ClearPoint Neuro, Inc. (CLPT) Earnings Call Transcript

Thank you. Comments made on this call may include statements that are forward-looking within the meaning of securities laws. These forward-looking statements may include, without limitation, the company's beliefs, estimates, or projections regarding future revenue and results of operations. You are cautioned not to place undue reliance on forward-looking statements which speak only as of the date on which they are made. Actual results or trends could differ materially. The company undertakes no obligation to revise forward-looking statements for the new information or future events except as required by law. For more information about the company's risks and uncertainties, please refer to the company's filings with the SEC, including the company's recent filings on Form 8-K, Form 10-K, and Form 10-Q. All the company's filings may be obtained from the SEC or the company's website at www.ClearPointNeuro.com. And now I'll turn the call over to Joe Burnett, Chief Executive Officer. Thank you. You may begin.

Thank you. And as always, thank you to all the investors, analysts, and biopharma partners listening to today's call. remain both committed to and focused on developing a complete neuroecosystem capable of delivering various minimally invasive treatments, including cell and gene therapies to the brain. We believe that this approach will finally unlock hope for the patients and their families who are battling these frightening neurologic disorders and who today have very few options to choose from. This is one of the largest unmet needs in all of medicine, and we at ClearPoint believe that we can play an important, if not essential role in this exciting future. The second quarter of 2026 in itself has been an exciting one and possibly one of the most important series of events in our history. While our long-term vision remains unchanged, anchored by our four-pillar growth strategy, there has been substantial progress leading us to up-prioritize certain parts of the strategy and to take advantage of this new information from the last few months. So today, instead of looking to the horizon and reconfirming our long-term strategy, I will focus on these three most important and elevated priorities that are right in front of us. These three activities will represent the largest time and financial investment for the second half of this year. First, we have all seen regulatory updates from pharma partners demonstrating an accelerated pathway to phase three trial enrollment and even commercial approval. This revised potential schedule is much faster than what we believed just six months ago. And once again has highlighted the need to pursue commercial readiness activities in support of our partners global launch plans. Second, as of July, we have now taken possession of the 30,000 square foot Cal preclinical facility in Torrey Pines, California, which includes our analytical lab space. This milestone has enabled us to sign our very first statement of work for GLT services, which we expect to complete in the first half of 2022. when all of our equipment and procedures are in place. We believe that this asset will fuel growth in our preclinical services business, starting here in the second half of 2026, with continued growth in 2027 and beyond. And third, the announcement of our partnership in focused ultrasound, which when combined with our in-development robotic system and Harmony 1.0 control software, will be designed to assist our partners in the next phase of drug delivery growth after approval, which will be commercial expansion, scale, and efficiency. These three foundational activities have become paramount over the last few months and warrant a greater demand of our focus and our attention. I will now hand the call over to Danilo D'Alessandro, our CFO, to review financials in the quarter, after which I will spend some time detailing the second half 2026 priorities. Danilo?.

