Greetings, and welcome to the ClearPoint Neuro, Inc. Fourth Quarter and Full Year 2023 Financial Results Conference Call. [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, the size of total addressable markets or the market opportunity for the company's products and services and management's expectations, beliefs, estimates or projections regarding future revenue, results of operations or the adequacy of cash and cash equivalent balances to support operations and meet future obligations.

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, 2022, and the company's quarterly report on Form 10-Q for the three months ended September 30, 2023, 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, 2023, which the company intends to file with the Securities and Exchange Commission on or before March 31, 2023.

All the company's filings may be obtained from the SEC or the company's website at www.clearpointneuro.com. It is now my pleasure to introduce to you Joe Burnett, Chief Executive Officer. Thank you, Joe. You may begin..

Thank you, Diego. And as always, thank you to all of the investors and analysts on today's call. Our mission and our priority are to help restore quality of life to patients and their families who suffer from some of the most debilitating neurological disorders imaginable. We are thrilled to have you here on this journey with us.

ClearPoint had an excellent fourth quarter of 2023 and is off to a strong early start here in 2024, both financially and in the execution against our four-pillar growth strategy, which includes biologics and drug delivery, functional neurosurgery navigation, therapy and access products and in achieving global scale.

We continue to expect growth in 2024 of approximately 25% to 35%, fueled by the continued expansion of preclinical services, the progression of our pharma partners through the global regulatory and clinical trial process as well as the introduction of numerous exciting clinical products to our new and existing hospital customers.

I will now turn the call over to Danilo, our CFO, to review our financial performance in the fourth quarter and full year 2023, after which I will add some additional detail on progress relative to our four pillar growth strategy here in 2024.

Danilo?.

biologics and drug delivery, functional neurosurgery navigation and therapy and capital equipment and software. Biologics and drug delivery revenue included sales of disposable products and services related to customer-sponsored preclinical and clinical trials utilizing our products.

Biologics and drug delivery revenue increased 49% to $13.6 million in 2023, up from $9.1 million in 2022. This increase was due to an expansion of our services on increasing commitments by our current partners and new pharmaceutical partners.

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 intended target. This revenue segment declined 7% to $8.5 million for the year 2023.

The decline in this segment was fully due to lower service revenue of $0.6 million as a result of pausing a co-development program with one of our brain computer interface partners in 2023 compared to 2022.

Capital equipment and software revenue consisting of sales of ClearPoint reusable hardware and software and related services was $1.8 million for the year 2023, a 21% decline compared to 2022. Gross margin for the full year 2023 was 57% compared to 66% in 2022.

This 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 in prior years as we launch new services and increase our presence in this space.

Increased costs related to the transition to the new manufacturing facility contributed as well to the decrease in gross margin compared to the prior year. Research and development costs were $11.7 million for the year 2023 compared to $10.9 million in 2022, an increase of $0.8 million or 7%.

The increase was due primarily to increases in personnel costs, including share-based compensation expense of $1.2 million due to growth in headcount, partially offset by a decrease of $0.6 million in research costs as a result of reprioritization of certain activities.

Sales and marketing expenses were $12.6 million for the year 2023 compared to $9.4 million in 2022, an increase of $3.2 million or 35%.

This increase was primarily due to increases in personnel costs, including share-based compensation expense of $3 million, resulting from increases in headcount in our clinical and marketing teams as we expand our commercial reach in preparation for multiple new product launches over the next 12 to 15 months.

This hiring reflects the learning curve required to train and educate on the expanding ClearPoint Neuro product portfolio, which will be targeting new physician customers and new surgical arenas within hospitals.

General and administrative expenses were $11.8 million for the year 2023 compared to $9.6 million in 2022, an increase of $2.1 million or 22%. This increase was due primarily to an increase in the allowance for credit losses of $1.4 million and the increased share-based compensation of $0.8 million.

Net interest income for the year 2023 was $0.4 million. I will now turn over to the fourth quarter 2023 results. Total revenues in Q4 were $6.8 million for the three months ended December 31, 2023, an increase of 32% over $5.2 million in the fourth quarter of 2022.

Biologics and drug delivery revenue increased 76% to $4.1 million in the fourth quarter of 2023 from $2.3 million in the same period in 2022. The increase was predominantly due to a 122% increase in biologics and drug delivery service revenue, partially offset by a slight decrease in product revenue.

