5/4/2021

speaker
Operator

Good day and thank you for standing by. Welcome to the Neuronetics Report's first quarter 2021 financial and operating results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the call over to your speaker today, Mark Klausner. Please go ahead.

speaker
Mark Klausner

Good morning, and thank you for joining us for Neuronetics' first quarter 2021 conference call. A replay of this call will be available on our website for 30 days. Joining me on today's call are Neuronetics President and Chief Executive Officer Keith Sullivan and Chief Financial Officer Steve Furlong. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our business, strategy, financial and revenue guidance, the impact of COVID-19, and other operational issues and metrics. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. For discussion of risks and uncertainties associated with Neuronetic's business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K and the Form 10-Q, which will be filed later today. the company disclaims any obligation to update any forward-looking statements made during the course of this call, except as required by law. During the call, we'll also discuss certain information on a non-GAAP basis, including EBITDA. Management believes that non-GAAP financial information taken in conjunction with U.S. GAAP financial measures provide useful information for both management and investors by excluding certain non-cash and other expenses that are not indicative of trends in our operating results. Management uses non-GAAP financial measures to compare our performance relative to forecast and strategic plans, to benchmark our performance externally against competitors, and for certain compensation decisions. Reconciliations between U.S. GAAP and non-GAAP results are presented in tables accompanying our press release, which can be viewed on our website. With that, it's my pleasure to turn the call over to Neuronetics President and Chief Executive Officer Keith Sullivan.

