ClearPoint Neuro, Inc. (CLPT) Q4 2020 Earnings Call Transcript

Greetings. Welcome to the ClearPoint Neuro Full Year 2020 Financial Results Conference Call. Comments made on this call may include statements that are forward-looking within the meaning of securities laws. These forward-looking statements may include, without limitation, statements related to anticipated industry trends; the company's plans, prospects and strategies, both preliminary and projected; and management's expectations, beliefs, estimates or projections regarding future results of operations. Actual results or trends could differ materially. The company undertakes no obligation to revise forward-looking statements for new information or future events. For more information, please refer to the company's annual report on Form 10-K for the year ended December 31, 2019, and the company's quarterly report on Form 10-Q for the quarter ended September 30, 2020, both of which have been filed with the Securities and Exchange Commission, and the company's annual report on Form 10-K for the year ended December 31, 2020, which the company intends to file with the Securities and Exchange Commission on or before March 31, 2021. All the company's filings may be obtained from the SEC or the company's website at www.clearpointneuro.com. I would now like to turn the conference over to Joe Burnett, Chief Executive Officer. Please go ahead, Mr. Burnett.

Thank you, Brock, and thank you to all of the investors in ClearPoint listening to today's call. I'm joined here by our Chief Financial Officer, Danilo D’Alessandro. 2020 taught us all a lot about ourselves, from friends and family to work and life balance to everyday priorities and attitudes. We, at ClearPoint, learned a lot about who we are and how we respond to challenges beyond our control. In short, we make the best of the situation in front of us, and we want to lead by example. Our goal back in March of 2020 was to exit the pandemic stronger than we had entered it, and I'm proud to be able to say that we have done exactly that. And while we continue to see disruptions in case volumes and evaluations as many hospitals are still limiting surgical procedures, we are encouraged by the rapid deployment of vaccines and believe that we will return to pre-COVID case volumes in the second half of this year. We are almost there. During the past year, however, we did not stand by idly waiting or hoping for cases to return. We kept our team fully intact and redeployed our resources to further our development programs and bring new partners in both the biologics and medical devices parts of our business. Our innovative pipeline of products is more exciting than it has ever been, and we are now in a position to prove our role as innovators with a cadence of annual product releases that solve real problems for both surgeons and for patients. Further, our successful capital raise just a few weeks ago leaves us with more than $65 million in cash on our balance sheet as of today to ensure the funding of these portfolio programs is something that is fully in our control. I will now turn the call over to Danilo for the financial detail from 2020, after which I will provide additional commentary on our continued four-pillar growth strategy. Danilo?

