Monogram Orthopaedics Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 14, 2024

Key Takeaways

  • At the end of Q1, cash was ~$2.1 M with a quarterly burn of $3.6 M (projected to drop to ~$1 M/month as V&V winds down) and no debt or warrant obligations, providing runway through the planned 510(k) submission.
  • Monogram received positive feedback in its 4th FDA pre-submission, with no objections on its robust V&V plan or planned OUS clinical trial, targeting a 510(k) submission in H2 2024.
  • Verification and validation testing is progressing, including 9 of 15 successful simulated cadaver surgeries and submillimeter accuracy observed in early laser-scan analyses, while IEC 60601 certification is ~40% complete.
  • The company’s strategic investment thesis focuses on developing the first active autonomous cutting saw-based robot to challenge Stryker’s haptic monopoly and build a broad patent portfolio around active robotics.
  • With $10.1 M in cash at quarter-end and milestone-driven capital needs, Monogram is exploring a potential community bridge financing to complement institutional funding ahead of key regulatory milestones.
AI Generated. May Contain Errors.
Earnings Conference Call
Monogram Orthopaedics Q1 2024
00:00 / 00:00

There are 3 speakers on the call.

Operator

Greetings, and welcome to the Monogram Technologies First Quarter 2024 Business Update Conference Call. I'm Larry Hallob, Director at MZ Group North America, representing Monogram Technologies as their external Investor Relations advisor. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

Operator

A press release detailing Q1 2024 financial results was issued on May 14 and is available in the Investor Relations section of the company's website. I will now turn the call over to Monogram Technologies' Chief Financial Officer, Noel Kanabi.

Speaker 1

Good afternoon, everyone. I'm looking forward to this conversation. Welcome to our Q1 2024 investor call. Would you please forward to the next slide? I'm going to go over the forward looking statements disclaimer real quick for everyone.

Speaker 1

So, this is a legal disclaimer. This presentation by Monogram Orthopaedics, Inc. Monogram may include forward looking statements to the extent that the information presented in this presentation discusses financial projections, information or expectations about Monogram business plan, results or operations, products or markets or otherwise make statements about future events, such statements are forward looking. Such forward looking statements can be identified by the use of words such as should, may, intends, anticipates, believes, estimates, projects, forecasts, expects, plans, goal, target or proposes. Although Monogram believes that the expectations reflected in this presentation are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward looking statements.

Speaker 1

Thank you for that. So, this presentation is summarized here. It's going to be a quick recap of the Q1 summary financial data, the investment thesis, timeline review, and next steps. So here is the summary financial data of Q1 20 24. Importantly, at the end of the quarter, our cash balance was as projected about $2, 100, 000 That's a quarterly burn of about $3, 600, 000 or $1, 200, 000 per month.

Speaker 1

It's important to note that management was able to pay down the accounts payable balance by net of $1, 100, 000 This balance related to elevated balances from the activity in Q4 related to verification and validation activities. We expect that the monthly burn this will not be repeated in subsequent quarters and the monthly burn will reduce to around $1, 000, 000 a month. Important to note in our financials and our cost structure, we have 28 full time employees, 22 of which are in engineering and 6 are administrative support and an additional 26 engineering contractors, 12 of whom support the V and V efforts that I just mentioned. It's very important to note that 60% of our costs are labor and so it's a highly variable cost structure. As the V and V activity winds down, we will be able to reduce that cost significantly, particularly on the contractor side, about 12 of the contractors support to the end of the activities and we should be able to reduce some of that cost outlay when those activities are done and we anticipate that to be done most largely at the end of the first half of the year.

Speaker 1

It's an extremely highly variable cost structure and we will manage it accordingly. It's important to note that we still have no debt and we have no warrant obligations as overhangs. We expect to have sufficient access to cash through our 510 application and significant milestones as they occur. With that, I'll hand it over to Ben to give you an update of our recent progress.

Speaker 2

Sure. Thanks, Noel. Appreciate that color. And thank you everybody for joining us today and for those of you who are watching the recording. So I want to start by just highlighting some of the key recent progress we've made and then walk through where we're headed.

Speaker 2

So as we have communicated, we have our 4th formal pre submission communication with the FDA. We put out a press release on that. Management was pretty excited about the feedback we received. The FDA reviewed substantial portions of our verification and validation testing plans, provided helpful feedback that we're integrating into those plans. We feel that our verification and validation plan is pretty robust.

Speaker 2

The FDA also reviewed as part of that process our planned OUS clinical trial protocol and we felt that they provided a very fair and constructive feedback to that. We feel like the FDA didn't there were no kind of objections to the plan that was proposed. So we felt pretty good about that. We plan to share with the FDA our final clinical trial protocol when that's ready at the appropriate time. But feeling very good about where we are with the FDA and their understanding of how our product works.

