A Busy Summer

Summer usually brings with it the promise of a little down time. We eagerly anticipate it and the promise of a slower pace—even if it’s just for a fleeting three-month period. It is vacation time. People pack up the car or head to the airport and then on to their favorite getaway spot or perhaps to a new and exotic far-off location. Now that the summer of ’07 is fading into the sunset, it’s pretty clear that the medical device industry didn’t take much of a vacation.

In fact, it seems as if the industry was working double time during the hot summer months. The Centers for Medicare & Medicaid Services released its final inpatient prospective payment system rule for 2008 (all 2,141 pages of it), which goes into effect on Oct. 1. The FDA approved a significant amount of new products and oversaw  quite a few product recalls (read about Baxter’s recall woes, Page 17). Perhaps almost more impressive were the number of headline-making deals cooked up by device firms.

The month of July saw billions of dollars worth of device deals. Teleflex expanded its medical technology business with the acquisition of Arrow International, a medical device manufacturer, for $2 billion. The deal would make medical technology Teleflex’s largest source of revenue and profits. Also in July, Ev3 bought FoxHollow Technologies for $780 million, creating a vascular technology powerhouse. Not to be outdone, shoring up its Memphis, TN-based spinal division, Medtronic bought rival Kyphon for just shy of $4 billion. Topping all the others, Dade Behring, a diagnostics company, was purchased by Siemens Medical Solutions for $7 billion. (See Top of the News for more details on a few of these deals, Page 12.)

June didn’t have quite as many billion-dollar deals, but the money kept rolling in. Greatbatch bought Enpath Medical for $96.5 million. Diagnostic companies Qiagen and Digene merged in a deal worth $1.6 billion. Medisystems, which makes medical devices used in dialysis and blood-related treatments, was acquired for $78.7 million by one of its customers, NxStage Medical, a maker of a portable dialysis machine. And still there were many other smaller deals.

My purpose in outlining this information is not to provide a laundry list of device M&A, but to illustrate the ongoing strength of the sector. When you look back, it’s pretty impressive. And there’s undoubtedly more to come. Not to mention (though this takes into account more than just summer months), venture capitalists are looking past traditional favorites such as computer-related startups or drug-development companies to invest in medical device companies, spending roughly $2 billion for the first half of the year.

The takeaway message is that it’s not just about the bottom line. It’s about the promise of innovation from a strong, competitive and prosperous industry, and what it means for the variety of suppliers and contract manufacturers that serve it. As the features in this month’s issue make clear, OEMs—startups and billion-dollar public firms—are turning at an ever-increasing rate to contract partners to provide start-to-finish design and engineering capabilities, product assembly and electronics manufacturing services, as they focus on core competencies and growing their businesses, either organically or through acquisitions.

Medical Product Outsourcing also has been busy this summer. As you flip through this month’s issue, you may have noticed MPO’s new look. As we quickly approach our fifth anniversary next year, we decided it was time to update the magazine’s design. Our goal was to make it cleaner and easier to read. The updated design, of course, is about aesthetics and does not alter the quality content (I feel it enhances it) that has served us so well for nearly five years. I believe we’ve succeeded, and I hope you agree.