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Mazor Robotics: The Next Intuitive Surgical

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Conventional wisdom in choppy markets is to avoid high valuation stocks. The volatility will give you nightmares. If properly prepared, volatility can also give you opportunity.

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In a correction good young companies often see the price of their equity fall more than average. This is what successful investors look for in the overall strategy.  Let me give you an example.

Start with a long time favorite in the healthcare field: Intuitive Surgical (ISRG:NASDAQ).  I ran across ISRG in April 2008.  Wow that was right in the middle of the financial crisis when Bear Stearns was going out: volatile times back then.  

Intuitive Surgical  are the guys that pioneered robotic surgery.  Their Di Vinci surgical suite specializes in procedures like prostatectomies and hysterectomies.  

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From a patient perspective, Di Vinci offered faster, less invasive and quicker recovery times than conventional surgery.  For physicians it meant being able to offer a better service and a happier customer.  For Intuitive Surgical it meant big upfront revenues on the sale of the equipment and even more continuous income from sale of disposable products consumed during the surgery.  A true win win situation.

Back in 2008 when I discovered ISRG it was selling at nearly 100 times a token level of earnings.  The total market cap was somewhere around $500 million.  To rich for my blood at the time.  After all, it was the middle of the financial crisis.  Not a time to take chances.

Today Intuitive Surgical is worth just over $45 billion.  They are far and away the leader in robotic surgery.  The lesson: if there is a long term investment thesis, even a major financial crisis is a short term hurdle.

Along Comes Mazor Robotics For Spinal Surgery

Mazor Robotics (MZOR:NASDAQ) created the Renaissance Robotic Surgical System.   This dramatically simplifies the very nature of spinal surgery.  The system is 98%-99% accurate, reduces complications by more than two-thirds and reduces exposure to harmful radiation by 35%-50%.  Finally, it reduces recovery time and that makes for happy patients.  When it comes to alleviating back pain a satisfied customer is a walking endorsement for the Renaissance System.

Promising Agreement with Medtronic

The fun got started back in 2016 when Mazor signed a marketing and distribution agreement with Medtronic (MDT:NYSE) that represented a breakthrough for the Renaissance System.  Mazor is an Israeli company strong on technology but weak in global distribution.

The selling and distribution of surgical suites like Renaissance is long and involves entire project teams of medical experts and IT professionals to train hospital physicians and their surgical teams.  Once trained, it practically takes an Act of Congress to force doctors to change their habits.  So the long selling cycle tends to lead to long-term customer relationships.

How Mazor Makes Money

The company makes money from three sources.  The Renaissance Surgical suite sells for about $850,000.  With the sale, Mazor offers maintenance and service under contracts.  This is like annuity income that is highly profitable.  Disposables at a cost of $1,500 per operation are the second most important revenue stream.  The gross profit on these items is over $1,350.

Blade & Razor Business Model

The interesting thing about Mazor’s business model is the disposables business. One only needs to consider the potential 100,000 US procedures and 500,000 worldwide might do for the company. Of course there is a lot of blue sky thinking here.  For example, not every surgical procedure will be appropriate.  Sometime, patient characteristics like obesity etc. preclude the use of various surgical techniques. Also cost and reimbursement issues have to be taken into consideration. Having stated all these caveats the opportunities for Mazor are interesting, so say the least.

Constant Comparisons

Along the way Mazor’s potential will constantly be compared with Intuitive Surgical.

The most recent data shows Da Vinci was used in over 650,000 procedures last year employing 3597 machines.  That works out to one surgery suite for every 180 procedures.  If we use this as a proxy, Mazor will need to sell roundly 2800 Renaissance Systems to service 500,000, and that is just half the global market.

Will Mazor succeed or will something trip them up along the way. On the positive side, it has regulatory approval for use in the United States and most everywhere else in the world. However, the healthcare business is littered with promising companies that flamed out so the risks are there. For all their success, Intuitive Surgical’s path encountered a few bumps.

There are already over 200 systems in place worldwide.  Mazor is starting to catch on. The company expects to report full year 2017 revenues of about $65 million in mid February.  We think near term order backlogs could be a little soft.  If so the stock could be impacted and that is an opportunity to watch for.

Something to remember, Mazor’s current value at about $1.7 billion may sound sizable but Intuitive Surgical is a far more lofty $45+ billion. We are neither doctors nor investment advisors so we won’t give you advice on your aching back or you financial portfolio.  However, we will keep you informed as more information on Mazor becomes available about this technology.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 22 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Ethereum

Ethereum: Building A Lead In The Marathon

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A lot of what is written these days on cryptocurrencies fits into one of three categories. The first is a description of the latest price moves up and down.  We all know how much drama there is and that makes good headlines.  

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Let’s call the second category the SegWit syndrome where we receive a description of the latest breakthrough in blockchain technology written from a developer viewpoint: hard to read and nearly impossible to understand.

In the third category is all of the other highly qualified writers and journalists that I have not already insulted.  Apologies to all.

For more than 30 years as a Wall Street analyst, hedge fund manager and Director of Research, my approach is to access things from an analytical perspective.  Technology is constantly changing the world but the things that make for long term business success pretty much stay the same.  That is why our bias tends to favor the crypto giants Bitcoin and Ethereum.

