The goal of a Laguna Hills maker of root canal equipment to make it big on Wall Street has taken a turn for the worse.
Sonendo Inc. on Nov. 21 said it was leaving the New York Stock Exchange due to its market cap being under $50 million during 30 consecutive days of trading.
On Nov. 22, its first day trading on an over-the-counter exchange, the stock fell 46% to 13 cents (OTCQX: SONX). As of late last week, the company’s shares traded around 15 cents with an $8 million market cap.
“We firmly believe that our current stock price and market capitalization do not reflect the intrinsic value of Sonendo’s underlying business,” Chief Executive Bjarne Bergheim said in a statement about the delisting.
The company went public in 2021 when it raised $94 million, and saw its shares climb as high as $12.50.
Paradigm Shifting
Sonendo was founded in 2006 by Bergheim and his father, Olav Bergheim, who still sits on the board. Bergheim is a longtime OC entrepreneur who founded the $3 billion-valued ophthalmic device company Glaukos Corp. (NYSE: GKOS) in Aliso Viejo.
About 4 million root canal procedures are performed annually in the U.S., representing a $1.9 billion total addressable market. In 2017, Sonendo won Food and Drug Administration approval for its GentleWave system to treat tooth decay, which the company says is the most prevalent chronic disease globally.
Sonendo calls its GentleWave system a “paradigm-shifting platform technology for tooth decay” that uses minimally invasive techniques to preserve tooth structure.
It says GentleWave, which has been used on more than 1 million patients, has eliminated pain in about 99.5% of patients. On Oct. 18, the company announced its next-generation GentleWave G4 System.
Since going public, the company’s shares have steadily declined; last year it raised another $63 million through a private placement of common stock and pre-funded warrants.
Annual revenue has grown, albeit at a decelerating rate, from 42% in 2021 to 26% last year. Analysts late last year predicted 36% growth to about $56 million in 2023; instead, they are now estimating a 5.6% climb this year to $44 million.
Piper Sandler analyst Jason Bednar in August downgraded the shares to neutral, citing revenue shortfalls, execution challenges and a cash burn that may necessitate another capital raise within the next two years. Sonendo may breach minimum revenue covenants under its current loan agreement, he added.
“The strategy to improve growth isn’t developing as expected,” Bednar wrote in his report.
Q3 Results
In its latest third-quarter report, Sonendo said sales climbed 6% to $10.4 million, while its loss from operations widened to $16.1 million, up from $14.6 million a year ago.
The company said it reduced its quarterly operating cash burn by 35% to $10 million. Its cash and short-term investments fell to $55.9 million as of Sept. 30, down 39% since Dec. 31.
The company expects to save $6 million to $8 million annually with a reduction in employees, which was 261 on Dec. 31.
Sonendo said it has three fundamental pillars going forward: growing top line revenue; improving margins; and prioritizing cash preservation.
“We remain incredibly optimistic about our long-term growth opportunities and a sustainable platform we’re building to capitalize on the potential that exists within the endodontic and broader dental market,” Bergheim told analysts.
Twelve days later, the delisting was announced by Sonendo, which said it intends to take all advisable actions to maintain its listing on the NYSE. Sonendo said the transition to the OTCQX will not affect the company’s business operations.
