Is This Medical Gear Maker Ready To Continue Its Rally?

We’ve all seen those commercials where someone has to get up frequently during the night to urinate; Axonics NASDAQ: AXNX is a company whose products address that problem. 

The stock rallied to a high on Monday then pulled back along with the broader market. 

The Irvine, California company specializes in sacral neuromodulation (SNM) systems. These are used to treat people with overactive bladders. Symptoms include urinary urge incontinence and the urge to urinate frequently. The company’s products treat other related conditions, such as bowel control issues. 

So what exactly are SNM systems? Axonics is not a pharmaceutical company; instead, it’s a medical gear maker. The company’s implantable Axonics R15 and F15 create neurostimulation to help patients regain bowel and bladder control. 

Medtronic NYSE: MDT is a rival in this space, with its InterStim bladder control therapy.

The two companies had previously been engaged in a patent dispute over SNM devices. 

One of Axonics’ selling points is that its systems are compatible with full-body MRIs in many cases. That means magnets won’t interfere with the MRI scan, a big convenience factor for patients wearing internal devices. 

The company also offers an externally-worn trial device, so patients can get an understanding of how the gear functions. 

Another product is Bulkamid, an injectable treatment for stress urinary incontinence, a condition when urine leaks out during moments of physical activity that increases abdominal pressure, such as coughing, sneezing or exercise. Axonics acquired Bulkamid in 2021. 

Young Company In Fast Growth Mode

The company had its IPO in 2018, meaning it's still well within the period of time when a stock is likely to notch big price gains. That’s indeed been the case, as the stock advanced 6.77% in the past month, 55.18% in the past three months and 38% year-to-date. 

Last week, Axonics said the University of Alberta in Canada had implanted four patients with the company’s F15 system. It marked the company’s first foray into the Canadian market. 

After that announcement, the stock vaulted 5.02% in trading volume 87% higher than normal. Turnover was also heavy as the stock advanced in the following session, then rallied to a new high on Monday. 

Axonics reported its second quarter on August 1. The company is not yet profitable, which is not unusual for medical technology companies in their early growth years.

However, revenue has increased at double- or triple-digit rates in each of the past eight quarters. Year-over-year sales were increasing even during the pandemic, when many medical procedures were postponed. Its three-year revenue growth rate is a stellar 283%. 

There was good news in the report: The second-quarter loss was narrower than analysts expected and revenue beat views, according to data compiled by MarketBeat. 

Analysts Boosting Price Targets

Turning to MarketBeat price target data, analysts have a “buy” rating on the stock, with a consensus target of $77.86, just $0.92 from where it’s currently trading. 

Since the earnings report, five analysts boosted their price target on the stock. 

In the earnings release, CEO Raymond Cohen said, “Sacral neuromodulation revenue grew 39% year over year, benefiting from the broad commercial launch of the Axonics F15, our newly developed, long-lived, recharge-free sacral neuromodulation system. Bulkamid generated another quarter of record revenue and we now expect approximately 50,000 women will have their stress urinary incontinence symptoms treated with Bulkamid in 2022.”

Cohen credited a TV campaign, which began in April, for lifting awareness of the company’s therapies. 

The company increased its guidance for fiscal year 2022. It now expects: 

• Total company revenue of $253 million, an increase of 40% compared to fiscal year 2021. This compares to prior revenue guidance of $238 million.
• Sacral neuromodulation revenue of $205 million, an increase of 30% compared to fiscal year 2021.
• Bulkamid revenue of $48 million, an increase of 111% compared to fiscal year 2021.

There’s plenty of good news here, but always use caution when investing in a stock that’s not yet profitable. On the other hand, many medical startups set themselves up as acquisition targets. A company like Axionics that is rapidly growing revenue could be a good candidate for an acquisition down the road.