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Down below is the $CLPT writeup I sent to my paid subscribers earlier last week.
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$CLPT - ClearPoint Neuro (formerly known as MRI Interventions)
Stock Price: $18.50
Market Cap: $390 million
Website: ClearPointNeuro.com
Investor relations [click here]
Headquarters: Irvine, California
Training Center: Solana Beach, California
Founded: 1998
IPO Date: 2016
S-1 Filing for IPO [click here]
CEO: Joseph Burnett
COO: Peter Piferi
CFO: Danilo D’Alessandro
Chairman: John Fletcher
Employees: 70+
VC Funding: $107.6 million [click here]
Phone: 949-900-6833
Email: info@clearpointneuro.com
2020 earnings report [click here]
Investor Presentation [click here]
10-Q Filing [click here]
Secondary stock offering, February 2021 [click here]
$CLPT patent portfolio [click here and here]
2020 revenues: $12.8 million (actual)
2021 revenues: $15.8 million (estimate)
2022 revenues: $25.2 million (estimate)
$CLPT writeup from @maxwellhouse99, February 2021 [click here]
$CLPT writeup on Seeking Alpha, October 2020 [click here]
$CLPT system overview, January 2020 [watch here]
$CLPT demo video, January 2020 [watch here]
$CLPT navigation system, July 2020 [watch video here]
$CLPT emerging applications in neurosurgery, December 2020 [watch here]
$CLPT webinars [watch here]
$CLPT in the Journal of Neurosurgery [click here]
$CLPT writeup on Seeking Alpha, March 2021 [click here]
$CLPT — ClearPoint Neuro
INTRODUCTION:
I first heard about $CLPT a couple months ago when a neurosurgeon sent me a direct message on Twitter. He put together a short writeup for me explaining why he was so bullish on the company — I figured if a neurosurgeon liked this company then perhaps I should take a look. I ended up spending a few hours that night doing some due diligence, going through the investor presentation and watching demo videos on YouTube.
It became quite clear to me that $CLPT was building something very special that had enormous upside potential especially as biotech and pharmaceutical companies develop more drugs for the brain and need a better system to help with delivery. That’s where $CLPT comes into play.
Over the past couple months I have spoken/messaged with at least 12 medical professionals from general physicians to neurosurgeons — all of whom own $CLPT shares with some of them having as much as 40% of their investment portfolio in $CLPT.
One of them said to me… “$CLPT is like using GPS on your phone or in your car to get somewhere compared to the current way which is like using paper maps”
I hope you enjoy this writeup on $CLPT — I’m hoping to interview the CEO in the next week or two (I’ve already emailed him twice) or perhaps if I can’t get him to speak with me on Zoom then I’ll put together a roundtable of neurosurgeons and we can discuss the company in more detail.
OVERVIEW:
$CLPT aka ClearPoint Neuro (formerly known as MRI Interventions) operates as a medical device company. $CLPT develops and commercializes platforms for performing minimally invasive surgical procedures in the brain under magnetic resonance imaging (MRI) guidance.
$CLPT’s mission is to improve and restore quality of life to patients and their families by enabling therapies for the most complex neurological disorders with pinpoint accuracy. $CLPT is the only company to help deliver a drug by accurate catheter placement through the brain barrier using real-time MRI. There is no other real-time MRI platform available on the market. Medtronic has the NexFrame platform that is used in a static way.
Applications of the $CLPT’s current product portfolio include deep-brain stimulation (aka DBS), and biopsy, with future applications of laser ablation, neuro-aspiration, and delivery of drugs, biologics and gene therapy to the brain.
The ClearPoint Neuro Navigation System has FDA clearance, is CE-marked and is installed in 60 active clinical sites in the US.
$CLPT’s SmartFlow cannula is being used in partnership or evaluation with more than 20 individual biologics and drug delivery companies in various stages from preclinical research to late stage regulatory trials. To date, more than 3,500 cases have been performed and supported by the Company’s field-based clinical support team which offers support and services for our partners.
$CLPT has two product platforms — the ClearPoint system which is a neuro-navigation system designed for instruments and devices to treat various neurological diseases and conditions, as well as for performing biopsies. The ClearPoint system is already in commercial use to perform minimally invasive surgical procedures in the brain. The ClearPoint system is also designed to enable the delivery of therapies to treat certain neurological diseases.
