Peter Mantas of Logos LP presented his in-depth investment thesis on Clearpoint Neuro (US: CLPT) at Wide-Moat Investing Summit 2022.

Thesis summary:

Clearpoint Neuro is a neuro navigation guidance platform for minimally invasive brain surgeries. The company’s proprietary platform is the only platform that is FDA approved for magnetic resonance imaging (MRI) guidance.

The company is cash-rich, with no long-term debt. It has a low cash burn, with low/no dilution risk and a path to positive FCF generation in 48 quarters. The equity is tightly owned, with insiders holding ~21%, PTC Therapeutics ~15%, and large shareholders another ~20%. The stock may be seen as a Covid reopening play as neuro biopsy and procedure backlog open up.

The revenue and margin profiles are strong, with revenue of ~$84 million by 2026 (~$22 million by yearend 2022), and gross margins of ~70%. The business has diversified pillars of growth, including (1) drug delivery, (2) functional neuro, (3) BCI (Blackrock Neurotech), and (4) clinical research organization (CRO) services. Clearpoint Neuro also has a regulatory capture opportunity.

Clearpoint Neuro is installed at over 65 locations worldwide and is being used for placement of deep brain stimulation (DBS) leads for movement disorders, MRI guided laser interstitial thermal therapy (aka laser ablation) for treatment of drug resistant epilepsy and brain tumors, brain tumor biopsies, as well as delivery of gene therapies and stem cell therapies to targeted locations in the brain at the known sources of over 20 neurodegenerative diseases.

There is no other approved direct MRI guided stereotactic system for neurological interventions. Leading competitors in the conventional neurosurgery space include Brainlab , Medtronic, Elekta, FHC Inc., Integra Life Sciences, and Neurologica Corporation (a subsidiary of Samsung Electronics). These companies offer devices and systems for use in conventional stereotactic neurological procedures, such as surgical navigation workstations, frame based and frameless stereotactic systems, portable computer tomography scanners, and computer controlled guidance systems.

The company’s focus is on recurring revenues of disposable cannulas which are proprietary to CLPT for the delivery of a therapy into the brain. The company is vigilant in protecting its IP through patents, trade secrets, exclusive licensing agreements. CLPT has licensing agreements with Phillips for parts of the navigation platform software, agreements with Medtronic for use of their laser ablation. BCI (Blackrock Neurotech) was designated a Breakthrough Device by the FDA. Approval is expected in late 2022/early 2023. CLPT has patented and exclusive rights to the unique delivery technology of the BCI implantation.

The company wants to create a suite of go-to tools, systems and services in functional neurosurgery which will be the gateway for (1) drug delivery, (2) BCI, and (3) CRO services. CLPT does not take the risk in biotech development but partners with CGT companies. The company is working on milestone and royalty application agreements with select biotech partners. Biggest current partners include Charles Rivers Laboratories, Bayer, PTC Therapeutics (Aromatic l amino acid decarboxylase AADC).

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About the instructor:

Peter Mantas serves as a general partner of Toronto-based private firm Logos LP. Peter is also one of the managing partners at Orion Legal Group and sits as an advisor for a number of venture-backed technology and life-science related companies. Prior to this, he held various economic research positions at the Export Development Bank of Canada, Statistics Canada and held management roles at various large cap technology companies. Peter has both an LL.B. and B.C.L. from McGill University’s Faculty of Law. Prior to studying law he obtained an Honours Baccalaureate in Commerce, Magna Cum Laude, from the University of Ottawa, Telfer School of Management.

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