Neuropace Inc (NPCE) 2023 Q2 法說會逐字稿

Good afternoon, and welcome to NeuroPace's Second Quarter 2023 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the call over to Irina Ridley, Chief Legal Officer and Head of Investor Relations for a few introductory comments.

下午好，歡迎參加 NeuroPace 2023 年第二季度收益電話會議。提醒一下，本次會議正在錄製中。我現在想將電話轉給首席法務官兼投資者關係主管伊琳娜·里德利 (Irina Ridley)，請其發表一些介紹性意見。

Good afternoon. Thank you for joining us for NeuroPace's Second Quarter 2023 Financial and Operating Results Conference Call. On today's call, we will hear from Joel Becker, Chief Executive Officer; and Rebecca Kuhn, Chief Financial Officer. Earlier today, NeuroPace released financial results for the second quarter ended June 30, 2023. A copy of the press release is available on the company's website at neuropace.com.

下午好。感謝您參加 NeuroPace 2023 年第二季度財務和運營業績電話會議。在今天的電話會議上，我們將聽取首席執行官喬爾·貝克爾 (Joel Becker) 的講話；和首席財務官麗貝卡·庫恩。今天早些時候，NeuroPace 發布了截至 2023 年 6 月 30 日的第二季度財務業績。該新聞稿的副本可在該公司網站 Neuropace.com 上獲取。

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.

在我們開始之前，我想提醒您，在整個電話會議中，我們將做出包括聯邦證券法含義內的前瞻性陳述的陳述，這些陳述是根據美國《私人證券訴訟改革法案》的安全港條款制定的。 1995 年。本次電話會議期間所做的任何與對未來事件、結果或業績的預期或預測相關的聲明均為前瞻性聲明。

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, the impact of COVID-19 on our business and prospects for recovery, 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.

所有前瞻性陳述，包括有關NeuroPace 的預測、商業機會、商業擴張、市場狀況、臨床試驗的陳述以及與我們的運營趨勢和未來財務業績、COVID-19 對我們業務的影響以及復蘇前景、費用相關的陳述管理層、市場機會估計以及市場和收入增長預測均基於當前估計和各種假設。這些陳述涉及重大風險和不確定性，可能導致實際結果或事件與這些前瞻性陳述所暗示的結果或事件存在重大差異。因此，您不應過分依賴這些陳述。

For a more detailed descriptions of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our public filings with the SEC, including our annual report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 2, 2023, our quarterly report on Form 10-Q for the period ended March 31, 2023 filed with the SEC on May 4, 2023, and our quarterly report on Form 10-Q for the quarter ended June 30, 2023, to be filed with the SEC as well as any reports that we may file with the SEC in the future.

有關與我們業務相關的風險和不確定性的更詳細說明，請參閱我們向SEC 提交的公開文件中的風險因素部分，包括我們向SEC 提交的截至2022 年12 月31 日的10-K 表格年度報告。我們於2023 年3 月2 日向SEC 提交了截至2023 年3 月31 日的10-Q 表格季度報告，並於2023 年5 月4 日向SEC 提交了截至6 月30 日的10-Q 表格季度報告， 2023 年，以及我們將來可能向 SEC 提交的任何報告。

This conference call contains time-sensitive information, which we believe is accurate only as of this live broadcast on August 8, 2023. 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.

本次電話會議包含時間敏感的信息，我們認為這些信息僅截至 2023 年 8 月 8 日的本次直播準確。 NeuroPace 不承擔任何更新或修改任何財務預測或前瞻性的意圖或義務，除非法律要求。陳述，無論是因為新信息、未來事件還是其他原因。

And with that, I will now turn the call over to NeuroPace's Chief Executive Officer, Joel Becker. Joel?

現在，我將把電話轉給 NeuroPace 的首席執行官喬爾·貝克爾 (Joel Becker)。喬爾？

Thank you, Irina, and good afternoon, everyone. It is my pleasure to be here with you today on my first quarterly earnings call with NeuroPace. I'm excited about and committed to advancing our company's mission to transform the lives of people living with epilepsy, with RNS therapy.

謝謝伊琳娜，大家下午好。我很高興今天能與大家一起參加 NeuroPace 的第一次季度財報電話會議。我很高興並致力於推進我們公司的使命，即通過 RNS 療法改變癲癇患者的生活。

I'm pleased with what I've seen in the solid underlying fundamentals of the business, excited by the opportunities that lie ahead and committed to leading NeuroPace to deliver on our commitments of consistent revenue growth, operating discipline and effective cash management. I am also very thankful for the opportunity to lead the talented and experienced team at NeuroPace.

我對公司堅實的基本面感到滿意，對未來的機遇感到興奮，並致力於領導 NeuroPace 兌現我們對持續收入增長、運營紀律和有效現金管理的承諾。我也非常感謝有機會領導 NeuroPace 才華橫溢且經驗豐富的團隊。

On today's call, I will provide highlights from the second quarter of 2023 and review our key business priorities for the remainder of the year. I will then turn the call over to our CFO, Rebecca Kuhn, to present the details of financial performance for the quarter before opening the call to Q&A.

在今天的電話會議上，我將介紹 2023 年第二季度的要點，並回顧我們今年剩餘時間的主要業務優先事項。然後，我將把電話轉給我們的首席財務官麗貝卡·庫恩(Rebecca Kuhn)，在電話問答開始之前介紹本季度財務業績的詳細信息。

I am pleased to report total revenue was $16.5 million, representing growth of 62% compared to the prior year period and 14% compared to the first quarter of 2023. The strong performance was primarily driven by increased utilization of the RNS system within comprehensive epilepsy centers, or CECs; revenue contribution from our partnership with DIXI Medical to distribute their SEEG electrodes in the United States; and implants of our RNS system in the NAUTILUS study.

