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M. E. Garza
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M.E. Garza is one of the founders of the biotech and healthcare sector news portal BioMedReports.com. He believes in getting the news from credible sources on the street and often reaches out to CEOs and newsmakers directly for interviews and discussions about their companies. Since he began... More
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  • Viking Systems: Undervalued and Breaking New Ground (OTC:VKNG) 6 comments
    Nov 15, 2009 8:33 PM | about stocks: IMGG, ISRG, BSX, MDT, CAH

    It's rare to find a profitable small cap biotech company, much less one that has been flying under the radar screen and has so many positive features that can help propel its share price upward quickly.

    We have uncovered one that meets those requirements and then some. The company even has a forward looking news development, a solid management team, very few outstanding shares, a well protected patented technology that is being embraced by the medical community, and as we came to find out this weekend, the shares have been under tremendous shorting pressure. That means the recent price movement- based on surprisingly few shares traded- may lead to a wave of short sellers trying to buy the stock in order to cover and limit their losses, pushing the price higher.

    We believe the company's shares are still highly undervalued and that the small cap biotech community may get excited about this company as news spreads and the name becomes more familiar. This is particulalry true given the unexpected rise in share price seen by another company proposing better medical imaging solutions, Imaging3, Inc. (OTC:IMGG). Upon closer inspection, in fact, one can easily argue that this stock presents speculators more grounded and compelling reasons to put their investment dollars to work here.

    Viking Systems, Inc. (OTC:VKNG) is breaking new ground as a publicly owned designer, manufacturer and marketer of high-performance laparoscopic vision systems. The Company's flagship product is the 3Di Vision System, an advanced three-dimensional (3D) vision system used by surgeons for minimally invasive surgery (MIS). For the first time, surgeons are now offered 3D visualization, voice-activated access to clinical information and complete freedom of movement during these types of procedures.  Surgeons love the features and the ability to perform complex procedures more confidently than ever, thus allowing more patients to realize the benefits of minimally invasive techniques.

    Viking also manufactures advanced two-dimensional (2D) vision systems for targeted configurations and channels, as well as 2D cameras and components, sold through strategic partner and OEM programs.

    The Company is currently developing a portfolio of targeted technologies and services that serve the current and emerging needs of the minimally invasive surgical space.

    According to a recent report, the company achieved a major milestone in October when their "Next Generation" 3DHD camera system was demonstrated to the surgical community utilizing a prototype Sony 3DHD flat panel display at the American College of Surgeon's 95th annual Clinical Congress in Chicago. The described reaction of the medical community was very positive and the level of interest shown by all surgical specialties was substantial. Attendees waited their turn to see the interactive 3DHD demonstration and appeared delighted with what they experienced.


    "While 2D high definition cameras now represent the vast majority of placements in the approximately $1 billion surgical video systems market, it is now clear that 3DHD is the next advancement in endoscopic surgical vision," said Jed Kennedy, Viking's president and chief operating officer.

    Viking and Sony are planning a similar demonstration later this week at MEDICA, the world's largest medical device trade show, which kicks off in Dusseldorf, Germany on November 18th. The show is expecting close to 140,000 trade visitors.

     

    An even more intriguing news development later this month, involves the delivery of a "designed to specification" prototype high definition 3DHD visualization system by Viking Systems to "a manufacturer of surgical robotic systems as part of a development agreement." While the name of that manufacturer has not been disclosed by Viking, our research leads us to believe that entity is Sunnyvale, California based Intuitive Surgical- the same company that manufactures the da Vinci Robotic Surgical System which has expanded its installed base to more than 900 academic and community hospital sites, while sustaining growth in excess of 25% annually. At the end trading on Friday, shares of Intuitive Surgical, Inc.(NASDAQ:ISRG) closed at $274.52 per share. While there can be no assurance that a supply agreement will be awarded upon the completion of the development contract, Viking believes that the new product has several unique features that will address specific market needs and that the company is well positioned to support any production needs for the system.

