Alphatec stock was on track for its worst day in over two years after a double hit of missed third-quarter estimates and slashed full-year guidance.
The bad was pretty bad. Alphatec, a medical technology company that designs and sells products for spine surgery, saw third-quarter revenue grow about 13% to $221 million, missing Wall Street's calls for $225 million. Adjusted earnings of 9 cents a share also fell short of analysts' consensus estimates of 10 cents.
The core issue: a cross-selling problem. While overall surgeries climbed in the third quarter, fewer doctors bundled Alphatec's high margin biologics -- its expensive bone-graft substitutes used in spinal fusion -- lowering the revenue earned per procedure. Third-quarter biologic sales fell by roughly $1 million from a year ago. Now, Alphatec expects biologies to be flat this year instead of delivering its usual $15 million to $25 million boost. Broader industry softness didn't help either, management said, leading to fewer mid-to-lower back surgeries than forecasted.
To make matters worse, Alphatec slashed its 2026 revenue outlook to about $862 million, down from $882 million and marking a sharp reversal just three months after reaffirming guidance in the second quarter.
Investors sounded the alarms. Shares of Alphatec plummeted 32% to $7.71 in premarket trading Friday after closing down 0.7% at $11.37 on Thursday. The stock was heading for its worst single-day percentage drop since Aug. 1, 2024, according to Dow Jones Market Data. Shares have fallen 46% this year as of the closing bell Thursday.
Needham analyst David Saxon said Friday that zero growth for Alphatec's biologics segment over the next year puts the company's goals for 2027 at risk, even if it has beat its multiyear plan thus far. Erring on the side of caution, the firm lowered the stock's price target to $12 from $14 while maintaining a Buy rating on shares.
The silver lining? Alphatec's hardware business has been booming, growing 17% from a year ago during the third quarter. Profitability, management said, also has risen much faster, showing the business has become more cost-efficient even with fewer sales.
Wall Street has yet to throw in the towel. Of the 14 analysts covering shares, 13 have a Buy rating while only one rates the stock as Hold, according to FactSet.
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