Investor FAQs 

[fa icon="plus-square"] What is the market potential for Nexeon’s proprietary neurostimulation system? What is the revenue potential for the industry, and what is its growth rate?

The global bioelectronics market is expected to grow from $4.5B in 2016 to $7.89B in 2020.[i]  A sub-segment of this emerging industry is biomedical device development for the use of neuromodulation.  There are four major areas within this market: Spinal Cord Stimulation, Deep Brain Stimulation (DBS), Sacral Nerve Stimulation (SNS), and Vagus Nerve Stimulation (VNS). These four neurotechnology thrusts are expected to grow at a CAGR of 11.2% from 2015 to 2020, to reach a total neuromodulation market size of $6.20B by 2020 from $3.65B in 2015.[ii]

DBS represents the second largest segment within the neuromodulation market, and it has been used worldwide in over 135,000 patients to treat chronic neurological diseases for over 20 years.[iii], [iv] This market segment was valued at ~$390M in 2010, growing at ~8% p.a. to reach ~$590M in 2015. DBS is a fast growing market segment with a forecasted CAGR of ~9%, growing the market to ~$910M by 2020.

The first FDA approval for DBS systems came in 1997 for the treatment of essential tremor, and then in 2002 for the treatment of Parkinson’s disease, which affect a combined total of 15 million people in the United States.[v],[vi] Medtronic remained the only major player with both FDA and CE mark approval until recently. St. Jude’s Brio System received FDA approval in 2015 for treatment of Parkinson’s disease and essential tremor. Boston Scientific entered the EU market in 2013 and is currently undergoing FDA trials.

DBS therapy is estimated to have penetrated less than 10% of the United States market.[vii] We believe the shortcomings of current DBS technology have limited adoption of this therapy in the United States and in other international markets.

[i] DeciBio. Neuromodulation: Market Size, Segmentation, Growth, Competition and Trends. 2015.

[ii] Neuromodulation Market by Technology (DBS, SCS, Trasncranial Magnetic Stimulation) & by Application (Depression, Parkinson’s, Tinnitus, Alzheimer’s, Epilepsy, Ischemia, Obesity) – Trends & Global Forecast

[iii] Bronstein JM, Tagliati M, Alterman RL, Lozano AM, Volkmann J, Stefani A, et al. Deep brain stimulation for Parkinson disease: an expert consensus and review of key issues. Archives of neurology. 2011;68(2):165.

[iv] Deep Brain Stimulation for Movement Disorders, (2015).

[v] Ross GW, Abbott RD. Living and dying with Parkinson's disease. Movement disorders : official journal of the Movement Disorder Society. 2014;29(13):1571-3.

[vi] Louis ED, Ottman R. How Many People in the United States Have Essential Tremor? Deriving a Population Estimate Based on Epidemiological Data. Tremor and other hyperkinetic movements. 2014.

[vii] Sillup GP. Forecasting the adoption of new medical technology using the Bass model. J Health Care Mark. 1992;12(4):42-51.

[fa icon="plus-square"] What is the anticipated lifecycle of your product or service offering? What are your current and future plans for R&D investments?

Nexeon controls 100+ current patents and patent applications in its portfolio, which are of varying ages. The utility patents related to our medical device innovations in both America and Europe last for 20 years.

In 2018, the Premarket Approval process will begin for the Nexeon’s proprietary system for the treatment of symptoms associated with Parkinson’s disease. This is the first step in the process of getting FDA approval for our technology for this first disease indication.

As related to R&D, this has been core to our operations since day one.  We are a team of clinical scientists, engineering researchers, and bio-statistical analysts. Much of our early traction was accomplished via non-dilutive funding that awarded to our operations by US and international government bodies in the form of grants and contracts to support the ongoing development of our innovative technology. Research will continue to play a pivotal role in our company as we launch the investigative use of our technology across many disease indications in collaboration with a host of different physicians.  The three categories initially identified for expansion include DBS for treatment of obesity, dysphagia, and cognition; VNS for treatment of epilepsy, asthma, and Chronic Obstructive Pulmonary Disease (COPD).

