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Thursday, July 21, 2016

For BioSig, The Mayo Clinic Partnership Provides Confidence,Credibility.

BioSig Technologies, Inc. (BSGM) is a Minnesota-based medical device company developing a proprietary technology system designed to improve the rapidly growing multi-billion dollar electrophysiology (EP) market. The company's leading product is called PURE EP, a Class II medical device that marries together proprietary hardware and advanced signal processing software to improve the signal clarity of cardiac data during an electrophysiology study. The enhanced real-time data provides the electrophysiologists with a better diagnostic tool, leading to improved clinical outcomes through maximized ablation efficacy, shorter surgery times, and reduced need for repeat procedures.

I've written several articles now on BioSig, and past works provide an overview of the system and the electrophysiology market (Article-1), highlight recent proof-of-concept data (Article-2), and even take a stab at valuation (Article-3). However, for this article, I'd like to delve into a different subject; BioSig's burgeoning relationship with Mayo Clinic, something that I believe is incredibly important regarding product validation and establishes a precedent for future success.

The Mayo Clinic - An Undisputed Market Leader

U.S. News & World Report ranked Mayo Clinic in Rochester, Minnesota among the best hospitals in the nation in their 2015-2016 rankings, including No. 1 rankings in eight specialties: diabetes and endocrinology, gastroenterology & gastrointestinal surgery, geriatrics, gynecology, nephrology, neurology & neurosurgery, pulmonology, and urology. Mayo is ranked No. 2 in three additional specialties: cardiology and heart surgery, ear, nose & throat, and orthopedics, and No. 3 in cancer (1). Importantly, Mayo Clinic was ranked No. 1 overall and has consistently ranked at or near the top of these rankings for the past 20 years.

Why is this important for investors in BioSig? Well, quite simply, Mayo Clinic has an incredible history of success and its involvement, while certainly not a guarantee, provides credibility and a precedent for future success. BioSig has ongoing research programs with Mayo Clinic, including a recently expanded relationship just announced in March 2016 that will involve nine different validation trials between now and the second quarter 2017 (2). These advanced research programs are being led by Dr. Samuel Asirvatham, MD, a professor of medicine and vice chair of the Division of Cardiovascular Diseases, Department of Medicine, at Mayo Clinic, and a member of BioSig's Scientific Advisory Board (3). 

These new studies are designed to build upon the initial studies conducted at Mayo Clinic over the past year through a tripling of investment to fully characterize and develop novel features of PURE EP discovered during prior preclinical work. These features have the potential to make a significant impact in the treatment of complex arrhythmias, and I do not think Mayo Clinic would be involved with PURE EP or with BioSig if the hospital did not see tremendous potential here.

And the relationship is not superficial; Mayo Clinic is intimately involved. In March 2016, Dr. Ammar M. Killu, M.D., a cardiologist at Mayo Clinic, presented findings on PURE EP at the 13th Annual International Dead Sea Symposium (IDSS). The presentation (see slide deck) shows the significant electrical noise and radio-frequency interference that impacts acquisition and display of intracardiac signals. The preclinical study demonstrates the superiority of PURE EP to GE Healthcare's CardioLab product, the current market leader with approximately 50% share. This data validates why I believe PURE EP is a potential game-changer.

- A History Of Success

Mayo Clinic is a nonprofit organization committed to clinical practice, education and research, and providing expert, whole-person patient care. Each year, over 1.3 million people from all 50 states and 140 countries will come to Mayo Clinic to receive care from the 4,500 staff physicians and scientists, 2,400 residents and fellows, and 57,000 clinical and hospital support staff. Revenues totaled $10.3 billion in 2015, and the organization generated income of $526 million (4). 

In 2015, Mayo Clinic total research budget was $662.8 million, on par with major players in the medical technology sector, including Abbott, Boston Scientific, St. Jude, Stryker, and Becton Dickinson, and Baxter. The organization also funded another $283 million in education programs, putting the total research and education budget at nearly $1 billion. I think investors need to start looking at BioSig's partnership with Mayo Clinic in the light of a major research collaboration with a large biopharma or medical device player.

Mayo Clinic Ventures (MCV) is a mission-driven, global leader in research and technology commercialization, and the doorway to Mayo Clinic's intellectual assets. Some of the medical advancements most widely used throughout the world have been developed at Mayo Clinic. For example, nearly every MRI machine contains Mayo Clinic technology and Mayo Clinic holds the patent for the assay-of-choice to diagnose vitamin D deficiency and monitor treatment results. In addition, Mayo Clinic was awarded a Nobel Prize for discoveries that led to the isolation and first use of cortisone (5).

MCV forms product development collaborations, actively mines Mayo Clinic for ideas, teaches entrepreneurism, starts companies, runs a business accelerator, and participates in a $100 million venture and growth fund that supports economic development. Mayo Clinic research personnel are conducting some 8,000 IRB-approved human studies at any given time and organization scientists publish more than 5,500 research and review articles in peer-reviewed journals each year.

