Helius Medical Technologies Inc (NASDAQ: HSDT) is on the up this Tuesday morning, with the microcap healthcare equipment provider seeing its stock price climb by nearly 20%
But is HSDT stock worth your attention?
What is Helius Medical?
Helius Medical Technologies is a neurotechnology company, focuses on developing, licensing, and acquiring non-invasive technologies for the treatment of symptoms caused by neurological disease or trauma.
Its product, Portable Neuromodulation Stimulator (PoNS), is a non-surgical medical device intended for use as a short-term treatment of gait deficit due to symptoms from multiple sclerosis and balance deficit due to mild-to-moderate traumatic brain injury, as well as to be used in conjunction with supervised therapeutic exercise.
The company is headquartered in Newtown, Pennsylvania.
How Does Helius Medical Make Money?
The company makes the entirety of its revenue through product sales to consumers and rehabilitation facilities. It commenced US commercial sales of its PoNS technology in the three-month quarter ended 30 June 2022, though the product has been available in Canada since 2019.
US commercialization is being aided through the Patient Therapy Access Program and the Therapeutic Experience Program. These initiatives are aimed at increasing market awareness and access to the company’s product.
The company also has initiatives in place to ensure that, in the US, the product is immediately available for distribution across all 50 states, with the product available on a direct-to-consumer ecommerce platform. Products are delivered direct to patient’s door.
The established US list price of the complete PoNS system is $25,700, with the controller costing $17,800 and the mouthpiece available for $7,900.
Additionally, a network of fully licensed and compliant providers are equipped to provide tele-health services such as e-prescribing and telemedicine access.
HSDT Stock Financials
The company’s most recent earnings showed it achieved revenues of $119,000 in the three-month period ended 30 June, almost doubling the $63,000 it earned in the same period last year.
However, this figure is dwarfed by the company’s operating costs, which amounted to $3.5m in the same period. This is a significant reduction on the second quarter of 2021 though, as the business previously shelled out $6.2m in operating costs.
Consequently, net losses are on the way down, dropping from $6.0m to $3.8m across the same time frame. The earnings noted that the company had cash of $3.3m at the end of Q2 2022, though a public offering on 9 August has since raised proceeds of $16.4m.
Data from Morningstar shows the stock has a price to sales ratio of 2.51 and a price to book ratio of 3.22, compared with respective industry averages of 5.25 and 4.3 from CSIMarket. This could indicate that the stock is undervalued.
The company does not pay its shareholders a dividend.
HSDT Growth Potential
For patients with multiple sclerosis, Helius indicates that there is a potential addressable market of around 700,000 people in the US as 70% of the nation’s 1 million sufferers report issues with walking.
This addressable market could expand considerably, as the PoNS system has FDA Breakthrough Designation for use in the treatment of stroke victims, of whom there are 7 million in the US. A pilot study with stroke victims has been completed, with an additional study in development.
Studies are also ongoing into the use of the technology to treat patients who have suffered traumatic brain injury and have been left with mobility problems, which could increase its addressable market by a further 6.8 million people.
Helius also sees potential for future use in patients with Cerebral Palsy, Parkinson’s Disease, neurological wellness issues and balance maintenance problems.
HSDT Investment Risks
The primary risk for Helius comes in the form of cash burn. While the company has significantly reduced its operating costs and revenues are on the rise, the latter still massively outstrips the former.
The influx of a fresh $16.4m from a public offering earlier this month will have boosted Helius’ coffers, but there remains a risk that the business could run out of money before reaching profitability.
Furthermore, the company could be forced to offer more stock and further dilute shareholders’ interests if the disparity between costs and revenue is not eliminated quickly.
Another significant risk is that sales fail to take off in a meaningful way. While the company’s PoNS technology might work fantastically well, its high cost of $25,700 will make it prohibitively expensive for many potential buyers.
Initiatives like the Patient Therapy Access Program make the product significantly cheaper for qualifying individuals, while financing is available to consumers through a third party and Helius even cites the National MS Society as a potential source for would-be buyers to find financial assistance. However, this might not help enough for many people.
The product is not yet covered by Medicare or Medicaid, but there is a registry program to generate evidence for coverage. Failing to secure this coverage could be problematic for the company’s fortunes.
Is HSDT Stock a Good Investment?
Helius Medical looks to be in an exciting place at the moment, having just commenced selling its product in the US market. It still has a long road ahead, but costs and revenues are both moving in the right direction and, following its recent public offering, the company is well funded for the immediate future.
There are plenty of hurdles for the company though, with Medicare coverage and studies into further applications for its technology primary among these. Any failings here could leave the stock in a poor position for future growth.
It’s also worth noting that HSDT stock is inherently a risky investment as it is a penny stock, and therefore prone to price fluctuations. Investors should consider their personal appetite for risk before backing Helius Medical.
