European regulators temporarily suspended sales of GI Dynamics‘ (ASX:GID) EndoBarrier weight loss device "pending a review of its vigilance and reporting systems," the company said today, sending share prices plummeting in pre-market trading.
Lexington, Mass.-based GI Dynamics won CE Mark for the EndoBarrier, a plastic gut liner designed to slow the uptake of nutrients in food, to treat obesity and Type II diabetes.
GI Dynamics shares were down 20% before the opening bell today, to 37¢.
GI Dynamics did not immediately provide further detail on the reason for the suspension of sales, but noted the product is not the subject of a recall for devices currently owned by hospitals or distributors, and that it will continue ongoing clinical trial activities, including trials currently underway in the United States.
"The company is working diligently with our notified body and with competent authorities in Europe to remedy our systems and resume product shipments as soon as possible," new CEO Michael Dale said in a prepared statement. "However based on the current schedule established for review of our systems, we do not expect resolution of the stop shipment before end of October."
GI Dynamics said it expects 3rd quarter revenues of between $550,000 and $575,000, well off the $840,000 in sales it generated in the 2nd quarter. Canaccord Genuity analyst Matthijs Smith told the Sydney Morning Herald that GI Dynamics "will have a lot of work to do to try and regain people’s confidence."
The 2nd-quarter sales slump is likely to surprise investors, Smith said, given GI Dynamics’ bullishness on new "centers of excellence" it’s opened recently.
"To have sales be declining at such a rapid rate while there has been announcements of more centers of excellence building up … doesn’t build confidence in investor community," he told the newspaper. "The company really didn’t provide anything to make you feel more comfortable."