Medical device company Echo Therapeutics, Inc. (ECTE) suspended its product development, research, manufacturing and clinical programs, and operations on grounds that its current liquidity is insufficient to fund activities beyond Sep 30, 2014. Following the company’s decision, its shares crashed a substantial 32.5% to finally close at $0.77 till the last trading session.
The suspension of Echo Therapeutics’ operations follows a strategic review of the company’s current financial position, funding alternatives, and projected product development costs and timelines which confirms that it does not have sufficient financial resources to continue operations.
In an earlier effort to conserve its liquidity and capital resources, Echo Therapeutics had reduced overhead costs, capital expenses and workforce only last month. The company also ceased the active development of the Symphony CGM System – a non-invasive, wireless, continuous glucose monitoring system for use in the critical care setting. Continuous efforts by Echo Therapeutics’ directors and management to identify and review potential funding opportunities failed to yield any credible results.
Echo Therapeutics’ management was in talks with Platinum Management (NY) LLC and other members of its investor group that would be willing to fund the company’s operations. However, despite weeks of discussions, no credible financing transaction could be reached.
Furthermore, Medical Technologies Innovation Asia (MTIA) failed to fulfill its prior funding commitment contemplated by its Dec 2013 Stock Purchase Agreement with Echo Therapeutics. Thus, the company now depends on additional third-party funding for resuming operations.
Echo Therapeutics has continuously posted operating losses over the past few years. In the second quarter of 2014, the company posted a loss of 31 cents per share which was, however, narrower than 51 cents recorded in the comparable quarter of 2013. The decrease in loss per share was due to lower shares outstanding at the end of the quarter (nearly halved).
In fact, reported net loss actually rose 12.6% to $3.8 million from $3.3 million in the second quarter of 2013. Revenues in the quarter also slid 15.3% to $19,107 from $22,557 in the 2013-second-quarter.
Echo Therapeutics’ cash and cash equivalents of $4.1 million as of Jun 30, 2014 also went down significantly by 49.0% from $8.1 million as of Dec 31, 2013. Deferred revenues from licensing agreements also decreased 25.0% to $114,642 from $152,856 as of Dec 31, 2013.
Currently, Echo Therapeutics carries a Zacks Rank #2 (Buy). Other well-performing medical instrument stocks include Alphatec Holdings, Inc. (ATEC), ERBA Diagnostics, Inc. (ERB) and Edwards Lifesciences Corp. (EW). Alphatec Holdings and ERBA Diagnostics sport a Zacks Rank #1 (Strong Buy) while Edwards Lifesciences carries a Zacks Rank #2 (Buy).
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