Myomo, Inc.
Q1 2018 Earnings Call Transcript

Published: 9 May 2018

[Operator:]

Good afternoon and welcome to the Myomo Inc. First Quarter 2018 Earnings Conference Call. All participants will be listen-only mode. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Vivian Cervantes, Investor Relations. Please go ahead.

[Vivian Cervantes:]

Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statement. All statements, other than statements of historical facts are forward-looking statement. The words anticipate belief, estimate, expect, intend, guidance, confidence, target project and other similar expressions are used typically 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 Myomo’s business, financial condition and other operating results. These include but are not limited to the risk factors and other qualifications contained in Myomo’s filings with the Securities and Exchange Commission towards your attention and directive. Actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Myomo expressly disclaims any intent or obligation to update these forward-looking statements. At this time, it is now my pleasure to turn the call over to Mr. Paul Gudonis, Chairman and Chief Executive Officer of Myomo. Paul, please go ahead.

[Paul Gudonis:]

Thank you Vivian and welcome to all of you. Thank you for joining us at our first quarter 2018 earnings conference call. I’m joined today by Ralph Goldwasser, Myomo’s Chief Financial Officer, who’ll provide a discussion of our financial results and also be available for your questions after our prepared remarks. We issued a press release with our first quarter earnings results soon after the market closed today. A copy of this press release can be found in the Investor Relation section of our website. After completing our follow-on financing in December of 2017, we increased investments to scale up operations to address this large opportunity we have to address the needs to restore function to individuals who suffered upper limb paralysis. I’ll in to the details of the sales, marketing, reimbursement activity in a few minutes after I review our quarterly results with you. In the quarter ending March 31, 2018, total revenue was $313,000, up 45% from the year-ago quarter. The first quarter is typically our slowest period, however our product revenues increased by 56% over the same period a year ago, and revenues in this quarter were mostly reflected results of sales, marketing and related insurance reimbursement efforts which began back in 2017 for these patients. Our gross margin came in at our target 65% and were pleased that we ended the quarter with a strong cash position of just over $14.1 million, reflecting a 3.6 million of proceeds from the exercise of warrants issued in connection with our follow-on offering. Let me now provide you with a review of our first quarter operational activities. We’re investing our capital in to four primary initiatives for revenue growth; one, increased sales and marketing; two, our new product development; three, clinical studies and reimbursement support; and four, international expansion. Since January 1, we more than doubled our field sales team. We’ve gone from three to eight business development managers and were planning and hiring a few more in the coming months. Since the beginning of the year our business development team has signed up another 13 new orthotics and prosthetics locations including major O&P clinical providers such as Wright & Filippis with locations across the State of Michigan. We collaborated with O&P provider, GRE and an initial marketing campaign to conduct patient screening days to identify potential users for the MyoPro. And based on these encouraging results, we’ve now announced over 20 additional screening days at major cities across the country as listed in our website. And number two, in terms of product development, we introduced the MyoPro 2 for adults last year and we’re preparing to announce a program for adolescents with arm and hand paralysis due to cerebral palsy, Brachial Plexus shoulder nerve injuries at birth and other medical conditions. We’re also currently testing prototypes of our upcoming pediatric size device which we began developing after receiving a grant from the Children’s Hospital of Philadelphia last year. These new products and programs have opened up new patient populations for us to address and represent new revenue opportunities. Our third initiative is increased efforts relating to accelerating the reimbursement process and the growing number of insurance authorization cases. Our Chief Medical Officer, Dr. Brandon Green has increased his staff to support the O&P clinicians who are engaged with patients seeking MyoPro, and we are also focused on completing clinical studies currently underway at several academic medical centers as well as the VA. To serve the large number of Medicare eligible patients who are permanently impaired after stroke and other incidents late last year, we applied to CMS for a new unique product code and coverage for the MyoPro. Doing so allows medically qualified Medicare beneficiaries to obtain a MyoPro device to support use their arms and hands to perform ADLs, the Activities of Daily Living to live independently and to reduce their overall cost of care. This HCPCS code application process can take a year or longer and there is no assurance that CMS will grant such a code. As of this date, we’re still waiting to hear from CMS and in the meantime we continue to work with our O&P partners to successfully obtain reimbursement for the patients covered by other commercial health insurance plans. Finally, our fourth initiative is the expansion in to international markets. After receiving approval for the market in Canada last fall, we teamed with Ottobock and their O&P customer in Toronto, Biodesigns who has now fit the first reimbursed patient in that country. There are several more patients in the pipeline and we’ll be working together to establish broader distribution in Canada. In Europe, Ottobock is fitting several patients in Germany, and we’ll begin a clinical study if there are outcomes with the MyoPro to support reimbursement policies there. Our Vice President and General Manager, Jon Naft will be speaking at the OT World Conference in Leipzig, Germany next week along with Michael Schaffer of Ottobock to introduce the MyoPro at this very large conference for clinicians in the field all across Europe. In summary, we’re increasing the investments necessary to grow our business, enabled by a recent follow-on public financing. And with that I’ll now turn the call over to Ralph Goldwasser for a financial review of the first quarter of 2018.

