What happened
Shares of start-up medical-imaging technology company Nano-X Imaging (NNOX -1.87%), or simply Nanox, jumped again on Thursday after it was announced that a major healthcare company increased its investment in the company. As of 3:40 p.m. ET, Nanox stock was up a whopping 17% for today's session and is now up more than 200% in May alone.
So what
Johnson & Johnson (JNJ -1.15%) is a behemoth in the healthcare space and, as it turns out, it's an investor in Nanox stock. Last quarter, the company's filings revealed that it had 196,228 shares of Nanox. But in a filing today, investors discovered that Johnson & Johnson now owns 317,704 shares of Nanox.
In other words, Johnson & Johnson increased its Nanox position by 62% during the last quarter. And that big vote of confidence has the market enthusiastic about Nanox today.
Now what
Nanox is trying to profit from novel medical-imaging technology, but it faces a long road to realizing its vision. Going into May, it appears investors were extremely skeptical regarding its long-term prospects. According to data from Nasdaq, nearly 6.3 million shares of Nanox were sold short as of April 28. That's a big bet against Nanox, and it would take 14 days for shorts to cover that many shares. Suffice it to say, that's a long time and is conducive for creating a short squeeze with positive developments.
Nanox's positive developments started on May 1 when it announced it received FDA clearance for its flagship device. But the company still needs to manufacture and commercialize its devices before I'd call this company a success.
On one hand, I don't think investors should read too much into Johnson & Johnson's investment. After all, the company is invested in over 20 companies, and its position in Nanox is on the smaller side.
On the other hand, I don't consider myself an expert on what it takes for a healthcare company to succeed long term. But I do assign expert status to Johnson & Johnson. Therefore, it's nice to see the vote of confidence from the company. But it doesn't negate the fact that Nanox still has plenty of work to do.
