NeurAxis (NYSE-Amer: NRXS) scored a significant milestone on Wednesday, making its NYSE-American market debut, selling 1,098,667 common shares and raising roughly $6.59 million before underwriting discounts and commissions. The capital raise may not end there. The company also granted the underwriters a 45-day option to purchase up to 164,800 additional shares of common stock at the initial public offering price, less the underwriting discount. But with or without, for those who like to invest in late-stage companies already on the heels of an FDA approval, NRXS may be the ideal candidate. And if share prices weaken post-IPO, which is often the case with microcap biotechs, consider seizing the opportunity. Why?
Foremost, NRXS is already a revenue-generating company, scoring a modest $2.7 million in revenues in 2021 and 2022, respectively. While that might not sound like much on its own, know that the expected revenue growth, likely substantial based on milestones in the crosshairs, could meet with 88% gross margins, which the company has maintained over the past two years. Thus, from a value standpoint, NRXS may be too good to ignore – even at higher prices.
Yes, that’s decidedly bullish sentiment. However, NRXS supports its case by advancing toward marketing approval of its NeurAxis PENFS, the first FDA-cleared treatment for pediatric Functional Abdominal Pain (FAP) and Irritable Bowel Syndrome (IBS). It’s a case where being first to market could enable NRXS to secure a substantial share of the estimated $9 billion total addressable pediatric care market. Even reaching just 25% of the expected yearly cases, about 200,000 children, put a roughly one billion dollar revenue-generating opportunity at current reimbursement in play. The better news is that the competitive landscape for NRXS may be nil or very close to it. That’s part of a deliberate strategy.
Targeting Unmet Pediatric Care Needs
NeurAxis is focused on monetizing its assets by addressing critical clinical needs that have gone unmet or under-served. Doing so is crucial as it can help reduce or, in the best case, eliminate the need for providers to resort to off-label pharmacological treatments in situations where limited to no options are available. In cases where the current standard of care is lacking to this degree, a first-to-market treatment with proven clinical effectiveness could bring substantial rewards. In other words, NRXS is timely to its opportunities.
Better still, they are positioned to cash in sooner than later from a clear commercial pathway, an FDA De Novo clearance, and robust intellectual property protecting device and method related to its potentially life-saving treatments. The FDA De Novo clearance is enough to expose the opportunity at hand. It’s an application submitted by NRXS that, if granted, establishes a new “device type” along with classification, regulation, necessary controls, and product code. It also creates a pathway toward future approvals by making the device eligible to serve as a predicate for new medical devices through an expedited 510(k) process.
Being granted the De Novo clearance certainly exposes intrinsic and inherent value. But that’s just the most basic perspective; more accurately, the designation indicates that NRXS is an innovator whose work can bring an entirely new treatment method to the market. That totality, derived from extensive work developing Percutaneous Electrical Nerve Field Stimulation (PENFS), separates NeurAxis from others. Also a value driver, its IP may widen the competitive advantage in NRXS’s favor, noting its neuromodulation work is unique in providing access to the central nervous system to stimulate and ultimately inducing a change in brain pathways and connectivity.
IB-Stim is NeuroAxis’s Treatment Frontrunner
The technology can be transformative for both NRXS and patients. For investors, too, noting that NeurAxis’s IB-Stim™ PENFS technology has already proven itself safe and effective for targeted indications, including treating patients between 11 -18 years of age with FAP and IBS. Benefits go beyond its effectiveness; it’s also favored as a non-drug and non-surgical device therapy that can be used in outpatient settings to reduce pain through neuromodulation to branches of cranial nerves. This alternative approach can help generate favorable treatment results in roughly three weeks.
In addition to facilitating quick results, IB-Stim helps eliminate potentially severe side effects from drugs being prescribed off-label. The advantages don’t stop there, as in addition to IB-Stim being FDA-indicated, side effects are localized skin irritation compared to suicidal ideation, depression, and weight gain from traditional care. Treatment is also targeted via the brain-gut axis, appreciably different from conventional localized and peripheral care that comes with unintended consequences.
Remember, NRXS differs in its approach to treating targeted pediatric therapies, where the line between risk and reward is more strict than in treating patients with more robust and developed immune systems. That’s not to say there’s less consideration when prescribing adult drugs, as physicians must always be responsible in that respect. However, there is a more defined red line when treating children off-label.
