CONTROL BIONICS LIMITED — Capital/Financing Update 2024

Aug 18, 2024

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19 August 2024

ASX ANNOUNCEMENT (ASX:CBL)

New US Insurance Code Approved - Significant Strategic Milestone for the NeuroNode[®]

Control Bionics positioned for accelerated growth and to materially benefit from the Approval of the New HCPCS Code identifying the NeuroNode® as a Reimbursable Medical Device in the United States.

Control Bionics Limited (ASX: CBL) is pleased to announce the Centers for Medicare & Medicaid Services ( CMS ) has approved a new Healthcare Common Procedure Coding System ( HCPCS ) code for the NeuroNode®. This means it now qualifies for a US$4300 reimbursement that wasn’t previously available.

Highlights:

Once this becomes effective on 1 October 2024:

• It results in a material benefit to the business’ operations in the US.

• Represents a substantial opportunity to build a wholesale distribution model for the US – as part of our previously explained ‘NeuroNode® Only’ strategy.

• Control Bionics and any of our existing US partners can from 1 October 2024 apply for the extra ~US$4,300 reimbursement for customers covered by Medicare and Medicaid and further seek to have this covered ‘in-network’ with private insurers.

This approval marks a significant milestone in enhancing the accessibility and insurance coverage of NeuroNode® for users with impaired speech and motor function in the United States.

About the HCPCS Code Approval

The newly established HCPCS Level II code, E2513, “Accessory for speech generating device, electromyographic sensor,” recognizes the unique functionality and benefits of NeuroNode® as a cutting-edge augmentative and alternative communication ( AAC ) device. Unlike traditional input devices such as joysticks and buttons, NeuroNode® utilizes electromyographic ( EMG ) signals and 3D spatial movements to provide precise control over speech generating devices.

This new code will enable healthcare providers to accurately report the use of NeuroNode®, making it simpler to process claims and enhancing patient access to this revolutionary technology.

Control Bionics Limited Registered Office: Level 4, 11-13 Pearson St, Cremorne, Victoria, 3121, Australia T: +61 3 9897 3576 W: www.controlbionics.com ABN: 45 115 465 462

NeuroNode®: A Breakthrough in AAC Technology

NeuroNode® is a class I medical device. It provides non-invasive, EMG-mediated computer access, communication, and environmental control capabilities for individuals with conditions such as Amyotrophic Lateral Sclerosis ( ALS ), cerebral palsy, spinal muscular atrophy, and certain traumatic brain injuries.

By detecting the body's EMG signals or 3D spatial movements, NeuroNode® empowers users to send coherent, unambiguous commands to their AAC devices. This functionality is crucial for those who cannot use standard input devices, offering a transformative solution for communication and control.

Medicare Benefit and Payment Determination

The Centers for Medicare & Medicaid Services have categorized NeuroNode® under the Durable Medical Equipment ( DME ) benefit, recognizing its role as a critical accessory for speech generating devices. The Medicare Fixed fee schedule amount has been set at US$4,299.75.

Strategic Impact

This HCPCS code approval enhances the credibility and marketability of NeuroNode®, allowing Control Bionics to expand its reach within the healthcare sector and improve the lives of individuals with severe speech and motor impairments.

Whilst Control Bionics and its US customers have been reimbursed for the NeuroNode® for many years, this has been done through a general ‘Accessories’ code which resulted in reduced gross margin for the business. The introduction of this new code will now allow for the direct billing of all the components provided as part of our solutions.

The complexity of the US healthcare reimbursement system is such that deriving the future financial impact to Control Bionics difficult to project. The scale of the impact is dependent on a multitude of factors, many of which are outside of the business’ control.

Based on historical results, we note:

• Were this code and reimbursement in place from 1 July 2023, and all insurers (public and private) paid out to the maximum recommended by Medicare, it would have resulted in an additional ~US$400,000 (~A$615k) in revenue and margin (i.e. 100% flow through to EBITDA) for FY24.

