BioSig: A Useless Product, A Paid Stock Promotion, And Unrevealed Clinical Studies Data

BioSig (BSGM) sells an add-on device to EP (electrophysiology) machines called the PURE EP. It is supposed to make the signal clearer. The product pitch is still based on bench and academic animal studies, with no published clinical data. The company said they’d present clinical data – but they didn’t. This is a big red flag.

We believe now is a good time to sell or short the stock. It has almost doubled over the past 4 months. It’s up 50% over the past month. BSGM is almost out of cash, has no revenues, and needs money to have a product launch. Recent shareholders who bought 2.15 million shares at $4 in a private placement in March have now registered their shares to sell. We predict that as sales fail to materialize, aside from an occasional sale with partners or with an experimental EP lab, the stock will drift down to $1-$2 per share within one year and below $0.50 after two years.

Note: We contacted the company at multiple email addresses on May 24th, and haven’t received a reply. We asked the company to address the questionable history of two insiders which we document in this article. We also asked why the company said they would publish their clinical studies but didn’t, primarily at the Heart Rhythm Society conference.

BioSig Is In A Desperate Situation Right Now With A Delayed Product Roll-Out

BioSig’s PURE EP System got FDA 510(K) clearance in August 2018. That’s over eight months ago, and the company hasn’t sold a single device yet. This doesn’t make any sense if the product is a “world-class device that addresses a large unmet need” like the company says it is. Healthcare companies with useful products, whether medical devices or drugs, typically have everything set up to ship their product the day after FDA approval. BSGM hasn’t even sold its PURE EP to a single lab who might want to try it out.

As our research shows in this report, the device is likely unnecessary for atrial fibrillation (“AF”) and we believe the company won’t get any real sales. But the investor relations rep says that the reason why they haven’t made any sales yet is because they want to do a “controlled roll-out.” The longer the company waits to do this roll-out, the more skeptical investors will become. On 3/31/19, the company reported only $10.9M in cash. BSGM needs to raise tens of millions of dollars more in order to start marketing their PURE EP machine.

On Jan 9, 2018, BSGM announced:

The appointment of Mr. Austin comes at a crucial time for BioSig, as the Company executes its market entry in the U.S. in 2018.

No market entry happened in 2018, despite FDA approval in August 2018. We also notice that BSGM doesn’t have this past press release listed on their website.

In December 2018, a sell-side report from Roth Capital Partners stated on page 1:

BioSig recently initiated PURE EP’s controlled domestic launch with KOL electrophysiologists, and the official PURE EP domestic launch is expected to occur in May 2019.

On page 18 it states:

Over the next ~three months, PURE EP systems will be used on patients by multiple KOL electrophysiologists at external evaluation sites for the purpose of generating supportive clinical data for the PURE EP system’s official launch in May 2019 at the Heart Rhythm Society Scientific Sessions in San Francisco, California.

Again, the launch didn’t happen at the Heart Rhythm Society in May 2019, with no explanations why. We checked BSGM’s PR releases and did not find any clear guidance on when the product launch is now scheduled. Also, there was no clinical data revealed. Why is the company secretive about it? In this report we discuss several red flags we discovered which may justify the lack of commercial progress with the PURE EP.

BioSig’s Recent Accredited Investors Appear Ready To Sell

BSGM’s Prospectus filed on 4/30/19 says:

On March 12, 2019, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”). Pursuant to the Purchase Agreement, we sold to the Investors an aggregate of 2,155,127 shares (the “Shares”) of our common stock in exchange for aggregate consideration of $8,620,506 (the “Private Placement”). The Shares were sold to the Investors at a price of $4.00 per share. In addition, on or prior the date that is 45 calendar days after the closing date of the Private Placement, we are required to use commercially reasonable efforts to prepare and file a registration statement on Form S-3 or Form S-1 with the Securities and Exchange Commission covering the resale of the Shares. We are additionally required to use our commercially reasonable efforts to cause such registration statement to be declared effective as soon as practicable thereafter.