Thank you, Joe, and good afternoon, everyone. Let me start by looking at the full year 2020 results. ClearPoint Neuro total revenues were $12.8 million for the year ended December 31, 2020, a 14% increase over revenue of $11.2 million in 2019. Our revenue is made up of three components: functional neurosurgery navigation and therapy, biologics and drug delivery, and capital equipment. Functional neurosurgery navigation and therapy revenue, which consists primarily of disposable product sales related to cases utilizing the ClearPoint system, decreased 12% to $6.3 million in 2020 from $7.1 million in 2019. Revenues here reflect the continuing impact of the COVID-19 pandemic on elective procedures. Biologics and drug delivery revenue, which includes sales of services related to customer-sponsored clinical trials utilizing the ClearPoint system and related disposable products, increased 109% to $5 million in 2020, up from $2.4 million in 2019. This increase was due primarily to an increase of approximately $2.7 million or 302% in biologics and drug delivery services. Capital equipment revenue, consisting of sales of ClearPoint reusable hardware and software and of related services, decreased 10% to $1.5 million in 2020 as compared with $1.7 million for 2019. While revenues from this product line historically have varied from quarter to quarter, we believe that many hospitals have postponed capital equipment acquisition activities due to the COVID-19 pandemic as evaluations of new technology have been postponed. We achieved a gross margin of 71% on sales for 2020 compared to a gross margin of 65% for 2019. This increase was due primarily to our revenue mix shifting toward higher-margin service revenues in 2020 relative to 2019. Research and development costs were $4.7 million for 2020 compared to $2.8 million in 2019, an increase of 67%, resulting primarily from cost increases in additional personnel, collaborative research, intellectual property, including amortization of acquired license rights. Sales and marketing expenses were $5.4 million for 2020 compared to $4.8 million in 2019, an increase of 13%, resulting primarily from an increase in base compensation costs, attributable primarily to head count increases in our clinical and marketing teams that were partially offset by decreases in travel costs and incentive-based compensation. General and administrative expenses were $5.3 million in 2020 compared to $4.3 million for 2019, an increase of 22%, resulting primarily from increases in compensation, consisting primarily of stock-based compensation and transition costs, occupancy costs and legal fees. I will now turn to the fourth quarter 2020 results. Total revenues were approximately $3.7 million for the three months ended December 31, 2020, an increase of 16% over $3.2 million in the fourth quarter of 2019. Functional neurosurgery and therapy revenue decreased 5% to $1.6 million for the fourth quarter of 2020 from $1.7 million for the same period in 2019, due to the previously mentioned effects of the COVID-19 pandemic. Biologics and drug delivery revenue increased 40% to $1.5 million in the fourth quarter of 2020 from $1.1 million in the same period in 2019. This was primarily due to an 81% increase in biologics and drug delivery services. Capital equipment product and related service revenue increased 41% to $0.6 million for the fourth quarter of 2020 as compared with $0.4 million in the same period in 2019, due primarily to an increase in system placements in the fourth quarter of 2020 relative to the same period in 2019. We realized a gross margin of 61% on sales for the fourth quarter of 2020 compared to a gross margin of 69% for the same period in 2019, due primarily to a one-time year-to-date reclassification of certain costs previously classified during 2020 as operating expenses into cost of revenues. Research and development costs were $1.8 million for the fourth quarter of 2020 compared to $0.8 million for the same period in 2019, an increase of 120%, resulting primarily from cost increases in compensation, collaborative research, intellectual property, including amortization of acquired license rights. Sales and marketing expenses were $1.5 million for the fourth quarter of 2020 compared to $1.5 million for 2019, due primarily to decrease in travel costs and incentive-based compensation, which were offset by increases in compensation costs due to head count increases in our clinical and marketing teams. General and administrative expenses were $1.3 million for the fourth quarter of 2020, flat from fourth quarter 2019 levels. Cost increases in compensation, occupancy and legal fees were offset by the one-time reclassification of costs previously mentioned. With respect to our cash position at the end of December 2020, we had cash and cash equivalent balances of $20.1 million compared with $5.7 million at the end of 2019. Our cash increase resulted primarily from the issuance of senior secured convertible notes in January and December 2020 in the aggregate amount of $25 million, which resulted in net proceeds to us totaling approximately $24.3 million. I will now turn the call back to Joe.

