The quest to help people live healthier lives is a noble pursuit, one that is at the very core of the medical device industry. But in a competitive marketplace where success is measured by revenue growth and shareholder returns, a noble cause is rarely enough. In order to be able to continually develop and deliver life-enhancing technologies to patients around the world, companies must be able to translate their missions into strategic and sustainable business plans.
With 111 years of financial growth and technological innovation under its belt, Becton, Dickinson and Co. (BD; Franklin Lakes, NJ) has clearly figured out how to translate its corporate purpose, 'helping all people live healthy lives,' into market success.
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BD Chairman, president, and CEO Edward J. Ludwig on global leadership and growth.
With offices in nearly 50 countries worldwide, BD is an international powerhouse with annual revenues of more than $6.3 billion. In addition to maintaining a significant presence in established device and diagnostics markets, the company also operates in many developing countries where few other medtech companies have ventured. Working under what BD chairman, president, and CEO Edward J. Ludwig refers to as a transnational approach, the company structures its global offices in a manner designed to ensure the company has an in-depth understanding of varied national needs. With such needs in mind, BD develops and adjusts its products to meet the unique requirements of the many markets it serves.
In March 2008, Ludwig ended a two-year term as chairman of industry association AdvaMed (Washington, DC). During his term, Ludwig served as a tireless advocate for expanded patient access to the lifesaving and life-enhancing value of medical technologyan industrywide mission that is closely aligned with BD's own fundamental approach to healthcare.
In this interview with MX editor-in-chief Steve Halasey, Ludwig discusses BD's long and prestigious history, its ongoing strategies for domestic and international growth, and the company's leadership role in shaping the future of healthcare delivery.
Big Policy Issues
MX: You have recently ended a two-year term as chairman of the industry association AdvaMed. During your tenure, what were the most noteworthy challenges for the association and for industry at large that came to your attention?
Edward J. Ludwig: Too often people become obsessed with the costs involved in providing healthcare, forgetting to measure the value that is received as an output of the healthcare system. We believe that our efforts are all about helping people live healthy lives, and that purposewhich is also BD's corporate purposestands on its own merits.
In this context, the number one challenge is to make sure that all patients have access to the best possible medical technology, and to ensure that they have a shot at the most overall cost-effective healthcare. So what we do at AdvaMed is always focused on access to the value of medical technology.
This focus is manifested in a number of waysincluding even the way that AdvaMed has been organized over the yearsin order to ensure that people all over the world have access to the best possible medical care and safe, effective, and innovative medical technology. We need an effective FDA, so AdvaMed worked very hard to develop and then support enactment of the medical device user-fee program, and in 2007 we worked with the agency and Congress to strengthen that program. We also need a predictable and transparent process to reimburse providers who use our medical technologies and an appropriate level of payment for technology innovations, so AdvaMed engages with the Centers for Medicare and Medicaid Services (CMS). And we need free trade, as well as regulatory transparency and consistency, across borders, so AdvaMed has a group devoted to international affairs.
If you boil all of this down, it is all aimed at making sure that people have timely access to the best possible medical technology, so that they can all live healthier lives.
When you say that people sometimes focus on the wrong part of that equation, are you thinking particularly of policy makers, regulators or commissioners, patients at large, or whom?
Everywhere in the worldwhether as countries, as companies, or as individualswe are spending a greater portion of our disposable income on healthcare. To some people, the mere fact that we're spending more is seen as a bad thing.
I don't see it that way. The world and its economies are not static; they grow and change over time. A hundred years ago, for example, some 3040% of the population was working in agriculture. Today, that number is closer to 510%. So, as the world evolves, and as economies evolve, if we feel it's appropriate to spend more on healthcare, we should do so.
When we talk about the people who focus too much on the cost of the input and not on the value of the output, a lot of times people say that it's just policy makers. But I think it's policy makers, companies, and even insurance companies.
For example, we know that chronic disease represents an enormous portion of the money spent on healthcare in this country. If you add up all the amounts spent on chronic diseases such as cardiovascular disease, chronic obstructive pulmonary disease (COPD), high lipid levels, diabetes, obesity, behaviors such as smoking or excessive drinking, you probably are talking about half of what we spend on healthcare every yearor more.
Consequently, many of our companies, including BD, are focused not only on products that are interventional, but also on those that are preventive.
Some people reach a point at which they have a very serious medical condition and they require a significant healthcare intervention. They need a coronary artery bypass, a pacemaker, a prosthetic knee or hip, or whatever. Those products represent an important part of industry's story, but that's only part of the story.
There's another important part of our story, which is prevention. Many of the products used in this realm, such as diagnostics, are also regulated devices.
It's easy to look at the costs. It's much harder to look at the value and the outcomes. That's why we spend as much time on it as we do.
Part of that has been AdvaMed's value of technology campaign. In your experience, when there is a need to address such a disparate target audiencepolicy makers, insurance companies, and regulators, both domestic and overseashow does AdvaMed go about making its point?
AdvaMed president and CEO Steve Ubl talks about the association as the preeminent advocate on behalf of the value of medical technology. The traditional target for that message has been public policy makers and government regulators. We are still probably spending an appropriate but large amount of time there. But we are now also expanding our audience.
In the United States, in addition to working at the federal government level, we're also working at the state level, with other trade groups in the medical field and spanning the business arena, and with hospital associations, physicians groups, and insurers. There's a lot of partnering going on. And we are also reaching out to patient advocacy groups, because those are the actual beneficiaries of our technologies.
The lion's share of decisions is still strongly influenced by what goes on in Washington, and I don't think that's going to change any time soon. So that's where we spend a lot of our time.
We also spend a fair amount of time outside the United States, because most healthcare outside the United States is moderated in large part by government action. We have to go where the action is, so that's why we spend a lot of time on government-based policy.
How has your involvement with AdvaMed influenced your leadership at BD, and vice versa? How do the differences and similarities between those roles influence your thinking in both places?
The purposes of the two organizations are very much aligned. BD and AdvaMed are both trying to help people live healthy lives. Where they differ, obviously, is that AdvaMed represents the totality of every component of medical technology imaginable.
In the AdvaMed context, I worked as a leader among leaders, managing very much by influence, by consensus. That's important, because wherever possible, we try to speak with one voice as an industry.
Some people thought that would be difficult. But because of our common purposes, we have found that we typically don't end up with a lot of fractious discussions. On most counts I found it relatively easy to come to some consensus about what AdvaMed's members felt on a particular issue. And then we were able to go forward with one voice.
Because of who I am and what the company is, leading at BD is not vastly dissimilar. I see myself not just as the boss, but again as a leader among leaders. And again, we're trying to use everyone's skills and capabilities to find the best solution and go forward on that basis.
