Shares of OM fell 12.7% at $16.91 apiece in after-hours trading after the release of the news yesterday evening. By midday today, OM shares had recovered slightly, down more than 10% to $17.27 apiece MassDevice‘s MedTech 100 Index — which includes stocks of the world’s largest medical device companies — was down 0.6%.
San Jose, California–based Outset Medical paused shipments for its TabloCart with Prefiltration, an accessory for Tablo. The company said the shipment hold is pending FDA clearance, for which Outset plans to submit later this month.
News of the shipment hold follows last month’s announcement of an FDA warning letter for Tablo. That included an observation asserting that TabloCart with Prefiltration requires prior 510(k) clearance for marketing authorization. TabloCart, a Tablo accessory, launched in the third quarter of 2022. Sales have remained immaterial to Outset’s financial results. Outset said it intends to work collaboratively with the FDA to resolve this, with steps potentially including a 510(k) submission.
“Since receiving the warning letter on July 6, we have made the decision to file a 510(k) for TabloCart with Prefiltration and pause distribution of the product until a 510(k) clearance has been granted,” said Outset chair and CEO Leslie Trigg. “As we look ahead to the second half of the year, we expect our strong momentum both in the acute and home end markets to continue to drive the business.”
Outset Medical beats The Street in Q2
The at-home dialysis technology developer posted losses of $44 million for the quarter. That equals 90¢ per share on sales of $36 million for the three months ended June 30, 2023.
Outset Medical’s bottom line remained nearly the same as in the same period last year, with 43.8% sales growth.
Adjusted to exclude one-time items, losses per share came in at 69¢, landing 9¢ ahead of expectations on Wall Street. Sales also topped projections as analysts forecast revenues totaling $34.8 million.
“Our momentum entering 2023 carried through the second quarter, led by the strong demand from hospitals due to the value realized from insourcing dialysis with Tablo,” said Trigg. “As important, Tablo’s unique ease of use and flexibility continues to drive patient interest and demand from home-care providers, including traditional acute-care providers.”
Outset reaffirmed its projections for revenues between $144 million and $150 million. It added that it expects to fall at the low end of that range due to the shipment hold. The company also reaffirmed its gross margin guidance for 2023 to land in the low 20% range.
Background on some of the issues Tablo has faced
In June 2022, Outset put a hold on shipments of the Tablo system for home use. The hold came as a result of a pending FDA review and clearance of a 510(k) submitted for changes made since the Tablo system’s original March 2020 clearance.
In August of 2022, the company said that it received the FDA 510(k) clearance and resumed Tablo shipments.
Not long after the company resumed shipments, a class action securities lawsuit came through against Outset. The plaintiff later voluntarily dismissed that suit.
Despite the issues surrounding Tablo, following the resumption of shipments, Outset’s performance improved. The company secured a $300 million debt financing and landed on Deloitte’s list of fastest-growing companies. It also produced a string of strong financial performances, culminating in a Street-beating first quarter to open 2023.
This story originally ran on Aug. 2, 2023. Updated Aug. 3 with the next-day stock price.
