Myomo Inc.

Q1 2023 Earnings Conference Call


spk03: Good afternoon and welcome to the myOMO first quarter 2023 earnings conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference 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 star then one on your telephone keypad. 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 Golodetz. Please go ahead.
spk01: Thank you, Operator, and good afternoon, everyone. This is Kim Golodetz with LHA. Welcome to the MIOMO First Quarter 2023 Conference Call. Earlier today, MIOMO issued a news release announcing financial results for the three months ended March 31, 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 or call LHA at 212-838-3777 and speak with Carolyn Curran. With me on today's call from myoma are Paul Godones, 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 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 they involve and are subject to certain risks and uncertainties and other factors that may affect myeloma's business, financial condition, and operating results. These and additional risks, uncertainties, and other factors are discussed in my own most filings with the Securities and Exchange Commission, including the Form 10-Q for the quarter ended March 31, 2023, and subsequent filings. Actual outcomes and results may differ materially from what's expressed in or implied by these forward-looking statements, except as required by law. MyOMO undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. It's now my pleasure to turn the call over to MyOMO CEO, Paul Godonis. Paul, please go ahead.
spk06: Thanks, Kim. Good afternoon, everyone, and thanks for joining us. As demonstrated by our Q1 financial results, we had a very strong start to the year. Decisions we made about advertising and reimbursement strategies, along with the actions to control costs, have begun to pay off while positioning us well for both top-line growth and improved bottom line in 2023. Product revenue in Q1 2023 was $3.4 million, which met our expectations of 20% year-over-year growth in MyoPro sales. We increased our patient pipeline with more than 400 new candidates entering the process of obtaining a MyoPro. 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 MyoPro in the past, and we did this while spending 33% less on direct-to-consumer marketing. In turn, our cost per pipeline ad is down 53% from the first quarter of 2022 and down 50% from the fourth quarter of 2022. These metrics are all trending in the right direction. As you may recall, Earlier this year, we modified our pipeline focus to patients who have insurance from carriers that have paid for the MyoPro in the past. We received 122 authorizations and orders during the quarter, which is up 30% 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 continue 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 MyoPro, and 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 Riser Medical and China Lead Ventures were able to move forward and launch the JV startup activity for Jiangxi Myomo. We've begun the process of providing technical documentation and know-how so that the JV staff can establish its local manufacturing and distribution operations. The JV is also starting the process to obtain regulatory approval from the National Medical Products Administration to begin offering the Myomo product line to rehab hospitals, and to patients. As a reminder, the JV contract calls for more than $10 million in additional license payments over the next decade, and Myomo shareholders have a 19.9% equity stake in Jiangxi Myomo, with our Chinese partners putting up all the capital to fund this business. Here in the U.S., we continue to work toward our goal of securing Medicare Part B coverage for MyoPro, ultimately as a lump sum payment, but in the interim more likely as a rental because that's how we're currently classified by the Centers for Medicare and Medicaid Services, or CMS. In January 2023, CMS issued a public notice regarding new rulemaking 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 benefit category, if made, could lead to lump sum reimbursements. In the meantime, we move forward as recommended by CMS staff to make the MIOPRO 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 submitted for publication to support the reimbursement of the MyoPro for Medicare beneficiaries. While I can't go into details regarding the research until publication, both studies add to the body of research that supports the safety and the effectiveness of the MyoPro. 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 payment. To increase these chances for success, these claims are for reimbursing myopros and rental and are being processed by the DME-MACS. 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 which triggers a manual review of the patient's medical necessity criteria and their chart notes. In addition, we're in the process of identifying and evaluating four 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-MACs 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 towards billing contractors, we believe that coverage of the MyoPro for Medicare Part B beneficiaries would address the issue of equitable treatment of these seniors, since others with Medicare Advantage, VA patients, and those covered by various private payers are able to obtain a MyoPro and improve the quality of their life and their health outcomes. Now I'll turn the call over to Dave Henry, my OLCF own, for more detailed discussion on our financial results. Dave? Thank you, Paul, and good afternoon, everyone. Let me start my remarks with a review of our first quarter financial results. Total revenue for the first quarter of 2023 was $3.4 million and was comprised solely of product revenue. This was down 11% from the prior year quarter, which included the $1 million partial payment of the technology-based from our joint venture partner in China. 