In both organizations, the important thing is to harness the extraordinary talent that is residing within them. In this sense, a company leader acts more like an orchestra conductor than in some autocratic, dictatorial fashion.
You've identified patient access to technology as a significant policy concern for industry and for BD. In the United States or globally, what are the key obstacles to addressing this or other major policy concerns? Are they regulatory? Are they legislative? Do they involve indifference or opposition from various parts of the healthcare system?
Particularly in this country, we need two policy organizations to be very efficient: FDA and CMS. Fortunately, at the present time, both are improving.
The vision and purpose of FDA and industry are very much aligned. Industry wants to rapidly develop safe and effective products and make them readily available to people who need them, and FDA wants to ensure that industry's products meet those standards and patients have timely access to innovations.
In order to achieve these goals, industry needs an effective FDA. And it is certainly true that FDA needs more resources, a better information technologies (IT) infrastructure, and more staff with high-tech scientific skills in order to do its job right.
Companies sometimes find that they have challenges in getting products to market because the agency changes regulatory requirements it previously agreed to. Sometimes the agency changes its policies when a company is in the middle of a process, such as a clinical trial. So the company believes it is headed in the right direction, and all of a sudden, FDA says 'Well, that's not really how we're going to think about these things; you'll have to start all over again.'
Many of BD's diagnostic products are sold in Europe for years before they are finally sold in the United States; some never make it to the United States at all. That's because the procedures for obtaining a CE markthe designation that permits a product to enter the EU marketplaceis much more process-driven. The procedures often make use of standards developed by the International Organization for Standardization (ISO), and require only that the company validate that its process is producing a reliable product that does what it is intended to do. CE marking doesn't rely on inspecting the end points, and it's much more consistent and transparent.
An efficient CMS is also essential for getting products onto the market and into the hands of users. BD does not yet have a lot of issues with reimbursement, but as we move into new fields we will need to ensure that there is an appropriate level of payment for the labs, hospitals, and doctors' offices. However, I know of companies that have had significant problems with reimbursement issues. A company's product can be approved as safe and effective, and available on the market, but the company may still end up spending the next two years trying to figure out who's going to pay the provider for the product and under what circumstances. Obviously, that's a big problem.
Are these same obstacles also important internationally?
Essentially, yes. For instance, many products used in Japan are probably three generations behind world class simply because the country's regulatory system is so onerous and its reimbursement process is so archaic. The Japanese system doesn't distinguish between a new rapid molecular test that can be run in 10 or 15 minutes and a culture-based test that takes two or three days. Consequently, both tests are reimbursed at the same rate.
Japanese officials believe their policies are in the best interest of restricting healthcare costs. But what's actually happening is that they are in some instances denying the best healthcare for the Japanese people. At the end of the day, they're going to be spending money that they shouldn't have because they're not doing the kinds of preventive screenings and preemptive treatments that they should be doing.
Is the average length of hospital stays in Japan still much longer than in the rest of the industrialized world?
Yes. It has improvedso it may not be measured in months anymorebut it is still measured in weeks instead of days.
And again, our goal is to help get people out of the hospital faster because if they're in the hospital, they're generating an extraordinary amount of cost. Moreover, when you're in a critical-care setting like that, there's always a chance that something bad could happen in terms of medical errors, infections, or other problems. The best paradigm is to get the patient into the hospital, conduct the necessary intervention, and return the patient back into the community as soon as possible.
When industries and their companies are experiencing safety issuessuch as those that have recently raised concerns in the airline industry, or those involving drug-eluting stents and implantable cardioverter-defibrillatorsthere is a tendency for the policy and regulatory environments to undergo wide pendular swings. Throw in the timing of a presidential election year, and it can easily be understood why there seems to be an upswing in favor of increasing the rigor of the regulatory processes for drugs and medical productsperhaps well beyond what might be considered a 'least burdensome' approach. Can you comment on the struggles that industry has with that kind of environment, and how AdvaMed and BD attempt to deal with it?
This is a real problem, much of which has resulted from some difficulties that a few companies in the pharmaceutical industry have experienced over the past couple of years, including the market withdrawal of Vioxx, the concern about the impact of antidepressants on children, and so on. The device industry also experienced some challenges involving implantable cardiac rhythm products about three or four years ago, and these resulted in recalls and some considerable concern over the transparency of clinical information.
The challenge for our industry is to try to ensure that providers and patients are not disadvantaged by overly stringent regulations implemented to deal with isolated issues. AdvaMed and BD work very hard to influence FDA to focus on appropriate requirements for the industry generally, that will still enable access to transformative medical technologies. We are hopeful that the FDA staff who will continue their careers into the next administration will not be adversely affected by a political backlash. Some industry observers have even suggested that the FDA commissioner's term should be modified to lessen political influences.
It's a bit controversial to say so, but I think if you really want to give FDA a strong leg to stand on, you have to make it a nonpolitical entity. And perhaps you would appoint the FDA commissioner to serve a longer term.
I don't have a firm answer about how to do that, but I think it would be a step in the right direction to have a different way of naming the FDA commissioner and to allow him or her to serve for a fixed period of time. That practice might permit the commissioner to get some specific things done, as opposed to being whipsawed by the vagaries of the political process. But, as I say, that would be somewhat controversial.
Would that also be a step on the way to increasing the scientific capabilities of the agency at the same time?
Right. I think you need both. But what is missing most is a stable context for the leadership to do its job without interferencenot unlike the way that the head of the Federal Reserve does his or her job.
That doesn't mean those officials don't get criticized. Individuals can agree with them or disagree with them, as they will. But it does mean that those officers serve with some stability, which is important.
The BD Way
You have described BD's approach to the market as consisting of a number of distinct steps: identifying emerging healthcare problems; developing and applying technology; applying manufacturing skills to get high quality at low cost; and then applying the company's sales, service, and support expertise. Can you explain how this approach evolved and developed? What would you consider good examples of those steps?
BD's approach to strategy is very much analytically and financially driven.
A recent article in the Harvard Business Review described two approaches to envisioning the future. One is to define the future in terms of what an individual will possess in 510 years: what kind of job, car, house, and so on. The other is to define the future in terms of what an individual will have contributed and achieved.
BD's approach to strategy is very much of the 'what do you want to achieve' school of thinking. And in our particular case, that comes down to deciding what we want to contribute to the improvement of healthcare.
