NeurAxis, Inc. (NASDAQ:NRXS) Q3 2024 Earnings Call Transcript

NeurAxis, Inc. (NASDAQ:NRXS) Q3 2024 Earnings Call Transcript November 12, 2024

Operator: Conference is being recorded. I would now like to turn the conference over to your first speaker today, Ben Shamsian with Lithium Partners. Please go ahead.

Ben Shamsian: Thank you, and good morning, everyone. Thank you for joining us for Neuraxis’s third quarter 2024 financial results and corporate update conference call. Joining us today on today’s call is Brian Carrico, CEO of Neuraxis. I am Tim Henrichs, CFO of Neuraxis. At the conclusion of today’s remarks, we will open the call to questions. If you are listening through the webcast, you can send in a question by utilizing the ask question box or simply emailing a question to nrxs@lithiumpartners.com. If you are dialed into the live call and would like to ask a question, you can follow the instructions provided by the operator. Today’s event is being recorded and will be available for replay with the webcast information provided in the press release.

Finally, I would like to call your attention to the customary safe harbor disclosures regarding forward-looking information. The conference call today will contain certain forward-looking statements, including statements regarding the goals, strategies, beliefs, expectations, and future potential operating results of Neuraxis. Although management believes these statements are reasonable based on estimates, assumptions, and projections as of today, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at any time of any phonetic or webcast replay. Actual results may differ materially as a result of risks, uncertainties, and other factors, including but not limited to, the factors set forth in the company’s filings with the SEC.

Neuraxis undertakes no obligation to update or revise any of these forward-looking statements. With that said, I would like to turn the call over to Brian Carrico, Chief Executive Officer of Neuraxis. Brian, please proceed.

Brian Carrico: Thank you, Ben. Good morning, and thank you for attending the third quarter 2024 earnings call. During today’s call, I will highlight the many recent accomplishments in our commercialization strategies for IVStim, which is our IBS neuromodulation technology, and RED, our pending products for patients with evacuation disorder. We will discuss the milestones and growth plans for the remaining months of 2024 and into 2025 as we come off another strong quarter of execution and continue the commercialization of our market-leading PENFS technology. Following my remarks, Tim Henrichs, our CFO, will review our financial results for the third quarter of 2024. Let’s first review the recent achievements. As I just mentioned, we are coming off a very strong quarter of year-over-year growth, the biggest milestone in the company’s history, and a new FDA indication expansion.

Q&A Session

To highlight the three big announcements, we grew 40% year-over-year in Q3. We received notice of our category one permanent CPT billing code, and we received FDA clearance for an age expansion from 11 to 18 to 8 to 21 years of age, nearly doubling our market opportunity. I will speak in much more detail later in the call about all three announcements. We are continuing to execute at a high level on our growth objectives, rooted in the foundation that strong published data will drive insurance expansion, leading to sustainable revenues and margins. We laid out these objectives in previous calls and continue to put the final pieces in place to allow blanket insurance coverage and, in turn, the scaling of PENFS revenue. In recent months, we have made significant achievements as we advance and hit milestones with a goal of cash flow breakeven.

Regarding IVStim, our primary focus on revenue trajectory saw a significant change from Q1 to Q2 and an even larger positive year-over-year change in Q3 as children’s hospitals get more comfortable with billing and coding. We also saw the very beginning of new insurance policy coverage taking effect. As such, I am excited to share with you that our momentum in Q3 has continued into Q4, and thus far, the quarter is off to a very good start. I now want to focus on and highlight the catalyst for what we expect to be significant revenue growth in the coming quarters. In a perfect world, children’s hospitals could access blanket insurance policy coverage and a category one CPT code. As mentioned earlier, the category one CPT code has been awarded by the American Medical Association CPT panel and will become effective January 1, 2026.

