Piper Sandler raised its target on AXNX share price to $84 from $82. It sees several growth drivers evident, including increasing therapy awareness driven by the company's efforts in direct-to-consumer marketing.
Axonics (NASDAQ: AXNX) is a global medical technology company developing and commercializing novel products to treat bladder and bowel dysfunction.
What Does Axonics Do?
According to Bloomberg, Axonics, Inc. operates as a medical technology company. The company focuses on designing, developing, and commercializing innovative and minimally invasive sacral neuromodulation solutions used to treat patients with overactive bladder, fecal incontinence, and urinary retention. Axonics serves patients worldwide.
The company offers users an Axonics Therapy trial using a disposable device, and for those that want to continue, there's a discrete implant. This is operated with remote control. It claims to help restore the connections between the brain and bladder or bowel to give users a better quality of life.
The company is shifting its product focus from a rechargeable product to the F15, its new non-rechargeable device, also known as the primary cell, which has a higher gross margin. It can also potentially last around 20 years in the body, far exceeding any previous products.
It also has an FDA application for a new rechargeable device with a recharging interval of one hour every six months.
Axonics sacral neuromodulation (SNM) systems provide patients suffering from overactive bladder and/or fecal incontinence with long-lived, easy-to-use, safe, clinically effective therapy.
Additionally, the company acquired Bulkamid, a best-in-class urethral bulking hydrogel, last year. Bulkamid provides safe and durable symptom relief to women with stress urinary incontinence (SUI).
Axonics is creating awareness of the profoundly embarrassing and personal issues it can help with via direct-to-consumer advertising on television and other media.
During a September fireside chat with Wells Fargo, Axonics CEO and Director Ray Cohen was very upbeat in the company's outlook. The team is building consumer awareness, improving its product offering and witnessing the market grow at pace.
Ray Cohen, CEO and Director of Axonics, commented:
If we go back to 2019 and we look at what's happened… 2019 to 2021, what we see is that's running at about a 15% compounded annual growth rate (CAGR), which is precisely what we've said that we thought would happen.
Danny L. Dearen, President & Chief Financial Officer, Axonics Modulation Technologies, Inc., said:
Things are going quite well. We have good momentum in the business, and we feel good about where we are today and the balance of the year.
How Does Axonics Make Money?
Axonics makes money selling its recharge-free F15™ SNM implantable stimulator, its r-SNM system, and Bulkamid.
Before Q4 2019, Axonics derived revenue only from its international operations in select markets, including England, the Netherlands and Canada.
Beginning in February 2021, with the acquisition of Contura Ltd, Axonics markets Bulkamid, a urethral bulking agent, to treat female stress urinary incontinence (SUI). And from March 2022, with the FDA approval of the company's long-lived, recharge-free F15™ SNM implantable stimulator, Axonics now markets and sells the F-15 recharge-free system to customers in the United States in addition to the existing r-SNM system. The new recharge-free system is protected by intellectual property based on company-generated innovations.
During the first half of 2022, Axonics brought in $117.4m in net revenue, compared to $80.2m in the first six months of 2021.
Axonics' clinically proven products are offered at hundreds of medical centers across the US and abroad. Reimbursement coverage is well established in the US and is a covered service in most European countries.
AXNX Stock Financials
Axonics has a $3bn market cap, and its share price is up 392% since going public in 2018.
Gross margins for Q2 came in at 72.5%. It is modeling the second half of the year on gross margins of 69%, which it hopes will account for any margin pressures on paying up for inventory. It has been overpaying to combat supply chain issues and keep things moving.
Axonics raised its 2022 guidance on its Q2 call to $253m from prior revenue guidance of $238m, which represents growth of 40% compared to 2021.
Over the past year, AXNX stock has traded between $38.41 and $79.92. Today it trades at around $74. Year-to-date, the Axonics stock price is up by 26.32%, while the S&P 500 is down by -22.29% over the same period.
FactSet analysts have a consensus Buy rating on AXNX stock with a target share price of $82.37.
Axonics Growth Potential and Risks
The addressable market is growing. When Axonics began discussing this in 2018, the US market was around $525m. Today it is about $750m, according to its data modeling.
Overactive bladder affects an estimated 87 million adults in the US and Europe, and an additional 40 million adults are estimated to suffer from fecal incontinence. SUI affects an estimated 29 million women in the US alone.
The company is actively pursuing a direct-to-consumer marketing campaign and TV advertising.
The company says around 7% of its website visitors are filling out a symptom survey, with around 42k captured so far. The company reaches out to those interested in being matched with a provider to make the connection.
In its Q2 earnings call, Axonics indicated that COVID-19 deferrals, procedure slowdowns and staffing shortages did not impact its Q2 results. However, it did experience some supply chain challenges and higher costs for certain components.
Cohen is still optimistic that the future looks rosy as the reopening is well underway and the Axonics procedures are relatively quick, so they don't tend to be impacted by staffing shortages.
Supply chain issues continue, but the company can pay up to overcome this. It is now building up an inventory supply and is getting closer to the ideal position it wants to be in. Plus, it is looking ahead and planning inventory build and ramp for 2024.
Medtronic (NYSE: MDT) is Axonics' primary competitor, and both heavily focus on advertising and search engine optimization. Medtronic currently sells around seven of every ten devices today, but Axonics is taking market share.
Medtronic's InterStim X is its new non-rechargeable device with an 8-to-10-year life span. Axonics F15 has double the longevity with a potential 17-to-22-year life span. Also, Axonics' F15 is 30% to 40% smaller than the Medtronic competitive device.
Is AXNX Stock a Good Investment?
Axonics recently ranked No. 1 on the 2021 Deloitte Technology Fast 500™ and the 2022 Financial Times ranking of the 500 fastest growing companies in the Americas.
The company's goal is to achieve a 50.1% market share in a $1.5bn market. Whether it can achieve that remains to be seen.
Axonics is a speculative investment, particularly as overall market conditions are bearish. However, healthcare is a defensive sector, and this is a market with a clear need for Axonics' products.