Carlsmed Inc. (NASDAQ:CARL), an AI-powered innovator in spine surgery, is poised for significant growth following key advancements and strong analyst projections.
The company recently secured additional Medicare reimbursement for its aprevo personalized interbody implants for cervical fusion procedures, effective October 1, enhancing its financial outlook.
This favorable reimbursement, granted through the Centers for Medicare & Medicaid Services’ (CMS) New Technology Add-On Payment (NTAP) program in the Hospital Inpatient Prospective Payment Systems (IPPS) Final Rule for fiscal year 2026, means cervical fusion procedures using aprevo devices will be eligible for an additional $21,125 beyond standard Medicare Severity-Diagnosis-Related Groups (MS-DRGs) for qualifying inpatient procedures.
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This benefit extends to private payors as well, utilizing unique ICD-10-PCS procedure codes.
Carlsmed, which priced its initial public offering of 6.7 million shares at $15 per share in July, focuses on AI-enabled personalized spine surgery solutions. Its aprevo cervical system, having received FDA Breakthrough Device designation, is anticipated for a U.S. commercial launch in 2026.
Bank of America Securities (BofA) has initiated coverage on Carlsmed with a Buy rating and a price forecast of $16, recognizing the company’s potential to establish a new standard of care in spine fusion.
BofA analyst Travis Steed highlighted Carlsmed’s differentiated technology and robust outlook, assigning a premium valuation of 5x 2026 estimated revenue.
This premium, higher than recent medtech IPOs and other spine companies, is justified by Carlsmed’s projected high revenue growth and strong gross margin profile.
BofA conservatively forecasts Carlsmed will add around 20-25 new surgeons each quarter through 2027, indicating a steady increase in adoption.
Carlsmed forecasts impressive top-line growth: 66% in 2025 and an annual 40-45% through 2028. Its asset-light business model is expected to support profitability, with gross margins in the mid-70s and capital expenditures at just 1% of sales, significantly lower than the approximately 10% for traditional spine peers.
BofA estimates the total spine market at roughly $1.4 billion, with a compound annual growth rate (CAGR) of approximately 1.5%. In the first quarter of 2025, the global spine market (including biologics) saw 2.6% organic growth, driven by a 4.1% increase in the U.S. market.
Despite the market being largely commoditized and dominated by major players like Medtronic Plc (NYSE:MDT), Globus Medical Inc (NYSE:GMED), Alphatec Holdings Inc. (NASDAQ:ATEC), Johnson and Johnson (NYSE:JNJ), and Orthofix Medical Inc. (NYSE:OFIX) (who collectively hold about 70% of the market), spine surgeons notably favor new technology.
The remaining 30% of the market is split among many smaller companies, creating an opportunity for new market entrants with disruptive technology like Carlsmed’s to gain traction.
BofA sees significant market share capture potential for Carlsmed, with analyst Steed estimating total revenue of $133 million in 2028, representing only about 1% of the total U.S. spine market.
Price Action: CARL stock is trading higher by 0.88% to $13.70 at last check Monday.
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