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Presentation

Operator:

Noel Knape: Hello, everyone. Welcome to the Q2 2024 Update Call with Monogram. We are looking forward to reviewing our quarter with you. There will be a lot of great news to go over with you and look forward to your questions at the end of the call. Let me just read through this legal disclaimer so we get it on record and then we’ll get into the meat of the matter. This presentation by Monogram Orthopedics may include forward-looking statements to the extent that the information presented is in this presentation discusses financial projections, information or expectations about Monogram, business plans, results of 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 and 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. Thank you for letting me go through that. This is just a brief summary of the agenda for today. We’re going to give you the brief summary of the financial information for the quarter and year-to-date and then Ben’s going to go over the recent milestone accomplishments, next steps in our evolution and then we’re going to open it up to questions.

So just short and sweet. Okay. So in line with how we’ve previously reported that our cash position at the end of June 30th 2024 is $7.3 million and we have operated cash flow of $6.4 million almost $6.5 million over the six months ended June 30th, 2024. Our average monthly cash burn as we’ve stated in the past and we’ve stuck to is a little over $1 million a month. We’ve been really tight on marshalling our resources to stay at that level and we’ve succeeded in that goal. It’s important to note that we have 27 full-time employees and a highly variable cost structure. We still have no traditional debt and no warrant obligations at this time. A portion of our spend was related to the verification and validation phase that was ongoing through June and that’s coming to an end so we will be able to reduce our contract labor.

That’s a big part of our variable cost structure to a degree going into the third quarter. So we’re comfortable where we are and we’re ready to execute the next phase of our development. So with that, I’ll hand it over to Ben and he’ll go through the recent milestones. Thanks.

Ben Sexson: Sure, thanks Noel. And thanks everybody for joining you for our Q2 2024 Business Update. As Noel said, we hit some pretty major milestones that we’re quite excited about. So the first, not the least of which is we successfully submitted our 510-k application to the FDA for our mBôs TKA System. The application was submitted on July 19th. It has passed administrative review. So the FDA has gone through it and it is a complete application. And now we’re in what’s called the primary substantial review phase which should last approximately 60 days. So we expect to hear from the FDA on or around September 17th. So that’s going to be here before we know it. Just in terms of, this is not guidance but this is from the FDA’s website.

The goal in 2024 for the average time to a decision is about 124 days right now. So we are pretty excited about where we are. We are looking through this fundraise that we’re currently running and some of the other initiatives to be in a spot where we can push forward. And we are not currently expecting a clinical trial request but as I’m going to get into with the next key milestone, we’re ready for one if that becomes necessary based on the FDA’s feedback. So again, we’re pretty confident with the application. We are pretty confident with the substantial equivalence of our system to the claim predicate and we look forward to interacting with the FDA around that submission. The next major critical milestone, we have alluded to this for some time, but we were able to announce our strategic clinical trial collaboration with Shalby.

We’re very proud to be partnering with them on the clinical trial in India. We see a lot of strategic potential kind of in the intermediate term to post-approval launch OUS. We see them as a potential partner that could be very helpful for that. They are one of the largest orthopedic hospital networks in the world. We think it’s pretty validating that they like our system. We are really excited to get into their surgeons hands. We are going to be working with six surgeons on the clinical trial. We anticipate that there’s going to be a pretty quick trial. It’s 102 patients is the target patient population with three month follow-up. And we anticipate that we will be submitting our system for regulatory clearance in India very soon as possible.

So we’re kind of on track with those timelines. The plan right now is to leverage the clinical data from outside the U.S. for post-launch marketing in the United States, as well as for launching internationally where we think we can scale quite rapidly with less working capital constraints. So it’s pretty exciting to be talking to various distributors. Actually in January of next year, we’re going to be attending a major international trade show in Dubai where we hope to continue to explore commercialization opportunities outside of the United States as we anticipate hopefully a clearance. And obviously in the United States, we also continue to look at ways to leverage our technology. And with that, I want to highlight the key upcoming milestones that we see.

