Neuraxis, Inc.

Thank you for standing by, and welcome to NEURAC's fourth quarter and fiscal year 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to Ben Shamsian with Litham Partners. Please go ahead.

Thank you, and good afternoon, everyone. Thank you for joining us for NeurAxis's fourth quarter and full year 2023 financial results and corporate update conference call. Joining us on today's call is Brian Caruso, CEO of NeurAxis, and Tim Hendricks, CFO of NeurAxis. At the conclusion of today's prepared remarks, we will open the call to questions. If you are listening through the webcast, you can send in a question through the portal utilizing the ask a question box. or by simply emailing questions to NRXS at lithiumpartners.com. If you're dialed into the live call and would like to ask a question, you can follow the instructions provided by the operator. Today's event is being recorded and will be available for replay through the webcast information provided in the press release. Finally, I'd also like to call your attention to the customary Safe Harbor disclosures regarding forward-looking information. The conference call today will contain certain forward-looking statements, including statements regarding the goals, strategies, beliefs, expectations, and future potential operating results of NeurAxis. Although management believes these statements to be reasonable based on estimates, assumptions, and projections as of today, these statements are not guarantees of future performance. Time-sensitive information may no longer be available may no longer be accurate at the time of any telegraphic or webcast replay. Actual results may differ materially as a result of risks, uncertainties, and other factors, including but not limited to the factors set forth in the company's filings with the SEC. NeurAccess undertakes no obligation to update or revise any of these forward-looking statements. With that said, I would like to turn the event over to Brian Caruso, Chief Executive Officer of NeurAxis. Brian, please proceed.

Thank you, Ben, and welcome, everyone. Good afternoon, and thank you for attending the first quarterly earnings call from NeurAxis. We look forward to holding these quarterly calls going forward to update you on our progress. During today's call, I will highlight the many accomplishments from 2023 and our commercialization strategy of our revolutionary neuromodulation technology. We will also discuss the milestones and growth plans for 2024 as we continue to execute the commercialization of our market-leading PENFS technology. Following my remarks, Kim Henrichs, our CFO, will review our financial results for our fourth quarter and full year of 2023. But before that, with this being our first call, I thought it best to provide a broad overview of Neuraxis and the opportunities that we believe will drive the company's growth going forward. Neuraxis is a leader in the field of neuromodulation. Our company was founded in 2012 with the vision of using neuromodulation to help treat many of the disorders that exist today. And we are the first to market for our indications. Our initial focus is the pediatric and adult GI space. specifically on disorders of gut-brain interaction, or DGBIs, which includes functional abdominal pain associated with IBS, functional dyspepsia, irritable bowel syndrome, and more. With our targeted indications, we have a large total addressable market, with $9 billion on the pediatric side and over $23 billion in adults. While we are currently focused on the pediatric space, we are evolving into the adult space later this year on two fronts, which I will discuss later. There are currently no FDA-approved drug therapies for children with abdominal pain-related disorders of the gut-brain interactions. The current medical treatments, which are off-label drugs, can often have serious side effects and most lack scientific evidence of efficacy. In peer-reviewed publications, our proprietary technology has been shown to be equivalent to or better than prescription medications in alleviating symptoms associated with these disorders. In part, this has driven the support of academic medical societies, including the American Academy of Pediatrics and the North American Society of Pediatric Gastroenterology, Hepatology, and Nutrition. With the great body of work we have on all the publications and the subsequent support from the key societies, we are now rapidly achieving insurance company acceptance. We expect to significantly expand upon the 16 million covered lives that we currently have throughout 2024 and earn broad coverage by all the major insurance companies by the end of 2025. This will mark the true acceptance of our therapy, and our goal is to become the standard of care for these debilitating conditions. Our proprietary technology can be referred to as percutaneous electrical nerve field stimulation, or PENFS. Percutaneous electrical nerve field stimulation targets nerves, including the vagus nerve, to alter pain transmission at the central level. This is accomplished via a set of electrode needle arrays placed into and