• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Healthcare

An Eye for EYES, and Here Are the Whys

Second Sight Medical Products is producing a promising vision restoration device, with more in the pipeline.
By JIM COLLINS
Jun 19, 2015 | 05:00 PM EDT
Stocks quotes in this article: EYES, AMNL, VYCO, BSX

After my columns the last few days on halloysite clay/iron oxide producer Applied Minerals (AMNL), I'll switch gears completely and focus on life sciences.

One area I've been particularly interested in is vision therapy. Today I'll return to one of my favorite ideas, Second Sight Medical Products (EYES), and next week I'll focus on another company in the vision field, Vycor Medical (VYCO).

Second Sight shares have had a wild ride since the company's initial public offering last Nov. 18. The deal was done at $9 a share. EYES opened first-day trading at $17 and quickly rose to $24. Then gravity made its presence felt tremendously, and EYES plummeted all the way to its IPO price of $9 in January. The shares have recovered markedly of late, and traded above $16 on Thursday.

I have never fully figured out what caused the price swoon in EYES. It is interesting to note, though, that shares of EYES have risen 30% since the 180-day post-IPO lock-up period expired on May 18th. So, insider selling -- and there has been some to cover taxes and expiring options, for example -- wasn't the issue.

It seemed as if the market came to the conclusion that Second Sight was just too speculative at a valuation of $530 million, which is its market cap at $15 a share, based on a revenue run rate of $1.9 million in the first quarter of 2015. I get it. EYES is not cheap, and like most companies in the early rollout phase, there's a burn rate in play here. In Second Sight's case, it's about $5 million per quarter.

But that analysis ignores the massive efforts the company has undertaken to prepare for wider adoption of its Argus II retinal implant. This company has been built to run at a much higher rate of implantation than the 19 Argus II implants done in the first quarter of 2015

Potential EYES investors must remove themselves from the "Oh my God" moment of seeing a patient who hasn't seen in decades regain vision when his or her Argus II unit is activated. Viewing Argus II YouTube videos can be addictive. (I love this one.) But remember, Second Sight is a company backed by a billionaire, Al Mann, and is built to build things.

So, with the knowledge that EYES is a manufacturing company, its relevant business drivers are two incredibly basic principles. In any manufacturing company, once a company develops a product, it has to be able to

  • build them, and
  • sell them

I just saved you the two years and $196,800 (the school's own estimate) that it currently costs to attend Harvard Business School.

Seriously, EYES has taken important steps recently to address both manufacturing and sales. On May 1, Second Sight announced two crucial hires: Tony Moses, formerly president of Eye Therapies, was named commercial vice president, Americas, and Jim Miller, most recently value stream production manager for Boston Scientific (BSX), was named director of manufacturing, a newly created position for EYES.

So, Second Sight addressed both "making" and "selling" functions, and I am eager to watch the development of both factors.

If you think this is a billionaire's pet project with no prospects to ever reach critical mass, let me know and I'll make you on offer on your EYES' shares. If you think that Argus II's current indication for retinitis pigmentosa is only the tip of the iceberg, you should probably hold on to your shares. If you understand that using Argus II to address age-related macular degeneration -- a treatment for which it is already indicated in Europe -- will quintuple its addressable market, you should buy more. Lastly, if you understand that rejigging Argus into a device that allows for direct cortical stimulation and bypassing the optic nerve completely ¿ which describes EYES' Orion I product, currently undergoing animal testing --  you should continue buying EYES until it hits the mid-$20s.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider EYES to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jim Collins' firm was long in EYES and AMNL.

TAGS: Investing | U.S. Equity | Healthcare | Technology

More from Healthcare

Trade Carefully With Soaring Gritstone Oncology

Bruce Kamich
Jan 21, 2021 8:16 AM EST

The history we are concerned about is the past couple of weeks.

UnitedHealth Group Charts Appear Toppy Ahead of Earnings

Bruce Kamich
Jan 19, 2021 8:53 AM EST

The technical indicators of the health benefits concern are not sending strong signals at present.

Moderna Now Looks Like an Effective Long Trade With Few Side Effects

Bruce Kamich
Jan 14, 2021 12:06 PM EST

MRNA has corrected its big November rally and now looks ready to start a fresh advance, according to the charts.

Pacific Biosciences Reaches Our Price Target: Now What?

Bruce Kamich
Jan 13, 2021 12:19 PM EST

Let's check out the charts and technical indicators.

Emergent BioSolutions Is Looking Stronger

Bruce Kamich
Jan 12, 2021 10:37 AM EST

Here's an update on EBS shares.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:01 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    I'll discuss price targets in my Saturday column.
  • 07:54 AM EST GARY BERMAN

    Friday Morning Fibocall for 1/22/2021

    SPX (Long-Term View) The 1/21/21 NEW high @ 3861...
  • 11:16 AM EST CHRIS VERSACE

    Worst Stocks to Buy for the Biden Presidency

    Biden's take on the minimum wage, likely moves on ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login