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Barry Cohen
Barry Cohen
Articles (101) 

Analysts Bullish on Axonics' Prospects

Rated a buy with target set 40% above current stock price

November 04, 2019 | About:

There may be a good investment opportunity in an Irvine, California-based startup that is challenging medical technology giant Medtronic (NYSE:MDT) with what appears to be a superior device to treat a serious bowel disorder.

Axonics Modulation Technologies Inc. (NASDAQ:AXNX) recently received Food and Drug Administration approval for its implantable, rechargeable sacral neuromodulation (SNM) system to treat fecal incontinence. People with the condition are unable to control their bowel movements.

“We believe the number of patients seeking SNM treatment will expand dramatically over the next few years given our fuss-free, long-lived, full-body MRI-compatible device,” Axonics CEO Raymond Cohen said in a statement.

The Axonics device is about as big as a thumb drive. It can be charged wirelessly through the skin and is supposed to last about 15 years. By contrast, the Medtronic product needs to be replaced by surgery every three to five years, according to a recent article in FierceBiotech.

The Fly reported on November 5 that Piper Jaffray analyst Adam Maeder said Medtronic sued Axonics the previous day, alleging patent infringement. He pointed out that this is not unusual in the medical device businesss and that he expects Axonics to "defend itself vigorously" and continue to sell its system during a likely protracted legal process.

Analysts are buoyant about Axonics' prospects. Of the four covering the company, two have it as a buy and two a strong buy. The stock trades at about $25 and has been assigned a target price of more than $43.

Axonics went public a year ago at $15 a share in a $120 million initial public offering and shot up to $43 in late June before retreating to its current level.

In mid-September, BIOTUESDAY reported SVB Leerink initiated coverage of the company with an “outperform” rating and $45 price target. “To us, Axonics represents a hyper-growth story with a clear pathway to profitability in SMID-cap MedTech,” analyst Danielle Antalffy wrote.

She thinks in the short term Axonics said should be able to gain market share because of its advantages relative to the Medtronic device. In 2021 and beyond, growth will be driven by greater awareness and continued innovations.

According to the American College of Gastroenterology, more than 5.5 million Americans have fecal incontinence, but it’s believed that underestimates the actual number of people who have the condition. Other treatment options may include medication, muscle exercises or surgical repair of the anal sphincter muscle.

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In early October, Mass Devices reported that Axonics management said, "There's no reason" why physicians implanting these devices "can't at least double the number of procedures" they're doing.

Mike Matson, a Needham & Co. analyst, thinks Axonics can take significant share in the first full year its system is on the market. He believes the company will become profitable in the fourth quarter of 2021 and for the entire year in 2022.

Axonics plans to start its marketing efforts by targeting the 1,000 top-volume device implanters in the U.S. That group accounts for about 80% of users. The benefit of this strategy is that the company won't have to find and train new physicians.

The company nailed its first big customer last month, signing an exclusive agreement to supply it system to Adult Pediatric Urology & Urogynecology in Omaha. “We are excited to be the first private group practice in America to work exclusively with Axonics,” ADPU’s Dr. Rebecca McCrery said in prepared remarks, adding that the advantages of the company’s system are significant compared to the legacy (Medtronic) product. “Axonics is clearly committed to this market, and we encourage our fellow implanters to make the switch.”

Disclosure: The author has no positions in any of the stocks mentioned in this article.

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About the author:

Barry Cohen
Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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