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| Now we expect this trend to continue, which spreads the recognition of revenue over a longer period of time, but is still providing the company with healthy gross margins and cash flow |
| Over the next six to nine months, we expect to submit multiple new hardware and software product improvements, which should enable full market release in the second half of 2024 as well as more substantial revenue traction |
| From a competitiveness of our system, I think we've gotten some very, very good early results and been able to highlight how our particular device performs in certain patient types and be able to document that performance and collect feedback on why certain parts of the software or certain parts of the laser design or flexibility of the capital and hardware itself, how those things provide a meaningful advantage for us in the near-term |
| Biologics and drug delivery revenue growth accelerated to 55% or $3.5 million in the third quarter, up from $2.2 million in 2022 |
| So, I feel very good about that as well |
| Our deepening partnerships with biologics and drug delivery companies, expansion of our navigation platform into the operating room and the full market release of our Prism Laser Therapy system can sustain top line growth in the years ahead, while the flattening of operational expenses scale in our newly certified Carlsbad manufacturing facility, an improvement to gross margins can create leverage and ensure revenue grows faster than expenses for at least the next couple of years |
| Our strong balance sheet with over $24 million in cash and equivalents, will continue to enable us to launch these key new products and execute on our strategic plan, while at the same time, reduce our operational cash burn |
| We are more excited for the company and its prospects than ever |
| As products get launched from the new site and revenue grows, we expect our gross margins to continue to improve |
| We've worked hard to get to the spot and are incredibly excited for the team, but also for the patients that we hope to treat with new devices and therapies in the very near future |
| So, in the past, we've talked about the laser market as ClearPoint Navigation having an inherent advantage because even if the laser catheter is placed in the operating room, the patient still has to be transported to the MRI suite because that's where the laser is turned on inside of the MRI to give you all of the crucial heat information or the thermometry information |
| Our third quarter results represent a shift of priority to cash flow improvement leading to $1.8 million operational burn, while still demonstrating double-digit growth overall and an acceleration to 55% growth in biologics and drug delivery |
| That investment or pivot is already yielding terrific results with growth of 55% in that segment and $3.5 million total revenue for the quarter |
| This is an exciting second-generation laser therapy system with many clear advantages compared to the currently available systems |
| The gross margin in Q3 improved to 57% compared to 53% in Q2, so we are once again moving in the right direction |
| While our installation experience has been limited, we have been able to win exclusive business from some early users who plan to use PRISM for all of their cases moving forward |
| This increase was fueled by a 109% increase in biologics and drug delivery service revenue as we expand our service offering to pharmaceutical customers |
| The last few years, we have a race to build a foundation, a team and a product portfolio that can prepare us to realize a total addressable market that could treat more than 1 million newly diagnosed patients each year and in doing so, create a $12 billion revenue opportunity for ClearPoint via our products, services and partnerships |
| The return on just our current team's effort and energy is much more beneficial with one hospital that can deliver 10 to 20 times the volume as that other one |
| But directionally, we expect further gross margin improvement in 2024 and 2025 |
| As we look to 2024, we will add a new revenue opportunity in our biologics business as we expect to achieve GLP readiness next year |
| This is an exciting time as we plan for new product and service launches across all four of our growth pillars |
| And finally, pillar number 4 of achieving global scale made significant progress as well |
| Two, operating leverage due to higher revenue |
| These preclinical services are arguably our newest product launch and are already delivering great early results |
| I think the addition, as I mentioned, of the capability to be able to do GLP studies on the biologics side, which significantly increases the revenue even for the same project, if it's a GLP one |
| The most important highlight or point of emphasis we want to make on the call today is our stated priority of flattening operational expenses and improving cash flow |
| So a long way of saying, I think we are making a couple of modest sacrifices right now, but -- we're doing that with the additional insight that we're very pleased with the development we've made with our products |
| So, the first is, I think the market is actually still a very interesting and potentially exciting market |
| So, the thought -- the thought or advantage we have at ClearPoint is to say, well, if you do it with ClearPoint, you can do the entire procedure in the MRI and you don't have to worry about transporting that patient, right? That was kind of an inherent advantage that we thought made a lot of sense |
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| Increased costs related to the transition to the new manufacturing facility also contributed to the decrease in gross margin |
| From a financial standpoint, the segment showed a significant decline of more than 20% |
| And I think we certainly responded to some questions we had in the past when our overall gross margin had dipped down to 53%, I think, in Q2 |
| As anticipated in our prior earnings call, our operational cash burn in the third quarter was meaningfully below the operational cash burn of the prior quarters |
| Capital equipment and software revenue, consisting of sales of ClearPoint reusable hardware and software and related services decreased 26% to $0.4 million in the quarter from $0.5 million for the same period in 2022 |
| Our operational cash burn in Q3 was $1.8 million, down 54% from the prior year third quarter |
| This revenue segment declined $0.5 million to $1.9 million for the third quarter |
| Our operational cash burn in the third quarter was reduced to only $1.8 million, the lowest quarterly operational cash burn since 2020 |
| So that's something that impacted our Q2 revenue |
| However, the vast majority of that decline are almost $400,000 in the quarter was the result of one development partner who is funding a brain-computer interface project in 2022 and had to pause the program in 2023 due to financial constraints |
| Yes, it's really a combination of a few things that have led us to go ahead and bring the guidance down slightly |
| While the strategy does slightly reduce our forecasted revenue in 2023, and to the range of $23 million to $25 million |
| So I would say we're -- we've been a little bit behind on the demand side this year, but it's been triggered more by this slower capital deployment process or new installations more so than individual accounts slowing down their usage or demand of the product |
| If I could start on the quarter and the softer revenues in functional neuro and now the lower 2023 |
| If this strategy can accelerate the install of more ClearPoint systems, then a delay in the revenue recognition still fits our model as the installation enables our disposables to be used and sold into the account |
| The decrease in gross margin was primarily due to an increase in biologics and drug delivery preclinical services, which to date have had a lower margin than the prior year as we launched new services and increase our presence in the space |
| In fact, it was the lowest quarterly operational cash burn since 2020 |
| So I think that realization has been a little newer to us |
| So what that means is that we would not have to supply a clinical specialist for every single procedure, which brings our overall cost down |
| The limited market release revenue for this year of 2023 that is built into our guidance is very minimal |
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