CEO Dan Starks told an audience last week that excessive focus on emerging markets “fails to appreciate the potential of the medical device industry.” The CEO firmly believes that straying into emerging markets implies a lack of imagination and focus. This is highly controversial, as most medical technology giants have been investing significantly in emerging markets, including Johnson & Johnson (JNJ) and Medtronic (MDT), a company Dan Starks has publicly lambasted before. Medtronic has been in the news lately as it transforms its business model, shifting to a solutions company enveloping more parts of the healthcare value chain—a move St. Jude’s CEO disagrees with.
St. Jude’s strategy is to focus on innovation rather than delivering cheaper products to emerging markets. The manufacturer defines itself as a disruptive innovator, delivering high-tech medical products. According to Dan Starks, innovation is key to addressing the needs of the current healthcare environment driving positive outcomes in medicine and cost-effectiveness.
Following FDA approval of its Ilumien Optis system, Frank Callaghan, president of the company’s cardiovascular and ablation technologies division, said, “The advancements in the Ilumien Optis system continue to build on St. Jude Medical’s leadership in providing innovative products that reduce health care costs and improve outcomes for patients battling coronary artery disease. This next-generation system is a scientific advancement that delivers critical information to physicians about the location and severity of disease within the coronary arteries, potentially resulting in better medical decision-making and overall cost-effective treatment.”
This follows St. Jude’s recent acquisition of Nanostim, a company making a wireless and leadless pacemaker. The company paid $135 million to shareholders with extra incentive-based payouts equaling $65 million. Analysts call the move and the device the next step in medical device innovation.
Look for St. Jude to become a big player in the domestic market as it continues to innovate and drive sales growth. It will be very interesting to keep track of the results of this company versus companies that are diversifying abroad. 2014 will help reveal the prevailing strategy between St. Jude and companies like Medtronic.
- Part 1 - St. Jude posts solid financial results, topping estimates
- Part 2 - St. Jude Medical: Key strategic stock outlook
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