Marvelous Microcaps

iCAD, Inc.: Breast cancer detection solutions built on artificial intelligence

INTRO:


At Perritt Capital Management, we take focused positions in companies where we have high conviction of their success; companies that are out of the mainstream of small cap investing. To highlight our process, we are pleased to present the fourth installment in our new series “Marvelous Microcaps – Big Ideas on Small Companies”. This series profiles companies that we believe have a niche in their existing markets or are launching a product that could disrupt their marketplace.

THE COMPANY:

iCAD (ICAD) operates through two segments, Cancer Detection and Cancer Therapy.  Their advanced breast cancer detection solutions are built on artificial intelligence that enable radiologists to find cancer earlier and faster.  Their Breast Health Solutions suite operates in 2D and 3D and rapidly and accurately analyzes each image detecting both malignant soft tissue densities and calcifications with unrivaled accuracy.  The company’s ProFound AI Risk product works with 3D mammography and is the first and only clinical decision support tool to estimate breast cancer risk for each woman. This will move the breast mammography industry from age-based screening to risk-based screening leading to both prevention and treatment of breast cancer.

With their innovative technology, they expanded the breast cancer detection to also detect and treat other cancers.  Xoft Brain IORT recently treated the first patient with glioblastoma (brain cancer).  Xoft is FDA-cleared and licensed for the treatment of cancer anywhere in the body.  It used the world’s smallest X-ray source to deliver a precise, concentrated dose of radiation directly to the tumor site thus targeting only the cancer cells and not damaging nearby healthy cells.  IORT and Xoft allow oncologists and surgeons to deliver a full course of radiation treatment in one day, at the time of surgery, while the patient is already under anesthesia.  Other cancers that can be treated are non-melanoma skin cancer, Endometrial, and cervical cancer.

WHY WE OWN: THE PERRITT ADVANTAGE

The marketplace in breast imaging for this product is huge and largely untapped.  Approximately 20% of breast cancers are not detected and traditional mammograms generate many false positives.  ICAD’s product operates more efficiently, accurately, and faster.  The current install base is about 1350 units marketed by a sales force of only 13.  The Therapy segment’s potential is huge to treat many types of cancer in the operating room removing the need for many sessions of radiation.  The platform also provides for a razor-razorblade model resulting in recurring revenues.

Third quarter of 2021 had 31% revenue growth which missed analysts’ estimates by $500,000.  The stock has fallen more than 30% providing a great buying opportunity.  They have cash of $35.8 million which should be sufficient to fund their future growth. A new CEO was appointed in December and Insiders have bought stock recently.

ICAD traded at a little more than 3 times 2022 sales estimates which reflects 30% growth with 72% gross margins.  They have been affected by Covid-related slowdowns in procedures, which we believe will increase as the effects of the COVID pandemic diminish.  They have been aggressively pursuing subscription offerings which will likely increase recurring revenues.  This is a stock that has disruptive technology and is currently selling at bargain bin prices.

 

Perritt.  Marvelous Microcaps – Big Ideas on Small Companies.

 

Data here is obtained from what are considered reliable sources; however, its accuracy, completeness, or reliability cannot be guaranteed.

Fund holdings and sector allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security.  Please click PRCGX and PREOX for a list of the top ten holdings.

Russell Microcap Index covers the smallest stocks in the Russell 2000 with market caps between approximately $50 million and $300 million.  One cannot invest directly in an index.

Before you invest in the Perritt MicroCap Opportunities Fund or Perritt Ultra MicroCap Fund, please refer to the prospectus for important information about the investment company, including investment objectives, risks, charges, and expenses.  You may also obtain a hard copy of the prospectus by calling 800-331-8936.  The prospectus should be read carefully before you invest.

 

Mutual fund investing involves risk.  Principal loss is possible.  The Funds invest in smaller companies, which involve additional risks, such as limited liquidity and greater volatility.  The Funds invest in microcap companies which tend to perform poorly during times of economic stress.  The Ultra MicroCap Fund may invest in early-stage companies which tend to be more volatile and somewhat more speculative than investments in more established companies. 

Past Performance does not guarantee future results.

The Perritt Funds are distributed by Quasar Distributors, LLC.

First published January 2022.

Invest With Us