Calmare(R) is a non-invasive and non-narcotic chronic pain management therapy that has benefited many patients who have reported that their pain scale (VAS) number was reduced significantly, often down to "pain free" or "0," with those results lasting for months. And the technology is beginning to gain traction in the marketplace. It is one thing to see a small company making headway in a huge market and quite another when considering that larger medical device companies in the pain management sector could be interested in adding a non-invasive and non-narcotic alternative to their portfolio of pain management therapies. Boston Scientific Corporation (NYSE:BSX), Stryker Corporation (NYSE:SYK) and Medtronic, Inc. (NYSE:MDT) all offer an invasive and expensive pain therapy using spinal implants and they have done well in the marketplace. Significantly, all the aforementioned companies have a history of acquiring new technologies.
The surgical alternative therapies for chronic pain offered by BSX, SYK and MDT are usually reimbursed by private insurance and Medicare. The implants enable the patients to control the intensity of electrical current for their own pain relief. Usually spinal implants are not advised for chronic pain patients until all other therapies have been exhausted and proven to be ineffective for a particular patient. In addition, the use of medications has come under increasing scrutiny due to their inherent addictive properties. So non-invasive pain medications can have a significant downside in the treatment of pain and can have a reduced effect over time with many patients.
It is well accepted in the chronic pain management discipline that conventional transcutaneous electrical nerve stimulation (TENS) units do not provide long-term pain relief. But in the middle ground between non-invasive TENS and invasive surgical implants is a new technology - Calmare technology - which, depending on the pain condition and the individual patient, can provide long-term relief or reduction of neuropathic pain without surgery.
Sporting a capitalization of only $18.9 Million (currently trading at $1.38/share), Competitive Technologies (OTCQX:CTTC) is the licensed worldwide distributor of the non-invasive Calmare(R) pain therapy medical device (also known as MC-5A and/or "Scrambler Therapy"). On August 18, the company announced its first order from the US military--the sale of 12 Calmare units to be installed in nine U.S. military medical facilities in the U.S. and overseas (including Camp Pendleton, Camp LeJeune, and the Bethesda Medical Center). Click HERE for the full list of military locations.
The military had conducted an evaluation of Calmare at a number of military hospitals for over a year resulting in an initial order from the Federal Government. As a frame of reference for the potential for additional Calmare placements, there are 1748 Veterans Administration (VA) hospitals and 266 Department of Defense (DOD) medical centers that could employ Calmare in their chronic pain management therapy regimen. Considering the Federal budget deficit problem, any technology that may provide a lower cost solution to chronic neuropathic pain will most likely be explored. BSX, MDT and SYK spinal implants are already being used within the US Military system.
Technology Already Approved for Sale
Unlike many small medical device companies preparing to go through the FDA approval process before the company can even begin to sell like Delcath (Nasdaq: DCTH) had to do for years, Calmare received 510k marketing clearance from the FDA in 2009 and, therefore, is permitted to sell in the US and begin building revenue and profits. In addition, the Calmare technology has the CE Mark, which is required for selling medical technology in the European Union and various other countries outside the EU.
The company has been successful in selling Calmare with sales of 77 units in the first six months of 2011, but there is even a greater expectation that with with insurance reimbursement and the news of the US Military order, there will be a ramping up of orders from clinics and medical centers.
Insurance Reimbursement and CPT Code
What will really drive future sales and interest by potential acquirers for Calmare is when there is broad insurance reimbursement of Calmare treatments. And that reimbursement may finally be coming. Up to now, the physicians purchasing Calmare for their medical practice have been entrepreneurial "fee for service" medical professionals who have evaluated the technology over a period of months with their own patients and have witnessed the positive results. However, it is understandable that many physicians and medical centers will wait for reimbursement approval and/or more clinical studies on the efficacy of Calmare. Although some insurance companies have fully or partially reimbursed for Calmare treatments already, these claims have been handled and approved on a case by case basis so far.
However, a long awaited CPT III code was assigned July 1st and will be effective January 1st. As defined by the American Medical Association, "Category III CPT codes are a temporary set of tracking codes for new and emerging technologies. These codes are intended to facilitate data collection on and assessment of new services and procedures. The Category III codes are intended for data collection purposes in the FDA approval process or to substantiate widespread usage."
