InspireMD Inc (NYSEMKT:NSPR) has had a rough twelve months. The company is down close to 90% since the start of the third quarter of 2016 and a little over 80% year to date. As of the close on July 14, InspireMD shares went for just $0.45 a piece.
With the company set to report earnings for the second quarter of this year in a few weeks, there’s a good chance we’ll see some degree of recovery near term and – if earnings are strong – that we’ll see this recovery expand into the latter half of 2017 and beyond.
Here’s what we are looking out for.
By way of a brief introduction to the company, InspireMD s a biotechnology play that’s developed a portfolio of medical device-type assets using a proprietary technology called MicroNet. As noted on a couple of occasions in the past, it’s basically an alternative construction of a traditional stent, which removes some of the blockage risk associated with the current standard of care devices in the space. The risk of blockage is a major risk in patients that need stents and can result in a range of cardiovascular and neurological events – strokes, heart attacks, that sort of thing. The actual blockage comes about as a result of particulate getting trapped in the mesh from which the stent is constructed. With MicroNet, InspireMD has altered the construction to form the stent from the above noted MicroNet tech, which is essentially a super fine, narrow mesh type material that isn’t large enough (as in, the holes that the mesh creates aren’t wide enough) to cause particulate buildup. No buildup means no blockage and no blockage means a reduced event risk.
That’s the tech. Operationally, the company is all about pushing its portfolio into an ever widening range of global markets. There are four primary iterations of the product in place right now, CGuard (Carotid), MGuard (Coronary), NGuard (Neurovascular) and PVGuard (Peripheral), and all told, they have addressable markets that total to something like a potential $4.5 billion in annual revenues.
That’s plenty of potential and the value thesis for InspireMD is rooted in how much of this potential it can realize and – just as importantly – how much it spends trying to do so.
There’s cash on hand right now of around $9 million. Debt is nonexistent. The most recent operational update saw management announce that it has finally completed the transition to a local distribution network in Europe, meaning the company has deeper exposure to a host of local markets on the European mainland and – by proxy – that it should be able to increase top line in these regions at a reduced cost going forward. There is a constant and steady stream of data from various trials of its products – most notably, the CGuard iteration – hitting press and an equally consistent presence at various key industry events.
In other words, while it may be doing so relatively slowly, this company is definitely growing into its target markets and – for us – is at the start of a longer term turnaround in fortunes, both from a top line perspective and a valuation perspective. Even with the distributor shift, InspireMD generated 12% growth during the first quarter of this year in year-over year sales of CGuard, when compared to the same period last year. Sequentially from the final quarter of 2016, this number rises to 84%.
Management stated alongside the previous earnings release that the company expects to achieve year over year and sequential quarterly growth during the second quarter of this year, meaning we should get some pretty solid headlines as and when the next numbers hit press.
Bottom line, this one is a very cheap opportunity to pick up exposure to a growth space. For perspective, the company currently trades at a market cap of just $3 million. Again, cash on hand is $9 million and there’s no debt on the balance sheet. Don’t be surprised when this imbalance reverses.
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Disclosure: We have no position in NSPR and have not been compensated for this article.