Regarding blanket insurance policy coverage, we went from 4 million covered lives on January 1 to about 35 million covered lives today, and we continue to announce new policies regularly. So what does it take to earn the remaining payers? As we all know, the scientific community has accepted flagship technology but has been hindered by a lack of written insurance policy coverage. The largest payers have been waiting on the academic society to publish guidelines for FAP IVF. The most important recognition any medical technology can receive is independent guidelines by the academic society because this is an independent review of the literature, and a grade is assigned, which the payers accept as the standard. We announced on the last call that a systematic review by the academic society NASPGHAN was released at a conference in late May, showing our technology has the highest grade certainty level and the largest magnitude effect.

NASPGHAN is the North American Society for Pediatric Gastroenterology, Hepatology, and Nutrition, and they are the academic society for pediatric gastroenterology where our technology resides. This systematic review is in abstract form now, but we believe this information is the work being used to publish guidelines in the coming months. We are told by the largest payers that this publication is an internal mandate for policy coverage, so we are eagerly waiting for this publication to get it to the payers. Sticking with insurance policy coverage, I want to go into detail about the most important aspect of our growth. As we have stated, late in 2023 and early in 2024, written policy coverage is the key to revenue significantly increasing. We also stated that once the insurance policy coverage is written and in place, the children’s hospitals who were not already utilizing IVStim take a minimum of 120 days to get the technology loaded, their processes in place, and begin ordering.

With all of that said, I am happy to announce we have added additional payers, bringing our total covered lives to about 35 million covered lives. In addition to this announcement, we have countless payers in the review process. Assuming even a few of those payers make positive decisions in Q4, we will exceed the 50 million covered lives number we projected early in 2024. We have many children’s hospitals that have been ordering for years, but for a variety of reasons, we have not received early insurance policy coverage in those specific areas. Once insurance policy coverage is written in those specific areas, the children’s hospitals are expected to increase revenue very quickly because the product is already in their system, therefore not needing the 120 days to get set up.

Turning data into insurance policy coverage and then into revenue is a process that we believe is beginning to work well, and the expected academic society guidelines will only expedite that process. Earlier in the call, I mentioned we have achieved the company’s most important milestone to date in the form of a category one CPT code, which will allow for more seamless billing and reimbursement. This is a permanent billing code that will become effective on January 1, 2026. The reason this code is so critical is that it brings a permanent code, making it much easier for revenue cycle teams to bill a procedure. It will bring a permanent reimbursement amount and RVUs, which is how most physicians’ productivity is measured. Moving to FDA expansions, back in July, we made a submission to the FDA for the expansion of our IVStim label to include a patient population beyond the current 11 to 18 years old to 8 to 21 years old, nearly doubling the number of children we can treat.

We recently heard from the FDA, and this expanded indication was awarded on October 30. Regarding RED, or Rectal Expulsion Device, our point-of-care device that identifies patients with pelvic floor dysfunction and provides immediately actionable test results in patients with chronic constipation, licensed from the University of Michigan, we submitted a 510(k) in early August. We are optimistic we will begin commercialization in late 2024. Finally, we have closed the necessary financing with reputable healthcare funds, ensuring we are well-funded for the foreseeable future. I want to focus on PENFS/IVStim. I want to begin by highlighting the work we have done over the last five years to demonstrate and document the true efficacy of our therapy, which now includes 16 publications covering 10 different types of studies.

This has resulted in the highest level of evidence available for functional abdominal pain associated with IBS. We at Neuraxis are very proud of this and believe it validates our optimism and expectations. I am excited to say that the efforts we have put in are starting to bear fruit. Not only do we expect this abstract data to change the guidelines, but we also expect it to expand insurance coverage with the largest payers significantly. We are beginning to see many of our achievements reflected in the numbers. The number of treated cases has increased to about 900 patients in the last twelve months, which represents just over one-tenth of one percent of the 600,000 debilitated children in the United States who suffer from IBS and are in strong need of IVStim.

Now I would like to focus on how this translates to revenue growth and why we continue to be bullish on significant revenue growth as we move into 2025 and beyond. I want to start by highlighting the sustained and increasing demand for IVStim. If you recall, revenue in Q1 was down 20% year-over-year, and units were down 14%. In the second quarter, we had a strong acceleration with year-over-year revenue decline by roughly 5% versus 20% in Q1 and total units increasing by a robust 16%. In the third quarter, we had a stronger acceleration, and total units increased by approximately 50%. The positive change here is due to several reasons, including accounts getting more comfortable and physicians seeing the academic society guidelines poster stating PENFS is the highest grade of evidence and only the very slightest insurance policy coverage taking effect.

