UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 11, 2022
(Exact name of registrant as specified in its charter)
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
(Address of principal executive offices) | (Zip Code) | |||||||
(650 ) 237-2700
Registrant's telephone number, including area code
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
On August 10, 2022 NeuroPace entered into an exclusive distribution agreement with DIXI Medical USA Corp., or DIXI Medical, pursuant to which NeuroPace will become the exclusive distributor in the United States of DIXI Medical’s products approved in the U.S. DIXI Medical is a subsidiary of a European company that pioneered the development of stereoelectroencephalography electrodes, or SEEG. These electrodes are used in the epilepsy monitoring units of Comprehensive Epilepsy Centers to determine where epileptic seizures originate.
The agreement has an initial term of three years from the date of commencement of commercial activities under the agreement, subject to early termination under specified circumstances (such as for cause, as defined in the agreement), and may be automatically renewed for additional one-year terms unless either party provides written notice to the other party of its intention not to renew. NeuroPace will purchase its entire requirement of DIXI products from DIXI Medical at negotiated prices, subject to a minimum annual amount of orders during the term of the agreement. DIXI Medical will provide NeuroPace with commercial support during the term of the agreement. For the commercial support, NeuroPace will pay DIXI Medical a $2.0 million cash payment anticipated to be in the fourth quarter of 2022, and a $1.25 million cash payment on each of the first and second anniversaries of the date of commencement of commercial activities under the agreement, for a total of $4.5 million.
Item 2.02 Results of Operations and Financial Condition.
On August 11, 2022, NeuroPace, Inc. issued a press release announcing its financial results for the fiscal quarter ended June 30, 2022. A copy of the press release dated August 11, 2022, is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The foregoing information in this Item 2.02 (including the exhibit hereto) is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |||||||
| Press release dated August 11, 2022 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| NeuroPace, Inc. | ||||||||
| Dated: August 11, 2022 | By: | /s/ Rebecca Kuhn | ||||||
| Rebecca Kuhn | ||||||||
| Chief Financial Officer and Vice President, Finance and Administration | ||||||||
NeuroPace Reports Second Quarter 2022 Financial Results and Provides a Business Update
Mountain View, Calif. –August 11, 2022 – NeuroPace, Inc. (Nasdaq: NPCE), a commercial-stage medical device company focused on transforming the lives of people suffering from epilepsy, today reported financial results for the quarter ending June 30, 2022.
Recent Highlights
•Announced exclusive U.S. distribution agreement with DIXI Medical to sell its stereo EEG electrodes to Epilepsy Monitoring Units (EMUs)
•Completed sales team expansion initiative
•Begins enrollment in the NAUTILUS study for primary generalized epilepsy
•Total revenue of $10.2 million for the second quarter of 2022
•Initial implant revenue of $8.0 million for the second quarter of 2022
•Replacement implant revenue of $2.2 million for the second quarter of 2022
“While we faced headwinds from reduced EMU patient volumes in the first half of 2022, the operating environment improved through the second quarter with the positive trend continuing into the third quarter. Having completed our sales team expansion initiative, we are more confident in our ability to reach patients earlier in their treatment journey and increase utilization within CECs.” said Mike Favet, Chief Executive Officer of NeuroPace. “I am also thrilled to partner with DIXI Medical to be their exclusive U.S. distributor of stereo EEG electrodes. This partnership is particularly impactful for NeuroPace as it grants us access to a new, adjacent market while also providing better visibility into the diagnostic evaluation pipeline for our core RNS business.”
Second Quarter 2022 Financial Results
Total revenue was $10.2 million in the second quarter of 2022, compared to $12.6 million in the prior year period. Initial implant revenue was $8.0 million, compared to $9.2 million in the prior year period. Second quarter of 2022 initial implant procedures were limited by the reduction of patients going through the EMU diagnostic process in the first half of 2022 and COVID-19 related cancellations. Replacement implant revenue was $2.2 million, compared to $3.4 million in the prior year period. Replacement implant revenue will generally continue to decrease until a significant number of devices with the longer lasting battery reach end of service. More than 90% of patients have had their NeuroPace device replaced when the battery reaches end of service, so replacement implant revenue is primarily a function of when the batteries in the previously implanted devices reach end of service.
