Q1 2024 ClearPoint Neuro Inc Earnings Call

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Operator: Greetings and welcome to the Clearpoint Neuro, Inc. first quarter 2024 financial results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press * 0 on your telephone keypad.

Greetings and welcome to the Clearpoint Neuro, Inc. First quarter 'twenty 'twenty four financial results conference call.

Operator: At this time all participants are in a listen only mode.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Operator: As a reminder, this conference is being recorded. Comments made on this call may include statements that are forward-looking within the meaning of securities laws. These forward-looking statements may include, without limitation, statements related to anticipated industry trends, the company's plans, prospects, and strategies, both preliminary and projected, the size of total addressable markets, or the market opportunity for the company's products and services, and management's expectations, beliefs, estimates, or projections regarding future revenue, results of operations, or the adequacy of cash and cash equivalents to support operations and meet future obligations. However, actual results or trends could differ materially.

Operator: As a reminder, this conference is being recorded.

Operator: The company undertakes no obligation to revise forward-looking statements for new information or future events. For more information, please refer to the company's annual report on Form 10-K for the year ended December 31st, 2023, which has been filed with the Securities and Exchange Commission, and the company's quarterly report on Form 10-Q for the three months ended March 31st, 2024, which the company intends to file with the SEC on or before May 15th, 2024. All the company's filings may be obtained from the SEC or the company's website at www.clearpointneuro.com.

Operator: Comments made on this call may include statements that are forward looking within the meaning of securities laws. These forward looking statements may include without limitation statements related to anticipated industry trends, the company's plans prospects and strategies, both preliminary and projected besides a total addressable market or.

Operator: The market opportunity for the company's products and services and managements expectations beliefs estimates or projections regarding future revenue results of operations or the adequacy of cash and cash equivalent balances could support operations and meet future obligations.

Operator: Actual results or trends could differ materially the company undertakes no obligation to revise forward looking statements for new information or future events.

Operator: For more information please refer to the company's annual report on Form 10-K for the year ended December 31, 2023, which has been filed with the Securities and Exchange Commission and the Companys quarterly report on Form 10-Q for the three months ended March 31, 2020 for which the company intends to file with.

Operator: Within the Securities and Exchange Commission on or before May 15th 2020 for all the company's filings may be obtained from the FCC or the company's website.

Operator: Www Dot Clearpoint neuro dot com it.

Operator: It is now my pleasure to introduce your host, Joe Burnett, Chief Executive Officer. Thank you, Joe. You may begin.

Operator: It is now my pleasure to introduce your host Carol Burnett Chief Executive Officer. Thank you Joe you may begin.

Joseph Michael Burnett: Thank you. And thank you to all of the investors and analysts on today's call for being a part of the Clearpoint vision and journey. Our mission and our priority is to help restore quality of life to patients and their families who are suffering from some of the most debilitating neurological disorders imaginable. In the first quarter of 2024, we have continued to make progress across our four-pillar growth strategy, including biologics and drug delivery, functional neurosurgery navigation, therapy, and access products, and in achieving global scale.

Joseph Michael Burnett: Thank you.

Joseph Michael Burnett: To all of the investors and analysts on todays call for being a part of the Clearpoint vision and journey.

Joseph Michael Burnett: Our mission and our priority is to help restore quality of life to patients and their families who are suffering from some of the most debilitating neurological disorder. It's imaginable.

Joseph Michael Burnett: In the first quarter of 2024, we've continued to make progress across our four pillar growth strategy, including biologics and drug delivery.

Joseph Michael Burnett: Channel Neurosurgery navigation therapy, and access products and in achieving global scale.

Joseph Michael Burnett: In 2024, we expect meaningful contributions from not just one but all four of these growth pillars as we launch new products and services throughout the year. These new products will allow us to expand into the operating room, expand into laser therapy, expand internationally, and expand into more comprehensive preclinical and clinical trial services, as many of our biologics and drug delivery partners progress through the regulatory process and begin first-in-human clinical trials for their therapy. I will now turn the call over to Danilo, our CFO, to review our financial performance for the quarter, after which I will add some detail to our four-pillar growth strategy. Danilo?

Joseph Michael Burnett: In 2024, we expect a meaningful contribution from not just one but from all four of these growth pillars, as we launched new products and services throughout the year.

Danilo: These new products will allow us to expand into the operating room expand into laser therapy expand internationally and expand into more comprehensive preclinical and clinical trial services as many of our biologics and drug delivery partners progress through the regulatory process and begin first in human clinical trials for their therapy.

Danilo: I will now turn the call over to Daniela our CFO to review our financial performance in the quarter, after which I will add some detail to our four pillar growth strategy Daniela.

Danilo DAlessandro: Thank you, Joe, and thank you all for joining us today. Looking at the first quarter of 2024 results, total revenue was $7.6 million for the three months ended March 31st, 2024, and $5.4 million for the three months ended March 31st, 2023, which represents 41% growth versus the first quarter of 2020. Our revenue is made up of three components, biologics and drug delivery, functional neurosurgery navigation and therapy, and capital equipment and software.

Danilo: Thank you Joe and thank you all for joining us today.

Danilo DAlessandro: Biologics and drug delivery revenue includes sales of disposable products and services related to customer-sponsored preclinical and clinical trials utilizing our products. Biologics and Drug Delivery revenue increased 61% to $4.3 million in the first quarter, up from $2.7 million in 2023. This increase was fueled by our expanded Biologics and Drug Delivery office. Functional neurosurgery navigation therapy revenue consists of commercial sales of disposable products and services related to cases utilizing the Clearpoint system to deliver medical device therapy to the proper target and the Clearpoint NeuroPrism laser applicator. This revenue segment declined 18% to $1.9 million for the first quarter of 2024. The decline in the segment was fully due to lower service revenue of $0.5 million.