Expansion to different disease indications and entering new therapy markets are our primary aims both because the unmet need is profound and the adaptation of our core technology would be minimal to address these other conditions relative to previous development requirements.  In conjunction with these clinical endeavors, we anticipate that an additional component of our R&D strategy will center around the data our devices are collecting and how that can be leveraged to support physicians in monitoring disease progression, identifying new trends, and making more informed decisions that ideally would produce better therapeutic outcomes for their patients.

Nexeon plans to spend approximately $4.8 million on R&D in 2017 and $3.4 million in 2018, and any follow on funds that are awarded from grant applications that are in process.

[fa icon="plus-square"] What alliances or partnerships have you entered (e.g. joint ventures, marketing alliances, licensing arrangements, selling/distribution agreements, channel partnerships, software agreements, etc.)?

Nexeon is in its second year of a device manufacturing agreement with GlaxoSmithKline (“GSK”) for production to be used in preclinical research at its bioelectronics company Galvani Bioelectronics. Nexeon’s devices have been designed to read and correct the electrical signals that pass along the nerves of the body, including irregular or altered impulses that can occur in association with a broad range of diseases. We hypothesize that GSK, research hospitals and universities, and other medical R&D groups will deploy our technology to investigate new therapies for disorders as diverse as inflammatory bowel disease, arthritis, asthma, hypertension, and diabetes could be treated.  Each of these partnerships are evaluated on a per case basis with various ongoing opportunities via long-term manufacturing contracts, IP licensing, or potential acquisition.

Additionally, we consider each of our early adopters to be partners. In an effort to diversify our offering in an industry where our competitors are much larger than we are and have a much larger capital reserve to achieve sales and marketing milestones, we have chosen an alternative means to convert customers to our offering via novel clinical trial design, support, and associated bio-statistical analysis discussed in more detail below in a FAQ related to customer satisfaction and value proposition. 

[fa icon="plus-square"] Who is the end user of the product or service offering?

There are ultimately two end-users for our DBS technology: neurologists and their patients who suffer from movement disorders related to Essential Tremor or Parkinson’s disease.

As a research-focused company, we have partnered with physicians in the development of our device, taking design and functionality inputs from key opinion leaders in the industry and world renowned DBS researchers and physicians. Chronic neurological disease progression and corresponding therapy management require ongoing oversight of the patient’s condition.  Based on the feedback from our end-users, we predict that providing capabilities such as local field potential (LFP) recording, novel stimulation patterns, and closed-loop gives these physicians the data and versatility to advance the scientific research in this field with the ultimate outcome of supporting healthcare providers in making chronic disease management decisions that facilitate delivery of improved patient outcomes. 

Our secondary end-user is our neurologists’ patients who would benefit from DBS therapy. We have developed our technology with features to assist the physician in delivering a more optimized quality-of-life. The therapy supported by our system was developed to treat the targeted symptoms without introducing or increasing undesired side effects, all while diminishing the overall burden associated of chronic disease therapy.

[fa icon="plus-square"] What drives customer satisfaction for this industry and the product?

We are focused on creating value for our primary customers, our DBS neurologists, by providing the sophisticated platform technology that supports never-before-seen investigative scenarios aimed to advance the clinical science research and improving the efficacy of DBS therapy and associated patient’s quality-of-life.

Our system offers versatility in prescribed stimulation and unmatched sensing capabilities, all on a rechargeable platform.  The adaptive finesse of the system’s engine can be iterated upon with inputs from the objective data collected. And while our targeted milestones are conservative relative to historical comps, we anticipate that the bolus of data collected from a small number of novel studies will generate a macro-pool of clinical data by a community of physicians empowered to advance this therapeutic frontier and to contribute to a macro-pool of data that can be leveraged for education, quality control, standardization, and expansion of care.

We do recognize that we are a tool for a physician to use his or her care, skill, and judgement to deploy or not for the betterment of the patient.  However, while we may not be directly interfacing with our secondary customers, we do consider the patients implanted with our devices as well as their caregivers and/or family members to be customers of major priority.  There are countless issues in the typical pathway for patients and caregivers from the moment of chronic disease diagnosis through chronic care management.  We are not aiming to tackle all of these issues from the beginning, but we are aligning our devices with features that do contribute to a better quality-of-life for these patients and potentially their caregivers.  

