CARLSMED, INC.

Carlsmed, Inc. is a commercial-stage medical technology company focused on pioneering AI-enabled personalized spine surgery solutions, aiming to establish its aprevo Technology Platform as the standard of care for spine fusion surgery. The company's mission is to improve outcomes and decrease healthcare costs for spine surgery and beyond. The aprevo Technology Platform is designed to address limitations of traditional lumbar and cervical spine fusion surgery by optimizing patient outcomes and reducing revision surgeries ¹. The company operates in the medical device industry, which is characterized by high competition and rapid technological change ². The total addressable market for aprevo lumbar devices in the United States is estimated at approximately $13.4 billion, based on an estimated 445,200 lumbar fusion surgeries performed in 2025 ³, and for aprevo cervical devices, it is approximately $6 billion, based on an estimated 372,600 cervical fusion surgeries in 2025 ⁴. These estimates assume a compound annual growth rate (CAGR) of approximately 1.5% in the spinal fusion market ⁵.

Carlsmed's competitive positioning is strengthened by its claim to be the first available solution to provide personalized digital surgical plans and accompanying aprevo interbody implants tailored to each patient's unique pathology and vertebral bone topography ⁶. The company's robust intellectual property portfolio, as of December 31, 2025, includes 45 total issued patents and approximately 120 pending patent applications, covering implants, manufacturing processes, design processes, software user interface, and AI-enabled algorithms ⁷. Additionally, Carlsmed leverages a significant base of patient and imaging data, having used approximately four million de-identified radiographic images to train its AI models and created over 40,000 3D patient-specific models (PSMs) ⁸. While the company states it is the first commercially available solution of its kind, it competes with manufacturers of conventional spine and orthopedic devices, including Medtronic PLC, Johnson & Johnson, and Globus Medical Inc., some of which are larger and more capitalized ⁹.

The core business model revolves around selling aprevo interbody implants and accompanying single-use surgical instruments to hospitals and ambulatory surgical centers in the United States. Revenue is primarily generated from the sale of these personalized implant devices, with the company recognizing revenue in the period of its use within a spine fusion surgical procedure ¹⁰. The company leverages an asset-light, on-demand manufacturing model, where aprevo interbody implants are manufactured by contract manufacturing organizations (CMOs) only after surgical plan approval, reducing inventory requirements ¹¹. The primary customer segments are hospitals and ambulatory surgical centers, with sales driven by a combination of a direct sales team and independent sales agents ¹².

The aprevo Technology Platform consists of AI-enabled software solutions, custom-designed interbody implants for each patient's unique pathology and vertebral bone topography, and single-use surgical instruments ¹³. The platform supports surgeons in achieving proper spinal alignment for patients with degenerative disc disease (DDD) and adult spinal deformity (ASD), aiming to improve clinical outcomes and reduce revision surgeries ¹⁴. The platform is currently marketed for lumbar and cervical spine fusion surgeries ¹⁵. The aprevo lumbar interbody implants received FDA 510(k) clearance in December 2020 for adult spinal deformity and in August 2022 for several degenerative conditions of the lumbar spine ¹⁶. Lumbar procedures using aprevo implants are covered by Medicare, Medicare Advantage, and commercial payors, often mapped to MS-DRG codes that provide premium reimbursement ¹⁷.

For cervical spine fusion surgeries, the aprevo Technology Platform received FDA 510(k) clearance for its interbody implants in November 2024, following FDA Breakthrough Device Designation ¹⁸. The first in-human personalized cervical procedure was completed in July 2025 ¹⁹, and limited early sales commenced in December 2025 ²⁰. In August 2025, CMS finalized X-codes for custom-made anatomically designed interbody fusion devices for cervical spine fusion surgeries and established a New Technology Add-on Payment (NTAP) of up to $21,125 for qualifying inpatient procedures, effective October 1, 2025 ²¹. In December 2025, the company also received FDA 510(k) clearance for its cervical plating system ²².

For the fiscal year ended December 31, 2025, Carlsmed reported total revenue of $50.5 million ²³, an increase from $27.2 million in 2024 ²⁴. Gross profit for 2025 was $38.0 million ²⁵, yielding a gross margin of 75.3% ²⁶, up from 73.8% in 2024 ²⁷. Operating expenses totaled $68.6 million ²⁸, resulting in a loss from operations of $30.6 million ²⁹. The net loss for the year was $29.6 million ³⁰, compared to a net loss of $24.3 million in 2024 ³¹. Diluted EPS is not explicitly stated. As of December 31, 2025, the company had cash, cash equivalents, restricted cash, and short-term investments of $109.9 million ³², and total debt outstanding under the Term Loan of the Customers Loan Agreement was $15.6 million ³³. The accumulated deficit as of December 31, 2025, was $100.8 million ³⁴.

