Monogram Technologies Inc.

Greetings and welcome to the Monogram Technologies third quarter 2024 financial results and business update conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow formal presentation. As a reminder, this conference is being recorded. Before we begin the formal presentation, I'd like to remind everyone that statements made in this call and webcast may include predictions, estimates, or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause action results to differ materially. Your caution to not place under-reliance in these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we're not obligated ourselves to revise or publicly reach the result of any reservation of these forward-looking statements, a lot of new information, or future events. Throughout today's discussion, we'll attempt to present some important factors relating to our business that may affect our predictions. We may also review our most recent Form 10-K and Form 10-Q for a more complete discussion of these factors and other risks, particularly those heading risk factors. A press release detailing these results was issued on November 14, 2024, and it's available in the Investor Relations section of our company's website, monogramtechnologies.com. Your host today, Ben Saxon, Chief Executive Officer at Noel Canopy. Chief Financial Officer will present unedited results of operations for third quarter ended September 30th, 2024. And at this time, we'll turn the call over to Chief Monogram, sorry, Monogram Chief Financial Officer Noel Canopy. Thank you.

You may begin. I'm sorry though, you're on mute by accident. Can you hear me?

Yes. Oh, I'm sorry. My phone got caught on mute. Once again, can everyone hear me? Yes. Okay, great. Sorry about that. Good afternoon, everyone. I'm just going to go over a brief agenda of today's presentation. I'll start off with a financial summary, and then I'll hand it over to Ben to go over upcoming milestones, a review of our regulatory strategy, and then open the floor to questions. Next slide, please. So here are some key points on our year-to-date financials. We're sitting on $16.5 million in cash. at the end of Q3, 2024. Our operating cash flow year to date is 10.9 million. That works out to be about a 1.2 million cash run rate, which is on par with what we've had in the year, and we continue that to be the same going forward. The important note for this three-month period was that we had a significant financial raise. We were able to generate $13.99 million from financing activities. The lion's share of that came from a very successful preferred D raise, which was upside. We started looking to raise 10 million and oversubscribed. We ended up raising 13. Thank you for your involvement in that. The greater crowd was really supportive and that puts us in a really good position going forward. We continue to have the same amount of full-time employees of 27, and we have a highly variable cost structure on top of that. The 27 employees primarily, you know, around R&D and the engineering staff. The other engineers that we have are outsourced and can be, you know, turned on and off as we deem necessary. So that's been very important going forward. We continue to have no traditional debt, and we have very minimal short-term warrant obligations that were related to the preferred D-rays. Those are executable in six months and for up to 12 months, so it's not a long-term obligation of any sort. Our out-of-the-U.S. clinical trial cost estimate is about $1.2 million. That's included in the run rate that we expect to go forward at $1.2 million a month. Then we'll get into that in the milestones upcoming. So all things said, we expect to have sufficient access to capital through our short-term milestones. With this raise and our current run rate, we are in a very good position to meet our obligations and in the year at a very strong balance sheet position. So we're very pleased with the activity this quarter. Next slide, please. I'll hand it over to Ben.

