Conference Transcript - COCH 2026-06-17

Brent Lucas, CEO

Go ahead. All right. All right, great. We'll get started. My name is Brent Lucas. I'm the CEO of Envoy Medical. We are listed on the NASDAQ under COCH. Forward-looking statements. Quick snapshot of where we are as a company. And then get into, these are investor highlights. So throughout this presentation, we'll touch on all these, so I'm not going to spend too much time here. but Envoy Medical, if you're not familiar with us, is a hearing health company. We are essentially positioning ourselves to disrupt the cochlear implant market, but we make fully implanted hearing devices. We have two devices, one is a fully implanted active middle ear implant, and the other is a fully implanted cochlear implant that is an investigational device. The world is really excited about that second device, about the Acclaim CI, so we are positioning ourselves with that fully implanted cochlear implant to go after the existing players in the market. We have a large TAM, which I'll get into in a second, and then also significant differentiation. So it's pretty obvious, I think, when you learn about this, if you're not familiar with cochlear implants, to see the difference between our device today and the existing devices on the market. But it's also important for you to realize our differentiation going forward, and we'll talk about that as well we do have a validated technology in our device in that we have a sensor a piezoelectric sensor that was part of our first product so our first product the esteem had this sensor and everybody had told us over the years take that sensor and put it with a cochlear implant we ignored him for the first 20 years of the company but when I took over as CEO we did that we took that sensor and we've put it with a cochlear implant and and now I think we're in an incredibly good position. It's a mature and it's a concentrated market. So the CI space, if you're not familiar, has three main players. They've been the same players for about three decades. They have pretty much the same products. This is an industry ripe for disruption, and I think we have the product to do it. And then, as you'll see later, we have multiple milestones, a lot of good things going on to be excited about. So this is a large market. hearing loss in general is a massive market and really quite frankly an untapped market in the United States but here the CI market is a very specific market and is a very exciting market in my mind we are geared towards adults so let's focus on just the adult market in the US you have 2.8 million adults in the United States that could get a cochlear implant the good news for us is only about 5% of people who could get a cochlear implant have gotten one that's despite the fact that these products have been around for about three decades already now if you ask people why is that if you ask patients if you ask surgeons and audiologists why is that that these devices which provide hearing to people that don't have it why are they not getting one it's because these traditional devices have these big large external components on the side of their head and people don't want to deal with that the manufacturers of course that have the products morning won't admit that they don't talk about that in publications but that's reality if you get on the floor and actually talk to people. We project our price somewhere around $30,000 when we get commercial so that's how we get the TAM of 84 billion and that's just the US. I think this is a relatively conservative number quite frankly because of a couple of factors. One, we might end up charging more for the device than 30,000. The other reality is that everybody has two ears not one so that 2.8 million is a smaller number. About 30% of people get both of their ears done so that TAM could be could be larger and then as people live longer as they age as people more drugs are introduced into the world such as COVID right that's not a drug but the COVID pandemic you have ototoxicity from certain cancer treatments there's going to be a rise in hearing loss it's not going to be something that goes down this is going to be something that goes up this slide here highlights just sort of the overall size of the hearing market and I think one of the and so I'm not gonna spend too much time on it because everybody knows somebody with hearing loss I mean you know this is a big market you know it's probably an untouched market and if you look at the large strategics in the US and and throughout the world there's not a traditional medical device company that has yet gotten into this space this is white space for the for the large strategics but what I do want to pull your attention to is the last bullet talking about dementia and cognitive decline. There is a growing body of evidence that there is a strong connection between untreated hearing loss and dementia and cognitive decline. This is growing. This is getting a lot of attention in a lot of different cycles, circles. So as you can see, the healthcare economics of an intervention like a cochlear implant will only get stronger. And I think that's an important thing when we start thinking about reimbursement and we start thinking about how this can can grow as we get further along. It's a little bit of a kindergarten slide here, so I apologize for that, but if you're not