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Focus On Ethereum

By now it is probably no longer necessary to describe Ethereum’s open source blockchain platform that features self executing smart contracts.  Everybody knows that by now, right?

As a business person and investor, I am drawn to the leadership already created by Ethereum founders.  Say what you will about Initial Coin Offerings, but Ethereum accounts for over 80% of that market.  But that is just surface stuff because if ICO were to stop overnight, the demand for Ether would not end.

One of the forces behind this prediction is the Enterprise Ethereum Alliance which is now just over a year old.  Membership totals somewhere near 300 companies from JP Morgan and MicroSoft down to much more modest enterprises.  The mission of EEA is to bring together Fortune 500 companies with blockchain experts.  This is a great selling tool for Ethereum and as the list grows, so does their competitive strength.

Capital And Competition

To be successful, it is critical to always keep an eye out for what is going on around your business.  It is a well turned phrase that if a business doesn’t disrupt itself, someone else will. That takes capital. These days capital is flowing into crypto in many different ways.

The Weird Journey of Algorand

Venture Capital are dying to find a way of tapping into the cryptocurrency wave.  As we pointed out in a recent article, VC’s have been wounded by things like crowdfunding and ICOs and looking for about any action.  That is when I came across MIT’s Algorand blockchain project.  It raised $4 million in seed money from two VC’s.  Now $4 million is chump change but still it made me ask, what were they thinking?

Here is how CoinDesk described the project.  Algorand constitutes a digital currency and transaction platform.  It represents the latest effort to build a wholly new blockchain aimed at tackling some of the perceived governance issues associated with distributed systems.

The Professor Speaks

The head of the Algorand is MIT professor,  Silvio Micali. In addition to spending 30 years in cryptography he is also a Turing Award winner.  So obviously he is no slouch.  But apparently all these years in academia has depleted his appreciation for Econ 101 which states that everyone behaves in a way to optimize profits.  Professor Micali and the Algorand platform appears to be forgetting the value incentives for crypto mining.

At a recent conference Macali explained his attitude and the Algorand approach in this way. “We must use incentives as a last resort.” “ When you put incentives out there, people learn how to use those incentives for making money in ways that are nearly impossible to predict.”  Wow, that sounds a lot like creative capitalism.

Crypto Socialism

Micali believes that miners who have invested lots of dough in expensive equipment are dealing in trivial computations and do not need to be rewarded.  Instead the Algorand platform uses “validators” who in return for doing trivial computations will not have to invest in expensive equipment.  

Coindesk describes Algorand as the latest effort to build a wholly new blockchain system. The best guess on a release date is sometime in the next year. Taking that statement at face value out of respect for the author, at this time,  investors in Ethereum have little to be worried about from competition.  In the meantime Ethereum founder Vitalik Buterin is working on something call a DAICO.  It is intended as an improvement on the current Ethereum ICO process.  As we suggested earlier, when a tech company disrupts itself, it reduces the chances of being overtaken by others.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 22 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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The Abyss Becomes First Startup to Test “DAICO” Concept

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An ICO by the name of The Abyss is looking to become the first project to test Vitalik Butrin’s “DAICO” concept. The founder of Ethereum outlined the new crowdfunding protocol in a post that appeared on the Ethereum Research Forum in January. If successful, The Abyss’ token raise could have profound implications on the budding world of ICOs.

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The Abyss Token Sale

Next-generation gaming platform The Abyss is developing a token sale based on Butrin’s Decentralized Autonomous Organization Initial Coin Offering, or DAICO for short. The company will launch a month-long token sale on Mar. 7, with early participation giving investors a bonus of up to 25%. A hard cap of $60 million has been placed on the sale, with 1 ABYSS token valued at 24 U.S. cents. Minimum investment in the project is 0.1 ETH.

According to a post that appeared on the project’s Medium channel last month, The Abyss token raise “will represent an advanced and improved ICO mechanism, allowing token holders to control the fund withdrawal limit, also providing an option to vote for refund of the remaining contributed money in case the team fails to implement the project. With all this, The Abyss project is to become the world’s first Token Sale, pioneering and promoting the DAICO concept.”

The Abyss essentially serves as a multi-level referral platform allowing gamers to participate in in-game and social activities. It also allows developers to lower marketing expenses by directly engaging the gaming community.

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As far as we can tell, no other company has adopted DAICO yet. As a member of the Ethereum Enterprise Alliance (EEA), The Abyss could provide a valuable case study into the system’s viability and reception among investors. As it turns out, The Abyss is very well received by the blockchain community, with several third parties giving the company a favorable review.

DAICO Model

At the core of Buterin’s DAICO model is the need to minimize investor risk during an ICO campaign. The solution is to combine the current ICO structure with the DAO, The resulting DAICO system utilizes smart contracts to encode certain rules into the token raise that startups must follow from the very beginning.

For example, DAICO could stipulate that management receive “approval” from investors each time it wants to utilize funds generated from a crowdsale. In this case, the company would “tap” investors for approval, and the investors themselves would decide whether to grant the firm access to the funds.

