What happened
Shares of medical-imaging start-up company Nano-X Imaging (NNOX -1.07%), also known as Nanox, skyrocketed 191.2% in May, according to data provided by S&P Global Market Intelligence. The month was packed full of consequential information for investors, and the company's long-term prospects are significantly improved.
So what
I believe Nanox's month will make more sense if I briefly explain the business. Nanox intends to disrupt the X-ray market with its proprietary imaging technology. It claims its machines will be significantly cheaper to install and operate, which could be game-changing for the majority of the world. Nanox also wants to install machines at little or no cost to medical professionals, charging only a per-use fee.
The only problem is the FDA hadn't cleared Nanox's Nanox.ARC multisource imagining machine -- that is, not until May.
On May 1, Nanox announced that the FDA gave 510(k) clearance for the Nanox.ARC multisource machine, paving the way for it to be manufactured at scale, commercialized, and installed so that the company can finally start generating revenue from it.
Even though there's still much work to be done, this news alone sent Nanox stock skyrocketing. After all, many investors never thought the FDA would clear the company's technology. In fact, in 2020, prominent short-seller Muddy Waters Research said that Nanox had "no real product."
Muddy Waters also said that if Nanox accomplished its plans, "It seemingly will come as a shock to most of the radiology profession."
My point isn't to disparage Muddy Waters and others. It's that many investors doubted Nanox would ever get this far. When it did, the market was astonished.
Later, on May 22, Nanox reported financial results for the first quarter of 2023. Its business generates little revenue, and it's burning through cash as it tries to develop and sell its technology. But what turned investors' heads was management's expansion progress.
According to management's update, Nanox is working with local governments in Ghana, Nigeria, and Morocco. In Ghana, machines are already operational. In Nigeria, machines are there awaiting permits to start operating. And in Morocco, Nanox just got a license to import machines.
In summary, it appears Nanox is well on its way after its updates in May. And that's why the stock skyrocketed.
Now what
For me, the biggest concern now with Nanox is that of funding. In Q1, the company's cash, cash equivalents, restricted cash, and marketable securities decreased by about $12 million sequentially to $91 million.
As a very young company, Nanox's business is nowhere close to being self-funding. It's customary for start-up medical companies to periodically issue new shares to raise money, and I wouldn't be surprised to see Nanox do the same. But this dilutes existing shareholders.
It's looking increasingly optimistic that Nanox can accomplish its business goals. The relevant questions after May are: How long will it take, and how much will it cost existing shareholders? These will be things to watch for this promising company.
