Little Known Surgical Robot Stock Mazor Robotics
Last month we wrote about 10 companies building surgical robots. There were at least 3 key takeaways from that article as follows:
- There is a lot of money to be made in this space. Investors in the biggest publicly traded surgical robot company, Intuitive Surgical (NASDAQ:ISRG), made a return of +3,687% over the past 16 years.
- Dismiss any notions you might have of actually being operated upon by an autonomous robot. Surgical robots are always assisted by humans at the present time.
- The majority of exciting surgical robot companies are private and there aren’t many pure-play opportunities for retail investors in this space
In light of this information, we were pleasantly surprised to discover a promising surgical robot stock recently, Mazor Robotics (NASDAQ:MZOR), which may be worth a closer look for retail investors.
Founded in 2000, Israeli company Mazor Robotics has a flagship spinal surgery system called the Renaissance which has been used to perform over 16,000 procedures worldwide, many of which would not have been possible without their technology. In 2014 they introduced the Renaissance for brain surgery and continue developing the platform for additional spine and brain surgery procedures. In May of this year MZOR stock nearly doubled when Medtronic (NYSE:MDT) entered into an agreement with them, the highlights of which are as follows:
- There is a U.S. based co-promotion phase which involves MDT buying 15 surgical robot systems in 2016
- If all milestones are met by end of 2017, Medtronic assumes exclusive global sales rights for MZORs spine products
- An $11.9 million investment is being made by MDT along with 2 follow on investments capped at $20 million apiece
Now to put this into perspective, today MZOR has a market cap of around $500 million which means Medtronic is 244X bigger. When a company that size makes an investment in a micro-cap like MZOR, that is a very positive sign. Provided all the milestones are met, MDT would own around 15% of MZOR when all is said and done. With around $12 billion in cash on their books, it’s not farfetched to think that Medtronic could just easily acquire MZOR in the future.
Even before the news of the MDT agreement, MZOR wasn’t exactly sitting on their hands. Here’s a look at their basic financial numbers over the past 5 years:
MZOR is sitting on $13 million in cash and has no debt. Just to get an idea of where these revenues are coming from, MZOR has a total of 108 active surgical robot systems installed globally with 64 of those systems installed within the United States. Anywhere from 30-40% of their total revenues are coming from sales of disposables and services.
The recently signed agreement with Medtronic proposed that in the next 4 years MZOR could potentially sell “100s” of their systems through Medtronic sales channels. If we assume that this means at least 200 systems then that would mean MZOR would need to build 50 systems a year. In 2015 they only sold 23 systems while in 2014 they sold 20 systems. Essentially they would need to double production capacity and we’d expect to see revenues double as well. With Medtronic’s deep pockets, it doesn’t seem likely that MZOR has to worry about funding going forward and consequently there isn’t a great deal of pressure to achieve profitability. It’s all about hitting those milestones with Medtronic.
MZOR has been trading on the Tel Aviv stock exchange since 2007 and in 2013 began trading on NASDAQ. Shares are up +138% in the past 6 months and are steadily climbing. While the Medtronic news is great, don’t forget that MZOR will be putting all their eggs in one basket with a potentially “exclusive” agreement with MDT down the line.
Here at Nanalyze, we complement our tech investments with a portfolio of 30 dividend growth stocks that pay us increasing income every year. Find out which ones in the Quantigence report freely available to Nanalyze subscribers.