Perfect. Thanks, Noel. Really appreciate it. And thank you, everybody, for joining us for today's call. I want to start by just giving some high-level updates and drill into some detail that I think a lot of folks are interested in hearing more about. So to start off with, the objective of Monogram right now is to commercialize the first fully autonomous saw-cutting robot on the market. That's really our clear goal. definitive goal as a management team, as an engineering team. Pretty much every employee at the company right now is solely devoted to making that a reality. As we move to the next slide, to that end, we've made some pretty significant progress to date. So I'm going to kind of drill into first off the submission that's been done. So for those of you who would follow the story, in July, we submitted Our first five, 10 K application to the FDA, uh, that was, uh, uh, submitted, uh, basically following a very aggressive development push a pretty far ahead of schedule kind of verse versus what we had been communicating to the market. And, uh, subsequent to that, uh, submission, we received what's called an additional information request. Uh, we'll also call that an AIR, uh, from the FDA. That was received on September 30th. This was really not a surprise to management. The application was almost 28,000 pages. The FDA really, it's a pretty incredible task to try and review that level of complexity in 72 days, which is how long they took to review the application. And we now have 180 days from receipt of that request to produce the requested additional information, which would put us to March 29th of next year would be the latest that we would be able to reply to the FDA without kind of overstepping the clock. So I want to kind of drill into the additional information request a little bit as much as I can. So as part of the additional information request, The FDA advised us or recommended that we request what's called a Q submission or Q sub meeting. We anticipate that that meeting will take place in December. So the FDA had basically 15 comments that related to various aspects of the system. I would characterize them in different buckets. One bucket would just be, you know, clarification questions about how the system works. Another bucket would be additional proposed testing or not specifically recommending testing, but making making comments that could be inferred to be recommending some additional testing and then just additional clarification points and questions. We have prepared a response a written response to those 15 questions that the company is planning on submitting actually this week. It's incredibly detailed. We have spent probably hundreds of man hours looking into every single meticulous question that was asked, thinking through how we want to address the appropriate testing in cases where we think appropriate testing would be needed. So that document will be submitted to the FDA. Right now it's about 40 pages and maybe 15 to 20,000 words, something like that. So it's a pretty thorough, very thoughtful document. The FDA has about 21 days to respond to that. So that puts us into a meeting sometime in December to go through our proposed response and the proposed testing that's included in that response. We expect that during that meeting, we're going to get a lot more clarity on whether our proposed testing plan will kind of fully address all of the FDA's questions. And that teleconference, we think, is really a critical moment for the company in terms of really de-risking the application. Obviously, nothing's guaranteed, but it certainly would be very helpful to have a conversation with the FDA and have more clarity. And we believe if the FDA takes a favorable position on the testing that we have planned, we think that we have sufficient time to execute the proposed plan. We wanted to really take our time to really be extremely thoughtful in terms of what our plan is. So that kind of tackles the AAR, and I'll be happy to answer more questions on that in the Q&A. The other major milestone update, moving to the next slide, is that the company plans to perform, as we've kind of said many times, an OUS clinical trial. That is proceeding as planned on schedule. So we have applied to run an OUS clinical trial for the fully autonomous version of our robot. We are going to be running that with a group called Shalbi. They're a publicly listed hospital chain. They're listed in India, on the Indian stock market. And that agreement will help us to execute our clinical trial. We're going to be working with Five shall be surgeons at three shall be sites. The goal is to perform surgery on 102 subjects. The FDA is wanting us to look at four soft tissue complications. The acceptance criteria will be an 11.4% incidence. The primary endpoint will be after six weeks with a secondary endpoint of 12 weeks. So within kind of three months post-op, That'll be kind of the follow-up period. As Noel said, you know, on the low end, we expect the clinical trial to cost on the order of $1.3 million. The reason we think it's going to be sort of economical for the company is largely because Shelby uses the same implant as Monogram. So we licensed an implant that we have upgraded and shall be acquired the company we licensed the implant from. So it's a company called Consensus Orthopedics. So this is a clinically established FDA cleared implant, and we are leveraging the same implant. So