Greetings and welcome to ClearPoint Neuro’s Second Quarter and Six Months 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. Comments made on this call may include forward-looking statements as defined by securities laws. These statements may include anticipated industry trends, the company’s plans, prospects, and strategies as well as management’s expectations, beliefs, estimates, or projections regarding future results. Actual results or trends could differ significantly. The company does not undertake any obligation to update forward-looking statements based on new information or future events. For further details, please refer to the company’s annual report on Form 10-K for the year ended December 31, 2019, and the quarterly report on Form 10-Q for the quarter ended March 31, 2020. Both have been filed with the Securities and Exchange Commission, along with the quarterly report on Form 10-Q for the quarter ended June 30, 2020, which will be filed with the SEC on or before August 14, 2020. All filings can be accessed through the SEC or on the company’s website at www.clearpointneuro.com. I would now like to turn the call over to Joe Burnett, Chief Executive Officer. Please go ahead, sir.

Thank you, Brock, and thank you to everyone listening on today's call. The second quarter of 2020 brought about new personal and professional challenges to the entire world. And we here at ClearPoint Neuro were no exception. Our priorities during the second quarter for the company and for our team and culture were threefold. Number one, to make sure that every patient that needed treatment felt supported by the availability of ClearPoint products and our team members. We wanted to ensure that surgeries performed during COVID restrictions gave the patient the best possible chance of success. Number two, while cases decreased in the quarter, we wanted to ensure our development projects and investments in our talented team continued to move forward so that our strategy is intact, and so that we exit the crisis in a stronger position than when the pandemic started. And number three, to protect our employees from layoffs or furloughs, so that they can be a pillar of strength for friends and family who have all been impacted by the health or financial impact of the crisis. I can tell you now today that we accomplished all three of these goals during the second quarter. In parallel to achieving these three cultural goals, we believe our financial performance indicates that we made the most of the situation, and we were encouraged by the speed at which elective case procedures bounced back in June to about 85% of the pre-COVID run rate. This combined with our diversification into biologics and drug delivery enabled us to still have a successful quarter from a financial standpoint and deliver $2.5 million in top-line revenue. I will have Hal Hurwitz, our CFO take you through some of the detail, and then I will provide an update on our four pillar growth strategy and expectations moving forward. Hal?

Thanks, Joe. Total revenues were $2.5 million for the three months ended June 30, 2020 and $2.6 million for the three months ended June 30, 2019, which represents a decrease of $129,000 or 5%. Drilling down on these revenue numbers, one can see the effects of the COVID-19 pandemic that Joe described in his opening remarks. Functional neurosurgery revenue which consists of disposable product commercial sales related to cases using our ClearPoint system decreased 38% to $1 million for the three months ended June 30, 2020, from $1.7 million for the same period in 2019. This decrease was due to the effects of the COVID-19 pandemic, in which substantially all elective surgical procedures historically representing approximately 80% of our ClearPoint system case volume, were postponed or cancelled in April 2020 and resumed modestly compared to pre-pandemic levels in May and June 2020. Biologics and drug delivery revenues, which include sales of disposable products and services related to customer-sponsored clinical trials utilizing the ClearPoint system, increased 183% to $1.2 million for the three months ended June 30, 2020, from $413,000 for the same period in 2019. This increase was due primarily to an increase in biologics and drug delivery service revenues attributable to the establishment of relationships with biologic and drug delivery companies that included period-based retainers for clinical services in support of such companies’ respective clinical trials. Also contributing to the increase in biologics and drug delivery revenues was an increase in related product revenues. Capital equipment revenue, consisting of sales of ClearPoint reusable hardware and software, and services related thereto decreased 51% to $240,000 for the three months ended June 30, 2020, from $485,000 for the same period in 2019. While revenues from this product line historically have varied from quarter to quarter, we believe that many hospitals have postponed capital equipment evaluations and acquisition activities during the pandemic resulting in this decrease. Gross margin for the three months ended June 30, 2020 was 74% as compared to 60% for the same period in 2019. This increase in gross margin was due primarily to a shift in the mix of revenues by line of business that resulted in service revenues which bear higher gross margins in comparison to other product lines, representing a greater contribution to total sales. Turning to operating expenses, total operating expenses for the three months ended June 30, 2020 were $3.3 million, a 15% increase from operating expenses of $2.9 million for the same period in 2019. Breaking down the components of operating expenses: Research and development costs were $822,000 for the three months ended June 30 2020 compared to $698,000 for the same period in 2019, an increase of 18%. The increase was due primarily to increases in headcount and related personnel costs. Sales and marketing expenses were $1.1 million for each of the three months ended June 30, 2020 and 2019. Travel and entertainment expenses decreased during the three months ended June 30, 2020, as compared to the same period in 2019, resulting primarily from reduced activity due to the COVID-19 pandemic. Also decreasing was incentive compensation resulting from the reduced product sales I previously discussed. These decreases were offset by an increase in personnel costs, resulting primarily from headcount increases in our clinical and marketing teams. General and administrative expenses were $1.4 million for the three months ended June 30, 2020 compared to $1 million for the same period in 2019, an increase of 33%. This increase was due primarily to increases in share-based compensation, professional fees, and a reduction of the allocation of shared departmental resources to production due to the reduced manufacturing activity as in effect of the COVID-19 pandemic. Net interest expense for the three months ended June 30, 2020 was $197,000 compared with $259,000 for the same period in 2019. This decrease was primarily due to a decrease in the amortization of the discount associated with secured notes that were repaid and retired in the first quarter of 2020 and to the repayment and retirement in June 2019 of other secured notes. This decrease was partially offset by the interest expense associated with the secured notes issued in January 2022. Cash used in operations for the three months ended June 30, 2020 was $1.7 million and our cash balance at June 30, 2020 was $16 million. I will now turn the call back to Joe.

