Hello everyone, and thank you all for joining us during the Lytham Partners Fall 2025 Investor Conference. My name is Ben Shamsian, and I'm Vice President of Lytham Partners. During this Fireside Chat webcast, we welcome NeurAxis, ticker symbol NRXS, on the NYSE American. Joining us today from the company is Brian Carrico, NeurAxis's Chief Executive Officer. Also joining us today is Chase Knickerbocker, Senior Research Analyst at Craig-Hallum, who I've asked to moderate today's Fireside Chat. Chase covers a wide array of specialty pharmaceutical, biotech, and medical technology companies at Craig-Hallum, including NeurAxis. Chase brings a unique commercial perspective to his coverage as he has held several field positions in his role at Stryker before joining Craig-Hallum. Before I turn it over to Chase, I want to remind everyone that management is available for one-on-one meetings throughout the conference and beyond.
If you have not already signed up and would like to schedule a meeting with NeurAxis, please send me an email at shamsian@lythampartners.com. With that said, Chase, the floor is yours.
Thanks, Ben. Brian, thanks for doing this. Maybe just to start, for those in the audience that are less familiar with NeurAxis, maybe hit us with a little bit of a refresher and some background on the company, and then maybe just some background on IB-Stim specifically and the mechanism in which it impacts functional abdominal pain.
Yeah, thanks, Chase. Good to see you. Thanks, Ben. Yeah, background on the company. We are a growth-stage medtech company. We've been around for a little over 10 years, and our focus has been in the pediatric GI space. We have two FDA indications today. One is for functional abdominal pain in patients, children, I should say, 8 -21 years of age, and one FDA indication for functional dyspepsia in children 8- 21 years of age. With that functional dyspepsia indication comes nausea symptoms, which is part of functional dyspepsia. As we are in the pediatric space, we've had our first indication for several years, and we recently received the functional dyspepsia and nausea symptoms indication. The technology itself is a percutaneous electrical nerve field stimulator, and this technology is placed in an outpatient clinic or an office by a pediatric gastroenterologist.
This technology has a neuromodulation frequency, no different than many implantable and non-implantable neuromodulation medical technologies. This technology itself is placed on a Monday, for example, and the technology runs for five days uninterrupted, and the patient wears this for the entire five days. The patient takes the device off and brings it back to the physician's office where it's discarded. At that point, they receive a second device, and this continues for four weeks. The treatment is for four weeks, and we have good data at this point at six months and 12 months after four weeks of treatment. This is not something that needs to be worn forever, and the data at 12 months is statistically significant and really strong.
From a mechanism standpoint, this is a neuromodulation frequency, as I mentioned earlier, and the current or the frequency goes through the percutaneous needles, which do break the skin around the auricular area. You wonder, you say, why are we going to the auricular area to treat functional abdominal pain and functional dyspepsia and nausea? The reason is because this neuromodulation frequency travels through the cranial nerves, through the nucleus tractus solitarius, and ultimately to the amygdala, which is the part of the brain that we are ultimately modulating. We have very good animal mechanistic data. We have very good real-world data and placebo-controlled trial data at this point showing that this is how the device is working from a mechanism standpoint, along with the outcomes. That's high level on the company, who we are, where we're at, and the technology itself.
Can you talk a little bit more about the pretty major unmet need in functional abdominal pain for these children and also in functional dyspepsia now as well, and just kind of what is used today, kind of just the overall unmet need in the treatment landscape as it exists?
Sure. When we were contacted around 10 years ago by our now Chief Medical Officer and still practicing pediatric gastroenterologist at Children's Wisconsin, Dr. Adrian Miranda, he made it very clear at that point that there's a growing condition. This condition continues to evolve and become a larger patient base, and that is functional abdominal pain and functional dyspepsia. For 30 or 40 or 50 years, these patients have continued to have no FDA-approved or no FDA-cleared treatment options. They've been left with options such as amitriptyline, SSRIs, TCAs, antidepressants. These are medications that in most cases have FDA black box warnings. These are medications that most parents don't want their children taking, and quite frankly, the physicians don't like to prescribe them.
