Thursday, March 26, 2020

IBI Research On BioSig Technologies: Revolutionizing The Electrophysiology Market


Summary
The Corona bear market is offering stellar buying opportunities.
Fundamentally strong stocks are trading at a deep bargain to their intrinsic value.
BioSig Technologies is another company that you should pick up.
Powered by its disruptive PURE EP technology, BioSig is poised to change the electrophysiology market.
The company is undergoing robust fundamental improvements that will unlock tremendous value.
For all long-term investors, there is only one objective - maximum total real return after taxes. - Sir John Templeton
Author's Note: This article was published inside IBI on March 23, 2020 at 2:44 am ET.


Corona Bear Market Opportunity

By now, I bet that you're sick of hearing about the 2020 Corona bear market. As the pandemic ramps up its death toll, market fear is at an all-time high. Nearly all investors are terrified when their stocks fall into a seemingly bottomless pit. Due to that pervasive market fear, many investors sold out of their holdings. As such, their temporary paper losses turned into real losses. Adding further injury to the insults, some will never enter the stock market again due to this pain.
Remember the saying, "no pain, no gain"? It's true! Contrary to conventional wisdom, your best time to buy stocks is during a bear market. And the time to sell is before the fall. As you can see, you can now pick up the same company at a dime for a dollar. Doing so would position you to earn multiple fold returns at the next bull market. In this research, I'll feature a fundamental analysis of another promising bio-stock, i.e., BioSig Technologies (NASDAQ:OTC:BSGM). If you're opportunistic and bold, you don't want to miss out on BioSig.
Figure 1: BioSig chart (Source: StockCharts)

About The Company

As usual, I'll present a brief corporate overview for new investors. If you are familiar with the company, you should skip to the subsequent section. Operating out of Westport, Connecticut, BioSig is focused on the innovation and commercialization of stellar technologies to serve the unmet needs in the electrophysiology market. That is to say, the fruit of its ingenuity improves the outcomes of heart surgeries relating to arrhythmias.
Figure 2: Business overview (Source: BioSig)

Cardiac Arrhythmia 

Since BioSig tackles cardiac arrhythmia, you should learn the disease fundamentals. As a group of disorders, cardiac arrhythmia epitomizes abnormal heartbeats. This disruptive pattern is further classified as an irregular heart rhythm that is either too fast or slow. Underlying the culprit for the disease is an abnormal electrical conduction pathway in the heart.
Some patients with arrhythmia can live without any associated symptoms. Nonetheless, you can see manifestations such as dizziness, chest tightness, shortness of breath, and fainting in other patients. Regarding treatment, the primary modalities are drug, device implantation, or surgical ablation.
Interestingly, most patients on drugs eventually need to have cardiac surgery. Therefore, this creates a robust demand for BioSig's technology, PURE EP.
Figure 3: Electrical signals of the heart (Source: Southern Med)

PURE EP 

You may wonder, how does PURE EP works? During a cardiac ablation procedure, the surgeon relies on the live reading of heart signals dubbed electrocardiogram (i.e., ECG or EKG). If you're suspected of having a heart attack, your doctor usually gets an ECG to figure what's going on. ECG is the roadmap that helps surgeons know the exact location of the disease tissues.
The challenge for ECG is that electrical signals produced by the operating room's equipment can cause interference. Hence, getting a pure reading is nearly impossible. You don't have to believe me. But why do you think that you're told to turn off your electronic device in an airplane? Electromagnetic interference is real.
Blessed by the spirit of innovation, BioSig captures lightning in a bottle with PURE EP. As a disruptive technology, PURE EP leverages BioSig's ingenious science, software, and technology to deliver hopes.
The device works by simplicity; that is beauty, which is ingenious. All you have to do is to plug it into the current system. And voila! PURE EP displays extremely pure signals without the surrounding noise. This clarity enables physicians to finish the surgery faster and thereby improves the clinical outcomes. In the battle of life and death, speeds if of paramount importance.
Figure 4: PURE EP system (Source: BioSig)

