Okay, I think we can get started. Thanks, everyone, very much for joining. My name is Mike Kratky. I'm the Senior MedTech Analyst here at Leerink, and today I'm thrilled to be joined by NeuroPace CEO Joel Becker and CFO Rebecca Kuhn. Thank you very much for joining.
Thank you, Mike.
Thanks to Leerink for having us here.
Great. It might be helpful, just for those that are less familiar with the story or revisiting, if you could kick us off with a little bit of an overview on NeuroPace and some of the key points of focus for 2025.
You bet. NeuroPace is a medical device company that manufactures an implantable pulse generator as well as leads to treat patients that have drug-resistant epilepsy. If a patient has failed two or more anti-epileptic medications and not received the quality of life improvements that they need, then they're considered drug-resistant, and they become the potential indicated patient for this technology. If you think about drug-resistant epilepsy more broadly, there are 3.6 million epilepsy patients in the United States. About a third of those patients are drug-resistant. The NeuroPace RNS System is indicated in the adult focal population. The focal population is about 60% of the overall market, and the other 40% is generalized. The unique part and differentiating nature of the RNS System is it's the only closed-loop neurostimulator focused on the brain.
That allows us to monitor, record, and then tailor and target both detection settings as well as stimulation for the patient's individualized epilepsy seizure pattern and treatment needs.
Perfect. That is a great place to jump in. It might be helpful to just talk a little bit about the fourth quarter. You put up another great quarter of commercial execution. What have been some of the key growth drivers that you have seen that have led to some of that outsized growth?
Thanks, Mike. Yeah, we did have a good quarter, and it was a good end to the year. Just briefly for folks here, we finished 2024 with 22% top-line growth, came in at $79.9 million for the year, came in at the top end of our guidance range. Gross margin also came in at the top of the range, and then operating expenses came in at the low end of the range. We grew the top line 22% and grew operating expenses 7%. We got some nice leverage through the income statement. It is a growth story for us, as you mentioned, but it is a growth story with discipline and a focus on execution. The things that are primary drivers for us here in terms of that top-line growth are really threefold. One is really continuing to expand adoption and utilization in our core customer group.
Our core customer group is what we call the Level 4 comprehensive epilepsy centers. These are the places that tend to be the tertiary referral and academic centers, and the adult focal population ends up in these centers because of their diagnostic capabilities. There are about 200 of them in the United States. We have a presence in the vast preponderance of them. What we've been focused on there is really expanding the adoption of the number of epileptologists that refer for RNS therapy, as well as then the utilization. Expanding adoption and utilization within our Level 4 centers has been the primary driver of the dollar revenue growth that we've seen. In the second half of the year, we also saw an important second key strategy for us begin to kick in, and that's what we refer to as Project CARE.
It is an expansion in site of service. Our ability to move beyond the Level 4 centers into Level 3 centers and out into the community setting really started to have a meaningful impact on the business. We have also been incrementally expanding our commercial organization, both in 2023 as well as in 2024. The folks that we had hired and trained in the second half of 2023 and first part of 2024 were then able to be independent and out driving activities on their own. All three of those things really came together here in the second half. We grew the business faster in the second half of the year than the first half of the year. It is nice to see accelerating growth through the year. Those three things are really the key drivers for us.
Understood. Yeah, love to see that. In terms of just the Level 4 centers specifically, I would love to get your thoughts. You mentioned increasing adoption, increasing utilization among your existing accounts. What are going to be some of the key components of that, sticking with just the Level 4 centers?
It's a great question. The first area of focus for us is to increase the adoption of the technology within these core target customer groups. As I mentioned, we set a new high for active prescribers in 2024. Each quarter in 2024, we also increased the number of prescribers to all-time highs. We started well and continued to raise the bar throughout the year, and we added people at a faster rate in 2024 than we did in 2023 as well. We have been expanding the customer group of prescribers and continue to do so at an increasing rate in 2024. Once we have someone who sees and has deployed the utility RNS within their practice, it's really a matter of expanding utilization across different patient populations. That's a matter of patient identification and then education of when to use RNS across those groups.
We call that the modern RNS story. Clinicians, rather, tend to start with a particular type of focal epilepsy patient in mind. We have a conversation about different locations of focal epilepsy in the brain, then expand that to network stimulation, which is a new and emerging clinical trend, and then also how neuromodulation can be used, in particular RNS, because of our ability to record information, can be used in conjunction with surgery as well. That is really what helps us expand the envelope and then increase utilization in those core customer groups to drive the growth.
Yeah, no, that's really helpful commentary. I mean, it seems like increasing the number of prescribers in some respects would be a bit of a leading indicator. Yeah, no, appreciate that color. I guess switching to the Project CARE side of the world, you mentioned the increasing contribution in 3Q and 4Q. How is this initiative broadly progressing, and what are you seeing in terms of RNS adoption outside of those Level 4 centers over the last six months, and what are you expecting for this year?
