Neuraxis (AMEX:NRXS) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
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Summary
NRXS reported Q1 2026 revenue of $1.6 million, an 80% increase year-over-year, driven by the new Category 1 CPT code for Penfs that improved billing and reimbursement processes.
The company is focusing on expanding insurance coverage as a key driver of scalable growth, aiming to improve payer policy coverage and operational infrastructure for efficient treatment.
Operational highlights included a 33% increase in average selling price and a 32% approval rate for internal prior authorization, indicating successful shifts towards covered procedures.
Commercialization efforts are now prioritized, with strategic hires and a focus on markets with favorable insurance coverage and demand, particularly targeting children's hospitals.
The VA healthcare system represents a complementary opportunity, with early order activity noted and expectations of significant future potential.
NRXS aims to achieve cash flow breakeven with a target of $15 million in revenue, based on current SG&A and variable margin rates.
Full Transcript
OPERATOR
Good day and welcome to the Naraxis First Quarter Fiscal Year 2026 Financial Results Conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions. To ask a question you may press Star then one on a touchtone phone. To withdraw your question please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Ben Champion, Investor Relations. Please go ahead.
Ben Champion (Investor Relations)
Thank you and good morning everyone. Thank you for joining us for Naraxis first quarter 2026 financial results and corporate update conference call. Joining us on today's call is Brian Carricko, CEO of Naraxis and Tim Hendricks, CFO of NRXS. At the conclusion of today's prepared remarks we will open the call to questions. Please follow the operator's instructions to ask questions. Today's event is being recorded and will be available for replay through the webcast information provided in the press release. Finally, I'd also like to call your attention to the customary safe harbor disclosures regarding forward looking information. The conference call today will contain certain forward looking statements and including statements regarding the goals, strategies, beliefs, expectations and future potential financial operational results for NRXS. Although management believes these statements are reasonable based on estimates, assumptions and projections, as of today, these statements are not guarantees of future performance. Time sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties and other factors including but not limited to the factors set forth in the company's filings with the sec. NRXS undertakes no obligation to update or revise any of these forward looking statements. With that said, I would like to turn the event over to Brian Carrico, Chief Executive Officer of Naraxis. Brian, please proceed.
Brian Carrico (Chief Executive Officer)
Thank you Ben. Good morning to everyone joining us. Good to talk to everyone again. Quarter one 2026 was an important quarter for Naraxis. I talked a little bit about this on the last earnings call six or seven weeks ago. It was our first full quarter of operating with the Category 1 CPT code for PenFS and it gave us the clearest view to date of what drives adoption what continues to limit broader utilization and where we need to focus our resources. I will structure my remarks today around six key areas. Number one revenue and first quarter highlights. Number two insurance coverage status and payer progress. Number three key performance indicators or KPIs number four commercialization, including our current structure, new hires, and upcoming changes Number five the VA opportunity and number six a summary of our focused next steps. Following my remarks, Tim Hendricks, our CFO, will review our financial results for the first quarter 2026. For the first quarter 2026 revenue was 1.6 million, compared with 896,000 in Q1.25, representing an 80% year over year revenue growth. The quarter modestly exceeded our expectations, but the more important point is what we learned from the quarter. Quarter one confirmed proof of concept and that demand is strong where access barriers are reduced and healthcare providers with the right combination of payer coverage, physician engagement, and operational capacity perform extremely well. We also saw strong improvement in average selling price during the quarter, driven by the continued mix shift toward covered and reimbursed procedures and away from discounted financial assistance channels. That mix shift is important because it supports stronger revenue quality margin potential and long term scalability. Some key first quarter highlights include as we've discussed, the Category 1 CPT code for PNFs became effective on January 1st, creating a more standard framework for procedure billing and reimbursement for children's hospitals and RVUs for physicians. We continue to operate with more than 100 million