there's a lot of really nice synergy there. It saves us a lot of money. We don't have to worry about inventory on the implant side. And I should highlight that the clinical trial has been reviewed formally by the FDA. in February. They indicated that they believe the population is generalizable to the U.S. population. So this is really great news. We kind of have, let's call it a belt and suspenders plan to getting clearance. So if everything goes great in the December meeting with AIR and the FDA doesn't feel like clinical data is needed with our application, that's terrific. If the FDA wants clinical data, that's okay. We have a plan to get that data very quickly. And the clinical trial will be helpful regardless because it's a clinical trial for the fully autonomous version of our system. And it'll give us valuable information about our system. We believe that the two critical, what's called critical milestones that would come out of this, obviously, there's certainly risk. But if the FDA were to clear our system, we think that's obviously a very significant milestone. And if the FDA, once we have our first live inpatient surgeries, we think that's also a very significant milestone. So the company is a really interesting inflection point. Moving to the next slide and just kind of detailing what's upcoming. So this year, you know, we've kind of highlighted what we've done this year. The big news was submitting the 510K application, which was a really significant lift. I think it was a really, really strong application. I think the team did an incredible job. For the size of our team, the dedication was really – just terrific. So it was a massive team effort, very happy with where that landed. So right now, kind of the main outstanding thing to do this year is to have a Q-sub with the FDA about that submission that was done in July and continue to push forward on getting clinical trial clearance in India, where we're planning on running the clinical trial. Moving into next year, we have a couple of critical milestones that we anticipate. So we anticipate firstly submitting a second 510K for the fully autonomous version of our robot. And we also plan on initiating the clinical trial that we've been talking about. We expect our first live inpatient surgeries and we expect that clinical trial to move very quickly. Shelby does a lot of volume and patient enrollment as we anticipate will be fairly efficient. The company is also looking to expand its international relationships. The relationship that we established with Shelby is very attractive for the Indian market. We would like to find similar relationships in other large markets with large populations and growing demand for robotics. We think there are a lot of attractive markets that may have, let's say, lower barriers to entry or that are significantly underserved. So we're going to be attending our first kind of major international trade show early next year. And then in terms of just planned launches, you know, we We anticipate that obviously, depending on what happens with the system that was submitted, 2025 may be a launch year or it may be into 2026 for the fully autonomous version of the system. But regardless, we're in a pretty exciting spot with respect to critical milestones. Moving to the next slide, before we open up the Q&A, You know, a big question we get is, you know, just sort of reiterating the investment thesis and the value proposition of Monogram. When you look at the market dynamics, just from a 30,000 foot view, we think that the market has never been better for a solution like we're developing. And the reason for that is the underlying market is fundamentally changing, and it's changing in a very interesting and quick way that we think may be underappreciated by the market generally. So I'm just going to share some select statistics that we think highlight this point. When you look at the percentage of fellowship programs that have access to a MAKO, that number is 70% of fellowship programs have access to a MAKO. If you're going to try and get into orthopedic medicine, large joint reconstruction without a fellowship, it's incredibly difficult. More than 90% of orthopedic residents seek a fellowship. So the front end of the funnel is very much Mako dominated. And then you look at where the robotic adoption is going. We've seen studies that suggest that by 2030, which That's only six years away. One in two knee replacements will be robotic. And then you couple that with the fact that 60% of orthopedic surgeons in the US will be over the age of 65 in a similar timeframe. So the market is changing very quickly. The way we've done knee replacements is not the way we are going to do knee replacements. And we think that the future as it appears today is very much Mako dominated. Mako appears to control the front end of the funnel, right? For any market, whatever's filling up that funnel, that tends to be fast forward that what's going to dominate the funnel down the road. We think Mako has done an incredible job of locking up sort of new entrance into the market. And then if you think about just attrition on the backside of surgeons retiring, and that existing mix, the share of surgeons, kind of that mix going away over time, we think this really lends itself to the future of orthopedic medicine. So with that, I want to open up the floor for questions and look forward to answering any questions folks may have.

