Kendall International Inc.
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The (literally) trials and tribulations of its parent, Tyco International, have been both irrelevant to its strongly performing medical device business, Tyco Healthcare, and maddeningly distracting at the same time. But it has shaped the company's strategy, most notably in moving the company away from acquisitions as an engine of growth, forcing Tyco Healthcare to focus more on R&D and new product development.
Dealmaking in the device industry is occasional and incremental when compared with the level of activity in pharmaceuticals, the result of that industry's maturing into a handful of dominant players, not all of which see acquisitions as strategically critical to their long-term success. The less-than-robust public market for small device companies is both symptom and cause of the device dealmaking lull. Because the markets they target are generally too small to sustain years of significant growth, few investors are willing to invest in them as stand-alone companies. And without long-term investor support, smaller firms have few options other than to sell out to large companies and little negotiating leverage when they do so.
In the early 1990s, St. Jude Medical was the market leader in its sole product area: mechanical heart valves, which placed it among the most profitable of device companies. Demographics, however, limited heart valves' future growth opportunities and St. Jude needed to diversify, moving into cardiac rhythm management (CRM), cardiology catheters, and vascular access devices, while also expanding in cardiac surgery. The diversification process went anything but smoothly, the company missed its numbers, and investors were quick to punish St. Jude for its integration missteps. In the past year, however, the company has become one of Wall Street's few device darlings, ranking number one in 2000 for returns among device stocks. The company's growth is largely the result of sticking to a strategy that has St. Jude well-positioned in CRM's traditional markets, while also poised to pursue huge new opportunities in atrial fibrillation and, to a lesser degree, congestive heart failure. And St. Jude has not forgotten its base: cardiac surgery, where the company has introduced new sutureless anastomotic technology for minimally invasive coronary bypass surgery.
Founded over 160 years ago, Germany-based B. Braun is a leading hospital supplier of medical supplies and products around the globe, combining a broad product and a strong service component. Pursuing a broad-based strategy that seeks to leverage its wide array of products, a la American Hospital Supply Corp., B. Braun officials nonetheless understand the importance of having state-of-the-art products in its many technology categories. Its US business has been less successful, raising the question why strong foreign suppliers often find it difficult to crack the US marketplace. But B. Braun is anything but a cautious, conservative, family-owned company, as its long history might suggest. From manufacturing to corporate culture, the company relentlessly pursues the latest and most up-to-date approaches.
- Medical Devices