Thank you, Danilo. I now want to add some additional color to our four-pillar growth strategy. First, let's talk about biologics and drug delivery. We continue to maintain and grow our relationship with more than 25 individual customers in the drug, gene therapy and stem cell space, providing them with products and services to support the various regulatory phases prior to commercial approval. In addition to those 25 relationships, we have identified more than 75 additional potential customers based on their neuro target and their mechanism of action where we believe ClearPoint technology can help. We now have a team in place that is actively reaching out to those companies and academic centers as we speak. In 2020, all of our partnered preclinical and clinical trials were put on hold for at least a while, driven primarily by restrictions caused by COVID-19. And in most cases, those trial stoppages lasted throughout the year. We are encouraged that at least 5 of our pharma partners have resumed enrolling patients already in 2021, which is a step in the right direction and enables us to resume our clinical revenue stream of products used during those procedures. More importantly, it restarts the crucial clinical timeline and progression through these necessary regulatory trials. One example is the treatment of AADC deficiency syndrome patients in France under their compassionate-use program led by our partner, PTC Therapeutics. This was highlighted in a recent news article published in France's Le Monde, one of the top newspapers in France. While at the request of some partners, we do not publicly disclose all company names, we do expect multiple new clinical trials to be initiated here in 2021, now that the COVID-19 fears seem to be subsiding with the global distribution and access to the vaccine. Now where our sales into clinical trials declined in 2020, our expansion into clinical and development services grew, and our entire segment of biologics and drug delivery more than doubled as a result. Examples of such services, including development of custom drug delivery cannulas and needles, benchtop protocol writing and study execution, clinical case support and site training, and pre-commercial launch planning. These are turnkey solutions that can prevent drug companies from having to replicate the same expertise and expense within their own organizations. The expansion of these services are not only meant to provide a meaningful revenue opportunity for ClearPoint, but are also meant to start our engagement with these pharma partners much earlier in the development process. When our products are used early in development, it makes them much more likely to be used throughout the regulatory trial and commercialization process as well. The specific skill set of many new hires will continue to expand these service offerings and make a relationship with ClearPoint more valuable and stickier than ever before. Each year of engagement with a pharma company generally comes with a larger service revenue potential. And as mentioned before, we now have more than 25 customers progressing through that growing revenue opportunity. Moving on to Pillar number two, which is functional neurosurgery navigation. We saw a decline in year-over-year cases and revenue, once again, driven by the impact of COVID-19 on elective procedures. The majority of our hospitals once again put in place at least some restrictions in the fourth quarter to limit and prioritize elective procedures or to halt procedures entirely until substantial ICU beds were available. Many of these closures have persisted into the first quarter of 2021 and case volumes have continued to be depressed in January and February of this current quarter. On the bright side, we have seen hospitals reopening their doors. Many of our customers who had halted cases altogether in Massachusetts, California, Arizona, Texas, Oklahoma and Kansas have all started to schedule cases again for March and April. At this point, we believe that we will be able to return to pre-COVID volumes sometime in the second half of 2021. Similarly, we expect to begin a number of new site evaluations starting this summer, which will return us to growth in this functional neurosurgery segment. As a point of reference, given that we are already 2 months into the first quarter, we now expect case volume for Q1 of 2021 to be in the range of 190 to 200 cases, up from the 175 cases we saw in the fourth quarter of 2020. While our case volume was certainly impacted, we did make substantial progress on our development pipeline and portfolio. As announced recently, we have been developing a next-generation SmartFrame Array, which is designed to not only simplify our existing workflow and save time, but also to enable expansion into the operating room for certain parts and eventually all of the procedures. In the future, we will no longer be an MRI-only company, but rather have a portfolio of operating room and MRI suite products to enable the site and the surgeon to choose which technology is most appropriate for each individual patient. Our newly announced partnership with Blackrock Microsystems in Salt Lake City, Utah, will add an additional operating room tool to our portfolio in Microelectric Recording, or MER. MER is a commonly used and complementary navigation tool for DBS cases today. Similarly, we recently announced our license and development agreement with Philips, on our Maestro Brain Model, which will become our foundational navigation engine across our portfolio of products. We want to be viewed as an innovative and essential navigation company focused in neurosurgery, and our proposed cadence of new products over the next 24 months will help us to prove that to the market. We expect first cases of Array in 2021, first cases of the Maestro Brain Model in 2022 and first cases of our MER platform in 2023. Moving on to Pillar number three, which represents ClearPoint's therapeutic program. Starting first with our partnership in laser interstitial thermal therapy or LITT, we continue to make progress on our own neuro laser platform for intracranial and spine applications. While COVID-19 did impact our timelines due to supply chain disruptions and temporary closures of companion testing facilities, we are back at full speed in the development process and now expect first clinical cases to be performed in the first half of 2022. Given that our partner CLS does have FDA clearance and CE Mark for nonneuro applications, we are continuing to gather experience with a similar version of the system, which will give us more confidence going into a neuro release in 2022. For our PURSUIT aspiration device, we have temporarily halted commercial activity as neuro aspiration for intracerebral hemorrhage is less of a market share activity and more of a market development activity. Attempting to train hospital staff and physicians on a new technique is simply not a priority during this pandemic, and we expect to reevaluate this priority in early 2022 when the bolus of delayed elective procedures has caught up. We also recently announced an additional agreement with Blackrock for what we describe as a smart biopsy needle. We will continue to make progress on this new market for ClearPoint and provide updates in the second half of 2021. And finally, looking at pillar number four, which is global expansion and scale. We recently announced our first year European cases here early in 2021 and will continue site expansion as COVID travel and hospital restrictions resolve. Our expansion into Europe is crucial as it enables many of our new and potential pharma partners to begin enrolling patients in European and other sites outside of the United States. We have also added capacity to our clinical specialist team with 5 additional head count currently going through training. By the second half of this year, we expect to have the capacity to cover approximately 3,000 cases per year at our current operational burn rate. We also recently announced our robotic assistance platform designed to automate certain parts of our procedures. This approach will help surgeons and their teams increase capacity and be able to monitor multiple patients at the same time in multiple rooms. All of these technologies will be available for simulated use testing and training at our new education facility, nicknamed the Cove in Solana Beach, California, where we expect to open our first courses later this summer as travel begins to resume. Danilo and I are now happy to answer any questions there are from the field.

