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Why the Prestigious Mayo Clinic is a 10% Holder of This Undiscovered Public Company


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NEW YORK, NY / ACCESSWIRE / May 3, 2018 / One way to source investment ideas is to see where the smart money is moving.

For instance, Steve Cohen's new fund Point72 took a big position in Oncosec Medical Inc (ONCS) in 2017, just months before the stock ripped higher by more than 100% when the company presented some results from a new drug trial.

Similarly, billionaire Robert Duggan was a huge backer of Pharmacyclics Inc (PCYC) in the years before the stock rose from $2 to $261 where it was acquired by the pharmaceutical company AbbVie Inc (ABBV). Since that home run, Duggan's most recent target is Achaogen, Inc. (AKAO) where he has been buying the stock.

We've discovered a tiny newly public company with similar validation from a prestigious healthcare institute, and the public markets have yet to catch on. NeuroOne Medical Technologies Corporation (NMTC) is a developer of central nervous system related medical devices, and they plan to file their first U.S. FDA approval application in a few months, during the third quarter of the year. The company could have an approval from the FDA by the end of 2018!

The intriguing thing is the Mayo Clinic's large ownership stake. This hospital system owns more than 10% of the company, and with two advisory board members, it's clear they're involved because they know and like the technology. Following the smart money indicates that NeuroOne is on the right track, and the stock could appreciate significantly in 2018 as the FDA application process gets underway.

The Mayo Clinic All In On NMTC?

The Mayo Clinic is a 10% holder of NMTC stock, and NeuroOne's core technology has been used in clinical and preclinical testing there and at the Cleveland Clinic according to recent SEC filings. The company has two of the Mayo Clinic's doctors on its scientific advisory board, plus experts in neurology from the Cleveland Clinic and Emory University.

This kind of equity holding from a health care institution isn't particularly common among public companies, and it suggests that Mayo is on board with the technology. After all, this is where NMTC's thin-film technology was prototyped, and the hospital system clearly wants to maintain involvement.

NMTC's primary technology has to do with measuring brain activity and is applicable to a host of neurological disorders like Parkinson's, Essential Tremors, and Dystonia. Its first planned use, however, will be in epilepsy.

Epilepsy Drugs Only Help 65% Of Sufferers, What About The Rest?

Epilepsy affects about 1% of the world's population or 3 million people in the United States. For about 65% of these, their seizures can be controlled by one or more anti-epilepsy drugs. But the other third of patients may never respond to drug treatment, and doctors start to consider alternative options.

For some patients, this may include surgically removing the portion of the brain that is causing the seizures, called a surgical resection. This can be curative in about 50% of cases where it is tried IF the "epileptogenic zone" can be identified properly, where the seizures are originating.

To do this, doctors must record electrical activity in the brain to look for abnormal behavior. They use electrodes placed across a patient's scalp, directly on the brain, or deeper into the brain tissue in a diagnostic procedure called an electroencephalography (EEG).

When doctors have to apply the electrodes to the brain, this is done by removing a portion of the skull to access the brain directly, where they implant strips and grids of electrodes. The patient stays in the hospital for days or weeks afterward with wires coming out of their skull while doctors monitor the electrical activity in their brain before, during, and after their seizures.

This diagnosis process is invasive, time-consuming, and expensive for everyone involved, and it doesn't always lead to a final diagnosis or surgical resection - least of all, a cure for epilepsy.

NeuroOne Could Improve This and Expand The Market Ten-Fold

Despite an estimated 50% cure rate, most patients will never go through this process because it's so problematic. An improved way to identify epileptogenic zones, leading to successful resection or ablation (destruction) of the tissue, could drastically increase the number of patients who receive relief from their seizures. This would also increase how many patients choose to undergo the diagnostic process.

 

NeuroOne's technology could do exactly that. Their core technology consists of a proprietary thin-film polyimide electrode in a number of different forms, which can be used in the diagnostic process.

The first, a thin-film cortical electrode for use in intracranial EEGs, will be filed with the FDA through a 510(k) application process in the coming months, during the third quarter, setting up a major catalyst in the fourth quarter of the year when the FDA may make an approval decision.

But this is just the first application, and NMTC a host of products will be hot on its heels, including a depth electrode, minimally invasive implantation techniques, and a combination depth electrode/ablation device.

This technology has vast implications for the field of neurology, and the thin-film application alone is in an estimated $112 million market opportunity. But what may go unnoticed is the opportunity for this technology to expand the number of patients who seek diagnosis, and thus the market for NMTC's technology. This will be made possible not by a single device, but by the company's portfolio of planned technologies: cortical and depth electrodes, a combination device that includes ablation technology for on-demand tissue ablation, and a non-invasive delivery system.

Diagnosis can take weeks as the older technology is used today, and NeuroOne hopes to bring this process down to days through enhanced implantation technologies, higher definition EEGs, and potential combination devices.

Ultimately, this could take the addressable market from $112 million, according to the company, to more than $3 billion as in the slide below.

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View photos

Stock Could Rise 300% With Commercial Sales Expected In 2019

Companies in the medical instruments and supplies segment trade at high valuations, with Price/Sales multiples in the 3-5X range. NYU Stern lists an average multiple of their sales of 4.35X for healthcare product companies.

This is why $12 million in revenue at NeuroOne, or just 10-20% of the $112 million addressable market with their first product, could rapidly justify a higher valuation of $90 to $150 million for the company. That would be a stock price of $12 or more, and this doesn't even consider the true market opportunity of their planned portfolio.

NeuroOne is new to the public markets and will need to access capital to further their business which is a risk to any investment in this company. NeuroOne needs to execute well to bring all of these products to market. As with most micro-caps, this is a high-reward and high-risk opportunity that could be worth nothing, and investors should be aware of the headwinds facing the company, including medical device competition from larger companies.

2018 Could Be A Breakout Year for NMTC

NeuroOne hasn't made much noise in the public markets since they've gone public, which has made for an intriguing investment proposition for those in the know. That could be about to change. 2018 could be huge for the company, and its stock, as they file their first FDA 510(k) clearance application. Guidance is for that to happen in Q3, with a possible decision from regulators by the end of the year! With more events hot on its heels, this one could get attention rapidly in the coming months.

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