We are pleased with what we have seen so far. As you mentioned, Mike, in the second half of 2024, in particular, we started to see some increasing impact from those centers. What we have seen is really kind of three customer groups that have emerged as part of the Project CARE centers. One is a group that has the patients, has the epileptologists, has the infrastructure. It is really a training and contracting exercise, and they get up and running, and they are implanting and managing patients in relatively short order. The second group is a group that is going to get there, but for some reason, either from an infrastructure perspective or a capacity perspective, it is going to take them a little bit to put all the pieces in place.
That group we've actually seen where they're interested in identifying and managing patients, so being able to program and have patients receive RNS implants, but they're happy to refer them out to an implanting center for a period of time, as long as they get them back and they know that the implant procedures are going to go well. They're more than happy during the interim period of time to have patients treated from an implant perspective and then managed back in the center. The third group that we've seen emerge is a group of centers who, again, have the expertise and have the patient population, but aren't as interested in actually doing the implants. They're happy to have those patients referred out as long as they get them back and can manage those patients.
For us, we're relatively agnostic as long as we're advancing the mission here of helping patients that are suffering from seizures get the therapy that they need. We are interested in continuing to, in particular, expand out, however, the implanting centers in Level 3 in the community as well, because as we think about indication expansion, when we get to, in particular, the idiopathic generalized population, that group really represents an opportunity in that the generalized patients don't need to be referred to the Level 4 centers for advanced diagnostics. It increases capacity for implants in the market.
Totally. I certainly get a lot of questions on NAUTILUS, and we'll get to that. Maybe beforehand, you talked about more and more adoption in some of the Level 3 centers. What does the learning curve look like for getting those epileptologists up to speed on RNS?
It's a great question. With those epileptologists, it's really very similar to the learning curve and the training that we do in the Level 4 centers for someone who's new to RNS therapy as well. It tends to focus on patient identification and then RNS and neuromodulation and what role can that play in your practice. It's also interesting to note that for a number of the epileptologists in these Level 3 or community centers, while they may not have been implanting or referring for implant RNS, perhaps where they trained or a center they were previously, they're familiar with neuromodulation and with RNS. It's obviously tailored and targeted to the clinician's background as well.
Understood. Let's jump to NAUTILUS. Can you provide any incremental updates on the timeline for a potential data readout of this study? What does the path forward look like in terms of the FDA submission?
NAUTILUS, for those of you who may not be quite as familiar, is our FDA trial for the idiopathic generalized epilepsy population. Again, back to segmentation of the patient populations, 60% is focal, 40% is generalized. Of the 40% that's generalized, the biggest segment, 50% of that population is idiopathic generalized patients, and that's the group that we're focused on here with the NAUTILUS trial. In that trial, we've talked about and are working to complete follow-up here this month for the 12-month safety and efficacy endpoints. We finished completing implants and enrollment in March of 2024. Now we're finishing follow-up here in March of 2025. From there, we'll monitor the data. Once we've gotten the data appropriately monitored, we'll do the statistical analysis. Once we've done that, then we'll engage with the agency.
When we've reviewed the numbers in the statistical plan and gained alignment with the agency, we'll get the data lock. Once we're at data lock, of course, in parallel, we'll be working on the submission. When we have the data and the submission ready to go, we'll submit. We've said that we plan to submit in the second half of 2025. We'll plan a data readout of top-line data from the trial in and around the time of submission as well.
Understood. Really helpful. Just in terms of thinking about the setup going into NAUTILUS, what have been some of the key points that have really driven your confidence that this can be a successful readout?
It's a great question. It's a great question in particular because it's a blinded randomized trial. There are reasons why we undertook the trial and reasons why we have optimism about the technology and the patient population. If you start with the fundamental technology premise of being able to monitor and record and then tailor and target both detection as well as therapy settings, those are very consistent across different types of epilepsy. We see what fundamentally differentiates the technology as being consistent between focal or generalized patient populations. We also see where there are emerging clinical trends where people are using both a focal strategy as well as what we call a corticothalamic approach, where they'll treat focal patients, so currently indicated patients, both in treating the cortex as well as in treating the thalamus.
The reason that's important is in treating the generalized population, the general approach is to target the anatomy of the thalamus in order to stimulate the network and stop the propagation that they see there. We see some clinical trends that also kind of speak to people utilizing the technology in the current population, but in kind of a hybrid for how generalized patients are treated. A couple of other things. One, there are, even though we do not teach or train or promote to it, some single-center publications that are out there in the patient population that generally have good results. Finally, we were really encouraged at the pace with which the clinical trial enrolled. We think that speaks to both clinician as well as patient interest.
