by Travis Johnson, Stock Gumshoe | September 29, 2016 2:19 pm
This teaser ad from the Oxford Club stands out as being much more deeply personal for them than others — that’s because it’s about one of their editors, David Fessler, who has apparently been in a wheelchair since a swimming accident a few years ago… and is “finally walking again” thanks to a “miracle device.”
Which is wonderful, of course — but will that “miracle” really mean that “shares could launch from $4 to $65” for their favored stock? Let’s look into it, see if we can identify the stock, and give you a chance to think about it rationally. That way, you won’t have to cough up $6,400 to join their “Chairman’s Circle” and then perhaps feel like you have to buy a gajillion shares of the stock just to convince yourself that you didn’t make a mistake.
Here’s how the ad gets us thinking about the investment potential:
“Miracle Device That Can END Paralysis…
“The Company That Designed This Breakthrough…
“The oxford Club Reveals Why Shares Could Launch from $4 to $65 Over Time… but You Have to Get In by October 11.”
I’m going to go out on a limb and guess that the October 11 bit is a bit of hyperbole. Newsletter ad copywriters know that you won’t subscribe unless there’s an urgent and immediate reason to do so, which means they almost always throw in an imminent catalyst that’s expected over the next month or so. One of the rules of marketing is that letting people take their time and think things over is bad. You’re never more likely to type in those credit card numbers than in the immediate first flush of excitement you have when you read a feel-good or get-rich-quick ad.
But who knows, maybe there is something coming on October 11… we’ll check.
There’s a long story about Dave Fessler’s injury, recuperation, and supportive friends at the Oxford Club — but the real point is the “supersuit” that he has used in his rehabilitation, and the way it lets him walk around. Here’s a bit from the ad:
“With this device, you’ll see Dave no longer need a wheelchair – he’s up and walking around.
“Not just walking… but exercising… even kicking around soccer balls.
“In short, when Dave’s wearing this carbon fiber ‘superhero suit,’ it’s almost like he’s his old self again – the guy who used to ride 100 miles on his bicycle.
“It’s giving him a real chance to get his life back.
“And it’s not just Dave… but also the 375,000 people with spinal cord injuries this year… and the 10.2 million who suffer a debilitating stroke.
“Plus many of the 3.6 million U.S. veterans who are currently disabled… and the 110 MILLION disabled people worldwide.”
So that’s a large market, obviously — even if your friends and family are all fortunate enough to be able-bodied and not reliant on wheelchairs or other support, you almost certainly know someone in a wheelchair, and we all see wheelchairs every day. It’s pretty easy to put a face on the numbers, even if you don’t know Dave Fessler.
The device they’re talking about is a type of robotic exoskeleton that you wear, and those have been around for a while in testing and in rehab hospitals, but there are a few different companies who work in this area. So which one made the suit Fessler used to walk, and which stock are they touting?
Here are some more clues from the ad:
“A Miracle 10 Years in the Making
“It was 2005… in a small room on UC Berkeley’s campus…
“Three scientists in the robotics and human engineering lab came up with an idea…
“They were going to create a super-light carbon fiber suit that would make whoever wore it SUPERHUMAN.
“The suit could carry 150 pounds on the user’s back and it would feel light as a feather.
“Not only that, whoever wore it could walk for miles without the usual fatigue…
“And like they are for Superman, injuries could become nonexistent….
“The U.S. military and contractors such as Lockheed Martin came to see it in person….
“Since then, this company has received more than $35 MILLION from the Department of Defense.”
OK, so, like a lot of technological advances, this one got its start with military funding. What makes this particular company’s offering special or unique? Well, this caught my eye in the ad:
“This Suit Can ‘Predict’ What a Disabled Person Wants to Do…
“… even if you’re paralyzed, your brain still works just as well as it did before your injury.
“The problem is your body doesn’t react to the commands of your brain.
“But with this lightweight superhero suit on, your brain can command it to do the physical work… and it can allow you to walk again.
“Using computer software, it predicts what you want it to do….
“When you want to stand up, the computer then engages the motors in the suit.
“There are four motors in all – one at each hip and one at each knee.
“Just like your joints, they bend and react.
“And suddenly… you’re standing just as you once did.”
That sounds pretty cool, and they include some photos of Dave Fessler at his rehab clinic using the “suit” … and a few other examples of people who’ve seen miraculous results:
“Darren Mumford suffered a gunshot wound to his spinal cord in the British military.
“He was wheelchair-bound for nearly three years.
“Not anymore… he recently walked across the CNBC soundstage on live television!
“Christina Anderson was 31 years old when a drunk driver slammed into her car. Nine years ago, doctors told her, ‘You won’t walk again, no matter what.’
“She has completely defied all odds. Now she’s up and walking and proving she can do anything!”
