Top 30 medical device companies.

Five years. Does it seem like an eternity or quicker than a flash? In the medical technology business--much like life--clearly it depends on your point of view. Perhaps, if you're on the research and product development side, it could seem like an excruciatingly long series of trials and errors as you drive a new device to market. If you're dealing with a product recall regulatory and compliance hurdles, customer relations issues and reengineering challenges, days can seem like years.

On the flip side, financial successes can seem fleeting. When Medical Product Outsourcing launched its inaugural issue in June 2003--our first Top Companies Report--the drug-eluting stent was the new, industry-changing "blockbuster" device. Until that point, the pharmaceutical industry had been the land of bottom line-altering blockbuster products. The drug-coated stent changed all that. Change, however, is the operative word and we've seen what's happened to the stent market in five (arguably short) years. It tumbled following mixed-message studies that longer-term effects of the devices weren't as safe as originally thought. But the market for the tiny mesh devices has begun a recent rebound (two new players, Medtronic and Abbott, have joined early leaders Johnson & Johnson and Boston Scientific--which should alter the playing field even more). Things change quickly.

What hasn't changed is the device market's strength. Though the industry has had to deal with challenges as it matures, solid fundamentals, a growing international marketplace and a consistent focus on new product development have fueled expansion.

According to research by Chicago, IL-based Navigant Consulting, the worldwide medical device market in 2007 was $220 billion, up from $203 billion in fiscal 2006. Some more liberal estimates have even put the total as high as $270 million. The US device market generated $75.6 billion in revenue for 2007, and a compound annual growth rate of 9% is expected from now until 2013, according to research firm Frost & Sullivan.

Factors such as an aging population in North America and Western European countries and an increase in chronic diseases such as diabetes bode well for continued near-term success. But, as a review of the companies on this year's Top 30 list will clearly indicate, international markets--both as manufacturing and sales centers--increasingly are helping buoy sales and are expected to do so even more in years to come. Developing economies in Asia (more than just China), Latin America and Eastern Europe all provide opportunities.

As you examine the list, you'll also notice that consolidation continues, and it's not just the big guys gobbling up the startups. Buyouts and private equity shaped the industry in 2007 with big bucks. Dade-Behring, a member of past Top Companies lists, was acquired by imaging and diagnostic powerhouse Siemens. Billion-dollar players such as Kodak Healthcare (now Carestream), Bausch & Lomb and Biomet became privately held firms in 2007. Biomet stays on this year's list as it continues to publish its financial data (though not obligated to do so). Carestream did not respond to MPO's requests for information, and Bausch & Lomb declined to participate. And as we go to press, drug-maker Novartis is making a move to purchase eye-care giant Alcon for a whopping $39 billion. So, once again, the list is ever changing.

As you read our report, please take note that while the device and diagnostic companies are ranked according to sales reported for FY 2007 (though we do provide some 2008 figures to date, where possible), some may include non-device sales within a division, such as combination products, drug delivery, software or device-related services. Not all companies publicly break out just the device portion of total revenues. We consulted numerous public documents and contacted company officials as needed to arrive at the best estimates. Also note that foreign currency conversions were done based on the conversion rate at the end of the fiscal reporting period being discussed.

The MPO Staff

1 Johnson & Johnson

$21.7 Billion ($61.1B total)

KEY EXECUTIVES:

William Weldon, Chairman and CEO

Dominic J. Caruso, VP, Finance and CFO

Brian Perkins, VP, Corporate Affairs

Donald M. Casey Jr., Worldwide Chairman, Comprehensive Care Group

Nicholas Valeriani, VP, Strategy and Growth

Sheri S. McCoy, Worldwide Chairman, Surgical Care Group

NO. OF EMPLOYEES: 119,200

GLOBAL HEADQUARTERS: New Brunswick, NJ

When it comes to medical devices, there's no ignoring the 800-pound gorilla in the room. The powers that be at New Brunswick, NJ-based Johnson & Johnson claim their device and diagnostics businesses make up the world's largest medical technology business. Certainly, with 2007 revenues in excess of $21 billion (35% of the company's total sales), there's no arguing with that boast.

In 2007, J&J's device businesses achieved total growth of 7.2% compared with 2006 (domestic sales increased 3.2% and international sales increased 11.1%--4.6% from operations and 6.5% from currency).That's impressive expansion in light of a significant decline in the market for drug-eluting stents (DES), which took a toll on sales of the Cypher sirolimus-eluting coronary stent manufactured by the company's Cordis division.

For example, in the second quarter of the 2007 fiscal year, Cordis sales declined 21% overall due to lower Cypher sales, and US sales were down 26%.

Despite the declining numbers, J&J is optimistic that the market is poised to turn around. During the first quarter of 2007--on Feb. 1--J&J completed the $1.4 billion acquisition of Menlo Park, CA-based Conor Medsystems, Inc., a cardiovascular device company developing controlled drug-delivery technology focused on DES to treat coronary artery disease.

The company recently announced that it plans to file with the FDA in 2010 for US approval of Cypher Elite, an improved version of J&J's Cypher stent already on the market. Company officials also plan to seek European and US approvals for the Nevo sirolimus-eluting heart stent in 2009 and 2011, respectively.

"We have begun clinical trials on Nevo," said Dominic J. Caruso, vice president of Finance and chief financial officer, noting that the company is using sirolimus, which is the drug used on its existing Cypher stent on the stent platform it acquired when it bought Conor Medsystems. "It's also a redesign of the stent itself," he added. Using Conor's reservoir stent technology, the company can use more than one drug on a stent, including antiplatelet agents to mitigate the risk of developing blood clots, which has been a concern with the technology.

Overall, the company's stent sales slid 34% in 2007. J&J is predicting only 1% compound annual growth for all DES worldwide between 2007 and 2012 and noted the total market for these devices would be $4 billion by 2012.

According to J&J, excluding the impact of the DES market decline, the company recorded total growth of nearly 13% across its device and diagnostics businesses. Expansion was attributed to its Vistakon unit's disposable contact lenses; LifeScan's blood glucose monitoring and insulin delivery products for diabetes care; Ethicon Endo-Surgery's minimally invasive products; DePuy's orthopedic joint reconstruction and sports medicine businesses; Ortho-Clinical Diagnostics' professional products; and Ethicon's wound care and women's health products.

"We enjoy strong competitive positions across our diverse franchises, with more than 80% of [medical device and diagnostic] sales coming from businesses in the No. I or No. 2 market positions," William C. Weldon, chairman and CEO, wrote in a letter to shareholders." Our vision care business surpassed the $2 billion mark for the first time in its history."

Part of the year's success at J&J was due to a series of important product launches and regulatory approvals, including US approval of the Realize adjustable gastric band, a device for treatment of morbid obesity; the Animas 2020 insulin pump, which the company said is the smallest full-featured insulin pump on the market; and Genesearch breast lymph node assay, a novel molecular diagnostic tool for detecting the spread of breast cancer to lymph nodes while the patient is undergoing surgery. This assay helps breast cancer patients and their doctors avoid the challenges of a second surgery to remove cancerous lymph node tissue following results of a biopsy. It was cited by TIME magazine as the second leading medical breakthrough of 2007.

"We are well-positioned in 2008 with a robust pipeline and strategic development programs in orthopedics, biosurgicals, bariatric surgery, vision care and other major categories," Weldon wrote.

During a June 2008 meeting with members of the investment community, various company officials outlined their growth expectations from J&J's medical device units during the next several years, with orthopedic and surgical care products leading other sectors.

The company expects an average of 6% annual growth in revenue from its surgical care unit during the next four years, reaching $40 billion in 2012. Orthopedic products will get a 9% annual boost to $48 billion, according to J&J's projections.

Sheri McCoy, group chairman of J&J's Ethicon surgical business, said the company is focusing on developing less-invasive surgical products and looking to emerging markets to help fuel growth. More than half of surgical sales now come from outside the United States, according to McCoy. The focus on international sales has prompted the opening of a surgical training center in Russia this year, with plans to open one in Brazil next year. Meanwhile, the company already has a manufacturing plant in China. The push to tap emerging markets is a common theme throughout each of the company's divisions.

Michael Mahoney, the group chairman of J&J's DePuy orthopedic division, said the unit gets more than 40% of its revenue from outside the United States and claims the No. 2 spot in the global market, while retaining the top spot in the domestic market. Brazil, Russia, India and China had record growth last year, and the company is making investments to build on that momentum.

"We recognize the potential of the marketplace and see the opportunity to gain share," Mahoney told analysts. The company has been introducing a range of new product platforms that include more durable materials and instruments for minimally invasive surgery. Those are both necessary to stay on top, he said, as patients in several segments are increasingly younger, including hip replacement patients, who are demanding better implants and less-invasive techniques. The DePuy unit was the largest revenue contributor within the medical device division, accounting for $4.59 billion in sales in 2007.

Overall, medical device sales are J&J's second-largest revenue driver--behind pharmaceutical sales.

For the first quarter of 2008, the company continued to report device and diagnostics growth--however, as seen in 2007, it was limited by continued slow stent sales. The company recorded $5.7 billion in revenue for the first quarter, a 7.2% increase compared with the first quarter of 2007, with operational growth of 1.4% and a positive impact from currency of 5.8%. Domestic sales increased 0.2%, while international sales increased 13.8% (2.6% from operations and 11.2% from currency). Sales, excluding the impact of lower sales of DES, grew nearly 5% operationally, the company said.

Cordis sales were down 15% operationally, with similar results domestically and internationally. Cypher sales were approximately $400 million, down 27% on an operational basis versus the prior year. Sales in the United States of approximately $170 million were down 28%. A reduction in percutaneous coronary intervention (angioplasty or stent placement) procedures, a lower penetration rate of DES and lower prices resulted in an estimated market decline in the United States of approximately 25% versus the first quarter of 2007, according to Louise Mehrotra, vice president of Investor Relations.

But not all Cordis news was bad. Growth drivers within the Cordis franchise include the Biosense Webster electro-physiology business (cardiac navigation and therapeutic and diagnostic catheters), which achieved double-digit operational growth in the quarter, with ultrasound products continuing to be strong contributors. The neurovascular business also achieved strong growth in the quarter due to the re-launch of the Trufill DCS Orbit Coil system and the Cordis Enterprise stent in 2007.

According to Mehrotra, the DePuy franchise had operational growth of 4% when compared with the same period in 2007, with US growth at 2% and international business growing by 6% operationally. Hip growth on a worldwide basis was 9%, led by the strong results in the United States. On an operational basis, worldwide knee growth was 2%, while spine was flat, she reported. Sales for the company's Mitech sports medicine business grew 11%.

Ethicon Endo-Surgery achieved operational growth of 6% in the first quarter of 2008, with US sales growing 3% and sales internationally growing on an operational basis by 9%. Strong results were achieved in the energy business due to the success with the harmonic scalpel. In addition, the Endocutter, a key product in performing bariatric procedures and advanced sterilization products, also contributed to growth in the quarter, company officials said during a conference call with reporters and analysts. Ethicon worldwide sales grew operationally by 1%, with US sales down 1% and sales outside the Unites States growing operationally by 3%. Sales of sutures and women's health products were flat, while meshes and hemostasis devices achieved solid growth. The diabetes franchise grew operationally by 6% in the first quarter of 2008. The US business grew by 4%, while international grew 8% on an operational basis. Growth in the United States was driven by the strong double-digit growth of the Animas pump business. The success of the LifeScan One-Touch Ultra diabetes testing line has been the major driver of growth in international markets. J&J's Vision Care franchise achieved double-digit operational sales growth of 12%, with sales in the United States increasing 16% and international sales rising 9%.

2 GE Healthcare

$17 Billion ($172.7B total)

KEY EXECUTIVES:

Jeffrey R. Immelt, Chairman and CEO

Joseph M. Hogan, President and CEO, GE Healthcare

Mark L. Vachon, President and CEO, Global Diagnostic Imaging, GE Healthcare

Omar S. Ishrak, President and CEO, Clinical Systems, GE Healthcare

Peter McCabe, CEO, Surgery

John R. Chiminski, President and CEO, Medical Diagnostics

NO. OF EMPLOYEES: 46,000 (319,000)

GLOBAL HEADQUARTERS: Fairfield, CT

In the face of FDA warning letters and cuts in imaging reimbursements by Medicare, GE Healthcare posted relatively modest gains in 2007. Though the year was a mixed bag, the healthcare imaging giant still holds on to the No. 2 spot on MPO's list of Top 30 performing companies. The imaging industry has been fighting reimbursement cuts that were part of the Deficit Reduction Act of 2005, which President Bush signed into law in 2006.

GE Healthcare, based in Chalfont St. Giles, United Kingdom, is a leading maker of diagnostic imaging equipment, such as magnetic resonance imaging (MRI), ultrasound and computed tomography scanners. The company also makes cardiology diagnostic equipment as well as contrast agents used in imaging procedures. In addition, GE Healthcare manufactures clinical equipment such as patient monitors and ventilators; develops life-sciences technology for drug discovery; makes clinical and financial management software for healthcare providers; and provides a range of services from consulting to equipment financing for hospitals.

The company's revenues rose 3% to $17 billion in 2007. Profit of $3.1 billion in 2007 was 3% lower than in 2006. These numbers are well short of the $20 billion in revenue and $4 billion in profit the company had predicted for 2007. The company said increased sales in the international diagnostic imaging, clinical systems and life-sciences businesses were partially offset by price pressures on US equipment sales and lower sales of surgical imaging equipment resulting from regulatory suspensions of equipment shipments. In January 2007, GE Healthcare executives signed a consent decree with the EDA prohibiting the manufacture and distribution of specified GE OEC Medical Systems X-ray surgical imaging systems at facilities in Salt Lake City, UT and Lawrence, MA until the devices and facilities have been shown to be compliant with the FDA's current good manufacturing practice requirements.

The ban was lifted in early June this year and the FDA said the company had satisfied the agency's correction requirements. The OEC 9900 Elite C-arm, a fluoroscopy device that uses X-rays to reveal real-time imagery of a patient's internal structure, is the first product to receive manufacturing and shipping authorization.

"Coming out of this, we're a better business," remarked Pete McCabe, president and CEO of GE Healthcare Surgery." The OEC 9900 C-arm is the most reliable product produced in our business' 30-year history. Our quality system, alongside customer focus and technical innovations, is a foundation of our business. In the last year, we've been able to strengthen it to levels that will ensure we continue to differentiate our products and services as the best in the marketplace. We look forward to again being a leader in this highly competitive field."

According to the company, every day, seven out of 10 surgeons rely on an OEC C-arm in their operating rooms. In fact, during GE Healthcare Surgery's stop-ship, many customers held their equipment orders, some waiting more than 18 months, the company claimed. To respond to the demand, GE Healthcare Surgery has added additional shifts and resources to work through its backlog as quickly as possible, company officials said.

