Okay. We can kick things off. Thanks, everybody, for joining. I'm Mike Kratky. I'm our Senior MedTech Analyst here at Leerink, and very pleased to be joined today by NeuroPace CEO Joel Becker, and CFO Patrick Williams, and in the crowd, Scott Schaper from Investor Relations as well. Gentlemen, thank you all for joining.
Thank you.
Thanks, Mike. Thanks for having us. Thanks to Leerink, looking forward to a great program today.
Great. You know, you guys ended the year with significant commercial momentum for your core RNS business and focal drug-resistant epilepsy. Joel, I'd love to hear your perspective just in terms of what have been the two-three most important factors driving some of the recent growth you've seen.
It's a great question, Mike. There's really three things I'd point to. One, and you've heard us talk about this, we've been consistent in the execution of the strategy, which is really focused on and starts with driving increased both adoption and utilization in our core Level 4 comprehensive epilepsy center customers, and that's really what has driven our growth, initial implants, through both more people prescribing as well as then higher rates of utilization within those centers. One.
Two, we've made some improvements in, and some investments in our referral management, so really focusing on the pipeline of patients and how do we both identify patients as well as then remove some of the friction for those patients as they move through the pipeline and work to both have high yield of patients that move through the diagnostic process as well as speed that up. Thirdly, really commercial execution. We've made ongoing investments in the commercial team, as well as strengthened our training and our sales leadership team. I think all those investments compounding are really contributing to the growth momentum that we've seen.
Excellent. You know, maybe just to take a step back, I'd love to hear you characterize RNS's current position in the market, you know, how you're seen versus some of the other neuromodulation treatments out there, and how that could evolve over the next year or so?
Also a great question. From an RNS perspective for NeuroPace, we see our technology as one that's highly differentiated versus the other products that are available. There really isn't anything that does what we do. It's the only closed-loop neuromodulation device. What that means practically for a patient is that, and for the clinician who cares for them, is that we can monitor and record and analyze what's going on with that patient's particular brain activity, and then tailor a therapy protocol to what meets their needs specifically. As I mentioned, we're the only ones who do that and can do that. That's a real point of technology differentiation for us. Then the other thing I'd point to is clinical indication expansion. We're really at the forefront of developing the data.
I suspect you may have a question or two about our NAUTILUS trial here.
Certainly will.
We're really at the forefront of developing the data and then the products that go along to support that technology and clinical differentiation with a robust product pipeline. Punchline is we start from a differentiated position with the technology, and we're further differentiating the technology as well as the clinical indications.
Amazing. Well, certainly a lot to dig into. You know, it might be helpful to frame your 2026 outlook. You know, recently issued your guidance, 20%-22% for RNS. Would love to hear some of the factors that might cause you to land on the higher versus low end of that, and what do you see as kind of the key points of sensitivity?
I'll say a little bit, and then I'll ask Patrick to really talk about the year. It's really the guide is focused around our core business. It's the core focal epilepsy business and our core comprehensive epilepsy center customers. What has been driving the momentum in the business is what we're really focused on when we talk about our outlook for the year. Patrick, what would you say?
Yeah. We guided $98 million-$100 million. You talked about it. We had divested from one of our other product lines that we were distributing last year called DIXI. The way that we think about potential maybe top end of the range as you just stated was a little bit of what Joel said. I think one of them is the increased productivity and focus of the sales force. We've added a lot of new investments. We talked about training. We have a 201 class. We're adding a 301 class. I think really it's a shift from the company going from maybe a little bit more clinically focused in the past to try and now bring those in harmony with commercial and clinical at the same time.
We also made a pretty significant investment in what we call our nurse navigators. These are folks that some of them actually came from Level 4 CECs, where they actually had the same title. They navigated a patient that would come in for a workup that potentially could get some sort of medical device intervention for epilepsy. Now they're on our side of the fence, and their goal is to try to shepherd these patients through that process, which can take months, even up to a year, depending on where you're at. You know, I think those are the big opportunities that we have for potential upside on the range. We do have a new product coming out, called SeizureID, which Joel can certainly talk more about.
