Why Shares of Outset Medical Are Down Tuesday

What happened

Shares of Outset Medical (OM 8.12%) were down by 12.1% as of late Tuesday morning. The healthcare company released its fourth-quarter and full-year financials after the close of trading Monday. The stock is down more than 29% over the past year, but up more than 28% over the past three months. Outset has a 52-week low of $11.41 and a 52-week high of $48.71.

So what

A lot of the numbers in the report were positive. Revenue for the fourth quarter was $32 million, up 14% year over year. Full-year revenue was $115.4 million, up 12.4% from 2021.

However, the company's losses increased. Outset reported a fourth-quarter loss of $41.4 million, compared to a loss of $41.2 million in the same quarter a year ago. For the year, the company reported a loss of $163 million, compared to a loss of $131.9 million in 2021.

The other concerning thing for investors was Outset's lukewarm guidance for 2023. The company kept its guidance the same, saying it expected revenue this year of between $140 million and $150 million, which would be a rise of 22% to 30% over 2022. Outset did not issue guidance for net income.

Now what

Outset Medical specializes in medical technology to help dialysis patients. Its Tablo dialysis system, which is a self-contained console, is designed to make dialysis simpler and less expensive for hospitals and at-home patients. The Food and Drug Administration gave the device 510(k) clearance in 2016 and approved it for use by at-home patients in 2020.

The company's revenues have grown at a compound annual rate of 175% over the past five years. That's primarily because chronic kidney disease, which leads people to need dialysis, is on the rise. According to the National Institute of Diabetes and Digestive and Kidney Diseases, there are 37 million people in the U.S. with chronic kidney disease, and according to Outset, there are 135,000 new end-stage renal disease patients every year in the U.S., 60% of whom will require dialysis. Investors may be getting impatient waiting for the company to start turning a profit, but it is certainly headed in that direction.