Pgiam/iStock via Getty Images
MedTech company Outset Medical (NASDAQ:OM) traded lower premarket Friday after RBC Capital Markets downgraded the stock to Sector Perform from Outperform, arguing that its challenges in H2 2023 will likely continue this year.
RBC analyst Shagun Singh cites a delay in uptake for the company's Tablo hemodialysis systems until matters raised in the FDA Warning Letter related to the TabloCart component are resolved.
In August, Outset Medical (OM) paused its distribution pending FDA review and clearance of a 510(k) application after the regulator issued a warning letter related to TabloCart following an inspection of OM's San Jose, California facility in early 2023.
"We expect factors impacting OM in 2H'23 to persist into 2024 and believe it is a 'show me' story until TabloCart approval and subsequent positive trends in Tablo console adoption," Singh wrote, trimming her price target on OM to $6 from $14 per share.
As other reasons for the downgrade, Singh cites staffing constraints, a challenging capital environment, competitive misinformation related to Tablo use, and a lack of stock-moving catalysts despite current valuation.