NeurAxis, Inc. (NRXS) Earnings Call Transcript & Summary

Good morning, and thank you for joining us for the iAccess Alpha Virtual Best Ideas Fall Investment Conference. IAccess Alpha hosts 4 virtual investor conferences annually focused on small and microcap public companies. Many of the companies that participate in our events are introduced to us through recommendations from investors and industry professionals. We'd like to give a special thanks to all of the investors who have continued to recommend ideas and participate in our conferences. Your involvement is a critical part of what makes these events possible, and we sincerely appreciate your continued support. Our next conference will be the iAccess Alpha Virtual Best Ideas Winter Investment Conference taking place on December 8 and 9, 2026. Thank you again for joining us. We hope you find today's presentations informative. Now let's begin with our first presenting company, Neur, Inc. [Operator Instructions] I'd now like to turn the floor over to today's host, Brian Carrico, President and Chief Executive Officer of NeurAxis, Inc. Please go ahead.

Thank you. My name is Brian Carrico, CEO of NeurAxis. I appreciate everyone joining today. As the host mentioned, we are NeurAxis. We've been public since August of 2023, so just over 3 years, and I look forward to presenting today for about 20 minutes and opening it up for questions for the last 10 minutes. So who are we? So for those of you who are new, and I hope many on the call are new, we are a first-to-market growth stage med tech company. We're focused on neuromodulation therapies for chronic and debilitating conditions in GI, specifically from disorders in the gut-brain interaction in pediatrics and adults. From a corporate standpoint, we secured a Category I CPT code for the PENFS technology. We obtained significant expanded commercial payer coverage, and we have the only FDA-approved or FDA-cleared treatment recommended in the academic society guidelines. For those who invest in med tech, you understand and likely understand that in order to scale a medical technology, you need a Category I CPT code, which was awarded just about 1.5 years ago and took effect in January of 2026. So that is the foundation of this company. We've built this company on discipline and execution with a strong foundation in evidence. Our evidence is extremely strong at this point, which is why we have the insurance policy coverage we do and why we were awarded the Category I CPT code. We now have over 100 million covered lives. Our first half '25 revenue was $1.8 million. 2026 was almost double that, $3.5 million. Gross margins went from 84% in the first half of '25 to 86% in the first half of 2026. From a pipeline standpoint, we are currently focused on what we have in hand, which is the pediatric and adult version of functional abdominal pain and IBS and functional dyspepsia and nausea. We're highly focused in the pediatric space today because that's where our insurance policy coverage is. And as we announced on our last earnings call, we are expanding into the VA due to an FSS contract. So from an adult standpoint, we are not in the private side. We're working through an RCT, a multisite RCT. That will be 6 centers, Cleveland Clinic, IU, Hoag, Stanford, Louisville, Marshall are the 6 centers that are doing the adult RCT. So the focus is primarily in the pediatric side where we have significant insurance policy coverage and in the adult section of the VA, where we have an FSS contract, we're just entering that space today. From a total available market -- serviceable available market, we have got about a $22 billion serviceable available market. That includes about almost 2/3 of that is in the adult space, which, as I mentioned, is primarily in the research stage, but about $8 billion of that is in the pediatric opportunity, which we'll highlight today from a research and execution commercialization standpoint. So what are we treating today? So first of all, DGBIs is what we're treating, and this today is a problem with an unmet need. There are no FDA-approved therapies for children or adults with functional dyspepsia outside of our technology and only one peripherally acting drug approved for pediatric IBS, which as a general rule, doesn't compete with our technology. These disorders negatively affect impact quality of life and the ability to function. This means kids going to school, playing sports, social activities, et cetera. There is essentially no data to support the use of the most prescribed drugs. In addition to that, most of these have serious side effects and a growing number of families are seeking non-pharmacologic alternatives for children. So what's the technology look like? Well, this is our current device today. We are in the process of redesigning the device. We expect that out in early 2027, it will look more like an Apple product. But from a gross margin standpoint, this device you are looking at here is $1,200. Each patient gets 4 devices over 4 weeks. So each device runs for 5 days, the patient throws it away. The patient comes