Year-over-year, revenue grew by $23.3 million, or 85.9%, from $27.2 million in 2024 to $50.5 million in 2025 ³⁵. Cost of sales increased by $5.4 million, or 75.2%, from $7.1 million to $12.5 million ³⁶. Gross margin expanded from 73.8% in 2024 to 75.3% in 2025, primarily due to enhanced manufacturing efficiencies and process improvements ³⁷. Research and development expenses increased by $2.7 million, or 19.0%, to $17.0 million in 2025 ³⁸, while sales and marketing expenses rose by $13.6 million, or 63.1%, to $35.0 million ³⁹. General and administrative expenses saw a significant increase of $8.2 million, or 97.4%, to $16.6 million ⁴⁰. The net loss increased by $5.4 million, or 22.2%, from $24.3 million in 2024 to $29.6 million in 2025 ⁴¹.

During the reported period, Carlsmed completed its IPO on July 24, 2025, issuing 6,700,000 shares of common stock at $15.00 per share, generating net proceeds of approximately $88.1 million after underwriting fees and offering costs ⁴². The company also completed a subsequent closing of the sale of 1,117,743 shares of Series C convertible preferred stock in January 2025 for gross cash proceeds of $12.0 million ⁴³. Operationally, the company received FDA 510(k) clearance for its aprevo interbody implants for cervical spine fusion surgery in November 2024 ⁴⁴ and successfully completed the first in-human personalized cervical procedure in July 2025 ⁴⁵. In December 2025, FDA 510(k) clearance was received for its cervical plating system ⁴⁶. The company also enhanced its Digital Production System (DPS), reducing lead time for aprevo interbody implants to customers from 10 business days or less to six business days, effective February 2026 ⁴⁷.

Carlsmed expects its gross margin to remain relatively constant over the short term compared to its 2025 full-year results and to modestly increase over the medium and long term due to economies of production scale, increased leverage of its AI technologies, and other planned manufacturing efficiencies ⁴⁸. The company anticipates its operating expenses to increase in future periods, and if revenue growth does not sufficiently offset these increases, it may not achieve or maintain profitability ⁴⁹.

A major growth area for Carlsmed is the broad commercialization of its aprevo Technology Platform for cervical spine fusion surgeries. The company received FDA 510(k) clearance for its aprevo interbody implants for cervical spine fusion in November 2024 ⁵⁰, and the first in-human personalized cervical procedure was successfully completed in July 2025 ⁵¹. Limited early sales commenced in December 2025 ⁵². In December 2025, FDA 510(k) clearance was also obtained for its personalized cervical plating solutions ⁵³, with the first personalized plating procedure using the corra Cervical Plating System completed in February 2026 ⁵⁴. The commercial launch of the corra Cervical Plating System is planned for later in 2026 ⁵⁵. The company expects to drive adoption among its existing base of surgeons already using the aprevo Technology Platform for lumbar spine fusion ⁵⁶. The estimated total addressable market for aprevo cervical devices in the United States is approximately $6 billion, based on an estimated 372,600 cervical fusion surgeries in 2025 ⁵⁷.

Another significant growth vector is the continued expansion of the aprevo Technology Platform for lumbar fusion surgeries. The company aims to establish the platform as the standard of care for lumbar fusion ⁵⁸. As of December 31, 2025, 253 surgeon users had completed one or more procedures, compared to an estimated 4,000 spine surgeons in the United States whose patients could benefit from the platform, indicating ample opportunity for growth ⁵⁹. To achieve this, Carlsmed plans to grow its commercial infrastructure, including its direct sales team and independent sales agents, and expand market access initiatives such as medical education programs, fellowship programs, and surgeon training at top academic institutions ⁶⁰. The company is also investing in patient awareness initiatives, including a physician locator web page, to drive increased patient volume ⁶¹. The total addressable market for aprevo lumbar devices in the United States is estimated at approximately $13.4 billion, based on an estimated 445,200 lumbar fusion surgeries in 2025 ⁶². Additionally, in February 2026, the company announced the successful completion of the first posterior lumbar spine surgery using its newly developed aprevo Lumbar Bi-lateral Posterior System (PLIF), with a commercial launch expected in the first half of 2026 ⁶³.

Operationally, Carlsmed expects its research and development expenses to increase as it accelerates product and software innovation, develops additional clinical data, and expands manufacturing capabilities ⁶⁴. Sales and marketing expenses are also expected to increase in the foreseeable future as the company expands its sales organization and marketing efforts in the United States and into other geographies, broadens indications for the aprevo Technology Platform, and establishes international sales channels ⁶⁵. While increasing in absolute value, sales and marketing expenses are expected to decrease as a percentage of revenue over time ⁶⁶. General and administrative expenses are anticipated to rise to support business growth as a publicly traded company, including costs for accounting, audit, legal, regulatory, tax, insurance, investor relations, and SEC compliance ⁶⁷. These costs are also expected to decrease as a percentage of revenue over time ⁶⁸. The company's streamlined Digital Production System (DPS) allows for delivery of patient-specific aprevo interbody implants to customers within six business days of surgical plan approval, as of February 2026 ⁶⁹.

