March 18, 2021: As I watch the Nasdaq sell off 1.3% this morning, I keep punching up one particular stock ticker to see the reaction. Are shareholders in this stock going to follow suit and sell, like so many general tech stocks these days?
And each time I look, the shares remain rock-solid. The folks who own it clearly aren’t interested in selling, despite tech weakness everywhere else in the stock market.
I was going to hold off and add this stock at the beginning of next month, when I’m due to put out a new edition of the Good Buy Report portfolio.
But the opportunity is so compelling right now - I don’t want us to miss out on it.
Stereotaxis (STXS) trades at a little over $7, and is an emerging player in the burgeoning field of robotic precision surgery. I expect the shares to at least double over the coming year.
More specifically, Stereotaxis’ FDA-approved robotic technology is focused on a specific kind of surgery to fix cardiac arrhythmia - when our hearts don’t beat exactly as they should.
As you can see from the chart, Stereotaxis’ shares are wedged between a $7-$8 resistance zone at current prices. No guarantees, but I expect the shares to break through this zone and move sharply higher thereafter.
Getting the Right Beat
Heart arrhythmias are a common, often deadly problem affecting 2-5% of the US and global population. According to a study in the Journal of the American Heart Association, ventricular arrythmias may cause up to 80% of sudden cardiac death, killing as many as 450,000 Americans a year.
I hate to call this sort of thing a “market opportunity,” but researchers say the treatment market for this condition, at roughly $2.5 billion in size, is growing at 13% a year.
At that pace, this will be a $6.5 billion marketplace by 2026 - a huge opportunity for a company like Stereotaxis.
So here’s the opportunity for Stereotaxis…
Currently, the condition is treated by means of a delicate, hard-to-learn procedure. A surgeon manually pulls a catheter through a patient’s arteries into the heart cavity.
Once in place, the surgeon triggers targeted electrical impulses at the tip of the catheter, “ablating” (destroying) small portions of tissue to correct the arrhythmia.
Stereotaxis’ robotic technology automates this procedure. Giant magnets, mounted on opposite sides of the operating table, allow a cardiac surgeon to robotically “steer” the catheter through a patient’s arteries. According to studies of Stereotaxis’ system, it allows a surgeon more precision in attacking heart arrhythmia, while being safer, with faster recovery times for the patient.
More than 100,000 people have been treated using Stereotaxis’ systems in more than 100 hospitals around the world. Over 350 scientific publications have documented the technology’s clinical value.
If that’s the case, you might well ask - why is Stereotaxis only a $7 stock?
Right Time, Right Technology
I actually witnessed a demonstration of Stereotaxis robotic equipment years ago, at a hospital in Florida, around 2006 or so. At the time, I was still a financial journalist for PBS Nightly Business Report.
As amazing as it was to see, it was clear at the time that robotic technology and costs for this kind of delicate procedure had not yet evolved to the point that hospitals and cardiac surgeons were ready to embrace it in a big way. So Stereotaxis was one of many “emerging health tech” companies biding its time in the healthcare marketplace.
I think that’s changing now.
The technology has become much more finely tuned and sophisticated to the demands of surgeons. At the same time, the costs for installing these systems - relative to what they can achieve in patients’ healthcare outcomes (with shorter bed stays and more outpatient work) has come down dramatically.
As we move past the pandemic, hospitals and doctors’ offices are planning to move back to planning for big-dollar capital investments. But they’re under the same pressures as before - to deliver good healthcare at a greater value to patients and hospitals alike.
“The Next Intuitive Surgical”?
The opportunity before us, in my opinion, is similar to that of another robotic surgery pioneer - Intuitive Surgical (ISRG), whose stock is up more than 300% in the last 5 years, and 600% over the last decade.
The 2 companies’ robots aren’t comparable, and are used for different kinds of surgeries.
But both have the same “razor and razor blades” business model: Sell a hospital on a robotic surgery suite. That’s the first sale. But the real money is made in the years afterward as hospitals replace “consumable” bits and pieces of the system after each surgery.
Ironically enough, I also did a Nightly Business Report story in the early 2000s on ISRG. I visited the Cleveland Clinic satellite hospital in Weston, Florida to develop video and surgeon interviews for the piece. Not long after, the stock went winging higher.
That business model has made Intuitive Surgical a huge stock market winner. I expect much the same for Stereotaxis as the company builds out its “installed base” of surgical suites in coming years.
(see chart below)
In Stereotaxis’ most recent quarter, the company reported $8.7 million in revenue - 11% more than analysts expected. Executives say their technology “continues to experience significant interest” and “anticipate robust double-digit revenue growth in 2021.”
According to the CEO, "While hospitals remain negatively impacted by COVID-19, we have experienced a gradual return towards more normal capital planning. We received an additional order for a Genesis system from a US hospital that is establishing a new robotic electrophysiology program. Given the advanced status of multiple additional discussions, we are comfortable providing preliminary guidance for $10-20 million in Genesis system revenue in 2021.”
There’s a final comparison I’ll make between STXS and ISRG. When the FDA first approved Intuitive Surgical’s technology for commercial use, it was for just a few very specific surgeries. Over time, as regulators looked at more data and studies, they approved the robotic system for many other kinds of ailments.
In published comments, Stereotaxis’ executives see the same kind of expanding use for their robotic systems.
Lastly, from a technical analysis standpoint, I continue to be impressed by the strength of the stock. (see chart below)
The chart shows us that - even as the major tech stocks within the Nasdaq have begun to weaken since February - Stereotaxis’ stock has barely flinched.
I’m sure if the Nasdaq selloff turned into a panic, it may drag down Stereotaxis’ shares temporarily as well.
But from what I’ve seen so far, the stock’s ability to shoot up 40% late last month - and hold those gains despite some tough days for tech stocks in general - is a nice sign of strength for Stereotaxis’ shares.
The buyers of the stock have their eye on future growth and profits and haven't panicked into selling their shares, despite days of late where the Nasdaq index has plummeted 2 or 3% in a day.
In short, I think the time is right to put Stereotaxis in the Good Buy Reports portfolio so we’re in position to ride the growth of the company’s robotic systems - and share price - to much higher levels.
Best of Good Buys!