[Ralph Goldwasser:]

Thank you Paul. Welcome and thank you for joining us in our first quarter 2018 earnings conference call. As Paul noted, total revenues for the first quarter of 2018 increased 45% year-over-year to $313,000, from $216,000 in the first quarter of 2017. During the quarter, product revenue increased by $111,000 or 56% versus the comparable period of 2017. Gross margin was 65% for the quarter ended March 31, 2018 consistent with our expectations and in line with the 64% reported in the comparable period in 2017. Research and development expenses for the three months ended March 31, 2018 was $372,000, an increase of $15,000 or 4%, as compared to the three months ended March 31, 2017. This increase was primarily due to increased personnel costs. Selling, general and administrative costs for the three month ended March 31, 2018 were $2,236,000, an increase of $1,091,000 or 95% as compared to the same period in 2017. The increase was primarily due to increases in personnel cost of 595,000 which includes 310,000 for additional sales, marketing and personnel hired and share based compensation expense of $285,000. Other administrative costs increases include professional fees, rent, insurance and office expense of $268,000. During the three months ended, March 31, 2018, we had an operating loss of $2,403,000, as compared to an operating loss of $[1,363,000][ph] during the three months ended March 31, 2017. During the three months ended March 31, 2018, the company generated interest income as compared to interest expense - generated interest income of $42,000, as compared to interest expense of 141,000 in the same period in 2017. We did not incur interest expense during the three months ended March 31, 2018 due to the pay-off of our outstanding debt in our convertible promissory notes being converted in to common stock upon the closing of our IPO on June 9, 2017. The company’s net loss for the quarter ended March 31, 2018 amounted to 2,345,000, compared to a net loss of 1,556,000 for the corresponding 2017 period. Adjusted EBITDA for the quarter ended March 31, 2018 was a loss of 2,502,000, compared to a loss of 1,341,000 for the corresponding 2017 period. Cash on hand at March 31, 2018 was 14,160,000 compared to 12,959,000 at December 31, 2017. The increase in cash primarily reflects 3,550,000 of cash proceeds received from the exercise of warrants during the quarter, offset by cash used in operating and finance activities of 2,333,000. Before I turn over the call to Paul for Q&A, let me just mention some housekeeping items. Our first annual meeting will be held on June 19, 2018 in Boston and we plan on hosting our second quarter 2018 earnings conference call in August. Paul?

[Paul Gudonis:]

Thank you, Ralph. This concludes the formal part of our presentation. So operator we are now opening up the call up to question please.

[Operator:]

[Operator Instructions] Your first question is from David Solomon of ROTH Capital Partners. Please go ahead.

[David Solomon:]

Just curious, could we get a rough ASP on the units that were sold this quarter?

[Paul Gudonis:]

Sure David. So we’ve seen some good migration up in the average selling price in the first quarter because we had a mix more to our flagship product, the Motion G, our ASP came in at $22,000 per unit, where over the last several quarters it was ranging more around $16,000.

[David Solomon:]

And just a question on the staff that you hired for the reimbursement, how many people do you have now helping on the reimbursement front?

[Paul Gudonis:]

We’ve grown that now to five FTE, full-time equivalents, so these are some clinical and medical writers as well as reimbursement and processing staff under the leadership of Dr. Green.

[David Solomon:]

Has there been any shortening in the timeframe from - of client interested, clients getting reimbursement or is it roughly the same timeframe or is the main increment or main progress going to occur if and when a code arrives?

[Paul Gudonis:]

Right now it’s been still around the same period, I know where some of these have gotten reimbursed within 30 to 45 days. Many of them six to nine months, some stretch out beyond that. But the reason for adding to the reimbursement team is, before it was just Dr. Green with one assistant and so this way we’ve substantially increased the size of the team so we can more quickly process these insurance reimbursements also to handle a much larger demand where we’ve already started to see from the increased sales and marketing activity and more as we expect as the year goes on, as we introduce more of these screening days around the country, more O&P providers and more of the online marketing and search engine optimization that we are doing to generate awareness among potential MyoPro patients.

[David Solomon:]

And just a quick question, are you guys willing to give guidance at this point or is it still too early for that?

[Paul Gudonis:]

We think it’s still too early David, and we’ve only been public company for a couple of quarters. We’ve now ramped up our sales and marketing activities, we’re building the pipeline going in to insurance authorization. We want to get a better handle on the timing, success ratings on. So wanted to mature a little bit more before we feel we can give a guidance that would be really useful to everyone.

