Q1 2024 NeuroPace Inc Earnings Call
Operator: Good afternoon, and welcome to Neuropace's first quarter 2024 conference call. As a reminder, this call is being recorded. I would now like to turn the call over to Jeremy Pfeffer from Lifesize Advisors for a few introductory comments. Please go ahead.
Good afternoon, and welcome to New Real estate Trust first quarter 2024 conference call.
Speaker Change: As a reminder, this call is being recorded I would now.
Like to turn the call over to Jeremy Feffer from lifestyle advisors for a few introductory comments. Please go ahead.
Jeremy Feffer: Good afternoon. Thank you for joining us for Neuropace's first quarter 2024 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 first quarter ended March 31, 2024. 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 are forward-looking statements within the meaning of federal security laws, which are made pursuant to the safe harbor provisions of the Private Security Litigation Reform Act of 1995.
Jeremy Feffer: Good afternoon. Thank you for joining us for neuro pieces first quarter 2024 financial and operating results conference call.
Jeremy Feffer: On today's call, we will hear from Joel Becker, Chief Executive Officer, and Rebecca Cohen, Chief Financial Officer.
Jeremy Feffer: Earlier today <unk> released financial results for the first quarter ended March 31, 2020 for copper.
Jeremy Feffer: A copy of the press release is available on the Companys website at <unk> Dot com.
Jeremy Feffer: Any statements made during this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including those around 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.
Jeremy Feffer: 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 1095.
Jeremy Feffer: For more detailed descriptions of the risks and uncertainties associated with our business, please refer to the risk factors sections of our public filings with the SEC, including our recent annual report on Form 10-K for the year ended December 31st, 2023, filed with the SEC on March 5th, 2024, and our quarterly report on Form 10-Q for the quarter ended March 31st, 2024, to be filed with the SEC, and any other reports that we may This conference call contains time-sensitive information, which we believe is accurate only as of this live broadcast on May 8th, 2024.
Jeremy Feffer: 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. And with that, I will now turn the call over to Neuropace's Chief Executive Officer, Joel Becker. Joel?
Jeremy Feffer: Any statements made during this call that relate to expectations or predictions of future events results or performance are forward looking statements.
Jeremy Feffer: 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 assess.
Jeremy Feffer: 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 Feffer: For more detailed descriptions of the risks and uncertainties associated with our business. Please refer to the risk factors sections of our public filings with the SEC, including our recent annual report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March five 2024.
Jeremy Feffer: Our quarterly report on Form 10-Q for the quarter ended March 31, 2024 to be filed with the SEC and any other reports that we may file with the SEC in the future.
Jeremy Feffer: This conference call contains time sensitive information, which we believe is accurate only as of this live broadcast on May eight 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.
Jeremy Feffer: Or otherwise.
Joel D. Becker: With that I will now turn the call over to neuro patients Chief Executive Officer, Joel Becker Stahl.
Joel D. Becker: Thank you, Jeremy, and good afternoon, everyone.
Speaker Change: Thank you Jeremy and good afternoon, everyone.
Joel D. Becker: I will start out today's call by reviewing our performance in the first quarter and key business priorities for the remainder of 2024 before turning the call over to our CFO, Rebecca Kuhn, to present the details of our financial performance for the quarter ended March 31, 2024, which will be followed by a Q&A session. Okay. Let's get started.
Joel D. Becker: I will start out today's call by reviewing our performance in the first quarter and key business priorities for the remainder of 2024 before turning the call over to our CFO Rebecca Cohen.
Rebecca L. Kuhn: To present, the details of our financial performance for the quarter ended March 31 2024.
Rebecca L. Kuhn: Which will be followed by a Q&A session.
Rebecca L. Kuhn: <unk>.
Joel D. Becker: We are pleased with the start to 2024, reporting total revenue of $18.1 million for the first quarter, up 25% compared to the same period last year. Revenue for the quarter included strong year-on-year growth contributions from sales of the R&S system and Dixie Medical SEEG products, as well as contributions from our strategic biotechnology collaboration. Over the past year, we have worked to find a balance between investing in top-line growth and maintaining strong financial discipline across our business.
Rebecca L. Kuhn: We are pleased with the start to 2024 reporting total revenue.
Joel D. Becker: $18 1 million for the first quarter.
Jeremy Feffer: 25% compared to the same period last year.
Jeremy Feffer: Revenues for the quarter included strong year on year growth contributions from sales of the IRS system.
Jeremy Feffer: And the Dixie Medical guess EEG products, yes.
Jeremy Feffer: And contribution from our strategic biotechnology collaborations.
Joel D. Becker: Over the past year, we have worked to find a balance between investing in top line growth and maintaining strong financial discipline across our business. We're proud of the success. We have achieved on both of these fronts. The first quarter was another example of this as we held our cash burn to $7 6 million.
Joel D. Becker: We are proud of the success we have achieved on both of these fronts. The first quarter was another example of this, as we held our cash burn to $7.6 million, which included increased payments for variable compensation as a result of our strong operating performance.
Joel D. Becker: Which included increased payments for variable compensation as a result of our strong operating performance.
Joel D. Becker: We are also pleased to have recently extended the maturity date of our term loan to September 30, 2026, further increasing the company's financial flexibility. With those high-level comments about the quarter providing an overview for today's update, let me now dive into some of the details that helped drive this performance. As we review the results and performance of the business in the first quarter of 2024, we are and will remain focused on execution of growth opportunities in our current target market, which is estimated to be approximately $2 billion annually, that offers significant near-term opportunities for growth in treating patients at comprehensive epilepsy centers in the U.S, while also investing in and executing on our longer-term strategy to expand our reach beyond these Level 4 centers and bring Neuropace's total market opportunity to more than $55 billion.
Joel D. Becker: We're also pleased to have recently extended the maturity date of our term loan to September 32026, further increasing the company's financial flexibility.
Speaker Change: With those high level comments about the quarter, providing an overview for today's update let me now dive into some of the details that helped drive this performance.
Joel D. Becker: As we review the results and performance of the business in the first quarter of 2024.
Jeremy Feffer: And we will remain focused on execution of growth opportunities in our current target market, which is estimated to be approximately $2 billion annually.
Jeremy Feffer: That offers significant near term opportunities for growth and treating patients at comprehensive epilepsy centers in the U S.
Jeremy Feffer: While also investing in and executing on our longer term strategy to expand our reach beyond these level four centers and bring neuro cases total market opportunity to more than 55 billion.
Joel D. Becker: Our objective is to help close the treatment gap for drug-resistant epilepsy patients by expanding access to RNS therapy through increasing adoption and utilization in Level 4 centers, expanding referrals to and implants outside of Level 4 centers, and expanding indications for RNS therapy, including for generalized epilepsy patients. Progress was made on this strategy in Q1, as we remain laser focused on increasing adoption of the RNS system. One of the metrics we use to measure this progress is total active prescribers. And while we will not quantify this number, we were pleased to see this metric continue its upward trajectory and achieve an all-time high in the first quarter.
