Cardiovascular Systems (NSDQ:CSII) shares plunged 19% today after the medical device company missed expectations with its preliminary fiscal 1st quarter numbers.
St. Paul, Minn.-based Cardiovascular Systems said it expects to post net losses of -$13.1 million to -$13.9 million, or -41¢ to -43¢ per share, on sales of $43.9 million. Analysts were looking for losses per share of -39¢ on sales of $49.4 million; CSI had guided for losses of -38¢ to -40¢ per share on sales of $48.5 million to $50.0 million.
The news pushed CSII shares down -19.4% to $13.40 per share today in mid-day activity.
“We continued to make progress on our sales optimization strategy to significantly expand our sales organization, while cross training representatives to sell both peripheral and coronary applications. However, as our recent results suggest, some aspects of the transition have been challenging. After a thorough review, we believe we have taken the right steps to address the immediate challenges and continue to expect the vast majority of the optimization effort to be completed by the third quarter of this fiscal year,” chairman & CEO David Martin, who last month revealed a cancer diagnosis, said in prepared remarks. “We see no change in our multi-billion market opportunity, or our potential to address it. Our unique orbital atherectomy technology is groundbreaking, addressing the large population of underserved patients with calcified artery disease. We believe our sales optimization strategy, including a large focused sales force, is the ideal approach to capitalize on this opportunity and drive attractive double digit revenue growth and profitability in the future.”
The Q1 miss prompted Leerink Partners analyst Danielle Antalffy to downgrade her CSII rating from “outperform” to “market perform” and cut the price target by nearly ⅔, to $17 from $45.
“Clearly the salesforce transition – in part driven by the cross-training of sales reps between both PAD (peripheral) and CAD (coronary) – is taking longer than expected,” Antalffy wrote this morning in a note to investors. “CSII is implementing a number of changes to the salesforce and salesforce management, including a new head of sales and accelerated hiring. But it takes anywhere from 4-6 quarters for reps to ramp to full productivity, and even with an accelerated hiring program, growth is likely to remain suppressed through the rest of FY2016.
“We believe the shares will be range-bound for the next few quarters until we and investors begin to see some tangible benefits from recent salesforce adjustments,” she wrote.