Diagnostics & Imaging Week Executive Editor

SAN FRANCISCO — Stepping to the podium shortly after a JPMorgan Chase (New York) official hailed the "compelling" economics of healthcare as a sector of interest for investors, Medtronic (Minneapolis) Chairman and CEO Art Collins offered up some substantial reasons why the growth "beat" goes on.

The first med-tech presenter at the 24th annual JPMorgan Healthcare Conference, Collins outlined, for a near-capacity audience in the Grand Ballroom of the Westin St. Francis Hotel, the near- and somewhat longer-term outlook for the largest pure-play company in the sector.

Similarly to Doug Braunstein, head of Americas investment banking for JPMorgan Chase, who noted that the dollar amount of investments in healthcare had more than doubled over the six years he has been delivering the welcoming remarks at the conference, Collins cited the strategic focus for Medtronic as it eyes growing from its present $10 billion in revenues to a projected $20 billion by the end of the decade.

He noted that the company is "increasingly … building information technology into our products," citing, for example, Medtronic's big push in patient monitoring, which he characterized as a "game changer" in terms of addressing the chronic diseases that "dominate healthcare spending."

Collins also cited the company's leadership in insulin pump and glucose monitoring technology, mentioning the "limited launch" currently in process for its Guardian RT continuous glucose monitor.

He emphasized the diversification path the company has followed over the past decade, shifting from a focus tilted toward pacemakers and other cardiac rhythm management (CRM) products to one where its CRM business shares top billing with Spinal and Neuro/Diabetes.

"We believe we're operating in a natural growth sector," he said, noting the usual demographics dealing with a populace that is living both longer and more actively. Medtronic is "well-positioned in large markets," Collins said. While the cardiovascular market is "highly penetrated" by his company and others, he said "the other markets where we participate are under-penetrated."

"Market development is a significant part of our efforts," Collins said, noting that two-thirds of Medtronic's 2005 revenues were from products introduced in the past two years.

In order to ensure that the beat continues to go on, the company invests heavily in research and development. In fiscal 2005, the company's R&D spending hit a milestone of $1 billion, he said, and that the figure as a percentage of revenues will continue to go up.

"We now have the richest product pipeline in our history," Collins said.

CRM continues to be a big part of the company's product mix, accounting for some 47% of total revenues, but Spine and Neuro/Diabetes also are big contributors. The three business units overall represent 85% of revenue growth, Collins said.

A company totally focused on the diagnostic space, and drawing an overflow crowd to the Elizabethan C&D venue of the conference, was Zonare Medical Systems (Mountain View, California), developer of compact ultrasound solutions powered by its Zone Sonography technology.

Don Southard, president and CEO, cited both the speed of the technology, which allows acquisition of images a zone at a time, and the portability of the company's Convertible Ultrasound approach, by which the system can be used as a 160-pound, cart-based system, or as a hand-carried scanner weighing just 5-1/2 pounds.

"This is a software-based product," he said, "which allows us to have an annual upgrade cycle that provides a recurring revenue stream." It's also Internet-downloadable, adding to the convenience factor for users.

"There are increasing demands for portability in this sector," Southard said, driven in part by the growing incidence of repetitive stress injuries suffered by technicians.Introduced at the Radiological Society of North America (Oak Brook, Illinois) conference in late-November 2005, the first system was shipped to a customer last March. The company shipped its 200th system last month.

Southard said Zonare believes its potential market is valued at some $1.5 billion, and that the company anticipates rapid sales growth, particularly after the imminent signing of a distribution agreement in Japan, with shipments to that country, the world's second-largest medical market, expected to begin by July.