Great. Thank you.

At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we pull for questions.

And our first question here is from Tom Kerr from Zacks Investment Research. Please go ahead.

Good afternoon, guys. A question on the out-of-U.S. India trial. I think we're just reading on clearance. Is that taking longer than we thought, or sort of what's the timeline on that, or what are your expectations? And then part two on the OUS trial, if it's approved, it goes on in 2025. Would there ever be a revenue-producing items from the trial, or is that just purely R&D expenses?

Sure. Thanks for your questions. So the, you know, the first point about time to launch in India. Yeah. So we, as you can imagine, the just like in the United States, there is a regulatory agency that has to approve the system for clearance. We have received soft approval to import the unit for clinical trial use for training purposes. The clearance is still kind of in process, but we are working with one of the largest clinical research organizations in the country that has done a really, really good job helping us put together that application. It was a a painstaking application. I think we've done a very good job with that. I would say that India is pretty receptive to technology. I think that there's an awareness of the value proposition of robotics for that market. So we feel like that's on time and at this point don't have any concerns about getting clearance to run the clinical trial. We haven't provided any specific dates for that, largely because we don't want to peg ourselves without having absolute certainty on when we expect that to kick off. But I would say that we're prepping a system. Now that we have clearance to import, we're going to start prepping a system to ship over and start training the five surgeons And we're going to be as aggressive as possible to initiate that trial once we get the clearance. But we would announce the clearance once we got it. In terms of – I think your second question was, is it all cost or is there any revenue opportunity out of it? The clinical trial itself is going to be all cost. Part of that is just the – we want to follow all of the best practices for running a clinical trial. So we really want to, we don't want to have any, uh, economic incentives or anything else. It's really purely just a cost. Uh, we're pretty far removed from the process. So, uh, the clinical research organization is really, uh, and the surgeons are going to be responsible for enrollment. Uh, they're going to be responsible for proper execution of the study. We're, we're really going to be at an arm's length, um, when the trial is actually executed, but we don't anticipate any revenue, but what we do anticipate is, you know, if the trial is successful, obviously that would, uh, we, we anticipate could lead to a clearance in India, which is a very significant market. Um, just to kind of help paint the picture there. Uh, there's a company that's listed on the Korean stock exchange called, um, correct. So, uh, they're a very big player. in the robotic market in India. They guided last year, I think on the order of 100 systems in India. We think the market potential is much more significant than that. We think that we have some, in terms of just how we compare competitively with our system, we think we have some favorable dynamics. But, you know, it's a different market. Obviously, it's cost sensitive. We have some technology we're working on to try and drive down our costs so that we can be as competitive as possible. But it's a very large market, huge population, obviously. And we anticipate post-clearance that Shalbi could be a helpful partner for us to scale very quickly in India.

Okay, thanks for the cover on that. A couple of quick financial ones. So the marketing advertising costs in the quarter was high, obviously because of the preferred stock. Does that go back to normal in the fourth quarter where you're, you know, five digit numbers or six digit numbers?

No. Do you want to take that?

Yeah. So, so Tom, I would say, uh, that was, uh, that's not a, that's not an ongoing thing. So, um, you know, uh, the, the marketing expense was largely to drive, um, awareness of the campaign and the marketing spend is really been materially reduced since, since that was closed.

Okay. That makes sense. Just want to clarify. Yeah.

And one more quick, I will say, uh, you know, one thing I would just say kind of a nice energy out of it that I think is I think is a little bit underappreciated. So I just want to kind of highlight the, some of the value propositions of our system or potential value propositions. You know, one of the, one of the things we're really thinking a lot about is, and the team is really devoted to is having, we have an aspirational goal to have the most accurate system on the market. Now, obviously that would need to be clinically validated and, and this is just an aspirational goal, but, If that turns out, for example, to be the case, we can demonstrate that clinically speaking, our robot is very accurate. We think that the marketing that's been spent to date over the life of the company, it feels like we have somewhat of an intangible asset in our newsletter and in the audience that follows Monogram. And we think that we will potentially have the ability to market our system in ways that could resonate with our audience. So I think it's an undervalued thing for us to have this support. So just kind of a note there.

Yeah, that's an interesting note. Quickly, and I'll get back in the queue, the burn rate, you said $1.2 million throughout this quarter in 2025. But then you said you're funded enough to achieve short-term milestones. But with your cash, that's more than 13 months. Will you say short-term – is there a better way to say that, that you're funded until the end of 2025? Or what do short-term milestones mean? Why not long-term milestones?