Jeremy Feffer: Our objective is to help close the treatment gap for drug resistant epilepsy patients by expanding access to harness therapy through increasing adoption and utilization in level four centers.
Joel D. Becker: Expanding referrals to in implants outside of level four centers.
Jeremy Feffer: It's expanding indications for iron therapy, including to generalized epilepsy patients.
Jeremy Feffer: Progress was made on the strategy in Q1, as we remain laser focused on increasing adoption of the <unk> system.
Joel D. Becker: One of the metrics we use to measure this progress is total active prescribers.
Jeremy Feffer: While we will not quantify this number we were pleased to see this metric continuous upward trajectory and achieve an all time high in the first quarter.
Joel D. Becker: We also made significant progress in hiring and training field representatives under the previously announced incremental expansion of our commercial organization. These new representatives are now moving through our in-depth training and education program. We expect the majority of these representatives will complete these activities in the first half of the year and begin to be signed off and able to engage in independent field activities in the second half of the year.
Jeremy Feffer: We also made significant progress in hiring and training field representatives under the previously announced incremental expansion of our commercial organization.
Jeremy Feffer: These new representatives are now moving through our in depth training and education program.
Jeremy Feffer: We expect the majority of these representatives will complete these activities in the first half of the year and begin to be signed off and able to engage an independent field activities in the second half of the year.
Joel D. Becker: We expect that these representatives will also begin to have an impact on the second phase of our long-term strategy, expanding access to RNS therapy beyond level four centers. Pilot program activities have begun in targeted areas, including professional education activities, such as webinars, symposia, and peer-to-peer programs. This is accompanied by additional commercial activities, such as the initiation of digital social media awareness programs. Center contracting activities and the placement of representatives in targeted geographies.
Jeremy Feffer: We expect that these representatives will also begin to have an impact on the second phase of our long term strategy expanding access to <unk> therapy beyond global four centers.
Jeremy Feffer: Program activities have begun in targeted areas, including professional education activities, such as Webinars symposia and peer to peer programs.
Jeremy Feffer: This was accompanied by additional commercial activities such as the initiation of digital social media awareness programs.
Jeremy Feffer: Center contracting activities.
Jeremy Feffer: The placement of representatives in targeted geographies.
Joel D. Becker: While it is still early in the rollout of these programs, and they did not have a material impact on our results in the first quarter, we have begun to see implant-related activity, as well as the identification of additional patients in need of Phase 2 monitoring and referral to Level 4 centers. Additionally, the sales representatives that we have added are primarily focused in geographies where we have identified project care center expansion opportunities, along with supporting geographies where we have been experiencing revenue growth in our RNS and Dixie product lines. We look forward to updating you further on these activities as they progress.
Jeremy Feffer: While it is still early in the rollout of these programs and they did not have a material impact on our results in the first quarter.
Joel D. Becker: <unk> begun to see both implant related activity as well as the identification of additional patients in need of phase two monitoring and referral to level four centers.
Jeremy Feffer: Additionally, the sales representatives that we have added primarily focused in geographies, where we have identified project care center expansion opportunities.
Jeremy Feffer: Along with supporting geographies, where we have been experiencing revenue growth in our rns and Dixie product lines.
Jeremy Feffer: We look forward to updating you further on these activities as they progress.
Joel D. Becker: Finally, 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, in which all implants are complete, and the trial is in the follow-up phase. We believe that the strong interest in this study is further evidence of the significant unmet need that exists for patients with drug-resistant idiopathic generalized epilepsy.
Jeremy Feffer: Finally, the third phase of our strategy is based on expanding the approved indications for the iron This system.
Jeremy Feffer: This effort is currently focused on the pivotal <unk> study.
Jeremy Feffer: Which all implants are complete and the trial is in the follow up phase.
Jeremy Feffer: We believe that the strong interest in this study is further evidence of the significant unmet need that exists for patients with drug resistant idiopathic generalized epilepsy.
Rebecca L. Kuhn: 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 opportunity. In addition to the success our commercial team has had with our RNS system, we also continue to see revenue growth from our exclusive partnership with Dixie Medical to market and sell their diagnostic electrodes and related products for epilepsy.
Jeremy Feffer: As a reminder, the Nautilus trial requires evaluation of a primary safety endpoint and then effectiveness evaluation 12 months post implant.
Rebecca L. Kuhn: If approved our rns system would be the first device with an FDA approved indication for generalized epilepsy.
Jeremy Feffer: This study has the potential to represent a highly meaningful market expansion opportunity.
Jeremy Feffer: In addition to the success of our commercial team has had with our rns system.
Jeremy Feffer: Also continued to see revenue growth from our exclusive partnership with Dixie medical to market and sell their diagnostic electrodes and related products Alex for epilepsy. This.
Rebecca L. Kuhn: This is a highly complementary offering to our RNS system, which provides our sales team with an additional opportunity to call on physicians at the CECs. Lastly, we are pleased with the strategic collaboration we entered into with the biotechnology company in the fourth quarter of 2023, which completed an important additional milestone in the first quarter of 2024. We believe this groundbreaking collaboration is another example of the value 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. With that as an overview of our operational progress, let me now turn the call over to Rebecca to review our financial results for the first quarter of 2024. Rebecca
Jeremy Feffer: This is a highly complementary offering to our <unk> system, which provides our sales team with an additional opportunity to call on physicians at the Cec's.
Jeremy Feffer: Lastly, we are pleased with the strategic collaboration we entered into with a biotechnology company in the fourth quarter of 2023.
Jeremy Feffer: Each completed an important additional milestone in the first quarter of 2024.
Rebecca: We believe this groundbreaking collaboration is another example of the value our rns systems can provide through its proven ability to collect and analyze data, which is then used to generate insights that can help inform treatment strategies.
Jeremy Feffer: With that as an overview of our operational progress let me now turn the call over to Rebecca to review our financial results for the first quarter of 2020 for Rebecca.
Rebecca: Thank you Jill.
Rebecca L. Kuhn: Neuropace's revenue for the first quarter of 2024 was $18.1 million, representing growth of 25% compared to $14.5 million for the first quarter of 2023. This growth was primarily driven by increased sales of our RNS system. We also generated meaningful revenue growth from sales of Dixie medical products. However, replacement implant revenue continued to decline compared to the same period last year and represented approximately 4% of total revenue. Gross margin for the first quarter of 2024 was 73.6%, compared to 71.7% in the first quarter of 2023.
Rebecca: <unk> revenue for the first quarter of 2024 was $18 1 million.
Rebecca: <unk> growth of 25% compared to.
Rebecca L. Kuhn: $14 5 million for the first quarter of 2023.
Rebecca: Growth was primarily driven by increased sales of our Rns Vista.
Rebecca: We also generated meaningful revenue growth from sales of Dixie medical products.
