Neuropace Inc (NPCE) 2021 Q1 法說會逐字稿

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  • Operator

  • Good morning, and welcome to NeuroPace's First Quarter Earnings Conference Call. (Operator Instructions) We will be facilitating a question-and-answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes.

  • I would now like to turn the call over to Matt Bacso from Gilmartin Group for a few introductory comments.

  • Matthew James Bacso - Principal

  • Thanks, operator. Good morning, and thank you for participating in today's call. Joining me from NeuroPace are Mike Favet, CEO; and Rebecca Kuhn, CFO. Earlier today, NeuroPace released financial results for the quarter ended March 31, 2021. A copy of the press release is available on the company's website.

  • Before we begin, I'd like to remind you that management will make statements during this call 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 contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including those relating to our operating trends and future financial performance, the impact of COVID-19 on our business and prospects for recovery, expense management, expectations for hiring, growth in our organization, market opportunity, revenue guidance, commercial expansion and product pipeline developments are based upon our 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 a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our public filings with the Securities and Exchange Commission, including the final prospectus filed with the SEC pursuant of Rule 424B4 on April 23, 2021, in connection with our initial public offering.

  • The conference call contains time-sensitive information and is accurate only as of the live broadcast on June 3, 2021. 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.

  • With that, I will now turn the call over to Mike.

  • Michael L. Favet - President, CEO & Director

  • Thanks, Matt. Good morning, and thank you for joining us. Before we get into the details, I would like to take a moment to acknowledge that this is our first earnings call since we completed our IPO and listed on NASDAQ in April. I would like to take this opportunity to say thank you to all who participated in the offering, which raised approximately $105 million in net proceeds, and to those who have invested in the company since. I would also like to again thank the entire NeuroPace team, our Board of Directors, and most of all, our patients and the clinicians who care for them. With all of your support, we are well positioned to take the next steps toward our goal of making RNS Therapy the standard of care for drug-resistant epilepsy patients.

  • While many of you had a chance to hear our story during our IPO process, I'll start today's call with an introduction to NeuroPace before moving on to cover recent updates and our vision for the future. Lastly, Rebecca will provide an update on the financial results before we open the lines for questions.

  • NeuroPace is a commercial-stage medical device company focused on transforming the lives of people suffering from epilepsy by reducing or eliminating the occurrence of debilitating seizures. Roughly 3.4 million people in the United States are living with epilepsy. While antiepileptic drugs are available as a first-line treatment, approximately 1/3 of people with epilepsy are considered drug-resistant since medications are unable to control their seizures. As a result, there are approximately 1.2 million people living with drug-resistant epilepsy in the United States. Many of these individuals have been struggling with the effects of epilepsy for years, often decades, moving from one failed drug therapy to another, struggling with the medication-related side effects and the limitations that seizures put on their lives.

  • As a company, we strive to help epilepsy patients regain their lives and reach their full potential. Our RNS System is the first and only commercially available brain-responsive neuromodulation platform designed to reduce or eliminate the occurrence of debilitating seizures. Our device continuously monitors brain activity and is programmed to recognize patient-specific patterns associated with seizures. The device is able to close the loop by responding in real-time to deliver personalized treatment at the source, preventing seizures before they start. Our RNS System also records ongoing brain activity as patients live their normal lives, giving physicians unprecedented visibility into patients' unique seizure patterns, thus providing insights they can use to optimize therapy outcomes.

  • While comprehensive epilepsy centers, or CECs, offer a variety of therapies for drug-resistant epilepsy, in clinical practice, specific therapy choices are typically based on the patient's type of epilepsy and location of seizure onset. Surgical resection or ablation can be considered for patients with well-identified seizure onset locations. However, only approximately 20% of drug-resistant epilepsy patients are candidates for surgical resection or ablation because for most patients, removing or destroying brain tissue at the location of their seizure onset would be too damaging or the patients are unwilling to undergo the procedure.

