Electromed at Oppenheimer Conference: Strategic Growth in MedTech

Electromed Inc. (NYSE: ELMD) shared its strategic insights at the Oppenheimer 35th Annual Health Care MedTech and Services Conference on Tuesday, 18 March 2025. The company highlighted its innovative airway clearance technology, emphasizing both growth opportunities and challenges in the bronchiectasis market. While Electromed is experiencing strong growth and profitability, the potential for market expansion remains significant.

Key Takeaways

• Electromed’s SmartVest device is central to its market leadership in airway clearance.
• The U.S. bronchiectasis market presents a $2.3 billion opportunity, with only 127,000 out of 824,000 diagnosed patients using HFCWO technology.
• The company reported significant reductions in antibiotic use, hospitalizations, and emergency visits among its users.
• Electromed announced a $5 million stock repurchase program, reflecting confidence in its valuation.
• The company is debt-free and expects continued double-digit growth driven by operating leverage.

Financial Results

• Revenue: Approximately $60 million annually.
• Market Cap: Around $210 million.
• Gross Profit Margins: In the mid-70s.
• Debt: No debt.
• Stock Repurchase Program: $5 million announced.

Operational Updates

• Product Focus: Solely on airway management using High Frequency Chest Wall Oscillation (HFCWO).
• Manufacturing: All products are made in the U.S.
• Sales Model: Direct-to-patient and provider model, with selective use of Durable Medical Equipment (DME) distributors.
• SmartNotes: Post-delivery assessments at 5 and 30 days to track patient improvement.
• Expansion Strategy: Increasing sales reps and shrinking their territories to boost market penetration.

Future Outlook

• Growth Expectation: Continued double-digit growth in the near term.
• Operating Leverage: Expected to expand further.
• Market Expansion: Focus on increasing market share in bronchiectasis and exploring hospital market opportunities.
• Payer Coverage: Investments to expand coverage and increase reimbursement.

Q&A Highlights

• Algorithm: Consistent pressure settings for different body types with adjustments for size variations.
• Pricing: Largely fixed due to contracts; growth driven by market share and unit volume.
• Direct to Consumer vs. DME: Direct-to-consumer efforts enhance awareness, transitioning patients to referrals.
• Market Penetration: Education and new drugs are key to increasing awareness and market penetration.

Electromed’s strategic focus remains on leveraging its innovative technology to capture a larger share of the bronchiectasis market. For more details, readers are invited to refer to the full transcript below.

Full transcript - Oppenheimer 35th Annual Health Care MedTech and Services Conference:

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Good morning, everyone. Suraj Kolbe, Senior Medical Device Analyst at Oppenheimer. Pleased to have you guys join us in person. And also to those listening later on, this morning, we are pleased to have Jim Cuneff, CEO and Brian Nagel, CFO of ElectroMed, present to us their story. Jim, it’s a pleasure to have you.

I’ll let you take the floor here. And folks, to those of you listening, in case you have any questions, you know the drill, just send me an email or my junior’s an email or put it in the chat box. We’d be more than happy to resurface at the end of the presentation and ask questions. Again, Jim, the floor is yours.

Jim Cuneff, CEO, Electromed: Suraj, thank you for that introduction. And good morning, everybody, and welcome. I’m Jim Kniff. I’m the CEO of ElectraMed. And with me as Suraj had mentioned is Brad Nagel.

He’s my partner in crime, who’s the CFO. And we’re really excited this morning to share with you the Electromed story. And as you can see here, we’re an innovative leader in airway clearance technology. This is the standard disclosures which I won’t go through. But a little bit about ElectraMed.

Our focus is we’re a single product company. Our focus is really on airway management and I’ll show you how we do that in a minute. But we’re based here in New Prague, Minnesota. We’re about an hour southwest of the Twin Cities. We’re a thirty plus year old company.

We generate about $60,000,000 in revenue. Our market cap is around $210,000,000 as of the opening of the market this morning. And we manufacture all of our products in The United States, which I think is great. We get a lot of questions from investors, do we have exposure to the tariffs that are being introduced? And the short answer is we have nominal exposure to the tariffs, which puts us in a really good spot.

And as I mentioned before, we’re a single product company and the mechanism of action of our product is called high frequency chest wall oscillation. And again, I’ll walk you through that in a little bit more detail. Couple other highlights about the company is, as you can see here, relative to the financials, we’re growing, we’re profitable. We are a leader in the airway clearance market. As I mentioned, the mechanism of action of our SmartVest product is called high frequency chest wall oscillation or HFCWO, which is what I’ll refer to it as.

