In mid-July, shareholders of the medical device maker Baxter (NYSE:BAX) were feeling good, having seen their shares appreciate 27% since the beginning of the year. But the good news couldn't last.
Investors then heard about the company's recall of its COLLEAGUE triple-channel infusion pumps because of a software issue and a subsequent recall covering both its COLLEAGUE and Flo-Gard infusion pumps when it was discovered that "repairs" made to some of the pumps were in fact bogus. Shares spiraled down about 15% over the next month.
On Tuesday, the Food and Drug Administration said that the recalled pumps, used for intravenous treatments, could cause serious injury or death if patients used them. Most of the damage to the company's stock price from the recalls had already been done, and the stock had rebounded quite nicely recently. The FDA announcement is just another example of the agency trying to look like it's taking charge of the situation. There will likely be no major financial ramifications for Baxter because of this episode, although it has taken a bit of a public relations hit.
While concern was certainly warranted in this instance, I believe the dip in Baxter's stock price was more of an emotional overreaction on the part of investors as opposed to a decision to sell based on financial consequences.
For those investors who are still not sold on Baxter, there are plenty of other cutting-edge medical device makers that have been prospering. Intuitive Surgical (NASDAQ:ISRG) is up 140% year to date and is looking strong with projections in the neighborhood of 45% to 50% for top-line growth this year. Hansen Medical (NASDAQ:HNSN) is also up close to 140% year to date and has a partnership with St. Jude Medical (NYSE:STJ) to integrate each company's technology to allow for more precise maneuvering of catheters within the heart.