back 2 days later and get a second device. And that process continues for 4 weeks, and that's where the 4 devices comes in. Each one is $1,200, so that's $4,800 to the company when this is approved by insurance. So why have we been so successful? Well, for starters, the foundation of this company has been research. We have 21 technology and NeurAxis-related studies. We've done 10 different types of research, and we've done all investigator-initiated research. We've run very lean. We've been extremely disciplined. We've executed. We've done exactly what we said we'd do sooner than we said we'd do it. And at this point, with these 21 studies, all investigator-initiated research at these 13 children's hospital sites with 10 different types of studies, that research has allowed us to gain significant insurance policy coverage with significant more insurance policy coverage expected in the next 6 to 9 months. We've said for years that strong data equals strong policy coverage and reimbursement equals strong revenue growth, and we're starting to see that across the board throughout the country. So how does the technology work? Well, this technology gives us through needles. This is not a transcutaneous device or transmagnetic device. This is a device that has 4 needles. This device breaks the skin around the [indiscernible]. We target cranial nerves V, VII, IX and X, the vagus nerve. This gives us direct access to the central nervous system through these peripheral cranial nerves. Then we're stimulating a part of the brain called the amygdala, and that allows us to induce changes in the brain pathway and connectivity long term. I mentioned earlier that data does not support the standard pharmacotherapy. So for 50 years, these children show up and they get amitriptyline, SSRIs, TCAs. You can see here, these drugs, first of all, don't have data. They did not beat placebo. None of these drugs will beat placebo. They cause an increased risk of suicidal ideation, mood changes, weight gain, long-term risk of dementia and much more. That's why they have FDA black box labels. This is why we have such strong support from the academic societies, both pediatric and adult. This is the growing body of clinical evidence. We've talked about this a little bit. But ultimately, we want to look at the fact that we had a landmark RCT to begin to kick this off in 2017, and that allowed us in 2019 to get the FDA indication, our first indication. And you can see here the improvement of global symptoms. So pain is important, but the improvement in global symptoms is critical. And this study, this RCT was published in the Lancet. Another slide here, number needed to treat. When you look at drugs, IBS drugs in adults, the number needed to treat is the number of patients that need to be treated for one patient to get the targeted improvement of at least or greater than 30%. The IB-Stim number needed to treat is 3. IBS drugs in adults, the number needed to treat ranges from 6 to 14. So you can see the superiority here in the data, which, again, why we have such strong support from physicians, families, insurance companies, et cetera. Functional disability scores. In order to move a patient from moderate disability to minimal disability requires 1.5 point. We moved patients 2 full points or 4 levels, which is pretty remarkable in the randomized controlled trial. We did the largest pediatric registry in children with DGBIs. This was 300 patients at 7 centers throughout the country. 61% of these patients have failed at least 4 medications prior to treatment. These were real-world evidence. We took all comers. Unlike pharmaceutical trials and most trials that are sponsored where they have significant inclusion/exclusion criteria, we took all comers, no exclusion criteria, and this showed sustained efficacy at 6 to 12 months. We went head-to-head with medications at Cincinnati Children's, where we were superior. So let's talk more about now that we've talked a little bit about the research and we start to see the foundation and why this has been so successful and why we expect additional insurance coverage in the coming months. The go-to-market strategy. We've got almost 30 medical policy coverage plans now. We have over 100 million covered lives. And the Category I CPT code that took effect January 1 has been effective for 2 reasons. Number one, it streamlines billing. It cements the technology into health care. It brings RVUs. It brings 1.5 RVUs to the physician. And that if they choose to bill an additional E&M with that, those are additional RVUs. But the RVUs of 1.5 to place this are very good and physicians have been very pleased with this. But ultimately, this brings credibility and it brings the technology into mainstream medicine. IP portfolio of 13 issued patents, 9 pending patents run through 2039. Medical Advisory Board, 6 of the leading pediatric gastroenterologists from around the country in Boston, Cincinnati, UNC, Yale and Nationwide in Columbus. Again, we have strong academic society support from the Pediatric Gastroenterology Academic Society, all 3 adult