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Quotient Ltd Jumps 95% On Revenue Beat – But A CE Mark Is Trivia

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Updated 22 Jun 2022

Key points:

  • Quotient has announced an earnigs delay and a revenue beat
  • Their recent CE Mark is an unimportant diversion
  • Good sales in the current quarter for their new product is important though

Quotient Ltd (NASDAQ: QTNT) stock has jumped 95% premarket this morning on the back of an announced revenue beat over expectations. The results are delayed, but that very announcement of the delay has shown that beat. However, it's also worth mentioning that a CE Mark, which some seem to think important, is really rather trivial. It's not, as some think, some form of approval of a drug, test or device. It's just a necessary precondition of it being offered for sale.

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Quotient is a commercial-stage diagnostics company. It develops, produces and sells products for the global transfusion diagnostics market. Given the importance of delivering the right blood to the right patient this is of course an interesting market.

The specific announcement this morning is that the quarterly and annual results are to be delayed. This is not, it has to be said, normally a reason for a stock price to jump. For if results are delayed, well, experience tells us that there's something wrong there. However, the earnings estimates were for revenues of $81.8 million in the quarter (as against $9.64 million in the year ago quarter) and EPS of minus -$0.34.

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In the announcement of the delay Quotient has pointed out that the delay is only of two days, until Friday before market open. But more importantly, they have announced revenue, which is a decent beat at $9.8 million. We can – and probably should – assume that the EPS will be a beat as well given this higher revenue.

That might explain the 95% Quotient stock price rise on its own. But there's another issue in here. They've also announced that they've received – to be booked in Q1 2023 fiscal year – $1.4 million in orders for their IH MosaiQ solution. The point here being that this is a new product, one they've only just received the CE Mark for.

CE Marks are often misunderstood. Genedrive (LON: GDR), Abingdon (LON: ABDX) and Avacta (LON: AVCT) all announced that their covid tests had CE marks. Share prices jumped on this welcome news – but then all faded back. As it was realised that a CE mark is simply a bureaucratic application to be able to sell into the EU market. It's not the result of a test or approval process at all. Having a CE Mark doesn't unlock the market that is.

But, as Quotient is now indicating, their new product – and they're saying they're booking some 15% or so of quarterly sales for this new product before the quarter has really got going – is in fact selling. The CE Mark might well have been just that necessary paperwork but now, with it, they are gaining real sales.

Which is what could well be behind this 95% rise in the Quotient stock price. After all, it's not really what has happened which influences prices, it's what will. The revenue beat for the quarter just gone is interesting, sure it is. But nowhere near as interesting as the idea that there's a new product which might well provide significant earnings boosts off into the future.