Q4 2023 NeuroPace Inc Earnings Call

Operator: Good afternoon, and welcome to Neuropace's fourth quarter and year-end 2023 earnings conference call. As a reminder, this conference is being recorded. I would now like to turn the call over to Jeremy Pfeffer from LifeSci Advisors for a few introductory comments.

Good afternoon, and welcome to new of a basis fourth quarter and year end 2023 earnings conference call.

As a reminder, this conference is being recorded.

I would now like to turn the call over to Jeremy Feffer from like say advisors.

Introductory comments.

Good afternoon. Thank you for joining us for neuro paces fourth quarter and year end 2023 financial and operating results conference call.

Jeremy Pfeffer: Thank you for joining us for Neuropace's fourth quarter and year-end 2023 Financial and Operating Results Conference call. On today's call, we will hear from Joel Becker, Chief Executive Officer, and Rebecca Kuhn, Chief Financial Officer. Earlier today, Neuropace released financial results for the fourth quarter and year ended December 31, 2023. A copy of the press release is available on the company's website at neuropace.com. Before we begin, I would like to remind you that throughout this call, we will make statements that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.

On today's call, we will hear from Joel Becker, Chief Executive Officer, and Rebecca crew Chief Financial Officer.

Earlier today <unk> released financial results for the fourth quarter and year ended December 31 2023.

A copy of the press release is available on the company's website at <unk> Dot com.

Before we begin I would like to remind you that throughout this call. We will make statements that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Any statements made during this call that relate to expectations or predictions of future events results or performance are forward looking statements.

Jeremy Pfeffer: All forward-looking statements, including those related to Neuropace's projections, business opportunities, commercial expansion, market conditions, clinical trials, and those relating to our operating trends and future financial performance, expense management, estimates of market opportunity, and forecasts of market and revenue growth, are based on current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

All forward looking statements, including those around neuro patients projections business opportunities commercial expansion market conditions clinical trials and those relating to our operating trends and future financial performance expense management estimates of market opportunity and forecast of market and revenue growth are based on current estimates and various assumptions.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those implied by these forward looking statements.

Accordingly, you should not place undue reliance on these statements.

Jeremy Pfeffer: For more detailed descriptions of the risks and uncertainties associated with our business, please refer to the risk factors section of our public filings with the SEC, including our recent quarterly reports on Form 10-Q, our annual report on Form 10-K for the year ended December 31, 2023, to be filed with the SEC, and any other reports that we may file with the SEC in the future. This conference call contains time-sensitive information, which we believe is accurate only as of this live broadcast on March 5th, 2024. Neuropace disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. With that said, I will now turn the call over to Neuropace's Chief Executive Officer, Joel Becker. Joel?

For more detailed descriptions of the risks and uncertainties associated with our business. Please refer to the risk factors section of our public filings with the SEC, including our recent quarterly reports on Form 10-Q annual report on Form 10-K for the year ended December 31, 2023 to be filed with the SEC.

Any other reports that we may file with the SEC in the future.

This conference call contains time sensitive information, which we believe is accurate only as of this live broadcast on March five 2024, Neuropace disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.

With that I will now turn the call over to Europe Paces, Chief Executive Officer, Joel Becker Joe.

Joel D. Becker: Thank you, Jeremy, and good afternoon, everyone. As you saw in the fourth quarter press release issued earlier today, the Neuropace team has continued to execute on our strategy and delivered another strong quarter to cap off what has been an outstanding year. Revenue for the fourth quarter was $18 million, a 41% increase compared to the same period last year. For the full year 2023, we reported total revenue of $65.4 million, a 44% increase over 2022. As we look back to where the company was just a year ago, we've continually raised the bar and exceeded expectations. I am proud of everyone on the team and all that was accomplished in 2023, and look forward to capitalizing on this momentum in 2024.

Thank you Jeremy and good afternoon, everyone.

As you saw in the fourth quarter press release issued earlier today. The neuro pain team has continued to execute on our strategy and delivered another strong quarter to cap off what has been an outstanding year.

Revenue for the fourth quarter was $18 million of <unk>.

41% increase compared to the same period last year.

For the full year 2023, we reported total revenue of $65 $4 million.

44% increase over 2022.

As we look back to where the company was just a year ago, we've continually raised the bar and exceeded expectations.

I am proud of everyone on the team and all that was accomplished in 2023 and look forward to capitalizing on this momentum in 2024 with that let me step back and provide some additional color around what drove our top line results in the fourth quarter and full year 2023.

Joel D. Becker: With that, let me step back and provide some additional color around what drove our top line results in the fourth quarter and full year 2023. I will then review our key business priorities for 2024 before turning the call over to our CFO, Rebecca Kuhn, to present the details of financial performance for the quarter and year ended December 31st, 2023, which will be followed by a Q&A session. In 2023, we developed and worked to execute our three-part strategy to expand access to and increase adoption and utilization of RNS therapy for drug-resistant epilepsy patients that supports our current near-term and medium-term growth plans across existing and new groups of clinicians as well as patients. These plans are aligned with the International League Against Epilepsy, or ILAE, which published new guidelines in 2022 stating that once a patient has tried and failed two medications, they should be referred for additional treatment, even if surgical intervention is not appropriate.

We will then review our key business priorities for 2024 before turning the call over to our CFO Rebecca Kuhn.

Present, the details of financial performance for the quarter and year ended December 31, 2023, which will be followed by a Q&A session.

In 2023, we developed and worked to execute our three part strategy to expand access to and increase adoption and utilization of rns therapy for drug resistant epilepsy patients that support our current near term and medium term growth plans.

Across existing and new groups of clinicians as well as patients.

These plans are aligned with the international league against epilepsy, or IL, AE, which published new guidelines in 2022, stating that once a patient has tried and failed to medications. They should be referred for additional treatment, even if surgical intervention is not appropriate.

Joel D. Becker: We believe RNS fits exactly into that category. Turning to our three-part strategy for expanding access to and developing the market for our R&S system, The first part of our strategy, which is in motion now, is focused on Level 4 Comprehensive Epilepsy Centers, or CECs, and is aimed at driving adoption across clinicians and expanded therapy utilization by current prescribers under what we call the modern RNS story. This approach aims to stimulate our existing base of customers at Level 4 Epilepsy Centers through education and support on how RNS can be used to treat a broad range of patients with drug-resistant focal epilepsy through traditional focal stimulation approaches, treatment with a network stimulation approach, and utilization of RNS as a hybrid therapy with surgery, meaning either in conjunction with surgery or by utilizing RNS to help inform subsequent surgery.

We believe rns fits exactly in that category.

Turning to our three part strategy for expanding access to and developing the market for our rns system.

The first part of our strategy, which is in motion now is focused on the level for comprehensive epilepsy centers or <unk> and is aimed at driving adoption across clinicians and expanded therapy utilization by current prescribers under what we call the modern rns story.

This approach aims to stimulate our existing base of customers at level four epilepsy centers through education and support on how rns can be used to treat a broad range of patients with drug resistant focal epilepsy through traditional focal stimulation approaches treatment with a network stimulation approach and.

Utilization of rns as a hybrid therapy with surgery, meaning either in conjunction with surgery or by utilizing rns to help inform our subsequent surgery.

Joel D. Becker: The modern RNS story also involves highlighting the improvements in ease of use and efficiency we have made with the RNS platform. We are pleased with the momentum of these efforts within our Level 4 Centers, and it has driven much of our RNS system growth in 2023. The second part of our strategy, which we call Project CARE, will be an area of focus in 2024 and provides an opportunity to expand access to our RNS system outside of Level 4 CEC. This expanded access has the potential to allow for appropriate patients who could not or would not have been referred to a Level 4 center for care to be treated closer to home and also provides the opportunity for patients to be identified and referred to Level 4 centers. This new approach is now possible due to the FDA approval of a PMA supplement in 2023, which opens up our ability to access the approximately 1,800 additional epileptologists and the remaining functional neurosurgeons to prescribe and implant the RNS system within the currently approved labeled indication.

