Greetings, and welcome to ClearPoint Neuro Inc. Fourth Quarter and Full Year 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. 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, statements related to anticipated industry trends, the company’s plans, prospects and strategies, both preliminary and projected and management’s expectations, beliefs, estimates or projections regarding future results of operations. Actual results or trends could differ materially. The company undertakes no obligation to revise forward-looking statements for new information or future events. For more information, please refer to the company’s annual report on Form 10-K for the year ended December 31, 2020, and the company’s quarterly report on Form 10-Q for the quarter ended September 30, 2021, both of which have been filed with the Securities and Exchange Commission and the company’s annual report on Form 10-K for the year ended December 31, 2021, which the company intends to file with the Securities and Exchange Commission on or before March 31, 2022. All the company’s filings may be obtained from the SEC or the company’s website at www.clearpointneuro.com. I would now like to turn the conference over to your host, Joe Burnett, Chief Executive Officer.

Thank you, Peter, and thank you to all of the investors and analysts on today’s call for being a part of the ClearPoint vision and journey. Our mission and our priority is to help restore quality of life to patients and their families who are suffering from some of the most debilitating neurological disorders imaginable. In the fourth quarter and full year 2021, we have continued to make progress across our four pillars of growth and their strategy, including biologics and drug delivery, functional neurosurgery navigation, therapy and access products and in achieving global scale. While elective case volumes was once again impacted in 2021 by the Delta and Omicron variants, and supply chain disruptions created very meaningful distractions on a day-to-day basis, our team still achieved record revenue and case volume for the year. We expect that growth to continue here in 2022 as we keep our heads down and focus on the task at hand in a very unsettling geopolitical environment. I will now turn the call over to Danilo, our CFO, to review our financial performance in the quarter and full year 2021, after which I will add some detail to our four-pillar growth strategy. Danilo? Danilo D’Alessandro: Thank you, Joe, and thank you all for joining us today. Let me start by looking at the full year 2021 results. ClearPoint Neuro total revenues were $16.3 million for the year ended December 31, 2021, a 27% increase over revenue of $12.8 million in 2020. Our revenue is made up of three components: functional neurosurgery navigation and therapy; biologics and drug delivery; and capital equipment and software. Functional neurosurgery navigation revenue consists of commercial sales of disposable products and services related to cases utilizing the ClearPoint system to deliver medical device therapy to the proper target. This revenue…

Thanks, Danilo. 2021 was a successful year for our team across our four-pillar growth strategy headlined by record revenue of $16.3 million, record case volume of 929 cases supported new partnerships in both our medical device and drug delivery businesses and the successful hiring of talented new employees across product development, quality, legal and clinical support. Let’s break down that progress into our four growth pillars. First, our biologics and drug delivery team continued to add additional partners and services throughout 2021. We currently have approximately 40 individual pharma and academic partnerships across multiple indications, up from approximately 25 at the start of 2021, a pace of more than one new partner every month. As a reminder, it is common that each customer or a partner has a drug platform of their own, meaning they are not planning to use their drug or vector for only one indication. Our decision to expand into Europe has already helped us to win additional European-based pharma business and academic researchers. We plan to continue adding partners and still believe that an initial commercial gene therapy approval for neuro could take place in 2022, either in Europe or in the United States. In addition, our existing partners continue to progress through the clinical and regulatory pathway and plan to initiate new clinical trials in patients this calendar year. Our many talented new hires in 2021 continue to add new services and productivity to the team, and we expect our biologics and drug delivery business to continue to be our fastest-growing segment here in 2022. Second, our functional neurosurgery navigation business expanded as well, achieving record revenue and case volume in 2021 despite the headwinds created by the Delta and Omicron variants impacting elective procedures. Starting with our patients. We launched our first program designed…

Thank you. [Operator Instructions] Our first question is from Frank Takkinen with Lake Street Capital. Please go ahead.

Joe, Danilo, thanks for taking my questions. Congrats on the progress here. I wanted to start with one on – I wanted to start with one on the guidance. First, can you parse out expectations around growth in the different business lines? I think I heard you make a comment around you expect drug delivery to grow fastest. But any additional color there would be great. And then second, how should we think about the recognition of those revenues across the year, given we’re still seeing some Omicron impact in the first quarter of this year?

