Is NeuroMetrix A Good Buy?

| About: NeuroMetrix, Inc. (NURO)

Company Overview

NeuroMetrix (NASDAQ:NURO) is a medical device company that develops and markets devices for the treatment and management of the neurological complications of diabetes. The company's newest product SENSUS Pain Management System came to market in the first quarter of 2013. The SENSUS system is used to treat chronic pain linked to diabetic neuropathy. For a good overview of diabetic neuropathy go here. The SENSUS system is the only transcutaneous electrical nerve stimulator that is designed to treat chronic pain associated to diabetes. Diabetic neuropathy is the main cause of this chronic pain with up to 50% of diabetics affected from it. The company estimates that the U.S. market for this type of pain management is over 300 million dollars. The company also has another product on the market which is the NC-stat DPN check. Its main focus going forward though is the SENSUS system.

The Numbers

The company recently reported it Q3 2013 results, which we will take a look at. The company reported total revenue of 1.3 million, which was down from Q3 2012 numbers, but up from Q2 2013 numbers. The operating expenses were 2.3 million down from 3.6 million in Q3 2012. The company saw a net loss of 0.7 million for Q3 which equals 0.26 per share. This is a drastic improvement from Q3 2012, which saw a net loss of 2.6 million or 1.24 per share. While the company did do a reverse stock split in February of this year it did adjust the per share numbers to show this. NeuroMetrix also saw income of 0.9 million from a change in fair value of warrants. Taking this into account the total net loss would have been about 1.6 million, which is still a good improvement from the 2.6 million net loss in Q3 2012. The company saw a significant increase in the shipment of the SENSUS system for the quarter as well. It reported that it shipped 557 devices up from 210 in Q2 2013 and 145 devices in Q1.

Looking Forward

The company appointed David Van Avermaete to its board of directors in October of this year. Mr. Avermaete brings a lot of knowledge and expertise to the company, especially in the diabetes field. For more on Mr. Avermaete read this article. The company also signed an agreement with Simplex Healthcare in September of this year for distribution of the SENSUS system. Simplex Healthcare runs Diabetes Care Club one of the biggest mail order suppliers of diabetes care products. You can find more info about this agreement here. The company also signed an agreement in October of this year. The agreement was with OsteoArthritis Centers of America, which is a subsidiary of Rehabilitation Management Group, Inc. This agreement paves the way to having the SENSUS system available in the clinics that operate in affiliation with RMG. For more on this agreement you can read this article. These two agreements open up a good distribution network that was not there in the first three quarters of this year. The company also has a good focus on what it wants to accomplish in the rest of 2013. At the time of the company's CC it reported that over 1000 SENSUS systems had been shipped, while the original goal for 2013 was between 1000 and 2000 systems. The company stated that it is now looking to reach the higher end of this range by the end of 2013.


After doing the research on this company I would say that it is a pretty good buy, at least in a speculative play. The sales for the new system are increasing quarter over quarter, while the operating expenses are decreasing quarter over quarter. While the company is not profitable right now it looks like it is on the right track to change that in the near future. While I would say it is a good buy at this time there are some concerns. One is the fact that the company didn't have any real guidance during the CC or in its ER release. The other concern is the fact that there is no data right now on long-term patient retention. One last concern is the fact that another company could release a similar device in the near future. Taking the concerns into consideration I would still rate this company a good buy. The upside potential outweighs the downside risk by a good margin. I will say that the stock has been pretty volatile in the last week of trading so I would recommend buying in around the 2.00 area and not chasing the price up.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in NURO over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.