academic societies and the American Academy of Pediatrics, who, by the way, cosponsored our Category I CPT code application. So our management team that's been here really -- most of this team has been here since the beginning, except for our Chief Financial Officer, who joined us almost 3 years ago. Our Board of Directors, Beth Keyser, who is the President at Anthem; Mitch Watkins, who's got several commercial exits in med tech; Dr. Gil Aharon, who has his PhD. Dr. Aharon is -- has been very successful in public med tech companies. So to recap this, right now, the key investment highlights are very clear. We have an extremely large serviceable available market. We're first to market with an FDA de novo clearance first to market. Category I CPT code, which is extremely difficult to gain, to get, but it's critical for success to mass scale a technology. When you're talking about $50 million, $100 million, $200 million in revenue expectation, this Category I code is critical. We have major insurance payer coverage momentum. As I mentioned, over 100 million covered lives where we sit today. We had the highest-grade evidence via the guidelines. We have about 1,000 published patients at this point, a seasoned management team. We have a clear path to profitability. We've been extremely disciplined with capital. And when you look at where we are today, the next steps are crystal clear. Number one, we have -- because we have complete buy-in from a clinical standpoint throughout the country, the next steps are, number one, finalize the remaining payers in the coming months and year from a commercial policy standpoint; and number two, from an execution standpoint, I've talked a little bit in the earnings calls about expanding the sales force in parallel to increased insurance coverage. There will be more to come on that this fall, but we are aggressively expanding the commercial force, both from a sales rep standpoint, a clinical rep standpoint and a sales leadership standpoint. And we'll make those announcements as we can in the coming months. So those are, without question, the 2 priorities. There's absolutely no reason those things don't continue to happen in the coming months, and we start to see exponential revenue growth throughout the rest of 2026, but really in 2027. The capital structure where we sit today in the NYSE American, the symbol NRXS, the share price even yesterday, I believe it was $5.75, $5.74 on Friday. We have 13.6 million shares outstanding. We have 1 million warrants at $2.38. We have 2 million RSUs and the Series B preferred 3.7 million shares, fully diluted $20.4 million. Cash position is about $4 million with no long-term debt. And with that, I am happy to open this up to questions.

So the first question that comes, what commercial payers do you have? Well, great question. So the biggest payer we have is Anthem. It's around 40 million covered lives. They have a great policy. We also have around 11, 12, 13 Blue Cross Blue Shield plans like CareFirst in D.C., Virginia, Maryland, Boston or Massachusetts Blue Cross Blue Shield. There are multiple Blue Cross plans throughout the country. And then we have Medicaid covers this as a general rule through a program called EPSDT, which is Early Periodic Screening Diagnosis and Treatment. And the Medicaid reimbursement is extremely important. About 20% to 25% of the patients in the pediatric GI department are seen with this condition, and therefore, you need Medicaid reimbursement. So as long as the CPT code is on the fee schedule, which is just a matter of the state loading the code on the fee schedule, which right now is between 25 and 30 states of the 50 have the Medicaid fee schedule loaded, then EPSDT covers this for Medicaid patients. So commercial payers, Anthem, 11 or 12 or 13 Blue Cross plans, big Blue Cross plans, Blue Cross Michigan, Blue Cross Florida, as I mentioned, CareFirst, Vermont, we have a lot of Blue Cross plans. And then there are a bunch of smaller plans we have throughout the country. We do have Molina, which is roughly 5 million covered lives that's a Medicaid -- managed Medicaid plan. And so that -- those are the covered lives. Another question, how significant are the Medicaid reimbursement delays to near-term growth? Well, I don't know that we really have any Medicaid reimbursement delays. Like I said, 25 to 30 states right now are covering this through EPSDT under medical necessity. On occasion, you'll get a state that says medical necessity is not is not met. That's pretty rare at this point because these are children because they don't really have any other options. So long story short, Medicaid reimbursement, the real delay are in the 25 or so states that don't have this loaded on the fee schedule, and we're working with children's hospitals to put those requests in to ensure that, that happens. I can also announce today, I don't think this is material, but it's extremely important. We have a Vice President of Market Access and Reimbursement and Provider Solutions, who is now simply going to be in charge of billing, coding and provider solutions, whereas