All right. Next presentation here is from NeurAxis, ticker symbol NRXS. That is on the NYSE American. Presenting today is Brian Carrico, Company's Chief Executive Officer. We are going to try to get through the presentation in about 15 minutes, leave plenty of time for questions as well at the end. Brian, take it away.
Thanks, Robert. As Robert said, Brian Carrico, CEO of NeurAxis, ticker symbol NRXS. For those who aren't aware, we just did an IPO in August of 2023. It's been public about 18 months. We're excited to be here. I appreciate you coming. We're at an extremely exciting point in the company, working 10 years on an idea that's come to fruition. We believe we're at an exciting inflection point right now. We'll jump right into it here. Who are we? A couple of points at the top, you see, we're developing neuromodulation therapies for chronic and debilitating GI conditions in both pediatric and adults and patients. As you'll see today, we have one pediatric indication. We just expanded that indication. We're expecting a second pediatric indication soon. We're expecting our first large adult indication by the end of 2025.
We're developing and commercializing neuromodulation therapies to address chronic and debilitating conditions in children and adults. That's really the focus of who we are and what we're doing. That's our foundation. With two FDA indications in the market, one being the pediatric indication around the percutaneous electrical nerve field stimulation, which we'll talk about, and then one technology that we just licensed from the University of Michigan around constipation. I'm really going to touch very briefly on that at the end of the conversation. I want to focus really today on our flagship technology, the PENFS technology targeting the auricular branch of the vagus nerve . From a corporate standpoint, as any of you in med tech understand, the importance of a category one CPT code. We can have all the demand in the world, but if you don't have coding coverage and payment, there's not a lot of upside.
We were fortunate enough in 2024 to submit alongside the American Academy of Pediatrics for a category one CPT code. We were awarded that CPT code last fall. We are currently expecting that code to become effective January 1, 2026. Most of you probably know that is about an 18-month process. That category one CPT code is extremely important because it brings RVUs to physicians. That is how they are measured, paid, and bonused. It brings a permanent reimbursement amount for that site of placement. It also brings credibility to the insurance companies, especially Medicaid and large commercial payers from a recognition standpoint and prior authorization. In order to get the category one CPT code, I cannot emphasize enough how important that is, the amount of demand that is there. Because there is no permanent billing code, it really prevents the majority of utilization.
Policy coverage, the second hurdle. We went from 4 million covered lives early last year. We're up to 51 million covered lives. We are waiting on the published academic society guidelines, which coincided with the category one CPT code. Those guidelines have been released in abstract form listing us as the highest level of evidence. We're expecting those to be published in the month of May. We're expecting those to carry us, if you've listened to our earnings calls, we're expecting those to carry us with the remaining large payers that still have left to make a decision. In 2024, we did $2.7 million in revenue, gross margins of 88%. I fully expect to have those gross margins over 90% in 2026 as we continue to gain more policy coverage. I talk a lot about this.
Strong data, you know, in the micro-cap, small-cap healthcare space, if you don't have great data, you are not going to receive insurance policy coverage. Therefore, revenue growth will be difficult. We've built this company on the foundation of data in order to get insurance policy coverage to grow revenues. Some of that started to hit. As you can see in Q1 2024, we were down 20%. That's not revenue we lost; that's from children's hospitals billing the technology and receiving no prior authorization required. They were not being paid and therefore had to pause their business. We didn't lose that business, but we were up 40% in Q3 and 43% in Q4. I alluded in the Q1 earnings call for Q4 that Q1 was on track to be as strong or better. I stick by that.
This is our pipeline. I’m going to focus on the first few indications. The top indication is functional abdominal pain in children aged 8 to 21 years. The next one down is already commercialized. The third indication is functional dyspepsia or functional nausea, which we expect FDA approval for in the coming month. Same call point: children's hospitals, pediatric gastroenterology, same insurance policy coverage, same Category I CPT code, same synergies, same sales force. The fourth indication is functional abdominal pain and irritable bowel syndrome, along with functional dyspepsia in adults, expected FDA approval by the end of 2025. We can discuss the remaining three indications at another time.
