Nexeon MedSystems Inc (NXNN)

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Täglich Brothers Initiating Coverage with Speculative Buy rating and 12-month price target of $3.00 per share.
Nexeon Medsystems has substantial growth potential with its Neurostimulation SystemTM that is targeting the Deep Brain Stimulation (DBS) market. Consulting firm Crystal Market Research projects the global DBS market to reach $3.2 billion by 2025 from approximately $720 million in 2016, due primarily to an increasing number of people diagnosed with Parkinson’s disease and increased awareness about neurological disorders.
One of the primary advantages Nexeon’s Neurostimulation System should have is the ability to record how a body reacts to neurostimulation, providing doctors data on how a patient responds to the therapy being provided. The company anticipates European approval no earlier than 3Q18 with US trials beginning in 2019.
In September 2017, NXNN through a series of transactions acquired Medi-Line a Belgian-based, global provider of medical device solutions. Medi-Line had revenue of $7.2 million in the 12-month period ended March 31, 2017.
We anticipate the company has approximately $5 million in non-dilutive funding available primarily through European subsidies and grants, which should be sufficient to fund operations through 2018.
For 2017, we project a net loss of $3.5 million or ($0.14) per share on sales of $2.8 million. Our sales forecast reflects four months of Medi-Line revenue, as well as revenue from neurostimulation research units sold to Galvani Bioelectronics in 3Q17.
For 2018, we project a net loss of $3.5 million or ($0.13) per share on sales of $7.4 million. Our sales forecast reflects the operations of Medi-Line and sales of neurostimulation research units. We anticipate gross margin of 40% and operating expense margin of 83.8%. We are excluding potential sales from the Nexeon Neurostimulation System until European approval is received, which could occur as early as 3Q18.


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