ClearPoint Neuro Inc.

Thank you for standing by, and welcome to the ClearPoint Nero Inc. Q3 2023 Earnings Conference Call. Comments made on this call may include statements that are forward-looking within the meaning of the securities 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, the size of the total addressable markets or the market opportunity for the company's products and services, 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, 2022, and the company's quarterly report on Form 10-Q for the three months ended June 30, 2023, both of which have been filed with the Securities and Exchange Commission, and the company's quarterly report on Form 10-Q for the three months ended September 30, 2023, which the company intends to file with the Securities and Exchange Commission on or before November 14th, 2023. All the company's filings may be obtained from the SEC or the company's website at www.ClearPointNero.com. I would now like to turn the call over to Joe Burnett, Chief Executive Officer, to begin the call. Joe, over to you.

Thank you, Mandeep. And thank you to all of the investors and analysts on today's call. ClearPoint Neuro is the premier cell, gene, and device therapy enabling company uniquely focused on precise navigation and quality control delivery to the brain. Our four pillar growth strategy continued its progress here in the third quarter with some important updates that I will discuss momentarily. The most important highlight or point of emphasis we want to make on the call today is our stated priority of flattening operational expenses and improving cash flow. Our operational cash burn in the third quarter was reduced to only $1.8 million, the lowest quarterly operational cash burn since 2020. The last few years, we have raced to build a foundation, a team, and a product portfolio that can prepare us to realize a total addressable market that could treat more than a million newly diagnosed patients each year And in doing so, create a $12 billion revenue opportunity for ClearPoint via our products, services, and partnerships. That unserved market is still very much our intention and our vision. However, instead of continuing to invest in growing our capabilities and portfolio in the near term, we are going to make sure we focus on extracting value from the existing capabilities that we have already built and invested in, as well as new product launches that we already have planned here in 2024 in 2025. Our deepening partnerships with biologics and drug delivery companies, expansion of our navigation platform into the operating room, and the full market release of our PRISM laser therapy system can sustain top-lane growth in the years ahead, while the flattening of operational expenses, scale in our newly certified Carlsbad manufacturing facility, and improvement to gross margins can create leverage and ensure revenue grows faster than expenses for at least the next couple of years. We continue to believe our goal of operational cash flow breakeven is achievable sometime in the second half of 2025. While the strategy does slightly reduce our forecasted revenue in 2023 to the range of 23 to 25 million, we continue to expect operational cash flow to be meaningfully less in the second half of 2023 compared to the first half With our Q3 result being the first tangible example of that commitment. Our strong balance sheet with over 24 million in cash and equivalents will continue to enable us to launch these key new products and execute on our strategic plan while at the same time reduce our operational cash turn. We are more excited for the company and its prospects than ever. as we expect that these launches in 2024 will introduce three new and additive revenue streams to our base, which I will talk about in more detail a little bit later on the call. I will now turn the call over to Danilo to discuss our Q3 financial results, after which I will provide additional color on our four pillar growth strategy. Danilo?

Thank you, Joe, and thank you all for joining us today. Looking at the third quarter 2023 results, Total revenue was $5.8 million for the three months ended September 30th, 2023, and $5.1 million for the three months ended September 30th, 2022, which represents 12% growth versus the third quarter of 2022. As a reminder, our revenue is made up of three components, biologics and drug delivery, functional neurosurgery navigation and therapy, and capital equipment and software. Biologics and drug delivery revenue includes sales of disposable products and services related to customer-sponsored preclinical and clinical trials utilizing our products. Biologics and drug delivery revenue growth accelerated to 55% or $3.5 million in the third quarter, up from $2.2 million in 2022. This increase was fueled by a 109% increase in biologics and drug delivery service revenue as we expand our service offering to pharmaceutical customers. The biologics and drug delivery service growth was partially offset by a $0.3 million decrease in product revenue. Functional neurosurgery navigation revenue consists of commercial sales of disposable products and services related to cases utilizing the ClearPoint system to deliver medical device therapy to the desired target. This revenue segment declined $0.5 million to $1.9 million for the third quarter. Capital equipment and software revenue consisting of sales of ClearPoint reusable hardware and software and services decreased 26% to $0.4 million in the quarter from $0.5 million for the same period in 2022. Gross margin for the third quarter of 2023 was 57% as compared to a gross margin of 71% for the third quarter of 2022. The decrease in gross margin was primarily due to an increase in biologics and drug delivery Preclinical services, which to date have had a lower margin than the prior year, as we launched new services and increased our presence in the space. Increased costs related to the transition to the new manufacturing facility also contributed to the decrease in gross margin. Research and development costs were $2.4 million for the three months ended September 30, 2023, compared to $2.7 million for the same period in 2022, a decrease of 8%. The decrease was due primarily to reprioritization of certain research and development initiatives, partially upset by higher personnel and share-based compensation costs. Sales and marketing expenses were $2.8 million for the third quarter compared to $2.4 million for the same period in 2022, an increase of $.4 million, or 17%. This increase was due to additional personal costs, including share-based compensation, as we expand our commercial reach and preparation for multiple new product launches over the next 18 months. This hiring reflects the learning curve required to train and educate on the expanding ClearPoint product portfolio, which will be targeting new physician customers and new surgical arenas within hospitals. General and administrative expenses were $2.9 million for the third quarter, compared to $2.4 million for the same period in 2022, an increase of $0.5 million, or 21%. This increase was nearly all due to an increase in the allowance for credit losses of 0.5 million, partially offset by lower professional fees of 0.1 million. With respect to our cash position as of September 30th, 2023, we held cash and cash equivalents of 24.3 million compared to 26.5 million as of June 30th, 2023. Our operational cash burn in Q3 was $1.8 million, down 54%, from the prior year third quarter. We maintained our focus on appropriate resource allocation and cash management and remained committed to effectively and carefully managing our operating expenses. As anticipated in our prior earnings call, our operational cash burn in the third quarter was meaningfully below the operational cash burn of the prior quarters. In fact, it was the lowest of quarterly operational cash burn since 2020. The reduction of operational cash burn versus the first half of 2023 will continue enabled by, one, the easing of supply chain conditions that allows us to gradually reduce inventory levels. Two, operating leverage due to higher revenue. Three, the completion of the transfer of the company's manufacturing operations to Carlsbad. And four, on the expense side, our existing headcount should be sufficient to support our business for the next 12 to 18 months. We will continue to take measures to reduce and contain cash burn going forward. With that, I'd like now to turn the call back to Joe. Thanks, Danilo.