The goal behind that is really our first suite or product in our AI suite of artificial intelligence, and it's really to make
The physician's life a little bit easier, more efficient. I think whenever you can make things a little easier, adoption can increase. I would say with our core stuff we have right now, that could potentially lead to some upside in that range. Of course, the big one, NAUTILUS, we do not have the idiopathic indication in our guidance right now, and we've talked about that coming in mid of this year, and then there'll be a ramp-up on that. With that, I'll stop and let you ask the next question.
No, sounds great. You know, maybe just sticking with the focal side for now, but you know, in terms of where we are today, just with Level 4 CEC penetration, the number of patients treated there annually and where you are today, do you see any structural barriers that you think need to still be addressed to be able to drive greater adoption there, and just your runway for those patients?
A great question with regard to, in particular, some of the dynamics around. We've touched on it a couple of times already, kind of patient flow and patient management from the time when they're determined to be a drug-resistant epilepsy patient, then the diagnostic workup and who does that and where does that take place, et cetera. A lot of that really takes place in the Level 4 comprehensive epilepsy centers, and so that's where we start, and that's where our commercial organization and our clinical organization is focused. It's where our customer relationships are deepest and strongest. There's about 75,000 patients a year that cycle through the comprehensive epilepsy centers, and I know, because we follow it closely, you model closely our business, and so, folks can figure out how many implants a year we do.
By any measure, that's a very modest number in terms of penetration, even within that core focused group of focal epilepsy patients. Your question is about constraints, and the short answer is there aren't any structural constraints that we see that limit our ability to penetrate both that group as well as in the broader group of drug-resistant epilepsy patients. It's really a matter of effectively educating the clinicians along the way, effectively educating patients along the way, and then having that be, again, as frictionless and losing as few people as possible. We're excited about the things we're doing. Patrick mentioned the nurse navigators.
We're also excited about the indication expansion work there as well because when you think about the business that we're in today, the adult focal patient population, an argument could be made that's actually the toughest patient population to get to. They have the longest diagnostic pathway, they've been sickest longest, and some of the indication expansion that we're looking at in terms of idiopathic patients as well as in pediatrics, we think that there's the potential for the diagnostic pathway to be more abbreviated, as well as for some of the adoption dynamics to be even more conducive.
I you know, maybe just picking up there, but focus has been historically on those Level 4 centers. Your Project CARE initiative has seemingly been a great success already. Would love to hear you kind of characterize in terms of, you know, as that's progressed, have you seen greater adoption there? Has it largely been coming from a combination of, you know, patients treated outside of these Level 4 centers and enabling that kind of diagnostic pathway or just the referral pathway in general?
Our focus has been more broadly on access to RNS. If we rewind a couple of years, actually, our labeling required us to be focused on not only the adult focal patient population, which is still the case, but also focused on what turns out to be Level 4 comprehensive epilepsy centers because of the requirements that people had to have in place in order to be able to implant RNS. We actually had a PMA supplement that we filed and was accepted that allowed us to then expand outside the Level 4 centers, and what that has done for us is really two things. One, with our current approach today, it has allowed us to improve education and, as a result, referral from community centers into Level 4 centers.
Just you can imagine, if somebody's in a more far-flung geography and they don't naturally have the relationships and connection with a comprehensive center, we can help facilitate that. One, it helps with referral. Two, there are centers out in the community who can readily treat, both diagnose as well as implant and then program RNS devices. We've been able to bring additional implanting centers up. Thirdly, we've been able to do that along the way as well, and what I mean by along the way is some of these centers will become implanting centers. They're not there quite yet. We get a combination then of those people referring while they develop their program.
Referral, implant, as well as program development, I think has all been helpful and additive to the growth that we've been seeing in the comprehensive epilepsy centers. I consider it particularly encouraging, however, that the growth that we're seeing is primarily driven by adoption and utilization with regard to initial implants in the adult focal population in the comprehensive epilepsy centers. Almost the most focal, pardon the pun, approach that we could have to the market is driving the growth that we're seeing today. Now we've got market development, clinical data development, and product development levers that we're executing on in our strategy that's gonna broaden that approach, and I think will be salutary to growth going forward.