speaker
Keith Sullivan

Good morning, and thank you for joining us. I'll begin by providing an overview of the first quarter performance, followed by an operational update. Steve will then review our financial results, and I will conclude with our thoughts for the balance of 2021 before turning to Q&A. From the time I joined the company in July of 2020 until the end of the year, my number one priority was to understand who our patients are, where they are, and how we can best educate them as they seek to find relief from their depression. As part of that exercise, we partnered with a market research firm to review the MDD patient landscape and identify the ideal patient population for NeuroStar Advanced Therapy for mental health. We wanted to learn what communication tactics would be most effective in reaching and developing relationships with those patients. With that study completed in late 2020, we used the findings to develop a new commercial strategy focused on building awareness of NeuroStar to ensure that we are helping our customers find and treat as many patients as possible. In parallel, we went through a process of optimizing our sales force, which included a rebuild and training of both the business development managers, or BDMs, and our neuro practice consultants, Cs. After beginning our newly aligned commercial organization together in late January to introduce these concepts and conduct training, we were able to shift into execution of the strategy we had worked multiple quarters to develop. We have seen early success and our first quarter performance reflects that traction. Despite many of the programs and initiatives not launching until the beginning of February, Starting with the review of the first quarter, total revenue was $12.3 million, up 7% over the first quarter of 2020, primarily driven by strong year-over-year growth in treatment session revenue. Our U.S. treatment session revenue was up 18% over the first quarter of 2020. This strong year-over-year performance was driven by growth in the installed base as well as the positive impacts of our new patient education programs and our NPCs beginning the process of training our existing accounts. Coming into the year, our goal was to have treatment session revenues approach 2019 levels by year end. I'm pleased to report that we have achieved this goal with the first quarter of 2021 treatment sessions. revenue surpassing first quarter of 2019 by 9%. One of the many metrics we captured through TrackStar is motor threshold tests, which we view as a leading indicator of treatment session revenue, as they represent new patient starts. During the first quarter, motor threshold tests increased by approximately 24% over the first quarter of 2020, indicating business is getting closer to normal. On the capital equipment side, US Neurostar Advanced Therapy System revenue declined by 32% over the first quarter of 2020. This performance was in line with our expectations for the newly hired sales force who were working within a shortened 60-day quarter, having been put into the field on February 1st. Despite the short window, our BDMs were able to engage with physicians and generate several hundred new opportunities within our CRM system in Q1 and are adding more every day. While it is difficult to say when those opportunities will convert into capital sales, we are very encouraged by the initial progress and continue to expect BDMs to be increasingly more productive through the balance of the year. To date, there have been over 112,000 patients who have been treated with the NeuroStar Advanced Therapy for mental health. A unique advantage we have relative to all other companies in our industry is the ability to accurately track treatment sessions and patient data on a real time basis. Through our TrackStar system, in which 80% of our installed units are linked via the cloud, we can track treatment session data in real time. giving us true insight into our business and patient trends as they develop. Our TrackStar data indicates that we have seen strong treatment session utilization trends in the first three months of the year. During the first quarter, the number of treatment sessions has increased by 15% over the first quarter of 2020, and more impressively, increased by over 55% compared to the first quarter of 2019. As we moved into April, for the first time ever, we are now averaging over 3,000 treatment sessions per day. Following the significant planning efforts over the last few quarters, the first quarter represented our transition into execution of key initiatives to build awareness and motivate patients with depression to request NeuroStar and train our customers on the best practices to educate patients who are searching for an alternative to drugs on the benefits of NeuroStar. During the quarter, we optimized our digital and social media marketing campaigns, expanded our concierge call center efforts, and launched two new customer programs. In addition, we continued to put the pieces into place to execute our clinical and regulatory strategy. beginning with our marketing campaigns. A key driver of our growth strategy is to leverage digital and social media marketing to build awareness, educate, and then engage patients to request Neurostar appointments. During the first quarter, our digital campaigns drove over 25 million online targeted audience impressions, which represented a material increase over the first quarter of 2020. Our media strategy optimizations based on market research resulted in a meaningful shift in the age demographic of the patients seeking treatment with NeuroStar, particularly those in our targeted age range who we did not directly target with previous marketing initiatives. Importantly, we saw the impact of our improved messaging in our ability to engage potential patients. In the quarter, These efforts to build awareness generated more than a 30% increase in patients who proactively requested an appointment with a psychiatrist in their area after seeing a NeuroStar advanced therapy for mental health advertisement online. A significant percentage of patients requesting appointments with NeuroStar are now coming through our concierge call center. The call center has ramped quickly since its launch and over 90 accounts are currently qualified to receive leads. The initial results are very exciting. In just a few months, thousands of patients were motivated to go online, pick up the phone to seek treatment with NeuroStar. This strong response rate validates the messaging and types of campaigns we have been running and proves the value we can deliver to the MDD patient population and our customers. This impressive increase in patient interest in NeuroStar provides our NPCs with a huge opportunity to prove out our value proposition and assist our customers in offering more patients hope for beating their depression with a NeuroStar treatment. As noted on the fourth quarter call, we recently launched two exciting programs aimed at making sure that our customers are able to assist as many patients as possible. The first program is the Five Stars to Success, which is proven, detailed, and a prescriptive formula to improve a customer's NeuroStar practice. The program, which is based on market research, is designed to focus on the patient journey to the practice. We want to ensure that from the initial expression of interest, through the initial consultations, to the decision to obtain treatment with NeuroStar that the patient does not get lost in the process. Approximately 30% of our accounts have begun the program, and a large number of our accounts have already earned their first three stars in the five-star program. The second program is Precision Pulse, which is designed to partner with our customers to build awareness among MDD patient population about Neurostar in their local areas. We have seen strong early adoption by customers, and we expect that as the year progresses, we will continue to see more customers participate. At the beginning of April, we hosted a quarterly regional sales meeting. Given the logistics of COVID and the size of the team, we decided to invite the entire sales team out of simplicity and efficiency. As a result of this meeting, we gained initial feedback on the five stars and precision pulse programs and additional market insights from the team. Based on the feedback, we are confident that we are focused in the right areas and have the right team in place to execute our strategy. We are very encouraged by the positive traction of our marketing and customer training efforts, and we will continue to work to refine our strategy to drive increased awareness among MDD patient population and help our customers identify and treat more patients. Lastly, we made strides towards executing on our long-term clinical and regulatory strategy. Shortly after our fourth quarter call in March, we named Corey Anderson our new Vice President of Clinical Affairs and Medical Operations. We were very excited to bring Corey on board and he has made an immediate impact on driving the clinical development of NeuroStar. In his first 60 days, Corey and his team have already opened a productive dialogue with the FDA to explore pathways to additional indications. As previously announced in late Q4 of 2020, we received FDA clearance for our TouchStar treatment, a three-minute treatment protocol used with our NeuroStar advanced therapy system. A software update is available at no charge to our entire installed base, and all new systems shipped since February have included the Touch Star protocol. It is still early days, but we are working with a group of 20 leading KOLs and industry societies to determine the most appropriate utilization of this treatment protocol. Overall, I am very proud of our performance in the first quarter and enthusiastic about how we are positioned for the future. Since I joined the company, we've accomplished all of the key milestones that we set out to achieve. The completion of the market research study, the development and introduction of a new commercial strategy, the expansion, optimization, and training of our commercial team, the addition of key talent throughout the organization, and progress towards the development of our clinical and regulatory strategy. I am very pleased by our initial success as we continue the execution of our strategic shift to a patient-focused company. We believe that long-term success in our industry requires much more than just selling a system to a physician. Success requires a deep understanding of patients with depression, and their journey to obtaining treatment beyond medications. Success also requires a true partnership with our customers as they treat an increasing number of patients with NeuroStar. Our partnership ensures that through our Five Stars to Success program, our customers have access to the best practices we have developed over the last 12 years to help practices reach patients. With that, I'll turn the call over to Steve.

