Earnings call transcript Q1 2023

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Operator

Good afternoon, and welcome to NeuroPace's First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode.

We will be facilitating the question-and-answer session towards today end of call.

As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Trip Taylor from the Gilmartin Group for a few introductory comments.

Trip Taylor

operator. you, Thank thank and participating today's in Good you call. afternoon for

first NeuroPace Joining released CEO; the is XX, available are press and company's of from A financial ended copy XXXX. Rebecca for on NeuroPace Favet, release today, Mike me the March Earlier Kuhn, results website. the quarter CFO.

to I'd meaning remind this pursuant you provisions begin, during relate harbor include forward-looking future statements or of Reform that are Private Act are call of Litigation Securities the statements management safe which performance will we Before of of the that like to within Federal Laws, during Securities make this statements forward-looking the XXXX. predictions statements. events, or Any to made results that call expectations made

including clinical expansion recovery, around market market the our those outlook, relating to impact opportunities, business business statements. and uncertainties estimates are Accordingly, and not trials, for reliance commercial risks expense our trends events cause on forward-looking those results actual and those by statements, and involve financial conditions, operating could to these these place and These NeuroPace's prospects or statements of management, All should implied based on statements. future various performance, revenue and forward-looking differ that material opportunity, COVID-XX from assumptions. you upon materially undue current

with Form please with For XX, in quarter XX-K more that filings as December March detailed SEC XX-Q including X, we filed as reports March XXXX report to well SEC, the the XX, the refer on may associated with business, our the Factors ended descriptions be and and Risk report SEC of XXXX file for SEC our the on risks ended on the quarterly future. of public the the with XXXX any to the our with year section our filed uncertainties Form annual for

disclaims financial or any time-sensitive by new update as broadcast as except May intention only whether NeuroPace required contains revise statements, of because we or believe law, conference on projections This any X, forward-looking information, or live of this events XXXX. obligation, call which to otherwise. is future accurate information, or

that, with I now the call over And to will turn Mike.

Michael Favet

afternoon, Trip. over an you call I for business detail on to our priorities our to first Today, and highlight will questions. us results and performance open joining today. Good quarter the Rebecca Thanks turn update I then year. we before for thank call the everyone provide the financial key will the the

quarter strong execution revenue prior to revenue and to of began To The commercial by quarter. XX% fourth growth begin, performance of operational Total increased compared representing the was $XX.X the Comprehensive led to million, RNS driven or partnership, Centers which utilization in System fourth CECs and strong was XXXX. XX%, Medical within DIXI record our distribution XXXX. the contributions the of of the quarter our compared first in period from Epilepsy year

a corresponding As management, decline to expected expense our first revenue fourth quarter quarter replacement on the of increase we With and XX% to represents in total increased in quarters without focus continued revenue. implant than revenue less to now compared expense of the prior XXXX. compared continued

of our made our Medical happy differentiated our System am with I System. the CECs we features to our Growth to Based within see in of Overall, million utilization by strategy the revenue RNS $XX will increasing recognizing $XX total be with million our the underlying year and have DIXI year with full $XX progress coupled primarily first business, up XXXX million, $XX epileptologist I'm million. and of selling the on we to driven now fundamentals expect strong RNS pleased from to full expectation of XXXX products. original benefits continue of

year. patient volumes that Our Monitoring reported the or EMU last Epilepsy remained over Unit customers have stable

to continue show that to signs are we of improvement. pre continue all they volumes believe to way the pandemic not patient levels, back While

To XXXX, the managing one, more patient will on in commercial with prescribers strategy increase utilization the objectives three the revenue and, of RNS growth additional driving in our Now two, RNS expanding our our concentrates System implanting patient selection; System discuss objectives; three, adoption and I detail. pipeline; initial and implant new of support centers.

