While producing the Top Company reports can be a challenge or even a chore at times, the revelations made in writing my group and reading those completed by my colleagues are valuable. The insights gained from why a company may have taken an action or made an acquisition gives us useful insights on how we view and cover the industry. As much as we may dread the long days in June when many of the reports are completed, the takeaways make it worthwhile. As such, in my Letter in this issue each year, I share some of my discoveries and observations. Hopefully, these prove useful to you, the reader, as well.

Since M&A is my primary focus for many of the reports, I’ve noticed a shift in acquisitions in recent years. I’m not sure if the company purchases are more targeted or strategic (i.e., smaller in size and value) due to a rethinking of M&A strategy across the sector or if it has more to do with the financing options and interest percentages. With lower interest percentages, borrowing is more attractive, hence bigger buys aren’t as problematic.

Historically, we saw the elimination of a company or two from the previous year’s top company list due to a mega-deal. One of the bigger players on the list would gobble up one of the bottom 10. As a result, a new entity would enter the list that year. 

The last few years, we’ve seen changes, but they’ve been due to financial reasons. Revenue diminishes for one company and another takes its place. This year, we lost three—Dentsply, Canon Medical, and Align Technologies (which had debuted on the 2024 list). They were replaced by Mindray (which should have been brought on a couple years ago), Nipro, and the returning Hologic. 

Somewhat related, we’ve also reported on companies slimming down in recent years. As such, the spinout is becoming a popular strategy for firms as an alternative to a sale, but both are being leveraged. Medtronic will spin out its diabetes unit as MiniMed, J&J is speculated to be splitting from Cerenovus, Stryker will separate from its Spine segment (VB Spine), and BD shipped off Embecta (diabetes) and will now do the same with Biosciences and Diagnostic Solutions. Edwards’ Critical Care Product Group goes to BD, while Baxter’s Vantive Kidney Care moves to Carlyle Group. Did 3M look at the Novartis/Alcon model in shearing off Solventum? There are more examples within the reports, but you get the idea. 

Elsewhere, we see the continued hit to diagnostic firms as COVID-19 test demand bottoms out. As such, so do dollars coming from those products. Fortunately, those organizations seem to have found more favorable revenue streams to rely on and invest in and haven’t seen their overall bottom lines affected too much. 

GE HealthCare continues to bank on AI innovations. However, its year-over-year revenue figure isn’t showing the ROI yet. Am I alone in thinking we’ll eventually witness a watershed moment when their sales take off due to the regular investment and exploding interest in AI? Healthcare may not be fully ready for it today, but it shouldn’t be long. I look forward to the report for that year. 

Meanwhile, is there finally a light at the end of the tunnel for Philips and its device challenges? The settlement agreement of $1.1 billion took many by surprise as some speculated it to be in the range of $2 billion to as much as $10 billion. While there are also ongoing payments to the U.S. treasury, short of another incident, the worst may be behind them.

Another company seeing device challenges, albeit for different reasons, is Boston Scientific. They’ve nixed a couple of brands from their TAVR portfolio and we’ll have to wait to see if they remain in the crowded marketplace for that technology. Not sure what they’ll do with that investment, as a spinout is unlikely for a product they’ve stopped selling, and an outright sale would get them bottom dollar at this point. I guess with how aggressive the organization has been with M&A, they can’t get it right every time. 

Speaking of Boston Scientific, it finally cracked the top 10. While the company has seen good gains in revenue, it’s been at #11 for several years now. This year, it pushed to #10. A notable position change was also made by BD, going from #8 to #6, leapfrogging two peers—Philips and GE. Another one worth mentioning is Intuitive and how quickly it has risen. In 2019, the company was comfortably sitting at #25 with $3.72 billion in revenue. In this year’s list, they are at #16 and over $8 billion in revenue. Quite the rise!

Finally, Baxter shared a cautionary tale on supply chain resiliency this past year via its North Carolina facility. After the results of a devastating hurricane, the nation’s IV bag supply was in serious jeopardy. Fortunately, the company acted quickly and fellow list member, B. Braun, also ramped up production to help address the challenge. 

Let me know what noteworthy findings you uncover within this year’s reports.

Sean Fenske, Editor-in-Chief

sfenske@rodmanmedia.com