Nova Eye Medical (EYE) Discussion

A MULTI-BILLION DOLLAR OPPORTUNITY (potentially)

There is such a big opportunity for EYE here with a very young and rapidly growing market. If iTrack Advance manages to tick the boxes the share price could easily go above a $1bn market cap. That combined with the only treatment for iAMD and we are easily looking at a multibillion dollar company. Given both iTrack and 2RT (especially) will have revenues which are essentially recurring (ie itrack devices can only be used once and 2RT has a pay per use fee structure) the valuation multiple could be huge.

Let’s hope these funds raised are the key to unlocking the growth potential of MIGS and delivering 2RT to the market. I liked the fact that there was more clarity on iTrack Advance (eg delays are related to admin not efficacy/safety issues) and it seems like progress is being made with 2RT so I have decided to bite the bullet and increase my position quite substantially during this recent price fall! At 18c this company is an absolute bargain. Now that I am so heavily invested I will try to spend more time in these forums providing insights from my own research on the company and industry.

iTrack for Glaucoma

I think the most important thing to determine first is whether or not iTrack Advance is sufficiently better than alternatives to cause doctors to shift from iStent and Omni et al. I would definitely be keen to hear what others have to say. There needs to be a big enough difference if we are to expect doctors to shift from other devices to iTrack. There is definitely the advantage of being the only device that does full 360 degrees canaloplasty (Omni can only do 180 at a time). I would like to know how much time this saves (eg time saved from not having to re insert device to do the second 180 degrees). There is also the advantage of having the navigation light. Once again, I would like to know how important this is, from videos it still seems like the Omni device is quite visible even without the light. Then there’s the comparison to stents, which is much more tough. There are some in the industry who suggest that stents and canaloplasty can be combined for better results, which would mean that iTrack doesn’t need to be superior to stents.

2RT for iAMD

For me, 2RT is not important at the moment. The valuation of the company clearly does not incorporate 2RT and I can’t see why it should anytime soon. This definitely de-risks the company and we are essentially getting a free option to benefit from 2RT by investing in iTrack with very little to no risk (from the 2RT side). This is what the E&P report (below) essentially argues in its $1.30 valuation (which I agree with). Certainly, 2RT is a massive opportunity and it would certainly put the company in the spotlight. I would say that any positive clinical data or a good valuation (based on the partners investment) could see a significant re rate, but we will have to wait and see as so far the market has failed to even co sided the existence of 2RT in its valuation.

Management

Whilst we can definitely question some of the actions taken by management, it is true that the FDA can be a massive pain to deal with, so we shouldn’t write off the management team on the basis of the delays. With the capital raise, a SPP would have been greatly appreciated however in reality, there are very few retail holders so this would have likely failed to raise much money. These guys have been with the company for ages (with Ellex prior to EYE) and are probably best suited and best experienced to drive growth. They are not paying themselves massive salaries and other compensation (unlike most companies that are the same size as EYE) which is a very good sign of a solid management team who put shareholder interests first. It would be nice if they were buying more shares on market but it’s up to them to decide where they would prefer to invest their own $$. Their forecast of relatively high growth for this past financial year has been spot on, so I see no reason to doubt their optimism about the company’s future prospects.

The op-ex is not unusual, and all other companies in the MIGS space are operating at huge losses and spending huge amounts of money on marketing so it is probably an unavoidable part of being in a high growth and very young industry. This should improve in the years to come and I expect that this will be an extremely high margin industry.

What I took from the recent presentation:

• Certainty around the clearance of iTrack Advance (the reason for delays was purely admin related so nothing wrong with the device itself)
• Massive growth (>100%) in China (which is a market we operate alongside just one other product), iTrack Advance could potentially be the dominant MIGS device in Asia given the lack of competition relative to Europe and the US
• Canaloplasty (a market in which iTrack pioneered) is set to be the highest growth segment of the ophthalmic market
• iTrack Advance will be accessible to 50x the number of doctors compared to original iTrack which could see revenues grow exponentially (well above the industry forecasted CAGR of 20%)
• Confirmation that talks with partners for 2RT has progressed. There is clearly interest and EYE is currently in talks with multiple potential candidates (which could see partners bidding up the offer price)
• Increased focus on commercialisation of 2RT: looks like the company is seeking ways to accelerate the process to commercialisation
• 2RT is a US$600m p.a opportunity (arguably a conservative estimate)
• Seeking ways to minimise production costs and thereby improve margins (reducing need for future cap raises)

What I’m looking for going forward:

• Clearance for iTrack Advance before the end of this month (March 2023)
• Data on the number of NEW doctors who have expressed to use iTrack Advance (ie not existing iTrack users but new customers)
• A partnership for 2RT in the near term, but not if it is at the expense of a good deal (they should continue negotiating for the best possible deal given how groundbreaking of a treatment 2RT is)
• Reduction in cost base (would like to hear what their strategy is to reduce costs)
• A clear target year to be profitable (would like management to follow in the lead of other similar companies and set a year in which they intend to be profitable, as well as a clear path to profitability)
• More customer data in presentations would be great (eg data on the number of recurring customers, data on number of new customers etc.)