Nerve testing devices maker NeuroMetrix (NURO) reported second-quarter fiscal 2010 net loss per share of 20 cents, in line with the Zacks Consensus Estimate, but wider than the year-ago loss of 13 cents. Net loss bloated two and half fold to $4.5 million from $1.8 million a year ago as revenues were hit by the revamp in Medicare reimbursement.
Revenues tumbled 43% year over year to $3.9 million as change in reimbursement for nerve conduction studies (NCS) using electrodes (electric conductors) led to declines of 22% and 25% in the average selling price and number of electrodes sold, respectively in the quarter. Sales narrowly trailed the Zacks Consensus Estimate of $4 million.
Consumables (electrodes, needles and other accessories) and medical equipment (including nerve testing devices such as ADVANCE and NC-stat) contributed 87% and 13% of sales, respectively. Consumables sales sank 45% to $3.3 million while medical equipment sales slipped 27% to $0.5 million.
Gross margin trimmed to 63.5% from 71.4% a year-ago on account of top-line erosion. Operating expenses rose 4% year over year to $6.98 million as the company spent more on R&D and sales and marketing expenses.
The installed base of active accounts contracted 3.3% sequentially to 4,167. NeuroMetrix placed 77 new systems in the quarter, edging up from 75 in the previous quarter.
NeuroMetrix focuses on the development and marketing of devices that help physicians detect and treat diseases and peripheral nerve injuries, and offer regional anesthesia and pain control. The company’s flagship products are ADVANCE and NC-stat devices for NCS.
NCS is considered as gold standard for diagnosis of Diabetic Peripheral Neuropathy (DPN). However, higher cost and limited access have prevented its wide-spread adoption. Studies conducted using ADVANCE and NC-stat declined 5.2% sequentially in the quarter.
The company is developing a low cost version of its NC-stat system for NCS with a target to launch this product globally in second-half 2011. Moreover, NeuroMetrix is modifying ADVANCE to make the device more appealing to physicians.
The beleaguered quarterly results have forced the Massachusetts-based company to pursue a host of cost saving initiatives including laying off of a quarter of its workforce, realignment of the sales organization and scale-back of the development of ASCEND device for therapeutic nerve injections and regional anesthesia. NeuroMetrix predicted a charge of $0.3 million for the third quarter associated with severance costs. The company expects its restructuring efforts to fetch roughly $2.5 million in annual savings.