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What’s Oxford’s “The Next Ten-Bagger: Handheld Ultrasound” Stock?

What's being pitched by Alexander Green and Bill O'Reilly as "Humanity’s Next Gigantic Leap" in ads for The Oxford Club?

Better than Intuitive Surgical? The "Biggest Healthcare Innovation in Half a Century?" Thinkolator answers below...


This article was originally published on April 11, when we first saw the teaser pitch circulating from Alexander Green. It is still making the rounds, without any changes to the “presentation” that we’ve noticed, so we’re re-posting this to answer new reader questions. The “secret” company has reported a little bit of news since, but most of it was negative, with the revenue and earnings coming in about 10% short of estimates in their last quarterly update in early May… the stock is down about 25% from when we first posted this story, and what follows has not been updated since April 11, 2022.

Here’s the sum-up of Alexander Green’s latest teaser pitch about a company offering a handheld ultrasound device:

“It’s got cutting-edge technology and is in all of the top 100 hospitals in the U.S.

“It has the potential to impact not just millions, but billions, of people worldwide.

“It’s got 812 patents and pending applications protecting its intellectual property.

“It just locked in a new deal with a major international distributor that gives it access to 2 BILLION new customers.

“And yet it’s almost entirely undiscovered, and trading for well under $10.”

Add in the always-polarizing Bill O’Reilly, who serves as Green’s “interviewer” for his teaser presentation about this new stock pick (and gives away a copy of one of his novels as part of the deal), and you can see why Gumshoe readers are banging on the door asking for answers… so let’s put the Thinkolator through its paces and see exactly what O’Reilly and Green are teasing here.

First, the backdrop — this is all coming from an ad for the Oxford Club and its Communique newsletter, that’s their basic entry-level subscription ($49/yr), a go-anywhere investment newsletter and basic strategy. Like all the big publishers, that membership acts as the wide open end of the marketing funnel — once you’ve pulled out your credit card, they know you’re the next great sales prospect and you’ll quickly get more offers for their “upgrade” services at $499, $2,5000, or whatever else. Ironically enough, we generally hear more from subscribers who are satisfied with the “entry level” newsletters than with the higher-end products… at least, if you can tolerate the extra marketing email you’ll receive.

So what is this new company they’re teasing? Here are some other clues that we can feed to the Thinkolator for you today:

“Dr. Paramjeet Deol of Chelsea and Westminster Hospital called this device…

‘Nothing short of revolutionary [and] a game changer.’

“Dr. Gary Cohen, the chair of diagnostic imaging at the Temple University School of Medicine, calls the device…

‘A huge innovation and a step forward for healthcare.'”

And the folks who do investment teaser “presentations” love to have a physical device to point to as the embodiment of their secret, it adds to the “you gotta tell me what it is!” factor when there’s a box with that secret whatever sitting right on the desk next to Bill O’Reilly, so we get a little look at how small it is… and some more clues…

“Investors such as the Bill & Melinda Gates Foundation, the investment giant Fidelity and fund manager Baillie Gifford have poured in more than $400 million.

Elon Musk even sent the medical device in this box into orbit with his SpaceX crew.”

And some bigger-picture hints:

“The goal of the company behind this newest development… is to provide the highest-quality medical treatments available, faster than ever before… and at a price that will dramatically cut the cost of healthcare….

“This company’s prized technology won an Apple Design Award for excellence in innovation…

Fast Company magazine awarded it the “World Changing Idea” in the field of health and wellness.

“And I consider it the biggest development in medical technology in about 50 years.”

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OK, so that’s really an embarrassment of clues. We could put the Thinkolator to work… but I don’t mind making its job a bit easier, so we can shovel in a few other hints…

“The creator of this award-winning device has an incredible backstory.

“He’s a brilliant scientist… in fact, he won the National Medal of Technology and Innovation.

“He’s known for bringing next-generation DNA sequencing to the world today….

“In fact, he’s the first person ever to be named as the World Economic Forum’s ‘Technology Pioneer’ three separate times for the companies he founded.

“That’s important.

“One sold for $93 million. Another sold for $140 million. And another sold for $375 million.

“His genomics company went public in 1999… and by the following year, it reached a $5 BILLION market cap.”

And what’s this secret device? We eventually get to see it in the presentation, and he drops these other clues…

“… what they did was reinvent ultrasound from the ground up.

“They’ve replaced resonating quartz crystals, which have been used in ultrasound since the 1960s… with semiconductor technology and artificial intelligence.