Yeah, sure. I think, you know, we – I think it's always important for us to – you know, there's kind of a – we don't want to run things to zero. There's kind of a point at which we always want to make sure that the tank is – you know, full, so to speak. So I think that's part of it. You know, we think that there may be opportunities, you know, if we continue to execute on critical milestones. You know, one of the reasons we went public was to basically help clean up the cap table to become more investable by large strategic players. We've alluded to some of the milestones being helpful for that. I think that, you know, we have the ability to accelerate our development, but that would be in part tied to access to capital. So for example, what we've said is that we want to be a multi-application system, right? So when you think about returns on invested capital, it is incredibly accretive for the company to deploy new applications on our system. So for example, a partial knee, if we could develop a, we see a, for example, an opportunity for a press fit partial knee there, there has not been any company in the space that has commercialized the press fit partial knee, which is kind of the perfect application for a press fit implant. Uh, So, you know, there is a possibility that we could step on the accelerator if we have the right opportunities and partners. I hope that makes sense. So, you know, the burn rate could go up, but it would be tied, we feel, to very high ROI R&D capabilities, I would say. So if we just sustain it where we are right now, yeah, I think we have an attractive runway. But if time is of the essence to deploy new applications.

Got it. Thanks. I'll jump back in the queue.

Once again, as a reminder, if you would like to ask a question, it is star 1. At this point, I'd like to turn the floor over to Larry Hull for any questions over the web.

Our first webcast question asks, can you speak to any strategic interest in your technology? How many and how advanced are any discussions?

Sure. Thanks, Larry. So, what I would say is, you know, just kind of going to the last slide and, you know, you know, just reiterating the market dynamics, right? So when you look at the market right now, 70% of fellowship trained surgeons are being trained with a MAKO system. And you kind of think about the front end of that funnel. And then 60% of orthopedic surgeons will be 65 years old within the next seven years. So you kind of think about the attrition on the back end of that funnel. So we anticipate, uh, you know, that that was always the investment thesis for monogram was that. Uh, we always felt like strikers value proposition with Mako was obvious. Uh, we believe they have the best robot on the market and we believe that their robot, um, has some limitations that can be overcome by a next gen system. And if the market dynamics and what's called the competitive landscape is shifting as quickly as we think it is, we think it's only kind of a matter of time before that awareness drives interest in monogram. Now, whether it has already driven interest in monogram is difficult for me to speak to. I would just say monogram has what we think is going to be one of the most attractive orthopedic systems on the market in development. I think the engineering team has done an incredible job. I think our registration is very fast, very efficient. I think our cutting is going to be very fast, efficient, safe, accurate. Our laxity planning, all of it. I'm incredibly proud of how our system is performing. We've had Now, well over 20 surgeons come in and use the system and verify and validate its performance. We think the feedback is really starting to resonate. We think that we will convert surgeons to our platform post-commercialization. We think the surgeons we convert will be both high volume and low volume. And we think our robot will have broad market appeal. So, um, you know, I think, um, I think for somebody on the outside looking at Monogram, I think it's just really important to kind of think through all of those things. I think it's really important to look at utilization of systems on the market. So Stryker has very high utilization of the Mako system, uh, you know, on the order of 60 plus percent of Mako of robotic surgeries that Stryker does or of surgeries that Stryker does are robotic. the utilization of any other system on the market is much, much lower than that. And so if we move to a world where one out of two joint replacements, knee replacements is robotic, we think that just the dynamics of not having a well-utilized robot will start to cause a squeeze. So I would say, yeah, I mean, we're in constant communication with our providers you know, peers in this space. And I think that's what we've said publicly.

Our next webcast question asks, can you provide any more details on the timing of the FDA clearance, such as what are any outstanding items?

Perfect. So the big thing right now, you know, we submitted to the FDA in July. The FDA came back to us in September after 72 days with a request for additional information. We were largely expecting that. We think we can address all of the FDA's information requests if they accept our proposed test strategies. So we're cautiously optimistic, but we need to meet with the FDA, have a teleconference, and review our proposed strategy in detail. we have until March 29th of next year to do all of the proposed testing we plan to do and respond to the FDA. And then the FDA would then have, so their target is 90 days from a submission to get approval. So, you know, 92 minus the 72 days that have been used gives you some idea of when we might hear back but you know conservatively speaking we would expect to hear back in the second quarter of next year if we use the full clock to uh to submit um once we have this december meeting i would note that you know we're going to be as aggressive as we can uh to get uh to get the the response in and give the fda the data that we plan to to submit so That would be sort of the timeframe that we would expect to hear back by, let's call it the second quarter of next year. If the FDA requests clinical data with this submission, which was kind of always the risk, we have our plan to do the clinical trial in India in a going from a slow simmer to soon full on ready to go. So we're in a pretty good position to address what needs to be done to get this thing cleared as quickly as we can.

