Al Mann is on the short list of medical visionaries that have proven themselves with commercial success in the past, but Mann's self-named MannKind has been anything but a smooth ride for investors over the past few years. With Mann's next IPO, Second Sight, coming to Wall Street, we asked three of our top analysts to weigh in with their thoughts on whether they'd want to own Second Sight in portfolios. Read on to learn what they think.
Brian Orelli: I'm no fan of MannKind. From hinting that an approval was coming before the first rejection, to changing devices causing the second rejection to not being able to get Afrezza's best property -- fewer hypoglycemia events -- on the label, Al Mann has arguably made some mistakes developing Afrezza.
But that shouldn't take away from the fact that Al Mann is a billionaire. And he didn't get there by accident. He sold Pacesetter, which developed pacemakers, to Siemens, insulin pump maker MiniMed to Medtronic (NYSE:MDT), and Advanced Bionics, which makes cochlear implants, to Sonova Holdings.
Why was Mann able to sell off those companies but not MannKind? They were selling devices that doctors clearly wanted to use. We'll know for sure when Sanofi (NYSE:SNY) launches Afrezza in a few months, but many people think doctors are going to be cautious about dosing insulin through the lungs.
It doesn't seem like Second Sight Medical Products will have as many doubters. It's not hard to see a market for people that were going blind wanting to have some of their functional vision restored.
That isn't to say you should go out and buy shares right after the IPO. Watching a few more quarters to see how the U.S. launch of Second Sight's Argus II System proceeds could be a prudent move. Through the first nine months of the year, Second Sight only generated $1.9 million in product revenue, which cost the company $2.1 million to produce. Add in R&D, selling and marketing costs, and all the other expenses, and the company is a ways away from being profitable.
Fortunately, with Al Mann backing the company, having enough capital to get to profitability shouldn't be a problem. Assuming, of course, the company doesn't get sold first.
Todd Campbell: Catching lightening in a bottle is hard to do twice, let alone multiple times, and no one may be more aware of that than Al Mann given MannKind's fits-and-starts. Despite MannKind's struggles, however, Second Sight proves that Mann's passion for disruptive healthcare solutions remains unchecked, and that alone may make the company worth a look.
There's no question in my mind that a device that can offer sight to millions of people would be a big success. There are more than 5.8 million people that could conceivably benefit from Second Sight's technology someday, but unfortunately Second Sight is still a ways away from treating them. Currently, Second Sight's Argus II, an implantable visual device, is only approved to treat retinis pigmentosa, a hereditary disease that affects about 100,000 people in the United States. So far, the company has implanted the Argus II in about 90 people, so Second Sight may be the poster-child of an emerging and therefore high-risk investment.
A bigger, and more exciting, opportunity may come later on in the form of the Orion 1, a device that will be built on technology used by the Argus II that will directly stimulate the brain, rather than the optic nerve. If Orion 1 can do that, then I'd be much more willing to be a buyer.
George Budwell: After more than 20 years of R&D, Second Sight Medical Products was finally able to gain marketing approval by the Food and Drug Administration in 2013 for its Argus II Retinal Prosthesis System as a treatment for individuals with late-stage retinitis pigmentosa. The system was granted marketing authorization in Europe in 2011. The company is now looking to tap the public markets to speed up the device's commercial launch, and to begin preclinical work on its potential successor Orion I. Before jumping on this IPO, though, I think investors should carefully weigh the risk factors going forward.
Firstly, this system might be a huge step toward improving vision in the totally blind, but it is a "step" nonetheless. Numerous private and public companies are working on rival medical devices and therapies that have the potential to render Argus II obsolete in a few short years. Next, Second Sight isn't including the Orion I clinical trial expenses in this IPO -- only "preclinical studies." With clinical trials expected to begin in 2016, I think a massive secondary offering will occur before then, dramatically diluting early shareholders. As such, I'm happy watching this IPO safely from the sidelines.
Brian, Todd, and George do not have positions in the companies mentioned. The Motley Fool owns shares of Medtronic. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.