Expert Insight

If you've been following my work, you know that I give much credence to medical experts. After all, your doctor has the best clinical insight into a technology's utility. Tapping into that source provides you invaluable information about efficacy and safety. In doing so, you're using what Phillip Fisher coined "scuttlebutt."
As his informal research methodology, scuttlebutt yields crucial information. If you don't know about Phillip Fisher, he's one Warren Buffett's two mentors. The other one is Benjamin Graham.
When I assessed the medical front, I noticed that BioSig used PURE EP in humans at top U.S. hospitals (starting in 1Q2019). From his clinical experience with PURE EP, the electrophysiologist (Andrea Natale, M.D.) at the Texas Cardiac Arrhythmia Institute remarked,
With the use of the PURE EP System, I was able to identify cardiac signals which were previously undetectable to me. I believe that the PURE EP System could change diagnostic and treatment strategies of arrhythmias, leading to more successful outcomes.
From Dr. Natale's insight, you can bet that PURE EP filtered the noises to improve the signal's clarity. It might not mean much to you, but an improvement in cardiac signaling can make a huge difference between life and death. Asides from Dr. Natale, Dr. John Miller of Indiana University, is thrilled about PURE EP. Dr. Miller enthused,
We found that the clarity of the signals made a great difference in the confidence with which we could continue applying ablation energy to an abnormal pathway that was in the region of the normal conduction system; BioSig technology allowed us to see a clear signal from the normal conduction pathway during ablation that was obscured by noise on our standard recordings. It was a jaw-dropper!
As you can see, the experts converged on a similar conclusion: PURE EP is superior to standard ECG recordings. When you conduct market research, be sure to focus on what different key opinion leaders are saying. Then you take the aggregate consensus. The common theme from many experts is always better than an isolated view.
In taking this research one step further, I learned about a tweet from Dr. Andrew Brenyo. What he said is intriguing. When you look at his tweet, you can see that PURE EP demonstrated the superior signal tracings. There was virtually no background noise. 

Figure 5: Dr. Brenyo PURE EP review (Source: Twitter)
Imagine you're the heart surgeon. You're intensely focused during a surgery. There are many variables to watch out. Mentally filtering out ECG noises is cumbersome. As such, wouldn't clarity in the ECG tracing give you a huge advantage? Of course.

Intellectual Property Protection

Shifting gear, let's talk about a topic that can be boring to you. But it's vital to your investing success. Specifically, you have to check the intellectual property ("IP") protection for your med-tech investment. As you can see below, BioSig covered its ground with 26 issued worldwide patients for the PURE EP.
You may ask, why is this important, Dr. Tran? It doesn't mean much right now. Yet when BioSig ramps up sales for PURE EP, competitors will try to mimic its technology. Bees are naturally attracted to a honey jar. And having strong IP protection deters predators. Ultimately, that ensures a healthy profit margin for BioSig.
Figure 5: IP Protection (Source: BioSig)

Mega Market

Although BioSig has superior technology, you should still assess its market potential. Disruptive technology can fail if it doesn't address a large market. Accordingly, the global EP device market is projected to reach $7.4B by 2022, i.e., an impressive 10.4% CAGR.
Additionally, the global growth in cardiac ablation surgeries should ramp up from 440,629 in 2017 to 830,390 in 2022. At the 13.5% growth rate, this market would almost double in just five years. Hence, you can bet that this is a lucrative niche. To cut into that market, BioSig needs to galvanize awareness and thereby aggressively launch PURE EP into hospitals.
Figure 6: Global EP market (Source: BioSig)
As BioSign is entering a robust growth phase, it's not surprising that the company inducted Dr. Zachariah Zachariah into its Dream Team Board of Directors. In my view, the Florida-based cardiologist, Zachariah, provides invaluable leadership and strategy. Notably, Dr. Zachariah has an impressive track record as the Chairman of Florida's Board of Medicine.
Zachariah is the holder of numerous awards, such as the Ellis Island American Legend Award, the Golden Heart Award from the American Heart Association, etc. My finger would bleed from typing out all his accolades. I believe that strong leadership and commercialization/regulatory insight will boost PURE EP sales in the coming years.