The next question asks, what do you anticipate the timing of the OUS clinical trial to be?

Sure. I want to be really careful how we answer this because I want to, anytime you're reliant on a regulatory agency, there's some variability that comes with that. We've already submitted and we have received, just actually today, I got a notice, informal notice that We received approval to import the system to start training surgeons for the clinical trials. So what's been communicated to me by the CRO, who is well-versed on these matters, is that the application is moving as expected. It's going through the process. And we're eagerly anticipating kind of more news on that front. But I would say certainly by next year, we would be surprised if we weren't doing live patient surgeries.

Our next webcast question asks, if everything goes right with the FDA, what could 2026 revenues look like for Monogram?

Sure. So we kind of think about that in two buckets. And I would caveat, you know, Tom was asking about the burn and capital. So much comes down to capital availability. And obviously we're sensitive to raising capital at prices we think do not necessarily reflect the intrinsic value of the company. But, you know, obviously the capital needs of the company itself. So With those caveats, I'll say that we expect initially to grow faster outside the U.S. than in the United States. And the reason for that is just the time it's going to take us to kind of fully seed the U.S. accounts that we're targeting with implants. And it's a little bit of a longer time to get through all of the the hospital buying groups that we've been, um, we have surgeons that have relationships with. So, uh, and also the servicing of us, uh, revenues is a little more involved. So, whereas OUS. Shelby already has the implant. Uh, we would be a little bit more of a open platform model where we would supply the robot and sell the consumables, uh, and, uh, and some software piece. So all that to say, if you look at the comps in India for the Corexo system, they did 100 units last year. So obviously, India is a very attractive market. I'm not saying that that's what we would do, but we think that we could move pretty quickly in India if the value proposition makes sense with Shelby. That's what I would say for OUS. Domestically, our plan is we're targeting five sites initially. So that would be five blaze surgical systems. We have a range of surgeons of various volume levels. We have one surgeon who's quite interested in our system who is a pretty well-known robotic user that does a lot of volume. You know, it's going to be a mix, but we haven't provided any guidance yet on where we see revenue in 2026. But we think we'll be in a – we think – put it like this. I think we have a market – I think we're going to have a problem of meeting demand and kind of less trying to drive interest. I think we'll have a problem where we won't be able to fulfill demand. That's what I anticipate, but – We'll see when the time comes.

The next question asks, what other international markets are you targeting?

Sure. So that's why we're going to Arab Health in January. So, you know, when you look at some of these large markets, like, for example, you take Indonesia, which is a massive population. There's a bunch of pretty attractive markets in South America. We think parts of even the Middle East, eastern, far eastern Turkey. If you look at where Corexo has done really well, we think that they have kind of blazed the trail in terms of markets that are attractive for robotic adoption. So those are some of the areas that would be a focus for us outside the United States. Uh, we're, we're going to start attending trade shows that'll help us, uh, build the relationships we need to, to launch, uh, in some of those markets.

The next question asks, what are the cost saving benefits of in-boss robotics system to hospitals and surgeons?

