Most companies in medical devices are too busy struggling for survival to invest sufficiently in R&D. Medtronic, however, is based around product development. This focus ensures it can stay ahead of the competition, which should allow it to maintain its high annual growth rate.
The medical device business can be quite discouraging at times. Even leading companies that have been first to market with innovative products often find their products surpassed by fresh versions in just a few years. However, recent articles in Forbes and Fortune magazines have highlighted the ongoing success of Medtronic, a Minneapolis based medical device company.
Medtronic's medical device business is focused on cardiology, neurology, oncology, orthopedic (spine), ENT (ear, nose and throat) and vascular markets. Despite fierce competition, the company has remarkably managed to average 19% sales growth and 23% earnings growth per year over the past ten years without increasing prices. Medtronic's stock has also grown at an annual growth rate of 38.5% over the past 10 years.
Medtronic focuses its efforts on technology to benefit large patient populations that suffer from chronic and debilitating diseases. Uniquely in the industry, it develops products to manage a variety of disorders, including those that tend to change over a lifetime. For example, the company expects its InSync product, which synchronizes the two pumping chambers in the heart, to enter the US market late this year. The product is part of a novel concept that utilizes pacemaker technology to treat chronic congestive heart failure.
Much of the company's success is due to its ability to 'cannibalize' its product lines. The company strategically develops plans for four generations of replacements for every new device it sells. These plans help the company to not only face its competition but more importantly to stay ahead of it. Medtronic upholds its golden reputation by making product development an ongoing effort and continued investment; competitors who are merely surviving in this competitive business often neglect R&D.