Semler Scientific Stock

Semler Scientific, Inc. provides technology solutions to improve the clinical effectiveness and efficiency of healthcare providers.

The company’s patented and the U.S. Food and Drug Administration, or FDA, cleared product, QuantaFlo, measures arterial blood flow in the extremities to aid in the diagnosis of peripheral arterial disease, or PAD, and serves as an aid to measure hemodynamics related to heart dysfunction.

The company has an agreement with Mellitus Health, Inc, or Mellitus, a private company to exclusively market and distribute Insulin Insights, an FDA-cleared software product that recommends optimal insulin dosing for diabetic outpatients in the United States, including Puerto Rico, except for selected accounts.

The company has also made cash investments in Mellitus, in Monarch Medical Technology, LLC, or Monarch, a privately-held digital health company whose proprietary product, EndoTool Glucose Management System, or EndoTool, offers a technology-enabled approach to inpatient glycemic management, and in NeuroDiagnostics Inc., a privately-held company that is doing business as SYNAPS Dx, or SYNAPS, whose product, Discern, is a test for early Alzheimer’s disease. The company continues to develop additional complementary proprietary products in-house (such as the company’s recently released QuantaFlo extension as an aid to measure hemodynamics related to heart dysfunction), and seek out other arrangements for additional products and services that will bring value to the company’s customers and to the company.

Products and Services

The company markets a patented and FDA-cleared, cardiac and vascular testing product, QuantaFlo, to the company’s customers, who include insurance plans, physician groups, risk assessment groups, hospitals and retailers. The company also has an exclusive distribution arrangement for the United States, including Puerto Rico, to distribute Insulin Insights, an FDA-cleared, software solution designed to provide insulin dosing recommendations to clinicians for the adjustment and maintenance of blood glucose levels in insulin-dependent patients with Type 2 diabetes.

QuantaFlo

QuantaFlo is a four-minute in-office blood flow test. Healthcare providers can use blood flow measurements as part of their examinations of a patient’s vascular condition, including assessments of patients who have vascular disease. The following diagram illustrates the use of QuantaFlo:

QuantaFlo features a sensor clamp that is placed on the toe or finger. Infrared light emitted from the clamp on the dorsal surface of the digit is scattered and reflected by the red blood cells coursing through the area of illumination. Returning light is ‘sensed’ by the sensor. A blood flow waveform is instantaneously constructed by the company’s proprietary software algorithm. Both index fingers and both large toes are interrogated, which takes about 30 seconds for each. The product may be used with provocative maneuvers.

The company has primarily developed a license model rather than an outright sales model for QuantaFlo. This license model eliminates the need to make a capital equipment sale. Consequently, the company generally requires no down payment or long-term commitment from the company’s customers. QuantaFlo has an expected average lifetime of at least three years. As of December 31, 2022, the company roughly estimated that routine office usage of the QuantaFlo has ranged from a few tests per week up to 10 tests per day. The company also offers contracts in which the company invoices on a per test basis for use of QuantaFlo. Approximately 62% of the company’s customers are on the fixed-fee software licensing model, whereas 38% are on the variable fee model based on usage.

The company has placed its QuantaFlo product with healthcare insurance plans, integrated delivery networks, independent physician groups, hospitals and companies contracting with the healthcare industry, such as risk assessment groups and retailers in addition to doctors’ offices. The company’s two largest customers are the U.S. diversified healthcare companies and affiliated plans, and in the year ended December 31, 2022, they accounted for 40.4% and 29.0% of the company’s revenues, respectively.

Insulin Insights

Insulin Insights is a software program that is used by a healthcare provider to optimize outpatient insulin dosing. In April 2021, the company entered into an agreement with Mellitus to exclusively market and distribute this software program in the United States, including Puerto Rico, except for selected accounts.

The company is distributing Insulin Insights using a software as a service, or SaaS, license model on a per patient per month fee rather than an outright sales model.

The company seeks to distribute Insulin Insights to healthcare insurance plans, integrated delivery networks, independent physician groups, and companies that contract with the healthcare industry, such as risk assessment groups, long-term care, or remote patient monitoring organizations, in addition to doctors’ offices. This software product will be of interest to the company’s existing customer base, as well as help the company to expand interest in QuantaFlo to additional customers.

Other Products and Services

In addition to the company’s internal research and development efforts, in October 2020, the company invested in SYNAPS, whose product, Discern, is a test for early Alzheimer’s disease. In December 2022, the company purchased a senior secured convertible promissory note of Monarch, maker of EndoTool, a technology-enabled approach to inpatient glycemic management. The company do not have a distribution agreement for Discern or EndoTool.

Strategy

The company’s strategies include targeting customers with patients at risk of developing cardiac and vascular diseases; expanding the tools available to internists and non-peripheral vascular experts; developing additional product and service offerings that allow healthcare providers to deliver cost-effective wellness and receive increased compensation for their services; and exploring additional product and service offerings through arrangements or potential acquisitions.

Sales and Marketing

The company provides its QuantaFlo product to the company’s customers through the company’s salespersons, who have experience selling products and services to the company’s anticipated market.

The company delivers its QuantaFlo testing product directly to the company’s customers, and in-service training to the customers is provided either on-line or in person. Because QuantaFlo is relatively easy to use, training can generally be accomplished in less than one day.

Customers who have licensed the company’s QuantaFlo product may pay by credit card or check generally on the 15th of each month as an advance for usage during the next 30 days. In some cases, customers prefer an annual license paid in advance. The company provides technical support daily, coupled directly to the manufacturing operation so that replacement products, if needed, can be shipped overnight directly to the customer. The majority of the support is over the telephone and focuses on software and connectivity issues, rather than hardware. The company upgrades QuantaFlo operating systems as appropriate by direct shipments or electronically.

In addition to the license model with a fixed monthly fee, the company has contracts that charge a variable monthly fee, in which the company invoices based on the number of tests performed with QuantaFlo. In addition to licensing the QuantaFlo software, the company has sold QuantaFlo equipment and accessories.

The company has an agreement with Mellitus to exclusively market and distribute Insulin Insights, a new software product, in the United States, including Puerto Rico, except for selected accounts.

Patents and Licenses

The company has been issued one patent for the company’s apparatus, U.S. Patent No. 7,628,760, which expires December 11, 2027.

The Semler Scientific logo, QuantaFlo and other trademarks or service marks are the property of the company.

Government Regulation

QuantaFlo is a medical device subject to extensive regulation by the FDA and other federal, state, local and foreign regulatory bodies.

To commercially distribute QuantaFlo or any future medical device the company develops requires or will require either prior 510(k) clearance or prior approval of a pre-market approval, or PMA, application or de novo classification from the FDA.

The company is subject to unannounced device inspections by the FDA and the California Food and Drug Branch.

History

Semler Scientific, Inc. was founded in 2007. The company was incorporated in the state of Oregon in 2007. In 2012, the company converted from an S-Corporation to a C-Corporation; and it was reincorporated as a Delaware corporation in 2013.