Outset pauses shipments of dialysis accessory after FDA warning letter, denting sales outlook

Dive Brief:

Outset Medical has paused distribution of an accessory for its Tablo Hemodialysis System in response to a warning letter, the company said in a Wednesday earnings announcement.
The U.S. Food and Drug Administration cited the prefiltration accessory in a warning letter last month, telling Outset it needed 510(k) clearance for the device. Outset launched the accessory in the third quarter of 2022 and previously said sales have been immaterial to its results.
However, the pause on shipments has affected Outset’s outlook, driving the company to predict it will now hit the bottom end of its revenue range. Analysts at Morgan Stanley called the new outlook “a surprise” but expect the company to eventually realize TabloCart sales.

Dive Insight:

TabloCart with Prefiltration is an accessory for filtering carbon and sediment out of water, which makes up more than 90% of the total composition of a standard dialysate prescription. With water being a key component of hemodialysis and patient outcomes, Outset made TabloCart with Prefiltration to simplify prefiltration and enhance filter volumes.

The company introduced the accessory in the third quarter of 2022 without securing 510(k) clearance. The FDA flagged that action as a problem in a warning letter.

In its second quarter results, Outset revealed that it is pausing shipments of TabloCart with Prefiltration in response to the warning letter. The company plans to file a 510(k) for the accessory and resume sales once it has FDA clearance. Outset reiterated its full-year revenue outlook of $144 million to $150 million but warned the loss of TabloCart with Prefiltration sales is likely to put it at the bottom end of the range.

“The guide now assumes that some Acute customers may pause Tablo console purchase decisions until TabloCart receives clearance. At this point, however, the company has not seen any customers push out or delay console purchases, which could be a source of upside in 2H,” analysts at Morgan Stanley wrote in a note to investors.

Outset will eventually realize the device sales, according to the analysts, “and any potential Tablo console deferments appear more a shift in timing, than a demand problem.”