The other thing that makes us I think unique and I’ll I’ll, spend a little bit more time on this later on in the presentation is unlike a lot of other manufacturers in the home care space, we have a direct to patient and provider model. And a consequence of that is, we have very strong gross profit margins in the mid-70s. We’re a growing company, we’re profitable, we’re generating cash, and we have no debt, which I think makes us really kind of an outlier for a company our size. Let me talk just a few minutes about the disease state that we serve. It’s called bronchiectasis, which is a bit of a mouthful.

But essentially, this is a chronic irreversible lung condition. And essentially, what ends up happening is the patient’s lungs, their airways expand and they get repeated episodes of pulmonary inflammation, which leads to infection, which leads to mucus accumulating within the airways. And the problem with that is as you can imagine, if you have too much mucus in your airways, you start to kind of drown and you can’t breathe. And so, what our product really does is it helps to remove that mucus from the airways so that those patients can breathe easier. We feel like this is a great market to be in because this disease is misdiagnosed.

Many of the patients that go in to see a pulmonologist are usually diagnosed with asthma or with COPD. So, we think that there’s a great market development opportunity to increase the awareness of bronchiectasis. This disease is under diagnosed and obviously as a consequence of that HFCWO is under prescribed. But we feel like that’s changing. There’s some interesting dynamics that are happening in the market right now that we believe are tailwinds to further growth.

To that end, I know it’s a lot to unpack here. Here’s kind of our iceberg slide. We show this in every investor presentation. And let me orient everybody to the slide. So at the exposed end of this iceberg, there’s eight twenty four patients in The United States who have been diagnosed with bronchiectasis.

Of that only one hundred and twenty seven thousand of those patients have adopted our technology or one of our competitors technologies. Remaining seven hundred thousand U. S. Bronchiectasis diagnosed patients, only about two hundred and thirty thousand of them are actively seeing a pulmonologist. And a pulmonologist is really our sweet spot, that’s our call point for our sales reps.

And if every one of those patients that has this disease got prescribed HFCWO, that’s a $2,300,000,000 market opportunity for us. So we feel like there’s a lot to explore and unpacking that and taking advantage of it. That does not even include at the lower end of this iceberg the four point one million patients in The United States that have COPD bronchiectasis overlap and that’s just another opportunity for us to unpack in time. How is bronchiectasis treated? So today you basically with our Clearway device you basically clear the mucus from the airways.

The pulmonologist treat the infection with antibiotics and then they want to reduce the inflammation that the patient has. Again, the more inflammation, the more mucus can build up. There’s some exciting new drugs that are coming into the marketplace, most notably at the end of this calendar year that will address the inflammation side of this treatment paradigm. But we feel like the first step in that paradigm is really clearing the mucus from the airways. This is kind of a depiction of what our product actually does.

And so essentially the patient wears a vest, that vest is attached to a hose, that hose is then attached to a generator. And that generator really, introduces airway into the vest that it releases that air that’s in the bladders of that vest. And that mechanism of action of that oscillating treatment is really what forces the mucus out of the bronchial airways, so that patient can either cough that up or swallow the mucus and again breathe easier. Since this is a chronic irreversible condition, the patient needs to be in this treatment really twice a day. Usually, the sessions run about thirty minutes per session and they do this really for the rest of their lives, so seven days per week.

You know, we’ve got I think the best in class product in the marketplace today as you can see, great industrial design on the product. This is a product which is used in the patient’s home, so it’s very attractive. It’s not cumbersome, it’s lightweight, it’s easy to use, there’s no on off buttons on this technology, it’s all through a touchscreen. And we’ve made it that way because one of the key elements of patient success is having adherence. So we want to have a product that is comfortable.

We feel like the vest that we manufacture is the most comfortable to market. We have Velcro enclosures. Many of our competitors have snaps which are difficult for patients who have arthritis to use. And the other thing that I would just comment on is the fact that we have reimbursement both from CMS as well as most private payers in the country for this technology. The other thing that we do that is unique to ElectraMed is we want to make sure that not only does the patient have a great experience with the product that we connect, but we can also show that they’re actually their quality of health is actually improving.