What the above means is the accredited investors who bought BSGM stock in March for $4 per share in a private placement, required the company to register the shares for them for sale 45 days later. Only 45 days is a fast turnaround, and suggests they have no desire to hold BSGM long term. BSGM filed an EFFECT for those shares on 5/6/19.

As stated above in the Roth report, BSGM had planned last year to have a booth at the Heart Rhythm Society conference on May 9th, which coincided with the registering of the shares for sale. These investors shares were registered sale right around the time of BSGM’s participation at this conference. BSGM has also been engaging in paid stock promotions to boost the share price. This behavior is very similar to how Soliton, after their IPO in February, issued multiple PRs per week over a couple months, and the founder was on a Yahoo finance show only a week before their 2.2M share lock-up expiry.

BioSig Is Doing A Paid Stock Promotion Campaign

BSGM is currently running an email promotion campaign. As shown below, at the top of the promotion webpage, it mentions the CEO’s recent insider buying.

Source: Biotech Stock Watchlist

At the bottom in the disclaimer, it shows that this company has been paid $118K so far to promote BSGM:

Source: Biotech Stock Watchlist

Here is a PR from BSGM on 2/21/19 titled “The Future Is Now; Med Tech That’s Changing Lives,” that is also a paid promotion. On the bottom of the PR it states:

Source: BioSig News

On 11/13/18, BSGM issued a PR from financialnewsmedia.com. This is another paid promotion as it says at the bottom:

For current services performed FNM has been compensated forty six hundred dollars for news coverage of the current press releases issued by BioSig Technologies, Inc. by a non affiliated third party.

With the stock price being inflated from stock promotions, it usually means it can deflate easily.

The CEO has made some insider buying recently, 15k shares at $7.775 on 5/20/19, 9,400 at $7.30 on 5/21/19, 2,000 at $6.85 on 5/22/19 and 4,000 at $6.89 on 5/23, totaling $226,850. We believe this is a token amount, in order to support the current stock price. It doesn’t make logical sense for him to buy at these inflated prices when he could have bought three months ago at under $5.

This isn’t a significant amount of money for Londoner. As shown below, his 2018 compensation from BioSig was $854,167 in cash and $1.38M in stock awards.

Source: 2018 10-K

BioSig Insiders Have Skeletons In The Closet

BSGM’s co-founder and former Chief Technology Officer, Budimir Drakulic, was convicted in court of scamming his girlfriend out of around $1M – and still hasn’t paid it back as far as we known.

This bizarre story was told in a Daily Mail article from 2014. Drakulic’s girlfriend, Katherine Underwood, would wear disguises and go undercover following Drakulic in order to try and recoup her money. From the article:

Underwood’s judgment against Drakulic was renewed in 2012 — it is $1,602,289, with more interest accumulating every day. Drakulic never paid her anything, even though he’s been earning money.

Underwood did an interview about Drakulic’s scam on 20/20. The interviewer quoted:

The judge called Budimir’s conduct willfull, malicious, and despicable.

Drakulic was also named in a lawsuit by Signalife shareholders, where he currently works, on 2/24/09.

Drakulic is still involved with BGSM. BSGM got uplisted to the Nasdaq on 9/21/18. Below are pictures of the company ringing the Nasdaq bell. Drakulic is the one with the sunglasses.

Source: Linkedin

Drakulic also was there at BSGM’s booth at the HRS conference earlier this month. Again, the sunglasses!

Source: LinkedIn

Drakulic isn’t the only BSGM insider with skeletons in the closet. Kenneth Londoner, BSGM’s CEO and also co-founder, was a fund manager mentioned in a Forbes article from 2005 titled “We Wuz Robbed!” From the article:

Despite a December 2000 article on TheStreet.com, in which Londoner admitted to having a “challenging” year–it turned out later that his investments were down 70%–CIBC Oppenheimer promoted a new Red Coat fund in its Los Angeles office in early 2001, in part because Londoner promised to double its sales commission take from Red Coat.“

Gomer was relatively lucky. He and nine other investors sued CIBC Oppenheimer and recovered $3.6 million, or 70% of their losses. As for Londoner, he is now a director of finance at a Charleston, S.C. port security company.”