“They’ve taken 9,000 metal transducers…

“Each smaller than the tip of a human hair…

“And placed them all on a tiny, low-cost silicon chip.

“And that chip is ‘the brains’ inside the handheld device.

“With these new innovations, the goal of this device is to deliver images:

  • 100 times faster
  • 100 times cheaper
  • At 100 times the resolution.

“The device simply connects to a smartphone, so you can scan with one hand and see images on your phone in your other hand…

“In real time.

“And unlike past ultrasound technologies, it’s the first to gain FDA approval to scan every part of the body…”

OK, so we’re basically replacing those ultrasound devices that are carted around hospitals for imaging fetuses, kidneys, etc., with a handheld device that plugs into an iPhone. It can reach some places where conventional ultrasound isn’t used, and Green says that “in many instances” it can replace an MRI or a CAT scan. Sounds pretty cool, and it’s obviously far cheaper than those larger machines — and Green says that “Every one of the top 100 hospitals in the country already has this device.”

And what’s the stock? Well, this won’t be a surprise to most of you — with all those clues, we barely even had to shift the Thinkolator out of neutral to get your answer today: This is Butterfly Network (BFLY), the portable ultrasound “disruptor” which came public through a SPAC merger a little over a year ago.

So what’s the story? Well, most of what Green says is pretty much straight from the first SPAC presentation from late 2020, which you can see here if you’re interested, and the company also got a lot of press back in 2018 when it was just starting to take orders for their Butterfly IQ devices.

Like most SPACs, there has been quite a bit of adjustment since they came out with those promotional five-year forecasts of how they were going to change the world, and the share price has come down pretty dramatically in the last year.

Some more of the specific clues from Green’s pitch are pulled directly from that SPAC presentation, too, including the revenue forecasts of $44 million in 2020 and growth to $78.1 million in 2021, $137.9 million in 2022 and $235.2 million in 2023, which is indeed impressive — that’s a blistering 70%+ growth rate.

And probably some of the reason for the weakness in the share price has been the failure to hit those numbers — they were more or less right about 2020, which shouldn’t be a surprise (the presentation came out in November of 2020), they “beat” that by a hair and had $46 million in revenue, but 2021 ended with just $63 million in revenue, 20% below the SPAC presentation forecast, and the few analysts who cover the stock (maybe only one, actually) expect $85 million in 2022, which is roughly in line with the company’s 2022 guidance today… but which is also about 35-40% short of what the SPAC presentation was forecasting 16 months ago, and the other numbers (margins, etc.) have also failed to improve. A reminder to at least check the numbers when you’re deciding whether to follow a newsletter into a stock — sometimes they rely on very old data and keep using that data in their promotional materials, as with Green’s tout that they are “experiencing terrific sales growth” and “crushing earnings.”

So today, as revenue growth in 2021 came in at less than half the level predicted in the SPAC presentation of late 2020 (35%, vs. the 77% predicted), Butterfly Network has dropped to a market cap of about $825 million, down quite dramatically from the ~$5 billion peak it enjoyed in its very early days a year ago. Is it worth buying now?

Well, the valuation is obviously much more appealing… but you couldn’t call it “cheap” — it’s trading at something in the range of 10X expected 2022 revenues, and even the optimistic numbers in the SPAC presentation didn’t have them stopping their “cash burn” until 2024, following years of investment in building the platform and releasing new hardware and software updates.

The good thing is that the SPAC merger happened before panic started to kick in for some of these deals later in 2021, so the SPAC shareholders didn’t redeem their shares, and that means they still have a good chunk of cash to use in building the market for their product — they’ve used up roughly $100 million of the $500 million in cash they got from the SPAC, so they’ve still got a little more than $400 million left, almost half of their market capitalization. They expect to have “adjusted EBITDA” losses of about $185 million this year, so the cash burn is accelerating (that was $122 million last year), but they do still have some runway left. They probably won’t need to raise money again until sometime in 2023.

And the shares fell quickly enough last year that the warrants haven’t been redeemed, so there are still a bunch of SPAC warrants out there if you’re interested in some leverage — they don’t trade much, and the price looks pretty high given how low the shares have fallen (strike price is $11.50, warrants last traded at almost 90 cents), but don’t expire until February of 2026 (unless they trigger their early-redemption clause).

What’s the outlook for the company? Well, it’s still a huge potential market — they’re focused on expanding into places where conventional ultrasound doesn’t reach, which to some degree means they have to make a new market, but there are billions of people for whom medical imaging of any kind is mostly out of reach.