From a foundation standpoint, let’s discuss the total addressable market (TAM) and the serviceable available market (SAM) on the next slide. We have a very large SAM. As mentioned, we are first to market. Current treatments are off-label pharmaceuticals with significant side effects. We have a clear commercial pathway: Category I CPT code effective January 1, 2026, major insurance coverage in place, and the highest grade of evidence per published guidelines, which is critical. Approximately 1,000 patients have been published. Our experienced management team and board include the President of Blue Cross Blue Shield Indiana. There is a clear path to profitability. Previously, we were burning $600,000–$800,000 per quarter; now we are around $350,000–$400,000, and this continues to improve. The path to profitability is in sight.
From a serviceable available market standpoint, on the bottom left of the left wheel, functional abdominal pain, $3 billion. I want to walk you through this one and you can extrapolate those numbers out to the rest of the indications. 6 million children just in the U.S. suffer from functional abdominal pain associated with IBS. 10% of those are debilitated. That means they're not going to school, they're on a pharmaceutical, they're not playing sports, they're not playing with friends, et cetera. That's 600,000 kids. Multiply that by $5,000, which is the amount of revenue we receive per patient when approved by insurance at the $3 billion market. That's real revenue that's available. I've talked publicly. That means they're not going to school, they're on a pharmaceutical, they're not playing sports, they're not playing with friends, et cetera. That's 600,000 kids.
Multiply by $5,000 per patient gives the available revenue. There are 260 children’s hospitals. Two accounts are on track to generate about $600,000 this year, treating only one in five eligible patients, implying roughly $3 million potential per account. These patients are distributed across all 260 hospitals, creating synergy for our W-2 sales force. The functional dyspepsia indication will be available soon. Today’s market involves disorders of gut-brain interaction with no FDA-approved therapies.
These disorders are negatively affecting and impacting the quality of life in these children, as I mentioned. There's no data to support the use of the medication these children have been receiving for 50 years. Quite frankly, the medications are dangerous. Most have FDA black box warnings. Most families these days don't want their children starting with a pharmaceutical. The technology itself, this is a picture of what the technology looks like today. This is placed, for example, on a Monday morning by a pediatric gastroenterologist. It stays on for five days around the clock. These needles do break the skin. It's not painful. There's no anesthetic. There's no anesthesia. It's not a painful procedure. Once the patient wears this device for five days, the patient can take it off on a Saturday morning. They come back on Monday morning for a second treatment.
They wear that device for a week and it runs for four weeks. At that point, we have tremendous data at 12 months. We have three studies now, I believe, including a 300-patient registry showing statistical significance at 12 months. This particular device is the one that we talked about, 88% gross margins we just reported. We expect those to go over 90% shortly. The synergies of the treatments that I showed in the pipeline, these are all disorders of the gut-brain interaction. We are affecting a part of the brain called the amygdala. As you see here, we are gaining direct access to the central nervous system through cranial nerves 5, 7, 9, and 10. That includes the vagus nerve. We are stimulating and reducing the firing of the amygdala. The amygdala is the part of the brain that is essentially overstimulated, for a lack of better terms.
It's overstimulated. We're reducing the firing of that amygdala. We're essentially inducing changes in the brain pathways and the connectivity long term. That's why we're seeing long-term results after four weeks of therapy. This device is also, this is also a picture of our new technology. It's not much different from a functionality standpoint, but it will be a new look in 2026. This is a quick slide on the data that doesn't support the pharmacotherapy. These children are receiving TCAs, SSRIs, antidepressants, amitriptyline. You're talking about significant side effects, black box labels. The physicians are not excited to give these treatments, but it's all they've had for 40, 50, 60 years. Our first study, let me touch on it, research very quickly. Our first study was a double-blind placebo-controlled trial in 2017 in pediatrics. This was a slide. This is a result of global symptom improvement.
This is number needed to treat. The number needed to treat to have an effect with our technology is three. If you look at the adult drugs around IBS, like lubiprostone, linaclotide, and rifaximin, the number is 6-14. We have very strong data. It is why you are seeing the response from the insurance companies that you see. Long-term disability, functional disability, and long-term follow-up. We move patients from moderate disability to minimal disability. In order to do that, a half a point is significant. We move them two full points, so four boxes, if you will, from moderate disability to minimal disability. We have done the largest pediatric registry in children with DGBIs. This was about 300 patients. We took all comers. Unlike most trials you see that have exclusion criteria, inclusion-exclusion criteria, we had none.
