In the automotive market, it was Japan that gave the Big Three a run for their money.
In medical devices, the Big Three — Fridley, Minn.-based Medtronic Inc. (NYSE:MDT), Natick, Mass.-based Boston Scientific Corp. (NYSE:BSX) and Little Canada, Minn.-based St. Jude Medical Inc. (NYSE:STJ) — better watch out for Biotronik, a German medical devices firm.
Biotronik has especially been gaining a lot of ground in the troubled cardiac rhythm management market.
“We and the Street have significantly underestimated the gains Biotronik has made on a worldwide basis, and particularly in the U.S. where the company’s share has reached 5 percent [in ICDs],” wrote Cit Investment analyst Matthew Dodds in a research note this week. “In contrast, we previously had Biotronik at 1 percent in the U.S. and 3 percent worldwide.”
Previously, in a quarterly earnings call on Feb. 22, Medtronic reported slippage in its U.S. ICD market, as did Boston Scientific, which temporarily recalled and suspended its ICD sales and cardiac resynchronization therapy defibrillators last year. St. Jude also reported flat ICD sales in the U.S. in its first-quarter earnings call on April 20.
But Biotronik is not only a threat to the Big Three in the ICD market in the U.S. and abroad. It followed Medtronic in having an MRI-compatible pacemaker win CE Mark approval for sale in the European Union and is likely to be similarly the No. 2 entrant in the U.S. market ahead of St. Jude and Boston Scientific, Dodds predicted. St. Jude recently got its MRI-compatible pacemaker approved in the EU.
Dodds said Biotronik is “pretty far along on this front, having already developed an MRI-compatible ICD with EU approval forecast for [fourth quarter of 2011]. … He noted that Medtronic has acknowledged that it is much more complicated to receive MR Conditional status for ICDs; no one knows where Boston Scientific and St. Jude are in terms of developing MRI-compatible ICDs, he said.
The hegemony of the Big Three in medical devices is being challenged from a domestic competitor as well. Dodds noted that Johnson & Johnson (NYSE:JNJ) is becoming dominant in the cardiac mapping/ablation market, which is a $2.25 billion market globally. Its Cordis/Webster business is the dominant player with a 44 percent market share.