re: jt campbell update report BrainZ – well on TrackWe confirm...

re: jt campbell update report BrainZ – well on Track
We confirm our Speculative Buy recommendation for BrainZ Instruments (ASX:BZI) up to $1.00 per share.
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It is now three months since the ASX float. The ASX release today from BrainZ suggests that the development of the business is well on track.
In the key US market, a ten-strong sales team of part-time Clinical Specialists has been recruited and trained, with BRM2 trials commencing at 5 new hospitals over the past month. The goal is for 15 new hospitals to start trials each month, and there is currently no reason to modify the assumptions used for our valuation modelling. Over the next 6-12 months it will be important to watch the conversion rates for trial to sale, as well as the time period before purchase. The valuation model would be too conservative on sales conversion if rates in the US match those seen in Aus/NZ.
Today’s ASX release also covers the recent purchase of BRM2 by Great Ormond Street Hospital, London, a premier neonatal unit. As we understand that a trial comparing BRM2 with a competing product (NicoletOne) had been in progress at Great Ormond St, this is encouraging indeed for BrainZ as it confirms the competitive nature of the technology for neonatal specialists. At this stage we have not seen any formal results from the comparison, and it might be that the competing product has also been bought, even though it would be unusual to stock an intensive care unit with more than one type of equipment.
The next expected milestone is the submission of the US 510(k) for the patented seizure detection algorithm, due in the coming month. We consider this to be an important product enhancement both for competitive reasons as well as for future market expansion in adults.
We maintain our Speculative Buy recommendation up to $1.00 per share (as outlined in initiation research dated 19 December 2005).