Sure, Frank. Thanks for the question. Yes. So what you said is correct and what you heard was correct is that we do expect biologics to be the fastest-growing portion of that. In fact, I would not be surprised if our biologics revenue for the year comes close to catching up to our functional neurosurgery revenue for the year. So, we do think that will be the fastest. The one other opportunity for growth that I would characterize in there is also on capital sales. So if you remember, we did about $1.4 million in capital sales the last two years. This has not been a large number for us, and I think there’s some pent-up demand for our technology. So, I do expect capital to grow as well this year pretty significantly on a percentage basis, maybe not so much on a dollar basis, given it’s a smaller base. But I do think that’s the case. So, I would expect biologics and functional neurosurgery to be pretty close this year and for capital to also grow quite a bit. And I’m sorry, Frank, what was the second question?

Just any color you can provide around seasonality or contribution on a quarterly basis throughout the year given the Omicron is still lingering in the first quarter?

That’s right. Yes. So yes, we did see an impact of Omicron here in January and February so far this year. So, I think it is going to be our disposable functional neurosurgery sales will be a little muted as a result of it. By no means was it nearly as catastrophic as April of 2020 when hospitals were completely shut down. But I would say they’re about 30% to 40% of our hospitals particularly in the Northeast, Minnesota, California, in some cases, where these elective procedures had been not necessarily canceled, but postponed until March and April. So similar to what we’ve seen, even with the Delta variants in the past, we saw a reduction in elective procedures here in January and February, but then there was a little bit of a catch-up that took place in the month after that. So, I expect that to continue here. So if you’re looking at just that segment of our business, yes, I’d say January and February is a little bit muted, but March, we expect to be back to normal based on the cases that we already have scheduled on the books here. As far as the rest of our business, many of those things are actually pretty choppy. So it’s hard to figure out month-to-month what the benefit is. For example, we could sell two or three capital systems in one quarter and then only one in the next. So that type of discrepancy makes capital certainly choppy like we’ve seen in the past. Similar on the biologics side, where enrollment in clinical trials and shipment of products is a little bit more predictable, the timing and delivery of services can change pretty significantly quarter-to-quarter. An example could be that a customer would pay us to develop a custom software or a custom cannula for them to use for their clinical trial. Based on when that project happens to end, that would trigger the recognition of certain revenue. That might happen in one quarter, but not in the next. So it can be a little choppy as well. But similar to the discussions we’ve had in the past, we expect to grow. And if I were to break down first half versus second half of the year, I do expect the second half of the year to be bigger for us, both on the revenue side of things as well as on the cash burn side of things. We should see an improvement by then.

Okay. That’s helpful. I wanted to ask one on SmartFrame Array. I don’t know if I caught exactly when your expectation is around the software clearance, but my assumption is second half 2022, given I think that’s when you guided to first procedures. Maybe one, can you confirm that? Two, can you just kind of walk us through how you think about the ramp of SmartFrame as you look out over the next couple of years and how you think that’s going to plug into the already established installed base today of MRI customers?

Sure. Yes, yes. So what you defined, I think, is exactly right. We did set it for the Array 1.1 preplanning module, which as we’ve kind of rolled out the first version of Array last year in a limited market release, the feedback was pretty consistent to say, yes, we like the product. We like to continue using it. Our reorder rate of our limited market release sites was very positive. I think it was 100%. But I think some of the feedback we got that do want some more traditional [indiscernible] be planning to embedded in software. Our team reprivatized a couple of projects complete submitted it to the FDA, we currently expect approval from the FDA sometime in the second quarter, which would set us up for sort of first clinical cases with that complete solution, as you mentioned, in the second half of next year. So, I think that’s kind of positive. We do also – we’ve also gained significant experience with the array in the cases and the sites that we’ve already worked with. So, we do think we’re going to accelerate – moving from a limited market release to a full market release very quickly after that clearance. And I think we’ve talked about it in the past, but just for everyone on the call, a limited market releases where we select a few certain sites that have either particular volumes or particular diversification in cases where they can use a particular technology in a number of different ways. And we isolate our sales to those sites so that we can collect feedback from an R&D standpoint so that we can work on clinical publications, white papers, marketing messaging, things like that. And then when we move to a full market release, it symbolizes more of a full launch where there’s no longer a governor on which sites we’re able to move to that our commercial team can actually place it at any site or even a new site that doesn’t use ClearPoint at all. So that’s the terminology that we use. And we do expect a full market release in the second half of this year, which would enable a much more rapid adoption of the technology as we move forward. I still believe a lot of our current existing customers will continue to use the traditional SmartFrame, but will also use array in some cases. However, the more exciting part of array is some new hospitals and opportunities that we’ll be able to be using ClearPoint for the very first time because it’s a simpler procedure and it’s designed for specific types of workflows.

