Nova Eye Medical (ASX:EYE) has been on a strong run, up 50% in one month. Is there more upside?

Nova Eye Medical (ASX:EYE) has had a good month. The optometry company obtained FDA clearance for its newest generation canaloplasty device for canal-based glaucoma surgery, the iTrack advance to treat glaucoma. So is it time to jump on board?

 

 

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Who is Nova Eye Medical?

Nova Eye Medical, formerly known as Ellex, has been listed since 1987. A big change came in 2020 when it divested its Ellex Laser and Ultrasound business, changed its name to Nova Eye Medical and buckled down to focus on Glaucoma and intermediate Age-Related Macular Degeneration (iAMD).

The former, glaucoma, is a progressive eye disease that involves the build up of fluid inside the eye, leading to excessive intraocular pressure and damage to the optic nerve. The market for treatments amounts to US$700m and the market for canal surgery (the segment Nova Eye Medical operates in) is projected to grow at a CAGR of 20% between now and 2027.

 

Multiple products on offer

The company’s main product is iTrack, which uses ‘microcatheters’ to remove the need for stents in glaucoma treatment. The second is Molteno3, a glaucoma drainage device. iTrack has been for sale since 2008 and has been used in over 120,000 surgeries worldwide. The company just got FDA approval for the latest generation, which has led to the company’s hot share price run of late.

 

 

The company can now commence marketing and sales for the latest generation of iTrack. It anticipates launching the product next month at a conference in San Diego. Furthermore, Nova Eye Medical is developing a technology called 2RT that is aimed to tackle iAMD.

 

Why it is not the time to buy Nova Eye Medical

Investors will be hoping Nova Eye Medical has similar success to Telix Pharmaceuticals (ASX:TLX) which grew its sales exponentially post-FDA approval. We do not think history will repeat itself here for EYE.

First, we note that this is not a completely new product that Nova Eye Medical is introducing, it is an upgrade of an existing product. We have no doubt that existing customers will upgrade, but we don’t see sales momentum being as strong as it would be if it was a brand new product being introduced to market. Take Telix Pharmaceuticals (ASX:TLX) and its sales growth in the last year as an example of how strong a biotech or medtech company’s sales can grow when a new product is released to market. .

Second, the company will be loss making until at least the end of FY25, according to consensus estimates. And bear in mind that this is a company that reached commercialisation many years ago.

 

Looking for another FDA approval

Third, although it is likely there might be further upside from a future FDA approval of 2RT, it is unclear when this will be. The company is planning to undertake a confirmatory pivotal clinical study for 2RT. But it still hasn’t got this underway nearly 2 years since it completed its Investigational Device Exemption (IDE) with the FDA.

The company has told investors it has received expressions of interest to participate in the study received from all 28 invited retinal research institutions and leading retinal specialists. But the jury is still out on when the trial will get underway.

 

Nova Eye Medical not a buy right now

We acknowledge that Nova Eye Medical has positive momentum right now and is no pre-revenue company. But to us, the fact that it isn’t profitable, even with a product on the market, is too concerning for us to recommend the company at this time.

 

 

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