This pattern has emerged over the 110-plus-year history of the company. It would be unrealistic to think that people just woke up one day in 1897 and said, 'This is what we want to do.' But over time, BD employees have relentlessly pursued the company's stated purpose of "Helping all people live healthy lives." And as a result and natural outgrowth of this purpose, they have continually been on the lookout for underappreciated emerging healthcare problems within their chosen spaces of drug delivery, diagnostics, and biosciences.
How does this work out in actual practice?
I can provide several examples. The principal business of our BD Medical segment is to provide parenteral drug-delivery devices, which are used when it is necessary to bypass the gastrointestinal system in order to get a drug into the body.
There are consequences to having such a focused interest in that area. The first such consequence was for the company to manufacture the syringe, which is a way of injecting drugs into a muscle or a vein, or below the skin. And that single product category served the company very well for well over 80 years.
But then we began to look at some of the secondary effects related to the use of syringes. With the advent of the human immunodeficiency virus (HIV) and the prevalence of hepatitis in the developing world, for instance, we became increasingly aware of the problem of healthcare worker safety related to needlestick injuries. And in order to protect both healthcare workers and their patients, we quickly recognized that it was essential to design drug-delivery products that help to prevent needlestick injuries and cannot be reused.
Many such insights arise from BD's deep experience and knowledge of its chosen fields, and from staying focused on the customer and asking the right questions. How is the product being used? What are the positive consequences? What are the negative consequences? Such questions can be very revealing.
In diagnostics, the obvious goal is to get answers faster and more accurately so that therapy can be targeted. So in every one of these cases, the unmet need keeps us searching for better solutions.
Sometimes we are able to invent those solutions on our own, as with the BD ProbeTec ET system, which was the first real-time DNA amplification assay for the detection of Chlamydia trachomatis and Neisseria gonorrhoeae in clinical specimens. But sometimes we can advance the state of the art even more quickly by acquiring companies or products from outside. That's what we did in the case of GeneOhm, whose real-time PCR technology and other intellectual properties offered what we think is a superior approach aimed at healthcare associated infections, including methicillin-resistant Staphylococcus aureus (MRSA).
But once again, our progress is driven by constantly asking questions, such as 'What more can we do?' or 'What can we do better by working with our customers?'
In biosciences, the third area of focus for BD, our key goal is the development of instruments and systems that are increasingly easy to use. Nowadays, every one of useven those of us who are technologically challengedcan use modern PCs, laptops, and notebooks.
Our goal is to apply these same kinds of consumer electronics achievements to very sophisticated scientific tools. By doing so, we will make these sophisticated biotech tools easier and easier to use so that more and more people can use them. And in turn, such easier use will multiply the pace of drug discovery and insight into how cells mediate or moderate disease.
BD is always on a quest. And the general direction of the quest is to determine how we can harness technology to solve the problems that are plaguing our areas of interest in healthcare.
You have suggested that this process can also bring about changes in medical practice. Can you provide some examples of areas where this has occurred?
Another hallmark of BD's strategy is very strong country organizations. For example, we have some very insightful people running our business in China, and we also have some bright folks running our R&D center in Singapore.
Working together, these two groups observed that, in China, intravenous (IV) therapy was being practiced by using needle sets, as opposed to indwelling intravenous catheters. This meant that every time a hospital patient needed to have an infusion, someone would have to stick a needle in the patient's vein in order to provide the infusion, and then remove the needle. And if the patient needed another infusion an hour or two later, the whole process would be repeated. As a result, many patients experienced significant pain, infections, and irritation, and they also developed extraordinary scars and other problems.
Observing these practices, our people, who have significant experience with IV therapy in the United States, Europe, and elsewhere, noted that this was a problem that had already been solved for other parts of the world. But because of the unique techniques used in China, and the fact that there was not a lot of sophistication among the healthcare workers, we discovered that this market required a product with special features that didn't really exist until then. And it had to be produced at a very low cost.
So, working at our R&D facility in Singapore, we devised that product. Initially, we produced the product in Singapore, but we soon moved production to Suzhou, China, so that it was being produced in China for China. Today, we have about a hundred nurse practitioners who travel all over the major cities of China, teaching nurses how to practice this more sophisticated patient-oriented form of IV therapy.
Through this innovation and related training, we helped a lot of people live healthier lives. We helped nurse practitioners establish themselves as much higher contributors to the Chinese healthcare system and instilled a lot of pride in them. People felt better, costs went down, and quality went up.
And then, based on what we learned in China, we brought our experience back to the United States in the form of a product called the BD Nexiva closed IV catheter system. BD Nexiva is probably the most sophisticated peripheral IV catheter in the world. It improves healthcare worker safety because it's an automatically retracting needle device. And it protects patients because it is a closed systemit doesn't allow infection to enter through the IV site.
All together, BD Nexiva is a win-win product, improving medical practice and patient safety globally.
BD Growth, at Home and Abroad
BD has experienced both significant organic growth and significant acquisition activity. How would you weight the importance of those two strategies, and what do you think have been the company's most noteworthy acquisitions?
From day one, when BD was founded 111 years ago, right up until the present, the company has been focused on both internal and external innovation. Innovation is not just something that has to come from within our own walls. Of course, we can and do invent new solutions, and it's wonderful when we do. But those solutions are just part of a larger continuum.
Approximately one-third of our innovation is developed in large part by BD personnel, and solutions developed with partners constitute another third of our business. The final third of BD's innovation is achieved through acquisitions. We employ all three methods: self-invention, licenses and partnerships, and acquisitions.
Recently, our most significant acquisitions have been GeneOhm and TriPath. In the past 10 years in BD's history, those acquisitions are two of the largest and most successful that we've done. But at the time of the acquisitions, both of them were fairly modest in terms of total revenue.
When BD purchased GeneOhm, GeneOhm had annual revenues of between $5 million and $10 million. And yet, we paid more than $200 million for the company because we saw enormous potential for expanding the market for screening for healthcare-associated infections.
TriPath had about $100 million in annual revenues when we acquired it, and we paid more than $300 million for the company. We saw a great potential to expand its Pap screening business in the United States, Europe, and Japan through TriPath's liquid-based preparation, which provides a monolayer ability to study cells in a much purer environment.
Even more importantly, TriPath had developedand continues to developscreening tools using special biomarkers to detect cancer sooner. Earlier detection enables earlier treatment and increases the survival rates of people with early-stage cancers.
GeneOhm and TriPath are good examples of acquisitions that were significantly additive to our own core capabilities. BD had its own molecular diagnostic product, the BD ProbeTec system, which we added to the GeneOhm product line. Through the combined knowledge of BD and GeneOhm, we think we can accelerate the development process.