Danilo DAlessandro: Looking at the first quarter 'twenty 'twenty four results total revenue was $7 $6 million for the three months ended March 31, 'twenty 'twenty, four and $5 $4 million for the three months ended March 31st 2023, which represents 41% growth versus the first quarter of 2023.

Danilo DAlessandro: Our revenue is made up of three components biologics in drug delivery functional neurosurgery navigation and therapy and capital equipment and software.

Danilo DAlessandro: Biologics in drug delivery revenue include sales of disposable products and services related to customer sponsored preclinical and clinical trials utilizing our products.

Danilo DAlessandro: <unk> and drug delivery revenue increased 61% to $4 3 million the first quarter up from 2.7 million in 2023. This increase was fueled by our expanded biologics and drug delivery offering.

Danilo DAlessandro: Functional neurosurgery navigation therapy revenue consists of commercial sales of disposable products and services related to cases, utilizing the clearpoint system to deliver medical device therapy to the appropriate target and the Clearpoint neuro presume laser applicators.

Danilo DAlessandro: Revenue segment declined 18% to $1 9 million for the first quarter of 'twenty 'twenty four the decline in the segment was fully due to lower service revenue of $25 million.

Danilo DAlessandro: Capital Equipment and Software Revenue, consisting of sales of Clearpoint Reusable Hardware and Software and related services, increased 255% to $1.4 million in the quarter from $0.4 million for the same period in 2023 as a result of multiple placements of Clearpoint Capital and Software and Clearpoint Neuro Prism Laser. Gross margin for the first quarter of 2024 was 59%, in line with a gross margin of 59% for the three months ended March 31st, 2023.

Danilo DAlessandro: Capital equipment and software revenue consisting of sales of clear point reasonable hardware and software and related services increased 255% to $1.4 million in the quarter from point $4 million for the same period in 2023 as a result of multiple placements of clear point capital and softer and Clearpoint neuro prison later.

Danilo DAlessandro: Our systems.

Danilo DAlessandro: Gross margin for the first quarter 'twenty 'twenty four was 59% in line with gross margin of 59% for the three months ended March 31 2023.

Danilo DAlessandro: Research and development costs were $2.6 million for the three months ended March 31, 2024, compared to $3 million for the same period in 2023, a decrease of $0.4 million, or 13%. In line with prior quarters, the decrease was due primarily to lower product development costs as a result of reprioritization of certain research and development initiatives. Sales and marketing expenses were $3.3 million for the first quarter of 2024, compared to $2.9 million for the same period in 2023, an increase of $0.4 million, or 12%.

Danilo DAlessandro: Research and development costs were $2 $6 million for the three months ended March 31, 2024 compared to $3 million for the same period in 2023, a decrease of $24 million or 13%.

Danilo DAlessandro: In line with prior quarters. The decrease was due primarily to lower product cost as a result of repurchase nation of certain research and development initiatives.

Danilo DAlessandro: Sales and marketing expenses were $3 $3 million for the first quarter of 'twenty 'twenty four compared to $2 $9 million for the same period in 2023, an increase of <unk> $4 million or 12%. This increase was due primarily to additional personnel costs, including share based compensation, resulting from increases in head count as well as increases.

Danilo DAlessandro: This increase was due primarily to additional personnel costs, including share-based compensation, resulting from increases in headcount, as well as increases in travel costs as we expanded our product and service offerings. General administrative expenses were $2.8 million for the first quarter, a slight decrease of $0.1 million or 4% compared to $3 million for the same period in 2023.

Danilo DAlessandro: And travel costs, as we expanded our product and service offering.

Danilo DAlessandro: General and administrative expenses were $2 $8 million for the first quarter, a slight decrease of <unk> 1 million or 4% compared to $3 million for the same period in 2023.

Danilo DAlessandro: Overall, our operating expenses for the first quarter of 2024 were $8.8 million, compared to $8.9 million for the first quarter of 2023. We continue to show operating leverage as OPEX was essentially flat while we grew our revenue 41% compared to Q1 2020. Net interest income was $0.1 million for each of the three months ended March 31, 2024, and 2023 as a result of interest rates remaining relatively consistent. As of March 31st, 2024, we had cash and cash equivalents totaling $35.4 million, as compared to $23.1 million at December 31st, 2023, with the increase resulting primarily from the completion of a public offering of the company's common stock in March 2024, which resulted in net proceeds of $16.2 million.

Danilo DAlessandro: Overall, our operating expenses for the first quarter of 'twenty 'twenty, four were $8 $8 million compared to $8 $9 million for the first quarter of 2023, we continue to show operating leverage as Opex was essentially flat, while we grew our revenue 41% compared to Q1 2023.

Danilo DAlessandro: Net interest income was <unk> 1 million for each of the three months ended March 31, 'twenty 'twenty, four and 2023 as a result of interest rates remaining relatively consistent.

Danilo DAlessandro: As of March 31st 2024, we had cash and cash equivalents totaling $35 $4 million as compared to $23 $1 million at December 31st one two and three with the increase resulting primarily from the completion of a public offering of the company's common stock in March 'twenty, 'twenty, four which resulted.

Danilo DAlessandro: Net proceeds of $16 $2 million.

Danilo DAlessandro: Our cash burn in Q1 2024 was $3.8 million, down 32% from the prior year's first quarter. We continue to maintain our focus on appropriate resource allocation and cash management and will continue to focus on demonstrating operating leverage as we grow our revenue. I'd like to turn the call back to Joe.

Danilo DAlessandro: Our cash burn in Q1, 2024 was $3 8 million down 32% from the prior year's first quarter.

Danilo DAlessandro: We continue to maintain our focus on appropriate resource allocation and cash management and will continue to focus on demonstrating operating leverage as we grow our revenue.

Danilo DAlessandro: I'd like to turn the call back to Joe.

