Second Sight Medical Products
Second Sight Medical Products (EYES) saw a boost in its stock price yesterday on no company-specific news releases, although healthcare-related stocks have shown relative strength of late thanks to M&A activity and positive trial results. EYES was a high-flyer out of the gate, soaring by 167% versus its IPO price just two days after its debut on November 19, as momentum money drove the stock higher. As we discuss below, it has an exciting, potentially break-through product, and the company is backed by a well-known billionaire. But, with the meteoric rise, the stock became a target of short sellers, pouncing on a company with little revenue at this point. Yesterday’s sharp rebound was likely the result of some short covering, rather than any pure fundamental catalyst.
For some more background on EYES, the company develops implantable visual prosthetics to restore some functional vision to blind patients. Its current product is called the Argus II System, which treats outer retinal degenerations, such as retinitis pigmentosa (RF).
The company was created by Alfred Mann, a name that may be familiar to some. He is also the CEO of MannKind Corporation (MNKD), a company developing therapeutic products for diabetes and cancer. He is also a major stakeholder in EYES, owning 11.3 million shares, or 42% of total shares before the offering. The fact that a well-known billionaire, who helped guide MNKD to FDA approval for its Afrezza inhalation product, is significantly backing the company helps bolster investor confidence.
Circling back to its Argus II system, it is the only retinal prosthesis approved in the U.S. by the FDA (received approval in 2013), and it also has marketing approval in Europe. While it does not restore normal vision and it does not reverse the progression of the disease, it can restore some functional vision in patients who otherwise would have total sight loss. For instance, EYES says that it can improve a patients’ orientation and mobility, allow patients to feel more connected with people in their surroundings, and provide patients with enjoyment from being visual again, allowing people to track groups of players as they move on the field, as an example.
As of the date of its IPO prospectus (11/14/14), EYES had implanted about 90 Argus II units. The average implant duration for these patients is 2.9 years with several users continuing to use the system more than seven years following implantation. Over the next 12 to 18 months, EYES intends to introduce the Argus II System in countries other than the US and Europe. It also plans to conduct a clinical study that is intended to demonstrate the safety and efficacy of the Argus II System for the treatment of age-related macular degeneration, which is the leading cause of blindness in people over the age of 65 in developed countries.
To date the company is not generating a profit, with an operating loss of ($13.7) million over the first nine months this year. Revenue was just $1.9 million, up from $1.0 million in the year ago period. Of course, light revenue and large losses is typical for early stage developmental biopharmaceutical companies. As of Sept 30, 2014, it had a cash balance of just under $1 million, which is primarily from the remaining proceeds from the offering. As of this post there are no estimates for future earnings and revenue figures.