Medical device makers prosper
BOSTON— The state’s medical device industry has plotted a stable course in recent years even though it is heavily involved in manufacturing, a sector that has declined, according to a new report by the Donahue Institute at the University of Massachusetts.
Employment, investment and sales data all show that medical device companies are not just surviving but making a solid contribution to the state’s economic climate, said Michael D. Goodman, institute director of economic and public policy research.
“Massachusetts has, in the medical device industry, a stable employer, and I think that’s quite notable,” Mr. Goodman said yesterday at the annual meeting of the Massachusetts Medical Device Industry Council, or MassMEDIC, at the John F. Kennedy Library.
Medical device makers employed 20,555 people in Massachusetts in 2004, according to the most recent federal economic census numbers. That was up from 20,370 in 2001, the date of the previous economic census. During the same four-year period, however, the state lost about 100,000 manufacturing jobs.
Only two other states — California and Minnesota — had bigger medical device work forces in 2004 than Massachusetts. In addition, the medical device industry was responsible for another 29,040 Massachusetts jobs at suppliers and other businesses in 2004.
“We’re looking at an overall contribution to the state economy of just over $8 billion,” Mr. Goodman said.
MassMEDIC drew about 400 to its 11th annual meeting yesterday, an event that comes as companies in the state are grappling with globalization, mergers and acquisitions and the rise of private equity investments in public companies.
Since about 2000, medical device exports from Massachusetts have been rising faster than overall state exports, Mr. Goodman said. Medical device exports in 2006 totaled $2.5 billion, or 10.5 percent of all state exports, and the state has strong medical device markets in western Europe and Japan.
“The reliance of the Massachusetts export economy on medical instruments and medical exports only seems to be growing,” he said.
Across the country, many of the medical device makers with the best stock growth are the medium-sized companies such as Cytyc Corp. of Marlboro, according to Rachel H. Gravelin, managing director of Bank of America’s healthcare investment banking group. Cytyc’s stock rose 244 percent since 2002 as it has acquired businesses that observers might once have expected industry heavyweights such as Johnson & Johnson to purchase, she said.
“That speaks of how well the street (Wall Street) has responded,” Ms. Gravelin said.
Private equity investors such as the Blackstone Group, Bain & Co. and the Carlyle Group are also investing in medical device companies, sometimes paying nearly nine times earnings before interest, taxes, depreciation and amortization, a key measurement. What private equity investors like are the clean balance sheets, good management teams and predictable ways to get out of investments, Ms. Gravelin said.
“I think they’re going to be here, and they’re going to be here big,” she said.
For Massachusetts, barriers to the growth of medical device companies remain the same things that are hampering other industries, notably the high price of housing, according to Thomas J. Sommer, MassMEDIC president. But another economic force is actually helping certain companies. As the dollar has declined relative to certain currencies, European manufacturers are turning to Massachusetts companies to manufacture parts, Mr. Sommer said.
“We look very, very attractive to overseas manufacturers who are looking for quality workers,” Mr. Sommer said.
The educated, skilled workers employed in medical device businesses may even be shoring up the state’s overall manufacturing industry, Mr. Goodman said in an interview.
“I think there is also the danger of losing one’s manufacturing edge, but I think this industry is preventing that from happening,” he said.
MassMEDIC wrapped up its conference with an appearance by New England Patriots linebacker Tedy Bruschi, who overcame a 2005 stroke and heart surgery to resume a professional football career that has included three Super Bowl championships. Mr. Bruschi, wearing a cast on his right wrist, which was broken last year, said he relied on hard work and determination, skills he learned early in his career, to battle back from his stroke.
“Every day that I play professional football helps me be what I am,” Mr. Bruschi said. “I’m a father, I’m a husband, I’m a three-time world champion and I’m a stroke survivor.”
May 02, 2007