Neurostimulation system maker NeuroPace files to go public

The nearly 14-year-old company hopes to raise $75 million to support its implanted, closed-loop seizure prevention system.
By Dave Muoio
12:31 pm
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NeuroPace, maker of an implanted neurostimulation therapy device for uncontrolled epileptic seizures, filed SEC documents yesterday outlining plans to raise as much as $75 million in an IPO listing on the Nasdaq.

The Mountain View, California-based company has been around since 1997 and has brought in a couple hundred million in funding across several rounds, according to CrunchBase. In fact, the medical device company raised money from investors and lenders as recently as September.

Its primary focus is the RNS System, a neurostimulator that differentiates itself from competing devices by placing its leads directly on the source of seizure within the brain.

The system is indicated for adults who experience frequent and disabling epileptic seizures from one or two sources within the brain, and who have tried two or more anti-seizure medications to no avail. It acts as a closed-loop system that is able to monitor the brain for early signs of a seizure and then automatically deliver stimulation to prevent its occurrence.

Additionally, the system collects EEG data that is captured by a wireless home remote monitor, and then shared with an online system for clinician review. Placement of the RNS system requires a surgical implant procedure.

NeuroPace received a Pre-Market Approval from the FDA in 2013 for the system, and began a commercial rollout the following year. Those efforts are focused on selling the system directly to epileptologists and neurosurgeons prescribing and implanting neuromodulation devices across roughly 200 comprehensive epilepsy centers in the U.S., according to the prospectus.

WHAT'S THE IMPACT?

NeuroPace estimates that there are approximately 575,000 adult drug-resistant focal epilepsy patients across the U.S., which it said gives the system a total addressable market opportunity of $26 billion.

However, the company also estimated that 24,000 of these patients are being treated annually at the centers targeted by its sales efforts, translating to an annual core market opportunity of about $1.1 billion.

In the summary of its recent financials, NeuroPace disclosed annual revenues of $28.5 million in 2018, $37 million in 2019 and $41.1 million in 2020. It ascribed 2020's slowdown in revenue growth to the COVID-19 pandemic. Net losses in 2019 and 2020 were $30 million and $24.3 million, respectively.

Similar to its September fundraise, the company said that it's aiming to grow its business by ramping up its sales efforts and broadening the indications of its system. The S-1 also mentions expansion into international markets and the pursuit of additional indications outside of the epilepsy space – all of which could be supported by fresh funds from the IPO.

THE LARGER TREND

Competing devices for drug-resistant seizures and other similar conditions are primarily focused on vagus nerve stimulation and deep brain stimulation. While often requiring an implant, the FDA has also cleared a noninvasive neurostimulation device for self-administered cluster headache prevention and for the acute treatment of migraines.

NeuroPace's decision to target an IPO instead of returning to funds or lenders could stem from the recent flurry of recent health tech startups going public. The past several months have included IPOs from Amwell, GoodRx, Eargo, Oscar Health and Nanox – and that's not dipping into the cavalcade of SPAC deals assailing health tech and other markets.

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