We have designed our system such that patients are experiencing fewer symptoms, maintaining or decreasing oral medication use, minimizing undesired side effects, and decreasing the amount of time required for visits to their doctors’ offices.  More specifically related to how this is achieved, Nexeon’s neurostimulation system will be able to sense brain signals and more optimally provide closed-loop control of any diseased area of the brain.  This sensing reduces side-effects by stimulating only when disease-related signals are present. Additionally, the system will feature a 3D lead that allows for current steering or more selective stimulation that can be tailored to individual patient anatomy and disease.  Or in more general terms, this feature means that the electrical current can be honed in to stimulate only the target regions of the brain without hitting any adjacent, non-target tissues that may then cause undesired side effects.

Pointing to a specific case, our technology was used to achieve a successful clinical result in which the patient reclaimed a normal quality-of-life. The patient had no adverse effects reported at the 14-month post operation follow up.

Lastly, and consistent for both patient and physicians, the usability of our system is another driver of customer satisfaction. A rechargeable battery within the system engine limits the need for replacement surgeries. A physician programmer and patient remote control have been designed with our end-user preferences in mind to create a predictable, intuitive interface. 

[fa icon="plus-square"] When will your company breakeven in terms of profitability and cashflow?

Nexeon’s DBS product will launch commercially in Q2 of 2018 in Europe assuming the Company is able to recertify the previous CE Mark.  Nexeon plans to be profitable starting in Q1 2019. The firm plans to earn $2.9M from continuing operations in 2018.

To achieve this series of milestones, the technology needs to be approved by EU regulators for the use of patients who suffer from movement disorder symptoms associated with Parkinson’s disease.  Additionally, we will hire and train a salesforce.

The company predicts reaching profitability while still investing heavily in research and development.  However, long term free cash flow generation for the firm’s shareholders will remain a principle concern.

[fa icon="plus-square"] Does the company have proprietary intellectual property in the form of patents, trademarks, copyrights?

Nexeon controls 100+ patents and patent applications. In America, Nexeon has 13 patents granted and 7 pending approval. In Europe, Nexeon has 68 patents granted and 6 pending approval. Nexeon licenses Siemens’ patents for use in all medical device development. These patents are specifically related to self-healing networks and the Internet of Medical Things. The Internet of Medical Things is the collection of medical devices and applications that connect to healthcare IT systems through online computer networks. Nexeon acquired Medtronic’s patents related to remote monitoring. Finally, Nexeon owns copyrights associated with the design of the system.

[fa icon="plus-square"] What gives your company a competitive advantage?
  • Proprietary, patented intellectual property co-developed with end-user customer
  • No large capital investment needed to grow the sales force because of small DBS neurologist community
  • Experienced management team with a successful track record of profitable exits for investors
  • CE mark of approval from the European regulators indicates a more likely PMA process approval
  • Entrance into a large, addressable market. 89% of the DBS candidates are untreated due to issues related to current technology deficiencies
  • Entrance into a growing market. The market for DBS devices used to treat patients with Parkinson’s disease is projected to exceed $900M globally by 2020. The global bioelectronics market will surpass $7B by 2020.
  • Significant room for expansion after the initial DBS product launch. Neurostimulation with our platform technology can treat patients with other ailments.
  • Attractive economics for the hospital, physician, and manufacturer because of
  • Reduced per patient surgery need. Because our device uses a rechargeable battery, we hypothesize that patients can be treated with one implant procedure as opposed to competitive devices that require follow-on surgeries every 3-5 years due to new battery need.
[fa icon="plus-square"] Who are your competitors?

Our competitors are Medtronic, St. Jude Medical, and Boston Scientific Corporation. Combined, these firms only satisfy the needs of 11% of the DBS market, thus we hypothesize that there is room for additional innovative players.

Currently, the only FDA-approved DBS systems (Medtronic’s Activa System and St. Jude Medical’s Brio Neurostimulation System) are stimulation-only devices. A new DBS device with a segmented electrode for current steering is undergoing a pivotal clinical evaluation (Boston Scientific’s Vercise system); however, this device lacks the capability to record brain activity, which is needed for closed-loop DBS. None of these systems can sense or record disease-related neural activity, which hinders the efficacy of conventional DBS and the adoption of closed-loop DBS. As a significant advantage over current systems, our system can sense and record neural activity to support the clinical and commercial realization of closed-loop therapy.

[fa icon="plus-square"] What are the primary risks facing this opportunity?