Joseph Michael Burnett: Thanks, you know. 2024 is off to a great start for Clearpoint as we have made significant progress toward both financial operating goals, as well as strategic product and partnership goals that will benefit the company in 2024 and beyond. This year, we have the potential to grow along a number of different vectors at the same time. This opportunity is a result of the multiple investments we have made into the team and to the portfolio, all of which will start to gain steam this year.

Joe: Thanks Danielle.

Joe: 24 is off to a great start for clear point as we have made significant progress towards both financial operating goals as well as strategic product and partnership goals that will benefit the company in 2024 and beyond.

Joseph Michael Burnett: This year, we have the potential to grow along a number of different factors at the same time.

Joseph Michael Burnett: This opportunity as a result of the multiple investments we have made into the team and the portfolio all of which will start to gain steam gain steam this year.

Joseph Michael Burnett: These 2024 growth opportunities include, number one, adding new hospitals and research centers to our installed base at an accelerated rate. Number two, expanding our navigation offering into the operating room, where more than 95% of all procedures take place.

Joseph Michael Burnett: These 2024 growth opportunities include number one, adding new hospitals and research centers to our installed base at an accelerated rate.

Joseph Michael Burnett: Number two expanding our navigation offering into the operating room, where more than 95% of all procedures take place.

Joseph Michael Burnett: Number three, increasing SANE store sales with the SmartFrame OR and the Prism Laser Therapy System, complementing our MRI-guided system with our existing customers. Number four, adding new preclinical and clinical trial services to our biologics and drug delivery portfolio. And number five, participating in the progression of our biotech partners as they move beyond benchtop and preclinical to first-in-human clinical trials. As a result, we expect all of our segments to contribute meaningful double-digit growth to the company in 2024. We continue to expect revenue for the year in the range of $28 to $32 million.

Joseph Michael Burnett: Number three increasing same store sales with a smart frame or and the prison laser therapy system complementing our MRI guided system with our existing customers.

Joseph Michael Burnett: Number four adding new preclinical and clinical trial services to our biologic and drug delivery portfolio.

Joseph Michael Burnett: And number five participating in the progression of our biotech partners as they move beyond the bench top and preclinical and into first in human clinical trials.

Joseph Michael Burnett: As a result, we expect all of our segments to contribute meaningful double digit growth to the company in 2024, we.

Joseph Michael Burnett: We continue to expect revenue for the year in the range of 28 to 32 million and as already mentioned, we started the year strong with growth of 41% here in Q1.

Joseph Michael Burnett: And, as already mentioned, we started the year strong with growth of 41% here in Q1. Let's again break that progress down into our four growth pillars. First, our biologics and drug delivery business, which is our largest segment, continued to perform and grew 61% in the first quarter. Our core Clearpoint navigation system and software, and our SmartFlow cannulas continue to be the leading guidance and infusion technology for gene and cell therapy due to the confidence of precision targeting with MRI, predictable infusions with our well-studied cannulas, and comprehensive documentation of the success of the procedure with live imaging and monitoring using our maestro AI-derived software.

Joseph Michael Burnett: That's again break that progress down into our four growth pillars.

Joseph Michael Burnett: First our biologics and drug delivery business, which is our largest segment continued to perform and grew 61% in the first quarter.

Joseph Michael Burnett: Our core Clearpoint navigation system and software and our smart flow Cannula is continued to be the leading guidance in infusion technology for gene and cell therapy due to the confidence of precision targeting with MRI predictable infusions with our well studied cannula and comprehensive documentation of the success of the procedure with live image.

Joseph Michael Burnett: And monitoring using our maestro a our AI derived software.

Joseph Michael Burnett: We continue to believe our comprehensive solution is second to none, and further refinements and add-ons will only extend our leading position. Importantly, in Q1, we saw the BLA submission by one of our partners, PTC Therapeutics, for their AADC deficiency drug, Aphasia. This is an important milestone and reflects the first ever neuro gene therapy submission here in the United States and could potentially lead to the first commercial gene therapy product sometime in 2025. We also congratulated another partner, Aviata Bio, for their first ever dosing of a human patient with their experimental treatment for frontal temporal lobe dementia, which is another severely debilitating disease.

Joseph Michael Burnett: We continue to believe our comprehensive solutions are second to none and further refinements in add ons will only extend our leading position.

Joseph Michael Burnett: Importantly in Q1, we saw the BLA submission by one of our partners PTC therapeutics for their E. A D C deficiency drag it stays at this.

Joseph Michael Burnett: This is an important milestone and reflects the first ever narrow gene therapy submission here in the United States and could potentially lead to a first commercial gene therapy product sometime in 2025.

Joseph Michael Burnett: We also congratulate another partner I'll be out of bio for their first ever dosing at the human patient with their experimental treatment for frontal temporal dementia, which is another severely debilitating disease.

Joseph Michael Burnett: We continue to expect the phase progression of multiple partners and programs during the balance of this year, leading to additional first in human progress updates as these drugs graduate from the bench and preclinical testing into these crucial phase one and phase two trials. We have also added testing and modeling capabilities to our preclinical team, which are already showing results with that 61% growth. This includes prototyping of an additional route of administration, as well as new AI-derived predictive and monitoring software.

Joseph Michael Burnett: We continue to expect the phase progression of multiple partners and programs during the balance of this year, leading to additional first in human progress updates as these drugs graduate from the bench in preclinical testing into these crucial phase one and phase two trial.

Joseph Michael Burnett: We have also added testing and modeling capabilities to our preclinical team, which are already showing results with that 61% growth rate.

Joseph Michael Burnett: Includes prototyping of additional routes of administration as well as new AI derived predictive and monitoring software.

Joseph Michael Burnett: These additions to our biologics portfolio allow us to pursue more strategic partnerships with pharma, which may include drug-based clinical milestones, co-development programs, commercial product pricing agreements, and actual drug therapy royalties. Due to the co-labeling or combination device strategy for pharma, our partners fully recognize that we will be an essential part of their supply chain for years to come, and we are happy to de-risk their programs by providing long-term commitments and other assurances of supply. The most challenging part of our business model is predicting which partners will be successful and when commercialization will be achieved. Our team has done an amazing job turning these challenges into opportunities.

