Stereotaxis, Inc. (STXS) research, news, and more from GeoInvesting

Company description

Wed, 24 Oct 2018 12:21:28 GMT

Stereotaxis, Inc. designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally. Its products include Niobe ES robotic system that enables physicians to complete interventional procedures by providing image guided delivery of catheters and guide wires through the blood vessels and chambers of the heart to treatment sites; and Vdrive system, which offers navigation and stability for the diagnostic and therapeutic devices designed to enhance interventional procedures. The company also offers Odyssey solution, a real-time information solution to manage, control, record, and share procedures across networks. In addition, it provides disposables and other accessories, such as QuikCAS automated catheter advancement disposables for the remote advancement of electrophysiology catheters; and CARTO RMT navigation and ablation system, CELSIUS RMT, NAVISTAR RMT, NAVISTAR RMT DS, NAVISTAR RMT THERMOCOOL, and CELSIUS RMT THERMOCOOL irrigated tip diagnostic/ablation steerable tip catheters. Further, the company's disposables and other accessories include V-CAS and V-CAS Deflect catheter advancement systems; and V-loop circular and V-Sono ICE catheter manipulators. The company markets its products through direct sales force, distributors, and sales agents. Stereotaxis, Inc. was founded in 1990 and is headquartered in St. Louis, Missouri.

Research

Wed, 27 May 2020 00:33:12 GMT

Closing Out Long Position In STXS

STEREOTAXIS INC (NYSE:STXS) ($3.86; $266.5M market cap), a company that designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally, announced a $15 million common stock offering at 9% premium to Friday’s close.

STXS is offering 3.66 million shares at a price of $4.10 per share.

“We are excited to have Consonance Capital join us in our mission to improve patient care and positively transform interventional medicine with robotics,” said David Fischel, Chairman and CEO. “This financing is particularly meaningful during this period of uncertainty and disruption, and strengthens our commitment to significant innovation and support of our customers.”

We are extremely disappointed that this is the third time we were led to believe that the company was well capitalized and shortly thereafter announced an equity offering. Furthermore, part of the reason we initiated our position in February 2019 was due to management commentary that they would become profitable in a couple of quarters. However, according to estimates, the company is still slated to lose money in 2020.

We understand that COVID-19 has put new stresses on many medical device companies that have elective surgery angles. And even though we strongly believe in the company’s vision and business plan, given the facts, we plan to sell our shares in STXS. We will continue to track the company closely as they market their robotic platform to treat arrhythmias and will monitor the their plight to become profitable.

Research

Tue, 05 May 2020 18:12:55 GMT

STEREOTAXIS INC (NYSE:STXS) ($3.49; $249.2M market cap), a company that designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally, announced Q1 2020 results:

Sales of $5.8 million vs $7.0 million in the prior year
Loss of $0.03 vs loss of $0.04 in the prior year

“Our financial performance late in the quarter was impacted by broad-based reductions in procedure volumes as hospitals globally curtailed activity to lessen infection risk, preserve equipment, and focus their resources on battling the pandemic. This impacted revenue from disposables and temporarily disrupted the completion of certain project-specific service activities. Stereotaxis has responded to the disruptions with broad deployment of TeleRobotic support, leveraging proprietary connectivity technology to enable remote clinical and technical support of robotic electrophysiology practices.”

“While the pandemic has slowed progress on multiple Genesis purchase orders we had expected to announce at this time, we continue to see significant interest in Genesis. Over the last three weeks we hosted 51 physicians from 29 hospitals on TeleRobotic visits to remotely view and test drive the Genesis system. Progress on the two Genesis orders previously announced continues without interruption, with installations and revenue recognition expected in early summer.”

Research

Tue, 10 Mar 2020 17:57:13 GMT

STEREOTAXIS INC (NYSE:STXS) ($4.52; $301.5M market cap), a company that designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally, announced Q4 2019 results:

Sales of $6.9 million vs $7.2 million in the prior year
Loss of $0.02 vs loss of $0.02
Began year with purchase orders for robotic systems
Anticipates robust double-digit revenue growth in 2020 as commercialization of the Genesis RMN System drives a resurgence in system sales to new and existing hospital customers.
Robotic system orders are expected to provide confidence in revenue growth sustaining and potentially accelerating in 2021 and beyond.
$30.2 million in cash with no debt; Stereotaxis’ balance sheet will allow the Company to deliver on its commercial and innovation initiatives over the coming years and reach consistent meaningful profitability without the need for additional financings.

