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Medtech Companies Begin to Rally in Wake of Japan’s Catastrophe

As the world’s second largest medical device market has been hit with one disaster after the next, many investors, businesses, and the population in general are wondering how Japan will cope.

UPDATE: March 23, 2011: The Japanese government estimates that the megaquake could cause more than US $310 billion in damage, reports JMD&MT's Miki Anzai.

As the world’s second largest medical device market has been hit with one disaster after the next, many investors, businesses, and the population in general are wondering how Japan will cope. Tens of thousands of employees work for U.S. medical device companies in Japan, which has a device market size of $23.9 billion. Since Friday’s earthquake and consequent tsunami, the medical device industry has stepped up efforts, as it did in a similar fashion following last year’s earthquake in Haiti, to provide help during this disaster.

Fast Facts (as of March 17, 2011)

  • 11 out 54 nuclear power plants in Japan are down.
  • Government urgers nine prefectures to conserve power to prevent a complete blackout in Tokyo.
  • About 3-4% of population is directly affected by the tsunami.
  • About 40% of population could be affected by power rationing.

Information compiled from Canaccord Genuity March 16 daily letter.

Becton Dickinson is distributing $325,000 to nonprofit organizations such as AmeriCares, the American Red Cross, Project HOPE, and the Give2Asia Japan Earthquake & Tsunami Fund. It is also matching donations up to $50,000 from its global associates to the U.S. Fund for UNICEF and the American Red Cross. The company’s operations in Japan, called Nippon Becton Dickinson, are in Tokyo, and the company has a manufacturing and distribution site at Fukushima prefecture . In a release, Becton Dickinson confirmed that its employees in Japan are safe but its Fukushima plant is temporarily closed for damage assessment. The company obtains some components and finished products from third-party Japanese suppliers, and stated that this specific inventory will meet the global demand until it resolves supply chain interruptions. Its revenue in Japan comprised about 5% of total 2010 revenue.

Abbott Labs has more than 2400 employees at its Japanese offices in Tokyo, Fukui, and Chiba. It made a donation of more than $3 million through Abbott Fund, its philanthropic foundation, to the Japanese Red Cross. According to Abbott CEO Miles White, the donation will support immediate relief efforts. Medtronic’s foundation is giving $1 million through direct grants, employee-matching grants, and product donations and will assess where funding should be allocated based on the needs of the people in Japan. Amgen is donating $1 million through Direct Relief International and the International Medical Corp.

Other companies that have joined the effort include Olympus Group and Omron Healthcare. Covidien, which has about 1500 employees in Japan (nearly all are confirmed safe), said that its Tokyo and Shizuoka facilities didn't sustain damage. The company is donating at least $1 million in grants, employee-matching gift funds, and products.

Although hospitals in Japan have been stocked with supplies, representatives at relief organizations believe that supplies will begin to wane. U.S. device companies that do business in Japan should anticipate to see a drop in sales due to delayed shipments. In addition, analysts expect that elective procedures such as hip and knee implants will take a big hit, as critical care is currently the highest priority.

This is a developing story and more information will be posted.

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