Second Sight Medical Products, Inc. (EYES) has been in operation for more than two decades. It develops, manufactures and markets implantable visual prosthetics that are designed to deliver artificial vision to sight-impaired individuals. EYES’ shares soared to hit their 52-week high of $20 on March 9, following the FDA’s approval of its Argus 2s Retinal Prosthesis System. The stock has rallied 20.9% over the past three months to close yesterday’s trading session at $7.
According to Business Wire, the Vision Care market is expected to grow at a 4.31% CAGR between 2019 and 2027.
However, EYES’ next generation Orion Visual Cortical Prosthesis System is still under development. Also, the company is alleged to have violated its MOU with Pixium Vision SA. So, with a narrow portfolio of products and solutions, EYES’ prospects look bleak.
Click here to checkout our Healthcare Sector Report for 2021
Here’s what we think could shape EYES’ performance in the near term:
Orion System Yet to be Fully Developed
Amid the COVID-19 pandemic, EYES had to temporarily halt the early feasibility study of its Orion Visual Cortical Prosthesis System--an investigational device intended to bring artificial vision to individuals who are blind due to a wide range of causes--because in-person visits were restricted .
The study was resumed in September 2020, and on May 13, 2021, the National Institutes of Health (NIH) released $1.4 million of a $6.4 million planned five-year grant for the study. EYES is expected to use the money primarily to pay UCLA and Baylor College of Medicine to conduct the Orion Trial. However, the system is still in the developmental stage and no peer-reviewed data is yet available.
Large Private Placement of Common Stock
EYES announced on March 24 that it has entered into definitive securities purchase agreements with accredited investors for a private placement that is expected to generate gross proceeds of roughly $27.9 million. It will issue 4.65 million shares at a price of $6 per share and is expected to use the net proceeds for its working capital. However, the stock has declined 20.6% since the announcement.
Violation of MOU with Pixium Vision
Pixium Vision SA accused EYES of violating a memorandum of understanding (MOU) with it dated January 5, 2021, after EYES announced its private placement. There are allegations that this move was not only prohibited under the terms of the MOU but is also detrimental to Pixium Vision’s interest. Consequently, EYES received a summons from Pixium Vision on June 1, 2021, related to a suit filed in the Commercial Court of Paris. Pixium vision is claiming damages aggregating to roughly $6.37 million. However, the suit is adjudicated, it could potentially result in material harm to EYES’ business, financial condition and operational results.
Consensus Price Target Indicates Downside
EYES is currently trading at $7, and Wall Street analysts expect the stock to hit $2.5 in the near term, which indicates a potential 64.3% decline.
POWR Ratings Reflect Bleak Prospects
EYES has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. EYES has a D grade for Sentiment, which is in sync with unfavorable analyst sentiment.
The stock has a D grade for Value also. This is consistent with its 312.75x trailing-12-month EV/S, which is 3,914.8% higher than the 7.79x industry average. Its 242.15x trailing-12-month P/S is also higher than the 8.24x industry average.
EYES has an F grade for Quality. This is justified given its negative values for ROE, ROA and ROTC.
EYES is ranked #169 of 183 stocks in the C-rated Medical - Devices & Equipment industry. Click here to access EYES’ ratings for Stability, Momentum and Growth as well.
Better than EYES: Click here to access several top-rated stocks in the same industry.
Bottom Line
EYES’ Orion Study has yet to be completed and the company is facing a lawsuit regarding its alleged violation of MOU with Pixium Vision. These factors are expected to impact the company’s stock price negatively in the near term. So, it’s best to avoid the stock now.
Click here to checkout our Healthcare Sector Report for 2021
EYES shares were trading at $6.71 per share on Tuesday morning, down $0.29 (-4.14%). Year-to-date, EYES has gained 258.82%, versus a 13.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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