Closing remarks:

We are not surprised at the lack of revenue growth in the 4th quarter, as the company prepares to sell its new generation solution in 2020: Genesis
We would have preferred for the company to achieve profitability in Q4
It’s still unclear when profitability will be attained
However, we are still bullish near and long-term on STXS and believe the company is well funded, enabling it to reach profitability as it sells Genesis

Research

Thu, 14 Nov 2019 16:01:56 GMT

Sales of $8.2 million vs $7.6 million in the prior year
Breakeven vs loss of $0.01 in the prior year

“Our revenue growth and net income in the quarter is reflective of the positive impact a resurgence of robotic system sales can have on our financial performance. Stereotaxis continues to make tangible progress in the regulatory process, supply-chain optimization, and commercial discussions necessary for a broad launch of the Genesis RMN® System. As we plan towards 2020 and the broad commercialization of Genesis, we expect an exciting year of significant growth.”

The 9% top line growth this quarter marks the best quarter of growth since Q2 2015. The company remains debt free and expects the resurgence in system sales to drive robust and accelerating revenue growth.

Research

Thu, 12 Sep 2019 19:33:56 GMT

STEREOTAXIS INC (NYSE:STXS) ($3.51; $208.5M market cap), a company that designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally, received FDA 510(k) approval for its steerable catheter control system on Monday.

We had a brief call with CFO Martin Stammer yesterday to discuss this approval. Per our conversation, it seems this was more procedural than a catalyst. This particular FDA approval applies to variations made to an existing product line. However, the continued dialogue with the FDA may help streamline approval for its new Genesis RMN product, something that will open a new door for sales growth.

Research

Tue, 10 Sep 2019 18:33:01 GMT

STEREOTAXIS INC (NYSE:STXS) ($3.40; $202.0M market cap), a company that designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally, received FDA 501(k) approval for its steerable catheter control system. We tweeted the news yesterday that we found on the FDA site. At this time, we have still not seen a press release from the Company. We have reached out to the company to learn more about this development.

Research

Wed, 04 Sep 2019 04:00:00 GMT

STEREOTAXIS INC (OOTC:STXS) ($2.70; $160.4M market cap), a company that designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally, announced its common stock has been approved for listing on the NYSE.

“We are excited to list on the NYSE American. This is another milestone in our effort to improve awareness of our differentiated technology, clinical value, and growth opportunity. Listing on the NYSE American should support a more robust capital market for existing and new shareholders.”

The stock will begin trading on the NYSE under its current symbol on Friday September 6 , 2019.

Yesterday, via a premium twitter alert, we shared a new bullish Seeking Alpha article on STXS, where the author lays out a case for substantial upside to the current price. Based on the $1.1 billion price tag that Siemens Healthineers recently assigned to its acquisition of one of STXS’s peers, Corindus Vascular Robotics, the author suggests that STXS could support a share price of $13 to $26. We have not corroborated this target, and it should be noted that the author tempers the range:

"Clearly these valuation levels reflect a takeout price of a robotic vascular peer, and this section is not suggesting that Stereotaxis is worth those levels today based on its fundamentals. Yet the future growth opportunity is arguably just as large, if not larger, for Stereotaxis as it is for Corindus as well as for Auris Health, which was acquired by J&J (JNJ) for $5 billion in February 2019."

Research

Mon, 12 Aug 2019 15:06:48 GMT

STEREOTAXIS INC (OOTC:STXS) ($2.40; $142.3M market cap), a company that designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally, reported its Q2 2019 results last week which we covered here. Two items from the conference call gave shares a boost despite the sub par results and the unexpected private placement.