Speaker 2

It's been an extremely busy quarter and this second quarter is also very busy. We're really pushing very hard through the verification and validation testing. We'll get into the weeds on that shortly, but there's a lot of activity happening. So for example, as part of the verification effort, we need to bring in external surgeons to run fully end to end simulated surgeries on cadaveric specimens. We so far have completed 9 of 15 surgeries successfully.

Speaker 2

We've also made very significant progress with our Envision navigation. We hope to share more potentially demo more soon. Envision is our AI enabled navigation technology that when combined with robotics really was the impetus for us to expand the name. We felt like Monogram Orthopaedics was not really truly representative of the potential application opportunities for what we call kind of markerless or marker light registration and tracking. We're very excited about the promise of that technology in potentially other areas.

Speaker 2

As Noel said, we're pretty aggressively resourced right now. Our burn is certainly elevated as we push through the verification and validation phase in anticipation of a submission for 510 approval. We've brought on a lot of experienced contractors to help us with execution of the various verification test protocols and that certainly contributed significantly to the elevated burn. But again, that is pretty variable. And we have been recently supporting ongoing site visits and demos with Tier 1 capital allocators.

Speaker 2

So that's also been taking a lot of effort and resources from the team. Overall it's been very busy. We're working a lot. There's been a lot of weekends that the teams have been putting in late nights. So really, really proud of how hard the team is working.

Speaker 2

The next thing I want to jump into is just a recap on the investment thesis of Monogram. I feel like this is a little bit misunderstood and I want to make sure we really highlight what it is we're doing and why we think it's important. So in really simple terms, the most the largest robotics player in our market in our view has monopoly. So if you look at Stryker's market share for robotic joint replacements, they have 89% of those. And then if you look at their share of the cementless knee market, they have 75% of those.

Speaker 2

So in any other industry, if you were to talk about a company with 89% or 75% market share, you would call that a monopoly and we would not disagree. Basically, they account for the majority of cementless and robotic procedures in our market. Now I think where a lot of people fail to realize why that is, is they don't appreciate the significant IP advantage that Mako has established. So they have own essentially robotic cutting with what's called haptics. Now haptics is essentially haptic control, so that's controlled impedance or admittance where external forces are applied to the arm.

Speaker 2

So in Mako's case, the surgeon is actually pushing on the end effector to move it around within a virtual go fly zone. That technology and that patent portfolio is broad, extensive and we think extremely well protected. And we think that's a huge reason why Mako has 89% of the market and I feel like this is really not well understood and I want to try and highlight that today. So of 1352 patents assigned to Mako, this is kind of approximate about 600 of those include a haptic claim. So haptics does not mean just something vibrating, it's far more than that and we feel like this is really not well understood.

Speaker 2

If you look at any of the competitors on the market today, basically none of them are of significance are doing really robot cutting. Even those that do claim to do robot cutting in practical use, surgeons are still kind of using limited portions of those systems. So there's a picture there, for example, of the largest player in these which is Zimmer that you can see that they have a robotic jig. So that would be a robot holding a jig that constrains a saw wherein the surgeon manually completes the cut. There's other systems on the market that have, let's say, a rotary tool, but we think the efficiency of making all 6 total knee cuts with such tools is challenging.

Speaker 2

So when you really just to recap, Mako has a very, very solid market position. They essentially own haptics and there are serious problems with every other kind of system on the market. So for example, most of the other systems don't use a CT scan. It's not a patient specific surgery. Some systems, some embodiments don't have any safety boundaries.

Speaker 2

Some systems use a rotary tool which has issues with thermal necrosis and requires irrigation. There's potential accuracy issues in the sagittal plane when you're cutting with a manual saw. So there's serious limitations. Monogram looked at this and we saw an opportunity. And what was the opportunity we saw was there's an opportunity for a robot to come in and cut, but to cut actively or autonomously.

Speaker 2

So this is a completely different paradigm. Now there are companies that have tried to do this in the past, but they have relied primarily on rotary cutting tools. The problem with rotary cutting tools is that they are not sufficiently efficient to resect bone as far as we've seen and in the research we've conducted. The most efficient way to execute 6 planar cuts in the knee is with a robotic saw. Actively cutting or autonomously cutting with a rotary saw is a non trivial challenge that we believe we have solved.

Speaker 2

So the monogram system works by a robot that's autonomously executing the cuts and the surgeon is controlling the arm with a foot pedal. It's a completely different paradigm. And what we think the advantages of the system are may include and this is not substantiated by clinical claims, but it's really how we design the system is we're looking to minimize surgeon fatigue, we're looking to eliminate user skill, we're looking for a faster learning curve, We're looking for a robot with more dexterity, so no tool changes during cutting. We have patient specific bone boundaries at the reception level for intense safety. We believe that accuracy is less encumbered when you don't have significant forces being applied to the robot arm.

