Computer chips are coming to a brain near you — and sooner than you think.
At least that’s according to a report by investment bank Morgan Stanley, which estimates the brain-computer interface (BCI) market could be the next opportunity for investors, with a total addressable market of $400 billion.
“This is, to us, the next big opportunity in med tech — and it’s rare,” Morgan Stanley analyst Kallum Titchmarsh told Yahoo Finance. “BCIs have been in development for 100 years essentially. When you are five years away from full commercial launches, I think it’s time to get excited and get ahead of the curve.”
Titchmarsh covers medical technology stocks, such as Inari Medical (NARI), Penumbra (PEN), Sight Sciences (SGHT), Irhythm Technologies (IRTC), Nevro (NVRO), Inspire Medical Systems (INSP), and Embecta (EMBC), at Morgan Stanley. The report, published last month, estimates the commercial launch of BCIs in about five years.
“On our numbers, we expect just under $1.5 billion of revenue to be generated from BCI implant procedures out to 2035 (hitting north of a $500 million annual run rate in 2036), and hitting the $1 billion annual run rate by 2041,” the report said. “To us, these numbers seem very plausible, particularly when compared to existing med tech end markets…”
Analysts told Yahoo Finance that several neuro-technology companies are vying to be the Apple (AAPL) of their industry.
Titchmarsh estimates the penetration will be limited in the first 20 years of launch — likely sitting at less than 3% by 2045. “But still, this is such a large target market, you don’t really need too much penetration to be generating quite significant revenues,” he said.
Morgan Stanley broke the market into two categories: enabling BCIs and preventative BCIs. Enabling BCIs would help patients who have already lost their ability to move or speak as a result of a severe neurological disease or traumatic injury. Preventative BCIs would stop conditions such as depression and epilepsy.
Initial applications will help those with motor neuron disease and amyotrophic lateral sclerosis (40,000 and 30,000 people), spinal cord injury (300,000), stroke (900,000), multiple sclerosis (1 million), cerebral palsy (500,000), limb amputation (2.5 million), epilepsy (3 million), and depression (21 million, 2.5 million with severe treatment-resistant).
“In the future, there will be no phones, just Neuralinks,” Elon Musk posted on X, formerly Twitter, in June. Musk co-founded BCI company Neuralink in 2016, which is now valued at a reported $8 billion.
There are several others making big strides that are backed by the richest people in the world.
Synchron, a company that implants its chip through the blood vessels with no drilling of the skull, has its Series C funding round backed by Microsoft (MSFT) co-founder Bill Gates and Amazon (AMZN) founder Jeff Bezos. The company has an estimated valuation of about $400 million.
Palantir (PLTR) co-founder and venture capitalist Peter Thiel has poured at least $10 million into Blackrock Neurotech, which sports a valuation of a reported $350 million. German billionaire Christian Angermayer is on the board of Blackrock Neurotech and is also an investor.
Titchmarsh is focusing on four players he says currently lead the pack: Neuralink, Synchron, Precision Neuroscience, and Paradromics.
“I think being first is super important,” Titchmarsh said, adding that whichever company is first to market will get the foothold on reimbursement. “It’s rare to see four or five players in a med tech space compete. It is more likely we’ll see probably three.”
He expects that within the first few years of a commercial launch, the market will be narrowed down to three key players. Beyond that the likelihood of acquisitions by public companies is high.
Precision Neuroscience CEO Michael Mager (left) shows off his company’s brain implant technology at the Yahoo Finance Invest conference.
“Three large companies have neuromodulation businesses: Medtronic, Abbott, and Boston Scientific,” Titchmarsh said. “But this seems very unique of a market, and it may actually be better in the hands of these companies as kind of pure plays for now so that it doesn’t get lost in the broader development pipeline. Would I be surprised in 10 years if one of these large med tech companies had a BCI? Not at all.”
Last month, Precision Neuroscience closed a $93 million funding round, valuing the startup at around $500 million.
“We view brain-computer interfaces as a generationally important life sciences innovation and one that really is … going to have applicability today in paralysis, tomorrow in a number of different areas,” Michael Mager, co-founder and CEO of Precision Neuroscience, told me at Yahoo Finance’s Invest conference (video above). “We tried to build this company from the very beginning to go the distance.”
Precision has temporarily implanted its device, called the Layer 7 Cortical Interface, into more than two dozen patients during clinical trials. The company uses a minimally invasive approach that doesn’t penetrate the brain like its competitors.
Precision Neuroscience’s co-founder and chief science officer, Benjamin Rapoport (formerly of Neuralink), said the technology goes beyond med tech.
“There’s an aspect of it that is novel manufacturing techniques,” Rapoport, a practicing neurosurgeon, told Yahoo Finance. “There’s an aspect of it that is supply chain related. There’s a significant aspect of it that’s artificial intelligence and machine learning-driven. We’re pushing so many limits on all these fronts that there’s not really any other, to date, field or technology in medicine that has required innovation on so many levels at the same time.”
Precision is awaiting FDA approval to implant its chip in patients for up to 30 days. Rapoport expects the cost of a BCI to be six figures.
“For the economic impact on a young person, who has probably 50 years of life and maybe 35 years of work ahead of them, what you’re giving them and their family is a level of independence and economic self-sufficiency,” Rapoport said. “And that’s worth a year or two salary — I think most people would agree.”