Thank you, Joe, and thank you all for joining us today. Looking at the second quarter 2026 results. Total revenue was $10.9 million for the three months ended June 30th, 2026, and $9.2 million for the three months ended June 30th, 2025, which represents 18% growth versus the second quarter of 2025. Our revenue is made up of three components, biologic drug delivery, neurosurgery, navigation therapy, and capital equipment and software. Biological and drug delivery revenue includes sales of disposable products and services related to customer sponsored preclinical and clinical trials utilizing our products. Logix and drug delivery revenue decreased 15% to $4 million in the second quarter, down for $0.7 million in 2025. This decrease was mainly due to a decrease in product revenue of $0.9 million due to a single customer order that occurred in the quarter of the prior year and did not recur in the current quarter. The ENDD service revenue increased $0.2 million from prior year. Neurosurgery navigation revenue consists of commercial sales of disposable products related to cases utilizing the ClearPoint system, the PRISM laser system, and Aeroflow. This revenue grew to $5.6 million for the second quarter of 2026, driven primarily by additional revenues due to sales of the Aeroflow product, as well as introduction of our 3.0 operating room navigation software, which has positively impacted procedural volumes in the operating room during the three months ended June 30, 2026 compared to the same period in 2025. Capital equipment and software revenue consisting of sales of our reusable hardware and software and of related services increased 24% to $1.3 million in the quarter from $1 million for the same period in 2025 due to an increase in the placement of ClearPoint navigation systems, PRISM laser units, and airflow control units. Gross margin for the second quarter of 2026 was 62%, an increase of 2% compared to 60% in Q2 2025, mostly related to a decrease in excess and obsolete inventory. Research and development costs were $4.6 million for the three months ended June 30, 2026, compared to $3.8 million for the same period in 2025, an increase of $0.8 million or 21%. The increase was due primarily to higher personal costs of $0.8 million. Sales and marketing expenses were $6.8 million for Q2, compared to $4 million for the same period in 2025, an increase of $2.7 million, or 68%. This increase was due primarily to additional personal costs of $1.8 million and increases in travel costs of $0.3 million, resulting from the expansion of our clinical and sales teams. The increase was also driven by additional amortization expense of acquired intangible assets of $0.2 million and marketing material cost of $0.2 million. General and administrative expenses were $5.6 million for the second quarter, an increase of $2.2 million or 64%. This increase was due primarily to increases in occupancy costs of $0.7 million, professional service fees of $0.5 million, personal costs of $0.3 million, general corporate costs of $0.3 million, and IT The cash reduction was primarily due to the operational cash burn of $15 million through Q2 2026 and $2 million due to payments for taxes related to net share settlement of equity awards. We do expect the operational cash burn to decrease in the second half of the year as we benefit from the completion of the ERAS integration. I'd like now to turn the call back to Joe. Thank you, Danilo.

