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NAOV: Foundation Built in 2018, Expected to Catalyze Growth Beginning Later This Year

By Brian Marckx, CFA



Fiscal 2018 Results / Business Update
NanoVibronix (NAOV) filed their 10-K for the fiscal year ending December 31, 2018. Relative to the financials, revenue was $55k and $318k in Q4 and the full-year 2018, respectively, compared to $70k and $239k in the prior year periods. The annual increase relates to 43% and 30% growth in sales of UroShield and PainShield, respectively. PainShield accounted for 73.9%, or $235k, of total sales in 2018, while UroShield accounted for the remaining 26.1% ($83k).

Operating expenses increased from $3.2M in 2017 to $4.5M in 2018, with all of the difference related to SG&A expenses. Sales and marketing expenses more than doubled over that period which was largely attributed to personnel additions. Meanwhile G&A expenses increased by about $550k, or 27%, which reflects higher professional and consulting fees – at least some of which we think is related to clinical and strategic advisement and related activities.

Relative to the operational update…
NAOV is making substantive progress on their multi-pronged strategy aimed at accelerating revenue growth. As we discussed in our January 17th initiation report, this strategy includes;

- a focus on leveraging clinical evidence to facilitate awareness-building, sales and marketing, and regulatory efforts
- publishing existing clinical data and generating new data through commencement of additional clinical studies
- expanding the distribution footprint and overall sales capabilities
- label expansion (including OTC use for PainShield) and additional regulatory clearances for their existing product suite and initial approvals for their product pipeline
- optimize manufacturing to increase production efficiencies and scalability
- obtaining reimbursement
- licensing to category-specific companies with significant distribution

As it relates to clinical trials and driving awareness of the evidence supporting the utility and efficacy of their technology…

PainShield Trigeminal Neuralgia Study Published in of the Journal of Anesthesiology and Pain Research…
The previously-announced clinical study of PainShield as a treatment for trigeminal neuralgia was published in the January 2019 issue of the Journal of Anesthesiology and Pain Research. The U.S.-based double-blinded cross-over study (n=59), titled “The Effect of a Surface Acoustic Wave (SAW) Device on the Symptomatology of Trigeminal Neuralgia”, compared PainShield to a sham device on the following outcome measures; pain (as assessed by Visual Analog Scale, or VAS), quality of life (based on a number of QoL questionnaires) and breakthrough medications taken (breakthrough medications included Percocet, oxycodone, hydrocodone, codeine, and morphine patches).

Participants were instructed to use PainShield or the sham device each night for 30 nights while they slept. Each day they completed a Visual Analog Scale (indicating pain severity) and medication logs (reporting how much pain medication they took). QoL questionnaires were completed at the end of the 30-day treatment period.

Results, which were first announced in July 2018, showed that patients in the PainShield group (n=30) experienced a 55.2% improvement in baseline pain scores versus a 2.3% improvement in the control cohort (n=29). In addition, while control saw a 1.5% decrease in breakthrough pain medication use (including opioids), PainShield patients used 46.4% less. Moreover, there was an improvement in uninterrupted sleep favoring the PainShield group. The improvements in VAS scores as well as in the amount of pain medications used (both favoring PainShield) were statistically significant (charts below). There was also an improvement in overall quality of life favoring PainShield, although the difference was not statistically significant.

View Exhibit I

Interim results of new study supports effectiveness of PainShield in tennis elbow…
In March 2019 NAOV announced interim results of a new study supporting the effectiveness of PainShield in the treatment of lateral epicondylitis, or tennis elbow. Results of "The Effects of the NanoVibronix's PainShield Surface Acoustic Waves on the Symptoms of Lateral Epicondylitis" showed seven of ten patients with tennis elbow using PainShield plus physical therapy had complete pain resolution or significant improvement in pain. This compares to just five of twelve patients in the control group that had similar outcomes. No adverse events or complications were reported.

The randomized, double-blinded study evaluated PainShield over 30 days on patients suffering from lateral epicondylitis. Symptoms included pain, discomfort and loss of mobility. A total of 24 patients (12 in each treatment cohort) were enrolled. The interim results were from 22 of the patients that completed the study (two others did not complete). While NAOV’s press release announcing the results does not specify the expected total enrollment, it does note that the study is ongoing and additional patients are enrolling. Upon completion of the study, the company expects to have the results published later this year.

