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Neuronetics, Inc. (NASDAQ:STIM): Innovative Neurohealth Solutions Driving Sustainable Growth
Published on September 24, 2024 | Ticker: STIM

Neuronetics, Inc. (NASDAQ:STIM) is a commercial-stage medical technology company that is revolutionizing the treatment of neurohealth disorders. The company's flagship product, the NeuroStar Advanced Therapy System, is a non-invasive and non-systemic office-based treatment that uses transcranial magnetic stimulation (TMS) to create a pulsed, MRI-strength magnetic field to induce electrical currents designed to stimulate specific areas of the brain associated with mood.

Business Overview

The NeuroStar Advanced Therapy System was first cleared by the FDA in 2008 to treat adult patients with major depressive disorder (MDD) who have failed to achieve satisfactory improvement from prior antidepressant medication. Since then, the system has received additional clearances from the FDA, including as an adjunct for adults with obsessive-compulsive disorder (OCD), to decrease anxiety symptoms in adult patients with MDD that may exhibit comorbid anxiety symptoms (anxious depression), and most recently, as an adjunct for the treatment of MDD in adolescent patients aged 15-21.

Neuronetics has established itself as the market leader in TMS therapy, with over 175,379 global patients treated with over 6.4 million treatment sessions through March 31, 2023. The company's strong commercial execution has driven impressive financial results, with annual revenue of $71.3 million and an annual net loss of $30.2 million in 2023.

Financials

In the first quarter of 2023, Neuronetics reported total revenue of $17.4 million, an increase of 12% compared to the same period in 2022. This growth was primarily driven by a 22% increase in U.S. treatment session revenue, which reached a record $13 million. The company's gross margin also improved to 75.1% in the quarter, up from 73.3% in the prior year period, reflecting the higher mix of treatment session revenue.

Despite the solid top-line performance, Neuronetics reported a net loss of $7.9 million in the first quarter of 2023, an improvement from the $10.5 million net loss in the same period of 2022. The company's focus on prudent cost management has helped drive this reduction in net loss, with operating expenses decreasing by 6% year-over-year.

Liquidity

Neuronetics' liquidity position remains strong, with $47.7 million in cash and cash equivalents as of March 31, 2023. The company's cash flow usage has also improved, with negative operating cash flow of $12.0 million in the first quarter of 2023, compared to $15.2 million in the same period of 2022. Neuronetics expects to achieve cash flow break-even in the fourth quarter of 2024 and on a full-year basis in 2025.

Recent Developments

The company's recent FDA clearance for the use of the NeuroStar Advanced Therapy System as a first-line adjunct treatment for adolescent patients aged 15-21 with MDD represents a significant market expansion opportunity. This clearance increases Neuronetics' total addressable market within MDD by approximately 35%, as the company now has the ability to serve an estimated 4.3 million adolescent patients in the United States.

Neuronetics' comprehensive commercialization strategy, which includes initiatives such as the Better Me Guarantee Provider Program and NeuroStar University, has been instrumental in driving increased adoption and utilization of the NeuroStar system among its customer base. The Better Me Guarantee Provider Program, in particular, has yielded impressive results, with participating sites seeing up to a 6.5x improvement in patient follow-up within 24 hours and a 48% increase in the number of motor threshold tests being completed, compared to non-participating sites.

The company's international expansion efforts have also shown promise, with international revenues representing 4% of total revenues in the first quarter of 2023 and 2022. Neuronetics' exclusive distribution agreement with Teijin Pharma Limited for the Japanese market has been a key driver of its international growth, with the NeuroStar Advanced Therapy System receiving reimbursement coverage in Japan in 2019.

Outlook

Looking ahead, Neuronetics' guidance for the second quarter of 2023 calls for revenues of $18 million to $19 million, with the company reaffirming its full-year 2023 revenue guidance of $78 million to $80 million. The company expects total operating expenses for the full year to be in the range of $80 million to $84 million.

Conclusion

Neuronetics' strong commercial execution, innovative product portfolio, and comprehensive commercialization strategy have positioned the company for long-term sustainable growth. The recent FDA clearance for the adolescent MDD indication, coupled with the company's robust clinical data pipeline and collaborative partnerships, further strengthen Neuronetics' ability to drive increased adoption of the NeuroStar Advanced Therapy System and expand its addressable market. As the company continues to execute on its strategic initiatives, investors can look forward to Neuronetics' continued progress towards profitability and cash flow positivity.

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