Sale of Niobe system to hit in Q3:

“In the third quarter, we expect to recognize the sale of a new Niobe robotic system to Overland Park Regional Medical Center, a part of our HCA Midwest Health. We expect in the coming months to be able to provide you with additional confidence that the replacement cycle opportunity for Genesis is real and that our innovation support robotic adoption by new customers.”

Uplisting progress:

“We expect an uplifting to a national exchange to be achievable in the near term.”

In our note last week, we mentioned how annoyed we were with the private placement deal. Management offered further detail on its reasoning for going through with the deal. Despite management’s reasoning, we still believe it was the wrong move and are concerned that management went against its prior comments expressing no need to raise additional capital to execute its plan.

Research

Thu, 08 Aug 2019 15:29:46 GMT

STEREOTAXIS INC (OOTC:STXS) ($1.98; $117.4M market cap), a company that designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally, announced Q2 2019 results and a private placement transaction of $25 million.

Sales of $6.8 million vs $7.6 million in the prior year
Loss of $0.03 vs a loss of $0.02 in the prior year

“The second quarter was an exciting period for Stereotaxis and a pivotal turning point in our effort to reestablish a long-term growth trajectory,” said David Fischel, Chairman and CEO. “Since showcasing our innovation accomplishments and strategy at the Heart Rhythm Society conference in May, many existing and potential customers have visited our headquarters to view our innovations first hand. The broad, enthusiastic response validates that our innovation and strategic decisions were sound and that our plan is medically and commercially attractive. We are confident in our expectation for significant revenue growth in the years ahead.”

With the financing announced today, Stereotaxis has the financial strength to accelerate the development and commercial introduction of these innovations, as well as to fund a second wave of innovations in electrophysiology and beyond.

Stereotaxis’ innovation accomplishments support an expectation of robust and consistent overall revenue growth beginning in the coming quarters and accelerating throughout 2020.

We are not expecting much growth from STXS until the company is able to market some of its newer products that are awaiting government approval in the US and abroad. We anticipate that this should happen within 12 months. So, we're not surprised that top line growth was not impressive.

However, we are extremely annoyed that the company completed a private placement. We already had made an exception to buy and add this stock to our favorite model portfolio because we normally don't buy microcap stocks with diluted share counts over 50 million. The company's diluted share count try their private placement was already slightly over 100 million. After taking into consideration the private placement, the company's diluted share count now stands at 117.7 million.

But why we are really perplexed, is that the company was adamant in commenting on numerous occasions, that it did not have to raise any more capital to execute its growth plan.

Now we know why shares had the sharp pullback over the last two weeks. It is good to see management is still forecasting strong growth moving forward. We plan to reach out to management to voice our concern about the private placement and be on the conference call to see if management expands on the reasoning for the private placement.

Research

Tue, 30 Jul 2019 15:50:49 GMT

STEREOTAXIS INC (OOTC:STXS) ($1.95; $115.6M market cap), a company that designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally, saw its shares recently hit new highs of $3.00, before a sharp retracement last week. We saw no news associated with this pullback. Similar to INTZ, STXS should report its Q2 2019 results in the next two weeks (again no “to announce” date provided yet). The keys we are looking for from the upcoming quarter are:

After stabilizing revenues over the last several years, top-line growth is important to us.
Any update on more regulatory approvals as well as an FDA approval timeline of its Genesis RMN product.

We feel it is important to monitor these approvals as they will likely accelerated sales and make the company a more attractive acquisition target.

Research

Fri, 24 May 2019 15:57:09 GMT

STEREOTAXIS INC (OOTC:STXS) ($2.41; $142.9M market cap), a company that designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally, saw its shares hit new 52 week highs on the heels of a bullish Seeking Alpha article title, “Stereotaxis: Well Positioned To Become 'Intuitive Surgical Of Endovascular Surgery' With Genesis Launch And Proprietary Catheter Development”. Below are the bullet summaries from the article:

Unveiling of Innovation Plan at HRS details path to over $60 million in annual sales, or double current levels, from existing customer base alone.
Company’s 110 active systems worldwide and $25-28 million in recurring revenue since FY2011, including record levels in FY2018, provide solid foundation to build off of.
Robotic medical device market is area of active M&A as evidenced by JNJ’s recent +$5 billion acquisition of Auris Health, which may have implications for Stereotaxis.
In addition to leading position in robotic cardiac ablation market, Stereotaxis has broad clearance throughout vascular system, including neurovascular and peripheral anatomy.
Management/Board-led investment of $34 million has solidified balance sheet, and importantly, management sees no need for further capital raises to reach profitability.

