Medtech Big 100 analysis: Sales grow, jobs decrease, R&D spending climbs

Our ranking of the world’s largest medical device companies shows record-high revenue and a double-digit boost in R&D activities.

Total sales are up but employment is down in our latest Medtech Big 100 ranking of the world’s largest medical device companies.

Aggregate revenue for the 2023 Medtech Big 100 grew 2.8% to a record-high $453.2 billion, the second straight year of growth after a rare dip in the first year of the COVID-19 pandemic.

More than three-quarters of the companies reported positive sales growth year-over-year, but the industry is still working to return to the type of growth rates it saw before the pandemic.

It’s worth noting that the aggregate revenue comparison year over year with the Big 100 is not perfect. The companies included on the list can vary a bit each year. However, the results were also positive when we compared the performance of the Medtech Big 100 companies in 2022 and early 2023 with their prior-year results, excluding companies that were not previously ranked. Revenue growth averaged 4.4% at the 94 companies that made the list this year and last year.

Most of our Medtech Big 100 companies disclose R&D spending and employment counts as well. Total headcount for the list is down nearly 7% to 1.18 million — catching the beginning of layoffs the industry has experienced as it grapples not only with a higher cost of doing business but from operational challenges at health provider customers. By May 2023, MDO’s sister site MassDevice had reported on roughly 18,000 job cuts across the industry since mid-2022.

However, even as they engaged in layoffs, it appears that medtech companies made a bet on innovation to boost future growth: R&D spending increased nearly 13% to $26.4 billion.

More Medtech Big 100 analysis: How does medtech CEO compensation stack up to the rank and file?

Medtech sales: COVID-19 challenges remain

Of the 94 companies that made the list this year and last, 73 reported year-over-year sales gains. Four companies experienced 50% or greater growth.

Shockwave Medical grew revenue 106.5% year-over-year to $489.7 million. ICU Medical followed with 73.2% growth, while Masimo sales grew 64.3%.

Eighteen companies in the analysis reported year-over-year revenue decreases.

Invacare had the largest sales decline on the Medtech Big 100 list, decreasing 15% to $741.7 million in 2022. The wheelchair and mobility scooter manufacturer earlier this year engaged in a restructuring that saw two U.S.-based subsidiaries go through a voluntary Chapter 11 bankruptcy protection process.

Hologic and Dräger’s medical division had the next largest sales declines, with 13.6% and 11.8% decreases, respectively. Hologic has been providing COVID-19 testing technology, and Dräger makes ventilators — both high-demand technology during the height of the pandemic.

A drop-off in COVID-19-related revenues affected other companies. For example, Abbott’s overall revenue boomed in recent years as it sold hundreds of millions of dollars worth of COVID tests. And 3M CEO Mike Roman attributed its revenue drop to lower sales of its disposable respirators on the company’s most recent earnings call.

Though sales of COVID-related products are waning, staffing shortages continue at hospitals, leading to decreased procedure volumes.

“The staffing issue has been a factor that has been holding back procedure volumes, particularly deferrable procedures,” Andrew Jay, general partner at medtech-focused hedge fund Borna Health Fund, told Medical Design & Outsourcing. “Procedures such as artificial hips and knees, that’s something that could be postponed. There were a lot of procedures that people needed but didn’t have to have right away. You could see this happening in the heart valve market and some other places, as well, where healthcare facilities were not able to maximize their throughput through their [operating rooms].”

While in previous years diagnostics and imaging companies topped the list of increased sales, this year’s analysis saw more of a mix of companies. The companies that grew the most are developers of devices like heart catheters, intravascular lithotripsy (IVL) therapy, noninvasive patient monitoring and orthopedics.

Shockwave Medical more than doubles revenue, grows R&D more than 60%

Shockwave Medical stood out with the highest year-over-year growth, reporting a 106.5% increase in revenue to $489.7 million in fiscal 2022.

Shockwave Medical develops IVL therapy devices that treat various cardiovascular disorders, including peripheral artery disease (PAD) and coronary artery disease (CAD). Using various catheters, the company’s technology uses local delivery of sonic pressure waves. The technology safely modifies calcium while significantly reducing the risk of complications, according to the company. The company has enjoyed enough success that there was speculation earlier this year that it was an acquisition target.

