Pins and Needles
Imagine a miracle cure that can shed your extra pounds, lower your risk of stroke and heart attacks, protect your kidneys, give you a stronger liver and even help you sleep better, maybe. That's what GLP-1 therapies — Ozempic, Wegovy & Co. — do.
What's the catch?
They're expensive, for one — $1,000-$1,500 per month. For those that can afford it, they win the privilege of constantly getting stabbed with a needle — once a month or more. If they stop, the benefits from the therapies fade. Right now, about 50% of patients drop off of Ozempic and Wegovy before six months are up.
Injections are inconvenient. They make it tough to stay on the treatment. Many never begin. Who likes shots? No one.
Vivani Medical takes a stab at solving this. Doctors implant its device under a patient's skin. The treatment lasts an entire year. There's no need to worry about adherence, dosing or missing appointments. Patient's results in trials have been better than the injection route.
Sounds good so far, but…
Getting under your skin
The company isn't selling anything yet. Its device is still in the clinic. There are a lot of steps between now and making money. That makes the business a pretty risky prospect. A few of Vivani's treatments are getting close to market (or being a zero).
On its own, a fancy new delivery for a miracle drug that doesn't quite make any revenue yet isn't that appealing. It has a few shots at either 1) being worth a ton or 2) being worth nothing.
Two things tip the scales and take the edge off the business risk. The first is that its spinning off its brain delivery business. The idea is similar to its GLP-1 delivery: an implant.
Delivering therapies to the brain is notoriously tricky. It has a similar risk profile as the subcutaneous delivery mechanism. It could, again, be worth a lot or nothing. It could end up being a platform for loads of different therapies… if it works. It's also a bit further away from hitting the market. The point is that business risk is separate from the subcutaneous one. The odds of one of these businesses working are higher than both of these businesses not working. Even if its just a little bit.
Management worked everyone up to get excited about the spin-off. Then the government shut down. Vivani had to delay its spin-off. Oops. Investors got a little queasy. Shares fell about 15%.
The probabilities and economics of the company's prospects didn’t change. Just some uncertainty around timing.
The second factor lending some credibility to the situation is Gregg Williamson. He’s the largest shareholder and a company director. Gregg bought nearly 3% of the company's market cap before the snafu around spin-off timing. He's only reported buying Vivani shares over the past few years. Nothing else.
Sometimes directors performatively purchase shares to signal their confidence in the company. They don't need to purchase 3% of the company to do that. At the very least, Greg wouldn't be doing this if things were going badly. As a director, he’d probably know.
Don't be a pill
The outcomes for the company are uncertain. They could be zeros. The position in the portfolio is a small one. The company's position in the market is also a small one. Not quite zero, but not far from it. Investors don't expect it to work out. It may not. Given the prospects, though, if it does work out and the given vote of confidence from management's purchases, shares offered an attractive opportunity.
Disclaimer: None of this is investment advice. It's meant to illustrate ways LCM thinks about investing. Things that LCM decides are good investments for LCM and its clients are based on many criteria, not all of which are covered here. Some or all of LCM's ideas may not be suitable for other investors. LCM does not recommend investing either long or short any position mentioned. LCM may own positions in some of the companies mentioned. Some of its ideas will lose money — investing entails risk. See full disclaimer here.