Being desirable can be a good thing for a medical device company, especially when it comes stock price.
During the first half of 2014, several of the medical device companies with the greatest stock price gains were M&A targets. Covidien’s stock has seen a significant uptick after Medtronic announced its plans to acquire the Ireland-based device company. And both Allergan and Smith & Nephew have seen considerable stock increases amidst rumors that they could soon be acquired.
Here are the five companies with the most gains so far this year, listed in order of their percentage stock growth so far this year:
Allergan—best known for the drug Botox, but also a maker of silicone breast implants and tissue expanders—is a notable acquisition target. In early January, it was trading at roughly $111 per share. After Valeant Pharmaceuticals announced its plans to orchestrate a hostile takeover of the firm, Allergan’s stock spiked and was trading around $165 on July 9.
Valeant, which is known for running acquisitions in a manner that maximizes immediate profit-making potential at the expense of R&D and future product development, had offered about $53 billion for the maker of Botox and other lesser known drugs. And hedge fund wolves have been closing in.
In response, Allergan CEO David Pyott tells The Wall Street Journal that some shareholders have made it clear to him that the company should go shopping for attractive deals, should it fend off the Valeant bid.
Humlebaek, Denmark–based Coloplast actually stands out more in the list because it is a company that has been seeing steady stock growth in recent years. The company’s stock price rose 37.1% during the first six months of 2014. And if though it has dipped slightly since then, it is still up about third, trading around 375 Danish krone ($68) in early July.
The company—which is a leading supplier of ostomy, continence and wound care products in Europe—expects another year of strong growth in the United States. In May, it upped its revenue growth projections, saying it expects a 7% growth in sales for the present fiscal year.
Coloplast’s success, though, has not equalled much job growth at its U.S. headquarters in Minneapolis. The city recently fined Coloplast $600,000 for failing to meet job goals around a more than $3 million economic development package around the creation of the Danish company’s new Twin Cities facility, according to the Star Tribune of Minneapolis.
Consider the case of Covidien, whose stock is up by nearly a third so far this year after Medtronic announced its plans to buy it for $43 billion.
The mid-June announcement of the merger caused Covidien’s stock to shoot up in value from around $70 per share to around $90, where it was still trading as of early July.
The merger stands to make Medtronic, which was already the fourth largest medical device firm, even more competitive. With total revenue of $14.3 billion, Covidien is a heavyweight in its own right, ranking as the eighth largest device company. In the same time period, Medtronic’s total revenue was $16.7 billion. For the sake of comparison, diversified healthcare behemoth Johnson & Johnson had total revenue of $28.6 billion in that same time period.
Ironically, long-term Medtronic shareholders could take a tax hit when the deal goes through. Medtronic’s stock was up about 11% in value as of early July, trading for around $63 per share.
Edwards Lifesciences: +30.5%
After struggling in 2013, Edwards Lifesciences has seen its fortunes brighten in the first half of this year, especially in the courtroom.
The Irvine, CA–based company’s stock shot up in April, to around $81 per share from a previous $73, when a federal district court issued a preliminary injunction in favor of Edwards in a transcatheter heart valve patent case with Medtronic. The injunction blocked Medtronic from selling its CoreValve System in the United States.
Amid the threat to U.S. CoreValve sales, Medtronic officials apparently decided that spending more than $1 billion over the next eight years was worth it when it comes to ending the patent battle with Edwards.
Medtronic announced in May that it had agreed to pay Edwards a $750 million payment upfront—and between $320 million and $480 million in license royalty payments over the next eight years—to settle all pending cases or appeals in courts and patent offices around the world.
Edwards stock was up nearly a third in value for the first half of 2014, and as of early July, it was trading around $88 per share.
|Refresh your medical device industry knowledge at MEDevice San Diego, September 10–11, 2014.|
Smith & Nephew: +24.5%
There is also London-based Smith & Nephew, which was said to be an acquisition target of Stryker and Medtronic. The acquisitions rumors helped propel the stock from just over $70 per share in early January to roughly $88 on July 9.
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