Medtronic CEO: China hottest medical market

Healthcare execs speak at Bear Stearns conference; Asia lauded as fast-growing market for medical devices, drugs.

By Aaron Smith, staff writer

NEW YORK ( -- Health care executives speaking at the Bear Stearns healthcare conference in New York said the best opportunities for growth are overseas, and Medtronic's new CEO pointed to China as the world's hottest international market.

William Hawkins, the newly-appointed chief executive of Medtronic, Inc., (up $0.24 to $54.08, Charts, Fortune 500) said that China would supplant Japan as the company's second-biggest market (behind the United States) within the next eight to 10 years.

"We think there's a lot of opportunity to accelerate growth outside the U.S., and we project double digit [international] growth for years to come," said Hawkins, who was promoted to the top job in August.

Hawkins said that 70 percent of Medtronic's sales are currently from the U.S. market. The Minneapolis-based company recently launched the Prestige spinal implant in the United States, following approval from the Food and Drug Administration. Hawkins said 1,400 physicians have been trained to implant the device. Also, the company's experimental Endeavor spinal implant is going before a panel of FDA experts in October, and Hawkins expects that device to get approved for the U.S. market by the end of year.

Jim Connolly, executive vice president for the pharma company Wyeth (up $0.69 to $46.41, Charts, Fortune 500) and general manager for the company's vaccine business, said the international market was driving sales for the pneumonia vaccine Prevnar, the company's second-biggest seller and the world's top-selling vaccine.

Sales for Prevnar, a vaccine to prevent pneumococcal disease in infants and young children, soared 32 percent in the first half of 2007 to $1.2 billion, and Connolly projects that annual sales will reach $3 billion in 2009, a year earlier than expected.

Connolly said that overall sales for the Madison, N.J.-based company were being driven by markets in China and Japan, and that Prevnar sales were driven by "emerging markets," particularly Brazil, Turkey, Saudi Arabia, Malaysia and Thailand.

"The real opportunity for growth is in the emerging and developing markets," said Connolly.

Pfizer Inc. (down $0.29 to $23.96, Charts, Fortune 500) chief executive Jeffrey Kindler, who was appointed to the top job in 2006, referenced the vibrant markets in Asia and Latin America as "growing at twice the rate of developed markets." Kindler said his company has established factories in China, and is ramping up its R&D presence in India and Korea.

Total Chinese drug sales increased 12.3 percent to $13.4 billion in 2006 from the previous year, according to IMS Health, while Indian sales grew 17.5 percent to $7.3 billion and Latin American sales grew 12.7 percent to $33.6 billion.

But not all the healthcare news was rosy. Medtronic plans to reduce 900 jobs, which Hawkins said will help reduce manufacturing costs by 25 percent over the next five years.

Healthcare factory jobs seemed the most vulnerable to the ax. In August Amgen (up $0.20 to $51.10, Charts, Fortune 500) announced plans to cut 2,200 to 2,600 workers, and chief executive Kevin Share described manufacturing as his company's "great big bucket of expense."

Sharer listed R&D, notably clinical development, as his second-biggest target for cost reduction. "We've got room to cut in there, too."

Amgen execs expect to achieve pre-tax savings of up to $1.3 billion in 2008 through restructuring, to offset plunging sales in Aranesp, its anti-anemia franchise which was hit by side effect warnings.

"While it would be nice to get a free pass on 2008, that isn't going to happen," said Sharer. "It's like rolling a boulder uphill for the rest of your life, if you want a metaphor of what my life is like."

Pfizer is also involved in a multi-billion dollar restructuring that includes some 10,000 job cuts. In reference to generic competition, which will threaten the future sales of its cholesterol-lowering blockbuster Lipitor starting in 2010, Kindler said his company will continue to promote name-brand products even after the patents expire.

Bristol-Myers Squibb (up $0.24 to $28.05, Charts, Fortune 500), a drug company that forced out its former CEO Peter Dolan in 2006 after a serious of management missteps, is also cutting costs, though it has yet to announce details like the number of lay-offs or projected savings.

The new chief executive James Cornelius said that Bristol "felt like it was designed for a $25 billion pharmaceutical company but with $15 billion worth of revenue" when he took the job as an interim CEO in 2006. (In April, his position became permanent.)

"We hope to be a more nimble pharma company going forward with fewer people," said Cornelius.

But despite the company's plans to downsize, Cornelius said there will be no cuts to R&D, so that the company can better prepare itself for a future without Plavix, which loses patent protection in 2011. The chief executive also said he has no plans to cut sales jobs.

CEOs and executives from scores of healthcare companies are presenting at Bear Stearns' 20th annual healthcare conference in New York. Top of page