speaker
Steve

Thank you, Keith. Total revenue for the first quarter was $12.3 million, an increase of 7% over first quarter 2020 revenue of $11.5 million. During the quarter, total U.S. revenue increased by 6% and international revenue increased by 63% over the prior year quarter. The U.S. revenue growth was driven by an increase in U.S. treatment session revenue, and the international revenue growth was driven by an increase in Neurostar advanced therapy system sales. U.S. Neurostar advanced therapy system revenue was $1.8 million. Compared to the prior year revenue of $2.6 million, it was down 32%. The decrease was primarily driven by lower Neurostar system sales in the quarter as a result of the launch of our new commercial organization during the quarter. In the quarter, the company sold 23 systems, down from 38 in the first quarter of 2020. US treatment session revenue was $9.6 million, an increase of 18% over first quarter 2020 revenue of $8.2 million. the growth was primarily driven by an increase in per-click treatment session volume over the prior year period. In the first quarter of 2021, revenue per active site was approximately $10,512 compared to approximately $9,418 in the prior year quarter. As a reminder, we calculate this metric by dividing total U.S. treatment session revenue by the beginning of quarter active sites. Over time, with some level of seasonality, as we continue to execute on our commercial strategy, we would expect this metric to increase. Gross margin for the first quarter of 2021 was 81.9%, compared to the first quarter 2020 gross margin of 75.5%. The increase was primarily a result of a change in the product mix compared to the prior year quarter. Operating expenses during the quarter were $17 million, a decrease of $2 million or 11% compared to the first quarter of 2020. The decrease was primarily due to lower headcount and product development expenses compared to the prior year quarter. During the quarter, we incurred approximately $2.2 million of non-cash stock-based compensation expenses primarily related to the first quarter 2021 expansion of our commercial organization. Net loss for the first quarter of 2021 was $7.9 million, or 31 cents per share, as compared to a net loss of $12.6 million, or 68 cents per share during the first quarter of 2020. EBITDA for the first quarter of 2021 was negative $6.6 million as compared to negative $10.8 million for the first quarter of 2020. Moving to the balance sheet, as of March 31st, 2021, cash and cash equivalents were $121.3 million. which included the $80.6 million in net proceeds raised through the closing of an underwritten public offering of common stock, including the full exercise of the over-allotment option during the first quarter. Now turning to guidance. For the full year 2021, we now expect revenue in the range of $59 million to $63 million. up from our previous guidance of $58 million to $62 million. Our guidance assumes that COVID headwinds subside and there are no major resurgences in the U.S. that impact our customers or patients. In addition, we expect that our newly hired BDMs and NPCs will begin to have a modest positive impact on revenue in the second quarter. Moving into the second half of the year, we would expect their contribution to increase as they gain experience and progress towards full productivity. For the second quarter of 2021, we expect revenue in the range of $14 million to $15 million. The company now projects total operating expenses for the full year 2021 to be in the range of $64 million to $68 million. The increase in operating expense guidance is primarily as a result of increased non-cash stock-based compensation expenses, which for the full year we expect to be approximately $8 million. In line with the strategy we outlined when we raised capital earlier this year, we are evaluating additional investments in sales and marketing, product development, and indication expansion during the year to support and accelerate top-line growth. I would now like to turn the call back over to Keith.

