Investing.com -- Shares of NeuroPace Inc (NASDAQ: NPCE ) plummeted 36.1% today after the company reported that its primary effectiveness endpoint for the NAUTILUS study did not reach statistical significance in the overall study population. The study was designed to evaluate the safety and effectiveness of the RNS System for the treatment of individuals with drug-resistant idiopathic generalized epilepsy (IGE).

While the study met the 12-week post-implant primary safety endpoint, demonstrating a favorable safety profile of the RNS System, the lack of statistical significance in the primary effectiveness endpoint for the broader study population has raised concerns among investors. However, the company noted a statistically significant response in a subset of patients with lower baseline frequency of generalized tonic-clonic seizures, which represents the majority of participants.

Despite the setback in the overall effectiveness endpoint, NeuroPace highlighted several positive outcomes from the study. The data showed clinically meaningful improvements in median percent seizure reduction, responder rates, and an increase in seizure-free days over the first year of treatment. These improvements continued into the second year for patients who have progressed in the study, suggesting the RNS System’s potential for personalized patient treatment through programming over time.

Dr. Martha Morrell, NeuroPace’s Chief Medical Officer, expressed optimism about the results, emphasizing the statistically significant seizure reduction in a substantial patient subgroup and durable improvements across multiple secondary endpoints. CEO Joel Becker reiterated the company’s confidence in its long-term growth strategy and the potential for future indication expansion into IGE.

Leerink analyst Mike Kratky called the NAUTILUS study "surprising and disappointing," but clarified that a follow-up conference call eased fears a bit. "Overall, we would have preferred cleaner, more definitively positive topline results, but management has offered some reasons to remain positive on NPCE’s path forward in drug-resistant IGE," he said.

The NAUTILUS study is a prospective, multicenter, randomized, single-blind, sham-stimulation controlled study that enrolled 100 participants, with 87 undergoing implantation of the RNS Neurostimulator and Leads across 23 epilepsy centers in the US. NeuroPace received FDA Breakthrough Device Designation status in 2021 for the potential use of its RNS System to treat IGE.

NeuroPace plans to submit the full dataset to the FDA and for peer-reviewed publication and will engage with the FDA to discuss regulatory pathways based on the data. These discussions may include utilizing overall median seizure reduction data across the full study population and pursuing a more targeted indication focused on patients with lower baseline seizure frequency, who may represent a majority of patients with IGE.

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