Thanks, Hal. As I hope you can see, we believe we had a strong quarter performance certainly compared to how things looked back in April of this year. However, we are cognizant that new challenges lie ahead as a direct result of the continuing COVID-19 pandemic. And we will continue to focus on patient support and pipeline execution in the months ahead. Starting with our first pillar of growth, in functional neurosurgery, we continue to see that case volume has not yet returned to pre-COVID levels, and we do not expect a full return in the foreseeable future for the following reasons: Number one, the virus continues to spread to many regional hospitals, which remain at risk to again suspend elective procedures for some duration of time. We currently have a handful of hospitals that have in fact reduced procedure volume in preparation of protecting ventilators and hospital beds in the event of the case influx. While we do not expect a drastic change in practices, as we had seen from March to May of this year, we do expect continued openings and closings. Number two, patients have to maneuver a series of testing before becoming candidates for surgery with our products. While in the past month, we have enjoyed an increase in surgical procedures, we need to remember that from March through May of this year, many patients were not able to see their neurologist during that time to do the proper testing and preparation for surgery. Those meetings are again taking place. But we do expect a lull in cases as the patients destined for surgery continue to undergo the appropriate preliminary study. And finally, our case volume continues to be centered around 60 active clinical sites in the United States today. Should one of the centers or one of our high-volume users be impacted directly by COVID, it can slow down the return to these pre-COVID levels. We must also remember that the patient plays an important role in the decision to move forward with surgery as well. As many of our patients are being treated for high-risk categories like Parkinson's disease, it is not uncommon that a patient may change their mind about their surgery the day before or even the day of. As Hal mentioned in his comments, while capital acquisition has not completely stopped, there has been a significant pause placed on new site evaluations and purchases. We did not initiate any new sites for installation in the quarter. However, we do maintain a pipeline of more than 20 potential additional placements. Our team has done a great job making progress remotely. However, we expect there to be at least a few months before additional placements begin and our sales team can pass through meaningful hurdles through the acquisition process. Our development efforts have not stopped, however, and we have made meaningful progress during this time on our next-generation navigation platform and other ancillary products. We look forward to offering continued updates on these programs in the very near future. For our second pillar, biologics and drug delivery, we continue to expand the number and depth of our partnerships in the gene therapy and stem cell space. While many preclinical and bench testing labs had to shut down for a period of time, shipments to these labs have resumed supporting preclinical efforts of our more than 20 active relationships. We also saw a pause in recruitment and enrollment for a number of pivotal studies. However, those cases seem to have started scheduling again. We've continued our training and talent investment in this space and have identified more than five potential development projects currently underway to cement our role as a leading device partner for these exciting biologics companies. For our third pillar, therapy projects, we've continued to make progress with our laser partners CLS and IGT in Sweden and France respectively. The COVID interruption, however, did impact our ability to progress through some key preclinical milestones based on lab and testing availability. We now believe that we will perform our first human cases using our complete laser solution sometime in the second half of 2021. As for our fourth pillar, achieving global scale, we've continued to support appropriate regulatory filings in countries requiring CE Mark. The current travel ban from the United States to Europe has again slowed our ability to train and install systems in the quarter at some of these new centers. We do believe, however, that we will have active clinical sites installed in Europe in the first half of 2021. Further, you can see from the 74% gross margin in the quarter that our disposable and service businesses continue to gain profitability, highlighting the validity of our razor/razorblade model. While we do not expect every quarter to have this level of margin, as so little capital has been sold, we do continue to feel we can gain economies of scale with increased throughput and less travel for local clinical specialists as they're hired. With that, I would like to open up the call for any questions.