Our strong results System develop the of growing, presence awareness neurosurgeon that we XXXX amongst as benefits first quarter epileptologist continue a of demonstrate is RNS to clinical and the customers.

the highlighting patients realize so gap on more close focused need product. We the that can of remained by benefits our treatment their the life-changing to provided

benefits drug the resistant importance and continues treatment on patients. epilepsy providing team educate physician of Specifically, the advanced RNS of System, to the their our to

and As the expanding full the indication, scope utilization. are criteria patient clinical we to that seeing Systems RNS supports improvements selection share of and discuss we evidence

are manage pipeline to the We working the within patient actively CECs.

stage We are and journey, RNS System at treatment potential their in identifying patient an RNS believe educating is adoption. crucial earlier to increasing we which

enable We patients pipeline System marketing and more RNS nurse navigators with being programs the diagnostic through in patient working NeuroPace campaigns. Patient are leverage guide education team to leads implants. field leads through through to CECs process. and our direct-to-consumer identified to convert patient us our the Our the

our Additionally, of provides network System. RNS of team patient with in-depth benefits education RNS our patient on a along ambassadors the

additional their States. the Medical the candidates is United the RNS two We identify stereo results distributing with has line in and and through are commercial first DIXI quarters journey. product with EEG enabled This very driving earlier team, revenue products to interact us patient our potential pleased in the of

leveraging reminder, are being therapeutic accounts can to the line products are large DIXI and to of most stereo electrodes grow States revenue in stereo patients seizures a from RNS Medical EEG System. to accelerate convert Over United the with patients EEG that and resection our prior we localized focused to determine time, used RNS intervention. where ablation team by and epilepsy product epileptic commercial this believe we leverage As our adoption competitive originate. surgical Most

by our we are RNS CECs important to our to Improving efforts additional increasing centers prescribing on in increase providers care progress expanded part the an of physicians. implanting team good efforts the of to and of increasing making are number physicians. prescribing System the treatment of gap. field close the number patient utilizing is calling the our number We With access and

professional this of are and field We team. by through programs the doing work education expanding our

Moving epilepsy. to our continue expansion clinical clinical trial generalized our on we top make priority, into strong progress updates, to the

because Diagnosis of resistant simpler focal and neuromodulation patients and As approximately a expansion epilepsy, reminder, and applicable, these generalized patient there does drug not because is require options market for and diagnostics ablation are few are faster of as no approved than this represents not patients it opportunity a is meaningful advanced epilepsy epilepsy. have XX% group. resection therapy this for treatment

be approximately Enrollment completed study the XXX of the XXXX. on track in is NAUTILUS of the to first quarter patients in

for a after endpoint follow As intend implantation. the year indication primary generalized expand We this one support up RNS the primary treatment results the to study evaluating safety is of the epilepsy. and reminder, a supplement include to a to evaluation at from of efficacy device the System the PMA

to Additionally, as this our solution continues need with patients an to optimal NIH of generalized look funded feasibility amongst We type study progress the for unmet providing forward an potentially symptomatic Lennox-Gastaut patient population. planned. for epilepsy, syndrome,

to across traction for and Increasing To our Medical implant are EEG products. a use, entire of summarize, growth business. is the gaining great distribution with executing year revenue the the initial of start stereo drove to team the it's utilization RNS we the off and easy DIXI System,

by utilization need. We and invigorated receive focused patients remain the are care ensuring the increasing trajectory on that they

to XXXX. syndrome our are improve for burn Lennox-Gastaut study well for successful generalized trajectory. and positioned the epilepsy recent pivotal progressing keep of for primary We study planned. NIH NAUTILUS We Our while a all our successfully achievements continuing believe accomplished this as us cash

now call over to to quarter With that, financial review our Rebecca first I results. the will turn

Rebecca Kuhn

NeuroPace’s to first RNS representing the of first our but, less was first driven revenue replacement and experienced Thanks and of sequentially, than quarter decline of The System expected, was of from for of quarter total quarter, revenue fourth We replacements Medical strong as DIXI by revenue. than in continued XX% XX% by anticipated of and quarters, $XX.X utilization the prior XXXX compared to the contributions $XX.X higher now in distribution to Mike. increased compared XXXX partnership. primarily to million our implant compared million XXXX. performance the XX% $XX.X growth quarter million, for represent

of first Gross the XXXX, margin fourth RNS products. to quarter the to than XX% have in was for first period gross XX% the the in with to product gross Medical quarter quarter of change in due of inclusion DIXI was the margin which products, XX%, a XXXX The in margin XXXX. core year compared our prior decline relative and lower mix a primarily of

over margins gross anticipated than DIXI and XXXX, volumes is we fixed also to units. the During will as expect time, higher quarter of Medical. more we generally overhead first allocated sales increase, Over attributed increase had