我很高興地報告總收入為1,650 萬美元，與去年同期相比增長62%，與2023 年第一季度相比增長14%。強勁的業績主要是由於綜合癲癇中心內RNS 系統利用率的提高推動的，或 CEC；我們與 DIXI Medical 合作在美國分銷他們的 SEEG 電極帶來的收入貢獻；以及 NAUTILUS 研究中我們的 RNS 系統的植入物。

As we previously communicated, replacement implant revenue continues to decline as we complete our transition to our second-generation device with a longer-lasting battery. It now represents approximately 5% of total revenue and is expected to decline further in the second half of 2023. Given the strong underlying fundamentals of the business, we are raising full year 2023 revenue guidance to range between $59 million and $61 million, up from $52 million to $54 million and from our original expectations of $50 million to $52 million at the start of the year.

正如我們之前所傳達的，隨著我們完成向具有更持久電池的第二代設備的過渡，更換植入物的收入繼續下降。目前，它約佔總收入的 5%，預計 2023 年下半年將進一步下降。鑑於該業務強勁的基本面，我們將 2023 年全年收入指導上調至 5,900 萬美元至 6,100 萬美元之間，高於5200 萬美元至5400 萬美元，而我們年初的預期為5000 萬美元至5200 萬美元。

I am committed to delivering consistent and repeatable operating results and I look forward to updating you on our progress. Through a disciplined and focused effort on expense management, cash burn has been significantly reduced from $9.8 million in the first quarter of 2023 to $4 million in the second quarter of 2023 without compromising revenue growth. Cash burn improvement was primarily driven by 3 components; revenue growth, gross margin improvement and expense management, all of which will be key areas of focus as we continue to grow and scale the business. We remain committed to ongoing financial discipline with a focus on appropriate resource allocation and expense management.

我致力於提供一致且可重複的運營結果，並期待向您通報我們的最新進展。通過嚴格、集中的費用管理工作，現金消耗已從 2023 年第一季度的 980 萬美元大幅減少至 2023 年第二季度的 400 萬美元，且不影響收入增長。現金消耗的改善主要由三個因素推動；收入增長、毛利率改善和費用管理，隨著我們不斷發展和擴大業務，所有這些都將成為重點關注領域。我們仍然致力於持續的財務紀律，重點是適當的資源分配和費用管理。

I now want to update you on the core elements of our business that comprise of the rationale for a change in guidance before providing some initial thoughts on where I will be focused, as I continue to dive deeper into the business. Our commercial strategy is focused on closing the treatment gap for drug-resistant epilepsy patients by expanding access to RNS therapy. Expanding access to RNS therapy is comprised of expanding patient access to and treatment within CECs, expanding patient indications for the RNS system, and expanding the number of clinicians and centers with access to RNS therapy.

現在，我想向您介紹我們業務的核心要素的最新情況，其中包括指導變更的基本原理，然後再提供一些關於我將重點關注的初步想法，因為我將繼續深入研究該業務。我們的商業戰略重點是通過擴大 RNS 治療的可及性來縮小耐藥性癲癇患者的治療差距。擴大 RNS 治療的可及性包括擴大患者獲得 CEC 的機會和在 CEC 內接受治療、擴大 RNS 系統的患者適應症，以及擴大可獲得 RNS 治療的臨床醫生和中心的數量。

With regard to CECs and currently indicated patients, the number of new RNS system implants in the second quarter demonstrates that recognition of our RNS systems distinct features and benefits continues to grow despite our belief that patient volumes in the epilepsy monitoring units, or EMUs, have not yet entirely returned to 2019 levels and corresponding growth rates. We believe that patient volumes will continue to improve, providing an even greater funnel of patients that could benefit from our RNS system.

就CEC 和當前指定患者而言，第二季度新的RNS 系統植入數量表明，儘管我們相信癲癇監測單元(EMU) 中的患者數量已有所增加，但對我們RNS 系統獨特功能和優勢的認可仍在繼續增長。尚未完全恢復到2019年的水平和相應的增長率。我們相信患者數量將繼續增加，從而提供更大的患者漏斗，可以從我們的 RNS 系統中受益。

We have recently made changes to our sales leadership and, as previously communicated, have accelerated the growth of our commercial field organization. The new members of our field organization are now moving through their training cycle and are beginning to be able to more fully contribute to our commercial efforts. We look forward to demonstrating the impact to expanding RNS therapy access that this expanded team can make over time. Through our partnership with DIXI Medical, we are identifying and educating additional prospective RNS patients earlier in their treatment journey.

我們最近對銷售領導層進行了調整，並且正如之前所傳達的那樣，加速了我們商業領域組織的發展。我們現場組織的新成員現在正在接受培訓，並開始能夠更充分地為我們的商業工作做出貢獻。我們期待著證明隨著時間的推移，這個擴大的團隊可以對擴大 RNS 治療的影響產生影響。通過與 DIXI Medical 的合作，我們正在早期識別和教育更多潛在的 RNS 患者。

Additionally, our nurse navigators and patient ambassadors are working with patients that come into our funnel either through referral, DIXI Medical or through our direct-to-consumer campaigns to address patient questions or to testify firsthand as to the benefits of our RNS system. We believe that our clinician and patient education efforts as well as our marketing programs are contributing to the growth in initial implants and will lead to more patients being able to benefit from our RNS system.

