Echo Therapeutics Narrows Loss, Meets Ests - Analyst Blog

Echo Therapeutics, Inc. ECTE posted narrower loss per share of 36 cents in the fourth quarter of 2013 compared with 48 cents in the comparable quarter of 2012, despite a significant 100.9% rise in net loss to $3.9 million from $1.9 million incurred a year ago mainly due to more than a twofold rise in average shares outstanding. Nevertheless, loss per share was in line with the Zacks Consensus Estimate.

ECTE's net loss for full year 2013 was $19.4 million or $2.33 per share, up 57.6% from the net loss of $12.3 million but down 25.3% from $3.12 per share in 2012.

Excluding deemed dividend on beneficial conversion feature of convertible preferred stock, net loss for the reported quarter and year was $3.5 million or 33 cents per share and $19.1 million or $2.28 per share, respectively.

Following the earnings release, shares of ECTE slipped 1.3% to close at $3.08 till the last reported session due to the continued rise in net loss every quarter.

Revenues

Total revenue in the quarter amounted to negative $40.1 thousand, an improvement of 54.3% from the year-ago quarter level. For the full year, total revenue more than quadrupled to $27.6 thousand from $5.1 thousand in 2012.    

Expenses

For the fourth quarter of 2013, operating expenses fell 33.2% to $3.1 million; research and development (R&D) expenses dropped 55.6% to $1.3 million and selling, general and administrative (SG&A) expenses slid 6.1% to $1.8 million.

The decline in expenses was attributable to substantial cost reduction measures implemented by the company across all operational activities at the end of the 2013-third quarter. As a result, operating losses declined 33.6% to $3.1 million from $4.7 million in the fourth quarter of 2012.

For the entire year, R&D expenses increased 30.3% to $11.3 million primarily due to increased engineering and design expenses incurred on outside contractors and personnel related to its Symphony CGM System development. Likewise, SG&A expenses rose 31.2% to $8.4 million mainly due to increased personnel costs, legal costs and expenses associated with pre-launch marketing and manufacturing activities.

Due to higher R&D and SG&A expenses, operating loss for the year rose 30.6% to $19.6 million from $15.0 million in 2012.  

Financial Position
 
ECTE had cash and cash equivalents of $8.1 million as of Dec 31, 2013, up 115.0% from $3.7 million as of Dec 31, 2012. Deferred revenues decreased to $152.9 thousand at the end of 2013 from $302.7 thousand as of Dec 31, 2012. The decline has led to the improvement in revenue for the reported quarter and year.


Zacks Rank

Currently, ECTE carries a Zacks Rank #3 (Hold). Other preferable stocks from the medical instruments industry include Cynosure, Inc. CYNO, Syneron Medical Ltd. ELOS and ABIOMED, Inc. ABMD. While Cynosure and Syneron sport a Zacks Rank #1 (Strong Buy), ABIOMED holds a Zacks Rank #2 (Buy).