With the recent gains seen out of ARCA Biopharma (NASDAQ: ABIO) (Full ABIO Report Here), investors are starting to look for other investment opportunities in the cardiovascular space. In fact, this search for cardiovascular-related investment opportunities has led to a sympathy run in InspireMD (NYSEAMERICAN: NSPR).
While the stock is up well over 10% today in a sympathy run, that, in and of itself, shouldn’t be the basis for a decision to, or not to, invest. Nonetheless, it was what grabbed my attention, leading to me taking a dive in the stock.
All in all, after digging in, I do believe that NSPR stock represents a strong opportunity for long run gains. Here’s why I’ve come to that conclusion:
What Is InspireMD?
InspireMD is a commercial-stage biotechnology company. This means that the company works in the biotechnology space, specifically, the cardiology space, and currently has products on the market that generate revenue.
The company’s core focus is on the development, manufacture, and sale of medical devices designed to reduce cardiac risk. The company’s claim to fame is its proprietary embolic prevention system (EPS)/thrombus management technologies and neurovascular devices.
These devices have proven in multiple clinical studies and real-world cases to be a superior solution to key clinical issues associated with the way stents are performed in patients with high risk of distal embolization, no reflow, and major adverse cardiac events.
At the moment, InspireMD has two products. The first, known as CGuard is the company’s flagship product and the second, MGuard is a close second. Here’s a quick look at the products that InspireMD has to offer:
- CGuard Carotid Stent System – The flagship product at InspireMD is its CGuard Carotid Stent System. It is currently approved in the United States for us in improving carotid luminal diameter in patients at high risk for adverse events from carotid endarterectomy who require carotid revascularization and meet specific criteria. The stent is an open cell platform that’s wrapped in a MicroNet mesh. The product helps to prevent peri-procedural and late embolization by trapping potential emboli against the arterial wall. For more details, click here.
- MGuard Prime Embolic Protection System (EPS) – The second in line is the MGuard Prime EPS. The product is designed to trap and seal thrombus and ruptured plaque, prevent distal embolization, and optimize flow. The treatment has shown in various clinical trials and real-world cases to be superior to standard STEMI therapy and requires no change in current physician practice. Currently, the MGuard EPS is indicated for improving luminal diameter in vessels with reference diameter from 2.5 to 4.0 mm having lesion length less than 38mm and providing embolic protection in patients undergoing primary or rescue PCI for acute ST-segment elevation myocardial infarction (STEMI) or non ST-elevated acute coronary syndromes. For more details, click here.
As a commercial stage biotechnology company, InspireMD currently has multiple regulatory approvals. Both products mentioned above have been approved for use in the United States and are generating revenue from sales.
CGuard is also approved in Europe. More recently, toward the end of 2018, CGuard was approved and received reimbursement coverage in Australia. The company also recently announced that CGuard was approved for commercialization in Mexico.
The company’s MGuard product is also available outside of the United States. The company recently announced both CGuard and MGuard Prime EPS approvals in Vietnam. In fact, both products have regulatory approvals in the United States, Asia, Europe, the Middle East and more! Many of which have happened relatively recently.
Expanding Revenue Is A Big Story
At the moment, InspireMD is seeing strong growth in revenue. In fact, according to the company’s year-end 2018 financial report, it generated $3.601 million in sales in the 2018 year. That figure proved to be more than 30% year over year growth from the $2.761 million generated in 2017.
It’s worth mentioning that $3 million of the $3.601 million in revenue generated throughout the year came from CGuard sales, a product that is experiencing rapid growth. In fact, sales in 2018 increased 55% over the $1.9 million in CGuard sales reported in the year 2017.
Chances are that this rapid growth isn’t likely to slow down any time soon. First and foremost, the CGuard product is seeing strong uptake right here in the United States as well as in Europe. However, the product is entering new markets this year with late 2018 regulatory approvals in Australia, Mexico and Vietnam. Considering the expectations of strong organic growth in regions where InspireMD already has a strong foundation, combined with the recent regulatory approvals in other regions, I’m expecting that CGuard sales will continue a rapid rise in volume.
Digging Into The Financial Data
You can see a strong picture in revenue above. However, what’s the rest of the financial picture look like? As mentioned above, the company generated $3.601 million in revenue in the 2018 fiscal year.
During the same period, the company generated a net loss of $7.696 million. It’s worth mentioning that losses are shrinking and revenues are growing. In the year 2017, the company produced a net loss of $8.438 million on revenue in the amount of $2.761 million.
It’s also worth mentioning that gross margins are headed in the right direction. During the 2018 year, gross margins reached 27.6%. For the 2017 year, margins were only 21.2%. In the report, the company said that the higher volume of sales allowed it to more effectively use its fixed manufacturing resources, leading to the strong growth in gross margin.
Finally, at the end of the year 2018, InspireMD had current assets in the amount of $11.49 million, $9.384 of which is held in cash and cash equivalents. Even if losses were to stay where they were, the company has well over a year of runway in cash on hand. This is great news for a company with growing revenue, shrinking losses, and improving margins.
Consider The Risks
As you know, if you put money into the stock market, you’re taking on risk. That is no different when purchasing NSPR stock. If you’re considering an investment, take a moment to consider these risks:
- Operating Loss: Currently, InspireMD is operating at a loss. As a result, if the company is unable to reach a profit before the piggy bank runs dry so to speak, it will have to lean on the investing or lending community for financial help. This could lead to dilution or toxic financing alternatives.
- Sales Growth Must Continue – InspireMD had incredibly strong CGuard sales growth in the 2018 year. However, for the company to be a strong investment opportunity, this growth must continue. It also wouldn’t hurt to see efforts bringing the MGuard EPS sales up. With recent approvals around the world and strong sales growth in countries in which the company already operates, chances are that the growth will continue. Nonetheless, should this not be the case and sales reach a plateau, we could see declines.
- Penny Stock – Finally, with a market cap of under $10 million, NSPR is a penny stock. Penny stocks generally come with added risk and high volatility.
The takeaway here is a simple one. If you’re considering an investment in the cardiology space, you should take a look at InspireMD. While any investment will come with risk, the company is working effectively in a space that is expected to grow to be worth $15.18 billion annually by 2024 with a CAGR of 6.2%.
Keep in mind that the market cap of NSPR is well under $10 million. With that said, I’m expecting that with the strong growth in sales in currently established regions, along with recent approvals in new regions, the company will easily tap into a larger percentage of the global market. Considering the scale of this market, even a small percentage gain in market penetration would be a meaningful growth story for a company with such a small market cap.
All in all, I believe that InspireMD is presenting a compelling growth opportunity!
What Do You Think?
Where do you think NSPR is headed moving forward? Join the discussion in the comments below!