No Fiscal Flat-lining In This Medical Sector
BY MARILYN ALVA
Monday, September 15, 2003
INVESTOR'S BUSINESS DAILY
Michael Flannery nearly took his last breath in August at a baggage claim area of Pittsburgh International Airport, where he collapsed in cardiac arrest.
But the airport had an automatic external defibrillator hanging on a nearby wall. A patrolling officer, who had been trained to use the device, grabbed it and shocked the 59-year-old traveler's heart into a normal beat.
The Pittsburgh airport is one of several that have installed automated external defibrillators, or AEDs. The devices are smaller and more user-friendly than their hospital-based counterparts.
They're also among the fastest-growing medical products on the market today. You'll find them in schools, shopping malls — even some homes.
Rising Awareness
AEDs have been available for about 15 years, says Richard Packer, chief executive of Zoll Medical Corp., (ZOLL) which makes the devices. "But people are only now recognizing the need for one and that they are suitable for a lay person to use."
Rising awareness of AEDs and other devices has helped push financial growth at companies that make medical gear. Consider:
• Annual sales of stents are expected to more than double to $5 billion by the end of next year, fueled by a surge in drug-coated stents, analysts say.
• Sales of sleep apnea systems are expected to exceed $600 million this year vs. less than $400 million a few years ago.
• The imaging market grows 9.3% annually, estimates research firm Frost & Sullivan.
• Combination PET/CT scanners generate some $500 million in annual sales and grow about 20% a year, thanks in large measure to adoption by heart and cancer specialists, says Monali Patel, medical imaging manager at Frost & Sullivan.
As a group, the medical systems and equipment sector ranks No. 21 among the 197 industries listed by IBD. Players range from billion-dollar outfits like Varian Medical Systems (VAR) to much smaller firms, like BioLase Technology Inc., with less than $40 million in annual revenue.
Longer Lives, More Bucks
The common denominator is that each firm benefits from a population that is growing older.
"Quite frankly, (medical gear is) improving patient outcomes, and that's the bottom line," said analyst David Bouchey of C.E. Unterberg, Towbin. "People are living longer and they are living better."
Some estimate that the medical equipment and systems industry generates $50 billion in annual sales.
The imaging market alone took in $18.5 billion in product revenue worldwide last year, according to Frost & Sullivan. Sales for patient monitors hit $6.5 billion, led by $2.5 billion for diabetes-related gear.
Medical gear makers aren't necessarily developing new products. CT scans have been around three decades. The difference is, today's versions are a lot more effective. For example, they can now be used for cardiac calcium scoring to detect calcified plaque in arteries.
"That's something you couldn't do with an older scanner because the image resolution and quality wasn't as good," Patel said.
The medical equipment sector has gotten another lift from increased reimbursement rates. In early August, the Centers for Medicare and Medicaid Services, or CMS, increased payment rates for PET scans.
The CMS also recently said it would expand national coverage of implantable cardiac devices to include patients with a previous heart attack, among others.
As far as new technologies go, analysts see strong potential for wireless medical monitors and neuromodulation, a nerve-site stimulation designed to treat patients with central nervous disorders.
Leerink Swann estimates the nascent market will exceed $850 million this year and grow 20% over the next several years. |
