What Recession? How Biomedical Device Companies Thrived in a Bad Economy

NEW YORK, Jan. 31, 2012 /PRNewswire/ -- The biomedical devices industry grew, invested, and prospered from 2007 to 2009, flouting an overwhelming trend that saw many of the world's largest companies collapse during the worst economic climate since the Great Depression. How did they do it? A new analysis of this industry from WTP Advisors, the global tax and business advisory firm, reveals three key traits that helped recession-proof the top independent biomedical device makers around the world, and determines whether or not their success is sustainable over the long-term.

The study is published in the current online edition of the biomedical industry journal MD+DI.

"In short, our study shows that the best of biomedical device makers succeed by making very little, very well, for sale at very high prices," says lead author, Yair Holtzman, director at WTP Advisors and Global Life Sciences practice leader.

The authors looked at 25 of the top independent biomedical device makers worldwide[1] and analyzed their business strategies, financial results, marketing investment, product portfolios, and research and development to better understand what drove growth and profitability in a time of worldwide downturn.  They found three common characteristics shared by the most successful of the 25 firms that appeared to contribute to their growth during the recession, and are still a factor today, including:

• High Value-Added Manufacturing: Building advanced technology products in developed markets while adding a very high level of value to base costs has and will continue to do well for this sector.  For highly differentiated products sold as customized solutions, the U.S. and Europe have been great places to establish and grow businesses.
• Increased Marketing Efforts: These companies continued to increase spend on marketing efforts during the Great Recession of the last couple of years (2008-2010).
• Investment in Research & Development and New Products: The most successful biomedical device companies developed a robust pipeline of new products and R&D capabilities, which allowed them to navigate challenging times successfully. Even during the great recession they were increasing their R&D spend.

However, Holtzman warns, "Despite the unparalleled success of the biomedical device industry from a 10,000 foot view, our close study reveals operational fissures that, if left unchecked could threaten future growth."

For instance, some firms, having grown through acquisition of start-ups and by purchasing of piece parts of organizations now have too many plants and too many labs to be efficient.

Holtzman believes that consolidation will be a key driver facilitating growth over the coming years and that companies should sweep up the collections of purchased parts and turn these businesses into coherent and focused companies in order to achieve maximum efficiency.

In the future, the industry review reveals that the big opportunity for the biomedical device business – one already being grasped by the best in the industry – will be to move beyond the sometimes bumpy revenue stream from selling things, and migrate to a business model focused on selling systems that provide a point of control and differentiation (through software) or that yield sustained revenues from related consumable products used in caring for patients.

"This is the kind of strategy that worked for King Gillette when his business first adopted the razor and blades model, and one that has also worked for IBM as it has migrated from a hardware business to one driven by sustained revenue streams from software and services," Holtzman says.

Going forward, Holtzman concludes, biomedical device companies will need to demonstrate that a particular intervention improves a specific patient outcome and is more cost effective than existing alternative treatments available on the market.

WTP Advisors is a leader in tax and business advisory services for a global marketplace. Our highly skilled professionals equipped with years of industry experience, coupled with our cutting-edge technologies, make substantive and long-term differences to an organization's profitability. WTP Advisors is headquartered in White Plains, N.Y., with offices across the Americas, Asia and Europe.

[1] The organizations that were examined in this analysis include:  Abbott Labs, Alcon, B. Braun, Baxter, Beckman Coulter, Becton, Dickinson, Biomet, Inc., Boston Scientific, C R Bard, Inc., CareFusion, Covidien, Danaher, Fresenius Medical Care, Getinge AB-B, Hospira, Medtronic, Smith & Nephew, Inc., St. Jude Medical, Stryker, Synthes, Terumo, Tornier, Varian Medical, Wright Medical, Technology, and Zimmer Holdings.

SOURCE WTP Advisors

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

440k+
Newsrooms &
Influencers

9k+
Digital Media
Outlets

270k+
Journalists
Opted In

GET STARTED