Bloomberg News

Brainsway Sees Partnership as FDA Backs Depression Device

January 21, 2013

Brainsway Ltd. (BRIN) expects to reach an agreement this quarter for a medical-device company to market its non-invasive system to treat depression in the U.S., Chief Executive Officer Uzi Sofer said. The stock rose to the highest in almost three years.

Discussions are under way for a deal that may lead to a “large” upfront payment to Brainsway, he said. The company, which is traded on the Tel Aviv Stock Exchange and has a market value of 582 million shekels ($156 million), will seek a stock listing on Nasdaq in the U.S. after the distribution agreement, he said.

“We are in discussions with several large companies interested in partnering with us,” Sofer said in an interview at the company’s Jerusalem headquarters, where an assembly line is set to churn out 20 devices a month. “Our next step is to reach a deal with a distributor.”

Brainsway is counting on its Deep TMS System appealing to psychiatrists and patients because it offers a way to treat depression without surgery or pharmaceuticals that typically are taken for life. Regulators in the U.S. and Canada this month approved the product for use in patients who failed to respond to antidepressants or can’t tolerate them.

Sofer declined to disclose which companies Brainsway is in talks with, though he said they include some of the largest in the industry. Minneapolis-based Medtronic Inc. and St. Jude Medical Inc. of Saint Paul, Minnesota, are among companies that market implantable devices for deep-brain stimulation treatment of neurological illnesses. Johnson & Johnson (JNJ:US) of New Brunswick, New Jersey, is the world’s largest medical-device maker.

Magnetic Pulses

Justin Ihle, a spokesman for Medtronic, said the company isn’t pursuing a partnership with Brainsway. Rachel Ellingson, a spokeswoman for St. Jude, didn’t immediately respond to a call or e-mail seeking comment. J&J doesn’t comment on rumors or speculation, Carol Goodrich, a spokeswoman, said in an e-mail.

In Brainsway’s system, a coil is placed against the patient’s head to apply brief magnetic pulses to the brain, a process known as transcranial magnetic stimulation. Patients are treated five times a week for four weeks, with each session lasting about 20 minutes, Sofer said. Whether further treatment is needed would be decided by the patient’s doctor, he said. He declined to discuss planned pricing for the system.

Neuronetics Inc. of Malvern, Pennsylvania, is the only other company with U.S. Food and Drug Administration approval for a non-invasive transcranial magnetic stimulation device. The closely held company’s shareholders include Pfizer Inc. (PFE:US)

‘Deeper Structures’

Neuronetics’ product is approved only for patients who have failed to improve after treatment with one antidepressant, while the FDA allowed Brainsway to market its product for patients who have failed with any number of drugs, or who can’t tolerate medication, Sofer said. Brainsway’s product also goes deeper into the brain, he said.

“The main breakthrough of the technology is that it’s actually the first time you can, in a non-invasive way, penetrate and influence deeper structures of the brain to stimulate it,” Brainsway Chief Technology Officer Ronen Segal said.

Cyberonics Inc. (CYBX:US) treats epilepsy and depression by surgically implanting a device to deliver stimulation to the vagus nerve, a pathway to the brain. The Houston-based company has a $1.38 billion market value.

Brainsway’s product faces some obstacles, David Keiser, an analyst at Northcoast Research Partners LLC in Cleveland, wrote in a Jan. 11 report. “Treatment results with transcranial magnetic stimulation are good, but not great,” he wrote.

Depression Market

In a clinical trial, 36.7 percent of patients showed a 50 percent or greater reduction in depression symptoms after treatment with the Brainsway product. “However, it remains to be seen how those results will hold up over time,” wrote Keiser, who said Brainsway’s FDA approval was “not a concern” for Cyberonics. He recommends buying Cyberonics shares.

About 15.5 million people reported struggling with bouts of depression in the U.S. in 2010, according to a government survey. The market for treating depression is tens of billions of dollars a year, said Segal.

Brainsway rose 6.9 percent to 46.50 shekels in Tel Aviv, its highest close since April 2010. The shares had soared 68 percent this year through yesterday after winning the regulatory approvals. The company would join Israeli businesses from drug developer Kamada Ltd. (KMDA) to Babylon Ltd. (BBYL), which markets translation software, in seeking Nasdaq listings this year as trading in Tel Aviv dwindles.

Analyst Coverage

A U.S. listing may boost Brainsway’s value by exposing it to more investors and possibly attracting analyst coverage. No analysts follow the company, according to data compiled by Bloomberg.

“We are looking to be in the Nasdaq because this is the right place to be,” said Sofer. “The reason is not so much to raise money as it is to give the company its real valuation.”

Brainsway, which licensed the technology from the U.S. National Institutes of Health, has European regulatory approval to market the device for bipolar disorder and schizophrenia. The company plans to try to expand the system’s use for as many as 25 brain disorders ranging from cocaine addiction to Alzheimer’s disease, according to Brainsway.

To contact the reporter on this story: David Wainer in Tel Aviv at dwainer3@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net


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