AOTI Inc (AIM:AOTI) shares leapt 29% to 85p, their highest level in more than a year, after a proposed US Medicare coverage decision opened the door to a significant expansion of the market for its TWO2 topical oxygen therapy.
In a long-expected development, the AIM-listed medical technology company said the Centers for Medicare & Medicaid Services had issued a proposed nationwide coverage determination recognising that topical oxygen therapy should be used for the treatment of hard-to-heal diabetic foot ulcers.
The proposal will now undergo a 45-day public consultation, with CMS expected to review responses and finalise its Local Coverage Determination (LCD) within a year, which would move topical oxygen therapy to be reimbursed under Medicaid.
Of the 69 million Medicare enrollees, diabetes affects as many as 32% and diabetic foot ulcers around 13%.
Expecting the decision to support wider reimbursement from Medicaid, commercial insurers and managed-care providers, AOTI estimated its currently reimbursed market at around $400 million, with broader Medicare and private insurance coverage potentially increasing its addressable opportunity "as much as 65-fold (or circa $26 billion)".
Panmure Liberum analyst Dr Julie Simmonds said it was "a meaningful announcement" for AOTI, which is the market leader in topical oxygen therapy in the US.
"Ahead of the full LCD it also derisks reimbursement in other market segments," she said.
"Although direct financial impact is likely to be limited until FY2028, the proposed LCD marks a significant milestone for AOTI and has the potential to improve current growth rates.
"The company is well positioned to take advantage of this shift in reimbursement even ahead of the final LCD.
"Following a difficult 2025, AOTI has addressed the issues and started 2026 positively, and we expect a positive trading update on Monday. AOTI remains highly undervalued compared to wound care peers."
Panmure Liberum has a 'buy' rating on the shares.
