Nanox's stock falters after investor report calls its business 'a complete farce'

Activist short seller Citron Research called the Israeli digital X-ray company out on its limited R&D expenditure, suspicious distribution agreements and other factors. Nanox has described the report as incorrect and misleading.
By Dave Muoio
03:35 pm

Israeli "digital X-ray" company Nanox is fielding increased scrutiny and a sizable hit to its share prices following the publication of a scathing report and commentary that referred to the company as "Theranos 2.0."

The criticism was posted yesterday by activist short seller Andrew Left's Citron Research, an online stock analysis and commentary blog that has focused on identifying overpriced or fraudulent stocks since launching as in 2001. In it, Citron describes Nanox as "a complete farce on the market" with stock prices "heading to $0" not too long after the company announced a multibillion market valuation.


Nanox's stock had reached as high as $64 per share last week, but took a tumble yesterday following the report's publication and currently sits around $38 per share. The company issued a statement on "unusual trading activities" this morning, in which it said that Citron's report was incorrect and misleading.

"Nanox believes that the allegations in the report are completely without merit and strongly condemns the publishing of the false and misleading information contained in this report," it said in the statement. "The company is carefully reviewing the report and will provide additional information on the allegations as appropriate."

Citron supports its claim with information gleaned from Nanox's financials and business updates. Chief among the items noted are the company's modest R&D spending of roughly $7.5 million since 2018 and its 21-person workforce, which Citron argues is unlikely to be sufficient when seeking to disrupt medical imaging market leaders such as GE, Siemens, Philips and Fuji.

Another highlight of the commentary is the Israeli company's reported interactions with the FDA. The company has submitted a 510(k) application for their system, which in March returned a major deficiency letter from the agency. Citron argued that the company's pitch to customers highlighting a never-before-seen approach to medical imaging is tonally at odds with language in its F1 filing stressing that the company's regulatory submission expects to "make no new claims as to the operation, image quality or functionality of the Nanox.Arc versus the predicate device."

Of note, Nanox submitted a filing to the SEC within the past couple weeks stating that it has since submitted additional data to the FDA in response to the agency's identified deficiencies, "including the results of certain performance tests."

Capping off the report is a review of Nanox's reported distribution agreements, which Citron said point toward "fake customers." The largest agreement highlighted in the report would provide 1,000 Nanox systems to a company called the Gateway Group, which, Citron notes, does not yet appear to have a presence in the medical device sector. Another, LATAM Business Development Group, is described in Nanox's agreements as operating in Brazil, but according to its LinkedIn page "only has three employees who are all located in Israel where [Nanox] is also coincidentally located."

Citron is promising a second part to its analysis that it says will focus on self-dealings, "shady fundraising," and false market-size claims, but its view of Nanox's operations has already been made clear.

"To put things into perspective, this $3 billion company is nothing more than a science project with a simple rendering, minimal R&D, fake customers, no FDA approval and fraudulent claims that are beyond the realm of possibility," the report reads. "This $3 billion science project appears to be nothing more than a complete stock promotion."

While Citron's report has yielded an immediate market reaction and response from Nanox, it could also invite deeper review from its stock holders. This morning, Rosen Law Firm, a practice known for class action suits against companies that have misrepresented their business, announced that it was preparing a securities lawsuit against Nanox and put out the call for shareholders to participate.

MobiHealthNews has reached out to a representative of Nanox for additional comment, and will update this article with any response.


Nanox was founded in 2012, but really began to pick up steam among investors with its software-supported X-ray technology within the last couple of years. Within 2020 alone, the company announced a $26 million raise in January, a $20 million investment and partnership in June, $59 million in July and its headline-grabbing Nasdaq IPO in August. Initially priced at $125 million, this listing performed well for Nanox and brought in a total of $190 million, according to the company.

Other analysts had so far been relatively bullish on the Israeli company, and some of its institutional backers don't appear to be jumping ship, investor outlets report. Oppenheimer's Suraj Kalia reportedly suggested that the stock "could" disrupt the space, but has yet to prove itself, while Cantor Fitzgerald's Steven Halper stood firm by a $70.00 price target.

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