The Nanosonics Ltd (ASX: NAN) share price is under pressure on Tuesday morning.
In early trade, the infection prevention company’s shares are down 16% to a 52-week low of $4.21.
Why is the Nanosonics share price sinking today?
Investors have been selling down the Nanosonics share price today after it revealed big changes in the North American market.
According to the release, the current GE Healthcare sales model will be revised from 8 February 2022 until the expiry of the current agreement in June 2022. The release does not make clear which party is driving the change.
Under the revised North American sales model, GE Healthcare will consume inventory and transition to a passthrough sales model for its ongoing sales of trophon to be made exclusively through its ultrasound sales team.
What is the new model?
The new model will see Nanosonics manage all inventory, ship, install and train the new GE trophon customers, which will become Nanosonics’ customers for the ongoing provision of consumables.
In addition, GE will commence the transition of all existing GE trophon customers to Nanosonics for the ongoing provision of all consumables. During this transition, both companies will have a focus on ensuring a positive customer experience with no disruption in continuity of customer supply.
Positively, the company highlights that it has a well-established logistics operation based in Indianapolis. And with the planned expansion of these resources, it believes it will be well positioned to manage the transition and ensure the ongoing continuity of supply to customers.
Nanosonics’ Chief Executive Officer & President, Michael Kavanagh, commented: “The revision to the North American sales model represents another significant milestone in the ongoing growth of the organisation and is consistent with our evolution to an increasingly direct sales model and OEM capital reseller channel strategy over time.”
“Discussions are underway with GE Healthcare to commence a new capital reseller agreement at the expiry of the current agreement in June 2022 and we look forward to the opportunity to continue the successful relationship that we have had with GE over the last 10 years,” he added.
What financial impact will this have?
The transition is expected to have an overall one-off impact on revenue in FY 2022 in the range of $13 million to $16 million.
This reflects a proportion of the anticipated growth in the second half being deferred to FY 2023 as the transition to the new sales model is implemented.
In addition, the company is going to have to increase its direct sales operations by the end of the fourth quarter of FY 2022. These operations will be tasked with continuing market growth momentum, where management believes a significant opportunity remains for the trophon franchise across new installed base, upgrades and consumables.
The increase in operating expenses associated with the expansion of the North American teams is expected to be approximately $1 million in the second half.
For now, Nanosonics revealed that it expects to report first half sales of $60.6 million later this month. This will be a 41% increase over the prior corresponding period.
The post Why is the Nanosonics (ASX:NAN) share price crashing 16%? appeared first on The Motley Fool Australia.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Nanosonics Limited. The Motley Fool Australia owns and has recommended Nanosonics Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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