8-K: Myomo Reports Record Backlog and Pipeline Growth in Q1 2024, Revenue Up 9%

Myomo announced a 9% increase in revenue to $3.8 million for the first quarter of 2024, alongside record growth in patient backlog and pipeline.

Summary

• Myomo's first quarter 2024 revenue reached $3.8 million, a 9% increase compared to the same period last year.
• The company shipped 91 MyoPro units, a 14% increase year-over-year, but experienced a lower average selling price.
• MyoPro orders and insurance authorizations totaled 180 units, a 48% increase from the first quarter of 2023.
• The backlog of orders and authorizations reached a record 275 units, up 56% year-over-year, including 83 Medicare Part B patients.
• A record 493 new candidates were added to the MyoPro patient pipeline, bringing the total pipeline to 1,112 candidates, a 30% increase year-over-year.
• Gross margin decreased to 61.2%, down 580 basis points from 67.0% in the first quarter of 2023, due to lower average selling prices and increased costs.
• Operating expenses increased by 24% to $6.2 million, driven by higher R&D, payroll, and advertising costs.
• The operating loss for the quarter was $3.9 million, compared to $2.7 million in the first quarter of 2023.
• Net loss for the quarter was $3.8 million, or $0.10 per share, compared to a net loss of $2.6 million, or $0.11 per share, in the same period last year.
• Adjusted EBITDA was $(3.5) million, compared to $(2.5) million for the first quarter of 2023.
• The company received first payments under the new Medicare fee schedule and expects revenue growth in the second quarter.
• Cash, cash equivalents, and short-term investments totaled $11.0 million as of March 31, 2024.
• Cash used in operating activities was $3.2 million for the first quarter of 2024, compared to $1.8 million for the first quarter of 2023.

Sentiment

Score: 5

Explanation: The document presents mixed results. While there is strong growth in backlog and patient pipeline, the increased losses and decreased gross margin are concerning. The company's future outlook is positive but dependent on achieving key milestones.

Positives

• Revenue increased by 9% year-over-year, reaching $3.8 million.
• The number of MyoPro units shipped increased by 14% to 91 units.
• MyoPro orders and insurance authorizations saw a significant 48% increase to 180 units.
• The backlog of orders and authorizations reached a record 275 units, a 56% increase year-over-year.
• The patient pipeline grew by 30% to 1,112 candidates.
• The company added a record 493 new candidates to the patient pipeline in Q1 2024.
• Myomo received first payments under the new Medicare fee schedule.
• The company expects to generate more than $5.0 million in product revenue in the second quarter.

Negatives

• Gross margin decreased to 61.2%, down 580 basis points from 67.0% in the first quarter of 2023.
• Operating expenses increased by 24% to $6.2 million.
• The operating loss for the quarter was $3.9 million, compared to $2.7 million in the first quarter of 2023.
• Net loss for the quarter was $3.8 million, or $0.10 per share, compared to a net loss of $2.6 million, or $0.11 per share, in the same period last year.
• Adjusted EBITDA was $(3.5) million, compared to $(2.5) million for the first quarter of 2023.
• Cash used in operating activities was $3.2 million for the first quarter of 2024, compared to $1.8 million for the first quarter of 2023.

Risks

• The company's ability to obtain sufficient reimbursement from third-party payers is a risk.
• Myomo needs to navigate factors both within and outside its control to grow revenues sufficiently to achieve operating cash flow breakeven on a quarterly basis.
• Revenue concentration with a particular insurance payer is a risk.
• The company's ability to continue normal operations and patient interactions without supply chain disruption is a risk.
• Myomo is dependent upon external sources for the financing of its operations.
• The company's ability to effectively execute its business plan and scale up its operations is a risk.
• The company faces competition in a highly competitive and evolving industry.
• General market, economic, environmental and social factors may affect the evaluation, fitting, delivery and sale of the company's products.

Future Outlook

Myomo expects to generate more than $5.0 million in product revenue in the second quarter of 2024 and anticipates full-year revenue between $28 million and $30 million, assuming hiring goals are met and no supply chain disruptions occur. The company also believes that reaching operating cash flow breakeven on a quarterly basis by the fourth quarter of 2024 is achievable.

Management Comments

• First quarter revenue reflects our focus on patients with traditional insurers with a history of payment, while temporarily accepting lower pricing from CMS' billing contractors known as the DME MACs.
• We expect growth to increase during the second quarter as we ship MyoPros to Medicare Part B beneficiaries following the publication of reimbursement fees by the Centers for Medicare and Medicare Services (CMS) on April 1, 2024.
• Our record backlog entering the second quarter includes 83 Medicare Part B patients, which will contribute to our expected revenue growth in the quarter.
• Given our backlog, we're in a position to generate more than $5.0 million in product revenue in the second quarter.
• We're making progress on our capacity expansion plans, hiring approximately 20 people during the first quarter.
• We have the opportunity to generate between $28 million and $30 million in revenue in 2024, presuming that we meet our hiring goals and that there are no supply chain or other unexpected disruptions.
• We continue to believe that reaching operating cash flow breakeven on a quarterly basis by the fourth quarter of 2024 is achievable.

Industry Context

Myomo operates in the wearable medical robotics industry, focusing on upper-limb paralysis solutions. The company's results are influenced by factors such as reimbursement policies from insurance providers, particularly Medicare, and the adoption of its technology by healthcare providers and patients. The growth in the patient pipeline and backlog indicates increasing market interest in Myomo's products.

Comparison to Industry Standards

• While specific competitor data is not provided in the document, Myomo's 9% revenue growth and 56% backlog increase suggest a positive trajectory compared to some peers in the medical device sector.
• The decrease in gross margin to 61.2% is a concern and should be compared to industry benchmarks for medical device companies, which often aim for margins above 70%.
• The increase in operating expenses by 24% is significant and should be compared to similar companies in the growth phase of their development.
• The company's focus on Medicare reimbursement is a common strategy in the medical device industry, but the impact of underpayments from CMS' billing contractors highlights the challenges of navigating complex reimbursement systems.
• Companies like Ekso Bionics and ReWalk Robotics are also in the rehabilitation robotics space, and their financial performance and market adoption rates would be relevant for comparison.

Stakeholder Impact

• Shareholders may be concerned about the increased losses and decreased gross margin, but encouraged by the growth in backlog and patient pipeline.
• Employees may be impacted by the company's hiring plans and capacity expansion efforts.
• Customers (patients) will benefit from the increased availability of MyoPro devices and the new Medicare reimbursement schedule.
• Suppliers may see increased demand for components as Myomo scales up production.
• Creditors will be monitoring the company's cash flow and progress towards profitability.

Next Steps

• Myomo will focus on shipping MyoPros to Medicare Part B beneficiaries following the publication of reimbursement fees.
• The company will continue to execute its capacity expansion plans, including hiring additional staff.
• Myomo will provide an updated revenue forecast when it reports its second quarter financial results.
• The company will continue to work towards achieving operating cash flow breakeven on a quarterly basis by the fourth quarter of 2024.

Key Dates

Keywords

Myomo, MyoPro, medical robotics, wearable technology, neurological disorders, upper-limb paralysis, rehabilitation, Medicare, insurance authorizations, backlog, patient pipeline, revenue, gross margin, EBITDA