The 10 largest medical device companies in the world

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Mergers & acquisitions continue to change the medical device landscape, as reflected in Medical Design & Outsourcing’s new Big 100 list.

We pulled financial regulatory filings and reached out to major companies in some cases to create a list of the 100 largest medical device companies in the world, ranked by annual revenue for their medical device operations. Yesterday, we counted down Nos. 20–11. Today, it’s the top 10.

Baxter

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Baxter is a company undergoing a major transformation under CEO José “Joe” Almeida, who took the reins from longtime CEO Robert Parkinson Jr. early last year after leading Covidien through its $50 billion merger with Medtronic in 2015.

The Deerfield, Ill.–based company, which sells renal and medical products including pharmaceutical devices and acute renal care equipment, has spent the last year-and-a-half under Almeida’s guidance adjusting its corporate culture and its focus on innovation and invention.

“Culture will take the company to its top performance. And it can take a company down so fast. It’s all about leadership and the people that you have around the table leading the company. Strategies can be replicated, cultures can’t. Culture is your value as a company,” Almeida said last November at the annual Cleveland Clinic Medical Innovation Summit.

Almeida said that he has worked to shift the culture to reduce excessive internal over-analysis and improve employee independence, creating an environment where innovation can flourish.

“The part that separates most companies regarding innovation, those that truly get it, is the bridge between the invention and the innovation,” Almeida said. “The ability to create value in healthcare and access is quite significant.”

The transformation has been positive for the company, which Almeida said in June is positioned to pull the trigger on a massive acquisition worth up to $7.5 billion – as long as it’s the right company.

“We’re open to the tuck-ins, and we’re doing them, and we’re working very hard to get even more opportunities. We have a good pipeline in our pharmaceutical business between partnership and some tuck-ins and even in our advanced surgery, our biosurgery business,” Almeida said during the company’s first-quarter earnings call.

Though it hasn’t jumped on any acquisitions that large, the company did close a $625 million acquisition of Claris Lifesciences’ injectable drug business in July, including the company’s portfolio of injectable generics and 3 manufacturing plants.

Baxter also announced it inked a deal with Israel’s Tel Aviv University’s Ramot business segment, looking to bring early stage research technologies developed at the University to market.

The move is significant for Baxter, which Almeida said previously had no connections in the country.

“We did not have any contacts in Israel. You think about it. If you were a medtech and you don’t have a foot in Israel, you’re missing a big part of innovation,” Almeida said.

The company has strengthened its portfolio pipeline through other contracts as well, inking a collaborative deal with the Mayo Clinic in May with an initial focus on kidney disease.

Baxter is continuing to grow, getting leaner and meaner and looking to improve its portfolio, including its management in venture capital and financial returns.

Stryker

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After a year filled with acquisitions, Stryker was relatively calm on the M&A trail in 2016 – apart from a $700 million deal for fluorescence imaging technology developer Novadaq and the buyout of substance disposal maker Cactus.

The past year was still a busy one for the company, which offers an array of products across orthopedics, general medical and surgical use, spinal and neurotech fields.

Business for Stryker has been brisk, and while it has been engaged on a number of legal fronts, including hip implant suits and its own levied employee poaching suits, it has avoided any major pitfalls so far.

In March, Stryker launched the robotic-arm assisted total knee arthroplasty application for its Mako system, touting it as the first and only robotic tech for total knee, hip and partial knee replacements.

The launch marked a major milestone for the company, which closed its $1.7 billion acquisition of Mako Surgical in 2013 but was met with skepticism from analysts on Wall Street, who questioned the potential uptake for the device.

On the vascular front, the company celebrated an unexpected victory, putting an early stop to enrollment in a clinical trial of its Trevo anti-stroke device after a review board decided that the trial had a high probability of success. The device, designed to remove blood clots that cause ischemic stroke, came with the company’s $135 million acquisition of Concentric Medical in 2011.

In February, Stryker inked a deal with the U.S. Defense Dept., netting a $486 million fixed-price contract to supply orthopedic products to the military and other federal agencies.

In a boost to its production capabilities, Stryker announced a deal with GE Healthcare’s 3D printing arm, GE Additive, looking to build out its own additive design and manufacturing facilities. Through the deal, the company looked to acquire machines, materials and services, adding to the 3D printing machines it acquired from Arcam and Concept Laser.

Internally, the company opened a new customer experience center in San Jose, Calif., featuring what it calls the “Operating Room of the Future.”  The display includes integration of Microsoft’s altered-reality HoloLens holographic computer system, and gives a glance into how the company’s devices integrate to improve efficiency and safety.