And apparently the “suit” is being used pretty widely already:
“30 medical centers across the country are using it right now… Soon it could very well be hundreds… and then thousands.”
There’s some background in the ad that helps answer the “why would insurance pay for this” question, with indications that it reduces the negative impacts of wheelchair use (blood clots, atrophying muscles and lost bone density, reduced mobility and need for accomodations like ramps and wider doors, etc.)
And the Oxford Club folks also emphasize that this technology has other uses as well, like supporting manual laborers with “suits” that give them more strength or stamina at demanding jobs — that’s originally why a lot of this work was funded, because of the Department of Defense and their interest in figuring out how to help soldiers more easily haul their heavy loads.
There’s also a blue sky prediction about the massive growth that might be coming — someone has to put numbers to those dreams of the future, right? This is the one Oxford quotes:
“Nasdaq predicts that in the next five years, the market for ‘human augmentation’… should grow to $5 BILLION — a growth of 30,203%”
So… what other specific clues do we get about this stock?
“The market cap is about $80 million and it sells for just around $4 a share. A breakthrough like this at $4 a share is enough to get any investor excited. This is an early-in opportunity to watch your money explode in value very quickly.
“Of course, high reward also means high risk, as small stocks can be volatile. But if things go as we expect, you’re likely sitting on a blockbuster.
“You’re at the perfect crossroads of a company that’s established itself… but hasn’t seen its biggest growth yet.”
“Each paralysis-defying suit costs $100,000….
“375,000 people could benefit from these supersuits this year alone.
“That equates to around $37 billion in revenue.
“With more than 1 million disabled vets in the U.S. alone… that number could swell to $100 BILLION.
“Even if we’re conservative, imagine an $80 million company collecting $10 billion… $20 billion… or $30 billion…”
I’m not sure sure that the Oxford Club and I have the same definition of “conservative” … but you can make your own call on that. Other clues?
“It has virtually zero competition in this space and 17 airtight patents….
“It now has operations in England, Germany, Italy, Spain and Sweden. It’s handling its growth perfectly.
“It has only $180,000 in debt and more than $4 million in cash on hand, so it’s smartly managing its assets.
“After recently landing three military contracts, it’s positioned to nearly double its 2015 revenues.
“And best of all…
“It’s the ONLY company with FDA clearance. It received the seal of approval in April this year. It’s full speed ahead now.”
OK… so who is our mystery “super suit” maker? This is Ekso Bionics (EKSO), which has certainly been teased a few times before… it was pitched by the folks at Smart Tech Investor last year, and has been touted in free articles many times by Keith Fitz-Gerald over at Money Map Press.
Before you get too excited about the past interest in the stock, and the folks who might seem to have made fortunes based on buying it at 60 cents or $1 or $2 over the past few years, I should note that EKSO also did a reverse split earlier this year to comply with Nasdaq listing requirements… so the shares that were talked up at $1.20 or so by Jim Pearce last year didn’t rise in value to the current $5 or so. It takes seven of those shares from before this Spring to equal one share now, so last year’s price was actually more like $8.50. Even back in April, when Ekso got FDA approval for its exoskeleton, the shares were around $6.50.
Now, after a huge pop over the last few trading days that was almost certainly caused by the Oxford Club ad and/or recommendation to their subscribers (the stock has come down a bit today, but at one point yesterday the stock was hitting almost a 50% gain over two days), the shares are still well below where they started the year.
Ekso Bionics does indeed make an “augmented walking” exoskeleton, largely for use in rehab facilities, and it does have a different level of FDA approval than its competitors. The other “pure play” exoskeleton company that gets a fair amount of press is ReWalk Robotics (RWLK), and they also have FDA approval (they were first, they’ve had it for a couple years now), but their approval doesn’t include the same precise patient population (the biggest difference is that EKSO is approved for stroke victims with partial paralysis, ReWalk is approved only for spinal cord injury).
And there are others working in this area beyond those two “pure play” small caps — of particular note is Indego, which is owned by large-cap industrial engineering firm Parker Hannifin (PH). Indego got approval from the FDA this year as well, also for spinal cord injury. The other one that I see mentioned on occasion is not quite as advanced as those three, it’s Rex Bionics, which is a New Zealand company that trades on the AIM in London, and they’re still in pretty early clinical trials, don’t have approvals yet, and have a device that looks dramatically larger and more institutional (though perhaps it doesn’t require crutches like all the other ones do, which might justify the larger size). And there are at least a dozen other big industrial companies or little startups working on various kinds of augmented “suits” that use robotics for some purpose, though not always for walking.