While comparing STXS to two of its closes microcap peers, the author implies a price range of between $3.50/share to $15.72/share, based on its $35 million FY2019 sales estimate. Please see the author’s full valuation analysis in the article. We are going to take a closer look at his valuation assumptions.

As we mentioned in yesterday’s tweet, the author echoes many of our same bullish sentiments. You can see our full coverage on STXS here.

Interviews

Mon, 13 May 2019 13:36:14 GMT

In our April 24, 2019 email, we mentioned that we had a chance to interview $STXS management and that our main takeaway was that the company is now entering the next phase of its turnaround process and looks to double revenue over the next five years. The company was not focused on growing revenues during the first phase of its turnaround. The company is now at a point where it does not need to raise funds going forward.

More insights from our interview:

Overview:

The company is the global leader in Endovascular robotics. Its main product is the Niobe Robotic Magnetic Navigation system. Below is the description of the system and a visual from the Company’s website:

The Stereotaxis remote magnetic navigation system utilizes two permanent magnets mounted on pivoting arms that are enclosed within a stationary housing, with one magnet on either side of the patient table. During a procedure, the physician guides the catheter movement by simply moving a computer mouse from a room adjacent to the patient but outside of the x-ray fluoroscopy field.

By magnetically controlling the working tip of the interventional device, the physician maintains the same degree of control regardless of number of turns or distance traveled. This provides the ability to safely access anatomic areas unreachable by other approaches.

The system has two recurring revenue streams with the Odyssey Solution and the Vdrive system, both of which work in conjunction with the Niobe system.

The Odyssey solution aggregates and integrates a vast amount of clinical lab information into one large screen and a single mouse and keyboard control, as shown above. The Vdrive System completes the remote lab by extending the operator’s ability to navigate remotely to non-magnetic diagnostic and ablation devices. Below are the 3 components of the Vdrive System:

Early History:

The company went public in 2004 and was spending a lot of money on marketing its product, however, the product did not meet industry expectations at first. Management had told us that the speed of the system was slightly slower than expectations. Furthermore, the company was spending too much capital on ancillary products that it did not have a competitive advantage in, instead of investing in its core robotic technology platform. Finally, management stated that the company did not offer support services to physicians using the product.

The company began growing revenue but was incurring losses as it progressed forward. In 2014, the company brought in Martin Stammer as new CFO to help relieve itself of the financial handcuffs its operating losses had caused. They were not spending much on R&D during those years and had to issue preferred stock to help clean up their debt.

From 2016 to 2018, the company finalized its balance sheet clean up (the company currently has no debt) and begun its R&D efforts once again. And as we mentioned above, the Company is now in growth mode, looking to drive the top and bottom line moving forward (we discuss in more detail below). In 2017, the company hired CEO David Fischel to help with its growth.

Market Opportunity:

The endovascular market is a $4+ billion market growing at 10 to 15% annually. The Company claims that there is currently no competition in the market they serve of robotic treatment for cardiac arrhythmias (robotically controlling catheters). However, they do see competition in the ancillary products they sell. We were told that there are roughly 800,000 procedures a year and STXS currently only captures about 1% of the market.

Safety and Efficiency:

Most procedures are still done manually. The Niobe system is best used in complex procedures. The clinical data supports that Niobe system is safer and more efficient than manual procedures. We will guide you to the Company’s site for a full clinical data summary and it’s worth noting that the adverse effects from surgeries are under 1% with Niobe, versus 10% manually.

Growth Mode:

The company is now focused on growth. Management stated to us that they believe they can double revenue in the next several years from its current installed base. After focusing on its installed base, they also believe there are other opportunities that can propel growth. While they did not specify, we think one avenue could be a system replacement cycle. The original systems were from 2003/2004 and most labs look to replace equipment on average every 10 years.