Joseph Michael Burnett: These additions to our biologics portfolio allow us to pursue more strategic partnerships with pharma, which may include drug based clinical milestones co development programs commercial product pricing agreements and actual drug therapy royalties.

Joseph Michael Burnett: Due to the co labeling a combination device strategy for pharma are our partners fully recognize that we will be in a central part of their supply chain for years to come and we are happy to derisk their programs by providing long term commitments and other assurances of supply.

Joseph Michael Burnett: The most challenging part of our business model is predicting which partners will be successful and when commercialization will be achieved.

Joseph Michael Burnett: Our team has done an amazing job turning these challenges into opportunities.

Joseph Michael Burnett: First, we have reduced the success risk by having multiple shots at goal, both across indications and across partners. We are currently active in more than 35 different disease states, meaning even if just a few of the diseases we encounter are solved, it could have a significant impact on our current revenue. Similarly, we have recreated redundancy within these indications, meaning we often have multiple partners looking to treat the same disease and do not need every partner to be successful; only one or two per indication.

Joseph Michael Burnett: First we have reduced the success risk by having multiple shots on goal both across indications and across partners.

Joseph Michael Burnett: We are currently active in more than 35 different disease states, meaning even if just a few of the diseases. We encounter a salt it could have a significant impact on our current revenue.

Joseph Michael Burnett: Similarly, we ever created redundancy within these indications, meaning we often have multiple partners looking to treat the same disease and do not need every partner to be successful only one or two per indication.

Joseph Michael Burnett: In this sense, we may be viewed as an attractive ETF of neurobiotechnology companies, where we are diversified across both partners and diseases. But we also do not bear the capital risk of having to fund these expensive clinical trials, limiting our downtime.

Joseph Michael Burnett: In this sense, we may be viewed as an attractive ETS of narrow biotech biotechnology companies.

Joseph Michael Burnett: Where we are diversified across both partners and diseases, but.

Joseph Michael Burnett: But we also do not bear the capital risk of having to fund these expensive clinical trials limiting our downside.

Joseph Michael Burnett: Second, we have also reduced the timing risk by adding all of the preclinical services and capabilities to allow us to achieve cash breakeven without having to rely on the commercialization of these drugs. With our current portfolio, we believe that a partner could order each and every one of our existing products and services and create up to a $10 million revenue opportunity for Clearpoint before a drug is ever approved or commercialized. That would equate to an opportunity of close to $500 million over the next 10 years. Realizing this opportunity would be more than enough to generate positive cash flow and fund the company into the commercialization stage of these new-to-world cell and gene therapies.

Joseph Michael Burnett: Second we have also reduced the timing risk by adding all of the preclinical services and capabilities to allow us to achieve cash breakeven without having to rely on the commercialization of these drugs.

Joseph Michael Burnett: Our current portfolio, we believe that a partner could order each and every one of our existing products and services and create up to a $10 million revenue opportunity for clear point before a drug is ever approved a commercial lot that.

Joseph Michael Burnett: That would equate to an opportunity to get close to $500 million over the next 10 years with our existing group of partners.

Joseph Michael Burnett: Realizing this opportunity would be more than enough to generate positive cash flow and to fund the company into the commercial commercialization stage of these new to world cell and gene therapies.

Joseph Michael Burnett: Just this week, we are again participating in the American Society of Cell and Gene Therapy annual meeting in Baltimore, which is on the heels of the European counterpart meeting which took place last month in Rome, Italy.

Joseph Michael Burnett: Just this week, we are again participating in the American society of cell and gene therapy annual meeting in Baltimore, which is on the heels of the European counterpart meeting, which took place last month in Rome, Italy. These meetings often show an immediate return and represent a significant part of our <unk> sales process to pharma and biotech company.

Joseph Michael Burnett: These meetings often show an immediate return and represent a significant part of our B2B sales process to pharma and biotech companies. It is especially reassuring that many of our partners have successfully raised capital, and we seem to be seeing a pickup in the investment into the biotech market. The bottom line is that the market appears to be putting significant capital again into this space, and we seem to be in the right place at the right time as both small and mid-cap device companies and biotech have both rebounded the same. Moving on to pillar number two, or functional neurosurgery navigation. Here we have made progress on a few very important fronts.

Joseph Michael Burnett: It is especially reassuring that many of our partners has successfully raised capital and we seem to be seeing a pick up in the investment into the biotech market.

Joseph Michael Burnett: Bottom line is that the market appears to be putting significant capital again into this space and we seem to be in the right place at the right time at the small and mid cap device companies and biotechs, both rebound at the same time.

Joseph Michael Burnett: Moving on to pillar number two or functional neurosurgery navigation here, we have made progress on a few very important fronts.

Joseph Michael Burnett: First, we saw our highest demand ever for our traditional MRI guided system, leading to the opening of eight new customers and approximately $1.4 million in capital revenue, which was a new record. To put this in perspective, in 2023, we added seven new customers the entire year. And this year, we have already added eight customers in just the first quarter alone. This shows the accelerated demand for our products and the realization that we offer a unique capability for neuro-navigation.

Joseph Michael Burnett: First we saw our highest demand ever for our traditional MRI guided system, leading to the opening of eight new customers and approximately $1.4 million in capital revenue, which was a new record.

Joseph Michael Burnett: To put this in perspective in 2023, we added seven new customers the entire year and this year, we have already added eight customers in just the first quarter alone.

Joseph Michael Burnett: This shows the accelerated demand for our products and the realization that we offer a unique capability for neuro navigation.

Joseph Michael Burnett: Even if you do not use Clearpoint for every patient case, having access to Clearpoint is becoming an essential capability for any modern neurosurgery department. While we do not expect every quarter this year to have eight new customers and 1.4 million in revenue, we do continue to have a healthy fund and expect to keep adding customers in 2024 at around double the historic rate. Next, we saw the release of our 2.2 software that includes the optional Maestro brain model capability.

