On Wednesday, Helius Medical Technologies, Inc. (NASDAQ:HSDT) experienced a downgrade in its stock rating by Maxim (NASDAQ:MXIM) Group from Buy to Hold. The revision follows a recent decision by the Centers for Medicare & Medicaid Services (CMS) regarding reimbursement rates for Helius's Portable Neuromodulation Stimulator (PoNS) device, which were set notably lower than those obtained through the Department of Veterans Affairs (VA).
The analyst from Maxim Group expressed disappointment at the CMS reimbursement determination, highlighting a significant pricing gap. The CMS has priced the PoNS Mouthpiece at $2,963.30 and offered a preliminary rate of $519.80 for the PoNS Controller. These figures stand in stark contrast to the VA's pricing of $7,344.97 for the Mouthpiece and $23,843.72 for the Controller, necessitating a reduction in revenue projections for Helius.
This disparity in pricing is seen as a critical issue that may hinder the company's ability to achieve profitability and could limit its pricing power for broader market adoption. The analyst pointed out that the CMS, as the largest healthcare purchaser in the U.S., has a considerable influence on future reimbursement decisions from other third-party payors.
Helius Medical Technologies plans to contest the CMS's decision at the upcoming Healthcare Common Procedure Coding System (HCPCS) meeting in November. However, the Maxim Group analyst remains skeptical about the potential for a reversal in the CMS pricing decision, deeming it uncertain and probably unlikely at this stage.
The uncertainty surrounding the CMS decision has led to the removal of the previous price target of $4.00 for Helius Medical Technologies. Although Maxim Group still believes in the potential of Helius's technology to treat gait deficit in patients with multiple sclerosis (MS), stroke, and mild traumatic brain injury (mTBI), the current circumstances necessitate a more cautious outlook.
In other recent news, Helius Medical Technologies has been in a dispute with the Centers for Medicare & Medicaid Services (CMS) over the reimbursement rates for its PoNS Mouthpiece, arguing that the current rate does not reflect the device's value.
The company intends to provide further evidence to CMS to establish a more suitable pricing. The company's CEO, Dane Andreeff, has indicated hopes for a revised fair reimbursement which could potentially enhance patient access and support the company's revenue growth.
In addition, Helius has reported preliminary results from its ongoing PoNSTEP study, which shows significant improvement in Dynamic Gait Index (DGI) scores for multiple sclerosis (MS) patients using the Portable Neuromodulation Stimulator (PoNS) Therapy. The study has revealed a notable correlation between therapy adherence and DGI score improvements.
Recent financial results, however, reveal a decrease in total revenue from the previous year and an operating loss for Helius. Despite these financial challenges, the company has extended its financial stability into 2025 due to a successful public offering. It is also preparing for FDA submission for stroke authorization and investigating the expansion of PoNS therapy for traumatic brain injury patients. These are among the recent developments at Helius Medical Technologies.
InvestingPro Insights
The recent downgrade of Helius Medical Technologies (NASDAQ:HSDT) by Maxim Group aligns with several InvestingPro metrics and tips that paint a challenging picture for the company. InvestingPro data shows that HSDT's market cap has dwindled to just $1.34 million, reflecting the market's concerns about its future prospects. The company's revenue for the last twelve months stands at a mere $0.59 million, with a troubling revenue decline of 29.7% over the same period.
Two particularly relevant InvestingPro Tips highlight HSDT's precarious position. First, the company is "quickly burning through cash," which is especially concerning given the lower-than-expected CMS reimbursement rates for its PoNS device. Second, analysts "do not anticipate the company will be profitable this year," aligning with Maxim Group's skepticism about Helius's path to profitability.
The stock's performance metrics are equally grim, with InvestingPro data showing a one-year price total return of -95.15% and the stock trading at just 3.94% of its 52-week high. These figures underscore the market's negative sentiment following the CMS decision and support Maxim Group's downgrade.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for HSDT, providing a deeper understanding of the company's financial health and market position.
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