Issue

Risk

Rationale

Quality System

Low

ISO 13485 certified, so FDA equivalence will be attained with relatively when required since the systems are similar.

R&D

Low-Med

We have already finished R&D of our DBS technology.  We are currently making minor, incremental changes to the system components.  The risk is executional not technological.

Over time we must continue to invest in R&D with at least 10% of revenues.

Manufacturing

Low-Med

We are in the process of setting up manufacturing at established contract manufacturers—companies with many years of experience building these types of devices.  This reduces our risk and capital requirements, simplifies our management structure

Regulatory / Clinical

Med

*EU/CE mark – European Medical Directive has recently changed, so although an earlier version of our device has been previously approved, the process is now much more stringent.  We are managing this risk by enhancing our quality systems and maintaining close communication with our notified body

* US/PMA – we will require a premarket study.  Study risk is minimal (since we will only study conventional DBS so that we get something approved).  It is primarily an issue of time to US approval, but we can/will get paid for our devices in the study

Reimbursement

Low

DBS systems are reimbursed worldwide, and we have established the pathway towards reimbursement. We first need to get regulatory approval and in certain countries, gather clinical data with our product.

Competitive

Med-High

We are going up against competitors with significantly greater resources than we have. Since we cannot be everywhere, competitors will focus their efforts on the sites that we target, and probably attempt to outspend us there.

 

R&D plays a big role in the neuortechnology industry. It is expected that the Company’s R&D activities and related expenses will increase significantly in the future as we increase the scope and rate of such efforts and begin more expensive development activities, including clinical trials and similar studies as required by the relevant regulatory authorities in our targeted jurisdictions (i.e. the United States).

The successful completion of the requisite clinical trials and studies to bring our contemplated medical devices to the U.S. and E.U. markets is uncertain. We cannot reasonably estimate or know the nature, timing, and estimated costs of the related efforts, nor can we make any assurances as to the period, if any, in which material net cash inflows from sales of our medical devices may commence.

 Unfavorable developments with respect to any of the foregoing could mean significant changes in the cost and timing associated with our ability to bring our medical device to market and begin generating revenues.

[fa icon="plus-square"] How do you know that your business has high growth potential?

Our revenue growth will come from taking share in this $650M market, and secondarily by increasing the average price of each system. The DBS market is currently $650M worldwide and growing at high single digits to low double digits.  We only have to take a very small share of this to be successful.

Beyond share, there is price.  Our system’s core engine is rechargeable.  Rechargeable systems sell for 30-50% more than non-rechargeable systems, so this will increase the ASP in the short term.  (It is true that in the long term this effect will be a wash because patients will not need to have their IPGs replaced.  The replacement IPG market (defined as procedures for patients who already have a successful implant but need to get a new one because the battery has drained) is currently about half of all IPGs, and therefore a little under half the value—since you don’t need new leads/extensions/remote controller for the second system.)

 

[fa icon="plus-square"] What is it about your management team that makes them uniquely capable of executing on this business plan?

Learn more about our executive leadership team here

[fa icon="plus-square"] What is the industry issue that Nexeon is addressing, and how is it addressing it?

Our DBS system was designed to decrease post-surgical DBS programming time for the benefit of both the patient and the physician. DBS programming is typically time-consuming because clinicians can only rely on clinically observable patient behavior to select therapeutic parameters. Patients are therefore required to attend weekly programming sessions lasting 1-3 hours, which can cumulatively last over 40 hours over the course of a single year. Programming time continues to increase as the market adopts DBS systems with more advanced stimulation capabilities that take longer to optimize. The LFP recordings in the Neural Hub enable clinicians to directly monitor the effects of the DBS therapy in real-time to converge on highly effective DBS parameters in minimal time.

Nexeon is creating a DBS platform that can be customized to the patient to deliver more effective stimulation and reduce disease symptoms.  For the last two decades, DBS treatment for PD has involved empirically selected parameters delivered continuously without adjusting for the patient’s disease state, medication status, or side effects. This is a brute force approach intended to overcome an overall lack of understanding of the mechanism of DBS and a lack of sophisticated tools necessary to respond to a dynamic situation. Stimulating in this continuous, brute force manner may promote habituation and side-effects such as impairment of verbal fluency, neuropsychiatric symptoms, and worsening of motor functioning, in addition to reducing battery life of the device. Instead of flooding the brain with electrical stimulation regardless of the dynamics of the underlying pathophysiology, the Neural Hub will listen to the brain’s dynamics and automatically drive the relevant neural circuits to the desired state in a closed-loop fashion.

