Painless? My Assets

Just when you think the pain for Merck (NYSE: MRK) shareholders is about as bad as it can get for biotechs, along comes the sting for tiny Biolase Technology (Nasdaq: BLTI). The firm, which makes tissue-cutting laser systems for use in dental surgery, is down 14% today after dropping guidance for the upcoming quarters.

The story is familiar to denizens of the Hidden Gems boards, as the company's cutting-edge technology, diminutive market cap, growth potential, and undersized institutional holdings made it a candidate worthy of further study. Were we looking at a future Transkaryotic (Nasdaq: TKTX) or TransAct (Nasdaq: TACT), or would this be a heartbreaker like eSpeed (Nasdaq: ESPD)?

Unfortunately for shareholders, it's been the latter. A series of warnings coupled with investor suspicions about inventory and accounting have pushed the stock down about 60% to near a 52-week low. A couple of pretty sharp Fool contributors have sliced and diced the previous numbers here and here.

Third-quarter revenues are now expected to come in somewhere around $12 million, but that won't be enough to keep the company in the black. Though the company claimed that this quarter's sales drop was due to hurricanes and buyers holding out for a newer Biolase model, it also lowered the fourth-quarter's revenue target. If you ask me, I'd expect the deferred sales would push up the next quarter's results, but well, no one asked me.

I'm a great lover of damaged goods, but this stock doesn't make my list. If you feel differently, you might at least wait until management has something more tangible to offer shareholders than apologies and a token dividend.

For related Foolishness:

• Dissect Biolase by the numbers.
• Check out the competition in the laser market.
• See how fear can make you rich.

Seth Jayson spent a good deal of time working in his father's dental practice, where a Biolase system is not on the wish list. At the time of publication, he had positions in no company mentioned. View his stock holdings and Fool profile here. Fool rules are here.