Why PolarityTE Stock Tanked Today

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What happened

In response to the company's fourth-quarter results, shares of PolarityTE (NASDAQ: PTE), a commercial-stage biotech focused on regenerative medicine, fell as much as 24% in afternoon trading on Monday. The stock was down about 13% as of 3:47 p.m. EDT.

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So what

PolarityTE recently changed up its reporting period. The company decided to move its fiscal year-end from Oct. 31 to Dec. 31. That change means that this period includes data from only two months.

Here's how the company numbers shook out during the shortened period:

  • Revenue was $700,000. That fell well short of the $1.93 million that Wall Street was expecting.
  • Net loss was $18.4 million, or $0.86 per share. That was better than the $1.06 loss that analysts had modeled.
  • Cash used in operations was $8 million.
  • Cash balance at year-end was $61.8 million.

It is worth pointing out that Wall Street's estimates appear to be based on the company's fiscal quarter ended on Jan. 31. That fact alone could explain why revenue and net loss were so much lower than expected.

Either way, traders didn't like the numbers that were reported, which is why shares are being sold off today.

Now what

PolarityTE has put its shareholders on a roller coaster ride in March. Just a few days ago, its share price shot higher after news broke that a Food and Drug Administration investigation was closed with a favorable outcome. All of those gains have evaporated in the wake of this disappointing earnings release.

PolarityTE is scaling up its commercial team to drum up demand for its SkinTE product line. Market watchers are predicting that the company will hit $20 million in sales in 2019 and $86 million in 2020.

If it can hit those numbers, then the share price will probably start to head in the right direction. But this is a business with a questionable history, so my plan is to focus my attention elsewhere.

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Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.