BioSig Technologies Is a Near-Term Biotech Catalyst Play

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- By George Ronan

Picking up an exposure to a biotechnology company ahead of a major catalyst is a risky approach to the markets, but, for an investor with a degree of risk tolerance, can be a rewarding one.

BioSig Technologies Inc. (BSGM) is a small-cap biotechnology company that has had a pretty volatile 2017 so far, but is set for a very near-term catalyst that could inject some immediate upside momentum into its market capitalization.


Here"s what investors need to know.

For anyone new to BioSig, it is a Minnesota-based biotechnology company that is trying to bring a suite of products to market in the U.S., the majority of which are designed to target the cardiology space.

Specifically, BioSig has developed a proprietary technology called Pure EP, which it hopes will revolutionize the way patients suffering from atrial fibrillation are treated. Well, revolutionize is probably a bit strong. Change considerably for the better might be a bit more accurate.

The problem

Patients with atrial fibrillation have scarring in their heart that leads to abnormal electrical charges and - in turn - an abnormal beating rhythm. Every individual over forty years of age has a one in four lifetime risk of developing the condition and it affects a population of approximately 6 million in the U.S. Further, it increases the risk of a patient having a stroke by more than four times - stroke is the fifth most common cause of death in the U.S.

So where does BioSig fit into all this?

The current standard of care treatment for patients with atrial fibrillation is ablation. This is where a physician uses heat to remove the scar tissue, as reached using a long thin catheter that enters the heart via either the neck or the groin. Prior to carrying out the ablation, however, a physician will conduct an electrophysiology test, the results of which can be visualized to represent where the fibrillation is in the heart and - in turn - where the ablation needs to be carried out.

These tests, however, are not particularly accurate. There is a lot of electrical noise created by the natural electric signals in and around the heart, which results in a similar degree of noise in the visual representation of the results.

With Pure EP, the company hopes it can remove this noise from the equation and, in doing so, can provide a physician with a far more accurate view of exactly where the scar tissue is that needs ablating. This, in turn, should translate to a far more effective treatment outcome for the patient and reduce the potential for some of the longer-term (and more serious) complications of atrial fibrillation, like ventricular tachycardia.

Now that we are familiar with the technology, where does it fit into the revaluation picture?

Well, the company has spent the past couple of years putting the device through its paces as part of a substantial clinical development program and - on the back of this program - has collected a wealth of data supporting both the efficacy of Pure EP as an evaluation tool prior to ablative surgery and as a tool that is superior to the current standard of care in this space.

With all this data in hand, the next step is to submit for regulatory approval. In the U.S., and with a medical device like this, this almost always involves employing the 510(k) application pathway and BioSig"s Pure EP submission is no exception. As compared to a New Drug Application, a 510(k) submission is a cheaper, quicker and far simpler pathway to approval.

In June, the company announced its intent to submit for approval using this pathway before the end of the third quarter of 2017. We are now well into the final quarter and the submission has not happened, so BioSig has missed its target, but management maintains it can still get the submission in the hands of the U.S. Food and Drug Administration by the end of this year.

This submission, followed by the FDA"s final ruling on it, is the catalyst in focus here.

Looking at timeframes, if BioSig can get its application in before the end of the year, we could be looking at a second-quarter approval for the device in its target indication at the outside.

Analysts put peak annual sales (by 2022) at around $105 million for the device. Consider this against BioSig"s current market capitalization, which comes in at just $40 million, and the potential for upside revaluation is clear.

What are the risks?

This company is very much dependent on this product successfully navigating its way to approval along the above-discussed 501(k) pathway. If BioSig is unable to persuade the FDA the device is ready for market with its application, the company is going to have to spend more money (and take more time) to get the additional data required to justify approval.

As such, if we see a negative response from the agency come decision day, it is going to hit BioSig pretty hard. This is a binary event risk and is something many biotechnology investors will already be familiar with (and, in turn, happy to take on subsequent to a bit of due diligence), but for anyone new to this sector, it needs to be considered ahead of an exposure.

Disclosure: The author holds no positions in any of the stocks mentioned in this piece.

This article first appeared on GuruFocus.


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