Rebecca L. Kuhn: Replacement implant revenue continued to decline compared to the same period last year and represented approximately 4% of total revenue.
Rebecca: Gross margin for the first quarter of 2024 was 73, 6% compared to 71, 7% in the first quarter of 2023.
Rebecca L. Kuhn: Our gross margin for R&S products improved due to the increase in units produced and sold as our fixed manufacturing overhead costs were spread over more units. A collaboration with a biotech company also made a contribution to our growth margin in the first quarter of 2024. The increase in gross margin was partially offset by the lower gross margin from the distribution of Dixie medical products.
Rebecca: Our gross margin for rns products improved due to the increase in units sold.
Rebecca: Our fixed manufacturing overhead costs with spread over more units.
Rebecca: Our collaboration with a biotech company also made a contribution to our gross margin in the first quarter of 2024.
Rebecca: The increase in gross margin was partially offset by the lower gross margin from distribution of Dixie medical products.
Rebecca L. Kuhn: R&D expense in the first quarter of 2024 was $5.8 million compared with $5.3 million in the same period of 2023. This increase was primarily driven by an increase in personnel-related expenses. SG&A expense in the first quarter of 2024 was $15.1 million, compared with $13.4 million in the prior year period. This increase was primarily due to personnel-related expenses, largely driven by the increase in our commercial team, as well as severance costs due to personnel changes.
Rebecca: R&D expense in the first quarter of 2024 with $5 $8 million.
Rebecca: With $5 3 million in the same period of 2023.
Rebecca L. Kuhn: This increase was primarily driven by an increase in personnel related expenses.
Rebecca L. Kuhn: SG&A expense in the first quarter of 2024 with $15 $1 million.
Rebecca: Compared with $13 $4 million in the prior year period.
Rebecca L. Kuhn: This increase was primarily due to personnel related expenses.
Rebecca: I would say driven by the increase in our commercial team as well as severance costs.
Rebecca: <unk> changes.
Rebecca L. Kuhn: Total operating expenses in the first quarter of 2024 were $20.9 million, compared with $18.7 million in the same period of the prior year. Consistent with recent quarters, operating expenses as a percentage of revenue were lower for both R&D and SG&A expenses relative to the prior year period. This performance reflects our focus on driving revenue growth while also effectively managing our operating expenses and cash. We continue to focus on finding the appropriate resource allocation to balance these objectives, which we expect to continue throughout 2024.
Rebecca: Total operating expenses in the first quarter of 2024 were $29 million.
Rebecca: Compared with $18 7 million in the same period of the prior year.
Rebecca: Consistent with recent quarters operating expenses as a percentage of revenue were lower for both R&D and SG&A expenses relative to the prior year period.
Rebecca: This performance reflects our focus on driving revenue growth, while also effectively managing our operating expenses and cash.
Rebecca: We continue to focus on finding the appropriate resource allocation to balance these objectives.
Rebecca: We expect to continue throughout 2024.
Rebecca L. Kuhn: Lost from operations was $7.5 million in the first quarter of 2024 compared with $8.3 million in the prior year period. We recorded $2.3 million of interest expense in the first quarter of 2024 compared to $2 million in the prior year period. The net loss was $8.9 million for the first quarter of 2024 compared with $10.4 million in the first quarter of 2023. As discussed previously, we have maintained a disciplined expense management strategy, resulting in a cash burn in the first quarter of 2024 of $7.6 million compared to $9.8 million in the first quarter of 2023.
Rebecca L. Kuhn: Loss from operations was $7 $5 million in the first quarter of 2024.
Rebecca: Paired with $8 3 million in the prior year period.
Rebecca: We recorded $2 3 million of interest expense in the first quarter of 2024 compared to $2 million in the prior year period.
Rebecca: Net loss was $8 9 million for the first quarter of 2024, compared with $10 4 million in the first quarter of 2023.
Rebecca: As discussed previously we have maintained a disciplined expense management strategy.
Rebecca L. Kuhn: Elting in cash burn in the first quarter of 2024 of $7 $6 million.
Rebecca: <unk> to $9 8 million in the first quarter of 2023.
Rebecca L. Kuhn: As a reminder, the first quarter of the fiscal year tends to be our highest cash flow quarter of the year, primarily due to the timing of compensation-related payments. Our cash and short-term investments balance as of March 31st, 2024 was $58.9 million. Our long-term borrowings totaled $58 million as of March 31, 2024. We announce today that we have finalized an agreement with our lender to extend the final maturity of our debt by one year to September 30, 2026.
Rebecca: As a reminder, the first quarter of the fiscal year tends to be our highest cash flow quarter of the year, primarily due to the timing of compensation related payments.
Rebecca L. Kuhn: Our cash and short term investments balance as of March 31, 2024 was $58 9 million.
Rebecca: Our long term borrowings totaled $58 million as of March 31, 2024.
Rebecca: We announced today that we finalized an agreement with our lender to extend the final maturity of our debt by one year to September 30th 2026.
Rebecca L. Kuhn: We believe this extension further improves our overall financial position. Regarding annual guidance for 2024, we continue to expect our total revenue to be in a range of $73 to $77 million, an increase of approximately 12 to 18 percent. This growth is expected to be mostly driven by an increase in sales of our RNS system, with growth from 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, a non-cash expense.
Rebecca L. Kuhn: We believe this extension further improves our overall financial position.
Rebecca: Regarding annual guidance for 2024, we continue to expect our total revenue to be in a range of $73 million to $77 million, an increase of approximately 12% to 18%.
Rebecca: This growth is expected to be mostly driven by an increase in sales of our <unk> system with growth from sales of <unk>.
Rebecca L. Kuhn: In medical products, continuing to make a meaningful contribution.
Rebecca: 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 their proportion of Dixie medical revenue.
Rebecca: Overall revenue and other factors.
Rebecca: We expect operating expenses for 2024 range between 80 and $84 million.
Rebecca L. Kuhn: <unk>, approximately $12 million and stock based compensation.
Rebecca: Noncash expense.
Joel D. Becker: I would now like to turn the call back over to Joel for closing remarks. Okay, Joel?
Rebecca: I would now like to turn the call back over to Joe for closing remarks.
Joel D. Becker: Joe.
Joe: Thank you Rebecca.
Joel D. Becker: At Neuropace, we are focused on the opportunity to help close the treatment gap for drug-resistant epilepsy patients by expanding access to RNS therapy. I look forward to continuing to execute on our growth strategy and to updating you on our progress throughout 2024. This concludes our prepared remarks. I would now like to turn the call over to the operator, who will open the call for questions.
Joe: Aerospace we are focused on the opportunity to help close the treatment gap for drug resistant epilepsy patients by expanding access to <unk> therapy.
Joe: I look forward to continuing to execute on our growth strategy.
Joe: And to updating you on our progress throughout 2024.
