Why it is profiled? This emerging robotic surgery company continues to expand its customer base in the under-penetrated knee arthroplasty market space.
Knee osteoarthritis is the most common form of osteoarthritis and it is the leading cause of disability worldwide. According to the American Academy of Orthopedic Surgeons, nearly 15 million people suffer with osteoarthritis of the knee and this condition is expected to accelerate as the increasingly active population ages and obesity rates increase.
Knee replacement , also referred to as knee arthroplasty, can give osteoarthritis patients a new lease on life. Operating in this under-penetrated knee arthoplasty market is MAKO Surgical Corp. (MAKO), a medical device company that markets advanced robotic arm solution and orthopedic implants for minimally invasive orthopedic knee procedures.
Incorporated in November 2004, MAKO went public in February 2008 pricing its shares at $10.00 each, below the price range of between $14 and $16 per share filed originally.
The company offers MAKOplasty, an innovative, restorative surgical solution that enables orthopedic surgeons to consistently, reproducibly and precisely treat patient specific, early to mid-stage osteoarthritic knee disease with minimal incision. MAKOplasty is performed using the company's proprietary RIO Robotic Arm Interactive Orthopedic system, or RIO, and proprietary RESTORIS unicompartmental and RESTORIS MCK multicompartmental knee implant systems. The RIO is a technology platform that is believed to have potential future application for other orthopedic procedures beyond the knee.
Since the first MAKOplasty procedure in June 2006, a total of 3,908 procedures had been performed through June 30, 2010. The company expects 3,400 to 3,700 MAKOplasty procedures to be performed in 2010, of which 1,524 procedures were performed during the first half. Last year, 1,602 MAKOplasty procedures were performed. MAKO believes that increased patient awareness about the benefits of MAKOplasty will be a contributing factor to driving its continued adoption.
MAKO commercially released its RIO system in the first quarter of 2009 and RESTORIS MCK multicompartmental knee implant system in the second quarter of that year. The company's domestic commercial installed base of RIO systems increased to 46 as of the second quarter of 2010 from 40 at the end of the prior quarter. RIO systems also made its international debut during the second quarter following the sale of one RIO system to a distributor in South Korea.
The South Korean distributor will be using the RIO system for demonstration purposes and to obtain the regulatory approvals necessary to fully market the RIO system and RESTORIS implant system in the South Korean market. It is expected to take at least 12 months for the distributor to secure regulator approval and begin marketing. South Korea represents one of the largest surgical robotic markets in Asia.
The company has yet to turn in a profit and, as of June 30, 2010, had an accumulated deficit of $134.1 million. MAKO generates recurring revenue through sales of its knee implants, disposable products and extended warranty service contracts. The company has been reporting revenue only from 2006 since the introduction of the MAKOplasty procedure and it's only since last year, sales of its RIO systems have been contributing to its revenue.
In 2009, MAKO reported a net loss of $34 million or $1.22 per share, narrower than $37.6 million or $2.20 per share incurred in 2008. Wall Street analysts expect the loss to shrink further to $1.05 in 2010 and to $0.65 in 2011 on revenue growth of 35% and nearly 62%, respectively.
As of June 30, 2010, the company had approximately $49.8 million in cash, cash equivalents and investments. The company is scheduled to report its third quarter results on November 1.
Over the past 52 weeks, MAKO traded in the range of $8.47 and $14.90. Considering the company's improving financials, the market opportunity for its knee implants and its attractive recurring revenue business model, MAKO might be a stock worth putting on the watchlist.
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