Joseph Michael Burnett: Even if you do not use clear point for every patient case, having access to clear point is becoming an essential capability for any modern neurosurgery department.

Joseph Michael Burnett: While we do not expect every quarter this year to add eight new customers and $1 4 million in revenue. We do continue to have a healthy funnel and expect to keep adding in 2024 at around double the historic rate.

Joseph Michael Burnett: Next we saw the release of our 2.2 software that includes the optional Nitro brain model capability.

Joseph Michael Burnett: This will be a key feature for our future software releases supporting drug delivery, deep brain stimulation navigation, and laser ablation planning and prediction. Finally, we achieved FDA clearance of the SmartFrame OR solution designed to move Clearpoint out of the MRI suite and into the operating room. We announced our first clinical cases just last week, and we have had all of our early customers either schedule additional cases or already reorder product, which is a great early fund. As a reminder, this product does not require any hardware or software capital components from Clearpoint and can often plug and play with existing hospital equipment.

Joseph Michael Burnett: It'll be a key feature for our future software releases supporting drug delivery deep brain stimulation navigation and laser ablation planning and prediction.

Joseph Michael Burnett: This will allow SmartFrame OR to likely be our fastest launch to date, and we expect to move out of limited market release and into full market release here in the third quarter with meaningful revenue traction in the second half of the year. All in all, this expansion of our customer base is a very positive early indicator, as the placement of the razor will allow razor blade sales to follow in the coming quarter.

Joseph Michael Burnett: Finally, we achieved FDA clearance of the smart frame or solution designed to move clear point out of the MRI suite and into the operating room.

Joseph Michael Burnett: We announced our first clinical cases, just last week and have had all of our early customers either schedule. Additional cases were already reorder product, which is a great early fun.

Joseph Michael Burnett: As a reminder, this product that does not require any hardware or software capital components problem, Clearpoint and can often plug and play within existing hospital equipment.

Joseph Michael Burnett: This will allow smart frame LR to likely be our fastest launch to date and we expect to move out of limited market release and into full market release here in the third quarter with meaningful revenue traction in the second half of the year.

Joseph Michael Burnett: All in all this expansion of our customer base has been a very positive early indicator as the placements of the razor will allow the razorblade sales to follow in the coming quarters.

Joseph Michael Burnett: For our third pillar, therapy and access products, we made some terrific progress in the quarter as well. First, our PRISM laser therapy limited market release continued to progress with multiple new users and new installations in the quarter, including our very first laser capital sale. Just to provide some clarification, when we talk about adding a new customer to our customer base, that means we took a customer who was not using Clearpoint at all and shipped our first product to them.

Joseph Michael Burnett: For our third pillar therapy and access products, we made some terrific progress in the quarter as well.

Joseph Michael Burnett: This does not include customers who were already using Clearpoint and then added a new technology like Prism. This example would expand our Prism install base but would not count as a new customer. Second, we just announced FDA clearance for an important prism accessory that will enable the prism laser fibers to not only be placed with Clearpoint navigation in the MRI suite but also place them in the operating room with commonly available navigation and robotics. This significantly expands the acceptable market, as the vast majority of laser ablation procedures are done today with navigation systems other than Clearpoint.

Joseph Michael Burnett: First our prism laser therapy limited market beliefs continues to progress with multiple new users and new installations in the quarter, including our very first laser capital sale.

Joseph Michael Burnett: Just to provide some clarification when we talk about adding a new customer to our customer base that means we took a customer who is not using clear point at all and shipped our first product to that this does not include customers who are already using clear point and then added a new technology like prison.

Joseph Michael Burnett: This example would expand our prism install base, but would not count as a new customer.

Joseph Michael Burnett: Second, we just announced FDA clearance for an important prison accessory that will enable the prism laser fibers to not only be placed with clear point navigation in the MRI suite, but do also placed prison laser fibers in the operating room with commonly available navigation and robotic systems.

Joseph Michael Burnett: This significantly expands the accessible market is the vast majority of laser ablation procedures are done today with navigation systems other than clear point.

Joseph Michael Burnett: We believe we will be successful in converting some of these customers to Clearpoint Navigation, but as step one, we can now provide a laser solution that fits into their existing workflow and focus on the many benefits of PRISM compared to earlier generation laser therapy options. If you look at our Q1 revenue for navigation and laser disposables, you will see that the segment showed an 18% decline versus the prior year. However, if you remove the brain-computer interface service revenue, our actual product revenue was pretty much flat.

Joseph Michael Burnett: We believe we will be successful in converting some of these customers to clear point navigation, but as step one we can now provide a laser solution that fit into their existing workflow and focus on the many benefits of prison compared to earlier generation laser therapy option.

Joseph Michael Burnett: If you look at our Q1 revenue for navigation and laser disposables, you'll see that the segment showed an 18% decline versus prior year. However, if you remove the brain computer interface service revenue or actual product revenue was pretty much flat.

Joseph Michael Burnett: Given the addition of new customers, new operating room navigation, and new therapy revenue, we expect to return to positive double-digit growth for the segment starting here in the second quarter. And finally, pillar number four of achieving global scale, we have made significant progress as well. Our international installations continue to grow, and we continue to work on regulatory submissions for new geographies on behalf of our pharma partners. We look forward to adding new countries to our set of regulatory approvals to further solidify the global nature of Clearpoint, which is crucial for many drug delivery strategies.

Joseph Michael Burnett: Given the addition of new customers, new operating room navigation and new therapy revenue, we expect to return to positive double digit growth for the segment starting here in the second quarter.

Joseph Michael Burnett: And finally pillar number four are achieving global scale, we have made significant progress as well.

Joseph Michael Burnett: International installations continue to grow and we continue to work on regulatory submissions for new geographies on behalf of our pharma partners.