Functional neurosurgery and therapy revenue decreased 11% to $2 million for the fourth quarter of 2023 from $2.3 million for the same period in 2022.

Capital equipment product and related service revenue increased 23% to $0.7 million for the fourth quarter of 2023 as compared with $0.6 million in the same period in 2022 due to an increase in the placement of ClearPoint capital and software.

Gross margin was 59% for the fourth quarter of 2023 compared to a gross margin of 64% for the same period in 2022.

The decrease in gross margin was due primarily to an increase in biologics and drug delivery preclinical services, which to date have had a lower margin than in prior years as we expand into new services, and increase our presence in this space.

Operating expenses for the fourth quarter of 2023 were $8.7 million compared to $7.8 million for the fourth quarter of 2022. The increase was mainly driven by the increase in headcount across the organization and share-based compensation as well as an increase in the allowance for credit losses.

With respect to our cash position at the end of December 2023, we held cash, cash equivalents and short-term investment balances of $23.1 million. Our cash burn in Q4 was $1.2 million, down 60% from the prior year fourth quarter, and the lowest quarterly cash burn since 2020.

We maintained our focus on appropriate resource allocation and cash management and remain committed to effectively and carefully managing our operating expenses. As anticipated in our prior earnings call, our operational cash burn in the second half of 2023 at $3 million was meaningfully below the operational cash burn of the first half of the year.

We expect to continue to have a very disciplined approach on managing our expenses. We continue to believe that our current headcount is sufficient to support our business for the next 12 months. On March 4, 2024, we also completed an equity offering with gross proceeds of $15 million, which further strengthened our balance sheet.

The proceeds will allow us to retire fully our outstanding convertible debt in the next 10 months. I'd like now to turn the call back to Joe..

Thanks, Danilo. As you can see, we ended the year with a strong fourth quarter, and that momentum is now carrying over into 2024. Let's break that progress and that momentum down into our four growth pillars.

First, our biologics and drug delivery team has made significant progress in building our capabilities and winning contracts with our gene and cell therapy partners. This allows us to perform these new services already in 2024 to secure this year's plan and to build next year's funnel.

The fourth quarter was our best quarter yet for the segment, which grew 76% to $4.1 million.

We expect this business to continue to be a significant driver for us this year and should contribute more than 50% of the total ClearPoint revenue in 2024 as we add additional partners, perform more advanced services and see our partners progress through the development and regulatory process here in the United States and globally.

We are thrilled by the reinvigoration of the capital markets in biotech that have seen multiple ClearPoint partners successfully raised capital in just the last couple of months, ensuring their continued investment and initiation of first-in-human clinical trials throughout 2024.

Next, our functional neurosurgery navigation pillar has also made significant progress and is already yielding early results here in the first quarter. Since the beginning of Q4 2023, we have executed on multiple FDA submissions and clearances for new products.

Our latest ClearPoint MRI Navigation software, version 2.2, is now released into limited market release and has been used in a number of successful early to late cases.

This version now has our Maestro Brain Model available within the Navigation software itself so that it may be used during a live surgery to help target specific structures in the brain.

We were also proud to see our first Maestro validation paper published in the peer-reviewed journal NeuroImage, demonstrating very clear advantages of the Maestro software compared to manual tracing and to FreeSurfer.

A priority for ClearPoint Neuro is not only offering innovative and effective products but to demonstrate the clinicians how and why these products outperform what is currently available through thoughtful and rigorous validation.

We were also thrilled to have received FDA clearance for another new product, this time for the SmartFrame operating room or SmartFrame OR, which is a pivotal product for ClearPoint Neuro as we expand our presence beyond the MRI suite and into the operating room.

As a reminder, more than 95% of all stereotactic procedures take place in the operating room today. And these are procedures that we have not had access to in the past. But now with SmartFrame OR, we have the ability to penetrate this new and fragmented market that is in need of a better solution.

We have now shipped our first SmartFrame OR products to customers out of the new Carlsbad facility and expect to give a further update on our initial experience in clinical cases with SmartFrame OR when we get together again for our Q1 earnings call.

