Birtcher Medical Predicts Loss; Stock Drops 16% : Surgery products: Firm blames industry slowdowns, a difficult acquisition and a backlog of applications with the FDA.

A warning that Birtcher Medical Systems Inc. expects a loss for its latest quarter drove the company’s stock down 16% in heavy trading.

Birtcher, which makes surgical equipment for “minimally invasive,” or outpatient surgery procedures, blamed industry slowdowns, a difficult acquisition 14 months ago, strong competition and a backlog of yet-to-be approved applications at the Food and Drug Administration for its second-quarter losses.

It was not known how steep the loss would be for the second quarter, but analysts had estimated earnings of 8 cents a share, Chief Executive William E. Maya said.

Maya said Tuesday that audited financial statements for the quarter ending Dec. 31 will not be available until the end of the month. He said, however, that preliminary financial statements show not only a loss for the quarter but sluggish sales as well.

Analysts, Maya said, had expected the company to have revenue of about $13.5 million for the quarter. But a preliminary review of second-quarter figures shows that the company more likely had revenue near $11 million.

Maya did not release six-month earnings figures.

“We are going to be far off the estimates of the street,” Maya said. Releasing the preliminary figures, despite fears of further stock devaluation, is “the right thing to do.”

“It’s not gloom and doom,” Maya said, “but a lot of things have happened at one time.”

Wall Street responded quickly. About 356,700 Birtcher shares were traded Tuesday, more than triple the normal volume. Birtcher closed at $6 on the NASDAQ market, down $1.375 from the previous day. That continues a slow downward slide of the stock from a 52-week high of $20.50 last Jan. 31.

The company has been losing ground since the December, 1991, buyout of Solos Endoscopy Inc. in Georgia, which makes video surgical devices. Analysts said that the acquisition proved not to be a wise investment since Solos products have not been well received by the medical industry.

“That has been an albatross around their neck,” said Robert M. Goldman, an analyst at the Dean Witter Reynolds Inc. brokerage in New York. “They are still going through a difficult assimilation.”

The effect of the acquisition was felt immediately. For the second quarter of the previous fiscal year, the company reported revenue of $14.1 million, but a loss of $1.9 million due to a $4.6 million charge-off related to the Solos deal.

Birtcher exacerbated its problems by eliminating its direct sales force and substituting a distribution network, a move that resulted in fewer sales, Goldman said. He suggested that Birtcher will only overcome its problems by selling off Solos Endoscopy.

“There’s no room for Solos products in the markets,” Goldman said, adding that he sees no gains in either sales or in the stock market for at least the next six months. “Their competitors already dominate the market.”

Mark Matheson, an analyst at Crowell Weedon & Co. in Los Angeles, agreed, saying that in addition to restructuring its sales operations, Birtcher was burdened by paying “top dollar”--$36 million--to acquire Solos Endoscopy when the electrosurgical equipment market in general began to slow down.

“It has gone less smoothly than they had hoped,” Matheson said.

Another setback for Birtcher has been the slowness of the FDA in getting market approvals for 30 new products. He said that the inability to get those surgical devices on the market have cut into Birtcher’s revenue.

Maya said that as a result, the company has trimmed down, laying off workers and shutting offices around the country.

This year, Birtcher has closed offices in El Paso and Chicago and is in the process of shutting down its Atlanta office, Maya said. In addition, staff has been cut from 227 last year to 169.

But, Maya said, with the recent court victory involving a patent dispute over its argon beam coagulator, a machine that stops bleeding during surgery, the company is hoping for better revenue by next fiscal year.

“The argon beam is the family jewel,” Maya said. “We have yet to feel the (beneficial) effects of that” court decision.