There are no indicated neuromodulation devices for the idiopathic generalized population in the United States today. This is a group of patients that, outside ongoing pharmacomanagement, there just aren't device-based interventional options today. Obviously, things more traditional approaches like resection just aren't an option in a patient with a generalized epilepsy.
Yeah, understood. A lot of that resonates with some of the work that we've done as well. I'd be curious, do you have a sense of the off-label use that happens right now in terms of either RNS or other neuromodulation devices for generalized epilepsy patients?
We do know that it happens. We don't actually trace by diagnosis, but we do have information as to lead placement locations. We can see we're out in clinics every day talking to doctors, and we understand how they're thinking about the ways that these patients get managed. Like you say, the publications that we've seen. We know that clinicians do select the technology to treat generalized patients, but it isn't anything that we track or, as you know, nothing we're actively involved with.
Understood. Maybe just from a commercial standpoint, how quickly do you expect you'd be able to drive adoption in the generalized population if you get the approval?
We're enthusiastic about it. We like the clinical need, we think, is significant for the patient population. There aren't other approved options today. Many times, as you think about and talk about advanced technologies and key opinion leaders and those kinds of things, people are always doing research and working on advanced clinical topics. For many in the neurology or epileptology community, they're still learning about neuromodulation. When you think about the referral pathway and process, then to also think about referring someone for an off-label procedure, we think it's important that we develop the data and the indications that can give people the confidence that they have high-level clinical evidence to rely on. Pending a successful trial, we do think there's a significant amount of opportunity in this segment. It's a large segment of patients that don't have good options today.
There will be work to do because options don't exist today. Awareness and education is going to be important. Coverage extensions will be important. That's all going to be work that we need to do, but we think this can be a significant opportunity for us.
Yeah. No, understood. This might be a tough question to answer, but really just thinking about whereas focal, you have a few different neuromodulation approaches that are approved and available, whereas you really do not for generalized. Even something like ablation or resection can be a little bit tougher for those generalized patients. Is it fair to think that there might be some warehouse patients out there on the generalized side that really do not have much else available? It could be pretty eligible and ready candidates if you do get approval.
I think it is fair to think about it that way. That is one of the adoption dynamics that we think can really be favorable in this segment of patients. I think another dynamic with this segment of the population is that, unlike the focal group who will go through, in most cases, a phase one and then an invasive phase two part of a diagnostic process, the generalized population, the invasive nature of the phase two of the diagnostic process is to localize the focal point of the seizure. In a generalized patient, there is nothing to localize. It is a generalized seizure. The diagnostic process is both shorter as well as does not have to be done in a Level 4 center. We think those can be favorable lower barriers to access to neuromodulation technology for these patients as well.
Understood. Maybe just on the competitive side, what are you hearing from your key accounts on just the level of either traction you're getting, whether their growth is coming from conversions or building the market in kind of de novo patients? How do you think about the growth from here over the next few years?
It's a great question. When we're in centers and when we think about where growth is headed, we think RNS should be, and our plan is to have it be the standard of care and for us to be the leaders. We're doing the work to both generate the indication, generate the clinical data, rather, and expand the indications. We're the ones doing that work. We're going to generate the high-level clinical evidence that supports the development of the field overall. We're doing the work on advancing the technology in a way that's going to allow us to both continue to generate what is today best-in-class clinical evidence, as well as work to further improve accessibility, as well as insights into that data with AI-enabled software tools that'll help make easily accessible the most important parts of that information, and then help with further insights and recommendations into therapy.
Today, I think we've got a lot of momentum based on the data and based on the technology. I'm excited and optimistic about that momentum continuing to build and develop with the things that we talked about in terms of our growth strategy. We see RNS as really the leader in the segment here. We spent some time talking about that. I'd encourage people to, if they haven't, take a look at the Investor Day materials that are up on our website. I think we've got a clear and compelling long-term plan for the business, as well as some near-term momentum.
Definitely agree. It was a very insightful commercial day, so appreciated that. The other question I wanted to ask, more just a clarifying question, but if you have previous neuromodulation patients that come in for a replacement, are those also eligible patients that you'd be able to potentially switch them over to RNS?
It is possible. Yep, that is an option. We do see it.
Fantastic. Rebecca, maybe one for you. Just in terms of you're thinking about the low-end versus the high-end of your 2025 guidance, what are some of the different factors that would kind of contribute to the different levels of growth in that range?
Are you speaking of revenue in particular, or?
Yeah, starting with revenue.
Oh my goodness, there's so many things going on in 2025. As Joel mentioned, we are first and foremost focused on growing our business within our core customers as we build adoption and utilization among our Level 4 customers. We see increasing momentum in Project CARE. In the second half of the year, in particular, in 2024, we're expecting to see additional growth there as we expand those efforts. We think Project CARE will be a key contributor. We're also looking forward to the contribution that our sales team will make as the folks we've hired in 2024, in particular, continue to build their experience and their competence and their productivity as they get out in the field. There's a lot of things to talk about. DTC is something we've started to emphasize more.