Our first question today is from Andrew D'Silva of B. Riley Securities.

Congrats on the progress. Just to start, I'd be very interested in additional color into your move into the operating room. And I'd really be curious on maybe a little bit on the margin profile as it relates to differences between the OR versus MRI suite? And then how significant will the human capital overlap be? Should we expect material differences between decision-makers or should we expect you to have to hire additional sales forces to be able to address the OR field team?

Thank you for your question, Andrew. Let me break it down into a few parts. First, it's crucial to identify what our target procedures are. When we mention a navigation system suited for the operating room, it doesn’t mean that all our procedures will transition there or that we will be involved in every case. Our strength lies in live MRI guidance, which is where we started, and we believe it's the most precise method for navigating and monitoring procedures. For instance, procedures like laser ablation are typically performed in the MRI suite since it provides essential temperature information within the body. Similarly, for drug delivery, it's beneficial to monitor the drug infusion and its penetration during the procedure, which again makes the MRI suite the primary setting. In the operating room, we are looking at procedures like biopsies and deep brain stimulation, which tend to be more predictable, as the targets are known in advance. We do have tools such as MER and smart biopsy needles that enhance precision in the operating room. While some procedures will remain in the MRI suite, our new Array system will help us enter existing biopsy and DBS markets in the operating room. From a human capital perspective, the clinical specialists involved will be consistent. However, the Array is designed for simpler, more predictable procedures that require less troubleshooting and anatomical knowledge, allowing us to sometimes operate without a clinical specialist on-site. As I mentioned earlier, we are opening the Solana Beach Cove office, which will function not just as a training center but also as our remote support hub. This way, rather than sending someone to assist with a biopsy, we can provide remote support and address any issues that arise. As we expand our presence in the operating room, I expect our clinical specialist team will be there for initial training and the first several cases. However, our goal is to gradually eliminate the need for a specialist in simpler procedures, allowing them to concentrate on areas like laser and drug delivery where we are delivering therapy directly.

Okay. That's great color. And moving over to just the new Philips Maestro brain model partnership. Can you give a little color on the efficiencies and advantages you expect to unlock relative to the legacy platform? And then I'd also be interested to know just how involved will Philips be during the development and commercialization process?

Sure. Yes. I think one of the biggest differences of our system and our approach is not just the sense of validation that has gone into Philips developing this tool over the past decade or so, but it also has to do with the speed of the approach. And many of the similar type of segmentation algorithms that are available out there today is very common that you need computer accelerations, a GPU of some kind, and you also need time, anywhere from 14 to 20 minutes is pretty commonplace to do some of the segmentation analysis. With our system, we believe it's fast enough, sub-1 minute for the analysis itself each time to be able to unlock these peri-procedural applications, where if you're running multiple scans for a procedure, it now becomes practical to rely on this model for navigation because you're not waiting 20 minutes after each scan. You can actually do it in 1 minute or so. So I think that's a big tool that we're going to use to unlock it, not to mention all of the additional advanced algorithms that we're building that will be layered on top of the segmentation tool itself. So the future as it kind of plays out is that in early 2022, we expect to launch the baseline segmentation tool, sort of the engine itself and then have a cadence of every 6 to 12 months after that, that a new application is sort of being launched to work with it. And the priority of those applications will sort of be dictated by not only the advancements that we make, but also the ones that will benefit our own therapeutic products the most as well as other ones that our partners have really decided are crucial for them. And in some cases, some of our pharma partners may very well be helping to fund some of these development efforts as well. So that's kind of the vision of the brain model itself. Your second question had to do with Philips involvement. In parallel to the license of the model itself, we also signed a development agreement with Philips, which effectively gives us access to some of their engineering team talent, primarily from the Philips research team. So some of the work we can kind of do ourselves as it relates to turning our own applications into skins that ride on top of the brain model and then some fundamental changes to the brain model that we need to add functionality, those are things that we have a conduit in Philips to help us with.

Okay. Perfect. And just last question for me. As we think about your continued expansion within the biologics and drug delivery segment, what additional overhead really should we expect to see as you look to capitalize on the translational service opportunity that you referenced, particularly as you expand internationally? And then you also talked about the 75 new target partners. How many studies do you think that actually equates to versus partners?