covered lives, including the major national health insurer policy announced in December, representing approximately 45 million health plan members. Patients treated increased meaningfully following the CPT code launch, particularly at children's hospitals with strong policy coverage. We confirmed that written medical policy coverage remains essential Payers generally do not provide reliable and consistent coverage. Based solely on the CPT code, we gained clear insight into the three factors that drive account level success, written medical policy coverage, physician champions, and dedicated IB STEM clinic time. We identified the remaining gaps we need to close, including payer coverage, clinical reinforcement, market level execution, C suite and administrator education, and consistent communication with each institution. In short, the quarter moved us from theory to evidence where proof of concept continued to succeed. The barriers that historically limited IV STEM adoption are now much better defined, and that gives us a far more actionable roadmap. Now I want to talk about insurance status. Insurance policy coverage remains the single most important driver of scalable growth. Quarter one confirmed that a single substantial medical policy, while extremely valuable, is not sufficient by itself. Providers need confidence that coverage exists across a meaningful portion of their payer mix before they fully activate programs and allocate consistent clinic time. This is why our payer strategy remains our highest priority. We're focused on expanding written medical policy coverage while also improving the practical infrastructure that allows hospitals and providers to treat patients efficiently once coverage exists. Our payer outreach now includes multiple parallel channels continued direct engagement with the payers and their medical policy teams implementation of the CPT code 64567 on fee schedules across state Medicaid programs where new codes are not yet fully loaded Physician and KOL driven advocacy to reinforce the clinical need in the published evidence engagement with both pediatric and adult academic medical societies Guidance from former payer executives and medical directors to refine our message to access the right decision makers and continued expansion of our internal prior authorization team to enhance administrative efficiency for providers and improve reimbursement confidence. We continue to make progress with large national payers. I will not disclose specific payer discussions today, but we recently gained improved access to medical directors and other decision makers at several of the largest remaining payers without existing policy coverage.
Brian Carrico (Chief Executive Officer)
Those conversations reinforced our belief that the challenge has often been access to the right decision makers and rather than fundamental opposition to the therapy. Our message to payers remains consistent. IV STEM addresses a large unmet need in pediatric functional abdominal pain and related disorders, offers a favorable safety profile and provides an alternative to off label medication use, including drugs with FDA black box warnings. The clinical evidence, published treatment guidelines Broad Academic Society and kol support the Category 1 CPT code and existing payer precedent together create a strong foundation for additional policy coverage.
Brian Carrico (Chief Executive Officer)
That said, as we clearly know at this point, payer coverage adoption does not happen overnight. We expect policy updates and prior authorization improvements to unfold gradually in parallel to pursuing those remaining payers. Our goal is to execute aggressively in markets where policy coverage exists and prepare the commercial infrastructure to scale as additional coverage comes online. We have also seen that some state Medicaid programs have yet to load CPT code 64567 on their fee schedules.
Brian Carrico (Chief Executive Officer)
This can delay programs, launches and affect hospital activation due to health equity considerations. Importantly, these are implementation issues rather than clinical adoption issues. In markets where policy coverage and fee schedule inclusion are in place, the CPT Code is having the intended effect Now I want to talk about KPIs. We will now provide set and meaningful KPIs each quarter going forward under the new CPT Code environment. This section includes the metrics that best explain both current performance and future growth potential. The purpose of this KPI framework is not only to report historical performance, it is to help investors understand the mechanics of adoption where coverage exists, whether providers have operational capacity, how patient submissions convert to treatments, and how reimbursed utilization affects revenue quality and margin potential.
Brian Carrico (Chief Executive Officer)
The first KPI I'll discuss is revenue 1.6 million in quarter 126 versus 896,000 in quarter one. 25 this is the top line performance under the first quarter with category one CPT code in effect.
