2023-10-27 11:12:40 ET
Summary
- Today we look at RxSight, Inc., a small ocular focused medical device company focused on transforming the cataract surgery market.
- The company is delivering 70% year-over-year revenue growth and rapidly expanding its installed base.
- After a big rally early this summer, the stock has given up a third of its value during the overall selloff in the market that began in August.
- Is it time to "buy the dip" in the shares of RxSight? An analysis follows below.
What we see depends mainly on what we look for. " - Sir John Lubbock.
Today, we put a small ocular-focused medical device company called RxSight, Inc. ( RXST ) in the spotlight for the first time. As can be seen in the chart below, the stock had a massive run-up early this summer but has fallen by more than a third since the start of August as the overall market has now officially hit a "correction." Where does RxSight go from here? An analysis follows below.
Company Overview:
This small medical device concern is headquartered in Aliso Viejo, CA, just outside of Anaheim. The company is focused on the development and sale of light adjustable intraocular lenses used in cataract surgery. The stock currently trades just above $22.00 a share and sports an approximate market capitalization of just under $800 million.
May Company Presentation
May Company Presentation
The company's vision (pun intended) is to transform the large and growing cataract surgery market which is currently dominated by procedures that use non-adjustable lenses. RxSight has the first-only adjust lens solution which offers many benefits (see below) over the long-time standard of care.
May Company Presentation
May Company Presentation
RxSight has a razor and razor blade business model. The company sells its RxSight Light Delivery Device (LDD) system that utilizes its intraocular lens ((IOL)) technology. This enables doctors to customize and optimize visual acuity for their patients after cataract surgery. It also sells the lenses and consumables used in the process.
May Company Presentation
Second Quarter Results:
On August 7th, RxSight posted its second quarter numbers . The company delivered a non-GAAP loss of 28 cents a share, 11 cents above estimates. Revenues soared just over 80% on a year-over-year basis to $20.8 million, beating expectations by some $1.5 million.
The company sold 67 Light Delivery Devices in the quarter and ended the quarter with an installed base of 523 LDDs. This up 37% and 78% over Q2 2022, respectfully. RxSight also sold 12,622 Light Adjustable Lenses to accommodate the 134% volume growth of procedures on a year-over-year basis. Operating expenses rose $5 million to $25.6 million from the same period a year ago.
Management bumped up its FY2023 guidance range by $2 million to between $81 million to $86 million, which would represent 70% growth at its midpoint.
Analyst Commentary & Balance Sheet:
Since second quarter results were posted, four analyst firms including Oppenheimer and JP Morgan have reiterated Buy ratings on the stock. Price targets proffered ranged from $31 to $36. Wells Fargo maintained its Hold rating and $31 price target on the shares.
Just over five percent of the outstanding float in the shares are currently held short. An insider sold approximately $2.5 million worth of shares in the high $20s/low $30s in August and September. It was a profitable trade given the same insider bought $6 million shares in February at $12.00 a piece within a $50 million capital raise .
The company ended the first half of 2023 with just over $147 million in cash and marketable securities on its balance sheet. The company posted a GAAP net loss of $13.8 million during the second quarter.
The company also raised $19.4 million in proceeds through the sale of common stock under its ATM facility. $20 million of cash was used to reduce debt during the quarter. According to the company's second quarter 10-Q , RxSight had a net balance left on a term loan of just over $19.5 million. At the time RxSight reported its second quarter results in early August, it had already raised an additional $11.9 million in the third quarter using this facility.
Verdict:
The company lost $2.41 a share in FY2022 on $49 million. The current analyst firm consensus has losses falling to $1.69 in FY2023 as sales rise over 70% to $84 million. They project sales growth of just over 35% in FY2024 and losses falling again to $1.44 a share.
May Company Presentation
RxSight is delivering impressive sales growth and targeting a lucrative and fast-growing market. I am impressed with RxSight's technology, and I would use it if/when I ever need cataract surgery. I also believe the company's business model is solid.
The challenge for investors is the company is delivering impressive growth but is unprofitable and will remain so for at least a couple years more. Not exactly the type of stock that has rewarded as interest rates have moved up in recent months and the market has become more uncertain.
I also don't care for the dilution RxSight, Inc. is enabling through the consistent use of its ATM facility. Therefore, I am going to pass on any investment recommendation on the stock despite the company's ' best of breed' technology. Once the market environment gets more supportive and/or RxSight's cash burn rates get significantly reduced, this is a name we will revisit as I like the company's story and target market.
The only thing worse than being blind is having sight but no vision ." Helen Keller.
For further details see:
RxSight: Losing Altitude Despite 'Best Of Breed' Platform