NeurAxis, Inc. (NRXS) is a medical technology company at the forefront of developing innovative neuromodulation therapies to address chronic and debilitating conditions in both pediatric and adult patient populations. With a steadfast commitment to improving patient outcomes, NeurAxis has established itself as a trailblazer in the industry, leveraging its robust scientific data and unwavering focus on securing widespread insurance coverage to drive sustainable growth.
Company History and Background
Founded in 2011 and headquartered in Carmel, Indiana, NeurAxis has a rich history of developing and commercializing cutting-edge medical devices. The company was initially incorporated in Indiana on April 17, 2012, under the name Innovative Health Solutions, Inc. In March 2022, the company changed its name to NeurAxis, Inc. and subsequently filed a Certificate of Conversion to become a Delaware corporation on June 23, 2022. Throughout its history, NeurAxis has developed three FDA-cleared products: the IB-STIM, the NSS-2 Bridge, and the original 510(k) clearance device called the EAD, now known as NeuroStim.
Product Portfolio
The company's flagship product, IB-Stim, is a percutaneous electrical nerve field stimulator (PENFS) device that has received FDA clearance for the treatment of functional abdominal pain associated with irritable bowel syndrome (IBS) in patients aged 11 to 18 years. Recognizing the vast unmet need in this patient population, NeurAxis has recently expanded the IB-Stim's indication to include patients aged 8 to 21 years, nearly doubling the addressable market. Currently, IB-Stim is the only product being marketed and sold by the company.
The IB-Stim device sells for $1,200 per unit, and each child being treated for functional abdominal pain associated with IBS will typically use three to four devices. The company expects that potential patients with future indications, such as functional nausea, post-concussion syndrome, and cyclic vomiting syndrome in children, will use six or more devices per patient.
NeurAxis' other FDA-cleared products include the NSS-2 Bridge, a percutaneous nerve field stimulator device indicated for use in the reduction of opioid withdrawal symptoms. In April 2020, the company licensed this device to Masimo Corporation for a one-time licensing fee of $250,000. The original 510(k) device, the EAD (now called NeuroStim), is no longer being manufactured, sold, or distributed and is reserved only for research purposes.
Scientific Validation and Clinical Studies
NeurAxis' steadfast pursuit of scientific validation has been a key driver of its success. The company boasts an impressive portfolio of 16 peer-reviewed publications covering 10 distinct clinical studies, positioning IB-Stim as the neuromodulation therapy with the highest level of evidence available for functional abdominal pain associated with IBS. This robust data has been instrumental in securing the support of leading academic societies, such as the North American Society for Pediatric Gastroenterology, Hepatology, and Nutrition (NASPGHAN), which has recognized IB-Stim as the gold-standard treatment for this debilitating condition.
Insurance Coverage and Market Access
Recognizing the importance of insurance coverage as a critical enabler of widespread patient access, NeurAxis has made significant strides in expanding its payer base. As of the latest reporting, the company has secured coverage for approximately 35 million lives, a substantial increase from just 4.5 million lives at the start of 2024. This rapid expansion of coverage has been a key driver of the company's recent revenue growth, with a 40% year-over-year increase in the third quarter of 2024.
Product Diversification
In addition to the success of IB-Stim, NeurAxis has also leveraged its expertise in neuromodulation to diversify its product portfolio. The company recently licensed the Rectal Expulsion Device (RED) from the University of Michigan, a self-inflating balloon that serves as an easy-to-use, office-based point-of-care interrectal function test to identify patients with chronic constipation due to pelvic floor dyssynergia. With a category one CPT billing code and strong national reimbursement, RED is poised to provide a significant revenue stream for NeurAxis, complementing the growth of IB-Stim.
Challenges and Litigation
Despite the company's impressive accomplishments, NeurAxis has not been without its challenges. In 2019, the company was embroiled in a lawsuit related to alleged misrepresentations regarding the reimbursability of its NeuroStim device. Plaintiff Ritu Bharnbhani, M.D. initiated the lawsuit against the company. While the court granted NeurAxis' motion for summary judgment and dismissed the complaint in 2022, the plaintiffs filed an appeal which is still pending. This litigation posed a significant distraction and financial burden for the company.
