It's official, Novadaq/Lifecell agreement ends September 2015. Arbitration is being pursued to force Lifecell to develop applications beyond breast reconstruction and colorectal. I vaguely remember the existence of a section in the agreement that specifies how the hand-off will be managed over the last year it's in effect. Goodbye, Lifecell. Hello, full revenue.
Gee, i was pleased to just add at 1.69 a couple of days ago...and it''s already up a buck.
This looks like a buying opportunity to me and even at his low price , it's almost doubled from when i first bought in.
The influences depressing the earnings are clearly transient, we have hot technology and the prospect of becoming the standard of care for several important surgery types.
Looks like a good bet to me.
BTW - I was looking back at the year-end press release (just 6 moths ago) and one of the "key accomplishments" for 2013 was the "appointment of a highly capable network of distributors in the Asian markets". Whatever the heck that means, it certainly hasn't gone anywhere the last six months and is just another example of Arun throwing around nuggets of opportunities or accomplishments that are meaningless. You give him too much credit.
I would take $20+ today - unless Arun makes some serious changes to get revenue growing, I don't think we will see that number for another 3+ years.
I appreciate you posting your response from IR yesterday. Hopefully after a few more quarters it will be easier to model the productivity of the new sales team.
You indicate that Arun indicated that the 3rd quarter would be weak. My recollection is that he indicated that the 3rd quarter would come in at a growth rate of 35% but that would be offset by a stronger 4th quarter, with overall growth for the second half coming in at the projected 40%.
You acknowledge that the company is sitting on some of the most compelling technology in the medical system space. I could not agree more and it is compounded by the fact that there is no competition presently or on the horizon. If anything, the recent acquisitions are going to further extend their lead in their space. It was Arun who got them to this point, why lose faith in him now.
You want them to be bought out. At what price? $18 or $20 or $24? Will Johnson and Johnson pay a 100%.
markup? Even if they did, is that fair value for their technology? Look, I would agree that the battle field is covered with the bodies of Doctor CEO's who could not cross the bridge to becoming Business CEO's.
In my humble opinion, Arun is developing an excellent business model that will take full advantage of the company's superior products and competitive advantage. At the moment, I, for one, am not going to let the pps volatility take my eyes off what he has accomplished to date.
endo - no doubt this stock became part of the biotech momentum stock universe, but with good reason - they were generating 40%+ revenue growth from their existing products and had two new products in Luna and Pinpoint that could potentially drive revenue growth into the 50%+ range. At $24, the stock was priced for perfection and I didn't think it would hold that level unless results were stellar, but with sales from LifeCell and ISRG floundering, we've been cut in half. With the fiscal year-end of the mutual funds looming in Oct, you could see further selling pressure, as funds with losing positions do some "window dressing", especially since Arun has already said Q3 results were going to be weak. This is just another reason I am praying for a sale of the company - although the primary reason still is that NVDQ is sitting on the some of the most compelling technology in the medical system space and they don't seem to have the leadership or resources to take full advantage of it.
Around this time each quarter I begin checking institutional activity for the prior quarter. While 9 of the 10 largest institutions have not as yet reported, those that have have shown an aggregate reduction. It is the first time that institutional exposure has declined since I first invested in the company. So far, we have declined from 78.5% to 74.8%. One institution declined by 800,000 shares and two others declined by 400,000 each. Seven institutions, including the above, reported an aggregate decline of 2,049,000 shares.
There are many reasons for the rapid decline of this stock from early April until now, but in my opinion, the institutional herd instinct is the biggest. In the first quarter Novadaq unjustifiably became a momentum stock with the institutions piling in. This drove the stock up to a pps of $24 and it was way over bought. In April, with the company making absolutely no announcements, the stock declined 40%, as the institutions have and continue to pile out. We are now in the most oversold position in several years, with the RSI declining to 17.5% at its low yesterday. With only 55 million shares outstanding, the stock is being whip sawed by the herd mentality of the institutions.
Yesterday, I shared emails with the company related to a sensitivity I have that could be influencing how the analyst interpret revenue growth.
During conference calls and investor presentations, Arun has repeatedly indicated that it takes 9 to 12 months for a salesman to become productive. The problem I have is that he has never clearly defined what he considers productive.
Is productive the point at which the salesman is fully product trained and released to commence marketing.
Is productive the point at which a salesman places a transaction into the pipeline, or is productive the point at which a transaction is actually consumated and the equipment shipped. The sales force currently numbers 60. Since we have no clear idea of what stage of marketing productivity they are at, the entire issue of matching revenues with the size of the sales force is wide open to interpretation.