familiar with hearing loss, the important thing I think for us to to make clear on this slide is we don't compete with hearing aids. We are not a hearing aid manufacturer. I'm not interested in hearing aids. I don't ever want to be a hearing aid company. I'm glad we're not one because as Apple, Google, Meta, and all these other people start coming into the hearing loss space, the hearing aid is going to be a very, very crowded market. So we are interested in the hearing implant space. And on this slide, that's that red dashed line and below. So I think from an investor standpoint, from my perspective as an operator, I love that we are a therapy of last resort for these people. These are people who have tried hearing aids and hearing aids no longer work for them. we are below that line and they need something different and right now the only thing that they can get that's different is electrical stimulation. In the future maybe there'll be a magic drug to reverse hearing loss but that's not even on the horizon right now. All the the drugs and the therapeutics that are being discussed are talking about very specific genetic mutations in children and I'm talking about noise-induced hearing loss over the course of somebody's life. So we are below that dotted line it's a it's a it's a market that is specific to cochlear implants, and I think one of the things that I would suggest is once you get past that dotted line, it's either us, a fully implanted, or it is a partially implanted, where you have everything on the side of your head. So let's talk a little bit about what traditional cochlear implants of today look like. If you're not familiar, this is what they look like. There is a large sound processor on the side of your head tethered to a magnet that is then connected to a magnet on the inside of your head so you have an implanted portion and you have an external portion these are very large they're very visible and oh by the way if it gets knocked off and breaks that's going to cost you about eight to ten thousand dollars to replace it and if it gets knocked off you can't hear you need the external portion to hear on the with the internal portion so anytime that magnet comes off is dislodged whether it's because you're sleeping or you're around water and you can't wear it you're now deaf you can't hear so we've decided to make take the good parts of cochlear implants which is electrical stimulation does work you electrically stimulate the cochlea you are going to have a perception of sound so we took what works with these traditional devices and again here's a couple more pictures before I move on importantly on this I would just point out that pretty much the three manufacturers they have about the same form fit and function there's not a lot of difference between the existing manufacturers and their device so they're about the same maybe the plastic molds a little bit different maybe the the colors are different you have different choices but essentially they're exactly the same they have the same drawbacks and they work exactly the same so what we did is we took what works which is electrical stimulation putting a electrode array in the cochlea and we made everything fully implanted so we have the fully implanted acclaimed cochlear implant now again I'm gonna I'm gonna foreshadow to our differentiation, there's a couple of, there's two other, the two other companies in this space that are talking about a fully implanted solution, but none of them have our design. Our design is unique in that we use that sensor, which is in that circle there, that's our piezoelectric sensor, and then also we are the only ones that were smart enough to put the battery pack in the chest, which is going to be a huge differentiator for me, or for us, in my opinion. So this is a first of its kind device and it will be the first that only has the sensor and the battery pack in the chest so this is a unique device across the board and we are in a pivotal study I'm gonna get to that a little bit later but we're in a pivotal clinical study this is an investigational device but we are now fully through enrollment and we are just in the data collection phase so we are in the final stage of our devices journey so let's see if this works this is a animate oops this is an animation there's no there's no sound so don't worry about that but it's a little easier for me to talk about it if if if this is working so this is let me see if I pause it if that screws up okay so you can see you have the battery pack in the chest with our design so if you're familiar with inspire medical the sleep apnea device very similar there's a battery pack in the chest pacemakers deep brain stimulators vagal nerve stimulators this is a very common thing for implantable medical devices to have the battery pack in the chest it is connected with a wire that we call the power lead the power lead is also completely underneath the skin and invisible so everything you see here is invisible it's underneath the skin you cannot see it then you have the processor which is in the head so this is this would be located behind the ear in a very similar location to where the magnet is located in the other cochlear implant devices it's about the way this it's about the width of two quarters if you stack them on top of each other so it's not it's not very big and again it's underneath your