    The following clauses stand out when one looks at the actual agreement:

    B. Whereas, VIKING possesses rights to patents relating to devices used in surgery, including laparoscopic/endoscopic vision systems for minimally invasive surgeries;

    C. Whereas, ISI desires to obtain from VIKING and VIKING wishes to grant to ISI an exclusive license under all of VIKING’s Licensed Patents and Applications limited to the Medical Robotics Field; and

    D. Whereas, VIKING desires to obtain from ISI and ISI wishes to grant back to VIKING a nonexclusive license under the Licensed Patents and Applications for certain products in the Medical Robotics Field;

    agreement

    In addition to this agreement, the company has major contracts/partnerships (still intact) with B. Braun Medical Inc, Richard Wolf GmbH, Boston Scientific (trades on the NYSE at over $8.00 per share under the ticker of BSX), Medtronic (trades on the NYSE at over $36.00 per share under the ticker of MDT) and Biomet, Inc. along with others.

    U.S. Army Orders Viking's 3D Systems

    In October 2009, the Company received the largest order in its history for its proprietary 3Di vision systems. This order, totaling approximately $900,000, was from the U.S. Army for deployment of one of their complete 3Di systems at each of seven regional Army Medical Centers throughout the United States. Viking  anticipates having all seven systems installed and operational before the end of the year. This is a follow-on order to the single system already in place at Walter Reed Army Medical Center in Washington, DC.

    Extremely Low Float

    Confirmed earlier by the company, only 4-5 million freely trading shares are available!  The company completed a reverse split, which took many of its shares off the market and sudden popular interest in the company would cause prices to rise dramatically. We all saw Vermillion, Inc's (OTC:VRMLQ) share price rise very rapidly and agressively recently due in large part to it's extremely low float.


    Share Structure Per Transfer Agent as of 4 Nov 09:
    Authorized Shares (AS) = 400,000,000 Shares
    Outstanding Shares (OS) =  42,715,110 Shares
    Restricted Shares = 31,779,522 Shares
    Float = 10,935,588 Shares

    There are no Preferred Shares issued.

    Again, when you compare the Market Cap of this company (currently at $24 million with actual reported revenues of $9 million) it is not unrealistic to expect a market cap of $36 million at 4x revenues.  To put things into perspective, Imaging3, Inc.(OTC:IMGG)  has a $385 Million Cap (14x the market cap of Viking systems) and they only have revenue of $2 million.

    As indicated below, Insiders have bought VKNG shares as high as .36 per share.   




    Management and Governance

    When Viking Systems was recapitalized on January 4, 2008, William C. Bopp, currently chairman and chief executive officer, signed a two year employment agreement. At the end of 2009, it is the intention of the Board of Directors to promote and appoint John "Jed" Kennedy, currently president and chief operating officer, to the position of president and chief executive officer. It is anticipated that Mr. Bopp will continue to serve as Chairman of the Board of Directors. Mr. Bopp said, "This transition recognizes the contributions of Mr. Kennedy to the success of Viking Systems to date and the Board's confidence in his leadership ability for the future."

    The company's CEO shows us a very strong background and leadership skills that confirm his ability to put strong companies together. He was the CFO and VP of ALARIS Medical Systems, Inc, which was acquired for approximately $2.0 billion by Cardinal Health, Inc. (NYSE-CAH) in July 2004, and Mr. Bopp assisted for an additional year with the integration of ALARIS into Cardinal Health before retiring in 2005. Mr. Bopp was formerly executive vice president and chief financial officer of C.R. Bard, Inc. (NYSEBCR).

    Mr. Bopp is a graduate of Harvard College, Cambridge, MA, and completed his MBA, Finance, from the Harvard Business School.