BioSig Red flags Investors Should Consider

There are several indications from our research suggesting that the PURE EP is something between an early stage research concept and a product flop:

  • We suspect that initial clinical cases using PURE EP technology were below the company’s and investigator’s expectations. No human data was presented at the 40th Heart Rhythm Society Meeting and BioSig cancelled its previously planned formal product launch at this meeting.
  • BioSig’s investor presentation is based on results from bench experiments and academic animal research; there’s no evidence for clinical utility 10 years after the PURE EP was invented!
  • Our research reveals that the PURE EP may be totally irrelevant to clinical needs of EP doctors for effective treatment of Atrial Fibrillation, a condition that accounts for more than 90% of all heart ablations.

We Suspect Initial Clinical Cases Of The PURE EP Technology Showed Inadequate Results

As we showed earlier in this report, no product launch happened in 2018, despite FDA approval in August 2018. As we quoted earlier, Roth Capital Partners stated:

Over the next ~three months, PURE EP systems will be used on patients by multiple KOL electrophysiologists at external evaluation sites for the purpose of generating supportive clinical data.

There were three PRs of the PURE-EP clinical cases earlier this year, which are what Roth was referring to. One PR was on 2/20/19 titled:

BioSig Announces Successful First-In-Human Use of PURE EP System

The next clinical case PR was on 4/16/19 titled:

BioSig Completes Successful Patient Cases at Greenville Memorial Hospital

The third clinical case PR was on 5/6/19 titled:

BioSig Technologies Completes Patient Cases at Indiana University

But BSGM didn’t provide any clinical data with these three cases. It’s only the PRs with a general quote from the investigating doctor who carried out the studies designed by BioSig.

The Company Said They Would Present Clinical Data At The HRS Conference – But They Did Not

It’s a red flag for investors when a company’s management says they’ll do something, but don’t stay true to their word.

From BSGM’s February 2019 Letter to Shareholders:

This year, for the first time ever, we will actively participate in the largest event in our industry – Heart Rhythm Scientific Sessions. We will be presenting the results from the First-in-Human studies and the early feedback from the use of our PURE EP System to a larger community of physicians, our potential future customers.

It seemed that the company was getting its first clinical validation data just in time for making an “official launch” and to present clinical results at the HRS meeting. Did it happen? No. There was no presentation from BSGM about their human studies, other than perhaps talking to people who walked up to their booth.

The HRS conference was held during May 8-May 11 in San Francisco. There were many sessions devoted to cardiac ablations. We checked all of the presentations given at these sessions and did not find any presentation related to BioSig’s technology. Dr. Andrea Natale, who is the Chairman of the scientific advisory board of BioSig and was the first to test its product back in February, presented an overview on mapping for AF, but his presentation did not even mention the PURE EP technology. He also did not disclose his affiliation with BioSig.

As we quoted earlier, the Roth report stated:

…the PURE EP system’s official launch in May 2019 at the Heart Rhythm Society Scientific Sessions in San Francisco, California.

Here is the PR from BioSig regarding the HRS conference. There’s no mention of any clinical program presentation or product launch, just that they will have a booth.

Why, despite a recent promise to “present” clinical data on its technology, nothing has been presented by the investigator at the Heart Rhythm Society meeting in May 2019? Also, why didn’t it start the official product launch? BSGM provides no explanations.

The only explanation we can think of is that the initial clinical studies were below the company’s and investigator’s expectations. Results were likely inconclusive or the technology just failed to deliver. No bad news won’t hurt the stock price if the company does an equity raise.

How the PURE EP Works

The PURE EP is described on BSGM’s website as:

The PURE EP System is designed to record and display high fidelity cardiac signals with intuitive visualization tools, which may allow electrophysiologists to better characterize tissue during ablation procedures. The proprietary hardware and software were designed to eliminate noise, artifact and baseline wander in real-time to present clearer signals during EP studies and catheter ablation.

