According to an analyst at Goldman Smallcap Research, NeurAxis Inc. (NYSE-Amer: NRXS) shares at current levels present a compelling investment opportunity. In fact, he models for a 12-month price target of $14 a share, roughly 236% higher than its current $4.16. That may not be an overly ambitious target, either. NRXS has only about 1.21 million shares outstanding, and many of those are tightly held. That tiny float does add volatility to trading. However, based on expectations for how quickly NRXS can penetrate markets with its innovative, non-surgical, drug-free approach to treating debilitating pediatric and adult conditions, more likely than not, once traction grabs to the upside, it may be the ultimate path of least resistance. (*share price on 9/25/23, Yahoo! Finance, 4:00 PM EST, $4.16)
Keep in mind that NRXS was brought to the public markets at $6 a share, debuting on the NYSE-American exchange in August. That price was offered after considerable due diligence by Alexander Capital L.P., a company specializing in providing full-service investment banking and wealth management services to its clients, acting as the sole book-running manager for the underwritten initial public offering. Thus, trading at an over 30% discount to that IPO price, and considering NRXS is stronger today compared to then, its share price appears materially disconnected from the models supporting a higher price. In fact, with plenty of data supporting the bullish thesis, the disconnect may be more than wide; it may present an investment proposition too good to ignore.
To use a phrase from the 90s, that's not irrational exuberance. NRXS assets and fundamentals clearly support higher prices, evidenced by tangible assets, a strong I.P. portfolio, and clinical trial updates showing its FDA-cleared percutaneous electrical nerve field stimulator (PENFS) IB-Stim technology could be on the precipice of earning standard of care (front-line) designation to treat patients 11-18 years old with functional abdominal pain (FAP) associated with irritable bowel syndrome (IBS) If they claim that spot, NRXS could add significantly to the over $9 million in revenues scored since 2019. They added over $682K to that total last quarter and, importantly, met those revenues with an 89.5% gross margin. That impressive margin isn't an outlier. On the contrary, it's the norm, beating its 88.4% G.M. earned in the same period last year.
Video Link: https://www.youtube.com/embed/Llud8PG21-k
FDA-Cleared PENFS IB-Stim Is Already Scoring Revenues
In other words, NRXS revenues fall quickly toward the bottom line. And because its FDA-cleared device and treatment serve unmet medical needs, millions could be in play. GSCR thinks so. Lead analyst Rob Goldman forecasts NRXS revenues to reach $22 million by 2025, over 144% higher than the combined revenues since 2019. However, that lofty projection may be conservative, especially if the PENFS IB-Stim treatment earns its targeted front-line position. That's not unlikely. The standard of care today uses off-label prescription treatments and sometimes surgery. NRXS requires neither. Its treatment is non-surgical and drug-free, instead using gentle electrical impulses targeting cranial nerve bundles in the ear that have proven to provide considerable pain relief. Moreover, the treatment can be done in an outpatient setting.
To generate the intended response, the IB-Stim stimulation targets brain areas involved in processing pain, showing a unique ability to reduce functional abdominal pain associated with IBS. The device is intended to be used for 120 hours per week up to 3 consecutive weeks, with NRXS designing the treatment to provide therapeutic value from triggering branches of Cranial Nerves V, VII, IX, and X and the occipital nerves identified by transillumination to aid in reducing pain when combined with other therapies for IBS.
Remember, NRXS is hoping to get IB-Stim marketed- it already is. And its revenue curve is expected to steepen in the last quarter of 2023, and all of 2024, with adoption rates increasing as medical professionals and care providers become more aware of the growing body of positive clinical data and large health insurance company payor support. Additionally, the increasing adoption of IB-Stim is getting a boost from patients who continue to gravitate towards non-drug-related therapies, willing to abandon off-label pharmaceutical use, whose side effects can often be worse than the condition itself. That's led to more and more patient parents leaving testimonials describing how this technology has significantly improved their children's quality of life.