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 recognized revenue on 80 units in the quarter, which was an increase of 13% over the prior year. ASP 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 with 65% in the prior year quarter and 70% in the fourth quarter of 2022. We realized record international revenue in the quarter, which represented 20% of product revenue. The remaining 10% of revenue was from the VA and domestic O&P channels. Backlog, which represents insurance authorizations and orders received but not yet converted to revenue. was 176 units at quarter end, up 10% compared with the prior year quarter, and up 7% sequentially. Our patient pipeline increased to 855 candidates in the first quarter, 28% from the year-ago quarter, which has been revised to reflect only previous payers. As Paul mentioned, a record 438 patients were added to our pipeline in the first quarter, 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 exited 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 this also contributed to the higher number of pipelines. We'll be closely monitoring this metric in the coming months. Gross margin for the first quarter of 2023 was 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 quarter a year ago's gross margin was also benefited by the million dollar partial license fee. 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 headcount reduction in January, as well as lower 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 cost for pipeline and ad decreased to $1,579, which is down 53% compared with the prior year quarter and down 55% sequentially. 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. Net 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 cents 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 equivalents under GAAP and are included in our weighted average shares outstanding. None of the pre-funded warrants have been exercised as of today. The adjusted EBITDA offer the first quarter of 2023 was 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 Turning to our cash position, cash and cash equivalents as of March 31st, 2023 were $9.3 million. Cash 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. For a form up of the license fee payment, we entered the second quarter with approximately $11 million in cash. As a result of this payment, we expect record second quarter total revenue. With the increase in backlog in the first quarter, we're in position to grow second quarter product revenues year over year and sequentially. We continue to believe that product revenue growth for the full year of between 20% and 30% is sustainable. With that financial overview, I'll turn the call back to Paul. Thanks, Dave. Well, as I outlined in my recent shareholder letter, this year marks 10 consecutive years of revenue growth for myOMO. We expect another year of growth based on the size of our patient pipeline, and we plan to meet growing demand with increased operational efficiency and lower cash burn. Our actions earlier this year to focus on the highest yield candidates in the pipeline, to lower the cost of growing the pipeline, and to reduce our operating expenses should enable us to reach these financial goals for the course of the year. So with that business and financial overview, we're now ready to take your questions. Operator?
spk03: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
spk06: 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 Investor Relations to set up a time. Okay, operator, we're ready for the first question whenever you are.
spk03: Our first question comes from Ben Hainer from Alliance Global Partners. Please go ahead. Good afternoon, gentlemen. Thanks for taking the question.
spk04: First off, for me, can you talk a little bit more about the implementation of the virtual waiting room? And, you know, maybe if I heard you right, you think that there may be some impact to the the pipeline drops. Can you kind of explain why or speculate on why that may be?
spk06: So we've been implementing this new technology so that when someone sees one of our ads, whether it's on television or social media, or they go to the website and they reach out to our call center, which is in Texas, we'll have an initial discussion with the patient to understand what their insurance, their diagnosis is, and then ask them if they would like to participate in a 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 what we call an online waiting room, and we'll have an available clinician, one of our certified process orthotists, who 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 avoids having to try to set up an appointment, which might be the next day, might be a week or two later, so people can immediately be evaluated and consider whether or not they'd like to be a candidate for the MyoPro. We explain the process they have to go through. They have to go get an appointment with their doctor face-to-face. They have to get their chart notes, a written order, and so on, in order for us to move forward with 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 provide them with additional information. So we're seeing the tradeoff of the convenience of it versus the effectiveness of having people in the pipeline. And there may be other factors that we're just not aware of. People may have other health issues going on and they want to take their time and considering moving forward with the MyoPro. So we keep them in our database. Yeah, so the cycle time between lead and that initial telehealth evaluation decreased pretty substantially in the first quarter. And what we're asking ourselves is whether that decrease in cycle time was really time that a patient might use to that they were using maybe a quarter, two quarters, three quarters ago to think about where they want to go forward, talk to their families, things like that. Because patients always drop 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 now just sort of kind of, you know, increase pipeline assets and increase drops because patients that haven't had really the time speak to their families before that initial telehealth evaluation.