Yeah, maybe another one there, right? On the physician fees that you saw a nice uplift there recently, recognizing it's still early days, but curious if you've been able to detect any impact from that yet, or just how you think about reimbursement in general, as another potential source of upside.
We had a good year in 2025 with regard to reimbursement and the physician fees being one of them. Patrick actually leads our efforts there in reimbursement, so I'll ask him to say a little bit about that. With regard to CPT and physician payment, with regard to outpatient payment, and with regard to inpatient reimbursement, we had momentum on all three fronts.
Yeah, I agree. I think the way that we think about it is whenever CMS and reimbursement can move in a neutral to positive direction, that's a good thing. I know there's been some other spaces within life science med device that have taken maybe a little bit more of a hit on this. We feel pretty good about where we're at. We feel very good about where we're at. 2025 was a good year, so that means 2026 is all set. We took a little bit on the CPT side, but that's the neurosurgeon, so that's the implanter. We don't get to monetize that side of it.
The epileptologist and the Level 4s and the neurologists that are doing the work, I think there's some stuff that we can do there as we move forward to try to see if we can increase their reimbursement for monitoring and taking care of the patients. I think the big one for us was related to our DRG. There was a little bit of chatter and noise around a potential downgrading of that, and that did not happen. You know, we were able to meet with CMS, have strong conversations with them, and they kept us stable and in the same DRG code that we have. In fact, as we kinda look forward, we're looking at how we can uplevel that DRG as we move forward.
What you don't hear from us or hear from our hospital customers is that they're losing money on our procedure. That's always a good thing. As a reminder, about 20% of our overall payer mix is what I would call just sort of standard traditional Medicare, Medicaid. About another 30% is through the advantages, we'll call them. Medicare Advantage, Medicaid Advantage primarily. Then the other 50% is what we would call our sort of prototypical private payers. You know, as Joel likes to say, we're trying to be a little bit more offensive or proactive on the reimbursement side, and that'll certainly segue into expanded indications. We've got exactly the same DRG code. It's the same procedure. It's the same implant. It's the same call point.
All of that is being worked on very closely now. I'm sure we'll talk about it, but you know, it'll take a little bit of time to get those private payers on board, including the advantage ones. What we've talked about is probably upwards of 12 months before we go through the full cycle of all of the coverage policy things that we need to go through, and get everyone on board, but we're being very proactive in that.
Got it. Yeah, really helpful. You know, you both knew it was coming, so would love to jump into the NAUTILUS side, the IGE expansion. You know, you recently confirmed that the FDA accepted the PMA submission, so review process ongoing. How would you characterize your current level of confidence on being able to get FDA approval for this new indication?
Yeah, it's an important topic for us as well. As you mentioned, we submitted the PMA supplement for the idiopathic generalized patient population in December on time. I think a high-quality submission. The agency, as you mentioned, has accepted that submission, which indicates that not only did it have the elements that they were looking for to be able to evaluate the application, but that they're active in looking at it. Those are both positive indicators in our view. We feel like the discussions have been productive, and we think things are moving according to our expectations.
We are pleased that we have a breakthrough designation on the application because it allows us to be more interactive versus, maybe sometimes you'd think about more of an episodic interaction with the agency, and you submit something, and then you kinda wonder what's going on. Whereas with our breakthrough designation, and frankly, with a lot of the work that we've done, to establish a dialogue with the agency on a number of different fronts, we have an ongoing, again, what I'd consider to be a very productive interaction. I'm not gonna be in the game of predicting probabilities here. Again, I'd say that it's moving according to our expectations, and we're excited about it.
Yeah. Fantastic. Well, maybe to dig in on the NAUTILUS data a little bit. You know, we saw the top-line results come out, and then we saw additional data come out throughout the year that I think there was a lot to be excited about. Maybe would love to get your perspective on, you know, maybe two or three of the main things that you came away from the results with, and any highlights from the data.
Thank you. I'm working to pick out two or three because there's a lot of-
Can certainly be beyond that.