skin and you cannot you cannot see it it's one of the hardest things about having a fully implanted device is trying to visualize it for folks so this is the beauty of our device and so I'm gonna spend a little bit of time here so when you hear when you're hearing me right now what's happening is that sound waves are vibrating in this room your pinna which is the big floppy thing on the side of your head is helping collect those sounds and funnel them down your ear canal once they're in your ear canal it actually works to make the sound stronger before it hits your eardrum when your eardrum vibrates it then engages these three tiny bones behind your eardrum which are called the ossicles and that is the key to your hearing organ and then it gets to the cochlea once in the cochlea there's these hairs it's a it's about a 20th of the size of your eyeball and inside of that cochlea which is a bony structure there is fluid and then within that fluid there's these little tiny hair cells which are nerve endings and then it takes the signal to the to the brain so that's how natural hearing works what happens for most of us about 85% of us maybe even 90% of us is those hair cells inside the cochlea begin to die off or get damaged over time whether you took the wrong drug it's genetic too much too many rock concerts whatever your those hair cells start to die off and you start to lose your hearing and so what we do is we electrically stimulate it by putting an electrode array in there to basically directly stimulate the nerve but what the beauty of our device is we have this sensor and we're the only ones that have the sensor and that's in the middle of your screen here that sensor is picking up the vibrations off of the bone so we're leveraging the natural anatomy we're picking those vibrations up and using that as the sound input so we're essentially using your ear as nature's microphone we do not have an artificial microphone in our system we're the only hearing company on the planet that does not have a microphone in our system so pick up those vibrations that's how the signal gets sent to the processor and then it'll go down it'll get processed and come back down to the electrode array which sits in the cochlea and again that's just delivering electricity to the cochlea I will tell you that about between all the manufacturers the cochlear electrode arrays are pretty similar this this gets a little scary here it looks like it's in the brain it's not it's just the band animation that processor sits on the outside of your skull and beneath your skin so on somebody like me who's bald you might see a little bump but on somebody with even a little bit of hair you're really not going to notice it so again I think the benefits of a fully implanted device are pretty obvious right it's it's discreet nobody has to see it we've trademarked invisible hearing because we are really the only company that can say we have invisible hearing nothing is outside the body whatsoever this is dependable you can wear this 24-7 I mentioned earlier you cannot wear a cochlear implant a traditional cochlear implant at night because the device will come off you put it on a pillow it'll come off plus you need to charge it or you need to change the battery in addition if you're wearing that all the time and the magnet starts to compress the skin you actually can have wound issues you can start to have abrasions that will start to fester and become something else so the fact that our device is fully implanted and you can wear it 24 7 I believe will be a game-changer and I would look I would ask you to look to the sleep apnea industry right with inspire medical everybody thought they had a device nobody would be interested in because you could just wear an external CPAP at night but they've obviously proved everybody wrong and it's very easy device to use so we have a rechargeable battery in the chest and I'm gonna get to the why that's a big deal in a second but because that's in the chest we can have a nice large battery which allows for multiple days between recharge that is going to be also an industry standard going forward again just I don't want to spend too much time on the esteem which is our first product because it's not covered by insurance and so it was not a commercially viable products. We had to pivot away from this product. I will say that's a lottery ticket in a way. If I can get insurance covered for it, that is going to be quite a significant deal because that is an FDA approved product and we're essentially working on reimbursement behind the scenes. But a key for somebody who's just looking at a PowerPoint taking my word for it, I think, is you look at that sensor. That sensor was with our first device. We got FDA approval with that sensor with one product already. so it bears repeating that we're using essentially that same sensor for our current product so it is a validated idea it's something that we've proven can work so here is the race for fully implanted cochlear implants so as I mentioned there's three main players in the space cochlear medel and advanced bionics I'm going to talk about them in a little in a second here but I want you to know that we are the furthest along in the journey when it comes to the race to fully implanted cochlear implants so we are the only one that received a breakthrough device designation from the