A key point to add here is that revenue loss from 2023 is from children’s hospitals that need written policy coverage for large payers, which is not yet in place. These are children’s hospitals that were treating patients after a no authorization required during the prior authorization, and then they were not paid. So they have paused treating until we get written insurance policy coverage. Therefore, there is significant revenue pause versus loss. The fact that we are alleviating those losses without these children’s hospitals shows the growth in new and existing accounts. Once larger payers write policy coverage, the children’s hospitals that are on pause begin ordering immediately, adding significant revenue. On average, selling prices for patients receiving IVStim through financial assistance are roughly 65% lower than the list price.

The insurance barrier is causing us to leave significant dollars on the table. As insurance coverage increases across the country, the percentage of sales through purchase orders will also increase significantly. This is why our number one priority continues to be written insurance policy coverage. The plan of action continues to be clear. Strong peer-reviewed publications and key society support from the likes of NASPGHAN and the American Academy of Pediatrics result in successful coverage from insurance companies, which results in strong revenues. Our internal prior authorization team continues to be successful as it reduces the workload for clinic staff, which allows greater access for pediatric patients, ultimately assisting in acquiring a permanent billing code.

We believe that in time, most accounts will move their prior authorizations to Neuraxis. We expect revenue growth to accelerate meaningfully as we move into 2025 towards cash flow breakeven, based on two catalysts: the continued gaining of coverage from insurance companies for IVStim and the commercialization of RED. Regarding RED for adult patients, we recently filed our FDA submission and are cautiously optimistic about FDA clearance and commercialization commencing in late Q4. Let’s speak a little bit more about RED, or the Rectal Expulsion Device product, which we believe to be a great opportunity for Neuraxis. We have now officially licensed this product from the University of Michigan, where it was developed, and we recently submitted a 510(k) to the FDA and are optimistic this product will be on the market in late Q4.

If successful, RED is expected to bring great clinical benefits to patients because the technology has a category one CPT billing code assigned to the procedure and strong national reimbursement. We believe that providers will be able to bring this clinically beneficial technology to their practice immediately. RED is a self-inflating balloon that is an easy-to-use office-based point-of-care interrectal function test to identify patients with chronic constipation due to pelvic floor dyssynergia and who are unlikely to improve with laxative use. The current treatment involves much trial and error by the physician as to which treatment will work, and RED will allow the physician to streamline the diagnosis and choose the best treatment option after the first visit, which is a real win for the patient.

In summary, we are pleased with continued and consistent execution of building the foundation on strong data and academic society support. This has resulted in significant early insurance adoption, which we expect to grow revenues financially, moving us toward profitability and setting the stage for a prosperous 2025. I will now turn the call over to our CFO, Tim Henrichs, to discuss financials. Tim, please proceed.

Tim Henrichs: Thank you, Brian. And let me add my welcome to everyone joining us on this call. These financial results were included within our press release, which was issued earlier and were also provided in more detail within our Q3 2024 10-Q filed this morning. I will add some color on key areas of the financial results as well as an outlook on certain areas. The hard work that our team has put in over the last few years is beginning to bear fruit. All year, we talked about accelerated growth in the back half of 2024, and now we are seeing it. As Brian mentioned, in the third quarter, we delivered strong acceleration in our revenues and units as a result of increased insurance coverage. The good news is we are only in the early innings of our ramp as we expect the number of covered lives to continue to grow.

In addition, we are optimistic with regards to the commercialization of RED in late 2024. As such, we expect revenue growth to continue in the fourth quarter of 2024 and into 2025. Given our current cost structure, our goal as a company to reach cash flow breakeven is achievable as a function of our sales volume, given our strong gross margins. Our recent successes in obtaining substantially more insurance coverage keep us on that path. Finally, we have strengthened our liquidity position for the remainder of 2024 and into 2025 with a $5 million investment from a dedicated life sciences fund. This will replace $3.2 million in committed funding from a current investor. The transaction is expected to close mid-November, and this investment will top off our 2024 capital raise activity at $11.2 million.