speaker
Keith Sullivan

Thanks, Steve. Turning to our expectations for the remainder of 2021, we will continue to be focused on building awareness and motivating patients with depression to request NeuroStar and training our customers on the best practices to educate patients who are searching for an alternative to drugs on the benefits of NeuroStar. Specifically, we will work to optimize our digital and social media campaigns, expand our concierge call center efforts, launch new customer programs, and continue to put the pieces in place to execute on our clinical and regulatory strategy. Now more than ever, As the leader in this space, Neuronetics is best positioned to partner with psychiatrists to treat depression. We have over 1,200 installed Neurostar systems globally. Our set of published clinical studies on TMS and depression surpasses all others. We built a strong understanding of how patients are treated through our outcomes registry, which is the largest registry covering patients with depression. We also have the largest and most comprehensive field-based commercial team, one that is incentivized to help physicians improve access to care and offer more MDD patients relief from their depression. The team includes NPCs, BDMs, reimbursement specialists, and clinical trainers. And we are the only company to offer unlimited clinical training as part of our partnership. We understand that treaters change, patients are unique, and clinical training whenever and wherever is needed is critical to positive patient outcomes. We remain very enthusiastic about the massive opportunity that lies ahead at Neuronetics. Despite being in the early innings, we have seen very encouraging success with the introduction of our new commercial strategy. As our BDMs and NPCs have more time in the field, and as we successfully implement education and training programs within our greater population of our customer base, we expect to continue to see the positive impact of these initiatives accelerate throughout the year. We look forward to our continued execution as we look to bring the benefits of NeuroStar Advanced Therapy for mental health, to all patients suffering from drug-resistant depression. I'd now like to open the line for questions.

speaker
Operator

As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Margaret Caxor from William Blair. Your line is now open.

speaker
Margaret Caxor

Hey, good morning, everyone. Thanks for taking the questions. Yeah, so paying a math person, I can't help but try to do the math on the 3,000 treatment sessions per day that you guys suggested you saw in April. And if I do that math, it kind of gets to 180 to 270,000 treatments, depending on whether you cut weekends or not. So maybe walk me through why we should or shouldn't be doing that math, and then Should we continue to see that number continue to ramp higher throughout the year given the sales and marketing initiatives that you guys are continuing to launch?

speaker
Steve

Thanks, Margaret. This is Steve. Actually, the math works. It certainly hasn't plateaued, and we do expect that number to continue to increase as the programs we've rolled out continue to gain traction. And so we look at it, you know, if you look at 3,000 treatments per day, 240 working days times, you know, $65 ASP, it gets you pretty close to $50 million at that rate in annual treatment session revenue. Obviously, our expectations are higher than that. But, you know, coming out of the pandemic and getting to that 3,000 number in Q1, we're very excited about, you know, the rest of the year.

speaker
Margaret Caxor

Okay. So that's quite positive. Can I push you a little bit on the 180 to 270? You're assuming just kind of weekdays, not weekends, right? So it's the 240.

speaker
Steve

Yeah, we're just assuming Monday through Friday.

speaker
Margaret Caxor

Okay. And then if we start to think about some of that treatment site accelerating, How aggressive are you guys going to try to be to try to put a secondary system purchase in some of these accounts? What's the right level or right point at which you want to do that versus just adding more new accounts?

speaker
Steve

Yeah, I mean, the term aggressive makes it sound like we're pushing our customers to take systems on our behalf. But with the scheduling course of MVD, you know, I think once, a customer gets to five or six patients per day, it really does necessitate that need for a second system. And so, you know, again, with the real-time insight that we have via the TrackStar, we know where a customer is at any specific point in time. And it's really at that point, once they start doing four or five, that the NPCs will start looking at, you know, their workflow and scheduling quirks. and then either recommend or not recommend that second system. So it'll be a balance between new customers and second system sales into our existing install base.

speaker
Margaret Caxor

Okay. And this last question for me, as we look at that guidance and what you said just now about treatment revenues and potential secondary unit placements, or at least demand, let's say, in some of these accounts that are seeing a rebound, Why shouldn't we assume a bigger impact, I guess, from the new BAMs you've hired in the second quarter? And how should we think about kind of that evolution as we go towards the second half in terms of productivity? Thanks, guys.

speaker
Steve

You're welcome. So, yes, as we've communicated, you know, our plan and guidance is somewhat back and loaded. I think in fairness to Keith and myself and the commercial team, you know, we have a little more than two and a half months under our belt. getting experience with their forecasting capabilities, and also with them having to rebuild their sales funnel. You know, I think coming out of Q1, we're very pleased with the performance in Q1 and also where they are relative to new opportunities. Again, I think we'll be able to get more aggressive once we work through Q2 and really get a better understanding of the cadence of the team before we really go out and start aggressively, you know, pushing guidance in the full-year forecast. So, again, what we saw to date, we're very pleased, and we do expect that productivity to continue to increase in the second quarter and also throughout the second half of the year.