Similarly, prior to acquiring TriPath, BD had some capability in cancer screening, particularly for blood-based cancers such as lymphomas and leukemias. TriPath brought a solid-tissue cancer capability into our portfolio. And BD has been able to help TriPath navigate the regulatory process more effectively. TriPath had faced a couple of challenges in terms of clinical trials that took longer than planned, and we're hopefully going to be able to improve that process going forward.
Does BD use a formal approach or regular vetting procedure to evaluate organic candidate technologies or acquisitions that the company might be interested in? If so, how does the process work? Is it conducted on a quarterly, semiannual, or other regular schedule?
The search for partners and potential targets is continuous at every one of our businesses. Our strategy is an evergreen, continuous process. It's not as though one day we develop a strategy, we state a strategy, we put it on the shelf, and then it stays there. Our strategy is driven by finding new emerging problems in our chosen fields and developing and applying technology to solve those problems. That is an evergreen, evolutionary process.
We're always probing for new and better ways to do things, and wherever we find that our own internal capabilities are limited, then we immediately begin an external search, either for a partner or for an acquisition.
In addition, due to our leading position in many of the sectors we serve, inventors and smaller companies often bring their ideas to us because they know that we are best positioned as a potential acquirer or partner. Our search process and being approached by outside parties are both important sources of new ideas for BD.
Once an idea gets teed up, we are very rigorous in vetting it. We have a corporate development group that goes in to assist the business that is evaluating the acquisition. BD's individual businesses are usually where the ideas start, but then the company supplements the business's team with development professionals, lawyers, financial analysts, and other experts to ensure the acquisition is done with great discipline.
Many times, we will also engage the services of an outside expert, whether it's a medical professional or a consulting firm. Outside opinions are very valuable.
On one occasion, when BD was evaluating a deal, we employed the help of a very large consulting firm on a confidential basis. In a meeting with the firm's team, I said to them, 'I have 10 people around me telling me this is a great deal. I want you to tell me why it's not a great deal. Sell me the other side of the story. I don't want you to make it up, but I want you to accentuate the negative and extenuate the positive because everybody around here thinks it's a great idea, and I'm sure there's something we might be missing.'
After evaluating the deal with those instructions in mind, the firm didn't come back and tell us not to make the acquisition. But its team did point out a number of areas that were sources of concern, and having that knowledge up front really helped us do the deal a lot more effectively.
And there have been a number of times whenafter great diligence, including outside supportwe have decided not to make a certain move. For every deal that we announce, we probably pass on another 10 because they just didn't pass muster. A deal has to make sense strategically, meaning it has to add to our capability, and pass muster financially. When the deal is complete, there has to be something left that benefits our shareholders as opposed to giving all the money to the sellers.
Does BD also have a venture arm that invests in early-stage technologies or companies that might later on be acquisition candidates? If so, does the company take an equity position or make other arrangements with those companies?
We do operate in that area. It's not a formal fund, but rather we might decide to make an allocation of anywhere between half a million and $1 million in an interesting venture.
BD also has incubator companies that share space in some of our facilities. After all, start-up companies often need care and feeding as much as they need money. So cohabitating with a larger company that has a vast array of skills--regulatory, computer-assisted design, skill at designing experiments and trials, and quality assurancecan provide as much benefit to a small company as would additional money.
We have not yet gotten any of those early-stage investments to the point where they've been brought into our core businesses. So to date, our investments haven't paid off in that specific sense. However, our involvement with the early-stage ventures has exposed us to some interesting ideas. I'm optimistic that in the next 35 years, we will see some of our venture investments move to the next stage in terms of product development. But right now, we're still in the investment mode.
In the foreseeable future, which of BD's product lines are likely to see greatest growth? What regions offer BD the greatest opportunities for growth?
One of the strengths of BD is that we have great diversity among our various product groups. We believe that every one of our three major segmentsand more or less our 12 major business unitscan grow at or above the company average, which has been about 68% on the top line on an exchange-neutral basis.
In BD Medical, BD is working to develop more-advanced systems for drug delivery. Such systems will focus on both patient safety and healthcare worker safety, as well as getting drugs to work better. One good example is the relationship BD has with Sanofi Pasteur, which hopes to market a new system for flu vaccination. The system, which has been submitted for approval in Europe, is integrated with a tiny BD microneedle.
In BD Diagnostics, we expect to broaden rapid molecular diagnostics. BD is looking to expand its menu for BD GeneOhm assays as we increase the capabilities we have in cancer screening and cancer diagnostics.
BD Biosciences is also exploring some interesting applications. On the clinical side, our biosciences products are used for CD4 testing. We are trying to devise easier-to-use and lower-cost CD4 test systems so they can be sold effectively in the developing world, where the largest prevalence of HIV exists.
Those are the big areas of interest for BD in terms of products. On balance, we expect to grow more rapidly outside the United States than inside the United States. Right now, about 55% of our business comes from outside the United States, and I think that number will continue to increase over time. BD is looking for growth opportunities in places like India, China, Russia, and Africa.
Based on sophistication of healthcare practices and similar factors, we think Western Europe and the United States have relatively similar characteristics in terms of growth opportunities. We need to be strong in Europe, but the other four regions I mentioned are also major contributors for us.
Medtech companies don't usually include Russia or Africa on their list of regional growth opportunities. Neither region is typically thought to have much capital to spend on medical technologies. How is it that BD is able to identify big growth opportunities in those areas?
Actually, Russia has a lot of money. Unfortunately for the rest of the world, oil is more than $130 a barrel, and Russia is benefiting. I was in Moscow about a year ago, and some parts looked an awful lot like a developing nation. But on the other hand, some of the major metropolitan areas of Russia have become very affluent and sophisticated.
Russia has always been the home of good science, but the country does have a set of problems when it comes to healthcare. For example, 80% of the blood samples taken in Russia are still done using a needle and syringe to aspirate blood from the vein, which is something that we stopped doing in the United States 50 years ago.
Evacuated blood collection systems, which BD markets under the BD Vacutainer brand, are the best and safest way to take blood samples, from both the patient's and the healthcare worker's point of view, as well as in terms of the quality of the specimen collected. And yet 80% of the Russian market for blood collection has yet to be converted to evacuated systems. And due to the nature of Russia's economic and political system, BD has no indigenous competitors in the country.
BD has set up a legal entity in Russia that employs about 50 people. But it's a slow go. The business currently represents about $50 million in annual revenue. It is still pretty small, but it's growing at between 20 and 30% a year. There's an emerging awareness in Russia of the need for basic "healthcare 101" products such as those offered by BD. That includes products for safe injections and safe blood collection.
That brings me to South Africa. There is a very sophisticated hospital in Cape Town that performs tuberculosis testing. Unfortunately, tuberculosis is a major cofactor problem with HIV-AIDS, and the epicenter of HIV-AIDS is in Africa, particularly South Africa.