We took all comers, 300 patients, seven centers, Boston Children's, Cincinnati, UAB, Riley, and others. Excellent data at 6-12 months. Other pieces and other parts of this, such as 61% of these patients had failed four or greater medications prior to taking or using IB-Stim. We did a head-to-head at Cincinnati Children's Hospital against amitriptyline and cyproheptadine successfully. This is the foundation of why we're so successful with the insurance companies. This is why we saw the guidelines being published or about to be published. They were released in abstract form, 16 total publications. We've done 10 different types of studies at 13 leading institutions. All of this research is investigator-initiated. No bias from the company, no sponsorship. Quick slide here on, we have 17 insurance plans today, 51 million covered lives.
The category one, this is everything to the foundation of the growth of the company. Insurance policy coverage, category one CPT code. The fact that the American Academy of Pediatrics submitted our category one CPT code, the fact that we have the guidelines listing us as the highest level of evidence. We're expecting a position paper from the society later this year stating that we should be used first-line treatment. When you look at these things that are happening, it's because of the data that we have published. We're fully expecting as the insurance coverage becomes effective and the category one code becomes effective, that the demand that's in place today turns into revenue. IP, this is just U.S. We've got 13 issued and nine pending patents. We do have international IP in process. We are working on some additional countries right now, such as Canada.
The IP is around both the device and the method. Manufacturing's in the United States, medical advisory board, management team. This is really the team that got us here. We just added Tim Henrichs, who is our new CFO. He's been here about a year. He was the global controller for GE in Germany. Then he was at Follett Corporation. Dr. Miranda, I would point him out. He's one of the leading pediatric gastroenterologists in the country. He's been involved with the research. He's been our Chief Medical Officer since 2017. Board of directors, Beth Kaiser, she's the president of Blue Cross Blue Shield Indiana. Mitch Watkins has been part of three med tech exits from start to finish, very successful. Gil Aaron runs a fund in Toronto called Rosalyn. He was also involved from the beginning or the restart beginning at Delcath and Miomo.
Very successful runs the last three or four years at those two companies. We had multiple options last year when we did a fundraising round to take capital. He wanted a board seat. We wanted him on the board for his experience. We just recently, he became a board member on January 1. The last thing I'll say separately from the flagship technology that we just discussed is the RED Technology. We just licensed this from the University of Michigan. This is a constipation technology. We licensed this for a couple of reasons. Number one, it's in the GI space, adult GI space. It already has a Category I CPT Code reimbursed by Medicare, reimbursed by commercial insurance. There's a real unmet need for patients who are seeing the gastroenterologist for constipation right now before they get to anorectal manometry. We just launched this.
We do think this will provide meaningful revenue to the company and help a tremendous number of patients. This is very new. We will report back in the coming quarters. One more thing. When I say the revenues of $2.7 million, we treated a little less than one tenth of 1% of the debilitated market last year. Cap table, the stock price is $2.50 today. Welcome to the way of the markets right now. I printed this yesterday or the day before. It is $2.50 today. There is the symbol, shares outstanding, warrants, options, RSUs, series B preferred that was done last year. Shares fully diluted about 15.8 million. Financial position about $2 million. As I mentioned, the cash burn is coming down. We have money into Q3. Revenues are increasing. We have not announced Q1. Would we likely have to raise some money?
Yes. We fully expect to be cash flow break-even and profitable sooner than later. Is that 15 minutes? Thanks. Thanks, Brian. I just want to delve into some topics here. Let's go back to the research here. You spoke about published research and specifically as it relates to insurance coverage. You've had nice success, 51 million covered lives currently. What's the next catalyst in terms of much larger national coverage? Yeah. We've built a relationship. There are five primary decisions left: HCSC, which covered almost 20 million covered lives from Illinois through Texas; Anthem, United Healthcare; Cigna; and Aetna. That would take us at or above around 200 million covered lives. They're waiting on the academic society guidelines to be published. The abstract didn't do it for them. Their internal mandates or their internal guidelines, if you will, require published guidelines.
