Neuraxis, INC Q1 FY2025 earnings call

Key Points - Brian Carrico highlighted the continued execution of commercialization strategies for IB-Stim and RED. The company has achieved three consecutive quarters of double-digit growth. - The Category I CPT code will become effective on January 1, 2026, and they are working towards securing remaining insurance policy coverage. - NASPGHAN's systematic review is expected to be published by the end of May, which is crucial for insurance coverage expansion. - RED, a rectal expulsion device, has FDA clearance and is in the soft launch phase with a positive response so far. ### Financial Details - Tim Henrichs discussed financial results, noting revenue growth, gross margin of 84.4% in Q1 2025 (down from 88.4% in Q4 2024 due to factors like higher discounted patient growth and manufacturing costs), operating expenses of $3.1 million (up 27% from Q1 2024 mainly due to a lawsuit settlement, but excluding the settlement, expenses were relatively flat), and cash on hand of $2 million as of March 31, 2025.

In the first quarter of 2025, NeurAxis reported revenue of $896,000, which is a 39% increase compared to the first quarter of 2024 ($647,000). Unit sales increased approximately 46% due to growth from patients with full insurance reimbursement coverage and the company's financial assistance program. For the IB-Stim segment, there was significant growth with 39% growth in Q1 2025. The RED product is in the soft launch phase, and further revenue expectations will be determined in the coming months.

Growth Catalysts - Management expects revenue growth to accelerate as they move towards cash flow breakeven. The receipt of the Category I CPT code and the upcoming NASPGHAN guidelines are key catalysts. - The company anticipates sales volume to continue growing with the increase in covered lives and the effective implementation of the Category I CPT code. - The soft launch of RED will provide more clarity on revenue expectations in the coming months.

Risks - Uncertainty in the timing of the NASPGHAN guidelines and subsequent insurance policy coverage from payers. - Legal settlement risk related to the past lawsuit, although the settlement has been made and payments are scheduled. - Market adoption challenges for RED in large adult GI practices due to committee and board approval processes taking time.

Q: When do you expect the guidelines and what's the timeline from receiving guidelines to strong orders?

A: The guidelines are expected to be published by the end of May. From there, orders are expected to increase based on policy coverage from those guidelines, with payers typically taking around 90 to 120 days to write policy coverage.

Q: Talk about operating expenses in near- and medium-term?

A: Excluding the legal settlement in Q1 2025, operating expenses were relatively flat compared to Q1 2024 while revenue grew. Near-term, operating expense dollars are likely to increase for sales and marketing to meet upcoming demand, but as a percentage of sales, operating expenses are expected to continue decreasing as top line and gross profit outpace expense increases.

Q: Color on RED's soft launch?

A: RED is in the soft launch phase, and the response has been stronger than expected. However, large adult GI practices have committees and boards that take time for approvals, but the response at conferences has been excellent.

Q: Color on legal settlement?

A: The company settled a lawsuit for $750,000, which will be paid in equal monthly installments from January 2026 to December 2026. This puts the legal matter behind them to avoid further legal risks and potential litigation costs in the future.