FDA we got that in 2019 we were the first ones to get an IDE for a US study we were the first ones to start implanting patients and we're definitely the first ones to get all the way through enrollment of the 56 patients so we are by far the furthest along in this race I'm also going to show you that cochlear and medel have a different type of device which I'm not worried about in the long run and I think a very important point on this slide is that advanced bionics which is the third player in the market does not have a fully implanted product so maybe they're considering M&A activity or maybe they're just going to be willing to give up their market share as time goes on I don't I don't quite know so durable differentiation so it's pretty obvious that we have a different product from what's on the market today right we don't have anything externally we don't use a microphone so that's pretty obvious but I want you to really understand that we also built a product that will be different going forward so Envoy Medical has a superior design in my opinion the architecture that we picked is different fundamentally from the other players that also will help us because we have IP around that but we also have regulatory moat around that so one of the things that you need to internalize if you're not familiar with medical devices is that the the timeline that it takes to get an idea to a market is easily 12 to 15 years. We're at about year 11 right now. So it gives you an idea that if somebody says, oh, Envoy has the proper design, the sensor really makes a lot of sense. The battery in the chest makes a lot of sense. They're going to have to go back to the starting board. This is a, we should have multiple years of being the only one on the market with this type of device because the regulatory hurdle is actually a bigger barrier than IP in my opinion. Okay, so here are some important design differences. So this is Cochlear's Tiki, which is from their publication. This picture came straight out of one of the doctors who published a paper on their feasibility study. And then Med-El, this is a graphic that was put in a publication talking about their device. Both of these products have a subcutaneous microphone. So they do not have our sensor, they have a subcutaneous microphone. Essentially they just put a microphone, like I'm speaking into right now, underneath the skin. There's problems with that. cochlear and metal both have talked about body noise problems people picking up body noise with that microphone also you're not using the natural ear you don't have the benefit then of having the natural ear be your sound pickup okay so I'm a big AirPod user I wear AirPods all the time our patients will be able to just pop an AirPod in and still get the benefit of using their device the other companies if you're picking up sound back here you can't put an air pod in and get that get that benefit so as AI moves forward and as connectivity gets different and different phones come out it's going to be a benefit of our patients that they can just use their ear which is going to be a huge thing in wearables they call them hearables but it's kind of tacky I think wearables will be a huge thing with the meta glasses there's all sorts of examples of new technology coming out where you want to be able to use your ear our device will be compatible with those because we use the natural ear so So a couple of big differences, the subcutaneous microphone. These both also still have magnets within them. Our device does not. These both also rely on an external part of the device for part of the day to do two things. One to provide better hearing and two to charge the internal battery. So these patients will have to wear an external thing for part of the day, kind of defeating the purpose of a fully implanted cochlear implant. In addition, they both made the very poor design choice, in my opinion, of putting the battery in the head so by putting the battery in the head that means you have to have a smaller battery right I can't I could put a much larger battery in my chest than I can put in my head skin is tight up here there's very little room by the way this the skin up here doesn't read vascularize well so once you go in there once or twice it starts to break down more easily there's all sorts of problems with doing that but because they put the small battery in the head that means you know there's so much capacity cochlear implants use a tremendous amount of energy. They're electrical stimulators that are firing all day long. You know from your cell phone if you have to charge once a day at about three years you start to lose capacity where you can no longer get a full day of charge and that's just chemistry. Over time battery capacity diminishes the more you recharge it, right? So as you go through this you'll realize that the fact that they have a small battery in the head is a problem in my opinion. The other big problem with their battery, not replaceable. To replace their battery, you have to replace the entire system. Our battery pack in the chest can be replaced with a simple incision. You unplug, you plug it back in. So again, we will be the only cochlear implant that uses the ear, the only cochlear implant that has the sensor, the only cochlear implant with a battery in the chest, and the only cochlear implant with a replaceable battery.

