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Intrinsic value hunter. Strong passion for the healthcare and medical device markets.
  • MRI Interventions: Brain Mapping Of The Future.  1 comment
    Jun 11, 2014 11:08 AM | about stocks: MRIC

    Last year during his State of the Union speech, President Obama elaborated on his vision for the US healthcare system. Amongst his talking points was the stress on further development and work on the human brain. Thus the Brain Activity Map Project (NYSE:BAM) was born. The purpose of this article is not to critique this initiative in further detail but rather allude to the current development within neurological treatment. Considering the maturation of the US healthcare system in terms of technology, it is quite surprising that advanced treatment for brain malfunction (i.e. tumors and movement disorders) is embryonic. However, amongst many debates on which approach is the correct one for developing proficient treatment, the company MRI Interventions (OTCQB:MRIC) has made major headway in offering institutions the ability to operate adeptly, as well as expediently.

    Based in Memphis, TN, with operations in Southern California, MRI Interventions (OTCQB:MRIC) has developed its high caliber ClearPoint product. As the company name implies, ClearPoint is an integrated MRI technology that gives surgeons and radiologists the ability to see, and more importantly reach, all portions of the human brain necessary to address any type of malfunction. For those unfamiliar with the market size for neurological treatments, this product can address various brain tumors, Parkinson's disease, Dystonia, Epilepsy, and all remaining movement disorders associated with the central nervous system. While the procedure possesses CMS coding and is economically attractive for any medical institution, the stock price is currently at $0.77 posing questions on the trajectory of the business itself. This is not reflective of the malfunctions of the product per se but rather the paradigm shift within neurological treatment that the company aims to transition.

    Time has certainly been on the company's side. Benefitting from being first to market, alternative treatments for brain mapping and planning involve primarily large skull invasions and fluoroscopy that has gathered more and more scrutiny as the healthcare system has evolved and become more efficient. By using the MR visualization, CP requires minimal skull invasion while yielding the highest precision hitting targets the size of a sesame seed. Additionally, the company operates in just under thirty sites within the US and has positioned itself from a P&L standpoint for exponential success granted they are able to boost their utilization.

    MRIC offers a razor/razor blade model in terms of their revenue stream. Increasing sites has certainly been stressed but rather it is the utilization of the ClearPoint that will get them to dominate, and essentially control the neurology treatment market. They currently offer three primary therapeutic applications through the technology: Asleep Deep Brain Stimulation, Drug Delivery, and Laser Ablation. While drug delivery and laser ablation have been researched and documented to be tremendously effective in the brain oncology and epilepsy treatment options, it is Asleep DBS that carries the load for maintaining a revenue stream. It is with utilization of the latter two that must be emphasized going forward.

    For every treatment initiated hospitals require a MRIC manufactured disposable kit. These kits maintain all necessary components for precise planning and allow the surgeon to map out the portions of the brain that he or she is able to effectively treat. Margins on these streams run as high as 75% for the company and will look to increase if they so choose to bring on additional leverage assuming volumes climb. The charts below show the current estimates FROM A HOSPITAL revenue standpoint granted what the healthcare codes insure each hospital per a ClearPoint procedure. Considering the margins the company possesses those numbers are subject to exponentially increase on the company's P&L granted they are able to benefit from increased utilization on their neurological treatment.

    ClearPoint Utilization  
    (rough estimates)MonthlyAnnual
    Reimbursement25,00025,000
       
    Asleep DBS560
    Epilepsy336
    Drug Delivery224
    Dystonia112
    Miscealeanous112
       
    total cases12144
    Revenue$ 300,000.00$ 3,600,000.00
    ClearPoint Utilzation Going Forward 
    (rough estimates)MonthlyAnnual
    Reimbursement25,00025,000
       
    Asleep DBS10120
    Epilepsy15180
    Brain Oncology10120
    Dystonia560
    Miscealeanous560
       
    total cases45540
    Revenue$ 1,125,000.00$ 13,500,000.00

    From a company standpoint there are many ways to look at what holistically drives the revenue. For MRIC it is evident that all pieces are in place for exponential growth, granted one of the therapeutic applications that the ClearPoint offers begins to increase. Below is a depiction of the variables that contribute to life cycle revenues essential for a company to become a billion dollars in revenue. Credit David Thomson (Blueprint to a Billion) for his keen insight on producing billion dollar companies, but his model accurately assesses the potential upside that MRIC possesses. Currently the company is rendering just under $5 million in annual revenue so the estimates in the figure seem to correspond accurately.

    Life Cycle Revenue$ 35,100.00
    CP unit 
    Product Scalability1.00
    Revenue/unit130.00
    # Customers27.00
    Purchase Frequency2.00
    New Product Extensions1.00
    Geographic Coverage5.00
    New Lines of Business1.00
    Life Cycle Revenue$ 5,040,000.00
    kits=Procedure 
    Product Scalability1.00
    Revenue/unit7,000.00
    # Customers144.00
    Purchase Frequency1.00
    New Product Extensions1.00
    Geographic Coverage5.00
    New Lines of Business1.00
      
    Aggregate LC Revenue$ 5,075,100.00

    (The model was developed from David Thomson's Blueprint to a Billion)

    Bottom Line:

    Ignoring the potential funding that companies with advancements in brain mapping may be able to receive over the next few years, MRIC has its work cut out for them. While possessing a powerful IP with very disruptive capabilities, it is the marketing and essentially the visibility for their game-changing product that will make this company a billion dollars in market capitalization. Research and think-tanks are certainly on their side for acknowledging MRI guidance as the brain mapping tool of the future. However, it will come with patient awareness and national press that will have this company saving lives and having their platform be the norm in neurological mapping and treatment.

    I am long MRIC.

    Disclosure: The author is long MRIC.

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  • TEEROI
    , contributor
    Comment (1) | Send Message
     
    with 33 locations active and each procedure taking approx 4-6 hours long the potential is enormous. I am long MRIC.
    13 Jun, 05:17 PM Reply Like
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