Wall Street's assessment of plastic surgery--related technology: a clinical and financial analysis.
Many plastic surgeons develop technologies that are manufactured by Wall Street-financed companies. Others participate in the stock market as investors. This study examines the bioengineered skin industry to determine whether it integrates clinical and financial information as Wall Street tenets would predict, and to see whether the financial performance of these companies provides any lessons for practicing plastic surgeons. In efficient markets, the assumptions on which independent financial analysts base their company sales and earnings projections are clinically reasonable, the volatility of a company's stock price does not irrationally differ from that of its industry sector, and the buy/sell recommendations of analysts are roughly congruent. For the companies in this study, these key financial parameters were compared with a benchmark index of 69 biotech companies of similar age and annual revenues (Student's t test). Five bioengineered skin companies were included in the study. Analysts estimated that each company would sell its product to between 24 and 45 percent of its target clinical population. The average stock price volatility was significantly higher for study companies than for those in the benchmark index (p < 0.05). Similarly, buy/sell recommendations of analysts for the study companies were significantly less congruent than those for the benchmark companies (p < 0.05). These results indicate clinically unrealistic projections for market penetration, significantly high price volatility, and significantly high discordance among professional analysts. In all cases, the market is inefficient-an unusual finding on Wall Street. A likely explanation for this market failure is a cycle of poor clinical correlation when assigning sales projections, which in turn leads to price volatility and discordance of buy/sell recommendations. This study's findings have implications for plastic surgeons who develop new technology or who participate in the equities markets as investors. Plastic surgeons who develop new medical devices or technology cannot universally depend on the market to drive clinically reasonable financial performance. Although inflated sales estimates have benefits in the short term, failure to meet projections exacts severe financial penalties. Plastic surgeons who invest in the stock market, because of their unique clinical experience, may sometimes be in the position to evaluate new technologies and companies better than Wall Street experts. Well-timed trades that use this expertise can result in opportunities for profit.
Krieger
L M
LM
Department of Surgery, UCLA Medical Center, Los Angeles, Calif 90095, USA. lkrieger@ucla.edu
Shaw
W W
WW
D001698:Biomedical Engineering; D003132:Commerce; D019981:Health Care Sector; D006801:Humans; D017768:Skin, Artificial; D013518:Surgery, Plastic / Q000191:economics*; D014481:United States