E Medigus, A High-Risk, High-Reward Micro-Camera Play

Medigus (MDGS) is an Israeli technology company offering the following products:

The company is concentrating on the ScoutCam (which also happens to be an important component of the MUSE, as it happens), and that seems a very good decision as the technology has much wider application than just the medical field and order backlog is rising rapidly. 

At first sight, this more singular focus on ScoutCam (and the intention to sell the MUSE business) is complicated a little by two announced participations (which are supposed to close next week), but management argues that they can make these a source of cash, financing the growth of their ScoutCam business.

The market doesn't seem to bite yet, but we think recent developments of the ScoutCam warrant a little more optimism not yet reflected in the share price. 

MUSE

The company's flagship device is the MUSE system, which addresses the unmet need in between drug therapy and invasive surgery for the long-term treatment of GERD (gastroesophageal reflux disease), commonly referred to as acid reflux. From the most recent company presentation:

And to have an idea of the market:

Not necessarily all that market is addressable, the MUSE competes against medicine and surgery but there is a valuable niche in-between:

You see the head of the device here with the microcamera:

But it has important advantages versus traditional surgery:

And it has already received a lot of regulatory clearances and reimbursement for treatment from payors:

The technology has been FDA approved (20-F):

The clearance by the FDA, or ‘Indications for Use’, of the MUSE ™ system is “for endoscopic placement of surgical staples in the soft tissue of the esophagus and stomach in order to create anterior partial fundoplication for treatment of symptomatic chronic Gastro-Esophageal Reflux Disease in patients who require and respond to pharmacological therapy”. As such, the FDA clearance covers the use by an operator of the MUSE‎ ™ ‎endostapler as described in the above paragraph. In addition, in the pivotal study that was presented to the FDA in order to gain clearance, only patients who were currently taking GERD medications(i.e. pharmacological therapy) were allowed in the study. In addition, all patients had to have a significant decrease in their symptoms when they were taking medication compared to when they were off the medication. As such, the FDA clearance included the indication that MUSE ™ system is intended for patients who require and respond to pharmacological therapy. The MUSE ™ system indication does not restrict its use with respect to GERD severity from a regulatory point of view. However, clinicians typically only consider interventional treatment options for moderate to severe GERD. Therefore, it is reasonable to expect the MUSE ™system would be primarily used to treat moderate and severe GERD in practice.

The company now intents to sell the MUSE business (see below).

ScoutCam

This is their micro (1.2mm – 6.5mm diameter) cameras that were designed for medical purposes, from the company website:

It features a micro medical camera equipped with micro CCD / CMOS sensors and ultimate image technology which cover a broad scale of innovative medical applications... It is already in use as medical inspection camera, for fiber optic endoscopes, as endoscopy camera, gastroscopy camera, laparoscopycamera, urology camera, arthroscopy camera, gynecology camera, surgical camera, ent camera etc.

The same web page shows a host of products based on this technology. But this technology has wider application opportunities besides the medical field, it's also applicable in a range of industrial practices, from the company website:

It is already in use for remote non-destructive testing (NDT), remote visual inspection, micro drilling inspections, cavities inspection, as tube inspection camera, pipe inspection camera and robotics.

And again the web page comes with a host of products. From the IR presentation:

After receiving a US patent the technology is getting some further traction recently:

It's early days and not too many firm conclusions can be drawn from this, but  it certainly looks like this is off to a promising start in just a couple of months.  Indeed, that order backlog of $1.1M as of May 31, 2019 for its micro-camera business, a 245% increase over 2018 revenues of the entire company, and things haven't stopped here.

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Disclosure: This article is part of a new “UnderCovered” series of exclusive articles featuring companies with limited coverage. Authors are compensated by TalkMarkets for their time, and ...

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Comments

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Joe Black 1 year ago Member's comment

Interesting company, but still waiting for it to recoup where it was just last month. It's been a bit up and down since then.

Shareholders Unite 1 year ago Author's comment

Yep, they have some interesting technology which is applicable in numerous situations.

Investment Advisor 1 year ago Member's comment

Sounds like good things are on the horizon for this company.

Barry Hochhauser 1 year ago Member's comment

Frist I'm hearing of this company, but it sounds like they are on the cutting edge of some impressive stuff! Taking a closer look at $MDGS.