Executive Summary / Key Takeaways

• NeurAxis ($NRXS) is poised for significant growth, driven by the upcoming Category I CPT code for its IB-STIM device, effective January 1, 2026, which is expected to streamline reimbursement, introduce physician RVUs, and expand patient access.
• The company has achieved critical milestones, including FDA indication expansions for IB-STIM in both pediatric (8-21 years, functional dyspepsia with nausea) and adult populations, significantly broadening its total addressable market.
• Despite consistent double-digit revenue growth in recent quarters, current sales represent a minuscule fraction of the addressable market, highlighting substantial untapped potential as insurance coverage expands beyond the current 55 million covered lives.
• NeurAxis is strategically investing in sales, marketing, and R&D, while demonstrating operating expense leverage, with a clear goal to achieve cash flow breakeven at an estimated annual revenue range of $10 million to $12 million.
• Key risks include the "going concern" qualification, ongoing internal control weaknesses, and the inherent lag in payer policy adoption, necessitating continued disciplined execution and potential future financing.

The Dawn of a New Era in Neuromodulation

NeurAxis, Inc. (NYSE:NRXS) stands at a pivotal juncture, transforming from a clinical-stage innovator to a commercial entity poised for substantial market penetration in the neuromodulation therapy space. Established in 2011 as Innovative Health Solutions, Inc., the company has meticulously built a foundation around its core percutaneous electrical nerve field stimulator (PENFS) technology, primarily the IB-STIM device. This journey, marked by initial FDA clearances for its NeuroStim and NSS-2 Bridge devices, has culminated in a focused strategy to address chronic and debilitating conditions, particularly functional abdominal pain associated with irritable bowel syndrome (IBS) and functional dyspepsia with nausea symptoms in both pediatric and adult populations.

The company operates within the broader medical device industry, a landscape dominated by diversified healthcare giants, yet it has carved out a specialized niche. NeurAxis's primary competitive advantage lies in its targeted innovation for pediatric care, offering a non-invasive or minimally invasive solution where traditional pharmacological options may be limited or carry significant side effects. This specialization fosters strong customer loyalty in specialized clinics, differentiating it from larger, more generalized neuromodulation players. However, this niche focus also presents vulnerabilities, as NeurAxis's smaller scale and more limited resources mean it must execute flawlessly to compete against the vast market reach and financial might of industry titans.

Technological Edge: IB-STIM's Differentiated Approach

At the heart of NeurAxis's investment thesis is its proprietary IB-STIM technology, a percutaneous electrical nerve field stimulator (PENFS). This device offers a distinct advantage by providing a non-pharmacological, non-invasive treatment for conditions like functional abdominal pain associated with IBS and functional dyspepsia with nausea. The tangible benefits of IB-STIM are particularly pronounced in its target pediatric population, where it offers a gentler alternative to off-label drugs, some of which carry FDA black box warnings. The device is designed for ease of use, with each treatment course typically involving three to four devices for pediatric IBS patients, and four to six or more for future indications.

The company's commitment to innovation extends beyond its current offering. NeurAxis is actively developing a second-generation IB-STIM device, anticipated in 2026, which aims for a "more modern look" and potential enhancements such as an infrared light to confirm operation, addressing patient feedback about not feeling the device working. Furthermore, the company is engaged in research to predict patient responses based on heart rate variability, autonomic dysfunction, and vagal insufficiency, which could significantly improve treatment efficacy and patient selection. These R&D initiatives are strategically designed to bolster IB-STIM's competitive moat, enhance patient outcomes, and potentially lead to higher average selling prices (ASPs) or improved margins through more efficient targeting.

Strategic Milestones Fueling Future Growth

NeurAxis's strategic roadmap is meticulously aligned with key regulatory and reimbursement milestones, setting the stage for accelerated growth. A "true inflection point" for the company is the Category I CPT code for PENFS, which becomes effective on January 1, 2026. This permanent code is critical as it will streamline billing and reimbursement processes for healthcare providers. Crucially, it introduces work Relative Value Units (RVUs) for physicians, a direct measure of productivity and compensation. As CEO Brian Carrico noted, physicians in children's hospitals are currently "treating patients for free" due to the absence of RVUs for the existing Category III CPT code. The finalized RVU of 1.46 per placement is considered "very good," and the Medicare/Medicaid reimbursement rate for IB-STIM in the Site 11 office is "higher than the cost of the device," a significant positive for hospital adoption. This shift is expected to substantially reduce the "no authorization required" barrier, which currently limits access for approximately 70% of patients seeking treatment.

