NeuroMetrix Inc. (NSDQ:NURO) took a pasting during the second quarter, as sales plunged 43.0 percent and net losses widened by 151.0 percent, forcing the nerve testing equipment maker to lay off 25 workers, reorganize its sales force and table the development of its Ascend anesthesia device.
The Waltham, Mass.-based firm reported net losses of $4.5 million, or 20 cents per share, on sales of $3.9 million during the three months ended June 30. That compares with net losses of $1.8 million, or 13 cents per share, on sales of $6.8 million during Q2 2009.
NeuroMetrix said changes by the Centers for Medicare and Medicaid Services to the reimbursement code for nerve conduction studies continued to bedevil its top line. The change caused a 22 percent reduction in the average selling price for the electrodes used with its equipment and a 25 percent reduction in the number of electrodes sold. Sales of consumables like the electrodes accounted for 87 percent of total revenues during the second quarter.
The poor results prompted NeuroMetrix to lay off 25 workers — a quarter of its workforce — during the period and make other restructuring moves aimed at saving about $2.5 million a year.
President and CEO Shai Gozani, calling the results "not satisfactory" in prepared remarks, said the company will also bolster its direct sales force with 25 independent sales reps and adding regional distributors to cover its orthopedic and specialty markets.
" The transition to a hybrid direct/distribution model is underway and will continue in the third and fourth quarters," Gozani said.
NeuroMetrix is also narrowing its product development pipeline, he said, modifying its Advance nerve conduction and invasive electromyography device to make it more attractive to the physician office market. Development of the Ascend device for nerve injections and regional anesthesia will be "de-emphasized in the near term," Gozani said.
In addition to the physician office market, NeuroMetrix will look to boost its footprint in the market for diagnosing large fiber diabetic peripheral neuropathy, he said.
Calling nerve conduction studies the "gold standard" for detecting DPN, Gozani said cost and limited access have limited utilization of NCS for wide-spread screening, "which is essential for early detection of DPN and prevention of its complications, such as foot ulcers."
"We believe that a rapid, low-cost, point-of-care test for DPN represents an attractive U.S. and international market opportunity. We have made development of a low cost version of NC-stat and a low cost disposable electrode for this application an R&D priority. Assuming that we reach our project milestones, we believe we have the capability to launch this product in the U.S. and several international markets in the second half of 2011," he said.
NeuroMetrix shares were down nearly 4 percent, to 40 cents, in early morning trading.