Guarded Exuberance

by James Cavuoto, editor

Like it or not, the growth of the neurotechnology industry depends heavily on perceptions—perceptions of investors, regulators, clinicians, and patient communities, among others. Few events in recent history have had as immediate an impact on neurotech investor and entrepreneur communities as the recent publication by investment firm Morgan Stanley that projects a $400 billion total addressable market for brain-computer interfaces in the U.S. alone.

The release of this report earlier this month prompted several BCI vendors to take to social media. “The initial market for brain-computer interfaces is likely to be larger than what Morgan Stanley estimates, driven by higher reimbursement rates and a greater population of highly motivated early movers,” Precision Neuroscience CEO Michael Mager posted on LinkedIn. “At Precision Neuroscience, we believe that this is a $2.5 to 3 billion per year opportunity in the first stage. Synchron CEO Tom Oxley highlighted several takeaways from the report, including that there are 3 million potential users of first-generation BCI devices. “Investor interest in BCI is picking up faaaassst. It’s an incredible time to be building in this field,” Paradromics CEO Matt Angle posted. These three firms, as well as Neuralink, are featured in the Morgan Stanley report.

The report breaks the $400 billion TAM into two epochs, an $80 billion early TAM that includes people with critical impairments, and a $320 billion intermediate TAM that includes follow-on adopters. The authors expect BCI commercialization, which includes product launch and reimbursement, within five year. They forecast $1.5 billion in BCI revenues through 2035 and annual revenues of $500 million in 2036. It’s not clear whether and to what extent the authors include sales of traditional DBS systems in their BCI forecast. There has been an increasing trend in the popular media to lump these two markets together, which has both positive and negative implications for both segments.

While reports like this from recognized financial firms certainly contribute to the perception that neurotechnology offers an attractive investment opportunity, vendors would be wise to guard against unrealistic expectations of revenue and revenue growth. We’re reminded of Alan Greenspan’s admonishment about “irrational exuberance” in the years preceding the dot-com crash of 2000. The realization of some of the BCI forecasts in the Morgan Stanley report will depend on a number of factors, including reimbursement, patient acceptance of the implantation procedure, and competition from less invasive therapies.

Many of these issues will be discussed in a panel titled “BCI Frenzy: Separating the Facts from the Hype in Brain Implant Market” at the upcoming Neurotech Leaders Forum in San Francisco. Moderated by NBR senior contributing editor JoJo Platt, the November 6 session will include executives from Paradromics, Precision Neuroscience, and Blackrock Neurotech. Attendees will also hear from Carolina Aguilar, CEO of another promising BCI firm, INBRAIN Neuroelectronics, on November 7.

In the final analysis, the success of implanted neuromodulation devices such as BCI and DBS systems will be determined less by realization of financial forecasts and more by delivery of effective therapies that offer patients solutions that they cannot obtain elsewhere.