And so one of the things that we do and this is a very high touch portion of the ElectraMed story is after we deliver the product to the patient’s home, we do an initial assessment as to what is their baseline. And then five days later, we go through and see if they’re improving after using our technology. We document all of that and then we follow-up again thirty days later. We provide all of that back to our providers in the form of what we call smart notes. And this is an indication that a, the technology that the prescriber has prescribed is actually doing what’s supposed to and that is including, really improving the quality of life for these patients.

Again, bronchiectasis is chronic, it’s irreversible. So we don’t cure bronchiectasis but what we do is we improve those patients’ quality of life. To that end, one of the things that we want to do and obviously, I think most everyone on this call understands, the cost of hospitalizations. What we have found is when patients get put on this technology that there’s a 57% reduction reduction in antibiotic prescriptions, there’s a 59% decrease in hospitalizations, and there’s a seventy five percent decrease in ED visits. And that’s really important because, you know, especially if that patient was formally admitted into a hospital that gets discharged, if they come back to the hospital for the same condition, that’s a never event and a big expense to the hospital.

So, we want to keep these patients out of the hospital. We want their treatment to occur in the home and this product enables that to happen. Yeah, I mentioned before about our direct to patient model. I think this slide does a really good job of depicting really, you know, how things operate in the home market. Most manufacturers will distribute their product through a durable medical equipment distributor.

That DME is one is are really the ones who are generating a lot of the demand for the technology in this market. And then they’re the ones who work with the patient for reimbursement coverage. Our model is a little bit different. We do on a selective basis go through some DMEs, but the majority of our revenue really comes from our direct to patient model. So, we work with pulmonologists to provide us with referrals for patients.

We then work with the patient to make sure that they can get financial coverage either through Medicare or through private payers. And again, much like a DME, we just deliver the product to the patient’s home and do their training. This is where our revenue comes from. So, we do have a nascent piece of our business both internationally as well as in the hospital market. I would say that, we feel like the hospital market in the near term is a great kind of greenfield for us.

But most of our revenue 94 percent comes from home care patients. About half of our payer coverage comes from Medicare. And we don’t feel like this technology in our product in particular is something that has exposure to competitive bidding. And in fact, we typically get about a 2% to 3% reimbursement increase for Medicare every year. And then as you can see I’ve been talking about bronchiectasis and that’s the preponderance of the diseases that we treat.

But we also this technology is appropriate It gets reimbursed for CF and also neuromuscular diseases as well. How will we increase our market share? There’s really four primary competitors in this market including us. One of our secret sauces I think has been that we have shrunk our sales reps territory. So we’re going to continue to add sales reps to expand our footprint.

We also have a really solid direct to consumer digital presence. As you can imagine, if you’ve got this disease that’s chronic and irreversible and it’s compromising your quality of life, many of these patients are going online to find different solutions and many of them find us. And then we’ve got respiratory therapists on staff that can work with those patients to better understand their disease state and then get them to a physician that can help them get access to our technology. As I mentioned before, this is a under diagnosed disease that we serve. And so, we feel like there’s a great opportunity through market development to expand education for not only patients but also providers.

And not only are we doing that but there’s other competitors in the market that are investing in that. And I think a consequence of that is all boats will rise and we’ll be getting some really nice tailwinds in treating bronchiectasis patients. We also have what we call smart advantage. We think not only do we have a best in class technology, but we also think we’ve got best in class customer care and support. This is not only for the patients but also the clinics which are working with those patients to make their burden in prescribing our technology easier.

And we feel like we’ve got not only technology but also documentation support that helps them. And then lastly, in need prescribing capability, this is something we’ve had great success with this year. That’s basically instead of a clinic sending a prescription to us through a fax which is kind of the norm, they do that digitally. It does a couple of things and make sure that when they do it digitally, we have all the documentation we need to be able to deliver this technology to our patients. It also helps with not only private payers but also Medicare and making sure that we have all the documentation necessary for us to get paid.

Our long term objectives as a company, we don’t give guidance, but we’ve been successful in growing our business double digits. We expect that to continue in the near term. And I think one of the other things that’s been really exciting about the Electromed story is the fact that not only have we been able to grow the top line, but we also have been able to get expanded operating leverage and we expect that to continue as well. So why invest in us? We’ve got a large expanding disease state that we’re serving.