Brian Carrico (Chief Executive Officer)
IB stem average selling price ASP is the second KPI. We're at $1,017 first $766 in Q1 of 25 up 33%. This shows reimbursement mix shift and revenue quality. Total covered lives remain steady at 101 million. Quarter 1 internal prior authorization Approval Percentage this one's important. This measure is percentage of full price approval submissions. Now remember, we do prior authorizations for a certain number of children's hospitals that we have access to these numbers. We don't have access to children's hospitals across the country that do their own prior authorizations, but for the children's hospitals that we do prior authorizations for, we had a 32% approval rate in quarter one compared to a 12% approval rate throughout the year of 2025. Quarter one number of ordering accounts we had 66 accounts order IV stem in the first quarter compared to 56 accounts in quarter one of 2025, so up 18%. That shows the breadth of adoption and concentration risk.
Brian Carrico (Chief Executive Officer)
The final KPI I'll share and Tim will talk about some of the financial KPIs, but the last commercial KPIL shares quarter one revenue per ordering IV STEM account. You could back into this number, but I'll give it to you $24,000 per account on average that ordered in quarter one versus $16,000 per account in quarter one 2025 up 53%. Now I want to talk about the commercialization. Commercialization and commercial execution is now the primary driver of growth. We have moved from an access creation phase into an execution phase and our commercial structure is being aligned around the markets and accounts where coverage, demand and utilization potential are strongest. Our primary commercial focus remains on children's hospitals. This is where we have the strongest evidence base, the clearest coverage momentum, and the most immediate opportunity to scale utilization. We have prioritized accounts based on their utilization potential, reimbursement environment, and ability to dedicate IV STEM clinic capacity. During the first quarter, we continued direct engagement with the children's hospitals that have previously treated with IV stem. Our team has been working with physicians, division chiefs, administrators and financial stakeholders to communicate the clinical data to the reimbursement pathway, the procedural economics and the operational requirements needed to consistently treat patients. The most successful accounts share three common characteristics Strong medical policy coverage across a meaningful portion of the hospital's payer mix at least one engaged physician champion who understands the clinical data and dedicated clinic time or a consistent workflow to identify, authorize, and treat eligible patients. Where one of those elements is missing, utilization is constrained. Our commercial model is therefore being built to identify the missing element at each account and address it directly, whether that means payer support, clinical reinforcement, operational workflow support, or economic education for administrators. We are also being disciplined about how we deploy resources. We are not expanding broadly into markets that lack sufficient payer coverage. Instead, we are focusing on depth in select markets where coverage and demand are already favorable, with the expectation that this approach will generate higher returns and more predictable growth within commercialization. I'm going to talk about the new hires and upcoming commercial changes. Based on what we learned in Q1, we are making several changes to align the organization for scale. First, we are strengthening commercial leadership and coordination. The sales organization is being aligned under a full time vice president of sales role while marketing is being elevated under a full time vice president of marketing role. This will create tighter coordination across field execution, messaging, account support, digital awareness, and market development. From a comprehensive standpoint, our payer access work will also continue to receive dedicated leadership focus, including commercial payers, Medicaid, and managed Medicaid opportunities. Second, we are testing a more targeted regional coverage model. Frequency of visit matters when we are in person, we are much more successful to drive clinical buy in and utilization. Our team needs to be in front of clinicians and hospital support teams more consistently. We are piloting territories that allow a representative to cover both children's hospitals and VA accounts within targeted geographies where coverage, demand and strategic fit justify the investment. This model will be tested and expanded as coverage improves. Third, we are increasing the rigor of our sales training. This includes internal and external training focused not only on product knowledge and clinical data, but payer dynamics, provider economics, and execution discipline. As additional policy coverage comes online, we need the team to be prepared to convert coverage into predictable utilization. Fourth, we are launching a focused initiative around integrative health programs within pediatric gi. Many of our most important referral sources already operate within this model, which emphasizes multidisciplinary care and reduced reliance on medication. We view these programs as an important entry point for broader and earlier IV STEM adoption. To support this effort that we see as the future, we are adding a clinical adoption and patient