Posted in Medical Device Business by Chris Newmarker on December 11, 2014
2014 has turned out to be a pretty decent year for the world’s 40 largest medical device companies: Only six of them have seen their stock prices decline, and the gainers on average have seen prices increase about 27%.
Some are doing even better, either because of unexpected sales growth or because they are acquisition targets.
Here are five companies with the most stock price growth over the year, as of December 11:
1. Edwards Lifesciences: +100.8%
There were questions over competition from Medtronic in the U.S. market, but it turned out that Edwards enjoyed solid sales growth for its Sapien transcatheter aortic valve replacement (TAVR) technology in 2014.
Better than expected Sapien sales pushed Edwards’ overall sales growth rate to more than 10% for the year. The Irvine, CA–based company’s stock has more than doubled in value, to about $132 per share, this year.
Increased competition from Medtronic and Boston Scientific could make it harder for Edwards to repeat the feat in 2015. But perhaps a rising tide will lift all boats. Edwards chairman and CEO Michael Mussallem recently said he expects the total market for transcatheter aortic valve replacement technologies to surpass $3 billion by 2019.
2. Allergan: +90.1%
Irvine, CA–based Allergan spent seven months fighting off a hostile takeover attempt from Valeant Pharmaceuticals International. It then turned around in November to apparently strike a deal with another pharmaceutical company—Actavis (Dublin, Ireland)—which is prepared to pay $219 per share, or $66 billion, for Allergan, which makes everything from tissue expanders and silicone breast implants to Botox.
The deal helped propel the Dow and S&P 500 to record highs on November 8 and contributed to a 2.1% increase in the Nasdaq biotech index. Allergan’s stock has now nearly doubled in value for the year, trading around $211 per share as of December 11.
After the acquisition, Allergan is expected to have $23 billion in revenue. “[The merger with Allergan] doubles the revenue generated by our brands business and doubles the international revenue of the combined company,” Brent Saunders, CEO and president of Actavis, said in a statement around the time of the merger announcement.
3. Smith & Nephew: +60.4%
Smith & Nephew is not being acquired—yet. Stryker executives are reportedly taking another look at London-based Smith & Nephew and its $4.4 billion-a-year medical device business.
The news comes after a six-month-waiting period imposed by the United Kingdom’s so-called “Put Up or Shut Up” rule, which allows the nation’s independent Takeover Panel to require a formal bid from a company within 28 days of its intentions to acquire a British company becoming publicly known.
All the speculation has driven up Smith & Nephew’s stock about 60.4% on the New York Stock Exchange this year. It is presently trading around $33 per share.
For its part, Smith & Nephew has seemed content to go its own way. Since his arrival at the company in 2011, CEO Olivier Bohuon has been redirecting the company’s emphasis on hip and knee replacements toward innovations in one of its oldest businesses—wound care.
Stryker's apparent interest in a megamerger comes amid Zimmer’s pending merger with Biomet for $13.4 billion. Combined, Zimmer and Biomet would have enough strength to surpass Stryker in size in the global orthopedics market, knocking Stryker down to third place, according to EvaluateMedTech, a market intelligence firm.
4. Covidien: +49.6%
Medtronic is nearing the finish line when it comes to its $43 billion purchase of Covidien, which has seen its stock rise 49.6%, to around $102 per share, so far this year.
Fridley, MN–based Medtronic and Dublin, Ireland–based Covidien intend to form a separate company, Medtronic plc, that will be based in Ireland. The Emerald Isle has a 12.5% corporate tax rate, while the U.S. corporate tax rate stands at 35% and also taxes overseas earnings.
Both Medtronic and Covidien officials, however, insist the deal is more about creating a larger device company with a stronger competitive reach. Post merger, the new Medtronic will be in a tight race with Johnson & Johnson when it comes to being the largest medical device company in the world.
5. CareFusion: +48.2%
CareFusion is another partner-to-be in a merger—in this case a $12.2 billion merger with Becton, Dickinson and Co. that is expected to close February 2015 at the earliest.
The San Diego–based company’s shareholders are expected to vote on the merger January 21, 2015. CareFusion’s stock was up 48.2% for the year, to about $59 per share, as of December 11.
BD (Franklin Lakes, NJ) makes medical supplies, devices, laboratory equipment, and diagnostic products. Its product lineup includes disposable needles, syringes and intravenous catheters. Meanwhile, CareFusion’s products are complementary because they include patient identification systems, the Pyxis automated dispensing device, the Alaris IV device, ventilators, skin prep products, infection surveillance systems, and surgical instruments.