It's been the only opportunity for these patients in the last, as I said, since the condition has been created or diagnosed 30 or 40 or 50 years ago. When we began on this mission, we became the first FDA-approved or FDA-cleared treatment. These children now have not only an FDA-cleared treatment that's well documented in the evidence, but they have a safe alternative to these medications, which have never beat placebo and are not approved or cleared by the FDA. This is not only a win for the company, which is important, but more importantly, it's a win for these children who have never had an option and for the families who don't want their children taking these off-label black box warning medications. I'll talk a little bit more about this.
The total addressable market, when you talk about, people often say, do a lot of children really have this? The data are very clear. Roughly 6 million children in the U.S. have functional abdominal pain associated with IBS, and that's a large number. That's not our target market. 600,000 or 10% of that 6 million number are the children that are debilitated. How do we define debilitated? We define debilitated, or we don't. The literature defines debilitated as children who are missing three or more days of school per week. In most instances, these children that are missing more than three days of school per week are also on some type of pharmaceutical that I mentioned earlier. We're looking at 600,000 children that are debilitated in the functional abdominal pain space, and there's 400,000 in the functional dyspepsia space.
Now we're talking about 1 million children that are debilitated in the U.S., missing three or more days of school due to one of these two conditions. If you multiply that by what we get at full price, it's roughly $5,000 per patient, and that comes out to about $5 billion in opportunistic revenue.
Great. Maybe just kind of speak to some of the challenges that are present for a new medical device upon launch. Talk about your kind of initial launch there, how coverage has progressed, and next we'll talk about guidelines and payer coverage and all that, but just kind of set the stage if you wouldn't mind.
Yeah, so, we've had this indication for several years, as I mentioned earlier. When you first come to market, obviously the first thing you have to do is you have the data to get through the FDA, and that was the placebo-controlled trial. The next step is to convince the academic community, the physicians, and that happened fairly quickly with a little more data. You have the physicians who want to treat these patients, but you have two glaring issues. One is a lack of insurance policy coverage, and it doesn't matter what we're treating or what we're curing or what we're doing here in the U.S., if you don't have reimbursement for a technology, it's very difficult to scale that technology. The first hurdle that we've faced, and it's a roadblock, and it has been from the time we got the FDA indication, is insurance policy coverage.
If the children don't have coverage, you just can't scale a technology. That's been the first hurdle. The second hurdle has been the fact that physicians, 99%, truly, 99% of the physicians that we work with, the pediatric gastroenterologists, are employees of children's hospitals, and they're not as concerned about reimbursement as much as they are concerned about RVUs. This is how physicians in children's hospitals are paid, bonused, and measured by RVUs, and they have to get so many RVUs per year. In the medical device world or in the medical community, physicians, when they do an office visit or a procedure, that is associated with an RVU, whether it's, you know, a half an RVU or one RVU, whatever it may be. If they have to get several thousand RVUs per year, and they're doing an IB-Stim, they're getting no credit for that.
That's essentially them working for free. Now we have an issue where the physician's not being compensated for their time, the patient's not being covered by their insurance coverage, the hospital's not being reimbursed. You have a situation where you have a phenomenal technology, well evidenced, supported by the academic community, but there's no way to treat the patient. That's been the hurdle leading up to mid-2024.
It certainly seems like all of that is set to change here in the near term. Maybe just talk about on the first piece as far as the Category I CPT code that will go effective January 1st, 2026. We have payment now that has been proposed in July from an RVU perspective. Just kind of walk through what you've heard from physicians around that and how they've told you it'll affect their usage, et cetera.
Yeah. We were awarded a Category I CPT code last September, and this is an 18-month process. It started last summer, and it goes until this upcoming January 1st, where the Category I CPT code will take effect. There are multiple aspects to a Category I CPT code, but it's critical to have a Category I CPT code, just like it's almost critical to have insurance policy coverage. The Category I CPT code brings along several elements. Number one, it brings along an RVU. The proposed RVU is 1.46 RVUs, so that every time an IB-Stim is placed, the physician will receive 1.46 RVUs. The initial feedback on that element is very pleased with that number. The second element that a Category I CPT brings along is a proposed payment schedule. There are two side elements to the proposed payment schedule.