access role with behavioral health expertise. This role will be relationship driven and patient focused, helping institutions expand access, integrate IV STEM earlier in the treatment pathway, and operationalize program growth. We will also continue to work with the academic, medical societies and other external stakeholders to support a broader integrative care framework. Fifth, we are actively pursuing additional talent in areas that can accelerate adoption, including medical science liaisons to ensure the clinical evidence is well understood and most importantly, top of mind a market development specialist to communicate the economic and operational value of ibstem to administrators and hospital stakeholders, which has been very Favorable based on Q1 feedback Digital marketing leadership to improve physician and patient awareness in targeted covered markets sales professionals in markets with adequate payer coverage and clear utilization potential and personnel with direct VA experience who can help accelerate adoption inside the federal system. Finally, we are preparing what we refer to internally as a strategic market initiative for select regions. This concept is to coordinate payer access, field execution, clinical education, market development, prior authorization support, digital awareness and patient facing messaging in the same targeted markets. The objective is to create local intensity. The overall principle is simple coverage unlocks the opportunity, but execution determines the level of growth. As you can see, we've turned as we said we would do, we've turned to a commercial focus and very much so, a comprehensive commercial focus. Okay, last I want to spend a few minutes on the VA opportunity. As previously announced, we were awarded a Federal Supply Schedule contract enabling commercial access to the U.S. department of Veterans Affairs. The VA healthcare System serves nearly 7 million active patients annually and functional dyspepsia is estimated to affect approximately 3% of that population. Given typical VA adoption timelines, we did not expect meaningful Q1 orders. However, we are already seeing multiple VA facilities placing orders and many more moving through the activation process more than we thought would be the case. That early activity is encouraging and reinforces our belief that the VA can become a meaningful channel over time. The pediatric commercial market remains our primary focus, but the VA represents a complementary opportunity with several attractive characteristics with a large patient population with a significant unmet need, centralized federal purchasing infrastructure, a pathway that is not dependent on commercial payer coverage. In the same way as the broader non VA adult market, strong alignment with non drug approaches for chronic functional GI conditions and the potential to leverage experienced VA focused personnel and clinical education resources, we are actively dedicating commercial resources to this channel and evaluating hires with proven VA commercialization experience. As utilization data and clinic adoption develop, we expect to expand our footprint in a disciplined way. More broadly for the adult IV STEM opportunity outside the va, we continue to believe that broad medical policy coverage will likely require a large randomized control trial. We have executed an agreement with the Cleveland Clinic and Stanford University to conduct a randomized control trial evaluating IV STEM and adult patients with functional dyspepsia. That study is designed to generate the evidence needed to support future adult medical policy coverage. While our near term commercial focus remains children's hospitals and the VA. To summarize, Q1 was successful for two reasons. First, performance modestly exceeded our expectations and demonstrated strong demand where access barriers are reduced. I should clarify, the strong demand is across the board the results the strong results where access barriers are reduced. Second, and more importantly, the quarter gave us a clear understanding of the drivers and constraints of adoptions. The most important conclusions are written medical policy coverage is essential to national scale and broad adoption that we all expect. The strongest accounts have payer coverage of physician champion and dedicated IV STEM clinic time. A CPT code alone does not create coverage, but it is a critical piece of the reimbursement infrastructure. Commercial execution must be concentrated in markets where coverage and demand already exist. Clinical reinforcement, administrator education, prior authorization support and digital awareness are all necessary to convert access into utilization. The VA is emerging as a meaningful opportunity alongside our primary pediatric commercial focus and at this stage success is straightforward in concept, though complex in execution. Expand payer coverage and execute with intensity in the markets where strong coverage we are moving decisively on both fronts. We have never been better positioned operationally, commercially or strategically. While monthly revenue may fluctuate and payer coverage timing remains difficult to predict, the underlying demand is becoming increasingly clear. We believe the Progress underway in 2026 represents the beginning of a multi year growth cycle for Neuraxis. With that, I'll now turn the call over to Tim Hendricks, Chief Financial Officer to discuss the financial results in more detail. Tim, please proceed.
