Vapotherm to officially shut down Exeter manufacturing operations Dec. 30
In SEC filing, medical device manufacturer casts ‘substantial doubt’ on its ‘ability to continue as a going concern’
Vapotherm Inc. will shut down its manufacturing plant in Exeter on Dec. 30, letting go 49 workers, in an effort to stem its ongoing losses by moving those operations to Mexico. But its most recent filing with the Securities and exchange Commission warns that even with the action, the company may not last another year.
The Exeter-based medical device manufacturer informed the state on Oct. 28 of its “permanent” plant closure – a notification required by the state’s state Worker Adjustment and Retraining Notification (WARN) Act, which requires a company to notify workers and the state of a pending mass layoff.
The company had already disclosed the shutdown in April, and the only question was exactly when the closing would take place and how many workers would be left after it closed. NH Business Review’s Book of Lists reported there were nearly 150 people working in New Hampshire at Vapotherm last year, but did not indicate how many were factory workers.
The company is moving its manufacturing operations to Tijuana, where labor is cheaper, as part of a restructuring effort to make the company profitable. But its losses and lack of cash threaten its continued existence as a going concern, according to its financial filings.
Vapotherm lost $26.4 million in its most recent third quarter and $92.2 million year-to-date, according to its Nov. 2 SEC filing. On Sept. 30, the last day of the third quarter, it had $28.7 million in cash. A $100 million loan it took out that day comes with an interest rate of 11.33 percent and a $20 million minimum liquidity requirement.
“As of November 2, 2022, the Company expects its existing cash and cash equivalents will not be sufficient to remain in compliance with the Liquidity Covenant,” said the filing. “Therefore, substantial doubt exists about the Company’s ability to continue as a going concern within one year.”
The filing sent Vapotherm’s share price tumbling further, from $2.27 on Nov. 2 to 58 cents a share at Monday’s close. The price had peaked at $54 a share in July 2020, at the height of the pandemic.
If the company fails to maintain the share price of $1 for 30 days, it faces delisting for from the New York Stock Exchange. Thus far it has been under $1 since November 4, briefly dipping under 50 cents on Monday.
The exchange has already issued a delisting warning to the company because it failed to maintain its capitalization standard and stock equity was less than $50 million.
The company had until Nov. 11 to submit a plan to return to compliance. The NYSE, if it approves the plan in 45 days, will monitor the company for 18 months. In the meantime, the company’s stock is being traded under the ticker symbol VAPO.BC.
As of Monday, Nov. 14, there was no public posting on the SEC website to indicate whether the company met its deadline.
Vapotherm has lost money ever since it went public in 2018, even when it was amassing rising revenues during the Covid pandemic, as the company rushed to step up its operating during surging for its respiratory equipment. From 2019 to 2021, it posted losses totaling $160 million.
But the drop in the number of Covid hospitalizations at the start of 2022 “took us by surprise,” said CEO Joe Army, in a call with investors following the third-quarter earnings release. In that quarter, the company posted $13.5 million in net sales, slightly more than a third of the amount reported for the same quarter last year. Year-to-date, revenues totaled $38.1 million compared to $91 million in for the first three quarters of 2021.
The move to Mexico will cost the firm about $3.5 million in related expenses, and the filing warns that there are risks to the move, including whether “the personnel we do recruit will lack the necessary skills” and that the change could adversely affect “company culture.”
In the call, said this was a “transitional year,” adding that the move to Mexico will result in labor costs that are 75 percent lower than in New Hampshire.
The move to Mexico would be the “most impactful” action in increasing profits, added CFO John Landry.
The company also hopes to increase profits by introduce higher “clinical value products,” educating those in other parts of the hospital of its equipment’s other benefits – to treat those in having trouble breathing during shock for example –
And establishing a new R&D facility in Singapore, also to cut down on expenses.
The company is also seeing signs that its products may be return to the high demand it saw at the height of the Covid pandemic.
Hospitalizations are climbing, said Landry, due to the rise in respiratory syncytial virus (RSV). “We’re encouraged by the sequential increases in our monthly disposable turn rate in comparison to their pre-Covid levels.”