此外，我們的護士導航員和患者大使正在與通過轉診、DIXI Medical 或通過我們的直接面向消費者活動進入我們渠道的患者合作，解決患者問題或親自證明我們的 RNS 系統的好處。我們相信，我們的臨床醫生和患者教育工作以及營銷計劃正在促進初始植入的增長，並將導致更多患者能夠從我們的 RNS 系統中受益。

We have continued to be encouraged by the ongoing durability of our results. As we have previously communicated, not only has RNS therapy demonstrated exceptional results in our regulatory clinical studies, RNS patient real-world outcomes were even better than those seen in the pivotal trial, with patients achieving 82% median seizure frequency reductions at 3 years. This seizure frequency reduction rate has not been seen in any published studies from our competitors. In fact, a recently published study from a competitor's patient registry demonstrated substantially worse outcomes in real-world patient populations, and routine clinical practice that had been observed in the controlled clinical trial and reinforced concerns related to side effects of nonresponsive stimulation, such as memory impairment and depression.

我們的成果持續持久，這讓我們繼續受到鼓舞。正如我們之前所傳達的，RNS 療法不僅在我們的監管臨床研究中顯示出優異的結果，RNS 患者的實際結果甚至比關鍵試驗中看到的結果更好，患者在3 年內實現了中位癲癇發作頻率減少82%。我們的競爭對手發表的任何研究中都沒有發現這種癲癇發作頻率降低率。事實上，最近發表的一項來自競爭對手患者登記處的研究表明，在現實世界的患者群體中，以及在對照臨床試驗中觀察到的常規臨床實踐中，結果要差得多，並強化了與無反應性刺激的副作用相關的擔憂，例如記憶力損傷和抑鬱。

We are also working to simplify and make the delivery of RNS therapy more efficient. In line with those efforts, we are excited to launch in the third quarter our updated nSight software tool designed to improve patient care by enhancing efficiency of case and patient data management. As an important part of our efforts to expand the population of patients indicated for RNS therapy, we remain on track with our plans to expand our RNS systems indication into generalized epilepsy, and expect to complete enrollment in our NAUTILUS trial in the first quarter of 2024.

我們還致力於簡化 RNS 治療並使之更加高效。根據這些努力，我們很高興在第三季度推出更新的 nSight 軟件工具，旨在通過提高病例和患者數據管理的效率來改善患者護理。作為我們擴大 RNS 治療適應症患者群體努力的重要組成部分，我們仍按計劃將 RNS 系統適應症擴大到全身性癲癇，並預計在 2024 年第一季度完成 NAUTILUS 試驗的入組。

We are also pleased to announce that we have completed implanting our first cohort of patients in our groundbreaking NIH-funded feasibility study in Lennox-Gastaut syndrome, or LGS, a type of symptomatic generalized epilepsy. As a reminder, approximately 40% of drug-resistant epilepsy patients have generalized epilepsy. Given that localization is not necessary, diagnosis is typically easier and faster than for focal epilepsy.

我們還很高興地宣布，在 NIH 資助的開創性 Lennox-Gastaut 綜合徵（LGS）（一種有症狀的全身性癲癇症）可行性研究中，我們已經完成了第一批患者的植入。提醒一下，大約 40% 的耐藥性癲癇患者患有全身性癲癇。由於不需要定位，診斷通常比局灶性癲癇更容易、更快。

Few treatment options exist for patients with drug-resistant generalized epilepsy as resection and ablation are not appropriate for this cohort of patients, and there are currently no neuromodulation therapies approved for this indication. We believe that expanding into generalized epilepsy will be meaningful to both our business and our mission.

對於耐藥性全身性癲癇患者來說，治療選擇很少，因為切除和消融不適合這組患者，而且目前還沒有批准用於該適應症的神經調節療法。我們相信，擴展到全身性癲癇對我們的業務和使命都有意義。

With regard to expanding clinician and site access to RNS therapy, in my first 4 weeks, I've identified what I believe to be a significant opportunity that will be an important part of our strategy and our market development efforts going forward. As a result of a PMA yes approval from the FDA that has expanded RNS therapy site and clinician qualification requirements, NeuroPace will now have the opportunity to target the additional approximately 1,800 epileptologists outside of Level 4 CECs and the entire population of functional neurosurgeons, empowering them to provide the RNS system as a much needed treatment option for their patients.

關於擴大臨床醫生和現場接受 RNS 治療的機會，在我的前 4 週內，我已經確定了我認為是一個重要的機會，它將成為我們未來戰略和市場開發工作的重要組成部分。由於 PMA 獲得 FDA 批准，擴大了 RNS 治療地點和臨床醫生資格要求，NeuroPace 現在將有機會瞄準 4 級 CEC 之外的另外約 1,800 名癲癇病專家以及整個功能性神經外科醫生群體，從而為他們提供支持提供RNS 系統作為患者急需的治療選擇。

We believe that with this program qualification expansion, we now have an opportunity to help a significant number of epilepsy patients who would not have been referred to Level 4 CECs to access RNS therapy in the community setting as well as enabling the potential for increased referrals to Level 4 CECs. A fully developed strategy will take time and will be the topic of additional future commentary. But we have already begun accelerating our initial market development efforts around this opportunity and are currently working through the targeting and qualification process with a number of pilot sites.

我們相信，隨著該計劃資格的擴展，我們現在有機會幫助大量原本不會被轉診至4 級CEC 的癲癇患者在社區環境中接受RNS 治療，並有可能增加轉診至4 級CEC 的癲癇患者的數量。 4 級 CEC。全面製定的戰略需要時間，並將成為未來更多評論的主題。但我們已經開始圍繞這一機會加速我們的初步市場開發工作，目前正在與一些試點地點一起完成目標確定和資格審查流程。

I'm excited about this opportunity to offer our RNS system through a significantly expanded group of epileptologists and functional neurosurgeons and expect this to be a core area focus for NeuroPace in doing our part to help close the drug-resistant epilepsy patient treatment gap. I plan to keep you updated going forward on our threefold commercial expansion strategy, and want to reiterate my commitment to executing on our plans of consistent revenue growth, operating discipline and cash management.

