Nanox sees stock slide after revealing ongoing SEC investigation into its business practices
Israeli imaging firm Nanox saw its shares tumble 5% during premarket trading after revealing Wednesday that the U.S. Securities and Exchange Commission is investigating its business practices.
The SEC’s Division of Enforcement notified Nanox about the inquiry on Nov. 8 as it explores whether the company violated any securities laws. As part of the process, the agency has subpoenaed the firm, seeking info on the development of its Nanox.ARC imaging system prototype and cost estimates for assembling the final product.
“The company is cooperating with the SEC in responding to its requests,” Nanox said in a Wednesday filing with the Securities and Exchange Commission, which is tasked with protecting investors and enforcing laws against market manipulation. “The duration and outcome of this matter cannot be predicated at this time.”
During the company earnings call Wednesday, Nanox leaders said they’ve spent about $600,000 on legal fees related to the SEC inquiry and proposed class-action lawsuit brought by investors. Attorneys filed the latest complaint in New York district court on Oct. 5, targeting Nanox and its officers. They claim the company made materially false and misleading statements about its business, operations and compliance policies since June and are seeking unspecified damages. In addition, lawyers filed two more class-action complaints also alleging violations of securities laws, which have since been consolidated into one.
“The company’s position is that the complaint has no merit and it will defend its position vigorously,” Nanox said in reference to both legal matters.
Meanwhile a third lawsuit, filed Oct. 28 in a California district court, alleges Nanox breached a consulting agreement. Plaintiffs in that case are seeking $1 million in unpaid fees and $29.5 million related to other “claimed entitlements,” according to the Nov. 17 SEC filing. Nanox also labeled this suit as meritless, with plans to fight the accusations in court.
Founded in 2011 and headquartered in Neve Ilan, Israel, Nanox has been working for years to create a novel system it claims can create high-end medical images at a lower cost. The company just recently closed more than $200 million in acquisitions earlier this month, purchasing artificial intelligence firm Zebra Medical Vision and teleradiology outfit USARad, which employs more than 300 radiologists.
As of Wednesday, Nanox said it has inked agreements to deploy 6,500 of its systems. The firm reported $13.5 million in losses during 2021’s third quarter, compared to $11.1 million lost in the same period last year. Increases in research, development and administrative expenses all contributed to the shortfall, Nanox told investors. Officials plan to highlight the firm’s technology at the Radiological Society of North America’s annual meeting, which kicks off Nov. 28 in Chicago.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.