Neovasc Inc (US) (NASDAQ:NVCN) Could Be A Discount Buy On Earnings Dip

Neovasc Inc (US) (NASDAQ:NVCN) just put out its first-quarter earnings, and the company has taken a bit of a hit on the release. At last close, shares went for $1.43 a piece – a more than 15% decline on the company's prerelease pricing. This is a company that we have looked at on quite a few occasions during the last twelve months, with our analysis tracking the company's progress across what has been a bit of a roller coaster ride throughout the period. Our long-term outlook on the stock has historically been bullish, and in contrast to the market response to latest release, this thesis remains in place. With this in mind, the recent dip might be an opportunity to pick up shares cheap ahead of a recovery.Here's what the numbers show and what we are looking for going forward.For those new to this company, Neovasc is a biotechnology play with a focus on cardiovascular health. Specifically, the company has developed, and is now trialing, a device called Tiara, which is an implantable medical device that’s designed to treat a condition called mitral regurgitation (MR), a condition that is often severe and can lead to heart failure and death. It's already in use across a certain number of patients as part of a compassionate use program, and it's in a number of ongoing studies designed to underpin registration applications with both the FDA in the US and the EMA in Europe near term.So, the numbers.The company reported revenues for the first quarter of 2017 at $1.5 million, missing consensus estimates of $2.6 million by a little over 26%. The vast majority of these revenues derived from consulting services topped up with sales of a legacy implantable device called Reducer. Expectations are that the topline figure should rise to $2.8 million during the second quarter vitiate, and should hit $12.4 million for the full year.A miss on consensus estimates isn't great, but for us, it's really not that important. The true value of this company lies in the approval and the subsequent rollout of the above-mentioned Tiara device. The best way to think about this company right now is as a development stage biotechnology play with an asset in the later stages of development. The progress of said asset along the development pathway, and the company's cash runway, really all that factor into valuation near-term.That, and the outcome of some litigation, which we'll touch on shortly.We got an update related to the former of these two inputs alongside the earnings release. According to the update, the device has been implanted in 28 patients, and the 30-day survival rate is 88% with no 30-day deaths in any of the last 17 recipients. This rate is the key metric for Neovasc going forward and 88% is strong enough to warrant a regulatory green light if it can be maintained. Cash at March 31 came in at $16 million, which given current burn, should last through to late 2017.Those familiar with this company will likely already be aware of the litigation situation. For those new to it, however, Neovasc was ordered to pay around $112 million to a company called CardiAQ at the end of last year and the payment is currently under appeal. If the appeal fails, the company will have to pay using a $70 million lump sum currently held in escrow and then make up the shortfall through an equity raise. This raise would be dilutive to shareholders and adds an element of risk to the equation. With that said, however, there's a good chance that any resolution, even if it involves an appeal failure, will allow for repayment over a drawn out period as opposed to a lump sum. This mitigates the dilution risk somewhat and shifts value-basis emphasis on to the Tiara outcome, as opposed to the legal uncertainty.Bottom line here is that this one has moved on the release of the latest numbers but from an operational perspective, nothing has really changed. Given this fact, we expect a revaluation to close the gap on the decline near term as the company moves towards commercialization for Tiara.We will be updating our subscribers as soon as we know more. For the latest updates on NVCN, sign up below!Disclosure: We have no position in NVCN and have not been compensated for this article.