5 of the Worst Performing Medical Device Firms of 2014 (So Far)

Posted in Medical Device Business by Chris Newmarker on July 9, 2014

Nine of the largest 40 medical device companies saw their stock prices decline during the half of 2014--with reasons ranging from Getinge AB's continued issues with the FDA to companies such as Drägerwerk AG and Terumo Corp. grappling with health system cost-cutting in the United States.

Here are five of the medical device companies with the greatest stock price declines during the first six months of the year:

Getinge AB: –20.2%

Swedish medtech company Getinge AB’s stock price fell more than a fifth, to 175.6 Swedish krona ($25.85), during the six months ended June 30. It's now trading over 176 krona ($25.91) per share.

The Getinge, Sweden–based provider of surgical, intensive care, infection control, care ergonomics, and wound care technology was already faring poorly amid decreased demand in late 2013. This year, its stock price has continued to take a beating over issues related to insufficient quality management.

The company—with annual revenue of 24.2 billion Swedish krona ($3.8 billion)—announced March 7 that it will spend 125 million krona ($19.6 million) a quarter for nearly two years to pay for external consultants to enhance quality management systems in order to settle FDA concerns.

The company’s stock price fell 7.2% in a single day.

The situation hasn't improved either: Getinge announced in late May that troubles with the FDA are worse than previously thought, according to Reuters.

Drägerwerk AG & Co.: –17.3%

The Lübeck, Germany–based medical and safety technology saw after-tax earnings fall 62.3% year-over-year in the first quarter ended March 31, to 8.5 million euros ($11.6 million). Sales were down 3.9%, to 513.2 million euros ($700 million).

Drägerwerk saw slight growth in its medical markets in the first quarter, with emerging markets such as China making the greatest contribution. However, the company reported that demand in the U.S., while considerable, could be greater, but cost-cutting measures are “suffocating some of the necessary investments in medical products,” according to its first quarter financial report.

The company’s DRW3 ticker stock has fallen 17.3% in value on the Xetra exchange for the first six months of 2014, and is presently trading around 80 euros ($109) per share.

Koninklijke Philips Electronics: –14.1%

The Dutch multinational industrial giant has been grappling with a challenging economic environment in Western Europe and the United States. Just this week, Philips announced that its top health care executive Deborah DiSanzo had left the company amid disappointing earnings results, according to The Wall Street Journal.

For now, Philips CEO Frans van Houten will run the health care business, which accounts for nearly half of Philips' sales.

Overall, Koninklijke Philips Electronics’ stock was down nearly 14.1% in value on the New York Stock Exchange for the first six months of the year. It’s been trading around $31 per share in recent days.

Terumo Corp.: –10.7%

Tokyo-based Terumo Corp. for its fiscal year ended March 31 said “conditions were generally severe in the global healthcare market as pressure mounted in developed countries to control healthcare costs.”

Sales for the year were up 16.2% to 467.4 billion yen ($4.6 billion), but net income decreased 27.5% year on year to 34.1 billion yen ($336 million).

The company, which makes and sells a wide range of general hospital products and equipment, is speeding up shifts in it management structure in order to have better decisionmaking when it comes to profits.

Terumo’s stock was down 10.7% in value for the first half of the year, and is presently trading around 2,300 yen ($22.63) on the Tokyo Stock Exchange.

Refresh your medical device industry knowledge at MEDevice San Diego, September 10–11, 2014.

General Electric: –6.2%

Though often popularly associated with appliances such as stoves and refrigerators, GE is a diversified company, making everything from medical devices to jet engines and water-processing equipment.

Sales for GE Healthcare have actually been softer than expected. First quarter orders of $4.2 billion were down 1%--driven by a 4% decline in the U.S. attributed to Affordable Care Act-related cost-cutting. Emerging markets were meanwhile up 10%.

"With all the stuff that’s going on in the [healthcare] industry, when you have new technology, you still can differentiate yourself and you still get good growth and good margins. I think we’re just wait and see and watch how the industry evolves," GE CEO Jeffrey Immelt told analysts in an April earnings call transcribed by SeekingAlpha.

The company’s stock stumbled in early 2014, falling to roughly $25 per share, after closing out the prior year at around $28.03 per share. Since then, the stock has recovered somewhat, and is now hovering around $26.

Chris Newmarker is senior editor of MPMN and Qmed. Follow him on Twitter at @newmarkerBrian Buntz is the editor-in-chief of MPMN and Qmed. Follow him on Twitter at @brian_buntz

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