Medical Device Link.

Originally Published MX September/October 2003

BUSINESS NEWS

Reported revenues for top-earning publicly traded medical technology companies for April through June 2003 (2Q03) versus April through June 2002 (2Q02). Only divisions reporting medical product revenues are included; pharmaceutical, consumer-product, and healthcare services are excluded. All figures in $ millions at July 2003 rate. Order is by FY02 annual revenues, from most to least (Click to enlarge).

Top-earning publicly held medtech companies are continuing to show why investors should be paying more attention to the industry. In earnings reports issued since the end of June, nine of industry’s top-20 public companies have announced second-quarter results reflecting double-digit revenue increases over the same period last year.

The strongest quarter-over-quarter gains were reported by cardiology giant St. Jude Medical (St. Paul, MN), which posted quarterly sales of $495 million—a 23% increase over its second quarter in 2002. The company attributed the increase to strong performance from its multiple product lines and its April acquisition of Getz Bros. Company, Ltd. (Tokyo), the largest distributor of St. Jude products in Japan.

During the quarter, St. Jude also announced that it had made a minority investment in Epicor Medical (Sunnyvale, CA), which develops devices for the treatment of atrial fibrillation, a common heart arrhythmia. St. Jude reported that it expects to acquire Epicor in 2004 for an additional $185 million, if specific clinical and regulatory milestones are achieved.

Medtronic Inc. (Minneapolis) posted an increase of 20% in the second quarter. According to Medtronic CEO Art Collins, the company’s cardiac rhythm management, spinal, and neurological businesses accounted for nearly 75% of Medtronic’s quarterly revenue and collectively grew more than 25%.

In spite of recent setbacks, cardiology leader Guidant Corp. (Indianapolis) also experienced strong growth, reporting a 20% increase over last year’s second quarter. The company reported record sales of $945 million. At the same time, Guidant reported a second-quarter loss from continuing operations of $80 million, due largely to payments resulting from patent arbitration with Cordis Corp. (Miami Lakes, FL). The company’s quarterly financial results also reflect its discontinuation of the Ancure endograft system, which was manufactured by its subsidiary, EndoVascular Technologies Inc. (Menlo Park, CA). The discontinued operations resulted in a second-quarter loss of $17 million. Guidant’s failure to report clinical failures of the Ancure delivery system became the subject of a criminal investigation last year. In June, the company agreed to pay $92.4 million as part of a settlement with the U.S. Department of Justice.

Other strong performers include Stryker Corp. (Kalamazoo, MI), which posted a 22% increase in second-quarter sales, for $892 million. The company’s international sales of orthopedic implants and medical and surgical equipment, along with high physical-therapy services sales, contributed to the growth. 

Boston Scientific Corp. (Natick, MA) has reported second-quarter sales of $854 million, an increase of 21% over the second quarter of 2002. The numbers reflect the first full quarter of sales for the company’s Taxus Express paclitaxel-eluting coronary stent system, which was introduced to the international market earlier this year. Boston Scientific is involved in a legal dispute over the stent with Medinol Ltd. (Tel Aviv, Israel). In June, the German patent court found that the Express stent infringes on two intellectual properties held by Medinol. 

Despite second-quarter sales increases of 11%, Baxter International Inc. (Deerfield, IL) reported profit difficulties. The company also disclosed that it is the subject of an SEC investigation following three downward earnings forecast revisions since April. Baxter is developing an expanded restructuring plan that aims to save up to $160 million annually by closing 30 facilities and downsizing its workforce by 6% (3200 employees).

Quarter-over-quarter losses were reported by three medical imaging companies. Philips Medical Systems (Andover, MA), Siemens Medical Solutions (Munich), and Amersham plc (Buckinghamshire, UK). All have headquarters in Europe and attributed part of the decline to negative currency translation effects.

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