Shares of Echo Therapeutics, Inc. (ECTE) continued to rise after the company reached a collaboration agreement with Hong Kong-based Medical Technologies Innovation Asia (:MTIA), Ltd., through which, its Symphony continuous glucose monitoring (:CGM) system will be developed, manufactured, marketed, and distributed in China, Hong Kong, Macau and Taiwan. Since the announcement on Dec 10, shares rose 6.8% after the market closed yesterday.
The collaboration agreement includes a license arrangement and equity investment in ECTE. Under the licensing, MTIA will bear the development, manufacturing and marketing costs for bringing Symphony CGM System in the Chinese market. MTIA has established sales channels in more than 1,000 hospitals across the China provinces.
Under the equity investment arrangement, MTIA will purchase 1,818,182 shares of Echo Therapeutics’ common stock, par value one cent per share, at $2.75 per share, reflecting a 1.5% premium to closing price on Dec 9, 2013.
Given the prospects of the deal, ECTE’s major shareholder, Platinum Montaur has decided to invest in 69,569 shares of its common stock for $2.75 per share. These equity investments will result in total equity investment of $10 million in Echo Therapeutics.
Last month, ECTE released positive results of its study on wireless Symphony CGM. The study revealed that Symphony is capable of monitoring glucose levels as it did on 32 patients in critical care units at four hospitals.
The Continuous Glucose-Error Grid Analysis showed that readings in Symphony CGM were 97.9% accurate and 1.8% were benign errors, with a combined A+B value of 99.7%. The glucose values range was 49 to 324 mg/dL.
The global market for glucose monitoring systems is measured at roughly $10 billion. The glucose monitoring devices include blood glucose meters and test strips which provide single blood glucose values.
Based in Philadelphia, Pa., Echo Therapeutics is a medical device company aimed at developing enhanced skin permeation technology Prelude SkinPrep System, and non-invasive, wireless, and glucose monitoring system. ECTE stated that it will apply for market approval of Symphony CGM system in the European Union in the fourth quarter of this year.
Echo Therapeutics posted a narrower loss of 49 cents per share for the third quarter of the year compared with $1.07 in the comparable quarter of 2012 as well as the Zacks Consensus Estimate of 56 cents. The decrease in loss was attributable to lower shares outstanding at the end of the quarter. Net loss, in fact, increased 22.8% to $5.2 million from $4.3 million a year ago.
Revenues in the quarter slid 27.1% to $22.6 thousand, significantly lower than the operating expenses of $4.95 million. This resulted in operating loss of $4.9 million compared with $3.6 million in the third quarter of 2012.
The company’s research and development expenses rose 28.8% to $2.8 million from $2.1 million in the third quarter of 2012. The increase was attributable to higher development, regulatory and clinical expenses, as well as manufacturing preparation costs.
Currently, ECTE retains a Zacks Rank #2 (Buy). Other stocks that are also worth a look in the medical instruments industry include Natus Medical Inc. (BABY), Cryolife Inc. (CRY), and Cynosure, Inc. (CYNO). All of them carry a Zacks Rank #1 (Strong Buy).
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