If I were ReWalk or Ekso, I’d probably be most worried about Indego — having a $15 billion company and a huge amount of engineering experience behind you seems to me like it would provide some nice advantages, and Indego’s product is quite a bit smaller and lighter (and unlike the others, doesn’t rely on a backbacp). I don’t know what features will end up being most important to rehab facilities or to home users who purchase these devices (for what it’s worth, Ekso is not approved for home use but ReWalk and Indego are)
And though the estimates of the potential market in this first wave of adoption by rehab hospitals are indeed in the $2 billion neighborhood over the next five years or so (mostly not in the $10-100 billion neighborhood, but still pretty good), that’s still not at all a foregone conclusion. As with any big and expensive medical device, the key to wider adoption will be some combination of endorsement by medical experts, continued validation and improvement of their technology, FDA support for more uses, and, perhaps most importantly, reimbursement by both government and private health insurance programs.
I can’t tell you where this road leads, of course, but there is generally some growth potential in the market as these new devices get FDA approvals and go beyond “investigational use” and begin to get rolled out to (they hope) more and more rehabilitation hospitals and more and more patients. Whether that means there’s really a $2 billion market for powered exoskeletons like these in 2021 or not, or whether it’s a much smaller or larger market than that, I have no idea. Going by just the revenue numbers for Ekso and ReWalk, it’s a $20 million market today (none of the others are public, and Parker Hannifin doesn’t break out the numbers for Indego but they’re presumably extremely small).
I would caution that market acceptance for new medical devices isn’t always rapid, and that it’s also hard to say what the value is of having broader FDA approval at this point in the game. Certainly it’s a hugely larger potential market for Ekso right now because they’re able to sell their devices for use in stroke rehabilitation as well as spinal cord injury, but they’ve so far sold so few devices, and are so far eons away from becoming the “standard of care” in even the much smaller spinal cord injury population, so there’s probably some risk in really overstating the importance of those distinctions at this early stage. Though there’s been a somewhat larger market for the ReWalk and Indego devices as “wheelchair replacements” so far because they’re approved for home use and the Ekso system is really designed for heavy-duty rehab center use, from what I can tell almost all of the use of these kinds of exoskeletons has been at the small number of top-tier military and rehabilitation hospitals. Market forces, competition, and precise distinctions and preferences (for doctors or patients) between the various devices approved and in development haven’t had much time to evolve yet.
Ekso has sold or rented 190 units so far and ReWalk has sold about 200 (they just announced that they sold their 100th “personal” system), and nobody else is even close — this is a market in its infancy, so they might all do well if the market grows rapidly but it’s awfully hard to guess at one particular winner… particularly when both of the “pure play” companies are so early in the commercialization process that their financials are underwhelming.
EKSO just did a stock offering last month when they finalized their uplisting to the Nasdaq (the stock did a bit of a runup into the uplisting, getting over $6, but the offering was at $4 so it crashed pretty sharply back down immediately upon that announcement), so they have enough capital to keep trying to build the market for at least a little while (and perhaps develop a home-use device, or advance their relatively quiet military and construction devices), but they have been burning through about $7-8 million in cash per year even before this expansion push so the $15-20 million they probably have today won’t last forever. ReWalk is in slightly worse shape on the cash flow front, they burn through about $30 million a year and have less than that in the bank (despite the fact that they also took on some debt this year). Neither one has any real chance of becoming profitable in the foreseeable future, but that’s not a surprise for an emerging medical device company.
With these kinds of little companies who help drive news flow for an emerging product area, it’s easy to be optimistic and excited but there’s ample reason to be a bit cynical. Lots of companies and labs are working in this area, markets often develop very slowly, and if the potential growth was urgent or spectacular or everything relied on being “first” you’d probably expect these little guys to have been taken over by now by one of the much larger medical device or prosthetics companies. The first meaningful device in this market could be the one that will be invented next year or that represents a more meaningful breakthrough on size or weight or effectiveness or whatever, by one of the smaller or lesser-known companies or by some subsidiary R&D lab hiding inside a large company. That doesn’t mean that EKSO (or RWLK) can’t grow quickly or become dominant “first mover” companies, of course, that does happen sometimes and those companies rarely look financially compelling in the early stages… but it does mean that Parker Hannifin, for example, which has obviously been closely involved in this segment for several years, has apparently chosen not to use their ample cash to take over one of these slightly-more-advanced competitors (PH could buy either RWLK or EKSO at a huge premium for the equivalent of about two months of earnings). Maybe someone will buy one of these guys, or maybe a dozen companies think they’ve got a better product that will lap ReWalk or Ekso over the next five years, I don’t know.
That might be useful context if you’re just trying to get your head around the near-term potential… but with little stocks like these, it’s all about big long-term dreams. All I’m trying to do is provide the contrarian look to balance the hype a little bit, the rest is up to you. How much do big and uncertain dreams interest you? Are you excited by Ekso (or any of the others), do you have any insight into these stocks or believe that Oxford Club folks are correct that this is the “easiest 15-bagger of all time? Or, perhaps, do you think they’re all junk, or just not ready for prime time? Let us know with a comment below.
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