Image source: Heartware International.

What: After updating investors on a key medical device in development and warning of a longer-than-hoped delay, shares in Heartware International (NASDAQ:HTWR) were down 33.8% at noon ET today.

So what: In Q3, Heartware International paused a trial evaluating its MVAD Ventricular Assist System due to a manufacturing problem related to how a circuit board is fastened in its device. It also reported that it had identified software bugs that would need to be addressed with a software upgrade.

In October, management revealed that it wouldn't be able to restart that trial in November, as had been previously hoped, in part because it was evaluating adverse events that had popped up in patients.

Now, Heartware International is disappointing investors yet again with news that the adverse events observed in the trial were blood clots that appear to have been caused by software problems with its device. Further, management warns that finding a solution to the problem with its MVAD system could take months, and potentially require starting its trial all over again.

Now what: Sales of the company's approved miniature heart pumps have been flattening out, with Heartware reporting revenue of $65.2 million in Q3, down from $68.6 million a year ago, and revenue of approximately $68 million in Q4, down from $73.2 million a year ago.

Today's news throws some water on the company's efforts to spark its sales growth, but it doesn't completely derail them.

Heartware could still deliver an end around for the MVAD system and management has said that it may file for approval of its existing HVAD device as a destination therapy in heart failure patients this summer. Currently, those pumps are approved for use as a bridge to transplant, so a FDA approval as a destination therapy could broaden the company's addressable market and kick-start revenue growth.

Nevertheless, because solving its MVAD device challenge could cause expenses to increase this year and it's not certain if the FDA will approve the HVAD system as a destination therapy, I'm sitting on the sidelines for this pullback.