Gross margin for the second quarter of 2022 was 73% compared to 74% in the second quarter of 2021. The decline in gross margin was primarily due to an increase in indirect labor costs, including stock-based compensation.
Total operating expenses in the second quarter of 2022 were $18.4 million, compared with $14.0 million in the prior year period. R&D expense in the second quarter was $5.7 million compared with $4.4 million in the prior year period. The increase in R&D expense was primarily driven by an increase in personnel related expenses, product development and clinical study expenses. SG&A expense in the second quarter of 2022 was $12.8 million compared with $9.5 million in the prior year period. The increase in SG&A expense was primarily driven by personnel related expenses, increased costs associated with operating as a public company, and increased sales and marketing costs to support commercial expansion initiatives.
Net loss was $12.7 million for the second quarter of 2022, compared to a net loss of $8.5 million in the prior year period. Interest expense in the second quarter of 2022 was $1.9 million, which was even compared to the prior year period.
Cash, cash equivalents and marketable securities were $92.4 million down from $103.2 million at March 31, 2022, and long-term borrowings were $51.0 million as of June 30, 2022.
2022 Financial Guidance
•Total revenue of $43 million to $45 million
•Initial implant revenue of $34 million to $36 million
•Replacement implant revenue of approximately $7.5 million
•DIXI Medical revenue of approximately $1.5 million, expected in the fourth quarter of 2022
•Gross margin in the low 70% range
•Total operating expenses of $74 million to $75 million, which includes approximately $8 million to $9 million of non-cash stock-based compensation expense
Webcast and Conference Call Information
NeuroPace will host a conference call to discuss the second quarter 2022 financial results after market close on Thursday, August 11, 2022, at 4:30 P.M. Eastern Time.
Investors interested in listening to the conference call may do so by following one of the below links:
•Webcast link for interested listeners:
◦https://edge.media-server.com/mmc/p/e9g3pw5c
•Dial-in registration for sell-side research analysts:
◦https://register.vevent.com/register/BI9a39528014b64663b5d4f5d3f7805954
Live audio of the webcast will be available on the “Investors” section of the company’s website at: https://investors.neuropace.com/. The webcast will be archived and available for replay for at least 90 days after the event.
About NeuroPace, Inc.
Based in Mountain View, Calif., 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. Its novel and differentiated RNS System is the first and only commercially available, brain-responsive platform that delivers personalized, real-time treatment at the seizure source. This platform can drive a better standard of care for patients suffering from drug-resistant epilepsy and has the potential to offer a more personalized solution and improved outcomes to the large population of patients suffering from other brain disorders.
Forward Looking Statements
In addition to background and historical information, this press release contains “forward-looking statements” based on NeuroPace’s current expectations, forecasts and beliefs, including the statements related to EMU patient volume trends, drivers of replacement implant revenue and under the caption “2022 Financial Guidance” above. These forward-looking statements are subject to inherent uncertainties, risks, and assumptions that are difficult to predict. Actual outcomes and results could differ materially due to a number of factors, including the ongoing uncertainty of the impact of the COVID-19 pandemic, as well as COVID recovery impact, on its business. These and other risks and uncertainties include those described more fully in the section titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and elsewhere in its public filings with the U.S. Securities and Exchange Commission (SEC), including its Annual
Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 10, 2022 and its quarterly report on Form 10-Q to be filed with the SEC on August 11, 2022, as well as any reports that it may file with the SEC in the future. Forward-looking statements contained in this announcement are based on information available to NeuroPace as of the date hereof. NeuroPace undertakes no obligation to update such information except as required under applicable law. These forward-looking statements should not be relied upon as representing NeuroPace’s views as of any date subsequent to the date of this press release and should not be relied upon as a prediction of future events. In light of the foregoing, investors are urged not to rely on any forward-looking statement in reaching any conclusion or making any investment decision about any securities of NeuroPace.
