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In the process of making patients healthier, medical device and in-vitro diagnostic manufacturers in 2003 made themselves healthier as well. Many companies we profile here reported excellent sales and earnings growth last year , some well into double digits. Their results are an indicator of the industry’s vitality.
A glance at the most successful medical device and IVD manufacturers reveals a commonality: cautious investments in acquisitions, R&D and emerging markets. New products are their lifeline, and keeping the pipeline full is essential to growth that lasts more than a few quarters. An excellent example is Medtronic, whose fiscal year 2004 sales now top $9 billion. CEO Art Collins has repeatedly noted that two-thirds of his company’s current revenues are from products introduced during the past two years. Medtronic’s approach is undoubtedly one of the best in the industry.
Aside from wise investments, several other developments are worth noting. While 2003 produced strong results, many companies nevertheless focused on operating efficiencies to improve margins. This seems to reflect continued concerns about global economic conditions, the maturation of some segments and uncertainty over healthcare cost-containment efforts by governments all around the world. Even though the economy rebounded in 2003, it’s never a bad time to trim fat if it doesn’t hurt product and business development.
One future concern for U.S. manufacturers, however, is gains from currency exchange. The dollar rebounded slightly as of late June, but it is far weaker than it was on January 1, 2003. Even so, it’s likely to further strengthen by the end of the year and dent the results of U.S. manufacturers.
This is our second annual look at the top companies, and we expanded it to include the top 25 medical device and top 10 IVD manufacturers. We base rankings on estimated sales of devices or IVDs, but because some companies report revenues based on therapies, their figures could include affiliated goods such as drugs or biologics. For instance, drug stents are a combination product so Johnson and Johnson’s Cypher sales reflect both the stent and drug coating. Similarly, results from companies such as GE’s Healthcare business include software and service revenues.
The sales listed here are for each company’s 2003 fiscal or calendar year, so while Medtronic’s 2004 year ended in April, we based the ranking on its 2003 sales. However details of its 2004 results are discussed in the report. Similarly, Hospira, the spinoff from Abbott Labs, is not included in this year’s listing because it did not begin trading as a public company until May this year.
For firms based outside the U.S., revenues were converted to dollars using the exchange rate reported on the last day of their reporting period. This method provides a consistent way of capturing their sales totals.
We believe our estimates very closely reflect each company’s interest in either the medical device or IVD sectors. As always, we encourage readers to offer their suggestions for improving the report for next year.
The MPO Staff