We speak to all five of those pretty frequently. And we're cautiously optimistic, as optimistic as you can be with a payer, that the guidelines allow that policy coverage to be finalized. Let's talk about sort of the competitive therapies, if there are any. What are you seeing out there in terms of competition of therapies for IBS, specifically in the pediatric space? In IBS, there are some pharmaceuticals like amitriptyline, albeit not helpful, not ideal for children. They do help some kids. And it's easy. You can write a prescription. Kid can be on amitriptyline eight hours later. So you're dealing with ease of use. There's no true competition. There's no other FDA-indicated treatment for functional abdominal pain in IBS. And there are some off-label pharmaceuticals that work. So you're dealing with that.
When you have a physician who has a child in pain and they can treat someone today, they often do it. You also have physicians who know that the data is outstanding with IB-Stim. They need a category I CPT code so they're paid for the procedure. Number two, they need to know that the patient will be reimbursed by insurance coverage. That's not the case today across the country. As I said, half the battle is the category I code, which will be effective January 1, 2026. Half the battle is the insurance policy coverage. We're cautiously optimistic that by January 1, the majority of that is taken care of. Competition's a loose word, but it's about convenience. Got it. You've made two very important announcements in recent months. One is the category I code and the 510(k) extension.
Talk about their significance and sort of what it means. Yeah. A category one code right now, if a physician has to get 3,000 RVUs in a year and they would like to be doing IB-Stims for one day a week, that's not realistic because they won't meet their RVU threshold. They won't be paid. They won't have a raise next year. They certainly won't get a bonus. They're prohibited, if you will, from doing very many IB-Stims. What they're doing is out of goodness of their heart. They know it's the right treatment. The demand, as I said, is incredible. The category one will bring payment, if you will, to the physicians. 99% of the pediatric gastroenterologists are employees of children's hospitals. We're not talking about private pain physicians here in an ASC that are simply concerned about reimbursement.
The RVUs really matter much more than a reimbursement to the physicians we have relationships with. The expansion from 11 to 18 years of age to 8 to 21, that increased our addressable market almost double in December, which was good. They were already treating those kids as often as they could. It allows the insurance policy coverage to pick that up. Okay. I want to dive into the numbers. Back half of 2024, strong growth, over 50% in the third and fourth quarter, respectively. What's leading to that? Why are you seeing the strong numbers? You did mention on the call that you're sort of seeing those trends continue here in Q1. Talk about that. Yeah. It sounds good. 40%, 43% in Q1 was good. It's really not that many patients.
The uptick was from a few accounts that received some positive insurance policy coverage. I've joked on the calls that most of our insurance policy coverage has come in areas where we have accounts that are not comfortable with the category three billing code. It hasn't helped us tremendously yet. There have been a couple of areas where we have insurance policy coverage and the accounts are okay with a category three billing code. If you're not familiar with the category three billing code, they're very difficult. First of all, the insurance company denies it immediately. They deny the appeal. You have to go to a second appeal. Number two, your coding and reimbursement team or Chief Revenue Officer has to build what's called a charge bundle. They have to build out the device, the physician time, the facility time, the supplies.
It's very time-consuming. It's difficult. The full picture needs to come together, category one CPT code and the insurance policy coverage. It appears the writing's on the wall. It's coming together. The category one code for sure. Yeah, we need those two to come together. Okay. I just want to touch on RED. You have the 510(k) clearance. Walk us through what revenues could be in the next six to nine months now that it is commercial and sort of how can that help the bottom line here as we go forward? I wish I had an answer for you. The response is significantly higher than we thought it would be. We're doing more of a hard launch at DDW, which is Digestive Disease Week. It's the largest global GI conference in San Diego the first week of May.
We will have much more feedback at that point. I might give more detail if I have enough information that I feel comfortable giving more detail on our, I believe, May 12th earnings call. Look, the feedback is positive. They are great margins for us. It is great reimbursement for the physician. It fills an unmet need for both the physician and the patient. We are cautiously optimistic this could be meaningful revenue to the bottom line. Okay. Thanks, Brian. Any questions from the audience? I guess pills can be started by physicians. I am assuming these are pediatric GI doctors who are prescribing amitriptyline. Just that these are the IB-Stim stuff, is that through pain doctors? Or is the distribution different for these kind of things? Yeah. Good question. Distribution is direct. We have a W-2 sales force.