Speaker Change: This concludes our prepared remarks, I would now like to turn the call over to the operator.
Speaker Change: We will open the call for questions.
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the 1 on your telephone keypad. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to cancel your request, please press star followed by 2. If you are using a speakerphone, please lift the handset before pressing any key.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your telephone keypad.
Operator: So with your AG Dawn from technology request.
Operator: With the order received should you wish to cancel your request. Please press star followed with you if youre using a speakerphone. Please keep the handset before pressing any keys one moment. Please for your first question.
Operator: One moment, please, for your first question. Your first question comes from the line of Mike Kratky from Learing Partners. Please go ahead.
Michael Holden Kratky: Your first question comes from the line of Mike <unk> from Leerink Partners. Please go ahead.
Michael Holden Kratky: Hi everyone, thanks for taking our questions. Can you just provide some additional color on what assumptions are being factored into your current guidance range at this point based on the commercial experience you saw in 1Q? You know, I know it's maybe a little bit difficult to answer, but, you know, how's the product level revenue that you saw in one cue between RNS and Vixie really helping to shape any changes that you might be seeing from here?
Mike: Hi, everyone. Thanks for taking my questions.
Michael Holden Kratky: Can you just provide some additional color on what assumptions are being factored into your guidance range. At this point based on the commercial experience you saw in <unk>.
Speaker Change: Maybe a little bit difficult to answer but.
Speaker Change: How is the product level revenue that you saw on <unk> between rns, and Vicki really helping to shape any.
Speaker Change: Changes that you might be seeing from here. Thanks.
Joel D. Becker: Thanks, Mike. That's a great question. So, excuse me, pardon me.
Speaker Change: Thanks, Mike that's a great question, so excuse me pardon me.
Joel D. Becker: As we said in our prepared comments, we saw, you know, really good contributions across product lines here from a year on year growth perspective. And so when we look at that, we take that into account as we think about the rest of the year, as well as a number of the activities that we mentioned that we have underway, whether that's the organizational expansion or the Care Activities or Traction with Prescribers.
Speaker Change: As we said in our prepared comments we saw.
Mike: Really good contributions across product lines here from a year on year.
Mike: Growth perspective, and so when we look at that we take that into account as we think about the rest of the year as well as then a number of the activities that we mentioned that we have underway whether thats.
Joel D. Becker: Organizational expansion or the.
Mike: Care activities or traction with with prescribers. So we roll all that into how we're thinking about the year. Obviously there is some.
Joel D. Becker: So we roll all that into how we're thinking about the year. You know, obviously, there's some. Some headwinds there as well, that we talked about in terms of the replacement cycle, in particular being something here in particular in the first half of the year. But when we take all that together, we feel like the guidance that we maintained with our comments today and that we issued a couple of months ago really represents our best view for what we expect the business to generate in revenue here through the rest of the year, with again good performance and contribution from both initial sales of the R&S systems as well as
Mike: Some.
Mike: Headwinds there as well that we talked about in terms of the replacement cycle in particular being something here.
Mike: You were in the first half of the year, but when we when we take all that together.
Mike: We feel like.
Mike: The guidance that we did we maintained with our comments today and that we have issued a couple of months ago.
Joel D. Becker: Really represents our best view for what we expect for the business to generate in revenue here through the rest of the year with again good good performance and contribution from both sales of the iron as the initial sales of the rns systems as well as with Dixie.
Joel D. Becker: understood. And yeah, maybe just one follow-up to that. You know, you had a nice beat in one queue and ultimately maintained the same guidance range for the year. Can you just confirm whether there was anything that you saw so far in two queues that's giving you pause about potentially raising the guidance range or really, you know, a lot of the same factors that were being considered initially? Just as you mentioned, we were here not too long ago talking about Q1, and we're here today talking about Q1 and that quarter and guidance for the year.
Speaker Change: Understood and maybe just one follow up to that you had a nice beat in <unk> and <unk>.
Speaker Change: Ultimately maintain the same guidance range for the year can you just confirm whether there was anything that you saw so far in <unk>, that's giving you pause about potentially raising the guidance range or really a lot of the same factors that were being considered initially.
Speaker Change: So just as you mentioned, we were here not too long ago talking about Q1 and.
Joel D. Becker: And really, when we set the guidance and when we maintain and confirm that guidance, it's with a full view of Q1 and then everything else that we've seen as we look forward to the rest of the year. So it really is a combination of both what we saw here at the beginning of the year and what we had contemplated, as well as then when we look at all those different factors going forward through the remainder of the year. We're, again, excited about a number of the opportunities here in front of us with a couple of noted headwinds as well.
Michael Holden Kratky: Got it. All right. Thanks very much.
Operator: Thank you. And your next question comes from the line of Frank Takkinen from Lake Street Capital Markets. Please go ahead.
Frank James Takkinen: Great. Thanks for taking the questions. Congratulations on a solid start to the year.
Joel D. Becker: I was hoping to follow up on your comment about new prescribers, Joel. I know you said you're not going to quantify that, but I was hoping maybe you could give a little bit more color on where those prescribers are from. And what I mean is, are they existing sites with new users who are now using the technology, or are they new sites? And then just give us the kind of refresh on how those typically scale up.
Joel D. Becker: Great question, Frank, and yeah, we were excited to see the new prescriber numbers there and the way that has been tracking in that metric. So the way that we look at that, it's the number of prescribers that have been associated with an initial RNS implant over the past 12 months. And so when we when we look at those and kind of look at where the prescriber is coming from, it's a combination of adoption within both current as well as new centers.
Joel D. Becker: So we see them coming from both, but given the nature of where we're at today, a lot of it is increased adoption within current centers, so we get new users and an expansion of adoption of users within centers in which we're present today, but there's also a component of new users in new centers as well.
Joel D. Becker: Okay, and then the second half of that, just thinking about how the new users are ramped up, what's the training process like, and what do you think about when they start to do as many procedures, maybe as the overall average prescriber?
Joel D. Becker: Yeah, a great question. And as you might imagine, when you have a new user, it can take a little bit for them to ramp up. And just as we do with all new customers, we really start with, you know, the foundations and the basics of RNS and neuromodulation therapy in their practice and then how they can incorporate it into their practice and scale that up. So we have a well-understood and reproducible training and implementation model there for both understanding where RNS fits in their practice, as well as how to scale it up in terms of patient selection and how to manage those patients And so we really work to take people through that education process and adoption process in a really described fashion that we've, we've, you know, developed over time here.
Frank James Takkinen: Okay, perfect. And then, if I could just sneak maybe one more in on the biotech agreement, congrats on the milestone achievement. Can you quantify whether or not you received a milestone payment with that? And what portion of the 3.7 million total contract value was that?
Joel D. Becker: Sure, Frank. We'll try and give you a little more color.
Joel D. Becker: So just as a reminder, the total payments and revenue over the anticipated nine quarters of the collaboration are up to a total of $3.7 million. So that happens over time. Unknown Attendee.