Okay. That’s perfect. And then maybe I’ll just end with a question on the biologics side of things. I know it’s something we spoke about in the past is just thinking about how ClearPoint is positioned into FDA approval documentation. Any renewed thoughts there on how ClearPoint’s technology or cannulas will be written into the technology? And any chance it’s you must use ClearPoint type of verbiage in order to due to the infusion for the patient or anything of that nature?

Yes, I’d say all the conversations we’ve had with the FDA and with a number of our pharma and academic partners is very consistent with the last time we spoke, meaning that there’s two ways that ClearPoint is involved in these procedures. The first one is a navigation tool, which gets a particular drug and cannula to a target in the brain. This is one where there is most of the protocols that we see today and that we work with today, even if they’re using ClearPoint, the protocol states to use any commercially available navigation system. So clearly, the pharma partner would benefit from having a very broad label so that if there’s a country that we didn’t happen to be approved in, they would still be able to use a particular navigation tool. I think it remains to be seen how the FDA and other notified bodies treat that. There’s three things that could take place. The first is that the company would be granted a very broad label like that says, yes, even though you use ClearPoint navigation, we’re going to allow you to say that any commercial navigation is fine, because we would have reviewed any of those commercial navigation options in the past. So we know that there’s validation, verification that’s take place. It must be safe, if we said it’s okay. So go ahead and go that approach. That’s one extreme versus the other extreme is to say, look, I appreciate you’d like this very broad label, but every patient you treated happen to be using ClearPoint navigation. So until you show us data on an additional navigation tool, we’re going to go ahead and keep it isolated in a particular product. Now, we’re not really necessarily expecting that. However, there is an intermediary…

Perfect. I’ll stop there. Thanks for taking my questions.

Thanks, Frank.

Thank you. Our next question is from Marc Weissenberg with B. Riley Securities. Please go ahead.

Thank you. Good afternoon. Turning back to turning back to the 2022 revenue guidance. I’m wondering if you could talk about base case procedures that are assumptions that are embedded in there and where we stand in terms of kind of the patient backlog and how that evolved in the second half of the year thus far into 2022?

Yes, sure. It’s a great question, Marc. So you’re right to notice that in the past, we have given out some sort of patient procedure guidance. I think, last year, we said we’d do between 900 and 1,000. We have not done that yet this year. The reason for that is sort of twofold. Number one is that we – at least as far as January and February, we were still seeing some delays or postponements caused by Omicron. And until we really were super, super 100% confident that Omicron was behind us, we really didn’t want to put out a number there that we didn’t have as much control over, if you will. We wanted to make sure that things are back to normal here in March where – before we gave any sort of case guidance. So that’s one reason. The second reason is that our revenue performance of the company is becoming less and less correlated only to procedure volume. In the past, it was pretty much a one-to-one if we had a good quarter relative to cases, then we also had a good quarter relative to revenue and vice versa. That is really changing rapidly as biologics and drug delivery and even capital become larger and larger parts of components of our revenue. So we didn’t want to get people concerned either way, either positive or negative, based on just procedure volume when it’s no longer a one-to-one correlation. As I mentioned, we’re not going to support a ton of biologics cases this year, but it’s also going to be our fastest segment. So that – we don’t want to create any confusion there. So those are the two reasons we didn’t provide that procedure guidance. To go to your second question relative to backlog I already commented that about 30% to 40% of our hospitals had issues with Omicron not always the drug, but maybe staffing was more commonly in January and February. In March, we currently have what would be our highest volume case month ever. So again, it is exactly what you described, where this is sort of backlog from the end of December and the first two months of this year, where a lot of hospitals have said, look, we can’t do these procedures, but the main difference versus April of 2020 is they’re not just postponing patients indefinitely. They’re saying, "Hey, we can’t do them today, but come back in six weeks and we have the MRI suite and your surgical team available to you." So we’re starting to see a lot of that catch-up in March and April. And I do expect March to be probably one of our biggest case volume month if everything goes according to the schedule that we have in front of us today.