The second product platform — the ClearTrace system, which is still in development, will be used to perform minimally invasive surgical procedures in the heart. The $CLPT ClearTrace system is designed to deliver therapies to treat certain cardiac diseases. $CLPT has license and collaboration agreements with The Johns Hopkins University, Clinical Laserthermia Systems Americas Inc, Koninklijke Philips N.V., Blackrock Microsystems, LLC, and University of California and San Francisco.
ClearPoint and ClearTrace systems both utilize intra-procedural magnetic resonance imaging to guide the procedures — both systems are designed to work in a hospital’s existing MRI suite.
Both product platforms, subject to appropriate regulatory clearance and approval, will provide better patient outcomes, enable physicians and hospitals to treat more patients, and reduce costs to the healthcare system.
$CLPT platforms are designed to enable physicians to see the target site, guide the surgical instrument to the site, deliver the therapy, monitor for adverse events and complications and confirm the desired results of the procedure, all under high resolution, intra-procedural magnetic resonance imaging.
ClearPoint system may enable physicians to treat patients who otherwise may not be treated utilizing current surgical techniques. In addition, by providing direct, intra-procedural visualization, we believe our ClearPoint system could reduce the amount of time needed to perform procedures and enable physicians to treat more patients in a given period of time.
$CLPT platforms should result in more efficient utilization of healthcare resources and physician time because they are designed to work in a hospital’s existing MRI suite, which adds additional utility for an infrastructure investment that has already been made by the hospital. Intra-procedural visualization capabilities and streamlined workflows should increase procedure efficiencies and reduce surgical times.
CURRENT PROBLEM:
The traditional standard of care for image guidance for neurosurgical procedures (laser ablation, DBS placement, drug delivery, Stereo EEG placement, biopsy, etc) is with stereotactic technology. Stereotactic image guidance is not real time live imaging. The patient gets a stereotactic frame attached to the skull and is transported from the operating room (OR) to the MRI scanner and imaging is taken with the stereotactic frame. The patient is moved back to the OR for the procedure.
The neurosurgeon uses the static imaging to guide the procedure based on the images in relation to the stereotactic frame. However, this has drawbacks. There is no live image of where the device, needle, etc is going in real-time. The surgeon must send the patient back to the scanner to confirm placement and make adjustments as needed, which can require multiple trips.
Furthermore, the brain may move a few millimeters when the patient is moved or transported, which affects accuracy. This can lead to misplacement by millimeters, which, in the brain and surrounding structures can be the difference between success, failure, or adverse events.
Misplaced drug delivery has led to halting of studies where precision drug delivery is necessary. In relation to DBS, the current standard involves the patient being awake during the procedure in order to confirm placement is in the correct area. $CLPT technology allows the patient to get the DBS probe installed until general anesthesia.
SOLUTION:
Before we talk about the solution, please watch this video which was posted on Twitter and shows the power of real-time imaging:
$CLPT provides live MRI guidance using their patented MRI compatible stereotactic frame, cannulas, software, etc. The system basically turns the MRI suite into an OR. The patient gets the stereotactic frame installed and is placed in the MRI scanner and live images are taken.
The neurosurgeon uses the navigation software to guide the placement and sees the movement and placement of the device in real time. This allows for accurate placement without need for moving the patient and repeating imaging — this increases accuracy and safety.
PRIMARY USES:
Biotech & Genomics: New drugs and biologic treatments are being aimed at specific locations within the brain for a variety of neurological disorders. The technology is currently in use in at least 30-40 biotech studies in various stages and the number appears to be growing. Older failed studies may be resurrected due to the new technology. Current examples of drug studies include AADC, Parkinson disease, and others. Future potential uses include focal epilepsy, biopsy of tumors, stereo EEG placement (basically eeg electrodes placed in deeper areas of the brain), and others.
EEG = Electroencephalography = an electrophysiological monitoring method to record electrical activity of the brain. It is typically noninvasive, with the electrodes placed along the scalp, although invasive electrodes are sometimes used such as in electrocorticography.
DBS (deep brain stimulation): Traditionally DBS is implanted with the patient awake to help confirm that placement is correct. For example, when used for tremor, once implanted and activated, the DBS can immediately stop the person’s tremor. Having the patient awake with resolution of the tremor confirms correct placement. There are reasons to transition to DBS placement in patients under anesthesia. Some patients cannot tolerate an awake procedure due to their mental status or anxiety.
