While the analyst may remain intrigued by the company’s Pantheris image-guided atherectomy system designed to treat patients with peripheral arterial disease (PAD), he sees AVGR dangling on a delicate line when it comes to cash flow, a challenge that lingers at the foreground. Mills believes Avinger not only could do well with a take-over, he pinpoints it as a pressing necessity.
On back of the quarterly print, the analyst reiterates a Hold rating on shares of AVGR with a $1 price target, which implies a 121% increase from where the stock is currently trading.
At the close of the second financial quarter, the medical device maker had a total of $14.0 million in cash and cash equivalents, a fall considering in the first quarter, AVGR exited with $23.0 million in cash- and $36.1 million by the end of 2016. However, thanks to cost reduction strategies and a restructuring plan that reigned in the sales force, the Avinger team lessened cash burn to roughly $9 million. Glancing ahead to the rest of the year, management predicts an even further cash burn softening to around $7 million per quarter. All these factors in mind, Mills would not be surprised to see AVGR seek out a boost in funding sometime in the back half of the year.
Mills notes, “While we still see potential in AVGR’s unique image-guided atherectomy platform, the firm remains in a highly challenging spot from a capital standpoint, and must find a buyer ASAP, in our view. Although the reduced headcount as part of restructuring efforts in 1Q17 (-30) and 2Q17 (-6) have lowered SG&A spend (sequential decrease ~33%, including updated guidance to further reduce cash burn to ~$7M in the third quarter), we note the remaining cash balance of $14M exiting Q2 leaves AVGR in a precarious financial position. While upcoming product instructions/indication expansion (BTK, ISR) are intriguing, we did see some pushback – BTK filing now expected in 1Q18 vs 4Q17 estimate, Pantheris 3.0 now expected 510k filing in 4Q17 vs 3Q17 estimate.”
At the start of May, the company got a green light from the FDA to kick off a pivotal Pantheris trial for in-stent restenosis (ISR)- with a next-generation “Pantheris 3.0” platform on delay for a 510(k) filing date, pushing prospective approval to the first quarter of 2018. Additionally, with the AVGR team expecting a 510(k) submission for its BTK device in the first quarter of 2018, Mills concludes, “The introduction of the device will target smaller vessels (>2mm) in the BTK segment PAD, expected to significantly expand AVGR’s target addressable market, estimated at ~one third of endovascular procedures in our view.”
Jason Mills has a very good TipRanks score with a 68% success rate and a high ranking of #61 out of 4,628 analysts. Mills garners 21.0% in his yearly returns. However, when recommending AVGR, Mills forfeits 84.9% in average profits on the stock.
Additionally, Steven Lichtman of Oppenheimer rates a Hold rating on Avinger stock without listing a price target and Josh Jennings of Cowen rates a Buy on the stock with a $2 price target, marking a 342% rise from current levels.