There's a reason why NeuroOne Medical Technologies (NASDAQ: NMTC) stock has been higher by more than 39% since the start of February- they have best-in-class products serving multiple billion-dollar market opportunities. Not only that, NMTC products are so specialized that their competitive landscape may stay more than thin; it can be non-existent. Hence, despite its massive month-to-date surge, NMTC stock is simply too good to ignore at current levels.
What's so special about NeuroOne? Well, a lot. But, in most basic terms, they have developed a new class of flexible, minimally invasive, thin film electrodes for cEEG and sEEG recording that can be instrumental in diagnosing and treating neurological conditions. And better yet, they have some influential names supporting their use, including key development partner and shareholder Mayo Clinic, and Zimmer Biomet, a strategic development and marketing partner that can potentially make NMTC the global leader in cEEG and sEEG recording, deep brain stimulation, and ablation technology.
The better news- reaching that goal can happen much faster than many expect.
Leveraging Best In Class Technology
How? By advancing best-in-class electrode technology that replaces decades-old product technology supported by partnerships, ample cash, and marketing expertise to earn the attention of caregivers worldwide. And more than just better, NeuroOne flexible thin film electrodes are unique, differentiated, validated, and most importantly, multi-functional, meaning that the same electrode is used for recording, monitoring, and stimulating treated areas. That's a substantial difference from competing products.
They are so good, in fact, that Mayo Clinic joined the NMTC team as a key development partner and shareholder of the company. While that's an impressive accomplishment, especially for a roughly $3.00 stock, they also have the support of Zimmer Biomet (NYSE: ZBH), a $24 billion global medical technology leader, as a strategic partner and current marketer of their Evo Cortical Electrode. Combining all power, NMTC has a defined goal to become the global leader in continuous electroencephalography ('cEEG') and stereo electroencephalography ('sEEG') recording, deep brain stimulation, and ablation. Better yet, they intend to own the procedure from diagnosis through the entire treatment process.
They have an excellent chance of meeting those ambitions sooner than later.
Impressive Products And A Robust Pipeline
In fact, NMTC is already well into making that happen, expediting its mission to become the preferred electrode choice for treatment professionals. Better still, they are accelerating the development pace and putting channels in place to commercialize its patented thin film electrode technology for intracranial electroencephalography ('iEEG') or electrocorticography ('ECOG') and sEEG recording of brain activity. Not only that, they have already received regulatory clearance.
Its Evo Cortical Electrode lineup is the first cortical electrode to receive 510(k) clearance from the FDA for in-human use. And for good reasons. Unlike any other known electrode on the market, its Evo line of electrodes uses thin film printed microcircuit technology manufactured using a fully automated photolithographic process that can record, monitor, and stimulate brain tissue for up to 30 days. In addition, it uses only a single substrate to significantly improve signal quality and has a flexible thin film design for optimum surgical placement. Even better, to facilitate efficient tunneling through the scalp, it has a single thin tail that by design provides added safety by requiring fewer incisions to place.
While that list of advantages should be enough to earn professional attention, its use case gets better. A study done by the Mayo Clinic found these electrodes created less inflammation in the brain tissue after seven days of implantation, an advantage not to be underestimated in importance. Further, because the electrode comes with disposable cables, surgical time is saved as well. That's excellent news as well.
Keep in mind, too, the applications are impressive, with electrodes currently used during epilepsy surgery and intraoperative mapping. By the way, the first human commercial application of the cortical electrode dates back to 2020 at the Mayo Clinic in Rochester, Minnesota, providing the initial validation of NMTC's game-changing electrode technology.
Still, there's more to like.
High Definition Quality, Long-Term Testing Validation
Another product changing the trajectory of NMTC for the better is the Evo sEEG Depth Electrode. This product is a high-definition thin film electrode technology for temporary use (up to 24 hours) alongside specialized equipment to record, monitor, and stimulate electrical signals at the subsurface level of the brain. Moreover, this depth electrode meets the particular requirements of diagnostic brain mapping procedures and does so with reduced noise, increased signal clarity, less invasive processes, and better tactile feedback during insertion into subsurface-level brain tissue. The Evo sEEG depth electrode is also FDA-cleared, receiving 510(k) clearance in September 2021, making it the second NMTC product to be cleared through the 510(k) regulatory pathway. The market opportunity for this product is substantial, and with its automated manufacturing process able to fulfill orders quickly, tapping into that potential is happening now.
