MTI 100: Medtech Giants Trade Places

The global medtech industry has a new leader, after a bulked-up Medtronic bumped Johnson & Johnson from first place. But astute M&A deals, as well as divestments and impact from poor sales and negative currency effects, have also led to other movements in the medtech rankings, according to Medtech Insight's annual review at the top medical device companies.

It took some time, but more than a year after Medtronic PLC completed its historic $43 billion merger with Covidien, the medtech giant has finally made it to the top of the leaderboard, a position long-occupied by Johnson & Johnson.

The 2016 edition of the MTI 100 – Medtech Insight's roll call of the top 100 companies ranked according to their medical device- and diagnostics-related sales for their most recent full fiscal year – shows Medtronic easily beat J&J to the number one spot. (Also see "MTI 100: The Rise And Fall Of Medtech's Giants" - Medtech Insight, 16 Dec, 2016.) Last year, Medtronic had only included one fiscal quarter's revenue from the acquired Covidien business and hence, fell short of overtaking its rival. But with a full year now in the bag, Medtronic's fiscal 2016 revenue of $28.82 billion – an impressive 42% jump from the previous year's top-line – was over $3 billion more than J&J's revenue generated by its now pared-down medical device segment. J&J's medtech top-line sank from $27.52 billion in 2014 to $25.14 billion in 2015, mainly due to gaps left by the sale of two significant businesses, Ortho-Clinical Diagnostics and Cordis.

And it's not just the top two spots that have changed. Apart from GE Healthcare and Siemens Healthineers (the new brand name for Siemens Healthcare GMBH as of May 2016), which have retained their respective number three and four positions from last year, there has been some shuffling among the other top 10 companies. (See Exhibit 1.)

Exhibit 1

SOURCE: Medtech Insight

Cardinal Health Inc. and Danaher Corp. both went up two positions. And Becton Dickinson & Co. made its debut in the top 10 by jumping four positions from number 13 to number 9 this year. Like Medtronic, BD benefited from a significant acquisition, the $12.2 billion deal for medication management and patient care company CareFusion Corp., which closed in March 2015. [See Deal] Fiscal 2016, which ended September 30, 2016 for BD, included the first full-year contribution from the acquired assets, which inflated BD's medtech-related revenue from $7.76 billion in fiscal 2015 to $9.96 billion in fiscal 2016.

Among last year's top 10 players that slipped down in the rankings – though only by one place – were Philips Healthcare, Roche Diagnostics Corp. and Stryker Corp. Both Philips and Stryker did see growth in revenue and were largely shoved out of the way by the aforementioned climbers.

Abbott Laboratories Inc. dropped out of the top 10 list this year, falling three places to number 11. The company saw its medtech-related revenue decrease from $10.18 billion in 2014 to $9.71 billion in 2015, as its outside-US diagnostics and medical device sales took a hit from unfavorable currency effects. Additionally, 2015 was a quiet year for the normally acquisitive Abbott, which meant it did not benefit from potential new sources of revenue. That said, Abbott returned to form in 2016, announcing two major deals – the first for IVD company Alere Inc. (ranked number 32 in the MTI 100) and the other for St. Jude Medical Inc. (ranked number 17). [See Deal][See Deal] While the St Jude deal looks to be going ahead, the Alere acquisition has now hit the rocks after a series of financial and regulatory problems chez Alere emerged and Abbott is working to extricate itself from the deal. (Also see "Abbott Steps Up Effort To Abandon Alere Deal" - Medtech Insight, 7 Dec, 2016.)

What's Ahead In 2017

2016 was much quieter than 2015 in terms of dealmaking, with fewer big-buck transactions and more bolt-on purchases. (Also see "M&A Analysis: November Deal Making Hits Whole New Low" - Medtech Insight, 13 Dec, 2016.) If Abbott does succeed in terminating its agreement with Alere, the IVD company will likely stay put in next year's league table. If Abbott completes the acquisition of St Jude Medical, the latter will drop out of next year's list, but the number of those bowing out should be fewer than the previous years. Barring other factors that might significantly impact these top players' performance, 2017's list will likely see a more settled picture and less movement than it did in a year marked by significant consolidation.

This article is adapted from In Vivo's sister publication Medtech Insight.