing, offset primarily by decreases in professional fees, stock-based compensation, and insurance costs.
Kevin Williamson: With continued planned investments in growth, including expanding sales force, participation in industry trade show events, prioritizing market access efforts, and driving reimbursement and coverage initiatives, increases in sales and marketing expenses are expected in future quarters.
Kevin Williamson: Net loss was 3.6 million for the first quarter of 2025, as compared to a loss of 3.6 million in the same period of 2024.
Kevin Williamson: While we expect to continue to improve our net loss, the company does expect to incur additional losses in the future.
Now turning to the balance sheet.
Kevin Williamson: As of March 31st, 2025, Cash and Cash Equivalence totaled 10.3 million as compared to 6.5 million as of December 31st, 2024.
Kevin Williamson: Our healthy balance sheet is fortified with ample cash runway to accelerate investment in our growth initiatives, which was further boosted by three financing transactions in Q1 2025, totaling $7.1 million in growth proceeds.
Kevin Williamson: Lastly, as of March 31st, 2025, the company has no outstanding debt.
Steve Foster: I will now turn the call back to Steve for closing thoughts.
Thank you, Kevin.
Steve Foster: We are proud of the progress that's been made and the work that has gone in to uniquely positioning Tenon Medical to grow with this expanding market. Going forward, we will be investing heavily in growth through commercial operations, clinical research, and product refinement.
Speaker Change: I think you all for attending, and I would like to hand the call over to our operator to begin our question-and-answer session with our covering analyst. Satya?
Thank you.
Speaker Change: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line. It's in the question, excuse me.
Speaker Change: You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handsets before pressing the star keys. One moment please, while we pull for questions.
Speaker Change: The first question is from Scott Henry from Alliance Global Partners. Please go ahead.
Thank you and good afternoon.
I guess for starters, when we think about top-line revenues, how would you...
Speaker Change: You describe your expectations for the trajectory through the year. Would you expect sequential growth at recorder and just any thoughts as regards to two Q, you know, at least in broad terms how we should think about the revenue growth there. Thank you.
Speaker Change: Yeah, thank you, Scott. So a couple of different factors. One of we mentioned earlier is the reimbursement environment.
Speaker Change: was privileged enough to attend the recent AMA meeting up in New York City. I do believe that there are clarifications coming encoding that will assist in moving things along in the pre-authorization phase.
You know, when certain physicians submit a patient for pre-authorization, they're simply seeking...
Speaker Change: sort of the thumbs up if you will to proceed with the procedure.
Speaker Change: that has been delayed a good bit because of coding confusion and things of that nature. So we do anticipate
Speaker Change: that will start to resolve. Now, that's not the flip of a switch, right? The coding book comes out in 2026.
Speaker Change: You know, people will be processing this information. So it's not an overnight thing. It's a bit difficult to predict but we do anticipate that'll improve and get better and better as time goes along here and that will contribute to us delivering incremental growth quarter over quarter.
Speaker Change: The second part of that is the building of our team, the onboarding of commercial resources to go out.
Speaker Change: and sell the technology aggressively, engage distributors in different geographies and what have you. And that's really the part that we're focused on. So we anticipate being able to deliver incremental growth as these things develop, you know, the second quarter and beyond in particular, and I think that's the way I would answer your question. And those are the two critical factors.
Speaker Change: Okay. Thank you. I appreciate the color. And then when we think about the SE launch coming in the middle of the year.
You know how?
Will that be an inflection point, or...
Speaker Change: is that something that will help build the platform over the long run but we won't notice a spike at that point just trying to get a sense of how we should be thinking about that product in the short term and in the long run.
Speaker Change: Yeah, we believe it leans more towards an inflection point, right? We launched our initial product, you know, a year and a half to two years ago, you get feedback immediately from the variety of different scenarios that our physicians face.
Speaker Change: and I can't stress enough that the revision component when there's other SI technologies there.
Having a smaller and lower profile.
Speaker Change: Inplant can be really beneficial because you kind of have to work around stuff that's already there in really simple terms. So we do think it's going to be an inflection point. We think it will bring more physicians into the adoption phase of the technology. We've gotten a lot of feedback that people were seeking a lower profile. So we're excited about delivering this technology and we think it will help us tremendously. Thank you very much.
in delivering at the top line.
Speaker Change: Okay, great. Final question, just on the GNA, it was a little lower in the first quarter than the fourth quarter, as well as I believe any of the quarters in 2024. Is that reflective of what we should see for the rest of the year or was there some noise in that number?
I'm happy to jump in here. Scott, thanks for joining.
Speaker Change: I think we're reflective of the corner and what you'll see moving forward with some additional investments and mainly on the sales side where you'll see those investments in the progression of initiatives that we discussed in our remarks.
Okay. Great. Thank you for taking the questions.
Thank you, Scott.
Speaker Change: The next question is from Nicholas Sherwood from Maxson Group. Please go ahead.
Nicholas Sherwood: Good evening. My first question is, how does the new indication for multiple spinal fusion surgeries expand your total addressable market?
