Top 10 med tech R&D budgets in 2014

Print 25 June 2015
Stacy Lawrence / Fierce Medical Devices

The largest med tech companies wield a huge amount of cash to funnel into R&D. The top 10 largest R&D spenders in med tech* spent a whopping $10.78 billion on developing new medical devices and diagnostics last year. That's a decline of 2%.

This assemblage of big med tech and diversified conglomerates have roughly quadruple the R&D spending power as venture capital investors, who put a total of only about $2.7 billion into U.S. med tech startups last year.

But these companies seem to be focused largely on shedding low-sales-growth businesses and acquiring higher growth ones. The margins are good for big med tech, but at such an enormous scale it's quite difficult to spark respectable growth rates with internal R&D.

Not that there isn't ample transformative energy in med tech, as the field buzzes with life infused from the rapid evolution of many of its aspects including novel materials, wireless connectivity and innovative batteries. Urgent patient and social needs including curbing healthcare costs with an aging population and an increased need for at-home and remote patient monitoring and care as well as the growing desire of patients to manage aspects of their own care and wellness via technology are fundamental to the ongoing march of med tech.

But it remains to be seen how the big med tech R&D players--and their bountiful budgets--will attempt to innovate in this environment. The long-standing med tech corporate trend, both in medical devices and diagnostics, is to create small amounts of revenue growth through incremental product improvements. To see the big players routinely aim for transformative products would be a refreshing change.

On that front, Royal Philips ($PHG) may prove an inspirational corporate model. It's in the process of dedicating itself entirely to HealthTech, a confluence of its consumer and healthcare businesses. It's freeing up billions in cash by selling off other parts of the business to reinvest in this new vision. It's in the midst of doing a slew of deals to gain access to and participate in the development of innovative tech; the largest purchase so far has been of the somewhat stagnant catheter-based imaging company Volcano for $1.2 billion.

On the flip side, the now-dominant, pure-play med tech combination of Medtronic ($MDT) and Covidien has many industry observers worried that the R&D efforts of the resulting company will not be sufficient to even replace their former separate activity, thereby creating a vacuum of internal R&D spending as well as external investment. But it has made a lot of promises--and several recent deals--that seem to indicate that the newly gigantic Medtronic is doing its best to remain nimble and active in R&D. -

*This list is based on data from EvaluateMedTech, to which we are grateful. The R&D budget figures are specifically for medical devices and diagnostics, but are structured to exclude life science research tools. Some data for companies that do not have a calendar fiscal year has been annualized.

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