我很高興有機會通過顯著擴大的癲癇病專家和功能性神經外科醫生團隊提供我們的RNS 系統，並希望這成為NeuroPace 的核心領域，盡我們的一份力量，幫助縮小耐藥性癲癇患者的治療差距。我計劃隨時向您通報我們三重商業擴張戰略的最新情況，並重申我對執行持續收入增長、運營紀律和現金管理計劃的承諾。

Finally, before we review our financial performance over the last quarter in detail, I would like to recognize the many contributions from Mike Favet over the past 4 years. His execution with the team has brought NeuroPace to the position of solid footing on which we find ourselves today. And I, along with the rest of the management team, the Board and all of NeuroPace's employees, thank him for his efforts.

最後，在我們詳細回顧上一季度的財務業績之前，我要感謝 Mike Favet 在過去 4 年中做出的許多貢獻。他與團隊的合作使 NeuroPace 取得了今天我們所擁有的堅實基礎。我以及管理團隊的其他成員、董事會和 NeuroPace 的所有員工，感謝他的努力。

With that, I will now turn the call over to Rebecca to review our strong second quarter financial results. Rebecca?

現在，我將把電話轉給麗貝卡，回顧我們強勁的第二季度財務業績。麗貝卡？

Thank you, Joel. And once again, thank you, Mike. NeuroPace's revenue for the second quarter of 2023 was $16.5 million, representing growth of 62% compared to $10.2 million for the second quarter of 2022, and 14% sequentially compared to $14.5 million in the first quarter of 2023. Our strong performance was primarily driven by increased utilization of our RNS system by physicians in treating new patients. We also had meaningful revenue from DIXI Medical products, which was higher than we anticipated previously. Replacement implant revenue continued to decline again this quarter as anticipated, and was approximately 5% of total revenue.

謝謝你，喬爾。再次感謝你，邁克。 NeuroPace 2023 年第二季度的收入為1650 萬美元，與2022 年第二季度的1020 萬美元相比增長了62%，與2023 年第一季度的1450 萬美元相比增長了14%。我們強勁的業績主要得益於醫生在治療新患者時更多地利用我們的 RNS 系統。我們還從 DIXI Medical 產品獲得了可觀的收入，高於我們之前的預期。正如預期的那樣，本季度替換種植體收入再次繼續下降，約佔總收入的 5%。

Gross margin for the second quarter of 2023 was 72.5% compared to 73.2% in the second quarter of 2022 and 71.7% in the first quarter of 2023. The decline in gross margin relative to the prior year period was primarily due to a change in product mix with the inclusion of DIXI medical products, which have a lower gross margin than our core RNS products. Over time, we expect our gross margin will generally increase as RNS volumes increase and fixed overhead is allocated over more units.

2023年第二季度的毛利率為72.5%，而2022年第二季度為73.2%，2023年第一季度為71.7%。毛利率較上年同期下降的主要原因是產品的變化與DIXI 醫療產品相結合，該產品的毛利率低於我們的核心RNS 產品。隨著時間的推移，我們預計隨著 RNS 數量的增加以及固定管理費用分配給更多單位，我們的毛利率將普遍增加。

Total operating expenses in the second quarter of 2023 were $19.8 million compared with $18.4 million in the same period of the prior year. In the second quarter of 2023, operating expenses as a percentage of revenue were lower for both R&D and SG&A. This was the result of our continued focus on appropriate resource allocation and cash management. And as Joel said, we plan to continue focusing on effectively managing our operating expenses going forward.

2023 年第二季度的總運營費用為 1,980 萬美元，而上年同期為 1,840 萬美元。 2023 年第二季度，研發和銷售、管理及行政費用 (SG&A) 的運營費用佔收入的百分比均較低。這是我們持續關注適當的資源分配和現金管理的結果。正如喬爾所說，我們計劃繼續專注於有效管理未來的運營費用。

R&D expense in the second quarter of 2023 was $5.3 million compared with $5.7 million in the same period of 2022. The decrease in R&D expense included reductions in outside services for product development and clinical studies, largely resulting from our increased focus and prioritization of key projects in these areas.

2023 年第二季度的研發費用為 530 萬美元，而 2022 年同期為 570 萬美元。研發費用的減少包括產品開發和臨床研究的外部服務的減少，這主要是由於我們更加關注和優先考慮關鍵項目在這些領域。

SG&A expense in the second quarter of 2023 was $14.5 million compared with $12.8 million in the prior year period. The increase in SG&A was primarily driven by personnel-related expenses, including an increase in sales-based compensation and expenses related to our CEO transition as well as expenses associated with distributing DIXI Medical products. These increases were partially offset by reduced general and administrative expenses, primarily outside services and insurance.

2023 年第二季度的銷售、管理及行政費用為 1,450 萬美元，而去年同期為 1,280 萬美元。 SG&A 的增長主要是由人事相關費用推動的，包括基於銷售的薪酬和與 CEO 過渡相關的費用以及與分銷 DIXI Medical 產品相關的費用的增加。這些增長被一般和管理費用（主要是外部服務和保險）的減少所部分抵消。

Loss from operations was $7.9 million in the second quarter of 2023 compared with $11 million in the prior year period. We recorded $2.1 million in interest expense in the second quarter compared to $1.9 million in the prior year period. Net loss was $9.1 million for the second quarter of 2023 compared with $12.7 million in the second quarter of 2022. Our cash and short-term investments balance as of June 30, 2023, was $63.6 million. Our long-term borrowings totaled $54.9 million as of June 30, 2023, with the full principal due on September 30, 2025.

