ClearPoint Neuro Inc.

Greetings. Welcome to the ClearPoint Neuro Incorporated fourth quarter and fiscal year 2019 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. Comments made on this call may include statements that are forward-looking within the meanings of security laws. These forward-looking statements may include, without limitation, statements related to anticipated industry trends, the company's plans, prospects, and strategies, both preliminary and projected, and management's expectations, beliefs, estimates, or projections regarding future results of operations. Actual results or trends could differ materially. The company undertakes no obligation to revise forward-looking statements for new information or future events. For more information, please refer to the company's annual report on Form 10-K for the year ended December 31, 2018 and the company's quarterly report on Form 10-Q for the quarter ended September 30, 2019, both of which have been filed with the Securities and Exchange Commission and the company's annual report on Form 10-K for the year ended December 31, 2019. which the company intends to file with the Securities and Exchange Commission on or before March 30, 2020. All the company's filings may be obtained from the SEC or the company's website at www.ClearPointNeuro.com. I will now turn the conference over to our host, Joe Burnett, Chief Executive Officer. Thank you. You may begin.

Thank you, Diego, and good morning, everyone. Good afternoon, rather. Welcome to our fourth quarter and full year 2019 earnings call. With me on today's call is our Chief Financial Officer, Hal Hurwitz. As always, we thank you for your continued support as our team works relentlessly to improve the quality of life for patients battling some of the most debilitating neurological disorders. We believe that 2019 is clearly an inflection point in our company history. We deliver growth in all four segments of our business, driven by above-planned performance by our commercial and our clinical specialist teams. In a testament to the dedication of our development and operations teams, we made impressive progress across our portfolio of navigation and therapy programs, which we now expect to result in FDA submissions or market introduction of numerous new products in 2020. In transactions that were completed in May of 2019 and January of 2020, We secured more than $25 million of financing from strategic partners that strengthened our balance sheet and facilitated us becoming a NASDAQ-listed company, an accomplishment driven by our finance and legal teams. And finally, the culmination of all of these individual parts enabled us to win multiple new biologics and gene therapy partnerships, which will lead to exciting new applications in the years ahead. It is not a coincidence that the totality of these developments led us to change our corporate name to ClearPoint Neuro. We feel we are a truly new company with an exciting future ahead. Just as important, the numbers that accompany the story are equally impressive. Let me highlight a few metrics of our progress. We posted another record quarter in revenue in the fourth quarter, leading to a record year in 2019. Total revenue for the year grew more than 50%, biologics and drug delivery revenue more than doubled, Cases grew by 20% to a record 801 for the year. We finished the year with 60 active clinical sites, including new installations in the fourth quarter at Beth Israel Deaconess in Boston and at the Cleveland Clinic. And we accomplished all of this with a cash burn from operations of just $2.8 million for the year and just $466,000 for the quarter. Hal will cover this in more detail shortly. We are also looking forward to our analyst day and bell ringing ceremony this Friday at the NASDAQ market site in New York City. This is the first time we have hosted an investor analyst day and we are excited to be able to spend more time introducing interested parties to our technology and just as importantly to our team. We have put a lot of work into our portfolio and partnerships and we look forward to sharing that progress with you. In addition to our management team, we will have our development and clinical teams on site for hands-on demonstrations of the ClearPoint platform as well as some future iterations that are currently in development. At this point, I'd like to turn the call over to Hal for a few minutes to highlight our operating results for the fourth quarter and for the full year 2019, and then I'll come back to provide some additional detail on our market and clinical activities and updates to our four pillar growth strategy. Hal?

Thank you, Joe. For the fourth quarter ended December 31, 2019, total revenues were a record $3.2 million. This is an increase of 41% year over year and our fifth consecutive quarter of record revenue. Breaking that down a bit to the underlying product areas, functional neurosurgery revenues increased 7% to $1.7 million for the three months ended December 31, 2019, compared with $1.6 million for the same period in 2018. The increase was primarily due to an expanded customer base and increased utilization by our existing customers of MRI scanner availability. Biologics and drug delivery revenues, which include sales of disposable products and services related to customer sponsored clinical trials, increased 99% to $1.1 million for the three months ended December 31, 2019, from $540,000 for the fourth quarter of 2018, driven primarily by increased product sales to new and existing customers. Capital equipment product sales and related service revenue increased to $446,000 for the three months ended December 31, 2019, versus $174,000 in the prior year fourth quarter. We now have 60 active surgical centers using ClearPoint, 34 of which are utilizing our ClearPoint 2.0 software, up from 29 such centers in the 2019 third quarter. Gross margin for the 2019 fourth quarter was 71% compared to gross margin of 70% for the same period in 2018. Gross margin varies slightly quarter to quarter based upon our revenue mix between capital equipment, services, and disposables, and our higher contribution from capital sales in the current year fourth quarter which bears a lower margin than other revenue lines did have an effect. However, as I've mentioned before, sales of capital equipment is the initial building block in expanding our installed base, enabling our razor blade model, and increasing the number of our active centers. Detailing our operating costs, research and development expenses were $880,000 for the three months ended December 31, 2019. compared to $481,000 for the same period in 2018, an increase of 83%. Sales and marketing expenses were $1.5 million for the three months ended December 31, 2019 compared to $879,000 for the same period in 2018, an increase of 72%, attributable primarily to increases in incentive compensation tied to increased sales, and in the expansion of our field's clinical team. General and administrative expenses were $1.3 million for the three months ended December 31, 2019, compared to $1.2 million for the same period in 2018, an increase of 8%. With respect to the 2019 full year results, a few key highlights. Total revenues were $11.2 million, an increase of 53% from $7.4 million the prior year. Functional neurosurgery revenue increased 29% to $6.9 million, driven by a record 801 cases, as Joe has mentioned, utilizing the ClearPoint Neuronavigation System in 2019, an increase of 20%. Biologics and drug delivery revenue increased 116% to $2.6 million for 2019, due primarily to the growth of both clinical services and product sales. Capital equipment sales and related service revenue approximately doubled to $1.7 million for 2019 due primarily to an increase in sales of ClearPoint systems. Gross margin for the year ended December 31, 2019 with 66%, down slightly from 67% in 2018. primarily due to the increased contribution from lower margin capital equipment sales substantially offset by an increase in sales mix from sales of services which bear higher margins relative to other lines of revenue. Cash at December 31, 2019 was $5.7 million compared to $3.1 million a year ago, which reflects the completion of an equity private placement in May 2019 that was led by PTC and as Joe has mentioned, the continued reduction of our operational cash burn. With that, I will now turn the call back to Joe.