Issue #8: The future of organ transplants and baby monitors for the next generation 🚨
Issue #8 | 03/17/21
One of my favorite pieces of investing advice is "time in the market is better than timing the market".
Let me explain why.
Last week one Redditor found their grandpa's old stock certificate for 6,722 shares of Meredith Corp bought in 1988.
They were asking how they could cash it in and if it was worth anything.
Now here comes the good part.
After 33 years in the market, their grandpa's shares had grown to be worth around $993,780.
As an investor, holding your stocks is usually better than selling for quick profits.
P.S. You can check out the Reddit thread here.
Let's get into this week’s report. Here’s what we found:
- A company that is improving the outcomes of organ transplants by over 78%.
- A company building modern baby monitors for the next generation of parents.
TransMedics Group, Inc. ($TMDX)
$42.79 - Share price at time of writing
- TransMedics is improving the standard of care for organ transplants which will save lives.
- Patients, physicians and hospitals all benefit from more transplants.
- Transmedics are targeting an $8 billion addressable market presenting a sizable opportunity.
- Their business model is driven by high value, high margin per procedure consumables.
What they do:
Almost five patients die each day in the U.S. waiting list for lung, heart, and liver transplants due to inadequate supply.
One of the bottlenecks is the use of cold storage, the current standard of care for the preservation and transportation of organs.
Putting an organ into cold storage can only be done for a short amount of time and it also demands that only the healthiest organs can be used.
TransMedics (TMDX) created the Organ Care System ("OCS") to help solve this problem.
The OCS is a device that allows human organs to function outside of the body, holding the organ at the body’s core temperature and delivering required oxygen and nutrients, reducing the risk of ischemic injury and severe post-transplant complications that are often associated with cold storage.
Why they’re spiking in interest:
According to MarketStream.io, total Reddit mentions of TMDX increased by 400% when comparing February 2021 to March 2021.
On 03/03/21 reported their Q4 earnings which showed impressive results.
A quarter ago, it was expected they would post a loss of $0.33 per share when it actually produced a loss of $0.19, delivering a surprise of 42.42%.
TransMedics shares have added about 80.4% since the beginning of the year versus the S&P 500's gain of 1.5%. It is likely this has also fueled the surge in Reddit interest over recent months.
💸 Signal: Ken Griffin, a billionaire hedge fund manager, purchased over 63,000 TMDX shares in Q3 2020 and is currently still holding these shares. Source - cheaperthanguru.com
Why TMDX could be valuable:
TMDX has a razor/razor-blade model with almost all revenue coming from the sale of single-use OCS related consumables.
This model of payment per transplant surgery can generate industry-leading margins of 25%+ as TransMedics scales over the next 3-5 years.
The biggest issue facing the organ transplant market is the availability of organs. While 156 million people over the age of 18 in the United States have registered as organ donors, only 3 in 1,000 people die in a way that allows for organ donation.
Organ health, patient suitability, geography and time constraints further reduce the available donor pool.
The primary benefit of TrasnMedics' OCS device is the ability utilize organs from DCD (circulatory death) patients, which not only allows TMDX to build market share within the current transplant structure but should allow them to drive a significant increase in the transplant market itself.
As the world population continues to grow and age, the need for organ donation will only become larger.
TMDX has the potential to build significant market share in a rapidly growing market.
What the risks are:
The primary risk to TMDX is continued disruption from COVID-19.
Elective surgeries around the world have been delayed as hospitals are geared up for the treatment of coronavirus patients. Transplants have fallen by half in the U.S. and more in other countries.
The FDA has itself has experienced delays with many scheduled meetings, reviews and approvals delayed.
Outside of near-term COVID-19 risks, the company faces risks from ongoing clinical trials in Lung, Heart and Liver over the next two years.
Sandbridge Acquisition Corp. ($SBG.U)
$9.93 - Share price at time of writing
- Sandbridge Acquisition Corp. (a SPAC) announced they are merging with Owlet Baby Care Inc., a Utah-based maker of baby monitors.
- Owlet was launched in 2012 by a team of parents that developed its flagship Owlet Smart Sock baby monitor.
- Owlet has built a connected and accessible nursery ecosystem that brings technology and vital data to modern parenting.
- The company will have cash of up to $325 million once the deal closes, which is expected in the second half of 2021.
What they do:
Suffocation is one of the leading causes of death among infants in the U.S.
Parents have traditionally used baby monitors to keep track of their baby’s health, but the technology is outdated, requiring parents to stay close and continue checking on the infant.
Owlet uses proprietary pulse-oximetry technology to track a baby’s heart rate, oxygen levels and sleep patterns to provide parents with invaluable peace of mind.
The Owlet Smart Sock integrates with Owlet’s camera product, the Owlet Cam, allowing parents to see and hear their babies via Owlet’s convenient smartphone app.
Why they’re spiking in interest:
According to MarketStream.io, Reddit mentions of SBG increased by 500% when comparing February 2021 to March 2021.
This spike happened around the same time the merger was announced between Sandbridge Acquisition Corp. and Owlet on 02/28/21.
Notable comment from Reddit:
"Picked up TWND, SBG and FUSE today. All are being slept on in my opinion and in this market the limited downside is a blessing." - SpacSingh
Why SBG could be valuable:
Owlet’s innovative baby monitor has resulted in strong net revenue growth, including more than 50% growth in 2020 after recording approximately $50 million in net revenue for 2019.
Owlet plans to leverage its proprietary data to build out its products and services, including a potential telehealth suite of recurring services.
Led by a team of forward-thinking founders and seasoned management, the Owlet is addressing a large and growing potential addressable market of over $81 billion.
Owlet has built a strong and highly loyal customer base of brand ambassadors who value the information and peace of mind that Owlet’s products provide during some of the most critical moments of their child’s developmental journey.
The majority of Owlet’s consumers and loyal advocates are first-adopters and millennials, a high-value demographic that is influential in product trends and digital product adoption.
Owlet's product and service offering is designed to serve these customers and future generations by providing parents with the right information at the right time to best care for their babies.
Owlet believes that five years from now, every baby will go home wearing a health monitor.
Similar to how it is required in the U.S. for every baby to leave the hospital in a properly installed infant car seat, Owlet envisions a future where every infant leaves the hospital with a wearable device like the Owlet Baby Monitor.
What the risks are:
According to the American Academy of Pediatrics, there’s no evidence that monitoring the vital signs of healthy babies actually reduces their risk for SIDS.
In an editorial published in the Journal of the American Medical Association, two doctors and a medical researcher warn that relying on smart baby monitors could actually put infants at risk.
The authors call on the Food and Drug Administration to step up its regulation of these devices.
Ken Ward, medical director of Owlet Baby Care, responded to these concerns stating "Owlet is actively addressing and resolving these concerns”.
That's a wrap!
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Disclaimer: This report by Ticker Nerd is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Ticker Nerd has no position in any stocks mentioned.