Sum It All UpA lot has happened in the last few months, and I will attempt to sum things up here. Pleae feel free to add any reasonable facts/analysis.
Positives:
- Best-in-class product: almost a "dream" sterilizer for sterilization departments--higher throughput, faster (if we include instrument sorting time), less error prone with its one cycle operation, ability to sterilize scopes that improve patient care and decrease hospital liability, cheaper on cost per instrument, "futureproof" your SPD for where the upcoming regulations/guidelines will go
- Competitive moat: patents and FDA approvals help protect this best-in-class profile from copycats
- Getinge has worldwide reach to push this revolutionary product (at least on paper)
- I personally like the strategy behind RR's commercialization so far, but this is a huge area of debate on this board
Negatives:
- Distribution partner uncertainties: Getinge contract renewal vs. change partner. Also no guarantee Getinge can get their act together if they re-sign the deal
- Cash level: $10mm left with another $3mm+ burn in Q2
- Has to fight big companies with entrenched positions for market share
- Heavy institutional selling: this is what I can confirm from filings and other people that occured in 2018--Fidelity (-1.7mm+), IG (-1.5mm), Sprott (-1.9mm). This does not even include any potential sale during the most recent high volume days on duo approval. Various reasons for this: PM change (Ninepoint, IG), size too small for fund? (Fido--TSO3 is only 0.1% of fund now and market cap below mandate guidelines)
At the end, there is plenty to both bulls and bears to hang their hat on:
- Bears: stock price will not go anywhere near-term until these institutionals are done selling, and the distribution deal finalized (with whatever party). The possibility of dilution looms unless management can find some non/less-dilutive financing from partnership, debt, convertible debt
- Bulls: long-term value proposition actually became stronger with the duo approval, and valuation is so undemanding (just tax shield + tax is worth $45mm or 50c/share) that makes risk/reward very favorable. Secular trends also favorable (regulations, guidelines, low-temp market growth)
So, if you are a short term trader, no need to get involved here. If you have a long term holding horizon (1-3yrs), I see this as probably the best opportunity I have seen in my 20yrs of professional investing experience.