Speaker 2

We believe robots are currently accurate if they're well programmed. And we believe that this morphology is more scalable to other clinical applications. So we're planning to execute a 1 robot for the operating room business model and we do not believe that haptics is the perfect embodiment for other applications outside of knees. So in some senses, we've started with what we believe is the most difficult application for our robot, which is knees where you require extreme efficiency and it's very difficult to compete with the haptic system. And the idea is to demonstrate that we can do it in the most difficult clinical application and therefore we believe it's scalable to other applications.

Speaker 2

And if you think about it from the perspective of a large strategic, our goal is to not require cannibalization of an existing product. So we want to enhance what would be an existing product needs, but have something scalable to other applications. Now we think the benefit of being early and again we can't speak maybe somebody has this under the radar. We don't know about it, but we believe that we have a significant first mover advantage. The benefit of being first to market is that it allows you to encounter problems that you are almost impossible to foresee until you start executing the solution.

Speaker 2

So we believe that we now have a very compelling patent strategy. As 1 of the first robot companies to demonstrate autonomous cutting with a saw with high efficiency without fixation, we believe that that's going to help us build an IP portfolio or patent portfolio that will in a sense allow us to claim active or autonomous. Our goal is to own active or autonomous in the same way Mako owns haptics, we want to own active robotics. So that's really what our vision is, to be the 1st active socketing robot and establish a broad patent portfolio around that. And we think that that's a pretty compelling value proposition given how well Mako has done claiming 89% of the market with basically the only robot cutting system on the market.

Speaker 2

So again, just to highlight the opportunity, you could just see, now obviously, Stryker is a much larger company than Smith and Nephew or Zimmer Biomet has shown. But really what we're trying to show here is and I believe we also have Innovus on there. What we're trying to show is, yes, even though Stryker is a well diversified portfolio since acquiring Mako, their knee business has really thrived. And we believe this presents a really significant opportunity. You have 1 company that's really consolidated a market and has monopoly.

Speaker 2

That value creation needs to be shared or we believe is should be at least competed with. So a lot of times we hear as a criticism, oh, well, you're just doing Mako. That's the biggest compliment of the world to us. Mako is 89% of the market. If we're competing in a way and comparable to them, look at the value that that's created for the Stryker brand, would that not be accretive to somebody else?

Speaker 2

That's really how we're thinking about it. And then if you think about other clinical applications, we think just objectively that an active autonomous robot scales better than a haptic system with 4 joints versus 7 joints and we can get into other details on that. So with that I really want to talk about what as a management team is front and center for us The second is we need to complete the 6, 601 certification. The second is we need to complete the 6, 601 is a big part of this, but all the verification validation testing, then we need to submit the 510 for FDA clearance that we want to demonstrate Envision integrated into a robotic pipeline. We also then anticipate our first live in patient surgeries and then hopefully 510 clearance.

Speaker 2

What we've said publicly is that we expect verification and validation testing to be largely complete by the end of this quarter and we anticipate a 510 submission in the second half of this year. So that's what we've said publicly. Just to give you a little more detail on what we're talking about when we say IEC 6601. So really consists of 2 major things. So we're it's 6, 601-onetwo.

Speaker 2

So the electro PMC testing is basically largely complete. So we expect to have our final test report this week, but we have passed. This was for any of you who know this testing was extremely difficult, a ton of effort and I'm incredibly proud of our hard working team for getting there and now we're in the same vein aggressively pushing IEC 6601 testing. It's approximately 40% complete and this is the critical path to our 510 submission. So getting the certification, all this testing done is the most important thing for us to submit a very robust application to the FDA.

Speaker 2

It's not a requirement by the FDA, but it certainly makes for a very strong application. And the robot is getting put through a lot of rough handling. I just want to give take a video of a test, share with everybody to give people a sense of sort of what the robot is getting put through. So this is a test that was run on the foot pedal and they literally connected it to a fire hose, which you could see kind of the pressures coming out of this thing. And they sprayed it at our foot pedal and the foot pedal can't have any leakage and needs to be fully functional after this testing.

Speaker 2

And this kind of hopefully gives folks a flavor of what we're dealing with and kind of the level of rigor. So any of you who have any familiarity with IEC 6601, it really is a bear and it's by far kind of the lion's share of the focus for a lot of our teams just pushing through that. In terms of internal testing, so we have a lot of verification validation test protocols. So these are things like system accuracy, registration, validations, all all kinds of every little kind of minutiae of the system has to be thoroughly tested both on the software and the hardware side. The electromechanical testing is 63% complete and the software cycle 3, this is really the final version of the software that we anticipate is the cycle 3 testing is about to kick off and that testing is going to take about 4 weeks.

Speaker 2

But really a lot of this is really coming together. And just to kind of highlight the verification validation to give folks a sample of what that looks like. So what that looks like is bringing in surgeons running simulated surgeries on cat cadavers and then it's a pretty gruesome process. I don't want to share pictures, but then what we do after the surgery is complete, we literally remove the bone from the specimen, put it into a chemical bath and then laser scan and compare the planned cuts versus the actual cuts. And right now we're very, very happy with the accuracy of our system with the specimens that have been tested so far.