Sure, Andrew. Regarding the scale and range of our translational services, I don't think we need to go too far because we will keep leveraging the expertise of other companies. For example, I don’t foresee us owning our own animal center at this time; instead, we will partner with companies that already have those resources. Our main focus will be on strategy and executing those protocols, whether related to regulatory strategy or benchtop toxicology tests. Having connections with over 20 companies allows us to learn from their successes and failures, which will be beneficial for our partnerships in the future. Similar to our collaborations with Blackrock for physiology, CLS for laser technology, and Philips for machine learning in brain modeling, we want to engage with firms that offer these translational services and know when to utilize their expertise to solve our challenges. I hope you're still on the call, Andrew, but I’ve forgotten your second question; could you please repeat it?

Yes. Of the 75 new target drug and biologics partners, how many actual clinical or preclinical studies do you think that equates to?

It's a very important question and something that's difficult to quantify. Each of those targets represents at least one potential trial. However, not every idea will necessarily lead to a human patient in a clinical trial due to various failures and acquisitions that may occur along the way. Nevertheless, it's a strong starting point. Each of these relationships is typically cash flow positive from the outset thanks to our consulting and regulatory strategy services. The more relationships we build, the better the offset and efficiency we achieve, which can make us more profitable. It's also common for ideas from an academic center to serve as a platform in their own right, similar to how our platform can address multiple disease states. A partner may have several opportunities within their portfolio, so while not every relationship advances to a clinical trial, one relationship could potentially lead to multiple trials. The reality lies somewhere in between those two extremes.

Sorry, I have one more question just kind of thought in my head. So as far as partnering with maybe earlier stage studies that are preclinical with academic institutions, for example, could you like work as a facilitator with the academic institutions with some of the actual biopharma companies that you partnered with to actually drive some of those products from preclinical studies at academic institutions and to maybe M&A or joint ventures with some of your partners? I mean, it seems like you'd be in a perfect position to actually facilitate a lot of introductions.

Yes, we currently facilitate connections by obtaining permissions from all parties involved before proceeding. We remain vigilant and aware of opportunities. While we don't disclose any confidential information, we do have insights into which ideas are successful and which face challenges. We will keep exploring these opportunities and, if the chance arises, we may engage in partnerships through introductions or various risk-sharing models, including early participation for future royalties. These sophisticated models are certainly under consideration.

The next question is from Frank Takkinen of Lake Street Capital Markets.

And I also echo Andrew's comments on congrats on a great year in such a challenging environment.

Thanks, Frank.

Starting with the Philips agreement, I have a question about the business model behind the Maestro. I understand that the initial step involves installing the engine, followed by rolling out algorithm enhancements as they are developed. Could you clarify the economic model related to the initial installation of the engine, any potential add-on opportunities, and how these aspects could affect the business's margin profile?

Yes, I want to clarify that we have not yet released the product, and we are still developing our strategy. I can share that there are existing tools in the market that, while taking a different approach, have similar objectives. These tools are capable of segmenting and quantifying brain regions in various patients or even the same patient over time, which is often used to monitor patients and in clinical trials, particularly in the pharmaceutical sector. The ability to compare a patient at different time points in a consistent and predictable manner is currently available. It's also important to note that many companies market their products not just by offering access to the model but also by selling yearly service contracts and additional fees per patient interaction, turning the software into a kind of consumable or disposable item. Given that this model is accepted in the market, we will definitely consider it. In the context of surgical procedures, where we provide navigation systems, lasers, cannulas, and biopsy needles, we have the advantage of already having a disposable product. However, we are not restricting the application of this model solely to our surgical cases; we believe we can assist with any candidate that could be treated with our device or drug therapies, regardless of whether they actually receive the therapy.

Got it. That's helpful. Secondly, just a little bit broader question on the biologics and delivery side of the business with as many moving pieces as they are with the COVID environment as well as you guys continuously adding new partners all the time, I was hoping you could help us just rank and file the opportunities you see based on the size of the opportunity once an indication is potentially approved as well as their time to market.