BD took a group of Russian doctors down to South Africa to show them the world's largest TB diagnostic facility. And what started out as a trip marked by a little bit of denial and coolness on behalf of the Russian doctors ended up laying the foundation for BD's largest-ever order for TB diagnostics systems. Unfortunately, Russia is facing an emerging and very troublesome TB problem, but fortunately, the Russian government recognized that its doctors need good diagnostics in order to provide good treatment.
With the exception of South Africa, most of Africa is not self-sufficient. Most African countries do not have the financial wherewithal to provide citizens with even basic healthcare. In those cases, we work with third partiesoften nongovernmental organizations (NGOs) such as the United Nations Children's Fund (UNICEF), the World Health Organization, Project HOPE, the Clinton Foundation, and the Red Crossto provide our products to those regions, sometimes free of charge. We are very careful to distinguish between philanthropy and commerce. In some instances, BD's work in those areas is philanthropy. In other instances, there's a commerce element.
Whenever possible, we believe there should be a commercial element to our work in developing nations. We design products specific to a region, and we price them so people in that region can afford them. If the operation is a commercial endeavor, it's more sustainable because our company is able to put some of the profits back into development in order to sustain and expand the medical technology products that are made available to that region. If our efforts were purely philanthropic, we'd run into limits on how much we could reasonably give away.
In Africa, BD's model is to work with these NGOs. We are also working with another major contributor to healthcare in Africa: the President's Emergency Plan for AIDS Relief (PEPFAR). That initiative measures in the billions of dollars.
We have established an arrangement with PEPFAR whereby BD is going to be providing people, technology, skills, and training to help build good laboratory practices in certain countries in Africa.
Combating the HIV-AIDS epidemic has to be done a step at a time. It's not the same as a disease like polio. With poliothank goodnesswe were able to devise a vaccine, and, through massive immunizations, we have all but eradicated polio; the same thing goes for smallpox.
Those diseases were of a nature where that was possible. HIV-AIDS represents a different kind of problem. The virus is constantly mutating and changing, so it hasn't yet been possible to devise a vaccine. Instead, we must approach the disease by going through the slow process of treating, diagnosing, monitoring, treating, diagnosing, monitoring.
In order to manage a disease in that fashion, a country needs a complete healthcare infrastructure. It's not just a matter of running around giving people shots; there must be an indigenous public health system that detects the people who are HIV-positive, helps them deal with their condition, gives them the medicines they need to continue to live, and trains them to live a healthy lifestyle so they're not transmitting their disease to their children or their partners.
Obviously that is an extraordinary calling. And BD is there not just with products, but with its skills and training.
Even with the help of many NGOs, these are gigantic undertakings for any company. Are there a lot of medical device companies involved in similar projects, or is BD on its own in this regard?
We're not on our own, but we believe that we're at the leading edge. We have general managers in charge of this strategy, and they are constantly challenging our R&D team to design products that meet a specific need in certain developing markets. They may identify a need for a new TB test. Or for a syringe for the African market that self-destructs so it can't be reused and therefore spread HIV. Or for a rapid diagnostic for malaria. Or for a cheap CD4 counter that is easy to use.
That's the difference between such projects being a nice thing to do versus being a strategy. The people running those projects can make demands of our R&D organization.
International in Scope
In order to grow its business in the international marketplace, what does BD do differently in terms of structure or operations, branding or marketing?
BD has been a global company since its founding, so the company has a rich tradition in the international marketplace. About 20 years ago, we began subscribing to an approach that some practitioners call transnational.
The transnational approach differs from a global approach, in which a company has a central tendency and a common set of products that are shipped all over the world. The early days of Sony were somewhat like that. It also differs from a multinational approach, in which the company's business units in each country are more or less independent. Good examples of that approach include Nestlé and even Procter and Gamble, during the early days of its exquisite nationalization approach.
By transnational, we mean that we conduct certain operationssuch as product development or manufacturing planningaccording to a global strategy. But we simultaneously subscribe to a very strong national organization. In fact, our national organizations are so important that we spend a lot of timeand I personally spend a lot of timevetting the candidates who are going to be the leaders in each of our top countries.
Most of the people working in BD operations outside the United States are from the countries in which they serve. So in Spain, virtually everyone in the organization is Spanish. In China, with a few exceptions, everyone is Chinese. Naturally, we do make exceptions when we need to import a particular skill that is not indigenous to that particular country. And that sometimes happens when we're getting started with a new operation.
Our approach is designed to ensure we have an exquisite understanding of national needs and nuances and that we adjust and tweak our products accordingly. The responsibility of the nationals who work in our country offices is to fully understand the nuances of the local healthcare system. We do this because we know that healthcare is delivered differently in each country around the world. So it is essential that we have a good understanding of each local healthcare system and its partsthe reimbursement system, the distribution network, the opinion leaders, and so on.
We also need to understand healthcare practice in each country. Healthcare practice is by and large fairly similar in many countries. But the way healthcare is practiced in the United States versus the way it's practiced in India is vastly different, not so much for cultural reasons, but rather for economic reasons.
So again, it's important to have a thorough understanding of the local healthcare practice, which often is less sophisticated than in the United States, Western Europe, or Japan. And when relevant differences are identified by BD's leaders in a particular country, those people have a voice in the product development process so they can make their unique needs known.
Over the years, we've discovered that there's rarely a product that is specific to a single country. A product may start in a given country, but almost every product BD has ever sold has turned out to have applications in not one, but many countries. Many products that are designed with a specific country's needs in mind quickly migrate to other parts of the world.
In terms of administration and communications, how does BD structure the 40 or so representatives for its leading markets? Do those country leaders all meet together at certain intervals, or do you use some other methods?
In terms of top executives, BD has three business executive vice presidents who run each of the three major segments of the company. We also have an individual who serves as our vice chairman and CFO. The fifth member of what I call the office of the CEO is executive vice president John Hanson, a British fellow who has been with the company for 25 or 30 years. He is responsible for all international operations.
All 40 country leaders don't typically get together all at once. The countries are clustered into regions, and occasionally John will arrange for a dozen or so leaders representing different regions to get together so that the group represents virtually every part of the world. Some of the larger countries, like Canada or Japan, have their own representative at these meetings. But regions like Latin America, which has dozens of countries, have one principal representative.
In some cases, we've modified how we break up regions in order to sharpen our focus on some areas. For example, we used to have an Asia-Pacific region that encompassed all countries in Asia minus Japan. That's an extraordinarily large territory. It represents about two-thirds of the world's population. A few years back, only one executive was responsible for that region because, even though it's a big geographic area with a big population, BD's business there was fairly modest at the time.