In November 2007, the company received another warning from the FDA. The agency sent a letter to the company citing defective devices discovered during FDA field tests that involved two GE Healthcare X-ray devices used in a hospital near New Orleans, LA and assembled at the company's Pewaukee, WI facility. During the tests, systems were found in which the protective barrier was not in place during the X-ray process to intercept the X-ray beam as required by federal law.

In positive FDA-related news, GE Healthcare received FDA approval in August 2007 for its new mobile mammography for breast cancer screening. The mobile Senographe Essential is built on the company's Senographe Essential platform, the next generation of GE's full-field digital mammography systems. In May, the company received FDA clearance for its Carescape Patient Data Module for mobile patient monitoring.

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To bolster the company's inorganic growth and broaden its diagnostic offerings, GE had announced plans in January 2007 to acquire Abbott's in-vitro and point-of-care diagnostic businesses for $8.13 billion. By July, however, the deal had fallen apart and the companies, whose boards both approved the merger, said they were unable to agree on final terms. In other merger news, GE Healthcare completed the acquisition of Allendale, NJ-based Dynamic Imaging, a developer of Web-based image and information management. The purchase will allow GE to expand its healthcare information technology offerings. Terms of the deal were not disclosed. The acquisition builds on GE Healthcare's strategy to combine early diagnosis with information technology to enable a new "early health" model of care focused on earlier diagnosis, pre-symptomatic disease detection and disease prevention. The early health theme is one often cited by GE executives.

"Predict, diagnose, treat and monitor is common medical practice today, but now we don't have to wait so long," said Joe Hogan, senior vice president and CEO of GE Healthcare, during a meeting with press, industry analysts and physicians in May 2007. "The diagnostic tools are available today, and we can substantially change the overall system."

GE Chairman and CEO Jeffrey Immelt agreed.

"By doing a better job on diagnostics, you can do a better job of therapy. And that's where we're investing," Immelt said during the same meeting. "High-field imaging, PET [positron emission tomography] scanning and other imaging tools are getting more effective. We're working on the overall patient experience. We're also working on taking more devices and imaging tools into the home."

Immelt also said emerging markets would be another vehicle for GE Healthcare to expand its business. He noted China and India as the biggest emerging markets but also said the Middle East and Africa are changing even more rapidly. He said the company is building plants to manufacture healthcare products in Saudi-Arabia to address a projected $20 billion market in the region by 2010.

For the first quarter of 2008, GE Healthcare had revenues of $3.9 billion for the three months ended March 31--almost identical to the same period last year. The firm said that the market remained volatile, with orders for diagnostic imaging down by 13% in the first quarter. However, GE remained optimistic, with international markets posting diagnostic imaging revenues that increased by 8%. Life-sciences sales in Europe were up by 24%. Overall profits for the quarter dropped 17% to $528 million from $637 million in 2007.

"Our focus on globalization has helped sustain the company during the US slowdown," said Immelt.

Unfortunately, due to declining demand for medical imaging services, the company was forced to lay off hundreds of employees from its Waukesha, WI operations in June this year. GE Healthcare spokesman Brian McKaig said the layoffs would affect fewer than 400 employees, but he did not provide specific totals. McKaig said the medical imaging equipment manufacturer has been hurt by passage of the federal Deficit Reduction Act, which caps Medicare reimbursement levels for medical imaging procedures. McKaig also said in a statement that governments, insurance companies and state legislatures are taking a number of actions aimed at reducing the amount spent on imaging.

In other noteworthy personnel news, Mark Kramer, the former director of the Office of Combination Products at the FDA who had nearly two decades of experience at the agency, joined GE Healthcare in June 2007 as its new vice president of Regulatory Affairs. Kramer is tasked with leading the regulatory function for medical devices across GE Healthcare and will work closely with global regulatory bodies to formulate strategic business plans.

3 Siemens Healthcare

$14 Billion ($103B total)

KEY EXECUTIVES:

Peter Loscher, President and CEO, Siemens AG

Jim Reid-Andersen, CEO, Siemens Healthcare

Klaus P. Stegemann, CFO, Siemens Healthcare

Heinrich Kolem, CEO, Customer Solutions Group for Siemens Medical Solutions USA

Bernd Montag, CEO, Siemens Healthcare, Imaging and IT

Donal Quinn, CEO, Siemens Healthcare, Diagnostics

NO. OF EMPLOYEES: 49,000 (480,000)

GLOBAL HEADQUARTERS: Munich, Germany

According to Siemens, its broad product portfolio provides answers to the "world's toughest questions confronting industry, energy, the environment and healthcare."

That may be the case, but judging by the company's bottom-line growth for fiscal 2007 (ended Sept. 30), Siemens also may have the answer when it comes to financial performance.

Overall company revenue (the company had six main business areas in fiscal 2007: Information and Communications, Automation and Control, Power, Transportation, Medical, and Lighting) increased 9% to $103 billion, while net income increased 21% to $5.6 billion. Though net income expanded, according to company officials, it was hindered by substantial corporate costs associated with ongoing legal trouble. Profit across all geographic areas increased by double digits--led by Europe (excluding Germany), which grew by 34%. Research and development spending also increased--by 9.6%--and the company's medical division represented 31% of total R&D expenditure, up from 28% in 2006.

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For Siemens Medical Solutions--now called Siemens Healthcare as part of a reorganization begun this year--revenue rose 20% to $14 billion, primarily as a result of the acquisitions in in-vitro diagnostics, the company said. The profit picture for the company (which provides diagnostic and therapeutic technologies, including imaging and laboratory diagnostics, therapy and healthcare information technology solutions), while rosy, was impacted by cuts to imaging payments by the US government. Profit for Siemens Healthcare, which has US headquarters in Malvern, PA, increased substantially (34%) to reach $1.9 billion.

In 2007, Siemens created a new Diagnostics division--rolling in recent diagnostics acquisitions--as part of a targeted strategy to create an integrated diagnostics company by combining the entire imaging diagnostics, laboratory diagnostics and clinical IT value chain under one corporate umbrella. During fiscal 2007, Siemens announced a significant addition to its Diagnostics group's portfolio (the deal closed during the first quarter of fiscal 2008). Dade Behring, Inc., a leading clinical laboratory diagnostics company, was purchased for approximately $7 billion.

"Complementing last year's acquisitions of Diagnostic Products Corporation and Bayer Diagnostics, this transaction positions Siemens as a leader in the highly attractive and rapidly growing market for laboratory diagnostics," former President and CEO Erich Reinhardt said at the time. "The implementation of integrated IT and clinical solutions from Siemens will help improve workflow efficiency throughout the healthcare enterprise, from admissions and administration to the laboratory and the radiology department. This will enable our customers to increase the quality of patient care while simultaneously reducing costs."

In May 2008, Donal Quinn was named the new head of Siemens' Diagnostics group, succeeding Jim Reid-Anderson, who became the new CEO of Siemens Healthcare that month following the resignation of Reinhardt in the wake of legal problems at the company. Both Reid-Anderson and Quinn had worked at Dade Behring.

Reinhardt resigned his position as board member and CEO of Siemens Healthcare in April this year. His departure is related to what the company called "compliance violations" and "unacceptable behavior" by the former Siemens Medical Solutions group relating to internal controls and the accuracy of documentation. Reinhardt was not accused of any wrongdoing and will continue to serve as a consultant to the company in the short term. Reinhardt took over as head of the Medical Solutions Group in 1994.

The restructuring in the Healthcare division was part of a much broader corporate cleanup. Last year, an internal investigation conducted by a law firm hired by the company revealed evidence of bribery and other corporate improprieties within Siemens, which resulted in a number of resignations and dismissals across multiple business units. Evidence of bribery goes back to the year 2000.

As part of the company's restructuring, Siemens brought on board a new CEO, Peter Loscher, who took over last July. He came from pharmaceutical giant Merck & Co., Inc. and is the first CEO in Siemens' 160-year history to be brought in from outside the company. The board felt an outsider would be better equipped to initiate a thorough cleanup and recast the company's image.

The company's businesses were broken down into three broad divisions covering industry, energy and healthcare beginning in January this year. Loscher also put the leaders of those three sectors onto the central managing board in Munich, ending a system in which a leader of a major business had his or her own managing board and reported to Munich headquarters without being based there. Siemens officials say the old way allowed corruption to spread and inhibited accountability.

In October 2007, a German court fined Siemens $306 million in connection with bribery activities in its communications equipment business, which it has sold off or folded into joint ventures over the last two years. In the United States, the Department of Justice and the Securities and Exchange Commission have begun investigations.

For the first six months of 2008 (ended March 31), Siemens Healthcare reported $8.5 billion in revenue (approximately 20% improvement compared with the same period last year) and $1.1 billion in profit (roughly a 6% gain over the first half of FY07). Profit margin was "strongly affected" by integration costs associated with the acquisition of Dade Behring, the company reported. Some of those costs, however, were offset by new orders that rose 10% year-over-year in the second fiscal quarter. Imaging and IT business continued to deliver solid profitability despite increasing challenges in market conditions, officials said.

One way the company hopes to offset any future losses is by cutting jobs. In July, parent company Siemens AG announced it would cut 16,750 jobs, or 4.2% of its global workforce, to streamline operations and save approximately $2 billion in costs. The company plans to consolidate its businesses from 1,800 separate legal entities to fewer than 1,000.

4 Medtronic

$12.3 Billion

KEY EXECUTIVES:

Art Collins, Chairman

William A. Hawkins, President and CEO

Gary Ellis, Sr. VP and CFO

Susan Alpert, Sr. VP and Chief Regulatory Officer

Pat Mackin, Sr. VP and President, CRDM

Scott R. Ward, St. VP and President, CardioVascular

Richard E. Kuntz, MD, Sr. VP and President, Neuromodulation

Stephen La Neve, St. VP and President, Spinal and Biologics

Christopher J. O'Connell, St. VP and President, Diabetes

NO. OF EMPLOYEES: 38,000

GLOBAL HEADQUARTERS: Minneapolis, MN

The company whose products benefit nearly 6 million patients annually boasted double-digit percentage gains for four of its eight business units by the end of its fiscal 2007, ended April 27 that year. Medtronic Chairman Art Collins ended his tenure as president and CEO (positions from which he transitioned in August 2007) on a strong note, with fiscal 2007 net sales of $12.3 billion, 9% growth from $11.3 billion for fiscal 2006. Net earnings also grew 10% to $2.8 billion. The increases were led by growth in the Vascular, Diabetes, Spinal and Navigation, and Neurological businesses, as well as international sales.

Current President and CEO Bill Hawkins should be poised to continue Medtronic's long-term growth, as the company had more than 200 clinical trials underway or planned by the close of the fiscal year--fitting for a corporation that increased its fiscal 2007 R&D spending by 11% to nearly $1.24 billion (about 10% of the company's revenue). The strategy of looking to future innovation has paid off handsomely in the past, as approximately two-thirds of fiscal 2007's revenue came from sales of products introduced within the previous two years. Aiding the effort was the addition of more than 2,000 employees as well as facility expansions to increase capacity. New facilities in the United States, Puerto Rico, Switzerland and Ireland played a role, too.

Medtronic arguably is best known as a market leader for pacemakers and defibrillators, and it managed to ride out a particularly rough year for the latter group of products. Although Cardiac Rhythm Disease Management (CRDM) sales of nearly $4.88 billion were flat at 2% growth for fiscal 2007, this number could have been worse had pacing systems not posted a 6% gain to $1.895 billion, compliments of product launches including Adapt, Versa and Sensia pacemakers. As the overall US market for implantable cardioverter defibrillators (ICDs) declined in 2007, the company's depreciation was only 1% for this category due to strong international sales--total US sales for ICDs dropped 9% to $2.08 billion, while international sales climbed 29% to $835 million with sales growth for the wireless Virtuoso ICD and the Concerto cardiac resynchronization therapy defibrillator. Overall CRDM sales grew 2% for fiscal 2008 to $4.96 billion. While ICD sales dropped 1% again, the company believes an eventual turnaround in the US market as well as opportunities in what it terms an underpenetrated worldwide market should bring favorable change in the future.

In the fourth quarter of fiscal 2007, Medtronic opted to separate its Physio-Control unit from the CRDM segment. The unit, which is a subsidiary offering external defibrillators, emergency response systems, data management solutions and support services used by hospitals and emergency workers, posted a 7% decrease for the year, going from $412 million in fiscal 2006 to $385 million in fiscal 2007. Physio-Control products made at Medtronic's Redmond, WA facility were temporarily suspended in January 2007 due to quality issues. This voluntary action reduced US sales by 20%, though the company said this impact was partially offset by 19% growth in international sales, which were aided by sales of the Lifepak CR Plus Defibrillator. The company's recently announced fiscal 2008 results for the year ended April 25, 2008, showed that Physio-Control once again was impacted by the quality problem, as sales decreased 15% from 2007 revenues to $329 million.

Medtronic's largest-growing segment in fiscal 2007 was the Vascular business, which had a sales increase of 28% to $1.2 billion. Coronary Vascular sales grew 31% to $918 million, primarily due to international sales of the Endeavor drug-eluting stent, which generated $300 million in revenue for the year, along with $260 million in sales for the Driver bare metal stent product line. Endovascular/Peripheral product sales grew 20% as the company capitalized on its fourth-quarter 2006 US launch of the AneuRx AAAdvantage Stent Graft System and increased international sales of the Valiant Thoracic Stent Graft System.

The Cardiac Surgery segment--including heart valve products, perfusion systems, positioning/stabilization systems for heart surgeries, surgical accessories and surgical ablation products--grew 6% to $704 million in fiscal 2007. Growth was fueled mostly by the Valves (9% growth) business, which had a 10% increase in tissue valve sales for products such as the Mosaic line, the Melody Transcatheter Pulmonary Valve and Ensemble Transcatheter Delivery system outside the United States. The Perfusion (4% growth) business also was a main driver, due to stronger international sales for Medtronic's cardiopulmonary and cannulae product lines.

In April 2007, Medtronic combined its Vascular and Cardiac Surgery segments. The newly named CardioVascular business reported total net sales of $2.13 billion for fiscal 2008. The US launch of the Endeavor stent in the fourth quarter was a main driver of the Coronary stent unit's 27% growth for the year to $710 million.

In fiscal 2007, Medtronic posted an impressive gain in the Diabetes segment, which grew sales 20% in fiscal 2007 to $863 million. Within this segment, external pump sales were $389 million, representing 32% growth from fiscal 2006 due to strong sales of the Paradigm REAL-time sensor-augmented pump system that integrates continuous glucose monitoring and insulin pump functionality. This system also helped Medtronic's Diabetes segment continue to prosper in fiscal 2008, with an 18% annual sales increase to approximately $1.02 billion.