we just did a national search, an exhaustive search and found who I believe is the most qualified, most aggressive, most successful Vice President of Market Access available in the United States, and we hired her and she began last Tuesday, and she's going to help us on our path to gain the remaining insurance policy coverages along with the additional -- the additional state Medicaid fee schedules and also going back to some of our earlier policies that have some type of restrictions such as you need to fail a couple of medications before you use the technology. And we're going to go back and improve those, especially now that we are a recommended treatment in the academic society guidelines. So when you look across the board at what we have, every CEO is going to tell you how great they are, but I look at third-party validation. Every academic society, all 5 academic societies, pediatric and adult are strong supportive here. We have over 20 investigator-initiated research trials. We're in the academic society guidelines as a recommended treatment. We have the highest-grade evidence, 1 of 4 treatments that have the highest-grade evidence in the academic society guidelines. Anthem is covering this. We have over 100 million covered lives. The technology has -- just gained across the board has the credibility necessary to grow at mass scale. Another question that came in, how are you balancing growth investment with cash preservation and potential dilution? Well, we've got $4 million in cash. We've been burning about $1 million per quarter. That's before we invest in the commercial leadership, commercial salespeople, clinical salespeople. It's also before we talk about any additional insurance policy coverage. We are not recognizing even a fraction of the insurance policy coverage we have because the insurance policy coverage we have is so spread out. So in most children's hospitals, we only have maybe 20% or 25% policy coverage. There are a handful of payers that we're doing very well with that I believe we're going to see policy coverage within the coming months, 3 to 6 months. And with those payers brings you take children's hospitals to 50%, 60%, 70%, 80% policy coverage, and that allows these children's hospitals to treat across the board. And they don't feel like they have to look at patients' charts. They don't -- they feel like they can offer this as a general rule to all patients. So growth investment with 1 key payer or 2 key payers, it takes us from a $1 million burn to potentially to profitability. We're getting closer. We're not going to put a date on that yet because we don't control when the payers announce policy coverage. And of course, as you would understand, we cannot announce policy coverage until the payer has publicly announced that. Next question, what is currently the biggest bottleneck to broader IB-Stim adoption? This is crystal clear. It's insurance policy coverage. We need to gain the remaining payers, and we're in the process of doing that. I see no issue right now with gaining those and then simultaneously expanding the commercial sales force. The next question we have is from -- well, I say it's from -- can you give us some details about your sales force? How many people, what their quotas are? I'm just going to say that we have -- we went from 3 W-2s to 7 W-2s. And I think by the end of the year, we'll have near 15 W-2s. And I think by the end of next year, we'll have 30 W-2s. And then in addition to that, we just hired 10 to 12 1099 reps, which is in the VA for the adult on the FSS contract. That's generally how those -- generally how that's done. What are the dividend rights of the Series B preferred holders? Great question. They have an 8.5% coupon, and that ends on December 31, 2026. So that's almost up, and I suspect those holders will convert to common. What are the biggest drivers of revenue growth from here? Crystal clear. Look, we have -- the buy-in is there and has been for years across the board at all 260 children's hospitals. The patients are on a 2- to 3-month wait time right now. So it's not like we need to go find patients. We're in a situation where we need to gain the additional insurance policy coverage. The good news is the RVUs for the physicians are really good. The reimbursement for the children's hospitals is outstanding. We are within a month or so of being able to see exact numbers across the board of what the reimbursement has been. We've got an anecdotal feedback which is excellent. And we'll be able to put a pro forma together to show the financial stakeholders so that these children's hospitals can employ more physicians' assistants and physicians and open up more slots to treat more patients with IB-Stim. This is a very profitable procedure for the children's hospital, and we expect this to do very well. But from a driver standpoint, gain the rest of the insurance policy coverage, expand the commercial sales force and then from an analytical standpoint, from a sophistication standpoint, make sure that the CFO and the financial stakeholders understand the financial upside. And