Speaker 2

So we're looking at sub millimeter accuracy. And it's not a statistically significant sample size yet, but we're aggressively getting there. So again, it's just a ton of testing that we're going through. And again, folks sometimes really don't appreciate the difference between a medical device and a prototype. Monogram had a prototype 5 years ago.

Speaker 2

So really big difference between a product that's been through all of this testing, all of these validations, all of this verification testing in a prototype. It's not it's a very heavy lift. So with that, just kind of jumping into the capitalization plan. So couple of things I want to reiterate here. 1 is that we are still an early stage company.

Speaker 2

We're not in the market yet, but we're obviously trying to get close and fundraising is certainly milestone driven and it's also driven by de risking events, right? So continued bulletproofing and derisking of the system are critical, right? You guys saw a flavor of the IEC 6, 601 testing we have to do. These large capital allocators in the space are not ignorant. They understand how difficult it is to take a product through all of this testing and through all the remediations and bulletproof.

Speaker 2

And so a lot of times you really do need to do the heavy lifting and continue to move the ball forward and that's exactly what we're trying to do. We closed the quarter, what we said publicly is with $10, 100, 000 in cash. We believe we have the capital we need to submit a 510, which is, in our opinion, a very significant milestone. And we have done significant on-site visits and demos for various people who allocate capital in medtech. We believe that we have a are starting to build value in terms of the product that's being created, but obviously it takes time, effort and we are sensitive to kind of the timing of critical milestones versus the money that comes in.

Speaker 2

It's not easy, but again, we're not we believe we have some very significant catalysts coming up. So we're going to continue to communicate our value proposition of our system which is really we aim to be the 1st autonomous active cutting saw based robot on the market And Mako kind of demonstrated what happens when you build a solid IP portfolio around a very effective way of doing a surgery and we plan to try and do the same thing that they've done in haptics with ACTIVE. And monopolistic markets a lot of times create opportunity. So we're going to try and do all we can to have a compelling product. 1 thing I do want to say is for a start up it's important to have options.

Speaker 2

1 of the things that's still I would say kind of a intangible asset is we have a lot of a very significant investor base that's been with us for a long time that really understands the story. And we see opportunities to potentially open up access to additional investment opportunities that could be accretive in events of some of the critical milestones we have planned. So we're going to be sharing more in the future about how we plan to raise capital, but we're considering a small bridge potentially from our community and kind of as a potential way to give back before we have what we anticipate could be some pretty significant updates. But stay tuned for that. We just don't want to be in a position where we are only beholden to institutional capital, especially as we have access to this intangible asset and especially as we have some pretty significant milestones on the horizon.

Speaker 2

So basically, we're taking a parallel path to fundraising and it really is a balance between raising kind of absolutely what you need to and trying to anticipate what's going to happen with the economy and also what we have in terms of critical milestones. So not always easy to juggle that, but we're doing our best to kind of manage to where we think we're in a good spot for the next milestones. This is just kind of highlighting that. So when you look at 510 approval in our space, we think that it's generally very accretive. We think the market generally rewards companies that have taken technologies through all of this testing, through all of this development and especially if the product market fit is solid.

Speaker 2

So with a market cap today of a little over $60, 000, 000 we think that there's certainly the potential for this to be an interesting opportunity if we can continue to execute our goals. And with that just to recap the investment thesis. So our vision broadly is to advance medicine through technology adoption. So in orthopedics, we're starting with knees and Mako owns robotic cutting with haptics. Monogram wants to own robotic cutting autonomously or active.

Speaker 2

We want to be the 1st robot company to do that with a saw. We think that a first mover advantage in autonomous robotics is going to help us establish very significant patent protections that would make it potentially difficult for another player to do the same thing. We believe that active robotics have a lot of potential benefits. Again, we have not yet conducted a clinical trial to substantiate this, but it's just our design objectives. So for example, we think active robotics could enable more personalized surgery, 3 d printed custom implants for example.

Speaker 2

We believe that they may offer enhanced patient safety, reduced learning curve. We believe that it could be more scalable to other clinical applications, drive increased efficiencies potentially over time even decrease surgical time and that kind of lends into Envision Navigation which is our next gen navigation solution which we're hoping to demonstrate as well as a catalyst. And we believe we have some pretty significant catalysts coming up, not the least of which is our planned 510 submission. And then just for anybody who has any questions, you guys met Chris Dyson, who runs the Investor Relations for Monogram. We really want to make sure that folks have somebody they can contact.