Rns story also involves highlighting the improvement in ease of use and efficiency. We have made with the rns platform. We are pleased with the momentum of these efforts within our level four centers and it has driven much of our rns system growth in 2023.

The second part of our strategy, which we call project care will be an area of focus in 2024 and provides an opportunity to expand access to our rns system outside of level <unk>.

This expanded access has the potential to allow for appropriate patients who could not or would not have been referred to a level four center for care to be treated closer to home and also provides the opportunity for patients to be identified and referred to level four centers.

This new approach is now possible due to the FDA approval of our PMA supplement in 2023, which opened up our ability to access the approximately 1800 additional uplift colleges and.

And the remaining functional neurosurgeons to prescribe and implant the rns system within the currently approved labeled indication.

We are planning to initiate this pilot program outside of level four centers during the first half of 2024 and some of these activities have begun.

While early in our process of initiating pilot program activities. We have been pleased with the interactions with a number of our initial target centers regarding the potential for appropriately indicated patients to be treated locally as well as in the identification of potential rns patients who should be referred to level four centers for <unk>.

Joel D. Becker: We are planning to initiate this pilot program outside of level 4 centers during the first half of 2024, and some of these activities have begun. While early in our process of initiating pilot program activities, we have been pleased with the interactions with a number of our initial target centers regarding the potential for appropriately indicated patients to be treated locally, as well as in the identification of potential RNS patients who should be referred to Level 4 centers for evaluation. In support of the growth that we have seen with the RNS system and Level 4 centers, as well as in order to ensure the proper support for project care, we have begun making incremental additions to our sales and support teams and are pleased with the skill sets and experiences of the representatives we have hired and that we are seeing express interest in joining the Neuropace team.

<unk>.

In support of the growth that we have seen with the <unk> system and level four centers as well as in order to ensure the proper support for project care.

We have begun making incremental additions to our sales and support teams and are pleased with the skill sets and experiences of the representatives. We have hired and that we are seeing expressed interest in joining the neuro pace team.

The third phase of our Rns strategy is based on expanding the approved indications for the rns system.

This effort is currently focused on the pivotal Nautilus study, which completed enrollment and subsequently the number of implants required for FDA submission during the fourth quarter of 2023.

Joel D. Becker: The third phase of our RNS strategy is based on expanding the improved indications for the RNS system. This effort is currently focused on the Pivotal Nautilus study, which completed enrollment and, subsequently, the number of implants required for FDA submission during the fourth quarter of 2023. We believe that the pace of enrollment and implants in the study reflects the significant unmet need that exists for patients with drug-refractory idiopathic generalized epile

We believe that the pace of enrollment and implants in the study reflects the significant unmet need that exists for patients with drug refractory idiopathic generalized epilepsy.

As a reminder, the Nautilus trial requires evaluation of a primary safety endpoint ended effectiveness evaluation 12 months post implant.

If approved our rns system would be the first device with an FDA approved indication for generalized epilepsy.

This study has the potential to represent a highly meaningful market expansion.

And opportunity.

Joel D. Becker: As a reminder, the Nautilus trial requires evaluation of a primary safety endpoint and an effectiveness evaluation 12 months post-implant. If approved, our RNS system would be the first device with an FDA-approved indication for generalized epilepsy. This study has the potential to represent a highly meaningful market expansion and an opportunity. Additionally, in 2024, we plan research and development work on software tools leveraging our data and AI analysis capabilities, designed to both enhance clinical insights, as well as patient support, efficiency, and ease of use. As we take a deeper look at our financial and operating performance for the fourth quarter of 2023, revenue growth was primarily driven by sales of our R&S system. However, the growth from new RNS system sales was partially offset by continued decline in RNS replacement implant revenue.

Additionally, in 2024, we planned research and development work on software tools, leveraging our data and AI analysis capabilities designed to both enhanced clinical insights as well as patient support efficiency and ease of use.

Let me take a deeper look at our financial and operating performance for the fourth quarter of 2023 revenue growth was primarily driven by sales of our in our system.

The growth from new Rns system sales was partially offset by continued decline of rns replacement implant revenue.

As I've mentioned on previous calls we expected this decline to occur as most patients with the older version of the rns device have already had their devices replaced with the newer version.

Also we continue to see revenue growth from our exclusive partnership with <unk> medical.

<unk> to market and sell their diagnostic electrodes and related products for epilepsy.

As a reminder, these products are used to determine where epileptic seizures originate.

Physicians use this information to target interventional treatments at the seizure source, including with our rns system.

Joel D. Becker: As I've mentioned on previous calls, we expected this decline to occur as most patients with the older version of the RNS device have already had their devices replaced with the newer version. Also, we continue to see revenue growth from our exclusive partnership with Dixie Medical to market and sell their diagnostic electrodes and related products for epilepsy. As a reminder, these products are used to determine where epileptic seizures originate.

While we do not plan to breakout revenue components on an ongoing basis the contribution from the Dixie partnership to our topline performance remains at approximately 15% of total revenue.

This is a highly complementary product offering to the rns system that leverages, our existing commercial team and customer base and provides earlier visibility into the pipeline of patients that may be appropriate candidates for rns therapy.

Joel D. Becker: Physicians use this information to target interventional treatments at the seizure source, including with our RNS system. However, we do not plan to break out revenue components on an ongoing basis. The contribution from the Dixie Partnership to our topline performance remains at approximately 15% of total revenue. This is a highly complementary product offering to the RNS system that leverages our existing commercial team and customer base and provides earlier visibility into the pipeline of patients that may be appropriate candidates for RNS therapy. As we review our performance, we continue to be pleased with the progress made in 2023. The strategy we put in place is focused on clinician and patient needs and leverages our differentiated technology and organization. As a result, we have been able to execute our commercial strategy while maintaining disciplined expense management, resulting in cash burn in the fourth quarter of 2023 of $3.4 million, compared to $7.9 million in the fourth quarter of 2022. With regard to the new opportunities we've recently announced, we have entered into a first-of-its-kind strategic collaboration with a biotechnology company that will leverage our R&S system's unique biomark The collaboration will evaluate biomarker changes in currently implanted RNS system patients that have enrolled in the biotech company's Phase 2a proof-of-concept trial of its product candidate.

As we review our performance we continue to be pleased with the progress made in 2023. This.

The strategy, we put in place is focused on clinician and patient needs and Leverages, our differentiated technology and organization. As a result, we have been able to execute our commercial strategy, while maintaining disciplined expense management, resulting in cash burn in the fourth quarter of 2023 of $3 4 million.

Compared to $7 9 million in the fourth quarter of 2022.

With regard to the new opportunities. We have recently announced we have entered into a first of its kind strategic collaboration with a biotechnology company, which will leverage our rns systems unique biomarker monitoring and data analysis capabilities.

The collaboration will evaluate biomarker changes and currently implanted rns system patients.

That have enrolled in the biotech companies phase Iia proof of concept trial of its product candidates.

We believe this groundbreaking collaboration is another example of the value that our rns system can provide through its proven ability to collect and analyze data.

Which is then used to generate insights that can help inform treatment strategies.

We expect to receive total revenue from this collaboration of approximately $3 7 million.

