Neuropace, Inc.

A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jeremy Pfeffer from LifeSciAdvisors. Please go ahead, sir.

Good afternoon. Thank you for joining us for Neuropace's second quarter, 2024 financial and operating results conference call. On today's call, we will hear from Joel Becker, Chief Executive Officer and Rebecca Kuhn, Chief Financial Officer. Earlier today, Neuropace released financial results for the second quarter ended June 30th, 2024. A copy of the press release is available on the company's website at neuropace.com. Before we begin, I would like to remind you that throughout this call, we will make statements that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including those around Neuropace's projections, business opportunities, commercial expansion, market conditions, clinical trials, and those relating to our operating trends and future financial performance, expense management, estimates of market opportunity, and forecasts of market and revenue growth, are based on current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For more detailed descriptions of the risks and uncertainties associated with our business, please refer to the risk factors section of our public filings with the SEC, including our recent annual report on Form 10-K for the year ended December 31st, 2023, filed with the SEC on March 5th, 2024, and our quarterly report on Form 10-Q for the quarter ended June 30th, 2024, to be filed with the SEC. and any other reports that we may file with the SEC in the future. This conference call contains time-sensitive information, which we believe is accurate only as of this live broadcast on August 13th, 2024. Neuropace disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. And with that, I will now turn the call over to Neuropace's Chief Executive Officer, Joel Becker. Joel?

Thank you, Jeremy, and good afternoon, everyone. I will start out today's call by reviewing our performance in the second quarter, as well as offering additional insights around our key business priorities for the second half of 2024, before turning the call over to our CFO, Rebecca Kuhn, to present the details of our financial performance for the quarter ended June 30th, 2024, which will be followed by a Q&A session. Let's get started. We are pleased with the team's performance in the second quarter of 2024, demonstrating revenue growth, gross margin expansion, and operating expense management as we continue to execute against our multi-phase growth strategy. For the second quarter of 2024, we reported total revenue of $19.3 million, up 17% compared to the same period last year. Revenue growth for the quarter included contributions from sales of the R&S system and Dixie Medical SEEG products and a small contribution from our strategic biotechnology collaboration with the majority of the year-over-year growth coming from sales of the R&S system. R&S sales growth was even more impressive on a year-over-year basis if we consider that the sales results in the second quarter of 2023 benefited from enrollment in the Nautilus study. Excluding contributions from units from the Nautilus study in Q2 of last year, R&S sales growth in Q2 of 2024 was 21%. Our focus as we look ahead is to expand access to the R&S system by executing our three-part growth strategy of expanding adoption and utilization. Our Q2 performance was primarily driven by our focus on the first part of this strategy, increasing adoption and utilization of RNS systems in level 4 centers. This includes working with and training a greater number of epileptologists at existing centers to drive adoption, and we continued to expand the number of new RNS prescribers to record levels during the second quarter of 2024. As a reminder, the annual market opportunity for drug-resistant epilepsy patients within level four centers is estimated to be over $2 billion. And as such, we have significant opportunities to grow within these centers. We also continued to make progress on the second phase of our long-term growth strategy of expanding access to RNS therapy outside level four centers, which we call the project care program. We are currently in the pilot phase of the program and an encouraging early metric that we are tracking is the number of patient referrals associated with the program. We have begun to see an increasing number of referrals from the program into level four centers for RNS implants. We consider these referrals to be a positive sign as they show the impact we are having in generating broader awareness of RNS therapy and educating physicians and centers on which patients are good candidates. Activities around the expansion of the pilot care program include professional education activities such as webinars, symposia, and peer-to-peer programs. This is accompanied by additional commercial activities such as the initiation of digital social media awareness programs, center contracting, and the placement of sales representatives in target geographies. With regard to our commercial organization, I'm also pleased to announce that our newly hired sales representatives have completed their training and will now begin independent activities in their sales territories and more fully contributing to our commercial efforts. These new sales representatives are primarily focused on the geographies where we have identified expansion opportunities outside of level four centers, along with supporting geographies where we have been experiencing higher revenue growth in our RNS and Dixie product lines. We are excited about the contributions they will make to our business going forward. Finally, the third phase of our RNS growth strategy is based on expanding the approved indications for the RNS system. This effort is currently focused on the pivotal Nautilus study in which all implants are complete and the trial is in the patient follow-up phase. We believe that the strong interest in this study is further evidence of the significant unmet need that exists for patients with drug-resistant idiopathic generalized epilepsy. As a reminder, the Nautilus trial requires evaluation of a primary safety endpoint and an effectiveness evaluation 12 months post-implant. If approved, our RNS system would be the first device with an FDA-approved indication for generalized epilepsy. This study has the potential to represent a highly meaningful market expansion opportunity and is on track to complete the one-year follow-up in the first quarter of 2025. In addition to the success our commercial team has had with our RNS system, we also continue to see revenue growth from our exclusive partnership with Dixie Medical to market and sell their diagnostic electrodes and related products for epilepsy. This is a highly complementary offering to our RNS system which provides our sales team with an additional opportunity to call on physicians at the CECs. Lastly, we remain pleased with the strategic collaboration we entered into with a biotechnology company in the fourth quarter of 2023, through which we are providing services related to their Phase 2A clinical trial, including, among other things, clinical trial readiness support, identification of potential patients satisfying the enrollment criteria, and RNS system data reporting and analysis. We believe this groundbreaking collaboration is another example of the value that our RNS system can provide through its proven ability to collect and analyze data, which is then used to generate insights that can help inform treatment strategies. With that as an overview of our operational progress, let me now turn the call over to Rebecca to review our financial results for the second quarter of 2024. Rebecca?