There’s a place in most portfolios for small speculative positions. In this regard, I think investors may want to consider Senseonics Holdings (NYSEAMERICAN:SENS) and SENS stock at these levels.
Senseonics is a medical technology company focused on providing implantable glucose monitoring (CGM) systems for those with diabetes. The company’s made some impressive progress on its commercialization of these devices, and appears ready to target a multi-billion dollar (and growing) opportunity in the diabetes space. In particular, Senseonics Eversense XL product is what most investors have their eye on right now.
These devices haven’t only received a lot of attention from investors. Ascensia, a large Swiss-based diabetes-focused CGM player has backed Senseonics. In addition to raising capital via convertible debt via this Ascensia partnership, the two companies have embarked on a mission to bring Senseonics’ core products to market.
This high-profile backer has provided significant validation to investors on the fence with SENS stock. Additionally, investors can start to see a path forward to long-term growth and eventual profitability, if this collaboration yields fruit.
Here’s why I think this is a big deal, and why Senseonics represents an intriguing speculative pick today.
Commercialization is Key for Investors in SENS Stock
As an early-stage medical device company, Senseonics doesn’t have a lot of revenue to show for its efforts. Over the past 12 months, the company’s brought in less than $5 million in revenue.
However, this stock has garnered sufficient excitement to justify a $850 million market capitalization. Accordingly, something must be up for investors to be willing to put their money to work in SENS stock at these levels.
In early February, Senseonics announced the initiation of European commercialization activities for its CGM system. In partnership with Ascensia Diabetes Care, the company’s looking to bring its 90-day and 180-day CGM products to market in Europe.
The company’s hope is that these long-term solutions will be well-absorbed in Europe. Ascensia has had tremendous success in marketing its Contour CGM products in Europe, and Senseonics is hopeful this partnership will yield fruit. Currently, the scope of this agreement is limited to Germany, Italy, The Netherlands, Poland, Spain and Switzerland.
Ascensia is quick to note that its Eversense product line is the only FDA-approved long-term CGM product in the U.S. Accordingly, there’s a tremendous opportunity should further commercialization efforts take hold.
Market Opportunity Is Significant
As mentioned, the fact that the Eversense product is approved in the U.S. and is beginning commercialization efforts in the U.S. and Europe is important.
These markets are two of the Crown Jewels in the global diabetes device market. According to recent estimates, this market could reach $4.3 billion by 2025. Sales are expected to grow at a significant CAGR of more than 16% a year. This would translate into an approximate doubling of revenue every five years, if this growth rate persists over the long-term.
Indeed, if Senseonics can grab a large enough slice of this market, the company’s near-billion-dollar valuation could make sense. Not only that, it could be cheap, depending on how well Senseonics markets and commercializes its products.
Senseonics’ unique opportunity in the U.S. is one that deserves the attention SENS stock has gotten from investors thus far.
This stock is certainly not cheap, and investors are taking a leap of faith of sorts with Senseonics at this level. Execution risk remains high with SENS stock, and the company will need to continue to show results from its commercialization efforts before we see this stock take off.
That said, there’s certainly a ton of room for optimism with this small cap play. For those willing to throw a few speculative dollars at a lottery ticket-like play, SENS stock isn’t a bad pick.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.