Growth Pursuits

So many factors come into play. Even when economic conditions are superb, finding the right balance for success is a challenge. You’re providing a product or service that you think the market needs and will demand. You market and advertise to grow demand, and thus increase sales. Then it’s time to expand the product line or perhaps add more services. Maybe more than one location becomes necessary to satisfy customers clamoring for whatever it is you’ve got to offer. That’s a pretty rosy scenario, no? Even a little competition would be healthy in an ideal world like that. Too much business is a problem we’d all like to have, I’m sure.

But what happens when you’ve got a great product in a sluggish economy and your customers are cutting back to save money because they’re having a challenging time as well? Or maybe you have a perfect product and government regulators have moved the goal posts a few times on you, delaying your product’s launch. This, in turn, allows the competition to release its version first and gain valuable time and market share. The best mousetrap in the world would be left holding its cheese under those circumstances.

How do you grow a business then? I wish I had the answers.

These are the questions that orthopedic firms and other medical device companies have been asking since the recession roller coaster started. In this issue of Orthopedic Design & Technology, we conduct our annual review of the top 10 publicly traded medical device manufacturers (sorted by fiscal 2010 revenue). We even included a few smaller companies to keep an eye on.

As you’ll see on pages 32-66, most of the firms on the list managed to grow sales. Granted,the majority of it wasn’t whopping double-digit gains, but steady (and respectable in these tougher times) growth was still evident. Firms often reshuffled divisions and reorganized—beyond layoffs, which are short-term—to make their companies easier to manage and more nimble in the long run.

Part of the answer to growing a business is continued innovation. Without a doubt, companies in this installment remained focused on improving their product pipelines—which isn’t a surprise because among all of the device sectors, orthopedic companies excel at “newer and better.”New product rollouts were robust. Research and development spending was up in many cases. Take for example Stryker Corp., the top company on this year’s list. Its technologies and processes produced 108 new U.S. patents in 2010, indicating a vital research and development stream. Company executives reported larger investments in innovation going forward. Zimmer Holdings Inc., number three on this year’s list, spent $220 million in 2010 on R&D, up from $205 million the year before, which was up compared with the year before that. “The rapid commercialization of innovative new materials, orthobiologics products, implant and instrument designs and surgical techniques remains one of our core strategies, and continues to be an important driver of sales growth,” David Dvorak, Zimmer’s president and CEO, wrote in the company’s 2010 annual report.

Expanding international markets also provided new sales avenues. In Zimmer’s case, at the end of 2010 the company purchased one of China’s leading orthopedic implant manufacturers, Beijing Montagne MedicalDevice Co., Ltd., and expects the reconstruction market in China to double in size to more than $3 billion by 2015. But, a word of caution. Even though countries such as Brazil, Russia, India and China (the “BRIC” countries) seem to be high on many companies’ target lists in the coming years, interest may slow as more onerous regulatory requirements (sound familiar?) are put into place—especially in China. Once the playing field is leveled, then what? Back to square one. Once again, innovation becomes the name of the game. And boy, this game can be tiring—but exciting and most definitely worthwhile. The life-changing technology these companies develop are true success stories for the millions of people they treat—no matter where they happen to live.

Christopher Delporte

Editorial Director, Medical Device Group