Investor Contact:
Gilmartin Group
Matt Bacso, CFA
investors@neuropace.com
NeuroPace, Inc.
Condensed Statements of Operations
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| (in thousands, except share and per share amounts) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Revenue | $ | 10,200 | $ | 12,630 | $ | 21,574 | $ | 23,847 | |||||||||||||||
| Cost of goods sold | 2,734 | 3,271 | 5,849 | 5,995 | |||||||||||||||||||
| Gross profit | 7,466 | 9,359 | 15,725 | 17,852 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Research and development | 5,669 | 4,437 | 11,246 | 8,537 | |||||||||||||||||||
| Selling, general and administrative | 12,771 | 9,527 | 25,215 | 17,794 | |||||||||||||||||||
| Total operating expenses | 18,440 | 13,964 | 36,461 | 26,331 | |||||||||||||||||||
| Loss from operations | (10,974) | (4,605) | (20,736) | (8,479) | |||||||||||||||||||
| Interest income | 221 | 100 | 355 | 126 | |||||||||||||||||||
| Interest expense | (1,852) | (1,873) | (3,682) | (3,722) | |||||||||||||||||||
| Other income (expense), net | (85) | (2,116) | (88) | (5,229) | |||||||||||||||||||
| Net loss | $ | (12,690) | $ | (8,494) | $ | (24,151) | $ | (17,304) | |||||||||||||||
| Net loss per share attributable to common stockholders, basic and diluted | $ | (0.52) | $ | (0.48) | $ | (0.99) | $ | (1.93) | |||||||||||||||
| Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted | 24,503,552 | 17,553,818 | 24,406,100 | 8,959,134 | |||||||||||||||||||
NeuroPace, Inc.
Condensed Balance Sheets
(unaudited)
| June 30, | December 31, | ||||||||||
| (in thousands, except share and per share amounts) | 2022 | 2021 | |||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 5,702 | $ | 19,187 | |||||||
| Short-term investments | 86,709 | 96,397 | |||||||||
| Accounts receivable | 8,474 | 7,091 | |||||||||
| Inventory | 8,419 | 7,822 | |||||||||
| Prepaid expenses and other current assets | 3,160 | 2,319 | |||||||||
| Total current assets | 112,464 | 132,816 | |||||||||
| Property and equipment, net | 951 | 603 | |||||||||
| Operating lease right-of-use asset | 4,986 | — | |||||||||
| Restricted cash | 122 | 122 | |||||||||
| Other assets | 21 | 21 | |||||||||
| Total assets | $ | 118,544 | $ | 133,562 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | 1,503 | $ | 1,378 | |||||||
| Accrued liabilities | 6,962 | 7,923 | |||||||||
| Operating lease liability | 2,936 | — | |||||||||
| Total current liabilities | 11,401 | 9,301 | |||||||||
| Deferred rent, noncurrent | — | 911 | |||||||||
| Long-term debt | 51,018 | 49,847 | |||||||||
Operating lease liability, net of current portion | 3,223 | — | |||||||||
| Total liabilities | 65,642 | 60,059 | |||||||||
| Stockholders’ equity | |||||||||||
| Common stock, $0.001 par value | 25 | 24 | |||||||||
| Additional paid-in capital | 502,250 | 497,522 | |||||||||
| Accumulated other comprehensive income | (1,451) | (272) | |||||||||
| Accumulated deficit | (447,922) | (423,771) | |||||||||
| Total stockholders’ equity | 52,902 | 73,503 | |||||||||
| Total liabilities and stockholders’ equity | $ | 118,544 | $ | 133,562 | |||||||