VKNG (OTC:BB) Viking Systems
Viking Systems 134 Flanders Road Westborough, MA 01581 508-366-3668
VKNG (OTC:BB)
Shares Oustanding (45.3m as of 1/31/2010)
YL .12 YH .38
Price .225 (4/5/2010)
Market Cap $10.15m (4/5/2010)
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Company Overview
Company Profile
Viking Systems (VKNG: OTC BB) is a leading worldwide developer, manufacturer and marketer of 2D and 3D visualization solutions for complex minimally invasive surgery. The Company partners with medical device companies and healthcare facilities to provide surgeons with proprietary visualization systems enabling minimally invasive surgical procedures, which reduce patient trauma and recovery time VKNG represents a pure way to play the trend in high definition visualization for minimally invasive surgery.
The leader in advanced 3D visualization solutions for minimally invasive surgeries.
If you ever found yourself in disbelief when watching the Discovery Channel or a sporting event on high definition TV, then you now know how surgeons feel when using Viking Systems new 3DHD (high definition) surgical video system. For the first time, surgeons are able to see blood vessels that were previously not visible.
While 2D high definition cameras now represent the vast majority of placements in the approximately $1 billion surgical video systems market, it is now clear that 3DHD is the next advancement in endoscopic surgical vision.
We see three key themes that Viking can capitalize on.
1. More surgeries are being performed using minimally invasive techniques.
2. 3D and high definition is being adopted by EVERY type of display, including medical procedures.
3. Robotic surgery.
3DHD is the next big thing for surgery.
TREND: More surgeries are being performed through minimally invasive procedures (less healing time, less trauma to the body). As a result, the surgeon’s eyes have to rely more on the scope’s “eyes”. The camera or the “eyes” of the scope has become the key factor with minimally invasive surgeries (MIS).
VKNG’s OEM biz (2d cameras for major medical device companies is a relatively low margin business but generates revenue the majority of current revenue (approx $7-8m).
The company is reducing efforts on 3d headset biz ….will still sell to certain markets where demand has been good.
Their focus is on the soon to be commercially available 3DHD camera technology.
Two markets they are going after.
1. standalone (embedding inside any minimal invasive scope)
2. as a add-on to a computer assisted surgical device/articulate surgical instruments (think of Viking's Next Generation 3DHD as a “generic Intuitive Surgical ISRG daVinci” for a fraction of the price. Most hospitals and surgeons want next generation technology but can’t afford daVinci’s $1.5m price tag.
“There’s 3D, and then there’s 3DHighDefinition”…similar to watching a high def channel on your non High Def TV. You can tell it’s different, but the only way to see the dramatic difference is with a HD screen.
Dr Bhayani, became certified in da Vinci robotic in 2003 currently uses the daVinci system, had this to say about Viking’s Next Generation 3DHD system,
“This 3D image is as good as any I have ever seen in my robotic procedures. I feel more in control and extraordinarily comfortable; it allows me to regain tactile feedback without sacrificing superior visualization."
By the 4th qtr ’10, VKNG looks to make commercially available, the only 3DHD visualization system.
This system will utilize a new flat panel 3DHD display produced by Sony and be offered at a lower cost point than the current headset 3D system. The system is targeted to provide the highest quality 3DHD visualization in a cost effective, standalone solution available to minimally invasive surgeons worldwide.
VALUATION: Intuitive Surgical ISRG the pioneer in robotic surgery , maker of the infamous daVinci, and a licensor of Viking’s IP, generates a little over $1b in revenues and commands a $14B market cap. (approx 12x’s revs)
Several medical device companies are looking to penetrate the multi-billion dollar robotic surgery market by introducing a much cheaper alternative that includes an articulating surgical device with a 3DhighDef visual solution.
VKNG offers the ONLY 3D High Def visualization solution.
What is that worth?
Stryker, Olympus, and Karl Storz make up 80% of the scope market and will need to include HD feature.
Approx 30k scopes/units sold annually (upgrade/new) in the U.S. alone. Other markets, foreign…China building 400 hospitals/ year.
CEO Jed Kennedy commented “Based on input from surgeons who had an opportunity to use the system clinically we believe that our Next Gen system is right on target and that restoring the all important 3rd dimension to minimally invasive surgeons in a cost effective, high definition format will make it the preferred choice for endoscopic visualization systems in ORs around the world.”
Eric J. DeMaria, M.D. said, “Using 3D cameras in the OR has changed my sense of depth and space while performing minimally invasive surgery”
Evan Krachman, Sony Marketing Manager, Surgical Applications, stated, “Sony is committed to developing 3D technologies for the surgical market. Our experience in manufacturing high-performance video technology for the broadcast and video industries allowed us to deliver high-quality HD to the surgical field, and now we’re further extending that expertise by delivering an even higher level of detail and texture with 3D”.
Jed Kennedy commented, “The feedback from surgeons who had an opportunity to use the system was extremely encouraging. Performing complex minimally invasive procedures with a 3D vision system has the potential not only to improve the quality of care but also to reduce procedure time and therefore cost of procedures.”
From VKNG's 10K Filing 2/22/2010
Our 3Di solution provides a higher level of technical sophistication than 2D for MIS procedures, without the high cost and technical complexity of a robotic solution. Due to improvements in technology combined with the trends in 3D adoption in the consumer market, we believe that the adoption rate of 3D vision systems in the medical market will greatly accelerate upon commercial release of our next generation 3D vision system.
Contributing to such expected increase in adoption is that we anticipate our next generation product will have a lower cost and selling price than our current 3D system and therefore be more competitively priced in relation to existing 2D high definition systems. Only a 5% penetration of worldwide vision system unit placements, or approximately 1,400 systems per year, could result in sales for our 3D technology in excess of $100 million annually
On August 5, 2008, we licensed our patent portfolio to Intuitive Surgical, Inc. pursuant to an exclusive license agreement (the “License Agreement”). The License Agreement provides Intuitive Surgical with perpetual, exclusive rights to use all of our then held patents in the medical robotics field, as defined in the License Agreement.
In the fourth quarter of 2009 we also completed development work of a 3DHD visualization system for a robotic surgical company under a development contract that provided us approximately $800,000 of total revenue beginning in late 2007 and ending in 2009. It is the parties’ stated intentions that this development agreement will lead to a multi-year supply agreement whereby we manufacture and supply products to the other party.
Financial Condition.
While the company has taken great measures to reduce their burn rate and secured a $5m equity line, we would like to see them develop a partnership with a larger medical device company that could help with the heavy lifting (marketing, sales, manufacturing).
Viking Systems is considered a highly speculative investment and should ONLY BE considered by high risk oriented investors.
Viking Systems
134 Flanders Road
Westborough, MA 01581
508-366-3668
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