  • In addition to our RNS System, there are 2 neuromodulation devices approved by the FDA to treat drug-resistant epilepsy: Vagus Nerve Stimulation, or VNS; and Deep Brain Stimulation, or DBS. These alternative neuromodulation devices provide continuous duty-cycle stimulation throughout the day and night to a fixed anatomical location, not specific to where the seizure starts. Only the NeuroPace RNS System provides targeted, personalized therapy that responds to a patient's abnormal electrical activity, delivering real-time stimulation only when and where it is needed without causing stimulation-related side effects. Only the RNS System from NeuroPace records brain signals associated with abnormal events and provides physicians with information about seizure patterns and trends, helping them to optimize therapy.

  • We have also developed an extensive body of clinical evidence demonstrating that the RNS System dramatically reduces seizure frequency and improves quality of life for adults living with drug-resistant focal epilepsy. In the largest and longest prospective neuromodulation study conducted in epilepsy, our RNS System demonstrated significant seizure reduction through 9 years of follow-up and provided enduring improvements in quality of life and cognition. The more recently published results from a real-world retrospective study conducted after FDA approval showed even better results faster. Specifically, the study reported an 82% median seizure reduction at 3 years of follow-up, demonstrating the utility of our unique brain recordings and driving improvements in therapy effectiveness across patient cohorts over time.

  • We continue to learn and innovate by leveraging our comprehensive brain recording data set, which includes approximately 6.6 million intracranial EEG records. These recordings, along with our data analytics capabilities allow us to improve our products and offerings, such as through our Insight platform, which provides clinicians with actionable information to help them monitor patient progress, optimize programming parameters and better counsel their patients. After its recent launch, over 60 centers are already using the Insight platform in their practice. We believe the capabilities of our RNS platform provide a competitive advantage, which allows us to continue to improve therapy effectiveness for people living with drug-resistant epilepsy. Additionally, we believe that our platform has the potential to offer a more personalized brain-responsive solution for people suffering from other neurologic brain disorders, resulting in improved outcomes.

  • NeuroPace participates in a large market today with potential to significantly increase the addressable market over time. The 1.2 million drug-resistant epilepsy patients in the United States represent a $26 billion total addressable market. From this group of drug-resistant epilepsy patients, about 50,000 are referred into CECs every year for treatment by epilepsy specialists. Of those 50,000 patients, approximately 24,000 meet our current indication for use and represents an annual core market opportunity of $1.1 billion. Over time, we intend to expand our indication into broader set of patients with drug-resistant epilepsy. We have an IDE approval for a clinical study to expand our indication into drug-resistant focal epilepsy patients ages 12 to 17 and expect to begin enrollment later this year. Additionally, we intend to expand our indication into generalized epilepsy, the second most common type of epilepsy. We were recently granted FDA Breakthrough Device Designation for the RNS System in idiopathic generalized epilepsy, which we believe will help -- be helpful in expanding our indication into this underserved patient population. We expect to submit for IDE approval of a clinical study in this population later this year.

  • Indication expansion into all drug refractory epilepsy patients in the United States would double the size of our addressable market. Market expansion is also possible by increasing, referring physician and patient awareness of the advanced therapeutic options available at the CECs. Additional market expansion can come through an increase in the number of epilepsy specialists and CECs treating patients with drug-resistant epilepsy and through expansion into markets outside the United States.

  • Turning to commercial. We have built a direct sales organization across the United States with 43 field representatives, consisting of therapy consultants and field clinical engineers deployed across 21 territories. In 2020, 132 of the approximately 200 CECs in the United States implanted our RNS System. Our commercial efforts include increasing the number of CECs implanting our RNS System, and we intend to have 148 CECs implanting our RNS System by the end of 2021. While we continue to expand into the remaining CECs, most of our growth is coming from increased utilization at centers that have already started to use the RNS System. Today, only a small fraction of the drug-resistant patients coming through the CECs that meet the RNS system indication for use are getting treatment beyond medication. We believe this represents a significant growth opportunity that can be achieved by having more of the epilepsy specialists at the CECs routinely prescribe the RNS System for the appropriate patients.

