LifeWatch Shares Rise to 3-Year High on China Telecom Deal

LifeWatch AG, a provider of remote cardiac and other patient monitoring systems, rose to a three-year high after a preliminary agreement to provide China Telecom Corp. with medical smartphones and related services.

LifeWatch shares rose 22 percent to 9.38 Swiss francs, their highest close since November 2010, giving the company a market value of 124 million francs ($136 million).

The agreement with China Telecom, the nation’s third-largest wireless company, may generate more than $400 million of sales over five years, LifeWatch said in a statement today. The binding memorandum of understanding provides a minimum purchase volume and China Telecom was granted exclusivity for the China territory, LifeWatch said.

The agreement “is a significant positive for the company and the stock,” Tom Jones and other analysts at Berenberg Bank in London, wrote in a note to clients. “It’s a step toward diversifying away from its core wireless cardiac monitoring business.”

The minimum sale alone of its health-enabled smartphone, called LifeWatch V, and the accompanying services, may lead to turnover rising by a third and a “multiplication” of earnings before interest and taxes this year, LifeWatch said.

“This cooperation is a great achievement and the confirmation of the right product and marketing strategy adopted by our CEO, Yacov Geva,” LifeWatch Chairman Kenneth Melani said in the statement. “We are very proud of our research and development team in Israel.”

LifeWatch Prospects

The final agreement is scheduled to be signed in March, LifeWatch said. The Swiss company said it expects to get the required regulatory approval in April, with sales of the smartphones to begin in the second quarter.

“Given the relative sizes of the two companies, should they be unable to agree on the final terms it would, in our view, be relatively painless for China Telecom to extract itself and far more burdensome for LifeWatch to enforce whatever binding terms the memorandum of understanding includes,” the Berenberg Bank analysts wrote today. “The question for the longer term is whether LifeWatch will become and remain a market leader in this space.”

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