Kips Bay Medical, Inc. (OTCMKTS:KIPS) Gets Slaughtered
Kips Bay Medical, Inc. (OTCMKTS:KIPS) is not a new company. It has been around for a while and it has a product. It’s a medical device that wraps around saphenous veins and prevents complications after coronary artery bypass graft procedures. It’s called the eSVS Mesh and it received its CE Mark five years ago. Back then, the stock was listed on NASDAQ and everyone seemed pretty happy about KIPS‘ future. Right now, things are a little bit different.
The first shipments started in June 2010 which means that the company has generated some revenues. Unfortunately, sales are conducted in a few countries in Europe and it’s fair to say that the eSVS Mesh has failed to gain traction with the doctors there. The revenues have been insignificant and the stock hasn’t been among investors’ favorites.
At the end of last year, NASDAQ decided to de-list the ticker due to failure to comply with the requirements, and, apparently, that’s when the management team decided that they need to change something. In January, they relieved some sales directors off their duties and announced that instead of trying to grow the revenues in Europe, they will focus on getting the medical devices approved by the FDA.
The market didn’t really react to the news. KIPS barely moved and, apart from the odd spike, the volumes remained pretty much non-existent. Some investors, however, were still holding their shares tight and were hoping for some good news. Yesterday, they too decided to run for the hills.
KIPS obliterated nearly 80% of its value in a matter of a single session and it dropped from over $0.20 all the way to just $0.04. What’s more, it did it on a record-breaking volume of around 6.4 million shares which should give you an idea of how colossal the sell-off really was.
Those of you who have just started their research might be thinking that the massive crash has something to do with the 10-Q for the first quarter of 2015. After all, it came out just minutes after Tuesday’s closing bell and it must be said that the figures in it are not that impressive. Here they are:
- cash: $2.5 million
- current assets: $3.5 million
- current liabilities: $416 thousand
- quarterly revenues: $8 thousand
- quarterly net loss: $844 thousand
The revenues are dismal and they have experienced a humongous 69% drop on a year-over-year basis. Usually, this alone is enough of a reason for many investors to hit the panic button. In KIPS‘ case, however, the decrease in revenues was expected because, as we mentioned already, the company wound down its sales operations at the beginning of 2015.
The real reason for yesterday’s petrifying crash is a press release which also came out a few minutes after the end of Tuesday’s session. Along with the aforementioned results, it discussed some data covering ten of the patients participating in the FDA feasibility trials for the eSVS Mesh, and, apparently, things are not going to plan. In a nutshell, seven out of the ten patients did not react to the device as KIPS had expected.
This is why so many investors lost all hope in the company and decided to liquidate their positions. But were they more scared than they should have been? And have they turned KIPS into a buying opportunity?
The truth is, the underwhelming data quoted in the press release covers only a fifth of all the patients enrolled in the trials which means that the information is not yet complete. The future might just yield some more positive results.
Even so, you have to be really adventurous to start buying and holding right now. KIPS admitted in the 10-Q that they don’t have any other products in development which means that if they don’t manage to get the current medical device FDA-approved, they might be “forced to cease operations.”
Thinking carefully about those last few words before putting any money on the line is absolutely essential.
