THE TIMES 100 / THE BEST PERFORMING COMPANIES IN AMERICA : A VIEW FROM THE STREET : A Reversal of Fortune for Medical Firms : Six of the 10 steepest stock price declines occurred in that sector. One reason? Growing worry over health care reform.
It’s easy to stumble in a rough-and-tumble industry. And few industries were jostled as much as health care was last year.
It’s no surprise, then, that six of the 10 California companies that suffered the steepest stock price declines in 1993 were in the turbulent medical equipment and services businesses.
“It is a very, very difficult environment,” says Alan H. Magazine, president of the Washington-based Health Industry Manufacturers Assn., which represents 700 companies that supply more than 90% of U.S. medical equipment.
The trade association chief faults slow approval of new devices by the U.S. Food and Drug Administration, which he says can discourage venture capital investment in the industry. But he believes federal health care reform proposals may be hurting even more.
“Sales in many parts of the industry are stagnant,” Magazine says. “Hospitals, doctors, clinics and others aren’t buying nearly as much medical technology . . . in part because of the uncertainty of what the health care system is going to look like as a result of reform.”
Advanced Medical Inc. was growing so fast a few years ago that its 40% revenue gain placed it among the 100 fastest-growing California companies on The Times 100 list in 1992. But sales at the San Diego firm, which makes intravenous pump systems, fell from $128.3 million in 1992 to $119.4 million last year, Chief Financial Officer Joseph W. Kuhn said.
The company’s stock plunged from nearly $6 a share a year ago to $1.125 as of April 8, according to data supplied by Star Services, a San Francisco-based business research firm. Advanced Medical officials attribute the decline to hospitals postponing equipment purchases as they face intense pressure from insurers to cut costs.
“One of the primary factors had to do with the slowdown in hospital buying decisions,” says Kuhn, who describes the medical marketplace as “highly competitive and mature.”
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Century City-based CBL Medical Inc., an operator of medical clinics specializing in workers’ compensation cases, saw its stock fall from nearly $3 a share a year ago to 21 cents as of April 8. The company says its 1993 performance stalled when payments from workers’ comp insurers slowed as carriers reacted to widespread fears over claims fraud.
CBL is one of a number of companies that have retreated from the workers’ compensation field, citing insurance payments that were as much as 500 days late. Company executives also say some insurers threw out legitimate claims in their heightened search for fraud.
In September, CBL--then the last publicly held company in Southern California in the workers’ comp business--announced it was abandoning the business and laying off most of its 140 employees. On Dec. 30, the company, which once managed 10 clinics to treat injured workers, filed for Chapter 11 bankruptcy protection.
San Clemente-based Laser Medical Technology Inc., whose stock plunged from about $9 a share a year ago to $1.375 as of April 8, recently completed a restructuring that ended with its founding family selling its stock and leaving the company. The small firm, which makes lasers and other devices for dentists, moved from France to California in 1987.
When Laser Medical entered the market three years ago, the prospects for using laser technology in dentistry looked much brighter, but interest has since cooled. Today plans center on other products, including files and automated devices to perform root canals.
“We are trying to redevelop the markets we were once successful in,” says Ira J. Fertik, the fourth chief executive to run Laser Medical in the past year.
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Some non-medical businesses also fared poorly.
UnionFed Financial Corp., the Brea-based parent of Union Federal Savings Bank, blamed losses from bad real estate loans for its steep stock decline. UnionFed’s stock, trading at more than $11 a share a year ago, had fallen to $1.625 as of April 8. Another company registering a steep stock decline was Kenfil Inc., a Van Nuys software distributor. As a result of lost sales due to damage caused by the Northridge earthquake, Kenfil earlier this month agreed to be acquired by hardware distributor AmeriQuest Technologies Inc. of Irvine.
