Orange County-based healthcare companies have seen their stock prices fall a bit with recent market ups-and-downs, but they still appear to be a relative safe haven.
Historically, the drug and device sectors have been considered a harbor for investors at times when the broader market stumbled. Their steady growth, predictable markets and dependable insurance, hospital and government customers have traditionally made them appealing as more volatile sectors went south.
Here’s a sampling of how Orange County’s publicly traded healthcare stocks are doing lately:
Quality Systems Inc.
Irvine-based medical software maker Quality Systems’ stock has rocketed in value since the beginning over the past decade, and the hot streak continues.
Quality’s shares are up 32% so far this year.
The company, which makes software that doctors and dentists used to manage their practices, counted a market value of $2.7 billion as of last week.
Quality has seen a boost from federal spending that will reward doctors for using electronic medical records. The company has prepared for the program, and analysts have said it is poised to benefit as one of eight companies that account for 80% to 90% of the market.
The company “should continue to benefit from healthcare organizations migrating to electronic health records for the next several years,” said Todd Bunton, an analyst with Zacks Investment Research.
Edwards Lifesciences Corp.
The Irvine-based cardiovascular device maker’s stock, one of Orange County’s hottest in recent years, has cooled a bit as the wider market got knocked down.
Edwards’ shares are down 6% since the beginning of 2011, with a market value of $8.7 billion at recent check.
It’s awaiting a potential catalyst for its stock—a decision by the Food and Drug Administration on whether to approve Edwards Sapien, a replacement heart valve, for domestic sales.
Sapien, which is on the market in Europe, holds the potential to broaden the market for patients who are too sick for open-heart surgery.
Edwards’ stock price fall “provides a buying opportunity for investors into a well-managed company,” Jan Wald, a Morgan Keegan & Co. Inc. analyst, said in a late July research note.
Investors who buy Edwards can take advantage of “overblown concerns about the available inoperable patient population,” Wald said.
Allergan Inc.
Allergan, the county’s largest drug maker, and based in Irvine, has seen its shares rise 15% since the beginning of 2011.
The company makes Botox, eye drugs, skin fillers, breast implants and weight-loss devices. It consistently runs neck-and-neck with Irvine chipmaker Broadcom Corp. for the ranking of most valuable public company, holding the spot recently with a market value of about $25 billion.
The company has benefited from rebounds in cosmetic medicine, with patients starting to find a bit of disposable income for certain procedures.
Another boost came last month when Allergan got FDA approval for Botox to treat overactive bladder conditions that result from nervous system damage.
The new Botox usage approval “is positive in that it may bode well for the eventual approval of Botox in idiopathic” overactive bladder, Seamus Fernandez, an analyst with Boston-based Leerink Swann LLC, said in a recent report.
Idiopathic overactive bladder, where there is no known cause for the disorder, is a much larger market opportunity for Botox. Fernan-dez said, if approved, it could ac-count for yearly revenue of $210 million by 2017, compared to about $40 million for neurogenic overactive bladder.
Masimo Corp.
Masimo Corp. in Irvine, a maker of patient monitors and other devices, outpaced the Standard & Poor’s stock index for most of the year until the past month.
It posted mixed results for the second-quarter, and saw its share price dip on some days of heavy trading.
They’re down 19% from the beginning of the year with a recent market value of $1.5 billion.
Analyst Matt Dolan of Newport Beach-based Roth Capital Partners LLC said in a research note that Masimo is tracking toward the bottom end of its forecast for 2011.
Masimo previously said it expects full-year profit of $71.6 million to $76.5 million for 2011. Wall Street expects Masimo’s full-year profit to come in at $71 million.
The device maker expects revenue of $446 million to $463 million, compared to analysts’ expectations of $450 million.
Masimo is tracking lower, according to Dolan, “in the face of a soft macro environment and the lack of U.S. regulatory clearance for Pronto-7.”
Pronto-7 is a palm-sized, non-invasive device that is used to measure hemoglobin, oxygen saturation, pulse rate and perfusion index.
Masimo started selling the device overseas last month.
Sun Healthcare Group Inc.
Shares of Irvine-based nursing home operator Sun Healthcare Group—along with others in the field—are another exception to the generally solid performance of the local healthcare sector.
Sun’s shares have taken a hard fall on more than the general market tumult. They’re down about 66% so far this year, with a recent market value of $107 million.
Sun and its competitors, including Skilled Healthcare Group Inc. of Foothill Ranch and Mission Viejo-based Ensign Group Inc., plummeted at the end of July when the Centers for Medicare & Medicaid Services said that they would cut the amount they paid for nursing home care by 11.3% on average starting Oct. 1.
Sun, the largest locally based operator with 165 nursing homes, lost more than half its value prior to that announcement.
“The industry, the analysts, (the) people did not see this coming at all,” said Robert Mains, a nursing home industry analyst who follows Sun and Skilled for Memphis, Tenn.-based investment bank Morgan Keegan. “What we saw was a reaction to much worse-than-expected rates.”
