Medical Device Industry Overview

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INDUSTRY & MARKET SEGMENT OVERVIEW
The Medical Device (“MD”) industry is one of the largest and most stable industries in healthcare with a global market exceeding $140B in revenue. The US represents approximately 60% of that revenue, or $85B in revenue, with historical growth rates unimpacted by recessions of ~ 8%*. While significant, only 4 % of US healthcare costs can be attributed to devices (source: King & Donahoe, “Estimates of Medical Spending in the US). The US market produces half of the world’s medical devices and consumes 40% of the world’s output. Nine of the top ten medical device companies in the world are US-based, and 6,000 US manufacturers employ over 400,000 people in the US. It is also a concentrated industry; the seventeen largest companies account for around 65% of the total industry revenue (source: Frost & Sullivan, “2003 Industry Outlook for Medical Devices”). While the largest companies do command nearly two-thirds of total revenue, and employ many people, 80% employ fewer than 50 and 98% employ less than 500 employees. Innovation often comes from technology-based, single product, smaller companies.
The initial segment target for the JI – the Neuorology segment – is a high growth but smaller segment. Exhibit A (see below) provides an overview of the US Device Market. As one can see from this Exhibit, device sales to the neurology segment are approximately US$3.1B (NB: these are 2008 sales; with historical growth rates 2013 sales would approach US$7.5B). While a small market relative to other segments, it is also the highest growth segment – at an estimated 20 % per year (see vertical axis on chart for growth rates). In fact, the four fastest growing segments are orthopedics, neurology, cardiology and cosmetic/aesthetics (three of these four are target segments of the JI’s lines of business).
Several of these much larger market segments – including cardiology at $24.9B and Orthopedics/Spine at $17.0B – will ultimately be

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