Friday, 15 July 2016

Positive Development on Lawsuit Settlement Makes NVCN A Highly Undervalued Buyout Target

Neovasc Inc. (NVCN) dropped from $1.84 to $0.46 on May 20 after the jury trial phase of the lawsuit against the company by CardiAQ.  The jury awarded CardiAQ, which is now owned by Edwards Lifesciences Corp.(EW),  $70 million on trade secret claims.

However, what has not been widely dispersed into the media is since the jury verdict, the judge ruled that this decision did not have jurisdiction in Massachusetts. Read the full document of the ruling on May 27th, with the key portions and conclusion below:

As the court case appears to be going in NVCN's favor, the stock price is greatly undervalued at less than 50 cents. Rather than try to start a new court case in Canada, EW might just buy NVCN out at these depressed prices. After all, the company did pay $400 million for CardiAQ so it is not a stretch to think that it would buy NVCN out when NVCN is valued at a $30 million market cap with $47 million in cash and a medical device currently in the market to treat forms of cardiovascular disease.

If the lawsuit is going so well, why hasn't NVCN gone public by disclosing these very important updates since the settlement? NVCN may be talking to EW about a possible buyout and is keeping quiet about the lawsuit developments as a sign of good faith while in negotiations. A deal will be easier on both parties when NVCN's stock price is at such a depressed level of less than 50 cents per share. This may be a huge disappointment to long-term investors who have held the stock at much higher prices and who maintain that Canaccord Genuity's price target of $7 can be achieved. But for people who buy at 50 cents or less, a $2 buyout from EW is a 300% gain. Even without a settlement, disclosure of the positive lawsuit development should send the stock back to the $2 level as that is where it was before the settlement was announced.

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