around the auricular area. We currently have one authorization from the FDA for functional abdominal pain associated with irritable bowel syndrome in children 11 to 18 years of age. This was a de novo clearance from the FDA. We also received and currently have a PENFS technology-specific CPT Category 3 billing code and are now taking the natural next steps in working with the American Medical Association toward an eventual Cat 1 CPT code. We also have other indications we are working on, including but not limited to functional dyspepsia in children, post-incussion syndrome in children, pediatric chemotherapy-induced nausea and vomiting, and our first adult indication of functional abdominal pain and irritable bowel syndrome. We are on track. barring any unforeseen hurdles to begin commercialization of these additional indications over the next two years. Separately, we are working to expand our portfolio of devices with the Rectical Expulsion Device, or RED, for which we have acquired a right to license from the University of Michigan. This is a very exciting opportunity for NeurAccess, which I will speak about in more detail in a moment. With that review behind us, I would like to review our 2023 achievements. During the 2023 calendar year, 3,321 IV stem devices were purchased, which treated about 830 children. Children's hospitals and private pediatric GI practices accounted for 67% of sales through a purchase order process, indicating the patient had insurance coverage for IV stem. The remaining 33% where patients purchased devices through various financial assistance programs offered through our IV STEM guidance and patient support, or GPS program, indicating that insurance coverage was unavailable for those patients. This data demonstrates why increasing insurance coverage for PENFS has been and continues to be our top priority. The GPS program is primarily in place to increase access to care for children. GPS also provides prior authorization services, patient advocacy services where families are educated on how to do consumer appeals for coverage and several financial assistance options. In 2023, GPS assisted 645 patients, a 53% increase from 2022. Prior authorizations were launched in May of 2023 and served 101 patients throughout the year, with 74 of those 101 in the fourth quarter alone, showing this program's growth and importance. As insurance coverage increases across the country, the percentage of sales through purchase orders will increase exponentially. This is why our number one priority is written insurance policy coverage. Our plan of action is clear. We believe that strong peer-reviewed publications and key society support from the likes of in the American Academy of Pediatrics result in successful coverage from insurance companies, which results in strong revenues. With this formula, we have rapidly reached 16 million covered lives as of today. And as mentioned earlier, we have great confidence that throughout 2020 core, we will significantly expand upon the 16 million covered lives already in place and obtain broad coverage by all the major insurance companies by the end of 2025. With the support that we already have from the primary academic societies and this broad coverage over the next few years, we expect a significant acceleration of revenue. 2023 was a year filled with many important milestones and achievements. In total, to date, over 2,600 children have been treated with the IV stem therapy, which treats functional abdominal pain associated with IBS in patients 11 to 18 years of age. In 2023, we treated 830 of the 600,000 debilitated children with IBSIM, representing a penetration rate of 0.14%. We believe this is less than one quarter of 1% of all children that suffer from functional abdominal pain and could benefit from our therapy. From a commercialization standpoint, we know there is a very large market with an unmet need, and the key to success in the medtech space is strong insurance reimbursement. This plan is on schedule and the proof of concept is apparent as we have seen 14 studies published by independent investigators from top children's hospitals. The studies include a preclinical study, a placebo RCT, long-term data, health economic data, quality of life data, real-world registry data, and many others. These 14 studies have led to early insurance policy coverage for major Blue Cross Blue Shield plans nationally, and we have just announced new policies bringing our total covered lives to over 16 million with multiple payers, both small and large, currently in the review stage. Our goal is to recognize as many covered lives as we can by the end of 2024, which will set the stage for a significant revenue ramp in 2025. From a proof of concept standpoint, we see the children's hospitals with moderate policy coverage translated into nice revenue. We have two examples of hospitals with moderate insurance policy coverage and each is on pace to generate over $500,000 in annual revenue in 2024. When you think about 260 children's hospitals plus pediatricians' offices, you can understand why we are bullish on our revenue