Unknown Attendee: And the payments and the revenue have some variation, terribly dramatic. So, you know, we're not going to give you specifics, but yes, there are payments that are received along the way, and, of course, revenue recognized along the way. So I hope that's helpful.
Frank James Takkinen: That's perfect. Thanks for taking the questions.
Operator: Thank you. And your next question comes from the line of Vik Chopra from Wells Fargo. Please go ahead.
Vikramjeet Singh Chopra: Hey, good afternoon. Thank you for taking the questions and congratulations on a nice quarter. I also had a follow-up question on guidance. You know, you had a pretty nice gross margin beat. Maybe just some additional color on what drove that. Why not raise the gross margin guide for the year and maybe just help us think about it for the year? And then I had a follow-up question. Chair.
Joel D. Becker: Sure. So our growth margin, Vik, increased year-over-year largely due to the increase in units, R&S units produced and sold. That means that our fixed overhead costs are spread over a larger number of units. So we continue to see nice leverage there, contribution from our biotech collaboration, as is always the case. The growth margin, then, is... reduced, because our gross margin has been reduced by the lower gross margin from Dick's.
Vikramjeet Singh Chopra: Okay, and then the follow-up question I had was on Project CARE; maybe just help us understand where you are with the pilot programs and what metrics you'll be providing for us to track the progress. Thank you. Hi, Vic. Thank you. That's a great question.
Joel D. Becker: Thanks for
Joel D. Becker: Hi, Vic. Thank you. That's a great question. Thanks for bringing up that topic.
Joel D. Becker: So just in terms of the specifics of some of the programs, we're initiating programs really in two buckets of activities right now. One is in professional education activities. So when we've, as I discussed in previous calls, taken a targeted approach here to initiation of activities with the pilot program, but within those targeted accounts, we're initiating professional education programs, including educational symposia and webinars, planning, and training for new users We were engaging in professional education activities on some of those same topics here with these centers in terms of the foundations of RNS as a neuromodulation therapy and then the process and practice of including RNS as one of the treatment options within their practices, so they learn to understand patient selection as well as patient management, programming, reimbursement, all of the things that go along with really establishing this as part of their program.
Joel D. Becker: So clinical as well as practice development, professional education, as well as then peer-to-peer activities, so with peers who are experienced in using RNS, they can, they can help guide centers through the early startup process. So that's then matched with a number of commercially related activities as well, including some initial work here from a social media perspective related to digital marketing and targeted geographies, as well as center contracting activities. And then I mentioned we made a fair bit of progress here with regard to the hiring and initiation of training for the incremental expansion of our commercial organization.
Joel D. Becker: So getting those reps trained and in position and targeted care geographies as well have been some of the commercial activities that we've been executing on as well. So those are some of the kinds of activities and the kind of major buckets. With regard to some of the metrics, it's really, you know, the way I think about it is really the building and development of the pipeline within each of these centers and then the ability to kind of track our way through that. And it really starts with everything from some of the activities that I just mentioned.
Speaker Change: And we are here today some of them some of the activities that I just mentioned.
Speaker Change: No.
Joel D. Becker: Starting and pacing off of the initial contact and sales call processes to then the contracting timing and contracting throughput. We also measure the education process and the completion of the education and training process. And then obviously patient identification and then moving patients to implants. So we track and measure all of that through and including referrals of additional patients who may not be good candidates directly for RNS patients outside of level 4 centers but can be referred into level 4 centers as well as then the implant rate over time in these centers.
Speaker Change: Starting in pacing off of.
Joel D. Becker: Good direct to rns patients outside of level four centers that can be referred into liver <unk> centers as well as then.
Speaker Change: Implant rate overtime in these centers, so I think it's.
Joel D. Becker: It's maybe a helpful way to think about it.
Speaker Change: <unk> and then execution pipeline in each of the steps along the way for each of these targeted centers and that's how we're managing it internally.
Speaker Change: Thank you and your next question comes from the line of Robbie Marcus from Jpmorgan. Please go ahead.
Hi, This is lilly on for Robbie Thanks for taking the question.
Joel D. Becker: So I think it's maybe a helpful way to think about it, just the development and then execution pipeline at each of the steps along the way for each of these targeted centers, and that's how we're managing it internally.
Joel D. Becker: Anything you can share on how we should be thinking about cadence for this year and any puts and takes that we should be keeping in mind for second quarter through fourth quarter.
Joel D. Becker: For second quarter. The street was at about $18 2 million is that sort of a fair place to be and then I had a quick follow up.
Speaker Change: Thank you for the question.
Operator: Thank you. And your next question comes from the line of Robin Marcus from J.P. Morgan. Please go ahead.
Joel D. Becker: We're not guiding quarterly.
Joel D. Becker: But I could maybe.
Robert Justin Marcus: Comment a little bit and then invite Rebecca to comment as well.
Rebecca: On kind of the balance of the year.
Robert Justin Marcus: Hi, this is Lily. I'm for Robbie.
Operator: Yes.
Lily: We've talked about in the past that we don't see in this business, maybe some of the traditional calendar as Asian and cadence that you might see in some others.
Robert Justin Marcus: Thanks for taking the question. Anything you can share on how we should be thinking about cadence for this year and any puts and takes that we should be keeping in mind for second quarter through fourth quarter? I think for second quarter, the street was at about 18.2 million. Is that sort of a fair place to be? And then I had a quick follow-up.
Rebecca: But we do tend to see.
Rebecca: Couple of times during the year, where there is some seasonality impact.
Robert Justin Marcus: C.
Joel D. Becker: Well, thank you for the question. We're not guiding quarterly. But I could maybe comment a little bit and then invite Rebecca to comment as well on kind of the balance of the year. We've talked about in the past that we don't see in this business maybe some of the traditional calendarization and cadence that you might see in some others, but we do tend to see a couple of times during the year where there is some seasonality impact.
Robert Justin Marcus: Some seasonality associated with summer vacations and summer holiday slowdowns particular kind of customer vacation times.
Rebecca: They can sometimes be toward the end of Q2 and beginning of Q3 kind of some of the summer holiday breaks and then.
Rebecca: The other kind of period of Av.
Rebecca: Cadence in calendar <unk> that we pointed out in the past as we.
Rebecca: We have.
Rebecca: Like with the.
Rebecca: The holidays for many.
Rebecca: But for this business, we kind of go for we go from Thanksgiving and then in between Thanksgiving and Christmas We have the biggest epilepsy society program of the year for us.
Joel D. Becker: We see some seasonality associated with summer vacations and summer holiday slowdowns, particular kinds of customer vacation times that can sometimes be toward the end of Q2 and beginning of Q3, kind of like some of the summer holiday breaks. And then the other kind of period of cadence and calendarization that we've pointed out in the past is, We have, just like with the holidays for many, but for this business, we kind of go from Thanksgiving to Christmas, and then in between Thanksgiving and Christmas, we have the biggest Epilepsy Society program of the year for us, the AES meeting, the American Epilepsy Society meeting.