[fa icon="plus-square"] What makes your business different or unique?

Nexeon also has minimal capital requirements to reach breakeven profitability. This is because of two factors. The first is there will be a quick 2017 launch in Europe of our DBS product because it has achieved prior CE approval for treatment of certain movement disorders, such as Parkinson’s, Essential Tremor, and Dystonia. The second is the limited salesforce needed to achieve our sales goals. Our targeted sales approach means there is limited upfront costs.

The innovation within The Neural Hub is our key differentiator. The DBS market is still dominated by traditional open-loop therapies, and the DBS community is calling for a closed-loop solution that adapts to patient needs.  LFP recordings enable closed-loop therapy and allow clinicians to directly monitor the effects of the DBS therapy in real-time to converge on highly effective DBS parameters quickly. Our system’s ability to record brain activity with high signal-to-noise ratio allows for objective selection of electrode contacts, faster programming, better monitoring disease progress and therapy efficacy. These are features needed in a closed loop system

The Neural Hub builds on the advantages of our competitors by combining the best features and adding new valuable capabilities into one comprehensive, adaptive system. The core platform technology has been designed to stimulate with a segmented electrode similar to Boston Scientific’s design; it records as well as Medtronic’s Activa PC+S; and it will be deployed on an iOS platform comparable to St. Jude, all on a rechargeable platform. 

The second advantage includes the system’s ability to perform targeted stimulation via current steering. This is enabled by our segmented electrodes and 16-controllable current sources with multiple stimulation frequencies. This innovation allows for more selectivity in the stimulation of tissue so that non-target tissue is not affected. This selectivity gives doctors more options to tailor stimulation for each patient and limits any potential side effects. 

The company has much potential in developing its technology and utilizing its 100+ patents related to implantable medical devices and internet of medical things technology. The differentiating factor that allows companies to realize their potential is the strength of the leadership team. The experience of Nexeon’s management team drives the ability for potential innovation to become reality. Management experience not only increase the upside potential through innovation, it also lowers the risk the company faces which would be caused by executional problems. Our leadership has a combined 8 profitable exits to shareholders.

 

[fa icon="plus-square"] How do you plan to acquire customers?

Our strategy for sales and distribution will vary depending on product line and region. At this time, we expect to utilize a targeted sales approach for our preliminary DBS product, first in Europe in early 2018, then in the United States following FDA approval. Territories in the United States and European Union not targeted by our sales force will be covered using a distributor/agent to reduce upfront costs. This approach would likely be altered if we formed a strategic partnership with an existing medical device company prior to our first sales.

[fa icon="plus-square"] Does the company have proprietary intellectual property in the form of patents, trademarks, copyrights, etc.?

Nexeon possesses a strong patent portfolio ensuring the freedom to operate which is critical to successful commercialization of the Neural Hub system. Maintaining a focus in the Internet of Medical Things allows Nexeon to utilize issued and pending patents for maximum commercial benefit and growth. Since its inception, Nexeon has actively pursued patent coverage of the proprietary systems and methods of delivering therapy. The patents have been deliberately written to provide broad and specific protection.

The Company has acquired a portfolio from Medtronic, Siemens, and renowned inventor Dr. Mark Bates including previously issued patents, pending patent applications, and a freedom to operate analysis issued in 2016.  Issued and pending US and foreign method and technology patents protect this intellectual property (IP).

For information regarding our IP position and strategy, read more here.

[fa icon="plus-square"] What are the probable exit scenarios?
Nexeon anticipates investors will receive returns on an acquisition once the technology achieves substantial market share or with the increase in the value of the shares of the Company.  Currently, the U.S. Securities and Exchange Commission declared effective Nexeon’s Form 10 Registration. This allows the company to report as a public company, and the company plans to trade on the OTC Market QX Exchange after FINRA completes its review. By trading on the market, investors can see immediate valuation increases when positive announcements are made and milestones are met. Because of this slow IPO, Nexeon anticipates having a successful IPO in 2018. The company can be acquired at any time during the duration of its trading on the OTC market or public exchanges. 
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