The medical technology – or medtech – industry is on pace grow at a 4.1% compound annual growth rate to reach $477.5 billion by 2020, according to the marketing intelligence firm Evaluate Ltd. While giants like Medtronics Inc. (NYSE: MDT) and Johnson & Johnson (NYSE: JNJ) dominate the market, smaller companies may offer the best opportunities for individual investors to realize the greatest growth rates.
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Flexpoint Sensor Systems Inc. (OTCBB: FLXT) represents a unique and diversified opportunity in the medtech space. The company’s patented Bend Sensor® is a flexible potentiometer with numerous potential uses in medical technologies. By partnering with medtech firms, the company hopes to generate stable, high-margin recurring revenue that is tied to medical device sales, making it a potentially attractive opportunity for investors.
In this article, we will take a closer look at the Bend Sensor’s® many applications in the medical field and where the company stands in commercializing the technology.
Flexpoint has already begun working with a number of medtech firms to test and commercialize products incorporating its Bend Sensor® technology. For example, the company is working with Haemoband Surgical Ltd. to develop a disposable colonoscope device that leverages the Bend Sensor® to monitor the device’s position while the procedure is being conducted. The same technology is anticipated to be adapted in myriad other surgical devices.
Researchers at the University of Rome Tor Vergata have evaluated various sensor options, published research papers and, subsequently chosen to use the Bend Sensor® in an interactive glove to assist doctors in neuroscience studies to determine a patient’s level of motor skill or post-surgical evaluation and therapy. Again, the same technology could be applied to similar technologies – such as exoskeletons that help disabled individuals walk or prosthetics that are designed to be computer-assisted in nature.
In the future, the company could also see significant demand from ancillary medtech industries like the ‘quantified self’ movement. Apple Inc.’s (NASDAQ: AAPL) Watch and FitBit Inc.’s (NYSE: FIT) fitness trackers have demonstrated significant demand for quantifying biometric data through handheld or wearable devices. These wearables require sensors to track user data that can be used to make more effective medical and personal health decisions.
Flexpoint has seen a steady increase in medtech-derived revenue. On September 15, 2016 the company announced that it received additional purchase orders for medical wearables from both new and existing customers. Korea-based Neofect’s Raphael® rehabilitation platform is among these customers that have built the Bend Sensor® into their product lines. Wearables as a subset of medtech are expected to reach $7 billion in revenue by 2020.
Aside from the medtech industry, the company has also built up revenue in areas like the automotive and toy industries where its sensors are being integrated into new products and technologies. The company recently announced that it has entered mass production of its Bend Sensor® for a Fortune 500 toy manufacturer during the third quarter, which could ramp up to more than 750,000 sensors during the first year alone.
The company’s total revenue came in at around $138,350 in 2015, but trailing 12-month revenue has reached more than $180,000, representing significant growth. Management believes that it will reach a breakeven point before or during the first half of 2017 and a sustained positive cash flow during the second half of the year as revenue begins to flow from contracts with multiple clients. These dynamics should put the company on solid financial footing moving forward.
The medtech industry is both large and growing with giants like Medtronics and Johnson & Johnson dominating the space. While these companies have become bellwethers, investors may want to look towards smaller companies like Flexpoint Sensor Systems Inc. for the best growth opportunities as their advanced technologies break new ground in this exciting industry. The company stands at a tipping point with accelerating revenue and a potentially near-term breakeven point.
Moving forward, the company’s innovative sensors have the ability to revolutionize a number of industries, including wearables, ‘quantified self’, virtual reality/augmented reality (VR/AR), and Internet of Things (“IoT”) and Industrial Internet of Things (“IIoT”). These broad end markets provide investors with significant diversification and exposure to a number of compelling markets that are poised for rapid and sustained growth.