Awareness around the new clinical products has driven significant momentum in our navigation business here in the first quarter. Now if you look back at our history over the past few years, we have activated approximately six new clinical hospital customers each year.

Now to put things in perspective, we have already activated six new clinical customers in just the first two months of 2024, so pretty much an entire year of activations in just a couple of months.

I would also report that our funnel of potential customers is the largest that it has ever been, which is only additive to new product introductions like Maestro, like SmartFrame OR and like PRISM, which can also be launched into existing customers and to drive same-store sales.

As I mentioned on our previous call, some hospitals are opting for lease or rental programs that somewhat slows down our recognition of revenue. However, that is still just a portion of our placement strategy, and we fully expect our capital revenue to grow significantly here in 2024.

For our third pillar of therapy and access products, our PRISM Laser Therapy business continues to grow, highlighted by another ClearPoint validation paper that was just announced by us yesterday.

This paper, peer reviewed and published in the Journal of Neurosurgery, shows the step-by-step preclinical validation of our non-cooled PRISM therapy system, comparing results not only to tissue temperature measurements but to actual histology.

This demonstrates the confidence we have in this product, and I believe this validation paper will be incredibly well received by the neurosurgical community as it is arguably the most robust preclinical analysis performed and published to date on any laser system.

We continue to make progress in our limited market release, having now activated our first General Electric MRI suite customer.

We anticipate clearance of an important operating room accessory kit here in the first half of 2024 that will allow our laser system to be compatible with other navigation systems used in the operating room and not only ClearPoint Navigation. We also expect submission of data for our 1.5-tesla clearance later this year.

However, we have more than enough potential 3-tesla customers to meet our 2024 expectations. So the 1.5 tesla is not slowing us down right now. This will be a continued growth driver for us going into 2025.

We also recently achieved FDA clearance for our Array version 1.2 software, which includes a unique parallel trajectory feature designed specifically to allow neuro-oncology surgeons the ability to perform a biopsy down one channel and a laser ablation down a different channel to reduce signal dropout in the MRI scanning.

This software has now been used successfully at multiple centers and with excellent results. Pairing our navigation with our therapy is one key advantage, and we have now successfully closed our very first purchase order that included both Navigation and PRISM laser therapy at the same new hospital.

All of the advantages of not requiring cooling, fast ablation times, lower energy requirements and faster refresh rates, combined with these new and innovative products like Array 1.2 software and these operating room accessories, we believe will make PRISM the clear choice for hospitals interested in expanding their LITT business.

We also learned that reimbursement to perform these laser procedures increased more than 30% this year, rewarding hospitals for moving to this more minimally invasive approach, which benefits the patients with shorter hospital stays and benefits the hospitals with increased throughput.

And last but not least, our fourth pillar of achieving global scale has made great strides as well.

We recently received our first product approval under the new European MDR program, which is a significant milestone and demonstrates to our biotech and pharma partners that we are willing and able to provide our products beyond the United States as they have requested.

We are now shipping products globally out of our new Carlsbad facility and have completely exited our historic facility in Irvine, eliminating those redundant costs that impacted gross margin in 2023. We have also meaningfully reduced our operational cash burn, and in the last six months of 2023, only used $3.0 million of cash in operations.

We continue to expect improved cash performance for the full year 2024 as we believe we can grow into these 2024 revenue targets without any meaningful increase in headcount this year as headcount is by far our largest expense.

This improved cash performance enabled us to do a small and targeted equity raise of approximately $15 million just a couple of weeks ago.

These proceeds put us in a position to retire our only outstanding debt, which comes due in January of 2025, and also to bolster our balance sheet, making us more attractive to pharma companies interested in long-term partnerships with ClearPoint.

These proceeds are, of course, additive to the $23.1 million that was already on the balance sheet at the end of 2023. We continue to anticipate revenue in 2024 to be in the range of $28 million to $32 million or approximately 25% to 35% growth for the year.

We also expect that full year 2024 revenue will show meaningful growth in all three product segments. I would now like to open the call to any questions..

[Operator Instructions] Our first question comes from Frank Takkinen with Lake Street Capital Markets. Please state your question..

Great. Joe, Danilo, congrats on the progress. Appreciate you taking the questions. I wanted to start with expectations around Q1. Obviously, we're a good portion of the way through Q1. It sounds like you're up to really strong start to the year with new product clearances as well as the six new hospital customers you announced.

