Neovasc Inc (US) (NASDAQ:NVCN) Just Keeps Getting Stronger

We've covered Neovasc Inc (US) (NASDAQ:NVCN) on a number of occasions across the last few months, each time suggesting that – despite the company's legal issues – its then-current price looked like a heavy discount to its inherent valuation. Our thesis has been, and still is, this: that the company has a liability on its books in the form of the cash it's been ordered to pay to CardiAQ, but outside of this liability, it's a strong development stage entity.Boston Scientific Corporation (NYSE:BSX) agrees, it seems.The latter just inked a deal with Neovasc that will see it acquire the company's tissue processing technology and facility for $67.9 million, and take a 15% stake in the company for a further $7.1 million. Neovasc is up to the tune of 135% on the news, and looks set for further strength as the week matures.This is a game changing development for Neovasc and its shareholders, and as far as our thesis is concerned, it essentially removes the liability risk that was the primary downside on the position.Before we get in to things in a bit more detail, let's run through a quick recap for those not yet familiar with the situation.In 2010, a company called CardiAQ hired Neovasc in a consultative role to help it develop a transcatheter mitral valve implant (TMVI) device. The partnership matured, ended, and a year or so after the ending, it came out that Neovasc had developed its own TMVI device, and – CardiAQ alleges – that the Neovasc device is built around patents and trade secrets that belong to CardiAQ.CardiAQ took Neovasc to court, and to cut a long story short, the court ruled that Neovasc must pay a total of $91 million damages. Now, before the latest acquisition deal, Neovasc had $25 million cash on hand, and assets totaling around $30 million, so the potential to have to pay this all in one go was a large downside risk. It would have bankrupted the company, and Neovasc would have run to zero. We considered this chance as being pretty low, however, since the outcome of the legal dealings called for Neovasc to be able to continue developing the device that underpins the dispute (called TIARA). As things stand, Neovasc is attempting to get a stay on the payment.However, even if the company doesn’t get the desired outcome regarding the $91 million, it now has (or will have, once the BSX deal closes out) enough cash to pay off the full amount. Yes, it's had to give up some manufacturing assets to do so, and 15% of its common stock, but the liability that underpinned the risk is now essentially removed.So, the outcome now, is that we've got a company with a solid development asset, for which there is a reported $9 billion addressable market, and a head start over its competitors in as far as reaching commercialization is concerned. If it needs to pay off the $91 million in one chunk, which again, we think is incredibly unlikely, it's going to have just a few million on hand and will probably need to raise to fund the late stage development of TIARA. That's now the primary risk. If it doesn’t need to pay it all in one go, or gets an extension that allows it to delay payment for a few years (read: until TIARA starts to generate revenues) then there will be no dilution.The takeaway here is that Neovasc was a possible bankruptcy stock during the second quarter, as markets expected a fine and a removal of the development rights for TIARA. Then it became a promising development stock with a heft liability in the third quarter. In the fourth quarter, it just became a solid development stock with a huge addressable market and a big name partner.We will be updating our subscribers as soon as we know more. For the latest updates on NVCN, sign up below!Disclosure: We have no position in NVCN and have not been compensated for this article.