NAOV’s has also made recent progress in building out their sales and distribution capabilities as well as on the awareness-building efforts…

Italy distribution: in March NAOV announced an agreement with N.B.A. Medica Srl to market and distribute PainShield and UroShield in Italy

“Very Positive responses from potential distributors of UroShield”: NAOV noted in their year-end business update (April 2nd) that they “are getting very positive responses from potential distributors of UroShield on the heels of our recent trials and publications.” As a reminder, distribution agreements were recently signed for UroShield covering India (December 2018), Israel (December 2018) and Switzerland (December 2018).

PainShield distribution: beefing up U.S. distribution for PainShield has also been a recent priority and now includes Fritz Clinic (as of January 2019), Golfballs.com (Q3 2018) and Fabrication Enterprises, Inc (May 2018).

New website: in early March NAOV announced the launch of a new website “designed to highlight the advantages of the Company’s proprietary and patented low intensity surface acoustic wave (SAW) devices, including PainShield, UroShield and WoundShield.”

Perhaps the most exciting news as of late came in late-March when NAOV announced that they have been receiving reimbursement approvals from commercial and worker’s compensation insurance plans. Specifically, NAOV announced that reimbursement for PainShield has been spurred by programs advocated by American Health Insurance Plans and the Centers for Medicare and Medicaid Services designed to encourage adoption of non-opioid pain management therapeutics. NAOV’s press release notes that this has aided in securing approval and reimbursement for the use of PainShield.

Prescription opioid crackdown…
The announcement that payers are encouraging use of novel pain management technologies such as PainShield comes as little surprise to us as we had all but anticipated that PainShield adoption and reimbursement would benefit as a result of a crackdown on the use of opioid pain medications.

As we initially wrote in our initiation report, U.S. state and federal regulators recently announced new measures aimed at stemming the oversubscribing of opioid pain medication. This includes a goal of the Trump administration to reduce opioid prescriptions by one-third over the next three years and more than 30 states enacting legislation limiting the number of opioid prescriptions for all conditions except cancer and palliative care. Insurers, both private and Medicare, have also placed limits on the number of prescriptions that they will now cover. These measures, coupled with a reaction by some doctors to do away with prescribing opioids altogether, has not only resulted in a significant decrease in the availability of these drugs for recreational purposes (and solely to feed addictions), but has also reduced access for patients that rely on them to control chronic pain.

This, we think, has created a potentially potent opportunity for NAOV with PainShield, particularly given that, in the face of the crackdown on opioids, the U.S. government is encouraging (and in some cases sponsoring) the development and use of alternative pain therapies (in fact, Mariano Rivera, per NAOV’s March 21, 2018 press release, recently approached President Trump about PainShield). Fritz Clinic, which treats thousands of patients per month and will use PainShield as an alternative to opioids, is the first of potentially more collaborations which could expand use and build awareness of the utility of the device to reduce reliance of these highly addictive medications.

NAOV’s Year-End Update: NOAV anticipates growth in latter part of 2019 (and beyond)…
Management indicated in a year-end business update (announced April 2nd) that, having laid the foundation in 2018, that they anticipate growth to materialize in the latter part of the current year. Specifically, as it relates to growth catalysts, NAOV points to the completion of clinical trials as an important milestone towards expanding regulatory approvals and in further validating the effectiveness of their technologies in addressing chronic pain (PainShield), catheter associated urinary tract infections (UroShield) and in facilitating the healing of chronic wounds (WoundShield).

NAOV notes that they are in the final stage of updating their products to improve their appearance and performance. In addition, the company expects to continue to refine and bolster their sales, marketing and commercial infrastructure. Outsourcing of manufacturing should provide the benefits of production efficiencies, scalability (relative to both operating leverage and manufacturing volume) and margin enhancement (and/or pricing flexibility).

Anticipated near-term milestones, per their year-end update includes; finalizing updated product design, launching contract manufacturing, FDA submission for PainShield for OTC use and for UroShield and securing additional licensing/distribution agreements.

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