So maybe if you can kind of continue down that thought process. And how should we be thinking about Q1. I don't know if it's easiest to talk about it from a seasonality perspective sequentially versus Q1, but any insight you can help us out with Q1 would be helpful..

Sure. Thanks for the compliment and the question, Frank. Yes, again, our business can be a little bit choppy in that if we have a large capital deal or a large service contract that -- where we get sort of paid and recognized revenue on the completion of that install or the completion of that product.

If that happens March 31 versus April 1, it can make the quarter look very different. What I can tell you right now as we wrap up the last few weeks of the quarter is that we're absolutely on track for another record quarter. So if you think about Q4, where we did about $6.8 million in total revenue, we fully expect Q1 of this year to be above that.

And that's probably the best sort of hint we can give you at this point based on closing the last three weeks of the quarter here..

Got it. Okay. That's helpful. And then maybe on SmartFrame OR, maybe bring us into how you're thinking about that launch process. I think I heard correctly a limited launch to start.

And then I assume that flips to a full market release potentially later this year, but maybe think about -- help us understand that launch process as well as how you're thinking about the contribution or inclusion of SmartFrame OR in the 2024 guide?.

Yes. SmartFrame OR is a very interesting product for a number of reasons. And typical for us, not just for this product, is to do something called a limited market release, where we hand-select some specific customers that are either friendly to ClearPoint and know our procedures, that are happy to be part of a development process.

But in some cases, like SmartFrame OR, we're actually approaching customers that have never used ClearPoint before at all. And they've helped us to design this product and to give a ClearPoint solution where they haven't had a ClearPoint solution that fit them in the past.

So as part of the limited market release, it's probably to the tune of 30 to 50 cases is what I would expect sometime over the next three months, maybe a little bit longer than that.

But really, the goal is to test drive not just the product and some of the features and benefits and build testimonials and build training materials but also to test drive pricing and what the messaging is to different hospitals that might be using different technologies.

The approach we have with someone using ClearPoint in the MRI who wants to do some of their additional overflow procedures in the operating room, that message is very, very different than, like I said, someone who's never used ClearPoint before, and this is our first introduction and their first ability to work with us. That approach is different.

It has a different message, a different focus, a different follow-up. And we want to be very prescriptive with our sales organization by providing the materials that allow them to do that in a very tactical fashion.

The last thing I would bring up with SmartFrame OR, however, is, again, it is designed to work with some of the hardware and software that's already in the hospital.

So if we are approaching a new hospital that's never used ClearPoint, historically, we would have to go through the entire capital purchase process, work with IT, work with legal, work with business agreements, get a generated IP address inside the hospital.

So there's a lot of gymnastics that it takes to get any capital equipment no matter how simple it is through a hospital system. With this device, we can say, hey, this is just the razor blade, and it works with a razor that you've already got in your hospital.

So we do expect the transition out of limited market release and into full market release to be a little bit faster than it has been historically. But I would say in the revenue guidance that we've given of between $28 million and $32 million for the year, the SmartFrame OR product is still a very small percentage of that.

It will be a much larger percentage in 2025..

Got it. Okay. And then maybe one more on PTC. I think if I read correctly in their earnings late February, they stated they expect to submit their BLA for Upstaza for AADC in March of 2024.

Can you maybe talk about the significance of this filing and how we should read through -- and what we should read through when that filing does occur?.

Yes. No, we're super excited, and we believe things are on track from our standpoint as well. As a reminder, this would be -- the drug Upstaza that this BLA represents is the very first neuro gene therapy ever approved anywhere in the world. And it is, in fact, commercially available in Europe today.

Patients are being -- children really are being treated with this particular drug. To be able to get the BLA submission in and in front of the FDA, by no means is this a process where you're just kind of throwing it over the wall and hoping for the best.

There have been years of phone calls and meetings and presubmissions and clinical trial design and everything that's kind of leading up until this point. So where you think in the device world of just filing a special 510(k) and thinking you've got all your documentation ready, this is a much more collaborative effort with the FDA.

And as a result, I think anything that even gets accepted by the FDA as the status probably has a very reasonable shot of seeing it all the way through, which I think would be exciting for the entire biotech community to see eventually on the United States market a drug that has passed all the GMP requirements, the manufacturing, clinical trial requirements, et cetera, and make this therapy available here in the United States..

