ClearPoint Neuro (CLPT): Sample Blue Sky Scenario

Let's have some fun

Disclaimer: Nothing in this article (or substack) is considered investment advice and is solely the opinion of the author.

Time to Imagine

With the start of a new month, I thought it would be fun to discuss CLPT, a company I've tweeted about frequently. Many of my followers know I'm bullish on CLPT for the long term, viewing it as a 'compounder' currently disguised as a 'shitco' (ie. not in the numbers quite yet). This distinguishes it from pure-play biotech companies, which often face binary outcomes solely dependent on asset-specific data. I regularly discuss the company and its partners with fellow and prospective investors, and I'm always intrigued by the various sensitivity analyses associated with its numerous partner programs. One of the most compelling aspects of the company is the optionality at the partner level, which invariably leads to the million-dollar question: how would the company’s free cash flow change if specific drugs were approved? The complexity lies in the fact that these assumptions are constantly changing, acting like a 'scale' that shifts the balance and timing of potential cash flows. While getting a drug across the finish line is paramount, other critical factors include when it gets approved, how it can scale, and how quickly it can be distributed (i.e., the velocity of its go-to-market strategy). The challenge of weighing each of these factors separately while simultaneously considering their collective impact is what makes this company so intriguing.

My Inverted Pyramid of Value

I have recently joked with some friends (who also happen to be investors) about various ‘blue sky scenarios’ that could unfold if different assets are approved, using an image I drew in Paint. I titled this masterpiece my ‘$5B Inverted Pyramid of Enterprise Value’ to illustrate what the company could be worth at different asset approval stages. This is a half-joke, but assuming CLPT has a success at each level (currently indicated by the green checkmark) and culminating with Parkinson’s at the top, the company could theoretically be worth north of $5 billion.