ironyworks, the bios have rallied from their lows,
look at ilmn, alxn, biib, regn;
something is very wrong here.
and that something is costly;
unless a buyout is in the works, and a lot of tree shaking is going on;
arun has not even had pillar ii published;
the markets have run away from nvdq;
if it was under most radar in the winter move to 23, it certainly
off all radar now; rgen was somewhat of a competitor to nvdq in my
portfolio, but now there is no comparison;
We were hurt in the ISRG debacle and the stocks are still linked in many minds.
Additionally, the biotechs as a whole have continued to sink alarmingly, taking us with it.
This company is fat with potential and as the PPS sinks the buying opportunity gets juicier!
something must be going wrong with the plan;
a continuous drop like this means something is up that is not public;
something will be released soon; no move at all for the past bull run,
in January/February, this stock would have moved over 23;
now going below 10.
When they announced the Swissray agreement they mentioned a specific number of millions of people in the countries covered. Japan could not have been in that agreement based on the number of people. Basically it covered SE Asia, and the Pacific "islands" (Indonesia, Philippines, NZ ...).
Market goes down 100+ points, this thing does down $.55 points. Market goes UP 100+ points, this thing goes Down $.45+ points. I guess because it went down less on an up day, that could be considered a positive. BULL. Doubt this has anything to do with Intuitive.
You're correct. On November 7, 2013 Novadaq entered an agreement with Swissray Asia to become the exclusive distributor of Novadaq products in Australia and Indonesia as well as other SE Asia and Oceania countries. It said that there has been an agreement on minimum annual purchase commitments but Arun has never mentioned these publicly, to my knowlege.
They also have an agreement with CHC Healthcare to distribute their products in China and Taiwan, once again with minimum annual purchases required. CHC hoped to begin importation into Taiwan as soon as they receive government approval, possibly by the end of Q2 2014 and in China possibly by Q3 2014.
So, Novadaq is moving ahead on the international front. Maybe he will address any approvals in the next CC. I really would like to see an agreement to distribute in Japan, but maybe that is covered by the Swissray Asia agreement. Japan is a huge sales opportunity, just like it is for Intuitive, and I'd like to see the approval process get started there ASAP.
GSA - I agree that international markets can be challenging, but I think the comparison to ISRG's experience may not be appropriate. As Arun has spoke about in the presentations, the use of Spy is very intuitive for the surgeons - it is not something that requires a lot of training, like ISRG's da Vinci system. Therefore, they should be able to establish meaningfully profitable partnerships to get Spy products through the "regulatory maze" and into the hospitals. The cost-saving benefits of Spy should be all the marketing muscle they need to penetrate the socialized markets outside the US. Perhaps they need a few more concrete studies or to extend the publications into more indications to drive it home, but if it takes them 2-3 years before they make a move outside the US, that is wasted opportunity IMO.
I could be wrong on this point but I recall during a CC last year Arun commenting that they had made a productive trip to Asia and that they had had productive discussions with companies related to their acting as sales agents for the companies products.
The international regulatory maze and local markets make the international penetration very costly and labor intensive. Only now after 20 years is ISRG at a point to make significant progress and at a cost of hundreds of millions of dollars. Arun is going for the US as a base to build out internationally. I want him to stay focused on the US until his revenues approach a Billion dollars or so. He can put his toe in the water and do preliminary work with partnerships but to develop his own in house international marketing staff should wait. Having the international contained within is much better for margins and control. Tred, your concern is very, very important and I think the international market will be even more important for Novadaq than for ISRG eventually.
Let revisit this in ~2-3 years.
A good many of those institutions you cited will be back for a second helping, probably at a higher price than they sold at.
A lot of positives to "takeaway", but I thought I'd throw out a continuing frustration - Arun casually mentioned that the ex-US market could easily double the potential (in terms of # of procedures) of the US market. This is something they have known for years, yet they don't have any plan to expand outside the US. Obviously, they don't have the resources to market/service the products outside the US, so where is the partnership - any partnership that would show some effort to expand into Europe or Asia?
Imho, the 40% drop we experienced in the April/May timeframe had very little to do with the fundamentals of the company, other then the changing circumstances surrounding Intuitive Surgery.
At the end of December Institutional ownership had increased to slightly more then 70% due primarily to the $106 million equity placement in October, 2013. One would have thought that Institutional Ownership would have moderated in growth after that placement. Instead, it continued to rapidly increase in the 1st quarter this year.
By March 31st, there were 19 new institutions investing $8.5 million with only $500 thousand of sold out positions. Existing institutions increased their positions by $11.5 million, with existing institutions decreasing by only $7 millions. By the end of the quarter Institutional ownership accounted for 44 million or 80% of the 55 million shares outstanding. In my mind, this was a clear case of piling on and it drove the stock up past $24 per share. We had become a momentum play.
We all saw what happened to the momentum stocks in April. There were a great many Institutions who had a substantial investment in Novadaq and a very substantial profit. A large number either exited or reduced their positions.
I, for one, am very glad to see daily volume on Novadaq down substantially from the April/May period. The market for our stock has calmed down in either direction. Maybe now, these folks will again begin to focus on the fundamental progress we are making across the board. And this progress is accelerating. It was great news for us when the company reported that in the 1st quarter 17 medical articles were published related to our products as compared to 15 for ALL of 2013.
The Board has been effective and I suspect a strong help to Arun. I wouldn't want to remove any of them, just complement them and introduce alternative strategies.
Arun stated that there would initially be a marketing push for capital equipment placements. Depending on how strong and broad the acceptance was there would be a transition to marketing emphasis on kits and utilization of the technology. I suspect the ~200 might partially transition to utilization but with new technology like the Doppler and Isotope/Radionuciotides (spelling) that he has in the pipeline for late 2015 introduction I suspect the 200 will stabilize and the total force should be ~350-450.
Between the two of us, we could just vote out the existing board and take over the company. I'd be honored to fill in as your assistant CEO, when you're OUS cutting deals with Japan and India. Perhaps other distinguished members of this panel would also be agreeable to selflessly joining our board of directors....comments?
Whereas the revenue shortfall and subsequent drop in the share price was triggered by SPY Elite, I have a hunch that
the the negotiations will end sooner, rather than later, and much to Novadaq's advantage. Arun does not strike me as the kind of person who would tolerate what is an intolerable situation for very long.
Thanks Endo for your quick reply. That is what I would like to see as well. I would like to see the first mover's advantage stay with Novadaq. Has Arun mentioned how large the sales force will or can be in the long term? Just for comparison, I am wondering how many sales rep does ISRG have?
two thumbs up for your spot-on analysis.
Sentiment: Strong Buy
you write that Novadaq will be a little more developed and entrenched in two years related to possible competition. With all due respect, that is a gross understatement. In two years the research coming out of their own shop combined with the research coming out of the two companies they have recently acquired is going to give them an enormous lead over any competitor. Add to the mix the incredibly rapid increase in the salesforce which they anticipate will reach 150 to 200 by the end of 2015. That is going to give them a very deep penetration of the marketplace. It also seems to me that they are using an early Cisco strategy which was to keep buying up start ups that enhance the overall product line.