Neuropace, Inc.

Greetings and welcome to the Noropolis Third Quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jeremy Investor Relations. Thank you, sir, you may be in.

Good afternoon. Thank you for joining us for NeuroPACE's Third 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 Third Quarter and its September 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 factor section of our public filings with the SEC, including our latest annual report on Form 10K for the year ended December 31, 2023, followed with the SEC on March 5, 2024, and our quarterly report on Form 10Q for the quarter ended September 30, 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 November 12, 2024. NeuroPACE disclaims any intention or obligation, except is 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 third quarter, as well as providing additional insights around our key business priorities for the remainder of the year, before turning the call over to our CFO, Rebecca Kuhn, to present the details of our financial performance for the quarter ended September 30, 2024, which will be followed by a Q&A session. Let's get started. We are very pleased with the performance of the business in the third quarter of 2024, as we generated record revenue, delivered on track gross margins, and demonstrated disciplined operating expense management, as we continue to execute against our multi-phase growth strategy. For the third quarter of 2024, we reported total revenue of $21.1 million, an increase of 28% 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, with the majority of the -over-year growth coming from sales of the R&S system. This Q3 2024 performance was driven by execution in a number of areas across the business. With regard to the top line, we continued to demonstrate execution of the first part of our strategy of increasing adoption and utilization of R&S systems in level 4 centers, and increased the number of active prescribers of R&S therapy to record levels. Adding to R&S system growth, we began to see a meaningful increase in the number of implants at centers that are part of our Project Care pilot program, and in the number of referrals for R&S implants from these centers to level 4 CECs. We also continued to expand the market penetration and utilization of Dixie Medical products, which contributed to our revenue growth in Q3. In the middle part of the income statement, we delivered a gross margin that was on track with our target range, and when combined with a disciplined investment strategy in our key growth and development priorities, reduced our cash burn to $1.8 million for the quarter. Combined with opportunistic use of our ATM facility, our cash balance increased in the quarter from $55.5 million at the end of the second quarter to $56.8 million at the end of the third quarter. We believe that our current cash position is sufficient to fund operations for the foreseeable future. We also focused on leveraging and developing our organization to increase our level of current performance, as well as prepare for the significant opportunities in front of us. The placement of additional sales representatives in the U.S. has helped build momentum in the launch of the Project Care program this year, which has contributed to our revenue growth over the past several months, while also increasing our field capacity so that we will be well positioned to take advantage of the multiple market development and indication expansion opportunities to come. Additionally, given the significant opportunities in the business, we've also been focused on strengthening our leadership team. We recently announced the hiring of new senior leaders, including Katie Teller to lead our marketing function, Brett Wingard to lead our research and development team, and Amy Treadwell to head up human resources. I would like to take a moment to touch on each valuable new team member's background. We are excited to now have Katie Teller leading our marketing function. Katie brings specific experience in the neurostimulation market and expertise in market development that position her well to manage our market development efforts around key strategic initiatives, namely expansion of the Care program, planning for launch of our indication expansions, guiding our direct to patient outreach and digital marketing efforts, and working with our research and development team on our product pipeline. We are pleased to welcome Brett Wingard back to NeuroPACE to lead our research and development team with his significant experience and expertise in neuromodulation and medical device development. Brett is uniquely well suited to oversee the exciting work underway to both enhance the efficiency and ease of use of the RNS system and to amplify our focus on device and data innovation and the use of RNS to continue to advance our technology leadership position. And most recently, we appointed Amy Treadwell as Vice President of Human Resources. Amy brings an impressive track record of success in healthcare and technology roles, and she will be instrumental in helping us continue to build an engaged, high performing culture to support our growth. We continue to make progress in the quarter on the third phase of our growth strategy, expanding the approved indications for the RNS system. The primary focus for this element of our strategy is the Nautilus study. As previously mentioned, all implants are complete. The trial is in the patient follow-up phase and remains on track to complete the required one-year follow-up in Q1 2025. As a reminder, if approved, our RNS system would be the first device with an FDA approved indication for idiopathic generalized epilepsy. We were also pleased to submit positive three-year safety and effectiveness data from our ongoing five-year prospective post-approval study of the RNS system in adults with drug-resistant focal epilepsy. We look forward to publishing and presenting the full study results pending the expiration of a publication embargo. With that as an overview of our operational progress in Q3, let me now turn the call over to Rebecca to review our financial results for the third quarter of 2024. Rebecca?