Number one, a Category I code streamlines the payment process for a Chief Revenue Officer in a children's hospital. Our current situation is very convoluted, very difficult to get a prior authorization, and the billing aspect is very difficult. The Category I brings along a traditional streamlined process where the code and the payment is loaded with the payers, with the state Medicaid offices, and therefore when the physicians and the children's hospitals bill for this, it's already loaded. The Category I code, in short, brings payment to the physician, and it brings streamlined billing and coding for the children's hospital and the physician. The other thing it does, the second side element I was referring to, is that roughly 70% of the prior authorizations that are done today leading up to the Category I come back as a no-auth required.
When a no-auth required happens, that ultimately means that the patient's not going to be reimbursed. Because the insurer says no-auth required, that also means you cannot do a predetermination. You can get no answer, which means the patient can't even do an appeal. They're stuck. 70% of patients today that want to be treated are immediately put to the side, and they cannot be treated because there's no Category I CPT code. Ultimately, the great news here is that the physicians will have compensation for their time. The streamlined billing will be in place. The code will be loaded. There are some questions from some children's hospitals.
If you want me to play devil's advocate here and talk about potential issues in January, we're told from some children's hospitals that it can take up to three months to get the Category I CPT code loaded in payers and in their system. We're cautiously optimistic that won't be a widespread problem, but we are being told that that can happen. We'll wait and see. We're doing everything in our power now to make sure these codes get loaded, but a lot of this is out of our control. The last thing I would say about this is we often get approvals for Medicaid, and the children get approvals for Medicaid, but then they're paid zero because the fee schedule is zero. Once the CPT payment is loaded on the state Medicaid fee schedules, then there will be payment.
Essentially, there's been no Medicaid treatment because the hospitals know they won't get paid anything. That will also change. A lot of positives changed as we move towards this Category I CPT code. Long time coming.
Absolutely. Just maybe, you know, if I had the remaining pieces widespread, private reimbursement, and maybe speak to the recent guidelines. The data's long spoken for itself. Now to have a guide, the leading guideline agency, you know, come out with strong support for the clinical evidence for IB-Stim. Speak to how that kind of puts you in a position to maybe be a little bit more on the offensive when it comes to insurance coverage and kind of how those conversations have progressed since the guidelines were published earlier this year.
Great question. As it's been well documented, we're approaching roughly 55 million covered lives, somewhere in that neighborhood. That's what may be called low-hanging fruit, but these are very strong Blue Cross Blue Shield policies from around the country. I believe we have roughly 17 or 18 insurance plans that have written policy coverage now. These are good policy coverages as a general rule. The big pushback from the larger payers and many of the Blue Cross Blue Shield plans and the Aetnas and the Cignas of the world has been that we did not have academic society guidelines. The academic society guidelines bring the most credibility because academic society guidelines are independent of the manufacturer, they're independent of the payer, and this is the academic society ranking or grading technologies based on evidence and based on their peer feedback.
It was announced and published, I believe, late May, that NASPGHAN, which is a subsidiary of the American Academy of Pediatrics, and NASPGHAN is primarily responsible for the Pediatric Gastroenterology Society. They published guidelines recommending IB-Stim as treatment. There were several recommended treatments, but a couple of these are done at the pediatrician level, and by the time they get to the specialist, which is where the patients we treat are going, we were, I believe, the only one at that point that would be utilized. More importantly, IB-Stim is now the only FDA-cleared treatment in the guidelines that's recommended. Since those guidelines were published, we have been, one of our two, I would say we have two high urgencies right now, and one of the two highest urgencies is the communication with the payers, and we're communicating with them as often as we possibly can.
We've gotten them all the data. It's our understanding that the academic society has contacted them separately with the guidelines explaining the urgency for these children to have access to IB-Stim. These payers now, there's a little bit of sit and wait because these payers, there are roughly 12 payers, large payers left that range from the largest payers you can think of to some very large Blue Cross plans that cover roughly 90% of the state, and that is the case in multiple states. It is somewhat of a sit and wait, and each one of these payers has an annual review date, and they are only obligated to review these policies on that annual review date.
We have asked for interim reviews because some of these reviews are not until February, March, April, May of 2026. We have asked for, requested interim reviews. They have been very polite. They have responded and said, "We do interim reviews. We cannot communicate with you and tell you if we are doing one for you." That is really it. I understand there is a hands-off there.