speaker
Margaret Caxor

Thanks, guys.

speaker
Steve

Thank you.

speaker
Operator

Thank you. Our next question comes from the line of Marie Sebald from VTIG. Your line is now open.

speaker
Marie Sebald

All right, Marie, your line is now open. Oh, I apologize. I was on mute. Thanks for taking the questions. I wanted to ask a question maybe for Keith here on rep productivity and whether, you know, the new, you know, BDMs and NPCs you hired, earlier this year are progressing as hoped. I know that you had expected those folks to be productive quite quickly, so would love to just kind of get kind of a qualitative understanding of how their progress is going.

speaker
Keith Sullivan

Very good. Thanks, Marie. On the capital side, the BDMs, I think we're exactly on track of where we expected to be. Again, they didn't get into the field until February 1st as a result of two and a half weeks of training and then our national sales meeting. Once they did get into the field, we were quite pleased with the number of opportunities that they were creating in our Dynamics database system. I think for a capital rep to sit down and type an opportunity in and all the data that needs to go in to create that opportunity, it was impressive that we got several hundred of them. So we're pleased with where we are on the capital side. On the NPC side, we rolled out two programs, two major programs to them And I think they've done hero's work to bring those to all of their accounts. What we learned early on was most of our accounts need to start at the very beginning of our Five Stars to Success program. And so when an NPC has 35 accounts that they need to train, they have to hustle to get around to all of them to deliver quality training to each one of their staff. Again, we were able to get 90 of our accounts to the three-star level, which is the minimum requirement to participate in our call center. And I found it amazing that our NPCs were able to get 90 of them at that level. So we're pleased with productivity on both sides of the ball.

speaker
Marie Sebald

Okay, that's great to hear. And then maybe looking ahead, You mentioned work on new indications. Can you give us sort of an update on what indications you're circling? And then we know that reimbursement is obviously important to commercialization there, so how you're thinking about the reimbursement progress.

speaker
Keith Sullivan

So honestly, Marie, I will tell you that we are looking at speaking to the FDA about two indications, and I would rather not discuss those publicly at this moment. We are We are in discussions with the FDA and we have an upcoming meeting with them. Once that is concluded, I can give more information on it. We have hired a reimbursement consultant to help with our reimbursement strategy around those two indications. I think as we progress with the FDA and we see what direction we're going to be able to go, we will be able to deploy this consultant to help us create the plan.

speaker
Marie Sebald

Okay, fair enough. One last one, probably just a housekeeping item maybe Steve can help with. I saw 916 active sites at the end of last quarter to start Q1. Could you give us the number for where you ended at the end of Q1?

speaker
Steve

Sure, it was 900. So slightly down, and so we continue to monitor the practices that are either embracing telehealth, have permanently closed, or are in a different state of transition. So we really weren't surprised by that number. Also, it was the one-year anniversary of the beginning of COVID, and the way we identify active is they had to have either purchased or treated a patient in the past year. And so a number of sites had dropped off based on that definition. And so, again, there's about 50 sites that are still on – telehealth that our practice consultants are working with to get them back so they're treating patients once again.

speaker
Marie Sebald

Okay, so you would expect that number to climb throughout the year then?

speaker
Steve

Oh, yes. All right, perfect.

speaker
Marie Sebald

Thank you.

speaker
Steve

Thank you.

speaker
Operator

Thank you. Our next question comes from the line of Bill. Your line is now open. Great, thanks. Good morning.

speaker
Bill

Just a couple questions for me. The first is really related to the new marketing programs you've put in place and just trying to understand, you know, it seems like the engagement has picked up, you know, especially in the targeted areas. But I just, you know, in terms of the metrics you look at and you plan on sharing in the future, I was just wondering if we're going to get any granularity on you know, the conversion of those appointments that you're seeing going in into patients. And that kind of ties into one of my other questions. Just running the math, it looks like the patients added in the first quarter looked down versus the fourth quarter, but just wanted to get clarity on that as well.