Neurological business, Medtronic's fourth-largest sales segment for fiscal 2007, grew 16% with total net sales of $1.183 billion. Within this category, Neurological Implantables grew 15% to $962 million, driven by sales of products such as the RestoreADVANCED and PrimeADVANCED neurostimulation systems for pain management and Activa Therapy for treatment of movement disorders associated with Parkinson's disease and essential tremor. Increased sales of the Synchromed II drug delivery pump also helped. Gastroenterology and Urology products increased 21% collectively to $221 million, with gains led by sales of the InterStim product line for treatment of overactive bladder and incontinence and the Prostiva line for treatment of an enlarged prostate. Overall, the Neurological segment changed in fiscal 2008 with the divestiture of the Gastroenterology and Urology diagnostics product lines, and the category was renamed as the Neuromodulation segment. This business increased 11% to $1.3 billion for the fiscal year; when adjusting for the divestiture of the aforementioned product lines, the unit actually grew 15%.

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For Medtronic's Spinal and Navigation segment, sales grew 13% in fiscal 2007 to $2.54 billion. Within the company's minimal access technology portfolio, CD Horizon Sextant II, a percutaneous lumbar fixation system with minimal access technologies that reduce procedural steps, was the main growth driver. Capstone and Crescent Vertebral Body Spacers also led to growth within the Spinal Instrumentation business. Biologics, with had net sales of $696 million (a 22% increase from fiscal 2006), had continued success with the Infuse Bone Graft; introduced in fiscal 2003 for spine, Infuse received FDA approval in late fiscal 2007 for use in certain oral maxillo-facial and dental regenerative bone grafting procedures. Navigation increased 18% to $127 million due to strong sales of the PoleStar N20, an intra-operative MRI Guidance System and O-arm Imaging System, a multi-dimensional surgical imaging platform for use in spine and other orthopedic surgery. For fiscal 2008, Spinal revenue was even healthier than it was in fiscal 2007, with revenues totaling $2.98 billion, a 23% increase.

The Ear/Nose/Throat (ENT) segment, which also contains neurologic technology-related products, posted a single-digit gain of 8% in 2007, bringing its total net sales to $539 million. Core ENT sales were $278 million, a 5% increase from fiscal 2007. Medtronic said these sales were impacted by the loss of revenue from the company's third-quarter fiscal 2006 sale of its tanometry product line. Neurologic Technologies had a net sales gain of 11% to $261 million for fiscal 2007.

Given the previously cited fiscal year 2008 results, it should come as no surprise that Medtronic brought back the days of double-digit gains for overall net sales--the company recorded a 10% increase to $13.5 billion compared with fiscal 2007.

"Medtronic had a strong close to the year," said Hawkins. "The stabilization of the ICD market, the launch of our Endeavor drug-eluting stent and strong performance in virtually every business and geography provides positive momentum as we begin our new fiscal year." For fiscal 2009, the company expects revenue of between $15 billion and $15.5 billion.

The company is looking to streamline operations and restructure its organization. Earlier this year, Medtronic announced it would reduce its staff by approximately 1,100 as part of its global restructuring and in response to a slower ICD and stent market. This spring, Michael DeMane, chief operating officer, also left the company. Several other additions were named, however, including the appointment of Jean-Luc Butel as president of Medtronic International. Steve LaNeve, formerly president of Medtronic Japan, also was named senior vice president and president of Medtronic's Spinal and Biologics business, replacing Pete Wehrly, who left the company.

5 Cardinal Health

$12 Billion ($87B total)

KEY EXECUTIVES:

Robert D. Walter, Executive Director

R. Kerry Clark, CEO and Chairman

Jeff Henderson, CFO

Dave Schlotterbeck, Vice Chairman and CEO, Clinical and Medical Products

Jeff Henderson, CFO

Dwight Winstead, Group President, Clinical Technologies and Services

Mike Lynch, Group President, Medical Products and Technologies

NO. OF EMPLOYEES: 43,500

GLOBAL HEADQUARTERS: Dublin, OH

For Cardinal Health, fiscal 2007 was a good year that "marked a return to strong growth with a more focused business model that we expect will provide a foundation for continued growth in the years to come," wrote CEO R. Kerry Clark in a letter to shareholders.

As the year began, the company didn't waste any time on creating that "more focused business model."

Cardinal kicked off FY07 with plans to divest its $1.8 billion Pharmaceutical Technologies and Services division, which manufactures and packages 100 billion doses of medication a year for pharmaceutical and biotech firms. The unit employed roughly 10,000 people at more than 30 facilities worldwide. In April 2007, private equity firm the Blackstone Group (which is part of the group offering to purchase orthopedic manufacturer Biomet) stepped up as a buyer for $3.3 billion. Proceeds from the sale were used to repurchase Cardinal Health stock.

The company also reorganized its divisions during the first quarter of 2007 into the following four segments: Healthcare Supply Chain Services--Pharmaceutical; Healthcare Supply Chain Services--Medical; Clinical Technologies and Services; and Medical Products Manufacturing. This change was made to better align operations with the needs of customers and take advantages of internal synergies, according to the company.

More change came in May with a deal valued at $1.42 billion (in addition to the assumption of $50 million in debt). Cardinal Health purchased Viasys Healthcare, a manufacturer of respiratory care devices as well as neurological, audio and vascular diagnostics, disposable medical products used in surgical procedures and orthopedic implants. Cardinal Health expects the acquisition to boost its role in the $4 billion respiratory care market, as well as expand its medical product offerings. Viasys posted 2006 revenue of $610 million. The purchase of Viasys signaled Cardinal's intention to become a larger player in the respiratory care market.

Clark, who took over as chairman and CEO in November, succeeding Cardinal Health founder Robert D. Walter (who became executive director and plans to retire at the end of the company's 2008 fiscal year), characterized 2007 as "a breakout year" for the company's Clinical Technologies and Medical Products sectors, which manufacture a range of products including intravenous infusion devices, automated dispensing and respiratory systems, in addition to infection prevention products. In total, the units accounted for more than 25% of the company's profit. Revenue for fiscal 2007 (ended Sept. 30) was $4.5 billion, up 11% from fiscal 2006, and profit was $584 million, an increase of 20%.

With an expanding profit margin of 13%, Cardinal Health's management expects the divisions to be an important driver of consolidated operating margins. Clinical Technologies and Services ($2.7 billion in revenue) grew 11%, while Medical Products Manufacturing ($1.8 billion) increased sales by 12%. Factors favorably impacting the bottom line included manufacturing cost reductions ($20 million) driven by strategic sourcing and expense control related to the company's restructuring program, as well as growth from manufactured gloves and respiratory product lines.

The Healthcare Supply Chain Services--Medical unit reported $7.5 billion (4% growth) in revenue and $318 million in profit. The increase primarily was driven by increased volume from existing customers and a surge in new customer accounts, according to Cardinal Health.

Growth didn't just come in balance sheet terms, however. In October, construction began on a $50 million, 250,000-square-foot expansion at the company's headquarters in Ohio. The new West Campus facility will be home to the Healthcare Supply Chain Services sector.

Cardinal Health, the largest company in Ohio by revenue, employs nearly 3,500 people across the state, including 2,700 in Central Ohio. With the completion of the West Campus facility, Cardinal Health planned to add more than 700 additional jobs.

Fiscal 2007 also saw the conclusion of an ongoing legal battle for the company. Cardinal reached a final settlement with the Securities and Exchange Commission (SEC) and settled several related lawsuits concerning historical financial reporting practices that date back to fiscal 2000 and 2004. Under the agreement approved by the SEC, Cardinal Health paid a civil penalty of $35 million, retained an independent consultant to review certain company policies and procedures, and will be enjoined from future violations of certain provisions of the federal securities laws. Since the investigation began, Cardinal Health has made a number of important changes to its financial reporting and disclosure practices; hired a new chief financial officer, chief accounting officer and controller; and enhanced its Finance department staff to support the company's size and growth. The company also created the position of chief ethics and compliance officer, which it filled in 2005.

So far, fiscal 2008 hasn't been without its share of inorganic growth. In March 2008, Cardinal Health announced plans to acquire the assets of privately held Enturia Inc. for $490 million. The cash transaction includes Enturia's leading line of infection prevention products--sold under the ChloraPrep brand name--which are used in hospitals and surgery centers to disinfect the skin before surgical and vascular procedures to help prevent bloodstream and surgical site infections, two of the most common types of healthcare-associated infections (HAI) among patients.

There's growth potential in the market. According to the US Centers for Disease Control and Prevention in Atlanta, GA, one in 20 patients, or nearly 2 million people per year, acquire an HAI, which results in nearly 100,000 deaths. Catheter-related bloodstream infections represent 19% of HAIs, and surgical site infections represent 23%. Beginning in October this year, the US Centers for Medicare and Medicaid Services no longer will reimburse hospitals for the added cost of treating certain HAIs, placing an increased economic burden on hospitals.

On the organic growth side, for the third quarter of fiscal year 2008 (ended March 31, the most recent results as of press time), the Medical Products and Technologies segment grew revenue by 48% to $679 million, driven by the acquisition of Viasys Healthcare and strong growth within the core infection prevention and medical specialty businesses. Segment profit grew 72% to $80 million on the Viasys addition, strong organic growth and the benefit of foreign exchange, the company reported.

Revenue for the Clinical Technologies and Services business increased by 11% to $747 million, driven by continued growth in customer installations for medication and supply dispensing products and infusion pumps. Segment profit increased by 29% to $127 million from a favorable product mix and improved operating leverage from expense management initiatives, the company reported. Segment profit for the quarter was partially offset by a $6.5 million reserve for a recall of integrated circuits and connectors on certain Alaris System infusion pumps. Cardinal Health officials indicated that the company would be ready to resolve the problem by the end of the 2008 calendar year. Alaris units were recalled by the company in 2007 after learning of a defect that could lead to over-infusion.

"Our Clinical and Medical products sector continued to deliver strong year-over-year growth, reflecting our leadership positions in medication dispensing, infusion, respiratory and infection prevention products," Clark said. "We will continue to invest in these businesses to strengthen our offerings for the future."

For the first nine months of FY08, the company's overall revenue was $68 billion, a 6% increase.

One area, in particular, that management cited for future growth was international sales. In fiscal 2007, less than 10% of the company's earnings came from business outside the United States. For 2008, the company plans to more aggressively pursue sales beyond US borders.

6 Baxter International

$11.3 Billion

KEY EXECUTIVES:

Robert L. Parkinson, Jr., Chairman and CEO

Joy A. Amundson, President, BioScience

Peter J. Arduini, President, Medication Delivery

Bruce McGillivray, President, Renal

Robert M. Davis, Chief Financial Officer

J. Michael Gaffing, VP, Global Manufacturing Operations and Supply Chain Operations

John J. Greisch, President, International

NO. OF EMPLOYEES: 46,000

GLOBAL HEADQUARTERS: Deerfield, IL

Though 2008 may be turning into the year of heparin for Baxter International, the company delivered solid financial performance for 2007, reporting a 22% increase in net profit.

With an eye toward its robust product pipeline, Baxter International managed to expand its geographic presence while accelerating its R&D investments in 2007--achieving success in the process. With total net sales of $11.3 billion, the drug and device manufacturer posted an increase of 9%, compared with $10.4 billion for 2006; of the 2007 total, $4.8 billion came from US sales, with the rest coming from international sales. Furthermore, net income was $1.7 billion, or $2.61 per diluted share, including after-tax special items of $119 million or 18 cents per diluted share. On an adjusted basis, excluding special items, the company reported net income of $1.8 billion, or $2.79 per diluted share, an increase of 25% compared with 2006.

Given its strong financial position, Baxter broke its own record for R&D spending, increasing its investment to $760 million, a 24% increase from $614 million in 2006. As a result of its pattern of year-over-year increases on R&D expenditures, the company gained approval for or launched more than 12 new products and advanced many of the programs in its product pipeline.

"2007 was a very successful year for our company," said Robert L. Parkinson, Jr., chairman and CEO." We met or exceeded expectations on all key financial metrics throughout the year. We are also particularly pleased with the improved profile of our earnings, the strength of our overall financial position, and most importantly, the progress we have made in accelerating innovation. We're very well positioned to continue to meet our commitments, leverage the benefits of our diversified healthcare model, and deliver enhanced value to our various stakeholders in 2008 and beyond."

Each of the company's three major units--BioScience, Medication Delivery and Renal--sells non-device products such as drugs, though many are marketed with a device component or in conjunction with a device. Baxter does not break down revenues by device and non-device product lines.

For 2007, net sales were $4.6 billion for BioScience, representing 6% growth compared to $4.4 billion in 2006. Medication Delivery sales were $4.2 billion, compared to $3.9 billion previously, marking 8% growth. The Renal segment posted a sales increase of 8% as well with 2007 total net sales of $2.2 billion, compared to $2.1 billion in 206.

Bioscience mostly is non-device-related products, as it manufactures recombinant and plasma-based proteins for treatment of hemophilia and other bleeding disorders; plasma-based therapies for treatment of immune deficiencies; biosurgery and other products for regenerative medicine; and vaccines. The major drivers of BioSciences' growth in 2007 included sales volumes for Baxter's advanced recombinant therapy, Advate--sales of the blockbuster drug exceeded $1.2 billion. In the company's regenerative medicine product line, Floseal and Coseal sealants, classified as medical devices by the FDA, were the primary growth drivers.

The Medication Delivery segment, which includes IV Therapies ($1.4 billion, 9% growth), Global Injectables ($1.5 billion, 4% growth), Infusion Systems ($860 million, 5% growth), Anesthesia ($422 million, 33% growth) and "Other" products ($43 million, a 4% decrease from 2006), had marked progress in 2007 compared with 2006--that year, total net sales had decreased 2%.

In the Infusion Systems segment, increased international sales of disposable tubing sets used for IV administrations played a role in 2007's growth achievement. In addition, international sales of Colleague infusion pumps rebounded.

The Colleague line of infusion pumps are used to give controlled amounts of medications or other fluids to patients intravenously or other direct line into the bloodstream. In 2005, the FDA sent warning letters and seized the devices (including Syndeo infusion pumps) from the company's Illinois warehouses due to problems including under-infusion by the device, battery failures, false alarms and failure to alarm. The company signed a consent decree with the agency and agreed to stop manufacturing and distributing in 2006. Before resuming sales in the United States, the company had to agree to continue to service pumps currently in use and supply additional pumps to customers when medically necessary.

By February 2007, Baxter received clearance from the FDA to resume sales. But in July 2007, the FDA issued a recall of Colleague and Flo-Gard infusion pump models related to the falsification of service and repair data. The recall initially pertained to 534 infusion pump devices in the United States brought in for routine maintenance or corrections at the company's Phoenix, AZ service center. In the course of ongoing quality control processes, the company discovered falsified repair, test and inspection data sheets, which included electrical safety data. Consequently, it is possible that pumps sent to be serviced, repaired or corrected were returned without service being performed on them. As a result, three employees in the Phoenix service center were dismissed. In August, Baxter extended the recall to include an additional 986 Colleague devices.