The new CPT code is:" 0278T Transcutaneous electrical modulation pain reprocessing (e.g., scrambler therapy), each treatment session (includes placement of electrodes)."
The AMA continues with the definition of the CPT III code:
However, the assignment of a CPT Category III code to a service does not indicate that it is experimental or of limited utility, but only that the service or technology is new and is being tracked for data collection. In the Final Rule for the 2002 Medicare Physician Fee Schedule (Federal Register, Thursday, November 1, 2001), the Center for Medicare and Medicaid Services (CMS) stated that they believed that Category III codes will serve a useful purpose and that payment for the service is at the discretion of the Carriers, but that the codes could be paid after entered into the computer systems. Local payment determination is reasonable for Category III CPT codes. It is not reasonable to categorically deny payment for CPT Category III codes since they are effectively more specific, more functional versions of unlisted codes which many payers cover with appropriate documentation.
The AMA continues:
Once payment policies are established of a Category III Code, the need for documentation will be minimized since Category III Codes are associated with unique and specific descriptions of the service or procedure. Since Category III codes are part of the CPT code set, all health care payers must be able to accept Category III codes into their systems to comply with the standards for transactions and code sets under HIPAA.
With clinical studies pending and more claims applications being filed for Calmare treatments with insurance companies, it is not overly optimistic (in the opinion of this author) to expect automatic insurance reimbursement in early 2012.
Clinical Studies and Peer-reviewed Articles
As for clinical studies, there currently are a number studies being conducted at the Mayo Clinic, University of Wisconsin Carbone Center and the Massey Cancer Center at the Virginia Commonwealth University-- including evaluating the efficacy of Calmare in the treatment of Chemotherapy-Induced Peripheral Neuropathy (CIPN). The following links will provide details of each trial:
Massey Cancer Center at Virgina Commonwealth University
Mayo Clinic (5 studies being conducted or currently being set up)
University of Wisconsin (UW) Carbone Center
A more layman-friendly notice of the UW study is in its recent newsletter, found HERE (Right column, center of page)
Additionally, Calmare has been the subject of a number of peer-reviewed articles in the Journal of Pain and Symptom Management, as published in the JPSM Journal.
A "dark horse" potential for additional sales comes courtesy of the Korea Food & Drug Administration (KFDA), which has authorized sales of the Calmare(R) medical device in the Republic of Korea. CTTC's partner, GEOMC Co., Ltd. of Seoul, South Korea, has expanded its relationship beyond just manufacturing the Calmare and is now the distributor in that country. A significant side note is that KFDA approval to sell a medical device includes insurance reimbursement approval.
Additional international distributors are expected to be named in the near future.
Media Coverage has been Growing
A recent feature story which aired on KSL-TV and was published in the Deseret News highlighted the success of Calmare in the treatment of a teenager who had suffered from severe pain from a nerve disorder called reflex neurovascular dystrophy, or RND, for nearly two years.
Another TV segment, from ABC News, out of Rhode Island, highlighted another patient's experience with Calmare/Scrambler in the treatment of her Complex Regional Pain Syndrome.
Capital Structure and Valuation
With only 14.2 million shares outstanding and a public float of only 13.4 million shares, CTTC's market cap is less than $19 million. The question that arises is what market cap would be reasonable to an acquiring company if Calmare technology receives broader insurance reimbursement, which would most likely trigger a substantial rise in revenue and profits? Would a $200 million market cap be a possibility--equating to over $15/share (assuming the same number of shares outstanding)? Would Stryker think $300 million too expensive a move to fill out its medical devices? Considering that the multi-billion dollar market in the treatment of chronic pain continues to expand as the overall US population ages, the market opportunity for an effective therapy using no pain medications and not requiring surgery is substantial.
Small companies with revolutionary new therapies/technologies that are effective oftentimes struggle with skepticism from the medical and the investment world. But for those companies fortunate enough to be introducing a new technology that can bear the scrutiny of clinical studies and eventually obtain insurance reimbursement, the returns to early investors can be significant as more media coverage and exponential revenue increases attract more investor interest. It would not be surprising if one or all of the Big Three in surgical pain relief implants-- Boston Scientific, Stryker and Medtronic-- could have Calmare and CTTC on their radar screens in the future as the technology meets with more success in the marketplace and with insurance reimbursement.