Images from Neuraxis.com

• NeurAxis is launching its IPO tomorrow, February 9, 2023.
• The expected initial price should be in the $7-$9 range, and the ticker will be NRXS.
• The company develops a neurostimulatory device targeting pain relief in IBS patients.

NeurAxis, Inc. (NRXS), a developer of neurostimulation treatments for irritable bowel syndrome and other health conditions, has proposed an Initial Public Offering (IPO) of $15mn through an amended registration document (S-1/A). The original plan had been for $19mn. In its pre-IPO stage, the company received $28.4mn in investments from investors including Masimo Corporation (MASI) and Brian Hannasch. The company is based out of Carmel, Indiana, and is led by CEO Brian Carrico. Mr Carrico previously held positions at Bard Medical and St. Jude Medical and has been with Neuraxis since 2012. The company has 16 full-time employees and one part-time employee.

The company intends to sell 1,875,000 common shares at a price range of $7 to $9, for a total value of between $13mn and $17mn, respectively. Alexander Capital is the sole underwriter.

NeurAxis develops neuromodulator therapies in a pediatric population suffering from chronic diseases. Lead product is IB-Stim, which has been cleared by the FDA for treating functional abdominal pain in IBS patients, as a non-implanted nerve stimulator device. For the nine-month period ended September 30, 2022, the company had revenues of $2mn. The company targets 260 children’s hospital and has sold its device to 50 of them.

Besides the approved indication, IB-Stim is also running trials in the following four indications per the company’s prospectus:
 

1. Chronic nausea -- RCT completed, and data being analyzed, see ClinicalTrials.gov Identifier: NCT03675321.
2. Post-concussion syndrome -- RCT currently enrolling patients, see ClinicalTrials.gov Identifier: NCT04978571.
3. Chemotherapy-induced nausea and vomiting -- RCT currently enrolling patients, see ClinicalTrials.gov Identifier: NCT05143554.
4. Cyclic vomiting syndrome -- Pilot study completed, see ClinicalTrials.gov Identifier: NCT03434652; multicenter RCT is anticipated to begin enrolling patients in the first half of 2023.
    

The core technology used by the company is PENFS (percutaneous electrical neural field stimulation), which is a noninvasive, reversible and painless procedure that can be quickly learnt by an administrator. The idea is to access the CNS through peripheral cranial nerves and create a stimulation that reduces the firing of amygdala. The stimulation is provided through low-voltage electricity just below the skin, near the appropriate nerve endings. Mild sedation or local anaesthetic may be used, and two or three needles may be placed under the skin. The procedure has very few side effects when performed in a sterile condition.

The device may look like this:

It may be used for up to 120 hours a week for 3-4 weeks. It is used to stimulate V, VII, IX and X branches of cranial nerves. This specific process does not require anesthesia. There are no other restrictions except that the device must not get wet. Patients can lead a more or less normal lifestyle while using the device. There are no known cardiac effects.

IB-Stim has several advantages over currently used treatments for IBS-related pain. Unlike medications, there is no problem of addiction and no black box warnings. Its safety also makes it available for pediatric use. As the company notes:

In the trial of 115 subjects, 10 patients reported side-effects and only three discontinued the study because of side-effects. Of such 10 patients, six experience ear discomfort (three in the PENFS group, three in the sham group), three experienced adhesive allergy (one in the PENFS group, 2 in the sham group), and one experienced syncope due to needle phobia (in the sham group). There were no serious adverse events.

The entire US market for pediatric indications is over $9bn. The company has 8 issued and 18 pending patents covering the device and the method. US patent protection lasts till 2039. The company has applied for international patents.

Interestingly, in its de novo approval document (this document is no longer available on the FDA page, and shows an error, however a cached version can be accessed), the FDA says this about similar/competing devices:

The IB-Stim is similar to the NSS-2 BRIDGE device previously granted in DENI 70018for a different intended use. It is also like the Electronic Auricular Device (EAD)electroacupuncture device cleai·ed in Kl 40530, which is the precursor device to both theNSS-2 BRIDGE and IB-Stim device. The IB-Stim duty cycle is identical to the dutycycle cleared in the Electronic Auricular Device (EAD) electroacupuncture device(K140530).

Note that the NSS-2 Bridge product, currently owned by Masimo, one of the early investors in Neuraxis, was also developed at Neuraxis. It is also a PENFS device, indicated for use in the reduction of opioid withdrawal symptoms. It was licensed to Masimo in 2014 for a one-time licensing fee of $250,000. 

The EAD was also developed by Neuraxis, but is no longer manufactured.

The IB-Stim device is supported by a number of insurers. About this, the company states:
 

Our technology specific CAT III CPT Code (0720T) was published on December 30, 2021 and effective on July 1, 2022. A CAT III CPT code is viewed as a temporary CPT code, and we expect to submit for our permanent CAT I CPT code in 2023. As of the date of this prospectus, there are three (3) commercial written insurance coverage policies that cover our CPT Code, including BCBS Nebraska, BCBS Massachusetts, and Quartz Wisconsin.

Thus, Neuraxis is launching on NASDAQ with an approved product and further approvals in the pipeline. The company has around $400,000 in current assets. Total assets amount to $1.3mn. Current liabilities are $6.75mn. In the September quarter, the company had revenues of $2.07mn, while cost of goods sold (COGS) was $221,000. Selling, general and administrative expenses were $4.1mn, while R&D expenses were $344,000. While the finances are in difficult straits, a successful IPO will be able to change all that. Add to that a revenue-generating stream - something many emerging companies do not have when they IPO - and the financial condition of the company is decent.

Competitors

Major competitive vendors that provide or are developing related treatments include the following public companies:  Abbvie (ABBV), Bristol-Myers Squibb (BMY), Amgen (AMGN), Arena Pharmaceuticals (ARNA), Gilead Sciences (GILD), Pfizer (PFE), Takeda Pharmaceuticals (TAK).

Bottomline: should you buy this IPO?

Neuraxis has a new approach towards relieving pain in the pediatric population, and while the method is tested, it is not widely tried. Early data generated by the company has shown notable improvements, with 95% of the children tested saying they will recommend the device to family and friends. There’s a basic revenue stream, which is rare for emerging companies. The only problem is cash, which is to be expected for a developing company. If they can generate some funding through the IPO, they will be able to bring other approvals of the same product to the market. There are four such indications in the pipeline, and each indication is worth at least as much as the current revenue stream of $2mn, probably more with greater exposure. As such, there’s decent potential in Neuraxis, as long as you are aware of the risks of investing in an IPO.

Related Article:
NeurAxis IPO Sets Stage To Take On Irritable Bowel Syndrome With A Non-Surgical Solution

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