In the interview, management hinted at the excitement around its latest innovations but has not shared the details publicly yet. The plan was to do so at the Annual Heart Rhythm Scientific Conference to be held on May 8 to 11th, 2019. Our May 9th 2019 email gives more color on the innovations that have the company so excited. Below are the highlights from the company’s press release:

Innovative robotic surgery system, Stereotaxis Genesis™ RMN, enriches robotic magnetic navigation with increased efficiency, reduced size, and enhanced lab experience
Genesis RMN System to be available in combination with Stereotaxis Imaging Model S, a next-generation x-ray system offered as part of a complete robotic electrophysiology lab solution
Combined technologies greatly enhance the accessibility and affordability of robotics in electrophysiology

Possible Merger/Acquisition:

When we asked about other procedures that were being done robotically and how those companies fared, he mentioned two that were acquired. Medtronic (NYSE:MDT) acquired Mazor in December 2018. Mazor was a leader in robotic spine surgery. And, in 2013, Stryker acquired Mako, which was a robotic surgery platform for knee and hip replacements.

Mako shareholders received an 86% premium, while Mazor saw a 10% premium, but it was one of the largest orthopedic deals in 2018, valued at $1.7 billion.

We believe it is worth monitoring the company’s strategic partners as possible suitors in acquiring STXS. Biosense Webster and Philips Medizin Systems are its closest partners, both of which are private companies.

Caveats:

Fully diluted share count is close to 100 million, well above the range we typically look for
Unclear why only 1% of the treatment of abnormal heart rhythms are done robotically
Execution risk remains a concern

Research

Thu, 09 May 2019 15:32:06 GMT

STEREOTAXIS INC (OOTC:STXS) ($2.00; $118.6M market cap), a company that designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally, announced Q1 2019 results:

Sales of $7.0 million vs $7 million in the prior year and up from $6.7 million in Q4
Loss of $0.04 vs EPS of $0.01 in the prior year

“The start of 2019 is highlighted by significant innovation accomplishments across all key aspects of our technology,” said David Fischel, Chairman and CEO. “These innovations will positively impact patient care, the physician experience, and the broad availability of our robotic technology in electrophysiology. They create a new financial and strategic foundation for the company and set Stereotaxis on a path for sustainable and significant growth.

The impact of these innovations will be transformational in the coming quarters and years. In parallel with our technological achievements, we are making continued progress in establishing and implementing the commercial infrastructure to ensure robotic electrophysiology practices are successful clinically and commercially. We are proud that we are able to accomplish this progress while being financially prudent.”

In conjunction with its earnings release, STXS issued two other press releases. First, it announced it has entered a strategic collaboration with Osypka, a pioneer in electrophysiology and leading manufacturer of interventional products.

“Stereotaxis is delighted to be partnered with Osypka. We have been impressed with Osypka’s expertise and capabilities, as well as with their commitment to high quality products that improve patient care,” said David Fischel. “Stereotaxis remains committed to advancing robotic technology in electrophysiology. This collaboration leverages the highly complementary strengths of both firms. It promises to dramatically improve our clinical impact in electrophysiology and opens attractive potential options as we advance our strategic vision. We look forward to working with Osypka to advance patient care and the physician experience in electrophysiology.”

The company also highlighted the innovations it has presented at the Annual Heart Rhythm Scientific Conference which it is currently attending.

“I am excited and pleased to introduce Stereotaxis Genesis, the future of robotic electrophysiology,” said David Fischel, Chairman and CEO of Stereotaxis. “Genesis is a new beginning for Stereotaxis. It is the tangible reflection of Stereotaxis’ commitment to innovation that improves patient care, enhances the physician experience, and enables broad availability of robotic electrophysiology.”

Our prior research notes on STXS discussed how its new management team joined the Company a few years ago to strengthen the Company’s balance sheet and make improvements to its product offerings. We believe those first steps are complete and it is now up to management to execute its growth strategy plan going forward.

Research

Wed, 24 Apr 2019 15:08:26 GMT

We were able to interview Stereotaxis Inc (OOTC:STXS) ($2.05, $121.4m market cap) management and are now even more confident in our decision to add the stock to our Top 5 favorite list, which replaced Cas Medical Systems, Inc. (NASDAQ:CASM), a now former favorite that was agreed to be acquired by Edwards Lifesciences at a 20% premium from our original long disclosure of $2.00.

