Navigating Contradictions: How Project CARE and Gross Margin Trends Shape RNS Growth in 2025

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Revenue Growth and RNS System Performance:
- NeuroPace, Inc. reported total revenue of $22.5 million for Q1 2025, an increase of 24% compared to $18.1 million in the prior year.
- This growth was driven by a 26% increase in RNS sales, or 29% when excluding the impact of NAUTILUS study implants in Q1 2024.
- The growth was attributed to strong execution on expanding access to RNS therapy, ongoing momentum from Project CARE access initiatives, and sustained strength in RNS adoption at Level 4 centers.

Product Focus and SEEG Distribution Termination:
- The company announced a decision to terminate its distribution of SEEG products, which had historically contributed to growth.
- This move aims to refocus resources on the significant opportunities within the RNS portfolio and position the RNS System as the standard-of-care for drug-resistant epilepsy patients.
- The termination will not impact 2025 revenue, as inventory will be sold through the transition period, which is reflected in the revised guidance.

Financial Performance and Gross Margin:
- Gross margin for Q1 2025 was 77%, an improvement from 73.6% in the prior year.
- The increase was primarily due to improved manufacturing efficiency and fixed overhead costs being absorbed across a higher volume of RNS System units, with less contribution from lower-margin SEEG products.

Clinical and Product Development Progress:
- NeuroPace presented three-year effectiveness data from the Post-Approval study of the RNS System, showing an 82% median seizure reduction in adults treated with brain-responsive stimulation.
- Progress in the NAUTILUS pivotal study remains on track, with data and FDA submission expected during the second half of 2025.
- The company continues to work on expanding indications for pediatric focal epilepsy, leveraging data from the Pediatric Epilepsy Research Consortium.