Stryker also won a tax break in Portage, Mich., where it plans to begin construction on a new research and development facility estimated to cost as much as $154 million, slated to be completed by 2019.

Danaher

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Danaher jumped from 13th to eighth on the Big 100 this year, largely on its purchase of the clinical microbiology business of Siemens Healthcare Diagnostics. The unit includes clinical lab, acute care and pathology diagnostics businesses. This latest purchase, however, is one in a long line of diagnostics growth through acquisitions for the conglomerate.

In 2004 Danaher acquired Radiometer and has shifted steadily toward diagnostics and the life sciences since then, acquiring Leica Microsystems in 2005, Vision Systems in 2006, Genetix in 2009, AB Sciex and Molecular Devices in 2010, Beckman Coulter in 2011, Iris International and Aperio Technologies in 2012, HemoCue in 2013 and Devicor Medical Products in 2014. Most recently, the company completed acquisitions of Cepheid, a molecular diagnostics firm, and Pall Corporation, which provides filtration, separation and purification technologies for a range of industries. Both of those acquisitions contributed significantly to the company’s recent performance.

At the same time, the firm has made changes to tighten its focus on life sciences and diagnostics, through divesting both communications and industrial technologies. In July 2015, Danaher sold its communications business to NetScout for $2.3 billion, and in July 2016, completed a spin-off of Fortive, the professional instrumentation and industrial technologies businesses.

Despite this activity, analysts have remained tepid on Danaher. The company has taken a lot of criticism because of its lack of organic growth. In its second quarter of 2017, Danaher reported total sales of $4.5 billion, an increase of 6.3% year over year. However, 6% of that growth is from acquisitions. Many industry watchers note that the move to focus on diagnostic and life sciences subsidiaries promises long-term sustainability.

The most recent earnings call for Q2, 2017 reported that the life sciences segment rose 4% year over year to about $1.4 billion. The sales growth of this segment is driven by a strong market for traction of mass spectrometers, microscopy, flow cytometry and genomics products. Impressive rise in the operating margin was driven by higher sales volumes and incremental year-over-year cost savings associated with restructuring actions.

The diagnostics segment is nearly equally as promising. Revenues at the diagnostics segment increased 14.5% year over year to $1.44 billion. Impressive performance of clinical business in China and robust performance of acute care diagnostic and pathology diagnostics business proved conducive to growth of this segment. However, operating margin at the segment contracted 760 basis points year over year, to 10.9%. The fall is attributed to higher costs associated with new product development and higher restructuring and impairment charges.

Still as of press time, Danaher is hovering in a low middle ground, having lost another 2.8% in shares in the month following Q2 earnings calls. This is a waiting game for analysts to see whether Danaher can metabolize its acquisitions to fuel energetic growth.

Cardinal Health

Cardinal Health continued the medical device play it began with the $320 million acquisition of AccessClosure in May 2014 by putting up $1.94 billion for Johnson & Johnson’s Cordis stent-making arm, which closed in October 2015.

Cardinal put Cordis back into the drug-eluting stent game via an overseas distribution agreement with Biosensors International in May 2016, inking a deal for Cordis to sell the BioFreedom, BioMatrix NeoFlex, BioMatrix Alpha and Chroma stents made by Biosensors in Europe, the Middle East, Australia and New Zealand. Cordis said it plans to gradually roll out a new private-label brand for stents: Lumeno.

The company’s board approved a $1 billion share repurchasing program after Cardinal in May 2016 tightened its earnings outlook for the rest of the year, meaning nearly $1.4 billion is on the table for stock buybacks.

And just before this issue went to press, Navidea agreed to deal its LymphoSeek injection for sentinel lymph node detection to Cardinal for up to $310 million.

* Revenues from Cardinal Health’s medical segment.

** MDO accidentally published Cardinal Health’s total employee count, versus medical segment employee count, in last year’s Big 100.

Siemens

The biggest news of 2016 for the German industrial conglomerate’s healthcare business came mid-year, with a global rebranding as Siemens Healthineers. Before and after that were a string of clearances and approvals from the FDA. (Notably, the U.S. safety watchdog gave the nod to the Sysmex CS-5100 and Xprecia Stride hemostasis analyzers; the Biograph Horizon PET/CT scanner; a trio of new mobile C-arms; stand-alone 3D breast screening for the Mammomat Inspiration; and the dual-source CT scanner Somatom Drive.)

