Medical Device Daily 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 particularly emphasized the diversification path the company has followed over the past decade, shifting from a focus heavily 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.

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.“

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.

The spinal market is one where Medtronic claims its usual No. 1 spot.

“Back problems are the second-largest reason you go to see a doctor,“ he said, drawing knowing nods from many in the audience. Worldwide, 1 million persons undergo spine surgery procedures annually.

In addition to the company's push into minimally invasive spine surgery, Collins cited its Infuse morphogenic bone growth factor program, which he said “greatly simplifies spinal fusion surgery.“

He noted that Medtronic has five artificial discs currently available in Europe and is “moving through the FDA approval process“ with those products.

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.

Addressing what many would consider a chink in Medtronic's armor, given its unusually low No. 4 spot in the coronary stent market, he took a “nowhere to go but up“ stance. “Stent sales amount to less than 1% of our total revenues,“ Collins said, “so we have a lot of room for growth.“

He noted that the firm's first-generation Endeavor drug-eluting stent (DES) has been launched in more than 85 countries to date, with an estimated U.S. launch date of 2007.

Trials of the next-generation Resolute DES are under way.

Prior to Collins' presentation, Braunstein said in delivering his welcoming remarks that he couldn't remember a year that had as much “transformational activity“ for healthcare and healthcare investors as witnessed in 2005.

It was, he said, “another robust year“ for merger-and-acquisition activity in the sector, totaling $150 billion in transaction volume across all of healthcare.

With 296 companies scheduled to present and some 7,000 attendees expected between Monday's opening and Thursday afternoon's close, “there's a lot to talk about“ at this year's conference, he said. “It's an exciting time for healthcare.“