The agreement is broken out into four phases through the fourth quarter of 2025 with certain milestones correlating to each phase the majority of which are planned to be completed prior to the end of 2024.

Now turning to 2020 for the neuro pace team and I will continue to focus on increasing revenue growth gross margin improvement and operating expense management.

Currently we are expecting to report between $73 million or <unk> $77 million in revenue for the full year 2024, which represents a 12% to 18% increase in revenue compared to 2023.

Joel D. Becker: We believe this groundbreaking collaboration is another example of the value that our RNS system can provide through its proven ability to collect and analyze data, which is then used to generate insights that can help inform treatment strategies. We expect to receive total revenue from this collaboration of approximately $3.7 million. The agreement is broken out into four phases through the fourth quarter of 2025, with certain milestones correlating to each phase, the majority of which are planned to be completed prior to the end of 2024.

Driven by execution of our strategies.

We look forward to keeping you apprised of our progress.

With that I will now turn the call over to Rebecca to review, our fourth quarter and 2023 financial results along with some additional detail around our 2024 financial plans Rebecca.

Thank you Joe.

Revenue for the fourth quarter as 2020, 'twenty was $18 million representing growth of 41% compared to $12 8 million for the fourth quarter of 2020 chair and approximately 10% compared to $16 4 million.

Joel D. Becker: The Neuropace team and I will continue to focus on increasing revenue growth, gross margin improvement, and operating expense management. Currently, we are expecting to report between $73 million and $77 million in revenue for the full year 2024, which represents a 12% to 18% increase in revenue compared to 2023, driven by the execution of our strategy. We look forward to keeping you apprised of our progress. With that, I will now turn the call over to Rebecca to review our fourth quarter and 2023 financial results, along with some additional detail around our 2024 financial plans. Rebecca

In the third quarter of 2023.

This growth was primarily driven by increased sales of our rns system.

We also generated meaningful revenue from sales of <unk> medical products.

Full year survey 60, Medical's exclusive U S distributor.

<unk> contributed a small amount of revenue for the fourth quarter of 2022.

Replacement implant revenue continued to decline compared to the same period last year and represented approximately 4% of total revenue.

Gross margin for the fourth quarter of 2023 was 75, 2% compared to 68, 8% in the fourth quarter 2022.

Rebecca L. Kuhn: Thank you, Joel. Neuropace's revenue for the fourth quarter of 2023 was $18 million, representing growth of 41% compared to $12.8 million for the fourth quarter of 2022 and approximately 10% compared to $16.4 million in the third quarter of 2023. This growth was primarily driven by increased sales of our RNS system. We also generated meaningful revenue from sales of Dixie Medical products in our first full year of serving as Dixie Medical's exclusive U.S. distributor.

74, 5% in third quarter of 2023.

Gross margin for the quarter increased primarily due to the increase in our net products for Houston solid.

Is that fixed manufacturing overhead costs was spread over more units.

The increase in our next question margin was partially offset by the lower gross margin from distribution of <unk> medical products.

R&D expense in the fourth quarter of 2023 was $5 4 million.

Compared with $5 1 million.

Same period of 2022.

Rebecca L. Kuhn: Dixie contributed a small amount of revenue to the fourth quarter of 2022, but replacement implant revenue continued to decline compared to the same period last year and represented approximately four percent of total revenue. Gross margin for the fourth quarter of 2023 was 75.2% compared to 68.8% in the fourth quarter of 2022 and 74.5% in the third quarter of 2023. Our gross margin for the quarter increased primarily due to the increase in R&S products produced and sold, as our fixed manufacturing overhead costs were spread over more units. The increase in R&S gross margin was partially offset by the lower gross margin from the distribution of Dixie medical products. R&D expense in the fourth quarter of 2023 was 5.4 million dollars compared with 5.1 million dollars in the same period of 2022. This increase was primarily driven by an increase in personnel-related expenses. SG&A expense in the fourth quarter of 2023 was $13.2 million, compared with $13.6 million in the prior year period. The decrease in SG&A was primarily due to a decrease in insurance and outside services expense, partially offset by an increase in personnel-related expenses.

This increase was primarily driven by an increase in personnel related expenses.

SG&A expense in the fourth quarter of 2023.

$13 2 million compared.

Compared with $13 $6 million in the prior year period.

The decrease in SG&A was primarily due to a decrease in insurance and outside services expense, partially offset by an increase in personnel related expenses.

Total operating expenses in the fourth quarter at 23 or $18 6 million.

Compared with $18 7 million.

The same period of the prior year.

This decrease reflects our focus on finding the appropriate resource allocation to effectively manage our cash which we are committed to continuing as we move into 2024.

Our key focus is on maintaining a balance of managing our operating expenses without compromising revenue growth.

Loss from operations was $5 1 million in the fourth quarter of 2023.

Compared with $9 $9 million in the prior year period.

We have recorded $2 2 million of interest expense in the fourth quarter compared to $1 9 million in the prior year period.

Net loss was $6 2 million for the fourth quarter of 2023, compared with $11 1 million in the fourth quarter of 2022.

Our cash burn in the fourth quarter of 2023 was $3 4 million.

Our cash and short term investments balance as of December 31st 2023, with $66 $5 million.

Rebecca L. Kuhn: Total operating expenses in the fourth quarter of 2023 were $18.6 million, compared with $18.7 million in the same period of the prior year. This decrease reflects our focus on finding the appropriate resource allocation to effectively manage our cash, which we are committed to continuing as we move into 2024. Our key focus is on maintaining a balance of managing our operating expenses without compromising revenue growth. Loss from operations was $5.1 million in the fourth quarter of 2023, compared with $9.9 million in the prior year period. We recorded $2.2 million of interest expense in the fourth quarter compared to $1.9 million in the prior year period.

Long term borrowings totaled $57 million.

As of December 31, 2023, with the full principal due on September 32025.

Yeah.

As we look ahead, we expect full year 2020 for revenue to increase by approximately 12% to 18%.

The range of $73 million to $77 million.

We expect this growth will be mostly driven by an increase in sales of our nextgen with growth from sales in <unk> medical products continuing to make a meaningful contribution.

We expect our gross margin to be in a range of 72% to 74% for 2024, although we may see small variability due to fluctuations in the proportion of <unk> medical revenue to overall revenue and other factors.

Rebecca L. Kuhn: Our net loss was $6.2 million for the fourth quarter of 2023, paired with $11.1 million in the fourth quarter of 2022. Our cash burn in the fourth quarter of 2023 was $3.4 million. Our cash and short-term investments balance as of December 31, 2023 was $66.5 million. Our long-term borrowings totaled $57 million as of December 31, 2023, with the full principal due on September 30, 2025. As we look ahead, we expect full-year 2024 revenue to increase by approximately 12 to 18% to a range of $73 to $77 million. We expect this growth will be mostly driven by an increase in sales of our RNS system, with growth in sales of Dixie Medical products continuing to make a meaningful contribution. We expect our gross margin to be in a range of 72 to 74% for 2024, although we may see small variability due to fluctuations in the proportion of Dixie Medical revenue to overall revenue and other factors. We expect operating expenses for 2024 to range between $80 and $84 million, including approximately $12 million in stock-based compensation and non-cash expenses. I would now like to turn the call back over to Joel for closing remarks. Okay, Joel?

We expect operating expenses for 2024 should range between 80 and $84 million.

Including approximately $12 million in stock based compensation and noncash expense.

I would now like to turn the call back of Mitchell for closing remarks, Joe.

Thank you Rebecca we are very excited by the progress we've been making over the past year at neuro pace. We believe that our strategy is clear that our opportunities are compelling.