[David Solomon:]

And just the last one from me, on the individuals who’ve made purchases, can you give us any trends on the type of conditions that you’re seeing most patients are coming to you for the MyoPro at this point?

[Paul Gudonis:]

Well the two major diagnosis still tend to be stroke, chronic stroke because that is the largest population about 2.1 million individuals in United States with that condition. So chronic stroke, and then the second most would be Brachial Plexus, which are the shoulder nerve injuries from motor cycle accidents, workplace accidents and the like, where we have doctors such as physicians at the Mayo Clinic and other Brachial Plexus surgery specialties referring their patients to us as well as Brachial Plexus patients finding us by doing google search for Brachial Plexus injury on the internet.

[Operator:]

Your next question is from Sameer Joshi of H.C. Wainwright. Please go ahead.

[Sameer Joshi:]

My questions relate to how you’re tracking your success from the screening events and also from the various center of excellence. What kind of metrics are you using particularly for the COE in terms of leads generated and actual patients that are referred and then from the screening events if there’s a similar progress if you could share?

[Paul Gudonis:]

So with the COE, the Centers of Excellence we are looking at what volume of new patients are coming in to the insurance pipeline through these O&P practices. The screening days we had a very successful initial marketing campaign with GRE in several locations in the mid-west and we are very encouraged by the response by patient that come in for these free screenings. So that’s why we’ve rolled this out now. If you look at our websites now up to 30 locations which are only taking place now in May and June and then we’re going to be scheduling the launch for July. So, we still are going to wait and see how many patients show up at the screening days. So I’ll have a better handle on that in our mid-year call.

[Sameer Joshi:]

From the GRE events in the four cities, can you give us how many attendees were there for (inaudible) locations?

[Paul Gudonis:]

They were able to introduce 15 new patients in to the reimbursement pipeline where a couple of those have already been approved and fit on those patients in just the first couple of months which was up from the number of patients they had with the previously sort of conventional method of just waiting for patient referrals from clinical sites.

[Sameer Joshi:]

Then I guess you’re planning for this larger 20 city screening events based on the success of that event?

[Paul Gudonis:]

Yes, and we keep refining the approach. We are using digital marketing firm, which is getting the word out to interested patients, to family members that have expressed interest in stroke or rehab or Brachial Plexus injury. And then during these invitations we’ve got days coming up in Boston, New York, Chicago, Detroit, Philadelphia, all around the country, and there’ll be more since our latest group of our business development managers just went through their initial training here in April. So they’re just going to get started recruiting new O&P providers in the southeast and southwest and the west coast, so you can expect that that number will grow significantly in the second half of the year.

[Sameer Joshi:]

On the reimbursement front, just following up on David’s question earlier, is your success rate still around that 75% mark or do you see improvements based on the new hires that you’ve made?

[Paul Gudonis:]

That’s a good number to use at this point Sameer, with new hires coming on board, they are just getting to start work on these new reimbursement cases. I expect there will be more of an acceleration of time to submit to insurance companies, time to appeal if necessary and then just doing high quality work should enable us to have a continued high success rate.

[Sameer Joshi:]

Do you have any update on the HCPCS code application or how that is going?

[Paul Gudonis:]

So we haven’t heard yet from CMS on the HCPCS code, they have their regular annual meeting to discuss new codes in the first week of June. So our expectation is they typically notified medical device companies about their preliminary decisions several weeks in advance. So I expect some time during May, we’ll get an initial indication from them before we attend the public hearing in June.

[Sameer Joshi:]

And one last one from me, you did mention Canada and Germany and the efforts there. Can you provide a bit more granularity on the number of patients or if there Ottobock has sort of Center of Excellence approach as well as like you have?

[Paul Gudonis:]

So up in Canada, since the first patient was reimbursed under the workers compensation plan they’ve got several more. They’re now going through the evaluation process over there. In Germany, Ottobock’s got two more patients to fit on Monday. And as I pointed out they are experienced in how to obtain reimbursement in their home market of Germany. So the plan is to fit these initial patients, follow them for six to eight weeks, demonstrate as we’ve seen here in the United States, the efficacy of the devices that these chronic patients are able to use their arms more effectively and the submit to payers there in Germany to obtain reimbursement for those devices and then eventually we’ve kept across the board coverage policies for those patients and similar patients.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back to Paul Gudonison for closing remarks.

[Paul Gudonis:]

Well I’d like to thank all of you for joining our call today. In summary, we’re off to a really solid start here in 2018, having entered the year with the resources now to invest in targeted sales and marketing campaigns as we grow the business. We’re increasing our distribution in the United States, while establishing a footprint in Europe and Canada, as we leverage our proprietary technology, the only commercially available upper limb orthotic device. This market need is very large and unmet, therefore we’re making the necessary investments to sell and deliver an increasing number of devices to serve this market. Thank you again for your time this afternoon.

[Operator:]

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.