Yes. I like to categorize the opportunities into two main areas, with a potential third area to discuss later. The first category includes rare inherited pediatric diseases like AADC, Friedreich's ataxia, Angelman syndrome, and Sanfilippo A syndrome. These conditions often lack effective treatment options, leaving children, their families, and healthcare professionals struggling for solutions. We see progress in this area, as evidenced by PTC's recent filing for commercial approval of their AADC treatment in Europe and their upcoming BLA submission in the United States, expected by the second quarter. Regulatory agencies recognize the urgency to treat severely ill children, even if the therapies remain experimental, and are willing to implement strict post-market monitoring. We anticipate seeing commercial approvals in this space over the next 12 to 24 months. These are smaller opportunities because they focus on rare childhood disorders, but many companies are also working to enhance diagnostics, as many affected children are often misdiagnosed. As diagnostic tests advance, the identification of these patients is likely to improve. The second category involves larger opportunities like Parkinson's disease, essential tremor, and Huntington's disease, which already have some treatments available. In this case, regulatory bodies will expect comprehensive scientific validation before considering acceleration, so we see these opportunities materializing closer to 2024 or 2025. Here, we are dealing with a larger patient population, generally older adults who may be more willing to take risks compared to parents seeking treatments for their children. Once reimbursement issues are settled, we could see these opportunities progress more swiftly. The appeal of a one-time injection through a small burr hole, which is cosmetically unobtrusive and typically involves a single pass, may attract younger patients who prefer not to wait for their health to decline. The third area I wanted to mention involves our ongoing work. We currently partner with 25 pharma companies and have 75 additional targets in the neuro cranial space. There are also potential partners in the spinal area. We're developing products designed for spinal infusions in drug delivery, with the understanding that neurosurgeons will likely perform these procedures. We aim to stay focused and not overwhelm ourselves with too many directions, but we believe that any area a neurosurgeon operates in is worth our attention as we transition into the future of gene and stem cell delivery.

Perfect. Helpful. And then the last question for me is about the COVID environment. I heard your comments about returning to pre-COVID levels in the second half of this year. I'm curious if your surgeons are experiencing a buildup of patients and whether there might be an opportunity for significant growth in the upcoming quarters as that situation improves.

Yes, there's a mix regarding the impact of COVID across the country. While some hospitals have continued to prioritize and schedule procedures, others have halted them entirely, leading to a backlog that needs to be addressed. The reality falls somewhere in between. It's important to note that when our products are used, it’s typically not the first point of contact for patients in the hospital; they need to meet with neurologists and undergo pre-surgery diagnostic MRI scans first. This process has been disrupted in some hospitals. We have hospitals that are functioning normally, others with significant backlogs ready to be resolved, and some that will take longer to address because they need to complete all the necessary consultations before surgery. We anticipate starting to clear some of this backlog in the third quarter of this year.

Our next question is from an indiscernible speaker.

I just wanted to follow up on the question that Andrew had. Actually, I have a couple of questions. But the first one, you mentioned something about potentially negotiating royalties in the clinical trials. Is that something that you guys are looking at or like milestone payments?

Yes, I would say it's something we're actively working on. The approach we're currently taking involves supporting a fee-for-service model during the preclinical phases, providing products that are included in the protocols during clinical trials, and supplying additional products once we reach commercialization, which also includes our clinical services. A key aspect of this, as I've mentioned before, is that if you are a pharmaceutical company, you're likely familiar with neurologists as your sales channel but may not have much contact with neurosurgeons. Therefore, the opportunity to effectively engage with us as your neurosurgery channel is significant. This isn't just about a physical product; it's a per-procedure fee that contributes to our overall model. That's essentially the plan we've been following. Recently, as we've been speaking with more early-stage companies and academic institutions, I've noticed a clear opportunity. For example, rather than having the pharma partner or academic center absorb some of the risks in the early preclinical stages, we could offer our expertise and take on some risk in exchange for a milestone, a clearance, a Phase I trial, or even a royalty. Based on our preliminary discussions, I believe there is a strong interest in this, even though the traditional approach I've described earlier remains the norm.

Got you. Okay. And then I wanted to talk a little bit about the sleep DBS. You mentioned that you're going to potentially go for a direct-to-patient marketing indication. Curious first, how long that might take? And then what's kind of instigating going after that now?