Siemens Healthineers also inked several deals with a range of partners: a molecular testing pact with lab equipment giant Thermo-Fisher, a global alliance with IBM Watson Health for population health management and an outcomes studies agreement with Northwell Health, to name a few.

On the M&A trail, late in 2016 the company acquired open connectivity provider Conworx Technology and, as of the time of this writing, had added workflow management provider Medicalis and announced the intent to acquire the Epocal blood diagnosis business from Alere.

* Revenues from Siemens Healthineers segment.

Fresenius

The big news from Fresenius Medical Care this year was that it inked a deal to pay $2 billion for NxStage Medical (No. 88 on this year’s list) and its home hemodialysis technology at $30 per share. The deal is slated to close in 2017 and Fresenius said it expects NxStage to add to net income and earnings per share within three years of the deal’s close.

Waltham, Mass.-based Fresenius Medical Care also rebranded its dialysis division last year, to Fresenius Kidney Care, launching a new website to provide education about dialysis and treatment options for people in various stages of kidney disease.

As the company aims to see revenues climb above $20 billion by 2020, it has spent the last year acquiring several large dialysis providers around the world. In February 2016, it bought Japan’s largest dialysis group with around 6,000 patients. In its biggest takeover yet, Fresenius bought Spain’s biggest private hospital chain Quironsalud for $6.4 billion in September last year.

Fresenius continues to deal with the lawsuits that came after the FDA launched a Class I recall of its GranuFlo product in March 2012. The company’s GranuFlo and Naturalyte products were used to lower the acidity of patients’ blood during dialysis treatments, but lawsuits allege that the compounds’ high concentrations of acetone led to abnormally high levels of bicarbonate in the blood, which caused fatal heart problems and strokes.

In March 2017, Fresenius Medical Care won the first bellweather trial in a series of product liability lawsuits brought over the dialysis drugs, after a Massachusetts jury found that the plaintiff’s estate failed to prove its case.

It was the first case to go trial among a group of plaintiffs who declined to enter a $250 million settlement struck in 2016 in the multi-district litigation proceeding in a Mass.-based federal court.

In an internal annual medical report, Fresenius last year touted a 27% reduction in mortality and a 22% cut in hospitalizations amongst its permanent dialysis patients over 10 years. The company accredited the positive patient outcomes to the company’s expansion into care coordination and continued innovation.

GE Healthcare (General Electric)

John Flannery, who is slated to assume the corner office at General Electric in 2018, has served as chief executive of the company’s healthcare division since 2014. There, he helped to turn around GE Healthcare, growing organic revenue by 5% and margins by 100 base points last year.

Under Flannery’s watch, the healthcare unit inked a number of deals, including a development and manufacturing deal with Check-Cap – a company developing an indigestible capsule designed for colorectal screening.

GE Healthcare also partnered with Accuray last year, collaborating on financing options for Accuray’s CyberKnife and TomoTherapy Systems. The deal, which is designed to make it easier for clinicians in Europe to offer the systems, will allow hospitals and healthcare practitioners to lease Accuray equipment and services through a turnkey offering.

In regulatory news, the FDA approved label changes for GE Healthcare’s ultrasound contrast agent, Optison. The decision removed contraindications for use in patients with cardiac shunts and for administration by intra-arterial injection – it’s the first contrast agent available in the U.S. to receive this label change, according to GE.

The company landed a reimbursement win when Cigna revised its coverage to include 3D mammography for routine breast cancer screening. GE Healthcare is one of only two companies with mammography systems on the market in the U.S. that can perform 3D breast tomosynthesis.

Royal Philips

Philips set about to redefine itself in 2016 even as it celebrated its 125th year, spun out its legacy lighting business as a separately traded concern, and dealt away its combined Lumileds and automotive lighting businesses.

Last year also marked Philips’s successful integration of its Volcano acquisition, the Dutch company told us. Philips made another big buy, closing its $2 billion play for Spectranetics in August 2017. The company also made a raft of smaller buys in personal health, diagnosis & treatment and innovation, including Electrical Geodesics, TomTec, RespirTech, Wellcentive, PathXL and the VersaVue and DynaCAD assets from iCad. And Philips sold another business, the Sonalleve MR-HIFU operation, to Profound Medical.

Looking ahead, the company said it plans to increase its productivity by lowering the cost of goods, non-manufacturing costs and “the cost of non-quality,” all while “embedding the digital transformation in every aspect of its operations.” Philips said it’s also eying its core businesses for growth, “by executing more effectively on customer partnerships, further transforming the business model from ‘transactional’ to one of ‘long-term partnerships’, with shared business goals and recurring revenue streams.”

