HomeMost PopularA Deep Dive into Iridex: Unlocking Value in Ophthalmic Medical Products

A Deep Dive into Iridex: Unlocking Value in Ophthalmic Medical Products

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IRIDEX Corporation (NASDAQ:IRIX) is a leading provider of laser-based medical products for the treatment of glaucoma and retinal diseases. Although its market cap is relatively small, the company is highly respected in the ophthalmic industry and known worldwide for its innovative treatments. In this comprehensive analysis, we will discuss why IRIX shares have experienced a significant decline and why we believe they are currently undervalued. We will also explore the potential for IRIX to unlock shareholder value through the separation of its retina and glaucoma businesses.

The Decline in IRIX Shares

About two years ago, IRIX experienced a sharp decline in its stock price, mainly due to concerns about its cash burn rate and a lack of growth in the glaucoma division. However, there are several key factors that the market may be overlooking. Firstly, IRIX stocked up on inventory during the global pandemic, leading to increased cash burn. However, as supply chain constraints have eased, the company is now selling down its inventory at a higher rate, offsetting the previous cash burn. Additionally, the integration of its retina laser-based system with Topcon’s PASCAL system has been completed, resulting in a significant reduction in research and development expenses. Finally, the glaucoma business has faced slower growth than anticipated, but IRIX has identified the reasons for this and is taking steps to address the issue.

The Two Divisions: Retina and Glaucoma

IRIX’s retina division is a well-established and profitable business, positioning the company as a global leader in laser-based retinal treatments. On the other hand, the glaucoma division is relatively new and has not gained significant market penetration. However, the glaucoma market represents a multi-billion dollar opportunity. IRIX’s laser-based treatment offers a non-invasive and effective solution for glaucoma patients, complementing other available treatments. The primary hurdle for widespread adoption has been the difficulty for physicians in applying the correct dosage and sweeping time for the treatment.

Unlocking Shareholder Value

IRIX recently announced a strategic review to explore options for the future of each of its product lines. Separating the retina and glaucoma businesses could unlock significant shareholder value by allowing each division to focus on its unique opportunities. The retina business, being steady and profitable, could potentially be sold to an acquirer who can leverage its existing infrastructure and distribution network. This could result in a valuation of $60-80M, representing a 6-8x multiple. On the other hand, the glaucoma business, currently burning cash but with tremendous potential, could be sold for a minimum of $30-45M, or potentially more as the sweeping process is automated and positive clinical trial results are obtained.



Based on IRIX’s financial statements and industry discussions, we estimate that the retina business is profitable. An acquirer could reduce general and administrative expenses by integrating the business into their existing infrastructure, resulting in significant cost savings. We believe it is reasonable to expect a net profit of $10M from the retina division, allowing for a sale price of $60-80M, or approximately $4.30/share, representing a 70% increase from the current share price.


The valuation of the glaucoma business is more challenging due to its current cash-burning nature. However, considering the multi-billion dollar potential of the glaucoma market, a sale price of 2-3x annual revenue ($30-45M) seems reasonable. As the sweeping process is automated and the clinical study yields positive results, the valuation could increase significantly, potentially reaching a value similar to that of the retina business.

Retina + Glaucoma

Considering the separate valuations for the retina and glaucoma businesses, along with the current cash on hand, we value IRIX at $7.15/share. This represents a potential upside of approximately 160% from the current share price. Additional tax assets of approximately $25M further enhance the valuation.


There is a risk that IRIX may not find acquirers for either business or for the company as a whole. The current market conditions pose a challenge for selling businesses. If no buyer is found within the next 18 months, IRIX may need to consider dilutive measures to raise capital. However, we believe that the undervaluation of IRIX shares provides little downside risk.


Despite the previous decline in IRIX shares, the company has made strategic moves to reduce cash burn and unlock shareholder value. We believe the separation of the retina and glaucoma divisions offers significant potential for IRIX and its shareholders. While the two businesses have different characteristics, selling each to the appropriate buyer could result in substantial gains. At our current valuation of $7.15/share, we see an upside potential of approximately 160%. Therefore, we consider IRIX to be a compelling investment opportunity.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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