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January 24, 2006

"Think of it as the fight for the Bionic Baby Boomer."

Published
January 21, 2006

Medical Devices Are Hot, Which Is Why Guidant Is

By BARNABY J. FEDER
New York Times

Think of it as the fight for the Bionic Baby Boomer.

From head to toe, aging boomers are being kept alive and kicking - or at least walking - by an expanding array of devices that combine the newest medical knowledge with the latest breakthroughs in digital electronics and material sciences.

Already, the medical device field has become one of the most innovative and profitable segments of the economy. And as wave after wave of baby boomers enter their prime health care spending years, the medical device market is expected to grow by double digits for years to come.

That trend more than any other may explain the current bidding war for the medical device maker Guidant. Many analysts have questioned the financial sanity of Boston Scientific's latest offer: $27 billion. Guidant's original suitor, Johnson & Johnson, whose most recent offer was around $25 billion, has until midnight Tuesday to indicate whether it will make yet another bid for the company.

In many ways, Guidant is a damaged company. Its market share has plunged, and its potential legal liabilities have mounted, after disclosures of fatal product defects that executives evidently knew about long before notifying doctors. But Guidant's continuing allure is its prime location in the booming medical device industry.

The industry's sweet spot now is the $10 billion market for implanted devices that regulate heartbeats; Guidant has been second only to Medtronic in that field. Forecasts call for that market to expand by 15 percent annually for the next five years, with the fastest growth likely to come from the most expensive and profitable products.

Guidant is also a player in the $7.6 billion market for balloon devices that can be threaded through arteries to clear blockages in blood vessels, and for the tiny metal cylinders called stents that are inserted to keep those vessels from reclosing. The worldwide market for such devices is expected to top $10 billion by 2010.

The fight for Guidant, though, is only one sign of the boom in medical devices. Even products that have been on the market for decades, like artificial hips and knees, are undergoing technology-driven makeovers.

The industry ranges from inexpensive equipment like disposable syringes, crutches and home pregnancy test kits to $1.3 million robotic surgery machines used to remove cancerous prostate glands and equally expensive M.R.I. diagnostic machines that can cost additional hundreds of thousands of dollars to install.

For the full story, please visit: http://www.theledger.com/apps/pbcs.dll/article?AID=/20060121/ZNYT05/601210447/-1/ZNYT


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