A couple of years ago, we said to ourselves, 'Well, maybe there's a cause and effect here.' So even though that region's representative was outstanding at her jobshe's since been promoted to a business position here in the United Statesshe recommended that we break the region into three parts. So now China stands on its own, and its leader reports directly to John Hanson. India also reports in on its own, and everything else in Asia outside of Japan is clustered under a separate leader. His charge is to run everything else, plus provide shared services to China and India.
The regional leaders get together quite frequently to discuss a wide range of issues. Each region also has leaders who are the ambassadors for their individual businesses. So, to the extent that a region or a country has a product or service need, they can discuss that with their regional leader, who will carry the message back to the worldwide team.
That structure would seem to offer some advantages in allowing BD to identify national and regional issues of importance, and then to elevate those for global consideration, if necessary.
Exactly. We want to be able to have a local focus and capitalize on local insights, yet also be able to leverage our global resources, including BD's R&D, product development, andoftenmanufacturing capabilities. With manufacturing, however, we typically try to place that function as close to the customer as feasible. For example, BD Medical has a fairly diverse and widely distributed base of manufacturing plants, while BD Diagnostics and BD Biosciences have fewer and more concentrated plants that serve customers worldwide.
Among the many challenges that people are dealing with at local levels, which have enough importance that they often come to you on a global scale?
That goes back to our earlier discussion regarding AdvaMed. Many of BD's people outside the United States are members of trade associations in their respective countries. For example, Eucomed is an AdvaMed analog in Europe, and the leader of BD in France, Christian Seux, currently serves on its board and also serves as chairman of the French industry association Syndicat National de l'Industrie des Technologies Medicales (SNITEM).
BD's involvement in trade associations around the world enables an added level of coordination. AdvaMed representatives may call Eucomed representatives to try to coordinate their efforts on a given issuefor example, the recast of the Medical Devices Directive. The biggest issues that come up are regulatory onesgetting products approved and reimbursed can be extraordinary challenges.
We have been working diligently for global harmonization, which is the focus of the Global Harmonization Task Force (GHTF). The GHTF is a group of industry and government regulatory leaders that meets periodically as part of a larger multiyear effort to harmonize regulatory standards. The idea is to establish a common data set and format that can be used anywhere in the world.
Right now, the approval process is far from universal. Many times, companies have to go through a whole new regulatory process, including clinical trials, to introduce a product into a new region. In many instances, that process is redundant.
Reimbursement and regulatory approval are very important issues on a global basis, as is postmarket monitoring. For example, if a company's product receives an adverse-event report or undergoes a recall in a certain country, the other countries where that product is available will want to know.
If companies handle postmarket incidents incorrectly, they'll find themselves in a world of embarrassment, at leastlikely worse. Regulators could take products off the market and assess fines. And some countries deal with such incidents more harshly than others. Everyone takes them seriously. Fortunately, our regulatory and quality teams are full of smart, dedicated, competent people. Those are important functions for us.
Reimbursement requires a similar level of international coordination.
Reimbursement is an extraordinarily important global issue. Unlike in the United States, most countries in the world are on a single-payer reimbursement systemwhich is to say the governments wield significant power. In many countries outside the United States, the government has monopolistic buying power, and companies have to sharpen their pencils and work hard to get their products accepted and reimbursed.
Many times, the lack of sophistication with which governments evaluate new products really hurts us. They'll say, 'Oh, that's another diagnostic test, so it's the same as the last one you launched.' And we'll have to respond, 'No, this one provides an answer in two hours and is 98% accurate. The other one was 80% accurate and took three days. So the new test costs more to produce, has a higher clinical value and therefore should be reimbursed at a higher rate.' There's a lot of discussion in this respect.
How does the current disarray in world economies affect BD, either in its revenues or its planning on a day-to-day, month-to-month, quarter-to-quarter basis?
Two major external factors affect BD. One is the price of raw materials. We use a lot of resins, and typically resins are priced as an indirect function of the price of oil. So BD has been adaptingsuccessfully to date, I might addto keep pace with the rising price of resin.
The second factor is somewhat beyond our control: currency. Interestingly, these two factors tend to move in opposite directions. For example, as the dollar weakens, we see a positive translation effect. When the dollar weakens, a euro translates to more dollars. So when we translate euro-denominated sales back into U.S. dollars, there's a positive translation effect.
On the downside for us, that same weak dollar is almost certainly contributing in some measure to the rising price of oil, which leads to rising resin prices, which have a negative effect on our bottom line. If the world economy were to go into a fairly significant contraction or slowdowna point that we seem to be approachingwe could see a greater impact. When the global economy slows, government purchasers of our products have less revenue because their taxes are down because the economy's not as strong. In such a situation, they tend to be a lot more finicky about how much they pay for healthcare. Healthcare costs come under greater scrutiny in times of economic stress.
Some companies' financial reports suggest that currency translation is boosting operational revenues by as much as 6%. But that doesn't seem like it would offset a 50% increase in the price of crude oil.
This year, BD is probably going to report somewhere in the range of 1112% growth in revenue, and about 67 % of that is expected to be from performance and the other 56% will likely be from currency translation. Each year is a slightly different story.
This year, the percentages you mentioned are on target. The important distinction is the scale. This year, BD will spend about $250 million on resins. And we expect to bring in about $3.5 billion in revenue outside the United States, with about $2 billion of that in euros.
The good news is that the positive effect of the currency translation has been greater than the negative effect of the higher resin prices because our foreign revenue figure is so much higher than our expenditure on resins. So, if we experienced a 10% increase in our resin costs, that would translate to about $25 million in cost. On the other hand, if we see a 10% depreciation in the dollar, that translates to about $200 million in additional revenue when converting euros to dollars.
Also, it's important to note that the price we pay for resinsalthough it tracks in the same direction as oilis not a function of day-to-day price fluctuations. The price we pay typically reflects a three- to four-month lag based on our negotiated contracts.
So operationally, BD is still able to overcome these challenges?
Yes. Despite the rise in raw material costs, we're having a good year.
Also, the rising cost of raw materials is not just related to oil. All commodities seem to be increasing in price. The market has shifted from being concerned about economic growth to being concerned about inflation, and that's a concern for everyone.
Fortunately for BD, we foresaw the headwind against raw-material commodities and costs, so we looked elsewhere in the company for productivity. That foresight has enabled us to continue to improve our operating income margins this year even though we're also dealing with the higher costs of raw materials.
How does BD's long-time presence in the international markets contribute to the company's approach to addressing the needs of those markets?