Speaker Change: Thank you, Nicholas. Yeah, this is a really important clearance for us. So to be clear, right, it physicians often time.
Speaker Change: because of the way the patient presents shoes to fuse multiple levels of the lumbar or even thoracic spine.
Speaker Change: Right? It could be because of deformity, it could be because of degenerative issues, etc. Right?
Speaker Change: When they do that, they have specific concerns that what we refer to is the bottom of that construct, which is the sacral pelvic part of the anatomy. And one of the challenges there is the SI joint is moving.
Speaker Change: Right, it's moving around. It may be a part of the patient's pain. It may not. But we all know from long experience that if we put any kind of hardware across the joint that's moving over time, the body breaks it down and either shapes it loose or even the times fractures that that hardware.
Speaker Change: The purpose of augmenting a long construct like that with Catamaran is to immobilize the S.I. joint in the short term.
Speaker Change: to protect that hardware that's being placed there. So it doesn't create elucencies, shape, loose, fracture, etc.
Speaker Change: and then set the joint up to seal and fuse in the long term so the SI joint doesn't become an issue for the patient.
Speaker Change: So just wanted to take just a moment to sort of describe what we're trying to accomplish there. It's all about immobilizing, yes I join, healing it so it doesn't move in the future.
Speaker Change: There are thousands of those kinds of procedures done in the U.S. market alone every single year. It's obviously a very big market in the biggest players in spine.
Speaker Change: Participate in that market with their pedical schools, their rods, their inner body spacers, their biologics, their...
their computer-assisted navigation technology, all those things.
Speaker Change: and so, us participating in that space in the sacred pelvic part of
of that time stroke.
Speaker Change: is really meaningful. And so we believe it's a significant increase in addressable market, the way the technology can be implemented in one of these instances. And it really now is about us going out and explaining that value proposition.
Speaker Change: Two complex spine surgeons presenting the data that we have both biomechanical and clinical data and compelling them to look at this as a solution for their patients. So significant opportunity for us moving forward.
Speaker Change: And do you kind of talk about the reaction you've gotten about that approval from your trained physician base and also is there any additional insurance reimbursement work that or approvals that need to be received before, you know, the device can be used in these surgeries?
Speaker Change: Yeah, the reaction from physicians, again it's early, we just got the clearance, etc. But the reaction is a positive.
Speaker Change: because there is a lot of concern about the sacred pelvic component of those long constructs. As a matter of fact, we were just down in Florida, a significant spine meeting down there. And there was a full three hour afternoon session focused exclusively.
Speaker Change: Hey, what do we do in the sacred pelvic part of a construct? What do we do at the bottom of this construct?
Speaker Change: So it's a hot topic, it's a significant issue that's seeking solutions out there right now.
Speaker Change: So the way I would respond to your question is there is a lot of interest. There are a lot of inquiries. There are a lot of opportunities to train. So in those early stages of moving positions towards adopting the technology and making it part of their practice.
As to reimbursement, yes, it's a slightly different reimbursement setup.
Speaker Change: in those types of scenarios because there's obviously a big spinal procedure with a long incision and things like that going on.
Speaker Change: as part of that procedure. In these instances, more often than not, we find physicians want to utilize our technology, what they refer to as bilaterally, right? So there's an SI joint on the left, there's an SI joint on the right.
Speaker Change: in that instance there would be two catamaran implants used in the procedure to immobilize both the left and the right side. And we believe that existing codes for the fusion of the SI joint will be applicable in this scenario. You know, we'll see as things move along, but we anticipate the coding is there and clear for the application of our technology in this instance.
Speaker Change: My last question is, can you kind of talk about the success you've had in targeting physicians for your workshops? I know that you started to develop a more targeted approach to recruiting physicians. Have you improved your capabilities in targeting the right people to
Speaker Change: you know, get more retention rates and more procedures done by the physician that you're
Speaker Change: It's a great question. Yes, we believe so, and there's two big components to that, right?
Speaker Change: One is having the data to target appropriately and we made some investments there. The second thing is to be able to bring training to them.
Speaker Change: There's a big difference between asking a physician to burn their weekend, fly somewhere, say an hotel, get trained, etc., versus being able to bring the technology to them in their own clinic.
Speaker Change: and utilize our synthetic model and do the training right there in a very convenient and efficient way for them. We now have both of those things in place, so we do believe they're targeting better than they were delivering meaningful training in the most cost effective and efficient manner possible for the physician.
Speaker Change: Sounds great. Thank you for answering all my questions and I will return to the queue.
Thanks, Douglas.
Thanks for watching. Bye.
Speaker Change: There are no further questions at this time. I would like to turn the floor back over to Steven Foster, CEO for closing comments.
Steven Foster: Thank you, Satchy. We appreciate your help. And I'd like to thank each of you for joining our Irmene's conference call today and look forward to continuing to update you on our ongoing progress and growth.
Steven Foster: If we were unable to answer any of your questions, please reach out to our IR firm MZ Group who would be more than happy to assist with that. I wish everyone a good day.
Steven Foster: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
John B.