speaker
Steve

Yeah, I mean... I would say a pretty impressive metric deck, Bill. We don't share it, but we do track utilization by site per day. I mean, our utilization is up over 55% compared to 19. Our MTs, which is indicative of new patient starts, are up significantly over 2019 and 2020. I guess I'm not sure what you're looking at that would indicate that we had a patient decline from Q4 to Q1. Obviously, Q1 is always our lightest quarter just due to the reset of medical plans and deductibles. And so we do see a decline historically. But, I mean, 9.8 in treatment session revenue, we thought that was phenomenal. And we also had a number of days lost due to weather. You know, we have a number of our service providers very dense in both Chicago and Texas, and they lost multiple treating days. So that number could have been easily, you know, north of ten and a half. And so, again, we're extremely pleased with all the data we're looking at and continue to be excited about the rollout of these marketing programs. I will say, as the NPCs work through the month of March, There was a great uptick in the last couple weeks when our customers really got a better understanding of the programs, how they worked, and what the benefits were. And we had a number of, I would say, very impressive orders at the end of March, and those have continued through April. So, again, everything that we're monitoring here internally is extremely positive.

speaker
Bill

Great. And then, thank you. And then on the accounts that are joining the call center, you know, it looks like you have about 10% of your treatment sites are on there at this point. You know, is this something that you would get to 100% over time, or is this targeting more of the high volume? And, you know, if so, kind of when do you expect to achieve that penetration rate?

speaker
Keith Sullivan

I'm not sure we can ever get to 100%, honestly, Bill. I think some accounts aren't going to want to participate in it, but I think our goal is to get as many as possible onto it. We want to go through all five stars with every account, so the first three is really focused around getting great clinical results, getting their office set up to receive the patients, understanding reimbursement, and then doing internal marketing with their patients and counseling both their front desk staff as well as their counselors on how to talk to these patients. So I think as many accounts as are willing will get at least those first three steps. So our goal is to get 100% of them. Whether they let us or not is unclear, but I think as we gain, you know, traction in the field, I think we'll get more and more accounts.

speaker
Bill

Great. And thank you. And then the last question for me just is just the initial feedback, you know, with the program now that you've implemented it from the initial marketing perspective, Any changes or major changes or even small minor tweaks of note that we should think about as you continue to deploy these programs? And that's all I have. Thank you.

speaker
Keith Sullivan

So I think from the overall design of the programs, both the five stars to success and the precision pulse, I think the foundation of those programs is solid and we have no plans on altering them after looking at what's going on in the field for the last 10 weeks. I think our marketing messaging and look and feel will always continue to evolve. We're in the process of introducing a new website in the next couple months. We're talking to agencies about new creative. So all of those things will continue to be fluid and being guided by our marketing research. So no major structural changes at all. And I think our patient journey has turned out to be a home run for us. I think it resonates with accounts. When we speak to the accounts and we point out opportunities for training, they're very receptive to it.

speaker
Bill

Great. Congratulations on that. Thank you very much. Thanks, Bill.

speaker
Operator

Thank you. Our next question comes from the line of Matthew O'Brien from Piper Sandler. Your line is now open.

speaker
Matthew O'Brien

Thanks. Good morning, and thanks for taking the questions. I guess Keith or Steve, just for starters, on the capital side of things, I mean, that was the only one number out of everything that was a little bit lighter than I'm sure some people were modeling, us included. You know, the session number was great. So basically you had this group, your BDMs, out of the field for a month. So the 23, if you just analyzed, would have been maybe closer to the mid-30s, and then You also took the price up. I guess the first part is, is that 35-ish number about right? You took the price up, it looks like, as well. Is that something that's durable? And then just to kind of round out this question, are you seeing anything, you know, competitively that should be pointed out from Brainsway or either the MAG companies that potentially could have weighed on the number of capital placements that you had in Q1?

speaker
Steve

Thanks, Matt. Yeah, I mean, you could extrapolate the 23 to the mid-30s if the team was out in the field for the full quarter. You know, I will say we were pleased with the number of opportunities that were created. I think many of the team realized that the selling cycle into psychiatrists is longer than I think they were used to. But again, if it's just a timing issue, that's fine. And our expectations for Q2 are much higher than we saw in Q1. And so, you know, again, in fairness to the BDM team, you know, they really only had, you know, less than 10 weeks to transact coming right out of the gate. So the number they put up was pretty impressive. From an ASP perspective, you know, their compensation plans this year, they do incent the BDMs to sell at higher pricing thresholds. And so, yeah, we do expect that ASP to hold. And really, the only variable with the capital equipment ASP will be the mix of the sales type leases, you know, into the green books and successes of the world versus the traditional capital sales that the BDMs sell. So, I think we mentioned on the fourth quarter call we actually had systems transacted at list price, but overall the ASPs have been higher in the first quarter. Competitively, no, we're not really seeing anything different. You know, there's still 56,000 psychiatrists, but, you know, the MAGs and Brainsway, they do pop up here and there. But, again, our value proposition and the partnerships that we're we provide to our customers really sets us apart. And you can see that in the uptick and the marketing programs, the customers signing on. And we do make it very attractive right now for customers to purchase a second or a third system. So, you know, we're going to keep doing what we're doing. Obviously, market leader, best in class. So that should continue to set us apart.

