5 of the Worst Performing Medical Device Firms of Early 2014 (Updated)

Posted in Medical Device Business by Chris Newmarker on March 10, 2014

The world’s top 40 medical device companies on average have eked out a slight gain in stock price so far this year. But there are exceptions to the rule as well, with reasons ranging from Getinge AB’s quality control issues to Terumo Corp.’s unmet expectations.

Stock performance among such companies took even more of a hit over the past week as markets fell amid troubling economic news from China and worries over Ukraine. Here are seven of the worst performing medical device companies so far in 2014, along with the year-to-date percent change in their stock price as of March 14.

Getinge AB: –21.4%

After faring poorly in late 2013 owing to decreased demand, Swedish medtech company Getinge AB’s 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.

The company’s stock price fell 7.2% in a single day, and it was down 21.4% for the year, to 172.9 krona ($27.22) per share, at the close of trading Friday.

The Getinge, Sweden–based provider of surgerical, intensive care, infection control, care ergonomics and wound care technology says the measures are needed because of results of FDA inspections in the second half of 2013.

Terumo Corp.: –10.5%

For Tokyo-based Terumo Corp., the story of its stock price appears to be related to unmet expectations.

While announcing third-quarter financial results last month, Terumo said operating income growth was slower than expected.

There have been distribution systems issues in Europe. The company, which makes and sells a wide range of general hospital products and equipment, also says its blood management business is facing declining blood transfusion use in the U.S. and Europe. The U.S. medical device tax is another issue to contend with.

On the flip side, a weakened yen is helping to boost sales, but currency situations can change.

As of March 14, Terumo’s stock was down 10.45% for the year, to 4540 yen ($44.67) per share.

General Electric Co.: –10.4%

So far this year, General Electric stock is down to about $25 per share, after closing 2013 at $28.03 per share. Potential reasons include investor jitters over the health of emerging economies, and how the industrial giant's bottom line might be affected overseas.

It's hard to say how much healthcare really plays a role in the stock decline.

Healthcare pulled in $18.2 billion in sales in 2013, down slightly from 2012, but the revenue made up just 12% of the $146.0 billion-a-year company's sales. GE blamed lower prices and the effects of a stronger U.S. dollar on the slight sales decline in healthcare products. The segment's profit actually increased 4% in 2013 as a result of increased productivity and volume, partially offset by lower prices, the effects of inflation and the stronger U.S. dollar.

GE CEO Jeff Immelt told analysts last month that "healthcare growth markets were still pretty good" during the final months of 2013, according to Seeking Alpha transcripts.

Koninklijke Philips Electronics NV: -10.3%

In just a week, Koninklijke Philips Electronics NV's stock went from being down 5.2% for the year to being down 10.3% for the year, closing at $33.16 on the New York Stock Exchange on Friday. The Dutch multinational industrial giant has been grappling with a challenging economic environment in Western Europe and the United States, so it is depending on growth in rising markets such as China to boost its sales.

Sales overall were down slightly to 23.33 billion euros ($32.49 billion) in 2013, according to the company's recent annual report.

Philips Healthcare's sales fell 4%, to 9.58 billion euros ($13.34 billion), in 2013, but the healthcare business was credited for delivering solid earnings. The healthcare business would have been up 1% in sales if not for negative currency effect.

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Siemens AG: –9.2%

Siemens' total first quarter profits were 1.8 billion euros ($2.5 billion), up from 1.6 billion euros ($2.2 billion) from the same period a year before. But the German multinational's healthcare sector profits were down to 471 million euros ($653 million) during the final three months of 2013, compared to 503 million euros ($698 million) during the final three months of 2012.

Along with headwinds from the strength of the euro, Siemens blamed weak economic conditions in Europe, uncertainty in the healthcare market, the excise tax on medical devices in the U.S., and—as with other multinationals—slowing growth in China.

Last year was not kind to the firm either. While the company's stock recovered from 2012 lows, the company had a mass layoff that included 300 employees working at a U.S. medical instruments facility. In all, the company announced that it would get rid of 15,000 international jobs.

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Chris Newmarker is senior editor of MPMN and Qmed. Follow him on Twitter at @newmarker.