The group of companies that make up the medical device industry are a complicated and diverse set of companies. Investing in these companies can often be confusing, and selecting one particular company to invest in can be very difficult. The challenge becomes even more difficult when you realize that this industry is composed of many sub sectors, making a single selection almost impossible. The following are sub sectors that are often identified within the medical device industry.
Medical device companies are also considered a little less sexy when compared to the glamour of the drug industry, but they include some of the genuine miracles of modern medicine: pacemakers, artificial joints, replacement heart valves, scanners, and radiotherapy machines. This vast industry directly employs more than 400,000 individuals and is indirectly responsible for almost 2 million more that supply and support this industry. But more important than providing employment, these company's products are a critical part of modern medical care, including everything from CT scanners and pacemakers to blood pressure cuffs and robots used by surgeons.
According to the US Government, the US remains the largest medical device market in the world (approximately 38 percent of the global medical device market in 2012) with a market size of around $110 billion, and it is expected to reach $133 billion by 2016, a 21% increase. There are more than 6,500 medical device companies in the U.S., mostly small and medium-sized enterprises. More than 80 percent of these medical device companies have fewer than 50 employees, and many (notably innovative start-up companies) have little or no sales revenue.
Investment in medical device research and development more than doubled during the 1990s, and research and development investment in the domestic sector remains more than twice the average for all U.S. manufacturers. Unfortunately for most medical device companies, they have to ramp up sales long before they ever become profitable, if they become profitable at all. Due to the long, draconian and sometimes unpredictable regulatory process that must be negotiated before a product can be sold, it can take from $70 million to $100 million in total sales before these businesses make their first cent of profits. This is truly a tough and very competitive industry.
Below is a list of the top 20 (by market capitalization) medical device companies. I have provided hot spots for each of the company's website, their current price as presented on Yahoo.com, and the current daily chart as presented by stockcharts.com. I have listed these so that in the future I can do further analysis on each of them. For today, I'm only interested in comparing the top two companies.
- Electro-medical equipment: Includes a variety of powered devices, such as pacemakers, patient-monitoring systems, MRI machines, diagnostic imaging equipment (including informatics equipment), and ultrasonic scanning devices.
- Irradiation apparatuses: Includes X-ray devices and other diagnostic imaging, as well as computed tomography equipment.
- Surgical and medical instruments: Includes anesthesia apparatuses, orthopedic instruments, optical diagnostic apparatuses, blood transfusion devices, syringes, hypodermic needles, and catheters.
- Surgical appliances and supplies: Includes artificial joints and limbs, stents, orthopedic appliances, surgical dressings, disposable surgical drapes, hydrotherapy appliances, surgical kits, rubber medical and surgical gloves, and wheelchairs.
- Dental equipment and supplies: Includes equipment, instruments, and supplies used by dentists, dental hygienists, and laboratories. Specific products include dental hand instruments, plaster, drills, amalgams, cements, sterilizers, and dental chairs.
Medical device companies are also considered a little less sexy when compared to the glamour of the drug industry, but they include some of the genuine miracles of modern medicine: pacemakers, artificial joints, replacement heart valves, scanners, and radiotherapy machines. This vast industry directly employs more than 400,000 individuals and is indirectly responsible for almost 2 million more that supply and support this industry. But more important than providing employment, these company's products are a critical part of modern medical care, including everything from CT scanners and pacemakers to blood pressure cuffs and robots used by surgeons.
According to the US Government, the US remains the largest medical device market in the world (approximately 38 percent of the global medical device market in 2012) with a market size of around $110 billion, and it is expected to reach $133 billion by 2016, a 21% increase. There are more than 6,500 medical device companies in the U.S., mostly small and medium-sized enterprises. More than 80 percent of these medical device companies have fewer than 50 employees, and many (notably innovative start-up companies) have little or no sales revenue.