Our first question today is from Sall Yanchus of Brookline Capital Markets. Please proceed with your question.

I'm curious about when you anticipate a return or improvement in elective surgery procedures. Do you think it could happen in the fourth quarter of next year, or do you have any insights on when things might pick up?

Yes, Sall. That's a very important question, and I tried to provide some insight in my prepared statements. The reality is that we have indeed seen a bounce back. If you look at our case volume results, we handled 11 cases in April, 44 in May, and then 71 in June. This trend is clearly moving in the right direction. However, as I mentioned earlier, there are several factors affecting certain hospitals in states heavily impacted by the COVID crisis, which can lead to some hospitals shutting down. One advantage we have is that the hospitals performing our procedures are among the most advanced in the country. When deciding which hospitals to send COVID patients to versus those that need to be protected for complex surgeries, our equipment is typically located in larger academic centers, which continue to care for seriously ill patients.

And that regionally looks like areas where there are outbreaks of the virus, so it's uncertain.

Yes, I think that's right. And luckily, our business is diversified across the country. As I shared, there’s four or five hospitals right now that are kind of in that red zone relative to available hospital beds. But again, if you think back to April, it was 100% of our hospitals and now we're talking about kind of 10% to 15% of our hospitals. So we're definitely moving in the right direction but we need to recognize that this pandemic is still not under control. So we need to make sure we're conservative in our planning.

The next question is from Andrew D'Silva of B. Riley FBR.

Just a couple quick ones from me. Can you just give a little bit of color on how things are progressing with the two days? And then also as it relates to just practices that don't have access necessarily to MRIs. Are you seeing additional efficiencies coming in there where they're able to more readily access MRIs and utilize ClearPoint for the procedures?

I'll answer the first question initially here, and thanks for the question Andrew. Our progress on two days is certainly continuing to gain steam. In fact, I believe we have 16 hospitals right now that have successfully scheduled and performed two procedures in the same MRI suite in the same day. And again, one of the most crucial parts of that is not the fact that it can be done, but it can reliably and predictably be done. The last thing you want to do is schedule two patients for surgery, bring them in, get them emotionally prepared to go through a challenging neurosurgery, an important one but a challenging one nonetheless. And then have that first procedure that was only supposed to last for three hours takes six hours. And then you have to risk keeping that patient, the second patient overnight or sending them home. So it really is a significant milestone when a hospital says, yes, I'm bringing two patients in today to get these procedures done. As I shared with you, I think at least 16 of our centers today have successfully done that, which gives us incredible confidence that there's no reason that all of our centers couldn't do it. Now, we’ll never get to 100% because some of our hospitals, like pediatric hospitals, there just isn't that much demand for these types of procedures, they’re fewer and farther between. But there's no reason for a situation where a hospital has access to a significant funnel of Parkinson's patients, for example, or essential tremor patients, where they can't reliably do two procedures a day using our platform and our training methods, so that's kind of bucket number one. Bucket number two is that access to MRI continues to improve as well. I would estimate at least 20% to 30% of all new MRI systems that go in with a focus on neuro are in fact those interoperative MRIs in the hospitals that we work with. And again, once an interoperative MRI, it’s technically an MRI suite that's designed for surgery. What that means in most cases is the surgical team, in fact, makes the decision on scheduling, not the radiology team. And that takes down one significant barrier of MRI access being that the surgical team does not need to negotiate for that time, it's actually reversed where they do surgeries when the patient needs it and then they backfill their own scanner with diagnostic scans when the time is appropriate. So those two trends are certainly still moving in the right direction.

And I was actually just a little bit curious, and this does not need to be specifically about this particular quarter. But just as the cadence goes, Medtronic, for example, has their own MRI guided laser ablation platform that is capable of being used without the ClearPoint neuro platform but I know that it does often get utilized with it. Have you seen a trend where more and more of those kinds of systems are being utilized alongside your platform despite the ability not to have to utilize it?