BioSig’s Value Proposition Is Based On Bench Studies And Early Animal Research: Still No Clinical Data

On Dec 6, 2018, Roth Capital issued a detailed report on BSGM’s technology and its valuation. Because this report has been proudly featured in the BSGM’s February 2019 Letter to Shareholders, we believe this report has been validated for its technical accuracy by BSGM. We will, therefore, use this report to summarize the accumulated evidence for the PURE EP value proposition.

The report goes into detail of two potential markets for the PURE EP technology: atrial fibrillation (“AF”) and ventricular tachycardia (“VT”). AF accounts for over 90% of heart ablations and is a much larger market than VT.

From the Roth report:

While the EP lab has witnessed numerous technological advancements with respect to 3D cardiac mapping and advanced ablation catheter tips, we believe that electrical signal processing has stagnated over the past two decades.

From the above quote, the Roth report states that an unmet need in cardiac ablations is the poor electrical signal processing of today’s equipment that distorts the signal and makes it “unrecoverable.” Our investigation failed to find any published evidence for this statement, especially when it comes to AF treatment.

We learn that back in 2013, the bench study has been done to demonstrate “less baseline wander, noise and artifacts.” From the report on page 15:

In 2013, PURE EP proof of concept testing commenced at UCLA Medical Center’s EP Lab using a unit designed with separate analog and digital boards.

The signal displayed by the PURE EP demonstrated less baseline wander, noise and artifacts than the traditional system. After additional testing, the prototype design was finalized in late 2013.

In addition to bench studies at UCLA, starting from 2014 Mayo researchers performed a set of animal studies using the BioSig technology. From the report on page 16:

In late 2014, BioSig established a strategic alliance with the Mayo Clinic, and Samuel Asirvatham, MD (Chair for Innovation, Department of Cardiovascular Medicine) and K.L. Venkatachalam, MD of the Mayo joined the company’s Scientific Advisory Board.

Exhibits 18 through 21 display electrograms from these animal studies comparing the PURE EP system simultaneously with traditional signal processing systems.

Four Exhibits are presented from animal studies in Roth’s report. Unless BSGM investors are technology geeks who mastered EP signal processing nuances, these “evidences” have little comprehensible meaning and their explanations are very brief. Here are a couple of examples:

Source: Roth Report

Regarding the above Exhibit 19 it states:

In order to improve the visibility and clarity of low-amplitude intracardiac signals, traditional systems use high gain settings to increase signal amplitude. However, this causes high amplitude signals to saturate the amplifiers and create saturation artifact, in which the saturated signal is truncated and information is lost

Source: Roth Report

Regarding the above Exhibit 21 it states:

The PURE EP is able to preserve subtle cardiac signals like the Purkinje potentials arising from the papillary muscle

It is unusual for an investor report to present product validation for a $100M+ market cap company with terms such as “low amplitude,” “saturate amplifier,” “truncated signal” and “Purkinje potentials.” We are surprised that all this techno-speak is not replaced by a couple of product testimonies from renowned EP physicians. Or perhaps, a real life analysis showing how exactly PURE EP adds value to a clinical case. After all, this device was invented 10 years ago.

Our Research Found That The PURE EP Is Unnecessary For The Treatment Of Atrial Fibrillation

BioSIG and its sell side analysts bring up Atrial Fibrillation (“AF”) as a large market, and the revolutionary signal processing of the PURE EP technology will help AF ablations treatment. This is because AF accounts for over 90% of all heart ablations. When we spoke to BSGM’s Investor Relations rep, he mentioned over and over again how PURE EP helps treat AF.

While we agree that AF is indeed a large clinical market and ablations treatment of AF has room for improvement, our investigation indicates that signal processing is not an area needing improvement.

We asked an EP physician about signal processing drawbacks of current commercial systems. He said that in relation to his ablation procedures, the signal is clear and does not need to be improved.