Consistent with our 2024 guidance. We believe we are positioned to achieve 2020 for revenue of between $73 million to $77 million and are also positioned to accelerate our growth in the future as these opportunities develop.

2024 will be a year focused on the execution of this strategy and the entire neuro <unk> team is committed to advancing each of its elements to deliver on their potential and to drive long term growth and profitability.

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

Thank you, ladies and gentlemen, we will now conduct the question and answer session. If you have a question. Please press star one.

And if you wish to cancel your request please press star two.

Your first question comes from.

Brian Tunick.

Kim Ann.

From Lake Street Capital markets. Your line is now open.

Great. Thanks for taking my questions. Congrats on all the progress was hoping to start with one on the.

The guide for the year, obviously, you guys had.

Very nice year in 2023, with 44% growth did a nice job of keeping expectations in.

In check throughout the year looking forward looking at 12 months to 18% growth looks like pretty solid growth, but I was curious if there is an element of conservatism baked into that just as we're early in the year and understanding the market dynamics for 2024, and then what are some of the elements that are.

Joel D. Becker: Thank you, Rebecca. We are very excited by the progress we've been making over the past year at Neuropace. We believe that our strategy is clear and that our opportunities are compelling. Consistent with our 2024 guidance, we believe we are positioned to achieve 2024 revenue of between $73 to $77 million and are also positioned to accelerate our growth in the future as these opportunities develop. 2024 will be a year focused on the execution of this strategy, and the entire Neuropace team is committed to advancing each of its elements to deliver on their potential and to drive long-term growth and profitability. This concludes our prepared remarks. I would now like to turn the call over to the operator, who will open the call for questions. Operator?

Our assumed on the low end of the guidance range and some of the elements assumed on the high end of the guidance range.

Hello, Frank.

Thank you and thanks for that question.

So our guidance as you said for 2024 is $73 million to $77 million, which implies.

Double digit growth for the business the midpoint there of 70, 515% growth and we're we're comfortable with that guidance.

We are obviously at the beginning of the year with our guidance and there are a number of opportunities.

I talked about them in my comments here in front of US we feel like we've got a clear.

Clear and compelling strategy with the with the modern Iron. This story, we're excited about project care.

We're underway with our incremental sales force expansion. So we think those are those are all opportunities in front of US. We've also there are also challenges in the year, but we're excited about 'twenty four.

Operator: Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press star 1. And if you wish to cancel your request, please press star 2.

We sit here in March we're excited about 24 and in those strategies and plans that we've got for the year.

Operator: Your first question comes from... Frank and Neuropace. Takkinen from Lake Street Capital Markets, your line is now open. Great. Thanks for taking the questions. Congratulations on all the progress. I was hoping to start with one on the guide for the year. Obviously, you guys had a very nice year in 2023 with 44% growth and did a nice job of keeping expectations in check throughout the year. Looking forward, looking at 12% to 18% growth, looks like pretty solid growth, but I was curious if there's an element of conservatism baked into that just as we're early in the year and understanding the market dynamics for 2024, then what are some of the elements that are assumed on the low end Hello Frank.

Some considerations when we think about the growth in the year.

And some things within the range, there, but kind of some things as we think about as you mentioned 23 versus <unk> 24.

23.

Our growth was primarily driven by sales of the rns system.

It was also bolstered by having a full year of distribution of Dixie medical products, there compared to we only had one quarter with Dixie Q4 in 2022, where that only contributed $1 $6 million in revenue.

And so that.

Yes.

Debt bolstered 2023.

And then.

We obviously had the replacement volume dynamic that we've talked about really more in the first half of 'twenty three than this in the second half of 'twenty, three but that being a factor as well and then and then some of the implants associated with the Nautilus trial as well. So all those factors were all considered in setting our guidance for 'twenty four.

Joel D. Becker: Thank you and thanks for that question. So, um, our guidance, as you said, for 2024 is 73 to 77 million, which implies. We have double-digit growth for the business, the midpoint there of 75, 15% growth, and we're comfortable with that guidance. We are obviously at the beginning of the year with our guidance, and there are a number of opportunities. I talked about them in my comments here, right in front of us.

And despite a number of those dynamics.

Results and plans for the double digit growth in the business.

So we think we think we've got some clear opportunities in front of us that we're excited about.

<unk>.

We think portend well.

And then and then some challenges to overcome as well, but we've rolled it all into the into the guidance as well.

I would just mention too I think and this wasn't specifically what you asked Frank with regard to 2024, but just you asked.

Joel D. Becker: We feel like we've got a very clear and compelling strategy with the modern RNS story. We're excited about Project CARE, and we're underway with our incremental Salesforce expansion. So we think those are all opportunities in front of us. There are also challenges in the year, but we're excited about 24. We sit here in March.

A question that tended to give some perspective around the business.

I would also add that as we as we talk about 2024.

We're here to point in time, it's obviously, a very important point in time, and we're executing around it but I would also like to point out.

As I mentioned in my earlier comments as well.

Where we're positioned in the business I think as we look into the future.

Joel D. Becker: We're excited about 24 and the strategies and plans that we have for the year. Some considerations when we think about growth this year and some things within the range there, but kind of some things as we think about, as you mentioned, 23 versus 24. 23, our growth was primarily driven by sales of the R&S system. It was also bolstered by having a full year of distribution of Dixie medical products there compared to when we only had one quarter with Dixie Q4 in 2022, where that only contributed $1.6 million in revenue. And so that bolstered 2023. And then we obviously had the replacement volume dynamic that we've talked about, really more in the first half of 23 than the second half of 23, but that being a factor as well. And then some of the implants associated with the Nautilus trial as well.

When we look at the business, where we're a leader in the space.

We've got differentiated technology and data.

Growth in our core business and our distributed products.

Market development plans here initiated with project care or indication expansion plans for the <unk> system with idiopathic.

Epilepsy with Nautilus.

And then.

The incremental expansion of the commercial organization that I mentioned along with.

Demonstrating operating discipline and a strong cash position. So we think.

As we look into the future. We believe this positions us to accelerate our growth as well and I guess just to.

Kind of got a little bit of a head of steam up there, but with regard to.

Closing out talking about 24 again, so as you mentioned.

We're comfortable with the guidance for 'twenty four we're here at the start of the year, we think Theres a number of really good opportunities in front of us.

As well as some challenges, but we're excited about the year.

And the plans that we've got for the year and I've tried to make the point in the past what what im focused on what the team's focused on I think what people have seen from US is that we are in the business of delivering consistent repeatable results and that's what we're focused on and executing around.

Joel D. Becker: Those factors were all considered in setting our guidance for 24. And despite a number of those dynamics, results in plans for the double-digit growth in the business. So we think we've got some clear opportunities in front of us that we're excited about, and we think portend well, and then some challenges to overcome as well, but we've rolled that all into the guidance as well. I would just mention, too, I think, and this wasn't specifically what you asked, Frank, with regard to 2024, but just you asked a question that kind of to give some perspective around the business. I would also add that as we talk about 2024.

Got it that's great color I appreciate all of that maybe just as a follow up on the sales organization heard the comments a couple of times that response as well as the prepared remarks about adding a few incremental sales reps can you level set us where that sales organization organization stands today, and how youre thinking about adding.

Is it new territories are you splitting territories or any other color you can provide about the <unk>.

Incremental sales rep additions. Thank you.

That's great question. Thank you Frank So I think we've talked about previous previously there's really a couple of phases here to the commercial organization expansion, we've talked about that I would want to highlight here we've talked about in the past that we actually had previously invested in our commercial organization as well so actually in 2022.

