What happened

Shares of medical technology company Nano-X Imaging (NNOX 3.71%), also known as Nanox, skyrocketed on Monday after the company received clearance from the Food and Drug Administration (FDA) for its flagship medical device. As of 10:30 a.m. ET, Nanox stock was up by a whopping 60%.

So what

Nanox intends to disrupt the world of X-ray technology with a medical imaging device that it says provides 3D digital images for a fraction of the cost of previously available technologies. One of its devices, its single-source device, received FDA clearance way back in April 2021. However, the company intends to build its business around its multi-source device, and it didn't have FDA clearance for that one. Moreover, it seemed like the FDA's review process would never end.

In Nanox's annual report, filed Monday, management said it received FDA clearance for its multi-source device on April 28. The clearance applies to both Nanox's medical device and the accompanying software known as the Nanox.CLOUD.  

According to its business model, Nanox's management plans to place its multi-source imaging devices in clinics, medical practices, hospitals, and other sites around the world at low cost -- or even at no cost. From there, it intends to make its money on a per-image basis and from its software. That makes the FDA's approval of Nanox.CLOUD just as important as its approval of the device itself.

Now what

Nanox stock rose by 60% Monday morning, but it's still down 89% from its all-time high. In short, this stock's price is prone to strong, emotion-driven moves propelled by both bulls and bears. But both camps should strive to keep emotions in check.

FDA clearance is a big deal for Nanox. However, the company still has a long road ahead. It needs to manufacture, find places to install, ship, and deploy its machines. And each of these steps comes with execution risks. That doesn't mean Nanox will fail -- indeed, it could overcome each subsequent hurdle with flying colors. But it's necessary for investors to be aware of how much more work the company has to do.

Moreover, in its annual report, Nanox management says, "We expect that we will need to obtain additional financing to implement our business plan." In other words, the road ahead for Nanox isn't just complex, it's also going to be expensive. Therefore, there's financial risk to be aware of as well.

All of that said, Nanox took a massive step forward on Monday, and it's understandable why the market was so fired up about it.