With that, I will go through the financial highlights in detail. 2024 third-quarter revenues were $667,000 compared to $477,000 for the same period in 2023, representing a strong 40% year-over-year revenue growth. Demand remained strong as our unit sales were up approximately 50% in the quarter, year-over-year. It is also worth noting that our September year-to-date revenue is now relatively flat to the prior year, which emphasizes our strong third quarter given our revenue was down 20% and 5% in the first and second quarters of 2024, respectively, compared to 2023. Such trends give us confidence for revenue growth going forward as discounted financial assistance orders turn into full reimbursement dollars with policy coverage. As mentioned before, we remain highly focused on expanding our insurance coverage.

Despite the inherent lag from insurance coverage to device orders, which we have spoken about before, recent performance indicates strong demand and enthusiasm on the part of healthcare providers and patients for our product. Gross profit for the third quarter of 2024 grew to $570,000 compared to $410,000 in the third quarter of 2023 due to sales volume. Gross margin in the third quarter decreased by 50 basis points year-over-year to 85.4%. Although we saw a significant increase in full reimbursement units quarter-over-quarter, discounted financial assistance units outpaced the growth of full reimbursement units, resulting in a decline in gross margin. Notwithstanding, the company maintains a very healthy gross margin. Our operating loss for the third quarter of 2024 was $1.7 million compared to $3 million in the third quarter of 2023.

The sharp improvement in the operating loss quarter-over-quarter was due to a number of factors. First, higher sales volume and higher ASPs resulted in higher gross profit. Second, 2023 included nonrecurring post-IPO costs. Those benefits were partially offset by incremental headcount in 2024 to build out the market access, sales, and finance teams, expenses related to the introduction of an annual short-term incentive bonus plan, and higher advertising costs to expand market awareness. Our net loss in the third quarter of 2024 was $1.8 million versus an $8.6 million net loss in the third quarter of 2023, primarily due to full amortization of the debt discount and issuance costs, and the extinguishment of debt in 2023 from the IPO last year, partially offset by our lower general and administrative costs that I previously discussed.

From a liquidity perspective, our cash on hand as of September 30, 2024, was $261,000. But to shore up our liquidity, we recently secured a $5 million investment from a life sciences-focused fund that is expected to close mid-November, replacing $3.2 million in committed funding from an existing investor. Our cash used in operations was $4.3 million and $4.1 million for the nine months ended September 30, 2024, and 2023, respectively. The increase in cash utilization was primarily due to new public company costs in 2024, such as legal, insurance, board, and stock exchange listing fees that were not incurred prior to the IPO in August of 2023. The company held no long-term debt as of September 30, 2024. However, we did have $148,000 of short-term debt related to the financing of our annual business insurance premiums.

Let me turn the call back over to Brian.

Brian Carrico: Thank you, Tim. In summary, we are early in what we see as strong top and bottom-line growth over the next few quarters. The consistent execution of our commercialization strategy is beginning to bear early fruits, as we see from the growth acceleration in the past three quarters. We are also achieving milestones that enable continued growth, including receiving our category one CPT code and the expansion of our 510(k) clearance. Furthermore, we remain excited about our opportunity with RED, which we expect to become commercial in late 2024 and has the potential to drive significant revenues. With that, operator, we would be happy to take any questions. As a reminder, you can ask a question on the webcast by typing in the ask question box, or if you are dialed in, follow the operator’s instructions. Thank you.

Operator: Thank you. As mentioned, at this time, we will now conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile our Q&A roster.

Ben Shamsian: Hi, Brian. While we wait for some questions, we have some that were sent to us. First, can you talk about the significance of receiving the category one code as well as the 510(k) extension?

