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ECOR: The Buzz on Vagus Nerve Stimulation

·7 min read

By John Vandermosten, CFA



Initiating Coverage

We are initiating coverage of electroCore, Inc. (NASDAQ:ECOR), a commercial stage device company, with a valuation of $4.00 per share. This target price is based on a multiple of future earnings which reflect continued growth from sales through existing channels with the Veteran’s Administration (VA) in the US, National Health Service (NHS) in the UK and domestic commercial payors. New contributions may come from other national healthcare plans, Europe and other overseas markets. The company’s sole commercial product, gammaCore, is currently approved for four indications in migraine and cluster headaches and has received Emergency Use Authorization (EUA) for respiratory problems related to COVID-19.

Exhibit I – gammaCore SapphireTM Device (1)

The company’s key product gammaCore SapphireTM (nVNS) is a non-invasive vagus nerve stimulator that is FDA cleared to treat pain associated with migraine and episodic cluster headache. The device activates the vagus nerve via electrical stimulation. This approach avoids many of the side effects associated with drugs and invasive surgical procedures, allows for a portable solution and supports repeated use.


Migraines affect an estimated 39 million Americans and about 12% of the global population (2), making it one of the most common conditions in the world. The characteristic symptoms of pain, nausea, vomiting and sensitivity to stimulus can also make it debilitating. It is a neurological disease that presents as a throbbing or pulsating pain, mostly on one side of the head and can be accompanied by nausea, vomiting, and heightened sensitivity to light and sound. Migraines can last for hours or days. In some cases, a set of warning symptoms, known as an aura, occurs before the migraine. Auras can include flashes of light or blind spots. They can also include tingling in the face, arm or leg, typically on one side, and difficulty speaking. Migraines are a complex pathology and there appear to be hereditary and sex components of the condition as well. Women are two to three times more likely than men to have migraines with the condition most common in individuals from 30 to 50 years of age.

Exhibit II – Stages of a Migraine (3)

Cluster Headaches

Cluster headaches (CH) are a primary headache disorder belonging to the trigeminal autonomic cephalalgias (TACs) group, characterized by short but extremely painful headache attacks. Symptoms include excruciating pain that is typically behind or around one eye, unilateral pain and restlessness. Unilateral symptoms can include excessive tearing, eye redness, stuffy/runny nose, sweating on the forehead or face, pale skin or flushing, swelling around the eye and drooping eyelid, all on the affected side. In contrast to migraines, CH primarily affect males age 20 to 50 and affect substantially more males than females. The frequency of attacks within clusters can occur every day up to eight times in a single day and each attack can last from 15 minutes to three hours. About 85% - 90% of CH patients experience episodic CH. The clustered periods, also called bouts, can last between two and 12 weeks and typically happen twice a year. Episodic CH patients endure headaches averaging four months out of the year while chronic CH patients have no remission or remission periods lasting less than three months per year.

Vagus Nerve & Stimulation

The vagus nerve (4) is the longest cranial nerve, extending from the base of the brain to the colon and is responsible for parasympathetic control over the heart, lungs and digestive tract and projects to higher centers that are responsible for pain regulation such as the nucleus tractus solitarius and spinal trigeminal nucleus (5). Neuroimaging studies have shown that chronic vagus nerve stimulation (VNS) inhibits activation of thalamus, limbic system, dorsal pons, locus coeruleus and nucleus tractus solitarius, all of which are implicated in headache.There are many forms of neurostimulation aimed at activating a variety of nerves implicit in migraine and other disorders. VNS systems were typically surgically implanted devices with substantial cost and risk. gammaCore’s design enabled a safer, non-invasive option for patients that could be administered in the home, greatly extending the efficacy of VNS.

Exhibit III – Steps to use gammaCore SapphireTM (6)

Key reasons to own electroCore shares:

‣ Effective, non-invasive, and non-pharmaceutical method to treat migraines

‣ Portable, simple and rapid solution for preventing and treating headaches

‣ Indicated for both migraines and cluster headaches

‣ Existing and expanding relationships with VA hospitals

‣ Recharge/refill business model

‣ Supply chain simplicity: direct to customer shipping

‣ gammaCore can be prescribed through telemedicine

‣ NHS relationship in UK may provide foundation for further global expansion

◦ Continental Europe

◦ Asia

‣ Opportunity for COVID-related sales following EUA award

‣ Extended indications

◦ Stroke

◦ Trauma injury related headaches


◦ Mild traumatic brain injury

◦ Inflammation

Migraine affects from 12-18% of the population which is estimated to be about one billion persons around the world and anywhere from 36 to 40 million persons in the United States. Cluster headaches are less common but still comprise a sizeable group. An estimated 0.1% of the population suffers from chronic and episodic cluster headaches, which is about 330,000 to 400,000 individuals in the United States and perhaps over seven million around the world. There are over 10 million covered lives in US government programs that have access to gammaCore and about 400,000 patients visited a VA provider for headache in 2018.

On June 30, 2020 electroCore held $18.9 million in cash after a raise of $7.4 million in sale of tax net operating losses, shares and notes. Subsequent to the end of the quarter, the company raised an additional $10.3 million from the sale of stock to Lincoln Park Capital Fund. For the first six months of 2020, the company has generated $1.5 million in revenues and burned $12.4 million in cash. We anticipate continued and accelerating growth over the coming quarters as penetration continues into existing channels and new markets and geographies are pursued. electroCore has a small amount of debt on its balance sheet related to the Cares Act that may be forgiven.

In our initiation, we review the pathophysiology behind migraine and cluster headaches, the vagus nerve and gammaCore’s mechanism of action. We discuss the incidence and prevalence of migraine and cluster headaches and review other available treatments including neurostimulation and pharmaceutical options. We then detail electroCore’s intellectual property, the risks the firm faces and peers and competitors. An overview of management and recent financial and operational results is also provided. Following an in-depth discussion of our model assumptions, we provide an appraisal of electroCore’s valuation. Our financial model structure and assumptions are explained providing the justification for our valuation estimate for the company.

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1. https://www.electrocore.com/wp-content/themes/wp-starter/includes/images/Relief_device.jpg

2. Migraine Research Foundation. migraineresearchfoundation.org

3. Understanding Migraine Progression Can Help You Anticipate & Manage Your Symptoms. January 18, 2018. The American Migraine Foundation; https://americanmigrainefoundation.org/resource-library/timeline-migraine-attack/

4. Also called the pneumogastric nerve or the tenth cranial nerve (cranial nerve X).

5. Miller S, Sinclair AJ, Davies B, et al. Pract Neurol 2016;16:362–375.

6. https://www.gammacore.com/about/using-gammacore/