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Tuesday, April 25, 2017

BioSig Provides Shareholder Letter - April 2017

BioSig Technologies, Inc. (BSGM) provided an update for investors via a Shareholder Letter posted on the company's website this morning. The letter highlights some of the recent positive developments for the company, including the collaboration with Mayo Clinic and the recent $5.0 million financing. I am optimistic about the future of BioSig and PURE EP™, a novel surface electrocardiogram (EKG) and intracardiac multichannel recording and analysis system.

Collaboration With Mayo

On March 23, 2017, BioSig announced it has signed a ten-year strategic agreement with a team of Mayo Clinic physicians. This new, expanded collaboration builds upon the work realized under the Advanced Clinical Research Program signed with Mayo Clinic in March 2016. BioSig intends to work closely with Mayo electrophysiologists, Drs. Samuel Asirvatham and K. L. Venkatachalam, to develop advanced clinical features and applications for its PURE EP System, as well as to leverage the company’s core competency in physiologic signal processing to develop future technologies.

Mayo is expected to contribute know-how, intellectual property and clinical support to the partnership. The company expects joint patent filings to come out of the relationship. It's an exciting transaction for BioSig to partner with one of the nation's leading centers for cardiology. It's also a huge validation of the platform and opportunity to develop next-generation devices. Mayo has a proven track record of success in developing cutting-edge technologies and innovative treatment methods. Mayo's R&D budget exceeds $650 million, putting it on par with several leading medical device players. I believe this relationship provides validation and credibility to PURE EP.

Expanding Opportunities

PURE EP stands for Precise Uninterrupted Real-time evaluation of Electrograms (PURE) EP Systems. BioSig's proprietary system is similar to traditional EP recording systems produced by GE Healthcare or St. Jude Medical, which have two computer screens and allow for independent, real-time review capabilities. However, where PURE EP is superior is in the systems very low noise, coupled with a minimum gain and maximum bandwidth. PURE EP also delivers unique proprietary topology features, including high input impedance, high common mode rejection ratio, and rejection of noise generated by an RF ablation generator. 

It's simply a better "mouse trap" in the rapidly expanding, $4 billion electrophysiology (EP) marketplace. According to the most recent MD&D report, global EP market revenues will grow nearly 10% annually, from currently $4 billion to approximately $6 billion by 2020 with accompanying procedure growth close to 10% annually, from 865,000 patients in 2015 to 1,350,000 in 2020. Procedure growth in the U.S. alone is projected at an 11.0% annual rate, from 250,000 in 2015 to 422,000 in 2020. This is accompanied by an 11.7% growth in revenues, from $1.85 billion in 2015 to $3.220 billion in 2020.



This is an exciting opportunity for BioSig and PURE EP. According to the American Heart Association (AHA), an estimated 2.7 million Americans are living with atrial fibrillation (AF). Untreated AF doubles the risk of cardiovascular-related death and causes a 4-5-fold increase in the risk of stroke due to the potential for clot formation originating from inside the heart or the atrial appendages. According to the U.S. Center for Disease Control and Prevention (CDC), more than 750,000 hospitalizations and 130,000 deaths occur each year in the U.S. because of AF. AF is the underlying cause for 15-20% of ischemic strokes and costs the U.S. an estimated $6 billion in direct medical expense each year.

But BioSig is also looking beyond the near-term opportunity in AF to other potential avenues of growth for the PURE EP system. One area that looks intriguing is bioelectric medicine, and BioSig and scientists at Mayo are aggressively pursuing development of PURE EP in this hot area. Bioelectric medicine is an emerging medical practice that uses miniature implantable devices to modify electrical signals in the body’s nervous system. The therapy has the potential to treat a wide variety of medical conditions, including, chronic pain, asthma, arthritis, headaches, migraines, and ulcers. Check out these informational videos by The Feinstein Institute for Medical Research.


The bioelectric medicine industry builds on the proven success of pacemakers, implantable cardioverter defibrillators (ICDs) and implanted spinal cord stimulators. BioSig and Mayo will target three categories of opportunity in this space: signal capabilities, therapeutic tools, and procedures.

According to a MarketsandMarkets research report, the global electroceuticals/bioelectric medicine market is expected to reach $25.2 Billion by 2021 from $17.2 Billion in 2016, growing at a CAGR of 7.9% from 2016. BioSig and Mayo are not the only companies looking to aggressively move into bioelectric medicine. In August 2016, Glaxo announced a $715 Million agreement with Verily Life Sciences LLC (formerly Google Life Sciences), to form Galvani Bioelectronics for the purpose of enabling the research, development and commercialization of bioelectric medicines. 

Cash Secured

Over the past several months, BioSig raised nearly $5.0 million in cash through the sale of common stock to accredited investors, which included participation from existing investors, at $1.50 per share. That's slightly above today's price of $1.47 per share. Participants in the offering also received warrants to purchase shares at $1.50 that if exercised, would raise an additional $1.65 million in cash.

The new cash will help BioSig complete the necessary 510(k)-enabling work currently underway on PURE EP before the filing expected in the third quarter 2017. This work position PURE EP for market approval in the fourth quarter 2017, which would be a major milestone for the company. Below is a quick update outlining the company's progress.


Exit Strategy

I've written in the past that I think BioSig's device is a potential game-changer for electrophysiology. PURE EP will expand the market opportunity for major players in this area, including GE Healthcare, Boston Scientific, and Abbott Labs. This is an area that has seen considerable consolidation over the past few years. For example, Abbott bought Topera for $350 million in December 2014, Medtronic bought CardioInsight for $272 million in June 2015, and AtriCure bought nContact for $149 million in October 2015. Also in 2015, Stryker Corp. bought external defibrillator maker Physio-Control International for $1.28 billion in cash. Perhaps most remarkable, Abbott announced a $25 billion definitive agreement with St. Jude Medical, Inc. to enter the atrial fibrillation, structural heart, heart failure and neuromodulation markets in April 2016. 

These transactions paint an optimistic picture as to the opportunities that are available in the marketplace, especially because BioSig's PURE EP is a complementary technology to existing equipment. Simply gaining 1% market share in the cath lab is worth $40 million in revenue. Given PURE EP's impressive data, this is a clearly viable exit strategy for the company. I'm also highly intrigued by the opportunity in bioelectric medicine. If company's like Glaxo and Google are spending over $715 million here, it seems logical that another major player in e-medicine, such as GE Healthcare or Abbott Labs, would follow a similar path. Acquiring BioSig gives e-medicine and EP players a "two-for-one" transaction.

Conclusion

BioSig is currently trading at only $1.47 per share, below the recent $5.0 million financing and well below my $9 target. Major catalysts on the horizon include the filing of the U.S. 510(k) application in the third quarter 2017 and gaining approval for PURE EP later in the year. I'm excited to see where BioSig and Mayo can take this technology in the coming years. In short, the valuation is attractive, the company is now well-funded, the technology is outstanding, and I think there is a clear exit strategy for investors post PURE EP approval in 2018.

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BioNap holds no position in any stock mentioned above.

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