Here's Why Cerus Corporation Dropped as Much as 33.2% This Morning
What happened
Shares of Cerus Corporation (NASDAQ: CERS) fell over 33% this morning after the company announced disappointing first-quarter 2017 financial results. Although Cerus said it remains on track to achieve its long-term growth goals, it failed to sign sales deals in France and South Africa before its own internal deadline of the end of March. First-quarter product sales also contracted significantly compared to the level achieved in the fourth quarter of 2016.
As a result of the soft start to the year, management lowered its full-year 2017 financial guidance slightly compared to its initial forecast. As of 11:50 a.m. EDT, the stock had settled to a 19.3% loss.
Image source: Getty Images.
So what
The new financial guidance is not too far below the initial guidance. Management now expects full-year global product revenue to fall in the range of $43 million to $48 million, compared to the previous $45 million-$50 millionrange. The new range is still above 2016 total product revenue of $37 million.
What may be more worrisome to investors is the rise of operating expenses, dwindling cash position, and a sharp quarter-over-quarter decline in product revenue. In last year's fourth quarter, Cerus Corporation reported $10.1 million in product revenue and had grown the category for several consecutive quarters.
Data source: Cerus Corporation.
The company also reported $53.8 million in cash, cash equivalents, and short-term investments at the end of the most recent quarter. That means it burned through $17.8 million during the quarter as it ramped up selling and marketing activities for its Intercept product portfolio. At that cash burn rate, Cerus Corporation has roughly three quarters of cash remaining. Put another way, investors should expect a new cash raise, either through a stock or debt offering, soon.
Now what
Cerus Corporation has struggled to grow revenue much in the last several years, as evidenced by full-year 2016 revenue being nearly identical to full-year 2013 revenue. However, management expects growth to be spurred by new guidelines for bacterial safety in blood recently handed down by the U.S. Food and Drug Administration, which has created a sense of urgency among U.S. hospital systems to meet the new requirements. This wasn't the start to 2017 that the company or investors wanted, but it could still be a minor delay in the biomedical products company's long-term trajectory. Either way, investors should be aware that additional financing will be needed shortly.
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