NeuroMetrix Inc. (NSDQ:NURO) switched tacks again, announcing layoffs for 27 percent of its workers, the disbanding of its U.S. direct sales force and the abandonment of its troubled flagship device in favor of the Type II diabetes market.
The Waltham, Mass.-based firm makes equipment to measure nerve conduction. It’s workhorse product, the NC-stat, hit the neurodiagnostics market in 1999. But after this year, the company said, it will no longer support the device. NeuroMetrix plans to shift customers from the NC-stat to its successor, the Advance system. The move also entails the disbanding of the company’s U.S. direct sales force in favor of third-party distribution. The general purpose NC-stat suffered a setback it never got over after the Centers for Medicare and Medicaid Services cut reimbursement rates for procedures using the device.
But the company is not leaving the NC-stat name completely behind; as it turns its eye from neurodiagnostics to diabetes, NeuroMetrix said it hopes to release the NC-stat-SL by mid-year. That device is designed to detect diabetic neuropathy, which can lead to lower-limb ulcers and amputation.
“While we are working towards broader coverage, uncertain physician economics have made new account acquisition challenging and therefore the cost of a direct sales force cannot be justified. president and CEO Dr. Shai Gozani said in prepared remarks. “Following this restructuring, our 2011 goal is to manage neurodiagnostics to achieve a positive net cash contribution to the company. The restructuring will involve a 27 percent reduction in headcount, realignment of responsibilities and a charge of approximately $2.2 million related to severance and inventory.”
When it announced its third-quarter results in early November, NeuroMetrix revealed plans to streamline its product offering, “shifting to a hybrid direct/distribution sales model combining a core of direct plus independent sales representatives” for the Advance NCS/EMG devices, which account for about 25 percent of total sales, Gozani said at the time.
NeuroMetrix also announced preliminary fourth-quarter and year-end results. Fourth-quarter revenues were $3.0 million, down 11.8 percent from $3.4 million during the third quarter. Full-year sales were $13.9 million, according to NeuroMetrix.
NURO shares closed down 1.5 percent at 59 cents, but rebounded to 62 cents apiece in after-hours trading as of about 5:20 p.m. EST.