Neuronetics Stock

Neuronetics, Inc. operates as a commercial stage medical technology company.

The company focuses on designing, developing, and marketing products that improve the quality of life for patients who suffer from neurohealth disorders.

The company’s first commercial product, the NeuroStar Advanced Therapy System, is a non-invasive and non-systemic office-based treatment that uses transcranial magnetic stimulation (‘TMS’) to create a pulsed, MRI-strength magnetic field that induces electrical currents designed to stimulate specific areas of the brain associated with mood. The system is cleared by the United States Food and Drug Administration (the ‘FDA’) to treat adult patients with major depressive disorder (‘MDD’) that have failed to achieve satisfactory improvement from at least one prior antidepressant medication in the current MDD episode. It is also cleared by the FDA as an adjunct for adults with obsessive-compulsive disorder (‘OCD’), and to decrease anxiety symptoms in adult patients with MDD that may exhibit comorbid anxiety symptoms (anxious depression). NeuroStar Advanced Therapy is safe, clinically effective, reproducible and precise; and is supported by the largest clinical data set of any competing TMS system. The company is the market leader in TMS therapy based on the estimated 147,400 global patients treated with over 5.3 million of the company’s treatment sessions through December 31, 2022.

The company designed the NeuroStar Advanced Therapy as a non-invasive therapeutic alternative to treat patients who suffer from MDD and to address many of the key limitations of existing treatment options. The company’s NeuroStar Advanced Therapy provides its psychiatrist customers and their patients with several benefits, including clinically demonstrated response and remission with durable results, a demonstrated safety profile with limited treatment-emergent side effects and high patient adherence. Additionally, NeuroStar Advanced Therapy was designed to provide a precise and reproducible office-based therapy that is efficient and convenient. The company’s therapy is delivered without general anesthesia or sedation, enabling the patient to drive and resume normal activities immediately following each treatment session. The company couples its product’s clinical benefits with significant practice development resources, on-site clinical training and reimbursement and service support to help the company’s psychiatrist customers develop a successful NeuroStar Advanced Therapy practice. The company also provides cloud-based practice management solutions that enhance convenience for both psychiatrists and patients.

The company’s growth strategy includes expanding its commercialization efforts in the United States, expanding international opportunities and pursuing pipeline development of the company’s therapy for additional indications. Outside the United States, the company’s products have received marketing authorizations in the European Union and Japan. The company’s initial international commercial focus is Japan, which has the third largest healthcare spend globally. The company has entered into an exclusive distribution agreement with Teijin Pharma Limited (‘Teijin’), a leading Japanese healthcare company, to further expand the company’s commercialization efforts in this market. The company is also evaluating the use of enhancements to the company’s NeuroStar Advanced Therapy System to treat additional indications related to neurological disorders.

As of December 31, 2022, the company had 1,101 active sites utilizing its NeuroStar Advanced Therapy Systems in the United States. The company sells its NeuroStar Advanced Therapy System and recurring treatment sessions in the United States with the collaborative support of the company’s 195 employees as of December 31, 2022. The company’s sales force targets an estimated 50,000 psychiatrists across 26,000 psychiatric practices in the United States, based on a 2020 dataset from Symphony Health and the company’s own internal estimates with those practices treating approximately 42% of the total MDD patients in the United States who meet the company’s labeled indication and are insured. Patients are reimbursed by Medicare and commercial payors in the United States for treatment sessions utilizing the company’s NeuroStar Advanced Therapy System.

Strategy

The key elements of the company’s strategy are to improve customer targeting and expand the company’s direct sales and customer support team to accelerate growth; increase the utilization of the company’s new and existing active customer sites of NeuroStar Advanced Therapy Systems; expand the company’s international market opportunities; and pursue enhancements of the company’s NeuroStar Advanced Therapy System and pipeline development for additional indications.

Research and Development

The company’s research and development expenses were $9.3 million for the year ended December 31, 2022.