• We expect that the separation of the NeuroNode® into its own code (rather than being bundled in the existing accessory code) will result in increased sales of the NeuroNode® through our existing sales channels.

The far more substantial opportunity provided to Control Bionics through this new HCPCS code is to build a wholesale distribution model for the US – as part of our previously explained ‘NeuroNode® Only’ strategy. More than 16,000 individuals in the US are diagnosed with either ALS ( Motor Neuron Disease) ) or Cerebral Palsy each year. These two conditions form ~50% of our current customers annually in the US. On the assumption the annual addressable market is 50% of those diagnosed then this would represent ~US$30m market for MND and Cerebral Palsy customers alone that has been created through this new code.

Timelines

The new code (HCPCS E2513) comes into effect from 1 October 2024. Control Bionics and any of our existing US partners will be able to immediately apply for the ~US$4,300 reimbursement from Medicare and Medicaid for a customer covered by either of these insurers. With the code now approved, Control Bionics will immediately commence negotiations with Private Insurers for the NeuroNode® to be covered as an in-network device with reference to the HCPCS code. We expect our existing partners will do likewise.

The process of securing these in-network agreements can be time consuming and therefore we can provide no guidance as to the time it will take to reach full coverage for the states in the US we currently operate in.

Commenting on this new HCPCS code, CEO Jeremy Steele said ‘The introduction of the new HCPCS code for NeuroNode® marks a significant milestone, not just for Control Bionics but for the countless individuals who rely on our technology to communicate and regain control of their lives. This recognition will greatly enhance accessibility, making it easier for patients to obtain the necessary support and devices through their insurance provider’.

Mr Steele went on to say ‘The new HCPCS code not only validates the groundbreaking innovation behind NeuroNode® but also positions Control Bionics for accelerated growth. This code will expand our market reach, enabling us to bring our life-changing technology to a larger audience, and driving our mission to enhance communication and independence for those with severe disabilities.’

This announcement was authorised by CBL CEO Jeremy Steele.

About Control Bionics:

Control Bionics is a medical device company assisting patients whose ability to communicate verbally or via text and social media is compromised by illnesses such as Motor Neurone Disease (MND) and Amyotrophic Lateral Sclerosis (ALS). Our core patented NeuroNode technology is a wireless wearable device that detects minute signals sent from the brain to any skeletal muscle and is captured as EMG (Electromyography) output. This output is then sent wirelessly via the NeuroNode to a personal computer, enabling speech and other computer controlled functions like email and texting. Our technology is integrated with eye gaze technology whereby the eye gaze enables a cursor to be moved about a computer screen, driven much like a mouse, and the NeuroNode acts as like the mouse button. Control Bionics is the only such product to harness three modalities – touch, eye and NeuroNode control – which combined yield unique benefits in terms of the ability of patients to express themselves with significantly faster speed and less fatigue.

Control Bionics recently extended its offering to mobility with the launch of DROVE – the autonomous wheelchair module. DROVE allows powered users the independence to operate their wheelchairs in their own homes for the first time. DROVE recently got approved by the TGA as a Class I medical device.

Control Bionics is currently commercialising its most recent advancement in its technology, the NeuroStrip ® . This wearable, miniaturised EMG device provides the business with the opportunity to enter new markets such as health diagnostics, sports performance and rehabilitation to name only a few potential markets.

Control Bionics operates in North America, Australia, Singapore and Japan.

Investors and Media

Jeremy Steele – CEO and Managing Director jsteele@controlbionics.com

Brett Crowley - Company Secretary brettcrowley@controlbionics.com

Investor Relations:

Joe Durak Executive Director & Founder Lynx Advisors joe@lynxadvisors.com.au +61 414 465 582

Control Bionics Limited Registered Office: Level 4, 11-13 Pearson St, Cremorne, Victoria 3121, Australia T: +61 3 9897 3576 W: www.controlbionics.com ABN: 45 115 465 462

For further information visit the website: https://www.controlbionics.com/