2023-04-06 11:25:44 ET
Summary
- What happened to our best new idea for 2023 in Q1?
- What’s left?
- Infrastructure and life sciences updates.
Innovate Corp. ( VATE ) remains our best new idea for 2023 . Shares rose over 50% in Q1, but this is a leveraged equity; they could have just as easily declined by the same amount. Neither necessarily means all that much.
Infrastructure
Their infrastructure subsidiary is performing okay. Margins range from 6-8%; they’re currently somewhere in the middle. That business isn’t great but it is good enough to service the debt. They made their February coupon payment and have enough capital for the next few quarters. VATE has a $330 million 8.5% 2026 bond outstanding that last traded 77.25-.77.5, which indicates the market’s wariness about their ability to pay.
Life Sciences
This is what I own VATE for. While Infrastructure keeps the lights on, Life Science is where there’s upside. For example, MediBeacon is working productively with the FDA to get approval for their TGFR system this year. That is one of several products that could be a bonanza for patients as well as shareholders.
6 Milestones to Watch for in 2023
- $32 million in HMN put obligation net cash proceeds
- MediBeacon TGFR US Pivotal Study done and PMA submitted to FDA
- Tax Benefits Preservation Plan expiration
- Margins up at DBM after underpriced COVID-era contracts roll off
- MediBeacon FDA Approval for TGFR System
- Commercialization ramp of R2’s Glacial Rx device.
25% of the way through the year and we’ve achieved the first milestone. The cash was received . MediBeacon is well on their way to achieving their two milestones by year-end. They have begun a follow on study that presupposes the success of their main TGFR US Pivotal Study. Glacial RX is on track for its commercialization ramp. The company chose to renew the poison pill. I dislike all poison pills including this one but I like that they consider it necessary. It goes until the fourth quarter. I don’t intend to vote to approve its extension.
Conclusion
After the first quarter, VATE’s $4 price alert remains current. I stand by its note:
Innovate ( VATE ) is a hold co for a rando hodgepodge of non-cross collateralized assets. It could be worth $15-20/share and that value could be unlocked in 2023. Buying VATE under $4 per share is StW’s best new idea for 2023… and perhaps our best idea ever. Details .
TL; DR
VATE remains my best new idea for 2023.
For further details see:
Best New Idea: Innovate