That reality further exposes the need for better, safer pediatric care. NRXS is more than aware of that need; they intend to serve it through a single call point for current and future indications. That mission is well in progress, evidenced by NRXS having the first FDA-cleared treatment for pediatric FAP and IBD and a growing body of clinical evidence supporting treating other indications.
NuerAxis Success By the Numbers
Supporting IB-Stim’s value to patient needs are four current publications, data from over 700 published patients, six different study types, thirteen children’s hospital studies, and an expected fourteen publications documenting the positive contributions from NRXS innovation and technology. In addition to the supportive research, data shows compelling advantages of IB-Stim compared to other treatments. While the list of benefits is impressive, what they exclude makes a much more impactful statement.
What IB-Stim doesn’t do is not unnoticed. Unlike some more commonly prescribed off-label treatments, IB-Stim doesn’t foster suicidal ideation, dementia, additional abdominal pain, or allergic reactions. Neither does it induce vomiting or diarrhea, documented symptoms associated with current drugs treating FAP and/or IBS from Mallinckrodt (NYSE-Amer: MNK), Johnson & Johnson (NYSE: JNJ), AbbVie (NYSE: ABBV), and Pfizer (NYSE: PFE). The better news for those finding NRXS early during its public debut is that much more value is expected to accrue.
In addition to NRXS nearing a hoped-for approval through its current FDA applications, its pipeline is impressive and positioned to add additional near and long-term value. That includes targeting chronic nausea, post-concussion, cyclic vomiting syndrome, and chemotherapy-induced nausea in children. Those are clearing human clinical design and are on the precipice of human clinical trials.
Essential to the entire investment thesis is that NRXS has a go-to-market commercialization strategy that benefits from at least four carrier coversages that insure nearly five million lives. Keep in mind that volumes of supporting evidence of efficacy were needed to score those four carrier inclusions. And those four are likely the precursor to additional carriers signing on during the remainder of 2023. Remember, few, if any, treatment providers question the better and safer results of using NRXS technology. That leaves the company in an enviable position of having the data supporting additional reimbursement participation as well as a society position paper and guideline that could lead to IB-Stim becoming the standard of care.
If so, the rewards can be enormous. In dollar terms, an entire treatment regimen per patient is estimated at roughly $4,800. Multiply that by the expected cases in the millions, and an exponential increase in NRXS valuation would be justified on approval of just its FDA De Novo application. There’s still more to appreciate.
The value proposition increases with NRXS advancing its prospective, randomized, double-blind study for post-concussion syndrome at Children’s Hospital of Orange County. The company noted that additional site(s) could be added to strengthen the research data and expedite NRXS targeting a $1.9 billion market opportunity from the estimated 400,000 patients diagnosed annually. Like its other treatments, this actively enrolling study targets an unmet medical need, again potentially positioning NRXS to capture the value inherent to an approved and likely front-line therapy.
Ready to Capitalize on Approvals
While data support approvals could be forthcoming, having the physical capability to meet demand is equally important. NRXS checks that box as well. Its in-house capabilities utilize 69,000 square feet of space for its offices, factory, warehouse, and environmentally controlled needs. That’s ample space for controlled and monitored manufacturing capacity, is sufficient in size for additional NRXS needs, and, most importantly, is FDA-registered, ISO-certified, and ITAR-registered to meet quality management standards and practices.
That makes its growing IP portfolio even more valuable, and knowing that NRXS has all the pieces to deliver better treatments to the markets, interest from others comes at a higher price. Eight issued and eighteen pending patents covering devices and methods can have that effect. Moreover, these protections are valid through 2039 without adding to existing claims that enhance patent longevity. Even better, NRXS expects these patents to be protected internationally, which allows them to operate freely and negotiate from a position of strength regarding potential partnerships and licensing.
Thus, before its IPO, NRXS was already strong. But after the NYSE-Amer bell rang on Wednesday, they are better positioned than ever to become a formidable player in pediatric care. In fact, with millions in the bank, NRXS is ideally positioned and capable of capitalizing on novel treatments targeting the brain with differentiated PENFS technology that is easy to learn for providers and effective in meeting its treatment goals.
Combining those strengths and advantages with expert management, an industry-leading Medical Advisory Board, a tiny trading float, and operations and infrastructure to support growth and scale, more likely than not, NRXS stock’s path of least resistance is higher. In fact, with the pathway to profitability already established, that trajectory is more than likely; it’s probable.
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