Speaker 2

Please reach out to Chris if you have any follow-up questions. But I do want to give everybody here an opportunity to ask questions and engage with management and hopefully to the best of our abilities we'll be able to answer that. Okay. So if you want to write a question, just on the right hand side, there is a comment and we will do our best to answer as many of these as we can. So Tom Kerr asks, can you provide more color on why and how the FDA can or needs to rely on an OUS clinical trial to help make a decision, what is the length of the OUS trial.

Speaker 2

So the OUS trial is more of a belt and suspenders, Tom. So right now, we don't believe that our 510 submission will require clinical trial for approval. We believe that our equivalents to the predicate device is over substantially equivalent. We believe that we our solution addresses the concerns that have been raised by the FDA over the past 2 years and for formal pre submission communications, but we want to run a clinical trial in parallel to our submission for 2 reasons. The first reason is once we hopefully get FDA clearance, which we hope we can get on a reasonably quick timeframe if the submission is well received, we want to have data to actually market with.

Speaker 2

So we would go to a surgeon and say they might ask for clinical data, we would have it, we would have live patient data to market the solution with. In addition to just the safety of our system, we're really looking at some additional features in capturing additional data. So we're going to be looking at surgical time, learning curve, the accuracy of the system. So not just the accuracy of making bone cuts, but the accuracy of the planned stress laxity to the post operative stress laxity. So we would have data that would be actual clinical real world data that we could share and that our sales force could use to help communicate the value proposition.

Speaker 2

But then the other potential benefit is if for whatever reason the FDA was unconvinced, we think this is a low probability. We've had a lot of very smart people assess the application. But let's say the FDA said we really, really want to see clinical data with the submission, well, we would have clinical data ready to go in parallel to that as a backup plan. So it kills 2 birds with 1 stone. The benefit of doing it OUS is it's substantially cheaper.

Speaker 2

So like on the order of more than 10 times cheaper. And the partner that we will be running the trial with uses the same implant, a cemented version of our implant that we licensed. So we wouldn't need a bunch of implant inventory. It's a very, very high volume institution. So we think we can enroll patients and get through the study very quickly.

Speaker 2

The study is actually pretty small in scope. So it's less than 100 patients and the FDA has reviewed this protocol and 3 months of follow-up with 4 critical endpoints, which are kind of 4 critical safety factors. So that's really kind of the idea there. And our goal is to try and have that data as soon as possible. I would say the blocker there is the IEC 6601.

Speaker 2

So that's a globally recognized certification that we think will greatly enhance the time to approval of the clinical study. So we think it's the smart approach is to get that in hand and then go for the study. Okay. Just want to make sure I tackled it because I was answering this question. This is from Kapil.

Speaker 2

OUS travels practice system or semi active, if for semi active, then what is the approval path for the active system? So, Kapil, that's a really good question. We are going to do semi active OUS and that's because for 2 reasons. Basically articulated both of reasons, but just to recap, we want to have post marketing data and we want to have an approval really completely derisked as much as possible. The plan for active would be to subsequently run OUS, the active version.

Speaker 2

So the institution we're working with is very receptive, wants to work, wants to partner, wants to collaborate. The market we're looking at is extremely large. And so we envision having a long term relationship with this institution. We plan on, for example, collaborating with Envision, which is our next gen navigation solution. So we're not really seeing it as 1 and done.

Speaker 2

We plan on having a clinical sort of pipeline as part of our R and D process. So we're going to be running trials continuously. The partner we're working with, we can do it very efficiently and a lot, lot cheaper than here in the U. S. So we think it's actually a great relationship.

Speaker 2

And if the FDA is accommodative to the data, which they really certainly seem to be, we think it's a real win. So this is kind of tied to the same thing. So Sal is asking about the 1st sale last year and first revenue, what is this distributor intend to do with the first robot and can we sell more? So we the country that we're looking at is has a let's just say it's a very large population and we think that there's a great and bright future for robotics. The partner that we have been talking to is actually a different partner than we sold the first system to.

Speaker 2

And we think the partner we're now working with is kind of a better relationship for us long term. And they do a lot of the surgeons that their KOLs are actually highly recognized and publishing. So the plan is really to go through the process and the approvals and all of that with them, which is what we're working through and clinical trial is part of that. So I should have mentioned the 3rd benefit of doing the clinical trial is that it's going to facilitate approval in the country, which we think is a very attractive market. Let's kind of keep going.

Speaker 2

So James Bull says the ROSA robotic surgery equipment has been getting increased exposure lately. Any comments as to how Monogram competes? So just to kind of go back, so ROSA is the robot that is owned by Zimmer. You can see here it's shown on the right. So it's a robotic jig.

Speaker 2

What's difficult is all we know is what we hear from surgeons that are users and kind of having our ear to the ground. The Zimmer implant is an incredible implant. We've talked to 1 of our surgeon KOLs, loves the ROSA system. And so you're right, it's they're a great company and a great brand. And so we think that any player in the space is formidable.

