Novadaq Technologies Inc: Initiation of Research Coverage

Friday, November 15, 2013

William Blair & Company initiated research coverage of Novadaq Technologies Inc. (NVDQ $16.20) with an Outperform rating and Aggressive Growth company profile. Novadaq is a pure play on fluorescence imaging technology, which is used to determine perfusion, or blood flow, inside tissue. The ability to see blood flow allows surgeons to easily identify cancerous tissues (which no longer receive blood) or tissue that needs to be avoided during surgery (e.g., bile ducts, ureters, nerves, and blood vessels) to minimize complications.

Analysts Margaret Kaczor and Ben Andrew estimated the company would generate sales of $34.4 million in 2013 and $52.4 million in 2014. Kaczor expects the company to record a loss per share of $0.02 in 2014, but projects it will generate net income in the second half of 2014 as it ramps up its direct sales and sales into hospitals, leading to earnings per share of $0.15 in 2015.

“Novadaq is the only company on the domestic market with a fluorescence imaging technology for use during surgery and diagnostic imaging,” Kaczor said. “We believe that the company is only in its first stage of growth as it works to penetrate the $2 billion-plus long-term market opportunity. Novadaq’s technology—the only FDA-approved technology on the market—is used in 25,000 cases today, compared with an addressable U.S. market of more than 1.5 million procedures. Supporting the market opportunity for its technology is a winning formula of compelling clinical data as well as a decline in overall patient care costs through the reduction of surgical complications. The company’s opportunity is twofold: penetrate existing opportunities with its two primary partners, LifeCell and Intuitive Surgical, and move to a direct model with two of its recently released product lines. Taken together, we believe that Novadaq’s opportunities can drive more than 40% top-line growth sustainably over the next several years.”

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