Medical Device Companies: Navigating Global Economic Challenges

Economic Impact on Sales and Revenue

Medical device companies are experiencing varied economic impacts on sales and revenue. Boston Scientific reported significant growth across multiple segments, despite foreign currency fluctuations. Abbott highlighted the unpredictability of foreign exchange rates affecting sales growth. Stryker expects increased full-year organic sales growth, while Zimmer Biomet anticipates a negative impact from currency exchange rates. Medtronic foresees accelerated growth with new technology launches.

"Not available in the European Economic Area. Net sales for the second quarter by business and region: Increase/(Decrease) Three Months Ended June 30, Reported Basis Impact of Foreign Currency Fluctuations Operational Basis Impact of Recent Acquisitions/Divestitures Organic Basis (in millions) 2024 2023 Endoscopy $ 676 $ 631 7.1 % 1.3 % 8.4 % (0.5) % 7.9 % Urology 525 485 8.2 % 0.9 % 9.1 % — % 9.1 % Neuromodulation 282 244 15.5 % 0.7 % 16.2 % (12.5) % 3.7 % MedSurg 1,483 1,360 9.0 % 1.0 % 10.1 % (2.5) % 7.6 % Cardiology 2,047 1,704 20.1 % 1.9 % 22.0 % — % 22.0 % Peripheral Interventions 590 535 10.2 % 2.1 % 12.3 % (2.8) % 9.4 %" --- (BSX, press release, 2024/07/24)

"Note, that Abbott has not provided the GAAP financial measure for organic sales growth on a forward-looking basis because the Company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth." --- (ABT, earning call, 2024/Q1)

"With one quarter behind us, we now expect an increased full year organic sales growth of 8.5% to 9.5% and we are increasing our adjusted EPS range to $11.85 to $12.05 a share." --- (SYK, earning call, 2024/Q1)

"Based on recent foreign currency exchange rates, we expect foreign currency to negatively affect year-over-year net sales by approximately 1.0 percent." --- (ZBH, sec filing, 2024/Q2)

"Combined, they made up 20% of revenue and grew high-single-digits. And we expect that their contribution to overall growth will accelerate over the coming quarters as we launch new technology." --- (MDT, earning call, 2024/Q4)

Supply Chain Disruptions

Medical device companies are grappling with supply chain disruptions, including increased transportation costs, product shortages, and inflation-driven operating expenses. Specific disruptions have impacted product lines and global operations, leading to financial pressures on hospitals and increased costs for raw materials and labor.

"This may include decreases in the demand for our products, disruptions to our operations or the operations of our suppliers and customers, disruptions to our supply chain, or increases in transportation costs." --- (BDX, sec filing, 2024/Q2)

"Neurovascular had US organic sales growth of 2.3% which reflects some US supply disruption related to flow diversion products." --- (SYK, earning call, 2024/Q2)

"Additionally, hospitals are facing significant financial pressure as supply chain constraints and inflation drive up operating costs, higher interest rates make access to credit more expensive, and fiscal stimulus programs enacted during the COVID-19 pandemic wind down." --- (ISRG, sec filing, 2024/Q1)

"• The impact of inflation and disruptions in our global supply chain on BD and our suppliers (particularly sole-source suppliers and providers of sterilization services), including fluctuations in the cost and availability of oil-based resins and other raw materials, as well as certain components, used in the production or sterilization of our products, transportation constraints, disruptions and delays, product shortages, energy shortages or increased energy costs, labor shortages or disputes, and increased operating and labor costs." --- (BDX, sec filing, 2024/Q3)

"Do we see spotty issues like I mentioned, relative to neurovascular? Yes. We saw a little bit of a supply disruption as it relates to our medical business outside of the United States as well." --- (SYK, earning call, 2024/Q2)

Regulatory Challenges in Global Markets

Johnson & Johnson leverages its deep regulatory and market access expertise to navigate global challenges, while Boston Scientific adapts its strategies based on regional data. Both companies emphasize the importance of differentiated innovation and strategic acquisitions to secure premium pricing and achieve regulatory milestones in diverse markets.

"We are confident Johnson and Johnson's global footprint, professional education capabilities, deep regulatory and market access expertise and well established health system and physician relationships will enable the Shockwave business to achieve the full potential of its differentiated platform." --- (JNJ, M&A Announcement, 2024/04/05)

"Depending on what the data show, then we're going to be able to establish what is our regulatory strategy in the U. S. I think important to say with all of this, the valve continues to do very well in Europe." --- (BSX, conference, 2024/05/14)

"I do think we benefit from the global nature of our business. While there are pockets cost containment efforts that we're managing, like VBP in China, we see tremendous opportunity to really secure a premium pricing, especially where we have differentiated innovation.And especially now that we're entering or are entering is like cardiovascular of significant unmet need, there is tremendous opportunities for us to ensure that we secure premium pricing for truly differentiated innovations, especially in areas like electrophysiology, in heart recovery with Abiomed, and more recently with Shockwave. Thank you." --- (JNJ, earning call, 2024/Q2)

"Additionally, as Shockwave continues to advance its robust pipeline, we will leverage Johnson and Johnson's broad global presence and infrastructure to accelerate expansion.Shockwave will benefit from our trusted well established relationships with healthcare systems and physicians around the world in addition to our deep regulatory and market access expertise and professional education capabilities." --- (JNJ, event transcript, 2024/04/05)

"As we continue to bring new innovations to market and execute against clinical and regulatory milestones, Innovative Medicine is well-positioned to achieve sustainable growth in both the near and long-term.Turning to MedTech, we continue to advance our pipeline, launch new commercial products and integrate strategic acquisitions that broaden and further differentiate our portfolio." --- (JNJ, earning call, 2024/Q2)

Innovation and R&D Investments

Medical device companies are prioritizing R&D investments to drive innovation and future growth. Intuitive Surgical, Boston Scientific, Edwards Lifesciences, Medtronic, and Stryker all emphasize increased R&D spending to develop new technologies and maintain product pipelines, reflecting a strong commitment to innovation despite economic challenges.