Got it. That’s very helpful. And as you guys get more visibility, hopefully, look forward to getting some more insight into that as the year evolves. In terms of the growth from new offerings in the year, how much can that contribute to? I think you’re guiding up 29% year-over-year at the midpoint. What kind of growth can new offerings provide this year?

So in general, I’d say there’s very little baked into that number from new offerings. Because of our historical approach where the moment we get FDA clearance for a new product, we generally enter a limited market release before a full market release. So where we – if you look at our investor presentation, I think we have seven or eight new technologies, that we expect first clinical use here in 2022. The broad assumption is to say, hey, those will be in a limited market release here in 2022 and then 2023 is when we start to see some of that sales benefit. The laser is a perfect example of that. Of the 29% midpoint growth that you just pointed out, pretty much zero of that is associated with the laser, even though we expect to be doing our first clinical cases this year. So hopefully, that kind of puts it in perspective. The one place where we will see growth from new product offerings is more on the services side of things. So as I mentioned in my statement, we’ve hired a number of people that have added new capabilities to the company. For example, our ability to do certain toxicology studies, our ability to act as study director for preclinical studies, these are capabilities we did not have in 2020. We hired these people in 2021, along with their expertise and their relationships. And then 2022 is when they’re going to become productive. So part of the biologics and drug delivery services growth that we expect to see here in 2022, part of that will be from new service offerings, but not necessarily new products. Hopefully, that makes sense.

It does. Very helpful. And then looking at OpEx, I think it was up kind of just over 60% year-over-year. Obviously, you talked about that was associated with a lot of increased head count and such. How should we think about that evolving in 2022? And then also, you did talk about kind of the cash position and you’ve got kind of four years of runway. But how do we think about the cash burn in 2022 and the cadence throughout the year?

Yes. So a couple of thoughts there. So number one, just going back in the history a little bit, when we did our significant capital raise back in February of 2021, part of our use of proceeds, estimates and documentation was that we were going to accelerate our product pipeline. So what that sort of meant to me and what I tried to communicate to others as well is to say, look, we had a great strategy in front of us, but it was going to take some time. So why don’t we use this capital to hire faster and get a very competent team in place now rather than slowly growing into it, so that we get the benefit of an additional 18 months to 24 months of productivity by hiring these people sooner. So really, that’s exactly what we did. And – the two primary places that those investments took place was in product development, where we’ve hired a number of people as well as signed partnerships with outside companies like Blackrock like D&K Engineering, REV1 Engineering, et cetera. So it allowed us to not only hire new people but hire expertise from other companies so that they could accelerate things. That’s one place where that added spend has come up. And the second part has been in our quality system, where we were operating as more of a start-up company. If you look back to 2019 and 2020, if we hired five or six additional quality people, just terrific folks here in 2021, which are really primarily all on staff in the second half of 2021. If you noticed there’s a much higher burn rate in the second half of last year than the first half. This is really an essential part of the business too, because…

Got it. That’s helpful. And then just a final one for me. If you could talk about kind of how your conversations with VAC have evolved over the second half of last year and into 2022 thus far and kind of the cadence for new system additions in 2022? Thank you.

Sure thing. Yes. So we continue to have VAC committees. And now that we’re global, we’re having them in each and every language, which is a fun experience for everybody. But I think, like I said before, there’s some pent-up demand for our technology where if you’re limiting access to the hospital and you’re counting ICU beds, it’s very rare that a hospital is going to prioritize bringing a new technology in. But it’s not to say that the opportunity didn’t remain. It was more of a timing issue. So I would say that there’s probably between 30 and 40 hospitals around the world right now that we are in active communication with. I do not expect us to place that many this year. But I would expect, if you look back in our history, I think the most that we’ve ever placed in a single year was maybe eight systems or eight hospitals. I expect this year to absolutely be a record number for placements for us as we kind of catch up for what we lost in 2020 and 2021. We haven’t run into too many issues with the VAC side of things with – one of the significant barriers we’re seeing more commonly today than value committees has been IT departments at hospitals with significant concerns about ransomware and access to patient data. So that’s been more challenging to overcome than sort of justifying our place in the value chain at a hospital. So hopefully, that gives you a little additional color.

It does. Very helpful. Appreciated. Thanks for taking the questions.

