February 8, 2019 / 3:30 PM / in 10 days

Short seller Carson Block targets medical device company Inogen

BOSTON, Feb 8 (Reuters) - Prominent short seller Carson Block is saying that medical device company Inogen Inc has inflated the size of its markets and expects the stock price to fall.

Block, whose research firm Muddy Waters is best known for targeting the shares of China-based companies, has written a new report that asserts that Inogen’s management has made overly optimistic growth forecasts.

Calls to the company’s media relations and investor relations departments seeking comment were not returned.

Muddy Waters is short Inogen Inc because it question’s Inogen’s statements about total addressable market size and potential growth, the report seen by Reuters said.

Inogen makes lightweight portable oxygen concentrators that free its users from being tethered to heavy tanks.

While the company has said the U.S. TAM is roughly 3 million users and is growing at 7 percent to 10 percent a year, Block said the real U.S. TAM is far smaller at about 1.3 million, citing Centers for Medicare & Medicaid Services (CMS) data. He also said CMS data shows that the oxygen therapy market has been shrinking. He wrote that Inogen based its estimates on data from Wintergreen Research.

“The key to INGN’s extreme multiple is its blue sky story,” the report said. The company’s stock had climbed steadily to a high of $282.92 in September but has declined by more than half since then, trading Friday morning at $137.03, down 1.9 percent.

Block sees more room for it to fall, arguing that “INGN will hit peak sales as soon as this year, and likely no later than next.” (Reporting by Svea Herbst-Bayliss)

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