Joseph Michael Burnett: We look forward to adding new countries to our set of regulatory approvals to further solidify the global nature of clear point, which is crucial for many drug delivery strategy.

Joseph Michael Burnett: As we mentioned on the last earnings call, we want to show progress towards operational cash breakeven by growing revenue and margin dollars while keeping operating expenses relatively flat. In the first quarter, you can see we grew revenue by 41% while keeping OPEX potentially flat, which in turn reduced our operational cash burn by 32% for the quarter. The successful execution of a limited and targeted capital raise in March yielded net proceeds of just over $16 million, which solidified our balance sheet with more than $35 million in cash and equivalents, putting us in a solid position to repay our only outstanding convertible debt, if necessary, in January of 2025. With that, I would like to open the call to any questions. Thank you.

Joseph Michael Burnett: As we mentioned on the last earnings call. We wanted to show progress towards operational cash breakeven by growing revenue and margin dollars, while keeping operating expenses relatively flat.

Joseph Michael Burnett: In the first quarter you can see we grew revenue by 41%, while keeping opex essentially flat, which in turn reduced our operational cash burn by 32% for the quarter.

Joseph Michael Burnett: The successful execution of a limited and targeted capital raise in March yielded net proceeds of just over $16 million, which solidified our balance sheet with more than $35 million in cash and equivalent putting us in a solid position to repay our only outstanding convertible debt if necessary in January of 2020.

Joseph Michael Burnett: With that I would like to open the call to any questions.

Operator: Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Thank you well now be conducting a question and answer session.

Operator: You'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: One moment, please, while we poll for questions. Thank you. Our first question is from Frank Takkinen with Lake Street Capital Markets. Please proceed with your question.

Operator: One moment, please while we poll for questions.

Frank James Takkinen: Thank you. Our first question is from Frank <unk> with Lake Street Capital markets. Please proceed with your question.

Frank James Takkinen: Great, thanks for taking the questions. Congratulations on the solid start to the year. I wanted to start with one around guidance. Obviously, you have to have a really strong start.

Frank James Takkinen: Great. Thanks for taking my questions. Congrats on the solid start to the year wanted to start with one around the guidance, obviously you're off to a really strong start if you just think about the mid point, you've got 25% of that already in the bag and typically we see you guys grow sequentially as you advance some of your different.

Frank James Takkinen: If you just think about the midpoint, you've got 25% of that already in the bag. Typically, we see you guys grow sequentially as you advance some of your different pipeline assets, partner revenues, new products, etc. I was curious how you were thinking about keeping the guidance range versus maybe increasing the low end of it or increasing the midpoint, given the strong start to the year.

Frank James Takkinen: Different pipeline assets partner revenues, new products launching et cetera, I was curious on how you were thinking about keeping the guidance range versus maybe increasing the low end of it are increasing the mid point.

Frank James Takkinen: Given the strong start to the year.

Joseph Michael Burnett: Sure. Thanks. Thanks for the question, Frank.

Speaker Change: Sure. Thanks, Thanks for the question Frank.

Speaker Change: At this point you know we're so early into the year I don't think we're in a position to change the guidance.

Joseph Michael Burnett: Yeah, at this point, you know, we're so early into the year, I don't think we're in a position to change the guidance. You know, one reason is the early start; there are always things that can happen in the second half of the year. And number two, a big part of our growth here in Q1 came from kind of a non-recurring capital component, which, you know, was a great start to the year, but we don't fully expect 1.4 million in capital sales every single quarter.

Speaker Change: One reason is the early start and Theres always things that can happen in the second half of the year.

Joseph Michael Burnett: Number two a big part of our growth here in Q1 came from kind of a nonrecurring capital component, which was a great start to the year, but we don't fully expect $1 4 million in capital sales every single quarter, it'll likely be less than that in the quarters ahead.

Joseph Michael Burnett: It'll likely be less than that in the quarters ahead, so that capital has to be replaced by something else. And in our case, we think, you know, very strongly, it's going to be replaced by the disposable flow of prism lasers and SmartFrame OR and traditional MR navigation disposables, which, again, like I just said, are going to kick in in Q2. But at this point, it kind of remains to be seen how strong the actual capital sales will be in the closing part of the year. So we're going to keep guidance where it is for right now.

Joseph Michael Burnett: So that capital has to be replaced by something else and in our case, we think very strongly it is going to be replaced by the disposable slow.

Joseph Michael Burnett: Prison lasers, and smart frame LR and traditional MRO navigation disposable, which again like I just said, we're going to kick in in Q2.

Joseph Michael Burnett: But at this point it kind of remains to be seen how strong the actual capital sales will be in the closing part of the year. So we're going to we're going to keep guidance, where it is for right now.

Frank James Takkinen: Got it. And that kind of segues into my second question, a two-parter. First, on the aid activations, obviously a significant uptick versus prior years. Anything specific to call out? Was it just pent up demand, maybe new products starting to spur excitement and activate sites? And then, as the second part to that, how should we think about the scale of processes as those sites are scaled? And how can they contribute to the second half of the year?

Speaker Change: Got it and that kind of segways into my my second question a two parter.

Frank James Takkinen: First on the eight Activations, obviously, a significant uptick versus prior years anything specific to call out a was it just pent up demand, maybe new products starting to spur excitement and activating sites and then as the second part to that how should we think about the scale up process is those sites are scaled.

Frank James Takkinen: And how can they contribute to the back half of the year.

Joseph Michael Burnett: Yeah, no, I think the good news is it's not one thing. It's actually, you know, demand coming from a few different locations. In some cases, it's a pharmaceutical company that has approached a hospital that would like to participate in a trial, and they need access to Clearpoint.

Frank James Takkinen: Yeah.

Speaker Change: I think the good news is it's not one thing it's actually demand coming from a few different location.

Joseph Michael Burnett: In some cases, it's a.

Joseph Michael Burnett: <unk> pharmaceutical.

