Shares of Nano-X Imaging (NNOX -4.20%), commonly referred to as Nanox, fell 29.5% in December, according to data provided by S&P Global Market Intelligence. The stock price just keeps tumbling for the company that aspires to revolutionize the X-ray industry, having now declined 84% from its high in 2021. The company did get Food and Drug Administration (FDA) clearance in December, but not the one investors were hoping for, which might explain the stock's underperformance for the month.
Nanox plans to commercialize a medical device called the multi-source Nanox.ARC, which can quickly and cheaply make a digital X-ray. It plans to make these devices available free to speed their adoption and charge a usage-based fee. It refers to this business model as medical screening as a service (MSaaS). The only problem is, it's waiting for the FDA to clear the device, which may or may not happen anytime soon.
Nanox is submitting paperwork as requested by the FDA. But in the meantime, the company has been busy making acquisitions. Specifically, it acquired Zebra Medical Vision, which it renamed Nanox AI. On Dec. 15, Nanox AI received FDA clearance for software that can detect lesions shown in medical images.
As of the third quarter of 2021, Nanox AI had received eight clearances from the FDA apart from its clearance on Dec. 15. So the company seems to be making good progress regarding the potential applications of its technology. But the engine that's going to make this car go is the multi-source Nanox.ARC. And until it gets that approved, it's unlikely Nanox stock will have much chance of beating the market.
As of the third quarter, Nanox claimed to have MSaaS contracts for 6,500 multi-source Nanox.ARC systems. When the company went public, it said it was targeting 15,000 machines deployed by 2024. So it's making significant progress with the agreements it will need to pull this off.
However, Nanox was also targeting 1,000 machines deployed in the second half of 2021, a goal it completely missed because it's still awaiting FDA approval. And investors are starting to wonder if the leadership team is up to the challenging task of gaining clearance, manufacturing, selling, and deploying these machines.
These questions have been getting louder. Founder and CEO Ran Poliakine announced in August that he was stepping out of the CEO role while maintaining his chairman position. Another large shareholder is Moshe Moalem, who owned over 4 million shares at the initial public offering (IPO). In December, however, filings with the Securities and Exchange Commission showed that Moalem now owns just 2.1 million shares, which is disconcerting.
On the bright side, Nanox still has around $100 million in cash, cash equivalents, and marketable securities. And it's "only" generated an operating loss of around $40 million through the first three quarters of 2021, so it has some time to get FDA approval for the multi-source Nanox.ARC. But until it does, I expect it will remain a rough ride for shareholders.