It has been a frustrating few months for shareholders of ASX healthcare company Nanosonics Ltd. (ASX: NAN), with the ongoing effects of the COVID-19 pandemic continuing to drive volatility in the Nanosonics share price.
After surging to a record high price of $8.25 in early January, the Nanosonic share price has slid 25% lower to just $6.16 as at the time of writing. Even some promising first-half FY21 results haven't been enough to pull Nanosonic shares out of their nosedive.
Company background
Nanosonics is a healthcare company specialising in hospital-grade disinfection technologies for ultrasound devices. Its technology aims to reduce the number of outbreaks of preventable infections that occur in medical institutions.
The company's flagship product is called trophon. It is a device that works by using high-frequency sonic vibrations to create a hydrogen peroxide mist that deep-cleans ultrasound probes. This "sonically activated" mist is more effective than disinfectant wipes or other similar cleaning products. This is because the droplets in the mist are small enough to get into tiny crevices and other openings in the ultrasound probe – killing bacteria, fungi and other nasties.
What's moving the Nanosonics share price?
Nanosonics was initially quite heavily impacted by the COVID-19 pandemic. Despite reporting a resilient result for FY20 – with revenues up 19% year-on-year to $100.1 million – the company admitted to a significant slowdown in growth during the last quarter of FY20.
Across the world, the focus of most hospitals switched to the management of COVID-19 outbreaks. Combined with bans on elective surgeries in many jurisdictions, this meant that demand for ultrasound cleaning devices dropped off significantly during the pandemic.
However, over the last few months of 2020, Nanosonics shares surged higher as the company reported early signs of a recovery from the worst impacts of the COVID-19 pandemic. In a November business update, Nanosonics stated that there had been a 16% rise in the number of trophon units installed during the first four months of FY21 versus the last four months of FY20.
After pushing the Nanosonics share price to a new high of $8.25, investors deserted the company in early January. Though without any news reported by the company at the time, it's difficult to speculate as to why investors were so turned off.
Recent financial results
In the company's first-half FY21 results, announced to the market in late February, the company stated that it was continuing to show signs of recovery from the worst of the pandemic. Revenues for the second quarter FY21 were up 48% over the previous quarter, driven by a 38% increase in the number of new trophon units installed.
Despite these positive signs of increasing business momentum, the overall result was predictably low when compared to the prior corresponding period. Total revenues of $43.1 million for the first-half FY21 were 11% lower than the first-half FY20, while operating profit before tax also declined significantly, from $6.7 million for the first-half FY20 to just $0.2 million for the first-half FY21.
Outlook
While not committing to a specific revenue target, Nanosonics CEO and President Michael Kavanagh stated that he was "optimistic" about market opportunities for the second half of the year. He commented that "the positive growth trend and improving market conditions experienced across the half are expected to continue, subject of course to the inherent risks and uncertainties associated with the COVID-19 pandemic."