Sure. So the, the biggest, uh, cost saving for any robotic system is, uh, Well, it really is the clinical value proposition of the robotic system. So the reason that one out of two robots will be robotic by 2030 is because certain types of robotics have actually changed the surgery, fundamentally changed it. So Mako uses a CT scan as the preoperative information to basically generate a personalized custom surgical plan for that patient. And they're one of the few robot companies in the world that use a CT scan. And what Mako has shown is that if surgeons personalize the surgery, that seems to enhance the patient satisfaction outcomes, surgical outcomes. So it's not a surprise that a one size fits none approach to surgery and giving everybody the same knee doesn't really cut it, what Mako has shown is that if you customize the surgery, patient outcomes seem to be enhanced. If you think about it in a very competitive landscape where orthopedic surgeries, joint reconstructions are highly profitable surgeries for hospitals, the ability to have a robotic system that enables a a surgery to be executed seamlessly, without risk, with minimal learning curve, kind of plug it in, and the surgeon's efficient from day one kind of thing, that could be very valuable to a hospital. So the most real fundamental value proposition from a cost savings is just, it's really the marketing side of it. It's enabling surgeries that makes a clinical difference. And then it's when you think about kind of the long tail risks of surgery, you know, adverse outcomes, you know, cutting an MCL, cutting a patellar tendon, doing something bad, a system that really mitigates those risks drives a lot of cost savings. So that'd be the first thing. The second thing, you know, I would say is Right out of the gate, our system is going to be hard for us to be competitive. When you look at the unit economics of just our consumables, as we're getting scale, obviously, we're going to be at a disadvantage versus our peers in terms of buying and getting the realizing efficiencies of volume. But we do have some advantages. So For example, the Mako system requires a tool change. So to do the posterior cut and the distal femur cut with the Mako system, you need a right angle adapter. And what a lot of surgeons will do is they will preload that adapter with a blade. So the surgeon will start the surgery, switch the blade, switch to the other tool, that tool will be preloaded. And sometimes even a rep will preload the the tool that was used with a different tool. So you could use three blades in a single case. And I can tell you that those blades are not cheap with our pricing analysis. So monogram system is just a, there's no tool change. It's just one blade per procedure. So we see some economic advantages there. Pretty much everybody is using similar fiducials to navigate the knee and other instrumentation. So there's not a huge opportunity there, but as we think about kind of the next gen and where it's going, we think there's certainly opportunities to potentially eliminate the fiducials, that consumable and lower cost. Then you think about cost savings, it's also just efficiency and time, right? So the faster you could do a surgery, the more your robot increases throughput the more competitive it is and kind of a head-to-head matchup. So we think our robot is certainly competitive, especially as we have scale and more purchasing power. But clinically speaking is where we think the rubber meets the road. So if you think about a large strategic and you think about the servicing costs to kind of manage a deployed robot base, right? For some companies in the space, they have thousands of robots that they have to manage and service and calibrate and take care of. If your robot is only optimized for a single application, let's say total knee, but it's not optimized for hip or shoulder or whatever, that becomes very inefficient. So we think that over time, as we become multi-application, having... let's call it a best-in-class piece of hardware that scales to other clinical applications will be a significant cost savings just from a distribution standpoint and service standpoint, training standpoint, cross-training robot operators on multiple applications. There's all kinds of interesting synergies. So a long-winded way of saying we think we have some advantages.

The next question asks, do you have to train surgeons once you receive clearance and start to commence commercialization?

Yeah, but one of the, so one of the advantages of our system is that we, you know, kind of the, the training required to be an expert in our system or the learning curve we think is going to be very fast. So we think the number of cases required to learn how to use the system is minimal. To just kind of give you some examples. So as part of our verification validation, when we submitted to the FDA, we had to have surgeons come in and use the system. Many of the surgeons that came in had never used the system. And we took them from a quick training session to doing surgery on a cadaver and the data for accuracy and all sorts of protocols that were being run were run with a surgeon who had only used the system basically that same day. So that's how much confidence we have in the system. And we think that training is, the required training for the fully autonomous version is pretty minimal. There really is minimal skill required to execute the cuts. So I don't, I think, I don't know, Larry, if you were, I don't think you were there, but we did, we had an analyst day not too long ago. And at the analyst day, we actually had Dr. Eunice's 13 year old daughter run the robot for the bone prep. So all of the cutting was done by a 13 year old girl who didn't know anything about a knee replacement. So we're really going to get to the point where the surgeon is just sort of like autopilot on a plane. telling the plane where to go, and the plane kind of takes off, flies, and lands pretty much on its own. Kind of a similar thing with our system. The surgeon will tell the robot where it wants it to put the cuts, but outside of that, it should be pretty intuitive.