  • Once at the CEC, a patient typically goes through an inpatient diagnostic evaluation within an epilepsy monitoring unit, or EMU, to determine the appropriate therapy option. It typically takes 6 months from the EMU diagnostic evaluation until the implantation of our RNS System. Because of COVID, there was a significant reduction in the number of patients coming through EMUs for these diagnostic evaluations. In recent months, we have started to see a recovery in the number of patients coming through EMUs for the diagnostic evaluation. Because of the lengthy time line from initial EMU admission to RNS System implant, this recent improvement does not impact our business in Q2, but we believe this is an encouraging trend for the second half of 2021. In spite of the delayed impact on COVID recovery for our business, we expect second quarter revenues to increase low single digits compared to Q1.

  • With regard to reimbursement, most of our patients are younger adults with commercial insurance. We have positive written coverage policies from commercial payers addressing over 200 million covered lives in the United States. In addition, Medicare and Medicaid regularly provide coverage. Overall, less than 1% of patients have been denied coverage for the RNS System implant, and with these positive policies in place, obtaining approval has become routine.

  • Lastly, I would like to discuss the transition we made in 2018 when we introduced a new version of our device that extended the battery life to an average of 8 years, doubling the battery life of the prior generation. While the longer battery life provides important benefits to patients, revenue from replacement devices will decrease over the next several years as the older devices are replaced with the longer-lasting newer model. We expect replacement revenues to continue to decrease until early 2024 before revenue from replacement devices starts to increase when the newer generation devices start to be replaced in greater numbers. It is important to point out that we have historically generated a greater than 90% replacement rate, giving us confidence that replacement revenue will be a meaningful source of growth following this transition.

  • To summarize, our primary focus is to continue to grow revenue in our current indication. We will do this by continuing to expand into all CECs in the United States, driving increased utilization at these centers, increasing referrals and investing in innovations to improve patient outcomes and ease of use. We are also investing to expand our indications to younger patients with focal epilepsy, patients with generalized epilepsy and to patients outside the United States. Finally, we are supporting the early feasibility work that could bring the benefits of responsive neuromodulation therapy to patients with other brain disorders.

  • With that, I will turn over the call to Rebecca, NeuroPace's Chief Financial Officer.

  • Rebecca L. Kuhn - CFO, VP of Finance & Administration and Assistant Secretary

  • Thanks, Mike. NeuroPace's revenue for the first quarter of 2021 was $11.2 million compared to $10 million for the first quarter of 2020, an increase of 12%. The increase was primarily driven by an increase in unit sales of our RNS System to comprehensive epilepsy centers for initial implant procedures. In the first quarter, revenue from initial implants was $8.1 million, an increase of 23% over the first quarter of 2020. Revenue from replacement implants was $3.1 million, a decrease of 8% compared to the first quarter of 2020. The decrease in revenue from replacement implants was expected. It is the result of the longer replacement cycle of our newer device with an 8-year battery life, which is double the battery life of our previous device, as Mike described.

  • Gross margin for the first quarter of 2021 was 75.7% compared to 70.7% in the first quarter of 2020. Our gross margin improved in the first quarter of 2021, primarily due to lower fixed cost per unit as our production volume increased and from our ongoing efforts to reduce our product costs. In the first quarter of 2020, our gross margin was negatively impacted by a reduction in production volume as a result of the COVID-19 pandemic.

  • Total operating expenses in the first quarter of 2021 were $12.4 million compared with $12.5 million in the same period of the prior year. R&D expense in the first quarter was $4.1 million compared with $4.8 million in the same period of 2020. The decrease in R&D expense was primarily driven by a reduction in payroll and personnel-related expenses due to our COVID-19 expense reduction efforts.