Tim Hendricks (Chief Financial Officer)
Thank you Brian and appreciate everyone joining us on this call today. These financial results were included within our press release which was issued earlier this morning and were also provided in more detail within our 10q also filed this morning. Similar to prior calls, I will dive into key areas such as our financial results, liquidity position and elements of an outlook. Given the momentum we saw Here in the first quarter of 2026, we've continued our growth streak as the first quarter of 2026 marks the seventh straight quarter of double digit revenue growth year over year. Fiscal year 2025 milestones including the Category 1 CPT code that became effective January 1st, FDA indication expansion into more clinical treatments and the adult population, Federal supply schedule, opening the Veterans Affair Health System to IV STEM and penfs and significantly more medical payer coverage set us up well for a 2026 growth story of not only revenue but gross margin expansion and operating expense leverage. We believe we are positioned very well to deliver on our commitments to both our patients and investors. So let's dive into the financial highlights in more detail. Our revenue in the first quarter of 2026 of 1.6 million was up 80% compared to 896,000 in the first quarter of 2025. In fact, 1Q26 marked the strongest quarterly revenue performance in the company's history. IB stim unit deliveries for 1Q26 increased 32% compared to prior year due to volume growth from patients with full reimbursement coverage, a continuation of what we saw in 4Q25 and a market shift from our historical mix of the company's discounted financial assistance program, outpacing the growth of higher margin full reimbursement payers in the past. As a direct result of that payer mix shift, our IB stim average selling price increased 33% as Brian mentioned previously, from $766 per device in 1Q25 to $1,017 per device in 1Q26. Our largest insurance payer, which we picked up in 4Q25, was a key contributor in the lift of the ASP in addition to broader acceptance of the IV STIM device as a result of the Category 1 CPT code. And given the Category 1 CPT code has been effective only since January 1, we expect the positive mix shift on revenue and gross margin that I will discuss next. To continue, Gross margin in the first quarter of 2016 was 86.4% compared to 84.4% in 1Q25. The 200 basis point expansion is a direct result of the adoption of the Category 1 CPT code and increased payer coverage as our unit growth shifted from discounted financial assistance to full reimbursement payers. Although our current market strategy is targeting all payers, our efforts to achieve more insurance coverage are particularly focused on the largest payers. We expect that success in that venture will continue to push our gross margins higher in the future quarters due to the adoption trend we experienced here. In 1Q26. Total operating expenses in 1Q26 were 3.1 million, an increase of 3% compared to 3 million in 1Q25. We measure, manage and present our operating expenses along three functions selling, research and development, and general and administrative. Consistent with 2H25, we reclassified $366,057,000 from general and administrative expenses into selling and research and development costs respectively in 1Q26 to conform to the current period and more transparent presentation as these costs are leading indicators of our future success. Valid expenses in 1Q26 were 824,000, a 65% increase compared to 500,000 in 1Q25. The increase is due to sales commissions that are directly related to our higher sales volume and additional sales reps and marketing personnel to leverage the IB STEM Category 1 CPT code and increased payer coverage. Research and development expenses in 1Q26 were 100,000, a decrease of 16% compared to 118,000 in 1Q25. The decrease is reflective of proceeds received for devices used in 2026 clinical research studies. Excluding those proceeds year over year, R and D expenses would have increased 45%. General and administrative expenses of 2.2 million in 1Q26 declined 9% compared to 2.4 million in 1Q25. The decrease was due to the absence of a one time non recurring legal settlement charge in 1Q25, partially offset by incremental stock compensation expense from the third year of a three year vesting plan, higher benefit costs and consulting fees related to the Federal Supply Schedule Agreement allowing us to sell to the U.S. department of Veteran Affairs. Our operating loss in the first quarter of 2016 was 1.7 million, 24% lower compared to a $2.3 million loss in 1Q25 and our net loss in 1Q26 was 1.8 million, 23% lower compared to 2.3 million in 1Q25. Our higher gross profit from increased quarterly sales year over year and the absence in 26 of a one time non recurring legal settlement charge incurred in 25 was partially offset by higher selling expenses directly attributable to the higher volume in 1Q26. As for liquidity, cash