Final 2007 sales figures for the device were not "significant," according to the Baxter's annual report. But, "resolving issues with the Colleague infusion pump has been Baxter's top priority," said Peter Arduini, corporate vice president and president of Baxter's Medication Delivery business, after the FDA granted 510(k) pre-market notification clearance to Baxter. "Baxter remains committed to our infusion systems customers and will continue to invest in this business to enhance the delivery of lifesaving medications."

The Renal segment's product lines are broken down into two categories: those for peritoneal disease (PD Therapy) and hemodialysis therapy (HD Therapy). PD Therapy reported net sales of $1.8 billion, a 10% gain from $1.6 billion in 2006, while HD Therapy had net sales of $448 million, a 4% increase from $431 million in the prior year. Latin America, Asia and the United States were the top sales regions for PD Therapy. HD Therapy attributed its sales growth to higher revenues stemming from Baxter's Renal Therapy Services businesses, which operate dialysis centers.

Looking specifically at the company's overall medical device portfolio, some of the notable 2007 product introductions included the V-Link Luer-activated device with VitalShield protective coating (the first needleless W connector containing an antimicrobial coating) and the Gelfoam Plus Hemostasis Kit (for control of bleeding during surgical procedures). In the United States and Canada, Baxter also launched Baxject II, a needleless transfer device with built-in filters for Advate. In February 2007, the FDA also cleared Baxter's upgraded Ipump Pain Management System. In terms of product development activities, the company completed enrollment in a Phase II clinical trial using Baxter's proprietary Isolex technology to select CD34+ adult stem cells from patients with chronic myocardial ischemia re-infusion into their hearts as a means to restore blood flow.

During the year, strategic alliances and acquisitions also played a role in Baxter's continued gains. For example, Baxter signed an agreement with Nycomed to market and distribute its TachoSil patch (a collagen sponge coated with lyophilized clotting ratters used for hemostasis and tissue sealing) in the United States upon FDA approval. Baxter also expanded its relationship with Halozyme to include the use of Hylenex (a subcutaneous delivery technology that enhances absorption of injectable products) and the use of Halozyme's Enhanze technology in the development of a subcutaneous route of administration for Baxter's liquid formulation of IV immune globulin. In the HD and PD Therapy categories, Baxter collaborated with DEKA for the development of a next-generation home HD machine for renal disease. Finally, the company acquired just about all the assets of MAAS Medical, a provider of infusion systems technology.

On the organization front, the 2007 fiscal year included a little bit of streamlining. In March, Baxter completed the sale of its Transfusion Therapies business to Texas Pacific Group (TPG) and Maverick Capital Ltd. (private investment groups) for $540 million. TPG and Maverick Capital, Ltd. established a new independent company called Fenwal Inc. With the acquisition, Fenwal becomes one of the world's largest suppliers of products and services to the transfusion medicine industry, with a product portfolio of manual and automated blood-collection products and storage equipment, approximately 3,500 employees and five manufacturing facilities worldwide.

The end of 2007 and beginning of 2008 brought Baxter a new challenge in the form of a recall of the blood thinner heparin. The main ingredient in some of Baxter's heparin, made in China from pig intestines, was found to be contaminated. Some medical devices contain or are coated with heparin. In June 2008, the FDA updated the number of deaths of patients who took heparin, nearly doubling it to 149, but said a link could not be established between the deaths to contaminated forms of the blood-thinning drug. An earlier FDA probe found chemical contaminants in some batches of Baxter's heparin. Officials previously had said there were 81 deaths among patients treated with heparin since January 2007. Baxter began recalling lots of the drug in January.

The contamination has resulted in numerous lawsuits against Baxter and other companies that manufacture heparin. The problem also has spurred multiple hearings on Capitol Hill regarding the industry's and the FDA's review of foreign suppliers to the pharmaceutical and medical device industries. The FDA also said in a posting on its Web site that contamination could lead to inaccurate test results from diagnostic devices that monitor heparin or use it as part of the device itself.

Baxter has said the main ingredient for its heparin probably was contaminated before reaching its supplier in China.

Despite the setbacks, the company seems off to a good financial start in 2008. The first quarter of 2008 showed steady progress for Baxter, which recorded $2.9 billion in sales, a 13% increase from $2.7 billion reported for the same period in 2007. The largest sales gain, at 13%, was achieved by the BioScience segment, with sales totals for the quarter of $1.2 billion. Medication Delivery sales grew 8% to $1.1 billion for the quarter, and Renal sales increased 6% to $558 million.

"Our strong and improving financial position reflects the continuing momentum in our business," said Robert J. Parkinson, Jr., chairman and CEO. "Our favorable outlook for the full year allows us to continue to accelerate our investments in research and development programs that will improve treatment for patients, expand access to care and enhance the quality of life for people around the world."

As such, Baxter raised its earnings outlook for 2008 (excluding the impact of foreign exchange) to sales growth of 5% to 6%.

7 Philips Healthcare

$9.5 Billion ($39.4B total)

KEY EXECUTIVES:

Gerard Kleisterlee, President, CEO and Chairman

Pierre-Jean Sivignon, Exec. VP and CFO

Stephen H Rusckowski, Exec. VP and CEO, Philips Healthcare

NO. OF EMPLOYEES: 27,441 (118,098)

GLOBAL HEADQUARTERS: Amsterdam, The Netherlands

Much like some other companies on this year's list of top companies, the medical device unit of Philips has gone through an organizational and brand transformation. Philips now calls its Medical Systems division Healthcare, which, according to the company, brings together Medical Systems and its growing Home Healthcare business--formerly Consumer Healthcare Solutions.

With this move, Philips Healthcare, headquartered in Andover, MA, wants to bridge both ends of the healthcare cycle.

"We believe the link bridging the hospital and the home is going to be increasingly important in delivering better patient outcomes while containing costs," said CEO Gerard Kleisterlee. "Given the unsustainably high healthcare costs in many markets and increased emphasis on both efficiency and patient comfort, we are seeing a gradual shift towards diagnosing, treating and monitoring patients in their homes rather than in hospitals. Demand for home healthcare is also growing due to the increasing number of elderly people and the rising incidence of chronic diseases."

But Philips isn't just paying the move lip service. This year's report about the company will read more like a laundry list of dens, as the company made a number of key acquisitions throughout the year to align operations with its new corporate vision.

Its blockbuster buyout for 2007 was the purchase of Murrysville, PA-based Respironics, a manufacturer of respiratory and sleep therapy products (covering both hospital and home health markets) for approximately $5.1 billion in cash. The deal was announced before the end of fiscal 2007 and closed in the first quarter of fiscal 2008.

"A core part of Philips' healthcare strategy is to take a leading position in the high-growth sector of home healthcare," said Steve Rusckowski, CEO of Philips Healthcare. "This acquisition, with its significant strategic and financial benefits to Philips Healthcare, is another important step in carrying out this strategy."

John L. Miclot, president and CEO of Respironics, said partnering with Philips would "create additional growth opportunities for our company, and we believe that our company will benefit significantly by being part of a larger, growing and dynamic organization."

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For its 2007 fiscal year, Respironics reported sales of approximately $1.2 billion. Almost three-quarters of Respironics' sales were achieved in the company's Sleep and Home Respiratory business, which consists of diagnostic and therapeutic devices for sleep-disordered breathing and chronic respiratory diseases. The remainder is in the hospital setting and includes noninvasive and invasive ventilation, respiratory monitoring, neonatal products and respiratory drug-delivery technology for the treatment of respiratory diseases.

Philips also made a number of other important purchases.

In two more December deals, Philips announced a merger agreement with clinical IT and service provider VISICU, based in Baltimore, MD, and Emergin, in Boca Raton, FL--both companies add to Philips' patient monitoring business. VISICU, purchased for $430 million, makes clinical IT systems that enable critical-care medical staff to actively monitor patients in hospital intensive care units from remote locations. The merger will boost the creation of products to give more clinical decision support to hospital staff, while allowing personnel to monitor greater numbers of critically ill patients, according to Philips. Emergin develops software that rapidly transmits medical alarm signals throughout hospitals. It had sales of approximately $18 million in 2007.

In October, Philips snatched up Windsor, CT-based Raytel Cardiac Services from SHL Telemedicine Ltd. for approximately $110 million in cash. Raytel develops home cardiac-monitoring systems that doctors prescribe to heart patients. The company will be integrated into Home Health within Philips.

In August, Philips bought E1 Paso, TX-based XIMIS, a healthcare IT company that focuses on systems to help reduce errors and streamline workflow in hospital radiology wards. Details of the transaction were not disclosed.

Finally, Brazil's leading general X-ray manufacturer, VMI-Sistemas Medicos, was acquired in June. Philips plans to boost VMI's Brazilian exports to other countries in Latin America, which currently represents approximately 5% of the newly acquired division's business.

In a divestiture among all the acquisitions, Philips sold 70% ownership interest in MedQuist (a provider of medical transcription and clinical documentation technology and services) to CBaySystems Holdings Ltd. As the company restructured, Philips considered MedQuist a "non-core holding."

For fiscal 2007, the Healthcare division reported $9.5 billion in total sales (based on conversion after at the end of the reporting period), a nominal increase compared with last year (0.3% in euros). Excluding the 2% positive impact of portfolio changes and the 5% unfavorable currency effect, comparable sales growth was 4%. Earnings before interest taxes and amortization (EBITA) were down approximately 1.3% to $1.3 billion. Particularly strong growth in Ultrasound and Monitoring and Customer Services partly was offset by a decline in Imaging Systems, which was negatively affected by the continued softening of the imaging market (partly due to the Deficit Reduction Act of 2005, which mandated imaging reimbursement cuts) in the United States, according to the company.

For the beginning of 2008 (as of press time, only first-quarter results were available), sales were up marginally (3% in euros), compared with the first quarter of 2007, to $2.3 billion. Higher earnings in Ultrasound, Patient Monitoring and Customer Services--mainly driven by margin improvements and cost reductions--partially were offset by lower earnings at Imaging Systems. EBITA for the quarter (ended March 31) was up 1.7% to $191 million. For full-year 2008, acquisition and integration charges related to Respironics, VISICU and Emergin are expected to negatively impact EBITA by approximately $158 million, the company estimated.

8 Boston Scientific

$8.4 Billion

KEY EXECUTIVES:

Peter Nicholas, Co-founder and Chairman

Jim Tobin, Director, President and CEO

Fredericus Colen, President, CRM

Jospeh Fitzgerald, President, Electrophysiology

Michael Onuscheck, President, Neuromodulation

Mark Paul, President, Neurovascular

Stephen Moreci, Sr. VP and Group President, Endosurgery

NO. OF EMPLOYEES: 24,500 (as of Jan. 31, 2008)

GLOBAL HEADQUARTERS: Natick, MA

Boston Scientific's slogan is "Delivering What's Next." Many have been wondering exactly what is next for the Natick, MA-based cardiovascular company. Since its acquisition of Guidant two years ago, Boston Scientific has worked to restructure and divest divisions, generate cash, pay down debt, weather a slowdown in the stent and implantable cardioverter defibrillator (ICD) markets, and work its way through FDA warning letters. All that, along with regular research and development and manufacturing activities, makes for a pretty crowded plate.

Despite all the challenges, the company achieved record sales of $8.4 billion, an increase of $536 million, or 7%, compared with 2006. Worldwide sales of the company's drug-eluting coronary stent systems posted a significant drop in sales--24%--to $1.788 billion, compared with $2.358 billion in 2006. Both US and international markets declined. Bare metal stent systems also slipped 19% from $2.506 billion in 2006 to $2.027 billion for fiscal 2007. US sales of the bare metal stents were down, while international sales rose slightly.

Worldwide sales for the company's Cardiac Rhythm Management (CRM) business in 2007 were $2.124 billion (including $1.542 billion in ICD sales), compared with $1.371 billion in 2006 (which included $988 million in ICD sales). On a pro forma basis for 2006, although Boston Scientific had acquired Guidant on Jan. 1, 2006 (the actual deal was closed in April), CRM sales were $2.026 billion, which included $1.473 billion of ICD sales. Overall sales for the company's cardiovascular products were $6.561 billion, up from $6.241 billion in 2006.

Endosurgery sales for 2007 were $1.479 billion, compared with $1.346 billion for the prior year. Neuromodulation sales grew to $317 million, up from $234 million in 2006.

Despite an overall rise in sales, the company once again reported a net loss. For 2007, Boston Scientific was $495 million in the red, though much improved compared with 2006. Reported results for 2007 included acquisition, divestiture, litigation and restructuring-related charges of $1.9 billion, or $1.10 per share. Adjusted net income for 2007, excluding these charges and amortization expense, was $1.2 billion. Reported net loss for 2006 was $3.6 billion, or $2.81 per share. The company said overall total debt was reduced by more than $700 million during the year.

As part of its plan to streamline operations while reducing expenses and personnel, the company divested business units it termed "non-strategic," including Cardiac Surgery and Vascular Surgery ($750 million to Sweden-based Gettinge Group);Venous Access and Fluid Management ($425 million to private equity firm Avista Capital Partners); and Auditory. The company had explored selling a stake in its Endosurgery division but decided against the move.

For the Auditory business sale, Boston Scientific amended its merger agreement with Advanced Bionics, which it acquired in 2004. Under terms of the new deal, the company sold the Auditory business and drug pump program of Valencia, CA-based Advanced Bionics to principals of the firm for $150 million. Boston Scientific retained the pain-management business (part of its Neuromodulation group), whose shareholders will be paid out in installments--$650 million in January 2008 and $500 million scheduled for March 2009. The new arrangements will save Boston Scientific $500 million in payments that would have been due in 2008 and 2009, and a potential $2.1 billion that might have come due in future years, according to Paul Donovan, a spokesman for Boston Scientific.

The company also sold its 13.3% stake in Houston, TX-based device maker Cyberonics Inc. for $48.6 million.

For 2007, Boston Scientific wasn't solely in sell mode. It purchased Remon Medical Technologies Inc., a privately held company based in Caesarea, Israel. Remon's technology uses wireless communications to exchange energy and data with minute devices placed deep inside the body. The devices monitor a variety of physiological parameters, stimulate tissues and organs or activate other devices, creating therapeutic responses. Terms of the deal were not disclosed.

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Of course, a leaner Boston Scientific means fewer employees. The company predicts 2,000 fewer workers as a result of its divestitures. Beginning in 2007, the company initiated plans to cut an additional 2,300 jobs, for a total of 4,300 jobs lost. Officials estimate between $475 million and $525 million in savings as a result, the majority of which will be realized in 2008.