“Philips is driving future growth and profit expansion with its shift to solutions. The company is investing strongly in research and development for value-added, integrated solutions along the health continuum, most notably in the areas of precision diagnostics, cardiology, oncology, respiratory and population health,” the company told us.

Johnson & Johnson

Medical devices are the fastest-growing business for Johnson & Johnson. The company’s medtech segment enjoyed 4% year-over-year sales growth, to $13.0 billion, during the first six months of 2017, versus 1.8% growth for the entire company.

The situation is a change from 2016, when the year’s medtech sales were slightly down even as the company’s revenue overall grew 2.6%.

“We are continuing to actively manage our portfolio, focusing on transitioning our business in higher growth areas with large unmet needs,” CEO Alex Gorsky said during a July earnings calls with analysts.

J&J has been actively acquiring and forging partnerships to further the growth. Company officials, for example, have said they are on track with their Verb Surgical robotic surgery partnership with Google’s Alphabet parent, which Gorsky has described as “computerized surgery.”

Verb Surgical is more than a robotics company; it’s a platform company, Verb Surgical CEO Scott Huennekens said during DeviceTalks West in December 2016. “There will be robotics – which are a key element – but also advanced instrumentation, advanced visualization, data analytics and machine learning,” Huennekens said.

Important acquisitions include:

• J&J made a major surgical vision care play with its $4.33 billion buyout of Abbott Medical Optics, which closed in February 2017.

• The company in July 2017 said it was taking its Pulsar Vascular and Neuravi acquisitions and combining them with its existing Codman Neuro neurological portfolio to create a new neurovascular business called Cerenovus.

• Johnson & Johnson subsidiary DePuy Synthes said in January 2017 that it had agreed to buy Interventional Spine’s expandable cages for minimally invasive spinal fusion surgeries.

• J&J subsidiary Ethicon Endo-Surgery announced in January 2017 that it had bought electrosurgical tools maker Megadyne Medical Products.

• J&J’s Ethicon in March 2017 closed on its purchase of Torax Medical and its Linx acid reflux treatment portfolio. The Linx system is made of interlinked titanium beads with magnetic cores that augment the esophageal sphincter’s barrier function, preventing reflux in patients with gastro-esophageal reflux disease. Torax has a similar device called Fenix that is designed to treat fecal incontinence.

Medtronic

Sometimes it’s not easy being big. The world’s largest medical device operation, created through the $50 billion merger of Medtronic and Covidien in early 2015, hit some operational snags in recent months: An “inadvertent human error” caused an IT systems shutdown in June, and demand is so high for Medtronic’s hybrid closed loop MiniMed 670G insulin pump system that it temporarily outstripped production capacity for the continuous glucose monitoring sensors that are part of the system.

The recent problems, though, amounted to a stubbed toe for the medical device giant, which sells everything from cardiac and vascular devices to minimally invasive therapies to restorative therapies to diabetes devices. Profits for the first quarter ended July 28, 2017 were up 9.4% year-over-year, to $1.02 billion, with sales growing 3.1% to $7.39 billion. For the fiscal year ended April 28, 2017, profits grew $13.8% to $4.03 billion, with revenue up 3.0% to $29.71 billion.

During his recent first-quarter earnings call with analysts, CEO Omar Ishrak outlined Medtronic’s three growth strategies: innovative new therapies, embrace of globalization and driving economic value for health systems.

Besides the MiniMed 670G, which launched in the U.S. in June 2017, other products driving growth include:

• The Solitaire stent retriever accesses arteries in the brain through a micro-sized catheter. It restores blood flow and removing blood clots that cause acute ischemic stroke;

• The Resolute Onyx drug-eluting stent, recently approved in both the U.S. and Japan, has a metallically dense, radiopaque inner core within its cobalt alloy wire to boost visibility during placement.

• The pill-sized Micra leadless pacemaker, already introduced in the U.S. and Europe, is coming to Japan.

When it comes to globalization, emerging markets grew 12% in the first quarter, with strong growth in countries ranging from China to Brazil to Saudi Arabia. Medtronic’s Hospital Solutions business also grew double-digits, with the company now managing cath labs and operating rooms for nearly 140 heath provider customers worldwide.

Medtronic also further streamlined through the $6 billion sale of its patient care, deep vein thrombosis and nutritional insufficiency business to Cardinal Health; the deal closed in July.

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