When it comes to the US market, which is where most of the money would probably come from in these first years, I’d guess that the challenge is breaking through the existing system on the insurance and legal side — primary care doctors aren’t expert in imaging, so they could buy one of these for their office and give people quick answers, but they also know they’re going to get sued if they don’t refer someone to a regular ultrasound or an MRI and something is missed, so they have to convince insurance companies to pay them something for the scan, to justify paying a few thousand dollars for it, even if the scan is going to be repeated by a specialist… and hospitals and specialists have already invested heavily in conventional ultrasound and imaging equipment, so transitioning to a different kind of device might not be a quick or obvious decision for them.

That seems to be the challenge for most “disruptive” medical devices — sometimes they are better enough to break through the traditions and the insurance and hospital bureaucracy, sometimes they are able to market themselves to patients and cause patients to demand the product (like with the da Vinci surgical robot), but the second level of challenge comes from the existing imaging companies, who aren’t sitting still or ignoring this “handheld” market, and disruption often takes a longer time than it does in consumer markets.

So yes, the Butterfly IQ device seems really cool, and it also seems to be lower-cost than most of the competitors, but it also does have some closer competitors than is implied by the Oxford pitch or the SPAC presentations — the Butterfly is far more portable and convenient than the existing cart-based big ultrasound machines, but there are also lots of different small handheld and phone-connected ultrasound devices available right now, both from other disruptors like EchoNous with its Kosmos handheld ultrasound and Clarius with its Convex wireless ultrasound scanner, similar products from SonoQue and SonoStar, and, probably more importantly, from industry leaders like Philips with its Lumify handheld and portable ultrasound, and GE’s Vscan. Butterfly has also been sued by Fuji’s Sonosite for patent infringement — I have no idea where that lawsuit will lead, it was only filed last month, but the existing imaging companies are not ignoring the “disruptors” here.

That clouds the crystal ball a little bit — in order to “win” this market, Butterfly Network would probably have to be both better and cheaper than the similar products from established med-tech giants… maybe they are, I don’t know enough about the market to be certain of that, and the products do differ in meaningful ways, but so far they seem to be at least cheaper than other high-profile competitors… though all of these companies emphasize the subscription/membership/upgrade options that give you more control, more accessories, or better warranty or upgrade services, and that’s probably where the profit is for most of them.

At Butterfly Network, for example, their subscription revenue is small but is presumably higher-margin, and is growing much faster than their product revenue (46% growth for subscriptions vs. 15% for products in the fourth quarter)… and they did have good full-year revenue growth… but there’s a little caution flag in those results as well, because they actually sold fewer devices in the fourth quarter of 2021 than in the same quarter of 2020. (That’s all from the annual results presentation for 2021, I have not actually dug in and reviewed the full financial results.) They talk quite a bit about “evolving” their business plan in this first year as a public company, particularly with what they now call their integrated “Butterfly Blueprint” that provides better integration for imaging data within health systems, but so far that evolution means their business is slower-growing and less profitable than was envisioned a year and a half ago.

I did read a bunch of comparison reviews of the various products, and Butterfly mostly stood out for the cool factor, lower cost, and more intuitive interface. That was enough to help the iPhone squash the competing products from Microsoft, Palm, Blackberry and others a decade ago, but whether it’s enough to help the Butterfly establish a big market is still an open question.

Still, it is cool, and it does have good marketing and pretty good revenue growth right now, and a decent cash pile to use in trying to build the business over the next couple years. That’s worth something, and it’s entirely possible that they really do have a better product on either the hardware or software side, and will either make a big splash in developed markets if we give them enough time, or build a strong platform in under-served markets in the future (that distribution deal Alexander Green mentions, to reach two billion people, is with a Africa-Turkey-India">new distribution company that aims to reach the “global south”, and is trying to get its products, now including the Butterfly, into the Middle East, Turkey, North Arica and India) — what the share price and the competition are whispering to me is that it’s not highly probable, but it’s certainly possible. That’s good if you’re a contrarian investor who can convince himself to bet on this product growing into a leader, particularly if you have some insight into this marketplace which convinces you that adoption rates will increase, and that investors are worrying too much about the competition… but bad if you’re a momentum-focused investor who wants to see proof of snowballing demand and enthusiasm from investors and analysts.

It’s a good story, but the numbers have been lagging the story so far. I like the idea, but I’m not in a rush to invest in the company at the moment.

But that’s just me, and I only get to worry about my money… what do you think? Will this be the next great health disruptor to create a multibillion-dollar business? Are investors too worried about inferior competition, or not worried enough? Will their investments this year get them over the hump, or will they be coming back to the market to raise money at an even weaker share price in a year to stay alive? It’s your money, so you get to make the call — let us know what you think with a comment below.