DAICO systems can also implement KYC/AML standards and structure a campaign more transparently than current methods. Widescale adoption of this system could have a lasting impact on the blockchain economy by weeding out scams and other companies looking to generate easy cash to finance their business operations. Hacked covered the development of DAICO in a Jan. 19 article, which provides greater insight into Buterin’s thought process.

ICOs generated billions of dollars for hundreds of startups last year, but the parade may soon end as regulators begin clamping down on token raises. The U.S. Securities and Exchange Commission (SEC) has taken special interest in ICOs, warning companies that their definition of a “utility token” will come under intense scrutiny by federal regulators.

Although ICOs aren’t illegal in the United States, there’s a good chance they will be categorized as securities. Such a designation would make them bound by federal securities laws, something most ICO projects want to avoid entirely. Against this backdrop, many ICOs are electing to avoid the U.S. market entirely.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 161 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Lessons From Venture Capital Craziness

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Financial technology or Fintech is a white hot area these days and lots of folks are after a piece of the action.  The payments business is one huge area of opportunity even before counting cryptocurrencies. When the global economy generates more than $90 trillion in GDP, that means lots of money constantly on the move.  Trouble is, these days, it moves slowly and at a high cost.

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With that much at stake, there is no shortage of entrepreneurs with the next disruptive idea.  As an analyst and investor, it is hard to choose who knows their stuff.   Revulut got my attention and here is how it happened.

Venture Capitalists are wrong on about 95% of their investments but to put a valuation of this magnitude was quite unusual, maybe even a little crazy. The crypto buzz had a lot to do with Revolut’s capital raising success.

Last summer, Revolut founders Nikolay Storonsky and Vlad Yatsenko raised over $66 million in VC funding and another $23 million from Crowdfunding. That is serious money considering the company was scarcely a year old at the time with hardly any revenues.  This placed the implied value of the company between $200-$400 million.

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It would be easy to declare insanity in the ranks of venture capital.  An equally plausible conclusion is that a major source of risk capital has done their homework on crypto and has given their seal of authenticity.  Just something to keep in mind as the price of crypto is soaring and the word bubble comes up.    

About Them

The Revolut app allows customers to open a current account in under 3 minutes, and includes a prepaid contactless MasterCard debit card.  So far there is nothing unusual about Revolut. Sounds like about any other branchless bank.

The company marketing offers freebees like free international money transfers that could save users 3% so that is good.  Also there is free access to global ATM machines although no mention is made of what networks are included or their location.  

And there is one other caveat; the free ATM access ends when you withdrawn $250 in any month.  That is chump change for most people.  If you average closer to $500 per month at the ATM, you will want to select the Premium service.  That will cost $6.99 per month.

OK so not everything is really free but still $6.99 per month beats the $25-$35 charged by conventional banks.

Offering freebees can be a great way to attract customers but read the fine print before making any commitments.  In Revolut’s case you really have to dig into the details such as the limit of free ATM withdraw before little charges start to creep in.  And if you are an American here is the most puzzling detail taken directly from the company website.

“You can transfer money to banks in the United States using Revolut. However, if you are currently living in the United States, you cannot make a bank transfer from Revolut to your local bank account due to licensing restrictions.”  Something must have been lost in translation: what does this mean?

The firm launched personal international bank account numbers (IBANs) across Europe last summer.  So if you live in the United Kingdom or one a a dozen or so Eastern European countries, Revolut offers real value added services.  For the rest of the planet, not quite yet.

Since then they have begun integrating  currencies like Bitcoin, Ethereum and Litecoin.  Here is the sizzle to bring in new customers.  “Revolute will now be able to buy, hold and exchange Bitcoin, Litecoin and Ethereum in just 30 seconds at the best possible rates.”  There is a 1.5% fee for this service which is competitive with exchanges like Coinbase and others.

Revolut is adding other new services beyond cryptocurrency to lending and pay-as-you-go travel insurance at the tap of a button.  Altogether, not a bad business plan but it is the crypto connection that moves the needle.

VCs Depending On Experienced Management

Storonsky is more than a slick operator with a pretty pitch deck.  He and his partner have deep experience in the global payments business.  Nikolay spent years as a currency trader with Credit Suisse so he understands the level of fees charged by the current system.  

The technical wizardry, however, rests with his partner Yatsenko. Vlad spent over 10 years building financial systems for major Wall Street investment banks.  He serves as the company’s CTO.

Conclusion: Why Is Revolut Unique?

The global payments business has long been a gigantic oligopoly controlled by a series of networks, governments, banks and a group of oversized corporations such as Visa, MasterCard, Fiserv and others.  

Taken together it is like a mafia of financial behemoths interested in nothing more than keeping the status quo.  Perpetuating the system enables them to maximize the amount of fees for the mindless service of money transfer.  Revolut could be one of many disruptive forces but will it take $90 million to get them there.  Evidence shows the answer is most definitely no.  The cache of cryptocurrencies in the Revolut business mix has attracted Venture Capitalist and others to pay outsized prices for access.  Bravo for crypto investors everywhere.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 22 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

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