Tactile Systems Technology Stock

Tactile Systems Technology, Inc. operates as a medical technology company that develops and provides medical devices for the treatment of underserved chronic diseases.

The company focuses its efforts on advancing the standard of care in treating underserved chronic diseases in the home to improve patient outcomes and quality of life and help control rising healthcare expenditures. The company’s areas of therapeutic focus are vascular disease, with an intention of advancing the standard of care in treating lymphedema and chronic venous insufficiency; oncology, where lymphedema is a common consequence among cancer survivors; and providing airway clearance therapy for those suffering from chronic respiratory conditions. The company possesses a unique, scalable platform to deliver at-home healthcare solutions throughout the United States. This evolving home care delivery model is recognized by policymakers and insurance payers as a key for controlling rising healthcare costs. The company’s solutions deliver clinically proven, long-term treatment for people with these chronic diseases.

The company generally employs a direct-to-patient and -provider model within its lymphedema portfolio, through which the company obtains patient referrals from clinicians, manage insurance claims on behalf of the company’s patients and their clinicians, deliver the company’s solutions directly to patients and train them on the proper use of the company’s solutions. This model allows the company to engage directly with patients and clinicians, which are both critical audiences to which the company can provide clinical evidence and education. For the company’s respiratory therapy products, the company has a durable medical equipment (‘DME’) distribution model, utilizing mature comprehensive respiratory DME providers to service patients. The company sells the AffloVest product to accredited DME providers. They gather and submit documentation for payer reimbursement, train patients on use of the device, and provide ongoing patient support.

The company’s proprietary Flexitouch and Entre systems are clinically proven at-home solutions for patients with vascular disorders, such as lymphedema. Patients with lymphedema or chronic venous insufficiency are typically treated by vascular surgeons, vascular medicine physicians, oncology care teams, wound physicians, nurses and therapists.

The company’s lymphedema products are the Flexitouch Plus and Entre Plus systems. A predecessor to the company’s Flexitouch system received 510(k) clearance from the U.S. Food and Drug Administration (the ‘FDA’) in July 2002, and the company introduced the system to address the many limitations of self-administered home-based manual lymphatic drainage therapy. The company began selling its more advanced Flexitouch system after receiving 510(k) clearance from the FDA in October 2006. In September 2016, the company received 510(k) clearance from the FDA for the Flexitouch system in treating lymphedema of the head and neck. In June 2017, the company received 510(k) clearance from the FDA for the Flexitouch Plus, the third-generation version of the company’s Flexitouch system. In December 2020, the company received 510(k) clearance for two new indications for the company’s Flexitouch Plus system: phlebolymphedema and lipedema. The company introduced its Entre system in the United States in February 2013 and the second generation, Entre Plus, in March 2023. The Entre Plus system is sold or rented to patients who need a simple pump or who do not yet qualify for insurance reimbursement for an advanced compression device, such as the company’s Flexitouch Plus system.

On September 8, 2021, the company acquired the assets of the AffloVest airway clearance product line from International Biophysics Corporation (‘IBC’), a privately-held company which developed and manufactured AffloVest. AffloVest is a portable, battery-powered, wearable vest that provides airway clearance to treat patients with chronic respiratory conditions, such as bronchiectasis or conditions resulting from neuromuscular disorders.

To support the growth of the company’s business, the company continues to invest in its commercial infrastructure, consisting of the company’s direct sales force, DME sales team, patient education team, reimbursement capabilities and clinical expertise. The company is a national, accredited provider of home medical equipment services approved for coverage by private payers, Medicare, the Veterans Administration and certain Medicaid programs in the United States. The company’s field commercial team is focused on increasing clinician awareness of the company’s lymphedema solutions. As of December 31, 2023, the company employed 254 field sales representatives for the company’s lymphedema products and a team of 16 supporting the company’s airway clearance products.

Strategy

The key elements of the company’s strategy are to increase awareness of the company’s solutions and establish them as the standards of care; utilize direct sales and customer support teams; demonstrate ongoing innovation to grow the company’s technology platform and expand adoption of the company’s therapies; continue the development of clinical and economic outcome data; and expand third-party reimbursement.

Products

The company markets Flexitouch Plus and Entre Plus systems as at-home therapies for the treatment of lymphedema and chronic venous insufficiency. The company markets AffloVest as an at-home therapy intended to promote airway clearance. These products have received 510(k) clearance from the FDA to be marketed in the United States.

