Medical marvel

Medical technology business Polarean Imaging (LSE:POLX) has passed some significant milestones in recent months.

Its landmark XENOVIEW product — which allows MRI scans to give a more complete picture of a patient’s lung health — was signed off by the US Food and Drug Administration (FDA) at the end of 2022. Then in May, the first clinical scan took place at an Ohio hospital using the technology. This followed the company’s maiden sale a month earlier.

So what’s gone wrong with the Polarean share price? As is often the case with penny stocks, it’s money.

The business had a healthy $16m of cash on its balance sheet at the end of last year. But in February, it announced that “the company will need additional cash resources to achieve the 24 month commercial targets and to pursue the development of the next indications and their approvals, and advanced R&D for future products.”

A dip-buying opportunity

Tapping shareholders for cash is one option the business is exploring to plug the funding gap. Yet given recent share price weakness, I’m still considering adding some Polarean shares to my portfolio.

City analysts expect Polarean’s sales to more than double from around $3m this year to $8m in 2024. This is possibly no surprise given the advantages its technologies provide for both medical personnel and patients.

The company’s technology not only provides clearer images, but they can be taken without the use of harmful radiation and don’t require invasive procedures. As the number of people suffering lung-related problems explodes, XENOVIEW has huge growth potential.

The number of people seeking treatment for chronic obstructive pulmonary disease (COPD) alone is tipped to soar over the next decade, as the graph above shows. Soaring cases of asthma, cancer and other conditions also mean demand for Polarean’s expertise could grow strongly.

A top dividend stock

Making a second income from penny stocks can be a difficult task. Usually, any surplus cash these growth-oriented shares make is ploughed back into the business rather than paid out in dividends.

Property stock Alternative Income REIT (LSE:AIRE) is one small-cap share that could provide a passive income however. Under real estate investment rules its required to distribute at least 90% of annual rental profits out by way of dividends.

This is why the firm offers up a huge 8.2% forward dividend yield. That’s more than double a corresponding 3.8% reading for FTSE 100 shares.

Alternative Income invests in a diverse range of real estate assets. This means that, while it can still theoretically struggle to collect rents during downturns, the risk is much reduced. The firm’s portfolio includes hotels, gyms, logistics hubs and care homes.

Encouragingly, 96% of the rental income it receives is inflation linked. This makes it an especially attractive penny stock to own in this period of rampant price rises.

The post 2 unloved penny stocks I’m considering buying today! appeared first on The Twelfth Magpie.

Polarean (LSE:POLX) had received the green light for its novel lung-visualisation technology from the US Food and Drug Administration (FDA) on 28 December.

The FTSE AIM-traded company seemed to have a bright new year ahead of it.

Indeed, a hospital in Ohio opened its wallet and gave Polarean its first product order in April.

So, why has the stock tumbled in 2023? And is its 48% price crash a flashing ‘buy’ signal for my portfolio?

Breath-taking technology

Polarean has produced what it hopes will be the next generation of lung-imaging technology. Unlike CT scans, no ionising radiation is involved, which is a bonus for patient safety.

Its patented hyperpolarized xenon-129 gas helps capture what the company calls a “Xenoview“. Patients inhale the product and hold it for around 10 seconds.

The final product is an MRI picture that provides healthcare workers with a detailed look into the lung’s labyrinthine network of 300m alveoli.

Researchers at prestigious institutions across the US, Canada, the UK, and Germany are currently working to flesh out use cases for the technology. The US National Library of Medicine website lists 94 projects that rely on Polarean’s innovative product.

Polarean’s first order for a gas-blend cylinder for the production of Xenoview came late last month from Cincinnati Children’s Hospital. The Ohioan paediatrics centre is one of the hospitals that has been involved in investigating Xenoview. The hospital bought enough gas for 100 scans.

Take a deep breath

Although Polarean looks like a golden boy in the academic world, capital markets gave the company a mauling in mid-February when it announced it would need to raise more cash to reach its two-year commercial targets.

The share price cratered nearly 20% in a day, and it hasn’t recovered since. Polarean said it was considering funding options ranging from strategic partnerships to equity raises.

Polarean gave shareholders more bad news in March, revealing that $12.4m of its $13.9m cash pile had been deposited at Silicon Valley Bank before it went bust. Fortunately, that scare was short lived, with the company’s deposits emerging unscathed.

Worryingly, Polarean’s investor presentation does not mention the words ‘profit’ or ‘profitability’ once in 21 pages, focusing instead on the technology and the target market.

Is Polarean a buy?

Polarean is currently trading at a price-to-sales (P/S) ratio of 50, which suggests investors are pricing in a lot of growth. The only broker covering the medical imaging device company predicts revenue will grow by 800% in two years.

I like that Polarean has less than £500,000 of debt and cash holdings over £10m.

In addition, institutional investors hold one-third of the company’s stock.

Still, this penny stock is too risky for me.

If the company can’t get to profitability, it might have to blow up its share structure and dilute existing holders to stay alive. For now, I’ll be watching from the sidelines – with bated breath.