So we anticipate submitting the application for regulatory clearance in India. We expect at some point to obtain hopefully clearance for the mBôs System here in the United States or to have a decision. If the decision requires clinical data, we hope to be in a position where we’re ready to provide that. And we are working very quickly towards our first live and patient surgeries, which of course is really why we’re hearing what this is about. So with that, I want to open up the opportunity for questions from investors. If you do have a question for Noel and myself, please feel free to write it in and with that on the right-hand side you’ll see a chat. I’ll just, let me see, if I’m not seeing any chat, let me see if folks can now chat, perfect.

So on the right there you can see if you want to leave a question for an overwrite or respond to you can type it to the chat. The first question comes from Tom Kerr. Let me put that here so this really says FDA decision and expect within 90 days of initial submission but you said previously six to nine months. Are those two different time frames can you clarify the FDA submission timeframe expectations? Sure. So we do not expect a decision from the FDA within 90 days. The way it works is we’re right now in the Substantia Review Period, so that takes 60 days. And how it works with the FDA is that it’s like playing chess where whoever’s turn it is, that’s their clock. So right now we’re on the FDA’s clock, so they have 60 days. Then when they come back to us with questions, they stop the clock and they hand the clock to us.

It’s our job to respond to those questions as quickly as we can and address anything that they raise attention to. And then we provide those responses back and the clock goes back to them. So the time that they review the application, they try and have that done within 90 days. And the average, the target that they have right now for the FDA is about 128 days to a decision. So hopefully that’s helpful. Okay. So Ramesh is asking what our relationship with Shalby is. So Shalby is going to be supporting our clinical trial. They operate a hospital network primarily in India, but they’re growing internationally as well in other countries. Their hospital business is growing at a pretty rapid clip. Shalby is actually publicly traded on the Indian Stock Exchange.

So you can see what those financials look like. We will say the Indian market is pretty attractive in our opinion. So one of the big players in India, to date, has been a company called Curexo, which is publicly traded on the Korean Stock Exchange. They have provided guidance, and we invite investors to go kind of research how many robots they have sold into India. We think it’s a pretty impressive opportunity. The population, obviously, in India is very large. They look very favorably upon robotic systems. And what’s attractive to us about OUS, obviously, massive clinical opportunity, massive markets, but it would be the ability to scale our revenues with minimal, not minimal, but with less of a working capital requirement. So in the United States, we’re planning to, it’s a little more capital intensive to distribute in the United States, obviously, higher margin.

So the goal is for the U.S. to grow very quickly, pressure test the system, up rev, anything that needs to be up rev, to really work through any kinks that we see kind of in the real world, for example, reliability of various components and that kind of thing. As we have a more measured growth trajectory in the United States, really you get only one shot at a first impression. So what’s really attractive to us is that we can work with a partner in India who moves a lot of volume, has a lot of experience with robotics and really pressure test the system as we grow in the U.S., which is a more competitive market for robotics. Hopefully that’s helpful. So, Sals asking about our fund for raising cash in 2025. So, obviously, our need for cash is going to be driven our ability to execute milestones.

And we think that we’ve been working extremely hard to keep hit our milestone, obviously submitting the 510-k was pretty significant achievement with such small team was a huge amount of work. There was really no task that was too low for anybody on the team. We all really work very, very hard. So I think it’s going to be the same thing for, once we get clearance, that’s obviously a very critical milestone for the company. We think that certainly hitting milestones and de-risking the story. We’ll continue to enhance the capital appetite from capital allocators in our space. And as we continue to have validation from surgeons, from other strategists, in the space that are saying, hey, what Monogram has is real. It’s competitive. It’s a solid product.

We anticipate that we’ll have access to more and more capital as we just keep putting one foot in front of the other and building. So would Shalby be a prospective client of mBôs technology? So certainly in India, they have a very strong presence in India. We think that they would be a great partner in the Indian market. And obviously, it depends really kind of it’s going to be market dependent. We’re taking one step at a time. They’re a very ambitious company. We are very close to their management team. We think that they have a very impressive group of surgeons that they work with. So certainly in India, a great opportunity for us. But we’re really taking one step at a time in terms of how we’re going to be moving forward. So, there’s a number of questions about the current offering, so we’re not making any comments on that at this point, but obviously we think that it’s — we think it’s attractive just given where the stock is currently trading and the preferred offering is trading.