Good stuff in there. We spend a fair bit of time focused on it, so there's a lot we could. I've only got 12 minutes. The two or three things. Okay. Number one is. I think it's appropriate, but sometimes we can gloss over this, but important bullet point number one would be just the extraordinarily safe device and procedure and therapy that we have here in this patient population. Sometimes, again, people would say, "Well, yeah, of course it's safe." Well, think about that for a minute. Yeah, of course it's safe. The first conversation any clinician's gonna have with a patient and question a patient is gonna have is, "Is this safe for me?" The answer is yes. It's safe both with regard to the surgical procedure.
We have more than 8,000 patients treated now, and our most common complication is less than 2% infection rate at the site of the skin incision, which doesn't have anything to do with the RNS procedure or device. We have a very safe procedure, one. Two, before we did this trial, nobody knew whether it was both safe as well as viable to place our leads in the thalamus to record and stimulate the way that we do in this patient population. Nobody'd ever systematically done it and evaluated it, and we have level 1 evidence that says, yes, it's very safe to do procedurally, placement-wise, and from a therapy perspective. You know, not to get too far ahead without saying we have a very safe procedure here.
Two, the efficacy data in particular the pre-specified secondary endpoints around median seizure reduction, that data was recently presented at the American Epilepsy Society Meeting. A 77% median seizure reduction rate in a highly refractory population that does not have other options and suffers from what we call generalized tonic-clonic seizures, GTCs, the big ones, the ones that are particularly dangerous, carry a higher risk of injury, a higher risk of potential death for epilepsy patients. A 77% reduction at 18 months portends even better results than we see in the focal population we have approval for today. Thirdly, both patient as well as physician impressions as to improvement in quality of life were significantly and consistently improved.
I think really across the board, we're excited about the NAUTILUS data and look forward to talking to folks about it, both the regulators as well as then eventually clinicians.
Yeah. Understood. Maybe on the efficacy side, I mean, when you think about KOL feedback and what you've been hearing from the medical community, how do they kind of value the different clinical measures of efficacy and, you know, how do they think about median seizure reduction as something that they track for their patients?
It's a great question and to start with clinician feedback, most of the clinician feedback that we get, because we're still an investigational device, is from the investigators, and those are the folks that we interact with most on the topic. Investigators were very pleased with the data and excited to see the outcomes, a number of congratulations and way to go and that kind of feedback, which is obviously great to see. I think we also saw in the trial people voting with their feet, as it were. The trial enrolled ahead of schedule. You know, trial enrollment schedules often move. They don't often move left. Most of the time they move right.
We think that both with regard to what clinicians were seeing in their observational work during the trial as well as the unmet need for this population, people are encouraged by what they were seeing and are further encouraged by the data that they have seen.
Understood. You know, I know we'll keep an eye out for the approval and FDA decision later this year. As we think about the potential size of that market, you know, how would you kind of characterize what that could mean for your business and just the overall size of the opportunity?
Maybe I'll start there with zooming out a little bit and talking about the universe of drug-resistant epilepsy patients. I'll confine my commentary here to the United States. If you think about, in the United States, there are about 3.6 million people who have epilepsy. About 1/3 of those are drug-resistant epilepsy patients, so 1.2 million. Within the drug-resistant epilepsy population, it segments to about 60% focal, about 40% generalized. When we think about generalized, what we're talking about here is the idiopathic generalized epilepsy population. That group is the largest subsegment of the generalized population and is about 50% of the generalized population. When you zoom back out to that 1.2 million, about 20% of that entire population is the idiopathic generalized group.
You know, 40% of the 1.2 million is about 480,000 patients, so about 240,000-250,000 of those patients are formally idiopathic generalized patients, and so a large subsegment here that I think, again, I'll comment on a little bit. I made reference to earlier, some of the diagnostic pathway and potential adoption dynamics. From a diagnostic pathway perspective, that group of idiopathic patients doesn't need all of the diagnostic work that the focal group does, and so has the potential to move from diagnosis to treatment more expeditiously. One, two. There are no other approved and indicated devices for drug-resistant idiopathic generalized epilepsy patients.