For capital allocation, the net proceeds from the IPO, approximately $88.1 million ⁷⁰, are being used to support commercialization and product offerings, with approximately $25 million allocated to increased sales and marketing efforts and approximately $46 million to research and development activities, including cervical spine fusion development ⁷¹. The remainder is for working capital and general corporate purposes ⁷². The company's ability to pay cash dividends on its capital stock is limited by the terms of the Customers Loan Agreement ⁷³.

Management explicitly flagged several structural headwinds and execution risks. The company's business and growth strategy depend on its ability to broadly commercialize the aprevo Technology Platform for cervical spine fusion surgeries, and failure to do so could limit future growth ⁷⁴. Managing the on-demand, customized implant model to meet evolving demand is expensive, time-consuming, and subject to uncertainties; an inability to manage CMOs to consistently meet demand on a timely basis could lead customers and surgeons to use competitors' products ⁷⁵. The company relies on a limited number of CMOs for manufacturing, increasing the risk of insufficient quantities or unacceptable costs, and reducing control over the manufacturing process, which could delay or impair commercialization ⁷⁶. The size and expected growth of the total addressable market has not been established with precision and may be smaller than estimated ⁷⁷. Discovery of alternative technologies or other personalized spinal implant technologies could materially adversely affect the business ⁷⁸.

Carlsmed faces several material risks, including its complete dependence on sales of aprevo interbody implants for revenue, making it vulnerable to market acceptance and adoption challenges ⁷⁹. The company has a limited operating history and a history of net losses, with expectations of additional substantial losses in the foreseeable future ⁸⁰. Operational risks include the challenges of managing an on-demand, customized implant model, which is expensive, time-consuming, and subject to uncertainties, potentially leading to delays in delivery and loss of customers to competitors ⁸¹. The reliance on a limited number of contract manufacturing organizations (CMOs) for all manufacturing processes increases the risk of supply shortages, cost increases, and reduced control over production, which could impair development and commercialization efforts ⁸². The medical device industry is highly competitive, with larger, more capitalized competitors, and rapid technological change could render the aprevo Technology Platform non-competitive or obsolete ⁸³. Product liability claims are an inherent risk, given the significant complications associated with spine surgeries, and could lead to substantial monetary awards or costly settlements ⁸⁴. The off-label use of aprevo interbody implants could harm the company's reputation or result in regulatory fines ⁸⁵. Recalls of products, whether voluntary or mandated by the FDA, due to safety issues or defects, could significantly impact the company ⁸⁶. The size and expected growth of the total addressable market is an estimate and may be smaller than anticipated, impacting revenue potential ⁸⁷. Macroeconomic conditions such as inflation, high interest rates, and geopolitical instability could adversely affect demand for products, increase costs, and lead to supply chain constraints ⁸⁸. Cybersecurity risks, including unauthorized access to systems or data, malicious cyber activity, and human error, could result in loss of sensitive information, operational interruptions, and reputational damage ⁸⁹. Regulatory risks include the dependence on third-party payor coverage and adequate reimbursement levels, with failure to maintain these potentially limiting marketability and revenue generation ⁹⁰. The company is subject to extensive federal and state healthcare fraud and abuse laws, and non-compliance could lead to substantial penalties or exclusion from government programs ⁹¹. Ongoing FDA oversight, quality system requirements, and post-market reporting obligations mean that regulatory changes or enforcement actions could disrupt operations ⁹². The Customers Loan Agreement imposes financial and operational covenants, including maintaining at least $20.0 million in unrestricted cash with the lender ⁹³ and compliance with certain minimum revenue amounts, which, if breached, could trigger default and require immediate repayment of the $15.6 million principal outstanding as of December 31, 2025 ⁹⁴.

Management's overall tone emphasizes a patient-obsessed culture and a commitment to establishing the aprevo Technology Platform as the standard of care for spine fusion surgery, driven by AI-enabled personalized solutions. They highlight the platform's ability to improve outcomes and decrease healthcare costs by addressing the limitations of traditional spine fusion. Key strategic priorities include continuing to drive adoption and market share capture for aprevo in lumbar fusion surgeries, broadly commercializing the aprevo Technology Platform for cervical spine fusion surgeries, and investing in further growing the base of clinical evidence. Management also stresses ongoing research and development initiatives to introduce enhancements and new capabilities, including expanding into additional indications and disease states within the spine, such as cervical corpectomy and cervical disc arthroplasty. The company expects its gross margin to remain relatively constant over the short term to its 2025 full year results and to modestly increase over the medium and long term with economies of production scale, increased leverage of its AI technologies, and other planned manufacturing efficiencies ⁹⁵.