We will expand as we get the category one code and additional insurance policy coverage. The pediatric gastroenterologist also plays this. Those 600,000 debilitated children I am talking about are seeing pediatric gastroenterologists at the 260 children's hospitals across the country right now. Okay. I think the gold standard for this kind of stuff still probably is CBT, which you can correct me if I am wrong. Obviously, those are harder to get in terms of psych people. Is that right? You are right. In the guidelines, they also had a high level of evidence, virtually impossible to get into. I think you are going to see research coming from Cincinnati Children's comparing PENFS to CBT. CBT has tremendous data, yes. It is just virtually impossible to get to it. Most, they do not have the psychiatrist correct.
It sounds like there may be a big tailwind for IB-Stim as an industry. The biggest loser might be pharma in this space. What about other competitors within the IB-Stim industry? What is having a provider pick this over other competitors that are IB-Stim? I'm not aware of another technology that has this competing with us in the neuromodulation space today. I would like to think our IP between the device and the method IP is strong enough to prevent that. I'm not going to get into it here, but we've got several mechanisms behind the IP that is not just neuromodulation, but light, sound, neuromodulation, any frequency, if you will, that would affect the central nervous system that would treat disorders of the gut-brain interaction. We feel pretty good about the IP around those.
In order to compete, you would have to use a deep brain stimulator. These children are not going to have surgical implanted devices for this condition. Do you find these children are getting these prescriptions for IB-Stim at a regular kind of suburban doctor's office? Or are they going to the specialized referral centers like Cleveland Clinic or Mayo? Funny you mentioned those two. Only children's hospitals, yes. This is not a rural pediatrician call point. I don't know that we have maybe one or two rural, if you will, private pediatricians. 99% of our accounts are children's hospitals in urban areas. Yep. Great questions. Hi. Can you just talk a little bit more about why you went from peds, IB-Stim, to dyspepsia, and then back to adult IBS?
Why not do the peds and the adults side by side and just push that through the FDA pathway together or right after each other? We had to do—normally there's an adult drug or an adult device, and they do an extrapolation to pediatrics without the pediatric data. We went pediatrics first. In order to do—we didn't have any adult data and still don't have adult data, although we're in the process of doing—we're looking to do an RCT at Cleveland Clinic on functional dyspepsia. We wanted to submit the functional dyspepsia and do them both at the same time. We've had conversations ongoing with the FDA. They've got guidance now about doing what they're calling a reverse extrapolation. From pediatrics to adults, because if it's safe for children, it's safe for adults. We decided to package together.
For the dyspepsia, but you'll do the IB-Stim separate? I want to make sure I'm answering your questions. We're going to have dyspepsia, pediatric, in the next month or so. We'll have both those indications. We're going to go package deal: dyspepsia and functional abdominal pain for adults in one FDA submission. We expect to have both of those indications by the end of 2025 in adults. Essentially, we'll have eight through adults in IBS, FAP, and functional dyspepsia. Separate CPT codes? Oh, same CPT code. Okay. I won't go down that path again. If we can't use the same CPT code, we won't do it. Exactly. Do you need to publish guidelines? What would the timeline be on that? Who's supporting the guidelines? For the adult side? Yeah.
You're probably talking—in a perfect world, to get blanket insurance coverage, yes. I think realistically, that's in early 2027. Yes, we're already in conversations that if we do this RCT and it's positive, then we go in the guidelines, yes. Great. Thank you. Yes. Great question. Any other questions? Can you just talk about your thoughts about the raise at some point? Is there any way to—this market cap just seems so... We're looking—we are strongly considering friends and family debt to avoid any dilution at a very good interest rate. We have not made the decision. We've got a board meeting in May. Again, the need continues to be less and less. We are very cognizant of dilution and the share price. Yes, sir. Thank you, Brian. Thank you. This presentation has now finished. Please check back shortly for the archive.