2023 年第二季度運營虧損為 790 萬美元，而上年同期為 1100 萬美元。我們第二季度的利息支出為 210 萬美元，而去年同期為 190 萬美元。 2023 年第二季度的淨虧損為 910 萬美元，而 2022 年第二季度的淨虧損為 1,270 萬美元。截至 2023 年 6 月 30 日，我們的現金和短期投資餘額為 6,360 萬美元。截至2023年6月30日，我們的長期借款總額為5490萬美元，本金將於2025年9月30日全額到期。

Now turning to our outlook for the remainder of 2023. We are increasing our revenue guidance and now expect total revenue for 2023 and to range between $59 million and $61 million, up from $52 million to $54 million. We expect that revenue growth will mainly be driven by increases in initial implants and revenue from the sale of DIXI Medical products. We continue to expect that we will complete the replacement of substantially all of the prior generation RNS devices by the end of 2023. With more replacement implants than anticipated in the second quarter, replacement revenue is expected to decline sequentially at a rate slightly faster than we anticipated earlier in the year.

現在轉向我們對 2023 年剩餘時間的展望。我們正在提高收入指導，目前預計 2023 年的總收入將在 5,900 萬美元至 6,100 萬美元之間，從 5,200 萬美元至 5,400 萬美元上調。我們預計收入增長將主要由初始植入物的增加和 DIXI Medical 產品銷售收入的增長推動。我們仍然預計，到 2023 年底，我們將完成對幾乎所有上一代 RNS 設備的更換。由於第二季度的更換植入物數量超出預期，預計更換收入將按比我們略快的速度連續下降。今年早些時候預計。

Replacement implant revenue will become a growth driver when the newer longer-lasting devices introduced in 2018 begin to reach the end of their battery life. We are increasing our gross margin guidance and now expect our gross margin for 2023 will be between 70% and 72%, up from 69% to 71%. Our quarterly gross margins may experience small variability due to fluctuations in the proportion of DIXI Medical revenue to overall revenue and other factors. We continue to expect operating expenses for 2023 to range between $75 million and $77 million, including $9 million to $10 million in noncash expenses.

當 2018 年推出的更新、更耐用的設備開始達到電池壽命時，替換植入物收入將成為增長動力。我們正在提高毛利率指導，目前預計 2023 年毛利率將在 70% 至 72% 之間，從 69% 升至 71%。由於DIXI Medical收入佔整體收入比例的波動和其他因素，我們的季度毛利率可能會出現小幅波動。我們仍然預計 2023 年的運營支出將在 7500 萬美元至 7700 萬美元之間，其中包括 900 萬美元至 1000 萬美元的非現金支出。

Our cash burn in the second quarter of 2023 was $4 million, a substantial reduction from our cash burn of $9.8 million in the first quarter of 2023. Based on our current cash burn rate, we believe that we have sufficient capital to take us to mid-2025.

我們 2023 年第二季度的現金消耗為 400 萬美元，比 2023 年第一季度 980 萬美元的現金消耗大幅減少。根據我們目前的現金消耗率，我們相信我們有足夠的資本使我們達到中期目標- 2025。

I would now like to turn the call back over to Joel for closing remarks. Joel?

我現在想將電話轉回給喬爾，讓他發表結束語。喬爾？

Thank you, Rebecca. Overall, the first half of the year results have been strong, with CECs continuing to expand initial implant volume, our distribution partnership with DIXI Medical contributing nicely to those efforts, and our clinical development program with NAUTILUS in the generalized epilepsy population is advancing as planned with tremendous opportunity and potential on the horizon.

謝謝你，麗貝卡。總體而言，今年上半年的業績強勁，CEC 繼續擴大初始植入量，我們與DIXI Medical 的分銷合作夥伴關係為這些努力做出了良好貢獻，並且我們與NAUTILUS 在全身性癲癇人群中的臨床開發項目正在按計劃推進蘊藏著巨大的機遇和潛力。

Building on the momentum with our core CEC customer group, I'm also very excited about the prospect of expanding drug-resistant epilepsy patient access to RNS therapy, through an expanded group of epileptologists and neurosurgeons in the community setting and look forward to keeping you updated on those efforts. Cash reserves remain strong and spending well managed. We believe that we have sufficient capital to take us to mid-2025. All of these factors position NeuroPace well for the remainder of 2023, into 2024 and beyond.

在我們核心 CEC 客戶群的推動下，我也對通過社區環境中擴大的癲癇專家和神經外科醫生團隊擴大耐藥性癲癇患者接受 RNS 治療的前景感到非常興奮，並期待著您的光臨更新了這些努力。現金儲備依然強勁，支出管理良好。我們相信我們有足夠的資金支持我們走到 2025 年中期。所有這些因素都使 NeuroPace 在 2023 年剩餘時間、2024 年及以後處於有利地位。

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?

我們準備好的發言到此結束。我現在想將電話轉給接線員，接線員將打開電話詢問問題。操作員？

(Operator Instructions) Your first question comes from Frank Takkinen with Lake Street Capital Markets.

（操作員說明）您的第一個問題來自 Lake Street Capital Markets 的 Frank Takkinen。

Great quarter. Congratulations, Joel, on the appointment, and I'll also extend my gratitude to Mike. I was hoping we could start with one around the guide. Obviously, a great quarter you guys had here, even after backing out the 5% contribution from replacement. It feels like the back half, you guys have done a nice job of staying conservative and prudent with the forward outlook. But maybe talk a little bit about what needs to occur to achieve the guidance that you guys have laid out for 2023 and what could be sources of upside as you start to think about second half '23?

很棒的季度。恭喜喬爾獲得任命，我還要向邁克表示感謝。我希望我們可以從指南開始。顯然，即使在取消了 5% 的替換貢獻之後，你們也度過了一個很棒的季度。感覺就像後半部分，你們在對未來前景保持保守和謹慎方面做得很好。但也許可以談談需要發生什麼才能實現你們為 2023 年制定的指導方針，以及當你們開始考慮 23 年下半年時，哪些可能是上行的來源？

Thank you, Frank, and thanks on behalf of the team. Thanks for the question. When we talk about guidance for the rest of the year, I think it bears mentioning that we're raising guidance by the amount of the beat in Q2 plus nearly that much again for the rest of the full year. And that puts us in a position of having raised by $7 million, which is again, nearly that beat plus the $3 million. And that's in addition to the guide that we raised by $2 million in the first quarter, putting us up now $9 million in guidance for -- from how we were thinking about the business at the start of the year.