The issue is made more difficult because the company never addresses the Pipeline, which would give us some insight into marketing development. So, in my mind, the analyst are all marching to the beat of their own drums in reconciling revenues with size of sales force. At some point, if nothing else, Arun needs to clearly define what he considers productive to be.
The company emailed me back and expressed their appreciation for the observations and suggestions. I only say that because I have found their investor relations department to be vey responsive. So if you have a concern or a suggestion write them an email.
According to Barron's: even though the stock was down today on huge volume, the fact remains that there were more trades on the buy side than the sell side, and furthermore the volume of the trades on the upside was more than the volume of the trades on the downside ( "uptick/downtick ratio" was 1.07).
Based on this, I believe that a bottom may have been put in today.....time will tell. Comments?
endo - I have been in this stock a long time and I have listened to every presentation and conference call - most of them more than once - and the sense you get after all those years is that Arun is very meticulous with his strategy and development with the technology, but has held back on pushing aggressively into certain areas because (and I'm quoting him) the company does not have the "bandwith" to focus on more than one area at a time. I accepted that when they only had the original Spy system for open surgery and very little money in the bank, but now they are flush with cash and the pace seems to be about the same.
It is unacceptable at this stage in the growth cycle that they would have a sequentially flat or down quarter with the Spy system sales through LifeCell. He seems to have already played his hand with LifeCell and told them they are out, but seems willing to watch LifeCell let Spy sales deteriorate over the next year - an aggressive CEO would buy or sue them out of the contract to keep the momentum going.
I know I harp on the international issue, but think about it - they signed the LifeCell agreement 4 years ago (Sep 2010). The Spy technology is relatively simple to understand and use - it doesn't take a lot of technical training like daVinci - and the cost/benefit equation is clear cut and an easy sell. There is no reason they could not have signed up multiple foreign partners over the past several years.
I noticed your Cylinder 3 regarding clinical studies in lymph nodes. In scanning the old press releases to confirm the LifeCell start date, the YE2009 press release in Mar 2010 had as one of the hi-lites that they "initiated human clinical studies with the use of Spy scope for the visualization of lymph nodes" and four years later they are touting the same thing? This is just one example of the shiny new "opportunities" that Arun has identified for investors, only to let it sit on the back burner for years or let it die on the vine.
I was in and out of Mako. Watched it similarly tank approx $40 down to teens. Luckily I was out then, and bought back in at $17. It took about a year as I recall before it got buyout offers. BO price was around $30. Wish I had been on sidelines this time. Still, also good company, good product. I will wait it out. JMHO.
Sentiment: Strong Buy
Down again on almost 10x average daily volume. Definitely NOT a good sign. However, maybe put in a short-term bottom on the heavy volume. Presentation tomorrow at Cannacord conference may be critical.
Ok, so lets look at the cylinders:
Cylinder 1) Deeply immersed in bringing a start from scratch salesforce up to speed. Now numbered at 60 salesmen,expected to go to at least 80 by year end.
Cylinder 2) The introduction of Pinpoint and Luna with significant upgrades to these machines already made and continuing to be made ( for example - each organ having its own color)
Cylinder 3) Completing clinical studies and soon commencing trials on lymph nodes and G.I.
Cylinder 4) Actively doing clinical studies on Endometriosis which will have its own specialized software.
Cylinder 5) Actively seeking International partnerships and I imagine some in the far east are already in place and are just awaiting regulatory approval scheduled for later this year.
Cylinder 6) Actively seeking acquisitions to complement the existing product line. Two have already occured this year.
Cylinder 7) Actively attempting to either have its partner Lifecell get its act together and expand the marketing effort into other arenas in which Spy Elite has an application, or take over the marketing effort themselves.
Cylinder 8) Very actively continuing research to identify more surgery applications for Pinpoint and Luna.
Tredleon, you have been in this stock as long as I have, maybe longer. You've seen how far they've come, particularly in the past two years, and yet you want them to go even faster. Sometimes going to fast can be reckless.
Appreciate the comments, but to conclude the company is running on "all eight cylinders" is a stretch. A couple issues still remain sketchy - if you are expecting Japanese approval by the end of the year (4 months away), how could you not have a marketing venture in place already to take advantage of that pending approval? Having 8 systems in Europe is an embarrassment - if they are trying to establish an international presence by themselves by providing a few machines here and there, is that really a "comprehensive strategy"? Sell the company - by the time Arun gets around to establishing a presence in these markets, the patents will expire.
Thanks Endo for all the info! Outstanding work! I'm surprised that the company would open up with individual investors such as yourself. Tremendous!!! Looks like the company is a screaming buy.