We also talked to an industry veteran who gave us his opinion about the value of the PURE EP improved mapping technology for ablations of arrhythmias. He told us:

Structured arrhythmias have little or no beat to beat variability in the way the errant electrical signals propagate through the heart muscle. These arrhythmias are almost always based in the atrium like AV node reentrant tachycardia, atrial flutter and supraventricular tachycardia. Structured arrhythmias would be the greatest beneficiary of a better mapping system using PURE EP technology, because the site for cardiac ablation is determined by understanding the nature of the errant pathways in the heart which is done by cardiac mapping. Ventricular arrhythmias are a mix of structured and unstructured patterns because they usually arise from ischemia from a prior myocardial infarct. Here more accurate mapping may be of some benefit because the signals are more variable and complex. The problem, however, is even if one knows more about the nature of the arrhythmia, there are no good cardiac ablation tools to successfully ablate the thick ventricular heart muscle. In additional, ventricular arrhythmias unlike the atrial ones have a high potential of being fatal and, therefore, defibrillators are the standard of care to treat these arrhythmias. Typically ablation is done only if the patient’s ventricular arrhythmia results in excessive defibrillator shocks which is not very common.

Unstructured arrhythmias, on the other hand, lack any definable pattern from beat to beat. The most common unstructured arrhythmia is atrial fibrillation (AF). AF is by far the most common and most difficult arrhythmia to treat. A majority of cardiac ablations done today are for treatment of AF. Unstructured arrhythmias, including AF, would benefit little, if at all, from an improved mapping system, because the sites for these ablations are based on anatomical locations such as pulmonary veins, left atrial roof, or left atrial posterior wall. There is little an improved mapping system can do to here. Any improvement here will come with better ablation tools and treatment strategies. In hearing discussions each year at the Heart Rhythm Society meeting, there is little discussion of mapping limitations as a major issue. So it is not clear to me what clinical problem is solved by this technology in AF.

This expert, therefore, questioned the PURE EP value proposition for ablation treatment of AF. For Ventricular Arrhythmias he confirmed it could have some value, but these arrhythmias are primarily treated by defibrillators, not heart ablations. He sees a value of PURE EP technology for identification and treatment of structured arrhythmias, like AV node reentrant tachycardia, atrial flutter, and supraventricular tachycardia, but the number of these conditions are very limited when compared to AF.

We were surprised by his assessment, because all of the promotional materials of BSGM and its sell-side analysts are ripe with references to a “huge and poorly served” AF market. We, therefore, looked at BSGM’s published literature, as presented on their website, to better understand the specific link between PURE EP technology and Atrial Fibrillation. We carefully read all of the publications and to our surprise we found no mentioning of a direct relation of PURE EP performance and AF.

For example, a 2018 review paper: Innovations in Clinical Cardiac Electrophysiology: Challenges and Upcoming Solutions in 2018 and Beyond, published by Dr. Samuel J. Asirvatham, who is intimately familiar with the PURE EP technology, only briefly mentions BioSig’s technology in the section of “Novel Targets for Catheter Ablation” in relation to Purkinje fibers, which, as we learned from the article, are implicated in a variety of ventricular arrhythmias, not atrial fibrillation. Nothing in this publication establishes even a speculative connection between ablation of AF and PURE EP technology.

Same goes with the other BioSig published literature we reviewed:

  • The study at the top of the page titled: Unipolar Intracardiac Signal Morphology as a Parameter for Catheter Contact Evaluation says nothing about AF.
  • The Use of Novel Electrogram Filtering Algorithm poster refers only to ventricles and VF, and does not mention AF.
  • The Use of Terminal Unipolar Electrogram Current poster refers to contact force with myocardium, again nothing about AF.
  • The 2017 paper Initial Experience with the BioSig PURE EP Signal Recording System, does not mention AF.
  • No mentioning of AF with the 2017 poster Assessment of Catheter position…
  • We did not find any reference to AF in the two older 2016 posters.