Speaker 3

All of these should point to very positive things.

Brent Lucas, CEO

I have limited amount of time, so I'm going to quickly go over this. Cochlear is our largest competitor. COH, look at them on the ASX. Their market cap's been cut in half since we started our pivotal study. Don't know if it's just us. It's just reality. It could be a coincidence. Who knows? Sunova owns Advanced Bionics. That's the other company I was talking about. And then Meadow is privately held. These have been the same three companies that have been in this industry for the last 30 years. There has not been disruption in this industry. This is ripe for it. I mentioned we're in a clinical trial. This is a little bit more detail. If you're interested, obviously you can go to clinicaltrials.gov and also find out more information. 56 patients, seven sites, all US-based, top-tier sites in our study. All 56 patients have been implanted. We are now through one-month visits for all of them and we're getting to three- month visits for all of them. Again, top-tier sites, Mayo Clinic, Cleveland and Clinic, University of Florida, Medical University of South Carolina. These are not places, these are not cowboy centers. These are legit practices that are very interested in what we're doing. So our timeline to commercialization, we are all the way, I made this slide, first version of this 10 years ago, we're now all the way on the right. This is a great time for folks to get interested in this product. A lot of blood, sweat, and tears and capital have gone into getting us to this point and with our market cap where it is today and our share price i think this is a great opportunity for you to buy into this story so we are now in a phase where data collecting i will be giving updates as we go through the various milestones so as patient number 56 goes through the process we'll be giving updates and then as we look forward we'll be submitting our pma to the fda in june may or june of next year and then hopefully fda approval by the end of the year. So I'm hoping to get a lot more excitement, a lot more momentum behind us over the next 18 months. And then once we get commercial, I'm quite certain this will be a big deal. Real high level, and I just say that we have a plan of a very targeted approach for commercialization. This is not something where I need to raise $100 million and commercialize the product. This is something where I already have these 35 sites picked out, and we're going to slowly but surely go deep with them. So if I can get 10 of these to implant 50 to 60, you know, we're already talking about 30 to $40 million with a very limited amount of surgical sites. So it's a great commercial opportunity. Very importantly, it's already covered by insurance. So our first product was not, this is going to be covered by insurance. It's a cochlear implant. So it has to be covered by insurance. That is the national coverage determination 50.3 that says Medicare care has to cover cochlear implants for FDA approved products as long as it's within indications this is our team advisory board members so we have a very very good group of advisory board again I want to point you to the fact that these are top tier centers these are KOLs these are people that are going to be at podiums just like this talking at conferences just like this to to the group so this is a very very good advisory board for a young startup company and again here's some recent milestones as well as some upcoming milestones and then with that i guess i got two minutes if anybody has any questions i'm happy to answer them yes sir yeah it's a great selling proposition yes 30 000 does that include just so the device covered by insurance that would be our asp that would be the device so traditional cochlear implant sells for about 25 000 right now all in surgical surgically it's going to be somewhere between 45 and 50,000. It should be covered by insurance. It depends on your insurance. Maybe sometimes there's co-pays. Yes, we can immediately begin to. Yes, we, so there are existing codes that I will tell you there's an honest debate going on right now about whether or not we want our own set of codes, because if we get our own set of codes, we can charge significantly more money over time. The good news about that is whether you have a category one or a category three code, if you have an NCD, which we do for cochlear implants, Medicare has to cover you right away so it might be a little bit more of a fight with private insurers but it won't be an issue with public insurers and for the medical for the breakdown it's about 60 65 percent Medicare in this space and and 35 40 percent so it will be we'll have plenty people that can get it yes so the cochlear implants sound a little bit nobody likes when I say this they sound like drunk Donald Duck at a like techno concert I mean there there's a there's this there's a there's an electrical sound that is very different you have to learn that hearing in terms of is it more has a higher level of fidelity than traditional cochlear implants that remains to be seen but i can tell you with our first product the esteem we got a lot of people talking about it being a more natural sound because you're using your ear i don't have data to say affirmatively if that's the case with this though Yes, sir?

Speaker 2

Where's the risk? Safety risk or is there some kind of risk?

Brent Lucas, CEO

So we anticipate our cochlear implant to have about the same adverse events as other cochlear implants. So, you know, nausea, maybe some wound breakdown here and there. It's a medical device, right, so you've got that kind of stuff. The data we're collecting is really what you're focused on is word scores. So we're going to focus on word scores just like our competition does. And to give you an idea of the benefit of that, it's about a, you know, a 40-point improvement over your baseline. So if you come in at a zero and you go up to 40%, that's considered a very, very, you know, like an above-average score. If you get to 60%, 70%, you're doing great. So that's the kind of data that we're – but we're also a lot of quality of life. We're doing a patient preference study. we're doing a lot of things to show that once we get the full picture this will be the this will be the device patients will want right if you need a cochlear implant you've made that decision you'll you'll get that so no control it's just no control not blinded we're comparing to our bait you're basically comparing to your baseline and you know that it is yes i do yep thank you Thank you.