What happened
Shares of Outset Medical (OM 0.84%) were down 9% as of 11:30 a.m. ET after falling as much as 12% on news the company had received a warning letter from the Food and Drug Administration (FDA). The stock is down more than 27% so far this year.
So what
Outset is a medical technology company focusing on dialysis care. In a Securities and Exchange Commission filing on Friday, the company said it had received a Warning Letter from the FDA on July 5 regarding the company's Tablo Hemodialysis System. The letter came from a FDA inspection of Outset on Feb. 10. While Outset provided a response plan after the inspection, the FDA's Warning Letter raised two new concerns. The first was that the company was promoting on its website that the Tablo Hemodialysis System could provide continuous renal replacement therapy, though that is outside the scope of system's current indications. The FDA also said the TabloCart with Prefiltration requires prior 510(k) clearance for marketing authorization.
The company said it plans to work with the FDA quickly to resolve the concerns, including the potential submission of a 510(k) on the TabloCart.
Now what
The news wasn't entirely unexpected as the healthcare company has been dealing with the FDA on the issue since at least February, as it mentioned in its annual report. However, the longer this drags on, the more it weighs on the company's stock. Outset's financial situation is relatively stable. In the first quarter, the company reported revenue of $33.5 million, up 4.6% year over year, but it also had an earnings-per-share (EPS) loss of $0.90 compared to an EPS loss of $0.78 in the same period a year ago. It reported it had $252.5 million, enough cash at its current burn rate to fund operations into 2025. The company has projected revenue to grow between 25% and 30% this year.