Brian Carrico: Sure, Ben. First, the category one code is the culmination of five, six, seven years of work. It requires an overwhelming amount of evidence and data, and it requires a significant amount of utilization. The criteria are strict, and the bar is high. But the reason for that is the category one essentially cements the technology into the medical foundation from the standpoint of the commercial insurance companies and state Medicaids recognizing category one CPT codes. The billing of a category three code, which is what we currently have, is more difficult. Many Medicaids or most Medicaids do not recognize the code, which makes the prior authorization and the billing very difficult. The commercial payers, when it comes to billing a category three code, require a children’s hospital, for example, to itemize the device cost, the physician time, the facility time, and the supplies.

It’s just a longer process and much more difficult for a chief revenue officer and revenue cycle team to operate with. So the category one code brings a recognizable code that will have all those items included in the code, and the reimbursement will be a permanent reimbursement amount. So number one, it makes the code much easier to bill, and that’s really what’s causing the delay once we get insurance policy coverage for accounts that have not brought the technology in before. The time to get that category three code set up is significant, as we mentioned multiple times today. So it brings a very clear path with a category one code to billing. Number two, it will bring a permanent reimbursement amount. So there’s a set reimbursement amount.

And number three, and probably most important, it brings RVUs. So RVUs are how physicians’ time is measured. So, for example, a physician is required to earn so many or work so many RVUs throughout the course of the year, and this will bring RVUs. So this motivates them. Currently, if they are doing this procedure, they are not receiving RVUs, so it does not go towards their workloads for the year. So they are doing this from a clinical benefit standpoint, but they are not receiving any compensation, if you will, because they are not meeting those RVUs. So this is extremely important when you talk about streamlining and scaling the technology. Regarding the 510(k) extension, it increases the age range to eight. We get it at eight years of age up to 21 years of age.

So I cannot tell you how many patients on a daily basis we are contacted that are eight, nine, ten, nineteen, twenty, or twenty-one years of age. So this is a significant improvement. It was just an excellent quarter.

Ben Shamsian: When it comes to the category one code, the 510(k) extension.

Operator: Thank you. Our next question comes from the line of Sergio Heiber with Heiber Research. Your line is now open.

Sergio Heiber: Hi, guys. Congratulations on achieving everything that you stated that you were going to achieve and the code and the age extension. I was wondering about getting the clearance for extending the age. Does not that increase the covered lives?

Brian Carrico: Morning, Sergio. How are you? It will not change. Yeah. It will not change. We still need covered lives. So age expansion just allows more patients to be treated and actually be on label. But the policy coverage is separate. We still need to get written policy coverage from payers. They still have to write policy coverage to enable this. I mean, there are still large payers, for example, that still cover this technology on a one-off case-by-case basis. But to get written policy coverage, where it’s an approved treatment for children, we still need to get written policy coverage with all of the payers.

Sergio Heiber: I understand. But let me rephrase the question. So you have existing coverage with some insurance companies. Those same insurance companies have patients in the new age group that is not covered. So would not that mean that you have more lives under coverage?

Brian Carrico: Well, two answers to that. One, most policies right now state that they will cover, for example, the use of Blue Cross Blue Shield Massachusetts as an example. That policy states they will treat patients 11 to 18 years of age. Our market access team has already gone back to those payers and said that, you know, this age expansion has happened, those conversations with the payers are going very well, and we expect in short order that they will expand those patients, that age range within their policy from 11 to 18 to 8 to 21. Now the second part of your question is, do we have more covered lives? The answer is yes. In theory, but we will not announce more covered lives because covered lives is a standard, you know, there’s a validated standard response to covered life.

If a certain insurance company covers a product or a technology, we list all of those covered lives as covered. So, you know, if you dive into this deeper, which we could do for you, we know on our internal models how many patients there are at each specific age range. But that’s not how you report or we report covered lives. Covered lives is reported based on how many patients there are. For example, if Blue Cross Blue Shield Massachusetts has a thousand lives they cover, I forget the exact number, it’s three or four million. But if they cover a thousand lives, we report one thousand lives. Now to your point, yes, there will be twice as nearly double the amount of covered lives within that payer that we can now treat. That’s true. But we do need to make sure that we get the payer to change the policy from 11 to 18 and move that to 8 to 21, which we are in the process of.

And we do not see any issue or real delay in making that happen.

