Carlsmed CEO on Cutting-Edge Spinal Care Technology

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1:32Carol Massar:Bloomberg Audio Studios, podcasts, radio, news.

1:37Tim Stenovec:You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Let's talk about some earnings. Carl's MedShares closed higher by 16%. That was on Thursday. It was the first day of trading after the MedTech company reported EPS and sales above estimates. as far as the numbers looked, a loss of 32 cents a share on a comp basis for the latest quarter versus the estimated loss of 43 cents. So that came in above estimates. Also sales came in at$15.2 million versus the estimate of$14.5 million. That was what analysts thought they would see. We've got Michael Cordanier back with us, co-founder, CEO, and president of Carl's Med.

2:16Tim Stenovec:It's the$350 million market cap company. He joins us here in the Bloomberg Interactive Brokers Studio. Welcome back. It's good to see you. It's been a few months since the IPO. That's when you were last here. Just to remind everybody, the company works on AI-enabled personal spine surgery solutions for back surgery. We know that back surgery does not always have great outcomes. Just remind everybody what your company can do.

2:41Mike Cordonnier:Yeah. First of all, great being back here. Thanks, Tim and Carol. So what we do is we take data about patient, data about the surgeon, create a virtual 3D model of that patient's pathology, and then the optimal three-dimensional surgical plan that's given to the surgeon. They approve it, and then we 3D print the devices on demand that are made for surgery. In surgery, the surgeons place the device, do the surgical correction for a spine fusion, and then we caught post-op data on every patient that continues to train and improve the planning. So we are not doctors.

3:22Tim Stenovec:I'm not. I'm not. I don't play one on TV. I thought about it, though. Thought about it. I did. But how is spine surgery done if you're not using Carl's Med technology?

3:33Mike Cordonnier:Yeah, typically there may be some pre-op planning, but most of the decisions are made in the operating room. And when the surgeon goes to perform the procedure, they will get access to the spinal disc, remove the disc, and then they'll look at what's available in the operating room for various sizes of fusion devices that go into where the disc was, and ultimately do the best they can with what's available in the operating room.

4:02Carol Massar:Having said that, Mike, you know that too, when a surgeon opens up somebody, things can look a little different, right? And that's just the way it goes. So how, if you are using your system, and you've got kind of a game plan, if you will, what's the movement for physicians to say, well, wait a minute, this doesn't actually align up? And how often does that happen?

4:22Mike Cordonnier:Yes, we do allow for some intraoperative flexibility while we do a really great job working with the surgeon prior to surgery to digitally model both the patient and the procedure and create the precise implants. We also give them some flexibility. We make a slightly larger size, a slightly smaller size. So if they get in and decide they need to make a slight change to the plan, they have the implants that they can actually do that.

4:51Carol Massar:But they've got to work it off of the parameters that you've given them. So, I mean, is there, I would assume that there are times where the surgeon's like, wait, something's different.

5:00Mike Cordonnier:It doesn't happen. Yeah, very, very rarely does that happen where something that was pre-op planned cannot be achieved intraoperatively.

5:10Carol Massar:What can you tell us about outcomes? Tell us a little bit about patients afterwards and how things are. Because back surgery can be a pretty difficult thing, having known people who've done it.

5:18Mike Cordonnier:Yeah. And one of the things we're really proud of is our recent publication in the Global Spine Journal that showed a 74 % reduction in reoperation at the two-year time point. Because the challenge, like we talked about with spine surgery, is you're limited to what's available in the operating room for how to achieve the alignment. and when you can really customize the plan, customize the devices to the plan, can achieve a very predictable alignment, which is what drives the best outcomes. And our two-year data really shows how this has truly become the new standard of care for spine surgery.

6:00Tim Stenovec:Well, to that point, if it's become the standard of care, how do you make sure that doctors are educated on it? Because if you're not learning this in med school or if you're not learning this in residency, I imagine you're going to conferences to learn about new techniques. It's not an easy thing to do to convince a doctor to do something different than she or he has been doing during their career.

6:22Mike Cordonnier:One of the things that we've really focused on is education. And so the great thing about the platform is it uses the same surgical techniques that they are taught in med school, in their residency, in their fellowship. However, it adds the preoperative planning. And what we've done is really partner with a lot of academic institutions in the residents and fellows programs so that we really are training the next generation of surgeons very early on on this whole concept of digital surgery so that they can implement digital workflow into their practice. And that's really where we see the mass adoption in the early and mid-career surgeons that are looking to really implement digital workflows.

7:11Carol Massar:I'm assuming what you look for is the big buy-in from hospitals, right? So tell us about the uptake and where you're seeing growth in that business. Because that to me sounds like that's what you guys really want to happen.

7:25Mike Cordonnier:Yeah. So we're still very early days. Okay. But we've had a ton of traction with large healthcare systems, as well as teaching institutions. What does traction mean? Yeah, so meaning that to get on contract, it is a process. So typically go through a value analysis committee. One of the great things with our platform, our technology is first, we've got great clinical data. Second, we've got a really great economic proposition because for our new cervical platform, we have a new technology add-on payment, which enhances the reimbursement to the hospitals when they use this. And for the lumbar platform, we recently got new codes, new DRG codes that are specific to the personalized devices, which incentivize utilization.

8:21Carol Massar:I mean, this goes to you want insurance coverage of this. Right?

8:24Mike Cordonnier:Yeah. Okay. Yeah. So from a commercial payer standpoint, we fit inside current CPT codes and DRGs. What's CPT? So that is the code that a surgeon is paid on, the provider code. Okay. The DRG codes are the codes that the hospitals are paid on. So for the DRGs for the hospital, we have elevated reimbursement. So it's great for the hospitals. for the surgeons. They're compensated the same way they would be with traditional spine surgery, but have the opportunity to use the personalized platform.

8:57Tim Stenovec:Carl's met focused on spine surgery. Is that just for now? Do you have a pipeline? Do you have ideas that you could extend this to other parts of the body?

9:04Mike Cordonnier:Yeah, lots of ideas. We're deeply focused on the spine right now. And since we last spoke and we announced this in December that we launched the cervical platform, which was a big part of our use of proceeds from the IPO, where now we can not only treat patients with lumbar degenerative disc disease and deformity, but also a cervical disc disease and deformity. And we have a deep pipeline inside of spine, and that's where we're going to focus in the near term.

9:37Carol Massar:Just 20 seconds. What does this program cost?

9:40Mike Cordonnier:The program.

9:41Carol Massar:Or the platform.

9:42Mike Cordonnier:Yeah, so the platform is priced at a point that's similar to what the reimbursement is. And so it provides great economics to the hospital.

9:55Carol Massar:All right, going to leave it there. Thank you so much. Mike Cordagnier, he is co-founder, CEO, and president of Carlsmed, joining us right here in our studio.

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