About 55% of our total revenues come from operations outside of the United States, which makes BD one of the most internationally focused medical technology companies in the world. Also, BD is on the leading edge in terms of designing products specifically for needs in the developing world. As I mentioned, region-specific products often start in one place and then are moved into other markets. They are designed to meet unique needs that often turn out to be not so unique. Once people in other countries see the product, they may say, 'Hey, I could use that as well.'
Obviously there's a whole host of challenges in doing business in places like Africa, where the infrastructure is extraordinarily thin. That's why we take a unique approach to certain regions. We focus on region-specific product development, and we provide partners for people on the ground in those countries. Such efforts are focused on building the capabilities of customers in the developing world to use our products.
When it comes to regions such as Eastern Europe, China, and Latin America, many medtech companies seem content to postpone entering a new market until a middle class with healthcare purchasing power has emerged. BD's activities in Africa suggest that the company has a different notion and isn't willing to wait.
No, we're clearly not waiting. We are trying to reach people and serve their needs today. And as we do that, more of the population in places like China, India, and Africa become regular consumers of more mainstream healthcare.
But regardless, we will meet the people where they are today and work from there. If such an approach requires partners and collaborations, so be it.
Areas of Interest
Earlier, we talked about BD's interest in advanced drug delivery, infection control, and diabetes. In terms of product development, what other areas of interest are occupying the company?
BD Medical is focused on parenteral drug-delivery systems. That focus started with the basic syringe, and it has grown from there.
So where does a position of leadership in advanced parenteral drug-delivery systems take you? It takes you into novel injection devices such as microneedles. I think the arrangement we have with Sanofi Pasteur is a prototype for other collaborations that BD will develop with other pharmaceutical companies who have a unique drugs with unique delivery opportunities. As a part of such collaborations, BD is able to adapt its systems to optimize the operation of a drug.
Many drugs have to be maintained in a powderedor lyophilizedstate and then reconstituted right at the point of delivery. We achieve that through what's called a wet-dry syringe. One compartment in the syringe contains the powdered drug and another compartment contains some sort of dilutionsterile water, for example. To operate the syringe, the practitioner may shake it a little before giving the injection, or it may be designed so that activation of the syringe causes the water and the drug to mix.
In regions where there is virtually no clean water to mix with a powdered drug, having both the drug and liquid components in the same handy sterile container provides quite a benefit to healthcare workers.
That's one example of how our technology has evolved, and you can imagine where else we might go. For example, there's a growing need for self injection, as well as a growing need for injecting biopharmaceuticals.
As for BD Diagnostics, the focus of future product development will be on creating faster, more accurate tests. Our focus will continue to be infectious disease, with an emerging focus on cancer.
Meanwhile, BD Biosciences continues to focus on providing tools for life science researchersparticularly tools focused on cells and the immune system. We provide researchers with tools that make their jobs easier and more efficient.
What is BD doing to turn these areas of interest into real products?
Over the past four years, BD has implemented a two-pronged strategy that we hope will begin to generate significant benefits over the next four yearsbenefits in terms of new products coming to market on a timely basis that will contribute to the practice of healthcare and, in turn, contribute to our growth as a company.
The more straightforward component of our strategy has been to increase the portion of every revenue dollar that we spend on R&D. Our R&D spending has increased over the last few years at a rate of approximately 10% annually. GeneOhm and TriPath are also R&D-intensive entities. By acquiring their R&D organizations, we've further increased our R&D spend rate.
In addition to increasing our R&D investment, BD has undertaken a full review of how the company manages innovation. We hired an outside firm that helped us perform an assessment of each of our main worldwide businesses. In those assessments, the innovation processes of each business were ranked on a scale of 1 to 4. Most scored right around a 2, and we're currently looking to move each of those ratings from a 2 to a 3 and, eventually, to a 4.
A lot goes into the process of innovation. Innovation requires a level of serendipity and creativity, but it also requires discipline, systems, and focus.
The innovation rankings of BD's businesses are part of what we call the company's global product development system, or GPDS. It's a phase-gate development process that features high-powered program management teams, led by team leaders trained in team management. They have internal contracts with BD's management that spell out milestones, and their project funding is released against the milestones. Such milestones include clinical trials and a defined set of other launch criteria.
Although it's too soon to say that such initiatives are going to start paying dividends tomorrow, we hope that the combination of spending more and spending it better will continue to contribute to our innovation in the future.
BD is a powerhouse in the IVD sector, where companies are facing a wide range of challenges, including shifting requirements for premarket review, competition from the use of home-brew tests, the need for down-classification of certain IVDs, and the emergence and regulation of molecular diagnostics. AdvaMed has pressed for passage of the Medicare Advanced Laboratory Diagnostics Act of 2007 (HR 1321 and S 2404), which deals with IVD-related reimbursement issues. What do you think of these IVD-related issues, and how do you expect the proposed legislation will progress?
I'm not a political expert, so I'm not in a position to predict how legislation will progress or when it might get passed. But I think this whole issue goes back to the greatest challenge facing industry today: the need to demonstrate value.
Using clinical information, device and diagnostics manufacturers must be able to demonstrate the value of what it is they're selling to hospitals and labs. We know that diagnostic products are, in one way or another, involved in 7080% of clinical conditions. We also know that they only represent about 34% of total healthcare spending. So our task is to continue to promote the significant value of such products when compared with the cost of the products.
The challenge with diagnostics is that regulators might be tempted to consider such products as modified pharmaceuticals, and that's a mistake. Luckily, we have made progress with FDA in terms of laying some preliminary groundwork on the agency's critical path initiative.
In some instances, manufacturers are inventing new gold standards. That's what's happening in diagnostics today. I'm speaking specifically about in vitro diagnostics, but I'm sure my colleagues on the in vivo imaging side would say the same thing. In both realms, companies are creating capabilities for which there is no predicate device because the new technologies are so much better than those that have gone before them. So, for example, if a company develops a molecular test for tuberculosis or MRSA that is far superior to anything that came before it, the company then faces the challenge of having to validate it.
The regulatory environment has two challenges: Getting products approved and getting them reimbursed. Over time, the regulatory and reimbursement events are going to merge. But it's almost a catch-22 right now. Some new diagnostics have incredible value, but for that reason, physicians don't have access to them.
Clinical laboratories have been conducting testing with unregulated home-brew tests for many years. Do you think FDA should regulate laboratory tests the same way that commercial IVDs are regulated?
There's a place in the world for both commercial IVDs and home brews, but there's also a point at which home brews are no longer home brews. When a home brew has been used for a specified period of time, clearly measured in years, it's time for that product to be subject to the same regulatory process that governs tests developed by third parties. Likewise, home brews are inappropriate when diagnostics reviewed by FDA and manufactured under good manufacturing practices are available.