spk04: 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 or diagnoses that have come through with the virtual waiting room versus previously, or is that kind of?
spk06: It hasn't changed at all. Yeah, Ben, it's been pretty stable. I mean, the majority of the candidates who reach out to us have hemiparesis due to a stroke. 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.
spk05: Okay.
spk04: Got it. And then lastly for me, on your discussions with the DME MAX, 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 DME MAX side, any more color that you can provide there?
spk06: Well, I would say I thought we had a very good meeting. It was a number of participants from the DMEMAC medical director staff, from what's called the PDAC, some of their professional staff, including a certified prosthetist, 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 the criteria for 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 pointed out that these patients did improve the relevant endpoints by having a myopro. These are patients who are seniors who have Medicare Advantage plans, so they fit in that over 65 category, which is important for the DMAT max in making their decisions. Okay. Got it.
spk03: Well, thanks for taking the questions, gentlemen, and I'll jump back in queue. Our next question comes from Scott Henry from Roth Capital. Please go ahead.
spk02: Thank you. Good afternoon. A couple questions. I'm starting to look at the model through the new funnel of pairs with a 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 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, you know, assuming I'm looking at these numbers correct, but it looks like I saw a higher percent of backlog dropouts and a higher percent of, you know, lost patients who were in the cumulative reimbursement pipeline. What are your thoughts on those numbers? And I'll be very early at this point. Hi, Scott.
spk06: It's Dave. 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 about sort of the pipeline of why we thought that the churn 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 backlog, we did have a higher percentage of people drop out of the backlog in the first quarter. We did have a large number of people from the standpoint of their medical conditions changing, which was a reason for dropouts. We had a few, I won't say it was that many, I'll 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 that were more older patients in the backlog that were with payers that weren't considered good payers anymore. And we decided to discontinue any efforts where people were just spending resources, or spending their time trying to collect. So we dropped a few of those. So those are the primary reasons for the change in the backlog. But aside from those handful that dropped that I would say that are directly related to our strategy to only focus on previous payers, The rest of the change was just really due to a higher number of people with things going on medically than we'd seen in prior quarters.
spk02: 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 waiting 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 going to 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?
spk06: Yeah, and I mean, I think – I think that's correct. I think it would also depend on the continued success of the lead generation if we are trying to adhere to a budget. And so we're trying not to spend more than we need to to generate leads. And so that will be a constraining factor, which I think will help keep the cost of pipeline ad down. But the question will be is, will the number of ads continue to be, you know, you know, where they've been. So we're kind of learning as we go with this new methodology, but we're encouraged by the results so far in first quarter.
spk02: Okay, great. And then, Dave, I think you said you're looking for 20% to 30% 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
spk03: 2024 yeah no that we we're not uh we're not assuming anything regarding uh okay uh great i think that should do it for me right now thank you for taking the questions thanks scott the next question comes from jim sudoti from sudoti and company please go ahead hi good afternoon thanks for taking the questions um
spk07: So it seems like you're attacking the reimbursement issue on multiple fronts. With the DME max, if you are approved as a rental, do you have any sense on what the length of that rental would be or what the monthly payment would be?
spk06: So typically with DME 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 that the patient continues to use the device during that period of time, and then we bill monthly. So we don't know how much they would pay. So that's why we've submitted a couple of claims. We're going to submit a couple more to see what the results are. Okay. Sorry. Sorry.
spk07: Go ahead.
spk06: Yeah, I was going to say that according to Medicare, you know, their billing manual, what they, you know, 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 a little bit of a bump up around 5% for rental payments because, you know, they try to take into account the time value of money. So, So what you might get in terms of a benefit in terms of the patient, if they go through all through 13 months, 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 post-delivery to try to make sure that their outcomes are maximum.
