You usually listen to the ISRG conference calls. Any mention of FDA approval for our equipment in the DaVinci?
On occasion I have referred to the old Wall Street addage that money flows from the impatient to the patient. That philosophy has worked well for me over the past two plus years on this investment. However, patience is no guarantee an investment will be successful. Been there, done that.
So it is important to regularly question whether the actions of Novadaq warrant our continued patience. I, for one, listen to all of the presentations and all of the quarterly CC's, and all of the Investor Day presentations. When you see the continued upgrading of their equipment you have to ask yourself a couple of straight forward questions. Can a reputable hospital that performs a great nany complicated surgeries not have at least one of these machines in their surgery suites? Will surgeons who either see or become aware of the benefits of this equipment not apply increasing pressure on hospital administrators to obtain it? Are the surgery applications for this equipment expanding? Is the equipment cost effective enough to meet the requirements of a hospital administrator? If you follow this company closely, the answer to all of the above questions is an increasingly stronger and stronger yes.
Then add to the above the simple but critical fact that there is absolutely no current competitive equipment on the marketplace today or any time soon. My conclusion and the conclusion of many of the regulars here is that continued patience is overwhelmning justified,
Yes, given Canadian accounting practices, we could show a profit for the quarter. However, that is likely to be somewhat discounted. However, depending on the level of revenues, an operating profit is not out of the question. That would be incredibly good for us. I have to admit I never could fully understand why it needs to take 9 months to a year for a salesman at the company to become productive. I've been assuming that a majority of the salesforce hired come with some experience in marketing in the medical industry.
Sometime during the next month, the company will report 2nd quarter results. Unless the marketing effort has fallen on hard times we should have an excellent comparative quarter. 2nd quarter results for 2013 were $8.1 million in revenues, $3.3 million in recurring revenues, and a net loss of $9.7 million.
It will also be interesting to see the changes in total and institutional exposures for the 2nd quarter, which we should begin seeing shortly.
This message board is understandably quiet as we wait to see the above. Hope all is well with all of you.
Imho, a number of subtle and not so subtle changes have occurred here and the oos is beginning to reflect those changes. Please feel free to take issue with any of these comments.
In April, the upward momentum players and a number of Institutions took profits because the stock had unjustifiably reached a high over $24 per share. This exiting was compounded by a rapid increase in short interest. to over 2 million shares. Today, based on the relatively light volume levels over the past week or two, it seems apparent that the momentum players are gone and the selling pressure of the Institutions has abated. The latest short interest report shows a decline of 80 thousand shares.
In April, Intuitive Surgery was under attack and its stock dropped substantially. We are still closely associated with them and that further compounded the pressure on our stock price. Recently, Intuitive won a negligence case by a jury vote of 10 to 2. That verdict will impact on other pending cases. Intuitive stock has rallied recently and we are beginning to also move up.
In April, there was a great deal of uncertainty related to our other partnership agreement. A great deal of the negative uncertainty was recently substantially reduced by the comments of Arun, who indicated that both companies are already discussing an orderly transfer of marketing. This will have a positive impact on our revenues when it happens.
In April the issue related to the sales force was would their efforts result in a continued growth rate of 40%. At a recent investor conference Arun indicated his continued confidence in the 40%. This guy is fundamentally very conservative so my conclusion is the sales force is doing well for this stage of their development.
Obviously, as with all stocks, we are vulnerable to an overall market correction. Quite frankly, that is the only dark cloud that is possibly looming on the horizon.
This is definitely a FWIW kind of posting.
Last quarter we had a substantial book loss of 29 cents a share. If you eliminate the warrant revaluation expense ( a Canadian accounting thing) of $12 million that loss drops to 8 cents. Should the stock remain at its current level on June 30th, we will see a complete reversal of the above. On December 31st our closing pps was $16.23. On March 31st our closing price was $22.28. The $6.05 increase in the pps caused the $12 accounting expense. Today's price of $15.12 results in a $7.16 decrease and would equate to a $14 million positive impact on book earnings or 25 cents per share. All things being equal, our book loss for the second quarter should be 5 cents or less. Like I said initially, fwiw. lol
pezel & fhaims
Could not agree with your comments more. I like the way they now divide the business into two major categories surgery and diagnostic. These two recent acquisitions are going to bear a lot of fruit down the road. Arun did mention what I had hoped to hear. He again stated that revenue growth will continue at 40% and they are at 65 salesmen. Arun tends to be conservative in these presentations but the tone of his voice and comments sounded very confident. As Pezel has already pointed out, he indicated that the capital expenditure constraints facing a lot of hospital administrators does not apply as much to Novadaq products because they are not only clinically positive but also economicly positive. He also indicated that Luna is generating additional revenue for the hospitals because once the patient sees the machine in action, they want the machine used again on their next visit.
