NeuroPace announces record full year 2023 revenue of $65.4M

NeuroPace, Inc. reported financial results for the fourth quarter and full year ended December 31, 2023.

“This is an exciting period in our Company’s history as we grew total revenue by 44% in 2023, which was driven by the execution of our strategy to expand market usage of our RNS System, while maintaining financial discipline and reducing our cash burn to $3.4 million in the fourth quarter,” said Joel Becker, Chief Executive Officer of NeuroPace. “In 2023, we successfully implemented the first part of our three-part growth strategy for developing the market for our RNS System, aimed at increasing adoption across clinicians and expanding therapy utilization by current prescribers under what we call the ‘modern RNS story.’ We also successfully integrated DIXI Medical SEEG electrodes into our product portfolio and expanded sales throughout the year.”

“The second phase of our strategy, called ‘Project CARE,’ shifts the treatment paradigm to a much broader set of epilepsy specialists outside of Level 4 centers, and provides access to the approximately 700,000 patients with drug-resistant focal epilepsy in the United States that are not currently treated in Level 4 centers. We have initiated activities for the Project CARE pilot, and plan to expand these activities as we gain experience.”

“The third phase of our growth strategy is based on expanding the approved indications for our RNS System, currently focused on the ongoing pivotal NAUTILUS study, an IDE study for patients 12 years and older with drug resistant idiopathic generalized epilepsy, in which we have completed enrollment and the number of implants required for FDA submission. Approximately 40% of patients are diagnosed with generalized epilepsy. There are no neuromodulation products currently indicated for generalized epilepsy in the United States.”

“We are energized by the strong momentum that was built in 2023 and look forward to continuing to both increase adoption and utilization of the RNS System and to expand access to RNS therapy in the large community of drug-resistant epilepsy patients while maintaining financial discipline,” concluded Mr. Becker.

Fourth quarter 2023 financial results
Total revenue in the fourth quarter of 2023 grew 41% to $18.0 million, compared with $12.8 million in the fourth quarter of 2022, and increased 10% compared with $16.4 million in the third quarter of 2023. The Company’s strong fourth quarter revenue growth was primarily driven by increased sales of the RNS System. The Company also continued to generate meaningful revenue from DIXI Medical products. This growth was partially offset by the previously guided decline in replacement implant revenue, representing approximately 4% of total revenue.

Gross margin for the fourth quarter of 2023 was 75.2% compared to 68.8% in the fourth quarter of 2022. The Company’s gross margin increased primarily due to the increase in RNS products produced and sold, thereby spreading its fixed manufacturing overhead costs across more units. The increase in RNS gross margin was partially offset by the lower gross margin for distribution of DIXI Medical products.

Total operating expenses in the fourth quarter of 2023 were $18.6 million compared with $18.7 million in the same period of the prior year. R&D expense in the fourth quarter of 2023 was $5.4 million compared with $5.1 million in the same period of 2022. SG&A expense in the fourth quarter of 2023 was $13.2 million compared with $13.6 million in the prior year period. Consistent with prior quarters this year, operating expenses as a percentage of revenue were lower for both R&D and SG&A expenses. The Company maintained its focus on appropriate resource allocation and cash management and remains committed to effectively managing its operating expenses without compromising revenue growth.

Loss from operations was $5.1 million in the fourth quarter of 2023 compared with $9.9 million in the prior year period. Net loss was $6.2 million for the fourth quarter of 2023 compared with $11.1 million in the fourth quarter of 2022.

The Company’s cash, cash equivalents and short-term investments balance as of December 31, 2023, was $66.5 million. Long-term borrowings totaled $57.0 million as of December 31, 2023. The Company’s cash burn in the fourth quarter of 2023 was $3.4 million, compared with cash burn of $7.9 million in the fourth quarter of 2022, representing another quarter of meaningful improvement attributable to the Company’s focus on operating discipline.

Full year 2023 financial results
Total revenue in 2023 grew 44% to $65.4 million, compared with $45.5 million in 2022. The Company’s strong revenue growth was primarily driven by increased sales of the RNS System. The Company also generated meaningful revenue from sales of DIXI Medical products in its first full year of serving as DIXI Medical’s exclusive U.S. distributor, which began in and contributed a small amount of revenue to the fourth quarter of 2022. This growth was partially offset by the previously guided decline in replacement implant revenue, representing approximately 5% of total revenue for the full year.

Gross margin for 2023 was 73.6% compared to 71.4% in 2022. The Company’s gross margin increased primarily due to the increase in RNS products produced and sold, thereby spreading its fixed manufacturing overhead costs across more units. The increase in RNS gross margin was partially offset by the lower gross margin for distribution of DIXI Medical products.

Total operating expenses in 2023 were $75.3 million compared with $73.3 million in 2022. R&D expense in 2023 was $20.8 million compared with $21.9 million in 2022. SG&A expense in 2023 was $54.5 million compared with $51.3 million in 2022. Operating expenses as a percentage of revenue were lower for both R&D and SG&A expenses.

Loss from operations was $27.2 million in 2023, including $9.6 million of stock-based compensation, compared with $40.8 million in 2022. Net loss was $33.0 million for 2023 compared with $47.1 million in 2022.

Full year 2024 financial guidance

• Total revenue to range between $73 million and $77 million, representing growth of 12% to 18% over 2023
• Gross margin to range between 72% and 74%
• Total operating expenses to range between $80 million and $84 million, including approximately $12 million in stock-based compensation, a noncash expense

NeuroPace continues to expect revenue growth to be primarily driven by increasing sales of its RNS System and higher sales of DIXI Medical stereo EEG products, while replacement implant revenue is expected to decline in 2024 versus 2023.
MB Bureau