The top med tech R&D spenders invested more than $10.5 billion on innovation in 2013, up by about $200 million from 2012. The list stayed largely unchanged, reflecting the continued dominance of a few big players, but M&A activity promises to vault some companies up the ranks next year or push others into the top 10.
GE Healthcare ($GE) is the only new addition to the list, but only because the company told FierceMedicalDevices that its healthcare R&D budget was $1 billion in 2013, although the figure is not stated in its annual report. The new addition kicked Covidien off the latest list.
The top R&D spenders in med tech invested between 6% and 12% of their device sales back into med tech R&D. From dental products to diagnostics to laboratory equipment, cardiology, imaging and orthopedics, the list reflects the variety of businesses in the med tech arena.
With the exception of GE, the budgets were taken from the companies' annual reports and reflect investments in diagnostics and devices only. Because there are only three pure-play device companies on the list--Medtronic ($MDT), Boston Scientific ($BSX) and St. Jude Medical ($STJ)--the restriction proved challenging. For example, the budget for Abbott Laboratories ($ABT) reflects R&D spending on its animal health business, whose budget was lumped together with the other "nonreportable" segments: eye care and diabetes products.
Baxter ($BAX) was excluded from the list because the company does not break down R&D spending by its pharmaceutical and medical device divisions. Similarly, due to its Alcon eye care unit and diagnostics business, Novartis ($NVS) was a contender for the top 10, but the company's med tech R&D spending could not be determined.
Companies that just missed the cut include Stryker ($SYK), with an R&D budget of $536 million, Covidien ($COV) ($508 million) and Becton Dickinson ($BD) ($494 million). Based on the annual reports of Thermo Fisher Scientific ($TMO) and Life Technologies ($LIFE), the now-combined laboratory equipment company will be on next year's list, but we'll have to wait until the numbers are released to see the effect of synergies on the company's R&D spending.
More consolidation is likely (especially in orthopedics), on the heels of proposed mega deals between Zimmer ($ZMH) and Biomet and Medtronic and Covidien. Will it result in reduced R&D spending? No, says Medtronic, which has promised that the combined organization will spend more on innovation than each had planned as an individual company.
Indeed, as the debate over cost-cutting Valeant ($VRX) and its bid for Botox maker Allergan ($AGN) rages on over in Big Pharma, the effect of M&A activity on investments in new products will be closely watched on the device side too.