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Amedica Corporation (NASDAQ:AMDA) Looks Set For Revaluation

Amedica Corporation (NASDAQ:AMDA) Looks Set For Revaluation
Written by
Chris Sandburg
Published on
May 30, 2017
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Amedica Corporation (NASDAQ:AMDA) took a real hit towards the end of last week on news of a delayed filing and – as tied to the delay – a notice from NASDAQ detailing the company's non-compliance with listing requirements. As the markets closed out on Friday, the company went for $0.32, a 13% decline on the session and a more than 49% discount to year open pricing.This is one we've looked at before (with our most recent coverage back at the end of October last year) and it's one that, even with the action we've seen over the last few months, is undervalued.Analysts expect Amedica to generate $33.7 million top line this year. Next year, this is expected to rise to $46.7 million. For reference, the company trades for a market capitalization of just $10 million at current prices.So what's gone wrong?Well, the company was banking on picking up approval in the US for what is basically an extension of the technology that underpins its current product portfolio (something called silicon nitride) of implantable spinal devices. Management announced earlier this year that the submission wasn’t successful and that the company had resubmitted with some additional data included. Markets saw this as a core failure and sentiment hasn’t really recovered from there on out. Couple the need for a resubmission with an almost parallel capital raise, and throw in the recent developments regarding the non-timely submission and the company's falling below minimum bid for too long a period, and things get pretty ugly.Ugly, sure, but sentiment may not necessarily reflect what's underlying in this situation. As mentioned, the company generates considerable revenues for an entity of its size and, irrespective of the approval status of the upgraded portfolio, it's current portfolio is game changing in its own right. For those new to the stock, Amedica has basically created a selection of spinal implants (and other parts of the body, but the focus right now is on the spine) that are made from the above-mentioned silicon nitride. Current standard of care implants are made out of metal or plastic, both of which have their respective drawback, and silicon nitride not only helps to overcome these drawbacks, it also brings a few fresh benefits to the table. It’s harder than plastic, promotes bone growth to a far higher degree than either metal or plastic, it’s actively resistant to bacterial growth and – by proxy – infection, and more.The problem is, and as we outlined last time, getting these sorts of products in the hands of surgeons, and in the bodies of spinal injury patients, can be expensive. It's not easy to persuade a medical professional to start using a new type of product when they're familiar, and comfortable, with an existing one (this, of course, isn’t just a phenomenon limited to the medical field).The time and money it's taking Amedica to do the above described is time and money that shareholders are being squeezed for, and this squeezing is compounding negative sentiment surrounding the stock.Which brings us to our thesis.It can only be a matter of time before one of two things happens. The first, that the product starts to gain traction and sentiment shifts on improved sales (which as we've said, are pretty good already). The second, that a buyer swoops in and picks up the rights to this technology at a huge discount to its inherent value; something that, at current prices, would be possible even if said buyer were to pay a decent premium for acquisition.One final note.Here's a snippet from the 8K associated with the filing delay:

… the Company requires additional time to fully consider whether there is any potential impairment in relation to certain of its long-lived assets in connection with the completion of the audit of its 2016 financial results…

For the non-accountants out there, the term long-lived assets basically refers to fixed assets (for the purposes of this discussion it's enough to say the two are synonymous, at least) and the impairment of these assets, which is just another way of saying how much they decrease in value over time, is something that Amedica would need to establish before its statements could be used as underpinning a buyout valuation. When companies file these 8Ks, it's unusual to reference long-lived assets in particular as the driving factor, and that Amedica was dressing itself up for acquisition would explain this specific reference.Speculative, but something to meditate on.We will be updating our subscribers as soon as we know more. For the latest updates on AMDA, sign up below!Disclosure: We have no position in AMDA and have not been compensated for this article.

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