Orthopedic Devices Maker Treace Medical Concepts' Gloomy Forecast Cast Concerns Over Long-Term Viability

Orthopedic medical device company Treace Medical Concepts Inc TMCI on Tuesday reported a first-quarter EPS loss of $(0.30), down from $(0.23) a year ago, better than the consensus of $(0.31).

The company reported sales of $51.11 million, up 21%, beating the consensus of $49.1 million.

The increase was driven by a higher volume of procedure kits sold due to an expanded surgeon customer base and a product mix shift that resulted from increased adoption of newer technologies and increased sales of complementary products used in bunion and related midfoot procedures.

Guidance: Treace Medical Concepts cut its fiscal year 2024 sales guidance to $201 million-$211 million, down from a prior guidance of $220 million-$225 million.

The company anticipates adjusted EBITDA to improve approximately 50% compared to full-year 2023.

Analyst Reaction:

Stifel downgrades Treace Medical Concepts from Buy to Hold and lowers the price target from $15 to $6, noting multiple increasing competitive headwinds that have added incremental uncertainty to the company’s near-to-long-term outlook.

• Treace’s commercial performance has suffered due to competition from imitation Lapiplasty products and rival minimally-invasive osteotomy offerings. The company faces intense competition, particularly in the osteotomy segment.
• While Treace’s Lapiplasty remains strong in Lapidus Fusion procedures, which comprise a smaller portion of bunion corrections, it lacks an osteotomy product for the more prevalent bunion correction procedures. 
• Management has hinted at launching an osteotomy product by the end of 2024, recognizing the necessity for a more comprehensive product portfolio.

Truist Securities also downgraded Treace Medical Concepts from Buy to Hold and lowered the price target from $17 to $7, citing a reduced growth outlook & projected deceleration trend in the second quarter and 2024 due to increasing competitive dynamics that are potentially structural in nature & could make it hard for the growth trajectory (and stock) to sustainably rebound. 

• Truist writes that this is the second major guidance cut in 7 months, which raises incremental uncertainty about the predictability of the business model.
• The competitive factors behind this reduction feel more structural than the (seemingly) more transient seasonality-related items. 

BTIG analyst downgrades Treace Medical Concepts from Buy to Neutral.

JP Morgan downgrades Treace Medical from Overweight to Neutral and lowers the price target from $15 to $8.

UBS maintains Treace Medical Concepts with a Buy, lowering the price target from $17 to $16.

Price Action: TMCI shares are down 62.6% at $4.161 at last check Wednesday.

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