Myomo, Inc. (NYSE:MYO) is a wearable medical robotics company that offers improved arm and hand function for those suffering from neurological disorders and upper-limb paralysis. The company's flagship product, the MyoPro, is a powered upper-limb orthosis designed to support the arm and restore function to the weakened or paralyzed arms of patients suffering from conditions such as stroke, brachial plexus injury, traumatic brain or spinal cord injury, or other neuromuscular diseases.
Business Overview
Myomo was incorporated in 2004 and has been steadily growing its product offerings and customer base over the past decade. The company's technology was originally developed at MIT in collaboration with medical experts affiliated with Harvard Medical School. In 2012, Myomo introduced the MyoPro, shifting its focus from devices designed for rehabilitation therapy sold to hospitals to providing an assistive device through Orthotics and Prosthetics (O&P) providers to patients for use at home, work, and in the community.Over the years, Myomo has expanded the MyoPro product line, introducing the MyoPro Motion W, a multi-articulated non-powered wrist, and the MyoPro Motion G, which includes a powered grasp. These enhancements have allowed users to better perform activities of daily living, such as opening doors, carrying objects, and stabilizing themselves to avoid falls.
Myomo's products are designed to help regain function in individuals with neuromuscular conditions, and the company has relationships with physicians and therapists who generate patient referrals. The company also utilizes digital and television advertising to reach potential candidates for its products.
Financial Performance
For the full year 2023, Myomo reported annual revenue of $19,241,158, a net loss of $8,147,565, and annual operating cash flow of -$6,172,764. The company's annual free cash flow was -$6,318,580.In the first quarter of 2024, Myomo generated revenue of $3.8 million, up 9% from the same period in 2023. This growth was driven by a 14% increase in the number of revenue units, partially offset by a 5% decrease in the average selling price (ASP) to approximately $41,300. The lower ASP was due to some payments from the Centers for Medicare & Medicaid Services (CMS) being below the final fees published by CMS, which became effective on April 1, 2024.
Myomo's gross margin in the first quarter of 2024 was 61.2%, down from 67.0% in the prior year quarter, primarily due to the lower ASP and some cost increases, including materials, partially offset by lower royalty expense. Operating expenses increased 24% year-over-year to $6.2 million, driven by higher headcount in clinical, reimbursement, and engineering functions, as well as increased advertising spend.
The company reported a net loss of $3.8 million, or $0.10 per share, in the first quarter of 2024, compared to a net loss of $2.6 million, or $0.11 per share, in the same period of 2023. Adjusted EBITDA was a negative $3.5 million, compared to a negative $2.5 million in the prior year quarter.
Liquidity
As of March 31, 2024, Myomo had $11 million in cash, cash equivalents, and short-term investments. The company used $3.2 million in cash for operating activities during the first quarter of 2024.In January 2024, Myomo completed a registered direct offering, generating net proceeds of approximately $5.4 million. The company believes its current cash position is sufficient to fund operations for at least the next 12 months.
Recent Developments
A significant development for Myomo in 2024 was the reclassification of the MyoPro from the durable medical equipment (DME) category to the brace category by the Centers for Medicare & Medicaid Services (CMS), effective January 1, 2024. This change means that the MyoPro is now covered for medically qualified patients and reimbursed on a lump-sum basis, rather than a 13-month rental in the DME category.Additionally, on April 1, 2024, CMS published new pricing for the MyoPro, with reimbursement for the MyoPro Motion-G at $65,872 and the MyoPro Motion-W at $33,481. These decisions by CMS have significantly expanded Myomo's addressable market, as the company can now serve traditional Medicare Part B patients, who make up approximately half of the senior population in the United States.
Prior to these changes, Myomo was unable to provide the MyoPro to traditional Medicare patients, as the company had to rely on pre-authorizations and reimbursement from Medicare Advantage plans, which had mixed results. Now, Myomo can work with physicians and therapists to evaluate Medicare Part B patients, obtain the necessary medical documentation, and provide the MyoPro device, submitting claims directly to CMS for reimbursement.
As a result of the new Medicare reimbursement policies, Myomo has been able to build a backlog of 83 qualified Medicare Part B patients as of March 31, 2024, and the company expects to deliver a large number of these devices in the second quarter. Additionally, Myomo's pipeline of potential Medicare Part B patients increased to approximately 230 at the end of the first quarter.
To capitalize on this expanded opportunity, Myomo plans to hire an additional 50-60 employees in 2024 to increase its clinical, reimbursement, and manufacturing capacity. The company believes this added capacity will enable it to double its MyoPro output in the second half of the year.
International Expansion and O&P Channel Growth
Myomo has also been growing its international business, particularly in Germany, which accounted for 25% of the company's revenue in the first quarter of 2024. The company has developed a network of over 100 O&P channel partners in Germany and is using social media to generate demand in the market.Domestically, Myomo's U.S. O&P channel currently accounts for only 4% of its revenue. However, the company sees significant growth potential in this area, as it plans to recruit, train, and certify more O&P providers to deliver the MyoPro to patients. Myomo believes the O&P channel could eventually become the majority of its business, as there are approximately 3,000 O&P clinical offices across the country.
Risks and Challenges
While Myomo has made significant strides in expanding its addressable market and reimbursement opportunities, the company faces several risks and challenges:1. Reliance on third-party payer reimbursement: Myomo's sales are dependent on obtaining adequate reimbursement from third-party payers, including government health programs and commercial insurers. Any changes or restrictions in reimbursement policies could have a material adverse effect on the company's business.
2. Concentration of revenue with a single insurer: Myomo's strategy of focusing on patients with insurers who have previously reimbursed for the MyoPro has resulted in a concentration of revenue with a particular insurer. Adverse changes in that insurer's reimbursement policy could significantly impact the company's performance.
3. Dependence on a single contract manufacturer: Myomo relies on a single third-party contract manufacturer, Cogmedix, for the production of the MyoPro and the sourcing of components. Any disruptions in this supply chain could hinder the company's ability to meet demand.
4. Competitive landscape: The medical device industry is highly competitive, and Myomo faces competition from larger companies with greater resources. The company's ability to maintain and grow market acceptance for its products is crucial to its success.
5. Regulatory environment: As a medical device company, Myomo is subject to extensive governmental regulations, and any failure to comply with these regulations could lead to the withdrawal or recall of its products from the market.