Silk Road Medical: A Smooth Path to Growth

It’s been a bumpy ride for Silk Road Medical (NASDAQ:SILK) this year. Since climbing above $75 late last year, the stock has retreated more than 40%. Yet with a huge growth opportunity ahead in the treatment of carotid artery disease, investors may want to take a closer look at this medical innovator. 

Today more than 4 million Americans have carotid stenosis, a condition in which the large arteries in the neck narrow often due to a buildup of cholesterol. Since these arteries are responsible for carrying blood to the brain, head, and face, it can lead to plaque traveling to the brain—and stroke. 

Carotid stenosis is commonly treated with medications that lower cholesterol or blood thinners that improve blood flow to the brain. In more severe cases, surgery may be performed to open the blood vessels.  

The traditional surgical procedure, carotid endarterectomy, is used in more than 80% of cases. It has been around for 65 years, and although it lowers stroke risk, it has a higher rate of complications. This is where Silk Road Medical comes in. 

What Does Silk Road Medical Do? 

Silk Road Medical specializes in developing minimally invasive therapies for carotid artery disease. The disease accounts for one-third of ischemic strokes in the United States. 

The company is positioning its TransCarotid Artery Revascularization, or TCAR, procedure as a superior alternative to high-complication surgery and high-risk endovascular procedures. It involves placing a hollow sheath in the carotid artery that directs blood flow away from the brain. This allows for a stent to then be inserted to stabilize plaque buildup and prevent stroke.  

TCAR is said to lower the risk of stroke and lead to a reduced incidence of adverse events. More than 30,000 TCAR procedures have been performed worldwide. Aside from its relative performance and safety, it is being marketed as an efficient, cost-effective treatment for carotid artery disease. This is because TCAR takes less time to complete leading to lower operating room costs and time for more patients to be treated. 

What are Silk Road Medical’s Growth Prospects? 

On a global level the TCAR market is estimated to be a $5.1 billion opportunity. This includes the potential conversion of standard and high-risk surgical procedures which are in the company’s view are outdated inferior treatments. Silk Road Medical, therefore, is on a mission to increase the adoption of its solutions in the U.S. and overseas.  

The international expansion opportunity alone comprises almost half of the addressable market. Then there is an untreated U.S. population of more than a quarter-million patients that are being monitored but have not gone the surgery route.  

Silk Road Medical is also pursuing growth opportunities beyond its core market. It is looking to expand the opportunity set for its current products by getting approval for new indications. It is also developing new products and therapies to address a global need for safer, more effective treatments for artery disease. 

 Is Silk Road Medical Stock a Buy? 

Although Silk Road Medical’s novel TCAR procedure is still a rather niche alternative to carotid artery disease care, adoption has increased significantly over the last five years. And with most hospitals using other approaches, the company has a long road ahead to transform the market. 

It is a challenge that could be met given the favorable outcomes seen in TCAR studies and procedures. As the medical community becomes more aware of TCAR and training is expanded, Silk Road could quickly grab share in a very large and growing global market. Nearly 2,000 physicians in the U.S. have been trained on the TCAR procedure.  

Last year approximately 10,400 TCAR procedures were completed. That figure is expected to top 14,500 in 2021. Revenues are projected to climb 40% this year which would be an acceleration from the growth seen in 2020. 

Silk Road Medical has already proven it can make inroads in a very competitive market. Through the end of last year, it had grown its U.S. market share from 1% to 6% over the course of three years. Add in the international market opportunity and the growth potential is enormous. 

The stock, therefore, seems to have a favorable risk-reward at current levels. Its decline year-to-date has been more a function of the market rotation into value sectors than a reflection of the company’s long-term growth outlook.  

The consensus price target for Silk Road Medical is $61.75 which implies nearly 40% upside. Long-term growth investors that start a position here could be on a path to some silky-smooth gains.