The Airxpanders Inc share price has dropped 50% today

The worst performer on the All Ordinaries (Index: ^AXAO) (ASX: XAO) on Monday by some distance has been the Airxpanders Inc (ASX: AXP) share price.

At the time of writing the medical device company’s shares are down 50% to 20 cents.

Why are Airxpanders Inc shares being crushed?

This morning Airxpanders announced that Scott Dodson has resigned as its president and chief executive officer with immediate effect.

No reason has been given for the exit of Dodson, who led the company through the early clinical trials, its IPO, FDA clearance, and the launch of AeroForm in Australia and the United States.

According to the release, the company’s current CFO and COO, Scott Murcray, has been appointed interim president and CEO.

Mr Murcray will steady the ship while executive search firm Korn Ferry assists the company in identifying and hiring a new CEO. The board believe that the availability of strong talent in the medical device industry and the attractiveness of Airxpanders’ opportunity means the company will be successful in appointing a new CEO in the near-term.

Judging by the share price reaction and the volume of shares traded (10x normal levels), shareholders appear to believe that Mr Dodson was the driving force behind the manufacturer of innovative medical devices to improve breast reconstruction and could struggle without him.

In addition to this, the sudden departure of a CEO never goes down well with the market and often leads to sharp share price declines like today or last week with market darling Lovisa Holdings Ltd (ASX: LOV). This is because in the past a sudden departure has often been a precursor to bad news.

Should you buy the dip?

I would stay clear of Airxpanders for now. Whilst I like its technology, its sales growth is certainly lacking.

As well as announcing the resignation of Mr Dodson, the board revealed that sales in the first quarter of FY 2018 have been flat on the fourth quarter of FY 2017. This means the company is continuing to operate at a loss and could require a capital raising within 12 months by my calculations.

I think medical device peers such as Cochlear Limited (ASX: COH) and ResMed Inc. (ASX:RMD) would be better options for investors.

Alternatively these hot blue chips could be even better options.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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