Complementing the CPT code, NeurAxis has aggressively pursued broader medical policy coverage. The company has successfully increased its covered lives from 4 million in early 2024 to approximately 55 million by late 2025. This expansion has been significantly bolstered by the publication of the NASPGHAN (North American Society for Pediatric Gastroenterology, Hepatology, and Nutrition) academic society guidelines in May 2025. These independent guidelines, which recommend PENFS as the only FDA-approved or cleared treatment with the highest grade of evidence, are considered an "internal mandate for policy coverage" by major payers. While policy changes are expected to "unfold gradually, not overnight," the company is actively engaging payers, with some already agreeing to interim reviews based on the new guidelines.

FDA indication expansions further amplify NeurAxis's market opportunity. The IB-STIM label has been expanded to treat patients aged 8-21 years, a significant increase from the previous 11-18 age range. Additionally, the company secured FDA clearance in Q2 2025 for functional dyspepsia with nausea symptoms in children aged 8-21, nearly doubling its pediatric market. In Q3 2025, this indication was further expanded to include adults, leveraging the same CPT code, call points, and sales force. For the adult market, NeurAxis is pursuing a multi-pronged strategy, including a randomized controlled trial, a federal supply schedule (SSS) contract for the Veterans Administration (VA) by early 2026, and a limited market release to gauge commercial insurance acceptance and cash-pay potential. The VA market alone presents a substantial opportunity, with nearly seven million active patients and a 3% prevalence rate for functional dyspepsia.

The Rectal Expulsion Device (RED), cleared by the FDA on December 6, 2024, is another promising product. Currently in a soft launch, RED addresses chronic constipation due to pelvic floor dyssynergia in adults. It offers an easy-to-use, office-based, point-of-care test with an existing Category I CPT code and strong national reimbursement. While its revenue ramp has been slower than anticipated due to necessary practice flow and habit changes, management remains bullish on its potential, particularly in the VA market due to sales force synergies.

Financial Performance and Operational Momentum

NeurAxis has demonstrated consistent operational momentum, translating into a pattern of double-digit revenue growth. The company reported net sales of $811,414 for the three months ended September 30, 2025, a 22% increase year-over-year. For the nine months ended September 30, 2025, net sales reached $2.60 million, up 35.1% from the prior year. This growth is largely attributed to increased unit deliveries, which saw a 38% rise in Q3 2025, marking the sixth consecutive quarter of double-digit unit growth. This volume expansion, however, has been significantly driven by patients utilizing financial assistance programs, where devices are discounted by approximately 65% below the list price of $1,195.

Gross profit for Q3 2025 was $675,927, an 18.7% increase year-over-year. However, the gross margin decreased to 83.3% from 85.4% in Q3 2024, primarily due to the higher proportion of discounted sales through financial assistance programs and expired RED inventory. Management anticipates a recovery in gross margins in 2026 as the Category I CPT code facilitates a transition of these discounted sales to full reimbursement.

Operating expenses have seen strategic increases, with selling expenses rising 125.3% to $762,548 in Q3 2025, driven by higher commissions, temporary commission structures for new state adoption, and increased advertising ahead of the CPT I code. Research and development expenses also increased by 3.6% to $130,850 in Q3 2025, reflecting investments in medical research, IB-STIM design improvements, and RED device development. Despite these increases, NeurAxis has demonstrated operating expense leverage. Excluding a one-time legal settlement charge, operating expenses in Q2 2025 decreased by 5% year-over-year, while Q1 2025 saw operating expenses remain relatively flat with a 39% revenue increase. This indicates a disciplined approach to cost management, with strategic investments in growth areas.

The company reported a net loss of $2.12 million for Q3 2025 and $6.09 million for the nine months ended September 30, 2025. While operating losses persist, the nine-month net loss decreased by 10.3% year-over-year, primarily due to higher sales volume and the absence of certain one-time settlements from 2024, partially offset by increased selling expenses and a lawsuit settlement in 2025.

From a liquidity perspective, NeurAxis held $4.38 million in cash and cash equivalents as of September 30, 2025. In October 2025, the company further bolstered its liquidity by raising an additional $2.8 million through an at-the-market equity offering and warrant exercises. The cash burn rate has been consistent at approximately $1.5 million per quarter, with management expecting this to last "well into 2026." However, two non-standard payments are anticipated in 2026: one for the reacquired NSS-2 Bridge license from Masimo (MASI) and another for a $750,000 lawsuit settlement, payable in monthly installments starting January 2026.

Outlook and Path to Profitability

NeurAxis's outlook is firmly anchored in the anticipated impact of the Category I CPT code and expanding insurance coverage, with management projecting "stronger growth expected in 2026 and beyond." The company's primary objective is to "drive national medical policy coverage, maintain disciplined commercial execution, and achieve cash flow breakeven as adoption accelerates." The CFO estimates that cash flow breakeven will be achieved at an annual revenue range of $10 million to $12 million.