Speaker 2

They have been looking at different applications for the robot. I know that it started out really with helping treat epilepsy and there's applications in now shoulder. Fundamentally though, we think that the opportunity is in robotic cutting. We think that's partly what was demonstrated by Mako, which is really the only robot cutting system on the market. So Mako owns robotic cutting.

Speaker 2

Nobody else is really with a robot arm using a saw in the way that Mako is doing it. And we plan to be the 2nd player in the market to do that. And the way we're going to do that is actively instead of haptically, which is an extremely challenging engineering problem. So we think we have a pretty compelling value proposition. 1 of the things that's a problem for any manual system that relies on a jig is we think that certainly the accuracy in the coronal pain tends to be okay.

Speaker 2

But in the sagittal plane, we think that it's challenging for manual based instruments. And if you think about just where the market might be going, which is more safety, more accuracy, ease of use, scalability, all of those factors, we think that we continue to believe in robot based cutting. Okay. Any other questions here? There's a question from James about NVIDIA.

Speaker 2

I think anything that's been publicly said there is what we're going to say at this time. Let's see here. Does a successful OUS clinical trial pave the way for approval in EU or other regions? So we think an FDA approval is by far the kind of most that's kind of the gold standard for getting into other markets. And so not FDA approval, FDA clearance.

Speaker 2

And having clinical data can't hurt, right? So the more real world data you have, the stronger the application certainly. But again, there's kind of multiple layers to having a US clinical strategy. It really is Monogram wants to be at the forefront of technology and it's really important to have real world data. So for example, the Envision navigation solution uses a machine learning based pipeline to auto segment critical structures.

Speaker 2

And we can do that in cadavers all day long. But we want to have data of live patients where we want to be training our models when there's blood and when there's other things happening in the operating room in different lighting conditions, so on and so forth. And so those are the kinds of things that are really imperative to an ongoing clinical relationship. And the partner we're working with we think is going to allow us to do that in a very scalable efficient way at low cost, I mean much, much lower cost. So the cost to run a clinical trial in the U.

Speaker 2

S. Far exceeds what it will cost us to run it outside the U. S. So maybe time for a couple more questions. We really appreciate everybody's time.

Speaker 2

If you do have questions, please type them into the chat on the right. So I'll give you guys 20 more seconds. Yes, so it's been a very busy time here. Hopefully, that gives you some idea of what we've been working on. Oh, sure.

Speaker 2

So thanks, Steven. So just a discussion about anything ongoing with Tier 1 relationships. So thanks for the question, Chris. So again, we think that the investment thesis that I laid out is potentially starting to be more and more recognized as time goes on and as Mako continues to do incredibly well. Mako has some very distinct things about it.

Speaker 2

It's the only saw based cutting robot on the market. It uses a CT scan so it's a personalized surgery and surgeon adoption is really tremendous and surgeon utilization is tremendous. So when you look at the utilization of their system, 60% plus Stryker procedures are robotic and they have 75% of the press fit knee market. So maybe I want to spend a little bit of time just understanding that. So if you think about hips, I think the utilization of press fit hips today is more than 95%.

Speaker 2

And over a 10 year period, it went from about 40% to 95% utilization of Pressfit Hips. Let's look at knees. The utilization of press fit knees today is about 15% and Stryker has 75% of that. Now imagine if that 15% does something similar to what happened in hips and goes to 95%. So I do think that large companies are starting to realize that there is a synergy between robotics and press fitting implants.

Speaker 2

The benefits of press fitting implants are really twofold. 1 is surgical time. You don't have to wait for the cement to cure which takes about 12 to 15 minutes. And then for younger active patients, prescriptive implants, the bones can constantly remodeling over time. You're not relying on bone cement for fixation.

Speaker 2

So there seems to be significant clinical benefit too from press fitting implants. So Stryker has 89% utilization of robotics and 75% of the press fit knee market, which is only 15% of knees today. But what if that goes to 95% of knees today? Do the other companies in this market have compelling robot utilization and a compelling answer to compete with Stryker. I think that's a fundamental question people need to ask and we think that we have a compelling robot that works very well with Crestwood implants.

Speaker 2

Hopefully that helped answer that Chris. Sure. So Michael is asking us to please define haptic and that comes down to really this slide here. So the Mako system, which is shown on the left, the user grabs an end effector that has a handle on it at the end of the robot and moves the robot around. And the user's force is what's really moving the robot arm.

Speaker 2

So in robotics, this is called haptic control. So generally speaking, it's either impedance control or admittance control. And the Mako portfolios patent portfolios cover more than just this. But in essence, this is really what it's about. So with the Mako robot, the user is moving the robot around along a plane unconstrained until they reach boundaries, virtual boundaries that seem to be tied to the implants.

Speaker 2

So that's haptics. So if you want to have the user move the robot around, you're really at risk of stepping on striper's toes in our opinion. And the FDA, the benefit of this is that it's very efficient at cutting. Human beings are very smart and we do a lot of dynamic compensation without even knowing it. And a human being, it really allows a user to cut as they would with a manual instrument very efficiently, but safely within boundaries.

