Early End of Honeymoon Period for MRI Interventions (MRIC)

The excitement over new and advanced technology no longer drives a stock upwards for ages in a gloomy economic scenario, and the shares of MRI Interventions (OTC: MRIC), the developer of a minimally invasive neurosurgical platform, were no exception. The company’s share price lost more than half of its value from its peak in less than four months after getting listed.

The share price had wild swings today between $1.93 and $2.23 during the first two hours of trading on a volume of around 65,000 shares, which is 1.5 times the average volume of 45,000 shares a day. With a $1.00 tag, the stock was offered in an initial public offering and debuted in the second half of May 2012.

The listing announcement also included a brief but tempting statement about the company’s success in getting a review of its flagship ClearPoint Neuro Intervention System on the cover of the Journal of Operative Neurosurgery. The first of its kind system, christened as ClearPoint, enables neurosurgeons to see inside the brain during procedures using MRI.

On June 19, 2012, the company declared the receipt of its 66th U.S patient for MRI-guided medical procedures. The patent specifically covered the company’s SmartFrame device, an MRI-compatible adjustable trajectory frame that is an integral component of the ClearPoint Neuro Intervention System. A week later, the company, along with Brainlab AG, announced the formation of an alliance with Tocagen to treat the most aggressive form of brain cancer. As per the pact, selected sites of Tocagen conducting clinical trials will use ClearPoint Neuro Intervention System for the delivery of Toca 511 into brain tumors under real-time magnetic resonance imaging (MRI) guidance. The advantage, as per the company, is that neurosurgeons can have a real-time visualization of drug delivery to the brain.

In a detailed research report released on June 27, 2012, Reuters estimated that every 20 new centers that adopt ClearPoint would add another $40 million to the company’s valuation. The report also stated that with a possibility of a recurring revenue generation from the disposable SmartFrame guidance system, a mere 10% penetration in the U.S. would result in the valuation of the company rising to $900 million. Reports of possible gain for MRI Intervention from the alliance with Tocagen, the potential of the technology to transform heart and brain surgery and the possibility of a buyout by bigger companies created the threshold and conducive environment for a price breakout in the first week of July 2012. In little over a month after listing, the stock quadrupled to hit $4.45 per share on July 5, 2012. However, the completion of $6 million financing through a private placement, even though positive, shied away investors who were concerned about stock dilution. MRI Intervention did assure the investors that it will be able to sustain operations and create positive cash flow without additional financing until at least late 2013 by increasing product sales.

On August 14, 2012, MRI Interventions, together with Brainlab AG, announced the use of the ClearPoint Neuro Intervention System in a clinical trial for the first time to treat pediatric brain cancer. Dr. Mark Souweidane commented, “It’s a departure from the standard therapy and has the potential to create a whole new paradigm in brain tumor treatment.”

Kimble Jenkins, MRI Interventions’ CEO who made a presentation at the Rodman & Renshaw Annual Global Investment Conference on September 11, 2012, will present again on September 19, 2012, at the UBS Global Life Sciences Conference.

Even though revenues of MRI Intervention rose by over 50% this quarter over the second quarter of last year and research and development expenses dropped by over 50% compared to last year, investors are still concerned about the slow adaptation of the technology. It is a well-known fact that most of the neurological therapies are still in the nascent stage while the procedural system is much more advanced. This reality continues to bring the stock down. The share price closed at $1.85, down $0.40 or 17.8% on a volume of 150,008 shares.

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.