Sparks - AOTI

AOTI has announced that the Centers for Medicare & Medicaid Services (CMS) has issued a proposed nationwide Local Coverage Determination (LCD) recognising topical oxygen therapy as medically necessary for diabetic foot ulcers (DFUs) that have failed to heal after four weeks of standard care. If finalised following the consultation process, the LCD would establish Medicare reimbursement for DFUs while supporting broader coverage across Medicaid and commercial payers.

We view this as a significant commercial inflection point for AOTI with the proposed LCD materially de-risking Medicare reimbursement for TWO2 therapy, opening the largest US payor segment (c 69m Medicare enrolees with a c 13% rate of DFUs as per management) while strengthening the case for broader payor adoption. Importantly, AOTI already has commercial coverage across c 86% of the US population and a leading 75% share of the topical oxygen market, positioning it to capitalise on the opportunity with limited incremental investment. While the proposal remains subject to final approval, it meaningfully improves long-term revenue visibility and expands the company’s addressable market. The share price is trading up 30% following the announcement.