Disclosure: Of the companies mentioned above, I own shares of Intuitive Surgical. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.

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Irregular
jdeedub
April 11, 2022 2:23 pm

Great write up. As someone who does a lot of U/S, it seems like a legit product to disrupt point of care U/S in the ED and in ICUs.

Agree with the cool factor and I could definitely see it catching on. But whether insurance will pay for it to grow market share for the company overall, is another story. But the product looks legit.

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Mitchell Gordon
April 11, 2022 2:25 pm

The last time I followed Greene was with Han Hoi and that was a bust. 2-3 years later and it has gone nowhere. And that was his “IF YOU ONLY BUY ONE STOC K, THIS IS IT” PITCH. That was before I found Stock Gumshoe and realized that he and the rest of the “promoters” are getting paid whether they believe in what they are selling or not. Too much Hype and not enough honesty. I have just lost respect for O’Reilly.

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Marc Pearsall
April 11, 2022 2:27 pm

Hi Travis,
I bought BFLY several weeks ago because I saw a YouTube video and thought it was a no brainer. Two weeks later FujiFilm launches a patent infringement lawsuit and the stock tanks 40% lower than my purchase price. I’m out of the trade.
They have what looks like a no brainer device, but with a major lawsuit looming on the horizon, better take a pass on BFLY networks for now. It has ZERO support at these levels and could very well go to zero from here.

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THE NEXT TEN-BAGGER: HANDHELD ULTRASOUND
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Irregular
jdeedub
April 11, 2022 2:59 pm
Reply to  Marc Pearsall

Seems to me like Fujifilm is not happy about potentially losing market share from their portable Sonosite which is in every ED/ICU for this same purpose. Clinically it feels like a dinosaur, is frequently low quality and doesn’t have a sleek iPhone interface for seamlessly sharing images with colleagues. It also doesn’t use a single probe for multiple functions. Sonosite was a DARPA project for battlefield US and that’s what it still feels like honestly.

Last edited 2 years ago by jdeedub
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Member
April 11, 2022 2:29 pm

I like this tech and have been following the stock for a year or so (Oxford Club subscriber). The stock is 50% below the 200 dma, along with much of the other biotech sector. So, it’s not likely to garner any institutional buying in the next two quarters. But I’d take this stock as a flyer. Maybe buy 1,000 shares and throw them on the buy and hold pile. I don’t want to be flip about putting trading capital at risk, including lost opportunity risk, but it seems to me this tech could catch on and go big. I’m not a stock wheeler dealer type, but it seems to me that even Apple could buy this company outright and help them scale up faster.

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Member
April 11, 2022 2:34 pm

It takes more than a nifty device to arrive at a diagnosis. Most MDs don’t have the experience necessary to understand what the image is showing. AI helps a little, no question. But the whole proposition looks iffy from where I sit.

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mrmicrobrew
April 11, 2022 2:51 pm
Reply to  mjorrin

That was exactly what I was thinking. My doc has shown me ultrasound images in the past and it could just as easily be a radar image from a world war two destroyer for all I can tell.

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Moneysap
April 17, 2022 1:11 pm
Reply to  mjorrin

Docs did not become docs because they are unable to learn. If a relatively inexpensive device can revolutionize timely office diagnosis, that is BIG.

Member
Darren Fitzpatrick
April 17, 2022 8:44 pm
Reply to  Moneysap

US training for docs has existed for awhile. Technology only helps so much to bridge that training gap.

mcdermov
October 17, 2022 9:19 am
Reply to  mjorrin

I am a diagnostic radiologist. Training to be a radiologist is cognitively arduous and continuing medical education required to remain registered as a specialist. If you miss something you get sued. We like the best images possible, and in general this requires higher-end more expensve equipment.
Butterly’s devices have a role in point-of-care scanning to check for fluid in the chest or abdomen, or giving guidance for procedures such as biopsy or line placement, but your’e not going to use it to scan a cancer patient for metastatic disease. There’s also an array of small footprint ultrasound devices to chose from, so no moat here.
Overvalued.
It is not surprising there’s 17% short interest here.

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3397
April 11, 2022 2:48 pm

Whats your take on HYPOINT hydrogen cell . Looks like a superior alternative to battery power

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April 11, 2022 5:59 pm

no its Hypoint. Their batteries are already ready. They will try them out on eVTOL helicopter

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gillo
April 11, 2022 2:49 pm

I got taken in by the cool factor, plus the fact that the CEO/inventor is a med tech superstar with something like 500 patents to his name. As usual, post SPAC it took a dump and I took a loss because the numbers don’t add up, at least for now. Might get back in if things pick up.