Being the first to do so, and to have the data to support it, we think has the potential to really open up again back to access for RNS. Sometimes people can say, I think, "Well, okay, the RNS System is on the market today, and can't people just use it in an idiopathic generalized population?" I would just have everybody consider, again, if we're back to where a lot of patients would live and where a lot of patients get treated, you know, our lives, we tend to spend a lot of time thinking about cutting-edge technology and emerging indications and those kinds of things.
When you're a patient and somebody says, "Here's the procedure we'd recommend for you, and here's the device," the first thing is, "Well, what about all that?" The second thing is we believe it makes a difference if somebody says, "It's not approved by the FDA," or, "It is approved by the FDA," in that referral process. We're doing the work to get the approval to demonstrate the leadership to really help improve access to the technology for patients.
Yeah. No, all very fair points there. I guess, you know, that's kinda the size of the opportunity. As you think about the preparations, the accessibility of that market once you get an approval, you know, is this something where we could see an impact right away? Is it gonna take some time beyond that? How should we think about the cadence of commercial adoption?
It's another great question, and it's something we spend a lot of time thinking about, have been spending a lot of time thinking about, and there are a number of things that we have been working on and are working on to put ourselves in position to take advantage of the approval. We've been investing in our commercial organization. For example, one, we've been investing in our commercial organization for a couple years here to provide the capacity. You know, importantly, there's a lot required of our field people. They work very closely with our clinicians, and we have high expectations there. It takes us some time to find and train and then have clinically effective those folks.
We've been working over the past couple years to invest in and expand our commercial organization to be able to provide that level of support. We feel like with the additional investments we're making here in 2026, we'll have the capacity that we need, and we'll be in position to support one, the potential for an approval. Two, the reimbursement work that Patrick mentioned, we're working in advance of approval to make sure that we have a good understanding of what the different private payers in particular are looking for and get it, making sure we're well prepared to be in front of and a part of the medical director's review. The good news is, it's the same product. The codes already exist for focal.
It's a matter of getting those codes extended to the emerging indications, so we don't see the same kinda lift that you need when you are just starting trying to get coverage for something. There will be work there. As you know, I know, and others either in the room or listening are probably aware of as well, private payer insurance coverage decisions are on an annualized basis, primarily annualized, and they're somewhat staggered, and so there'll be a rolling process here of getting those folks to evaluate those coverage decisions and then extend those coverage decisions. It's gonna take us a period of months, in some cases, maybe even as long as 18 months to get those things in place.
We expect that we will be able to, given the data and the fact that coverage exists for the technology already. Those are all things that we have been working on and are working on to lay track today and create capacity.
Understood
in advance of that.
Yeah, very helpful. You know, maybe just one last one on the commercial side, but in terms of how you think about the therapeutics landscape and how sensitive your commercial opportunity will be to some of these developments on the drug side, you know, how would you characterize that dynamic?
Well, we're pleased to see and are happy to work closely with drugs and biotherapeutics in the space. Our mission is to help patients that are suffering from debilitating seizures, and our indication for use is for the RNS System and neuromodulation to be used in conjunction with drug therapy. We wanna see as much advancement as possible, across all fronts. Unfortunately, if you look back at the history of epilepsy and pharmaceuticals and other therapeutics, over the past 100 years or so, there have been three generations of drugs and about 40 different medications approved. Over that period of time, there have been about a 1/3 of patients that remain drug-resistant. Improvements in quality of life, improvements in efficacy rates within that group, improvements in the length of time that patients can benefit.
In the end, it looks like there's a group of patients that are pharmaco-reactive and a group of patients that are pharmaco-resistant. Our hope and our focus and what we've seen is that, back to your question about differentiation, the unique differentiation of the RNS System that allows us to record and then analyze what's going on with these patients out there every day, we're providing physicians a window to the brain that allows them to both manage patients better with regard to medicines, diet, lifestyle, as well as neuromodulation, and so that's the role we wanna play.
Understood. Well, unfortunately already up on time, but Joel, Patrick, really appreciate the attendance, and thank you both for coming.