Also, if given a choice patients will likely opt for DBS placement. DBS placement via $CLPT is performed with live guidance, confirming correct placement in the target location.
Here are some related articles about $CLPT and DBS [click here] and [click here]
Laser ablation: Similarly to the prior uses, laser ablation is traditionally guided with traditional stereotactic imaging. Live guidance allows for more accurate laser beam placement. The extra precision is important as a few millimeters could be the difference between success and failure.
BUSINESS MODEL:
$CLPT has multiple revenue streams which include the software, hardware, refills (accessories) and the licensing fees from partners and drug companies.
The company talks about the 4 pillars of growth which you can see below — most $CLPT investors I talk to agree that biologics and drug delivery will be the holy grail yet it’s not currently priced in so this should be a catalyst in the future.
$CLPT is really a platform company so they’re selling everything the surgical team needs as you can see below — this is why we call it the “razor blade” business model because once you buy the fancy razor you need to keep buying the blades to keep the razor working. This is the same type of business model with $TMDX (TransMedics) because once you buy the OCS (organ care system) units you have to keep buying all the accessories, refills, etc to keep the OCS unit working properly (not to mention sanitary for the next patient).
COMPETITION:
When I asked several neurosurgeons about the competition for $CLPT, they all said “ROSA” which stands for Robotic Stereotactic Assistance.
ROSA is a robot that uses stereotactic imaging to guide placement. It relies on the old standard of taking images and transporting the patient back to the operating room. The movement of the patient and lack of live guidance make it less precise than the ClearPoint system.
You can learn more about ROSA by clicking [here].
PARTNERSHIPS:
Not only does $CLPT have some significant partnerships already in place but they also have dozens of biotech/genomics companies using $CLPT as their delivery system.
Several of these strategic partners and drug companies are also large investors including PTC Therapeutics.
$CLPT is already being used in 60+ centers around the world and recently announced the completion of the 4,000th procedure using the ClearPoint system [click here]
More information on partners [click here]
MARKET OPPORTUNITY:
In my opinion, the likelihood of $CLPT becoming a multi-billion dollar company increases significantly based on how many drugs are being developed and approved for the brain and different neurological diseases but then need $CLPT to provide the delivery system in order to get those drugs to the right place.
These next three slides are right from the company’s recent investor presentation so these are their estimates on the size of these three major opportunities: biologics, DBS and laser therapy.
FINANCIALS:
Right now if you look at the $CLPT financials you won’t be blown away but that’s because it takes a long time to get adoption to new systems/platforms, especially during the pandemic. I believe over next few years we will see significant revenue acceleration. I’ve talked a few fund managers that own $CLPT and think revenues will 10x over the next 4 years (from 2020 to 2024) although based on how many neuro-drugs are in phase 2 trials right now they said we could see $250-300 million in revenues by 2025 which would be a 75-80% CAGR on top line growth.
$CLPT already has very strong gross margins at 71% and it’s fair to assume they’ll continue to tick up over time. Many mature med-tech or med-device companies see gross margins at 80-85% as they are becoming profitable. I would expect the same from $CLPT.
Based on my calculations $CLPT should be profitable in 2023 however that can change based on their expansion plans, rollout of $CLPT ClearTrace and other market dynamics.
VALUATION:
Right now with the market cap around $390 million it means the stock is trading at 15x 2022 revenues which is very reasonable for a company that is changing the face of neurosurgery and drug delivery to the brain with the potential to average 80% growth for the next 4-5 years.
If $CLPT can get to $250+ million in revenues by 2025 then the stock should be an easier 5-bagger as it would most likely be trading at 10-12x sales — split the difference (11x) and you get $2.75 billion market cap / 21 million shares outstanding = $130 stock price (not including additional stock offerings which is always possible)
CHARTS:
$CLPT recently broke through the 20d and 50d moving averages although most growth stocks did. As the 10-year Treasury started moving higher (this changes the DCF models) combined with the fact that big investors were moving into the “reopening” stocks — lots of high-quality growth stocks like $CLPT have been selling off.
6 weeks ago $CLPT got above $31 per share, then dropped by 50% and has since settled into the high teens which still represents a 40% pullback from the February highs. The 100d moving averages are in the low $17s, I don’t know if we get down there but if we did I’d be buying $CLPT aggressively. Personally I think $CLPT is heading back to $30+ over the next 6-12 months because I believe plenty of investors will start to appreciate the potential and want to get in before revenues start to explode higher.