We’ve got clinically proven technology. As I mentioned, we have great payer coverage that’s only getting better. In fact, we’ve made investments this year, this fiscal year in additional resources to help mine the payer contracts that we have not only to see if we can get increased reimbursement for our technology, but also to expand our payer coverage in certain markets where we’ve got some white space. We are growing and we’re not only growing, but we’re doing it profitably. We’re generating cash and we have no debt.

And in fact, we just announced a week ago that we are doing a stock repurchase program of $5,000,000 So we feel like today our stacks a little undervalued and we feel like that’s a good use of our cash going forward. The other thing I wanted to mention before we open things up for questions is the fact that my incentive compensation as well as management’s incentive compensation. When I started, management had incentive compensation based not only on financial results but also on MBOs. And we have flipped that to make sure that our incentive compensation is really aligned with investors. So on the bonus side of the equation for us, we need to increase our revenue and also our earnings.

And if we do that successfully, people will get their incentive compensation. If we don’t, they don’t get that incentive comp, which I think aligns with what our investors are expecting from a company. We also feel like we have an attractive valuation. So when you look at whether it’s sales growth or gross profit margin or operating margin relative to the Russell Medical Index, as you can see, we’re kind of head and shoulders above other people within that index. And so we feel like this is a really good investment opportunity for folks.

So Suraj, with that, I will open it up for questions. I think we did okay time wise and the floor is yours, sir.

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: So, Jim, I have one question on my from my side and I know a couple of questions have come in from clients. So let me go over the dumb question that I have first, okay? I’ll leave the smart ones for later. Jim, let’s say Suraj comes in, right? He has more sub Q fat, you know, and let’s say somebody else has more visceral fat.

Does, is there basically one algorithm for both, in terms of high frequency, well, let’s say the mucus burden, everything is the same. Does it need to apply a certain pressure, certain time, for certain duration, and the mucus unloading would be equivalent? Or should we think differently, in terms of titration?

Jim Cuneff, CEO, Electromed: No, it’s a very good question. I think you should it would be consistent whether or not you’re someone who’s overweight or someone who’s thin. One of the things that we find though Suraj is most of the patients that have bronchiectasis ironically, they’re over 65 years of age and many of them are female and actually they’re relatively frail. And so one of the things that’s nice about our product is we’ve got a really lightweight vest, it’s very comfortable. And as you mentioned relative to the titration, even if you are if you have a little bit more skin on the bone, you know, we’ve got different sized vests to accommodate different sized patients.

We have different pressure settings that we can apply to patients, that accommodates the different body types.

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Got it. Got it. Fair point. Jim, I’m just reading a question from a client. What are the price versus unit volume dynamics in the high frequency chest wall oscillation market?

I guess, what I’m the way I see it as one for you guys and one for the broader market, maybe you can just kind of characterize how it’s playing out.

Jim Cuneff, CEO, Electromed: Yes. I’ll take a stab at this and Brad, you may want to jump in also. But just to kind of level set everyone and I think what’s really I’ve been in the medical technology market for over thirty years and I’ve never worked at the company where outside of when we sell a product to say a hospital or a distributor predominantly, you know, outside of The United States with our distributor team that we have there, our pricing is pretty well set. So we have, you know, fixed contracts for the most part with our commercial payers and the same thing with Medicare. With Medicare in particular, the reimbursement rate that they have for us as well as all of our competitors is static.

And so, there’s really not you know, one of the questions that I know came up when we first introduced Clearway, which is our most recent technology is, are you guys going to get a price bump? You know a lot of times medical technology companies when they have new innovation they get the luxury of getting a price increase on that. The short answer is no. I mean, outside of the Medicare increase that we get every year, that’s pretty much what the set price is for the technology. So you’ve got the price component, which is a bit of a fixed rate.

And then the way in which we increase our revenue is obviously through gaining market share and expanding the market and getting more unit volume. So, Suraj, did that answer your question?

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: No, fair enough. Jim, next question, and I’ll tack on my sub question to this. So this one is, what are the pluses and minuses of direct to consumer versus DME based sales? And if I could tack onto the same question, Jim, you mentioned an interesting point, which I, when I looked at it, I was like, this is really neat. The high touch part of the model where you showed the Smart West, patient report, which is invaluable for payers, you know, for performance, reimbursements, so on and so forth.

I guess my part of the question is also, does a HITECH, as good as it, does it also reduce the leverage for you guys over time?

