Business Overview

Tivic Health Systems, Inc. (NASDAQ:TIVC) is a health tech company focused on developing innovative bioelectronic medicine solutions. The company's first commercial product, ClearUP Sinus Pain Relief, is an FDA-approved device for the treatment of sinus pain and congestion. However, Tivic's recent breakthrough in noninvasive vagus nerve stimulation (VNS) technology has the potential to unlock significant growth opportunities and create substantial shareholder value.

Tivic Health was incorporated in 2016 with the goal of developing and commercializing non-invasive bioelectronic medicine. The company's first commercial product, ClearUP, is a handheld device that uses ultra-low current electrical waves to relieve sinus pain and congestion symptoms. ClearUP received FDA approval in 2021, making it the first FDA-approved bioelectronic treatment for these indications.

Financials

In 2023, Tivic generated $1.18 million in annual revenue from the sale of ClearUP, with a net loss of $8.24 million and negative operating and free cash flows of $8.51 million and $8.63 million, respectively. The company's quarterly revenue in Q1 2024 was $334,000, a decrease of 11.2% compared to the same period in the prior year, primarily due to a 35% decrease in unit sales offset by a 35% increase in the average selling price.

Tivic has been working to optimize the unit economics of the ClearUP business, including reducing the cost of goods sold and restructuring the internal team. In Q1 2024, the company launched a new version of ClearUP with improved power management and battery life. Tivic has also entered into a limited exclusive distribution agreement with McKesson, one of the top 10 medical equipment distributors in the U.S., to expand the product's reach through major retail outlets.

Breakthrough in Noninvasive Vagus Nerve Stimulation

While the ClearUP product has provided an initial revenue stream, Tivic recognized that a single product would be insufficient to support the expenses of a public company. As a result, the company began exploring the use of its bioelectronic expertise in higher-value disease areas, with a focus on vagus nerve stimulation (VNS).

The vagus nerve is the longest autonomic nerve in the body, responsible for regulating functions such as digestion, heart rate, breathing, inflammation, and neurological activity. Modulating the activity of the vagus nerve has significant potential in the treatment of various chronic diseases, including epilepsy, treatment-resistant depression, and inflammatory conditions.

Historically, most medically approved VNS devices have been implanted, requiring surgical procedures and commanding high premiums. There is a significant unmet need for safe and effective noninvasive VNS solutions that can deliver similar therapeutic benefits without the invasive nature of implanted devices.

In 2023, Tivic conducted a clinical study in collaboration with the Feinstein Institute for Medical Research at Northwell Health, one of the world's leading centers for bioelectronic medicine research. The results of this study, announced in May 2024, were highly impressive and differentiated from previous noninvasive VNS approaches.

Compared to baseline measurements, Tivic's novel noninvasive VNS intervention resulted in a 97% increase in heart rate variability (RMSSD), a widely accepted proxy for vagus nerve activity. This increase in parasympathetic activity has the potential to offer effective treatments for cardiac arrhythmias and other cardiovascular diseases.

The study also demonstrated that Tivic's noninvasive VNS intervention increased frontal theta power by 24% and reduced gamma power in multiple brain regions, including a 66% reduction in frontal gamma power. These changes are associated with reduced arousal, anxiety, and potentially improved outcomes in conditions such as treatment-resistant depression and post-traumatic stress disorder - areas where implanted VNS devices have already shown clinical utility.

Importantly, the magnitude of the autonomic, cardiac, and neurological changes observed in this healthy population study are on par with the results reported for implanted VNS devices, a remarkable achievement for a noninvasive approach. This suggests that Tivic's technology may be able to deliver similar therapeutic benefits to patients without the need for invasive surgical procedures.

Significant Growth Opportunity

The vagus nerve stimulation market is a rapidly growing segment within the broader $8.3 billion neuromodulation industry. While implanted VNS devices currently dominate the market, the development of safe and effective noninvasive solutions represents a significant growth opportunity.

Tivic's breakthrough in noninvasive VNS technology positions the company to potentially capture a meaningful share of this expanding market. The company's ability to achieve results comparable to implanted devices, without the associated surgical risks and costs, could make its approach highly attractive to both patients and healthcare providers.

Furthermore, the potential applications of Tivic's noninvasive VNS technology extend beyond the current indications for implanted VNS devices. The company's technology could be explored for the treatment of a wide range of chronic conditions, including epilepsy, treatment-resistant depression, post-traumatic stress disorder, and inflammatory diseases such as rheumatoid arthritis and multiple sclerosis.

Liquidity

As of March 31, 2024, Tivic had $1.7 million in cash and cash equivalents, with an accumulated deficit of $39.4 million. The company's cash and financial resources may be insufficient to meet its anticipated needs for the next twelve months, raising substantial doubt about its ability to continue as a going concern.

To address this, Tivic recently completed a $4 million registered public offering in May 2024, which provided the company with approximately $3.5 million in net proceeds after deducting placement agent fees and offering expenses. The company intends to use these funds as working capital, including advancing the next phase of its clinical work on the VNS program.

Risks and Challenges

Tivic faces several risks, including the inherent uncertainties of research and development, the challenges of commercializing new medical technologies, and the competitive landscape in the neuromodulation industry. The company's ability to successfully develop, obtain regulatory approvals, and commercialize its VNS technology will be critical to its long-term success.

Outlook

However, the promising results from the company's recent clinical study on noninvasive VNS have the potential to unlock significant growth opportunities for Tivic. The company's focus on advancing this technology, while continuing to optimize the ClearUP business, could position it to capitalize on the expanding vagus nerve stimulation market and create substantial value for shareholders.

Conclusion

Tivic Health Systems' breakthrough in noninvasive vagus nerve stimulation technology represents a significant milestone for the company and the broader bioelectronic medicine industry. The ability to achieve results comparable to implanted VNS devices, without the associated surgical risks and costs, could make Tivic's approach highly attractive and position the company for substantial growth in the years ahead. As the company continues to execute on its strategic initiatives, investors should closely monitor Tivic's progress in advancing its VNS technology and expanding its commercial footprint.