Thank you, Joel. Our team has continued to make tremendous progress in executing against our strategy. The reach we now have through a network of physicians, educated, trained, and prescribing RNS therapy is extraordinary compared to just a couple years ago, and will play a key role in closing the treatment gap by driving broader adoption and utilization of our system. For the third quarter of 2024, NeuroPACE's revenue was $21.1 million, representing growth of 28% compared to $16.4 million for the third quarter of 2023. Revenue growth was primarily driven by increased sales of our RNS system. Excluding the contribution from NodList study cases in the third quarter of 2023, RNS sales grew by 36%. We also continue to generate meaningful revenue growth from sales of Dixie Medical products. Growth margin for the third quarter of 2024 was .2% compared to .5% in the third quarter of 2023. Growth margin continues to be in line with our target range of 72 to 74%. R&D expense was $5.8 million in the third quarter of 2024 compared with $4.8 million in the same period of 2023. This increase was primarily driven by an increase in personnel and program expenses for product development, including AI software and next-generation device platform projects and clinical studies. SG&A expense was $13.9 million in the third quarter of 2024 compared with $13.4 million in the prior year period. This increase was primarily due to an increase in sales and marketing personnel related expenses partially offset by a decrease in general and administrative expenses. Total operating expenses were $19.7 million in the third quarter of 2024 compared with $18.2 million in the same period of the prior year, representing growth of 8%. With revenue growing by 28% for the quarter, we demonstrated strong operating leverage, resulting from our focus on driving revenue growth while also effectively managing our operating expenses in cash. We plan to continue to focus on balancing these objectives. Loss from operations was $4.2 million in the third quarter of 2024 compared with $6 million in the prior year period. We recorded $2.2 million of interest expense in the third quarter of 2024 compared to $2.2 million in the prior year period. Net loss was $5.5 million for the third quarter of 2024 compared with $7.3 million in the third quarter of 2023. As discussed previously, we have maintained a disciplined expense management strategy, resulting in cash burn in the third quarter of 2024 of $1.8 million compared to $2.3 million in the prior year period. In the third quarter of 2024, we paid coupon interest expense entirely in cash, whereas in the second quarter, $1.3 million of interest was paid in kind by increasing the principal of our debt. If we adjust cash burn for this difference, the -over-year improvement was even greater. Our cash and short-term investments balance as of September 30, 2024, was $56.8 million, an increase of $1.3 million compared to the end of the prior quarter. In the third quarter of 2024, we opportunistically raised $2.9 million in net proceeds under our ATM facility, resulting in an overall increase in our cash and short-term investments balance. Our long-term borrowings totaled $59.3 million as of September 30, 2024. As a reminder, the final maturity of our debt is September 30, 2026. Regarding annual guidance for 2024, we now expect our total revenue to be in a range of $78 to $80 million, an increase of approximately 19 to 22% over 2023. This growth is expected to be mostly driven by an increase in sales of our R&S system, with growth from sales of Dixie Medical Products continuing to make a meaningful contribution. We expect our gross margin to be in a range of 72 to 74% for 2024, although we may see some small variability due to fluctuations in the proportion of Dixie Medical Revenue to total revenue and other factors. We expect operating expenses for 2024 to range between $80 and $84 million, including approximately $10 million in stock-based compensation, a non-cash expense. I would now like to turn the call back over to Joel for closing remarks. Joel?

Thank you, Rebecca. We are pleased with the rate of revenue growth, demonstration of financial discipline, and execution of operating priorities during the quarter. The momentum in the quarter is the result of the hard work that's been taking place over the entire year, and we are focused on building on it further through the end of the year and beyond. Before we end today's call, I want to call attention to two upcoming events. First, we will be at the upcoming 78th American Epilepsy Society Annual Meeting, which is taking place in Los Angeles from December 6th through the 10th. We are very excited by the data that will be presented during the meeting, including several investigator-sponsored and initiated studies. We invite any of you attending the show to stop by and visit us at booth 2119. As we get closer to the meeting date, we plan on issuing additional details about our poster presentations and presence at AES. Second, we are planning to host an Investor Day in New York during the first quarter of 2025, with more details to come. I look forward to updating everyone on our continued progress through the fourth quarter of 2024 and into 2025. This concludes our prepared remarks. I would now like to turn the call over to the operator who will open the call for questions.