謝謝你，弗蘭克，並代表團隊感謝您。謝謝你的提問。當我們談論今年剩餘時間的指導時，我認為值得一提的是，我們正在將第二季度的指導提高到全年剩餘時間的增幅。這使我們能夠籌集到 700 萬美元，這又接近這個數字加上 300 萬美元。這還不包括我們在第一季度籌集了 200 萬美元的指導，根據我們在年初對業務的考慮，我們現在籌集了 900 萬美元的指導。

So as we mentioned, we do think it bears consideration as well, as you mentioned, that we do expect replacement implants and revenue to be down somewhat in the second half of the year. But our guidance here for the rest of the year really takes into account what we've seen in the business in terms of the growth in initial implants in RNS, the good growth contribution that we've seen from DIXI and the dynamics that I mentioned around the replacement implants. So it's really those factors that are driving the second half of the year guidance and that's what we're focused on.

正如我們所提到的，我們確實認為這也值得考慮，正如您所提到的，我們確實預計替換植入物和收入在今年下半年會有所下降。但我們對今年剩餘時間的指導確實考慮到了我們在業務中看到的 RNS 初始植入的增長、我們從 DIXI 看到的良好增長貢獻以及我提到的動態替換種植體周圍。因此，正是這些因素推動了下半年的指導，這也是我們關注的重點。

Okay. That's helpful. Maybe shifting over to one on initial implants. I realize you guys are intentionally not breaking that out. But can you put some goalpost around just where that number came in, trying to understand just the source of outperformance? I think it's looking at my model and making some estimates that you can say a plus 30% initial implant number is probably rather conservative for the quarter, but any further clarity you can provide to break out the performance between initial implants and DIXI?

好的。這很有幫助。也許會在最初的植入物上轉移到一個。我知道你們是故意不去打破這個局面。但你能否在這個數字出現的地方放置一些球門柱，試圖了解表現出色的根源？我認為它正在查看我的模型並做出一些估計，您可以說本季度初始植入數量增加 30% 可能相當保守，但是您可以提供進一步的說明來打破初始植入和 DIXI 之間的性能嗎？

I think as we've talked about, we're not breaking out revenue by different product lines. But what I would say is that we had strength in revenue performance across the different product lines. The initial implant contribution primarily was driven by utilization within existing centers. And so it was primarily existing centers driving that increase in initial RNS implants. But good contributions really across the business with some accelerated strength in replacement implants as we've mentioned.

我認為正如我們所討論的，我們沒有按不同產品線細分收入。但我想說的是，我們在不同產品線的收入表現方面都有優勢。最初的植入貢獻主要是由現有中心內的利用率推動的。因此，主要是現有中心推動了初始 RNS 植入量的增加。但正如我們所提到的，隨著替代植入物的加速發展，整個行業確實做出了良好的貢獻。

Okay. Perfect. And then maybe just for my last one, I was hoping to have a follow-up on qualification requirement downgrade, if we can call it that, to epileptologist, not at a Level 4 CEC. Maybe just take us a little bit deeper into how -- just how impactful that can be? And if you've already started to maybe see some impact from that change?

好的。完美的。然後，也許就我的最後一個而言，我希望對資格要求降級（如果我們可以這樣稱呼的話）進行後續的降級，降級為癲癇病專家，而不是 4 級 CEC。也許只是讓我們更深入地了解一下它的影響力到底有多大？如果您已經開始看到這一變化的一些影響？

Great. Thanks for that question as well, Frank. We're excited about the opportunity here for site expansion really for the role that we see it playing in advancing NeuroPace's mission. Our focus is, transforming the lives of patients and people who are suffering from epilepsy, and we see the opportunity here to expand sites as an opportunity to help close the treatment gap for patients who are indicated in our drug-resistant epilepsy patients.

偉大的。也謝謝你提出這個問題，弗蘭克。我們對這裡的網站擴展機會感到非常興奮，因為我們看到它在推進 NeuroPace 使命中發揮的作用。我們的重點是改變癲癇患者和患者的生活，我們認為擴大站點的機會是幫助縮小耐藥癲癇患者治療差距的機會。

You would know, but there are 1.2 million people in the United States living with drug-resistant epilepsy. About 50,000 of those are admitted to 1 of approximately 200 Level 4 centers. And we believe that the opportunity here is to expand the number of physicians and associated centers to a significant fraction of epileptologists and an additional 1,800 epileptologists from the 1,200 that are associated with Level 4 centers and then really expanding to the entire population of stereotactically trained functional neurosurgeons.

您可能知道，美國有 120 萬人患有耐藥性癲癇症。其中約 50,000 人被大約 200 個 4 級中心之一錄取。我們認為，這裡的機會是將醫生和相關中心的數量擴大到相當一部分癲癇病專家，並從與4 級中心相關的1,200 名癲癇病專家中增加1,800 名癲癇病專家，然後真正擴大到接受立體定向訓練的功能性患者的全部人群。神經外科醫生。

So we see that opening up the community setting, where we think an enlarged group of both clinicians as well as then as RNS therapy gets more broadly visible in the epilepsy community patients as well, and the ability to build stronger referral pathways even back into the CECs as well. So when you think about that in the past, where we've really been limited and focused on those Level 4 CECs, this opens up our ability to take out 2 eligible clinicians and centers RNS therapy to patients who may be -- who would not have had access to it before. And we think that's really exciting.