In April, the FDA lifted a warning letter that Boston Scientific acquired along with Guidant, freeing the company to introduce products that had been blocked by quality-control problems. Still in force, however, is a company-wide warning letter Boston Scientific received from the FDA in January 2006 that applies to its drug-coated stent business and the rest of the pre-Guidant areas of the company. The resolution of this warning letter has gone on much longer than the company had predicted.

While the warning letter has made it more difficult for the company to move products through the FDA approval process, there was some regulatory success to report in 2007.The FDA gave its nod to Boston Scientific's Acuity Steerable left-ventricular lead for use with cardiac resynchronization therapy defibrillators and cardiac resynchronization therapy pacemakers, both of which treat heart failure. The company also launched its Precision Plus Spinal Cord Stimulation System, a small rechargeable neuromodulation device for the treatment of chronic pain of the trunk, back and limbs.

Boston Scientific also racked up European CE Mark approvals for a number of products, including the Livian cardiac resynchronization therapy defibrillator (CRT-D) and its Taxus Liberte paclitaxel-eluting coronary stent system for use in patients with diabetes.

In addition, though an indirect victory for Boston Scientific, the FDA approved Abbott's Xience V drug-eluting stent in early July, making the company the fourth player in the US drug-coated stent market along with Johnson & Johnson, Boston Scientific and Medtronic. With the Xience approval, an identical stent, named Promus, made by Abbott but distributed on a private-label basis by Boston Scientific, also will be marketable in the United States. The unique arrangement stems from Boston Scientific's acquisition of Guidant, the original developer of the Xience V device. As part of the deal, Abbott purchased Guidant's stent business to assuage antitrust concerns, but Boston Scientific negotiated the right to sell its own version of the stent--although the company will, for the time being, pay a royalty of 40% to Abbott for every Promus stent it sells.

Moving into 2008, Boston Scientific remains in a restructuring mode. In June, the company signed an agreement to sell its investments in a portfolio of companies to Saints Capital, a secondary direct-investment firm. The transaction will raise pre-tax proceeds in excess of $100 million, the majority of which will be in cash, with a portion in a note payable over several years. Separately, the company announced that it has signed a definitive agreement to sell its investments in a portfolio of venture funds and companies, subject to certain closing and other conditions, to Paul Capital Partners, a private equity secondary market, for pre-tax proceeds in excess of $40 million.

Sam Leno, chief financial officer said: "The sale of these investments, which represent the vast majority of our private investment portfolio, is part of our previously announced plans to divest non-strategic assets, while focusing on our core businesses and increasing shareholder value."

Going forward, the company expects strong growth in the implantable cardiac device market, which together with stents accounts for about half of its total sales. Boston Scientific executives also predict a slow recovery in the stent market, thanks in large part to recent studies that have shown the tiny mesh devices are safe and effective, contrary to earlier conflicting studies that have cast a long and very expensive shadow over the market.

The company's first-quarter 2008 results showed drug-coated stent sales remain depressed, falling 9% to $428 million. Boston Scientific fared better with implanted defibrillator sales, which rose 3% to $411 million.

"The [drug-coated stent] market hasn't gone away," said CEO Jim Tobin at Goldman Sachs' recent annual healthcare conference. "This is a market that is going to be robust in terms of patient flow for a long time."

Tobin did note, however, that the market is not what it used to be and may never rise to its $6 billion pre-safety issue levels. But while market penetration may never regain its 88% level, it's not going to stay at 60%, he said.

Tobin also recently announced that he will remain president and CEO for the foreseeable future and will shift his focus back to day-to-day operations. Tobin, who has held the top spot at Boston Scientific since 1999, also will take over for Chief Operating Officer Paul LaViolette, combining roles while acquiring more direct access to managers who run Boston Scientific's businesses. As a result, LaViolette is retiring from the company after nearly 15 years of service--three years in his current job. LaViolette will serve as a senior adviser through Dec. 31 and will receive separation payments of $5.44 million next year and $1.81 million in 2010, provided he has complied with all requirements in the separation agreement.

"The time is now right for Jim to turn his full attention and energies back to the core challenges facing the company as a whole, especially those relating to strategy, the development of our human capital, organizational efficiency and effectiveness, and simplifying and streamlining operations," said Peter M. Nicholas, Boston Scientific chairman and cofounder, in a release.

Fred Colen, who has been executive vice president, operations and technology for the CRM group, will become president of that business. Off to a good start so far this year, the CRM group received a number of FDA approvals during the first half of 2008, including the Altrura family of pacemakers, Acuity Spiral left-ventricular lead for use with cardiac resynchronization therapy, the Cognis cardiac resynchronization therapy defibrillator, the Confient ICD and Livian CRT-D.

9 Covidien

$8.1 Billion ($10.1B total)

KEY EXECUTIVES:

Richard J. Meelia, President, CEO and Director

Charles J. Dockendorff, Exec. VP and CFO

Jose E. Almeida, St. VP and President, Medical Devices

Amy A. McBride-Wendell, Sr. VP, Strategy and Business Development

NO. OF EMPLOYEES: 43,800

GLOBAL HEADQUARTERS: Pembroke, Bermuda

A Year after spinning off from Tyco International, Covidien has charted an ambitious course to re-brand and position itself as a truly independent company. Once Tyco Healthcare, the medical device and pharmaceutical manufacturer became an independent publicly traded company (on the New York Stock Exchange, under the symbol "COV") on June 2, 2007.

Making a name for itself has meant more than just a name change.

In an effort to put ties with scandal-plagued Tyco behind them, company officials have begun investing in increased R&D, new products, increased sales and marketing efforts as well as strategic acquisitions and partnerships. If you're a baseball fan, you couldn't help but notice part of this strategy in play on the outfield walls of Boston, MA's Fenway Park (aka the Green Monster, home of the world champion Boston Red Sox), where Covidien's logo is prominently displayed. The company has its roots in Massachusetts. Though headquartered in Bermuda for tax purposes, most of its corporate functions are located in Mansfield, MA.

For 2007 and the beginning of 2008, Covidien was broken into five business segments: Medical Devices, Pharmaceutical Products, Imaging Solutions, Medical Supplies (which includes the company's contract manufacturing business) and Retail Products. In April of this year, however, the company sold its Retail Products group, which made infant care products, incontinence and feminine hygiene products as well as other retail items, to an affiliate of First Quality Enterprises, Inc. for $330 million in cash. The sale was part of Covidien's strategy to focus its portfolio and reallocate resources to its core healthcare businesses.

"We created a comprehensive strategy centered on growth, innovation and globalization to transform our organization from a cost-cutting integrator of acquisitions into an innovative, risk-taking growth company," wrote CEO Richard Meelia in Covidien's annual report to shareholders." We then reallocated financial resources to support this new strategy, which called for increasing our investment in research and development, strengthening growth functions such as strategic marketing and business development, expanding our sales and marketing workforce, realigning each of our businesses on a global basis and launching targeted initiatives to stimulate growth in the near-term as we build longer-term capabilities."

Meelia said that while spending on R&D had doubled between 2002 and 2006, the company would aggressively expand its efforts moving forward to keep pace with its competition.

For fiscal 2007 (ended Sept. 30), Covidien posted sales of $10.1 billion, an increase of 5% compared with 2006. Subtracting pharmaceutical and retail products sales, total revenue for device-related Covidien businesses was approximately $8.1 billion (Editor's note: This figure includes revenues from Medical Devices, Medical Supplies and Imaging Solutions. While Imaging Solutions incorporates a significant pharmaceutical element, it also includes a substantial device component as well.) Net sales in the United States across all business units were $6.1 billion (an increase of $100 million compared with 2006), while non-US business generated net sales of $4 billion (an increase of roughly $400 million).

Operating income decreased to $438 million, compared with $2.1 billion in fiscal 2006. Earnings were negatively impacted by a charge of $1.2 billion as part of a class action settlement related to Tyco International. Other factors affecting income for the year include increased marketing and branding expenses, sales force development and restructuring charges, according to the company. Covidien posted a net loss of $342 million for the year, compared with net income of $1.2 billion in 2006.

Medical Devices division sales were the largest revenue driver for Covidien at $6.2 billion. Operating income for the business unit decreased $93 million, or 5.1%, to $1.7 billion in fiscal 2007 compared with $1.8 billion in fiscal 2006. Imaging Solutions net sales increased $72 million, or 8.3%, to $942 million in fiscal 2007, while net sales for Medical Supplies increased $1 million, or 0.1%, to $993 million.

In the area of mergers and acquisitions, Covidien (then Tyco Healthcare) expanded its international presence with the acquisition of Polysuture, a Brazilian suture manufacturer in March 2007. In April that year, the company acquired the intellectual property for AbsorbaTack technology--absorbable fixation technology used in hernia repair--from Sorbx for $30 million (the company released AbsorbaTack products in the United States and Europe in January and May 2008, respectively). Following the close of the 2007 fiscal year, Covidien bought Scandius Biomedical, a developer of devices for sports-related surgeries. The purchase, according to the company, increases its reach into the growing $1 billion sports surgery market. In November, Covidien announced an agreement with Allergan, Inc. to co-promote the Lap-Band adjustable gastric banding system for the obesity surgery market.

Covidien has room to grow internationally, according to analysts. With 38% of sales overseas, it lags behind rivals such as Baxter and Becton Dickinson that have closer to 50% in international sales. However, a solid cash position and a good debt position means Covidien can afford to buy companies in faster-growing markets.

For 2008, experts expect earnings to drop slightly as Covidien continues to record some restructuring charges and ramps up its sales force. The charges eventually should yield annual savings as Covidien consolidates operations, outsources more work and divests underperforming businesses.

For the second quarter of 2008 (ended March 28), overall net sales rose 10% to $2.4 billion from $2.2 billion a year ago, fueled by strong growth in the Medical Devices and Imaging Solutions business segments, the company reported. Sales growth was driven by higher volume and new products. Operating income was $405 million, versus $484 million for 2007. Excluding restructuring and asset impairment charges and charges for Covidien's portion of a Tyco International shareholder settlement, adjusted operating income was $500 million in the second quarter, compared with $488 million in the prior year. Net income was $263 million, compared with $394 million for the same period in 2007.

10 Becton Dickinson & Co.

$6.4 Billion

KEY EXECUTIVES:

Edward J. Ludwig, Chairman, President and CEO

John R. Considine, Sr. Exec. VP and CFO

Gary M. Cohen, Exec. VP and President, Medical

William A. Kozy, Exec. VP and President, Diagnostics

David T. Durack, Sr. VP, Corporate Medical Affairs

Scott Bruder, Sr. VP and Chief Technology Officer

NO. OF EMPLOYEES: 28,000

GLOBAL HEADQUARTERS: Franklin Lakes, NJ

For the 2007 fiscal year (ended Sept. 30), Becton Dickinson & Co. continued the steady growth and performance the industry has come to expect from this 110-year-old medical device maker. According to Ed Ludwig, chairman, president and CEO, in the past eight years, BD's revenue and profit base has more than doubled.

Headquartered in Franklin Lakes, NJ, BD, which is comprised of three major segments (Medical, Diagnostics and Biosciences), has operations in more than 50 countries.

The company bested its 2006 financial performance by 11%. Total revenue for the year was $6.4 billion, compared with $5.7 billion for the prior year. The total reflects an overall estimated 3% favorable impact from foreign currency translation that affected all segments. Income from continuing operations was $856 million, or $3.36 per diluted share, in 2007, as compared with $815 million, or $3.18 per diluted share, in 2006

The Medical segment--the largest slice of the BD revenue pie--reported 10% revenue growth to $3.4 billion. Strong sales in the Medical division's Pharmaceutical Systems unit continued to significantly contribute to the growth of the segment, the company said, along with the continued global conversion to safety-engineered products. The Pharmaceutical Systems unit grew by 24%, reflecting the increased use of pre-fillable syringes by pharmaceutical companies to market new vaccines and biotech drugs, especially in the United States. Revenue growth in the Medical Surgical Systems unit primarily was driven by the growth in safety-engineered products and pre-filled flush syringes, according to company officials. Sales of safety-engineered products increased 6% in the United States and 30% internationally. For 2008, the company said it expects full-year revenue growth for the Medical division to be about 8%.

The Medical division's principal product lines include needles, syringes and intravenous catheters for medication delivery; pre-filled IV flush syringes; syringes and pen needles for the self-injection of insulin and other drugs used in the treatment of diabetes; pre-fillable drug delivery devices provided to pharmaceutical companies and sold to end-users as drug/device combinations; surgical blades/scalpels and regional anesthesia needles and trays; critical care monitoring devices; ophthalmic surgical instruments; sharps disposal containers; and home healthcare products such as ACE brand elastic bandages.

For the BD Diagnostics segment, there was revenue growth of 11% to $1.9 billion, which includes $88 million of revenues from TriPath Imaging, a maker of innovative solutions to improve the clinical management of cancer, which was acquired at the end of the first quarter of fiscal 2007 for approximately $350 million. Sales of safety-engineered products rose by 25% internationally and 9% in the United States, due in large part to BD Vacutainer Push Button Blood Collection Set conversion activity, the company said.

Principal products and services for the Diagnostics business include integrated systems for specimen collection; an extensive line of safety-engineered blood collection products and systems; plated media; automated blood culturing systems; molecular testing systems for sexually transmitted diseases and hospital-acquired infections; microorganism identification and drug susceptibility systems; liquid-based cytology systems for cervical cancer screening; and rapid diagnostic assays.

At the beginning of fiscal 2008, BD received FDA clearance for the BD GeneOhm StaphSR assay. According to the company, the new assay is the first test available to rapidly and simultaneously identify two deadly healthcare-associated infections--Staphylococcus aureus and methicillin-resistant Staphylococcus aureus--from patients with positive blood cultures. It will help enable physicians to implement the right treatment quickly and more cost effectively for patients with bloodstream infections.

In June, BD officially opened the GeneOhm manufacturing facility in Quebec, Canada for its Diagnostic business. The $34 million facility will manufacture and develop diagnostic tests that provide rapid detection of bacterial organisms, including those known to cause healthcare-associated infections. The 64,500-square-foot facility includes 30,200 square feet of new manufacturing space.

The company's Biosciences segment reported 13% revenue growth to $1 billion, resulting from continued strong sales of flow cytometry and bioimaging instruments, flow cytometry reagents and advanced bioprocessing products. Principal product lines include fluorescence-activated cell sorters and analyzers; cell imaging systems; monoclonal antibodies and kits for performing cell analysis; reagent systems for life-sciences research; tools to aid in drug discovery and growth of living cells and tissue; cell culture media supplements for biopharmaceutical manufacturing; and diagnostic assays.

In May, BD acquired all of the outstanding stock of Cytopeia, a privately held Washington corporation based in Seattle that develops and markets advanced flow cytometry cell sorting instruments. Terms of this transaction were not disclosed.

