Elekta AB (EKTAB) fell the most in seven months in Stockholm trading after Handelsbanken Capital Markets said new U.S. legislation will cut reimbursement for procedures using the company’s Gamma Knife radiosurgery equipment.
Elekta dropped 5.7 percent to 95 kronor at 10:30 a.m. The stock sank as much as 6 percent, the biggest intraday decline since June 5.
The law passed in the U.S. this week to avert income tax increases for most workers may lead to a 58 percent decline in Medicare reimbursement for the company’s Gamma Knife, Hans Mahler, an analyst at Handelsbanken in Stockholm, wrote in a report today.
“Even though the new rates are not yet implemented, we expect yesterday’s news to temporarily freeze new U.S. GK orders and potentially postpone planned installations,” Mahler said. He lowered his rating on the stock to reduce from accumulate.
Mahler cut his estimate for 2014 sales by 3.5 percent and lowered his estimate of earnings before interest and tax at Stockholm-based Elekta by 7 percent.
Elekta’s competitors, Accuray Inc. (ARAY:US) and Varian Medical Systems Inc. (VAR:US), have complained about higher U.S. reimbursement for Gamma Knife procedures compared with those using a linear particle accelerator, because they say the clinical outcome is the same, Mahler wrote. The new U.S. law will erase that advantage for Gamma Knife and favor Varian’s Edge and Accuray’s Cyberknife, both of which are cheaper than the Elekta product, he wrote.
Elekta spokesman Johan Andersson Melbi didn’t immediately respond to phone messages seeking comment.
Gamma Knife procedures are reimbursed at $7,910, while the government health plans pay $3,300 for patients treated with the other machines, Handelsbanken wrote. The new law calls for the two rates to be the same, meaning a 58 percent drop in Gamma Knife reimbursement.
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