NeuroPace NASDAQ: NPCE cut its full-year revenue outlook after third-quarter sales fell short of management’s expectations, as disruptions at major treatment centers and changes to its sales organization slowed procedures using its RNS System.
The company reported third-quarter revenue of $23.1 million, down 1.1% from $23.4 million a year earlier. RNS System revenue rose 1.4% to $22.9 million, but service revenue fell to $203,000 from $771,000. The results exclude NeuroPace’s former SEEG distribution business, which is presented as discontinued operations.
“Our third quarter results fell short of our expectations, and I want to be direct about why and also what we are doing about it,” CEO Joel Becker said on the earnings call.
Large Accounts and Sales Changes Weighed on Results
Becker said a meaningful portion of the shortfall was concentrated in several large accounts, where staffing changes, physician availability and diagnostic capacity affected patient evaluations and scheduling. He described the issues as specific to individual centers rather than evidence of a broader decline in interest in RNS therapy.
The company also attributed disruption to midyear changes in sales leadership and field roles. Becker said those structural changes are complete, although their full benefits will take time to materialize. NeuroPace plans to add sales personnel as it moves into 2027, with a focus on deeper coverage of major accounts and referral development.
The exit from the SEEG distribution business also affected the company’s routine access to operating rooms and neurosurgeons earlier in the patient journey, Becker said. Because the pathway from identifying a patient to implantation can take six to nine months, the effect became more apparent in the third quarter. He said performance at former SEEG accounts has since improved and that NeuroPace does not need to be in that business to maintain access.
Becker told analysts that most patients affected by delays at large accounts were pushed out rather than permanently lost. He also said the company had not seen accounts lost because of the sales-force restructuring. Fourth-quarter procedure volumes have shown signs of recovery, though management expects improvement to develop over several quarters.
Revenue Guidance Reduced
NeuroPace now expects 2026 revenue of $91 million to $92 million, down from its prior forecast of $99.5 million to $101.5 million. The new range includes approximately $90 million to $91 million in RNS revenue and implies fourth-quarter total revenue of about $23 million to $24 million, CFO Patrick Williams said.
The company raised its full-year adjusted gross margin forecast to 83% to 83.5% from 82% to 83%, while lowering its adjusted operating expense outlook to $85 million to $86 million from $90 million to $92 million. Williams attributed the spending revision partly to lower expected variable compensation and sales commissions. NeuroPace expects a full-year adjusted EBITDA loss of $8.5 million to $9.5 million.
For 2027, management expects RNS revenue growth of approximately 15% for the full year, with growth of 10% to 15% in the first half and 15% to 20% in the second half. That outlook excludes revenue from a potential idiopathic generalized epilepsy, or IGE, indication expansion and excludes service revenue.
Regulatory and Product Pipeline
NeuroPace expects to submit an amendment to its IGE application around year-end following a meeting with the Food and Drug Administration. Becker said the discussion clarified the analyses the agency wants to see. Assuming a full 180-day review of the amendment, the company considers mid-2027 a reasonable planning assumption for potential approval, though the timing and outcome depend on the FDA.
For adolescents ages 12 to 17 with focal epilepsy, NeuroPace has initiated enrollment in AURORA, a retrospective observational study designed to include up to 100 evaluable patients who previously received the RNS System in routine clinical practice. The company expects enrollment to finish in early 2027 and sees a path to a submission during the year, with potential approval by late 2027 or early 2028, subject to the data and FDA review.
The company also submitted its Remote Care feature to the FDA during the third quarter. The feature is designed to let physicians program the RNS System through telehealth. NeuroPace said approval is possible in the second quarter of 2027, subject to agency review and any requests for additional information.
Quarterly Financial Results
Third-quarter adjusted gross margin improved to 84.8% from 82.8% a year earlier, which Williams attributed to better labor absorption. Adjusted operating expenses fell to $19.2 million from $20.7 million, primarily reflecting lower personnel-related costs, including variable compensation.
The company reported adjusted EBITDA of $0.4 million, compared with an adjusted EBITDA loss of $1.3 million a year earlier. Its GAAP net loss from continuing operations narrowed to $3.3 million from $4.9 million.
NeuroPace ended the quarter with $49.5 million in cash equivalents, short-term investments and restricted cash, down from $51.9 million at the end of the second quarter. Long-term borrowings totaled $59.2 million as of Sept. 30.
About NeuroPace (NASDAQ:NPCE)
NeuroPace, Inc. is a medical technology company focused on treating people with drug-resistant epilepsy. Its primary product is the RNS System, an implanted responsive neurostimulation device designed to detect patterns of abnormal electrical activity in the brain and deliver stimulation in response. The RNS System includes a neurostimulator implanted in the skull and leads placed in or near seizure-onset areas of the brain. Clinicians use the system to review brain activity and adjust treatment, while patients can use accompanying tools to record information about their seizures and share it with their care team.
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