$XX was through $XX.X and in expenses. products, distributing for million lower same the period. We by Total in increase same and of XXXX. to with general focus personnel quarter compared compared DIXI The expense with expenses on million operating SG&A. million, services. the quarter expenses, in $XX.X revenue by reduced as continue the the quarter The driven with first associated of in prior expense first prior XXXX, by related and expenses, expense of a percentage million plan initiatives expenses compared R&D first In to quarter operating related $X.X R&D in SG&A partially optimize in was primarily were both million, offset decrease million, first with expenses driven XXXX. in year. R&D was primarily for XXXX the and were year operating outside the the was period decrease a of administrative the to personnel period expenses of $X.X study XXXX expenses in in XXXX clinical SG&A Medical of of $XX.X

million compared in compared interest Loss first from quarter We first million was period. first prior Net in the of million $X.X with prior XXXX. year loss period. the operations in in the $XX.X XXXX, of to the quarter, the recorded $X $X.X $XX.X year first with compared for $X.X of was expense in quarter in quarter XXXX, the million million million

and investments cash as was of Our $XX.X balance million. XXXX XX, short-term March

totaled XX, September Our the principal on XX, million $XX.X March long-term borrowings XXXX. as due XXXX, full of with

the to for outlook of remainder turning XXXX. our Now

and to $XX guidance increasing $XX are up XXXX We revenue our million. million, from $XX for million between million now $XX to and expect range revenue total

be We initial of mainly products. expect that growth DIXI by from the revenue will implants sale in increases supported Medical revenue and

begin replacement expect that the to implants the of we by replacement sequentially devices more quarter, replacement XXXX the we the of end expected in in the than decline newer continue prior in become Replacement With a substantially battery XXXX. to implant complete driver lasting of the growth anticipated at We anticipated of revenue reach when year. is to rate life. the their faster will first earlier all devices will longer revenue RNS end slightly generation than a introduced

margin expect between for be We XX%. continue to and XX% gross will our XXXX

small Our factors. quarterly DIXI due to margins fluctuations Medical proportion experience gross variability in overall may to of revenue and other revenue the

million expenses $XX million non-cash We including $XX between XXXX continue and range to operating $XX expenses. million, for in expect to million $XX to

cash a quarter the $X.X substantial of $XX.X our reduction first from in the million million, was Our burn first of quarter XXXX of XXXX. burn in cash

burn typically to the compensation-related highest due of quarter the year, in the cash Our of expenses. is primarily first timing

$X unique first that First related are of million compensation quarter included primarily quarter. approximately spending the to expenses,

the over prepared turn call open the concludes to like call who I our remarks. would will questions. for to now the operator This

Operator

question first JP Robbie comes Our Instructions] Marcus [Operator from Morgan. from

Rohan

taking is question. guess Rohan for this couple. I a Thanks for How’s the Robbie. Hi, it going? had I on

one is first guidance. The focused on

the up for guidance revenues down revenue which patient and about step year the by you're in X year. the on comment the the beat a Would essentially kind and the I'm stabilizing be progresses? funnel So just so given million, quarter, especially able commentary just assuming getting of better about how implies moving thinking balance contribution to quarterly the the of in this is cadence, as around forward coming you

Michael Favet

question about Appreciate about quarter question. then Rohan. getting of couple into the Thanks, guidance. Thanks. your and first comments A Great. the

the business. overall all performance we're happy really strength So the parts of with across

year. the we forecast to able continue the as in progress of forward, that able in go been so of off that the grow we continuing first great revenue second we initial We've of the the the build implants XXXX, Austin's will increasing here For continue make were to expect that revenue implant success half through of move we to as initial to general from through course trend quarter year.

that we're new Medical, us and of we'll from projecting, still still go than be in we incremental We're the QX. For to had in strong We on DIXI with marginal that as quarter guidance off about we including increases a really the building in base forward, talked better that. not a in It's that business for -- QX relatively changes we did revenue base. quarter. of increases QX any the -- first off that