Speaker 2

Now we will say that we think the boundaries could be enhanced and that's what we've tried to do with our version of the system. But that's really what haptics is. And nobody else it's really they've created an incredible impenetrable fortress around this technology. And we think that's why the other companies are struggling. And for active or autonomous which is where the robot is autonomously executing a cut path.

Speaker 2

So it's not really reliant on the user to move it around. It's really moving autonomously. There's been no robot company that's been able to cut efficiently. Most of the robot companies that have tried to cut autonomously have used a rotary tool, which is not efficient. There's a lot of problems.

Speaker 2

And so the surgical times with rotary tools are just too high. So if it takes you 15 minutes plus to resect bone, you're never going to be competitive with Mako. So from the ground, we said we need to have a active saw based system. Now the problem with autonomously cutting with a saw is that it's incredibly challenging for a number of reasons. 1 is there is a lot of vibration into the arm.

Speaker 2

The second is that you have to have a sequence of cuts. So a sagittal saw can only cut on a vector moving kind of on a specific vector, can't side cut, which makes it incredibly challenging. So you have to create cut paths that are generalizable to any anatomy and it's not trivial. And we think we have some very, very clever ways of doing it. And we think that it would be very difficult to do it without stepping on our patents, which we think have the potential to be extremely broad.

Speaker 2

So hopefully that helps answer it, Michael. So David is asking why do we think the stock is valued and selling so low and what do you think will happen? I think fundamentally, David, the problem we have is that we don't have enough institutional ownership. So we're mostly kind of retail driven. And I think that the value proposition requires a little bit of digging to really understand talking about haptic robotics, active robotics, autonomous.

Speaker 2

And I think a lot of people just think that, well, everybody has a robot and all robots are the same. And they don't dig a layer deeper to see, well, not all robots are the same when 1 of them has 89% of the market and 75% of press fit needs. And the arguments that well Stryker has a 1st mover advantage are really null and void when you look at utilization of their system, which is over 60%. I don't know any other robot company that has that level of utilization, right. So they've done something right.

Speaker 2

And I think that a lot of retail investors don't really fully understand that. I think that again to get institutional capital interested, it takes time, it takes milestones, it takes moving the ball forward. And that's really what we're focused on is trying to do everything we can to continue to derisk the opportunity. We believe the value proposition is going to become more and more and more obvious over time as Stryker continues to do what they are doing which is demonstrating that robotic cutting with a saw efficiently is what surgeons want and is what drives utilization and press fitting is what surgeons want. And that's really we think our investment thesis is that there isn't a good answer to what Mako is doing and we think we have a reasonably good answer for that.

Speaker 2

Obviously, I think it's a lot of people also appreciate that it's a very difficult market to raise capital in. Orthopedics doesn't have a lot of start up activity and the cost to distribute is high and so forth. So I think there's just a lot of people who remain skeptical and don't fully understand our investment thesis, which is why we're really trying hard to explain it. It is a little bit technical. But again, David, we're focused on the long term.

Speaker 2

And ultimately, what we're focused on is patients and trying to enhance patient outcomes and trying to bring technology to a market that we think will help drive utilization. So our goal is to have a robot that is safe as possible, as accurate as possible that automates the procedure that 1 of the things we don't really get into is surgeons don't do the surgery the same way. We were bringing in different surgeries to do our verification labs and they all want to plan the knee differently. What is the best way to plan a knee? There has to be a better way, some ways have to be better than other ways.

Speaker 2

And these are areas of opportunity where we think that technology is going to help us answer critical questions that are going to make patients' lives better. So fundamentally that's the value add that we're focused on. We're focused on how to make products that will make patient outcomes better and we're going to let the rest take care of itself. That's really what we're doing. And if we are able to drive patient outcomes and build something that is going to be helpful for humanity, I'm optimistic that that will be rewarded.

Speaker 2

And if we aren't able to build something that's valuable, then we'll continue to be penalized. I really do believe in what we're doing. I believe that it's going to be a very, very accurate safe system. And I've never been more excited about what the product can do and more optimistic about the product. Let's see if we can get to a point where we can get this into more surgeon heads.

Speaker 2

But yes, again, it's tough. Markets are tough, David. So David is asking what's the general timeline for the FDA approval. So the most recent timeline we've seen, I think, Noel, correct me if I'm wrong, I think we actually put it into I recently pulled that data. It's about 5 ish, 5.5 months, something like that, I think is the average time, I want to say.

Speaker 1

Yes, that's correct.

Speaker 2

So we think that's a good target to plan and we're pushing to get through the verification validation testing as quick as we can and then have all those test reports done. And in parallel, we're working on the 510. And so we want to be in a position to submit as aggressively in as timely manner as we can. So let's see here. So let's have this be kind of let's second to last question.