Joel D. Becker: You know, we're here at a point in time, it's obviously a very important point in time, and we're executing around it, but I'd also like to point out, as I mentioned in my earlier comments as well, where we're positioned in the business, I think, as we look into the future, you know, when we look at the business, we're a leader in the space, we've got differentiated technology and data, growth in our core business and our distributive products. Market Development Plans here initiated with Project CARE, our Indication Expansion Plans, for the RNS system with idiopathic, at Epilepsy with Nautilus, and then the incremental expansion of the commercial organization that I mentioned along with demonstrating operating discipline in a strong cash position so we think, As we look into the future, we believe this positions us to accelerate our growth as well, and I guess just to.

We had done some hiring in some commercial organization expansion for which those folks have been going through training and are now getting out into the field and beginning to hit their strides. So we've got that kind of that first wave.

Commercial investment that we had done previously and now.

We are underway with the hiring here that.

That we're talking about today, the incremental expansion of the sales organization and it's really focused both on to support the ongoing growth that we've seen in the core business.

As well as to support in anticipation of.

The initiation of our activities for project care.

Joel D. Becker: Kind of got a little bit of a head of steam up there, but with regard to closing out and talking about 24 again, so, you know, as you mentioned, we're comfortable with the guidance for 24. We're here at the start of the year. We think there's a number of really good opportunities in front of us, as well as some challenges, but we're excited about the year, and the plans that we've got for the year. And I've tried to make that point in the past.

And the sites that will be outside of level four centers.

Got it that's good color thanks for taking the questions.

Thank you Frank.

Your next question comes from <unk> Chopra from Wells Fargo. Your line is now open.

Hey, good afternoon, and thanks for taking the question.

And congrats to a solid end to the year. So I had to answer the first one.

You described some with some of the initial activities.

With regards to project can you maybe describe.

Joel D. Becker: What I'm focused on, what the team's focused on, I think what people have seen from us is that we're in the business of delivering consistent, repeatable results. And that's what we're focused on and executing around. Got it. That's a great color.

A little bit more detail and what's planned for the rest of the year and then I had a follow up.

You bet.

Hello, Vic and thank you for that question.

So with regard to.

Project care.

While we're early here in the process, we have begun to initiate some pilot program activities.

Joel D. Becker: I appreciate all of that. Maybe just as a follow up on the sales organization. I heard the comments a couple of times in the response as well as the prepared remarks about adding a few incremental sales reps. Can you set us up where that sales organization stands today? And how you're thinking about adding?

Including initial outreach to targeted centers.

Some of the contracting and various approval activities as well as some of the professional education as well as more site specific initial training activities.

It is still early but but a number of those types of activities are underway.

Joel D. Becker: Is it new territories? Are you splitting territories, or any other color you can provide about the incremental sales rep additions? Thank you. That's a great question. Thank you, Frank.

With some of these centers.

Got it.

The details I guess for my follow up question Congrats on the.

Cash burn for Q4, I'm just wondering how we should think about that for 2024. Thank you.

Joel D. Becker: So I think we've talked about previously, there are really a couple phases here to the commercial organization expansion that we've talked about that I'd want to highlight here. We've talked about in the past that we actually had previously invested in our commercial organization as well. So actually, in 2022, we did some hiring and some commercial organization expansion for which those folks have then been going through training and are now getting out into the field and beginning to hit their stride. So we've got that kind of first wave of commercial investment that we did previously.

Rebecca would you like to start out there and then I can add some commentary as well.

Sure.

So with regard to our cash burn.

As Joe mentioned, we have reduced Q3 dollars $4 million in the fourth quarter.

We've shared previously that we do see some fluctuations quarter to quarter, but generally we've reduced it considerably throughout the year, we're not going to specifically give you numbers for next year. Thank you Ken.

Go through our guidance.

And you come up with a pretty good idea, it's a pretty good idea of expectations.

And.

So I think we will.

I'll leave it at that.

Anything you would agile.

Okay great.

Great.

Joel D. Becker: And now we are underway with the hiring that we're talking about today, the incremental expansion of the sales organization. And it's really focused both on supporting the ongoing growth that we've seen in the core business, as well as to support in anticipation of the initiation of our activities for project care and the sites that will be outside of Level 4 centers. Got it. That's a good color.

Anything further there Vic.

Your next question comes from Mike <unk> from Leerink Partners. Your line is now open.

Hi, everyone. Thanks, very much for taking our questions. Another one on your initial revenue guidance for 2024 can you just provide some additional color on how much of the rns revenue growth is coming from overall epilepsy market growth for Neuromodulation systems versus growth from incremental market share you are expecting to gain this year.

Joel D. Becker: Thanks for taking the question. Thank you, Frank. Your next question comes from Vik Chopra from Wells Fargo. Your line is now open. Hey, good afternoon, and thanks for taking the questions and congratulations on a solid end to the year. So I had two. I'll start with the first one.

Thank you Mike that's a great question.

I think from what we've seen I'll address that maybe just talk a little bit about <unk>.

Pipeline and what we're seeing from a market dynamics perspective.

So.

We have seen we've discussed previously and we have seen where we do think that the.

Joel D. Becker: You know, you described some of the initial activities with regard to project care. Can you maybe describe them in a little bit more detail and what's planned for the rest of the year? And then I had a follow-up question.

Patient pipeline and the market availability associated with patients and that pipeline has been.

Joel D. Becker: You bet. Hello, Vik, and thank you for that question. So, with regard to Project CARE, While we're early in the process, we have begun to initiate some pilot program activities, including initial outreach to targeted centers, some of the contracting and various approval activities, as well as some of the professional education, as well as more site-specific initial training activities. It is still early, but a number of those types of activities are underway with some of these centers. I got it.

Strengthening.

And we feel like.

It's a pipeline if the pipeline isn't all the way back.

Mostly all the way back.

We may be arent seeing quite the level of expansion in some of the EMU.

Capacity that we hit that we had been seeing pre pandemic.

Harken back all the way to those days, but those market dynamics, but we do feel like the patient pipeline.

As solid and has been has been demonstrating good consistency there. So we feel like market conditions for patient pipeline have been have been good.

Rebecca L. Kuhn: We'll keep an eye out for the details, I guess. And for my follow-up question, you know, congrats on the cash burn for Q4. I'm just wondering how we should think about that for 2024.

With regard to competitive dynamics.

I think we feel like we're in a very good competitive position, it's a little bit hard to get into the specifics of the details of the market share calculations because our.

Rebecca L. Kuhn: Thank you. Rebecca, would you like to start out there, and then I can add some commentary as well? Sure. So with regard to our cash burn, as Joel mentioned, we reduced it to $3.4 million in the fourth quarter.

Competitor, our main competitors don't specifically break out there their epilepsy numbers in a way that we could make an apples to apples comparison.

Rebecca L. Kuhn: We've shared previously that we do see some fluctuations quarter to quarter, but generally, we've reduced them considerably throughout the year. We're not going to specifically give you numbers for next year, but you can go through our guidance and come up with a pretty good idea of expectations. And so I think we'll... Leave it at that. Anything you would add, Joel? Nope.

But I think with regard to market dynamics, we feel like we're in a strong position as it relates to both clinical data as well as the technology differentiation.

Feel like.

Joel D. Becker: Okay, great. Anything further there, Vik? Your next question comes from Mike Kratke from Learing Partners. Your line is now open. Hi, everyone.

We're we're in a good position from.

<unk>.

Dynamic perspective there.

Got it yeah I appreciate the color there and then maybe just a separate one another one on project care.

Joel D. Becker: Thanks very much for taking our questions. Another one on your initial revenue guidance for 2024. Can you just provide some additional color on how much of the RNS revenue growth is coming from overall epilepsy market growth for neuromodulation systems versus growth from incremental market share you're expecting to gain this year? Thank you, Mike. That's a great question.

