XTENT, Inc. (NASDAQ: XTNT)

According to the company’s latest 8-K, XTNT had cash, cash equivalents and short-term investments of $19.1 million as of December 31, 2008 with almost no debt. After certain adjustments to its balance sheet, we believe the company could be worth at least $15M in either liquidation or a merger. This represents a nearly 37% discount to the company’s current market value of $10M. We believe the probability of a merger or sale above the estimated $16M value is high, so we are adding XTNT to our ValueHuntr Portfolio.

 

About XTNT

 

XTENT, Inc. is a medical device company focused on developing and commercializing innovative customizable drug eluting stent (DES) systems for the treatment of coronary artery disease (CAD). CAD is the most common form of cardiovascular disease and the number one cause of death in the United States and Europe. XTENT® Custom NX® DES Systems are designed to enable the treatment of single lesions, long lesions and multiple lesions of varying lengths and diameters, in one or more arteries with a single device.

 

Valuation

 

We expect XTNT to burn cash at a much lower rate than in the past due to a recent 94% reduction in workforce. We believe there is a high chance that the company will sell itself or merge for at least the price the company’s assets would sell at auction. Therefore, we value the company at its liquidating value with certain adjustments.

 

Balance Sheet Adjustments at Liquidation

 

1) We write down assets written as Plant, Property, and Equipment to zero. This write-down may be aggressive, but it is done for the sake of conservatism given the company’s highly specialized nature.

 

2) The company has recently announced the exploration of strategic alternatives to enhance shareholder value. In January 27, 2009, the company filed an 8-K (Costs Associated with Exit or Disposal Activities) where it estimates that the total amounts to be incurred in connection with the initiative will be approximately $1.1 million to $1.2 million, all of which is expected to be cash expenditures. Thus, we have reduced the company’s cash holdings by $1.2M.

 

 

XTNT's Balance Sheet (Unaudited)

XTNT's Balance Sheet (Unaudited)

 

Catalyst

 

 

On January 23, 2009, XTNT announced that it plans to engage Piper Jaffray & Co. to help the company pursue strategic alternatives which may include the sale of some or all of the company’s assets or other types of merger or acquisition transactions intended to maximize shareholder value. Gregory D. Casciaro, XTENT’s President and CEO released the following statement:

 

Given the continued challenges faced in the capital markets, we believe it is in the best interests of the shareholders to consider strategic options; we are assessing all viable options available to us in order to maximize the value of our assets. Effective immediately, we are executing plans to reduce activities and costs to a critical minimum, including a significant reduction in headcount in order to preserve cash and flexibility.

 

On January 22, 2009, the company notified 115 employees out of its total employment base of 121 employees that their positions would be eliminated effective March 23, 2009. This represents a 94% reduction in labor expenses, which will allow the company to slow the rapid cash burn of approximately $5M per quarter, and help preserve cash while it pursues strategic alternatives.

 

Conclusion

 

We believe XNTN is worth at least $15M in either liquidation or a merger. This represents a nearly 37% discount to the company’s current market value of $10M. A strategic alternative to enhancing shareholder value needs to take place before the end of this year. Otherwise, the company may burn through all of its cash at hand because there is currently no revenue stream. We believe management has taken the right steps to preserve cash while the company explores strategic alternatives. Finally, we believe the probability of a merger or sale above the estimated $16M value is high, so XTNT is being added to our ValueHuntr Portfolio.

 

[Full Disclosure:  We do not have a holding in XTNT. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]

 

 

One Response to XTENT, Inc. (NASDAQ: XTNT)

  1. Pingback: Is XTNT a Bargain Once Again? «

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