Operator? Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. We ask that you limit your questions to one and a follow-up so that others may have an opportunity to ask questions. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Frank Takenin with Lake Street Capital Market. Please proceed with your question.

All right. Thanks for taking the questions. Congrats on the really solid results. Maybe I'll start with just a bigger picture one. Joel, you've been on board, obviously, for a number of quarters now and execution has been really solid. But as you look back at the previous quarters, maybe just parse out where you feel the primary growth is coming from in the core R&S growth. Is it the Project CARE Initiative? Is it market share taking? Is it expanding the market? And then maybe touch on the durability of where that primary growth is coming from.

Great. Thanks for the question, Frank. Nice to hear from you. If we look back over the past number of quarters and frankly, if we look at this quarter, it's really a matter of executing the strategy that we've laid out. As you know, three key planks in our strategy. One, increasing adoption and utilization within our core level four centers. Two, expanding site of service beyond the level four centers and increasing access to R&S for people who are site level four centers. And then three, expanding indications. And if we look at where we're seeing growth, it's both adoption as well as utilization within the level four centers. So as I mentioned in my prepared comments there, continuing to increase the number of prescribers has been great to see. We continue to increase that number. And so we're seeing broader adoption of the R&S system. And then also driving utilization within that group of customers. So I think there's some expansion of R&S from a market development perspective as well as share. And then starting, as I also mentioned, starting to see some meaningful contributions from site of service and the work that we're doing on the care side. So I think we've got a good diversification of some of those growth drivers that's now starting to come to fruition. And really we've been working on over the past number of quarters.

Got it. Okay. That's helpful. And then maybe asking about sales reps, I think last quarter you called out some of your newly hired reps had completed training and they're placed in geographies where you identify expansion opportunities outside of the level four centers. Maybe touch on that cohort of reps and then talk about any hiring plans that you, as you think about the next couple quarters in years.

It's a great question. Thanks for remembering that, Frank. Yeah, we did talk about that the initial tranche of that Salesforce expansion group that we had talked about earlier in the year had completed training and was being released as it were out to independent activities. And that's happened. And we can point to places where we believe we're seeing increased growth, both with regard to support for current R&S business as well as then with geographies that didn't have what we wanted from an intensity of coverage perspective previously and now do. And then there's a certain component of that that's part of care as well. So it's really been great to see those folks hitting the ground running and beginning to add both capacity to the commercial organization as well as impact. So that's been great. With regard to further hiring plans, we're not talking about that specifically here today other than to say that we continue to stay opportunistic around hiring where we can take advantage of growth opportunities that we see and are being mindful about hiring and organizational expansion and preparation in advance of some of the opportunities that we see coming down the road as well with regard to further care expansion and indication expansion efforts pending successful clinical studies as well. Thank you, Frank.

Our next question comes from Mike Crackey with Learing Partners. Please proceed with your question.

Hi, everyone. Thanks very much for taking our questions. Can you help unpack some of your comments on the Project CARE pilot program and how that's impacting your contribution to growth just between the traction you're seeing among the 1,800 epileptologists outside of level four centers, the fact that we're seeing a lot of people who are in the hospital, who are in the hospital versus any kind of uptick you're seeing in patient referrals, where's that growth really coming from?

Thanks, Mike. Appreciate the question. And so as you know, from a CARE program perspective, we've really been in the pilot phase and have started to expand that pilot in the second half here of 2024. And it's been gratifying here in the third quarter to begin to see a meaningful contribution from that program. And we're really seeing contribution both from implants within these centers as well as then referrals back into level four centers and referrals that then further kind of bifurcate, I think, in two directions. One, we'd kind of expected where when you're out in the community, we found that we were uncovering patients that needed phase two testing and then potentially further care and would get referred back to the level four centers, and we are seeing that. But we're also seeing that care centers who either aren't quite ready to do implants yet or, in some cases, want to be programming centers, will refer patients to a level four center to be implanted and then get the patient back and manage them either while the program is getting spun up or they want to do the patient management rather than necessarily the implants as well. So we're seeing both implants as well as referrals. And again, it's really been encouraging here to see that begin to inflect in Q3.