  • SG&A expense in the first quarter of 2021 was $8.3 million compared with $7.7 million in the prior year period. The increase in SG&A was primarily driven by an increase in general and administrative expenses, including outside services as we prepared to be a public company and an increase in payroll and personnel-related expenses, largely due to the adoption of new incentive plans. The increases were partially offset by reduced sales, marketing and field support costs, primarily travel, and the shift from in-person events to virtual events as a result of the COVID-19 pandemic.

  • Loss from operations was $3.9 million in the first quarter of 2021 compared to $5.5 million in the prior year period. The company also recorded a noncash charge of $3.1 million in other expenses due to an increase in fair value of convertible preferred warrant liability resulting from the initial public offering. Given the timing of the IPO in late April, we expect to incur one more charge for convertible preferred warrant liability in Q2. Net loss was $8.8 million for the first quarter of 2021 compared to $6.7 million in the first quarter of 2020.

  • Our cash and short-term investments balance as of March 31, 2021 was $30.5 million, while our long-term borrowings totaled $49.6 million. We received approximately $105 million of net proceeds from our IPO, which closed on April 26. We believe this funding will provide the liquidity and capital resources needed to support and grow our current business for the next few years.

  • Now I'd like to provide an update to our 2021 outlook. Our guidance is highly sensitive to assumptions on the global recovery from the COVID pandemic. We anticipate continued progress on vaccinations and immunizations, resulting in normalized hospital operations, including inpatient admissions for the diagnostic evaluations that precede RNS System implants. While the first quarter was a good start to the year, we continue to take a measured approach given the early stages of the COVID recovery. Based on this, we expect second quarter total revenue to increase low single digits compared to the first quarter of 2021. For the full year, we expect total revenue of approximately $47 million, representing growth of 14% compared to full year 2020. Given the replacement revenue dynamics Mike mentioned previously, we anticipate replacement revenue to be approximately $11 million, representing a decline of 16% compared to full year 2020. Lastly, we expect initial implant revenue of approximately $36 million, representing growth of 29% compared to full year 2020. As enrollment in our clinical studies picks up, we will be breaking out clinical study revenue. But given the uncertain timing of when these trials will start enrolling, our initial implant revenue guidance of $36 million includes a small clinical study revenue contribution.

  • At this point, I'd like to turn the call over to the operator, who will open the line for questions.

  • Operator

  • (Operator Instructions) Our first question comes from Robbie Marcus with JPMorgan.

  • Robert Justin Marcus - Analyst

  • Congratulations on the first call as a public company.

  • Michael L. Favet - President, CEO & Director

  • Thanks, Robbie.

  • Robert Justin Marcus - Analyst

  • Maybe just to start. I know first quarter, it seems like a million years ago and everybody is focused on the future. I'd love to see if you'd be able to comment -- you gave guidance for second quarter that was coming in a little better than I was thinking, up low single digits versus first quarter. So would love to get a sense of what you're seeing out in the field today. Are operations getting back to normal, close to normal, above normal? And there's potentially a lot of patients building up in the pipeline. Would love your thoughts, I'll just give you both my questions upfront, on the potential backlog of patients here that could should would be treated in 2021 and 2022.

  • Michael L. Favet - President, CEO & Director

  • Thanks, Robbie. We are seeing, as we put in the forecast, sequential growth from Q1 to Q2. And that's really driven by increased adoption and utilization within the center. It's not really driven by COVID recovery. As we stated a little bit earlier, the patients that are coming through the diagnostic process that the hospitals go through an inpatient stay in the epilepsy monitoring unit, as a precursor to becoming a candidate and then ultimately being scheduled for an RNS implant procedure, we are seeing, I mean, hearing from our customers that those -- the number of patients coming through that process is increasing. But on average, it's about a 6-month delay from the time that they first come in for that inpatient epilepsy monitoring unit stay until they get the RNS device implanted. And so that's giving us confidence that we'll continue to see growth through the second half of the year and really get that COVID recovery. With growth that we're seeing today, again, just coming from increased adoption and utilization without the benefit of that COVID recovery. There is a backlog of patients that we hear from our customers that are waiting to get into these epilepsy monitoring units. So as those centers get up to full capacity, that really primes the pipeline for us in the future and excited about what that means for the business as we go forward.