Realize it's early innings, but what metrics are you going to be paying attention to internally that will help give you a sense of how meaningful initiatives going to be for driving additional revenue growth over the next few years.

That's a great question, Mike Thank you.

It really gets too.

The point of the approach that we're taking from a market development perspective, and Thats really taking that targeted.

Joel D. Becker: You know, I think from what we've seen, the way I'll address that maybe is to talk a little bit about pipeline and what we're seeing from a market dynamics perspective. We have seen, as we discussed previously, and we have seen where we do think that the patient pipeline and the market availability associated with patients in that pipeline have been strengthening, and we feel like if the pipeline isn't all the way back, it's mostly all the way back, we maybe aren't seeing quite the level of expansion in some of the EMU capacity that we had been seeing pre-pandemic. It harks back all the way to those days and those market dynamics, but we do feel like the patient pipeline is solid and has been demonstrating good consistency there. So we feel like market conditions for patient pipelines have been good. With regard to competitive dynamics, I think we feel like we're in a very good competitive position.

Approach to the initiation of activities.

Allows us to evaluate and really learn from.

How we interact with and the way that we start in scale. These centers.

I think we have a pretty good idea, but I think we're also going to learn a lot in scaling up these centers that will give us some of those leading indicator metrics for the types of things.

Watch for everything from what are the targeting criteria that we think have resulted in centers that are particularly responsive pardon the pun.

What are the what are the underlying referral networks in patient populations that we should be looking for that translate into a pipeline of patients.

Joel D. Becker: It's a little bit hard to get into the specifics of the details of the market share calculations because our main competitors don't specifically break out their epilepsy numbers in a way that we could make an apples-to-apples comparison. But I think with regard to market dynamics, we feel like we're in a strong position as it relates to both clinical data as well as technology differentiation, and feel like we're in a good position from a competitive dynamics perspective there. I got it. Yeah, I appreciate the color there.

What are some of the indicators from a contracting and economic committee approval that we can look to to.

To see what the health of the process looks like and so.

Really the pilot is intended to allow us to do some of that diligence.

Confirm or correct some of our targeting assumptions and then develop that kind of the dashboard just as you say from a metrics perspective for.

Which centers.

Or have the profile that are the ones that we want to be.

Joel D. Becker: And then maybe just a separate one, another one on project care. I mean, I realize it's early innings, but what metrics are you going to be paying attention to internally that will help give you a sense of how meaningful this initiative is going to be for driving additional revenue growth over the next few years? That's a great question, Mike.

We're getting and spending time with I would mention of note and while it is while it is early innings.

One of the things that we have learned and then.

We've begun to see is that.

As some of the early centers have been.

And we've been engaged with them and they've been out.

Going through the contracting process and beginning to to go through the training and Onboarding process and have begun to identify patients that might be treated well locally.

Joel D. Becker: And it really gets to the point of the approach that we're taking from a market development perspective. And that's really taking that targeted approach to the initiation of activities allows us to evaluate and really learn from how we interact with and the way that we start and scale these centers. I think, you know, we have a pretty good idea, but I think we're also going to learn a lot in scaling up these centers that will give us some of those leading indicator metrics for the types of things to watch for. Everything from what are the targeting criteria that we think have resulted in, you know, centers that are particularly responsive, pardon the pun. What are the underlying referral networks in patient populations that we should be looking for that translate into a pipeline of patients?

We've also begun to see in a number of these centers. In addition to those patients the identification of patients the kind of uncovering of patients that were out.

Side of level four centers.

There are patients who could be referred back for further evaluation in level four centers as well so we've begun to see.

Began to see centers identify patients that can be treated locally as well as uncovered patients that can be referred back in.

And so both of those things really go to our strategy of increasing access to rns therapy through the care program.

So that's been an interesting and welcome dynamic to watch.

And so you start to take shape and some of those centers there, but hopefully that gives you a little bit of color on process and metrics for how we're thinking about approaching these centers and what we hope to take from the initial pilot phase here.

Joel D. Becker: What are some of the indicators from the contracting and economic committee approval that we can look at to see what the health of the process looks like? And so, really, the pilot is intended to allow us to do some of that diligence, confirm or correct some of our targeting assumptions, and then develop that kind of a dashboard, just as you say, from a metrics perspective, for which centers have the profile that are the ones that we want to be targeting and spending time with. I would mention of note, and while it is early innings, one of the things that we have learned and that we've begun to see is that as some of the early centers have been out, we've been engaged with them, and they have been out going through the contracting process and beginning to go through the training and onboarding process, and have begun to identify patients that might be treated well locally.

Understood really appreciate all the color.

Thanks, Mike.

Your next question comes from Robbie Marcus from Jpmorgan. Your line is now open.

Hi, This is actually Lili on for Robbie Thanks for taking my question.

There anything you can share on how we should be thinking about cadence for 2024.

Expect seasonality to be some.

What we saw in 2023 and looking at first quarter, specifically I think the street was at $17 2 million. So is that a fair place to start thanks, so much.

Thank you Ashley.

And if you maybe want to start out here.

I'll follow on with anything.

Thanks Neely.

We are providing guidance for the year, we're not going to provide guidance for the Florida.

Joel D. Becker: We've also begun to see in a number of these centers that in addition to those patients, the identification of patients, the kind of uncovering of patients that were outside of Level 4 centers that are patients who could be referred back for further evaluation in Level 4 centers as well. And so, you know, both of those things really go to our strategy of increasing access to RNS therapy through the CARE program. So that's been an interesting and welcome dynamic to watch and see start to take shape in some of those centers there. But hopefully, that gives you a little bit of color on the process and metrics for how we're thinking about approaching these centers and what we hope to take from the initial pilot phase here. I really appreciate all the color.

But.

As you mentioned, we have seen some seasonality in our business in the past in particular over the summer months as people take vacations I think that's pretty common.

We have kind of interesting dynamics in the fourth quarter, where in addition to holidays that everybody experiences. We also have a major medical meeting the Aes annual meeting.

It takes.

Total out of physicians.

From now offices for a number of days a nice long weekend.

So a lot of efforts that give us credit Suisse spend.

We have expenses associated with our attendance there.

Hi, Sam.

So I think that gives you some sense of seasonal trends.

Operator: Thanks, Mike. Your next question comes from Robbie Marcus from J.P. Morgan. Your line is now open. Hi, this is actually Lily on behalf of Robbie.

And.

At this point no reason related to things that are different from the prior year.

Operator: Thanks for taking the question. Is there anything you can share on how we should be thinking about cadence for 2024? Do you expect seasonality to be similar to what we saw in 2023? And looking at the first quarter specifically, I think the street was at 17.2 million.

Yes.

AG support all of that actually the only things I might I might add there would be a little bit of.

Commentary around.

Patient dynamic seasonality a lot of times when we talk seasonality, we've got we've got a.

A number of different factors that can come into play. There you can have clinician seasonality you can have kind of health plan and insurance seasonality as well. As then you can have kind of patient dynamics of seasonality.

Rebecca L. Kuhn: So is that a fair place to start? Thanks so much. Thank you, Ashley. Rebecca, if you maybe want to start out here, and I'll...

We have not traditionally really seen.

Kind of a health plan dynamic and or a patient.

Rebecca L. Kuhn: I'll follow on with anything. Sure, thanks Lily. We're providing guidance for the year. We're not going to provide guidance for the quarters.

Kind of beta around seasonality most.