Stellar Leadership

While on the topic of leadership, you should not overlook this crucial factor. The leadership team is critical to the success of the company. If you follow my research, you'd notice that I place as much emphasis on the leadership team as the drug/technology. An excellent leadership team can quickly improve a pipeline by removing subpar drugs and adding other promising molecules. Moreover, they can find ways of unlocking values from existing technology. Furthermore, they are quick and decisive in responding to changing market conditions.
If you look at BioSig's Board, you'd see many esteemed leaders with different expertise. In my view, the alpha in the pack is Kenneth Londoner. Asides from Chairing the Board, Londoner serves as the President and CEO. In Bio-stock investing, you want to pick the CEO with either solid financial or medical background, preferably both. I firmly believe that Londoner's financial prowess will serve you well in the coming years.
Figure 9: Strong leadership (Source: BioSig)
Before he co-founded BioSig, Londoner served as a mutual fund manager of a $2B fund at Seligman. As such, the Chief knows the financial aspects inside out. He'll give you a massive advantage over other bio-investments. You may ask, why is this important, Dr. Tran? That's because it takes tremendous capital to fund a med-tech company to success.
When Londoner is working for you, the financial front is well protected. In my view, Londoner is brilliant. Without a medical background, Londoner demonstrated deep insight into science and medicine. More importantly, he's driven by the mission to help countless patients. That strong desire led him away from fund management to co-found BioSig.

Robust Partnership

As you saw in my coverage of pharmaceutical stocks, I grade a young biopharma positively when it has a good partner. The same is true for a med-tech company like BioSig. As you can see, the remarkable partnership with Mayo Clinic is a validation of PURE EP's efficacy and safety. Remarkably, Mayo Clinic invested almost a million dollars in BioSig.
Of note, Mayo usually invests in young companies with revolutionizing technologies and medicines. Unless it knows that a technology/medicine can save lives, Mayo won't invest its capital. Mayo's success over the years speaks volumes about its investment.
Take Exact Sciences (EXAS), for instance. Mayo invested half a million dollars during Exact early development. Even during this Corona bear market, Exact is now trading at roughly $7.6B. Nevro Corp (NVRO) is another investment. The company now has a $2.25B market cap.
Figure 8: Mayo Clinic's Partnership (Source: BioSig)

Acquisition Candidate

With Mayo's investment, you must be wondering if BioSig will be acquired? Though the chances of any acquisition are low, never say never. A good med-tech company is a prudent buyout candidate. The Corona bear market creates a high favorable merger and acquisition (M&A) environment. A large company like Medtronic (MDT) can pick up BioSig at dimes for a dollar.
As you know, I never based an investment thesis on a potential acquisition. Nevertheless, you can see that the M&A activity for a med-tech like BioSig is substantial.
Figure 9: Merger and Acquisition landscape (Source: BioSig)

Valuation Analysis

As the Coronavirus pandemic wreaks its havoc, most bio-stocks are now trading a deep bargain. Fear is causing massive selling. Hence, this environment renders stocks to trade at a fraction to its true worth (i.e., intrinsic value). Asides from gauging whether a company is trading at a favorable valuation, I ran the actual number.
Keep in mind, biotech valuation is highly difficult because it requires knowledge synthesis from various disciplines. There are different ways to skin a cat. For me, I adapted my technique that is most applicable to early-stage med-tech. As such, I employ comparative market analysis, price to earnings, and appropriate discounts for the assets' current phase of development.
After appropriate discounts, my valuation revealed the price target ("PT") of $24.52, $12.26 and $6.13 for the corresponding 20%, 10%, and 5% market penetration. Looking at three values, I believe that the intrinsic value of BioSig should be around $12.26. Now how much of that value is unlocked depends on the commercialization success of PURE EP and other corporate developments.

