BrainsWay Ltd. — 2020 Form 20-F
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone Q4 filing; quarterly figures below are unaudited. Amounts are U.S. dollars unless stated otherwise, in millions except per-share data.
Business context and reporting period
BrainsWay is an Israeli commercial-stage medical-device company developing and selling Deep Transcranial Magnetic Stimulation (Deep TMS) systems. Its FDA-authorized uses include major depressive disorder (MDD), obsessive-compulsive disorder (OCD), and short-term smoking cessation. The United States generated about 88% of 2020 revenue. Revenue comes from system leases and sales.
Key financial metrics
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $22.057m | $23.101m |
| Gross profit / gross margin | $16.999m / 77.1% | $17.972m / 77.8% |
| Operating expenses | $21.828m | $26.448m |
| Operating loss | $(4.829)m | $(8.476)m |
| Net loss | $(5.385)m | $(10.328)m |
| Basic and diluted loss per share | $(0.24) | $(0.50) |
| Cash and short-term deposits at year-end | $17.182m | $21.895m |
| Total assets / total liabilities | $34.011m / $14.377m | $38.736m / $14.516m |
| Total equity | $19.634m | $24.220m |
| Accumulated deficit | $(77.294)m | $(71.909)m |
Cash flow: Operating activities used $1.436m in 2020, compared with $7.244m in 2019. Investing activities used $2.465m; financing activities used $1.030m. Cash and cash equivalents declined by $4.713m during 2020. The company reported no bank loan balance at year-end 2020; the prior bank loan was repaid in 2019. Year-end liabilities included $6.231m in IIA research-grant liabilities and $0.672m in lease liabilities.
Q4 2020: Revenue was $7.066m, versus $6.292m in Q4 2019. Gross profit was $5.500m, operating loss was $0.407m, and net loss was $0.406m, compared with a $1.991m operating loss and $2.316m net loss in Q4 2019.
Material changes versus prior comparable period
- Annual revenue fell 4.5%, which management attributed mainly to COVID-19-related disruption. Lease revenue rose to $13.628m from $13.218m, while sales revenue declined to $8.429m from $9.883m.
- Gross profit declined by $0.973m; gross margin eased by about 0.7 percentage points. Operating expenses fell $4.620m, including lower R&D, selling and marketing, and general and administrative expenses. Management cited efficiency measures and pandemic-related cost restraint.
- Net loss narrowed by $4.943m. Net finance expense fell to $0.319m from $1.430m, mainly reflecting exchange-rate movements and the prior-year fair-value remeasurement of IIA grant liabilities.
- Operating cash use improved by $5.808m, while cash and short-term deposits decreased by $4.713m. The comparison is affected by the 2019 Nasdaq offering, which provided $26.333m net proceeds.
- The installed base reached approximately 629 systems at year-end, including 359 leased and 270 sold systems; it increased by 36 systems in Q4. The company had shipped 216 OCD coils as add-ons.
Outlook, commentary, risks and unusual items
- Management expected continued operating losses in the near term as it expands commercialization and invests in R&D and clinical programs. It said year-end cash resources and anticipated product revenue were expected to fund operations and capital requirements for at least 24 months, while also cautioning that additional funding might be needed if liquidity proved insufficient.
- On March 1, 2021, after year-end, the company closed an underwritten ADS offering with gross proceeds of approximately $45.2m before fees and expenses. This materially increased available capital after the reporting date.
- COVID-19 reduced in-clinic visits and treatments, constrained in-person sales activity, and affected lease revenue and smoking-cessation commercialization. Management reported no significant supply-chain disruption to date and sufficient components to meet commercial demand, but warned of potential effects on sales, collections, suppliers, and clinical-trial timelines.
- Coverage and reimbursement remain a key commercial risk: MDD had broad U.S. private-insurer coverage, while OCD and smoking cessation were not generally reimbursed at year-end. The company was pursuing broader coverage, including in Japan.
- BrainsWay received FDA clearance for smoking cessation in August 2020 and was conducting a controlled market release. Planned development includes multiple-sclerosis fatigue, opioid and other addiction indications, and a multichannel stimulator; timing and success depend on trial results, regulatory authorization, reimbursement, and market adoption.
- Other significant risks include operating losses and capital needs, competition, reliance on suppliers and international distributors, regulatory compliance, clinical-trial uncertainty, intellectual-property licensing and patent expiry, Israeli geopolitical and currency exposure, and the potential effects of COVID-19.
- The company received a $0.638m U.S. Paycheck Protection Program loan in 2020 and obtained forgiveness of the full amount. It also reported up to $12.548m of future IIA royalties payable, subject to eligible product sales and grant terms. No material legal proceedings were reported.
- The auditor issued an unqualified opinion on the IFRS financial statements. Management concluded disclosure controls were effective at a reasonable-assurance level; the filing did not include management’s ICFR assessment or an auditor attestation because of the applicable transition period.
Important facts investors should verify
- Whether post-pandemic commercial activity can restore revenue growth and sustain lease utilization, particularly given the 2020 revenue decline.
- Actual cash runway after the March 2021 offering, ongoing cash burn, and whether management’s at-least-24-month liquidity expectation remains supportable.
- Progress toward reimbursement for OCD and smoking cessation, and the resulting effect on adoption and recurring revenue.
- Whether clinical and regulatory plans advance on schedule, and whether new indications and device enhancements can be commercialized economically.
- Collections and credit quality: net trade receivables were $5.582m, including $1.553m more than 90 days past due; the company reported that $1.517m of the past-due balance was collected after year-end.
- The terms and future payment burden of IIA royalties, license obligations, and customer lease commitments; future minimum operating-lease receipts were $25.591m at year-end, subject to contract performance.
- Share dilution and compensation changes: the post-period ADS offering raised gross proceeds of $45.2m, and the company approved an employee and director option exchange and additional CEO restricted stock units.