Shares of the medical imaging company Nano-X Imaging (NNOX) have been surging following a recent regulatory clearance from the U.S. Food and Drug Administration (FDA). The FDA has broadened its approval range for Nanox’s core medical device, the Nanox.ARC will include applications like pulmonary and intra-abdominal images, among others. This further adds to the utility of the groundbreaking tomographic imaging device, catapulting it to the forefront of the company’s services, which include teleradiology and the development of AI applications meant for practical medical imaging applications.
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Thus far, Nano-X has yet to gain profitability, a common occurrence with early-stage medical device stocks. However, the outlook remains positive, and this recent news from the FDA is a potential catalyst for the firm to turn the corner. It is a higher-risk opportunity, but investors interested in growing medical technology stocks might find it appealing.
Nano-X Expands Its Services
Nano-X Imaging specializes in tomographic imaging technology, teleradiology services, and artificial intelligence applications for medical imaging. Its ecosystem is a comprehensive suite of tools designed to revolutionize medical imaging. It includes Nanox.ARC is a user-friendly and cost-effective digital X-ray source; Nanox.AI is an AI-driven platform that enhances routine CT scans by detecting early signs of chronic diseases; CLOUD is a cloud-based platform for managing and storing data and providing in-depth imaging analysis tools.
Further, through its subsidiary, USARAD Holdings Inc., Nano-X has developed a decentralized marketplace, Nanox.MARKETPLACE, for remote access to radiology and cardiology experts and a broad teleradiology services platform.
The company has received FDA 510(k) clearance for its Nanox.ARC to expand its imaging services to include pulmonary and intra-abdominal images. The Nanox.ARC features a proprietary digital X-ray source, representing a significant advancement in X-ray technology.
The clearance permits the company to provide U.S. healthcare providers with a cost-effective solution that offers advanced diagnostic imaging capabilities and potentially improves overall patient care. It is currently deployed across various healthcare facilities in seven states in the U.S., and dozens of units are in various stages of shipment and deployment worldwide.
Nano-X’s Posts Mixed Financial Results
The company recently posted mixed financial results for the third quarter of FY 2024. Total revenue for the reported period was $3.0 million, reflecting 22% year-over-year growth from $2.5 million, though it missed analysts’ expectations. Earnings were primarily generated from teleradiology services, sales of imaging devices and services, and the sale of AI solutions, with revenue from teleradiology services witnessing an increase due to customer retention and an increased volume of the company’s reading services. However, the revenue generated from the sale of imaging systems experienced a considerable drop, from $99 thousand to $29 thousand in the reported period.
The company also reported a GAAP gross loss of $2.8 million and a non-GAAP gross loss of $0.2 million. The net loss of $13.6 million improved compared to a net loss of $21.4 million for the same quarter in 2023. Non-GAAP earnings per share (EPS) were -$0.15, which aligned with analysts’ expectations.
As of the quarter’s end, the company reported $57.1 million in cash, cash equivalents, restricted deposits, and marketable securities. At its current cash burn rate, the company will likely need to seek additional funding in the next two years, which could dilute current shareholders.
NNOX Unlocks a Significant Market
Like many early-stage medical device stocks, the slightest positive news can send shares soaring, and in the past five years, the stock has seen its share price reach almost $90 only to cascade down to $5 – a white knuckle ride most investors are ill-equipped for. The stock is up over 31% year-to-date and shows ongoing positive momentum as it trades above all major moving averages. It sports a rather large P/S ratio of 45.5x relative to the Health Care sector average of 3.8x, though it won’t take much movement in the denominator to improve that ratio significantly.
Analysts following the company have been bullish on NNOX stock. For instance, Cantor Fitzgerald’s Ross Osborn recently reiterated an Overweight rating on the shares while raising the price target to $12 (from $11), noting the FDA 510(k) has unlocked a significant market, with around 50% of existing leads contingent on the expansion for chest scans.
Based on recent recommendations from three analysts, Nano-X Imaging is rated a strong buy overall. The average price target for NNOX stock over the next 12 months is $12.33, representing a potential upside of 60.13% from current levels.
NNOX in Review
Nano-X Imaging’s recent FDA clearance for additional uses of its Nanox.ARC medical imaging device has spotlighted this early-stage medical technology company. Despite the company not being profitable, the significant advancements in technology and clearances for expanded use have the potential to drive future profitability. NNOX presents an intriguing opportunity for those interested in investing in growing medical technology and prepared to assume the risk.