因此，我們看到開放社區環境，我們認為擴大的臨床醫生群體以及 RNS 治療在癲癇社區患者中​​也變得更加廣泛，並且有能力建立更強大的轉診途徑，甚至回到社區CEC 也是如此。因此，當你想到過去時，我們確實受到限制並專注於 4 級 CEC，這使我們有能力為可能的患者提供 2 名合格的臨床醫生和中心 RNS 治療，而這些患者可能不會之前已經訪問過它。我們認為這真的很令人興奮。

We'll talk more about -- we're right at the start of this, and so we'll talk more about modeling the opportunity and how we see all that in future calls. But again, with the expansion in clinician requirements and center requirements that we see here, we think this lines up very nicely with -- our overall commercial strategy is to increase therapy access in CECs for patients that are in comprehensive epilepsy centers, expand indications for patients for RNS therapy like through the work that we're doing with the NAUTILUS trial, and then thirdly, expand clinician and site access. And we think this regulatory approval and the changing qualification criteria lines up very nicely with that third prong of that overall market development strategy.

我們將更多地討論——我們正處於這一切的開始，所以我們將更多地討論機會建模以及我們如何在未來的電話會議中看到所有這些。但同樣，隨著我們在這裡看到的臨床醫生要求和中心要求的擴大，我們認為這非常符合——我們的總體商業戰略是增加綜合癲癇中心患者在 CEC 的治療機會，擴大癲癇適應症患者接受RNS 治療，就像我們通過NAUTILUS 試驗所做的工作一樣，然後第三，擴大臨床醫生和站點的訪問範圍。我們認為，監管部門的批准和不斷變化的資格標準與整體市場開發戰略的第三個方面非常吻合。

Your next question comes from Robbie Marcus with JPMorgan.

您的下一個問題來自摩根大通的羅比·馬庫斯。

This is Allen, on for Robbie. Just to check, can you hear me okay?

這是艾倫，替羅比發言。只是想確認一下，你能聽到我說話嗎？

We can, Allen, thank you.

我們可以，艾倫，謝謝你。

Congrats on the good quarter. I think when we look back to some of the conservatism you had after the strong first quarter, you talked about how the EMU, the procedure environment hadn't exactly returned to pre-pandemic levels due to staffing, but clearly, it looks like trends have continued to improve in the second quarter. So when we look out to third quarter, fourth quarter, should we think about it as basically being a fairly normal operating environment? Or was there maybe some one-time catch up in the quarter that really drove the strength?

祝賀季度表現良好。我認為，當我們回顧第一季度強勁表現後的一些保守主義時，您談到了歐洲貨幣聯盟、程序環境如何由於人員配置而沒有完全恢復到大流行前的水平，但顯然，它看起來像是趨勢第二季度繼續好轉。那麼，當我們展望第三季度、第四季度時，我們是否應該認為它基本上是一個相當正常的運營環境？或者本季度是否有一些一次性的赶超真正推動了力量的增長？

So I think -- Alan, thank you for the question and for the congratulations on behalf of the team. So when we look at volumes, again, we really saw strength across the different pieces of the business and really that strength coming from initial implants as well as from the contributions from DIXI. We do see that patient volumes, we believe, going through the epilepsy monitoring units have strengthened. And they've strengthened our pipeline. And while we don't know yet whether the volume in those comprehensive epilepsy centers has consistently fully returned, we believe that we have seen strengthening. Does that answer your question?

所以我想——艾倫，謝謝你的提問並代表團隊向你表示祝賀。因此，當我們再次審視銷量時，我們確實看到了業務不同部分的優勢，而且這種優勢確實來自最初的植入以及 DIXI 的貢獻。我們相信，我們確實看到通過癲癇監測單位的患者數量有所增加。他們加強了我們的渠道。雖然我們還不知道這些綜合性癲癇中心的治療量是否持續全面恢復，但我們相信我們已經看到了加強。這是否回答你的問題？

Yes, that's helpful. And then I guess one on, I guess, the expanded criteria, if you will. When we think about what's needed to really target the opportunity, I know you said that you're kind of still going through the planning yourself. But when you think about the potential need for additional costs, especially since you're reiterating that your cash you can get you out mid-2025, do you see the potential need for additional spending to really go after that opportunity? And if so, will you be able to hold to that mid-2025 kind of target?

是的，這很有幫助。然後我猜想，如果你願意的話，我想是擴展的標準。當我們思考真正瞄準機會需要什麼時，我知道您說過您自己仍在進行規劃。但是，當您考慮潛在的額外成本需求時，特別是當您重申您的現金可以在 2025 年中期讓您擺脫困境時，您是否認為需要額外支出才能真正抓住這個機會？如果是這樣，您能堅持 2025 年中期的目標嗎？

Thanks again, Allen. It's a great question. As you state, we are in the early stages here to really fully understand the scope of the opportunity. That said, I would remind us that this remains within our currently indicated patient population. These are customers, and by that, I mean epileptologists and functional neurosurgeons that are the functional specialties that we call on today. It is our current technology and our commercial field team while these are expanded sites, our commercial field team is trained and highly experienced in interacting with just this type of procedure and customer and patient and technology. So we see that there will be customer training and education that will be needed certainly, and we're working on evaluating the scope there.

再次感謝，艾倫。這是一個很好的問題。正如您所說，我們正處於真正充分了解機會範圍的早期階段。也就是說，我想提醒我們，這仍然在我們目前指定的患者群體中。這些是客戶，我指的是癲癇病學家和功能性神經外科醫生，他們是我們今天呼籲的功能性專業。這是我們當前的技術和我們的商業領域團隊，雖然這些是擴展的站點，但我們的商業領域團隊在與此類程序、客戶、患者和技術的互動方面訓練有素且經驗豐富。因此，我們認為肯定需要進行客戶培訓和教育，我們正在努力評估其範圍。

But we see it really more as expanding that training and education to the additional sites, and epileptologists and neurosurgeons will be focused and thoughtful on targeting potential centers, and we'll be working on investing as we grow. And while we grow, we'll be thoughtful about how we invest and make sure that we're doing so responsibly so that we maintain both the ability to expand into the opportunity and develop the market while doing so with a focus on operating discipline and expense management.