MCV is always on the lookout for disruptive technology and employs a disciplined, systematic approach to discovering new drugs, devices, therapies, or health informatics platforms. Over the past 15 years, Mayo Clinic has been able to help 94 start-ups through licensing deals. Mayo Clinic intellectual property has been instrumental in the creation and success of numerous startup companies, including all of the names shown below:

Several of the above companies have recently completed IPO's or been acquired, including Amplimmune, mRemedy, TeraMedica, Cardio3, Nevro, Nile, and EnteroMedics (6). Prominent medical device companies that are relevant to BioSig include Medspira, Preventice, Resoundant, BodyGuardiaan, and perhaps the most analogous, Nevro Corp. (NYSE: NVRO).

Nevro Corp. - A Case Study

Nevro Corp. is a medical device company that helps patients suffering from chronic pain. Nevro's leading device is Senza® spinal cord stimulation (SCS) system, an evidence-based neuromodulation platform for the treatment of chronic pain. The Senza System is the only SCS system that delivers Nevro's proprietary HF10™ therapy. HF10 combines high frequency (10 kHz) with a unique waveform and a specific treatment algorithm to deliver proven effective pain relief with limited side effects or paresthesia (7).

The company was originally incorporated in Minnesota in March 2006 and has significant roots back to Mayo Clinic. Nevro licenses its technology from Mayo Clinic in return for a sizable equity stake plus future milestones and royalty payments. Nevro's product emerged from Mayo research that built the foundation for a separate Mayo-backed medical-device company, EnteroMedics Inc. EnteroMedics makes a stimulator to treat obesity. After refining that device, Mayo staff and former EnteroMedics CEO, Mark Knudson, began researching how a similar product could treat chronic pain (8).

Nevro completed its U.S. IPO in November 2014, selling 7 million shares at $18 per share. Today, Nevro shares go for $80, and the company commands a market capitalization of approximately $2.3 billion. Analysts estimate Nevro will generate revenues of $189 million in 2016, although the company is not yet profitable and is forecasted to lose approximately $50 million this year (9). Last month, the company raised $172.5 million in cash through a secondary public offering (10).

Nevro is an excellent example of how Mayo's early involvement led to a resounding commercial success. One of the most obvious points of comparison between BioSig and Nevro is that they have both have research and funding ties back to Mayo Clinic. Even though both are involved in different industries, neuromodulation versus electrophysiology, there is clear similarity among the two companies, including that revenues are derived from one major medical device.

A noticeable difference was the seed funding, with Nevro opting for multiple rounds of venture financing from organizations including Johnson & Johnson Development Corporation, Accuitive Medical Ventures, Bay City Capital, MPM Capital, Aberdare Ventures, and Three Arch Partners. BioSig, on the other hand, chose to come public through a S/1 filing, with founders maintaining ownership and control at this time.

What This Means For BioSig

From an operational standpoint, Nevro looks to be about three years ahead of BioSig. In this regard, the $2.3 billion market value for Nevro versus the $27 million valuation for BioSig seems a discrepancy. Yes, Nervo's Senza® targets the enormous chronic back pain market, but BioSig's PURE EP targets a very large electrophysiology market as well.

According to Global Industry Analysis, the electrophysiology device market will grow at a 12.1% compound annual growth rate, from $2.5 billion in 2012 to $5.5 billion by 2019, making it one of the fastest growing medical device segments (11). Accordingly, the number of catheter ablation procedures done in the U.S. is also expected to see accelerating growth (12). According to Health Research International, the number of catheter ablation procedures on a global basis is projected to reach 160,000 in 2017.

In my valuation model published last month, I forecasted PURE EP generating $615 million in cumulative revenue over the decade following approval, with approval likely during the second half of 2017. Peer-comparable valuation analysis suggests that BioSig is worth 7x its current valuation. Nevro is worth 85x BioSig's current valuation.


Last week, BioSig published a shareholder letter highlighting some of the company's recent developments, including a $4.5 million private placement, expanding the relationship with Mayo Clinic, and preparing for the commercial launch of PURE EP in 2017. It's a good read for anyone interested in the story.

In mid-August, BioSig will participate at the 38th Annual International Conference of the IEEE Engineering in Medicine and Biology Society (EMBC2016). EMBC2016 will take place in Orlando, FL with an overall theme of “Empowering Individual Healthcare Decisions through Technology.” Sessions include diverse topics from cutting-edge biomedical and healthcare technology research and development to clinical applications and biomedical education. BioSig will deliver an oral presentation entitled, “Enhanced Electrophysiology Recording System” and present findings from the preclinical trials at Mayo Clinic with a poster session to follow.

Presentation of this data could act as an excellent catalyst for the shares. Importantly, BioSig and Mayo have an additional nine studies planned between today and the second quarter 2017. Above I've outlined why I believe the relationship with Mayo provides confidence and credibility to the story. Nevro is a perfect example of a Mayo-backed success and clearly the roadmap for where BioSig could be heading over the next few years.


BioSig A Name To Watch In Outperforming Med Tech Sector >> LINK
Boston Scientific & Mayo Clinic Reveal Long-Standing R&D Deal >> LINK (FierceBiotech)


This article was written by Jason Napodano, CFA of BioNap, Inc.
Please see additional information on our Disclaimer.

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