  • Robert Justin Marcus - Analyst

  • Great. And maybe just a quick follow-up. It's really helpful you gave guidance for initial implants and replacements. I know there's a bit of dynamic with replacement. Just how do we think about the cadence of those 2 going through the rest of the year? And anything to point to that stands out in second, third or fourth quarter?

  • Michael L. Favet - President, CEO & Director

  • The general trend for replacement revenue is going to be declining replacement revenue over the course of the next few years as we go through that transition from the 4-year average battery life to the newer 8-year battery life that we started implanting in 2018. Well, we will expect to see a little bit of on unevenness from quarter-to-quarter depending on the timing of when certain devices or when individual devices reach that end of battery life replacement, but the general trend is going to be declining revenue over the course of the next few years.

  • Operator

  • Our next question comes from Drew Ranieri with Morgan Stanley.

  • Andrew Christopher Ranieri - Equity Analyst

  • Mike and Rebecca, congrats on the -- on your first quarter as a public company. Just to maybe start on new accounts for a moment. I think you ended 2020 around 130 active accounts. And Mike, correct me if I'm wrong, but I think I heard 148 by year-end. I think you've noted before that there might be another 40 that have been going through the committee process. But can you give us a better sense of timing on those accounts of when they could become active? Could you see even better account onboarding beyond the 148 in 2021? Or is kind of this year more of a focus on driving prescriber adoption at your current active accounts?

  • Michael L. Favet - President, CEO & Director

  • Thanks, Drew. Yes, we had 132 centers that implanted in 2020 and expect that, that will increase to 148 here through 2021. So by the end of 2021, we'll have had 148 centers. We're on pace to that, and so we continue to feel confident in the ability to add additional sensors throughout the course of the year. And that's driven by the comment that you made that we do have accounts that we've already identified that have gone through the contracting process that have identified interest in implanting the RNS System in their patients. I mean it takes a different amount of time for centers to be able to come up online with that. And that number of sensors, at 40 sensors compared to last year that have contracts in place, that gives us confidence not only in the ability to get into those 148 centers this year, but it's also the pipeline as we expand through 2022. So we'll focus on continuing to do that. The bulk of our growth, as you mentioned, is really coming from additional utilization -- increased utilization at the centers that are already using the product. But that said, the new centers are an important catalyst for us as we continue to move forward and are doing the effort -- putting in the effort and having the results around expanding those number of accounts through 2021.

  • Andrew Christopher Ranieri - Equity Analyst

  • And a question for Rebecca just on the gross margin side. You posted a 75.7% gross margins in the quarter. Just maybe how are you thinking about gross margins progressing throughout the year with new implants having a higher gross margin? It sounds like there's going to be a better second half as more patients come onboard. But is there any reason why gross margin should dip below the first quarter level throughout the rest of the year?

  • Rebecca L. Kuhn - CFO, VP of Finance & Administration and Assistant Secretary

  • Thanks, Drew. We were pleased with how the first quarter turned out. Our gross margin has been trending up sequentially. Having said that, we expect that it will remain in the mid-70s for the balance of this year. We do expect that over time, with increasing volume, that will see some modest improvements in future years. But for the remainder of this year, we're expecting to be in the mid-70s.

  • Andrew Christopher Ranieri - Equity Analyst

  • And just one last one on the Insight platform. Mike, you touched on it in your prepared remarks. I think you said you're at 60 centers today. But could you go into a little bit more detail about the rollout? Would you expect to get to all 148 centers by the year-end? And just how has the feedback been from your current prescribers?

