Midwest plays key role in developing new medical device companies

15 Aug Midwest plays key role in developing new medical device companies

CHICAGO -Last week, we talked about the size and growth of the medical device industry and some of the key market segments. This week’s column will focus on the leading players in this $100 billion industry.

Before we comment on some trends from this table, here are a couple interesting observations:
• Clearly absent here is the major part of the diagnostics business (with the exception of the imaging market), which includes clinical and molecular diagnostics. This includes key companies such as Abbott Labs, Roche Diagnostics, Bayer Diagnostics and Dade Behring. Put this all together and you have a $20 billion segment that’s conspicuously absent.
• Add the above segment and the total medical device industry is well in excess of $150 billion versus the $100 billion I indicated last week. There are a number of additional medical device companies (such as Hollister and Cook Medical) not listed here.
Here are some observations:
• The Midwest has five companies listed in the top 10, five more companies in the next 10 and two more in the next 10 group of companies for a total of 12 in the top 30 companies around the world. This is a pretty good representation!
These 12 companies represent sales of $52.8 billion (or 42 percent) of the total medical device industry (and remember that this doesn’t even include Abbott Labs, Dade Behring in Chicago and Roche Diagnostics in Indiana).
• Add to the Midwest the other eight U.S. companies and 67 percent of the companies are domiciled in the U.S. (this doesn’t include the U.S company Tyco, which is domiciled in Bermuda).
• Though there is a good sampling of European medical companies, there’s only one Japanese company in the top 30 companies.
• While some companies are totally dedicated to the medical device industry, there are others that only have part of their business in this segment. Some surprising players include 3M, which is known for its adhesive technology, Kodak, which is known for its photographic technology, Philips, which is known for its consumer electronics technology, and GE, which is known for its electrical and entertainment products.
• Market leader Johnson & Johnson isn’t just a leader in this field but is also one of the leading pharmaceutical companies as well.
Its business model is such a success that it looks like you can have your cake and eat it too (meaning being a leader in both business segments). Interestingly enough, the Midwest’s Abbott Labs has followed this model with relatively good success as well.
In conclusion, the Midwest plays a stellar role in developing new medical device companies (the area between Minneapolis and St. Paul is a hotbed of new device companies). Unless there’s considerable industry consolidation (not unlike the acquisition of Guidant by GE), the Midwest should maintain its market leadership.
See you next week!
• Read last week’s column.