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Shares of Entellus Medical Inc. (NASDAQ: ENTL), a device maker focused on sinus relief, are getting thumped after the company announced first-quarter earnings yesterday. Lighter-than-expected sales figures have incited the market to shave about 19.9% from the stock price as of 12:00 p.m. EDT on Thursday.
It's been a rough year for Entellus Medical. Including today's beatdown, the stock has given up about 33.2% in 2017. Although first-quarter sales rose a healthy 13% over the prior-year period, operating expenses increased a bit faster.
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First-quarter sales may have risen somewhat, but the company lost $8.3 million during the period, about 20.2% more than it did in the year-ago period. The Minneapolis company operates in the shadow of Medtronic, the900-pound medical device-making gorilla that considers itself the market leader in ear, nose, and throat technology. Although Entellus has performed fairly well in the highly competitive space, investors are right to be concerned about the company's profitability moving into the foreseeable future.
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Management blamed increased sales and corporate staff-related expenses for the operating expense uptick. Hopefully, the launch of a recently cleared device for patients with persistent eustachian tube dysfunction will keep them busy. It won't be the only device in this space, so investors will want to keep a close eye on its progress.
Looking toward the rest of the year, the company lowered the high end of its full-year revenue expectations a notch to $89 million. On the bottom line, it expects to lose between $24 million and $32 million this year.
At this burn rate, the still-unprofitable company has a fairly long time cushion. After raising about $45 million earlier this year through a secondary share offering, Entellus Medical finished March with about $68.2 million in cash. Between its cash reserves and about $50 million in new credit facilities, it should be a couple of years at least before it needs to raise more capital.
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