on hand as of 3-31-26 was $7.1 million. Our free cash outflow in the first quarter of 2026 was $1.2 million, 391,000 better than our quarterly burn rate of 1.6 million in 1Q25 due to a lower operating loss, primarily a result of the growth due to the Category 1 CPT code and increased payer coverage as well as more efficient working capital utilization. Since then, we have continued to improve our liquidity position into the second quarter of 2016 by raising an incremental $2.1 million to our at the Market Equity facility and the continued exercise of warrants from investors. As our current cash balance is approximately $8 million, our balance sheet provides us with sufficient capital to execute on our growth plans with no near term need for additional financing at this time. We do believe we will achieve cash flow breakeven in the future, but that goal is dependent on the continuation of our growth trajectory to reduce our current cash burn. Our current burn in the first, second and third quarters of 2025 was approximately $1.5 billion, with 4Q25 increasing to $2 million as we appropriately built working capital such as inventory in anticipation of the January 1, 2026 effective date for the PenFS Category 1 CPT code. That compares to our current cash burn of 1.2 million in 1Q26 as evidence of our progress toward that goal. And with that, I'll turn the call back over to Brian.
Brian Carrico (Chief Executive Officer)
Thank you, Tim. With that operator, we'll be happy to take any questions.
OPERATOR
We will now begin the question and answer session. To ask a question, you may press Star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. The first question today comes from Chase Knickerbocker with Craig Hallam. Please go ahead.
Chase Knickerbocker
Good morning. Thanks for taking the questions. Maybe I just wanted to start on breadth versus depth and kind of how you're seeing that trend, Brian, you know, not only since the last update, but if you could maybe give us your thoughts as things have started to materialize now, you know, four, four or five months into the year. Kind of how you expect 2026 to play out from, you know, a depth with kind of your best customers and then how that's trending and then and then how you how you expect kind of to expand accounts maybe based on the pipeline of kind of those accounts that are starting to establish IV STEM clinic days. Thanks.
Brian Carrico (Chief Executive Officer)
Yeah. Morning Chase, let's talk breadth. First breath first. I'll give you an example we had. I think our record in 2025 was something like 39 or 37 accounts. The most are ordered in one month, different accounts. And in Q1 it was something like. 44. And we've seen that expand. I'm not going to get into Q2, but we've seen that expand so we're seeing more accounts. I think our average in 2025 was something like 30 accounts. And I believe Q1, the average was high 30s. So that's up, you know, 25 to 30%. So we're seeing more accountss order, and that's a combination of is primarily directly related to the Category 1 CPT code and the issues that came along with that being able to bill. So we're seeing more accountss order and I would just say that's expanded into quarter two without getting into any details of quarter two. And then from a depth standpoint, we were pretty top heavy. We were more top heavy in quarter one with our top 10, our top 15 or top 20 accounts than we were in 2025. But that makes sense because the top 10, 15, 20 accounts were how you had IV STEM clinic time. They were bought in and the category one code allowed them, combined with the big payers that came through allowed them to get more approval. So they were already active. And then when you have newer accounts coming on, they always start slow. They treat whatever a patient a month or two patients a month, and then they begin to grow. So I would just say that as Q1 went on, we saw more accounts ordering. We saw the accounts at the top continuing to order more and more as they got more comfortable with the Category 1 code and the insurance coverage that's in place. And I would just say that's expanded into Q2. And we continue to see both new accounts ordering. We see the newer accounts ordering more and we see the more mature accounts ordering. Everyone across the board continues to order more as they get comfortable with the account Category one code. So both the breadth and the depth is increasing. But I'm not, we're not trying to go sell to 260 children's hospitals tomorrow. We're trying to be laser focused in areas where we have good insurance policy coverage and a champion in place in IV stem clinic time because we know the opportunity there is significant and they're comfortable with the billing and the reimbursement. So that's our real focus, is the depth. Of course. Of course we're adding new accounts and you'll see that in the KPIs as we move throughout the year. But we're really focused on when I talk about this comprehensive model