  • Michael L. Favet - President, CEO & Director

  • Thanks, Drew. Yes, the rollout of the Insight platform is going really well for us. At this point, we're in about approximately half of the accounts have started using -- have already started using a for their patients, and the adoption continues to grow over time. We expect that over the course of the next quarters, that there's going to be utilization -- there will be standard utilization across all of our accounts. Not something that we're specifically tracking to say that it will be 100% by the end of the year, but it's trending in that direction, and we've been really pleased by the uptake. As we've talked before, the importance of that Insight platform, just continuing to bring the power of the diagnostic data that's provided, the brain data that's provided from the device to the physicians in a way that makes it really easy for them to make clinical decisions based on the data coming from the device, the Insight platform is a really important tool to be able to do that offering, new reports -- insight report and a patient outcome report, they really make it easy for the physicians. And we've been very pleased by the feedback coming back from the centers that have started using it.

  • Operator

  • Our next question comes from Larry Biegelsen with Wells Fargo.

  • Lawrence H. Biegelsen - Senior Medical Device Equity Research Analyst

  • And I'll echo my congratulations on a good start to the year. So a couple for me, Mike. One, what's the strategy to expand utilization and active prescribers per account and capture the patients within the CECs that are appropriate for RNS, but don't get treated today? And secondly -- well, I'll stop there, Mike, and then I had a follow-up.

  • Michael L. Favet - President, CEO & Director

  • Thanks, Larry. The focus -- the primary focus, as you just hit on, for the expansion and growth of the business, it's coming through increased utilization at the comprehensive epilepsy centers. The way that we're doing that is broken into step one within the centers to expand the number of epileptologists within that center that are prescribing the RNS System for their patients. Today, we're at a spot where most of these centers, most of the 132 centers that prescribed and implanted devices last year, we're doing that with a relatively small number of the staff of the epileptologists within those centers. So that expansion to more of those epileptologists coming through education of those physicians, training of those physicians, helping them identify appropriate patients and feel confident in the therapy, the results of the clinical data, getting that to them is really important. We talked some -- in previous discussions about the outcomes from the real-world study that were published last year, getting all of that information out to the physicians. I mean then for those physicians that start to use the device within their patients is about turning that initial evaluation and trial in a few patients to routine utilization. I mean, so again, that's coming through education, awareness of the clinical data supporting the efficacy across a broad range of patients within our indication. I'm feeling confident in the system, and then that ease of use component is really important for that as well. So it's getting that experience with the advancements we're making like the Insight platform. They make it really simple for the physicians to take that data from the device and apply it back to know how to make the adjustments to the programming, how to get the optimal outcomes for their patients. So that's really the focus and the way that we're driving the growth at those centers.

  • Lawrence H. Biegelsen - Senior Medical Device Equity Research Analyst

  • That's helpful. And Mike, you mentioned earlier, the majority of the 1 million to 1.2 million patients are outside the Level 4 CECs. What steps are you taking today to drive more referrals?

  • Michael L. Favet - President, CEO & Director

  • Yes. Thanks, Larry. There are approximately 80% of the 1.2 million drug-resistant epilepsy patients that are today being managed by physicians outside of comprehensive epilepsy centers. We're today in the early stages of piloting 2 specific efforts. One of them is around referring physician awareness education. So it's identifying the physicians in the community that are managing those patients and providing an information to them about the benefits of therapies that are offered at the comprehensive epilepsy centers. We're piloting some activities around that, starting to do some work with our field team around creating that education and awareness and creating those referral channels. I mean the other that we're doing, which is also in the early stages of piloting, is evaluating and developing some tools for direct-to-patient awareness, so digital marketing programs to identify patients in the community that are looking for additional treatment options. And then helping create that referral pathway, that those interested patients can get seen by patient -- by physicians at the comprehensive epilepsy centers. Again, we're in the early stages of piloting. We just started that really in 2021. We're going to learn from that. I'm sure that there's a number of things that we'll learn and make adoption and adaptations to the way that we're approaching that and then be able to expand as we identify the mechanisms to do that successfully and be able to expand that in the future.

  • Operator

  • Our next question comes from Danielle Antalffy with SVB Leerink.

