Charting a Challenging Year

If there was one word or expression that appeared most often in annual reports, quarterly earnings statements, press releases and interviews conducted in preparation for this year’s installment of top companies it would be, without a doubt: “challenging.”

It seems that executives and industry experts from every specialty and sub-sector within the medical device space couldn’t escape using the word when describing overall market conditions for the 2009 fiscal year, and indeed it was a challenging year.

While many industries started feeling the effects of the “Great Recession” in 2008, the medical device industry was a little slower to feel the impact. That changed last year. Gone were most of the double-digit gains in revenue and profits that we’d gotten used to. In this year’s compilation—in a world where flat is the new up—single-digit increases are signs of solid growth and management (justifiably) pat themselves on a back for a job solidly done.

Lots of restructuring and streamlining were reported. Companies trimmed the fat—most often in personnel or product lines—to free up cash to stay competitive. However, given the dire straits the world economy was (and to some extent still is) in, results for the top 30 companies weren’t all bad. Most still reported increased revenue (though usually marginal), and they continued to roll out new products and services. Also impressive was the commitment these firms share to keep research and development activities as robust as possible. After all, these market conditions won’t last forever. Going forward, based on initial reports and financial results for the beginning of 2010, the management teams of the world’s largest medical technology companies remain cautiously optimistic. Questions, of course, linger about healthcare reform and the impending tax on industry, not to mention that the economy still isn’t out of the intensive care unit. However, the austerity of a very challenging year may have better prepared companies to seize the opportunities that are ahead.

“Time magazine called this era ‘the decade from hell,’ and when you are going through hell, Winston Churchill advised, keep going,” Jeffrey Immelt, chairman and CEO of General Electric, told his shareholders this year. That’s good advice.

As part of this year’s roundup of the largest global device manufacturers, we’ve added a new feature—a look at emerging growth companies called “Companies to Watch.”The largest medical device firms often steal the spotlight. They’ve got myriad product lines, large marketing budgets (billboards in sporting arenas—think Covidien’s logo on the Green Monster at Boston’s Fenway Park, events sponsorships, etc.), multinational footprints and billion-dollar bottom lines.

But what about the countless small companies and the thousands of midsize firms in between? We all know that innovation in the medical device industry usually goes from the bottom up, and that most cutting-edge R&D isn’t developed by the big boys; it’s acquired. Veteran industry journalist and MPO Contributing Writer Jim Stommen took a look at four medtech firms (that don’t have nine zeros in their revenue lines) with the technology—and the temerity—to take on the
sector’s largest players.

Our goal was to provide an industry update as well as some education. We hope it’s as
interesting and informative to read as it was to compile.