By the way, that's just one market. Expect all of its thin-film electrodes to gain market traction after NMTC announced last week that it successfully completed initial pre-clinical long-term testing of recording capabilities on its platform thin film electrode technology. It was a milestone reached that successfully showed the electrodes' ability to record electrical activity over 5 years measured using an accelerated aging test model. The test results were excellent and demonstrated NeuroOne's thin film electrodes' reliability against environmental factors that may contribute to device failure or malfunction, which is a well-established challenge with thin film electrode technology.
The results of NMTC's initial long-term testing of recording capabilities for its thin film electrode technology can have far-reaching and positive implications. Foremost, results support the potential expansion of utilization of these electrodes for long-term recording for indications such as epilepsy, Parkinson's disease, chronic back pain due to failed back surgeries, other related neurological disorders, and research applications. Not only that, they can leverage data to provide an opportunity to enter the research market and offer the near-term potential for strategic licensing agreements in specific markets. Hence, a perfect storm of revenue-generating opportunities is forming. The better news is that the storm is big and can quickly cement NMTC's place in the more than $10 billion therapeutic electrode market.
Still, there's more in play that makes the NMTC valuation proposition too good to ignore.
Therapeutic Electrodes Are Industry-Changing
In addition to the innovative products mentioned, NMTC is also developing therapeutic electrode technologies for brain tissue ablation. Its sEEG electrodes, in combination with its NeuroOne RF Generator and temperature sensing, provide a seamless, single diagnostic and therapeutic procedure able to remove brain tumors or lesions that cause seizures. The more excellent news is that the procedure can be done at the bedside.
Also, NMTC's in-development deep brain stimulation ('DBS') system utilizes the sEEG depth electrode to detect microseizures that can improve responsive stimulation algorithms. The applications for this product are broad, targeting Parkinson's Disease, epilepsy, and essential tremors, and these markets add additional revenue-generating firepower to the investment proposition. Better yet, in addition to targeted stimulation for movement, psychiatric and cognitive disorders, the NMTC technology can also be used for drug delivery, which puts another $6 billion market in play.
They aren't done yet. NeuroOne is also accelerating the development of a spinal cord stimulation system for reducing chronic back pain, using a paddle implanted like a cylinder electrode that can be placed percutaneously with an expandable midsection. That's important and unique in that it allows the electrode to be extended without displacement, and the scalability of the electrodes allows for precision targeting of the stimulation area. Targeting this market adds another $2 billion in global sales opportunities.
Exploiting markets is only as good as the IP protection held.
Impressive IP, Analyst PT Of $5.88
There, protecting its assets is a formidable IP portfolio. NeuroOne licenses three issued patents from The Wisconsin Alumni Research Foundation covering a neural probe array and thin film microelectrode array and method, which expire between 2025 and 2030. Further, NMTC has a patent application published in October 2018 covering a variety of concepts, including accessories for brain surgery to ablation and stimulation concepts for both cortical and depth electrodes. Notably, additionally filed for provisional patents were submitted in March 2017 and October 2017 to deliver drugs using its electrodes. Thus, NMTC is well-insulated from competition for at least the next eight years from a competitive perspective. Of course, add-ons can extend patent life.
And from a fundamentals perspective, NMTC is equally impressive. The company has only about 16.19 million shares outstanding, with insiders and institutions owning about 42% of the float. The market cap of about $42 million is impressive but appears to significantly undervalue its ability to penetrate billion-dollar addressable markets based on its commercialization prospects. Also, after its year-end, NMTC raised roughly $13.35 million before expenses, putting NMTC in good shape on a cash basis to accelerate its near-term commercialization objectives.
By the way, two analysts currently cover the stock and have an average price target of $5.88, representing more than 96% upside from current prices. That's good to know as well.
A Surge Expected In 2022
Indeed, all indicators point to NMTC having a breakout in 2022. Prestigious partnerships, industry-changing technology, and an impressive capital structure each contribute to the likelihood for appreciable gains without fear of near-term dilution. Indeed, the sum of its parts makes NMTC more than an attractive investment proposition; it's a compelling one.
The best news of all is that NeuroOne has the assets, technology, and revenue-generating firepower to command a much higher valuation today. Still, going forward into the year, expect NMTC to reach additional milestones that should not only drive shareholder value higher but also make current prices a launchpad for further appreciation. Thus, with Neuroone positioned to transform milestones reached into catalysts, the best advice may be to look out above.
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