His comments strongly indicated that they will be terminating the relationship we have been speaking about. In the question period he indicated how the two companies are already talking about an orderly turn over of the marketing effort. The partner to date has received 50% of the revenue. When the baton is passed Novadaq will get 100% of the revenue.
As it relates to competition there is presently none. Arun indicated that companies are sure to look at getting into the same business but are going to have a problem figuring out how to do it. For example, with Luna, the company is adding software that is very useful to the doctor in his determination how to specifically proceed, whereas in the past, the doctor throws 5 possible remedies at the patient all at once. I continue to believe that Luna will be huge in the future
This presentation is definitely worth a listen.
The William Blair presentation is tomorrow at 10:10 AM. Would love to hear some more positive news on how the sales effort is going. Would also love to hear them reiterate 40% revenue growth going forward. This recent move up is not on heavy volume and some might view that negatively. To me it looks more like Institutional selling has hopefully dried up. I remain convinced that when Institutions report exposure outstanding as of June 30th, one or more major players will show a substantial decline in exposure.
AG & Bharat
Could be wrong on this, but I recall someone on this board posting that either Firefly or a new version of it is not an attachment to DaVinci Xi but is actually built into the system.
I have never been a technical day trader so I am not firmiliar with the tools they use. That said, there is one thing they monitor which is important to them. That is when the 50 day moving average crosses below the 200 day moving average. There is a name for this situation which alludes me. The current 50 day moving average is at $17.53 and the current 200 day is at $17.39. Unless things change, they will cross shortly. At the same time the RSI has once again crossed below 30, which usually indicates an oversold position.
As mentioned in a previous posting, there are some investor presentations scheduled this month; namely, William Blair on 6/10, Bloom Burton on 6/18, and JMP Securities on 6/24.
A couple of points. I find your comment that you have recently learned that short interest on Novadaq has reached 3 million shares worrisome. That is a 700,000 shares increase since 5/15 and it occurs after the stock has already declined by 40%. While it is true that many companies the size and type of Novadaq have been trashed over the past two months, I have always tried to not underestimate the folks that are taking a position opposite mine. In that respect, the only fundamental I can readily think of that they know something about that I don't is the current status of the marketing effort. Were the initial sales just low hanging fruit and the marketing effort has now stalled? That, imo, is the only fundamental issue that could cause such a substantial drop in the pps.
The second point is the volume yesterday. It was over 400 thousand shares and we were down. That much volume on a stock that is 80% owned by Institutions indicates that institutional selling continues. Given the size of the company, there are a number of institutions with very large positions. JP morgan Chase come to mind. I remain convinced that one or more of these institutions is making a significant reduction in their exposure. The $64 dollar question remains, do these institutions know something we don't ?
One thing that could help us get some clarification is the fact that this month the company will be making several investor presentations. If they indicate that they remain on course to grow revenues by 40% a year, the bleeding could finally end. Right now, it is a heck of a situation.
You ask who is selling. Given the fact that at 3/31/14 most of the shares (80%) were owned by Institutional Investors, that is where the selling is originating. The stock price is very vulnerable right now because a major issue remains uncertain. How well is the sales effort going for Luna and Pinpoint. While the 1st quarter results for these machines were better then expected I recall a question asked during the Q&A section of the last CC. An analyst asked if these early sales were actually just picking low hanging fruit? In effect were these early sales to hospitals already very knowledgeable with the products. Add to that the recent shakiness of the partnerships and you have the grounds for some of the Institutions who have been in the stock since it was in low single digit territory to take some profits off the table. The problem is compounded by the recent increase in short interest. So, we have to wait on 2nd quarter results to begin to clarify the attractiveness of the company's products in the marketplace. That won't happen until the first week in August. Unless they make an important announcement in the meantime, the stock price remains vulnerable.
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.
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.
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.
At one point in the CC the company overviewed the 15 papers that had been published during the quarter. The 15 in the quarter surpassed the total number of papers published in 2013. The papers covered a broad range of procedures.
These papers, in my mind, represent the foundation blocks to establishing an ever expanding range of applications for our equipment. More applications mean more demand for our products and greater use. The fundamentals of this company continue to move in the right direction.
Your scenario related to Firefly being upgraded by Intuitive has to be right because it is the only one that explains why Intuitive had to resubmit to the FDA under I believe a 501K.