Joseph Michael Burnett: Company that has approached the hospital that would like to participate in the trial and they need to access the clear point. So that's one one driver that we've seen in the first quarter of the year.

Joseph Michael Burnett: Another one is or a more comprehensive offering now that we can offer in the same package not only navigation, but also navigation and laser therapy, which as you know relatively new from an offering standpoint, though we have seen that be the driver for a couple of these placements and then also the expansion in the operating room.

Joseph Michael Burnett: So that's one driver that we've seen in the first quarter of the year. And then also the expansion of the operating room, the ability to get some experience with Clearpoint without necessarily having to have access to an MRI magnet, which is what a lot of users have always wanted to do, and we simply have not had a solution for them in the past.

Joseph Michael Burnett: The ability to get some experience with clear point without necessarily having to have access to an MRI magnet, which is what a lot of users that have always wanted to do and we simply have not had a solution for them in the past and we saw that here in Q1 as well. So those are the three primary drivers I would say that that are leading to these early placements and I think very much will continue.

Joseph Michael Burnett: The balance of the year.

Joseph Michael Burnett: As for the second question the scale up process.

Joseph Michael Burnett: Most of these things can happen pretty quickly so of those eight placement there was probably modest revenue in Q1, but certainly within three months into Q2 is when we would expect that that ramp up which kind of comes in two different phases. The first phase can be the initial cases that are used either during the evaluation or.

Joseph Michael Burnett: The permanent placement, which or disordered sort of as they go and then once a hospital figures out how many and how often they are going to use the clearpoint system, it's not uncommon that they would purchase a stocking or a par level quantity that they can keep on the shelf, which gives us a little boost as far as getting maybe three or four cases on the shelf.

Joseph Michael Burnett: And we saw that here in Q1 as well. So those are the three primary drivers, I would say, that are leading to these early placements and, I think, very much will continue throughout the balance of the year. So there's a little bit of an accelerator that happens maybe three to six months after the installation takes place. So, you know, that disposable line that we just mentioned, we're expecting that to go from an 18% decline to double-digit growth here in Q2. So I think we'll see a meaningful turnaround in that part of the business.

Joseph Michael Burnett: As opposed to just going case by case, so there's a little bit of an accelerator that happens maybe three to six months. After the install takes place. So that's.

Joseph Michael Burnett: That disposable line that we just mentioned we're expecting that to go from an 18% decline to a double digit growth here in Q2. So I think we'll see a meaningful a meaningful turnaround in that part of the business.

Frank James Takkinen: Very good. That's helpful. Thanks for taking the time to answer the question.

Speaker Change: Very good that's helpful. Thanks for taking the questions.

Speaker Change: Thanks Frank.

Operator: As a reminder, if you'd like to ask a question, please press star 1. Our next question is from William Wood with B. Reilly Securities. Please proceed with your question.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star one.

Operator: Our next question is from William Wood with B Riley Securities. Please proceed with your question.

William McKinnie Wood: Appreciate you taking my questions and congratulations on the very nice start to 2024. So, just trying to think, yeah, so just trying to think in terms of the existing new customers, digging in a little bit to the last question. When you have a new customer come in, how often do you see them sort of starting with one product and then expanding into additional product services or capital services? You know, I mean, is the expansion into a multi-product service user typical, or is it more that people stay with sort of one?

William McKinnie Wood: I appreciate you taking my questions and congratulations on the very nice start to our 2024.

William McKinnie Wood: So I'm just trying to think.

William McKinnie Wood: Yeah.

William McKinnie Wood: So just trying to think of in terms of the existing new customers digging a little bit just to last question.

William McKinnie Wood: When you have a new customer.

William McKinnie Wood: Hum.

William McKinnie Wood: How often do you see them sort of starting with one product and then expanding into additional projects services or capitals.

William McKinnie Wood: Services.

William McKinnie Wood: Do you is the is the expansion into a into a multi product service user typical or is it more that people stay with sort of one.

Joseph Michael Burnett: I'd say it's very common that they move on to other indications. I would say traditional deep brain stimulation navigation is generally where they start.

Speaker Change: I'd say, it's very common that they move on to other indications, but I would say a traditional deep brain stimulation navigation is generally where they start.

Joseph Michael Burnett: And that's a nice entry point because it's a pretty predictable procedure, but it's also a procedure that many patients have anxiety over. And the thought of being able to look at a live MRI image to guide the procedure and that the patient could be asleep instead of awake for that procedure is generally a very attractive starting point for a hospital. We then see them move in a couple different directions.

Joseph Michael Burnett: And that's a nice entry point, because it's a pretty predictable procedure, but it's also a procedure that many patients having variety over and the thought of being able to look at a lot of MRI in the guide the procedure and the patient can be asleep instead of awake for that procedure is it is generally a very attractive starting point for a hospital.

Joseph Michael Burnett: Then see them move in a couple of different direction, one could be doing additional DBS procedure. So instead of treating essential tremor or at our Parkinson's disease, they might move onto using DBS to treat epilepsy, which is a generally a new procedure and a new target in and sometimes a new surgeon at the hospital itself.

Joseph Michael Burnett: One could be doing additional DVS-type procedures. For example, instead of treating essential tremor or Parkinson's disease, they might move on to using DVS to treat epilepsy, which is generally a new procedure and a new target and sometimes a new surgeon at the hospital itself. In other instances, the next step they take is to go into laser ablation, where you might have a functional neurosurgeon using laser ablation to treat epilepsy, or you might have a neuro-oncologist using laser ablation to treat tumors.

Joseph Michael Burnett: In other instances the next step they take as they go into laser ablation, where you might have a functional neurosurgeon using laser ablation to treat epilepsy, where you might have a neuro oncologists using laser ablation to treat tumor. So theres a couple of different directions that it can go there and then finally, which is something that's not always in control of the surgeon, but more in.