of involving the new hires and the economic side of this and meeting with the stakeholders and getting the physicians, the chiefs, the chairs, the chief revenue officers, the CFOs, when I talk about getting everyone in a room, that's generally at the top 10, 15, 20 accounts, where we know the revenue Opportunity is significant. They're seeing the benefit of the strong reimbursement where there's policy coverage and we're trying to grow deep and wide as quickly as possible in those accounts. And then simultaneously in parallel, we're opening new accounts and beginning to have those conversations. But there are multiple levels of a new account. They become a new account and then they become, you know, as time goes on and they see the reimbursement, they get more comfortable with the placements in the IV stem clinic time. Then they begin to expand the program. And that's really what we learned in quarter one. We suspected it, but now we've learned more detail around that. And that's why we're adding specific people to carry out specific roles to grow depth, because the opportunity in one average sized children's hospital is immense, not to mention the bigger programs.
Chase Knickerbocker
And so if we think about, you know, you kind of, you'd kind of mentioned you know, around some of the payer dynamics in the quarter and what it might take to kind of get broad swaths of volume from specific accounts. Do you have a kind of sense of what that kind of toppling over of the domino level of coverage has to be in an account before, you know, that account is, you know, one of your kind of top 10 from a depth perspective, like what it takes for them to really kind of adopt as standard of care IV stim.
Brian Carrico (Chief Executive Officer)
Well, to be more, let's just assume the policy coverage is strong. To be more frontline, it's got to be minimum 50% closer to 60 or 70%. Now the good news, Chase, is that we're seeing significant approvals and coverage and payment for Medicaid now that the most state Medicaids don't write policy coverage. But now that the CPT code 64567 is on the fee schedule in many states, I wouldn't even say most at this point, I'm not, you know, the delay is the delay, but that helps significantly because that can be anywhere from 20 to 30 to 40% of an account, depending on the geography in the country. Now, we know historically that, you know, from our internal prior authorizations in 2025, 19% of the patients we received in 2025 to our priority prior authorization team were Medicaid and 81% were commercial. So, you know, just because a hospital's 40% Medicaid doesn't mean this particular patient population is 40% Medicaid. It's generally in the 20% range. So to answer your question, it's a long winded way of saying it's gotta be, it's gotta be at least 50%. It's gotta, it really needs to be closer to 60 or 70% for them to be able to offer this across the board because that significantly eliminates and, and lowers the number of patients that aren't covered and are being sent to patient assistance program.
Chase Knickerbocker
Understood. And then maybe just one last one from me, Tim, can you maybe give us some thoughts, kind of an updated view on how you see SGA trending just with some of the incremental hires that we kind of discussed on the call. Thanks.
Tim Hendricks (Chief Financial Officer)
Yeah, yeah. On the SGA front. So in the first quarter, Chase, I recall the same question and at that time it was more of a holding pattern throughout the year as we waited to see what was going to happen with the Cat1CPT code. Now that we know that that growth is there, as Brian pointed out in his comments, we are, we have in a few cases and then we will hire on the sales and marketing front so that we can continue to drive the top line. And so as we look through the rest of the year, I do expect the selling and marketing expenses to tick up, which is different from our viewpoint in the first quarter, like I said, until we saw the Cat 1 code take effect. And then the second thing to call out is that in the second quarter we do expect to have a charge, a stock compensation charge as we disclosed in the subsequent event section of our financial statements which has been put forth to the shareholders, which we'll know on June 10th. And it's the cancellation of stock options and then the exchange reissuance of restricted stock units. And so that will be a charge in excess of $4 million, I expect. And the reason I don't know that for sure is it's a fair value measurement per GAAP. We won't know that exactly until June 10, but that's the range. So there will be that charge in the second quarter, but again that will be one time non recurring and a fair amount of that will be non cash. So I expect G and A, you know, to hold at the trend that we have. I expect the selling and marketing expenses to ramp up and then we have a one time charge coming here in the second quarter when we report next and in the August time frame.
