TranS1 shares plunge on revised outlook

Shares of medical device maker TranS1 Inc. plunged Thursday after the company said second-quarter revenue will fall short of its previous outlook because of sales-force turnover and related issues.

The stock fell $4.01, or 28.1 percent, to $10.24. Shares have traded between $8.61 and $26.48 over the past 52 weeks.

The company now expects revenue between $5.9 million and $6 million, down from prior guidance of $6.3 million to $6.5 million. Analysts polled by Thomson Financial expect revenue of $6.1 million, on average.

TranS1 makes surgical implants for degenerative-disc disease, which affects the lower spine.

"Our results this quarter were impacted by sales force turnover and the promotion of some high-performing direct sales people into regional management roles," Rick Randall, president and chief executive, said in a statement late Wednesday. "Additionally, approximately 50 percent of our direct sales personnel have been on the job for six months or less and thus are not seasoned in their territories."

Wachovia Capital Markets analyst Michael Matson reaffirmed a "Outperform" rating on the company, saying sales-channel growing pains are partly to blame for the changed guidance. He said there is still enough potential upside for the company to maintain his current rating.

Meanwhile, Cowen and Co. analyst Doug Schenkel also reaffirmed a "Outperform" rating.

"While reimbursement changes continue to represent a headwind, the miss was largely attributed to unexpected turnover within the company's sales force," he said in a note to investors. "Recent hires have allowed the company to achieve its targeted midyear 50 salesperson headcount."

Still, more than half of those representatives have been with the company for less than six months, leaving a learning curve, he added.

The company expects to release second-quarter results on July 31.