Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NeuroPace Inc (NPCE, Financial) reported a 17% increase in total revenue for Q2 2024, reaching $19.3 million compared to $16.5 million in Q2 2023.
- The company achieved a gross margin of 73.4% in Q2 2024, up from 72.5% in the same period last year.
- Revenue growth was driven primarily by increased sales of the RNS System and DIXI Medical SEEG products.
- The company has successfully expanded its commercial team, with new sales representatives completing their training and beginning independent activities.
- NeuroPace Inc (NPCE) has made significant progress in its Project CARE program, which aims to expand access to RNS therapy outside Level 4 centers.
Negative Points
- Despite revenue growth, NeuroPace Inc (NPCE) reported a net loss of $7.5 million for Q2 2024, though this was an improvement from a $9.1 million loss in Q2 2023.
- R&D expenses increased to $6.1 million in Q2 2024 from $5.3 million in the same period last year, driven by higher personnel-related expenses and product development costs.
- SG&A expenses remained high at $14.3 million in Q2 2024, only slightly down from $14.5 million in Q2 2023.
- The company has long-term borrowings totaling $59 million as of June 30, 2024, with a final maturity date of September 30, 2026.
- There is some seasonality expected in the summer months, which may affect revenue growth in the second half of the year.
Q & A Highlights
Q: Can you provide more details on the increasing number of referrals from the Project CARE program?
A: Yes, we have seen increasing activity and interest in CARE, both on the implants and the referral side. Centers are identifying patients who might be treated in a community setting but are initially referred to Level 4 centers while they get their programs set up. This has led to both implants and referrals with an increasing level of activity in the recent quarter. β Joel Becker, CEO
Q: How should we think about the margin and OpEx cadence for the back half of the year?
A: Our gross margin can fluctuate due to various factors, generally improving with RNS volume. We expect to see improvement over time but with small variations quarter to quarter. Operating expenses for the first half were a little over $41 million, putting us within our guidance. We don't expect significant fluctuations in OpEx, although there might be some increases in the fourth quarter due to major medical meetings. β Rebecca Kuhn, CFO
Q: Can you walk us through the growth between utilization by existing users versus new ones coming on board, especially with the CARE program?
A: Our guidance implies $38.6 million to $46 million in the second half. We expect growth each quarter, recognizing some seasonality in the summer months. The growth rate doesn't hold through the full calendar, but we see good growth and have raised our guidance to reflect that. β Joel Becker, CEO
Q: What are some key initiatives on deck for next year, especially with the NAUTILUS trial progressing well?
A: Key initiatives include expanding the Project CARE program, leveraging our expanded commercial organization, and increasing adoption and utilization within Level 4 centers. These efforts will support our eventual indication expansion for the NAUTILUS trial, setting us up well for future growth. β Joel Becker, CEO
Q: Did you quantify how much you benefited from NAUTILUS enrollment in Q2 '23 to get the 21% year-over-year growth for RNS sales this quarter?
A: We didn't quantify that specifically but included it as a point to indicate the underlying strength of the business. Excluding NAUTILUS, we wanted to show that we had to make up for the clinical trial revenue benefit in '23 and still demonstrate current period growth. β Joel Becker, CEO
Q: How have preliminary learnings from the Project CARE pilot shaped your overall commercial strategy?
A: We've learned important aspects regarding targeting, training, and education. These learnings have helped us refine our strategy and see significant opportunities both in the current focal drug-resistant population and potential future indications. β Joel Becker, CEO
Q: Can you provide more details on the growth coming from established Level 4 centers?
A: We've focused on expanding both adoption and utilization within Level 4 centers. This includes increasing the number of prescribers and expanding the patient populations for RNS therapy. We've seen success in both areas, contributing to our growth. β Joel Becker, CEO
Q: Any quantifiable learnings from the DIXI partnership regarding the patient funnel?
A: While we haven't quantified specific metrics, the DIXI partnership has broadened our visibility upstream in the diagnostic process, allowing us to have earlier and broader conversations about potential patients for RNS therapy. β Joel Becker, CEO
Q: Can you revisit the reasons for the decelerating growth rate in the second half?
A: We don't see it as a result of internal cuts or market slowing. We expect some seasonality in the summer months and tougher comps from the prior year in the second half. However, we are positioned for continued growth and have raised our guidance accordingly. β Joel Becker, CEO
Q: How will you handle the debt when it comes due in two years?
A: We recently extended the maturity of our debt to September 2026, providing us with additional flexibility. We continue to evaluate options and will consider what is in the best interest of the company and our shareholders. β Rebecca Kuhn, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