Rebecca L. Kuhn: But, as you mentioned, we have seen some seasonality in our business in the past, in particular, over the summer months, as people take vacations. I think that's pretty common. We have kind of interesting dynamics in the fourth quarter, where in addition to holidays that everybody experiences, we also have our major medical meeting, the AES annual meeting, that takes people out of physicians away from their offices for a number of days, a nice long weekend. From our perspective, of course, we have expenses associated with our attendance there.

Of these patients have been under evaluation and then on their journey.

Of epilepsy therapy for a number of years and so kind of a monthly variation one way or the other hasnt been something that at least traditionally we've seen.

As Rebecca said the seasonality that she called out there tends to be.

Mostly clinician based seasonality with some dynamics of course that you traditionally see your own people, having surgery around the holidays and those kinds of things, but those tend to be pretty consistent year to year as well.

Rebecca L. Kuhn: So I think that gives you, you know, some sense of seasonal trends and, uh... At this point, no reason really to think that they are different from the prior years. Yeah, I'd support all of that.

Joel D. Becker: Actually, the only things I might add there would be a little bit of commentary around patient dynamic seasonality. A lot of times, when we talk about seasonality, we've got a number of different factors that can come into play there. You can have clinician seasonality.

So, let's maybe just a little additional color around around some seasonality hopefully that helps.

Great. Thank you.

And then just another follow up on guidance.

Is there any color you can share on what's really driving the growth in 2024 is it new center adds from project care growing utilization ASP some mix of those dynamics, how would you break that down.

Joel D. Becker: You can have kind of health plan and insurance seasonality, as well as then you can have kind of patient dynamics of seasonality. But we have not traditionally really seen, you know, kind of a health plan dynamic or any patient kind of beta around seasonality. Most of these patients have been under evaluation and have been, you know, on their journey of epilepsy therapy for a number of years, and so kind of a monthly variation one way or the other hasn't been something that, at least traditionally, we've seen. As Rebecca said, the seasonality that she called out there tends to be mostly clinician-based seasonality with some dynamics, of course, that you traditionally see around people having surgery around the holidays and those kinds of things.

That's a great question and we.

We considered all of that as we put the guide together.

We do.

We do anticipate both rns as well as Dixie growth to really.

Drive the growth in the business in 2024.

And while it is early.

With regard to project care and we're not we're not calling out specific units in implants and growth associated with care.

I would say that.

Joel D. Becker: But those tend to be pretty consistent year to year as well, so that's maybe just a little additional color around some seasonality. Hopefully that helps. Great, thank you. And then just another follow-up on guidance. Is there any call you can share on what's really driving the growth in 2024? Is it new center ads from Project Care, growing utilization, ASP, some mix of those dynamics? So how would you break that down?

We're just getting started here with the initiation of activities at the beginning of.

2024, and we do expect that as we move through the year.

We would see.

See those activities expand in scope as well as potential impact as we move through 2024.

Our.

If there's anything else there actually our operator next question.

Your next question comes from Michael <unk> from Wolfe Research. Your line is now open.

Joel D. Becker: It's a great question. And you know, we considered all of that as we put the guide together. We we do, we do anticipate both RNS as well as Dixie Growth to really drive the growth in the business in 2024. And while it is early.

Good evening, Thank you one topic multi partner.

<unk> pharma collaboration I am interested in learning a bit more.

I think three three sub questions one what's the revenue from this considered in 2020 for guidance.

Joel D. Becker: With regard to Project CARE, and we're not calling out specific units and implants and growth associated with CARE, I would say that we're just getting started here with the initiation of activities at the beginning of 2024, and we do expect that as we move through the year, we will see those activities expand in scope as well as potential impact as we move through 2024. If there's anything else, Elf here, Ashley, Operator, next question. Your next question comes from Michael Polark from Wolf Research. Your line is now open. Good evening.

Two.

Are there more things like this out there to do or is this kind of a one off it seems interesting I suspect where there is one there is multiple what does that longer term opportunity look like and then three I guess another financial part do you consider that's pretty high margin revenue I would think so it sounds like kind of a.

Our fee for service.

Suspect Youre also getting paid for the implant. So just curious the financial profile of the type of revenue. That's it for me. Thank you so much.

Operator: Thank you. One topic, multi-parter. This pharma collaboration, I'm interested in learning a bit more. I think there are three sub questions. One, what's the revenue from this considered in 2024 guidance? and two, um... Are there more things like this out there to do? Or is this kind of a one-off?

Thank you Mike Great Great question.

We considered.

Really all the different pieces in the business as we as we thought about guidance for 2024.

Including four.

Joel D. Becker: It seems interesting. I suspect where there's one, there's multiple. What does that longer-term opportunity look like? And then three, I guess, another financial part. Do you consider this pretty high-margin revenue? I would think so. It sounds like kind of a...

And when we think about the opportunities that are out there.

We do think that so we're excited about this.

I'm sure, we'll learn a lot here in the.

Joel D. Becker: Thank you so much. Thank you, Mike. Great, great question. We considered really all the different pieces in the business as we thought about guidance for 2024, including rapport. And when we think about the opportunities that are out there, we do think that, so we're excited about this. I'm sure we'll learn a lot here in the collaboration with them. We're really pleased with how that has gone and how that is going.

In the collaboration with them.

We're really pleased with how that has gone in and how that is going but.

But we think that it really highlights.

A key part of the rns system.

Which we take every chance we can talk about and I think sometimes doesn't doesn't get quite the billing.

Joel D. Becker: But we think that it really highlights a key part of the RNS system, which we take every chance we can to talk about and, I think, sometimes doesn't get quite the billing that it should from a differentiation perspective, is that we are uniquely able to monitor, record, and then analyze data on brain activity. Increasingly, our ability to analyze that information, we feel like, has the potential to provide insights both for our core business as well as in other So we do think that we have a fundamental point of differentiation here in capability in that monitoring, reporting, and analysis of data that really can open up a number of different opportunities for us here, whether that's increased insights and efficiency in our core R&S business or other ways that we can leverage data outside of the R&S business that have the potential to be interesting and important to us. We think that's a fundamental point of differentiation.

That it should from a differentiation perspective is.

We are uniquely able to monitor.

Record and analyze data.

Brain activity.

And increasingly.

Our ability to analyze that information.

We feel like has the potential to to provide insights both for our core business as well as in other areas here potentially.

<unk> report. So so we do think that we have a fundamental point of differentiation here in capability in that monitoring reporting and analyzing the data.

That really can can open up a number of different opportunities for us here, whether thats increased insights and efficiency.

Our core rns business or other ways that we can leverage it outside of the rns business that are that.

Have a potential to be.

Interesting and important to us, but we think we think that's a fundamental point of differentiation with regard to margin.

Rebecca L. Kuhn: With regard to margin, Rebecca, do you want to chime in there? Sure, absolutely. So Mike, as you mentioned, we derive essentially service revenue from the agreement. As we've shared, we expect that it will be approximately $3.7 million over the course of the agreement, which started in the fourth quarter of 2023 and is expected to continue through 2025. The patients that enroll in the study are patients that already have the RNS system implanted. So, our revenue is really the service revenue that we derive from that arrangement. And so it's data from the implanted devices, um, you know, analysis and support by our team here. There is some incremental expense, yes, associated with it, but I think that kind of gives you a general flavor for the economics of the deal.

Rebecca you want to chime in there sure absolutely.

So Mike as you mentioned, we derive essentially service revenue.

The agreement as we've shared we expect that it will be approximately $3 $7 million of it.

Of course as the agreement switch.

Started in the first quarter of 2023 and is expected to continue through 2025.

The.

Patients that enroll in the <unk>.

<unk> R patients.

It already has the rns diskin than planned churn.

