Clinic And Home Neuromodulation Adoption Will Drive Long Term Opportunity

Catalysts

About Onward Medical

Onward Medical develops neuromodulation therapies designed to restore function and improve quality of life for people with spinal cord injury and related conditions.

What are the underlying business or industry changes driving this perspective?

• Scaling clinic-based ARC-EX adoption in the U.S., with high device utilization and growing demand for multi-unit purchases, positions the company to drive recurring procedure volumes and accelerate revenue growth as more centers embed the therapy into standard rehab workflows.
• Expansion into Europe following CE Mark and additional national registrations broadens the commercial footprint beyond the U.S., creating a second growth engine that diversifies the geographic mix and lifts total revenues as early launch countries ramp.
• Transition of ARC-EX into the home setting, supported by evidence from the LIFT Home study and a structured clinic to home pathway, enables longer-duration therapy and larger device volumes per patient, which is likely to increase average revenue per user and support higher long-term earnings potential.
• Progress of the ARC-IM Empower BP pivotal study, combined with clinical and community interest in blood pressure instability treatment, creates a pathway to a second major indication that can add a new revenue stream and improve operating leverage once commercialized.
• A robust balance sheet following the equity raise, together with disciplined cash burn and a runway into early 2027, allows sustained investment in commercialization and clinical programs without near-term dilution pressure, supporting future revenue growth and improved net margins as scale is reached.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Onward Medical's revenue will grow by 201.5% annually over the next 3 years.
• Analysts are not forecasting that Onward Medical will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Onward Medical's profit margin will increase from -1423.1% to the average BE Medical Equipment industry of 5.4% in 3 years.
• If Onward Medical's profit margin were to converge on the industry average, you could expect earnings to reach €4.0 million (and earnings per share of €0.09) by about December 2028, up from €-38.7 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 145.2x on those 2028 earnings, up from -4.5x today. This future PE is greater than the current PE for the BE Medical Equipment industry at 20.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.27%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Despite strong early interest, long term adoption of ARC-EX in clinics and homes could be constrained by capital budgeting cycles, clinician training burdens and competing rehab technologies. This would slow procedure growth and limit revenue expansion.
• The business model depends heavily on gaining broad payer and VA support for home use devices in the U.S. A prolonged period of reliance on self pay, Workers Compensation and case by case private coverage would cap addressable demand and keep net margins deeply negative.
• ARC-IM and Empower BP are still in pivotal and feasibility phases. Any delay, safety signal or underwhelming efficacy at interim analysis would push out or shrink this second major indication, reducing expected diversification of earnings and operating leverage later in the decade.
• Even with a strengthened balance sheet, sustained quarterly cash burn of about EUR 9.5 million to EUR 10 million and rising OpEx for commercialization and trials could force future dilutive capital raises if revenue growth underperforms. This would limit upside for earnings per share.
• Reimbursement and regulatory environments for advanced neurostimulation can shift as health systems scrutinize high cost devices. Less favorable coding, pricing or coverage decisions in key markets like the U.S. and Europe would pressure average selling prices and compress long run net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of €10.87 for Onward Medical based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €12.3, and the most bearish reporting a price target of just €9.3.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be €74.5 million, earnings will come to €4.0 million, and it would be trading on a PE ratio of 145.2x, assuming you use a discount rate of 6.3%.
  
• Given the current share price of €3.92, the analyst price target of €10.87 is 63.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.