Obviously, we’re offering those shares at $2.25, so we were hopeful that is an opportunity for our investors, but we haven’t made any public comments on how that offering is going. At this point, we have said that we plan to close that offering in early September and we still are on track to do that. It’s really nice having that as an option. We’re really kind of innovating in that space. It’s capital for small companies from institutional players. It really comes down to de-risking and moving the ball forward, and we think that as we continue to execute, we hope that it’ll get easier and easier to access bigger pools of capital. Again, have you tried reaching out to our investor relations? So, the big difference is that we’re offering preferred shares.

And what’s publicly listed are common shares. So if we would invite you to, we’ve tried to send a couple of explainer emails, but I would invite you to try and read those emails where we try and explain the difference between the offerings. So Gary’s asking when do sales start once we’re FDA clear? So it really depends on the market. We, our goal is to OUS we expect that the market ramp can be quicker than in the United States just given how things work in the United States with legal contracts and hospital groups can be slower moving. One of the things that’s very attractive about Shalby is they are very fast moving. So we do anticipate once we get clearance our goal is to ramp outside the U.S. as quickly as possible but we’re positioning ourselves to be launching in the U.S. as well.

We know which accounts we want to go to and which surgeons we want to start out with. So, but it really is hard to negotiate with hospitals before you have a cleared product. So there is some time that it will take us to ramp. Hey, Tim. So Tim’s asking, regardless of FDA requirements for clinical evidence, it sounds like you are pushing forward and you’re for actual clinical patients. Yes. So, one of the things that especially for the US market, right, surgeons, nobody wants to be the first person to try a new system on their patients. So we’re going to have a post-clearance marketing through this clinical trial, be able to show them, hey, look, here’s the outcomes for 102 patients, so we think that will be really helpful for helping to scale in the US, especially kind of some of those first movers that we’re targeting.

So Andrew’s asking, he says, he sees the stock has remained below $3. Do you believe after successful even that would increase? So I think, Andrew, one thing we want to say, and I’m sure there’s a lot of investors on the call who are just kind of frustrated with the stock price performance. Obviously, it is, it can be a little bit frustrating. The way we kind of think about it is when you look at comps in the space, post-clearance, when you look at what companies have been acquired for, I think we had, I don’t know if we had that here. Yes, so you can see this is a table that shows what some comparable companies have been acquired for post-clearance, when you think about just kind of an expected value, right. So we would invite, in terms of how we think about it, right, we think about what is the probability that we get clearance times, what we think the company would be worth post -clearance, and then what is the probability that we don’t get clearance, and what would the company be worth if we didn’t get clearance?

And we certainly think that the market is, I would say, being very conservative about our clearance strategy. That’s how I would interpret it. I think that we have presented a very reasonable approach to how we’re going to get clearance. So we have, not only do we have a really solid submission that we’ve already done. We’re going to hear back from the FDA pretty soon in September. But we also have a backup plan in terms of clinical trial with Shalby. So I really do think that we have done a very good job de-risking clearance as much as we can and the cost to run the clinical trial in India is very, not only is it quite a bit less than it would be in the United States, but the working capital required to do so is considerably lower. And that’s because Shalby purchased consensus orthopedics, which is the manufacturer of the mPress implant.

So we’re using our implant in India for the clinical trials, so that’s really a very attractive thing for us. So, Hendrick asking how many surgeries do we see occurring on a weekly basis to achieve that? So Hendrick, we have three sites and six surgeons and the amount of surgeries that Shalby does annually, we disclose that number I think was 14,000 knees a year, which is a lot of knees. So we think that we can move through the clinical trial pretty quickly, obviously, we don’t want to rush through it. We want to take our time and make sure that we do things right, but we don’t anticipate the data collection will take very long once we have everybody enrolled. And we don’t anticipate that the enrollment is going to be very time-consuming either.

So let’s see here. A lot of questions about just kind of time to initiate sales post clearance. I think we’ve touched on that. I think there’s a lot of kind of just logistical questions that our investor relations firm can answer. So Tom’s got a good question here. He’s just asking if this is a good burn rate recorder assumption. Noel, any comments on that? That looks like you’re muted, Noel.