speaker
Matthew O'Brien

Got it. And then the follow-up questions on that 3,000 patients per day comment. I know, Steve, you've got a lot of metrics in front of you. I don't know how much you want to share, but can you just talk a little bit more about the dynamics around that, you know, backlog, moving from four drugs down to two, making it easier to start on Neurostar, you know, COVID, you know, as a tailwind, as people are more depressed or recurring customers, just Any more color that you can provide on that? Because that's a pretty marked increase and really says something for the remainder of the year as far as your session business goes.

speaker
Keith Sullivan

So, Matt, our treatment sessions have steadily increased over the last several months. And I think, you know, quite honestly, I think There may be some tailwinds with COVID, but we really didn't expect those patients to come into the pipeline until they failed the two to four drugs, which would put them at the end of this year or the beginning of next year. So I think, you know, quite honestly, I am going to credit our marketing programs, driving awareness, and our NPCs in the field as doing their jobs and teaching accounts how to speak to patients, about the benefits of a Neurostar treatment.

speaker
Matthew O'Brien

Okay. So this feels like a more durable level to you, Keith, and then building from here. Is that fair?

speaker
Keith Sullivan

So the encouraging piece to us is we don't see a jump. It's been a steady increase in utilization of since, you know, COVID, since really the middle of last year. It's been steadily increasing.

speaker
Matthew O'Brien

Got it. Thank you.

speaker
Keith Sullivan

Thank you. Thanks, Matt.

speaker
Operator

Thank you. Our next question comes from the line of Dave Turkoli from JMP Securities. Your line is now open.

speaker
Dave Turkoli

Great. Good morning. Keith, maybe one for you, because I think – I think I'm hearing sort of the shift in the organization. But I just want to confirm it. So, you know, you have this patient-focused, you know, new commercial organization. That seems to be kind of the push going forward. And sometimes in the past I think we were looking more at the product features, like the ones on slide 19 of your deck, and maybe further indications. But it seems like this is a shift, so I'd just like to get your thoughts. I mean, it seems like this was your explicit goal to move the company in this direction, and I'd just like to hear you maybe explain why you think that's so important.

speaker
Keith Sullivan

I think there's two things, Dave. One is a small number of psychiatrists and neurologists are doing TMS. There's a massive opportunity out there to educate those physicians on the benefits of it. Those same physicians are writing a record number of prescriptions for antidepressants. If we can focus our sales organization on talking to physicians on how to speak to patients suffering with MDD, I think we win. We're certainly focusing the inside organization through Corey and Fred, our head of regulatory, on how we can advance the ball in the number of treatments we can offer to physicians. But right now, I think the depression market is still underserved and is still massive. And it's only growing as the patients that exhibited depression in COVID times get to the two to four failed drug stage. We have runway here that is enormous, and so we're focusing our outside team on that opportunity.

speaker
Dave Turkoli

And I guess as just a quick follow-up to one of the ones that was asked earlier, you know, you look at the six or so competitors. It doesn't seem to me like any of them are focused on this arena, but you have that chart on 7th and that shows sort of the differences. But, I mean, do you think that's a sustainable differentiated team? advantage for Neuronetics moving ahead.

speaker
Keith Sullivan

I do. You know, I think we're the only ones that care whether those doctors are successful or not. We have a treatment session price that we're proud of because that ties directly to the success of the company, to the success of the practice. And if we can When we go into an account, we talk to them about generating one patient per month per practice, and that one per month is $100,000 in revenue to that account. We're the only ones that care whether that account is successful or not.

speaker
Dave Turkoli

Thank you. I appreciate it.

speaker
Operator

Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Keith Sullivan for closing remarks.

speaker
Keith Sullivan

Thank you, Operator, and thank you again for joining us on the call today. I look forward to updating you on the progress next quarterly call, and I hope you are safe. Thank you.

speaker
Operator

This concludes this conference call. Thanks for participating. You may now disconnect.

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