Flexitouch Plus System

The company’s Flexitouch Plus system is a fully automated, programmable, advanced pneumatic compression device, or APCD, designed for the treatment of lymphedema in the home setting. The company’s Flexitouch Plus system has received 510(k) clearance for the treatment of lymphedema, phlebolymphedema, lipedema, certain types of other edema, venous insufficiencies and certain types of leg ulcers. The company introduced its first-generation Flexitouch system in the United States in 2003, the company’s second-generation Flexitouch system in 2006, and the company’s third-generation Flexitouch system, the Flexitouch Plus, in 2018. The mechanism of action of the company’s patented Flexitouch Plus system is designed to stimulate the lymphatic system similar to manual lymphatic drainage therapy, the current standard of care in patient treatment. By automating this technique, the company’s system offers an effective, convenient and accessible at-home treatment for patients.

The company’s Flexitouch Plus system consists of an electronic controller unit that offers 17 treatment settings and multiple contoured garment configurations for the trunk, chest, head, neck and the arm or leg. The company’s Flexitouch Plus is the only pneumatic compression system offering the flexibility for treating upper and lower extremities, the trunk and chest, and the head and neck. The electronic controller is a pneumatic compressor with four connector outlets. Each connector has eight outflow ports into which the garment hoses are connected. The company’s unique garments contain up to 32 air chambers, are made of a soft, pliable fabric and are designed with zippers and hook-and-loop fasteners to fit snugly around affected areas for maximum comfort and optimum pressure delivery. The garments come in a variety of sizes that can be easily adjusted to patients of all sizes. When the company’s system is activated, air passes through the hoses, delivering sequential inflation and deflation to the garments and applying gentle pressure to the skin. The inflation sequence is designed to stimulate the lymphatic system, moving lymph fluid from the impaired areas toward healthy regions of the body.

The electronic controller unit adjusts the amount of pressure and the timing of the pressure and release cycles. This unit is lightweight and easily portable, providing maximum convenience for at-home treatment. A typical therapy session using the company’s Flexitouch Plus system lasts up to one hour, with additional treatment options available if prescribed by a clinician. Beginning in November 2022, Flexitouch Plus controllers include Bluetooth capability that enables therapy data from the controller to be reported through Kylee, a companion application.

Entre Plus System

The company introduced its Entre system in the United States in February 2013 to offer a lightweight, portable pneumatic compression solution for patients with cognitive or dexterity issues who need a basic (simple) pump or for patients who do not yet qualify for insurance coverage of an advanced compression device, such as the company’s Flexitouch Plus system. The company’s Entre system is a basic pneumatic compression device used for the at-home treatment of venous disorders including lymphedema and chronic venous insufficiency, including venous leg ulcers. The company’s Entre system is a pump with garments covering the arm or leg with eight chambers that inflate in sequence and remain inflated for a preset time period. In 2023, the company’s second-generation system, Entre Plus, was introduced.

Kylee

In 2022, the company introduced Kylee, a free mobile application to help patients learn about lymphedema, track their symptoms and treatment, and share their progress with their doctor. The purpose behind Kylee is to help support and encourage patients to embrace self-care and become more educated about their condition. The company’s customers can use Kylee to track their orders for the company’s devices and view onboarding tutorials for using the device. Once a patient starts using the device, they can use Kylee to record their treatments and symptoms, and capture photos of their condition for sharing with their healthcare team. Flexitouch Plus controllers include Bluetooth technology, which is viewable using Kylee.

AffloVest

The company acquired the AffloVest business in September 2021. The AffloVest is the first truly portable high-frequency chest wall oscillation (HFCWO) vest. The device is battery-powered and affords patients the ability to ambulate while receiving treatment, as well as increases the likelihood that their treatment will travel with them. The AffloVest treats patients with retained pulmonary secretions resulting from bronchiectasis, cystic fibrosis and a host of neuromuscular disorders. The AffloVest offers various treatment modes and intensities. The user can set and store their personalized default treatment settings. The company’s AffloVest system has received 510(k) clearance as a HFCWO device and is intended for promoting airway clearance and improvement of bronchial drainage by enhancing mobilization of bronchial secretions where manipulation of the thorax is the physician’s choice of treatment.