Got it. Yeah, I appreciate the color. And maybe just as a follow-up, you posted a really nice revenue beat in 3Q, solid sequential growth versus the second quarter. It looks like the updated guidance isn't building in too much additional credit beyond your prior guidance for the fourth quarter. So are you seeing any specific headwinds you'd call out so far this quarter? Maybe just walk us through what would get you to the lower end of that guidance range for 4Q.

Thanks, Mike. Another excellent question. So if we just talk the growth of the business and the rest of the year guidance, first of all, we're really pleased with the top-line momentum that we demonstrated in the third quarter with a particularly strong growth rate at 28%. More broadly, if we look at the first half of 2024, the business grew 21%. And at the midpoint of our raised and increased guidance here, that would also deliver 21% growth for the second half of the year despite increasing comps in the second half of the year of 24 and 21% growth for the full year of 24 as well. Of note and potentially of interest, we also grew the business 23% year over year during the six months in the middle, so Q2 and Q3. So if you think about the first half of the year, the middle of the year, and now our implied guidance for the rest of the year, remembering that Q2, Q3, and Q4 all have headwinds from nautilus cases in Q2, Q3, and Q4 of 2023, we've been growing the business at 20% plus in 2024. We see the fundamentals of the business as strong. The updated guidance for second half and for the full year I think shows that at plus 20%. We're focused on continuing that. And we may have -to-quarter variability, but we feel good about the momentum and the direction both of the execution of the business as well as the opportunities that are in front of us here. So that's kind of how we've been thinking about 24 and how we've thought about both the second half as well as full year guidance. And I guess, you know, again, just to, I'd be remiss here not then mentioning we're getting that growth with single-digit operating expense increases. And that's resulting in significant improvements in our burn rate as well. And so as we said in our prepared comments, and of course, we focus on top-line growth. It's the most important thing we can do is top-line growth. But we also believe that with our current projections, we have the cash to fund our operations for the foreseeable future as well. So we think from a really through the income statement, we're pleased with the quarter from a top-line OPEX and cash management perspective. Awesome.

Thanks, y'all.

Thanks, Mike.

Our next question comes from Robbie Marcus with JP Morgan. Please proceed with your question.

Hi, this is actually Rohin on for Robbie. Thanks for taking our question and congrats on a nice quarter. So I appreciated the commentary you gave on just R&S driving the bulk of sales growth today. And I just wanted to get a sense for how you're thinking about this trend versus Dixie over time and maybe some preliminary color you can provide on kind of growth contribution into 2025.

Thank you. Thanks for that question. And yeah, we did call that out. And I just emphasize we, we got growth across product lines and that's the goal. And so it's great to see it. And we intend to continue that. But the significant majority of the growth came from R&S. And that's where the significant majority of our growth is going to come given the magnitude of that business and the magnitude of the opportunity that's in front of us. And that's in no way to slight the opportunity associated with Dixie. We are really pleased with the growth that we're seeing there but the majority of the growth here, the significant majority of the growth came from R&S. But it's just great to get that growth across product lines and have that amplifier both from a financial perspective and then as we've talked about the ability to kind of deepen relationships and vertically integrate in the diagnostic process makes I think it's a good combination.

And then I guess a follow up to the previous question just around OPEX and expectations for leverage down the P&L. Obviously SG&A came in lower than our expectations and it was a modest 4% growth year over year as you mentioned. And I know that you kept OPEX guidance unchanged for the balance of the year but is there anything that you can call out specifically in third quarter that drove the better leverage? And obviously this implies kind of from biomass low to mid teens, OPEX growth in fourth quarter. So is there any specific reason we shouldn't see this kind of single digit OPEX growth continue for the balance of this year and beyond?

I'll ask Rebecca to put some color around that. One thing I would mention that we did call out is within SG&A we're investing on the S and we're being real efficient on the G&A. So there's a little bit of a tale of two cities there. But Rebecca if you maybe wanted to say bit more about OPEX expectations and any color in the quarter.

Sure, just to add a little bit of color. So as you may have seen we grew R&D expense by about a million dollars year over year or 20%. We're clearly making investments in programs that we believe will help drive revenue growth both in the near term and over a longer time horizon. We're also bolstering our sales and marketing activities but as Joel mentioned those are then offset by lower G&A expenses. We continue to realize efficiencies within our G&A area. Some of that has to do with just ongoing experience operating as a public company. It's just kind of an ongoing focus though to drive efficiency particularly in that area. So I think that gives you a little bit more. I will say Q3 expenses can tend to be a little bit lower versus other quarters. And Q4 we have our AES annual meeting which can contribute to somewhat higher OPEX in the fourth quarter.