Sergio Heiber: Thank you. Again, I tell a lot of my investment friends about your company, and everybody’s impression is that the thing that the people that I speak to have not really understood is that it’s a cure, not a treatment. And I was wondering if you have evidence that it’s a cure. Are the studies reflected there is no recidivism of the disease?

Brian Carrico: That’s a great question, Sergio. We do not use the word cure. Although we have three great papers showing long-term data at twelve months, it’s statistically significant. There are patients, there are some patients, there are always a handful of patients that do not respond. I believe that anecdotally and that there are some registry data showing around seventy percent of patients have strong responses, have long-term outcomes. There are always going to be some patients that do not respond. And we’ve got some patients that long-term at nine months or twelve months or fifteen months relapse, if you will, and need another cycle of treatment. So it’s not perfect. We do not use the word cure, but it’s really good.

Sergio Heiber: And then another question I get asked is why isn’t it available for adults? So and will you be shooting in that direction?

Brian Carrico: Yeah. That’s another great question, Sergio. We’re going to release a new deck today that’ll be in our IR firm, and we just haven’t got to talk about that in our earnings calls yet, but we are well on our way to approaching the FDA for an adult indication expansion that would range from 21 through all adult ages. And I believe that we’re aiming for late 2025 to earn that FDA indication, but that is in process. The adult demand, the adult market size is obviously significantly larger than the pediatric size, and there is significant demand from the adult market. That’s a great question. We’ve been working on this for a couple of years. And we believe that roughly a year from now, we’re cautiously optimistic that we’ll be able to earn that indication as well.

Sergio Heiber: And will you need clinical studies for that?

Brian Carrico: We do, and we have what we believe the necessary research underway and completed.

Sergio Heiber: Okay. And then the new product, did you expect to get clearance from the FDA? Does that have a similar TAM or a larger TAM than the IVStim?

Brian Carrico: It’s got a similar TAM. I believe it’s around just a little over $2 billion market opportunity for the TAM. And how will you do that product search? The good news, Sergio, sorry to cut you off about that product, is that it already has a category one CPT code. That’s what we’re so excited about. IVStim that we’ve been working for so long on. And number two, RED already is reimbursed by most, if not all, commercial payers and Medicare.

Sergio Heiber: Oh, that’s fantastic. So you’ll be able to market it nationally much faster.

Brian Carrico: You know, we expect to hit the ground running immediately with this product from a revenue standpoint.

Sergio Heiber: And how will you sell that? Will you have an in-house team? A sales team, or through distributors?

Brian Carrico: Or both. Well, that’s one reason we took this product on. And if you look at our pipeline, which will be on our deck release later today on our IR, the synergies between our product is all pediatric GI, adult GI, and children’s hospital. So it allows our W-2 Salesforce to have the synergy, a very laser-focused synergy, who we call on. But to answer your question, it will be our W-2 Salesforce that will pick that product up. They have the time, the bandwidth, and the ability to do so. They have the gastroenterology expertise as we continue to build this company and the foundation on those principles I just mentioned, this will fit in very nicely.

Sergio Heiber: And then my last question is, will you reach the target of 50 million covered lives by the end of the year, and do you still expect to reach profitability next year?

Brian Carrico: Twofold. Number one, we set out to get in the year to reach 50 million covered lives. We also expected the guidelines to already be published, which, and we know there are countless payers, we believe, with policy coverage written, and they’re waiting for the published guidelines to be released. And now those published guidelines are not quite out yet. You know, we’re cautiously optimistic those will be out in January, and then those other policies will come through. Having that said, there are many payers that we believe are on the cusp of announcing policy coverage that could happen tomorrow or it can happen on January second or sometime in between. So it’s still very possible we have those 50 million covered lives by the end of the year. And regarding cash flow profitability in 2025, that’s the trend, that’s the goal, and we continue to work towards that. Yes.

Sergio Heiber: So, Brian, you had said that you expected the publication in January because it’s inherently better to publish in January than at the end of the year, and I didn’t understand that. Could you explain?

