Ekso Bionics Holdings, Inc. (NASDAQ:EKSO) is a company that we last looked at here at Insider Financial back on November 13, 2017. At the time, the company had just put out some news related to a pilot program that it was conducting with automaker behemoth Ford Motor Company (NYSE:F) and had picked up a serious upside revaluation on the back of the development.
The pilot program will see Ford trial Ekso’s proprietary technology with a view to implementing the system across its network of manufacturing and distribution plants in the US.
We noted that this run was very much justified and that this was a major development for the company but we also suggested that there was plenty of run room left as Ekso moved forward.
Because this company’s prospects are not rooted solely in exoskeleton development for manufacturing environments. As many reading will likely already be aware, Ekso’s primary target industry (at least, that is, for the last five years or so) has been the medical space. The company has developed an exoskeleton (called the EksoGT) that is designed to help people recover from spinal injuries or strokes and it became the first company to pick up and approval in this indication for this type of technology from the FDA back in 2016.
With that said, and as we have noted in the past, these sorts of new technological steps forward in the medical space are difficult and costly to initiate and, for us, that has been a major risk factor associated with picking up a position in Ekso to date.
To add a bit of perspective to this, the company generated $4.9 million revenues during the first nine months of 2017 and the vast majority of these revenues derived from sales of its medical technology. During the same period, operating loss totaled $23.7 million.
In other words, Ekso has had to tap shareholders for operational capital ever since picking up approval for its lead technology (and, indeed, for a number of years before that) and this dilution risk is enough to put many potential shareholders off from picking up a position.
Where are we going with this?
Well, the Ford deal stands to mitigate a large portion of this risk.
Why? Because the company generates a far higher margin on its manufacturing technology than it does its medical technology. If Ekso can successfully complete this pilot program therefore, and in turn, can pave the way for a national rollout of its manufacturing exoskeleton in Ford’s plants, it would take a considerable amount of pressure off shareholders from a capital burn perspective.
And over the last few weeks, it looks as though our thesis has played out as expected. The company initially took a bit of a hit on the back of what we think was just a short-term correction and, subsequent to this correction bottoming out, has returned to its overarching upside momentum. Ekso shares currently trade for $2.74 a piece, up more than 30% on their price back on November 13, when we last looked at the company.
So what’s next?
Going forward, it’s all about how successful the pilot program with Ford can be in terms of whether or not the company can achieve a solid national rollout on the pilot’s conclusion.
If we were to take a guess as to whether this is going to be possible, then yes, we don’t think Ekso should have any problem proving its value to Ford. With that said, the major risk is how long it takes the latter to get a deal together with Ekso in place and active.
The longer the period between pilot completion and a deal being inked, the higher the risk of taking a position in anticipation of such.
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Disclosure: We have no position in EKSO and have not been compensated for this article.