Ekso Bionics Holdings, Inc. (NASDAQ:EKSO) has been gradually climbing up the charts this week. The company opened on Monday somewhere in the region of $3.50 a share. By Wednesday close, it has put in highs just shy of $5.30 dollars a share – a more than 50% gain in a matter of days. Volume has increased dramatically, perhaps not unexpectedly, and it looks as though this large increase in volume is (at least from a driving perspective) behind the gains.
The question is, however, what’s behind the volume? And further, can Ekso continue to climb as we head into the final quarter of the year and beyond? Let’s take a look.
First up, let’s kick off with a brief introduction.
We first highlighted Ekso as being a potential momentum play in the middle of August, and for those looking for a detailed description of the company and its operations, it might be worth taking a quick look at this article. For those not wanting to click away, Ekso is a healthcare company with a focus on developing and commercialization of what it calls exoskeletons. Essentially, these are wearable technologies that help a person, who otherwise might not be able to, walk or move around in an upright fashion. The primary market for this kind of technology is in patients that have suffered strokes (and that are in a wheelchair as a result of cognitive/motor function impairment) and patients with some degree of spinal trauma (and resulting paralysis).
The company’s primary product is called the EKSO GT system, and Ekso is targeting a sales push towards both of the above mentioned market areas – stroke and spinal trauma. The problem is, that these systems are expensive to both build and purchase, which makes them equally expense to sell. When we first highlighted the company, we noted that a then-recent raise of $13 million would improve Ekso’s fire power from a sales perspective, and would likely boost numbers throughout the latter half of the third and the full fourth quarters of this year.
Without any real operational updates reported between then and now, it’s impossible to say whether our thesis surrounding an improved sales push is correct. We can say, however, that a couple of key developments point towards this prediction as being true.
The first, comes by way of a number of presentations given earlier this month at the leading spinal cord injury conference, the ISCoS Annual Scientific Meeting. The company maintained a strong presence at the conference, which is generally attended by some of the big names in the space, both companies and physicians. The data presented reinforces the efficacy of the systems in question, and will likely have been a supporting tool for the company’s sales force across the last month or so. Combine this with the increased awareness that comes from a strong lead conference presentation, and we expect good things.
The second comes from a large scale insider transaction that took place just this week. On September 28, 2016, Ekso CEO Tom Looby picked up 220,000 shares of common stock by way of an options exercise at $4 a share. Of course, we can’t tie this exercise directly to anything specific from Looby, but that a CEO is picking up such a large exposure ahead of earnings due during the end of next month or early November, suggests there’s something positive in the pipeline.
By way of risk, we revealed our considerations last time, and we are going to reiterate them here. The primary risk revolves around cash position. Cash before the company raised the above-mentioned $13 million net came in at a little over $4 million, so cash on hand (taking into consideration a burn of around $5 million quarterly) is probably somewhere in the region of $9-11 million – assuming a slight bump in sales costs with the added push. This is nowhere near enough to drive a sales wave of a multimillion dollar product for more than a few quarters, and dilution is almost certainly going to be an issue as we move forward into mid 2017 at the latest.
The hope is, that the company’s sales numbers can push up its valuation enough to offset the value lost through dilution. It seems that the CEO certainly thinks so, and given the other publicly available information, this is enough for us to reiterate our bullish near term momentum bias.
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Disclosure: We have no position in EKSO and have not been compensated for this article.