The steady financial gains appear to continue into 2008. For the first six months of fiscal 2008, overall revenues for the six months ended March 31 were $3.5 billion, an increase of 12%. Both the Biosciences and Diagnostic business segments posted 15% revenue increases. The Medical segment, still the largest sales generator at $1.8 billion, grew 9.6% for the first half of the year.

Notably, one way BD has distinguished itself over the past few years has been through many of its humanitarian projects. For example, to help fight the HIV/AIDS crisis in sub-Saharan Africa, the company, along with the International Council of Nurses, is establishing wellness centers in four countries hardest hit by the HIV/AIDS pandemic and healthcare worker shortages. The centers will provide comprehensive health services for thousands of healthcare workers and their families. According to BD officials, the goal is to sustain a healthy and productive healthcare workforce, leading to a stronger regional healthcare delivery system. The centers offer testing, counseling and treatment for HIV/AIDS and tuberculosis; prenatal services; stress management; screening for chronic conditions; and training for continuous professional development, including prevention of occupational exposures. BD is providing $120,000 in cash support to help fund the wellness centers, as well as training in safe injection and phlebotomy practices valued at more than $200,000.

11 Abbot Laboratories

$6.3 Billion ($25.9 B total)

KEY EXECUTIVES:

Miles D. White, Chairman and CEO

Richard W. Ashley, Exec. VP, Corporate Development

Thomas C. Freyman, Exec. VP, Finance and CFO

Joseph M. Nemmers, Jr., Exec. VP, Diagnostics and Animal Health Divisions

John M. Capek, Exec. VP, Medical Devices

Charles D. Foltz, VP, Vascular Solutions

Robert B. Hance, Sr. VP, Diabetes Care

Edward L. Michael, Exec. VP, Diagnostics Products

NO. OF EMPLOYEES: 67,000

GLOBAL HEADQUARTERS: Chicago, IL

Abbott's medical device and diagnostics unit made significant sales gains, increasing revenue from $5.2 billion in 2006 to $6.3 billion in 2007, which largely was driven by the company's vascular and diabetes businesses. But if one thing dominated the news out of the company's medical device division, it was the buzz surrounding the pending approval of its Xience V drug-coated stent.

The 120-year-old company submitted its approval application to the FDA in June 2007. In November, the FDA's Circulatory Systems Devices panel, in a 9-to-1 vote, recommended approval--with certain conditions--of the everolimus-eluting stent system. The panel recommended post-marketing study requirements. The panel also agreed unanimously on the condition that the device label contain the same recommendations for dual anti-platelet therapy duration as the other drug-eluting stents already on the US market. Some industry watchers had predicted there were not enough long-term data to support an affirmative vote for the device.

"I believe reasonable assurance of safety was demonstrated," said panel member Richard Page, MD of the University of Washington in Seattle, WA. "I think this represents a step forward for interventional cardiologists and our patients."

Xience V was launched in Europe and other international markets in 2006. The FDA finally approved Xience before the July 4 holiday this year, making Abbott the fourth company to receive approval for a drug coated-stent in the US market after Johnson & Johnson, Boston Scientific and Medtronic, which recently received FDA approval for its Endeavor stent. Abbott has said clinical trial results have shown a "significant reduction" in major adverse cardiac events. Most analysts think Xience will quickly become the stent of choice, because tests have shown it may have a lower rate of blood clots forming down the road and doctors think it's easier to put in. It is a smaller, more flexible stent than earlier-generation devices.

By 2010, analysts believe Xience could generate more than $500 million in annual sales, surpassing the current market leader, Taxus, which is sold by Boston Scientific.

Overall, the company's medical products business provided solid financial results, growing by double digits. As a result of the acquisition of Guidant's vascular intervention and endovascular business, Abbott's Vascular product unit posted a 53.8% increase in sales in 2007 compared with 2006--a total of $1.66 billion. The Vascular unit, however, did post a loss of $188 million. Stents contributed $672 million to sales in 2007--about the same as last year. Other coronary products totaled $604 million, up 32.5%. The company's Diagnostics business grew 11.1% to $3.15 billion in sales. The Diabetes business increased sales 9.9% to $1.25 billion. Abbott's Endovascular revenues grew 11.9% to reach $388 million. Both US and international markets across all product categories posted sales gains. Out of the Company's overall $25.9 billion in revenue in 2007, Abbott reported $3.61 billion in net income, more than double the previous year's net earnings of $1.72 billion, in part due to the Guidant division purchase.

"[The year] 2007 was an outstanding year for Abbott across all of our major businesses, and our strong momentum has carried into 2008," said CEO Miles White. "We delivered another year of strong sales and profitability. We expanded our business in important emerging economies such as China, India, Russia and Latin America. And we were highly productive in building our pipeline, providing the basis for a steady new product stream and continued future success."

On the diagnostics side in 2007, Abbott launched the Architect c16000, its large-volume chemistry analyzer, and the Architect ci16200, which consolidates both immunoassay and clinical chemistry testing. Both systems will better meet the needs of large-volume laboratory customers by processing more tests, faster, the company said. At the beginning of 2007, GE Healthcare announced plans to acquire Abbott's in-vitro and point-of-care diagnostic businesses for $8.13 billion. By July, however, the deal had fallen apart and the companies, whose boards both approved the merger, said they were unable to agree on final terms.

In other new product news, Abbott's Spine division in Austin, TX unveiled the Universal Clamp spinal fixation system for the correction of scoliosis and other spinal disorders. The device consists of a polyester band, a titanium clamp and a set screw and can be used in place of, or in addition to, the screws, wires, cables and hooks that are typical in modern spine surgery.

Abbott continues to expand its reach in the blood glucose monitoring market by continuing to introduce systems that are easier to use, require smaller blood samples and provide faster results. In April 2007, Abbott Diabetes Care launched its FreeStyle Life Blood Glucose Monitoring system for people with diabetes after receiving a 510(k) clearance from the FDA. The device eliminates the manual coding step usually required by most blood glucose meters before starting a new vial of test strips, allowing people with diabetes to test quickly and more easily. A year later, Abbott's FreeStyle Freedom Lite Blood Glucose Monitoring System became available in the United States, along with the FreeStyle Navigator Continuous Glucose Monitoring System. Designed to discretely and continuously measure glucose levels through a sensor in the back of the upper arm or abdomen, the Navigator system provides minute-by-minute information about which way and how quickly blood sugar levels are changing. This information can lead to proactive adjustments that can result in tighter glucose ranges, the company said. It received a CE Mark in June 2007 and has been available outside the United States since September 2007.

On a management note, in August 2007, Richard A. Gonzalez, president and chief operating officer, and a member of Abbott's board of directors, retired after 30 years with the company. The heads of Abbott's four operating businesses--medical devices, pharmaceuticals, nutritionals and diagnostics--now report to White.

To drive further growth, the company spent $2.5 billion in R&D investment, up from $2.3 billion in 2006. At present, Abbott claims it is the only company with a bioabsorbable drug-eluting coronary stent in human clinical trials. The Absorb stent is made of polylactic acid and is designed to restore blood flow in clogged arteries and then be fully absorbed by the body. Also currently in development is a fully integrated blood glucose monitoring system that combines a glucose meter, test strips and lancing capabilities in one device.

Joining an elite few, Stryker has managed to achieve a best-in-class track record for the seventh consecutive year: For 2007, the company recorded double-digit sales

12 Stryker

$6 Billion

KEY EXECUTIVES:

John W. Brown, Chairman

Stephen P. MacMillan, President and CEO

J. Patrick Anderson, VP. Corporate Affairs

Dean H. Bergy, VP and CFO

Andrew Fox-Smith, President, International

Michael P. Mogul, President, Orthopedics

Stephen S. Johnson. Group President, MedSurg

Timothy J. Scannell, President, Spine

James E. Kemler, Grou p President, Biotech, Osteosynthesis and Development

NO. OF EMPLOYEES: 18,800

GLOBAL HEADQUARTERS: Kalamazoo, MI

Joining an elite few, Stryker has managed to achieve a best-in-class track record for the seventh consecutive year: For 2007, the company recorded double-digit sales growth of 16.6%.Given that the company was one of only 19 Fortune 500 companies to achieve double-digit growth for six consecutive years through 2006, and the number of firms able to continue this heady gain for 2007 most likely dwindled as the US economy tumbled, the latest feat is quite an achievement.

Net sales totaled $6 billion for the fiscal year ended Dec. 31, compared with $5.1 billion for 2006. With such financial strength, the company managed to increase operating cash flow in excess of $1 billion, an 18.6% increase. Double-digit growth was apparent in various areas of Stryker's financial recordings for the year.

Domestic sales (64% of total revenues) were nearly $3.9 billion, a 17% increase from $3.3 billion in 2006. International sales (36% of total revenues) grew 16%, from $1.8 billion in 2006 to nearly $2.2 billion in 2007.

In terms of product lines, Stryker operates with two major segments including Orthopedic Implants and MedSurg Equipment.

The Orthopedic segment recorded net sales of $3.57 billion, representing 15% growth from $3.11 billion in 2006. Within this segment, sales of hip, knee, trauma, spinal and craniomaxillo-facial (CMF) implant systems grew 9%, 16%, 19%, 25% and 17%, respectively. Hip sales were driven by sales of X3 polyethylene and Accolade cementless hip products in the United States, as well as solid sales for the Exeter, Trident, X3 polyethylene and Accolate products in Europe, the Pacific region and Latin America. Knees had strong growth due to strong sales of the Triathlon Knee System in the United States, Europe, Canada and the Pacific region, along with growth of the Scorpio Knee System in Europe, the Pacific region and Latin America. Trauma saw sales gains with its Gamma3 Hip Fracture System in the United States, Europe, Canada and the Pacific region, as well as sales growth for the T2 Nailing System in the United States and Europe. Spine grew mostly as a result of strong product demand for thoracolumbar implant systems, interbody devices and cervical implants. CMF implant sales were aided by growth of products for neurological indications and CMF implants in the United States, Europe and the Pacific region.

MedSurg Equipment had net sales of $2.43 billion, a 19% increase from $2.04 billion in 2007. Sales of surgical equipment and surgical navigation systems increased 20% due to strong sales in powered surgical and operating room equipment in the United States, Europe and the Pacific region; another contributor was constant currency sales growth of interventional pain products in Europe. Sales of endoscopic, communications and digital imaging systems grew 20% in 2007, aided by strong growth in medical video imaging equipment (particularly the 1188 HD Camera) and complementary products such as the X8000 Lightsource and Vision Elect Monitor; arthroscopy and communication products also achieved strong sales in the United States, Europe and the Pacific region. Finally, sales growth of 16% for patient handling and emergency medical equipment was attributed to increased sales of stretchers and emergency medical equipment in the United States and Europe, as well as hospital beds in the United States and maternity beds in the United States, Canada, Europe and Latin America.

One of the company's top goals has been to invest in R&D to propel future growth and, as such, Stryker increased its expenditures in this area 16% to $375 million. As a result of increased spending for R&D activities over the years, Stryker was able to introduce several new products in 2007.

The Orthopedic Implants segment rolled out the condylar stabilizing ultra-congruent insert for the Triathlon Knee System, the Scorpio NRG with X3 advanced bearing technology and the Omega 3 Compression Hip Screw System. The MedSurg equipment segment also launched InTouch, a high-acuity care bed; the SDC Ultra, an all-in-one medical imaging information management system; the CORE Sumex drill for use in ear/nose/throat procedures; and the 45L PneumoSure insufflator.

One of Stryker's top achievements, in terms of product approvals, was US clearance for the Cormet Hip Resurfacing System, making the company the second to offer this type of technology in the United States (Smith & Nephew was first with its Birmingham system).

To better hone its core competencies, in 2007 Stryker sold its outpatient physical therapy business, Physiotherapy Associates, to Water Street Healthcare Partners, for $150 million. On the other hand, a celebration was on hand that year for the opening of the Homer Stryker Center, a clinical research and surgeon education center that was the brainchild of former Executive Vice President Ron Lawson, who retired at the end of the year.

Clearly, Stryker's results for the year showed that it could remain focused on business as usual, even when problematic issues cropped up. Stryker did manage to resolve with the US Attorney's office in New Jersey the government's investigation related to consulting relationships and other agreements with Stryker's surgeon customers. As part of the resolution, Stryker has a non-prosecution agreement for 18 months and will have related activities monitored by the US Attorney's office--while other orthopedic competitors paid millions of dollars as part of settlement agreements, Stryker did not pay any fines. Also in 2007, the US Securities and Exchange Commission made an informal inquiry regarding possibly violations of sales in foreign countries; a subpoena was sent to Stryker in 2008 from the US Department of Justice requesting certain documents. The company has said it is fully cooperating with government officials for all of these matters.

Stryker also received two FDA warning letters in 2007 targeting the company's quality systems at its Cork, Ireland facility and its Mahwah, NJ facility.

For 2008, Stryker is looking to carry on as a double-digit gainer in the industry, though its net sales target increase is lower than 2007's final gain. The company is forecasting net sales growth of 11% to 13%.

13 B. Braun

$5.3 Billion

KEY EXECUTIVES:

Ludwig Georg Braun, Chairman of Management Board

Michael Ungenthum, Vice Chairman of Management Board and Chairman of Executive Board of Aesculap AG & Co. KG, Aesculap

Division

Caroll Neubauer, Head of North American Region

Wolfgang Feller, Head of Avitum Division

Meinrad Lugan, Head, OPM and Hospital Care Divisions

NO. OF EMPLOYEES: 35,000

GLOBAL HEADQUARTERS: Melsungen, Germany

How do you say "steady growth" in German? We're not sure, but the answer may be synonymous with B. Braun. In its 168th year (fiscal year 2007), the company posted a 7.6% increase. (Editor's note: Percentages reflect changes based on the local currency in which the financials were reported--in this case, the euro--and don't take into account foreign currency exchange fluctuations year over year. Dollar amounts were converted using the exchange rate on the last day of the reporting period, Dec. 31.) Sales for the year were $5.3 billion. Net profit increased 19.7% to $320 million. The company also increased its workforce by almost 10%.

According to the company, Russia, the United Kingdom, Spain and China experienced "outstanding growth" during the past fiscal year. Eastern Europe also posted sales gains, as did the Asia-Pacific region (excluding China and Japan), B. Braun officials said.

B. Braun's Hospital Care division, which manufactures infusion therapy products, needles and syringes, catheters, IV sets and other products for basic clinical care and intensive medicine, posted a 7.4% sales gain, totaling approximately $2.5 billion. The performance largely was driven by the US market, Europe and Russia--where B. Braun recently has increased its activities. The company reported double-digit growth in sales of IV pumps and related disposables and IV catheters.

For 2007, sales in the Aesculap unit grew 7.1% to reach $1.5 billion. Research and development were the name of the game for Aesculap, with expenditures 30% more than the company average. The division develops surgical technologies, sterile container systems, closure technologies, as well as orthopedic, spine, neurosurgery and vascular systems. All product areas experienced strong rates of growth, often in the double digits, the company reported. Surgical instruments and suture materials remained the sales leaders of the division, while cardiology and neurosurgery also made an above-average contribution to growth in sales for the year.

