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NOVA EYE MEDICAL LIMITED (EYE) - Surging Sales and Strategic Growth: Managing Director Tom Spurling on Breakthrough Ophthalmic Technologies, Market Expansion, and Future Prospects

August 28, 2024 • Andrew Musgrave

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What are the secrets behind a 71% sales surge in the ultra-competitive US ophthalmic market? Get ready to uncover the strategies that propelled Nova Eye Medical Limited to new heights as we chat with their Managing Director, Tom Spurling. You'll learn how effective treatment technologies, strategic marketing, and an expanded sales team have pushed the company to achieve record-breaking sales of $23.3 million dollars. 

Tom also discusses the anticipated impact of the proposed 30% reimbursement rate increase by CMS and changes from MACs on their iTrack Advance and Molteno 3 devices. Discover how positive feedback from US surgeons is setting the stage for expansion into Western Europe and Asia and why the upcoming European Society of Cataract and Refractive Surgeons conference is a game-changer for Nova Eye's future. Tune in for insights on financial health, improvements in EBITDA, and the road ahead for sustained success.

Andrew Musgrave:

Welcome to another episode of ASX Briefs, and joining me today is Tom Sprling, the Managing Director of Nova Eye Medical Limited, a company that's at the forefront of innovative ophthalmic treatment technologies, and they've recently achieved some remarkable milestones. Tom, thanks for joining me today and welcome to the ASX Briefs podcast.

Tom Spurling:

Thank you very much for having me.

Andrew Musgrave:

Okay, just to get things started, the company has reported record results for FY24, with a 71% surge in US sales and a significant improvement in operating performance. So can you break down the key factors behind this remarkable growth, particularly in the US market, and how the expansion of your sales team has influenced this outcome?

Tom Spurling:

Sure very happy to. I would say there are three things that have led to the good result in USA a recipe, if you like. First, our product is fundamentally safe and efficacious and is therefore well received by doctors. They like to use it. Second, we've invested historically in marketing clinical data brand awareness over the last couple of years to ensure doctors know us. Not every doctor knows us yet. There's room to go there, but we have some. And on top of that, we've recently recruited five additional sales reps in order to expand our footprint in the geographical footprint of the US and to execute and convert the interest into revenues. And the order of this is important. New sales reps on their own are important, but it's the good product of the market and the clinical data that really causes the sales increase.

Andrew Musgrave:

Okay, and with the recent proposed 30% reimbursement rate increase by CMS effective January 25, and changes from MACs impacting mixed MIGS procedures, how do you see these updates affecting the demand for your iTRA Advance and Molteno 3 devices and what kind of impact do you anticipate on Nova Eye Medical's future growth?

Tom Spurling:

Yeah, it's an important announcement the finalisation of the draft they call them local coverage determinations by the MACs, or MACs as we call them, combined with the increase in reimbursement for canaloplasty, as it has been proposed by the Centre for Medicare from January 1, 2025, should improve the likelihood that surgeons and facilities select canaloplasty over stents, metal implants at the time of cataract surgery for those people that have glaucoma. So this is a very positive thing for our business. With respect to Molteno, there are no changes for surgeries using our Molteno device. This is testament to the underlying stability and usefulness of our Molteno product for later stage glaucoma surgery, which has, over many years, been reimbursed.

Andrew Musgrave:

And with the strong demand iTrack Advance, driving your FY24 growth, particularly in the USA. What has been the feedback from surgeons and how do you see this influencing your expansion plans into Western Europe and Asia in the next year?

Tom Spurling:

So feedback from the surgeons has been great in the US and it certainly helps. We think that there'll be sales expansion in those markets outside the US following the investments we've recently made. When I say recently April, May, June we have a dedicated following of surgeons outside the USA, only some of whom have been introduced to iTrack Advance. For this reason, we think there's a lot of potential for sales growth outside the USA. The most significant ophthalmology conference of the year, that's called European Society of Cataract and Refractive Surgeons, is taking place next week in Europe and eight surgeons, seven of whom are Americans, will be on the podium presenting their experience with iTrack Advance. This is a record podium presence for us and getting in front of those having our US surgeon friends, getting in front of new surgeons in Europe, will augur well for lead generation and F25 sales growth.

Andrew Musgrave:

Okay, and the company has reported record sales of 23.3 million Aussie dollars in FY24, coupled with substantial improvements in EBITDA. So can you elaborate on the financial health of the company, especially the improvements in margins and operating leverage, and how you plan to sustain and build on this performance moving forward?

Tom Spurling:

So in our glaucoma segment we reported just a small loss of $0.4 million in the second half. This was a $2.7 million improvement on the first half. That shows six months is a good period, so that shows a good outlook for that ratio between sales, gross margin and operating expenditure. So it was built on the improved gross margins as volume through our factory increased and the leverage of our marketing and clinical investment. The marketing clinical drives doctors to our products. We then executed with addition of new reps to, as I said before, turn the interest into revenue and we expect to continue to apply this algorithm as we continue the progression of operating result improvement through F25.

Andrew Musgrave:

Okay, and just to wrap things up, looking ahead as the company enters FY25 with strong momentum and potential reimbursement tailwinds in the USA, what are your top strategic priorities for the next 12 months and how do you plan to capitalise on these favourable market dynamics?

Tom Spurling:

Yep Indeed the reimbursement dynamics as proposed by the Centre for Medicare and Medicaid Services and the Medicare administrative contractor. If they come into being as foreshadowed, the likelihood of doctors choosing iTrack Advance to be used at the time of cataract surgery increases. Now just a key statistic. I don't want to get into too much detail, but our business is the clinical fact that 20% of patients who present for cataract surgery also have glaucoma. A recent report by MarketScope showed that there are 4.9 million cataract surgeries a year in the USA, of which, technically, 981,000 will have chronic glaucoma. Currently, Marketscope says only 370,000 of those 981,000 possible are using minimally invasive glaucoma surgery. Keeping in mind that we have just about 11,000 surgeries with our iTrack Advance in fiscal 24, our strategic priority is to get greater share of that existing and future market of cataract surgeons treating glaucoma at the same time as they're doing the cataract operation. We see it as getting high-volume cataract surgeons to use our device as a key priority in F25.

Andrew Musgrave:

Okay, Tom. Well, thanks for your time today. It's been great to get an update on the company and where it's at, and we look forward to further updates from Nova Eye Medical in the upcoming months.

Tom Spurling:

Thank you very much for having me.

Andrew Musgrave:

That concludes this episode of ASX Briefs. Don't forget to subscribe and we look forward to catching you on our next episode.