I would not advocate restricting labs from using home brews altogether. However, as a consumer, I would want to see some kind of regulation, maybe 'regulation lite,' that would provide some assurance about the test results I receive. I would suggest that the industry be a little more disciplined about defining the line at which a home brew becomes a mainstream diagnostic.
This is a level of understanding about the IVD sector that escapes most people. Do you think the view that you just presented is getting through to legislators and policy makers?
My sense is that the industry is getting its point across, and we're beginning to see some support for this approachhopefully even at the hospital and laboratory side. I think reasonable people can understand that home brews should be used primarily to support research. They provide a great way to make progress, and I would not discourage their use in that capacity, although even there, they should be subject to some kind of oversight to ensure that patients get reliable information.
BD has many points of interest in contact with the area that is becoming known as life sciences convergence, including the company's interests in diagnostics, drug delivery, and personalized medicine. In this area of convergence, where cross-sector opportunities are being explored, where do you think the strongest advances are being made?
By definition, we all know that the most expensive real estate on the planet lies within the four walls of a hospital. It's also a place of extraordinary complexity. You really want only the sickest, most needy people to be there.
As a result, nearly all of the major trends in healthcare are going in the direction of the patient. This has been under way for some time, and it includes the development of home-based and clinic-based products for self testing and self injection for the administration of drugs.
One trend favors the development of pharmaceuticals that are targeted to specific patient subsets. Previously, the Holy Grail in pharmaceutical development was to develop a single pill that everyone would take every day throughout their entire lives. That approach rests on a highly desirable business modeluntil it's discovered that some fraction of the population shouldn't have been taking that drug at all, and that they're now suing the manufacturers for tens of billions of dollars.
Another trend favors the development of companion diagnostics. We're very excited about this area, and we feel that BD brings a lot to the party.
A number of other large-scale trends are also affecting the healthcare system. For instance, we believe that the healthcare system will continue to experience labor shortages, both in quantity and quality. So it's essential that we do anything we can to reduce labor in hospitals and clinical laboratories.
Similarly, we know this industry is error prone, as measured and documented in many studies. This is partly the result of trying to perform a high volume of complex tasks. So we will continue to focus on error reduction, labor release, simplification, efficacy, faster time to result, and other improvements that address these key trends. BD's capabilities to address so many of these concerns are a source of substantial customer value.
Finally, the pharmaceutical industry is transforming in the direction of biopharmaceuticals. We clearly see a trend in favor of complex biopharmaceuticals, and BD expects to participate in this area on numerous fronts: supplying the tools that biopharma companies need to discover new drugs, the media they use to grow the cells that produce the desired proteins, and thenbecause the vast majority of such drugs are parenteral applicationsthe devices they can use to inject the finished drug.
Have these interests led BD in the direction of exploring new kinds of partnerships? For instance, you mentioned BD's partnership with Sanofi Pasteur. Is BD exploring partnerships with other kinds of companies that perhaps in the past it wouldn't have been quite so serious about?
We have partnered with pharmaceutical companies for many years. The simplest example is selling them prefillable glass syringes. In recent years, our relationships have become much more sophisticated. We are working with their research teams to be part of their drug discovery efforts. We're selling them the tools and instruments that are helping to make drug discovery more efficient. And we're selling them the mediain many cases, very specialized animal-free mediathat they use to make the pharmaceutical.
In the last of these cases, a drug company typically approaches us with a project such as a cell line that produces a certain protein at a certain level. Our task is then to use our various capabilities to optimize the media. After a few months, we are very often able to report that we can increase protein production by a factor of two or more.
Drug companies get very excited about those kinds of achievements. The drugs often have unique applications in fields such as autoimmune disease or cancer, and they are typically sold at very high pricing.
In the fields in which BD competes, you've identified dozens of themes and particular product types that are actively being explored and developed. Which of these do you think offers the greatest chance for the next really major breakthroughs?
It would be a dangerous business for a CPA to engage in predicting breakthroughs. But I think BD will continue to look for opportunities to move the value needle ahead in all of the areas that we've just spent some time discussing. BD will certainly maintain its course of significant evolution and significant enhancement.
BD may also decide to make some investments in further-out areas. We will not discuss them until we have very high confidence of their success. I wouldn't predict any major breakthroughs over the next couple of years.
Nevertheless, five or 10 years from now, I believe BD will be involved in several new areas based on a couple of product platforms now being developed. Two areas to watch will be advanced drug delivery and advanced diagnostics. Advanced drug delivery includes our advanced bioprocessing platform. In the advanced diagnostics area, the acquired properties of GeneOhm and TriPath may each become significant opportunities as they grow to their potential over the next five years. In five years, we hope to be talking about what these business areas are contributing to our revenue at that time.
The scenario that you just described is one of the things that have made the medical technology industry so attractive to investors. Most medtech companies tend to march ahead incrementally and produce good returns year to year, year after year. Clearly there is a group of investors out there who understand this model and stick with the industry. Do you think other investors who have not been savvy in this area are also beginning to get the message?
I'd be speculating if I claimed to understand the thinking of all investors. Just speaking about BD, however, I believe that our investor base is much more savvy about BD today than it was 10 years ago, and that's not an accident.
We spend a lot of time working with investors. Each of my top six direct reports and top four finance people10 people in allattend or make presentations to at least one or two investor conferences per year. We spend a lot of time trying to get the company's messages out. And, over the past several years, the company's stock price has reflected a greater appreciation for both our consistency and our future growth potential.
In the broader market for medical technology companies, there seems to be an increasing distinction between companies whose growth tends to be subject to boom and bust cycles, and companies that tend toward slow and steady growth. We've seen a lot of boom and bust in the cardiovascular space, and to a lesser degree in orthopedics. But there are also a lot of companies that offer a 'steady as she goes' approach to growth. Companies such as C. R. Bard, Hospira, and BD offer good solid growth.
We've already seen the beginning of a trend toward separating industry into these two camps. Clearly there are investors who favor the high-tech side of the business and want to try timing their investments to coincide with company boom cycles. And there are other investors who are more comfortable investing for the long run with companies like BD. Naturally, we encourage those kinds of investors to own BD stock.
It sounds as though we should check in with you again a few years from now to see how things have developed.
Yes. I think BD has reached an inflection point. The company is already well on its way, changing from its previous focus as a medical supplies company to a company focused on the development and commercialization of innovative, higher value devices. The company's growth rates and margins are starting to show that change, and it is also beginning to be reflected in our stock price.
So, yes. Let's touch base in another three to five years to see what our progress has been.