Orthopedics Rock the 2012 J.P. Morgan Healthcare Conference

By Maria Shepherd, Data Decision Group

 

Where do orthopedic industry CEOs, the investment community and Wall Street analysts all meet in January every year? In San Francisco, Calif., at the J.P. Morgan Healthcare Conference. Attendance is by invitation only for this premier annual event. The meeting rooms and hallways are jam-packed with chairmen and presidents of Fortune 500 orthopedic device companies rubbing elbows with leaders from small startup innovators in the medical device world.

Orthopedic and other device companies are not the only sectors represented at the J.P. Morgan conference. Biotech, pharma and healthcare IT are other important components of this massive four-day event. In total, there were an estimated 395 presentations from healthcare companies.

Why This Is Important

Investor confidence is critical to medical device industry growth. By industry, medical devices finished 2011 as the fourth-largest (as defined by total equity investments into venture-backed companies) industry sector (from a total of 17 categories) with $2.8 billion invested into 339 deals.1,2 The life-sciences sector (biotech and medical devices combined) accounted for 27 percent of all venture capital dollars invested in 2011 compared to 27 percent in 2010.

2011 Investments in Venture-Backed Companies by Industry

 

While there are many investment conferences, the J.P. Morgan Healthcare Conference is, by far, the largest and most prestigious. This is the only place to see CEOs of the largest medical device companies presenting their five-year business strategies (or lack thereof), while also getting a look at the newest and hottest startup technologies in development.

If the company is publicly traded, has annual sales over $1 billion, and wants to keep its stock price high, then the CEO must present strategy and tactics that address changes in U.S. regulatory policy, emerging markets in the growing markets of India and China as well as other developing nations, the complexity ofselling in the European Union and much more, all in approximately 25 minutes.

For example, in his presentation at J.P. Morgan, Medtronic Inc.’s CEO, Omar Ishrak, reiterated his belief that there are approximately 200,000 to 300,000 people in India’s middle class who could afford many of his company’s existing technologies. His goal is to help build the healthcare infrastructure around those patients, which could lead to millions more.

If a startup company has new, disruptive technology that has proven clinical or economic performance (with data to back up claims) and wishes to be acquired or issue another round of financing, J.P. Morgan is the place to be.

2011 Number of Deals*

*Total equity investments into U.S. venture-backed companies

True Leadership and Strategy

While Ishrak’s strategy was global, Robert Palmisano, the new CEO of WrightMedical Technology Inc. in Arlington, Tenn., focused on company competencies, presenting a truly well-defined strategy at J.P. Morgan, zeroing in on Wright’s strengths in the market. It always is challenging for company leadership to find and focus on a limited number of well-selected objectives. Few CEOs have the capabilities or the stamina to execute this type ofrigorous strategy. Wright’s CEO hasselected the extremities market as his top target focus, with special emphasis in the foot and ankle segment where the firm is a recognized market leader.

Palmisano stated that Wright will be focusing on the “vital few” product development programs and will provide new product development resources that are aligned with the strategy. For example, he said the company would be driving growth in the foot and ankle market with a steady stream of new products, by accelerating medical education, and improving sales force productivity. Plans also call for

improved orthopedic reconstruction division efficiency through focused research and development, sales and marketingactivities, as well as by improving instrument and inventory productivity. In addition, the company plans to increase cash generation through a focus on working capital and reducing inventory, as well as targeted capital spending.

It remains to be seen if the strategy will be successful, but given some of the company’s recent difficulties, the plan makes Wright a company to watch in the orthopedic extremities market.

It’s All About the Investing

The growth engine for our industry is the startup company and investor confidence is its lifeblood. New, highly disruptive products for minimally invasive techniques and emerging markets are the drivers of our industry. Persistent issues from 2008-2011 are expected to continue, but anacquisition-hungry industry needs startups and must prove that they have the ability to overcome industry obstacles.

 

References:

1. www.masshightech.com/stories/2012/01/16/daily41-Study-Venture-investment-rose-22-in-2011.html

2. www.pwcmoneytree.com/MTPublic/ns/nav.jsp?page=industry

 

Editor’s note: Readers are invited to submit market data and trend questions to Maria Shepherd. Periodically, selected questions will be presented in this column, with answers from Maria. Send your ideas and questions to [email protected].

 

 

Maria Shepherd, founder of Data Decision Group, has 20 years of leadership experience in medical device and life-sciences marketing in small startups and top-tier companies. Her firm quantitatively and qualitatively sizes opportunities, evaluates new technologies, and assesses prospective acquisitions for medtech companies. Shepherd recently was appointed to the board of the MSBiV Medtech Investment Committee. She can be reached at (617) 548-9892 andonline at [email protected] or www.ddecisiongroup.com.