Cord-blood storage specialist ViaCell (NASDAQ:VIAC) reports the second installment of its first-half results tomorrow. We know what Wall Street expects to see. But what should you be looking at?

What analysts say:

  • Buy, sell, or waffle? Four analysts follow ViaCell, where buy ratings outnumber holds three-to-one.
  • Revenues. On average, they expect quarterly sales to rise 25% to $17 million.
  • Earnings. Meanwhile, losses are expected to contract to $0.13 per share.

What management says:
Why did I refer above to the Q2 news as "the second installment of its first-half results?" Because, as management confided last quarter, "ViaCell now expects sales growth in the first half of 2007 to be lower than previously projected [and] sales growth will accelerate in the second half of 2007." In other words, barring a surprise, tomorrow's news should be examined less for what it tells us about what happened in Q2, and more for what management will reveal of its evolving expectations for quarters three and four. Specifically -- will it stick to its guns on its predictions for improvement in the second half?

What management does:
Of course, ramping sales is only half the battle. ViaCell earns stellar gross margins on the sales it already makes -- the problem lies in advertising and other operating costs, which continue to submerge operating and net margins in deep pools of red ink.

Granted, ViaCell isn't as bad off as some of the other players in its space: Cytori (NASDAQ:CYTX) and Osiris, whose negative operating margins run to three digits; Geron (NASDAQ:GERN) and Aastrom (NASDAQ:ASTM), which run to four; and poor StemCells (NASDAQ:STEM), which is now "boasting" a negative 53,716% operating margin. But a loss is still a loss, and ViaCell starts losing money even before we hit the bottom line on its income statement.

Margins

12/05

3/06

6/06

9/06

12/06

3/06

Gross

81.4%

81.4%

81.2%

80.9%

81.3%

81.5%

Operating

(31.7%)

(33.6%)

(39.1%)

(39.9%)

(41.1%)

(41.5%)

Net

(33.0%)

(34.0%)

(40.2%)

(39.7%)

(38.7%)

(39.8%)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Navigating this sea of red ink at ViaCell is the job of John Thero, who took over the CFO's chair in late June. Poached from a similar perch at drugmaker Acusphere (NASDAQ:ACUS), Thero previously spent a decade CFO-ing at medical device maker Abiomed (NASDAQ:ABMD).

ViaCell investors can take comfort in the fact that the company has found itself a bona fide biotech industry veteran to manage its finances. But at the same time, they may be less pleased to learn that Thero wasn't able to bring either of his last two employers into the black. (He did, however, preside over a tripling of revenues at Abiomed.)

I guess you know what we'll be hoping for here: That the third time will be the charm.

What did we expect when we last put ViaCell under the microscope, and what did we see? Find out in:

Fool contributor Rich Smith does not own shares of any company named above. Why do we tell you this? Because The Motley Fool has a disclosure policy.