Shares of EV3 Inc. sank more than 17 percent Monday after the company cut its sales and profit estimates for 2008, the second such reduction in three months.
The Plymouth-based maker of devices that treat vascular diseases said it now expects to earn 50 cents a share on sales of $500 million, down from its October guidance of 55 cents a share and $570 million in sales. EV3 had originally forecast a 2008 profit of 60 cents to 70 cents a share on sales of $585 million to $615 million.
EV3 executives blamed the shortfall on problems integrating its sales force with FoxHollow Technologies, a medical device company EV3 acquired last year for $780 million in cash and stock. They also said customers had higher-than-expected inventories.
"We remain very confident in the strategic and financial rationale for the merger," EV3 Chief Executive Jim Corbett said. Nevertheless, "we expect the sales force integration challenges and the elevated inventory levels will likely affect our net sales into the second half of 2008."
EV3 stock closed Monday at $10.03, down $2.13. More than 3.5 million shares traded hands, more than four times the company's normal trading volume.
EV3 and FoxHollow's integration problems have been well-known to Wall Street and were appropriately priced into the stock, said Thomas Gunderson, an analyst with Piper Jaffray & Co. in Minneapolis. Before Monday, EV3 stock was already down 31 percent since the merger was announced in July.
The integration of two sales forces "apparently didn't take off as a fast as they once thought," Gunderson said. The sales force "needed a little more than three or four days of training to go out and hit the ground."
In October, EV3 lowered its sales and profit guidance after it failed to get Food and Drug Administration clearance for FoxHollow's RockHawk, a calcium-cutting device to remove plaque from arteries.
Still, some Wall Street analysts remained bullish.
"Despite integration disruptions and related noise, EV3 has numerous incremental growth drivers on tap entering 2008," Rick Wise, an analyst with Bear Stearns, wrote in a research report last week. "FoxHollow gives EV3 a broader product portfolio, deeper pipeline and substantially larger sales force."
But EV3's warning on customers' higher-than-expected inventory levels came as a "complete surprise," Gunderson said. "Late last year, I thought we had assurances that they cleaned it up."
Monday's news damaged EV3's credibility with Wall Street, prompting the massive sell-off, Gunderson said.
Bloomberg News contributed to this report. Thomas Lee • 612-673-7744