I would say that the laser ablation market is an interesting one because we have been involved from the beginning. Deep brain stimulation procedures have been helping patients for more than 20 years, but our technology wasn't available initially. In contrast, we had the advantage of being present from the start with neural laser ablation, and we feel that we are growing alongside the market, possibly even outpacing the initial placements. Currently, about 30% to 35% of all laser ablation procedures utilize ClearPoint. The key reason this market is attractive to us and why we believe we have a credible path to market leadership is that, even if the laser ablation catheter is placed in the operating room without using MRI guidance for placement, the patient still needs to be transported to the MRI scanner to obtain temperature information during the laser ablation part of the procedure. Our technology operates best in the MRI environment. If the entire procedure can be completed in one suite without transporting the patient, it allows us to maximize the accuracy provided by MRI for both the ablation and navigation at the start of the procedure. We firmly believe this is the best option for patients, which is why we decided to develop our own laser system to control the entire procedure from start to finish.

That makes a lot of sense and aligns with some of the channel checks we conducted, so it's encouraging to hear. I have just a couple more quick questions regarding the remote working situation resulting from the pandemic, particularly from a sales and marketing perspective and regarding the essential employee protocols at hospitals. How has your ability to engage with decision makers been affected? I know that capital equipment purchasing has declined, but have you been able to sufficiently communicate with those who will ultimately make decisions at your target facilities?

Yes, we have been able to engage with key decision makers at hospitals despite the challenges posed by capital budgets and other uncertainties. I'll be attending meetings via Microsoft and Zoom, which are not in-person. As I mentioned earlier, we have made progress, but there are still significant milestones we need to achieve before moving forward with new capital purchases. The most crucial step is a successful evaluation process. Our usual approach involves collaborating with hospital committees to establish pricing for both capital and disposables, scheduling installations, and coordinating with IT professionals and medical device experts. We typically conduct a three-month evaluation where we provide our asset at our cost, while the hospital covers the disposable products used. If the evaluation is successful, it can lead to a capital purchase. Unfortunately, we haven't been able to conduct these evaluations lately because hospitals are focused on addressing backlog demand for existing procedures. The introduction of new technology for evaluation hasn’t been a priority given these uncertainties. However, there are still at least 20 additional sites that are progressing in the capital acquisition process, and we are prepared to install inventory and resume evaluations once we receive approval. I also want to emphasize that I don’t expect everything to return to normal in the near future, if ever. Access to hospitals will likely become more value-driven, determining which employees from different companies are permitted inside. I take pride in our team’s professionalism and the value added by our clinical team; we have not encountered any hospital that has deemed us non-essential. Therefore, we believe our channel and support network will maintain access to hospitals, even in situations where traditional sales personnel have struggled.

And last question for me just within healthcare more broadly, we're just seeing a lot of clinical trials adding additional sites as companies just try to hit earlier announced enrollment timeline expectations. Are you seeing that with any of your drug delivery partners right now?

We absolutely are. Yeah, I think that's a very ongoing conversation and it's a very, very delicate balance that we all have to make between expanding too quickly and then also ensuring that every single patient is treated in a consistent fashion and in the right way. The more sites you have, the less control you kind of have. And I think if anything that has made our model in the biologics and drug delivery space even more attractive to some of our partners, because number one, you know, we've demonstrated the ability to get a new site up and running quickly and we can get a new site up and running quickly, partially because we don't just train them and then move on, we have someone present for every one of those procedures. So it's a constant evolving training process. And you have the quality control of having a seasoned professional with eyes on the case throughout the entire procedure. So I think that's one thing that works in our benefit. The second thing is that if you are one of these biologics companies executing a trial, it puts you in a difficult spot because the more sites you expand to, the more you have to expand your own team to be able to support those sites. And that's why I've shared in the past that we have a service we provide to these companies where if they feel it's appropriate, they don't have to hire their own clinical team; rather they can hire our team as an extension of their own clinical group and we can not only perform the infusion, but we can help execute the randomization and the protocol itself. So if anything, I think it’s putting one of our services in even more demand than it was before, because we can help some of these companies to expand quickly at high quality and be able to catch up to some of those milestones and delays that the COVID situation has caused.

There are no additional questions at this time. I would like to turn the call back to Joe Burnett for closing remarks.

Well, thank you, again, from the entire ClearPoint team for staying by our side. With your help, we can continue to give patients with debilitating neurological diseases, like Parkinson's disease, tumors, and epilepsy, the comfort that they can count on us to receive these truly life-changing procedures. Thank you very much and have a good evening.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.