Why Is Integra’s Latest Earnings Report Frustrating Analysts & Investors?Why Is Integra’s Latest Earnings Report Frustrating Analysts & Investors?

The Princeton, NJ-based company had solid earnings, however, quality control issues led to the firm dropping its full-year revenue guidance.

Omar Ford

July 30, 2024

3 Min Read
Image Credit:AndreyPopov

At a Glance

  • The company cited operational and quality systems gaps as reasons for the lowered guidance.
  • An analyst criticized Integra for poor operational improvements and inadequate communication.
  • The company's shares fell 15% after it reported a 2Q24 revenue

Integra Life Sciences, a neurosurgery specialist, isn’t making investors and analysts happy after releasing its recent earnings report.

The Princeton, NJ-based company saw shares plummet as much as 15% earlier this week despite reporting 2Q24 revenue of $418.2 million which was up 9.7% year-over-year.

The culprit behind the drop is full-year revenue guidance of $1.609 billion and $1.629 billion, with adjusted earnings per share (EPS) of $2.41 to $2.57 below consensus estimates of $1.672 billion - $1.687 billion with EPS of $3.01 to $3.11.

Integra said that it was lowering its guidance because of quality control issues that also hamper shipping efforts.

“Integra has a very strong commercial team armed with a differentiated portfolio,” Stuart Essig, executive chairman, of Integra Life Sciences said during an earnings call, according to a Seeking Alpha transcript. “That said, over the last several quarters we've identified a series of operational and quality systems gaps. As a result of both the typical audits by regulatory agencies, as well as our own in-depth reviews of the state-of-the-art broader quality system, it has become clear that there is a need to bolster our manufacturing quality compliance processes across the organization.”

Related:Integra at Risk of Being Delisted

Essig added, “What has arisen from these evaluations is our compliance master plan, a systemic and holistic approach to improving our quality system and GMP compliance across our manufacturing and supply network. The plan will drive increased spending in the second half of 2024 and lower revenue and EPS expectations for the year.”

During the call, Joanne Wuensch, an analyst with Citi, asked Integra executives to clarify the nature of the shiphold issue.

“I don't want to sort of stick on this, but I'm a little confused on one thing, which is the shiphold and the implementation of the global compliance program, Wuensch, asked during the call, according to a Seeking Alpha transcript. “Were those things that FDA asked you to do, or were those things that you chose to do? And I'm trying to understand where the shiphold came from.

According to a Seeking Alpha transcript of the call, Leah Knight Integra’s CFO answered the question by saying “Integra voluntarily initiated the shipping holds across the SKUs that were impacted. Now the nature of that or how it came about was a result of observations that we've received, both internally, as a result of internal assessments that we do across our network, as well as regulatory authorities externally. So, a combination of those two is what's informed the broader compliance master plan, but also the current temporary shipping holds.

Related:Integra Shutters Lafayette Plant, Cuts 59 Employees

In a research note, BTIG Analyst Richard Zimmerman wrote that communication from Integra leadership added to the quality control issues.

“It's difficult to not be frustrated with Integra Life Sciences,” Zimmerman wrote in research notes. “The company has done a poor job of improving its operations but an even worse job communicating these issues and setting appropriate expectations. While valuation is at an all-time low, even if we account for some recovery in valuation, we think there are too many risks to EPS estimates and worry that they could move downward into FY25.”

About the Author

Omar Ford

Omar Ford is a veteran reporter in the field of medical technology and healthcare journalism. As Editor-in-Chief of MD+DI (Medical Device and Diagnostics Industry), a leading publication in the industry, Ford has established himself as an authoritative voice and a trusted source of information.

Ford, who has a bachelor's degree in print journalism from the University of South Carolina, has dedicated his career to reporting on the latest advancements and trends in the medical device and diagnostic sector.

During his tenure at MD+DI, Ford has covered a wide range of topics, including emerging medical technologies, regulatory developments, market trends, and the rise of artificial intelligence. He has interviewed influential leaders and key opinion leaders in the field, providing readers with valuable perspectives and expert analysis.

 

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