MRI Intervention’s Clearpoint Technology: The Future of MRI-Guided Surgery?

June 8, 2012
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Editor’s Note: OneMedPlace will be offering Special Reports on especially significant developments from emerging growth companies.  The first of these reports focuses on MRI Intervention, the maker of MRI guided technology with the potential to transform brain related procedures. On Monday, May 21, the company began trading as a public company under stock symbol MRIC. The stock opened at just under a dollar and has been on an upward trajectory, currently trading at $1.35 on the Bulletin Board.

Editor’s Note: OneMedPlace will be offering Special Reports on especially significant developments from emerging growth companies.  The first of these reports focuses on MRI Intervention, the maker of MRI guided technology with the potential to transform brain related procedures. On Monday, May 21, the company began trading as a public company under stock symbol MRIC. The stock opened at just under a dollar and has been on an upward trajectory, currently trading at $1.35 on the Bulletin Board.
Siemens, BrainLab, and Boston Scientific have partnered with a company with the first FDA-approved technology that allows surgeons to see, in real-time, into a patient’s brain during any of the 2.2 million minimally-invasive neuro procedures that happen every year in the U.S.

This technology, a suite of hardware, software, and disposable components, is designed to fully-integrate into a hospital’s existing MRI infrastructure and has already been vetted by leading centers across the country: USFC, John Hopkins, and at least a dozen others.
It has also received a CE-mark, the equivalent of an FDA-clearance, in Europe.

The technology has the potential to change the economics of brain-related procedures for hospitals by slashing average procedure time in half, improving accuracy, and allowing for patients to be under anesthesia during their own surgery. With these advantages, hospitals would be able to treat a larger patient population, cut costs, and enjoy greater margins on each procedure. Insiders say it also provides a clear benefit to patients undergoing surgery.

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This technology, called ‘ClearPoint’ was featured on the cover of ‘The Journal of Operative Neurosurgery’ in March of this year. On Monday, May 21,  MRI Interventions, the maker of MRI-guided technology for minimally invasive neurosurgery, began trading as a public company under stock symbol ‘MRIC.OB’. As investors learn of the company changing the face of MRI-guided procedures (not just neurosurgeries, as we’ll discuss later), insiders believe the gap between ‘fair value’ and today’s valuation will narrow.

Here’s an abbreviated look at how analysts are valuing this company:

–ClearPoint is covered under existing reimbursement codes, which pay a hospital an average of $25,000 per procedure.
MRI Interventions sells ClearPoint hardware & software close to breakeven at $180,000; it’s disposable components at $7300 per procedure. This is a razor & blades model where a company sees recurring revenue from the 2.2MM procedures that take place every year – in the United States, alone.

–At 1% penetration, sales of ClearPoint disposable components total $160MM. The gross margins on these sales are expected to fall between 60% and 75%, or higher – if the company realizes economies of scale.

–Fixed costs would remain largely unchanged, with the bulk of expenses falling under supporting costs (selling, general and administrative) related to the quantity of product sold. The consensus is calling for a profit margin of 25% of gross sales (in line with industry average). This means that on sales of $160MM, the company would earn $40MM.

The industry assigns an average 14.31 multiple on earnings which would value the company at $572MM, or more than 10X the current valuation.

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Looked at another way, MRI Interventions is trading at a 90% discount to what insiders believe the company can be worth in 12 months.

MRI Intervention’s partnerships with BrainLab, Siemens Health, and Boston Scientific could allow the company to aggressively expand their market share in the U.S. and Europe.

Boston Scientific will also play an important role in paying MRI Interventions incremental royalties on sales of products where the device-giant is implementing MRI’s technology. The company believes this deal should return significant cash-flows to investors, over and above projections made with sales of the ClearPoint system and components.

MRI Interventions is also developing a system called ‘ClearTrace’ to improve minimally-invasive cardiac procedures.