NeuroPace (NPCE): hires a top executive of $25 billion St. Jude Medical as its new CEO

M.Cap: $224 million | Debt: $71 million | Cash: $64 million | EV: $231 million | Revenue: $55 million | EV/Revenue: 4.2X

Volume: 94,439

Major shareholders: KCK Limited - 21.7% | Orbimed Advi. - 15.5% | Soleus Capital - 9.5% | Morgan Stanley - 9.1% | FMR - 4.7% | Millennium Manag. - 2.4% | Nantahala Capital - 1.6%.

Screen: New CEO appointment

I. RESEARCH

1. First and only commercially available brain-responsive platform

• RNS System is the only commercially available device recording continuous brain activity for remote and in-person patient monitoring.
• The company began the commercial rollout of our RNS System in early 2014.
• The RNS System is clinician-programmed to deliver precise therapy by monitoring brain activity, identifying unique abnormal patterns, and responding with subtle electrical pulses to prevent seizures.
• As of December 31, 2022, over 4,000 patients have received the company’s RNS System.

 2. For whom?

• The product is predominantly targeted for use in adult epilepsy patients, meaning patients who are 18 years of age or older, with drug-resistant focal epilepsy.
• Drug-resisting epilepsy
• Epilepsy is a chronic brain disorder causing sudden bursts of electrical energy, disrupting function and causing seizures.
• Antiepileptic drugs are the primary treatment, effectively controlling seizures for many.
• About one-third of patients remain drug-resistant due to incomplete seizure control or drug intolerance.
• Focal epilepsy
• Epilepsy is divided into focal and generalized categories.
• About 60% have focal epilepsy, with discharges in specific brain areas. The other 40% have generalized epilepsy, with widespread brain discharges.
• The company’s focus is on Focal epilepsy.

 3. Target

• The company sells the RNS System in the US directly to epileptologists and neurosurgeons who prescribe and implant devices in about 200 Level 4 CECs.
• CECs are specialized hospitals for epilepsy care. Level 3 CECs offer basic evaluations, simple surgeries, and VNS implantation. Level 4 CECs provide comprehensive care and complex surgeries.
• NAEC advises referring patients with uncontrolled seizures after 3 months with a primary care physician or 12 months with a general neurologist to Level 3/4 CECs.
• Today, US drug-resistant epilepsy patients often start care at physician offices or community hospitals, receiving Level 1/2 care from primary care physicians or neurologists. About 50,000 patients are annually referred to Level 4 CECs, with 48% (24,000) being adults with focal epilepsy.

 4. Competition

• Surgery
• Historically, removing brain tissue at the seizure source through resective or ablative surgery was preferred for drug-resistant focal epilepsy.
• Yet, this surgery holds risks, including neurological ones, and just around 50% become seizure-free within two years. Only about 20% of such patients have safe and effective foci for removal, coupled with willingness to undergo the procedure.
• Products
• Two other approved neuromodulation devices, Vagus Nerve Stimulation (VNS) and Deep Brain Stimulation (DBS), target the 80% of drug-resistant focal epilepsy patients not suitable for surgery.
• They stimulate for hours daily, causing side effects like memory issues, depression, sleep disruption, and vocal disturbances.
• The company’s claim about its advantage
• The company’s RNS System benefits are shown through four FDA-approved studies with around 600 patients and up to nine years of follow-up.
• Retrospective studies also support real-world outcomes.
• Initial clinical data indicates a median 44% reduction in seizures at one year, improving to 75% reduction at nine years, along with lasting improvements in quality of life and cognition.

5. Insurance coverage: The only neuromodulation system that is reimbursed

• Currently, RNS System is the sole epilepsy neuromodulation system with reimbursed in-person or remote brain activity reviews.
• By December 31, 2022, commercial payors covered 200+ million lives in the US. Medicare and Medicaid routinely cover RNS System implantation and care.
• The company believes that only under 1% couldn’t get RNS System implant due to coverage issues.

6. Potential further usage?

• The company believes that its RNS System may be effective in treating other brain disorders including depression, impulse control disorders, memory disorders, and post-traumatic stress disorder.

7. Financials

 II. WHY ARE WE FLAGGING THIS?

Track record of Joel Becker

 1. Viking North Ventures

• Most recently, he served as the President of Viking North Ventures, which specializes in working with medical technology and healthcare Companies, Boards and Investors to accelerate growth by providing advisory, leadership and strategy development services.

2. Top executive of St. Jude Medical, a $25 billion company

• At the time of his resignation, he served as President of Americas division.
• He was one among the top 16 executives of the company.
• In 2017, the company was acquired by Abbott for $25 billion
• Mr. Becker joined St. Jude Medical in 1993 as Senior Associate in Corporate Development.
• In 1999, he left the Company to join Myocor, Inc., a venture-backed heart failure company, as SVP. Mr. Becker returned to St. Jude Medical in 2002 where he held numerous leadership positions in both the Cardiovascular and Atrial Fibrillation divisions.
• He began serving as Vice President Program Management & Business Development for the Atrial Fibrillation Division from 2004 to February 2011.
• He then served as SVP-Marketing for the U.S. Division from February 2011 to October 2011. Mr. Becker was promoted in October 2011 to President, U.S. Division, which was expanded in January 2014 to become the Americas Division.