I can assure you that, that will move open spots pretty quickly. Do you have enough capital to fund the growth opportunity? Well, we've got an ATM that we've been extremely strategic. I think the last money we raised was $8 or $8.50. We raised money as we need it. We have no concerns about raising capital if it's needed. But as I mentioned earlier, we have $4 million in cash. We're burning -- our latest quarter, few quarters was $1 million per quarter. Yes, we're funded. One would surmise that we could potentially hit the ATM. But 1 or 2 of these payers I'm talking about as they come through, this is -- you're talking about accounts that have had this approved and been utilizing this for years, and they're trying to open a mass program, but they haven't been able to because they're only at 20% or 25% or 35% coverage of their patients, and they can't offer this across the board. So these new policies flip that opportunity. Next question, how should we think about gross margins as the business scales? Well, if we gave away no devices and we had no patient assistance program, we had no research devices, our gross margin is somewhere around 92%, and we're at 86%. So I think that we start to flirt with 90%. I'm not sure we get over 90%, but I think we flirt with 90% because you always have some patients that have patient assistance program because they're not covered, you always have some humanitarian devices. You always have research devices, especially considering the size of the RCT that we're doing in the adult side. The RCT in the adult side is going to be a landmark size. You're talking 300 to 400 patients at 4 devices each. It's not a lot of money, especially considering we're not sponsoring it. But to get gross margins over 90% is probably asking a lot. But look, we'll take high 80s. Next question, does the patient need recurring treatments? Or is it once and done? Well, when I say recurring, it's 4 weeks and then the patient is generally done. We don't -- as a general rule, they don't need a retreatment. We do hear of patients that are severe and chronic that need another round of 4 at 9 months or 12 months or 15 months. But we've got 3 good study -- at least 3 good studies now at this point showing good results at 12 months. So that's not common. So from a recurring revenue, there's no recurring revenue. It's 1 patient, 4 devices, $4,800 to the company when insurance approves it. What milestones should investors watch to gauge traction in the VA channel? Well, I think in Q1, we'll start to talk about this. How many -- I think it's straightforward. How many centers are ordering? And what's the average revenue per quarter per center? Are we driving roughly 200 VA hospitals? I think 180, but then there are a bunch of community care centers. So are we growing number of VAs and are we growing revenue within each VA? And we're starting -- we just launched those new 10 to 12 1099s, and we'll see how that goes in the coming 3 to 6 months. But I think that's pretty straightforward. And how much revenue do you need to reach cash flow breakeven? I believe our CFO mentioned on the last -- one of our last investor calls, somewhere in the $13 million range right now, $13 million, $14 million. So we're on pace for $7 million or $8 million this year. And that's with no new insurance policy coverage, that's with no growth in Q3 or Q4. So it's not even -- let's just call it double. And if you talk to our sales team or anyone on the commercial side and you said, what do you think you could do today if you had 2 or 3 more policies, what's the demand? And I think you're in the -- with our eyes closed, it's they would tell you 10x. The demand is incredible. The number of patients coming to patient assistance are incredible. This is just a matter of being successful in these last handful of insurance policy coverages. Does your product help with IBS-C, D and mixed? It's more around the pain, the functional abdominal pain, functional dyspepsia and nausea. And do all patients need 4 devices always? Yes, yes. We always have 4 devices. That's the protocol. Yes, that's the protocol. And those are all the questions we have. It looks like we've got about 2 minutes left. If anyone has an additional question. If not, I would enjoy meeting you on a one-on-one for additional questions. Look, I think our stock -- every CEO will tell you the stock lower than it should be, and I think that's the case. And maybe it's in a good spot today, but for what we're expecting in the coming 3 to 6 months with additional insurance policy coverage, the increased commercial sales force, the increased commercial leadership and just the revenue that is -- should, without a doubt, come from these expanded commercial insurance lives. I believe we're going to see a very nice run in the next 15, 18 months. It looks like that's all the questions. So I appreciate it. Everyone, have a great conference, and I look forward to speaking with you.

Thank you. That concludes NeurAxis, Inc.'s presentation. You may now disconnect. Please consult the conference agenda for the next presenting company.