Perfect. That's good color. I'll stop there. Thanks for taking the questions..

Thanks Frank..

Thank you. Our next question comes from Emily Christy with Stifel. Please state your question..

Hi. Congratulations on the quarter and the strong start to the year so far, it sounds like..

Thanks, Emily..

Kind of a high level, you have a lot of new products out there, various stages of launch, but most probably will be in full launch by the end of the year.

How are you balancing that internally in terms of resource allocation and sales force training, all of those kind of pieces? How does that come together?.

It's a great question. And we're trying to balance all of that with the other commitments we've made to scale and getting to cash flow breakeven at least on an operational standpoint as well.

So the luxury that I think we have that a lot of other companies don't is the -- everything we do in the clinic today is linked by the common ClearPoint platform and the fact that 90%, 95% of the workflow is the same, even if you're doing a DBS case or a drug delivery case or a laser case or a biopsy or even a stereotactic EEG, lead placement, for example.

So the buttonology, the software, the workflow is incredibly similar. So what we've been doing is really cross training our entire clinical team across all of the different product lines.

And yes, we have a little bit of redundancy where, in many cases, we've got two specialists right now, one to help with navigation, one to help with laser, for example. But we believe very strongly in this team and the ability to operate and navigate an entire procedure across all of these.

I think we don't see a need to hire twice the sales and clinical organization, for example, to be able to grow with these particular products. Now the SmartFrame OR project is an interesting one, however, because in that circumstance, remember, we're not a DBS company. We are a laser company, so we're delivering the therapy.

We are a drug delivery company. We're delivering the therapy through our cannulas and other accessories there, too. But for DBS, we're just there to navigate someone else's therapy to a target.

So with SmartFrame OR, we believe there's the potential that after training a site with five or 10 clinical cases, which, again, are a lot more common and a lot more frequent, it's possible that we'll be able to certify an employee there at that site, at that hospital to be able to perform these procedures.

And in the future, the ClearPoint representative would be there to launch new products and train on new techniques and new software, however, not necessarily have to be there for every case like we've historically done.

So that is another tool that we think will help us get scale, especially in some more remote hospitals where we don't have to put someone on an airplane and stay in a hotel to cover one of those live cases..

Right. Okay. Makes sense.

Just on the biologics side, adding new partners, kind of moving up the chain in terms of level of service, how do you think about kind of the margin impact of that going forward relative to some of these first entries you've had that maybe are lower margin? Is that just scaling up from here?.

Yes. It's a tricky question. And if -- I would love to predict it better than I think I can at the current moment. The important thing for us, number one, is every single agreement that we do is really gross margin positive from day 1.

So if you think about the distinction of us and a biotech company, it's like, yes, we both get rewarded by progress and commercial launch of these amazing drug therapies down the road, but we don't have the burden of funding the $20 million or $30 million or $40 million clinical trial to be able to get to that point.

In fact, we actually can make product at a reasonable gross margin, sell product at a reasonable gross margin during the preclinical and clinical trial process. So we don't have the massive reward, but we also don't have that same risk here. So every engagement that we have, we are bringing gross margin dollars into the company.

So it's really a gross margin percentage that we're talking about. And again, that can really fluctuate based on the design of the study and the level of services that we provide. I would say, typically, at this point, there's very few of these programs that are less than our capital margin, for example, which are in that 35% to 45% range.

The vast majority of the deals that we do are above 50% and some even north of that. However, just based on a quarter-to-quarter basis, it can be a little bit choppy. So that's one thing to think about. The other thing, Emily, that I see being an impact on gross margin here in 2024 is this acceleration we're seeing in capital placements as well.

So as we put in the press release today, we've already installed six systems here in Q1. We're not getting these systems away by no means.

But if you had a quarter, for example, last year where maybe we did $400,000 in revenue in a quarter that's capital, this year we might have a quarter that's over $1 million, for example, in which case it's a larger percentage of the overall revenue, which can again be a drag on gross margin percentage but not necessarily gross margin dollars.

And obviously, the more systems we place out there, the more stores that we're opening. So it's in our best interest to do that as quickly as we can..

