Muddy Waters LLC, the renowned research firm run by short seller Carson Block, took aim at medical devices company Inogen Inc. on Friday, saying in a new report that the company’s true total addressable market is much smaller than it has been claiming and accusing management of misleading investors.
In the report, Block said the company INGN, -2.16% which makes oxygen therapy products, was guilty of providing “misleading statements by management, shoddy market research presented as authoritative, thorough sell-side capture, and of course significant enrichment of insiders through stock sales.”
Shares of Inogen slumped 9% after the report was published to $126.87 before mostly recovering. In September, the stock had climbed to as high as $282.92.
Block, one of the industry’s most closely-followed short sellers, estimated Inogen’s total addressable market to be 1.3 million users, a far cry from Inogen’s claim of 3.0 million users. He also said data from the Centers for Medicare & Medicaid Services (CMS) showed the market for Inogen’s oxygen therapy products was shrinking, despite management projecting 7% to 10% market growth.
Inogen did not immediately respond to a request for comment.
Block voiced distrust of Inogen’s estimates, which are based on data from a research firm called Wintergreen Research. He said the firm’s research is of “middle-school student quality, replete with misspellings, poor grammar, bizarre statements of fact, and even outright plagiarism from the New York Times.”
Block also thinks Inogen’s sales will soon peak — “no later than next year,” he said in the report, despite the company’s “blue sky story.”
“At our forecast of peak earnings, we value INGN at $46 per share, a 67 percent decrease from its current price,” he said.
In its most recent third quarter earnings report, Inogen posted net income of $16.4 million, or 73 cents a share, up from $7.3 million, or 33 cents a share, in the year-earlier period. Revenue rose to $95.3 million from $69.0 million. The FactSet consensus was for EPS of 52 cents and revenue of $90.9 million.