We are cautiously optimistic we will see some interim reviews. I am also practical and realistic and know some of these reviews will not happen until the annual review date, and we are cautiously optimistic those are positive. We have gotten some additional news on policy coverage recently, or I should say on approvals recently. We have met with several high-profile children's hospitals who have informed us that even with a Category I CPT code, they feel confident that they can, through appeal, get this technology approved because of the credibility that a Category I code brings, combined with the academic society guidelines listing IB-Stim as the only FDA-cleared treatment that is recommended. We are cautiously optimistic. We have two kind of silos.
One silo is the academic insurance policy coverage push, and one silo is on the commercial side right now, which I am happy to speak about when we get there.
Yeah, maybe just to go there now, I guess first, do you feel that, you know, kind of once these potential larger payer wins come into place and with the Category I CPT code, that that is kind of the two gating factors from taking your, you know, very small penetration today and making it, you know, much more relevant penetration into the overall market, which you noted was fairly large? Just talk about the commercial infrastructure that you're starting to build out in preparation for that.
Yeah, I'd start by saying our penetration rate has been somewhere around 0.2% of 1%, and that's recent. You've seen some organic growth in the last year of roughly 40% per quarter, but that's not because of anything. You might say, you have some new insurance policy coverage. That's helped a little bit, but in many of these areas where we've gotten some insurance policy coverage, we're in children's hospitals where there might be, you know, seven or eight decent-sized payers, and we've received one or two of those. It really does, and many of these children's hospitals have been reluctant to bring the technology in because there's no Category I CPT code, and that means some of this insurance policy coverage has not been utilized yet.
I think it's important that we talk about the commercial side of this because from the commercial standpoint, there's no magic bullet to drive utilization, although the Category I code is as close to a magic bullet as possible. When you talk about being top of mind, the commercial force, we just hired a very experienced and successful Marketing Director who came from a company that was just acquired by Stryker, and she's outstanding. We're utilizing the academic society and CME talks. We're utilizing our commercial sales force, which will expand as the Category I code becomes effective and we get more insurance policy coverage. We're utilizing the marketing side or NASPGHAN and our commercial sales force, and we also have a very aggressive KOL. We're aggressively using our KOL network to do peer-to-peer talks, division talks beginning late Q4, early Q1.
We're bringing this data to the physicians in five or six or seven different ways. It's important that the commercial force, it'd be known that the commercial sales force right now is highly focused on creating, making sure that the coding and the billing are in the Chief Revenue Officer's hands, that the physicians are aware of the RVUs, that the chiefs of the divisions and the administrations are aware of the financial impact of the Category I code, how that can potentially help them. Probably most importantly is the fact that we are looking for children's hospitals to create IB-Stim clinic days. Let me explain that briefly.
If there are two new patients per week for a children's hospital, and each patient receives four treatments over four weeks, that means they need eight placements per week because if you have two new patients per week, each getting four weeks of therapy, you need eight placement slots. We're ensuring that these children's hospitals, as many as we can, have IB-Stim clinic placement days. In order to do that, it takes time because they're booked out months, and that's why we've been working on this since July to make sure that on January 1st, everyone has everything they need. Practically, there are 260 children's hospitals. I think we've talked about this, roughly 75 children's hospitals purchased a device from NeurAxis last year, but the $3 million came from, you know, whatever it did, $2.7 or $2.8 million came from roughly, you know, 90% of that came from 10 hospitals.
Those same 10 hospitals have been our revenue for three or four years. The importance behind the 75 children's hospitals is we are adding new accounts, but they buy virtually no product because of the Category I CPT code lacking and/or a lack of insurance policy coverage. The reason it's important that we're increasing the children's hospital accounts is because once the Category I CPT code hits, any account that's purchased product where we have a champion, that becomes a high-value target to put an IB-Stim clinic in place and make sure they're able to see multiple patients per week. Are we going to get to all 260 now? No, we don't need to get to all 260 now.
We need to get to the ones that are active, have champions, and we need to drive utilization and saturation and the penetration rate in those children's hospitals and then grow legs and then expand out. That's the focus right now.
Got it. Maybe just to help characterize as far as the revenue opportunity within your current install base, those 260 children's hospitals that you talk about, what percentage of the overall, call it, million highly debilitated patients do you think they treat? Taking that further into the 70 odd accounts that have ordered, what's the unlock for really building a much larger penetration within that? Is it as simple as broader payer coverage? Thanks.