ANALYSTS:
As with most small cap stocks including $CLPT there aren’t many analysts to rely on because these companies are simply underappreciated. It’s possible we get more analysts picking up covering in the next 6-12 months which could be a nice catalyst although I’d never buy a stock for that reason alone. The only two firms that cover $CLPT are very bullish with price targets of $32 and $38 — the second PT would be a double from current prices.
Of course it’s always possible those analysts could lower their price targets (since they love to chase prices in both directions) however nothing with the underlying $CLPT story or fundamentals has changed in the past 6 weeks so it would be a really pathetic move on their behalf.
MANAGEMENT:
Rather than do into much detail on management (which is very strong) I figured it would make more sense to post their bios/resumes. In several of my discussions with large investors and neurosurgeons, most of them have had direct conversations with someone from the $CLPT management team. I have reached out to the CEO twice in the past two weeks to setup an interview but I have not gotten a response. I think there’s a decent chance I get one after this writeup goes out. As you can imagine, it’s a little stressful for CEOs of publicly traded companies to do interviews because they never really know what questions will be asked or whether something they say could be considered an SEC disclosure violation since many of these companies are already into their next “quiet period”.
SHAREHOLDERS:
As I mentioned earlier, PTC is a large investor and strategic partner — you can learn more about the company at PTCbio.com
Otherwise the shareholder base is a nice mix of insiders, early investors, strategic partners, mutual funds, hedge funds and retail investors.
CONCLUSION:
I remain very bullish on $CLPT with a 6% position in my personal account as well as my Social Capital fund. Clearly I’m not a medical professional but I’ve spoken to more than a dozen people who are and know the $CLPT system better than I ever could. Even though I’ve never performed brain surgery or developed a drug for a neurological disease/disorder, it doesn’t mean I don’t appreciate how big of a deal real-time MRI imaging is for these problems. It’s quite clear that $CLPT has developed a better solution that is safer, faster and more accurate for the neurosurgeons.
$CLPT is already in 60+ hospitals and medical centers and could see that number double over the next 3-4 years. $CLPT will be cemented as the drug delivery platform of choice for any biotech/genomics company starting in their clinical trials, through FDA approval and into commercialization.
As $CLPT for DBS and laser guidance grows in use, more and more neurosurgeons will become accustomed to using the technology. Hospitals will have committed capital to $CLPT’s equipment and Neurosurgeons will be trained and become accustomed to using CLPT’s superior technology. It will be extremely difficult for another MRI guided device to enter and take market share in future years. This is similar to how Intuitive Surgical ($ISRG) built their moat in robotic surgeries.
I’m looking for companies with market caps under $10 billion (although mostly under $5 billion) that can sustain high revenue growth for the next 3-5 years leading to multiple expansion in many instances. I also look for stocks that are unknown or misunderstood with upcoming catalysts that should push the stock price higher. Even though I’ve seen a few people talking about $CLPT on Twitter in the past few weeks, there are still millions of investors that don’t know this company exists or what they are doing. Over the past few weeks as growth stocks have sold off I have consolidated my portfolio into my top 20 companies and $CLPT is definitely staying in there. I think there is tremendous upside as more companies default to $CLPT’s platforms for minimally invasive surgeries and drug delivery using real-time MRI guidance which leads to better outcomes for everyone.
I hope you enjoyed this writeup on $CLPT — if you decided to start a position please do your own research and due diligence. Just because I love this company doesn’t mean you need to as well. $CLPT is still a high-risk investment based on the market cap and low revenue base but I’m comfortable holding a 6% position knowing the potential upside.
I’d also like to thank @GuiPhilipps for helping me with a portion of this writeup. I’m going to try and get him as well as a few other experts to join me in a Zoom roundtable to discuss $CLPT in more detail.
Disclaimer: The stocks mentioned in this newsletter are not intended to be construed as buy recommendations and should not be interpreted as investment advice. Stocks mentioned in this newsletter should only end up in your own portfolio after you conduct your own research and due diligence. Many of the stocks mentioned in my newsletter have smaller market capitalizations and therefore can be more volatile and should be considered more risky. I encourage everyone to do their own research and due diligence before buying any stocks mentioned in my newsletter. Please manage your own portfolio and position sizes in accordance with your own risk tolerance and investment objectives.