Right. Okay. Great. And just one more for me, following on that in terms of the installs. So I noticed some new placements abroad in the U.K. and in China. I'm just wondering if you can give a little bit more color on those new relationships in those markets..

Yes, it's really from a few different places. So the sites that we have in China, for example, is a preclinical site, so a CRO similar to Charles River here in North America that we partnered with as well.

This is a situation where ClearPoint equipment is now -- or will be available and on-site there along with our own specialists to be able to work directly with Chinese or other pharmaceutical companies that want to do their large GLP preclinical testing over that particular site.

So the same way you see some of our other preclinical centers that are based in Europe, in Canada, et cetera. This is another version of that. But it allows us to kind of plant a flag there and be able to say, hey, yes, ClearPoint here is open for business.

If you're a pharma company, you don't have to find another navigation or catheter or cannula technology to be able to do your development work. We can be there for you as well. And I think that's kind of an example there versus some of the places in Europe are actually actual clinical systems at this point.

So our products are approved to be used clinically in humans and under CE Mark. Many of these new hospitals are interested in doing drug and delivery cases in the future.

It might be a site that is tentative to be included in a clinical trial later in this year, and we're installing the system now so that they can get practice on the system and do some more routine laser procedures or DBS procedures or biopsy procedures today to give them five or 10 cases of experience before they do their first very elaborate and very expensive biologics patients.

So that's kind of the thought process. But there's a lot of different flavors of these new installs that are going into that..

Great. Okay. Thanks for taking the question..

Thanks Emily..

[Operator Instructions] Our next question comes from William Wood with B. Riley Securities. Please state your question..

Thanks so much, and congratulations on a great quarter. Just a couple from us. So curious about sort of the PRISM laser system limited release. I would love just to get a little bit extra color on how that's been going.

And then as far as the full release, I believe, in the second half of 2024, if that's still going to be there, expected to take place in the second half and then how we should be thinking about those revenues and if they're in the '24 guidance already..

Yes. Sure thing, William. So just to set the stage of kind of where we are today, there's sort of two vectors to think about, right? There's two primary types of MRI scanners, okay? So there's a 1.5 tesla and 3 tesla. So not a big difference between the scanners. It's more the power.

It's the same companies like Siemens and GE, Philips, IMRIS that have access to both of those. And we kind of think the neurosurgery market is roughly split in half between hospitals that have 1.5 and hospitals that have 3 tesla, okay? So from that standpoint, we are currently only approved on these 3-tesla scanners.

So that entire validation paper that we just did, incredibly robust, thorough, thoughtful science, that was published just Friday in the Journal of Neurosurgery. That is a lot of the data that was submitted to the FDA to be able to earn clearance on the 3-tesla scanner.

So if you think of it that way, we have access to about half of the hospitals today that have this 3-t scanner that's out there. To get access to the rest of them, the worst-case scenario is we repeat the exact same study that we did.

So no invention, just simply execution that would allow us to provide the FDA with the exact same data for the 1.5 tesla. So that study is currently being scheduled and planned.

And our goal is to collect all of the data, do the histology, have that ready to submit by the end of this year so that sometime early in 2025, we can now unmask every hospital and say it doesn't matter if you have 1.5 tesla or 3 tesla. We have FDA clearance and compatibility with both, okay? So that's one staging item, if you will.

But if you heard in my prepared remarks here, we have plenty of 3-tesla opportunities out there that even if we're not going after 1.5 tesla right now, it's really not slowing us down. It's really the install process and the evaluation process, the VAC committees at hospital.

That's still something we have to do, but we have plenty of shots on goal with 3 tesla. The other vector that will get us into full market release, I would say, sooner is the ability to go where the procedures are. And there's probably 10% to 15% of all laser procedures today that are done using ClearPoint in the MRI suite.

So that means 85% to 90% of these procedures are using someone else's navigation in the operating room and then moving the patient from the operating room to the MRI to do the laser procedure.

So these accessories that I'm talking about will allow us to do that same exact workflow these sites are already doing, where they use someone else's navigation like a robotic system or like [CellFrame] or something like that, place a ClearPoint PRISM laser catheter at target and then move the patient to the MRI just like they would do with any of the laser systems out there today.