Sales and Customer Support Team and Customer Training

As of December 31, 2022, the company’s sales and customer support team consisted of 84 employees working collaboratively across the following departments: sales, marketing, field service and customer support, and reimbursement. In 2023, the company plans to continue to expand its sales and customer support teams to have the largest direct sales and customer support team in the industry, including 47 NeuroStar practice development managers, 19 area sales managers, 7 clinical training managers, 18 field service and technical support specialists, 15 sales leaders, 8 customer service representatives, 3 inside sales managers and 10 reimbursement specialists and managers.

Key Customers, Sales and Marketing— the United States

The company primarily markets and sells the NeuroStar Advanced Therapy System and recurring treatment sessions to psychiatrists, with primary care physicians and pain management specialists representing a small percentage of the company’s customer base.

The company targets approximately 50,000 psychiatrists across 26,000 psychiatric practices, who the company estimate, based on a 2020 dataset from Symphony Health and the company’s own internal estimates, treat approximately 42% of MDD patients who meet the company’s labeled indication and are insured. The company targets these practices by the number of psychiatrists within their practices, the number of patients they treat and their acceptance of commercial insurance and Medicare. The company’s psychiatrist targeting strategy makes for a well-defined customer base that is accessible by the company’s direct sales organization.

The company has structured its sales and customer support team with specialized roles to sell the company’s NeuroStar Advanced Therapy Systems and recurring treatment sessions, while delivering customer service at each stage of the implementation process. The company’s area sales managers are responsible for identifying key customer prospects, educating them on the value of NeuroStar Advanced Therapy System, gaining their commitment for capital placement and introducing them to the company’s PDMs. The company’s PDMs enhance the operational experience for providers and drive implementation of the NeuroStar Advanced Therapy System into the company’s customers’ practices. The company created the role of clinical training manager to partner with the company’s customers to conduct initial and ongoing on-site clinical training to ensure clinical and practice success.

Practice Management Support and Psychiatrist Training—the United States

The company’s PDMs play a pivotal role in ensuring the success of the company’s customers as they implement a new service line into their practice. In the early stages of implementation, they help the practice set goals, educate on the types of patients that can benefit from the company’s therapy and train the office staff on how to talk with patients about TMS and how to use patient educational tools, such as presentations, videos and starter kits. Once the practice begins treating patients, the company’s PDMs will educate the psychiatrist on how to track clinical outcomes, interpret data and effectively convey results to existing and potential patients and referring physicians. The company’s PDMs also work with the company’s customers to increase awareness with referring physicians and develop external marketing tactics. The company’s dedicated reimbursement managers help each practice navigate all issues regarding the reimbursement process, including investigation of benefits, prior authorizations and claims documentation. This group has assisted the company’s customers to conduct over 31,000 benefit investigations.

Psychiatrists and staff training on the NeuroStar Advanced Therapy System is a key to success within each practice. The company’s clinical training consultants take the burden of clinical training off the company’s NeuroStar practice consultants and provide a dedicated training resource to each customer. Clinical training consultants conduct at least a day, hands-on training course that is scheduled after system installation at each practice and also provide ongoing advanced on-site clinical training.

Field Support—the United States

The company’s field service engineers are responsible for maintenance, repairs and installation of upgrades. The company provides a 24/7 support hotline to respond to medical information inquiries and technical questions that arise in all time zones. The company pledges to have a field service engineer on-site within 24 hours of a service call. Because of the size and geographical coverage of the company’s field service engineers and its standard 24-hour response time, NeuroStar Advanced Therapy Systems experience over 99% uptime, helping to ensure uninterrupted patient treatments.

International

The company markets its products in a few select markets outside the United States through independent distributors. In Japan, the company has an exclusive distribution agreement with Teijin, for the commercialization of the company’s products. The current term of this distribution agreement expires March 31, 2025, subject to automatic renewal unless terminated by either party.