Joel D. Becker: Meeting the American Epilepsy Society meeting.
Joel D. Becker: The first week in December so we kind of go from Thanksgiving to Aes, and then not too long generate into Christmas.
Joel D. Becker: The second half of Q4 can be a little more impacted.
Speaker Change: Thank you excuse me I guess.
Rebecca: Did I had mentioned kind of on top of that though is.
Joel D. Becker: Even though those those kind of calendar <unk> and cadence based events have been there at different times, they're obviously different things going on in the business that can kind of cover some of that up so.
Joel D. Becker: That's the first week in December. So we kind of go from Thanksgiving to AES and then not too long, kind of right into Christmas. So the second half of Q4 can be a little more impacted. Excuse me. I guess the thing that I mentioned kind of on top of that, though, is even though those kind of calendarized and cadence-based events have been there at different times, there are obviously different things going on in the business that can kind of cover some of that up.
Joel D. Becker: I recognize that that may not be entirely helpful. In terms of building your quarterly models, but the mid summer holidays and kind of the Thanksgiving Aes Christmas period of time in Q4 for us tend to be some of the times it can be impacted a little bit more from a cadence perspective.
Speaker Change: Got it okay.
Rebecca: And then just a replacement revenues I think I heard you mentioned that you expect those headwinds to be strongest in the first half of the year. So should we expect those headwinds to moderate the <unk>.
Joel D. Becker: Second half and beyond.
Speaker Change: Any color on how youre thinking about that line item going would be helpful. Thank you.
Joel D. Becker: I recognize that that may not be entirely helpful in terms of building your quarterly model, but the mid-summer holidays and kind of the Thanksgiving, AES, and Christmas period of time in Q4 for us tend to be some of the times it can be impacted a little bit more from a cadence perspective.
Speaker Change: Sure you are very good.
Joel D. Becker: Listener.
Joel D. Becker: Yes.
Rebecca: Yes for the year as a whole.
Listener: We do expect that the.
Joel D. Becker: Trend in reduced replacement revenue will continue but that will be more pronounced in the first half of the year.
Robert Justin Marcus: Got it. Okay. And then just on replacement revenues, I think I heard you mention that you expect those headwinds to be strongest in the first half of the year. So should we expect those headwinds to moderate in the second half and beyond? Any color on how you're thinking about that line item growing would be helpful.
Robert Justin Marcus: And.
Robert Justin Marcus: Likely to be less so in the second half of the year.
Robert Justin Marcus: I'm not sure what I can add to that exactly but that is basically we have shared that before and continue to believe that that's true.
Joel D. Becker: You're a very good listener. We do expect that the trend in reduced replacement revenue will continue, but that it will be more pronounced in the first half of the year and likely to be less so in the second half of the year. You know, not sure what I can add to that exactly, but that is basically, we've shared that before and continue to believe that that is true.
Joel D. Becker: Thank you. Sure, you're a very good listener.
Speaker Change: Got it thank you.
Joel D. Becker: Thank you and your next question comes from the line of Ross <unk> from Cantor Fitzgerald. Please go ahead.
Ross: Hey, guys. Thanks for taking our questions and congrats on progress. So in terms of your patient population would be curious to see if you're seeing any traction with the hybrid use case, if you arent as offering for patients that have undergone surgery.
Speaker Change: Im sorry, Ross could you could you. Please just repeat that question, we broke up a little bit there.
Speaker Change: Sure I'm, just curious if youre seeing any traction with the hybrid use case of your rns therapy for patients that have undergone surgery.
Operator: Thank you. And your next question comes from the line of Ross Osborne from Kantor Fitzgerald. Please go ahead.
Speaker Change: That's a great question.
Joel D. Becker: We think about that patient population in particular.
Ross Osborne: As part of our focus on what we call telling them the modern <unk> story, where it.
Ross Everett Osborn: Hey guys, thanks for taking our questions and congrats on the progress. So, in terms of your patient population, we'd be curious to see if you're seeing any traction with the hybrid use case of your RNS offering for patients that have undergone surgery.
Ross Osborne: In particular in the level for comprehensive epilepsy centers.
Ross Everett Osborn: In the past I think in many in many cases people would have thought about.
Ross Everett Osborn: Traditional patient identification and selection as.
Ross Everett Osborn: I'm sorry, Ross, could you please just repeat that question? We broke up a little bit there.
Ross: Classic kind of first line therapy of resection surgery, and then and then maybe a little bit of an either or with Neuromodulation.
Ross Everett Osborn: Sure, I'm just curious if you're seeing any traction with the hybrid use case of your RNS therapy for patients that have undergone surgery.
Ross Everett Osborn: And the reality is about 20% of patients are really ideal candidates for resection surgery.
Joel D. Becker: That's a great question. And, you know, we think about that patient population in particular, as part of our focus on what we call telling them the modern RNS story, where, in particular, in level four comprehensive epilepsy centers. In the past, I think in many cases, people would have thought about, you know, kind of traditional patient identification and selection as, you know, the classic kind of first line therapy of resection surgery and then maybe a little bit of either neuromodulation. And the reality is that about 20% of patients are really, you know, ideal candidates for resection surgery.
Joel D. Becker: And that's not mutually exclusive in particular with rns and we do hear of examples and have examples of where for example.
Joel D. Becker: Folks, we're going to do a resection procedure put the rns device in first and that really then informed further either.
Joel D. Becker: And that's not mutually exclusive, in particular with RNS. And we do hear of examples and have examples of where, for example, folks were going to do a resection procedure, put the RNS device in first, and that really then informed further either not going to resect or the area in which they were going to resect. And so we do see a hybrid approach as a key component of that modern RNS story where, number one, the classic focal patient population.
Joel D. Becker: Going through resection, or the area in which they were going to Resect and so we do see a hybrid approach.
Joel D. Becker: A key component of that modern rns story, where number one kind of the classic focal patient population number two network stimulation for patients who may be multifocal in origination, but then also a hybrid approach to resection therapy using rns plus.
Joel D. Becker: Or to inform a resection surgery. So that's absolutely something that we that we see and something that we talk about with folks when we're when we're talking about patient identification and selection with artists.
Speaker Change: Great and then in terms of care you mentioned, Ed Glen activities are accelerating is it fair to assume that we should see revenue coming into the model during the second quarter or should we be thinking more second half of this year.
Joel D. Becker: Number two, network stimulation for patients who may be multifocal in origination, but then also a hybrid approach to resection therapy using RNS plus or to inform resection surgery. So that's absolutely something that we see and something that we talk about with folks when we're talking about patient identification and selection with RNS.
Joel D. Becker: Yes, I think what we're seeing is we're seeing.
Joel D. Becker: Implant activities.
Joel D. Becker: Underway, and we're seeing referral as well for patients that either.
