What's Next From Second Sight Medical Products Inc (NASDAQ:EYES)?

Second Sight Medical Products Inc (NASDAQ:EYES) has been a real roller coaster stock over the last few weeks. The company kicked off the year at around $2 a share, and remained pretty flat for the first week or so of January. Then it started to decline, and by the end of the month was trading for a 32% year to date discount. On February 6, the company set a record date for a pending rights offering, and soared 75% overnight. From highs of $2.76, however, Second Sight has since retraced, and now goes for around $1.89.We think there's a floor at current levels, and that we should get a return to the upside momentum near term.Here's why.For those new to this one, Second Sight, as its name suggests, is a healthcare company with a focus on eyesight therapy. Specifically, the company creates and markets implantable devices designed to restore functional vision to blind patients in a number of countries across the globe. That sounds pretty far fetched, but its not. The company has developed a system called the Argus II Retinal Prosthesis System. It's approved for patients with a condition called retinitis pigmentosa (RP), which is the collective name for a group of rare, genetic disorders that involve a breakdown and loss of cells in the retina and – by proxy – a loss of visual capability for the eye in question. The system uses electrical stimulation to that bypasses the defunct retinal cells and stimulates remaining viable cells inducing visual perception in individuals with a severe to profound form of RP. It's a pretty neat and futuristic mechanism of action. The system converts images captured by a miniature video camera mounted on the patient's glasses into a series of small electrical pulses, which are transmitted wirelessly to electrodes implanted on the surface of the retina. These pulses are intended to stimulate the retina's remaining cells, resulting in the perception of patterns of light in the brain. The patient then learns to interpret these visual patterns, thereby regaining some visual function.Anyway, the system is approved in a number of markets globally, and is available in centers in Canada, France, Germany, Italy, Netherlands, Saudi Arabia, Spain, Switzerland, Turkey, United Kingdom, and the U.S. The key to value creation for Second Sight, however, isn’t approval; it's coverage. These medical devices need insurers to cover them, or uptake is very difficult to achieve.And that's where the latest rights offering comes in.The company is looking to raise cash with which to fund the ongoing development of the Argus II system (it's an updateable software built into some patient-customized hardware) and this development push should improve the system's offering to blind patients. Improved capabilities (i.e. a larger improvement from baseline sight capability to treatment sight capability) will make Second Sight's pitch to insurers all the more attractive, and this will increase the likelihood of major insurers taking the treatment on to their roster.The latest announcement is an example of exactly this – the company has just secured a major insurer in Germany, German Institute for the Hospital Remuneration System (InEK). This is technically a renewal (the system had Status 1 coverage already) but that's just as important as new insurers – if the system can demonstrate benefit in the real world, it goes beyond a sales pitch to insurers.This is a potentially rewarding exposure, but it would be foolish to chalk it up as intriguing without a note on risk. The company has only treated a total of 215 patients with the system, of which 30 are in the just discussed Germany. There are hundreds of thousands of RP patients that qualify for Argus, but which wont get the treatment unless it can receive (and maintain) coverage. That's the key to continued strength, and that's where the risk lies right now.We will be updating our subscribers as soon as we know more. For the latest updates on EYES, sign up below!Disclosure: We have no position in EYES and have not been compensated for this article.