The coronavirus pandemic has crimped the in-person festivities that come with successful initial public offerings, but it hasn't stopped new healthcare stocks from bursting out of the gates. Shares of Nano-X (NASDAQ:NNOX) made their public debut on Aug. 21, 2020, and the stock has more than tripled already.

Has the time to buy Nano-X stock already passed? Here's what you need to know about the road ahead of this medical imaging pioneer.

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Image source: Getty Images.

Boosting X-ray availability

In recent decades, images produced by computer tomography (CT) scanners have improved by leaps and bounds. Sadly, replacing one of the X-ray tubes they rely on costs about as much as a modest three-bedroom home in the Midwest.

Worldwide spending on medical imaging equipment and services that use X-ray technology is expected to reach $21 billion next year. Nano-X thinks it can disrupt this massive market with its Nanox.ARC system, a CT scanner that costs far less to manufacture and operate than today's options.

How much less?

Nano-X showed investors a prototype earlier this year of a scanner with a price in the low five-digit range. On average, it costs around $300 to scan a patient with today's X-ray equipment. We don't have all the numbers yet, but it looks like the company's Nanox.ARC scanner can get the job done at a fraction of the cost of today's scanning options.

Nano-X has ambitions that extend far beyond becoming a provider of cheap scanning equipment. The company intends to produce steady cash flows with a pay-per-scan pricing structure. Without a major investment required to bring a CT scanner into their facilities, heaps of small healthcare providers could become this company's regular customers.

Earlier this month, Nano-X entered an agreement with SPI Medical, a medical device distributor in Mexico, to deploy 630 Nanox Systems. If Nanox.ARC earns regulatory approval and passes an acceptance test, SPI Medical will pay Nano-X a minimum annual service fee of $17 million for seven years.

Maybe it's still too soon

At recent prices, Nano-X boasts a $1.6 billion market cap, which doesn't seem unreasonable for a company that could become the world's largest provider of scanning equipment and ancillary services over the next few years. That is, until you consider the apparent risks.

Before throwing everything you've got at what looks like a terrific opportunity on the surface, it's important to understand that Nano-X is still a development-stage business. The company produced a working prototype earlier this year, but still hasn't proven it can manufacture its scanners at scale.

The most troubling thing about a Nano-X investment at the moment, though, is its lack of regulatory clearance. In January, the company submitted an application to a third-party reviewer for a single-source version of the Nanox.ARC scanner. Instead of forwarding the application to the Food and Drug Administration, though, the reviewer sent it back to Nano-X in March with a major deficiency letter attached.

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Image source: Getty Images.

Now what?

Nano-X lost $13.8 million during the first six months of 2020, and it's going to lose a lot more before it has a chance to generate steady revenue in the U.S. The third-party reviewer Nano-X hired assumes the FDA will want the company to address deficiencies in its initial application, including performance test results that the company still hasn't delivered. 

Nano-X has conducted additional product testing and expects to submit the results to its third-party reviewer by the end of September. The company also plans to submit an application for a multiple-source Nanox.ARC before the end of the year. It's the multiple-source version the company intends to commercialize at scale. 

If the market gets the impression that the deficiencies in Nanox-ARC's first application package were more significant than the company has let on, this stock will fall hard. Investors probably want to wait until this risky start-up proves it can develop, market, and manufacture a product at scale.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.