It has always been something we've aimed to achieve. Whenever a partner or a hospital encounters a patient who is extremely anxious, particularly in pediatric cases where it's impractical to keep them awake for the procedure, that's generally our entry point into the hospital system. Even if a hospital doesn't utilize our services for every deep brain stimulation procedure, they are aware that occasionally a patient may need us. Consequently, they consider us for those specific situations. We understand that patients would prefer options if available, and they are increasingly taking control of their healthcare decisions. While patients may be more willing to question their healthcare providers in less critical situations, such as choosing vaccines, neurosurgery still relies heavily on the expertise of surgeons and neurologists. Our desire for a direct-to-patient approach involves not only reaching out to patients but also educating neurologists about advancements in technology. In the past, we viewed the effort to gather necessary clinical evidence and labeling as quite costly, which led us to depend on the budgets of other DBS companies. They have made strides, and Medtronic recently highlighted their focus on DBS at the JPMorgan conference. We anticipate gradual progress in this area rather than an immediate transformation, as these procedures have been performed a certain way for two decades. Change takes time. Part of the reason we secured additional funding recently is to gain more control over this process, so we can lead rather than just follow the DBS companies.

Okay. This leads into your investor presentation, where you mentioned that the potential addressable market for eligible patients within the Parkinson's population is about 250,000 patients eligible for awake DBS. Is that correct? You also mentioned that only 6,000 patients receive it each year. What do you think is the main barrier to that?

I believe that when patients realize they need to be awake, it often becomes a significant hurdle. We've observed in previous trials and registries that when patients learned they could be randomized to an awake procedure, many opted out. The fear of being awake, even for a brief period during testing, is manageable for most, but the idea of staying awake during a lengthy 3- to 4-hour surgery is understandably daunting. This is definitely one barrier. Additionally, there are many other factors that could expand the DBS market and reach more of the 240,000 patients you mentioned. For instance, an article in The Neurologist last September outlined positive long-term outcomes for patients receiving DBS earlier in their disease progression. Consider a Parkinson's patient who has been taking levodopa for several years; as they increase their medication, its effectiveness diminishes until they become a non-responder. At that point, they experience severe issues like poor sleep and nutrition, leading to a rapid decline before being referred for DBS, which often is seen as a last resort. The aim of this trial was to challenge the norm of waiting until patients have severely deteriorated before treatment and advocate for earlier intervention. This approach not only addresses the issue of responsiveness but also potentially increases the number of patients who could experience significant benefits. A crucial part of our new strategy is the idea of adapting to the situation, where ideally we could transition all patients to an MRI suite for sleep DBS, which would be a major achievement. If that proves difficult or takes too long, we are developing a product with Array and Blackrock that will allow us to replicate the technologies currently used in operating rooms to assist patients who need an awake procedure. Essentially, it serves as a backup plan; if we cannot achieve sleep for every patient, we will still have an awake option available. Importantly, 95% of the software workflow will remain consistent between both procedures, which will help surgeons become more comfortable with ClearPoint in the operating room, making it easier to transition to the MRI suite later on if they prefer.

Got you. Okay. And then just last question. You mentioned on the clinical trials that there were no trials in progress. Does that imply that all of the revenues you generated did not include any dosing revenues from disposables on the cannulas in 2020? And then when do you expect that to resume or are you anticipating that to resume in 2021?

Yes. Let me clarify there because you're dead on, you're right there. So I would say all of the trials were halted for some period of time and some of them, that halt extended all the way through the end of 2020. Again, if you're a pharma partner and you've got a Phase I trial that's only 8 patients, the last thing you want to do is complicate the risks of that patient getting COVID or something at a hospital. So I think the safest route and most appropriate route was to say, 'Hey, we need to pause things and sort of wait until these things come.' So to answer the rest of your question is we did still have some disposable sales in biologics. It was almost half. I think it was $2.7 million of services versus $2.3 million of kind of nonservices. Where that kind of comes from? Those nonservices are often benchtop testing. So for example, if you're doing a toxicology study, you might need 120 of our cannulas to test in various situations to ensure that there's no sort of crossover effects of the drug with a cannula or something like that. So where these disposables aren't necessarily being used in a patient, they're still used very commonly in the benchtop setting.

Okay. Got you. And do you expect that to totally resume in 2021?

I do. I think by the second half of the year, I think all of our partners will have certainly resumed by then. Like I shared with you, I think at least 5 have actively already in 2021 resumed. And we do expect some announcements before the end of the year of additional partners kind of enrolling their first patients in trials.

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

All right. Well, once again, thank you to everyone for showing their interest in ClearPoint and attending the call today. We thank you for being a part of our important journey to help patients and their families who struggle with some of the most debilitating neurological disorders imaginable. Our company is in the strongest position we have ever been, and we look forward to continuing to update you on our expansion and execution in the years ahead. Thank you very much.

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