Sales and Marketing

The company generally utilizes a direct-to-patient and -provider model to market the company’s lymphedema products directly to patients and clinics, providing high-quality customer service and capturing both the manufacturer and distributor margins for the majority of this business. The direct channel allows the company to focus on two of its primary call points, vascular and oncology.

For AffloVest, the company utilizes the respiratory DME channel as its go-to-market method. The company’s utilization of DME representatives gives the company access to a larger channel than competitors that market and sell directly. The respiratory DME channel also already serves the chronic respiratory community, enabling them to identify complex respiratory candidates who are regularly on other respiratory therapies (such as oxygen, nebulizers, non-invasive ventilators, etc.) and who might benefit from the use of the company’s AffloVest.

The company’s direct-to-patient and -provider lymphedema business is composed of a direct sales force, patient training and support, reimbursement capabilities and medical expertise to educate, expand awareness, coordinate referrals and obtain payment for the company’s products.

The company sells the AffloVest to DME providers in the U.S. that service patients and bill third-party payers for the product. The DME providers obtain the prescription and coordinate with patients and payers to determine insurance eligibility and payment. These DME providers are staffed by trained respiratory therapists who are required in some states to set up patients on at-home prescription respiratory therapies like AffloVest. The company markets to, and educates, DME providers and clinicians about the AffloVest advantages. As of December 31, 2023, the company also employed a small group of respiratory specialists, who educate DME provider representatives, provide product demonstrations for targeted clinicians and support technical questions related to the AffloVest.

Research and Clinical Operations

The company’s research and development expenses, including spending on the company’s clinical evidence development efforts, totaled $7.8 million for the year ended December 31, 2023.

Manufacturing

The company has implemented a quality management system designed to comply with FDA regulations and International Standards Organization, or ISO, standards governing medical device products. In the United States, the company and some of its manufacturers are required to manufacture the company’s products in compliance with the FDA's Quality System Regulation, which covers the methods and documentation of the design, testing, control, manufacturing, labeling, quality assurance, packaging, storage and shipping for the company’s products.

Competition

The company’s most significant manufacturing competitors are Bio Compression Systems, Inc. and Lympha Press USA.

Government Regulation

The company’s systems are medical devices subject to extensive and ongoing regulation by numerous governmental authorities, principally the FDA, and corresponding state and foreign regulatory agencies.

Intellectual Property

Patents

The company’s patent portfolio consists of four sets of patents, including patents relating to the company’s Flexitouch system, the company’s AffloVest system and other related technologies. As of December 31, 2023, the company owned about 171 issued patents globally, of which 63 were issued U.S. patents. As of December 31, 2023, the company owned about 24 pending patent applications pending globally, of which 9 were pending patent applications in the United States. The company’s U.S. issued patents have varying patent terms, expiring between 2024 and through at least 2040, subject to payment of required maintenance fees, annuities and other charges. U.S. patents covering various aspects of the company’s Flexitouch system expired in 2017.

Trademarks

The company has registered the trademarks Tactile Medical, Flexitouch, Flexitouch Plus, the Flexitouch logo design, ComfortEase, Entre, AffloVest, AffloVest Pro, and Kylee with the United States Patent and Trademark Office on the Principal Register. The company relies in the United States on common law rights to the Tactile Medical design trademark. The Tactile Medical trademark is registered in Australia and Japan, and the AffloVest trademark is registered in Australia, the European Union, New Zealand, and the United Kingdom.

Seasonality

The company’s business is affected by seasonality. In the first quarter of each year, when most patients have started a new insurance year and have not yet met their annual out-of-pocket payment obligations, the company experiences substantially reduced demand for its products. The company typically experiences higher revenue in the third and fourth quarters of the year (year ended December 2023) when more patients have met their annual insurance deductibles, thereby reducing their out-of-pocket costs for the company’s products, and because patients desire to exhaust their flexible spending accounts at year end. This seasonality applies only to purchases and rentals of the company’s products by patients covered by commercial insurance and is not relevant to Medicare, Medicaid or the Veterans Administration, as those payers either do not have plans that have declining deductibles over the course of the plan year and/or do not have plans that include patient deductibles for purchases or rentals of the company’s products.

History

Tactile Systems Technology, Inc. was incorporated in Minnesota in 1995 and reincorporated in Delaware in 2006.