Yeah, so the first side of that, the 75 children's hospitals, how many of the one million patients are being, or just how many of the one million patients are being seen at children's hospitals? The heavy majority of that number, there's no data on that exactly, but we do know that once a patient is missing multiple days of school, they're certainly past their pediatrician and they're to a specialist. We know that the specialist in this case is the pediatric gastroenterologist. I think if you want to be conservative, 75% of these patients are being seen by a specialist. Regarding the penetration rate, this is, you know, if I lose sleep over one thing, it's this, it's even more so than the insurance policy coverage. Now that the Category I code is in place, there are several moving parts in a children's hospital.
Number one, assuming you have a champion, then you have to make sure that the Chief is on board to add slots, placement slots, and you have to ensure that the administration is on board. Once, as we start to show the pro forma for the Category I CPT code, the response has been very good. Not only because of the RVUs, but because the payment was favorable. The payment that came back was favorable. Look, it was fair. I don't think I would say that it was, you know, favorable from the standpoint as more than it should be. It was a very fair reimbursement amount, and the commercial contracts are a multiplier of that CMS payment. I think that so far the children's hospitals have been very pleased.
There are multiple avenues, multiple aspects of growing a children's hospital into where they're treating multiple new patients per week, and that's the focus. I don't know, again, I don't know if there's a magic bullet, but the Category I CPT code has certainly moved the needle significantly when it comes to setting these clinics up. We're 60 days into that, and it's without question moving the needle more than anything else has combined.
Got it. Just to kind of do the math there, the 78 accounts you're in, you know, if we've got 75% of those patients that are potentially treated at those children's hospitals, that's a very significant amount of patients that are, you know, potentially at the accounts which you, you know, currently have some sort of standing relationship that should be easier to reach as we continue to expand coverage and Level I CPT code goes into place.
Without question. One number I mentioned in Q1, I don't know that I mentioned it for Q2, but we had the number of patients that came to us through our GPS or our Guidance and Patient Support Program in Q1, whether they got treated or didn't get treated, I believe the revenue was something like $2.3 million. If we would have been able to treat those patients, the ones that just came to us from, I don't know, 15 children's hospitals, it was somewhere in the neighborhood of $2.2 million- $2.3 million. If you extrapolate that, it's borderline, you know, it's pushing a $10 million run rate, and that was from a very low number of children's hospitals.
The majority of those patients, as I said, 70% that are coming to us are getting, they can't do anything because of the no prior auth required, and we expect that to change. Look, we're cautiously optimistic, but I see the feedback, I see the responses, I see the programs being built, I see the demand, but until this machine is turned on January 1st, I'm as anxious as anyone to see what the response is going to be. I'm not concerned about the uptick. What I'm concerned about is how quickly the uptick happens. Can we get everything in place in Q4 to launch, you know, 25 of these or 20 or 30 of these in Q1 and have them treating a couple of patients a week? Or is it going to take them 30, 60, 90 days for whatever reason?
Administration, the chief having other responsibilities, the code not being loaded. I'm also hearing patients and physicians already talking about patients in Q4 who may want to get treated, wait until January 1st. Q4 could be interesting because if we have patients interested in being treated in November and December and they're not covered, are they going to do patient assistance or are they going to wait until January 1st? It sounds to me like they're going to wait until January 1st. There's a lot of unknown. The important factors are known, but there are some short, you know, I call them good problems to have, but there are some short-term good problems that we just don't know the answer to, and that will become more clear in the next three, four, five months.
Understood. Anything else, Brian, that we didn't hit on that you think is important to know?
No, rubber's meeting the road. This is not complicated at this point. This is about the Category I taking effect, gaining as much insurance policy coverage as we can, and commercial execution to drive utilization and penetration rate.
Exciting times ahead. Thank you.
Chase, thank you.
All right. Chase, Brian, thanks very much for your time today. Certainly found it informative and hope the audience as well. Before we wrap up, just a quick reminder, anyone who wants to set up a meeting with the company, please send me an email at shamsian@lythampartners.com. S-H-A-M-S-I-A-N at lithiumpartners.com. Once again, thanks to Chase and Brian, and we hope everyone has a great rest of the day.