Is SeaSpine Stock A Buy?

Is SeaSpine Stock A Buy? SeaSpine is a revolutionary company with some promising products and engineering research in hand. Relatively new in bioscience, the company is making its mark in a big way. 

SeaSpine has a current market cap under a billion dollars, but despite being relatively small when compared to titans of industry still has a track record of being involved in mergers and acquisitions.

SeaSpine is actually based on an Integra spinoff of a collection of firms, including one by the same name that was founded in 2002. The original SeaSpine, after being bundled with IsoTis and Thekken, saw its name pop up again when Integra split in 2015.

So what does SeaSpine do?

The company is in the business of providing solutions for spinal surgeons. This includes spinal instrumentation that helps to optimize different kinds of spinal surgery, and the development of products called orthobiologics, including interbody devices and other cutting-edge technology for making progress in anatomical medicine, particularly in the support of the spinal system.

SeaSpine Market Share Is Growing

In its mission statement, SeaSpine spokespersons point out that the company intends to be a “marketshare-taker” in its area of bioscience.

In reality, though, SeaSpine has a lot of competition in that sector, and that includes much larger firms like Medtronic (MDT), with a market cap around 175x larger, and Stryker (SYK), with a market cap about 100x bigger.

With its $713 million, SeaSpine is closer to a firm like Bioventus that has a market cap of $796 million.

Does SeaSpine Have a Moat?

While we’ve seen that SeaSpine is not alone in its market, some would argue that it does have quite an entrenched mode of unique and propriety technology, and uniqueness of methods, that provide a protective covering for a competitive field.

For example, a “unique device identifier” and other systems and procedures help to fine-tune SeaSpine’s approach to orthobiologics, and the company even has a mobile application integrated into that aspect of company and product development.

Then there are the acquisitions of firms like 7D Surgical, and the potential of some of SeaSpine’s new interbody device efforts. The makers of 7D Surgical’s machine vision image guidance system tout faster clinical workflows, reduced radiation and other positive outcomes in this type of AR medical use case.

That makes this company a complementary offering in SeaSpine’s overall operations – for example, cited “increases in surgical control” around the 7D machine vision technology correlate well to some of the products that SeaSpine has historically developed. 

So it’s safe to say that while SeaSpine doesn’t have a completely impregnable offering, it does enjoy some specialized standing within its field, and that’s enough to generate some pretty strong attention from investors who believe in the future of this sort of implantation and surgical enhancement in bioscience.

Is SeaSpine Growing Revenues?

Looking at revenues for SeaSpine, the full year numbers, which are projected for 2021 to be $200 million to $205 million, tell a different story – that’s a 30% increase from 2020.

So revenues are growing, although as pointed out by market analysts, SeaSpine missed revenues last quarter by some $470,000 and change.

SeaSpine Earnings Near Breakeven?

Here’s where things get a little strange for those who are used to looking at the earnings reports of more traditional companies.

For years now, SeaSpine has had negative earnings-per-share reported each quarter.

Analysts point out that while negative EPS is never something that companies love to report, it is not uncommon in a field like bioscience, where research development and product work takes place far earlier than a lot of the fruits of profit from these projects.

SeaSpine earnings appear to be increasingly less negative with a breakeven point on the horizon, perhaps in 2022.

For further reference, SeaSpine EPS was around negative $5 per share years ago. So while the negative EPS isn’t really good news, the situation is improving in terms of the company recouping more profits to balance out its costs.

SeaSpine Needs To Persuade Surgeons It’s Better 

A look at SeaSpine’s website shows as a deep bench in terms of professionals with previous experience at related firms like Integra, as well as elsewhere in this portion of the bioscience industry.

Experience aside, much of the legacy of the current management will be around promoting new solutions and bringing them to market as soon as possible while mitigating some of the risk of lower profits.

Sales professionals need to cultivate relationships with spine surgeons and convince them that SeaSpine products are worth trialing over proven solutions they may already be familiar with from the likes Medtronic (MDT) or Nuvasive (NUVA).

Headwinds for SeaSpine

To talk about the potential challenges for SeaSpine, it’s important to first talk about what the company is working on, which has a lot of potential, and the industry context that will determine whether SeaSpine will stay the course in future quarters.

For example, in November 2020, experts were looking at publication in the Journal of Bone and Joint Surgery, talking about the promise of SeaSpine’s ‘demineralized bone matrix product’ and revealing that a SeaSpine product called OsteoStrand outperformed other cellular bone matrix (CBM) products in trials – subsequent reviews provide us with clues as to the utility of SeaSpine products in clinical scenarios, which can be helpful, along with relevant technicals and other data, in evaluating where the company is going to go from here.

Then there’s the new WaveForm TO (TLIF Oblique) Interbody System being pioneered by SeaSpine as a posterior lumbar interbody fusion (PILF) product, where the company revealed in a recent press release that the technology “accommodates both direct impact insertion and insert-and-rotate techniques.”

The idea of implants that support better fusion, and new-generation bioutilities, is an important part of what SeaSpine enjoys in terms of industry attention and thought leadership: experts also cite the value of radiographic visualization during both intraoperative and postoperative imaging processes, which is likely to be interesting from a clinical perspective as SeaSpine continues to develop.

As exciting as these innovations are, the challenge will be to keep research progressing to make SeaSpine profitable and expand its impact on spine surgeons in a significant way.

Another challenge is illustrated with reports April 15 that SeaSpine equity decreased 9% on an underwritten public offering of shares. Decreases like that can shake the confidence of investors. Even in the times when SeaSpine announced positive indicators, share prices remained mixed in a volatile setting.

Is SeaSpine Stock A Buy?

The signs point to SPNE being attractive from a reward to risk perspective, compared to prior quarters, and some appeal in this market segment. Watch for further product development news, and when earnings and more comes out later this spring, we’ll see whether SeaSpine has been able to push trends further in the right direction.

From a valuation perspective, a discounted cash flow analysis forecast prices SPNE share price at $26.66, which suggests further upside opportunity from current levels.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.