Sure, thanks Mark.

Thank you. Our next question is from Bjorn Ng with 10X Capital. Please go ahead.

Hey Joe, great quarter on meeting the – years, especially when lockdowns are in effect. I think it’s a testament to the strength and superiority of the ClearPoint platform. So I have two questions here. My first question is on the expected guidance of $22 million. Could you share with us the breakdown you are expecting from both the functional neurosurgery, as the biologics and drug delivery segment?

Yes, I can give you a little bit extra color there. I would expect both of those categories to fall somewhere in the $9 million to $10 million range for the year. So that could be anywhere from $18 million to $20 million just from those two segments and then the balance to be coming from capital sales, which we do expect to be higher than the $1.4 million we saw last year. If we can place four, six, eight, maybe even 10 systems, not to say that we get the PO for all of them this year, so we could at least get them placed, then I think capital could be another $2-plus million, give or take. So again, it’s nice to see that all of our segments, we expect growth from. But if you do the math on what I just said, it is showing that, again biologics and drug delivery is going to be growing faster. In our view today, than our traditional neurosurgery navigation platform.

Got you. So back in Q2 2021, you shared with us that our complete portfolio covering both the OR and MRI surgeries that our next phase of growth is getting to 100 sites each to doing 100 cases per year. So that puts us at about $100 million revenue run rate. So from the latest investor presentation, some product expected clinical use, have been shift on 2023 to 2025. So could you share some color if this $100 million revenue run rate would still be realistic and achievable?

Yes. I mean I think that by – everyone at this company is here because we want to help patients and we want to be part of a successful growth story So one day achieving that $100 million milestone, which again, back-of-the-envelope, is 100 centers that are doing 100 cases a year. That’s part of our strategic plan. The timing is something that’s much more difficult to predict. What I would say today is that if the only product we have is Neuro Navigation for DBS placements in an MRI suite, we would not get to that $100 million. That’s why we are expanding our portfolio. That’s why we’re adding our therapeutic products. That’s why we’re expanding into the operating room. That’s why we’re adding additional clinical services. That’s why we’re going globally. So we’re kind of moving out in a bunch of different directions. But the reality is that for us to achieve $100 million, we do need a number of these new products to hit the market and de-commercialized. And that would include some biologics gene therapies being approved. That would include some clinical and commercial use of brain computer interfaces. But the good news is, is that we don’t need to reach 100 procedures from any one indication. We just need a hospital to do 100 procedures, including biopsy, laser ablation, DBS, BCI, biologics and drug delivery, aspiration, you name it. So we need to fill out the rest of our portfolio, and we need to make our procedures more efficient like some of the access technologies like drills and pumps and things like that will provide for us. So I would not read anything into the change in the slide where we sort of changed the format a little bit to talk about how some projects are now going to do first clinical use in 2022 and then some will be between 2023 and 2025. The rationale for that is to say, look, based on our budget and our current R&D schedules, we have line of sight and predictability to everything in 2022. We also recognize that things change, decisions change, priorities change. So we have another bucket of things that we’re working on. And based on new opportunities that come our way or reprioritization of some of those opportunities, some of those other ones might be accelerated. Some of those other ones might be put on a lower priority. So just kind of buckets the time a little bit differently. But it’s not to say that any of these primary projects have failed in any meaningful way. It’s more of us just saying, look, as we try to get to $100 million of revenue and 100 sites doing 100 cases, which are the technologies that are going to help us get there first? And let’s make sure we work on those and get them done before moving on to some of these lower priority projects.

Great. That’s very helpful. Thanks a lot Joe. So that’s all I have. I just want to say that I think your amazing CEO, the way that you have brought ClearPoint over the past three years. I have no doubt that ClearPoint will be the standard go-to option for new surgeries in the future. And as always, it’s a privilege to be your shareholder, and we are supporting you all the way. Thank you for all your hard work.

I appreciate it. Thanks so much.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would now like to turn the call back to Joe Burnett for closing remarks.

All right. Thanks, Peter. Once again, thank you to everyone interested in being a part of our team’s journey here at ClearPoint. We recognize the challenging global environment that we are all forced to live in today. We assure you that we are going to help patients around the world as best as we possibly can by keeping our heads down, staying focused and executing against our strategy to develop products that truly improve the quality of life for our patients and for their family. Good night, everyone.

Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.