Noel Knape : No, I think that’s a good assumption. We’ve been running a little bit over $1 million a month and we’re going to be able to reduce that a little bit with the variable cost structure going down with our contractors that were involved with the V&V. And that’ll be somewhat offset by the clinical trial costs that are very reasonable, as you noted. So that’s a reasonable burn rate and we expect to be successful, as you noted, in our continued capital raise efforts through the same time period. So we’re comfortable in our position.

Ben Sexson: Perfect. Robert’s asking, how can folks buy at $2.25? So if you go to our website, monogramorthopedics.com or monogramtechnologies.com, it’s right there on the home page. You’ll see how to purchase shares. So you’ll be buying preferred shares that pay a dividend that are convertible into common shares, which is what’s listed on NASDAQ. So if you ever wanted to sell, it’s pretty straightforward to do that.

Noel Knape : Today, I believe the price is around $2.60.

Ben Sexson: Yes, so Mark’s just asking if we have to wait for FDA clearance until we can start building robots. Yes, so not until we start building robots, we anticipate that we’re going to be building inventory before we launch. But we do need to have the clearance to legally sell our product. So, obviously in med tech, there’s very high barriers to entry. It’s very, very expensive to, and difficult and challenging time consuming to commercialize a robotic system. But that’s really where we think the value is once you have a system that’s cleared. Obviously, that’s a huge, huge achievement, especially if the system has attractive product market fit. So we have a question here about, one quick second. I have a question here about why we’re not targeting China versus India.

So one thing about India is that I think China is currently probably developing more of, but India has a very well-established infrastructure for running clinical trials. It’s actually very sophisticated. The CROs in India are very knowledgeable, and the FDA is pretty comfortable with India. We actually, in our pre-submission, shared our clinical trial protocol with the FDA in detail and discussed the Indian population, and they just do a really good job with running clinical trials. But obviously, China is a huge market, and Shalby does have pretty ambitious growth plans. So certainly, China is a huge market. It also, unfortunately, has been more and more difficult for U.S. companies to, just technology companies in China. That’s not the easiest thing, market to penetrate.

Okay. Let’s see here. So we have a question here from William about when we expect to have results from Shalby. So we’re really in the final stages of submitting to the Indian regulatory authorities. What’s been communicated to us from our CROs that their review period is about 90 days, after which we would get clearance. We would expect to get an import license before that. The time to get an import license is a little quicker. So our goal is to be as ready to go as possible for once the Indian authorities clear the system for the trial. Andrew’s asking about ethical concerns surrounding the clinical trial in India. I mean, no, because we’re actually planning to commercialize in India. So, having a clinical trial in India and having data will support the clearance in India.

And we think India is a very attractive market for our products, as evidenced by Curexo and what’s probably available in terms of how many units they’ve been selling in India. Yes, so Stuart’s asking just kind of for maybe a little more detail on that. So to put in perspective, we’ve seen guidance from Curexo, which is an India of, this is from 2013, of placing 100 units in 2013, or sorry, 2023. So obviously that’s a pretty attractive market size. We think that India has a lot of potential, and then obviously there’s a lot of markets around the world that there’s a need for robotics in the United States. The market opportunity is, as everybody knows, huge. We do about a million knees a year in the United States. And then obviously there’s hips, shoulders, spine, ankles.

So there’s really, it’s a huge market. Our primary addressable market is about $20 billion, and then that’s adult joint recon. And then if you add in extremities and spine, it’s about $30 billion, so it’s a very attractive market in the United States as well. So I think, we just have some more, just questions about the stock price and obviously it’s, the market is seems to be taking a wait and see approach in terms of getting clearance. But I think our job is really to keep building. Our job is to keep finding people, surgeons and partners who are attracted to what we’re developing. We think we have a differentiated product. We think our product, there’s a need for our product. And so we continue to think that there’s something here. So that’s what we’re doing, we’re going to focus, put our heads down, and the price is what it is.

