- People who suffer from chronic pain, headaches, and other issues related to the nervous system have new treatments at their fingertips, and two modalities are setting up opportunities for investors with foresight
- Medical marijuana and its derivatives are gaining rapid acceptance in the U.S. and Canada, and you can see the trend reflected in recent public market action from companies in this space, like Cara Therapeutics (CARA) and CV Sciences Inc. (CVSI) for example. Neurostimulation is also transforming numerous neurological conditions, just like medical marijuana. ElectroCore (ECOR) made headlines with a 2018 $75 million IPO around their neurostimulation device for headaches, and the Greatbatch spinoff Nuvectra (NVTR) has a compelling portfolio of neurostimulation devices
- Another newer company Nexeon MedSystems (NXNN) has two of their own devices headed toward U.S. and European regulatory approvals. The company is generating revenue already and its $10 market value appears quite conservative compared to their well-known peers at $200 and $400 million. With a host of possible catalysts in 2019, NXNN might not stay undiscovered for long
NEW YORK, NY / ACCESSWIRE / December 14, 2018 / Great advances are underway in our understanding of the human nervous system. Recent breakthroughs--medically and regulatory-- are bringing new options to patients with neurological conditions, and they could even be helping with America's opioid problem as better alternatives arrive.
Broader acceptance of medical marijuana has proved a boon to patients suffering from pain. Medical marijuana and cannabinoid-based treatments have propelled publicly traded companies onto the mainstage for their potential to transform healthcare, like Cara Therapeutics (CARA) and CV Sciences Inc. (CVSI).
Precisely placed electric fields targeting specific parts of the body can act like a drug too, and may provide a quality alternative to chemical drugs. This is called neurostimulation, and historically it required expensive, permanent and invasive devices intended for long-term use. But newer products that act on the peripheral nervous system are arriving. Indeed, these neurostimulation devices have recently lead new companies into the public markets with great acceptance from investors. ElectroCore (ECOR) raised $75 million in a U.S. IPO this spring that valued the company at almost $400 million based on their newly approved gammaCore device that can treat the pain of headaches with a slight electrical current. The Greatbatch (private) spinoff Nuvectra Corporation (NVTR) has a market value of $350 million based on their neurostimulation device Algovita for pain. Nevro Corp. (NVRO) is a $1.3 billion company based on their neurostimulation products for pain relief.
Management at the most recent entrant Nexeon MedSystems (NXNN) have a deep experience in this field, and they're aiming to make a name in this subsector with some novel improvements on older technology in two new devices. They're also working on some new indications, including for the treatment of opioid withdrawal, and their manufacturing business is already generating revenue. For a $10 million company, 2019 could make for a breakout year as they advance two new devices and get their first public market exposure.
Neurostimulation Demand Is On The Way To $16 Billion Yearly
According to Global Markets Insight, the global market for neurostimulation devices will exceed $16.6 billion by 2024. This includes Deep Brain Stimulation (DBS), which involves using brain electrodes to treat neurological conditions like Epilepsy and Parkinson's, and Vagus Nerve Stimulation and Spinal Cord Stimulation for the treatment of different kinds of pain.
The revenue opportunity for DBS devices should eclipse $1.4 billion by 2020 according to Global Markets. In 2017, it was worth nearly $900 million. Meanwhile, the pain setting has been taking off, and Global Markets expect this vertical to be worth over $4 billion by 2019.
How Nexeon Is Already Capitalizing and Expanding in 2019
We focus here on Nexeon as the smallest and least well-known public company in this space, even thought the company has a strong background and is making sales already. Nexeon is already generating revenue from their device manufacturing business called Medi-Line, which caters to large device companies. Nexeon reported revenues for the third quarter of $1.9 million, an increase of 138% compared to $0.8 million for the prior year quarter, for an annual run-rate of about $8 million.
Meanwhile, Nexeon is also developing two of their own proprietary neurostimulation devices and plans to begin the U.S. FDA and European approval processes in 2019 for both.
Viant is a DBS device with some key advancements over existing products from larger companies like Abbot Labs (ABT) and Boston Scientific (BSX). Current DBS devices used to treat Parkinson's Disease, epilepsy, and other movement disorders are unable to record brain function, requiring a trial and error adjustment process that relies on a patient's observable symptoms. This requires multiple expensive and time-consuming doctor visits.
Viant is designed to detect, measure and collect brain signals while also providing targeted DBS therapy to reduce the need for lengthy and painful reprogramming visits to the doctor. As this is following a well-tread path for other DBS devices, the approval process should be streamlined, and Nexeon is saying that they will file for an approval in Europe in 2019. That could set them up for a key European market entrance months later.
Second is an Auricular vagus nerve stimulation (aVNS) device for non-invasive use in a variety of proposed indications, including as a treatment for acute symptoms of opioid withdrawal. That device is already in one clinical trial and could be in another in 2019.
Valuation Attractive As They Begin To Compete
Nexeon's revenue numbers compare favorably even to their more well-known peers like ElectroCore (ECOR), and the company has yet to even launch their own proprietary devices. That's coming, and 2019/2020 will be pivotal years for NXNN. At an estimated $8 million in annual revenue based on their recent quarterly numbers, the company is already outperforming electroCore's quarterly sales figures, yet the public markets haven't seemed to notice the smaller entrant.
The valuation difference is significant and could indicate big upside for NXNN if the company continues to execute. At $10 million market capitalization and a $5 stock price, NXNN is only valued at $1.2X their sales! ElectroCore is a $200 million company with sales of less than $3 million annually right now, or a 68X Sales Multiple!
With compelling neurostimulation devices in the pipeline and their own devices moving towards FDA submission, NXNN is a medical device sleeper to be aware of.
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