Neurotech IPO Offers Access to the Growing Medical Device Industry
'Mente' is a wearable medical device which assists in managing the symptoms of autism in children.
Neurotech International seeks to raise $7 million to list on the ASX on 17 October 2016. Neurotech aims to address the growing medical device industry but is the IPO a suitable opportunity for Australian investors?
It is estimated that 1 in 68 children is affected by autism and to date the condition has no known cure. Autism affects the way individuals behave in social interactions as well as their ability to learn and communicate. The goal of medical treatments is to reduce symptoms to improve the lifestyle and lower the risk of additional development delays.
Neurotech International is a neuroscience focused technology company which aims to commercialise its ‘Mente Autism’ technology. Mente is a wearable medical device which assists in managing the symptoms of autism in children. The neuro-device market is one of the fastest growing sectors in the medical device industry and is expected to reach US$13.9 billion in revenue by 2019.
The company aims to raise $7million in a conventional IPO to fund development and research for its technology and accelerate sales and marketing efforts. Neurotech’s predecessor product has already had initial sales across Europe, Middle East and Asia with approximately 350 units being sold to date. The company has executed an initial distribution agreement to sell a minimum of 8,700 units via a distribution partner in Italy over the next three years. While the company is not expected to reach profitability in the short-term, the agreement provides the company with a near-term revenue opportunity. In mid 2017, results from the U.S. Clinical Trials are expected, which would be a major validation signal for the company and could assist Neurotech to apply for FDA clearance and enter the large U.S. market.
However, the Mente technology remains to be validated in a commercial setting and there is no guarantee that the company will be able to commercialise its product and reach profitability. With only one material contract in place, termination of the agreement would adversely impact Neurotech’s financial performance. Other hurdles include reliance on external capital and lack of patents.
The IPO is speculative but the upcoming clinical trial in the U.S. could be a near-term catalyst and significantly enhance the profile of Neurotech if successful.
ASX Code: NTI
Shares on Offer: 35m
Listing Price: $0.20
Market Capitalisation: 17.6m
Listing Date: October 17
This article was published first in The Australian.
Author: Simon Herrmann
Oct 10, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.