Avinger Inc (NASDAQ: AVGR) is having a strong day in the market today, gaining more than 12% after announcing an FDA 510(k) clearance. With the new clearance in mind, many investors are wondering if now is the time to jump in.
After seeing the buzze, I decided to dig into the stock to see what all of the excitement was about. After taking a dive myself, I have to say that this seems to be a very compelling opportunity. Here’s why I came to that conclusion:
What Is Avinger
Before we dive into the opportunity here, it’s important that you know what Avinger is. The company operates in the biotechnology space. In particular, the company develops medical devices in an attempt to help patients with vascular conditions.
In particular, the company is working to fight Peripheral Artery Disease, commonly referred to as PAD. This is a condition that causes narrow artery ways to reduce blood flow to the limbs.
Several Products In Use
One of the driving points for me when it comes to AVGR is the fact that the company already has several products in the making. Each of the company’s devices is designed to assist care givers in providing proper care for patients with vascular conditions. The company’s devices include:
Pantheris is a line of products that is designed to give doctors a better view of the artery wall. In fact, the better view of the disease layers and the artery wall helps the operator to be more precise when cutting. This technology ultimately helps the operator to avoid disrupting healthy layers of the artery wall. Of course, disrupting healthy layers may lead to adverse events, including the increase of restenosis.
Moreover, it’s worth mentioning that a new FDA 510(k) clearance was announced today surrounding this product offering. We’ll go into details about the clearance below!
Ocelot is a device that was developed by AVGR to empoer doctors to see inside the artery wall. This allows the operator to make informed decisions for the improvement of long term results while protecting the healthy areas of th arterial wall.
Recent clinical results show promising data. In fact, the clinical results of the company’s CONNECT II Trial make the product an intreaguing proposition for future value.
Next on the list is Lightbox. The lightbox from AVGR is a high resolution physician display that is paired with a technican touchscreen. This provides the team full control.
The display comes with an additional HDMI output for increased lab integration. This is important as it gives larger teams the opportunity to view OCT images side by side with other lab monitors.
Next up is the Wildcat, a medical device designed to assist operators in CTO proceedures. The spinning tip of the device helps to alleviate any static friction. Moreover, deploying the wedges corkscrews through tougher plaque or acts as an anchor.
The wedge angle on the device has been tailored over time to smoothly slice through occlusion plaque. All in all, this helps to achieve more successful results for the patient.
Finally, we have Kitycat. The shapeable tip of the device and 150 cm length allow for the device to go further into the artery. Also, the spiral flutes on the device expose blades that provide a more gentle approach to lesion access. Finally, the rotating tip of the device helps to minimize static friction during advancement and direct the tip into the lesion.
A Big Break For AVGR: FDA 510(k) Approval
On April 10, 2019, Avinger made a huge announcement. The company announced that it received 510(k) clearance from the US FDA for its Pantheris SV (Small Vessel) image-guided atherectomy system.
This is an important extension of the Pantheris product line as it is expected to expand he available market for the product line by 50%. Ultimately, the expansion will allow the company to address a larger portion of the estimated $500 million atherectomy market.
In a statement, Jeff Soinski, President and CEO at AVGR, had the following to offer:
We are excited to receive U.S. pre-marketing clearance for Pantheris SV, which we believe could expand our addressable market for atherectomy procedures by as much as 50%.With the clearance of this new device, we are well-positioned to build on the positive momentum we have seen in our Pantheris business since the introduction of the next-generation system in 2018.
Following our anticipated limited launch of Pantheris SV, we plan on leveraging our growing commercial infrastructure and installed base of Lumivascular accounts to efficiently scale up the introduction of Pantheris SV and drive growth of our Pantheris product family in the second half of 2019.
Strong Financial Position
One factor that really caught my attention when digging into AVGR has to do with its financial position. In many cases, companies at this stage of the game don’t have enough money to get past a couple of quarters. However, that’s not the case of Avinger.
In fact, according to the company’s most recent earnings report, it ended 2018 with $16,41 million in cash and cash equivalents. At the same time, the company had current assets totalling $21,621 million. Considering that the fourth quarter loss was under $6 million, the company has enough money on hand to get through an entire year of catalysts!
It’s also worth diving into the revenue at AVGR. According to the most recent release, the company generated revenue of $2 million for the fourth quarter. That figure increased 6% on a year over year basis, and this organic growth is likely to continue.
Moreover, with the 501(k) clearance from the FDA, we can expect for revenue to grow at a faster rate ahead. Considering the strong cash position and expectations of strong revenue growth ahead, the company is sitting pretty from a financial standpoint.
A Potential Takeover Target
Finally, I believe that AVGR represents a strong takeover opportunity for the right suitor. At the end of the day, the company has multiple revenue generating products on the market. Moreover, the 510(k) clearance opens the door to a larger addressable market.
Considering the above, there is plenty of value for the right suitor. Moreover, AVGR trades with a market cap under $40 million. This low price is a drop in the bucket to larger suitors that would gain quite a bit from a takeover of the company.
Risks To Consider
Any time an investment is made, risks are assumed. When it comes to AVGR, the most pressing risks in my opinion are:
- Operating Losses – At the moment, Avinger is operating at a loss. In fact, the company’s last report showed fourth quarter operating losses in the amount of $5.8 million. However, it’s also worth mentioning that the company is seeing meaningful declines in operating losses. In fact, the fourth quarter of 2018 was 32% better than the operating loss of $8.6 million that the company reported in the fourth quarter of 2017.
- A Potential Short Target – In late 2018, AVGR became a target for short side investors. This proved to become a painful reality for those holding the stock long. While conditions are looking good ahead, considering the strong growth seen year to date, the stock could become a short target yet again in the future.
All in all, I believe that AVGR represents a compelling investment opportunity. With products on the market that are generating revenue, a 510(k) approval that will likely lead to further growth in revenue, a strong cash position and the potential to be a takeover target, this stock is presenting a compelling opportunity that’s hard to ignore!