Speaker 2

So I wanted maybe we go for an hour. Okay, there we go. Thanks for the compliment. So Carmel said he would trust us. And honestly, Carmel, so I my mom has 2 knee replacements and a hip replacement and my dad needs a knee replacement.

Speaker 2

And I want a system that I would trust and that I would be comfortable doing on my own family. So we have made painstaking efforts to have a system that performs at the highest level and I'm incredibly proud of that. Okay. Can you provide a little more color on the next steps that need to happen before you submit the application in the coming weeks? So that's really all of this stuff here.

Speaker 2

So we need to get through this IEC 6601. So we're through the EMC portion. We need to get through the basic safety and essential performance, which is about 40% of the way through. And when I show this video of the fire hose, you know, being shot at our system, I mean, this is the kind of stuff that we're dealing with. And it's just working very, very hard to get through all of that.

Speaker 2

And there's a massive amount of paperwork that goes through it too, and they go through the FMEAs and all of the components and it's just a huge amount of work. So there's that piece of it, but we're aggressively resourced. And then there's the internal sort of verification and validation testing. So this is all of the test protocols of looking at every detail of the system. What is the system latency?

Speaker 2

How can you prove that it follows exactly within the cup pads? How can you prove the system accuracy? What is the end to end system accuracy? What is the accuracy of the arm? What is the accuracy of your registration?

Speaker 2

What is your accuracy of your segmentation? All of these details. And then all of the software to make sure that there aren't critical bugs, to make sure that it can't be hacked. There's a ton of things. So what I'm saying here is we are 63% of the way through our electromechanical tests.

Speaker 2

There's not any real concern about the test protocols. So like the big 1 that would have been a risk, right, is system accuracy. So let's say we were doing a simulated cadaveric surgery and our accuracy was 3 millimeters, we would have problems. But right now, our accuracy is basically less than or equal to 1 millimeter. So we're very, very accurate so far.

Speaker 2

Now this is not statistically significant, but what we're seeing is looking extremely promising that we're going to get through all of this and that there's not a lot of high risk to our verification. So we're not biting our nails whether or not the system is going to pass our internal testing. We've tested it very, very, very robustly. The big critical path, so when I say critical path, the thing that's going to slow down our 510 submission, if anything, would be the IEC 6601, which is a little bit out of our hands. We're reliant on a third party to test our system and it just takes it takes time, but we're pushing as hard as we can.

Speaker 2

So hopefully, that's that. But before we can submit the application in the coming weeks, So we never said that. What we said is that we expect the VNB to be largely complete by the end of this quarter and we plan to submit the 510 in the second half of the year. But I certainly like your enthusiasm, Kyle, The team is being very aggressive about working hard. So Kapil is asking about the timeline for custom imprints.

Speaker 2

I love this question. So I'm actually I have this I have our IMPRESS! Implant. It's my paper where you have my desk. So the plan is going to be we're launching with IMPRESS!

Speaker 2

Which is already cleared. So it's a press fit total knee that has a clinical track record in the cemented version. And so we really like the articulation, inserts, locking mechanisms, all of that. And we have a very attractive supply agreement. So that's our GEN-1 knee.

Speaker 2

And then the plan is to swap out the tibial component with a 3 d printed customized tibial component that we think has some significant clinical benefits. We've been working with the University of Nebraska on the development of that. We've shown that it has improved initial stability over the current state of the art total knee. And we think it's going to be easier to revise and hypothesis we have is that it's more peripherally loading which we think can be really positive. We haven't provided a timeline for that.

Speaker 2

We're really focused on getting the system cleared and getting adoption of the robot which we think is a very significant opportunity. And then once people are comfortable with our robot and our implants, we're going to start swapping components out of those with the PressFit 3 d printed custom implant. So starting with the tibial component, the total knee and then going from there. So, let's see here. I I think that's pretty good.

Speaker 2

What do you think, Noel? Seem to answer everybody's questions?

Speaker 1

I think so. I think it's important to reiterate the milestones that are forthcoming and to keep everybody aware of that and keep their ears open for those activities, because those are important for our continued evolution.

Speaker 2

Yes. These are really big things that companies recognize, right? So large strategics appreciate how hard it is to get 6, 601 certification, how hard it is to submit a high quality 5 ks. All of these things are just big milestones and we're continuing to push hard as far as hard as we can. So perfect.

Speaker 2

Well, thanks everybody for your time. We appreciate it. We will look forward to updating you next quarter. And hopefully, going back to some demos like we've done in the past to give folks a flavor of what Envision can do, that I think a sort of underappreciated hidden gem in our portfolio. But stay tuned for more news.

Speaker 2

And thank you so much for your support and your continued support. And we'll be updating you next quarter. Have a great 1. Thank you, everybody.

Speaker 1

Thank you.

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