New business model transforms Brainsway's fortunes

Brainsway on the rise credit: Tali Bogdanosky
Brainsway on the rise credit: Tali Bogdanosky

The company, which has developed and marketings a helmet for deep transcranial magnetic stimulation, has seen its share price rise 230% in the past year.

Exactly one year ago, Israeli medical device company BrainsWay (Nasdaq: BWAY; TASE: BWAY) was in the midst of a crisis. The company, which has developed and is currently marketing a helmet for deep transcranial magnetic stimulation as a non-invasive treatment for depression, OCD, and smoking addiction, saw falling revenue and its share price was 95% below its peak. Then in February 2023, Hadar Levy, who had served in various positions at the company since 2014, was appointed CEO. He tells "Globes," "The company had not adapted itself quickly enough to the changes in the market. Customers needed more time to make a decision on whether to buy the product and it was hard for them to commit to pay for it." All this was exacerbated by a high turnover of staff in the sales department and a major customer mired in difficulties.

Today, one year later, the situation looks completely different. While the share price is still far from its peak, Brainsway's share price has jumped 230% over the past year to give the company a market cap of NIS 372 million. This is not a rise that can be taken for granted, certainly not at the same time as management changes and strategy changes. So how did Brainsway go from a company that investors saw as science fiction, to a company with a proven product and revenue?

Levy recounts, "We made a significant strategic change. One element is focusing on networks of psychiatric clinics, as opposed to focusing on private clinics with one doctor. These are undergoing a process of consolidation into networks, and this makes marketing easier for us." Another element is to become marketing partners for the doctors (a move similar to the one successfully carried out by the Israeli aesthetic medicine company Inmode). "We help the clinic in everything, from its own marketing, to handling collecting fees for them from insurance companies."

Another change is a payment model where the clinic has almost no risk, and this is in line with the current interest rate environment. Levy says that "We noticed that our conversation with doctors was not about how they make money from the device - we have insurance reimbursement today for the treatment of depression in 50 states in the US, for every patient who did not improve after one drug - nor how they market the device to patients. The doctor asks, 'Who'll operate the device? Is there a risk for me in this activity?'

"So with the new approach, I install the device in the clinic entirely at my own expense, and also place a technician there who is responsible for collecting fees. All psychiatrists have to do is diagnose the patient and sign the prescription, as they usually do. After that, they don't have to deal with anything. We share the income with them, and the psychiatrist makes a profit from the first moment. I make a profit from five or more patients, and I only enter clinics where I am sure that these five patients will arrive."

Levy stresses that the change is not only financial, but perceptual. "I call it a 'limousine with a driver' - these are doctors who are not used to dealing with medical equipment, and I tell them, 'Relax, we take care of everything'."

After this streamlining, the company is generating cash instead of burning it. "Now we are probably beginning to loosen up a little in order to reinvest, also through acquisitions," Levy says.

From a seemingly far-fetched idea to an approved product

Brainsway was founded nearly 20 years ago as a research project that sounded far-fetched - a helmet placed on the head in which a magnestic field treated the mind and the brain. Its maturation into a commercial company was not smooth, and needed several CEOs (each with their own contribution), the last of whom is Levy, who rose through the ranks of the company.

The company's brain stimulation helmet is currently approved for use in the US for the treatment of depression and OCD, an obsessive compulsive disorder. It is also approved for the treatment of smoking addiction, but in the meantime the company is not making full progress in marketing for this treatment. Levy says, "We have excellent results in this area, but that's a different market segment. For this indication, I am looking for a strategic partner who comes from the world of detoxification, or cancer treatment."

An intriguing future indication that has already been successful in initial trials is stroke treatment. In Europe, the product is approved and already sold for this indication, and soon the company will begin further trials that may lead to the approval of this indication in the US too. Recently, the company developed a version of its product that can perform magnetic stimulation in several areas at the same time, and it hopes that this ability will be suitable for treating Alzheimer's, but it is a dream for the distant future.

In Europe, and in Israel, the product is approved for additional treatments that were successful in pilot trials including for PTSD, including shell shock, that is, difficulty in functioning after exposure to trauma. After October 7, Brainsway offered to treat people with PTSD for free and experimentally.

Only some of the direct victims of the Hamas atrocities will develop post-traumatic syndrome following the events, so it is customary to start treating this syndrome only six months after the events, when it is clear that it has indeed developed and remained. Brainsway has used its device for this situation to try to help, and has treated dozens of people so far.

"Our device was almost never installed in Israel until this year, because it had no insurance coverage, that is, it was not in the health basket and was not financed by the health funds," Levy explains. "At the beginning of the year, things changed and we started installing the device, mainly for the treatment of depression." In the meantime, ten clinics have opened in Israel, and Levy says they are all full.

Narrowing the loss and balancing operations

The third quarter of 2023 is the second consecutive quarter of recovery in spending after a problematic year for the company, and Brainsway is optimistic ahead of publication of its fourth quarter and full-year 2023 results at the start of March. Third quarter revenue was $8.3 million, up 61% from the corresponding quarter of 2022. The company had almost balanced operations, compared with a loss of $4.9 million loss in the corresponding quarter of 2022. Net loss shrank to $200,000 from a $5 million in the corresponding quarter (summing up the first three quarters in 2023, the company recorded a net loss of $4.3 million on revenue of $22.7 million).

Brainsway stressed that in all parameters an improvement was also recorded compared with the second quarter of 2022. The company currently has about $44 million in cash.

Published by Globes, Israel business news - - on February 18, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

Brainsway on the rise credit: Tali Bogdanosky
Brainsway on the rise credit: Tali Bogdanosky
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