We came across a bearish thesis on Nano-X Imaging Ltd. (NNOX) on Substack by Steve Wagner. In this article, we will summarize the bears’ thesis on NNOX. Nano-X Imaging Ltd. (NNOX)’s share was trading at $6.07 as of Nov 26th.
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Nano-X Imaging (NNOX) provided an update on its Q3 2024 operations, revealing mixed results and raising several concerns for investors. The company reported $3 million in revenue for the quarter, a modest increase from $2.5 million in Q3 2023. A notable highlight was the expansion of its U.S. sales and support teams, aimed at strengthening its global growth trajectory. Progress was also made in deploying the Nanox.ARC and Nanox.AI solutions, with dozens of units now operational worldwide. Additionally, Nano-X continued to expand its AI business, securing new distribution agreements with SpinexMedical and extending partnerships with Corewell Health, Dandelion Health, and Oxford University Hospitals.
On the clinical side, Nano-X initiated a multi-site clinical trial at Beilinson Hospital in Israel and in Ghana to gather data supporting the clinical efficacy of the Nanox.ARC system. Despite these positive developments, there were significant financial challenges. As of September 30, 2024, the company held $57.1 million in cash, a decrease from $82.8 million at the end of 2023. The cash burn, amounting to $26.1 million from operations, is a concern, particularly as it follows the deployment of only a few dozen ARC systems. The company reported a net loss of $13.6 million for the quarter, an improvement from a loss of $21.4 million in Q3 2023, largely due to a reduction in goodwill impairment expenses.
Breaking down the revenue, the teleradiology services segment generated $2.6 million, reflecting customer retention and increased service volumes. However, sales from imaging devices and services, including Nanox.ARC systems, accounted for only $29,000, signaling a significant shortfall in the company’s core imaging business. AI solutions brought in $0.4 million, up from $141,000 in Q3 2023, but still a small contribution relative to expectations.
Despite the modest progress, the situation is raising red flags, particularly regarding Nano-X’s ability to meet its promises. The company had initially planned to deploy 5,150 Nanox.ARC units to underserved regions after receiving regulatory clearance for musculoskeletal imaging, which has already been granted. However, deployments have been slow, and revenue from these systems has been minimal. Concerns have been raised about the lack of transparency surrounding these deployments, with management unclear about whether the systems in question are 2D or Nanox.ARC units.