Thank you.

I hope that helps.

Yeah, no thanks a lot. Our next question comes from

our next question comes from Vic Chopra with Wells Fargo. Please proceed with your question.

Hey, good afternoon and congrats on a nice quarter. Thank you for taking the question. So I had one follow-up on your Q4. Obviously you had a pretty big beat in Q3 and that would imply a sequential step down in dollars in Q4 which hasn't been the case traditionally. So is there something that you would call out? Is it maybe pull forward or any pack from hurricanes or is it just management conservatism? Just trying to get a better handle on that. And then I had a follow-up please.

Hi Vic. Thanks for the detailed and thoughtful question thinking about the quarters. And you know we really can't see anything that would say there was a borrowing or any kind of a pulling forward of cases necessarily from Q4 to Q3. You know there may have been some of that at the hospital level but we really, we can't, I don't think we can really point to anything like that at this point. But it is a little bit difficult for us to know all the individual ins and outs of scheduling. You know obviously growth was very strong in Q3 and it was great to see but it's difficult at this point to know what may or may not have moved around in terms of individual hospital schedules with regard to Q4. You know we did call out, there's obviously the AES annual meeting in early December, our largest meeting of the year and I think as we've talked about previously, that's pretty impactful to the whole field. So epileptologists as well as functional neurosurgeons and folks from our team, etc. etc. So you know we do expect that there'll be some impact in terms of the number of days available in Q4 and then of course we've got the normal holiday as well as year-end scheduling. But our guidance allows for all that and again what we've seen and I think is reflected in the guidance is that the business has been growing 20% plus in the first half of 24 and also in the middle of the year and our guidance reflects 20% plus growth for the second half of the year and full year 24. So we think that's a good place to be from a guidance perspective. We're focusing on delivering that 20% for the year and continuing it and building on the momentum the business has got.

Okay thank you. And then my follow-up question, I mean obviously you're starting to see some impact from Project CARE which you called out for Q3. But as we think about our next year, how should we think about the impact from Project CARE in 2025? Thank you.

Thanks Vic and I know you've been very much focused on CARE and I appreciate that. We see CARE and the expansion of service opportunity in 2025 as an important opportunity for us to continue to grow and expand the business. Again, strategy of increasing access to RNS therapy that we have underway really has the three planks that we've been focused on increasing adoption utilization within the level four centers. That's the preponderance of the business and the preponderance of the growth that we've been getting. Primarily the growth has been coming from implants and level four centers. We now can layer expanding site of service and continuing to expand pilot activities and then really incorporating CARE more fully across the field organization and across our customer group in 25. And so we'll begin to expand those efforts and expect CARE to expand in 25 as well. And then thirdly layering on indication expansion on top of that pending the successful clinical trials. So these things all work together. We're seeing the impact of adoption utilization in level four center focus. We're beginning to see expansion of CARE and we're going to be focused on expanding all three planks to that strategy and working to build

momentum. Our next question comes from

Ross Brunner with Cantor Fitzgerald. Please proceed with your question.

Hi, congrats on the core and thanks for checking our questions. So starting off sounds like project CARE is starting to take off nicely. Would you provide some color on what you're hearing from new accounts outside of level four centers on the level of difficulty or ease they're having when launching their programs?

Thanks Ross. Yeah and I think we've talked a little bit about this previously. I think accounts are at kind of different places on the spectrum. Some accounts that and of course this is all part of our targeting exercise but some accounts are really quite experienced with regard to functional neurosurgery as well as their epilepsy programs and in particular may have people who have prior RNS experience from other institutions or their training, et cetera. So for those folks, the turn on and turn key process is relatively quicker in some parts of it whereas for others they may be a part of the target program because they have a particularly robust epilepsy population or in areas where there hasn't been as much RNS penetration from a level four perspective and so some of those folks can take some more time to kind of get up and running from a training perspective so we see people kind of along the continuum there but that's where as well I think what we're finding is the way we're approaching the program and the flexibility that we have with the program really allows people who are ready to go to more quickly get into doing implants and following and programming patients within their own center with folks who are going to be ready to go. We can get them trained and ready to program and they can be referring people out in the interim while they get ready to do implants and then for some others if they want to be referral and programming centers we can also accommodate that so I think we see people at different points on the continuum we also see different ways that increasing access to RNS therapy can allow people to kind of tailor and target integrating RNS into their practices in different ways too.