Intellectual Property

The company’s patent estate includes patents and applications with claims directed to the company’s NeuroStar Advanced Therapy Systems and broader claims for potential future products and developments. On a worldwide basis, as of December 31, 2022, the company’s patent estate included over 100 issued or allowed patents and pending patent applications for the company’s products and novel design methods, manufacturing processes, novel TMS devices and systems and future combination products that are mainly designed to treat psychiatric conditions or perform diagnostic procedures. In the United States, as of December 31, 2022, the company owned or licensed 41 issued or allowed patents and 7 patent applications filed that are directed to the company’s TMS technology. Outside the United States, as of December 31, 2022, the company owned or licensed 58 issued or allowed patents, 7 pending patent applications and zero pending Patent Cooperation Treaty applications.

These U.S. issued patents are expected to remain in effect until between 2023 and 2035. The company’s core patents in the United States will not expire before 2024. The company’s non-U.S. patents are expected to remain in effect until between 2024 and 2035. The company’s worldwide intellectual property portfolio includes multiple pending patent applications relating to methods and apparatuses for the treatment of psychiatric health conditions in Australia, Canada, the European Union, Japan and the United States. The company’s patents and patent applications mainly relate to iron core technology, including materials, manufacturing methods, geometries, applications, and open core technologies, TMS design patents, including coil position, motor threshold level determination, contact sensing, and articulation arm designs, patient comfort, TMS support technologies and pulse monitoring, and potential next generation technologies.

Manufacturing and Supply

As of December 31, 2022, the company engaged with Spartronics to supply its console; Gharieni Group GmbH to supply the company’s chair, Molex Incorporated to supply the company’s SenStar Treatment Link; Paragon Micro to supply the company’s computer systems and other companies to supply components of the company’s chairs and treatment packs.

Government Regulation

The company’s products and its operations are subject to extensive regulation by the FDA and other federal and state authorities in the United States, as well as comparable authorities in foreign jurisdictions.

The company’s products are subject to regulation as medical devices under the U.S. Federal Food, Drug, and Cosmetic Act, as amended (the ‘FDCA’), as implemented and enforced by the FDA.

The company’s NeuroStar Advanced Therapy System is classified as a Class II medical device. The company initially received marketing authorization of this device through the de novo classification process. Subsequently, the company has cleared any changes made to its system through the 510(k) clearance process.

To obtain 510(k) clearance, the company must submit to the FDA a premarket notification submission demonstrating that the proposed device is ‘substantially equivalent’ to a predicate device already on the market.

The company has subsequently used the 510(k) clearance process to obtain authorization from the FDA for changes to the company’s system, including for its TouchStar treatment, a three-minute intermittent theta burst protocol delivered by the company’s NeuroStar Advanced Therapy System, which was cleared by the FDA on November 23, 2020.

The company’s manufacturing processes are required to comply with the applicable portions of the QSR, which cover the methods and the facilities and controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation and servicing of finished devices intended for human use. As a manufacturer, the company is subject to periodic scheduled or unscheduled inspections by the FDA.

In addition, a portion of the company’s business is subject to the Health Insurance Portability and Accountability Act of 1996, (‘HIPAA’), as a business associate of the company’s covered entity customers. To provide the company’s covered entity customers with services that involve the use or disclosure of protected health information (‘PHI’), the company is required to enter into business associate agreements. As a business associate, the company is also directly liable for compliance with HIPAA.

The company has received European Conformity (‘CE’) certification under the European Union (‘EU’ or ‘E.U.’) Medical Device Regulation (‘MDR’) (2017/745). This CE mark provides market authorization within the EU and European Economic Area (‘EEA’).

Competition

The company has competitors that sell other forms of TMS therapy, including Brainsway, Magstim, MagVenture, CloudTMS and Nexstim, that compete directly with the NeuroStar Advanced Therapy System.

History

Neuronetics, Inc. was founded in 2001. The company was incorporated in 2001.