So our revenue is related to service revenue.

We derived from that arrangement.

And so.

Data from the implant devices.

Analysis in support by our team here there was some incremental expense associated with it.

But I think that kind of gives you a general flavor for the economics of the deal.

Operator: Thank you. Thanks, Mike. Your next question comes from Devu Lavagnieri from Morgan Stanley. Your line is now open. Hi, Joel. Hi, Rebecca.

Thank you.

Thanks, Mike.

The next question.

It comes from.

From Morgan Stanley. Your line is now open.

Hi, Joe Hi, Rebecca and thanks for taking the questions maybe just to go back to guidance I know, it's been touched on a few times, but I was just hoping that you could help put a finer point on what you're building in for underlying and do implant growth for 2024, because when I look back at 2023 and some of the numbers that you gave new implant growth was probably close.

Joel D. Becker: Thanks for taking the questions. Maybe just to go back to guidance, I know it's been touched on a few times, but I was just hoping that you could help put a finer point on what you're building in for underlying and new implant growth for 2024. Because when I look back at 2023, some of the numbers that you gave, new implant growth was probably close to 50% year over year. You also kind of talked about how you're absorbing some of the RNS implants from the Nautilus trial there.

A 50% year over year.

Also kind of talked about that you are absorbing.

Some of the rns implants from one all of this trial there. So just to help us kind of parse out like what's being built in from an underlying utilization or new account metric perspective for your 2024 guide for rns.

Joel D. Becker: So just to help us kind of parse out what's being built in from an underlying utilization or new account metric perspective for your 2024 guide to RNS. Thanks Drew, that's a great question. We do see underlying growth here from RNS implants and really being driven off of the modern RNS story strategy that we talked about. We see growth coming from initial implant sales from RNS as well as growth from Dixie. So we see growth across both of the product lines, and as I mentioned, when you see the growth that's in the guidance, that growth has to overcome the impact of the Nautilus implants in 23, the net change of the further diminishment of the replacement units, and then that Dixie impact of full year distribution. So we do see growth.

Thanks drew that's a great question.

We do see.

Underlying growth here.

From from Rns implants, and in really being driven off of the.

<unk>.

Modern Rns story strategy that we had talked about.

We see growth.

Coming from.

Initial <unk>.

Sales from rns as well as growth from.

Dixie So we see we see growth across both of the product lines.

And as I mentioned.

When you when you see the growth that's in the guidance that growth has to overcome the impact of.

The Nautilus implants in 'twenty three.

Net change of the further.

<unk> of the replacement units.

And then that Dixie impact of full year.

Full year distribution.

So we do see growth, we do see growth across both product lines, we see growth across both of those product lines that results in the double digits that we've got here in the guide we're not breaking it out product line by product line.

Joel D. Becker: We do see growth across both product lines that results in the double digits that we've got here in the guide. We're not breaking it out product line by product line, but we do see strong growth from both of the product lines making up the point here in the guidance and needing to overcome some of those dynamics in 2023. I know that's not a full minute answer to the specifics of maybe you want me to do a calculation for you for how we get there, but those are some of the ins and the outs.

But.

We do see strong growth from both of the product lines, making up.

The point here in the guidance.

And needing to overcome some of those.

Some of those dynamics from 2023, I know thats not a full minute answer to the specifics of maybe you want me to do a calculation for you for for how we get there, but those are some of the ins and the outs the underlying organic growth rate associated with adoption and utilization in our core centers and then the.

Joel D. Becker: The underlying organic growth rate associated with adoption and utilization in our core centers and then the activities that we have underway to both expand adoption and utilization as well as initiate activities for project care and expansion of Dixie revenue are then kind of being offset by some of those other dynamics that I mentioned. Okay, but bottom line, you're feeling good about growing off, like, around the 52 million you did in initial implants for... We see initial implant revenue from RNS systems as an area of growth for us in 2024. Okay. Great And then just on Dixie, and I appreciate you're not going to give us all the finer details that we all desire, but just as you are thinking about 2024, just give us a sense of, are you expanding Dixie with existing customers? Have you kind of really spread that out around all the accounts that you had just for R&S?

The activities that we have underway to both expand adoption and utilization as well as initiate activities for project here.

And and expansion of <unk> revenue.

And then kind of being offset by some of those other dynamics that I mentioned.

Okay, but bottom line youre feeling good about growing off like around $52 million you did in initial implants for 23.

We see initial implant revenue from Rns systems.

As a area of growth for us in 2024.

Okay, Great and then just on Dixie and I appreciate youre not going to give us like the all the finer detail that we all desire, but just as you are thinking about 2024.

Just give us a sense of are you.

Pending Dixie with existing customers have you kind of really spread that out around all of the accounts that you had just for rns and I guess I'm just trying to get a sense of like where you are in the commercial progress distribution progress for the product line. Thanks for taking the questions Joel.

Joel D. Becker: And I guess I'm just trying to get a sense of where you are in the commercial progress, distribution progress for the product line. Thanks for taking the questions, Joel. Thank you, Drew. And it's another great question.

Thank you drew.

It's another great question and with regard to Dixie I think we see opportunities.

Joel D. Becker: And with regard to Dixie, I think we see opportunities, really across the product line with Dixie. And by that I mean, I think we see opportunities to, through service and support, and through, you know, talking with centers about the modern approach to managing epilepsy patients and the use of RNS phase two monitoring being an important part of that and so deepening the growth of SEEG electrode use in level four centers is is an opportunity for us to grow that part of our of our business even with current customers one two, We absolutely see the opportunity for us to expand the base of our customer footprint. You know one of the opportunities associated with a distribution deal like this one is of course to leverage our commercial organization and and we do feel like there is an opportunity to both competitively as well as then in introducing SEG electrodes into into level four centers an opportunity for us to expand the footprint of the technology as well and so we've we've been really pleased with the progress that we've made with Dixie but I also see opportunities in a number of different kind of vectors there to leverage the distribution relationship in our organization to broaden the adoption and utilization of Dixie as well as with our, Thank you.

Really across the product line with Dixie.

By that I mean.

I think we see opportunities to through service and support and through.

Talking with the centers about the modern approach to managing epilepsy patients in the use of rns phase two monitoring being an important part of that and so deepening the growth of <unk>.

C. G electrode use in level four centers is is an opportunity for us to grow that part of our of our business even with current customers one two.

We absolutely see the opportunity for us to expand the base of our customer footprint.

One of the opportunities associated with the distribution deal like this one is of course to leverage our commercial organization and and we do feel like there is an opportunity to.

Both competitively as well as then in introducing seg electrodes into.

And level four centers and opportunity for us to expand the footprint of the technology as well and so we've been really pleased with the progress that we've made with Dixie, but I also see.

Opportunities in a number of different kind of vectors there to leverage the distribution relationship in our organization to broaden the adoption and utilization of Dixie as well as with rns.

Thanks, Joe.

Operator: Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the number one. There are no further questions at this time. Speaker, please continue.

Thank you.

Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by the number one.

There are no further questions at this time speaker. Please continue.

Joel D. Becker: Thank you, and thank you everyone for joining the call tonight. Thank you for your time and for your interest in and support of Neuropace. We look forward to and are excited about 2024 and continuing Neuropace's mission of transforming the lives of patients living with debilitating seizures. Thanks to all. Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect.

Thank you.

Thank you everyone for joining the call Tonight. Thank you for the time and for your interest in and support of neuro pace.

We look forward to and are excited about 2024.

And continuing neuro paces mission.

Of transforming the lives of patients living with debilitating seizures, thanks to all.

Ladies and gentlemen, this concludes today's conference call. Thank you for joining you may now disconnect.