Joel D. Becker: Do need to be referred to.
Joel D. Becker: Level, two or level four centers for phase II monitoring rather or four centers that are just getting underway arent completely ready to do implants, yet but are referring patients they identify for implant.
Joel D. Becker: Great. And then, in terms of care, you mentioned implant activities are accelerating. Is it fair to assume that we should see revenue coming into the model during the second quarter, or should we be thinking more about the second half of this year?
Joel D. Becker: As well so.
Speaker Change: We do expect that both our activities in terms of the pilot program activities as well as rep impact and effectiveness.
Joel D. Becker: Yeah, I think what we're seeing is we're seeing implant activities underway, and we're seeing referrals as well, for patients that either, you know, do need to be referred to level two or level four centers for phase two monitoring, rather, or for centers that are just getting underway, aren't completely ready to do implants yet, but are referring patients they identify for implants, as well. So we do expect that both our activities in terms of the pilot program activities as well as representative impact and effectiveness will expand as we go throughout the year, particularly in the second half of the year. And so that's really what we're watching and focused on is those activities and the impact of those activities in the second half of the year.
Joel D. Becker: We will expand as we go throughout the year in particular in the second half of the year and so that's really what we're what we're watching and focused on is those activities and the impact of those activities in the second half of the year.
Speaker Change: Got it thanks for taking my questions.
Speaker Change: Thanks Ross.
Joel D. Becker: Thank you and your next question comes from the line of Michael <unk> from Wolfe Research. Please go ahead.
Speaker Change: Hey, good afternoon. Thank you I just have one topic on <unk>.
Joel D. Becker: <unk>.
Joel D. Becker: More than annualized into the model now we had a good steer as to how big It was when you. When you did the deal I'm not asking for the disclosure in the quarter or.
Speaker Change: The guidance for the year, but I am asking about what is the long term expectation for the <unk> product itself do you expect to grow. This is the focus of your sales force or.
Ross Everett Osborn: Got it. Thanks for taking our questions.
Operator: Thank you. And your next question comes from the line of Michael Polark from Wolf Research. Please go ahead.
Speaker Change: Is it kind of likely to run at this level and this is good and then if it's supposed to grow.
Michael K. Polark: Good afternoon. Thank you. I just have one topic on Dixie.
Michael K. Polark: What would be the building blocks of that growth is kind of the use case of these electrodes increasing so the market is growing or you think youre taking share.
Michael K. Polark: You know, it's kind of more than annualized into the model now; we had a good idea as to how big it was when you did the deal. I'm not asking for disclosure in the quarter or or guidance for the year. But I am asking you know, what is the long-term expectation for the Dixie product itself? Do you expect to grow this? Is this a focus of your sales force? Or, you know, is it kind of likely to run at this level? And This is good.
Michael K. Polark: Any color around that would be good because admittedly.
Speaker Change: Got it.
Michael K. Polark: I had a good sense following the first kind of 18 months, but now I'm wondering what kind of the three year vision for Dixie might be thanks, so much.
Speaker Change: Well I won't comment specifically on guidance for the next three years, Mike, but I will offer you some perspective here.
Michael K. Polark: My expectations for Dixie and those expectations are really borne out of the strategy behind.
Joel D. Becker: And then if it's supposed to grow? What would be the building blocks of that growth? Is the use case for these electrodes increasing, so the market's growing, or do you think you're taking share? Any color around that would be good because, admittedly, I kind of have had a good sense following this first kind of 18 months, but now I'm wondering what kind of the three-year vision for Dixie might be. Thanks so much.
Joel D. Becker: Having the product in the portfolio.
Joel D. Becker: And what we've seen in terms of clinical response.
Joel D. Becker: And customer utilization, we absolutely expect to continue to grow Dixie as part of our growth story.
Joel D. Becker:
Joel D. Becker: We see the use of SCG as a growing and emerging trend.
Joel D. Becker: Well, I won't comment specifically on guidance for the next three years, Mike, but I will offer you some perspective here. My expectations for Dixie are really born out of the strategy behind having the product in the portfolio and what we've seen in terms of clinical response and customer utilization. We absolutely expect to continue to grow Dixie as part of our growth story. We see the use of SEEG as a growing and emerging trend in comprehensive epilepsy centers as they pursue phase two monitoring of these patients.
Joel D. Becker: Comprehensive epilepsy centers as they as they pursue the phase II monitoring of these patients.
Joel D. Becker: And we see the opportunity both to grow and develop that market as we look to leverage our presence in centers, where there is significant neuromodulation presence.
Joel D. Becker: We can help tell that story.
Joel D. Becker: Yes, EEG usage as well as take share in places where.
Joel D. Becker: Folks are using.
Joel D. Becker: Other products for SCG, we SCG, we think Dixie has a great story to tell in terms of the products and the performance of the products and then when we think about the leverage that we can get from places where we have a strong presence in store.
Joel D. Becker: And we see the opportunity both to grow and develop that market as we look to leverage our presence in centers where there's, you know, a significant neuromodulation presence, and we can help tell that story. SCEG usage as well as take share in places where folks are using other products for SCEG. We think Dixie has a great story to tell in terms of its products and the performance of its products. And then when we think about the leverage that we can get from places where we have a strong presence and strong presence with those centers and those customers clinically, that's an opportunity for us to be talking about SCEG.
Joel D. Becker: <unk> presence with those centers and those customers clinically.
Joel D. Becker: That's an opportunity for us to be talking about seg and in places where the Dixie product line has a strong presence. We also look for places than where that's an opportunity for us to.
Joel D. Becker: More present with rns therapy as well.
Joel D. Becker: So I think the overall strategy here has been.
Joel D. Becker: It's a great product for us to have in the bag. Both in terms of products available to sell but also in terms of the ability to kind of vertically integrate into the diagnostic process move further upstream in terms of patient identification and then leverage both places where there is a strong rns presence to having a stronger dixie presence as well as with strong.
Joel D. Becker: S EEG centers.
Joel D. Becker: Ill provide an opportunity for us to both grow our market as well as.
Joel D. Becker: Take share from an rns perspective, so we think theres a lot of points of leverage there and we expect to grow Dixie.
Joel D. Becker: And in places where the Dixie product line has a strong presence, we also look for places then where that's an opportunity for us to be more present with RNS therapy as well. And so I think the overall strategy here has been that... It's a great product for us to have in the bag, both in terms of products available to sell, but also in terms of the ability to kind of vertically integrate into the diagnostic process, move further upstream in terms of patient identification, and then leverage both places where there's a strong R&S presence to having a stronger Dixie presence, as well as with then strong SEEG centers that provide an opportunity for us to both grow our market as well as take share from an R&S perspective.
Speaker Change: Thank you.
Speaker Change: Thank you and your last question comes from the line of jewelry.
Joel D. Becker: From Morgan Stanley. Please go ahead.