Management's guidance is built on several key assumptions. They expect policy changes and prior authorization improvements to "unfold gradually, not overnight," and acknowledge that "initial revenue conversion may lag as hospitals refine workflows and navigate early payer hurdles." Investments in sales and marketing are expected to increase, directly correlating with anticipated sales growth, and R&D spending will continue to rise as new indications and markets are pursued. The company is strategically preparing for the 2026 transition by prioritizing children's hospitals with high utilization potential, launching comprehensive education and outreach, and fostering "IB-Stim clinic days" to ensure dedicated treatment slots.

Competitive Landscape and Positioning

In the competitive landscape, NeurAxis is a specialized player, particularly in the pediatric neuromodulation segment. While larger, diversified medical device companies like Medtronic , Abbott Laboratories , Boston Scientific , and Nevro offer broader neuromodulation portfolios, NeurAxis differentiates itself through its targeted focus on pediatric functional abdominal pain and functional dyspepsia. These larger competitors possess extensive global reach, established brand recognition, and significant R&D budgets, which allow them to innovate across a wider range of conditions and leverage economies of scale.

NeurAxis's IB-STIM technology, with its non-invasive nature and specific FDA clearances for children, provides a unique value proposition that fosters strong customer loyalty in specialized clinics. This allows NeurAxis to capture a niche market share that larger players may not prioritize with equally tailored solutions. For instance, while Medtronic offers a broad array of pain management devices, its focus is less granular on pediatric-specific functional gastrointestinal disorders. Similarly, Abbott and Boston Scientific (BSX), with their versatile neuromodulation devices, do not have a directly comparable, FDA-cleared, non-invasive device specifically for pediatric IBS and functional dyspepsia. Nevro (NVRO), specializing in high-frequency spinal cord stimulation, targets a different chronic pain demographic.

Financially, NeurAxis's gross profit margin of 84.34% (TTM) is competitive within the medical device space, often comparable to or exceeding segments of larger players. However, its operating and net profit margins are significantly negative, reflecting its growth stage and heavy investment in R&D and market development. In contrast, established competitors like Medtronic (MDT) and Abbott (ABT) typically exhibit positive and substantial operating and net profit margins due to their scale and diversified revenue streams. NeurAxis's smaller scale also makes it more vulnerable to market share limitations and reliance on specific therapeutic outcomes, unlike the broader applicability of its larger rivals. The company's strategy to expand into adult indications and explore the VA market with IB-STIM and RED is a direct response to broaden its competitive footprint and leverage its technology beyond its initial niche.

Risks and Challenges

Despite the promising outlook, NeurAxis faces several significant risks and challenges. The company's auditors have expressed "substantial doubt about our ability to continue as a going concern," a reflection of its history of operating losses and negative cash flows since inception. While management intends to fund future operations through additional financing, there is no assurance that such funding will be available on acceptable terms.

Operational risks include identified "material weaknesses in our internal control over financial reporting" as of September 30, 2025, encompassing ineffective approval processes, inadequate contract management, misapplication of U.S. GAAP, and ineffective disclosure controls. Remediation efforts are ongoing and expected to continue through fiscal year 2025. Furthermore, the company is subject to litigation, including a $750,000 settlement for a 2022 lawsuit and threatened litigation over a U.S. patent valued at $2.00 million, which it intends to defend vigorously.

From a commercial standpoint, management's forecast remains "conservative," acknowledging that "initial revenue conversion may lag as hospitals refine workflows and navigate early payer hurdles" following the CPT I code implementation. The adult IB-STIM market may face initial coverage and reimbursement issues due to reliance on extrapolated adolescent data, necessitating focused clinical trials. The RED device also faces uncertainty regarding a new CPT code effective January 1, 2026, which "may or may not be positive." The company's ability to achieve profitability is directly dependent on securing widespread insurance coverage and successfully scaling its revenue to support its cost structure.

Conclusion

NeurAxis stands on the precipice of a transformative period, with its IB-STIM technology positioned to capitalize on critical regulatory and reimbursement advancements. The impending Category I CPT code, coupled with expanded FDA indications and growing medical policy coverage, forms a compelling narrative for significant revenue acceleration in 2026 and beyond. While the company has demonstrated consistent double-digit top-line growth and disciplined operating expense management, its current market penetration remains minimal, underscoring a vast untapped opportunity.

The path to cash flow breakeven, estimated at $10 million to $12 million in annual revenue, hinges on the successful execution of its commercial strategy, particularly the conversion of discounted sales to full reimbursement and the effective integration of IB-STIM into hospital workflows. Despite the inherent risks associated with a growth-stage medical technology company, including liquidity management and internal control remediation, NeurAxis's specialized technology and strategic focus on underserved patient populations provide a distinct competitive edge. Investors should closely monitor the pace of national medical policy adoption, the impact of the new CPT code on physician behavior and reimbursement, and the continued progress in expanding indications and commercializing the RED device as key indicators of the company's trajectory towards sustained growth and profitability.