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Irregular
Cheshire Lee F
April 11, 2022 4:04 pm

Excellent detailed review. I bought some, very little, because overall I like the Ox Club Communique and Income newsletters. Some good plays coming from them and I like the trailing top recommendations and their patriotic or world view editorials. You’re right about the email barrage but its still worth it, particularly if you double check some of their recommendations like using your website. I also use TradeSmith in conjunction with them because they recommended it. TradeSmith is outstanding.

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June 4, 2022 7:20 pm
Reply to  Cheshire Lee F

Lee Cheshire, what plan do you use with Tradesmith? Is it simple to use? Thanks!

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ramgroup
April 11, 2022 5:15 pm

Good detective work as usual! IMHO. technically this stock looks DOA and shows no signs of life unless it can get some traction @ $6.50 and higher.

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April 12, 2022 8:49 am

I was involved in selling into Hospitals and displacing existing suppliers is virtually impossible unless it is totally underwritten, the reason given was, say the new product doesn’t pick up on an illness, the claim would be that the old one would have done regardless of whether that is the case, whoever choose to change is in line for a whole lot of aggravation

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Barry Shaw
April 13, 2022 9:58 am

Excellent research. I m a member of Oxford Club and have had my finger on the BFLY button. I think I will wait until the stock sinks some more before taking a shot.

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Ricky Calliham
April 13, 2022 7:10 pm

I subscribe to the Oxford Club and have doubts about all of the selling they do for more news letters, so the Thinkalator did a good job in this case of investing news.

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Darren Fitzpatrick
April 17, 2022 8:42 pm

I’ve had many an argument on Seeking Alpha about this company. As a radiologist I personally think this is a stinker and would not invest. The tech is cool but I can already look at images from all over the world – that tech has existed for awhile. The breakdown in throughput and access to care in ultrasound is having a trained tech who knows what they are doing scanning a patient – not having a doc to interpret images- at least in the United States and most developed countries. Ultrasound is very hard to learn- it’s much more user dependent than other imaging modalities – you need to learn how to scan, then learn how to find what you’re looking for and how to interpret the images. My colleagues in the ICU and ED use portable US and frankly aren’t very good at it. They pale in comparison to an experienced tech and even a general radiologist- no amount of technology can overcome that training barrier. Honestly I wish I had bought puts when this was being pumped on Seeking Alpha months ago.

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Member
April 19, 2022 4:16 pm

I really liked $BFLY when they came public via the de-SPAC. So I did quite a bit of research on it – just the device really. Although they may have some advantages in how they use software to achieve different types of imaging results I found quite a few alternative products that come very close to doing the same thing. There are also some guys out there who do nothing but review these things and the Butterfly was good but not a “no brainer” and far from being unique in the category. It always really bothers me when a company tells a great story and asserts that they don’t have direct competition and after a few hours of work I find strong evidence to the contrary. It smacks of dishonesty and that eliminates it from my consideration.

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June 1, 2022 11:25 am

Doc I have a question for you and would appreciate your honest answer. Of all the stocks in the market what is the one stock that you think is your favourite number one ? no generalizations on different fields etc., just the number one in your mind and your gut feeling

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Irregular
June 1, 2022 3:49 pm

Thank you for refusing to oversimplify.

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Ken White
June 1, 2022 3:36 pm

Medical diagnostics is a major area of medical turf wars which can seriously complicate adoption due to who can bill, who can read and report, and what schedule of fees will be the acceptable standard for billing and to whom? This one will have serious “growing or adoption pains” in my opinion!

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Acebravo
June 1, 2022 3:38 pm

Sounds like Theranos 2

Member
Mark J
June 1, 2022 4:19 pm

TD Ameritrade has their warrants expiring 5/27/2025 with a symbol of BFLY+. This differs from the warrant you mentioned. Do they have more than one set of warrants with different expiration dates, or are these the same?

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Paul Mikoll
July 23, 2022 7:53 pm

Hon Hai/Foxxcon will be huge. There was so much hype when Green first came out with that pick the overseas Brokers knew which stock you wanted as soon as you said Taiwan SE. They are working on their own EV right now and they are covered with all the Patents Alex mentioned. It’s just not well known enough but don’t sell it just yet. Just about every tech company needs Hon Hai. Blessings

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