We feel there is a near term positive catalyst in the company’s coming attendance of the Annual Heart Rhythm Scientific conference on May 8 to 11, 2019, where we think they will be unveiling new product offerings. The Company’s Q4 conference call included the following commentary:

“There are other meaningful innovations at Stereotaxis done internally and in collaboration with others, which we have not yet shared publicly. We will showcase these innovations and expect to launch some of them in May at the Heart Rhythm Society's annual conference, the largest global gathering of electrophysiologists. We have had the opportunity to show our progress confidentially to select industry and hospital partners. We are very pleased by the reactions we have received and are confident that our strategy is sound.”

Our prior research notes on STXS discussed how new its management team joined the Company a few years ago to shore up the Company’s balance sheet and make improvements to its product offerings. The Company is now at a point where it does not need to raise any funds for operations. It can now focus on entering the next phase of its turnaround process and look to double revenues over the next five years. The company was not focused on growing revenues in the first phase of the turnaround.

Like CASM, we believe that STXS has a best-in-class product and a first class management team. However, while CASM could not boast a uniqueness of its own product (from a competition standpoint), STXS management claims there are no other direct robotic competitors for their particular focus in the treatment of abnormal heart rhythms.

Research

Mon, 18 Mar 2019 14:37:49 GMT

STEREOTAXIS INC (OOTC:STXS) ($2.30; $136.3M market cap) designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally. Shares of STXS hit a new 52 week high of $2.40 in Friday’s trading session on the heels of news that it has integrated technologies with Acutus Medical to treat arrhythmias.

“The successful integration of the Stereotaxis and AcQMap systems allows physicians and patients to seamlessly receive the benefits of both world class technologies,” said David Fischel, Chairman and CEO of Stereotaxis. “Using Stereotaxis’ robotic technology, electrophysiologists are able to enjoy the benefits of unparalleled patient and physician safety and exceptional catheter stability, all while seated away from the x-ray source in the control room. Our collaboration is premised on a shared vision that open ecosystems – stimulating collaboration and increasing choice – are positive for patients, physicians, providers, and medical progress.”

Research

Tue, 12 Mar 2019 16:50:05 GMT

STEREOTAXIS INC (OOTC:STXS) ($2.04; $120.9M market cap) designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally,announced Q4 2018 results:

Sales of $7.3 million vs $7.5 million in the prior year
Loss of $0.02 vs a loss of $0.13 in the prior year

“We have made meaningful progress on our strategic innovation initiatives and look forward to showcasing our progress in the second quarter at the Heart Rhythm Society meeting. The collaborations announced over the past year reflect just a portion of the relationships we are building across the industry. We are confident that our innovation strategy is clinically and commercially sound, will provide significant benefits to patients, physicians and hospitals, and will substantially increase Stereotaxis’ opportunity.

We achieved record recurring revenue for the year while establishing the foundational commercial infrastructure crucial for ensuring the success of robotic electrophysiology practices. With this commercial infrastructure now in place we have begun more actively engaging with customers to help them showcase their clinical and technological leadership. We expect this to create the right environment for increased demand for robotics, and combined with specific innovation, to support a return to more robust system revenue.”

The company is at a very pivotal point in their transformation now. The goal is to increase revenues and and reach consistent probability now that the recurring revenue continues to become a bigger part of their overall revenue. We're still not impressed with the recurring revenue growth. That's something we need to dig into a little bit. It seems they've been putting partnerships and relationships in place over the past few quarters to get ready for revenue growth.

We plan to be on the conference call at 10 a.m. to identify any information arbitrage that was not present in the press release.

On October 24, 2018, we added STXS to our Medical Device screen when the stock was trading at $1.25. You can see our original note here. We established a long position and added STXS to our Mock Takeover and Mock Favorite portfolio on February 25, 2019.

