Total Brain Limited: Janssen License Further Validates TTB’s Science

Business model
Total Brain operates a subscription-as-a-service (SaaS) model for its mental monitoring and support platform. The science behind the platform has been developed over almost two decades with input from the leading academic institutions in the field. This has generated a proprietary neuroscientific database of scale which underpins the scientific validation that differentiates Total Brain from other brain training and wellness applications. The app, promoted by channel partners, assesses the four core brain functions (emotion, feeling, cognition, self-control), pre-screens seven common mental health conditions, and delivers personalised self-care exercises.

Go-to-market plan playing out as announced
In late November, Total Brain announced it would refocus on expanding its presence in the clinical market, going direct to addiction and behavioural health clinics, licensing data to pharma companies and seeking out opportunities with large clinical platform providers. This go-to-market plan is playing out as announced with the company licensing iSPOT-D to Janssen R&D to use to support clinical studies and precision drug development to treat depression. iSPOT-D is the largest study of its kind in depression and has been published in 55 peer-reviewed publications. The study identified objective indicators of treatment response in more than 1,700 depressed individuals using genetics, cognition, brain structure, function imaging, as well as a range of other clinical measures. Major depressive disorder is one of the most common psychiatric disorders in the US, with more than 15m people impacted and costing US$100b annually, of which less than half achieve symptom remission with the first medication tried. Janssen is third pharma group to license iSPOT-D. The contract supports Total Brain’s cash runway and once received, underpins 65% of our H2FY22 revenue forecast of A$4.27m. Last month (ASX announcement November 25), the company highlighted it had sufficient cash until 30 June 2022 with $2.6m cash as at 30 September, $2.3m from an R&D receivable, anticipated data licensing deals, and the proceeds from existing and new client contracts.

Base-case valuation is $0.77/share
Our base-case DCF valuation is $0.77/share based on a WACC of 14.7% (beta 2.0, terminal growth rate of 2.2%). Near-term share price catalysts include additional contracts in the population health and clinical care support segments as well as an expansion of the IBM Health & Wellness 360 platform to other population health opportunities.