There’s only so much we can control that. And obviously, we do think that over time, if we continue to execute, hopefully we see that turn. Okay. It looks like just a number of questions here. Robert’s asking about how he can purchase this. So Robert, you would, if you go to our website, you can purchase the stock in $2.25. And then you’ll have, the shares will be held by our transfer agent, and all you have to do is give the statement to your broker. You ask them to convert the shares into common shares, and then give that statement to the broker, and they’ll transfer them to Fidelity or whoever your broker is. So it’s a pretty straightforward process. The preferred shares are convertible one-to-one at the shareholders ops whenever they want to do that.

So I mean theoretically, well, that’s what I’ll say there. So Robert’s just asking about the competitive landscape. I think what’s a pretty interesting opportunity is that we haven’t really seen. Monogram’s been developing since 2016, and we really have not seen anything that’s similar to what we’re doing. There’s really not many, with the exception of Mako, robots with a saw-based cutting end effector. A saw is a very efficient way of resecting bones for a total knee replacement. We think that what we have is pretty compelling. If you listen to our prior call, we explain the value proposition of our system that’s available on our website, on our IR link. But to cut a long story short, Mako is the dominant player in haptic robotics. So that’s kind of user-initiated cutting.

The user, in this case, the surgeon, grabs the end effector and quickly and efficiently resects bone quite accurately. So Monogram is going to try and own active robotics so that would be a paradigm where the user is not required to move the end effector around. And we think that we have solved a very, very difficult robotics problem that nobody else has really solved. Any other active system on the market utilizes a rotary tool, which is a less efficient way to resect bone. A lot of those systems require, for example, external fixation. There’re issues with potentially thermal necrosis. They require irrigation. We also have a very, very robust soft tissue module. So we think we have a really robust system end-to-end, and the V&V demonstrated the accuracy of our system.

We’re excited for the clinical trial to demonstrate that further. So I think we have something really, really pretty compelling. We’re getting a lot of questions here. I think maybe Noel, what we need to do is hold a webinar so that we can address all these questions. I have a hard stop. I’m already 10, almost 10 minutes past, so maybe we get one more question, but we’ll hold a webinar and it’ll be, give folks who have a lot of questions an opportunity to ask more questions. William Morrissey, I can see you’ll avoid which questions does he say we’re avoiding. Who is the transfer agent? Equity stock transfer. You seem to be avoiding the big question on pre-IPO stock. I’m not sure I understand what the question is. So we’re listed on NASDAQ. So, I think we need to do a webinar, Noel, there’s a lot of questions from folks, and not all of it’s really kind of tied to quarterly update.

But I guess just to really summarize, the team executed on our goal to submit the 510-k on a very aggressive timeline, I mean, we’re a very lean team, 27 employees, full-time employees, and this was a huge amount of work in a very small team. We’ve been able to keep the burden down and be very aggressive about developing in a capital efficient manner. And so now it’s really about continuing to execute. The clinical trial is moving forward. That’s, I mean, putting a clinical trial together is not a trivial task, but we think we have, we’re in the finishing stretches of having that. We have a really solid partner in Shalby, who are working with a really solid CRO as well. So that’s going to be a pretty significant achievement, our first live in patient surgeries.

We were very excited to kick that off. But I do think we need to put together a webinar. So we’ll do that. We’ll take that feedback. There’s a lot of questions here.

Noel Knape : I completely agree. Let’s just get that scheduled for September and get all these questions teed up prior. So we’re ready to have the discussion. So there’s a lot of information out there and I could see where we could go on and on and on about it. So I think it’s a really good idea.

Ben Sexson: Perfect. So with that, we thank you everybody for your time. Thank you for your support. We’ve had a lot of questions about how to invest. I’m going to drop a link here. So, here we go. I’m just going to drop the link to the investment. So you go to the website. I just posted our website monogramtechnologies.com. All you have to do is click on the invest now button. And you’ll see all of the details about that offering.

Noel Knape : Yes, I just like to make it a quick comment for everybody just as a reference, we recently had a couple of surgeons who are familiar with our offering with our robotic system, do an interview. And that’s been posted. That’s out there on the web. You could like track that down and look at it. You get a really sense of, a really good sense of how the surgeons is looking at this technology as an advancement in their space. And they’re super excited about it. And that makes us excited about it being a product that is ready for a good market opportunity. So I would hope that you would take the time to try and find that and have a look.

Operator: [Operator Instructions]

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