'Titans' Dominate Medical Industry, Analyst Says

A handful of large-capitalization companies—the "titans"—are dominating the medical product field and are poised to improve their position in the coming years, according to a research analyst who studies the medical market.

The major players—including Johnson & Johnson, Abbott Laboratories, Boston Scientific Corp., Medtronic Inc., Guidant Corp., and St. Jude Medical Inc.—are in commanding positions in the largest medical market segment, consisting of products that treat cardiovascular conditions. In addition, these companies are poised to take leadership roles in other fields by offering new products to treat neurological and peripheral vascular diseases and disorders, according to Kurt Kruger, medical products analyst for Banc of America Securities LLC, a subsidiary of Bank of America Corp.

Kruger also notes that, instead of a "clash of the titans," the healthcare industry may have to deal with a "club of the titans," an oligopoly of very few companies that set up high entry barriers in the fields they dominate. With sales of $1 billion or more, top-line growth of more than 10%, and operating profitability of more than 15%, these companies should grow increasingly powerful and seize control of an ever-larger share of the medical products market, Kruger predicts.

Since cardiovascular disease is the leading cause of death in the United States, Kruger sees good times ahead for manufacturers of cardiovascular devices. For example, he predicts that total revenue from stent sales will increase 6% in 2000 and 4% in 2001, bringing stent revenues to $3.5 billion.