Table 1: Valuation analysis (Source: Integrated BioSci Investing)

Potential Risks

Since investment research is an imperfect science, there are always risks associated with an investment regardless of its strength. At this point in its growth cycle, the most important concern for BioSig is whether the company can ramp up PURE EP sales in the coming years.
PURE EP is like an eagle dominating its niche. However, it takes tremendous commercialization resources to unlock its full value. Given that BioSig is a small company, it has limited resources. That aside, BioSign can also run into the potential cash flow constraints because it's a young and aggressive grower. Nonetheless, that risk is minimized due to Londer's financial prowess.

Conclusion

In all, I recommend BioSig Technology a strong buy with the five out of five stars rating. On a two to three year horizon, I expect the $12.26 PT to be reached. I also graded the stock with a low investment risk score. And I ascribed the 70% investment profitability. In a nutshell, you're going to make money on BioSig, provided that you hold it until the next bull market cycle.
From the trading paradigm, my gut feelings (i.e., intuition) sensed that the stock would reverse its downward trend as more investors know about its prospects. After all, BioSig has been flying under the radar of Wall Street for years. Despite that we're in the thick of a Corona bear market, some stock can defy market conditions. I believe BioSig is one such candidate. Moreover, we might have already reached the "point of maximum pessimism." After all, the DOW recently dropped below 20,000 points.
I know you're terrified of this Corona bear market. And yet, if you defy conventional wisdom, you can make a lot of money in the coming years. Growth stocks like BioSig are now available at a depressed bargain. Despite your fear, history proved again and again that the best time to buy is during a market downturn. Fundamentally strong equities usually trade several folds higher at the next bull market.
Due to the Corona bear market, BioSig stocks lost approximately half of its market capitalization. Nevertheless, this differentiated med-tech company is powered by sound fundamentals. And thereby, it'll spark a huge rally at the next market transition. Leveraging PURE EP, BioSig is poised to deliver high-quality cardiac signaling to help surgeons save lives. I believe that commercialization will ramp up in the coming years. Therefore, BioSig's intrinsic value will increase by leaps and bounds with that launch progress. And, I expect PURE EP to change the electrophysiology landscape forever. Ultimately, the tireless efforts of Londoner and his team will deliver hopes to countless patients who need surgery to treat their arrhythmias. 
As usual, the choice to buy, sell, or hold any stock is ultimately yours to make. In my view, you should pick up BioSig along with other strong IBI stocks during the Corona bear market. Months from now, you'd look back and pat yourself in the back for making a prudent decision. If it takes a year, so be it. It's a matter of when rather than if the market will rebound. As you're building your shares, remember to do so in a stepwise fashion to get the best average cost.
Last but not least, thanks for being patient with me last week. It was a hectic week for me with family and other obligations. I'm back in full force now to help you tackle the Corona bear market.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. Business relationship disclosure: Due to my medical and market expertise, companies and third parties like GuidePoint Advisors hired me as a paid consultant. Though being in the industry gives me expert insight on the forefront, my views may not be completely objective. On March 12th, 2020, I established a paid consulting relationship with BioSig.
Additional disclosure: As a medical doctor/market expert, I’m not a registered investment advisor. Despite that I strive to provide the most accurate information, I neither guarantee the accuracy nor timeliness. Past performance does NOT guarantee future results. I reserve the right to make any investment decision for myself and my affiliates pertaining to any security without notification except where it is required by law. I am also NOT responsible for the actions of my affiliates. The thesis that I presented may change anytime due to the changing nature of information itself. Investment in stocks and options can result in a loss of capital. The information presented should NOT be construed as a recommendation to buy or sell any form of security. My articles are best utilized as educational and informational materials to assist investors in your own due diligence process. That said, you are expected to perform your own due diligence and take responsibility for your actions. You should also consult with your own financial advisor for specific guidance, as financial circumstances are individualized.