Brian Carrico: Yep. Great question. So first, the reason these guidelines are so important is that this is an independent review of the literature by the academic society, which means we have zero involvement from a standpoint, a moral standpoint. We are not able to be involved. We don’t want to be involved in this. That’s why the credibility is so high. We were cautiously optimistic these guidelines would have been published in the fall. And the fact that they’re not here yet, we believe that they’ll be January. And the reason for that is we’re told that journals want to publish academic journals want to publish in January because they’re judged internally based on citations. And if they publish during a twelve-month January to December calendar year, if this so if they publish in October or November or December, they only get one or two months of citations, whereas if they publish in January, especially something as significant as the academic society guidelines for functional abdominal pain, that gives them a full twelve months of citation, which is very beneficial to them.

Again, this is not a conversation we’ve had directly with the journal. This is just somewhat common knowledge in the med tech space and in the academic space from a publication standpoint. And that’s we’re reading between the lines here.

Sergio Heiber: Thank you. That’s all my questions. Keep on doing a great job, and hopefully, it’ll attract some shareholder attention that you keep coming up with great news, and the market hasn’t responded yet.

Brian Carrico: Yeah. We are cautiously optimistic that this announcement today, the 40% growth year-over-year combined with the category one code, the increased insurance policy coverage, the expanded FDA indication, and then the upcoming launch of RED, you know. And then as I mentioned, Sergio, Q4 is off to an excellent start. So the Q3 momentum has continued into Q4. And look at some point, Sergio, we keep stacking strong quarters on top of each other with these milestones. The market will recognize.

Sergio Heiber: I think so too. Thank you very much for taking my questions, and congratulations on the quarter and the excellent development.

Brian Carrico: Thanks, Sergio. Appreciate your time.

Ben Shamsian: Alright. We have a question for you, Tim. On the last call, you spoke about expecting G&A expenses to settle in around $2 million a quarter. Can you comment about $2 million in Q3? Can we continue to expect this level in the near future?

Tim Henrichs: Yeah. From a cash perspective, the answer to that is yes. From a GAAP perspective, we will have some incremental startup costs for RED into 2025, and then we also introduced a long-term incentive plan for employees in the fourth quarter of 2024, and that will result in some incremental non-cash expense. But our plan as we head into 2025 is to be able to cover those expenses with the revenue growth that we are projecting. Short answer from the cash, yes. From a GAAP perspective, we will see some increased expenses, but we expect to hold our run rate going into 2025, especially with the revenue growth that we’re seeing here in the third quarter. We’re expecting in the fourth quarter, and we think that’ll carry into 2025. To continue to reach our goal of cash flow breakeven in the future once our revenues continue to grow at the pace they currently are.

Ben Shamsian: Okay. We have one more question here for Brian. Can you talk about the timeline for the commercialization of RED, and how do you think about the revenues over the next few quarters?

Brian Carrico: Yeah, Ben. So we’re cautiously optimistic that we’ll have this FDA indication by the end of Q4. And then we will, once we’re really close to the FDA indication, we’ll tee up manufacturing, and we will launch this product very quickly, whether that be the end of Q4 or the beginning of Q1. And then we’ll plan what’s traditional from a soft launch standpoint. We’ll launch so many accounts in the first thirty days, so many accounts in the first sixty days, and so many accounts in the first ninety days and make sure that everything is as planned. Then we’ll open this up. But as I mentioned earlier, we expect meaningful revenues out of this product in 2025. And assuming everything comes through the FDA and the soft launch goes as planned, we’ve spent about a year and a half on this technology at this point since we began the discussions of licensing it from the University of Michigan.

And we’re confident that the FDA will come through, that we will launch this product, and we’ll see meaningful revenues in 2025 and are cautiously optimistic in the first half of 2025.

Operator: Thank you. At this point, there are no more questions in the queue. Therefore, I’d like to turn the call back to Brian Carrico for closing remarks.

Brian Carrico: No. Thank you, everyone. I appreciate your time. We look forward to a great Q4 and talk to you again in spring. Everyone have a wonderful holiday season, and we will talk soon. Thank you.

Operator: Thank you. This does conclude the program. You may now disconnect.