Jim Cuneff, CEO, Electromed: Two great questions. So on the direct to consumer side, you know, really what’s nice about that is the fact that, you know, these patients as I’ve mentioned before, they’re not really looking for solutions. And when they go online, you know, they find us and they can communicate with us either through chat or they can request a packet, which they can do electronically, which we will then send to them. If they’ve got follow on questions as well, you know, we have respiratory therapists on staff that can actually consult with those patients. And what’s nice about that is, they’re not, you know, we’re not going to get a prescription directly through that interaction.

But what happens is those patients go, Ah, there’s a solution for this disease I have and I’m going to go talk to my pulmonologist and see if SmartVest is right for me. So, we feel like that’s a really it’s been just a terrific channel for us to generate awareness and also, you know, transition patients from a prospect into a referral. So that’s been great. And then relative to our SmartNodes, you’re right, that doesn’t necessarily translate into leverage for us. But we feel like it’s a really important component of making sure that the provider feels like this, you know, pretty expensive technology is actually delivering the results it should.

But I also think that’s important for the patient as well because one of the things that we want to make sure happens is the patient does have compliance because they’re not going to get all the benefits, you know, in day one. They’ll get the benefits usually after a week. They’ll certainly get huge benefits after the course of thirty days. But since this is an irreversible chronic condition, we don’t want patients to go, gosh, I feel better than I have in years and I’m going to stop using the technology. So we want them to continue to be vigilant in using the technology.

But you’re right, it’s expensive. But we feel like, relatively speaking, when you look at the price of our technology, we feel like it’s an investment worth making and we can get leverage in other parts of our reimbursement team to offset that expense. One last point on that, which I’ll mention is, you know, we have SmartConnect, which is a more passive monitoring for the patient, but it does require the patient to to do some technology things with their device. And what we found is that the adherence to that was so low that we really pivoted to this with SmartNodes to kind of offset the adoption rate of SmartConnect.

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Got it. Got it. Jim, final question from my side. That iceberg slide that you presented, two parts to this question. Obviously, there are three or four key players in the space and 127,000 current penetration, you know, less than 20% penetration, what is what would you say is the primary reason for such a large prevalence of undiagnosed patients or lack of knowledge or visibility or whatever?

That would be question number A. And question number B, you know, let’s say you all were to join forces with someone else, acquire someone else, or someone else acquires you. Does one plus one is equal to 2.5 or is it really two or less than two? How should we think about that?

Jim Cuneff, CEO, Electromed: Yes. No, that’s a great question. Well, I think on the ice how do you further penetrate that iceberg? I think there’s a couple of things and this is a big educational component, Suraj, as I mentioned. And, you know, there’s new drugs that are coming to the market.

So I think the good and to address inflammation. And I think the good news with that is, you know, these drug companies have very deep pockets and they’re spending a lot of money on training, education, for not only the patients, but also providers. So there’s a great there’s a lot more awareness to bronchiectasis than there has been in the past. And I think, you know, what ends up happening is most human beings fall into, habits. And so, I think these pulmonologists who are seeing, you know, upwards of 50 patients per day, If they see a patient, they think they’ve got asthma or they’ve been diagnosed with asthma once upon a time, they want to treat that condition and it’s an easy button or, you know, they’ve got COPD.

And many times they don’t think, well, what’s really, you know, of that within that COPD umbrella, what else might they have? What else might they have is bronchiectasis. And so, creating that awareness I think is going to result in more patients getting diagnosed with bronchiectasis and then getting on to our technology. Does that make sense?

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Yep, fair enough. Fair point.

Jim Cuneff, CEO, Electromed: Yeah. And then relative to one plus one equals, you know, 2.5, you know, I think there’s a there there. And again, I think a lot of it has to do with structure, if we are to join forces with somebody else. And I also think this is still highly a clinical sale. And so you’d have to have the feet on the street that are helping the providers in identifying patients and then working with the clinics to actually walk them through the reimbursement journey as well.

So I don’t think it’s you just get a bunch of generalists and hope that one plus one equals 2.5. I think there still needs to be some specialization on this.

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Fair points. Fair points. Gentlemen, always a pleasure, connecting with you guys. Jim, congrats on all the progress and look forward to you guys beating and raising again. Thank you so much for taking the time this morning.

And to everyone, we do appreciate it.

Jim Cuneff, CEO, Electromed: Thank you. And thanks to everybody

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.