NeuroPace IPO Likely to Transform Refractory Epilepsy Neuromodulation Market

by James Cavuoto, editor

March 2021 issue

NeuroPace Inc., the Mountain View, CA manufacturer of neuromodulation devices, has made its name in the industry by pioneering a closed-loop intracortical device for the treatment of epilepsy. As the company prepares for an impending IPO, it will takes its place among two other publicly traded manufacturers of implanted devices to treat epilepsy: Medtronic and LivaNova. Depending on its success in that market, the company may well emerge as a competitor to DBS vendors pursuing other neurological diseases and disorders.

The company’s first product, the RNS system, is the only FDA-approved brain-responsive neurostimulator for the treatment of focal onset refractory epilepsy. The system was designed to prevent epileptic seizures at their source. It treats seizures by continuously monitoring brain waves, recognizing each patient’s unique “seizure onset fingerprint,” and automatically responding with imperceptible electrical pulses before seizures occur. Physicians can view their patient’s EEG data on a secure website and program the device to personalize therapy for each individual.

Unlike anti-epileptic drugs or resective surgery, neuromodulation outcomes typically improve with time and do not cause the cognitive side effects that can be associated with those alternatives. The RNS system is now available at most comprehensive epilepsy centers in the U.S. and is widely covered by insurance.

In its SEC filing this month, NeuroPace described its plans to raise up to $75 million in an IPO listing on NASDAQ. The company said it plans to pursue new indications beyond epilepsy down the road, including depression, impulse control disorders, memory disorders, and post-traumatic stress disorder.

To distinguish its epilepsy offering from Medtronic and LivaNova, NeuroPace points out its use of intracranial EEG to respond in real time to patient-specific electrical activity that precedes a seizure. The other two devices intermittently stimulate the brain using a non-varying schedule in an attempt to prevent seizures. Because the RNS stimulator is active only three minutes per day on average, NeuroPace asserts that stimulation-related side-effects are less likely than with VNS or DBS. On the other hand, NeuroPace’s device is more narrowly indicated than the other two. CMS reimbursement rates to hospitals is about $50,000, whereas DBS rates are only $35,000.

In February, NeuroPace announced that it received breakthrough device designation status from the FDA for the potential use of the RNS system to treat idiopathic generalized epilepsy, which constitutes as many as one third of all epilepsies and is understood to have a strong underlying genetic basis.

NeuroPace plans to pursue an indication expansion to include drug-resistant idiopathic generalized epilepsy. A recent publication reported 82 percent median reduction in seizure frequency at three or more years in this population.

“This breakthrough device designation is an exciting validation of the potential of the RNS system to improve the lives of a broader population of people with epilepsy,” said Mike Favet, CEO of NeuroPace. “The RNS system’s personalized approach to neuromodulation, which recognizes and responds to a patient’s unique brain patterns, may offer a new solution for patients with drug-resistant idiopathic generalized epilepsy, a condition that severely impacts quality of life for the individual and family alike. We look forward to initiating a pivotal clinical trial to demonstrate the safety and effectiveness of the RNS system for this patient population.”

Idiopathic generalized epilepsy typically begins in childhood or adolescence, with occasional adult onset. It is the second most common type of epilepsy, after focal epilepsy. In the approximately one-third of IGE patients who are not effectively treated with medications, this disorder is debilitating, has substantial impact on day-to-day life, and carries risk for social and psychiatric disability, injury and premature death. No long-term solution exists other than antiepileptic medications, many of which have significant side effects and can cause birth defects if taken during pregnancy.

Last year, the company announced it has raised $67 million in a funding round led by Accelmed Partners with participation from an unnamed strategic investor, Revelation Partners, Soleus Capital, and returning investors KCK Group and Orbimed Advisors. The financing includes $33 million of new equity capital and $34 million from convertible debt provided by current investors from a prior funding round.

“NeuroPace has set the standard for epilepsy neuromodulation technology, with its unique ability to continuously monitor EEG data and respond with closed-loop stimulation,” said Evan Norton, General Partner, Accelmed Partners and new NeuroPace board member. “The company’s differentiated technology, unmatched clinical outcomes, and the large unmet market need it addresses make it a compelling investment in line with our goal of supporting healthtech companies poised for significant growth.”

Favet took over as CEO in 2019, replacing Frank Fischer, who stayed on as chairman. He previously held management positions with Advanced Cardiac Therapeutics, Sonitus Medical, Ventus Medical, Boston Scientific, and Guidant.

NeuroPace revenue increased from $28.5 million in 2018 to $37.0 million in 2019, representing approximately 30 percent growth. Despite the COVID-19 pandemic, revenue increased to $41.1 million last year, representing year over year growth of 11.3 percent. Net losses were $30.0 million and $24.3 million for 2019 and 2020, respectively.


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