Brainsway mulls direct US sales

Brainsway would sell its devices directly to the centers of excellence, which would sell them on.

Brainsway Ltd. (TASE:BRIN), the developer of the Deep TMS (transcranial magnetic stimulation) device for the non-invasive treatment of neurological disorders, is considered entering the US market in a different way from other Israeli medical devices companies operating there. "We like the model of excellence centers, although we are examining all the options," Brainsway CEO Uzi Sofer told "Globes".

In late 2012, Brainsway obtained US Food and Drug Administration (FDA) approval for its Deep TMS device for the treatment of depression, and the company is now ready for sales. The company's market cap is NIS 686 million, after a 110% jump in its share price since the beginning of the year. The market cap hit NIS 900 million in early February merely on expectations that it would announce the signing of a distribution agreement in the US, but subsequent profit taking on the lack of any news, has pushed the share price down.

The centers of excellence model is based on contracts with a leading US mental health clinic chain with 100 clinics, none of which are more than a 30-minute drive for a patient. Each clinic serves as a treatment center and as distributor of medical devices to smaller clinics in the area and as a technical support and training center for staff in the use of the devices.

"There are all kinds of ways to establish such a center," says Sofer. "You can establish it with the owner of a whole chain (such as Kaiser Permanente or United Healthcare - G.W.), or with 100 clinics separately. Another option is contract with a party that will establish centers of excellence from scratch."

These models do not involve a distributor or medical devices company, such as Johnson & Johnson (NYSE: JNJ) or Boston Scientific Inc. (NYSE: BSX) as a partner, and Brainsway would sell its devices directly to the centers of excellence, which would sell them on.

Sofer says that some medical devices companies also have competing products, and current clinics sell competing therapies. The advantages of Brainsway's centers of excellence are the worthwhileness of a clinic to sell the company's products, which will also influence sales, while not requiring a capital investment by the company in marketing. He says that the centers of excellence model is not necessarily the final choice. "I like this model, but all the options are open, including distribution by corporations, the advantage of which is their reputation," he says, adding that a deal could be signed with 4-5 months.

A Nasdaq offering will probably only be made after such a deal is signed, if an offering is made at all.

Brainsway currently manufactures its devices manually at its own facility, and even though it can boost production if it wants, it is currently limited to making 100 devices by April.

Sofer says that each Deep TMS device can treat 6-8 patients a day, and that a treatment last for a month. In other words, each device can treat about 80 patients a year. Insurance indemnification amounts to a few thousand dollars per patient, and Brainsway will see a third to half of the amount, depending on the deal that will be signed. Brainsway's competitor, Neuronetics Inc., which has developed a brain stimulation device, has only sold 500 units to date. But Brainsway believes that it can do better because of the additional advantages of the Deep TMS device and the FDA approval for the treatment of a larger group of patients.

Published by Globes [online], Israel business news - www.globes-online.com - on February 25, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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