Joseph Michael Burnett: So there's a couple different directions that it can go there. And then finally, which is something that's not always in control of the surgeon, but more in control of the chair of the hospital or the research center or some pharma and biotech companies, is to take this early experience using Clearpoint for laser, for DVS, for tumor, for epilepsy, and saying that, yes, I'm now a site that has significant Clearpoint experience, and I'm ready to be considered for enrollment in these more advanced clinical trials that are for cell and gene therapy that are coming down the road.

Joseph Michael Burnett: And control is the chair of the hospital or the research center or are some pharma and biotech companies is to take this early experience using clear point for laser for DDS for tumor for epilepsy, and saying that yes, I'm now at site that has significant clearpoint experience and I'm ready to be considered for enrollment.

Joseph Michael Burnett: And these more advanced clinical trials that are for cell and gene therapy that are coming down the road.

Joseph Michael Burnett: So I mean, we have to remember that about 90, 95% of the workflow is identical between a gene therapy infusion and a DVS procedure. So, you know, every one of these clinical procedures we're doing today is really preparing and training a site to be capable of doing clinical trial cases in the future, which is kind of another drawback as far as the technology goes.

Joseph Michael Burnett: You have to remember that about 90%, 95% of the workflow is identical between a gene therapy infusion as a DBS procedures. So every one of these clinical procedures. We're doing today is really preparing and training of sites to be capable of doing clinical trial cases in the future, which is kind of a another drawn on.

William McKinnie Wood: Got it. Yeah, that's very helpful.

William McKinnie Wood: Where the technology goes from.

William McKinnie Wood: Kind of sticking in that same vein, I mean, you had a lot of growth in the BDD revenue, which was largely based on the disposables and services related to preclinical and clinical, as you were just kind of discussing, you know, in that preclinical use, and maybe even the clinical, do you feel that the growth in that disposables and services is related to larger studies getting underway? Or more studies or more partners beginning to use your product? So is it more partnerships or just more general use?

Speaker Change: Got it yeah, that's very helpful. Tenancy in that same vein I mean, you had a lot of growth in the bdd revenue, which was not only based on the disposable and services related to preclinical and clinical as you were just kind of discussing you know.

William McKinnie Wood: In that pre clinical use and maybe even the clinical do you feel that the growth in.

William McKinnie Wood: And that disposable and services is that related to larger study is getting underway or more studies or more partners beginning to use your products or is it more partnerships or just more general use.

Joseph Michael Burnett: Yeah, I think it's I think of it more as the progression of the maturity of these different cell and gene therapy candidates. So, what I mean by that is, you know, generally, in your first engagement with a customer, we might do a little bit of prototyping, we might test compatibility, but, you know, there's not a big revenue opportunity for us in year one. You start to compare that to year two, year three, and year four, you know, then we start saying, okay, now we're doing repeatability testing, now we're doing toxicology testing and flow control studies and things like that, any of which sometimes could be 15, 20, as many as 50 different navigation systems and cannulas that are used in some of these studies.

Speaker Change: Yeah, I think it's I think of it more as the progression.

Joseph Michael Burnett:

Joseph Michael Burnett: The maturity of these different cell and gene therapy candidates.

Joseph Michael Burnett: So what I mean by that is generally in Europe, our first engagement with a customer we might do a little bit of prototyping, we might test compatibility, but theres not a big revenue opportunity for us in year. One you start to compare that to year two year three and year. Four you know then we start saying, okay. Now we're doing repeat ability testing that we're doing in tox.

Joseph Michael Burnett: Psychology testing and <unk>.

Joseph Michael Burnett: Flow control studies and things like that any of which sometimes can be 15 20 as many as 50 different navigation systems and cannula that are used in some of these studies. So as a customer continues to make progress on their drug generally the revenue opportunity for us continues to expand as well so.

Joseph Michael Burnett: So, you know, as a customer continues to make progress on their drug, the revenue opportunity for us generally continues to expand as well. So, you know, I would say, just to kind of answer your question, the majority of that growth that we saw here in Q1, the majority of that is existing customers that are progressing in their drug development, with the addition of, you know, a number of new customers as well or new partners that just started their very first engagement with ClearPoint. So it's a combination, but it's definitely heavily weighted towards existing customers and their progression. I got it.

Joseph Michael Burnett: I would say to kind of answer your question I would say of that growth that we saw here in Q1. The majority of that is existing customers that are progressing in their drug development.

Joseph Michael Burnett: You know with the addition of a number of new customers as well our new partners that Jeff started their very first engagement with clear point. So its a combination, but it's definitely heavily weighted towards existing customers and their progression.

William McKinnie Wood: Got it. Appreciate that, and thanks for taking our questions.

Speaker Change: Got it appreciate that and thanks for taking my questions.

Speaker Change: Yes sure thing.

Operator: Thank you. There are no further questions at this time. I'd like to hand the floor back over to Joe Burnett for any closing comments.

William McKinnie Wood: Thank you there are no further questions at this time I'd like to hand, the floor back over to Joe Bennett for any closing comments.

Joseph Michael Burnett: Once again, thank you to everyone interested in being a part of our team and our journey here at Clearpoint. As we showed in Q1, we believe 2024 is going to be an exciting year as we gain new customers, grow same-store sales with new product launches, and solidify important strategic partnerships with new and existing biotech partners. We expect to impact significantly more lives this year than in years past, and we are thrilled to work at a company that can impact so many patients in so many different ways. Thank you, and good night.

Joseph Michael Burnett: Once again, thank you to everyone interested in being a part of our team and our journey here at clear point as we showed in Q1. We believe 2024 is going to be an exciting year as we earn new customers grow same store sales with new product launches and solidify important strategic partnerships with new and existing biotech partners.

Joseph Michael Burnett: We expect the impact significantly more lives this year than in years past and we are thrilled to work at a company, which can impact so many patients and so many different ways. Thank you and good night.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Operator: Yeah.

Operator: Yeah.