So that's something that I think we expect to have in the first half of this year. And if we can get into the LMR and the full market release in the second half of this year, that again unmasks and opens up a lot of new opportunities for us as well.

So it's really those two primary triggers, one in the first half of this year and then one hopefully by the end of this year, that would get to the point where any hospital could be using ClearPoint PRISM if they wanted to..

Understand. Thank you for that extra color. In terms of your three sort of drivers of growth, you've got BDD, which clearly looks like it's going to be the main driver with over 50%, I believe you said for the revenues. But then you also have your capital equipment and then your functional -- your FNN.

So just when we're thinking about sort of parsing those out, it sounds like CapEx or capital equipment already has a pretty strong first quarter.

When thinking about 2024 revenues and sort of modeling that out, where should we think about the growth occurring? Or how should we think about the growth occurring in each of these segments through 2024 when we look to model these?.

Yes. I mean I think I made one comment in the remarks that this is going to be an interesting year for us where really all of our different segments are growing. So we expect significant growth from capital placements as well as capital revenue.

Even if a little bit of that revenue is deferred based on rental or lease programs, it's still going to be a significant growth over prior year. So that's one contributor.

If you look at our device business, we have an opportunity here to launch two or three key new products here, the SmartFrame OR, which gives us access to navigation in the operating room, which we've never had before. So that's growing from 0.

And every new PRISM account is an additional new growth where we've never had a laser therapy system, and we do now as well. So that device business, including navigation and laser therapy together, those are going to be significant and exciting growers for us. And then as you pointed out, biologics is doing what we continue to do.

I mean if you look at what we did in the fourth quarter of $4.1 million, there's no reason that we expect that to decline at all. So even if you take the $4.1 million, $4.2 million, whatever million, multiply that times four quarters, you're already looking at 20% growth. And that's assuming we just stay flat there, which is not the plan either.

So it's exciting to be part of something where last year, we kind of had an anchor relative to capital in some of our device business. Now we've got three different segments that we expect growth from all of them..

Got it. And then one last quick one.

Just thinking about the EU MDR approved certification that you got recently, how will this really affect or help your international adoption, specifically the EU adoption and expansion? And does not having this -- how does that affect other companies who have to still go through this approval process?.

Yes, really, it's an important decision that a lot of companies have to make right now, and sometimes they're going to partially make it.

So if you're trying to get a new product approved in Europe right now, it's more challenging than it has ever been based on increased documentation and in many cases, increased clinical evidence and usability studies that makes the development -- mathematics of launching a new product much more expensive than they have in the past.

So if you have to add time and add studies and even do some clinical work, you could look, in some cases, a doubling or even tripling the cost of bringing a new product to market. So in some cases, if you're making Tylenol there, sure, there's a big enough market that you're going to go after it.

But if you have a product that's sort of a niche right now, like we kind of do in biologics and drug delivery because nothing is commercially available and it's really participation in clinical trials, it makes it a little bit more difficult to justify this added spend to go into Europe.

And quite frankly, if we didn't have such important pharma partners that are there by our side to help us with some of the work and funding of it, we probably come to the same conclusion that some other smaller companies would as well to say, now is not the time. Let's see how this EU MDR plays out, and we'll make a decision down the road.

But we've taken a different approach to say, look, let's invest. Let's solidify these partnerships. Let's show them that we might be the one company that has the full suite of products in Europe, in the United States, in Canada, in Asia, in Japan.

So if we can be that one partner where a pharma company says, hey, wherever I want to go, ClearPoint is going to be there for me, we think that's going to help us win additional business as well..

Thanks, Joe, I appreciate that and congratulations again on a really nice quarter..

Thanks, William..

Thank you. There are no further questions at this time. I'll hand the floor back to Joe Burnett for closing remarks..

Once again, thank you to everyone on today's call.

This is an incredibly exciting time for ClearPoint, where we are earning new FDA global clearances, launching new products and expanding our portfolio and driving new customer activations as well as same-store sales and importantly, growing our terrific team and infrastructure that can help us gain scale towards cash breakeven here in the next couple of years.

We look forward to updating this group again through press communications and certainly at our next earnings call, likely sometime in early May. Thank you very much for your attention, and I hope to speak to many of you soon. Goodbye..

Thank you. This concludes today's conference. All parties may disconnect. Have a good day..