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The Worst Performing Medtech Companies of 2015

Posted in Medical Device Business by Chris Newmarker on December 10, 2015

Most of the major medical device companies are performing well when it comes to their stocks. But there are exceptions to the rule.

Chris Newmarker

A nearly $2 billion accounting scandal lands Toshiba in the unenviable spot of being the major medical device company with the worst performing stock of 2015, according to a Qmed analysis of stock for 36 of the largest medtech companies in the world.

Toshiba, which has seen its stock decline 43% in value between the end of 2014 and December 9, is luckily an exception to the rule. Only 14 out of the 36 companies saw their stock decline this year. (Here’s a link to the 100 largest device companies in the world.)

Still, there are still medical device companies that can point to a rough 2015. Here are 10 that are especially worth noting:

Toshiba Corp: –43.0%

Toshiba, a Tokyo-based multinational conglomerate, has seen its stock tank this year amid a company-wide accounting scandal involving nearly $2 billion in overstated profits over the past seven years. Japan’s securities regulators have proposed a fine equivalent to $60 million, the largest such fine they have ever sought.  “It could take five to 10 years to regain trust from investors,” Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo, told BloombergBusiness.

Financial moves Toshiba has been making to correct the situation have included the sale of its stake in optics company Topcon, which makes everything from surgical lasers to diagnostic imaging devices as well as metrology systems. Reuters reports the sale was the equivalent of $413 million to $496 million.

Draegerwerk AG & Co.: –23.0%

Just this week, Draegerwerk announced it would slash 200 jobs at its Lübeck, Germany, headquarters amid a company-wide effort to cut costs. The move comes about two months after the company—which manufactures breathing and protection equipment such as medical ventilators, gas analysis systems, and noninvasive patient monitoring technologies—cut its profit forecast for the second time during the year. Draegerwerk is citing weak business in China and the U.S. for its woes, according to Reuters.

Sonova Holding: –16.3%

Sonova, the Swiss hearing aid company formerly known as Phonak, has been struggling recently amid tough competition from Sivantos, which was spun out of Siemens earlier this year. Last month, Sonova cut its full-year sales and profit forecasts, according to a report on Nasdaq.com.

Zimmer Biomet: –11.8%

The orthopedics giant, which greatly expanded in June through Zimmer’s $14 billion acquisition of Biomet in June, continues to face currency-related headwinds, according to Zacks, which has had a Hold rating on the stock.

Zacks, however, also sounded an optimistic note: “We are encouraged by the strong strategic and financial goals which the combined entity expects to reach, now that the deal has been closed. Net synergies from the merger are currently anticipated to exceed $350 million in pre-tax by the end of the third year, post-transaction.” Qmed’s sister UBM media outlet MD+DI reports on synergies achieved ahead of schedule.

Novartis: –9.5%

Novartis has also been facing a negative currency impact on operations. Plus, Novartis’ Alcon eye care products business has been experiencing weakness, with sales down 12% year-over-year in the company’s most recent quarter. Alcon has seen competitive pressure when it comes to its intraocular lenses. Plus, equipment purchases in the U.S. and emerging markets have been slowing down.

Varian Medical Systems: –8.9%

Company officials say exchange rates wreaked havoc on 2015 results for Varian’s oncology treatment systems and imaging components business.
 
“To address the ongoing challenges for the overall business, we have initiated numerous corrective actions to make our product lines and operations more cost competitive,” CEO Dow Wilson said in an October earnings call, transcribed by Seeking Alpha.
 
“These include a restructuring to right size the business, accelerating product developments, including our new low cost flat panel, and stepping up marketing efforts, particularly in Asia. We are opening a facility near Shanghai to support a rapidly expanding X-ray equipment manufacturing industry in China,” Wilson said.

Smith & Nephew: –8.2%

The British medical device giant’s stock was up at the end of last year amid speculation that Stryker or some other large device company was going to buy it. A year later, S&N remains independent, and CEO Olivier Bohuon has shown himself to be pretty shy of megamergers. He prefers to focus on organic growth in faster growing areas, such as redirecting the company’s emphasis on hip and knee replacements toward innovations in one of its oldest businesses—wound care.
 
Currency exchanges are also causing trouble for S&N. For the quarter ended October 29, revenue was down 4%; it would have been up if not for currency headwind.

Other worst performers:

  • St. Jude Medical: –6.9%
  • 3M Co.: –5.0%
  • Siemens: –3.5%