Investment in medical device research and development more than doubled during the 1990s, and research and development investment in the domestic sector remains more than twice the average for all U.S. manufacturers. Unfortunately for most medical device companies, they have to ramp up sales long before they ever become profitable, if they become profitable at all. Due to the long, draconian and sometimes unpredictable regulatory process that must be negotiated before a product can be sold, it can take from $70 million to $100 million in total sales before these businesses make their first cent of profits. This is truly a tough and very competitive industry.
Below is a list of the top 20 (by market capitalization) medical device companies. I have provided hot spots for each of the company's website, their current price as presented on Yahoo.com, and the current daily chart as presented by stockcharts.com. I have listed these so that in the future I can do further analysis on each of them. For today, I'm only interested in comparing the top two companies.
Medtronic Inc and Abbott Laboratories are the two largest medical device companies and they are both on the list of Dividend Aristocrats. As a result, for me these two companies are a good place to begin to get acquainted with this industry. Medtronic operates in two segments: Cardiac and Vascular Group, and Restorative Therapies Group, while Abbott Laboratories operates in four different segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Vascular Products.
Analysis of Medtronic Inc is pretty straight forward. Review the fundamentals, view the chart, and make a decision on whether to buy or sell the stock. Abbott Laboratories, on the other hand, is a little more difficult to analyze. Last year Abbott divested the pharma arm of the business and became solely a medical device company. Abbott's divested company became AbbVie Inc. (ABBV), a research-based biopharmaceutical company. Investors who owned stock in Abbott Laboratories before the split now own stock in both companies and have done very well for themselves. For this analysis, however, the comparison of historical fundamentals is based on information prior to the split, so a definitive comparative conclusion may be difficult to conclude.
That said, a true comparison would have to look at future projections for Abbott to decide if an investment is appropriate. With the EPS growing from $1.39 (ttm) today to an estimated $2.48 next year, the P/E ratio drops from 28 today to 16 next year and the PEG should drop similarly. These are great numbers, and if estimates are true, this company is growing fast. Hopefully with the information below and a whole bunch of thinking, I'll have the insight to determine which company is a good entry investment into this industry.
Good Luck and Good Trading.
Analysis of Medtronic Inc is pretty straight forward. Review the fundamentals, view the chart, and make a decision on whether to buy or sell the stock. Abbott Laboratories, on the other hand, is a little more difficult to analyze. Last year Abbott divested the pharma arm of the business and became solely a medical device company. Abbott's divested company became AbbVie Inc. (ABBV), a research-based biopharmaceutical company. Investors who owned stock in Abbott Laboratories before the split now own stock in both companies and have done very well for themselves. For this analysis, however, the comparison of historical fundamentals is based on information prior to the split, so a definitive comparative conclusion may be difficult to conclude.
That said, a true comparison would have to look at future projections for Abbott to decide if an investment is appropriate. With the EPS growing from $1.39 (ttm) today to an estimated $2.48 next year, the P/E ratio drops from 28 today to 16 next year and the PEG should drop similarly. These are great numbers, and if estimates are true, this company is growing fast. Hopefully with the information below and a whole bunch of thinking, I'll have the insight to determine which company is a good entry investment into this industry.
Good Luck and Good Trading.