Next question asks, what is the cost of the EMBOSS robotic system Is this a razor slash razor blade business model?

Sure. So we haven't disclosed what our target ASP is, and it's going to be pretty variable. And I should say that the market in the United States is changing. It used to be that robot companies like Mako could charge a million dollars per system. What they've been transitioning to is more of a – a bundling where they offer hospitals and ASCs discounted pricing for use of the robotic system. So utilization drives economics for the hospital. And they essentially give the robot away in exchange for use commitments. So that's the direction the model is going. And yes, it is a razor razor blade model. So the capital equipment can certainly be an attractive business, but the money is made on the consumable, which in our case is the robot consumables and the implant consumables. And we think that some companies in our space are doing a very, very good job monetizing the robot consumables in addition to the consumables. to the implant. So that's really where the money we think is going to be made is, uh, utilization of the system and selling the implant.

And our last question asks, does it matter that knee surgery is an elective procedure as you look to rapid adoption once cleared?

So, um, I mean, the, uh, the reality is that, um, Even when we look at like, let's say COVID, which had a material impact on how the knee reconstruction business and joint reconstruction, it wasn't that the demand went away. It was just that the demand got deferred. People who need a knee replacement need a knee replacement. And I think when you look at the biggest barrier to surgery, it's a very real fear that frankly, I would have two of amputation. I mean, once you kind of fully appreciate what's happening in a knee replacement, you're, you're taking bone and you're, you're cutting it in a way that is, is permanent. You're never going back. Um, that is a very scary thing. And so our, our goal is to try and over time turn knee replacements into LASIK surgery, right? If we have a system, That is very, very accurate, that requires minimal skill, and that gives surgeons all the tools they need to carefully and appropriately plan where to put that implant so the patient has the highest likelihood of being satisfied and can execute that plan with minimal risk to the patient. We think that that's really the best we could do for the space and people who maybe are sitting on the sidelines, not getting any replacement because it's elective and they're just kind of suffering through. We, we really want to have a solution for those people to get their life back. Because when you, when you get a knee replacement or a joint replacement and it goes well, there's so many people that I've talked to that it's been game changing. It's enhanced the quality of their life tremendously. So that's really our vision. Our vision is to basically make knee replacements, a surgery that is not, is not so scary is basically just almost on autopilot. And part of, part of what happens has to happen for that to be a reality is that the, uh, surgeons, just more surgeons need to use robotics. And, uh, you know, a lot of people will say, well, Robotics haven't really proven anything clinically. And that's true if you use a robot to just do what you could do with manual instruments, right? If you just use a robot to do generic knee replacements, yeah, the value proposition isn't really that significant. But if you use a robot to personalize the surgery and really in ways that are transformative. We think that's where the value proposition is starting to showcase itself. So hopefully that helps address that.

Let's conclude the question and answer session.

I'd like to turn it back to management for any closing comments.

Terrific. So I just want to thank everybody for joining us this afternoon. The team has been working very hard to execute our objective. And our objective is very clear. We want to commercialize the first fully autonomous saw-based cutting robot on the market. And we believe that a solution like what we're building has an increasing market need. We think the dynamics of the market are shifting very quickly. We believe most younger surgeons coming onto the market use robotics and the predominant robot they use is Mako. And we think as you have the demographic trends kind of shift in the orthopedic space and more surgeons who are kind of used to doing things the old way, retiring, we think that the need for what monogram is building is going to become more and more acute. So We think time is on our side, and we're just going to continue putting our heads down and executing and doing everything we can to get clearance as quickly as possible. So really, really thank you for your support. We will be in touch with hopefully some updates over the coming months as we meet with the FDA and hopefully have additional news for our clinical trial. So with that, thank you. Really appreciate everybody's time.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.