PROTXX is raising capital through a convertible note. The startup has a valuation cap of $12 million and a discount rate of 20%. This is a reasonable valuation for an experimental medical technology company, and the discount rate provides a better deal for investors. It is important to note, though, that the tech is still at an early stage, and the revenue multiple is relatively high — just over 60x. On its own, the price would be reasonable. but for PROTXX, the numbers and product progress aren’t quite where we like to see them given the valuation. However, the company’s price score is still quite strong.

PROTXX plans to address the global neurological biomarkers market, which was estimated at $5.565 billion in 2018 and is expected to rise at a CAGR of 14.5% through 2026. As PROTXX’s complete product will be capable of supplanting many of the complex diagnostic and monitoring equipment and software used in the industry, it could address a considerable size of that market. While the current market is not all that large, the growth rate more than makes up for it. The market score for PROTXX is just slightly above average in reflection of this balance.

PROTXX has a strong team suited for leading the business, but there are some caveats. CEO and founder John Ralston holds a PhD in Electrical Engineering from Cornell University and a Master of Science in Management of Technology from MIT. For the past two decades, he has been working in upper-level leadership positions for technology and engineering companies, starting in marketing VP roles in the late 90s and early 00s and moving into CEO roles since. Many of the companies he has led have been acquired.

CFO James Walker has an MBA from Santa Clara University and has spent 25 years working in Silicon Valley and beyond. He spent sixteen years in the CFO role with venture-backed tech companies, and, most relevant to PROTXX, six years as CEO of a medical imaging company. He led Octagon Research Solutions, a software company assisting pharmaceuticals that he founded with his twin brother in 1999, which was later acquired by Accenture. He’s been with PROTXX since late 2019. He also spent a number of years working with a Japanese company, during which he could have formed connections that have enabled PROTXX to start pilot programs in Japan.

VP of Operations Josh Roper has been with PROTXX since late 2018 and holds an MBA from UC Berkeley. Roper has been working in product management for a couple of decades now. For a full decade, he worked with Silver Spring Networks, eventually rising to a Senior VP role. Like his colleagues, he has the relevant experience to be well-suited to manage PROTXX.

Finally, Andreas Hauenstein is the Director of Platform Engineering. Hauenstein has a Ph.D. in Computer Science from the University of Hamburg and has worked with tech companies for decades in the US and Switzerland. He has experience in scientific leadership roles, including five years as Chief Scientist for a company focused on back health. He does not appear as completely committed to PROTXX as the rest of the leadership team. Hauenstein describes himself as self-employed and doesn’t bother to include his engagement with PROTXX on his public-facing media. Given the importance of his role in product development, that is some cause for concern.

All in all, this is a strong leadership team full of academic credentials and relevant experience. Thus, PROTXX’s team score is strong.

PROTXX has plenty of great news for investors in the differentiation column. PROTXX’s software has twenty protective patents, making the product highly defensible. Competitors in the space are offering considerably more complex products that are frequently not integrated with diagnostics and don’t allow for remote monitoring, so PROTXX’s product is quite differentiated from a quality standpoint as well.

However, stringent regulatory requirements will represent hurdles PROTXX needs to overcome. Its product must be demonstrably accurate and reliable, as patients’ health is on the line. At the very least, there are no companies offering similarly differentiated products at the moment, so the space isn’t highly competitive. Due to these factors, PROTXX’s differentiators score is its highest across all five metrics.

The PROTXX team has worked hard to accumulate investments and form testing partnerships. The company has gotten clinical validation studies published and launched its initial commercial platform-as-a-service product, the wellness device. The company is still pre-profit and holds an enormous quantity of short-term debt — just over $2 million. There is also some concern about a burn rate in excess of $50,000 a month and an ongoing product development timeline. That said, revenue has grown significantly, from $43,359 in 2019 to $195,319 in 2020 — a remarkable increase in the pandemic year. Taken all together, the performance score for PROTXX is strong.

Investment in an innovative technology is always more of a risk than average for a startup, and PROTXX is no exception. Product development is the most stringent challenge ahead, as the company has already incurred significant costs and is not yet close to providing a verified working device. Given the long timeline the company will need in order to start providing balance and concussion analysis solutions — and the longer timeline for monitoring M.S., strokes, and Parkinson’s disease — there is serious concern that delayed commercialization could be a potentially fatal challenge for the startup.

Additionally, while the team is strong overall, it doesn’t appear universally committed, which is a concern for the product development phase and the company overall. Finally, investors should note that while the product is strongly differentiated and defensible, PROTXX’s target market isn’t huge, so there is little room for error.

With a high valuation and mounting liabilities, investors’ most pressing concern is likely whether the company can actualize its technology before financial woes come to a head. Collecting patient data through analysis of vibrations in the body — while unquestionably efficient and innovative — is an unproven technology and almost sounds too good to be true. Potential investors should weigh the potential of a breakthrough technology against a healthy dose of skepticism as well as the time risk of a lengthy product development and financial concerns.

When it comes to long-term care of chronic conditions, anything that makes patients’ diagnosis and consequent treatment easier is really valuable. PROTXX has the potential to achieve that to a remarkable degree. A one-minute, easy to use, and integrated testing firmware could be a game-changer in a relatively-small but growing market.

While PROTXX has had to take on significant liability and will incur much more before a full product release, its revenue is already growing significantly. As trials move into partnerships and engagements with biotech companies, investors have the chance to get in on a real innovation at an early stage. Given how its revenue has grown in the past year, the company could reasonably start seeing revenue in the millions in the next couple of years and start turning a profit by 2022. The only real concern is actually getting to that point.

PROTXX is creating a wearable medical diagnostic device that uses body vibrations to track and analyze the status of various neurological maladies. Conditions the device tracks include concussions, strokes, and neurodegenerative diseases like M.S. and Parkinson’s.

Despite a high valuation and concerning burn rate, the company’s revenue is growing, and the product is highly defensible thanks to an array of patents. Still, there is a long way to go before PROTXX can provide a commercial product, and its promises of what the device is capable of have not been fully proven. That said, if it works, this will be a game-changer in medicine. Therefore, PROTXX is a Neutral Deal.

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Analysis written by Benjamin Potts.