Tivic Health Systems, Inc. (TIVC) is a health tech company at the forefront of the rapidly growing bioelectronic medicine industry. With a strong focus on innovative technology and a commitment to addressing unmet medical needs, Tivic Health is poised to make a significant impact in the realm of non-invasive, nerve-based therapies.
Company History and Business Overview Tivic Health was founded in 2016 with the goal of developing and commercializing advanced bioelectronic solutions. The company’s first commercial product, ClearUP Sinus Pain Relief, was launched in 2019 and received FDA approval for the treatment of sinus pain and congestion. ClearUP utilizes Tivic’s patented, handheld neuromodulation design to deliver ultra-low current electrical waves, providing relief for a variety of inflammatory conditions.
In June 2021, Tivic Health was reincorporated as a Delaware corporation, marking a significant milestone in its corporate structure. The company’s journey has not been without challenges, particularly in the development of its ClearUP product. In 2023, Tivic discovered a technical issue in the silicon component of the ClearUP charging circuit, necessitating a product redesign. This led to the delivery of ClearUP 2.0 in January 2024, accompanied by various expenses related to inventory swaps, supply chain redesign, and other associated costs.
Despite these hurdles, Tivic Health has made substantial progress in improving the economics of the ClearUP product line. In the months following the transition to ClearUP 2.0, the company achieved an impressive average gross margin of over 70% on ClearUP sales, a significant improvement from the previous 40%-50% and the negative gross margin reported two years prior. This financial turnaround was further bolstered by a strategic realignment of marketing expenditures, resulting in solid returns on advertising investments and increased per-unit profitability.
In addition to its commercially available ClearUP product, Tivic Health has been making significant strides in the development of its novel, patent-pending vagus nerve stimulation (VNS) technology. The vagus nerve is the largest autonomic nerve in the body, running from the brain stem to the stomach and touching every major organ in between. Tivic’s non-invasive approach to VNS, known as non-invasive cervical vagus nerve stimulation (ncVNS), has shown promising results in clinical trials, demonstrating profound effects on the neurologic, cardiac, and autonomic nervous systems.
Financial Performance and Liquidity
Financials Tivic Health’s financial performance has been marked by fluctuations in revenue and profitability, as the company navigates the challenges of a rapidly evolving market and invests heavily in research and development. For the nine months ended September 30, 2024, the company reported revenue of $600,000, a decrease of 27% compared to the same period in the prior year. This decline was primarily driven by a 36% decrease in unit sales, partially offset by a 13% increase in the average selling price.
Despite the revenue decrease, Tivic Health has made significant progress in improving its gross margins. The company reported a gross profit of $241,000 for the nine-month period, with a gross margin of 35%. Excluding one-time charges related to the company’s supply chain restructuring, the gross margin would have been approximately 52%, a testament to Tivic’s efforts to optimize its operations.
For the most recent fiscal year (2023), Tivic Health reported revenue of $1.18 million, with a net income of -$8.24 million. The company’s operating cash flow (OCF) was -$8.51 million, and free cash flow (FCF) stood at -$8.63 million. In the most recent quarter (Q3 2024), revenue was $126,000, representing a 56% year-over-year decline. The net income for the quarter was -$1.43 million, with OCF and FCF both at -$1.41 million.
The decrease in revenue and increase in net loss for the quarter was primarily attributed to costs associated with redesigning the ClearUP product and transitioning to a new logistics provider. The company incurred one-time inventory disposal and restocking costs, which negatively impacted gross margin. However, in the months following the transition, the company has averaged over 70% gross margin on ClearUP sales compared to 40-50% previously.
Liquidity On the balance sheet, Tivic Health had cash and cash equivalents of $2.2 million as of September 30, 2024, compared to $3.4 million at the end of 2023. The company’s working capital stood at $2.6 million, providing a solid foundation to support its ongoing operations and future growth initiatives.
Tivic Health’s current ratio is 5.65, and its quick ratio is 4.34, indicating a strong ability to meet short-term obligations. The company has no disclosed debt, with a debt-to-equity ratio of 0. However, Tivic Health has stated that its current cash reserves may be insufficient to meet its anticipated needs for the next 12 months, and it expects to need to raise additional capital to continue funding its operations and product development activities.
Product Segments and Market Strategy Tivic Health has developed two complementary bioelectronic platforms:
Vagus Nerve Stimulation (VNS) Platform: Tivic’s second platform is a research-stage platform directed to vagus nerve stimulation, which is currently undergoing clinical evaluation. In May 2024, the company announced positive results from a pilot research study with The Feinstein Institutes for Medical Research, which confirmed the effectiveness of Tivic’s patent-pending non-invasive cervical vagus nerve stimulation (ncVNS) approach. The study found that Tivic’s ncVNS intervention resulted in significant increases in measures of parasympathetic nervous system activation, including heart rate variability, brain activity changes consistent with reduced arousal and anxiety, and pupil constriction. These results suggest Tivic’s ncVNS approach may have clinical utility in several disease areas including post-traumatic stress disorder, cardiac disease, inflammatory conditions, and ischemic stroke.
