Have you heard of this company? Nano-X (NNOX)


Nano-X Imaging is an innovative company based in Jerusalem which is developing a revolutionary "cold cathode" X-ray technology with the intention of making X-ray diagnosis less expensive and more available for the world's population -- two-thirds of whom still have limited or no access to medical imaging (and which is often characterized by long wait times for both the imaging and for the analysis of the results, even for those who do have access).

The company's name is pronounced like "Nannox" and the stock is listed on Nasdaq, trading under the ticker symbol NNOX.*

The traditional X-ray uses electrical energy to heat a cathode filament (often to temperatures in excess of 2000 degrees Celsius) and cause it to release electrons towards a "target" anode (often a metal disc composed of tungsten or molybdenum) which then produces X-ray radiation. This "analog" method of generating X-rays requires the machine to be large and bulky because the process involves tremendous heat and therefore requires a motor to turn the anode to keep it from melting, as well as filling the device with a liquid coolant around the X-ray generation core in order to absorb the heat. 

All of this makes X-ray machines expensive, which reduces their availability -- and yet X-rays remain the single most important type of medical imaging for diagnosing a huge variety of health issues.

Nano-X Imaging is pioneering the digital production of X-rays using field emission technology developed by engineers at Sony, in which the cathode does not produce electrons because it is heated but rather because it interacts with an electric field (hence it is called a "field emitter"). This process can be done at room temperature and is thus also referred to as "cold cathode" technology -- and it enables numerous transformational advantages over the hot cathode process described above, one of the most important of these advantages being the fact that the cathode can be turned into thousands of tiny electric "gates" on a silicon microchip, enabling very precise and efficient emission of electrons in a much smaller tube than would be possible using the conventional analog X-ray generation technology.

By digitizing the X-ray tube, Nano-X can produce a much smaller, less expensive, and more energy-efficient X-ray device, and one that can produce high-quality results while exposing the patient to less radiation than would be necessary for an analog X-ray machine to produce the same images. The digital X-ray tube can generate quality imagery with less X-ray exposure because, unlike an analog machine which must be always on or off and which has limitations regarding how fast you can turn it on or off, the digital array can turn each individual emitter on or off according to complex algorithms in order to be equally effective while exposing the patient to much less radiation. 

Also, because the traditional machines are so large, they have to physically "circle around" the patient in order to take a full scan (such as when you are getting a dental X-ray, and the technician circles the X-ray projector around your jaw: this also exposes the patient to more X-ray radiation than will be necessary with machines using the new digital cold-cathode technology).

The Nano-X device pictured above has a motorized arc which will contain six individual X-ray tubes and which can track backwards and forwards over the patient, and which will also be able to tilt in order to change the angle of the X-ray. The patient will lie on the bed underneath the arc, with the bed itself functioning as the receiving element for the X-rays and generating the digital images. Such a design would be impossible with conventional analog X-ray machines. Nano-X is calling their machine, for self-evident reasons, the Nano-X ARC.

The production of X-rays using cold-cathode digital technology on silicon is so revolutionary that many who heard about it at first did not even believe it was possible -- including some medical professionals, a few of whom were interviewed by a short-seller firm calling themselves "Muddy Waters," who published an inflammatory "hit piece" on Nano-X in September of 2020, alleging that the company and its technology are completely fraudulent. But there is no reason that X-rays cannot be produced through field emission technology embedded in silicon: in fact, the process is very much parallel to the way that a digital LED (light-emitting diode) produces visible light using electrical energy in a semiconductor material, as opposed to the conventional analog light bulb which produces light by heating a metal filament until it glows.

The US Food and Drug Administration has now given 510(k) medical device pre-market approval to the Nano-X digital cold-cathode X-ray tube (see this press release from the company, published this past Friday, April 2). In order to obtain 510(k) approval, the medical device in question must demonstrate both safety and efficacy -- meaning that it must be as effective as the existing approved devices. This approval from the FDA, in addition to a live demonstration which Nano-X broadcast in early December of last year, should prove beyond doubt that their X-ray technology is not fraudulent, and that the allegations to that effect published by the short-seller calling themselves "Muddy Waters" are baseless.

Of course, just because the FDA has now stated that the Nano-X digital X-ray tubes are safe and effective does not mean that they will be a successful business. There are many hurdles which the company must successfully navigate in order to bring their device to market, including gaining approval for their intended "multi-source" design (the ARC with six tubes embedded in the arc above the patient, shown above), as well as all the manufacturing and distribution and software design and sales and customer service and maintenance of equipment that will be required to go to market.

However, the company already has contracts for thousands of devices with distributors wanting to place the Nano-X ARC in countries around the world, pending the necessary regulatory approval and the ability of the company to produce those devices -- as well as important partnerships including a partnership with manufacturing giant Foxconn to actually assemble the Nano-X ARC itself.

Additionally, Nano-X has stated that it intends to pursue a business model that is almost as revolutionary as the cold-cathode technology itself, in which Nano-X will place the device in healthcare facilities basically for free, instead charging on a "per-scan" basis and stipulating a minimum of seven scans per day at around $14 per scan. This model has the potential to radically increase the availability of medical imaging by X-ray around the world, to the point that Nano-X hopes that every person could one day be able to get a diagnostic X-ray once per year in order to provide detection of health issues that can be much more effectively treated if caught early enough.

We have been investors in Nano-X since the very first public trades of the stock, on August 20 of 2020. While there are still many execution issues which must take place before this technology can be widely deployed and begin helping people around the world, we believe that this digital X-ray innovation has the potential to be transformational.

Now that the FDA has approved the Nano-X device, we doubt that short-seller "Muddy Waters" will issue an apology to the company for calling the company a "piece of garbage," but if whoever wrote that short-selling hit piece was actually honestly mistaken (perhaps because they relied on medical professionals who themselves just could not believe that digital field emission of X-rays was possible, and who did not conduct the due diligence to research the possibility for themselves), then they should apologize.

We think they should also apologize to the memory of the great American blues musician McKinley Morganfield, known professionally as Muddy Waters (1913 - 1983), and change the name of their short-research writing company to something else.

* At the time of publication, the principals of Taylor Frigon Capital owned shares issued by NNOX.

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