The strong dependence of the company's Outpatient division on US business (50%) led to division growth of only 1.3% as a result of currency exchange rates--a total of $696 million. Double-digit growth, however, was generated in European markets (Germany, the United Kingdom, Spain, France, Russia). By combining the hospital and homecare markets, B. Braun management is positioning the Outpatient division to capitalize on the transition from inpatient to outpatient care, creating a sales continuum. In terms of new product launches, antibacterial wound care products with silver coating, a new generation of catheters with optimized packaging and the ongoing expansion of the MRSA (methicillin-resistant Staphylococcus aureus) product portfolio have proven highly successful, the company said.

B. Braun's Avitum division, which provides dialysis products and services, was the growth leader across the company's four main divisions. Sales growth was 19.6%, exceeding management's expectations. Revenues totaled approximately $517 million--the result of a 16% increase in product sales and a 27% bump in services. International growth also played a role in a larger bottom lime. In the past fiscal year, the division expanded its activities in Poland, the Czech Republic, Slovakia, Spain, Hungary and South Africa. The company also broadened its service with the acquisition of Baxter Healthcare Ltd.'s Renal Therapy Services business in the United Kingdom.

For 2008, B. Braun officials said the company is reaching manufacturing capacity in hospital care and medical devices. As a result, a majority of investments made in 2007 were earmarked for expanding production capacities for core products. Work will continue this year on new facilities in Germany, as well as expanding capacity in the United States, Brazil, Peru and Spain.

The company also predicted sales growth of more than 8% (after exchange rates) for FY08. Products driving growth are expected to be automatic IV systems and IV catheters for the Hospital Care division, core categories for Aesculap and IV nutrition for the Outpatient division. The largest percentage increase in growth once again, however, will be for dialysis equipment, B. Braun predicts. In the United States, the company expects 10% revenue gains (in dollars).

14 3M Healthcare

$4 Billion ($24.5B total)

KEY EXECUTIVES:

George W. Buckley, Chairman, President and CEO

Patrick D. Campbell, Sr. VP and CFO

Robert D. MacDonald, Sr. VP, Marketing and Sales

Brad T. Sauer, Exec. VP, Healthcare Business

NO. OF EMPLOYEES: 76,239

GLOBAL HEADQUARTERS: St. Paul, MN

Just after World War II, in 1948, the story of 3M Healthcare began with just one product--a surgical drape. The company still makes drapes and dressings, and much more. In the medical and surgical areas, 3M manufactures medical tapes, dressings, wound closure products, orthopedic casting materials, electrodes and stethoscopes. In infection prevention, 3M produces surgical drapes, masks and preps, as well as sterilization assurance equipment. Other products include drug delivery systems such as inhalers, transdermal skin patches as well as dental and orthodontic products. In health information systems, the company produces computer software for hospital coding and data classification, as well as provides related consulting services.

In April 2007, 3M announced the creation of a new Medical Diagnostics business unit that is focused on developing and commercializing rapid diagnostic products for the detection of infectious pathogens, including methicillin-resistant Staphylococcus aureus and other treatment-resistant microbes.

"We see many market trends pointing to the need for rapid, easy-to-use microbial diagnostics that will aid in the prevention and control of infections in hospitals in the United States and abroad," Angela Dillow, global business manager of 3M Medical Diagnostics, said in a news release at the time.

The company steadily has been building the base of its diagnostic capabilities. In February 2007, it acquired Acolyte Biomedica Ltd., a United Kingdom-based company that manufactures automated microbial screening technology for the rapid detection, diagnosis and treatment of infectious disease. In April 2008, the company rolled out its first US product based on its Medical Diagnostics platform, the Rapid Detection Flu A+B Test. It is expected to be available prior to the 2008-2009 flu season.

"This is the first of several rapid diagnostic solutions we plan to bring to the marketplace that help hospitals improve patient outcomes, reduce costs and reduce the impact of resistant microbes," said Chuck Kummeth, vice president and general manager, 3M Medical Division.

The company's growth strategy seems to be working. 3M Healthcare is the second-largest revenue driver for its parent company, behind the conglomerate's Industrial and Transportation division ($7.27 billion). Healthcare led all segments with local-currency sales growth of 18.3% (excluding divestitures). This includes a 4.4% benefit from acquisitions and 4.5 % benefit due to the pharmaceuticals supply agreements. The sale of 3M's global branded pharmaceuticals business reduced the Healthcare division's sales growth by 23.7%, the company said.

Year-end revenue inched down negligibly, primarily due to the sale of the company's pharmaceutical businesses. Sales for the fiscal year (ended Dec. 31) were $3.97 billion, compared with $4 billion in 2006, a decrease of 1.1%. Income increased slightly to $1.88 billion in 2007 from $1.85 billion in 2007, roughly 2%.

In 2007, sales growth was broad-based across all platforms, led by infection prevention solutions and skin and wound care therapy products in medical, inhalers in drug delivery as well as healthcare funding and performance management solutions for the hospital market in health information systems, company officials said.

Growth also was the result of strategic purchases by the company, including:

* Lingualcare Inc., a Dallas, TX-based orthodontic technology and services company that offers the iBraces system, a customized, "invisible" lingual orthodontic solution

* Abzil Industria e Comercio Ltda., a manufacturer of orthodontic products based in Sao Jose do Rio Preto, Sao Paulo, Brazil

* Neoplast Co. Ltd., a manufacturer and distributor of surgical tapes and dressings and first-aid bandages for both the professional and consumer markets across the Asia Pacific region

* Articulos de Papel DMS Chile, a Santiago, Chile-based manufacturer of disposable surgical packs, drapes, gowns and kits

Terms of the deals were not disclosed.

Getting off to a good start in 2008, 3M Healthcare posted double-digit profit growth for the first quarter (ended March 31). Sales rose 12% to $1.1 billion. The strongest sales growth came from the medical, dental and orthodontics businesses, the company reported. Operating income increased 19.6% to $321 million, with margins of nearly 30%, excluding special items in the first quarter of 2007. During the quarter, the Medical division launched its Tegaderm infection prevention product for intravenous sites.

15 Zimmer Holdings

$3.9 Billion

KEY EXECUTIVES:

David C. Dvorak. President and CEO

Cheryl R. Blanchard, St. VP, R&D and Chief Scientific Officer

James T. Crines, Exec. VP, Finance and CFO

Jon E. Kramer, President, US Sales

NO. OF EMPLOYEES: 7,600

GLOBAL HEADQUARTERS: Warsaw, IN

In the United States and Europe, the older-than-65 age group is projected to grow to between 15% and 20% of the population by the year 2015, compared with 10% to 15% in 2000. And in 2008, baby boomers began turning 62, which means they're on the threshold of age-related degenerative conditions such as arthritis. If you're an orthopedic company with dominant products in knees and hips, you're in the right place at the right time.

That's certainly the case for Zimmer Holdings, Inc.

By the company's estimates, it holds the No. 1 market positions in hips (26% of a $5 billion global market) and knees (28% of $5.8 billion global market). In addition, Zimmer's market data show the average age of patients receiving total joint replacement is 67 to 68 years old, and recent studies indicate that this generation will experience a 40% increase in arthritis in the next two decades. Statistics such as these bode well for future financial success.

In the meantime, the company is performing solidly, reporting double-digit revenue growth for the 2007 fiscal year (ended Dec. 31) and rolling out a series of new products. Sales for 2007 were $3.9 billion, a 12% increase compared with 2006. Knee reconstruction products were the biggest revenue driver at 42% of sales, posting a 12% increase to $1.637 billion. Hips followed with $1.299 billion, a 9% increase.

"Our smaller businesses also are well positioned to deliver growth with new products and technology applications," CEO David Dvorak said in Zimmer's annual report.

It seems he's correct. While not the biggest bottom-line earner, sales from Zimmer's extremities product line showed the most impressive growth, increasing 34% to $104 million. Rounding out the company's Reconstruction division, revenues for dental products grew 23% to $221 million.

Sales for the Trauma division rose 6% to $206 million. Spine business revenue gained 11% to reach $197 million, while the company's Orthopedic Surgical Products (OSP) unit increased its sales 8% to $234 million.

The United States was responsible for 58% of net sales, Europe was 28% and the Asia-Pacific region was 14%.

Despite solid sales performance, net earnings of $773.2 million slid $61 million from 2006 profit of $834.5 million. The difference primarily was due to settlement charges related to the government's anti-kickback probe of five of the largest orthopedic companies. Adjusted earnings, excluding the settlement costs as well as acquisition-related expenses and other nonrecurring items, improved 14% to $961.6 million.

In September 2007, Zimmer, along with Biomet, Johnson & Johnson's DePuy franchise, and Smith & Nephew agreed to pay $311 million as part of a settlement reached with the US Department of Justice regarding an ongoing investigation into financial relationships with consulting surgeons. Prosecutors accused the four companies of using consulting deals with orthopedic surgeons as inducements to use their products. As part the settlement, Zimmer paid more than half of the settlement, $169.5 million, and entered into a deferred prosecution and corporate integrity agreement. The company also agreed to oversight by a federal monitor for 18 months and an independent review organization for an additional 42 months. A fifth company, Stryker Corp., paid no civil settlement but entered into a non-prosecution agreement with the government and agreed to reforms, including the federal monitoring.

Despite the government entanglements, Zimmer continued with business as usual, making strategic acquisitions and rolling out more than 20 new products across all product categories.

In early 2007, Zimmer agreed to buy Endius, Inc., a Massachusetts-based spine company that developed a minimally invasive instrument kit and associated implants for spinal fusion. In November, Zimmer acquired ORTHOsoft Inc., which develops computer navigation for orthopedic surgery. According to Zimmer officials, the acquisition bolstered the company's SmartTools computer-assisted surgery product portfolio. Dvorak has said the company would continue to develop minimally invasive and computer navigation concepts across Zimmer's range of businesses.

Among new products introduced to the market in 2007 was the Gender Solutions Natural-Knee Flex System, the company's second gender knee that builds on its original Gender Solutions NexGen knee launched in 2006.

Another noteworthy product launch is the NexGen LPSFlex Mobile knee, which was approved by the FDA in December. According to Zimmer, a key strength of its mobile bearing system is the ability to be used in a minimally invasive procedure. The main difference between a traditional knee replacement design and a mobile bearing knee is that the polyethylene articulating surface is free to rotate slightly along with the patient's natural movement. When used with the LPS-Flex femoral component, the knee replacement is designed to safely accommodate active deep flexion of up to 155 degrees for patients who are otherwise capable of that level of flexion. In the past, knee implants have been designed to accommodate flexion of only 120 degrees, according to Zimmer.

Meeting market growth demands and an aggressively expanding product line means the company will need more capacity. In February 2008, Zimmer announced plans to add a 100,000-square-foot manufacturing facility in Shannon, Ireland. Zimmer officials considered a number of sites before selecting Shannon, including existing sites and other global locations. The company expects to invest between $70 million and $75 million in the next two years and plans to begin manufacturing operations later this year. Initial employment will be approximately 25 to 50 employees, with total employment expected to be approximately 250 in five years. Initially, the facility will produce knee replacement implants, although other products could be added in the future, the company said.

For 2008, Dvorak said Zimmer would make additional investments in the higher-growth areas of spine and dental products. The company also plans to continue moving forward aggressively with knees and hips in 2008. For the first quarter (ended March 31), net sales increased 11%. The continued growth should allow the company to launch new products, including new knee and hip implants, as 2008 continues. Zimmer hopes to expand its knee portfolio with new products such as NexGen LPS-Flex Mobile Knee, Gender Solutions' Natural-Knee Flex and Patello-femoral Joint System. Additionally, the company added to its portfolio the Kinective Technology for hip replacement and Fitmore Hip stem, which received FDA approval in March.

In April, Zimmer initiated voluntary recalls to improve quality systems at its OSP facility in Dover, OH. The company expects the move to cause revenue to decrease by $70 million to $80 million. According to Zimmer, certain products did not meet internal quality standards. The company temporarily suspended manufacturing certain products at the facility, allowing it to improve production systems and provide enhanced quality training for employees, Zimmer said in a statement. Zimmer notified the FDA, distributors and end users of the recalls. Zimmer said the recalls do not affect its core hip and knee implants business. In late 2007, the OSP division initiated a recall of more than 60,000 Pulsavac kits, used to clean wounds, because their sterility was compromised.

16 St. Jude Medical

$3.8 Billion

KEY EXECUTIVES:

Daniel J. Starks, Chairman, President and CEO

John C. Heinmiller, Exec. VP and CFO

Joseph H. McCullough, Group President

Michael T. Rousseau, Group President

Eric S. Fain, President, CRM Division

Christopher G. Chavez, President, ANS Division

Frank J. Callaghan, President, Cardiovascular Division

Jane J. Song, President, Atrial Fibrillation Division

NO. OF EMPLOYEES: 12,000

GLOBAL HEADQUARTERS: St. Paul, MN

St. Jude Medical may not top MPO's "Top Companies" list in terms of net sales, but it can brag about a different impressive accolade: For the second consecutive year, Fortune magazine recently named the company the top-ranked medical and other precision equipment company. Indeed, reputation is key for any medical device manufacturer, and in spite of all the challenges 2007 brought to all the players in the cardiac rhythm management (CRM) market, St. Jude still managed to raise net sales 14% from $3.3 billion in 2006 to $3.78 billion in 2007 and grow cash flow from operations by 33% (from $648.8 million in 2006 to $865.6 million in 2007). Along its upward climb, the device manufacturer even managed to record fourth-quarter revenues topping $1 billion--a first for the company.

The success story was fueled by investments in new people, products and programs, with approximately 13% of sales allocated to R&D, according to Daniel J. Starks, St. Jude's chairman, president and CEO. More than 20 new products were introduced in the company's lines of implantable cardioverter defibrillators (ICDs) and pacemakers alone.

Revenues for the CRM division were $2.37 billion in 2007, a 15% increase from 2006. Among the contributors were new introductions such as Current and Promote, St. Jude's first radiofrequency wireless devices to treat heart failure and arrhythmias. CRM also saw US and European approvals of the Zephyr pacemaker, which automatically performs standard follow-up testing; US approval of the Merlin.net Patient Care Network, a Web-based remote monitoring system for patient device data; launches of the Atlas+ HF CRT-D and Epic HF CRT-D heart failure devices in Japan; and expansions in the company's high-voltage leads for heart failure devices.