As mentioned earlier on the call, our long-term four-pillar growth strategy remains unchanged, however, responsive to the best and latest information that we have in hand. As a smaller but agile company, we believe that this is one of our strengths and I want to spend some time walking through these priorities and the rationale and results that we plan to achieve for 2026. The first of these priorities is our clinical capacity. The most noteworthy change since our last call is that the FDA has seemingly reversed course on their regulatory approach surrounding some rare diseases. therapies for these diseases can be very challenging to test clinically due to the speed of disease progression and challenges with patient enrollment. When we started this year, we believe that the additional requirement of multi-year sham studies in these difficult patient populations would be required for US approval, pushing the potential time of a gene therapy approval out years into the future. Recent news from key biopharma partners seem to indicate that the FDA is once again open to creative trial designs and strategies that could support BLA submissions in the second half of this year. For ClearPoint, we want to ensure that the access to our technology and the support of our clinical team are not bottlenecks to the success of these launches. As a result of this new information, we have once again reactivated our clinical support growth strategy to meet this need, as we believe it may become a necessity as early as We intend to invest in growing our clinical specialist team globally and to train them to support these phase three and commercial drug delivery cases. the level of expertise that our surgeons demand is not a small task. We believe we have about 12 to 15 months to really get ready, so the time to hire and begin training is now. It is important to note that this is not only a U.S. strategy, as our partners are pursuing therapy submissions beyond the United States as well. We have accelerated our investment into the global approvals for our products and drug delivery ecosystem and have once again started hiring clinical specialists around the world. As an example, we have recently hired clinical support teammates in the United States, European Union, Canada, and Japan. This same expanded team will also be used to support multiple phase three trials in the next 12 to 18 months, which often include patient populations up to 10 times what a phase one trial would require. In fact, we expect between 10 and 15 trials using ClearPoint technology to be enrolling patients in the next 18 months. So when combined series of events in our history. This is because the news flow over the past few months really dominated and demonstrated the strength of our diversified biopharma partner strategy. Now, even if we did not look at our full list of 60-plus drug delivery partners and only looked at the subset that we have publicly mentioned that are under FDA expedited review, here are some of the newsworthy events from their public comments. UNICURE reported that following a Type B meeting, FDA indicated the three-year data from its Phase 1-2 program of AMT-130 and Huntington's disease can serve as the primary basis for a BLA under the accelerated approval pathway. UNICURE is now working to align with FDA on a confirmatory study ahead of time of a submission that is targeted for the third quarter. Just last week, Aspen Neuroscience received RMAT designation in Parkinson's disease and completed dosing of cohorts three and four in its phase 1-2A Asparo trial, bringing total patients dose to 15. In July, Kenai Therapeutics completed enrollment of its Phase 1B-2A replace trial of RNDP-001 in idiopathic Parkinson's disease. In July, neurona therapeutics presented updated phase 1 2 data in drug resistant mesial temporal lobe epilepsy at the aan annual meeting and was acquired by ucb in a transaction that closed in june the SIREN Biotechnology was awarded an $8 million non-dilutive grant from the California Institute for Regenerative Medicine or CIRM to support clinical developments of SRN 101 and high grade gliomas. And Regenexx Bio announced alignment with FDA on a path forward for resubmission of its BLA for MPS2 or Hunter syndrome, stating that no additional studies are required and that it expects to resubmit in the third quarter. This is why I made the statement about the second quarter being one of the most important series of events in our history. our number one goal as a company is to become an essential part of neuro drug delivery, especially for cell and gene therapies. This is the way that we can uniquely help the most patients and at the same time return the most value to our shareholders. The most important thing we can do is to have our technology and our team participate, participate, across all of these different neurological indications. Well, over the past few months, we got closer in Huntington's, we got closer in Parkinson's, we got closer in epilepsy, we got closer in tumor, we got closer in rare disease, we got closer in stroke rehabilitation. Across the board, we got closer to our goal. We do not expect any individual program's progress to move in a straight line. That is precisely why we built a portfolio this broad. With 60-plus partners across many indications, we expect news updates like this to continue across our partner base in the months and years ahead. Our second priority is the CAL. The ongoing construction of the ClearPoint Advanced Laboratories, or the CAL, has continued through Q2, and as of July, we are now in possession of the 30,000-square-foot facility in Torrey Pines, California, right down the street from multiple biopharma partners. Importantly, we have now signed our very first statement of work for GLP services at the Cal, which we expect to complete in the first half of 2027. Once fully operational, we expect that this GLP capability, along with offering numerous additional drug discovery services and added capacity, will allow us to add multiple revenue streams to our biologics and drug delivery preclinical business. While our revenue miss in the quarter versus our own internal plan was largely attributed to a delayed ramp of these preclinical Cal services, we expect a return to growth for our biologics and drug delivery business here in the second half of the year. And our third priority is supporting our partners with the technology that follows their expected approval. We announced a 10-year focused ultrasound drug test and received valuable feedback from more than 50 neurosurgeons during the quarter. In addition, we continue to advance Harmony 1.0, our software designed to control the ClearPoint drug delivery ecosystem through a single workflow. We are developing each of these technologies to help our partners achieve commercial drug delivery scale by increasing the access and efficiency of robotic workflows or by enabling intravenously administered agents to cross the blood-brain barrier. Given this new and elevated priority, our investment is expected to deliver fully functioning devices to be used pre-clinically at the CALS facility and generate additional biologics and drug delivery service revenue in 2027. As we embrace this new and important market information, our revised 2026 priorities are designed to build capacity across the full development pathway, from preclinical studies at the Cal, through larger pivotal phase three trials, to commercial scale around the world, all hallmarks of the leading neurosurgery leading neuro drug delivery company. As a result of these new priorities and investments, we are adjusting our 2026 revenue guidance to between 48 and $52 million, as our investment will be less focused on traditional sales expansion than previously planned and more focused on clinical case support for commercial drug delivery, global regulatory product expansion, capital equipment, equipment purchases at the Cal and development of our focused ultrasound robotics and harmony software solutions. We believe these decisions are the best way to extend our lead as the premier drug delivery partner, be true to our strategy, and prepare ourselves for an exciting future. With that, I would like to welcome any questions from investors or analysts on the call. Thank you.

