NeurAxis, Inc. (NRXS) Earnings

Management highlights

- Core Q1 2026 Milestones * This was the first full quarter of operations with the new Category 1 CPT code for PENFS, which created a standardized billing and reimbursement framework. Total covered lives under existing written payer policies remained steady at 101 million, including 45 million members from a major national payer policy secured in Q4 2025. * Key commercial KPIs showed strong improvement: prior authorization approval rate for handled submissions rose to 32% from 12% in full-year 2025; number of ordering accounts increased 18% YoY to 66; average revenue per ordering account rose 53% YoY to $24,000. * Management confirmed proof of concept: strong demand and utilization are achieved when three core success factors are in place: written payer medical policy coverage, an engaged physician champion, and dedicated IB-STEM clinic time. - Payer Strategy Progress * Expanding written medical policy coverage remains the company's highest strategic priority, as the CPT code alone does not guarantee consistent coverage. The company is pursuing multiple parallel outreach channels: direct engagement with payer medical policy teams, CPT code implementation support for state Medicaid programs, KOL/physician advocacy, collaboration with academic medical societies, guidance from former payer executives, and expansion of the internal prior authorization team. * Management secured improved access to decision-makers at several large remaining payers without existing coverage, and noted barriers are primarily related to access to decision-makers rather than fundamental opposition to the therapy. - Commercialization Restructuring * The company has shifted from an access creation phase to an execution-focused phase, aligning resources to markets with existing favorable coverage rather than broad expansion into undercovered markets. The primary commercial focus remains on children's hospitals, where the evidence base and coverage momentum are strongest. * Multiple organizational changes are being implemented to support scale: adding full-time VP of Sales and VP of Marketing roles; piloting a targeted regional coverage model to increase in-person visit frequency; increasing sales training rigor focused on payer dynamics and provider economics; launching an integrative pediatric GI health initiative with a new clinical adoption role for behavioral health expertise; adding targeted talent including MSLs, market development specialists, digital marketing leaders, and VA-experienced personnel; and preparing a focused strategic market initiative to create local intensity in targeted covered regions. - VA and Adult Market Opportunity * The company secured a federal supply schedule contract for VA access, and saw more early Q1 orders and facility activations than initially expected. The VA is a complementary high-potential opportunity with a large unmet patient population and a purchasing pathway less dependent on commercial payer coverage, and the company is dedicating commercial resources to expand this footprint. * For the broader non-VA adult market, broad payer coverage will require a large randomized controlled trial, which is already in progress with Cleveland Clinic and Stanford University for functional dyspepsia.

Guidance

- Revenue growth: Management expects the positive mix shift toward fully reimbursed procedures to continue, which will drive further gross margin expansion in future quarters. - Cash burn and breakeven: Quarterly cash burn is expected to decline to $1 million or less per quarter for the remainder of FY2026, down from $1.2 million in Q1 FY2026. Based on current SG&A and variable margin trends, management estimates approximately $15 million in annual revenue is needed to reach cash flow breakeven, against a current Q1 run rate of ~$6.4 million annualized. - Selling expenses: Selling and marketing expenses are expected to increase for the remainder of FY2026, as the company scales commercial resources in line with confirmed growth following the CPT code implementation. - One-time charge: A one-time non-recurring non-cash stock compensation charge of approximately $4 million is expected in Q2 FY2026, related to the cancellation and reissuance of stock options as restricted stock units.

Segment performance

Neuraxis operates a single core product segment focused on the IB-STEM/PENFS medical device for chronic functional GI disorders, with an additional early-stage opportunity in the U.S. Department of Veterans Affairs (VA) market. Total Q1 FY2026 revenue was $1.6 million, representing 100% of the company's total revenue, an 80% year-over-year (YoY) increase from $896,000 in Q1 FY2025. IB-STEM unit deliveries increased 32% YoY, while average selling price (ASP) rose 33% YoY from $766 to $1,017, driven by a mix shift away from discounted financial assistance programs toward fully reimbursed procedures. Gross margin for the segment expanded 200 basis points YoY to 86.4% in Q1 FY2026, up from 84.4% in the prior year period, due to the favorable payer mix shift. The VA market segment is in early activation, with more facilities placing orders and moving through activation than initially expected, but did not contribute meaningful revenue in Q1.

Risks & headwinds

- Payer coverage expansion is expected to progress gradually, and timing of new policy approvals remains unpredictable, which can delay near-term revenue growth. Monthly revenue may fluctuate due to variable coverage adoption timelines. - Many state Medicaid programs have not yet loaded the new CPT code onto their fee schedules, which is an implementation barrier that can delay hospital program launches and activation. - Sufficient payer coverage (at minimum ~50% of an account's patient population) is required for full account adoption, and gaps in coverage can constrain utilization even after the CPT code is in place. - Cash flow breakeven is dependent on sustaining the current revenue growth trajectory, and unanticipated slowdowns in growth could delay profitability.

Analyst Q&A

• Q: What is the trend for breadth (new accounts) vs. depth (growth at existing accounts) in 2026, and what is the company's strategic focus going forward?

  A: Both breadth and depth are increasing: the number of ordering accounts is up 25-30% from 2025 averages, and growth has continued into Q2. Mature top accounts are growing faster as they already have coverage and clinic capacity, while new accounts start with low volume and grow over time. The company's strategic focus is depth in accounts and regions with existing strong coverage, rather than broad immediate expansion to all children's hospitals, as the revenue opportunity in covered high-potential accounts is already immense.

• Q: What level of payer coverage is required for an account to become a top-performing high-depth account?

  A: An account needs coverage for at least 50% of its eligible patient population, ideally closer to 60-70%, to fully adopt the procedure as a standard offering and reduce reliance on the discounted patient assistance program. Adding Medicaid coverage (after CPT code loading to state fee schedules) can contribute 20-40% of an account's volume, which significantly helps accounts hit this threshold.

• Q: How will SG&A and operating expenses trend for the rest of 2026 following the new commercial hires?

  A: Selling and marketing expenses will increase for the rest of the year, a shift from the prior holding pattern while waiting for the CPT code to take effect. A one-time non-recurring non-cash stock compensation charge of ~$4 million will hit G&A in Q2 2026, related to the stock option cancellation and reissuance as RSUs; core G&A is expected to remain at its current trend outside of this one-time item.

• Q: What is the company's current cash burn projection and how much revenue is needed to reach cash flow breakeven? What is the plan for reporting VA revenue?

  A: Quarterly cash burn fell to $1.2 million in Q1 2026, and is expected to decline to $1 million or less per quarter for the rest of the year. Based on current 75% variable margin and current operating costs, ~$15 million in annual revenue is needed to achieve cash flow breakeven. The company will likely begin reporting VA revenue separately at some future point as the channel scales.