Growing Support For IB-Stim To Target Post-Concussion Syndrome
The benefits of IB-Stim treatment are fueling NRXS's mission of earning front-line designations. Those include more than showing excellent efficacy and safety profiles and being the first non-drug alternative to reducing functional abdominal pain in patients with IBS. IBS, also known as spastic colon, colitis, nervous colon, and spastic bowel, is the most common cause of recurrent abdominal pain in children, with an estimated 10% to 15% of children living with IBS at some point. Still, while IB-Stim's drug-free method of action has earned substantial attention and revenue, NRXS's plans go far beyond treating functional abdominal pain associated with IBS. The company is also evaluating IB-Stim™ for additional pediatric indications, including chronic nausea, post-concussion syndrome, chemotherapy-induced nausea and vomiting, and cyclic vomiting syndrome. That mission is already underway.
NRXS is advancing its prospective, randomized, double-blind study for post-concussion syndrome, enrolling up to 100 patients in a clinical trial conducted at Children's Hospital of Orange County, CA. The trial's primary endpoint will evaluate improvements in validated measures, including the Immediate Post-Concussion Assessment, Post-Concussion Symptom Scale, and Balance Error Scoring Symptom compared to placebo. NeurAxis noted that additional sites may join the study, potentially expediting the trial pace and ushering NRXS toward a $1.9 billion market opportunity to treat the estimated 400,000 patients diagnosed annually.
Notably, NRXS's approach to treatment could best those being evaluated by Big Pharma players, including Abbot (NYSE: ABT), Medtronic (NYSE: MDT), and Boston Scientific Corp. (NYSE: BSX). Each has devoted resources to explore the field. But keep in mind Big Pharma rarely develops new drugs these days; instead, they acquire them. That practice could bode well for NRXS, with its impressive neuromodulation work and achievements potentially leading to licensing or partnerships.
It's an opportunity indeed in play, noting that neuromodulation is a red-hot sector, with significant share price multiples given to companies in leadership positions. Since NRXS checks that box and may be better positioned than most to advance toward broad commercialization, earning a more appropriate multiple as a result of that position could be scored sooner rather than later. Plenty supports that presumption.
In addition to leveraging its first-mover advantage to revolutionize treatment for children and adults suffering from chronic and debilitating conditions, NRXS has a robust I.P. portfolio, over 700 patient reports, and several publications supporting its technology as a best-option candidate. Those are considerable value drivers. But, considering NRXS became public only a month ago, despite those milestones reached and pipeline assets, they may still be under the radar to many. However, that could change quickly, knowing that good news in the biotech sector tends to spread quickly. The more spread about NRXS, which is deserved, the more likely it is for its shares to correct to a higher and more appropriate level.
NeurAxis Is Deserving of A Higher Valuation
Here's the ironic part about NRXS's current valuation- they are better positioned today than when they debuted to the NYSE-American market at $6 a share. In fact, while intrinsics alone can justify that IPO price, its inherent potential takes it up an appreciable notch, including those from leveraging the value of its FDA De Novo clearance, which can make NRXS considerably larger faster than many expect. That clearance can lead to a "new device type" designation along with classification, regulation, necessary controls, and product code. That, in turn, paves a potentially expedited pathway toward earning future treatment approvals by leveraging its device eligibility to serve as a predicate for new medical devices through an expedited 510(k) process.
If so, NRXS could exploit a sweet spot of opportunity to capitalize on revenue-generating potentials from a global medical device market size estimated at $500 billion. By 2030, that figure is expected to reach as high as $800 billion, a forecast leading the analyst at GSCR to say that NRXS's post-IPO value presents an opportunity "too compelling to ignore."
Indeed, NRXS's sum of its parts supports that bullish appraisal. Moreover, that total does more than put NRXS on an accelerating growth trajectory; it also provides patients needing better care with hope. That combination is often the best part about investing in late-stage biotechs; they present win-win propositions. Even better, accounting for the gains investors can earn by being early to the opportunity, they may be more aptly described as win-win-win.
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