The company’s R&D spend grew 61.6% over 2021, increasing to roughly 16.7% of its revenue

“To highlight just a few of our key accomplishments in 2022, we had two new products approved in the U.S., demonstrated superiority in one-year follow-up in the PAD III randomized trial, added regulatory shipping approvals in 12 new countries, including Japan and China, launched over 500 coronary accounts in the U.S., had several wins in reimbursement across the globe, and broke ground on a new manufacturing facility in Costa Rica,” Shockwave CEO Doug Godshall said in an earnings call wrapping up the year.

Medtech Big 100 employment drops

There were approximately 1.18 million employees at the 80 companies in the Medtech Big 100 that disclose human capital on their annual report. Total employment at those companies dropped by about 64,000, or 5%.

Some companies give approximate counts rather than exact figures; Medtronic, for example, says it has more than 95,000 employees.

This Medtech Big 100 headcount drop came before the layoffs of the first half of 2023 as major manufacturers consolidated facilities and business units or automated manufacturing operations.

“There’s always some amount of restructuring and movement of people and trying to eliminate jobs to maximize profitability,” Jay said.

Despite the overall employment losses, Masimo, ICU Medical and Shockwave Medical grew their headcounts by more than 50%.

The biggest increase in headcount came from Masimo, which increased its workers 81.8% to 4,000 employees after purchasing Sound United parent company Viper Holdings for $1 billion.

The next highest headcount increase was at ICU Medical, which bought Smiths Medical for $2.35 billion last year. It grew its workforce 70.6% to 14,500 in 2022.

Shockwave Medical added 52.4% employees in 2022, bringing its headcount to 1,001.

Eleven companies reported lower headcounts year-over-year: Elekta, Royal Philips, B. Braun Melsungen, Integra Lifesciences, Ambu, Paul Hartmann, LivaNova, Invacare, Fisher & Paykel Healthcare, Avanos Medical and Cook Medical.

Cook Medical reported the largest job loss, a 26.1% decrease year-over-year. The privately-held company reported 10,270 employees for our current report, down from 13,898 a year before. (In May 2023, the company announced it was laying off 500 workers — about 4% of its global workforce — in what Cook Medical President Pete Yonkman described as the “most difficult decision we have had to make in support of our strategy.”)

Medtech Big 100 R&D rises nearly 20%

Medical device companies on the Medtech Big 100 are investing more in R&D than years prior. The 62 companies that disclose R&D spending collectively ramped up those activities by more than $4.4 billion — or 19.8% — to $26.4 billion year-over-year.

“New products are the life and blood of the medical technology industry. … New products can create new markets, new products can shift market share, new products can drive market growth by allowing physicians to treat patients that were previously untreatable,” Jay said.

Twelve companies reduced their R&D expenditures year-over-year: Getinge (-1%), Medtronic (-1.8%), Convatec (-2.6%), Smith+Nephew (-3.1%), Avanos Medical (-5.3%), Bio-Rad (-5.4%), Dexcom (-6.4%), Zimmer Biomet (-6.9%), LivaNova (-15.1%), Alcon (-16.6%), Globus Medical (-25%) and Invacare (-59.7%).

A dozen companies grew their R&D spending by more than 25%: ICU Medical (95.8%, though the Smiths Medical acquisition could have played a role), Shockwave Medical (61.6%), Orthofix (48.7%), Inari Medical (45.5%), MicroPort (41%), Masimo (39.5%), Medacta (38%), Alphatec (37.5%), HU Group (31.5%), Intuitive Surgical (31%), B. Braun Melsungen (29.8%) and Carl Zeiss Meditec (25.5%).

Three companies spent more than 20% of their revenue on R&D: MicroPort (49.9%), Novocure (38.3%), and Applied Medical Resources (20.0%).

“R&D is very important for these companies,” Jay said. “One factor that may be driving it is that traditionally, most of the new products or a good portion of the exciting new products in the larger companies came through acquisitions of smaller companies. Typically, larger companies, the way they grow is by acquiring smaller companies. What’s interesting is that for the smaller companies, the M&A activity has been significantly less over the past year or so.”

Rather than making big acquisitions (with the exception of J&J’s Abiomed acquisition), large medtech companies are allocating resources to more development within their own firms because the technology at the smaller companies is becoming more expensive to buy, Jay suggested.

“What may be driving it is that the smaller companies with the attractive fast-growing technology, fast-growing products for creating new markets — those companies may be too expensive to acquire,” he said.

— Managing Editor Jim Hammerand contributed to this report.