Research

Mon, 25 Feb 2019 16:17:55 GMT

Established Long Position In STXS; Adding to Mock Takeover and Mock Favorite Portfolios

STEREOTAXIS INC (OOTC:STXS) ($2.06; $121.8M market cap) designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally.

On October 24, 2018, we added STXS to our Medical Device screen when the stock was trading at $1.25. You can see our original note here.

On Friday, shares broke out to new highs, hitting $2.35 during the trading session. We encourage you to read a January 30, 2019 Seeking Alpha article tilted, “Stereotaxis: A Leader In Robotic Heart Surgery Is Ripe To Be Acquired”.

The author lays out different price target valuations ranging from $3.35 to $5.23 based on price/sales and EV/sales multiples of publicly traded competitors, as well as recent acquisition activity in the space. We also ran similar valuation scenarios with what we feel is a more accurate capital structure, which resulted in a range of $3.27 to $4.56.

We wanted to interview management prior to establishing a position to obtain a better understanding of the company’s capital structure (share count goes from 59 million to 100 million due to preferred stock) as well as if recurring revenue will begin to accelerate (only 4% recurring revenue growth). However, due to the breakout, combined with the research we have already done, we decided to establish a position. We are looking to interview management this week.

The theme of this company is similar to that of CASM, in which a new CEO joined the Company to streamline operations and focus on a recurring revenue model, as well as address some missteps that prior management had made.

The reason we were able to overlook the weak capital structure in CASM when we bought the stock was due to confidence in the CEO, best in class product, positive industry tailwinds and the company operating in an industry which has seen significant acquisition activity at premium multiples. We believe the same situation may be present with STXS. It is worth noting that like CASM, STXS has preferred stock outstanding which makes the capital structure a little messy, but unlike CASM, the Company has no debt and an overall cleaner balance sheet.

Overall, we believe we are finding the stock at a growth inflection point and that the Company will not have to raise anymore funds to execute its growth plan in the near term.

Some quotes from the recent press release and conference call:

On financing needs:

“The Company continues to expect moderate increases in operating expenses as it invests in strategic innovation initiatives. The benefits of these initiatives are expected to meaningfully contribute to revenue in 2019 and beyond. Stereotaxis' balance sheet will allow the Company to deliver on its commercial and innovation initiatives over the coming years and reach profitability without the need for additional financings.”

Growth outlook:

“The 3 guiding goals of our innovation plan are improving patient care, improving physician choice and improving the availability of our technology. The right innovation plan can provide these benefits to patients, physicians and hospitals, while also improving Stereotaxis' opportunity. Our innovation plan will more than double the annual revenue opportunity for Stereotaxis in just our existing commercial footprint of active hospital customers and should support meaningful growth in our commercial footprint.”

Industry relationships:

“In the second quarter, we announced an extension to our development alliance and supply agreement with Johnson and Johnson's Biosense Webster and a new collaboration with Acutus Medical, a San Diego based private company with an innovative cardiac mapping system.”

Our goal is to understand these relationships better and see if any of these companies could be potential suitors for STXS.

Research

Wed, 24 Oct 2018 14:56:17 GMT

STEREOTAXIS INC (OOTC:STXS) ($1.25; $73.7M market cap) - We are adding STXS to our Medical Device screen. The company designs, manufactures, and markets robotic systems and instruments for the treatment of abnormal heart rhythms in the United States and internationally.

After years of declining revenues, on the surface STXS does not seem to appealing. However, we encourage you to listen to a recent presentation where management discusses its failure to grow and how they now believe they are entering a growth phase. Here is a link to the audio presentation as well as the most recent investor presentation (Q4 investor presentation).

At around the 14 min mark, management talks about its past struggles and how they feel they are in a better spot to becoming a growth company. 2017 was the first year of growth for the number of procedures performed by the company since 2012, and STXS is on pace to report record recurring revenue for 2018. We plan to dig into the STXS story further, but here are a few reasons of optimism:

Over 80% of revenues are recurring revenue
Gross margins north of 75%
Clean balance sheet; $12 million in cash with no debt
Selling at low Price to sales of 2.4

We are still early in our due diligence process, and it is likely the next two quarters will show flat to down topline results. However, the direction the company seems to be heading is encouraging.