Thanks for the reply. Your explanation fits with my understanding but Vonpessal seemed to be describing something different. Just wanted to make sure I wasn't missing something. There seems to be a trend towards more sales which they refer to as capital sales vs installations under the "placement" model which was lower risk for the hospital but more costly. The placement model meant that NVDQ had to pony up for the hardware. This shift should make expansion less costly for NVDQ. All in all it sounds like they are successfully building confidence in their product and technology. The salesforce build out seems to be fairly aggressive which the market opportunities would seem to support. Now we just need to see if their new sales team can execute. Sounds like they are following ISRG's model of using a separate class of clinical field reps whose job it is to drive procedure volume. Now lets see what they plan to do with all that cash. My guess is that they are going to try to lock up significant IP, probably thought acquisition but possibly through licensing. Then again maybe they just want some of that cash to fund placements under the placement model.
Not much to add here other than to agree that Arun obviously has his sights set on something - either complimentary surgical imaging technology or IP/patents that perhaps run into the tens of millions or more. Funding a faster marketing launch - say 150 salespeople by YE 14, that does not require $185m. Also, the randomized clinical studies do not cost this much - and in many cases they don;t have to sponsor all of it. Perhaps they enter an intl JV where they want to retain a much larger slice of the economics, than what a small co would typically get as a margin dealing w/ Olympus, GE, Siemens, etc. It is frustrating - ISRG is a $400 stock 10yrs later partly b/c they never breached 40m shares. At some point NVDQ will grow only 13% y/y, we just negated that future yr with dilution. But I nitpick..
I've heard Arun say on several occasions, including the latest cc, that he wants the company "to maintain our first mover advantage". Now since they already have enough cash on hand to fund multiple clinical studies, R and D, and hire the salespeople they need, I think we're looking at either a large acquisition or an international buildout, probably in Japan. jmo
Sentiment: Strong Buy
They implied that they would be partnering any foreign distribution efforts, which is the only logical strategy - building an international marketing/distribution network from scratch would be ridiculous. Assuming they are partnering international, that would not typically require any cash - in most cases if the product is strong enough, you would get a distributor to pay you upfront for the rights. In any event, they seem to be growing revenues in line with the US marketing expansion over the past few quarters, so I can't imagine they need the cash for the US expansion of Luna or Pinpoint - they had plenty of cash on hand to handle that. That leaves acquisitions?
I would agree that the company has a great many plans in place that will cost a great deal of cash outflow. I would also agree that when money is available at an attractive price growth companies should go for it. However, at this stage, $186 million cash position seems a little aggressive. My gut tells me an acquisition might very well be part of the equation and is in the works. We shall see what we shall see.
Why? Because the current stock price is ridiculously rich! Trading at near 30x Sales...why not raise money at these levels? Love the technology but the valuation is down right scary!
Conference call indicated multiple new studies in the near term, international launch early next year will need marketing boots on the ground overseas and they also want to add another 100 domestic sales reps next year in anticipation of very positive results from the studies. They will need 200+ marketing persons to cover the US as a minimum. Remember the statement from earlier CC--"they are expected to bring in ~$1 million in revenue (annual) per person once up to speed." Sound like they want to up the ante and grow ~100% per year revenue for the next 3-5 years.
I agree. I think it has to be an acquisition as they could get any infrastructure improvements at Richmond financed, though I had thought that the manufacturing capacity would be adequate right now anyhow. I don't know what technology is out there or its valuation, but based on their purchases thusfar I don't see any other obvious way to spend $105M+. Anyone have any ideas on what company it could be? I know there is a European competitor out there...
Let me take run at that question you directed at Vonpeasal. Some hospitals did not buy the Spy equipment outright. They entered into some form of per us rental agreement. Some of these hospitals found that they would be better off buying the equipment and paying a much lower cost per kit. In effect, the economics were indicating BUY was the increasingly better choice when the machine was being actively used.
Vonpezel, Thanks for your post. One question. What do you mean when you say "hospitals buying the systems, not just the devices"
October 23, 2013 by leonardzehr · Leave a Comment
Canaccord Genuity has raised its price target for “buy-rated” Novadaq Technologies (NASDAQ:NVDQ; TSX;NDQ) to $22 from $18 after the company’s third quarter report beat consensus estimates. The stock closed at $16.18 on Tuesday.
“We continue to believe that Novadaq possesses one of the most attractive, emerging technologies in med-tech, and possesses the largest, least-penetrated collection of target addressable markets in our space,” writes analyst Jason Mills. “We recommend investors add positions at these levels.”
Pointing to the company’s plans to increase its sales rep headcount from 42 reps currently to 150-to-160 over the next few years, Mr. Mills said that in his experience, such a robust sales force expansion can be a strong leading indicator of “glowing” growth in small-cap med tech land, and “we believe it signifies Novadaq’s level of confidence with its SPY growth opportunities.”
He said Novadaq’s new “non-SPY” product development initiatives, including Trapper, surgical marker, and nerve and lymph node localization, “none of which are in our estimates, seem highly synergistic with its fluorescence imaging platform and could drive growth above our current estimates.”
I think the SEC is undermanned, underfunded, under great pressure from business, and completely swamped. I expect little from them.
Small stocks would be the easiest to manipulate.
But that only matters to day traders, so far as i can see.
Thanks for the update. The upgrades are a little surprising given the earnings call - it was a decent call, but nothing to get excited about. I still think the share price has gotten a little ahead of itself - over 20X annualized revenues - but then the whole biotech space seems to have gotten a little frothy lately, and NVDQ's future is certainly more predictable and brighter than most small cap biotechs out there.