    Disclaimer: Long VKNG

    Themes: healthcare, biotech Stocks: IMGG, ISRG, BSX, MDT, CAH
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Comments (6)
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  • Boaz Berkowitz
    , contributor
    Comments (85) | Send Message
     
    Sounds like some amazing technology!
    17 Nov 2009, 05:49 AM Reply Like
  • Danny Furman
    , contributor
    Comments (1002) | Send Message
     
    I appreciate the article, but would you still say the stock is undervalued today? Insiders sold millions of shares Friday (many positions liquidated), which indicates they did so yesterday as well. There has been major pumping going on, and most of it paid for.
    Regardless, kudos on being in ahead of the rush.
    17 Nov 2009, 09:03 AM Reply Like
  • M. E. Garza
    , contributor
    Comments (123) | Send Message
     
    Author’s reply » Show me the links to the pumping and insider selling. I see no such proof of that. The stock, if anything, is climbing higher.
    18 Nov 2009, 06:57 AM Reply Like
  • DocBates7
    , contributor
    Comments (13) | Send Message
     
    Now I certainly hope the stock goes up, however, I am inclined to agree with Danny. here's the info

     

    Insider selling has been from Midsummer Investment - they sold the following, which i would link but I got the info from my etrade account:

     

    11/13/09 Midsummer Investmen...
    Beneficial Owner of more ... Sale 76,457 0.48 – 0.53 -- $39.3 K
    Midsummer Investmen...
    Beneficial Owner of more ... Sale 105,268 0.41 – 0.51 6,001,350 $47.1 K
    Midsummer Investmen...
    Beneficial Owner of more ... Sale 84,732 0.31 – 0.51 5,916,620 $38.7 K
    11/12/09 Midsummer Investmen...
    Beneficial Owner of more ... Sale 918,543 0.26 – 0.51 6,203,080 $336.8 K
    11/11/09 Midsummer Investmen...
    Beneficial Owner of more ... Sale 85,417 0.28 – 0.33 7,309,200 $25.4 K
    Midsummer Investmen...
    Beneficial Owner of more ... Sale 137,583 0.27 – 0.31 7,121,620 $40.7 K
    11/10/09 Midsummer Investmen...
    Beneficial Owner of more ... Sale 192,800 0.21 – 0.34 7,615,320 $56.1 K
    Midsummer Investmen...
    Beneficial Owner of more ... Sale 26,200 0.30 – 0.34 -- $8.4 K
    11/4/09 Midsummer Investmen...
    Beneficial Owner of more ... Sale 189,450 0.20 – 0.33 7,808,120 $46.8 K
    11/3/09 Midsummer Investmen...
    Beneficial Owner of more ... Sale 130,933 0.21 – 0.26 -- $31.6 K
    Midsummer Investmen...
    Beneficial Owner of more ... Sale 73,869 0.23 – 0.27 8,132,170 $17.8 K
    Midsummer Investmen...
    Beneficial Owner of more ... Sale 123,348 0.21 – 0.28 -- $30.8 K

     

    as for pumping, I think Danny may be referring to comments made by you that are less than complete, see this comment you made on Nov 16th

     

    seekingalpha.com/artic...

     

    Did you guys read this:

     

    The Company has incurred significant losses from operations, and such losses are expected to continue. The Company's auditors have included a "Going Concern Qualification" in their report for the year ended December 31, 2008. In addition, the Company has limited working capital. The foregoing raises substantial doubt about the Company's ability to continue as a going concern. Management's plans include seeking additional capital and/or debt financing. There is no guarantee that additional capital and/or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to the Company. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The "Going Concern Qualification" might make it substantially more difficult to raise capital.

     

    investorshub.advfn.com...

     

    I would encourage all IMGG investors to look closely at VKNG-- which is also in the imaging business, but already has FDA approval AND had 9 Million in revenue -vs- IMGG
    ---

     

    yes they may have revenues but both companies have placed this statement into their filings. by copy/pasting IMGG's disclosure and not VKNG's, it sounds rather, well, like pumping
    18 Nov 2009, 08:28 AM Reply Like
  • Danny Furman
    , contributor
    Comments (1002) | Send Message
     
    The pumping I referred to was e-mails I got from penny stock junky services. in.finance.yahoo.com/q...
    18 Nov 2009, 09:47 AM Reply Like
  • M. E. Garza
    , contributor
    Comments (123) | Send Message
     
    Author’s reply » Good posts guys. I take the good feedback and the bad. Thanks for the heads up.
    19 Nov 2009, 03:47 AM Reply Like
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