"We continue to prioritize investments in R&D to fund innovation and future growth. During the quarter, we added approximately 550 employees, of which roughly half were in our manufacturing operations to support growth in customer demand." --- (ISRG, earning call, 2024/Q2)

"R&D expenses increased as a result of investments across our businesses in order to maintain a pipeline of new products that we believe will contribute to profitable sales growth." --- (BSX, sec filing, 2024/Q1)

"For the full year 2024, we continue to expect R&D to be 17% to 18% of sales as we invest in developing new technologies and generating evidence for our structural heart disease initiatives, with the goal of treating even more patients. Turning to" --- (EW, earning call, 2024/Q1)

"And on operating expenses, we continue to make appropriate investments in R&D to drive our future growth." --- (MDT, earning call, 2024/Q4)

"This favorability primarily reflects positive pricing trends and improved material cost and manufacturing efficiencies. Adjusted R&D spending was 6.5% of sales, which was approximately 10 basis points higher than the second quarter of 2023." --- (SYK, earning call, 2024/Q2)

Market Expansion Strategies

Medical device companies are leveraging data, innovative research, and strategic diversification to expand their markets. Abbott focuses on data-driven U.S. market dynamics, Medtronic explores new commercial prospects through groundbreaking research, Johnson & Johnson capitalizes on pipeline opportunities, Boston Scientific emphasizes innovation and category leadership, and Zimmer Biomet diversifies into faster growth markets.

"Now, that’s good, right - that provides a market expansion dynamic here in the U.S., but-.I mean, I’m really encouraged by some of the data that I’m seeing, and I think it starts with the data, right?" --- (ABT, earning call, 2024/Q2)

"Groundbreaking Research Creates Untapped Market Potential Innovative research in fields such as hypertension has also led to the expansion of new commercial prospects." --- (MDT, press release, 2024/07/16)

"I was just wondering if you can speak at all to how much of the value of the deal is driven by IVL for the current cat and pad markets versus either market expansion opportunities or the pipeline opportunities as I know Shockwave has a pretty deep pipeline set across Javelin, E8 and C2." --- (JNJ, event transcript, 2024/04/05)

"Our top tier growth continues to be fueled by innovation, clinical evidence generation, and our strategy of category leadership.Consistent with prior quarters, most of our businesses and regions grew well above market." --- (BSX, earning call, 2024/Q2)

"In addition to driving results in core markets, we’d also focus on diversifying our portfolio into more attractive, faster growth in markets with a goal of increasing our WinGuard, weighted average market growth rate. We" --- (ZBH, earning call, 2024/Q1)

Competitive Landscape and Market Positioning

Stryker is gaining international market share by converting competitive accounts, while Edwards Lifesciences maintains stable competitive positioning with strong U.S. sales growth. Boston Scientific and Medtronic are focusing on specific product opportunities and market expansion, respectively. Abbott is balancing share gain opportunities with competitive risks in the CGM market.

"Because our market shares are actually a little bit lower internationally, as we get Makos placed more of that business actually is coming from competitive accounts than they were in the United States." --- (SYK, earning call, 2024/Q2)

"competitive position and selling prices were both stable. In the U.S., our year-over-year first quarter TAVR sales growth rate was higher than our global constant currency growth rate." --- (EW, earning call, 2024/Q1)

"And then data HRS on the Leivas Pacemaker Empower, Curious how to think about that opportunity and how you think about the competitive landscape there?" --- (BSX, conference, 2024/05/14)

"So cumulatively, we expect to gain some share. But I think it's market expansion because we're getting more as we from open to laparoscopic to robotic, the pricing is better, higher as you go down like across that continuum." --- (MDT, conference, 2024/06/11)

"I was hoping you could just help or share your thoughts on the share gain opportunity in integrated pump segment of CGM market versus the share loss risk in the Type 2 non-insulin cash pace segment with a competitive launch share early in 2024. I just have one follow up." --- (ABT, earning call, 2024/Q1)

Customer Behavior and Demand Trends

Medical device companies are experiencing varied customer behaviors and demand trends. Customers face financial pressures, leading to cautious capital spending (ISRG). However, positive feedback and strong early demand indicators are noted (BDX, EW). Additionally, rising hypertension cases are expected to boost demand for specific devices (MDT).

"We continue to see our customers challenged by staffing shortages, inflation, debt servicing costs, and other financial pressures, particularly in the U.S. As a result, we expect our customers to continue to be cautious in their overall capital spending." --- (ISRG, sec filing, 2024/Q1)

"Customer feedback has been very positive and we gained a market position in the quarter." --- (BDX, earning call, 2024/Q3)

"So I guess it sounds like the early demand indicators are really strong there." --- (EW, conference, 2024/06/05)

"An increase in hypertension cases is anticipated to generate demand for renal denervation devices during the projected period." --- (MDT, press release, 2024/07/16)

"That also allows us to get access to an increasing number of patients, particularly as we look globally. So this framework, commonly understood by customers and integrate into how the company operates and thinks about its business and how we engage with customers in terms of the language which we use." --- (ISRG, event transcript, 2024/04/25)