And at this time, we'll conduct the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And your first question comes from Frank Pekkanen with Lake Street Capital Market. Please state your question.

Thank you for taking the questions. I wanted to follow up with a question on the strategic or change in strategic focus a little bit closer. Maybe walk us through in a little more granular detail, the reorganization, is this a matter of reps moving into the clinical support area? Is this a matter of investing in and building up the infrastructure more, saying more capital reps rather than reps pursuing recurring revenue? news and then probably a challenging question to triangulate to, but it would be nice to understand kind of how this can impact growth for 2027. It feels like obviously 2026 is really a big investment year. And what can this mean for growth in 2027 as these different items converge?.

Yes, thanks for the question, Frank. So I'll start with the, you know, organization and structural design, which, you know, it's not a massive change to what we had originally planned, but it is a reflection on, you know, what does the company and the commercial team need to look like, you know, two, three years out in the future? You know, the reality is is that our company and our business model is very different than a traditional device company. And the most glaring difference between the two is the partnerships that we do have with biopharma. So to kind of think of it this way, if in fact not only these phase three trials continue to progress where a typical phase three trial could be anywhere from 80 to 120 patients, and we start stacking those on top of each other. In the event that one, two, three, five of these cell or gene therapies start to get approved, what's different about our model is that in many cases, we are going to be selling our products directly to a pharma company, and the pharma company could be providing it as a kit with their drug to the hospital. So that in itself is a very, very different model. And you can imagine five years from now, it's possible that half of our revenue is coming through this sort of B2B model as opposed to a traditional sales model. So from our standpoint, that sort of derives the need for a slightly different salesperson who's very, very... very in tune with the clinical support, making sure these potentially million dollar procedures go incredibly well. and that needs to be the primary focus. So, you know, rather than hiring a bunch of more traditional sales folks to fill these particular roles, it puts us in a position where we can hire more of the clinical support mechanism and sort of survive with a limited group of these more traditional sales folks. I would say this, it's a similar situation when you think about about the competitive environment for our products. Right now we're competing for navigation, we're competing for laser, we're competing for in the EVD space with the Aeroflow product. This new position we have when our products are actually approved as combination devices with the drug itself, it doesn't have that same competitive support. And again, it's leading us to focus a little bit more on sort of, again, on just providing the best white glove clinical support service that we can. So I think that's, you know, that's hopefully the answer to the first question. And Frank, what was the second question that you had there? Just thoughts on 2027 growth. Oh, yes. Yes, so 2027, I mean, that's more timing. I mean, where I think could be drivers that would accelerate the growth versus the fear. And, you know, based on the midpoint of the guidance we provided of saying $50 million, you know, that I think equates to... If you can count all the ERA flow new revenue into that, it's above 30% growth. But next year, you know, we will have a true apples to apples comparison for the full year. And we still expect it to be kind of, you know, high double digits, let's call it, or high teens, I would say. If not 20% growth is kind of the range of what we're thinking about for total growth for 2027. but then there's a couple levers that could, uh, you know, could accelerate beyond that. So for example, uh, nearest term with the Cal facility, you know, if we in fact now have possession of the full 30,000 square foot facility, if we equip it with all the analytic equipment that we need, uh, to do histology and other analytic testing here, in the second half of the year, if our permanent installation of our MRI magnets and spec machines take place in the first quarter of next year as are currently planned, that could be a meaningful growth driver for next year that would get us above and beyond that, high teen sort of growth rates. Similarly, in the ascent, that Therapy Partners, their BLA submission is not only accepted, but it's actually approved in 2027. It's possible that we would not only be selling into this totally new space of commercial drug delivery that we haven't really done in the past, but it's also possible that some of these companies are interested in purchasing stocking orders of some of these products. So, we might actually get paid, deliver product, recognize revenue at a sort of accelerated rate versus what the patients actually experience, because we can, you know, a pharma partner could de-risk their launch by having three, six, nine, even 12 months of ClearPoint inventory in their own inventory locations. to supply as part of the product launch. So where I'd say we can kind of count on that high teens growth for 2027, you get to the point where accelerated adoption of GLP studies at the Cal could go faster than that, and any sort of commercial approval could go faster than that as well.