| Medtronic, Inc.  | Abbott Laboratories  |
| 15 June 2014 Price $60.70 1yr Target $65.63 Analysts 16 1yr Cap Gain 8.12% Dividend $1.12 Yield 1.85% 1yr Tot Return 9.97% Market Cap $60.64 Bil 3yr EarnGR 6.43% 5yr EarnGR 11.56% 3yr DivGR 8.15% 5yr DivGR 15.77% Payout Ratio 37% Beta 1.05 EPS (ttm) $3.02 EPS next yr $4.36 P/E 20.10 PEG 3.05 Debt/Equity .61 ROA 8.40% ROE 16.10% | 15 June 2014 Price $39.79 1yr Target $41.53 Analysts 18 1yr Cap Gain 4.37% Dividend $0.88 Yield 2.21% 1yr Tot Return 6.58% Market Cap $59.76 Bil 3yr EarnGR (2012) 0.27% 5yr EarnGR (2012) 9.99% 3yr DivGR (2012) 1.22% 5yr DivGR (2012) 5.01% Payout Ratio 58% Beta .58 EPS (ttm) $1.39 EPS next yr $2.48 P/E 28.63 PEG 2.42 Debt/Equity .31 ROA 6.90% ROE 12.50% |
 Medtronic, Inc. Headquarters |  Abbott Laboratories Headquarters |
| Medtronic, Inc. (MDT) manufactures and sells device-based medical therapies worldwide. The company operates in two segments, Cardiac and Vascular Group, and Restorative Therapies Group. The Cardiac and Vascular Group’s products include pacemakers; implantable defibrillators; leads and delivery systems; ablation products; electrophysiology catheters; products for the treatment of atrial fibrillation; information systems for the management of patients with cardiac rhythm disease management (CRDM) devices; coronary and peripheral stents and related delivery systems; therapies for uncontrolled hypertension; endovascular stent graft systems; heart valve replacement technologies; cardiac tissue ablation systems; and open heart and coronary bypass grafting surgical products. The Restorative Therapies Group offers products for various areas of the spine; bone graft substitutes; biologic products; trauma, implantable neurostimulation therapies, and drug delivery devices for the treatment of chronic pain, movement disorders, obsessive-compulsive disorder (OCD), overactive bladder, urinary retention, and fecal incontinence and gastroparesis; external insulin pumps; subcutaneous CGM systems; products to treat conditions of the ear, nose, and throat; and devices that incorporate advanced energy technology. It also manufactures and sells image-guided surgery and intra-operative imaging systems; and provides Web-based therapy management software solutions. The company serves hospitals, physicians, clinicians, and patients in approximately 140 countries. Medtronic, Inc. was founded in 1949 and is headquartered in Minneapolis, Minnesota. (Daily Chart) (Weekly Chart) | Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. Its Established Pharmaceutical Products segment offers branded generic pharmaceuticals for the treatment of pancreatic exocrine insufficiency, irritable bowel syndrome or biliary spasm, pain, fever, inflammation, hypothyroidism, gynecological disorders, intrahepatic cholestasis or depressive symptoms, physiological rhythm of the colon, dyslipidemia, and hypertension, as well as provides anti-infective and influenza vaccines. The company’s Diagnostic Products segment provides diagnostic systems and tests, such as immunoassay and clinical chemistry systems; assays for screening and diagnosis for drugs of abuse, cancer, therapeutic drug monitoring, fertility, and physiological and infectious diseases; genomic-based tests; hematology systems and reagents; and diagnostic systems and tests for blood analysis, as well as instruments that automate the extraction, purification, and preparation of DNA and RNA from patient samples, and detects and measures infectious agents. Its Nutritional Products segment offers pediatric and adult nutritional products comprising various forms of prepared infant and follow-on formula. The company’s Vascular Products segment provides coronary, endovascular, vessel closure, and structural heart devices for the treatment of vascular disease. Abbott Laboratories also offers blood glucose monitoring meters, test strips, and data management software and accessories for people with diabetes; and medical devices for the eye, including cataract surgery, LASIK surgery, contact lens care products, and dry eye products. The company primarily serves retailers, wholesalers, hospitals, health care facilities, laboratories, physicians’ offices, and government agencies. The company was founded in 1888 and is headquartered in Abbott Park, Illinois. (Daily Chart) (Weekly Chart) |
Lake Breaking News
MINNEAPOLIS AND DUBLIN - June 15, 2014 - Medtronic, Inc. (NYSE: MDT), a global leader in medical technology, services and solutions, and Covidien plc (NYSE: COV), a global healthcare technology and medical supplies provider, today announced that they have entered into a definitive agreement under which Medtronic has agreed to acquire Covidien in a cash-and-stock transaction valued at $93.22 per Covidien share, or a total of approximately $42.9 billion, based on Medtronic's closing stock price of $60.70 per share on June 13, 2014.
| The entire press release announcing the agreement under which Medtronic will acquire Covidien can be downloaded from the file located to the right. | 
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