The post This penny stock has halved in 2023 to 28p! Should I buy? appeared first on The Twelfth Magpie.

Should I follow the crowd and buy the shares for my own portfolio? Let’s take a look at the investment case.

An introduction to Polarean Imaging

Polarean is a US-based company that operates in the medical imaging research space. As an innovative company, it’s focused on solutions that help with the diagnosis of lung disease.

It specialises in the use of hyperpolarized xenon gas (129Xe) as an imaging agent. Its technology is designed to provide a novel, non-invasive approach to diagnostics and enable MRI systems to achieve an improved level of pulmonary function imaging.

Founded in 2016, Polarean listed on the London Stock Exchange’s Alternative Investment Market (AIM) in 2018 via an Initial Public Offering (IPO). Currently, it has a market-cap of around £120m, meaning it’s a small company.

The company is led by CEO Richard Hullihen, who has more than 30 years’ experience in the medical imaging industry.

Growth potential

Looking at Polarean Imaging today, there are a couple of things that stand out to me. The first is that in late December, the company’s key product, XENOVIEW, was approved by the US Food and Drug Administration (FDA).

XENOVIEW is designed for use with MRI systems for the evaluation of lung ventilation in adults and paediatric patients aged 12 years and older. It can provide pulmonologists, surgeons and other respiratory specialists with ventilation maps of patients’ lungs.

FDA approval is a huge achievement for the company. And it could lead to much higher revenues.

It’s worth noting that at present, the one broker covering the stock expects revenue to hit $9.8m in 2023 versus $1.5m in $2022. That’s a substantial increase.

The second thing that stands out to me is that there are some major name investors on board here. Currently, Amati Global Investors, Chelverton Asset Management (which has a great track record with UK growth stocks), and Aviva are some of the biggest shareholders.

This is all very encouraging and leads me to believe there could be significant investment potential here.

A speculative growth stock

Having said that, this stock is speculative in nature. Polarean is not expected to be profitable anytime soon. For 2023, the company is expected to post a net loss of $14.3m. Generally speaking, unprofitable companies are risky investments. One reason for this is that they are hard to value accurately.

Meanwhile, the company may need to raise capital at some point. Earlier in the year, management said the group had enough cash to last until 2024. However, it is burning through its cash pile. So I would not rule out a capital raising in the not-too-distant future. This could put pressure on the share price.

The size of the company also adds risk to the investment case. Typically, the share prices of companies this size are volatile in nature.

My move now

Given the lack of profits, I’m going to leave Polarean Imaging shares on my watchlist for now. The company does appear to have a lot going for it. However, right now, the shares are just a bit too speculative for my liking.

The post Hargreaves Lansdown investors are buying Polarean Imaging shares. Should I buy too? appeared first on The Twelfth Magpie.

The best penny share to buy now?

The company in question is medical imaging technology firm Polarean Imaging (LSE: POLX). Its non-invasive drug-device combination product helps clinicians diagnose lung disease. It also allows them to identify the best treatment for the patient and then regularly check in to see whether said treatment is working or not. As it sounds, this could be a big deal for pulmonary medicine.

Following two successful Phase III clinical trials, Polarean’s Xenon gas MRI now needs to be approved by the US Food and Drug Administration (FDA). Importantly, a response on this is expected by 5 October, hence why this penny share’s grabbing my attention now. 

So it’s looking positive then?

Based on recent activity, Polarean seems to think so. In anticipation of good news, the company has already taken on sales and marketing staff for when the product is officially commercialised. This should allow it to hit the ground running if/when it gets the green light. The potential demand could be huge. 

Polarean certainly isn’t short of backers either. It raised £27m earlier in the year from several UK and US institutional investors in an oversubscribed funding round. Specialist fund manager Amarti Global, for example, holds a little over 12% of the company which now commands a market capitalisation of £180m. 

All this makes POLX potentially attractive, in my opinion. So what things do I need to be aware of?

No sure thing

Well, one thing to highlight is the superb performance of this penny share to date. It’s more than doubled in value over the last 12 months. Since coming to the market in March 2018, the stock’s up over 400%.

I doubt early holders will be complaining. Then again, it’s worth asking how much of Polarean’s potential is now priced in. After all, it barely makes any revenue and will still have zero profit following approval. Adoption by hospitals will take time. Having come so far in so little time, one might wonder whether a ‘thumbs up’ from the FDA might be actually greeted with a shrug of the shoulders by the market. The share price may even fall as profits are banked by short-term traders.

Of course, there’s always the potential that Polarean might not gain clearance from the FDA, due to safety concerns. Such a scenario might be unthinkable to those already holding. However, I’ve been burned on such decisions in the past. I’m wary of assuming anything’s in the bag.   

Regardless of which direction POLX stock may go next month, I also need to remember that the company’s small-cap status (and therefore relative illiquidity) may exacerbate this move. 

Small position

In sum, POLX strikes me as a potentially exciting investment to make in September (even though this alternative stock remains my favourite penny share). That said, its almost binary nature makes it one that I most definitely wouldn’t bet all my capital on.

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