In Japan, they’re dealing with a death toll sure to rise above 10,000, rolling blackouts and a nuclear disaster of as-yet-undetermined proportions. On Wall Street, investors in medical device makers are contending with issues of their own, as share prices slide and the long-term impact of the Japan earthquake remains unknown.
Japan, the world’s third largest economy, is also a critical player in the global medical device market, ranking just behind the U.S. and European Union markets in terms of market size at just under $25 billion, according to Pacific Bridge Medical, a Bethesda, Md.-based Asian regulatory firm.*
The Dow Jones medical device index has slipped about 3.4 percent to $61.33 since the markets closed the day of the earthquake. Here’s a look at some of the companies with large medical device operations — which were down a collective 3.8 percent as of about noon today — and how they’ve fared since the markets closed Friday, March 11:
|Company||3/11 close||3/16 noon EDT||% change|
|Baxter International (NYSE:BAX)||$52.60||$50.56||-3.9%|
|Becton, Dickinson (NYSE:BDX)||$78.87||$76.00||-3.6%|
|Boston Scientific Corp. (NYSE:BSX)||$7.51||$7.08||-5.7%|
|Covidien plc (NYSE:COV)||$52.73||$50.42||-4.4%|
|C.R. Bard (NYSE:BCR)||$95.75||$93.83||-2.0%|
|Edwards Lifesciences (NYSE:EW)||$89.27||$86.13||-3.5%|
|Fresenius Medical Care (NYSE:FMS)||$67.39||$65.07||-3.4%|
|GE Healthcare (NYSE:GE)||$20.36||$18.96||-6.9%|
|Johnson & Johson (NYSE:JNJ)||$59.69||$57.76||-3.2%|
|Medtronic Inc. (NYSE:MDT)||$38.08||$36.97||-2.9%|
|Smith & Nephew (NYSE:SNN)||$57.51||$54.12||-3.4%|
|St. Jude Medical Inc. (NYSE:STJ)||$48.78||$47.22||-3.2%|
|Stryker Corp. (NYSE:SYK)||$63.02||$60.73||-3.6%|
|Volcano Corp. (NYSE:VOLC)||$25.96||$23.88||-8.0%|
|Zimmer Holdings (NYSE:ZMH)||$61.68||$60.16||-2.5%|
Abbott reported more than $2 billion in sales in Japan during 2010, and has grown its there business by 60 percent in the past three years, according to regulatory filings. Japanese sales account for about 5 percent of total sales for Abbott, Medtronic and Johnson & Johnson. Boston Scientific derives about 13 percent of its total global revenues from its business in Japan and has its Asian Pacific headquarters in Tokyo, according to regulatory filings. In 2010, the company reported just shy of $1 billion in sales for its Japanese unit. St Jude’s Japanese sales amount to 11 percent of its top line, according to Reuters; for Stryker it’s 10 percent and 9 percent for Zimmer Holdings Inc.
Becton Dickinson, which makes 5 percent of its total sales in Japan, has a syringe manufacturing facility in Fukushima, where a nuclear power plant is in danger of melting down. BD shuttered the plant temporarily to asess the damage, which does not appear to be extensive.
The impact of the temblor on the device industry will extend far beyond its immediate impact on The Street. Japan’s infrastructure took a huge hit and large portions of its manufacturing sector, which supplies much of the world’s chips and drives for devices of all stripes, are shut down. The effect on the global supply chain (not to mention the world’s third-largest economy) is likely to be hugely disruptive.
For device makers with large export businesses into Japan, it’s harder to predict the long-term effects, noted Pacific Bridge president Ames Gross.
"Hospitals in that area are going to be flooded with patients, so U.S. sales of medical supplies could increase in that region. On the other side, hospitals that were destroyed will not be buying supplies for the next year," Gross told the news service.
Analysts say any disruption will likely involve consumption, not production.
"We would expect greatest disruptions to the more elective surgical procedures as hospitals in the affected areas focus on critical care in the coming days," Bernstein analyst Derrick Sung told Reuters. "We would expect hip, knee and ICD implants for primary prevention to be more affected."
Most companies with distribution operations on the island are able to supply products from other locations and manufacturing issues have been minor, added William Blair & Co analyst Matthew O’Brien.
*Eds. note: Pacific Bridge Medical is a MassDevice sponsor. Return.