spk07: Okay, that makes sense. Could there possibly be a situation where you could get approved in one region but not in another?
spk06: Yes, that could happen because there are four regions. You should have their own medical directors, and that's why we met with all four medical directors presenting 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.
spk07: And do they coordinate with regard to the reimbursement amount, or could those vary from region to region as well?
spk06: They could vary from region to region. I know that my understanding is that the medical directors regularly conference with each other, but I don't know if they may make distinctions between each different region.
spk07: Okay. And if you do start getting reimbursed from one of the regions, will that help you with the private payers?
spk06: 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. It says, look, Medicare standard fee for service is 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.
spk07: Okay. All right. And then switching to the international sales, 20%, which is I think the highest I've seen in a while. Is that all from Germany?
spk06: Yeah, most of this journey we actually had, we talked about the National Disability Insurance Scheme approval. That was revenue in the first quarter. And we also, we don't really talk about it, but we did a sale to another European country. It was more from a research standpoint. So it's not one that we're expecting to continue, at least in the near term. So it's more of a wow. Yeah, the bulk of the sales are from Germany. We've been expanding our team of business development managers and clinical trainers and OMP locations that know the myopro in Germany, and that's been working well.
spk07: 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?
spk06: 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.
spk07: Got it. Got it. And were you surprised at all to receive the $1.7 million payment from the Chinese joint venture? Because I know on the last call you seemed a little hesitant regarding that one.
spk06: Surprise, I don't think is the right word. I think we were pleased. We're glad that they're finally able to move forward. I believe that they needed the government, the conditions to be right, I think, for them to start up a new business venture.
spk07: Right. Okay. All right. Well, you know, it seems like, you know, revenue is going up, expenses are going down. So, I mean, it seems like things are moving in the right direction. So, you know, hopefully those trends continue.
spk03: Thanks, Jim. Once again, if you have a question, please press star then one. Our next question comes from Edward Wu from Ascendant Capital. Please go ahead.
spk05: Yeah, thank you for taking my question. On the China joint venture, is there any timeline for the next process and when would you possibly get additional revenue from the joint venture?
spk06: So we are having weekly team calls of our engineering and operations team, regulatory, clinical team with the China joint venture staff. Their next steps really to obtain NMPA approval, that's the equivalent of the Chinese FDA, to be able to market the devices there. We don't know exactly when that would happen. And the other key activity in parallel is to establish, especially the manufacturing operations and the supply chain, So we're 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. Don't have a time frame when production would start yet because it's only been about 30 days since we've kicked off this joint venture project. The key item is the NMPA approval. We don't expect that they'll begin risk manufacturing before knowing that they're going to get NMPA approval to proceed.
spk05: Great. And my last question is, as a reminder, where does the joint venture have their distribution rights? Is it only in China?
spk06: It's China, Hong Kong, Taiwan, and Macau.
spk05: Great. Well, thanks for answering my question, and I wish you guys good luck. Thank you.
spk06: Thanks, Ed.
spk03: This concludes our question and answer session. I would like to turn the questions I'd like to turn the call back to Paul Godonis for closing remarks. Please go ahead.
spk06: All right. Well, thanks, Operator. Well, in closing, I just want to highlight what makes MyoMo a special company. We have a large unmet market opportunity to assist these individuals with upper extremity paralysis, and there's a growing awareness among clinicians of the MyoPro's utility. We've combined the use of digital technology with a targeted marketing approach to lower the cost of providing the MyoPro to these patients. Our international sales are growing, as you heard today, helped by the recognition from payers of the use of the MyoPro to improve activities of daily living. We're making good progress with CMS and expect to have more robust reimbursement in the U.S. in the near term, while at the same time, we developed an excellent track record of obtaining reimbursement from other health plans in the U.S., and we continue to innovate in product design and our business processes to operate more efficiently as we scale the business. Again, thanks for your continued interest in MiOMA, and have a good rest of your day.
spk03: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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