1 Industry a Heartbeat Away From Disaster: Medtronic, Inc. (MDT), St. Jude Medical, Inc. (STJ)

Page 1 of 2

Earnings season isn’t over, but the quarters from health care companies that have already reported have given us a great look at how the medical device sector’s faring. Numerous companies have reported good results, but one constant remains: The cardiac rhythm management, or CRM, industry — which handles everything from pacemakers to defibrillators — is facing off with a tough market. Sales are falling across the industry yet again, perpetuating a worrying trait that hasn’t eased up after tough results in the third quarter of 2012, as well.

Is there hope for a turnaround for companies in the CRM space, or is this an industry on the decline that you should keep your investment far away from?

St. Jude Medical, Inc.Sales on the decline
Just a few years ago, the CRM market was on the rise, growing by double digits. Now, however, the market across the world has dried up — in both the U.S. and internationally, sales are falling for CRM products.

St. Jude Medical, Inc. (NYSE:STJ) has traditionally been among the powers in this business, but the company’s reliance on CRM sales has come back to bite it. St. Jude’s CRM division supplies around 50% of total company sales, and when that division’s suffering, it’s tough sledding for the company.

St. Jude’s CRM department has already been on the downslide, with sales falling 4% on a constant currency in the third quarter — a significant year-over-year slide. With the company’s full-year results now out, we can see just how hard the division has fallen: CRM sales at a constant currency fell 5% year over year in St. Jude’s fourth quarter, near the high end of the business’ guidance, with sales down 3.5% over the course of the full year.

Fortunately, St. Jude’s largest segment in the CRM business — its ICD (or implantable cardioverter defibrillator) segment — hasn’t been hit quite as bad. Currency issues have really plagued this business, as the ICD segment only lost 2% over the course of the year at a constant currency. Falling pacemaker revenue has really hit St. Jude hard, but this company is hardly alone in its CRM troubles.

Boston Scientific Corporation (NYSE:BSX) doesn’t rely as heavily on CRM sales as its rival, but its sales are no less concerning. After losing 4% in its CRM revenue for the third quarter, Boston Scientific’s business dropped another 4% in Q4 for a total loss of 7% year-over-year for 2012.

Even the industry’s biggest major player, Medtronic, Inc. (NYSE:MDT) , has witnessed its CRM business losing sales, particularly among pacemakers. Things aren’t so good in this sector, but why are sales falling — and what should you account for in the future?

What the future holds for the CRM business
The CRM market is already mature to the point of saturation in economies such as the U.S. and Europe. New patients for implantable devices will inevitably arise due to rising obesity rates and an aging population in advanced economies — two major indicators for heart problems. However, with many patients already being treated with such devices, finding growth will remain a challenge. The Millennium Research Group has predicted little growth from the CRM market through 2016, particularly with prices falling in advanced economies.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!