但我們更多地認為這實際上是將培訓和教育擴展到其他地點，癲癇病學家和神經外科醫生將專注並深思熟慮地瞄準潛在的中心，我們將隨著我們的成長而努力進行投資。在我們成長的同時，我們將深思熟慮如何投資，並確保我們負責任地這樣做，以便我們保持擴大機會和開發市場的能力，同時重點關注運營紀律和費用管理。

(Operator Instructions) Your next question comes from Paige Chamberlain with Wolfe Research.

（操作員說明）您的下一個問題來自 Wolfe Research 的 Paige Chamberlain。

I have one on DIXI. We understand there's several strategic reasons behind that partnership, one being more visibility into the patient funnel. So I guess I'm just curious, now that you're about 9 months into this agreement, what have you been learning? And is this partnership helping you identify more patients on the front end and manage the patient funnel any better?

我在 DIXI 上有一個。我們了解這種夥伴關係背後有幾個戰略原因，其中之一是提高患者漏斗的可見性。所以我想我只是好奇，既然你們已經簽訂了這份協議大約 9 個月了，你們學到了什麼？這種合作關係是否可以幫助您在前端識別更多患者並更好地管理患者渠道？

Paige, thank you for your question. It's a great question. Let me say, we are a few months into this, but it is still relatively early as we think about the sales integration process and how the collaboration is integrating with both, our current customer base as well as potential new customers. I would say that we are pleased with how things have started. We have seen positive contributions to both revenue as well as our ability to get visibility further up the pipeline.

佩奇，謝謝你的提問。這是一個很好的問題。我想說的是，我們已經這樣做了幾個月，但現在還相對較早，因為我們考慮銷售整合流程以及協作如何與我們當前的客戶群以及潛在的新客戶整合。我想說，我們對事情的開始感到滿意。我們看到了對收入以及進一步提高知名度的能力的積極貢獻。

And we're continuing to work closely with both DIXI as well as with our field team in further defining and executing on those both current opportunities as well as customer expansion opportunities. So we're pleased with what we've seen so far. We're pleased with the contribution that we've seen to the current business as well as how it's helping us look into the pipeline deeper but it's also still relatively early in our overall integration efforts.

我們將繼續與 DIXI 以及我們的現場團隊密切合作，進一步定義和執行當前的機會以及客戶擴展機會。因此，我們對迄今為止所看到的情況感到滿意。我們對我們對當前業務的貢獻以及它如何幫助我們更深入地研究管道感到滿意，但在我們的整體整合工作中還處於相對早期的階段。

Got it. And then one more kind of jumping off that, too. You guys mentioned there were some changes to the sales force in the quarter. So I guess just kind of on an overall level, how are you feeling about the field team? Maybe if you could share any motivations behind some of those changes and what the changes will look like in practice? And then just for completeness, how is DIXI the partnership at all changing the sales strategy? Obviously, it's helpful to have another lever to pull, but what is that looking like in the field?

知道了。然後還有另一種跳脫。你們提到本季度銷售隊伍發生了一些變化。所以我想在整體層面上，您對現場團隊的感覺如何？也許您可以分享其中一些變化背後的動機以及這些變化在實踐中會是什麼樣子？為了完整起見，DIXI 的合作夥伴關係如何改變銷售策略？顯然，有另一個槓桿可以拉動是有幫助的，但是在現場它是什麼樣子的呢？

Paige, this is Rebecca. I'll comment on changes in the sales team. There may have been a bit of confusion about that. We had a change in our sales leadership this quarter with the new VP of Sales, which we announced about 2 months ago. Other than that, we have not had changes in the sales team. As you may recall, we accelerated growth in our sales teams earlier in 2022. But other than the change in sales leadership, there were not changes this quarter. Our field commercial organization remains about the same size that it has been for the full year.

佩奇，這是麗貝卡。我將評論銷售團隊的變化。對此可能有些困惑。本季度我們的銷售領導層發生了變化，新任銷售副總裁是我們在大約兩個月前宣布的。除此之外，我們的銷售團隊沒有發生任何變化。您可能還記得，我們在 2022 年初加速了銷售團隊的增長。但除了銷售領導層的變化之外，本季度沒有任何變化。我們的現場商業組織規模與全年大致相同。

There are no further questions at this time. Please proceed.

目前沒有其他問題。請繼續。

Thank you. And I'd like to say thank you to all who are on the call today and for your interest in NeuroPace. We're pleased with the first 2 quarters of 2023. We're focused on execution throughout the rest of the year, and we're excited about both the recent progress on and the future opportunities with our site expansion and clinical study work to expand patient indications in the drug refractory generalized epilepsy population with the NAUTILUS study. All of that with a focus on furthering NeuroPace mission to transform the lives of people suffering from epilepsy.

謝謝。我想對今天參加電話會議的所有人以及對 NeuroPace 的興趣表示感謝。我們對 2023 年前 2 個季度感到滿意。我們在今年剩餘時間裡專注於執行，我們對站點擴張和臨床研究工作的最新進展和未來機會感到興奮NAUTILUS 研究中藥物難治性全身性癲癇人群的患者適應症。所有這些都是為了進一步推進 NeuroPace 的使命，即改變癲癇患者的生活。

Thank you, operator. With that, we'll conclude today's call.

謝謝你，接線員。我們就這樣結束今天的電話會議。

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and ask that you please disconnect your lines.

女士們、先生們，今天的電話會議到此結束。我們感謝您的參與，並請您斷開線路。