And as a result, I think anything that even gets accepted by the FDA as the status probably has a very reasonable shot of seeing it all the way through, which I think would be exciting for the entire biotech community to see eventually on the United States market a drug that has passed all the GMP requirements, the manufacturing, clinical trial requirements, et cetera, and make this therapy available here in the United States.
Frank Takkinen: Perfect. That’s good color. I’ll stop there. Thanks for taking the questions.
Joe Burnett: Thanks Frank.
Operator: Thank you. Our next question comes from Emily Christy with Stifel. Please state your question.
Emily Christy: Hi. Congratulations on the quarter and the strong start to the year so far, it sounds like.
Joe Burnett: Thanks, Emily.
Emily Christy: Kind of a high level, you have a lot of new products out there, various stages of launch, but most probably will be in full launch by the end of the year. How are you balancing that internally in terms of resource allocation and sales force training, all of those kind of pieces? How does that come together?
Joe Burnett: It’s a great question. And we’re trying to balance all of that with the other commitments we’ve made to scale and getting to cash flow breakeven at least on an operational standpoint as well. So the luxury that I think we have that a lot of other companies don’t is the — everything we do in the clinic today is linked by the common ClearPoint platform and the fact that 90%, 95% of the workflow is the same, even if you’re doing a DBS case or a drug delivery case or a laser case or a biopsy or even a stereotactic EEG, lead placement, for example. So the buttonology, the software, the workflow is incredibly similar. So what we’ve been doing is really cross training our entire clinical team across all of the different product lines.
And yes, we have a little bit of redundancy where, in many cases, we’ve got two specialists right now, one to help with navigation, one to help with laser, for example. But we believe very strongly in this team and the ability to operate and navigate an entire procedure across all of these. I think we don’t see a need to hire twice the sales and clinical organization, for example, to be able to grow with these particular products. Now the SmartFrame OR project is an interesting one, however, because in that circumstance, remember, we’re not a DBS company. We are a laser company, so we’re delivering the therapy. We are a drug delivery company. We’re delivering the therapy through our cannulas and other accessories there, too. But for DBS, we’re just there to navigate someone else’s therapy to a target.
So with SmartFrame OR, we believe there’s the potential that after training a site with five or 10 clinical cases, which, again, are a lot more common and a lot more frequent, it’s possible that we’ll be able to certify an employee there at that site, at that hospital to be able to perform these procedures. And in the future, the ClearPoint representative would be there to launch new products and train on new techniques and new software, however, not necessarily have to be there for every case like we’ve historically done. So that is another tool that we think will help us get scale, especially in some more remote hospitals where we don’t have to put someone on an airplane and stay in a hotel to cover one of those live cases.
Emily Christy: Right. Okay. Makes sense. Just on the biologics side, adding new partners, kind of moving up the chain in terms of level of service, how do you think about kind of the margin impact of that going forward relative to some of these first entries you’ve had that maybe are lower margin? Is that just scaling up from here?
Joe Burnett: Yes. It’s a tricky question. And if — I would love to predict it better than I think I can at the current moment. The important thing for us, number one, is every single agreement that we do is really gross margin positive from day 1. So if you think about the distinction of us and a biotech company, it’s like, yes, we both get rewarded by progress and commercial launch of these amazing drug therapies down the road, but we don’t have the burden of funding the $20 million or $30 million or $40 million clinical trial to be able to get to that point. In fact, we actually can make product at a reasonable gross margin, sell product at a reasonable gross margin during the preclinical and clinical trial process. So we don’t have the massive reward, but we also don’t have that same risk here.
So every engagement that we have, we are bringing gross margin dollars into the company. So it’s really a gross margin percentage that we’re talking about. And again, that can really fluctuate based on the design of the study and the level of services that we provide. I would say, typically, at this point, there’s very few of these programs that are less than our capital margin, for example, which are in that 35% to 45% range. The vast majority of the deals that we do are above 50% and some even north of that. However, just based on a quarter-to-quarter basis, it can be a little bit choppy. So that’s one thing to think about. The other thing, Emily, that I see being an impact on gross margin here in 2024 is this acceleration we’re seeing in capital placements as well.
So as we put in the press release today, we’ve already installed six systems here in Q1. We’re not getting these systems away by no means. But if you had a quarter, for example, last year where maybe we did $400,000 in revenue in a quarter that’s capital, this year we might have a quarter that’s over $1 million, for example, in which case it’s a larger percentage of the overall revenue, which can again be a drag on gross margin percentage but not necessarily gross margin dollars. And obviously, the more systems we place out there, the more stores that we’re opening. So it’s in our best interest to do that as quickly as we can.