We've seen a nice return as we built that up somewhat in 2024, and we have more planned in 2025. Those are some of our key growth initiatives.
Yeah, no, that's super helpful. Maybe just on the margin side and the OpEx, can you talk about the degree of sales force expansion that you either expect to see in this year or the cadence of your OpEx coming from increasing your commercial footprint?
When we think about our sales force, we really like the word incremental. We're growing our sales team each year, starting in 2023 and then again in 2024. It's not huge. It's not like doubling. We choose incremental because it's big enough to make a difference or big enough to talk about. We expect those folks to continue to make an increasing impact. What we tend to do is hire a more junior rep. We call them Associate Therapy Consultants or ATCs. We'll put them in an area where we see good potential among care accounts, as well as strong demand among our Level 4 customers, so they can really supplement the work in the territory and the good work that the TC is already doing in that area.
Understood. Yeah, no, really helpful. Maybe just thinking about some of the future expansion opportunities. Joel, would love to kind of hear your thoughts on you have NAUTILUS. That's going to be a segue into the IGE market. Beyond that, whether it's LGS, whether it's some of the pediatric population, how do you think about contribution from here from some of the future growth drivers?
Thanks, Mike. The clinical development work that we're doing that you referenced, we think, is fundamental. If you think about our growth story, we're working across three areas of development. It is clinical development, product development, and market development. The clinical development really provides a lot of the basis for us to build around from a unique device capability as well as education and awareness efforts on the market development side. I'll start with, from a clinical development perspective, our post-approval study data. The post-approval study data is with the current technology and the current patient population, but our most recent data. Our data has been best in class. We're really excited to get this information out there. April 7th at the American Association of Neurology meeting, the post-approval study data is going to be presented.
We're excited to have the clinical community learn more about the ongoing benefits that we see from RNS and the adult focal population. That's the first piece of clinical data development. The second one, you mentioned NAUTILUS and the idiopathic population. We are working to expand in the focal pediatric segment as well. We're working with FDA, as well as an agency associated with FDA, NEST, to use retrospective data in a way that can support a future indication. That work is there. We recently completed enrollment in the LGS patient population as well, a smaller group, but a particularly challenged group of patients. Our interest is, over time, to have patients who are drug-resistant epilepsy patients be indicated for RNS. Our plans are to build the data sets that warrant that and then the devices that further support it.
Clinical development leading a lot of the way, supported by advancements in ease of use, efficiency, and efficacy from the product development pipeline, and then market development efforts that really leverage expanding site of service, expanding the sales force, and expanding our DTC efforts. We've got a number of shots on goal here to really, again, advance the mission of increasing access to RNS for patients who suffer from debilitating seizures.
Understood. Super helpful. Just as you think about some of those opportunities, to what extent are those being built in or considered contribution for on the revenue side within your LRP that you recently provided?
We consider all of that as part of our LRP. We took a comprehensive view of the business. If you do take the opportunity to review that information, we've laid it out both in the beginning and the end, the increasing number of activities that are in flight. That's something I think that I'd like to just impress on folks is you'd see it on a PowerPoint slide, but it's not a bunch of PowerPoint slides. These are real activities that are underway and, again, are in flight. With successful execution of those clinical development, product development, market development initiatives, this has the potential to look like a very different business two or three years from now than it has over the past two or three years.
Understood. You recently are coming off the back of a capital raise. I think on the 4Q call, you talked about you now have enough cash to fund operations through profitability. Do I have that right? Or what's the timeframe that you've provided?
You do. You have it right. Per our current plans, per that LRP, that long-range plan that we've been talking about, that plan shows us getting to cash flow break even with the balance sheet resources that we have. That's our focus.
Understood. Maybe just with the last under a minute or so, can you talk about how you're assessing business development opportunities from here? Anything that you think would be either accretive to your business or just about the level of strategic interest?
Yeah, I think that for us, hopefully, over the past number of minutes you've heard, we feel like we have a very compelling growth story right in front of us. The most important thing we can do from a business development perspective and a value creation perspective is to execute on that plan. We keep an open mind about creative opportunities. I think one of them that we did, our collaboration with a biotech company, Rapport Therapeutics, is an example of ways that we think about to inorganically also leverage the capability that we have. It is really built on and focused around the unique differentiated nature of the RNS System and helping the drug-resistant epilepsy population. That is where our focus is. It's a growth story. It's a growth story with discipline. We're focused on execution in that area.
Understood. Joel, Rebecca, thanks so much for joining us today. Thank you all for joining. I appreciate the time.
Thank you, Mike.