Carlsmed Eyes Growth as Cervical Launch, Medicare Shift Boost Spine Platform

Key Points

• Growth drivers: Carlsmed plans to launch its corra cervical platform in the fourth quarter, with cervical procedures expected to contribute a low double-digit percentage of full-year revenue as adoption grows. Its surgeon base increased 60% year over year.
• Reimbursement tailwind: New Medicare MS-DRG codes expected to take effect Oct. 1 could provide about $30,000 in incremental reimbursement per aprevo lumbar procedure versus non-aprevo surgery, potentially simplifying hospital economics and supporting utilization.
• Operating position: Carlsmed has reduced order-to-delivery time from roughly eight weeks to about one week, maintained 77% gross margins, and held nearly $90 million in cash at the end of the second quarter while targeting profitability below a $200 million annual revenue run rate.

Carlsmed NASDAQ: CARL outlined its strategy for expanding its personalized spine-surgery platform, citing clinical data, reimbursement changes and a planned cervical product launch as potential drivers of growth during a Bank of America small- and mid-cap virtual event.

Chief Executive Officer Mike Cordonnier said the company uses imaging and surgeon-provided information to create a three-dimensional model of a patient’s spinal condition, develop a surgical plan and manufacture patient-specific, 3D-printed fusion devices on demand. The company’s aprevo platform has received Breakthrough Technology designations for lumbar and cervical spine fusion, according to Cordonnier.

Unlike traditional medical technology suppliers, Carlsmed operates without inventory or surgical trays, Cordonnier said. The company digitally plans procedures, produces devices for scheduled surgeries and collects postoperative data intended to improve its platform over time.

Clinical Evidence and Market Opportunity

Carlsmed has focused much of its clinical research on adult spinal deformity, a complex patient population that can face high revision rates after conventional procedures. Cordonnier cited data published in The Global Spine Journal showing that patients treated using Carlsmed’s technology, including a 3D surgical plan and personalized fusion devices, had a 74% reduction in reoperations compared with traditional spine fusion.

He said the company currently addresses lumbar and cervical fusion markets that each represent about 400,000 addressable procedures, for a combined U.S. opportunity exceeding $10 billion.

Carlsmed initially launched its lumbar platform before introducing its cervical offering in December. For lumbar procedures, the company’s platform is designed to deliver three-dimensional alignment. In cervical fusion, the system was engineered with an emphasis on patients with poor bone quality, Cordonnier said, using implants with a high surface area intended to support fusion.

The company reported that its surgeon base grew 60% year over year in its latest quarter. Cordonnier said Carlsmed has prioritized teaching institutions, where it can train faculty members and reach early- and mid-career surgeons.

Cervical Expansion and Reimbursement Changes

Carlsmed plans to launch its corra cervical platform in the fourth quarter. The offering will include personalized fixation plates designed to help maintain fusion and alignment following surgery. Cordonnier said the company performed its first-in-human corra procedure during the first quarter and has received positive feedback during a limited market evaluation.

The company expects cervical procedures to contribute a low double-digit percentage of full-year revenue as the product ramps, Cordonnier said. He added that corra could deepen use among existing customers while also helping attract surgeons focused on cervical procedures.

Carlsmed also highlighted changes to Medicare reimbursement for lumbar aprevo procedures. Beginning Oct. 1, three new MS-DRG codes are expected to replace a more complex structure involving 11 reimbursement codes, according to Cordonnier. He said the new codes apply regardless of surgical approach, the number of treated levels or patient condition.

Based on national average reimbursement, Carlsmed anticipates the new structure will provide approximately $30,000 of incremental reimbursement for an aprevo procedure versus a non-aprevo procedure. Cordonnier said the change should simplify hospitals’ economic assessments and could support contracting and utilization, while the company expects to maintain similar average revenue per procedure.

Capacity, Margins and Profitability

Since its initial public offering, Carlsmed has reduced the time from order to delivery from roughly eight weeks to about one week, Cordonnier said. The faster turnaround has allowed the company to address more scheduled cases, including one- and two-level procedures for degenerative disc disease.

He said investments in commercial operations and technology are designed to support a tenfold increase in production capability. The company is continuing to automate aspects of its surgeon-in-the-loop planning process while maintaining patient- and surgeon-specific treatment planning.

Chief Financial Officer Leo Greenstein said Carlsmed reported average revenue per procedure in the second quarter of $31,000 for lumbar cases and $18,000 for cervical cases. Gross margin was 77% in both the first and second quarters, he said.

Greenstein said the company expects sales and marketing and general and administrative expenses to decline as a percentage of revenue in 2027 relative to 2026, while it continues to invest in research and development. Carlsmed has previously stated that it expects to reach its profitability measure at an annual revenue run rate below $200 million, he said.

At the end of the second quarter, Carlsmed had nearly $90 million in cash and used less than $3 million per month during the quarter, Greenstein said. He said management believes its cash position provides sufficient flexibility to pursue growth and innovation while progressing toward profitability.

About Carlsmed (NASDAQ:CARL)

We are a commercial-stage medical technology company pioneering AI-enabled personalized spine surgery solutions with a mission to improve outcomes and decrease the cost of healthcare for spine surgery and beyond. We are focused on becoming the standard of care for spine fusion surgery. The aprevo Technology Platform consists of artificial intelligence (“AI”)-enabled software solutions, and interbody implants that we custom design for each patient's unique pathology and vertebral bone topography, and single-use surgical instruments (the “aprevo Technology Platform”).

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