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Nanosphere Sees Q2 Revenues Rise 38 Percent; Stock Tumbles on Lowered Forecast

NEW YORK (GenomeWeb News) – Nanosphere said today that its second quarter revenues jumped 38 percent year over year, with the rise being driven by sales of its Verigene Gram-Positive Blood Culture Test.

Nanosphere also lowered its revenue guidance for the year as well as its expectations for instrument placements. In response, its shares plummeted around 32 percent to $2.00 in Wednesday morning trade on the Nasdaq.

The Northbrook, Ill.-based molecular diagnostics firm recorded $1.9 million in revenues for the three months ended June 30, compared to $1.3 million a year ago. That came in below the average Wall Street revenue estimate of $2.1 million.

All of the firm's quarterly revenues came from product sales, as it had no income from grant or contract revenues during the period, compared with $30,000 from such sources in the period last year.

The firm said it placed 35 systems during Q2, and it revised downward its expectation of placements for the year from the 200 to 250 range to between 150 and 200.

Nanosphere's net loss for the quarter fell to $7.8 million, or $.14 per share, compared to a net loss of $8.4 million, or $.19 per share, a year ago, beating the average analyst estimate by a penny.

The firm's R&D spending dropped 34 percent to $3.1 million from $4.7 million in Q2 2012. The company attributed that decrease to reduced spending on development goods and materials, and raw material inventory capitalization that had previously been expensed.

Nanosphere said its SG&A costs rose 22 percent to $5.1 million from $4.2 million in the year-ago period due to expansion of its field sales and customer support teams and increasing clinical trial expenses.

During the quarter, Nanosphere raised $4.7 million through a direct offering of its common stock and inked a deal for Hitachi High-Technologies to distribute its products in Japan.

The company exited the quarter with $32 million in cash and cash equivalents.

Nanosphere also revised its full-year 2013 revenue guidance downward from the $13 million to $15 million range to between $10 million and $11 million.

"We are lowering 2013 revenue and placement guidance to better reflect the extensive implementation process that our customers utilize in validating our Gram-Positive Blood Culture test as they adopt this significant change in diagnostic protocol," Nanosphere President and CEO Michael McGarrity said in a statement.

McGarrity said the company is encouraged by several indicators he says shows the foundation of "a sustainable revenue ramp," including that its customers are "generating clinically actionable results," that customer data confirms the accuracy and performance of the Nanosphere tests, and that its focus on streamlining the implementation process will speed up revenue growth in coming quarters.

"We expect this momentum to be further bolstered by our gram-negative and gastrointestinal enteric menu additions, each on track for submission to the FDA in 2013," McGarrity added.

On Wednesday morning investment bank Jefferies downgraded Nanosphere's stock to Hold from Buy and cut its price target on the firm's stock to $2 from $5.50.