Furthermore, the ongoing COVID-19 pandemic has presented its own set of obstacles, as healthcare providers have been forced to navigate the complexities of patient care during a global health crisis. NeurAxis has demonstrated its resilience, however, by adapting its sales and marketing strategies to accommodate the changing landscape and maintain momentum in its commercialization efforts.
Growth Strategy and Future Outlook
Looking ahead, NeurAxis remains focused on executing its comprehensive growth strategy. The company's top priority is to continue expanding insurance coverage for IB-Stim, with a goal of reaching 50 million covered lives by the end of 2024. Additionally, the company is actively pursuing FDA clearance for the commercialization of RED, which it expects to achieve in late 2024, further diversifying its revenue streams.
NeurAxis expects revenue growth to accelerate meaningfully as they move into 2025 towards cash flow breakeven, based on two key catalysts: continued gaining of insurance coverage for their IB-Stim product and commercialization of their RED product. The company is cautiously optimistic that they will exceed their projected 50 million covered lives for IB-Stim in 2024, as they have many payers currently in the review process. NeurAxis expects revenue growth to continue in Q4 2024 and into 2025 as they continue to gain more insurance coverage. The company's goal is to reach cash flow breakeven, which they believe is achievable as a function of their sales volume and strong gross margins.
Financials
In the third quarter of 2024, NeurAxis reported revenues of $667,000, a 40% increase compared to the same period in the prior year. The company saw strong demand and a 50% increase in unit sales in Q3 2024 compared to Q3 2023. However, discounted financial assistance orders outpaced the growth of full reimbursement orders, resulting in a slight decline in gross margin. Gross profit for the quarter grew to $570,000, with a gross margin of 85.4%. While the company's operating loss improved by 45% year-over-year, it continues to invest in initiatives to drive long-term growth, including building out its market access, sales, and finance teams, as well as increasing advertising efforts to expand market awareness.
For the full year 2023, NeurAxis reported revenue of $2.46 million and a net loss of $14.63 million. The company's operating cash flow (OCF) for 2023 was -$6.69 million, and its free cash flow (FCF) was -$6.77 million. In the most recent quarter (Q3 2024), the company reported a net loss of $1.8 million. Year-to-date through Q3 2024, NeurAxis reported an OCF of -$4.3 million and an FCF of -$4.4 million.
It's worth noting that NeurAxis has faced financial challenges throughout its history. The company has incurred losses since inception and has had to fund its operations primarily through a combination of sales, debt, and the sale of capital stock. In January 2023, the company's board of directors authorized a 1-for-2 reverse stock split, and on August 9, 2023, NeurAxis completed its initial public offering, selling 1.1 million shares of its common stock at a price of $6 per share and listing on the NYSE American exchange.
Liquidity and Capital Resources
As of September 30, 2024, NeurAxis had a cash balance of $261,000. The company recently secured a $5 million investment from a life sciences-focused fund to shore up liquidity. NeurAxis' debt-to-equity ratio for 2023 was -0.08, while its current ratio and quick ratio were 0.24 and 0.23, respectively. These figures indicate that the company may face challenges in meeting its short-term obligations.
The company's auditors have expressed substantial doubt about its ability to continue as a going concern, and NeurAxis expects that its existing cash will only be sufficient to meet its anticipated operating needs through the end of 2024. However, the recent $5 million investment and the company's focus on reaching cash flow breakeven provide some optimism for its financial future.
Historical Performance and Future Outlook
NeurAxis has shown mixed results in recent quarters. In Q1 2024, the company's revenue was down 20% year-over-year, and units were down 14% year-over-year. In Q2 2024, the revenue decline slowed to around 5% year-over-year, while total units increased by 16% year-over-year. The strong performance in Q3 2024, with a 40% year-over-year revenue increase and a 50% increase in unit sales, indicates a positive trend in the company's growth trajectory.
NeurAxis' unwavering commitment to scientific excellence, coupled with its strategic focus on securing widespread insurance coverage and diversifying its product portfolio, position the company for continued success in the years to come. As the medical technology industry navigates the evolving landscape of healthcare, NeurAxis stands as a shining example of a company dedicated to improving patient outcomes through innovative neuromodulation therapies.