Speaker Change: Hey, Joe Hey, Rebecca Thanks for taking the questions.
Joel D. Becker: Maybe just on.
Joel D. Becker: Your R&D strategy understand nonetheless wrapped up and follow up now.
Joel D. Becker: R&D spending has picked up over the last few quarters, but maybe just talk to us about like what else Youre spending your money there from a clinical development standpoint, or even just a product development standpoint.
Speaker Change: It's a great question. Thank you drew.
Joel D. Becker: As you mentioned within within R&D.
Operator: Thank you. And your last question comes from the line of Drew Ranieri from Morgan Stanley. Please go ahead.
Andrew Christopher Ranieri: Our investments in clinical research as well as in product research and product development. So you know and you just mentioned.
Andrew Christopher Ranieri: Hey Joel, hey Rebecca, thanks for taking the questions. Maybe just on your R&D strategy, I understand Nautilus wrapped up, it's in follow-up now. R&D spending has ticked up over the last few quarters, but maybe just talk to us about what else you're spending your money on there from a clinical development standpoint or even just a product development standpoint.
Andrew Christopher Ranieri: We're in we're in the middle of the we're in the middle of Nautilus, we've wrapped up the first part of the analyst, but we're in the we're in the follow up stage now and obviously that's.
Speaker Change: That study is a significant investment for us as well as the Lennox Gusto study that we're involved with as well and then.
Andrew Christopher Ranieri: I didn't comment about it here today, but.
Joel D. Becker: It's a great question. Thank you, Drew. And as you mentioned, you know, within within R&D, you know, our investments in clinical research, as well as in in product research and product development. So you know, and you just mentioned You know, we're in the middle of the, we're in the middle of Nautilus, we've wrapped up the first part of Nautilus, but we're in the follow-up stage now, and obviously that study is a significant investment for us, as well as the Lennox-Gastaut study that we're involved with as well, and then I didn't comment about it here today, but, I did in our last call mention investments in and focus on from a research and development perspective that we're engaged with from an AI and data monitoring and management perspective as well.
Andrew Christopher Ranieri: I did in our last call mentioned.
Joel D. Becker: Investments in and focus on from a research and development perspective that we're engaged with from an AI and data monitoring and management perspective as well.
Speaker Change: I expect to say a bit more about that going forward, but.
Joel D. Becker: The punch line here would be that.
Joel D. Becker: We're investing in the business and where we're working to strike that balance between optimizing investments in critical.
Joel D. Becker: Longer term as well as as medium term product development and clinical data development initiatives as well as that investing in commercial execution.
Joel D. Becker: Of the business, while maintaining good operating discipline and so I think I think what youre seeing from US here. If you. If you look at the income statement as some focused areas of investment in R&D.
Joel D. Becker: And I expect to say a bit more about that going forward, but the punchline here would be that we're investing in the business, and we're working to strike that balance between optimizing investments in critical, you know, longer-term as well as medium-term product development and clinical data development initiatives, as well as investing in commercial execution of the business while maintaining good operating discipline. And so I think what you're seeing from us here, if you look at the income statement, is some focused areas of investment in R&D, some expansion and investment in our commercial organization to continue to drive the top line, and, you know, a real strong focus on expense control and operating discipline in all other areas.
Joel D. Becker: <unk> expansion and investment in our commercial organization to continue to drive the topline and real strong focus on expense control and operating discipline in all other areas.
Speaker Change: Got it thank you and maybe just.
Joel D. Becker: One on the procedure environment diagnostic funnel environment in general.
Joel D. Becker: Anything that youre seeing in the first quarter into the second quarter.
Joel D. Becker: And.
Speaker Change: Anything that you would you would highlight thanks for taking the questions.
Speaker Change: Thank you.
Joel D. Becker: Another good question just with regard to Q1 in particular.
Joel D. Becker: I would say that we've seen and you have seen here for the past few quarters, good strong pipeline of patients and.
Speaker Change: Good good.
Andrew Christopher Ranieri: And maybe just one on the procedure environment and diagnostic funnel environment in general, anything that you're seeing in the first quarter into the second quarter, and anything that you would highlight. Thanks for taking the questions.
Joel D. Becker: Kind of consistency and robustness of what we're seeing from from individual centers and what we see from the pipeline more generally so.
Speaker Change: The pipeline looks good and consistent would you add anything to that Rebecca.
Speaker Change: No I think for our fleet.
Andrew Christopher Ranieri: With what we see in the pipeline we track.
Joel D. Becker: Thank you, Drew. Another good question.
Joel D. Becker: Patients in.
Joel D. Becker: Sure.
Joel D. Becker: A lot of emphasis on that.
Joel D. Becker: I think were pleased generally with being normalized.
Joel D. Becker: Normalized volumes, and just where the patient pipeline.
Joel D. Becker: So trends are positive.
Speaker Change: Thanks drew.
Joel D. Becker: Just with regard to Q1 in particular, I would say that, you know, we've seen and have seen here for the past few quarters, a good, strong pipeline of patients and, you know, a good, good, you know, kind of consistency and robustness of what we're seeing from, from, you know, individual centers and what we see from the pipeline more generally. So, I think, you know, the pipeline looks good and consistent. Would you add anything to that, Rebecca? I think we're pleased with what we see in the pipeline.
Rebecca: Thank you.
Speaker Change: There are no further question at this time.
Rebecca L. Kuhn: I think we're pleased with what we see in the pipeline. We track patients, and we place a lot of emphasis on that. I think we're pleased generally with seeing normalized EMU volumes and just where the patient pipeline is. So, trends are positive.
Joel D. Becker: Mr. Joel Becker. Please proceed.
Speaker Change: Thank you everyone for listening to our Q1 2024 call today.
Speaker Change: As I mentioned earlier here at neuro pace, we're excited about and focused on the opportunity to help close the treatment gap for drug resistant.
Rebecca L. Kuhn: <unk> FC patients.
Rebecca L. Kuhn: Expanding access to <unk> therapy.
Rebecca: Excited about doing so we look forward to executing on our growth strategy and to updating everyone on our progress throughout 2024.
Rebecca: Thank you.
Operator: There are no further questions at this time. Mr. Joel Becker, please proceed.
Speaker Change: Thank you. This concludes our conference for today. Thank you all for participating you may all disconnect.
Joel D. Becker: Thank you everyone for listening to our Q1 2024 call today. As I mentioned earlier, here at Neuropace, we're excited about and focused on the opportunity to help close the treatment gap for drug-resistant epilepsy patients. By expanding access to ARNAS therapy, we are excited about doing so. We look forward to executing on our growth strategy and to updating everyone on our progress throughout 2024.
Joel D. Becker: Okay.
Operator: Thank you. That concludes our conference for today. Thank you all for participating. You may all disconnect.
Joel D. Becker: [music].
Operator: Okay.
Operator: [music].
Operator: Okay.
Operator: Yes.
Operator: Hi.