Got it. That's very helpful. And then on the GLP statement of work, would you quantify how large that could be?.

Yes, I don't want to give away too much confidential information, but I would say this first version is split into a few different statements of work, and the total is in the multi-million dollar range. So we don't expect to recognize much of the revenue that we recognize revenue as the stage of the study is complete.

But by the end of the first half of next year, we currently expect. Okay, that's great. And just one last follow-up. I appreciate all the color. Can you break out organic growth versus year-flow revenue in Q2?.

I don't know, Danelle, do you have that number handy?.

Yes, so in the second quarter, ERAflow was 2.1 million disposables in the neurosurgery navigation therapy line and about 350K in the capital equipment and software. Perfect. The 2.45. Yes. Thank you. Thank you.

Thank you. And our next question comes from Tom Steffen with Stifel. Please take your question.

Great. Hey, guys. Thanks for taking the questions. I guess first one on kind of the pivot. I think the reprioritization makes a lot of sense, notably given the FDA developments over the last couple at three to five months. But Joe, can you talk about, I guess, your level of confidence that ClearPoint will be able to scale in time to sort of ensure that the company is not any sort of bottleneck? And what are the key milestones in getting there? Yes.

Yes, thanks for the question, Tom. I'm very, very confident that that would not be an issue. I mean, even if you looked at our clinical support team and we have in place today, I mean, we have more than 30, maybe even 40, uh, trained clinical specialists at ClearPoint that are capable of doing sort of what I would call the basic navigation cases, sort of the starting point of what a clinical specialist learns at ClearPoint. You know, we've got, I'm staring at four in the office that have recently been hired and going through training right now. So, you know, we already have a considerable infrastructure that's in place to be able to cover these cases. You know, I mean, even if each one of these folks is covering two to three cases a week, let's say, of these complicated procedures, I mean, we're still talking about in the thousands in the second quarter as well. So it's really that choice that we've made. You know, in the event that we got a pre-order of products or we got a new partner starting phase three trials or continued progress and positive news relative to the FDA or other global approvals of these drugs, you know, any one of those things can continue to, you know, to help inform our decisions. And, you know, maybe we do, uh, hire a little bit quicker. You know, I think on the Aeroflow side, there's the opportunity to flip a switch and hire faster. There's there's quite a bit of potential positive clinical trial evidence surrounding the use of the Uroflow device that's in a number of clinical trials currently. If those trials turned out to be positive and there's more clinical and guideline type demand for what we do, that's something that it's not a difficult role to hire for as well. We're just, it's really a reflection of us trying to be thoughtful with our cash firms, provided we are purchasing capital equipment for the Cal right now, and make sure we show a meaningful reduction in operational cash expense in the second half of this year.

Got it. Super helpful. And then sort of a follow-up, but, you know, As we think about Unicure specifically, I think a lot of investors are sharpening their pencils more there when they're thinking about the ClearPoint story. So, Joe, sticking with kind of the theme of capacity, upon launch of AMT 130, I mean, what type of capacity? do you want ClearPoint to be at in terms of the level of demand it can support, kind of max capacity, if you will, from a patient standpoint? And then as a follow-up to that, you know, any help on just how to quantify or think about quantifying the revenue opportunity with AMT 130 for ClearPoint maybe in the first, you know, one to three years? Thanks.