Compumedics share price rockets 26% higher on FDA news

The Compumedics Limited (ASX:CMP) share price has rocketed higher on Monday on the back of news out of the United States…

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The Compumedics Limited (ASX: CMP) share price has started the week with a bang.

In morning trade the medical device company's shares rocketed a massive 26% higher to 87.5 cents.

Why is the Compumedics share price rocketing higher today?

Investors have been fighting to get hold of the company's shares after it released an update on its Orion LifeSpan Magnetoencephalography (MEG) single Dewar system.

MEG is a neuroimaging technique for mapping brain activity by recording magnetic fields produced by electrical currents occurring naturally in the brain.

According to the update, MEG has received US Food and Drug Administration (FDA) approval in the United States following its installation at Barrow Neurological Institute in Arizona, USA.

The MEG hardware approval comes in addition to the already approved components offered with the Orion LifeSpan by Compumedics.

These include the amplifiers, the simultaneous electroencephalogram (EEG) subsystem; and the fully integrated, state-of-the-art co-registration, neuroimage processing, and source estimation software known as CURRY. Management describes CURRY as the world's gold standard for clinical MEG/EEG and neuroscience research.

What's next?

The FDA clearance allows for routine clinical use of the single MEG device, primarily for epilepsy and pre-surgical brain function mapping.

Sites using the Orion LifeSpan may now routinely bill both private and public insurance plans for MEG examinations. This is an important consideration when purchasing medical equipment.

Management notes that in the late 1980s there were about 200 MRI systems installed, like MEG today. These were largely used for research at that time before billable codes became available in the 1990's for MRI.

There are now about 36,000 MRIs installed globally, with 2,000 to 3,000 MRI systems sold annually. The company believes MEG may follow a similar trajectory over time.

The company's CEO and Chairman, Dr David Burton, said: "Compumedics Neuroscan is very pleased to have achieved this important milestone for the Orion LifeSpan MEG. Receiving 510(K) clearance from the FDA, whilst expected, it is nevertheless satisfying and validating after all the R &D over many years."

"In addition to the technical accomplishments achieved by the company and our partners at the Korea Research Institute of Standards and Science (KRISS), it represents a foundation for the commercialisation of our MEG technology. This market clearance will allow us to transition from product development to full commercialisation," he added.

Dr Burton also revealed that Compumedics is actively pursuing 40 identified MEG opportunities around the world. Four of these opportunities are substantively advanced.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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