NeurAxis Inc. (NYSE-Amer: NRXS) stock is in rally mode, jumping over 26% since last week. Despite this significant increase, investors following this innovative biotech anticipate further growth. That optimism is grounded in NRXS's position to capitalize on a multi-billion dollar treatment opportunity for pediatric patients with functional abdominal pain (FAP) associated with irritable bowel syndrome (IBS). Rob Goldman, lead analyst at Goldman Smallcap Research, is equally bullish about NRXS's prospects. He expects NRXS shares to reach $14 within 6-12 months, an over 229% increase from its current $4.25. (*share price on 9/27/23, Yahoo! Finance, 10:10 AM EST)
That target may not be overly ambitious, given that NRXS is well-positioned to potentially earn front-line designations for its percutaneous electrical nerve field stimulator (PENFS) IB-Stim technology to treat debilitating adult and pediatric conditions. In addition, the company has only about 1.21 million shares outstanding, with a good number of those in tightly held hands. In other words, the laws of supply and demand for NRXS shares can significantly impact share price movement. The excellent news is that, more often than not, that action works to the benefit of long-side investors, as bullish investors that sit on the bid add appreciable support.
Know this, too: NRXS is attracting the interest of investors for reasons beyond its share price to assets disconnect. While that's reason to act, the most significant factor supporting the NRXS investment proposition is that this company may be on an expedited pathway to having its IB-Stim treatments become the new standard of care for pediatric FAP associated with IBS.
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Investment Opportunity Below IPO Price
That capability led Alexander Capital L.P., the sole book-running manager for the underwritten IPO, to debut NRXS stock on the NYSE-American exchange in August at $6. Knowing that an IPO price is determined after considerable due diligence, including investors' appetite for shares, the current 29% discount may present an excellent entry point. There's plenty of evidence supporting that consideration.
Foremost, NRXS is better positioned today than when its shares became public. Its pipeline is strong, its assets are compelling, and most importantly, NRXS is already a revenue-generating company, with its IB-Stim treatments generating over $9 million since 2019. All but $2 million has come during and after 2022, showing that the NRXS revenue curve is steepening. There's more to like.
Updates from NRXS support expectations that its FDA-cleared PENFS IB-Stim technology could earn 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 so, NRXS revenues could surge tremendously. Moreover, those gains could fall quickly to its bottom line, with gross margins most recently reported at 89.5%. Notably, that impressive margin isn't an outlier; it's the norm, evidenced by its increase over the 88.4% scored in the same period last year.
FDA-Cleared PENFS IB-Stim Forecast to Reach $22 Million
That's excellent news from an accounting perspective. More importantly, because its FDA-cleared device and treatment serve unmet medical needs, millions of dollars in new revenues could be scored. Modeling the sector size to its products and the positions they can earn, GSCR thinks NRXS revenues can reach $22 million by 2025, an over 144% increase to the combined revenues since 2019. In fact, considering that NRXS's PENFS IB-Stim treatment could earn more than one front-line position, that forecast may still be conservative.
That's more probable than not, considering today's standard of care for pediatric FAP and IBS uses off-label prescription treatments and sometimes surgery. NRXS's solutions, on the other hand, require 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. Another consideration in NRXS's favor is that treatment can be done in an outpatient setting.
The IB-Stim device is intended to be used for 120 hours per week for 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. To generate intended responses, the IB-Stim stimulation targets brain areas involved in processing pain and, to date, shows a unique ability to reduce functional abdominal pain associated with IBS. These are critical factors to keep in mind while appraising the market opportunity. However, it's also important to know that NRXS isn't just hoping to get IB-Stim marketed – it already has.
Even better, the revenue curve from it is expected to steepen in the last quarter of 2023 and all of 2024, resulting from increasing adoption rates as medical professionals and care providers become more aware of the device's positive clinical data and extensive health insurance company payor support. The pace of those switching to IB-Stim is also accelerating as more patients gravitate toward non-drug and non-invasive therapies. That trend should continue, especially as patients are now given the option to abandon off-label pharmaceutical treatments, whose side effects can often be worse than the condition itself. Notably, more and more patient parents are leaving testimonials describing how NRXS technology has significantly improved their children's quality of life.
IB-Stim to Target Post-Concussion Syndrome
The reach of those benefits could soon be expanded to children with another debilitating condition: Post-Concussion Syndrome, another market presenting a blockbuster opportunity. That mission is already underway, with NRXS 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. Positive results from the combined efforts could lead NRXS to capitalize on a $1.9 billion market opportunity to treat the estimated 400,000 patients diagnosed annually.
If so, it's another unmet need filled. Moreover, the innovative neuromodulation 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). While each has devoted resources to explore neuromodulation, biotech investors know that Big Pharma rarely develops new drugs these days; instead, they acquire them. That could be excellent news for NRXS, noting its late-stage data puts them on the verge of changing milestones reached into catalysts for growth. Undoubtedly, that could put licensing and/or partnership deals in play, even as early as the end of 2023.
While appraising NeurAxis, remember that neuromodulation is a red-hot sector, with significant share price multiples given to companies in leadership positions. NRXS does more than check that box; they may be better positioned than most to expand commercialization and treat new indications. Plenty supports that presumption, particularly its first-mover advantage to revolutionize treatment for children and adults suffering from chronic and debilitating conditions. That's not all.
NeurAxis has a robust I.P. portfolio, over 700 patient reports, and several publications supporting its technology as a best-option candidate. Those assets should be considered value drivers since they support the mission of NRXS earning additional approvals. Contributing to that proposition, NRXS said it intends to maximize the value inherent to its FDA De Novo clearance. That clearance can lead to a "new device type" designation along with classification, regulation, necessary controls, and product code. That, in turn, could pave an expedited pathway toward earning future treatment approvals from its device eligibility serving as a predicate for new medical devices through an expedited 510(k) process.
NeurAxis Below Its IPO Price Exposes a Valuation Disconnect
The ironic part about NRXS's current valuation is that despite the lower share price, they are better positioned fundamentally and operationally today than when they debuted to the NYSE-American market at $6 a share. In fact, intrinsics alone can justify its current $25.26 million market cap. But that's not a fair appraisal: the inherent potentials must also be factored into the equation to appropriately value NRXS stock.
The combined factors support bullish speculation that the path of least resistance for NRXS shares is higher. After all, in addition to what they've achieved, NRXS is in an enviable position to exploit a sweet spot of opportunity to capitalize on revenue-generating potentials from an estimated $500 billion medical device market. By 2030, that figure is forecast to reach as high as $800 billion, a market size leading Goldman at GSCR to say that NRXS's post-IPO value presents an opportunity "too compelling to ignore." Apparently, with its rally intact, many investors aren't.
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