trajectory in the coming years as policy coverage and coding become formal, and this is what's only our first indication. One of the more relative proof of concept numbers relates to the total number of patients who came to our GPS and prior authorization teams in the fourth quarter. We had 201 patients come to our GPS and prior authorization team in the fourth quarter. If those 201 patients had insurance coverage, the revenue total would have been almost $1 million in addition to the revenue that we did record. Maybe more important is the fact that the majority of those 201 patients came from only about 15 children's hospitals who are currently using these services of the 260 children's hospitals. We have several short-term focus opportunities. including insurance policy coverage, which is being successfully addressed, as mentioned earlier, growing our internal prior authorization team to reduce the workload for clinical staff, which allows greater access for pediatric patients, and ultimately assisting acquiring a permanent billing code. Regarding prior authorizations, we built and launched an internal prior authorization team in 2023 to help with the time-sensitive prior authorizations required to increase access to care for children. This program has been extremely successful for those children's hospitals that have transferred their prior authorizations to NeurAxis. We believe that in time, most accounts will move their prior authorizations to the NeurAxis prior authorization team. Regarding the billing code, we have our own technology-specific billing code now, which is helpful in some areas but can be challenging for children's hospitals when building their charges to bill insurance, and this has caused a delay in treating patients even after written policy coverage is in place. As mentioned earlier, we are working towards obtaining the CPT Category 1 permanent billing code. Insurance coverage, though, is by far the most critical component to success, and our team is diligently addressing that. We expect revenue growth to accelerate meaningfully in the latter half of 2024 and into 2025 based on two catalysts. this continued gaining of coverage from insurance companies for IV STEM, or PENFS, and the commercialization of RED. With regards to expanded insurance coverage, we remain laser-focused on gaining policy coverage and shortening the gap between policy coverage effectiveness and utilization with the children's hospitals. Demand for our product has never been stronger, but expanded insurance coverage is critical to growing revenues. While we have 16 million lives currently under coverage, Most of them have been in place for less than 90 days or are not yet effective. It is important to appreciate that there's typically a 90 to 120 day lag from the time coverage is gained, from the time insurance companies for PNFS to when hospitals begin purchasing the product, as time is needed for billing teams to put the proper processes in place. As such, we expect to see a revenue ramp as the year progresses, just from the 16 million lives we haven't recovered today. we of course also expect that covered lives number to significantly increase by the end of 2024. regarding red for adult patients we are cautiously optimistic for fda clearance this fall with commercialization commencing in q4 let's speak a little more about red or the rectal expulsion device product which we believe to be a great opportunity for interactions red is a self-inflating balloon that is an easy to use office-based point-of-care, interrectal function test to identify patients with chronic constipation due to pelvic floor dysinertia and who are unlikely to improve with increased laxative use. The current treatment is a guessing game by the physician as to which treatment will work, and red will allow the physician to streamline the diagnosis and choose the best treatment option after the first visit, which is a real win for the patient. We acquired a right to license this product from the University of Michigan, where it was developed. We are in track for FDA 510K submission late Q2 and are cautiously optimistic, as mentioned, that this product will be on the market before the end of 2024. If successful, REDD is expected to bring great clinical benefits to patients, and because the technology has a Category 1 billing code assigned and strong national reimbursement, we believe that providers will be able to bring this clinically beneficial technology to their practice immediately. In summary, We are pleased with the continued execution of building the foundation on strong data and academic society support. This has resulted in early insurance adoption, which we expect to ramp up throughout 2024, setting the stage for a prosperous 2025. Before I turn the call over to Tim Hendricks to discuss the financials, I want to welcome and introduce Tim, who joined Naraxis as our permanent CFO in early February. Tim brings over 20 years of global leadership experience across several industries, which is already bringing significant changes and benefits to the finances and daily operations. Tim?