Tivic Health primarily sells its ClearUP product direct-to-consumer in the US through its website and online retailers like Amazon. The company has also established distribution agreements with major US medical suppliers such as McKesson and Cardinal Health, expanding its reach in the healthcare market.
Vagus Nerve Stimulation (VNS) Opportunity The successful results of Tivic Health’s Phase 1 clinical trial for its ncVNS technology have opened up a significant growth opportunity for the company. The global VNS market is expected to grow from $8.6 billion in 2021 to $21.3 billion by 2030, representing a compound annual growth rate (CAGR) of 10.6%, according to Polaris Market Research. Furthermore, IDTechEx has forecasted the peripheral nerve stimulation segment targeted by Tivic to grow at a 35% CAGR.
Tivic Health’s ncVNS approach has demonstrated industry-leading data, with the company’s recent clinical trial showing profound effects on the neurologic, cardiac, and autonomic nervous systems. These positive results have garnered the attention of industry experts and payers, and the company has engaged a leading growth strategy firm, Fletcher Spaght, to assess the market opportunity and commercial potential of its VNS technology.
The company has identified over 30 potential use cases for its ncVNS device, spanning areas such as neurology, psychiatry, cardiology, and autonomic nervous system disorders. Tivic Health is now focused on prioritizing the most promising indications and developing a comprehensive commercial strategy to bring its VNS solutions to market.
Operational Efficiency and Cost Management Tivic Health has been proactive in streamlining its operations and managing costs to improve its financial performance. In the third quarter of 2024, the company terminated its office lease, relocated to a smaller site, and established a new low-volume internal manufacturing and test facility. These initiatives contributed to a 20% reduction in the company’s year-over-year net operating loss.
Additionally, Tivic Health has continued to rely heavily on third-party service providers, including marketing agencies, manufacturing services, third-party logistics providers, and research partners, to carry out its operations. This approach has allowed the company to maintain a small core team and focus its resources on strategic initiatives, such as the development and commercialization of its VNS program.
The company is also exploring alternative monetization strategies for the ClearUP product line, such as licensing or white labeling, to achieve greater scale while focusing investment resources on the VNS program. Tivic Health believes it has the resources to fund the VNS program progression into Phase 2 and Phase 3 trials, potentially through a combination of non-dilutive financing, grants, and selective use of its ATM facility.
Challenges and Risks As Tivic Health navigates the dynamic bioelectronic medicine market, the company faces several challenges and risks that investors should be aware of. The company’s reliance on a limited number of large customers for a significant portion of its revenue could expose it to potential disruptions or changes in customer preferences. Additionally, the highly competitive nature of the medical device industry and the need for regulatory approvals for new products pose ongoing risks.
Tivic Health’s ability to successfully commercialize its VNS technology and identify the most promising clinical indications will be critical to its long-term success. The company’s ongoing collaboration with The Feinstein Institute for Medical Research and its partnership with Fletcher Spaght will play a crucial role in refining the ncVNS technology and developing a robust commercial strategy.
Furthermore, the company’s financial position and liquidity could be impacted by the significant investments required to advance its VNS program through clinical trials and regulatory approvals. Tivic Health’s ability to secure additional funding, whether through equity or debt financing or non-dilutive sources, will be an essential factor in its continued growth and development.
Conclusion Tivic Health is a promising health tech company that is at the forefront of the rapidly evolving bioelectronic medicine industry. With its commercially available ClearUP product and its innovative ncVNS technology, the company is well-positioned to capitalize on the growing demand for non-invasive, nerve-based therapies.
The company’s recent progress in optimizing its operations and the positive results of its VNS clinical trials have generated significant interest from industry experts and payers. As Tivic Health continues to refine its VNS technology and develop a comprehensive commercial strategy, investors should closely monitor the company’s ability to navigate the challenges and seize the opportunities in this dynamic market.
Tivic Health’s focus on three key areas to build shareholder value – turning the ClearUP product line into a profitable business, leveraging expertise in bioelectronic medicine to generate new business opportunities in non-invasive vagus nerve stimulation, and streamlining corporate operations to manage overhead costs – provides a clear roadmap for the company’s future growth. While the company faces challenges, including the need for additional capital and the competitive landscape of the medical device industry, its innovative approach to bioelectronic medicine and strong market potential position it as a company to watch in the coming years.
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