  • Danielle Joy Antalffy - MD of Medical Supplies and Devices & Senior Analyst

  • I echo Robbie's sentiment. Congrats on your first quarterly earnings call as a public company. Very early for you guys over there. So I really appreciate it. Just a -- first question is a follow-up actually to Larry's question. And I guess, Mike, when you think about where the points of pushback are, I guess, from my seat, looking at the clinical data, looking at the benefits of the device versus other refection or VNS or DBS, what is -- what are the points of pushback? Why once the physician starts using it don't they use this in a lot more patients right away? Just trying to understand where the barriers are to getting that physician using it in all the appropriate patients. Is it patient -- understanding patient selection? Is it the epileptologist that's the barrier? Just love a little more color there.

  • Michael L. Favet - President, CEO & Director

  • Yes. Thanks, Danielle. The barrier varies, as you would expect, from physician to physician. But I would say, in general, it starts with -- the first thing that we need to overcome is the awareness of the clinical data. So I agree with you. I think we have outstanding clinical data, and it's getting that information about how well this therapy works to reduce seizures and to improve the quality of life and cognition and mood, getting that information in those published studies to these physicians so that they understand what those benefits are. That's really important because it's about changing the way that they're thinking of managing these patients. So it's moving from a mindset of drug therapy and that being the primary treatment mode to moving on to additional therapies that are proven effective for those patients that aren't able to get a response from drug therapy and adequate response from drug therapy.

  • For those patients that start -- for those physicians, I'm sorry, that start prescribing the device within their patients, it's about building their confidence in the way the system works, that they're able to fit it into their clinical practice. That ease of use component is really important so that it can just become a standard part of their routine follow-up for these patients that are coming in. The Insight platform is a really important tool to be able to do that. And then it's patient selection. So it's helping them feel confident that they can identify the patients that are appropriate candidates. They can take that to their case conference for the review that's done within these centers and be able to identify the appropriate treatment for them. So there's a number of steps, but a lot of it, Danielle, has to do with getting them confident that this is going to be a standard part of their therapy that they're just presenting routinely to patients as an option for those that aren't able to get a response from medication.

  • Danielle Joy Antalffy - MD of Medical Supplies and Devices & Senior Analyst

  • Got it. Okay. And then one more follow-up for me, and that is on the refilling of the referral funnel or the refilling of the diagnostic centers that you talked about. Should we be thinking about these diagnostic centers as they work through this backlog of patients as operating above 100% capacity. And so you have sort of unusually high patient numbers coming into the CECs maybe in the back half of the year into 2022? Or do you see it as more of a streamlined like work through this backlog, but the way it's going to funnel through, there shouldn't be much of an air pocket of growth once the backlog is worked through. Just want to try to make sure I understand the cadence here.

  • Michael L. Favet - President, CEO & Director

  • Yes. That's a great question, Danielle, and one I'm very anxious to get the answer to as well. What we know is that there are a backlog of patients that are available and interested in coming into these comprehensive epilepsy centers for the diagnostic evaluation. It's yet to be determined whether the centers are going to be able to create surge capacity and increase efficiencies to be able to bring more of those patients through their centers more quickly. So I don't know the answer to that. We're very anxious to find out. We're hopeful that the centers will be able to improve their efficiency and have more patients coming through the centers. We do know that historically, the capacity of these centers has been going up. There's more epileptologists that are coming out of fellowship and going into practice. The number of these sensors are expanding, the number of epilepsy monitoring unit beds, the number of patients that they're seeing within those centers. That's a longer-term trend that's been positive, and we expect to continue to be positive. Are they going to be able to surge and have a bubble capacity? Don't know the answer to that yet.

  • Operator

  • And I'm currently showing no further questions at this time. I'd like to turn the call back to Mike Favet for closing remarks.

  • Michael L. Favet - President, CEO & Director

  • Thank you again for your time today. Rebecca and I look forward to meeting with many of you in the future at investor and industry conferences as well as individual meetings. And I hope you have a great day.

  • Operator

  • This concludes today's conference call. Thank you for participating. You may now disconnect.