Thank You to Saul, the Moderators and to everyone on this board for all you do.
(Oversimplified) Baseline / background information
- The vagus nerve is the main nerve(s) of your parasympathetic nervous system.
- " Parasympathetic" = nerves you cannot consciously control; examples include digestion, heart rate and immune system.
- The only “FDA Approved” treatments involving Vagus Nerve Stimulation (“VNS”) are “invasive” (implanted) devices that send electrical impulses to the vagus nerve to treat epilepsy and depression, and to aid in recovery of hand/arm functionality for stroke patients.
NOTE: The vagus nerve does have a role in muscle control, but there is some nuance and complexity in the subject, and in any case it’s not really relevant to this thesis.
Thesis in a nutshell
- Current “FDA Cleared” use of their device(s) is for the prevention and treatment of “primary headache” (including migraine, cluster headache and hemicrania ) in adults and adolescents.
- First “FDA Cleared” NON-invasive VNS (“nVNS”) treatment
- Variety of products, price points and business models (income streams) relevant to a variety of different end users.
- Potential to expand into adjacent indications (more revenue streams)
- The only nVNS provider that has established inroads into the VA system
- They basically have a single device; it’s a hand-held device; it is held in a particular placement on the neck and activated. When activated, it emits an electrical pulse that accesses and stimulates the vagus nerve.
- There are three versions of the same basic device; each version accommodates a different business model.
(NOTE: “FDA Cleared” is not the same thing as “FDA Approved”; for now I don’t regard that as relevant to this thesis).
Revenue (Millions)
| Rev$M | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2021 | 1.20 | 1.27 | 1.49 | 1.49 |
| 2022 | 1.90 | 2.16 | 1.99 | 2.56 |
| 2023 | 2.78 | 3.55 | 4.51 | 5.19 |
| 2024 | 5.44 | 6.14 | 6.55 | TBD |
YOY%
| Q1 | Q2 | Q3 | Q4 | |
|---|---|---|---|---|
| 2021 | 64 | 68 | 37 | 60 |
| 2022 | 57 | 69 | 32 | 71 |
| 2023 | 46 | 64 | 128 | 102 |
| 2024 | 95 | 72 | 43 | TBD |
Inside Ownership: 22%
CEO ownership: 2.7%
NOTE: Founder and Board Member, JP Errico was CEO at some point; later it was Frank Amato and now the CEO is Daniel S. Goldberger
Gross Profit Margin (TTM): 83.32%
5-year CAGR: 62%
Business model #1: gammaCore: recurring revenue
(NOTE: I’m oversimplifying here; please refer to their corporate presentation for limitations, warnings etc.)
- gammaCore is a prescription nVNS device
- gammaCore is FDA-Cleared for preventive and acute treatment of migraine headache, preventive and episodic treatment of cluster headache, and hemicrania.
- (…Collectively these indications are referred to as “primary headache” in their Corporate Presentation. )
- “gammaCore is the only FDA-cleared non-invasive VNS therapy in primary headache”
- gammaCore is a recurring revenue model, because they basically bill on a per-use basis. Currently the prescription is $600 for about 3 months of usage.
- gammaCore is mostly distributed via the VA system. It’s only available in a minority of VA hospitals, apparently; therefore there is a clear line of sight to expansion throughout the rest of the VA locations.
Business model #2: TAC-STIM: not recurring revenue
- TAC-STIM is a ruggedized version of gammaCore
- Price is $10k per device!
- It’s being used/assessed by Air Force Special Forces for performance enhancement (concentration, alertness etc.)
Business model #3: Truvaga Plus: not recurring revenue
- A less-powerful version of gammaCore
- Available for purchase for $500
- Basically a DTC “Wellness” product
- “Truvaga are general wellness products and as such have not been evaluated by the US Food and Drug Administration.”
- “Truvaga products are not intended to diagnose, treat, cure, or
prevent any disease or condition.” - Truvaga Plus won the Men’s Health Magazine Tech Award
- Truvaga Plus won the Woman’s World Magazine 50 over 50 award
- It’s designed to work for 3 years or 30,000 sessions; it’s not recurring revenue per this Board’s definition.
Top Dog, First Mover
- gammaCore was the first nVNS device on the market (July 2017)
- First “FDA Cleared” nVNS device
- Inroads into the VA system that competitors do not have
Opportunity to expand revenue: gammaCore: VA
- Currently in the VA system they have 6.5K gammaCore subscriptions
- …out of about 800K current headache patients in the VA system
- Currently the device is available from only 160 out of 1300 VA facilities
Opportunity to expand revenue: gammaCore: Joerns Healthcare
- 12.5 million covered lives
- Partnership is similar to their VA partnership
- …e.g.: Joerns handles the administrative stuff and electroCore ships product to patients and provides patient support
Opportunity to expand revenue: gammaCore: Specialty Pharmacies
- This was their first sales channel
- The Pharmacy writes a prescription for gammaCore
- Patients then purchase directly from electroCore
Opportunity to expand revenue: gammaCore: International Sales
- electroCore ALREADY has some International sales, mainly with NHS in the UK
- electroCore has clearances in EU/EFTA/EEA, UK, Canada and Australia for various conditions; please refer to their Corporate Presentation.
Opportunity to expand revenue: gammaCore: they are gunning for Additional Indications:
- PTSD: “gammaCore nVNS was granted Breakthrough Device Designation for PTSD by the US Food and Drug Administration in January 2022”
- Opioid Use Disorder
- Traumatic Brain Injury
- Parkinson’s Disease
- Acute Stroke
- Gastroparesis
Opportunity to expand revenue: ** NeuroMetrix acquisition**
- They bought a company called NeuroMetrix which has products in the same ballpark that are potentially quite complementary to $ECOR’s products
- This post is too long already so I’ll discuss more later
My thoughts on this, in a nutshell
- Check out how public interest in VNS is increasing since 2004: https://trends.google.com/trends/explore?date=all&geo=US&q=vagus%20nerve%20stimulation&hl=en-US
- Looks to me like they are Top Dog, First Mover in an Important/Emerging Industry
- Rate of revenue growth is slowing recently but still clipping along at a good rate
- Potential for top-line revenue to re-accelerate via expanding existing sales channels, adding new sales channels (…they are going after Influencer/Social etc.), international expansion and by getting FDA Clearance and/or Approval for more indications
- Because they don’t need full-on FDA “Approval” to add new indications, the potential exists for tremendous operating leverage as they add new revenue streams without the expense of Phase 1-2-3 trials etc.
Here is a good article on Seeking Alpha:
https://seekingalpha.com/article/4746977-electrocore-has-only-just-begun-to-scratch-the-surface-of-its-huge-tam
I’m long $ECOR; 2.5%-ish position while I learn more; I still have a lot of work to do on this.