Medical we So the as based The in quarter of we're that. started with with the we providing product, confidence is working get we'll that last around have DIXI on where more time first we're really year. guidance better business our that

about the year of is is what device replacement we expect first we because the older from replacement million implants revenue same specifically that of of that replaced. had in fourth the than the we quarter first of we in than anticipated. generate total replacements higher first that result quarter, about then there's of the quarters, will We number those off when quarter and a the from the be the implants. revenue are devices replacement total volume devices And revenue, That replacement from more had thought in year that had that of implants a we the to implant as in the through $X.X implant with in revenue still less because generated we strong anticipated, proportion to for quarter while had than and earlier the more be needing the in more that'll second result before, started

Medical quarter, and the and baking all guidance than we quarter So, into as banking initial overall not expect changes product, in first across the guidance, general that we're trajectory move in our strength the DIXI expected we that any with not to through that happy of against business then while in the the revenue, but implant aspects of came higher the providing. really growth we're into that, continuing

Rohan

you. helpful. it. That's really Got Thank

it generalized around helpful other can indication. of down here see be can approval? I question remind The NAUTILUS. you if pending the the like seems was and would you're line towards just market And epilepsy is potentially we really contribution guess the progress a I making had It when good what kind us just opportunity

Michael Favet

you for the and as our really study to going the believe I’m over encouraged of have start really, one to by that that's study question and Yeah, the running, model that for time. getting business well. thank I up had that we've importance

drug XX% the As a of reminder, generalized epilepsy epilepsy. represents about have patients that resistant

are to a So Resective fewer that are focal epilepsy that very interventions large procedures, generalized are procedures neuromodulation for generalized and treatment currently commonly for are done market And these epilepsy, there are and options epilepsy. even applicable compared it's opportunity. most patients focal which not for therapies for epilepsy. have the there no generalized ablative indicated epilepsy

So designation get FDA very reason much we patient to for group. undertreated were device populations, able this breakthrough from the the the

and faster to process have is Additionally, focal easier epilepsy. the diagnostic identify patients than epilepsy generalized that for

options more and and an for simpler a to lack patients more large treatment treated of get So, quickly need population DRE simpler diagnostic, very with these process. opportunity an unmet faster and diagnostic a much with patient patients

timing, of of the and we to quarter enthusiasm that we had tremendous to and that be starting investigator that expectation. that first from terms the sites, sites have in announced trial expect last patients on enrollment there's all the enroll group. we the of In amount year ago announced We next completed in quarter a couple and to had had continues board a of XX the months

to that to to And that have so tracking completion. believe we're start, good off a we're continuing well

completion so of on of the study device follow a the then of after enrollment, of for and reminder, implantation and first up side has of quarter up a off other building endpoint one-year XXXX that PMA period the follow the supplement As itself primary a the that.

tracking can out you timeline it. be So well the kind They with timeline. to of associated figure continue that to

Rohan

you thank so Great, much.

Operator

Thank you.

Our comes from next Street Frank Lake Markets. from question Capital Takkinen

Frank Takkinen

to quarter. it the into us dive Hey, coming I'm in maybe drove and to quarter? improving more to centers trends. what board utilization two I thanks you the centers of take growth deeper treat and was existing of really the congrats and in kind it wanted Could per treat into questions on starting for taking on Was progress all their the center the or a patients little levers. rate? as the new thinking And starting patients

Michael Favet

we to Frank. first they from utilization, saw XXXX, the in did and that as treated faster growth more Epilepsy in within off year primarily a contribution The well. the that. Thanks, coming driven was quarter get so We the from start patients in being Comprehensive a than treated was primarily more prescribers, centers with Centers

increase we utilization that from as So coming there increased bulk the contributions from both of center but and was increase, expected, utilization.