What about independent published reviews on the improvement of ablation technology for AF? Do they talk about PURE EP or about a problem of an “antiquated” standard signal processing technology? We looked at the recent expert consensus statement paper on catheter and surgical ablation for AF and searched this comprehensive 299-page document for specific terms, related to the assumed value of PURE EP technology. The terms we searched for were: “PURE EP,” “BIOSIG,” “signal processing,” “signal noise,” “signal artifact,” “baseline wander,” “recorder limitation,” “fidelity.” We found zero hits. This is an extremely extensive scientific paper on Atrial Fibrillation. We encourage readers to search for terms that BSGM uses in relation to AF and try to find it in this paper.

To better understand a typical ablation procedure for AF, we watched a short YouTube video explained by Dr. Anand (who is unrelated to BioSig). Below is a shot from this video, illustrating what the EP physician sees on the screen of a commercial system as an ablation of Pulmonary Veins, the major step in AF treatment, is happening.

Source: YouTube Video

There are multiple images on the large monitor and in the next shot we will focus on the EP signal window. At time 3:33 of this video, Dr. Anand explains what is happening to the EP signal as ablation of atrial fibrillation proceeds. He says:

If you look at the patient’s electrical signals, you see the small electrical deflections, which are actually a single beat of atrial fibrillation. And as we are completing this patient’s atrial fibrillation ablation, we notice something very interesting. The atrial fibrillation starts to slow itself down, the space in between beat to beat starts to increase, it becomes more chaotic and then eventually the atrial fibrillation can no longer sustain itself and the patient terminates into a nice, normal heart beat.

Here is another shot from this video, illustrating Dr. Anand’s quote. It seems very easy to see with a conventional EP system how the EP signal progresses from a fibrillation pattern before ablation (left side), to a normal heartbeat after ablation (right side).

Source: Youtube video

The PURE EP Is Just A Box, No “Razor/Razor Blade” Sales Model

Most profitable medical devices have a “razor/razor blade” model where once the main device is sold, the customer continues buying consumable parts. This creates a consistently growing revenue stream for the company. The “razor blade” usually has better gross margins than the “razor.” BioSig doesn’t have that model. All they are selling is the PURE EP, which is a box. The box needs to be constantly marketed and sold to new customers, and the gross margin is low. That isn’t a good business. There are also not a large amount of EP labs. Our research found varying estimates of the number of labs globally, so we took an average which came to about 6,000 labs worldwide (3,300 in the US, 2,700 ROW). Even if the PURE EP is a legit, even revolutionary product, once the low hanging fruit is gone, we believe it will be increasingly difficult to make more sales.

BSGM’s investor relations rep said that there would be a recurring revenue stream from annual software updates and maintenance. But he didn’t know how much revenue that would be. A software update shouldn’t be a significant change in the way a device is run. But it is a significant burden for the hospital that needs to validate that new software and integrate it with the main EP systems. Why would hospital pay for it? Whereas a continual replacement of physical “razors” for a medical device like a surgical robot is necessary and would come out to much more significant revenue growth.

Here is an example of how little the EP system business is worth. In 2013, Boston Scientific (BSX) acquired the electrophysiology unit of CR Bard for $275M in cash. Bard EP had $111M in sales the previous year so the purchase price equated to an only 2.5x multiple of revenue.

Conclusion

We believe everything is aligned for a sharp decline in BSGM shares. Shareholders who purchased 2.15M shares at $4 each two months ago can now sell at any time. The company is almost out of cash, and we believe will need to do an equity raise soon for its product launch. It has just finished stock promotion campaigns, which have contributed to the stock’s rally of almost 100% the past few months. We believe we have discovered that the PURE EP device is unnecessary for Atrial Fibrillation (“AF”) treatment, despite the company’s emphasis that it is an improvement.

10 years after the device’s invention, there has been no clinical data. A formal product launch and presentation of initial clinical data was cancelled at the HRS conference, which makes us suspicious of the data and the management. We believe that within the next month or two, as the recent shareholders sell their shares and the company raises working capital for its product launch, the share price will quickly fall 30-50% from today’s price of around $7.

Disclosure: I am/we are short BSGM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Additional disclosure: whitediamondresearch.com/…

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