Spine-Tech CFO links stock drop to Forbes article
CHICAGO, Aug 11 (Reuter) - Shares of Spine-Tech Inc
fell Monday after a Forbes magazine article said
competition is heating up and prices could drop in the spinal
implant market, the company and industry analysts said.
"The only thing that I know that has occurred, and I
haven't seen it yet, is there is an article out in Forbes
recommending shorting the stock," said Keith Eastman, chief
financial officer of Spine-Tech. "I think it's (Monday's drop)
linked totally to that article."
"The primary driver today seems to be an article from
Forbes," said Robert Faulkner, analyst at Hambrecht & Quist.
Shares of Spine-Tech, which makes the BAK Interbody Fusion
Systems series of surgical spinal implants to treat
degenerative disk disease, fell 4-3/8 to 53-7/8 in late
over-the-counter trading. It hit an intraday low of 52-1/2.
The Aug 25 issue of Forbes magazine said the marketplace
for BAK, Spine-Tech's major product, is getting crowded. It
noted the entry of U.S. Surgical and the future entry
of Memphis-based Sofamor Danek Group Inc , which
currently is waiting for FDA approval into the fusion cage
market.
The article, which was headlined "spine-chilling" and
showed a graphic of a human skeleton, also noted emerging signs
of a price war. It cited Furman Selz analyst James Flynn as
saying the potential discount on the fusion cages could rise to
25 percent if volume grows enough.
Flynn was travelling and could not be reached immediately.
"There's going to be some growing concern among people
about more competition," said Douglas Eayrs, senior healthcare
analyst, John Kinnard & Co. "But I think the volatility
today...is more related to the Forbes article."
"I think that it's inevitable when you get a magazine like
Forbes with a story with that kind of a headline," said Pamela
Lund, analyst with Miller, Johnson & Kuehn.
"These are the same short stories that have been around
since the stock was under $30," said Faulkner, who upgraded
Spine-Tech stock to a strong buy on Feb 11, 1997, when it was
trading at $23.
Spine-Tech shares had risen to a recent peak at 61-1/4 from
a year low at 18-1/2.
Lund maintained her accumulate rating and acknowledged that
competition could heat up in 1998.
"(There's) no question that it will have to shake out.
You've got a very vulnerable stock, given its very rapid price
ride," Lund added. "I still believe that the market for these
cages is really taking off. And that's what one has to look
at."
"So I think there will come a time when those concerns will
become legitimate," Faulkner said. "We're not there yet."
-- ((Reuters Chicago Newsdesk (312) 408-8787)) |