Frank Takkinen

remarks, Good know into one the in of a patient And attractions that force the then color. talk that sales some of agreement the RNS prepared to and and could information competitive color is I the is leveraging referenced but good. to on playing funnel, think at patients Thanks. to you maybe Very out distribution getting expectations was you your level primary versus DIXI, how to technologies. your how I maybe convert it high versus

Michael Favet

a the early, grow quarter through with deal we've strategic that for it's team better to our an to had strategy that working basic conversions with and this mentioned, to what RNS as in nicely. that the drivers earlier while product able quarters large implant. us agreement, I'm is we've team to selling the doing in, calling now got one rationale pleased some that But patients Epilepsy the process And able good behind coming fits team. couple the success into really on account the still have be really We've epilepsy lead into have using you within of visibility Two Centers to together key diagnostic business. been success the these to focused was field we're distribution established how and

DIXI We that and be of in have performance the have RNS that centers System. but to able and the generating are are increased that visibility for that getting being product, examples adoption just provides, pulling through an the good accounts into doing that for not are we what and the those helpful, process diagnostic using RNS DIXI, also understanding revenue of

field more that specifically to along RNS the will but of with pillars So that for as the pull more the we no through good and revenue that, our that two about visibility that conversions, and drive through numbers think feel that well. provide deal, go competitive very business ability team, the

Frank Takkinen

stop Congrats I'll there. Perfect. the on Thanks. all progress.

Operator

Thank you.

question from Michael Research. Polark next Our Wolfe Michael, from comes go please ahead.

Michael Polark

good Hey, Thank afternoon. you.

If missed it. I revenue the precise replacement. number. on over-performed you I heard I for be said want I X.X lines, hear the didn't three DIXI heard I of a it, to million but

I through new patient know kind what Can I DIXI them was. I so the go number the can in press the lines just don't And revenue of precisely three we release. see didn't individually? or get

Michael Favet

meaningful The for the significantly XXXX into initial of the from from QX RNS grew for revenue growth of for and Both quarter implants DIXI QX both last pieces those of overall had Medical. QX year of XXXX.

coming what very coming broken competitive than but close happening. the the from in with is implants, the the growth product. But first implants putting from those year had in you're at just on million, of implant we're haven't more based the RNS expected, revenue of which from quarter when your increase very X.X a of last We together revenue of that primarily of replacement what being from replacements anticipated And decrease as space. reasons initial by the the for revenue and we growth DIXI for was specifically amount the that primarily, growth was were timing then models, amount the out means as QX within in we're DIXI conscious for year, Medical the

Michael Polark

like to good you. not a there leverage in you and a on else? spreadsheet consider There pipeline behind drop this far, number like for for Again, that got the you bag Thank opportunity on is, harder, so levels. anything is so question but one-off I'm asking of things about and your are enough this Follow days do -- little commercial enough platform? but our problems was a DIXI, there think or potentially other it, work to that a early up specifics are could sounds unlikely with. and

Michael Favet

talked Thanks where other to for to than the answer fits are going for lot product looking about say, made I'm business. went a that good product able for us that be into for we're that DIXI That a of our and for fit, to we we after to not when sense question, mix. for give Mike, always get there specific strategic many that to that we've the aggressively that saw reasons

would can if there's things opportunistic of are continue that talk there's or pursuing that's that. we're We be about We monitor that but around another that like active to opportunity very there. specifics I that that nothing

Michael Polark

Thank Understood. you.

Operator

I to closing would like turn back for remarks. it now NeuroPace to

Michael Favet

for continue us the treated. patients, strong Yeah, and lots versus these comments. approaches from with patients trying from differentiation see get all neuromodulation to available across being very Really treatment in that are for of us close so these for quarter approach more the the means that gap thanks the to quarter, our happy strength of the to the our on responsive what coming results that revenue other to report and aspects for business of first with

with to the that reminded responsive outcome of we're taking a continue the neurostimulation versus approaches. the of other be approach there being differentiated We benefit

neurology benefits There's and side efficacy published was new of approaches associated the that There's really data other in that duty highlights with space. kinds continue effect study and the basis. to of neuromodulation that regular with on really within a come cycle responsive this a recently out challenges profiles

evening. appreciate epilepsy all and drug there. progress doing and a with that Really epilepsy you into generalized hope time looking resistant treated and expand epilepsy And great of so to everybody's today the we're work the getting to focal forward have patients more the

Operator

Thank you program. for conclude your participation conference. today's This the does

disconnect You may now

NeuroPace (NPCE) 4 May 232023 Q1 Earnings call transcript