Chase Knickerbocker
Understood. Thanks guys.
Brian Carrico (Chief Executive Officer)
Yeah, so I'll start with the VA conversation. Likely at some point in the future, we'll break down VA versus the pediatric children's hospitals. We might do that. I don't know when. Yes, at some point we'll likely break that down. We are putting some commercial focus, both marketing, sales, medical center liaisons, bringing some people in that have some relationships or strong relationships in that area. So yeah, at some point, possibly it. As far as cash flow break even, that's a, that's a Tim question. I think that's, you know, there are two questions there. Investors, when I have conversations, often care about the cash flow break even versus the P and L breakeven. So I would need clarification or Tim would need clarification on which number. And, and then the sec. What was the second question? I'm sorry? Tim, you can answer those too.
Tim Hendricks (Chief Financial Officer)
Yeah, so in the first, in the first quarter, as I mentioned, we burn rate came down to $1.2 million. And based on, you know, what we saw here in the first quarter, I expect that to continue to decline through the rest of the year and into 2026. And so, you know, from a guidance perspective, on a quarterly basis, you know, we'll be looking at a million dollars or less, I think, for the rest of the year. And then the way to think about the cash flow break even, if you just take, if you just take our first quarter and trend that out. So the operating loss for the quarter was $1.7 million. Right. So that's what we need. That's what we need to cover for profitability. And it's going to be a little bit less for cash. Our variable margin rate is approximately 75%. So if you take that, take that 1.7 divided by 75%, that's going to give you about 2.2 million or so. And that's just for the quarter. So if you turn that out for the full year, that's about 9 million of incremental revenue that we would need above the current pace in the first quarter. And so our first quarter, right, we came in at 1.6 million, which is about 6.4 million. And then you add 9 million on there. And so assuming right, no incremental increase in fixed costs and that 75% variable margin rate, and we saw a really nice expansion in the first quarter of 200 basis points on gross margin. So we've got opportunity to even increase that. But you take the 6 million current run rate on revenue and the 9 million on the incremental piece to get the cash flow Break even. You're looking at about 15. 15 million in revenue is probably the current trajectory based on our SG&A and our variable margin rate.
Brian Carrico (Chief Executive Officer)
Well the target's of course 100% but no, I don't know that any product or drug has 100% coverage. But you know we need to get in the, we need to get up in the 80% range and there are four or five key payers that get us, that promptly get us there. So I can't tell you the amount of time, energy and effort, resources, connections, ex medical directors, ex executives that are involved in this. And again I've. In the last few months we've learned more than ever that this is not necessary. No one's saying no to us. These payers have, you know, think about the market effect of something like a GLP one. There are things that are taking significant resources and time within payers and then you think about this technology and it's a matter of getting the attention of the right people to sit down and have the conversation. So I would just tell you we're making significant progress. I'm extremely confident in where we are and I wish I could give you a date as much as anyone but that's where we are right now.
OPERATOR
Again, if you have a question, please press star then one. At this point there are no more questions in the queue. Therefore I would like to turn the call over to Brian Carico for closing remarks.
Brian Carrico (Chief Executive Officer)
No, I appreciate everyone joining. If you have additional thoughts or questions, please schedule a time through Ben Shamsian or myself. Happy to have conversations around the talking points we had today. Everyone have a great rest of your day and rest of your week. Thank you.
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