Okay great and then any update on R&D projects for software tools using AI data analysis?

Thanks for asking yes we did mention in part of our discussion around investment and operating expenses here in the quarter the work that we're doing with regard to AI software tools and data development as well as next generation platform work we're particularly excited about a lot of that work that's going on and that's one of the reasons why we've also decided to host an investor day. We realized that it's probably been a few years or or at least a little while since we've updated people on our market development, product clinical development pipelines and we want to provide folks with some additional insight into what we're doing there as you as you mentioned with regard to AI and software programs that are in particular focused on efficiency and easy use as well as increasing efficacy from the insights they can provide and then more broadly our market development and clinical development pipelines as well. So we think all that is you know everything that's underway there we expect to continue to accelerate the trajectory of the business and we want to have an opportunity to more kind of give you kind of more of a fulminant review of that and that's part of what we've got planned for our investor day. We'll have more kind of more information to come there.

Okay great looking forward to the investor day congrats again on the quarter.

Thank you Ross.

Our next question comes from Michael Polar with Wolf Research. Please proceed with your question.

Good afternoon thank you. Can I ask on the investor day timing would you have us think about that as something that could align with maybe initial top line view of the Nautilus trial?

So it's a good question Mike thank you and there are a number of different factors to consider there from a timing perspective and so more to come on that as you might imagine with as much as there is going on in the business there's always a lot to consider with regard to timing. We are going to try and have it be you know a good nexus of a number of things coming together with regard to the different activities in the business and depending on where we're at with with study and with Nautilus as well as depending on different activities that we've got going on in the business we're going to try and coordinate that specifically but we'll have more on dates here shortly and then you'll be able to plan around that.

Appreciate that. For my follow-up I want to ask about the two smaller revenue lines replacements in this pharma collaboration. On replacements the question is just I know the numbers are very small here. What does that curve look like in 25 off of a low low base? Could replacement revenue be up or would you have us think about similar zip code to where it currently is? And then on pharma collaboration I know we know the lifetime value of that arrangement. My question is on timing. Is it linear? Is it kind of smooth quarter to quarter over the expected period or has it been a little bit lumpy? I want to make sure we don't have you know tough comps on that say in next year versus this year. Thank you so much.

Thanks Mike. I'll ask Rebecca to talk a little bit about each one of those. She's real close to following both our replacement cycle as well as on the revenue recognition site for reports. Rebecca?

Sure. So what we've shared with regard to replacement revenue is that we believe that really all of the prior generation devices have been replaced and so what we're seeing now is you know the beginning of current generation device is being replaced. Some that is opportunistic but we're you know we've I think we've reached we can at least say that we've reached the trough. We're not going to go too far just yet in predicting 2025. We'll have more to say about that later so if we can ask you to just be a little patient until we're ready to talk more about 2025. We can at least you know confirm that we're kind of at the end of that downturn. Now with regard to pharma revenue as you know it is relatively small. We've shared that we expect up to 3.7 million dollars over the course of nine perhaps nine plus quarters. Not a lot of fluctuation there of course there are some fluctuations quarter to quarter but I'll just say not dramatic. So but you know considering revenue recognition criteria which is always a fun topic. There are some fluctuations but maybe not to the extent that you would worry about. I hope that's helpful.

It was helpful thank you. Thanks Mike.

We've reached the end of our question and answer session. I would now like to turn the floor back over to Joel Becker for closing comments.

Thank you. Thanks everyone for joining us today. We're pleased with where we're at from a guidance perspective and what we're seeing in the second half of the year as well with growth and excess of 20% continuing and continuing our demonstrated operating expense leverage reduction and cash burn and projection that our current cash position can support our operating activities for the foreseeable future. So we're excited about all that. We're excited about the fundamentals of the business and the nature and trajectory of the opportunities that we see in front of the business as well. Thanks for your interest in and support our NeuroPace. We look forward to keeping you up to date here on the execution of the strategy as we progress and hope to see you either at AES or our upcoming investor day. Thanks again. Good afternoon.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.