Although the global ICD market has suffered in recent years after a slew of product recalls, Stark said the company believes the growth rate ultimately will improve in the United States (if not elsewhere), and St. Jude will continue to roll out new ICD products in the future--that strategy focus is bolstered by the knowledge that ICD and pacemaker sales were leading contributors of the company's double-digit net sales growth in 2007. ICD sales grew nearly 19% to $1.3 billion in 2007, while pacemaker sales grew 11% to approximately $1.06 billion, compared with 2006. US-based ICD sales grew 11% to $887.8 million, and international sales grew nearly 38% to $417.1 million. Pacemaker sales in the United States totaled $507.9 million, a 9% gain from 2006; international sales grew 13% to $555.3 million in 2007.

The Atrial Fibrillation (AF) unit, meanwhile, had revenue increases of 26% to an approximate total of $410.7 million, compared with $325.7 million in 2006. Among the various regulatory approvals for AF technologies used in the diagnosis and treatment of arrhythmias was US and European clearance for St. Jude's EnSite System Version 7 (which later was followed by approval in both regions for the EnSite Fusion Registration Module) used during electrophysiology procedures.

Neuromodulation is another area showing great promise for St. Jude Medical in years to come, and the company reported that its sales force additions and expanded geographic footprint led to increased sales for its Advanced Neuromodulation Systems division, with revenue growth of 17% to $209.9 million for 2007. Some of the notable introductions included enhancements to the Eon Neurostimulation System with NeuroDynamix technology, which was integrated with Rapid Programmer 3.1 to provide customized, targeted pain coverage; the company also received FDA approval for the Lamitrode Tripole 16C paddle leads for low-back pain. A large focus for the Neuromodular group moving forward will be its clinical trial evaluating deep brain stimulation for the treatment of depression; other trials also are being held to evaluate this technology for Parkinson's disease, essential tremor and migraines, among other indications.

One of the largest changes made in 2007 was St. Jude's move to combine its cardiac surgery and cardiology businesses into one unit, now known as the Cardiac Division. Sales of cardiovascular products increased nearly 7% to $790.6 million, compared with $741.6 million in 2006. One area of interest in this unit is in a new stented pericardial tissue vane, which began US investigational device exemption clinical trials in 2007. This follows on the heels of strong volume growth for St. Jude's tissue heart valves. Net sales of vascular closure devices grew 4% for the year, due in part to increase sales of the company's Angio-Seal product.

For all units combined, the United States captured the lion's share of sales at $2.1 billion, while Europe, Japan and Asia-Pacific markets had total net sales of $937 million, $322 million and $193 million, respectively.

In all these regions, physician customers will see a new side of St. Jude Medical as 2008 progresses. Physicians attending the 88th Annual Meeting of the American Association of Thoracic Surgery in May were the first to see St. Jude's unveiling of its new corporate brand identity, designed to communicate the company's mission to develop products and services that put more control into the hands of those who treat cardiac, neurological and chronic pain patients. A new logo fashioned with eight small squares organized into a larger square, with an unaligned ninth square in the middle, is intended to evoke the risks present in any medical procedure (ie, the ninth square) and the company's commitment to helping doctors control those risks (ie, the surrounding squares).

[ILLUSTRATION OMITTED]

Branding initiatives aside, new product rollouts will continue to dominate in 2008, as evidenced by clearance in May by the FDA and Europe officials for St. Jude's CPS Duo stylet and guidewire system, as well as the CPS Courier guidewire--not to mention FDA approval for the Mond stylet. In April, the company also announced an agreement to acquire EP MedSystems, Inc., a provider of CRM and AF products, for $92.1 million.

Indeed, the company is on a roll, with the first quarter of 2008 surpassing the $1 billion mark for the second consecutive quarter. With total net sales of $1.01 billion for the quarter, sales increased 14% compared with the same quarter in 2007. CRM products increased 15% compared with a year ago, while ICD, pacemaker, AF, and neuromodulation sales grew 20%, 10%, 28% and 8%, respectively.

17 Hospira

$3.4 Billion

KEY EXECUTIVES:

Christopher B. Begley, Chairman and CEO

Terrence C. Kearney, COO

Thomas E. Werner, Sr. VP, Finance, and CFO

Brian J. Smith, Sr. VP, General Counsel and Secretary

Richard J. Hoffman, VP, Corp. Controller and Chief Accounting Officer

NO. OF EMPLOYEES: 14,000

GLOBAL HEADQUARTERS: Lake Forest, IL

What a difference a year and a large investment can make. After an encouraging, yet somewhat flat 2006, with annual net sales growth of only 2.6% as the company continued its transition after spinning off from Abbott Laboratories in 2004, Hospira rebounded in a big way and was right on target with the executive team's stated goal in early 2007. Net sales for the year grew 28% to $3.4 billion, compared with $2.7 billion in 2006. Gross profit increased from $939 million in 2006 to $1.17 billion in 2007, while net income was nearly $137 million, compared with nearly $238 million in 2006.

[ILLUSTRATION OMITTED]

"Our 2007 results point to the success of our strategies of investing for growth and improving operating margins and cash flow. It's through our disciplined focus on executing these strategies that Hospira has become the growing, profitable company it is today and is positioned for continued success going forward," said Chairman and CEO Christopher Begley at Hospira's 2008 annual shareholders meeting in May.

Although the company steadily has increased its international presence, 69% of net sales came from the United States, where totals reached $2.37 billion--a 6.9% increase from $2.22 billion in 2006. International sales, however, exploded for the company as they grew 127% to nearly $1.1 billion in 2007, compared with $468 million in 2006.

The bulk of the marked increase in global sales was attributed to Hospira's $2 billion acquisition of Australia-based Mayne Pharma Ltd. early in 2007; excluding Mayne Pharma's contributions, the overall net sales increase was 4%. Along with expanding the company's global presence, Mayne Pharma significantly enhanced Hospira's specialty injectable pharmaceuticals portfolio, particularly oncology products.

The company's $551 million in cash flow from operations also was "instrumental," Begley said, in enabling the company to pay down some of its debt and invest in new ventures. One such initiative was the establishment of a new operational structure that included the appointment of three new regional presidents and division of the overall business into two product areas: Global Pharmaceuticals and Global Devices. Specialty Injectable Pharmacueticals and Medication Management Systems (MMS) were the primary growth drivers.

As the global market leader for generic injectable pharmaceuticals, Hospira's Specialty Injectable Pharmaceuticals branch includes more than 190 generics in excess of 900 dosages and formulations in areas such as analgesia, anesthesia, anti-infective, cardiovascular and oncology. With many injectables coming off patent in the next five to seven years, Hospira believes this division will be a profitable growth driver in years to come. Total US sales for 2007 were $876 million, an 8.4% increase from $808 million reported in 2006. (Editor's note: International breakdowns for each business unit were not provided in Hospira's annual report.)

The primary focus of the Global Device branch, known as Medication Delivery Systems, was MMS, which includes more than 400,000 installed infusion devices. US-based net sales for Medication Delivery Systems increased 4% in 2007 to $890 million, compared with $855 million in the prior year. Growth in infusion therapy and MMS sales were the primary drivers.

Last year, the company notably began a full-scale rollout of Symbiq, an advanced general infusion device, and introduced enhanced security features for the wireless version of Hospira MedNet drug safety software. Language translations were another initiative undertaken for key markets.

Hospira also has an Injectable Pharmaceutical Contract Manufacturing division, which reported US net sales of $149 million in 2007, an 18.7% decrease from $183 million reported for 2006.

Efforts to optimize manufacturing operations as a partial means of improving margins and cash flow also saved the company $15 million in 2007.

At the close of the year, 16 manufacturing facilities were in operation globally. Hospira had closed its Donegal, Ireland facility in 2006 and completed its planned closure of an Ashland, OH facility in late 2007. The company's Montreal, Canada facility was expected to close by the end of the first half of 2008. In addition, the company is still on track to phase out production at its North Chicago, IL facility (leased from Abbott) by early 2010. By the end of 2007, Hospira had nearly completed its $60 million expansion of manufacturing capacity at its McPherson, KS facility.

Looking at the first quarter of 2008, net sales increased 13.5% to $888.7 million, compared with $782.8 million in the first quarter of 2007.

"By focusing on our business strategy, Hospira continues to gain momentum," said Begley. "The first quarter was a good start to 2008, with particular strength in our specialty injectables business. Company-wide, we are delivering the right products to our customers that help reduce their costs and improve patient safety. Our focus will translate into another year of solid growth for Hospira."

There doesn't appear to be any undertakings as large as the 2007 Mayne Pharma acquisition on tap for 2008, but Hospira already snapped up another company at the end of April. Hospira bought Sculptor Developmental Technologies, a subsidiary of St. Clair Hospital, for an undisclosed sum of money. Sculptor is a software engineering company that will provide Hospira with barcode point-of-care technology for patient safety and clinician workflow capabilities. The company's VeriScan Rx is a software application that supports barcode medication administration.

17 Smith & Nephew

$3.4 Billion

KEY EXECUTIVES:

John Buchanan, Chairman

David J. Illingworth, CEO

Adrian Hennah, CFO

Joseph M. DeVivo, President, Reconstruction

Joe Woody, President, Advanced Wound Management

Mark Augusti, President, Trauma and Clinical Therapies

Michael Frazette, President, Endoscopy

NO. OF EMPLOYEES: 9,190

GLOBAL HEADQUARTERS: London, United Kingdom

Some may have seen the orthopedic market cool in 2007, but that wasn't the case for Smith & Nephew. Even as Sir Christopher O'Donnell retired from his post as head of the company's board at the end of July, David J. Illingworth smoothly stepped into the role of CEO and was able to boast a 21% increase for the year's revenues by the end of 2007. The double-digit increase, enviable for any company in business, was particularly impressive given 2006 revenues only had grown 9% compared with 2005. Whether examining revenues by product type, sales region or business segment, year-over-year increases were, in some cases, as high as 76%.

Once again, Smith & Nephew used its experience as a 152-year-old company to deftly handle legal entanglements with the government, complete strategic acquisitions, roll out new products and boost profits. By the year's end, the company's total revenue was $3.37 billion, compared with $2.78 billion in 2006.

Accounting for more than one-third (37%) of its revenue totals, the Reconstruction segment (overseen from Smith & Nephew's Memphis, TN location), contributed $1.24 billion in 2007, up 35% from $919 million in 2006. The company reported that 18% of that gain was due to the May 2007 acquisition of Plus Orthopedics, a private Swiss company, for $889 million. Global knee revenue was up 25% for the year to $634 million, while global hip revenue grew 50% to $567 million.

Reconstruction growth (20%) in the United States ($618 million) was attributed to healthy sales for products such as the Legion and Journey knees and the Birmingham hip resurfacing system, all launched in recent years. The company can claim even greater success internationally, with revenue rising 54% in 2007 compared with 2006, bringing the year's total to $622 million. Europe sales grew 76% (more than half of which was a result of acquisitions), and Japan sales grew 13%.

The next largest contributor to Smith & Nephew's 2007 revenues, with 23 % of total revenues, was the Advanced Wound Management segment. For the year, this unit saw revenue increase 12%, from $698 million in 2006 to $779 million in 2007. US revenues increased 13% to $157 million, while revenues outside the United States were on par with an 11% increase to $622 million. European regions all posted double-digit percentage gains, but growth in Japan was flat, according to the company.

In May 2007, Smith & Nephew strengthened its offerings in wound management by purchasing BlueSky Medical Group, Inc., a private US company, for an initial payment of $15 million, with future milestone payments of up to $95 million. The company's stated strategy has been to enter to the negative pressure wound therapy market, which the executive team believes is estimated at $1.4 billion. The Allevyn hydrocellular dressings were enhanced with new versions in the past couple of years, with 2007 bringing additions such as silver variants. Acticoat also offered new dressings for infection prevention. Last year, the company also entered into an agreement with Covalon Technologies, Inc. to distribute a range of denatured collagen dressings.

The Endoscopy segment, which added 22% of the company's total revenue, reported growth of 13% to $732 million, compared with $648 million in 2006. In the United States, sales increased by 5% to $361 million and were driven by the knee and shoulder repair sector as well as revenues from the company's Visualization and Digital Operating Room, which grew 7% due to the launch of the HD660 camera. Overseas revenue gains were healthier at 22% for the year, bringing the total to $371 million by the close of 2007.

The company expanded its shoulder repair offerings with the launch of the Kinsa RC Suture Anchor, while the arthroscopic hip repair market benefited from the introduction of the Lateral Hip Positioning System. The Endoscopy segment also redesigned and expanded its line of Clear-Trac disposable cannulas. Regulatory clearances also were granted in most major markets (excluding Japan) for the Kinsa anchor, Ultra Fast-Fix, Trufit BGS, 560 High Definition camera system and various arthroscopy instruments and devices.

Revenues from the Trauma and Clinical Therapies segment, which contributed 18% of Smith & Nephew's total revenue, grew 20% to $618 million in 2007, compared with $514 million in 2006. US revenue for the year increased 12% to $414 million, while international revenue increased 41% to $204 million.

The company's 2006 acquisition of Durolane hyaluronic acid product paid off in 2007 as it accounted for 5% of the underlying growth in sales outside the United States within clinical therapies (which grew 27% for the year). US clinical therapies operations were aided by a larger sales force that drove growth of Exogen (22%) and Supartz (10%) products. By August 2007, Exogen had captured the industry's top market share position for long bone stimulation, according to the company

The fixation product segment grew 17% for the year. In the United States, where sales grew 11%, continued growth of the PeriLoc compression plate system (launched in 2006) and the launch of the Intertan nail contributed to the gains. The Peri-Loc Variable-Angle Locked Plating System was a significant introduction for 2007, as was the Peri-Loc Periarticular Reduction Forcepts Set. Other important launches in fixation included the Large Cannulated Screw System, Trigen Meta-Nail Blocking Screw Instruments, Trigen Percutaneous Intertrochanteric/Femoral Antegrade Nail Instruments and Caption Platelet Rich Concentrate System.

Overall, the company's largest markets were the United States (46 %) and Europe (35%), with Africa, Asia and Australia and other regions rounding out the balance. In the United States, Smith & Nephew reached a settlement in September with the US Attorney for the District of New Jersey's office with regard to the subpoena the company (along with four other competitors) received in 2005 pertaining to antitrust law violations related to implant sales. Smith & Nephew paid a civil restitution payment of $29 million and legal costs of $1 million, as well as agreed to improve its compliance system.

In the same month, Smith & Nephew, along with some of its competitors, received word of another informal investigation--this time by the US Securities and Exchange Commission--into the company's marketing practices for its reconstruction products in Germany, Poland and Greece. The company is investigating on a voluntary basis whether any problems or issues have been apparent.

A few minor product recall issues also were dealt with in 2007. In March, the company recalled 539 RF Denervation probes, used with the Electrothermal 20S Spine System in radioffequency heat lesion procedures for pain relief, due to sterility labeling issues. A packaging error at a subcontractor also led to a voluntary withdrawal of 185 Birmingham Hip Resuffacing System implants. In addition, a precautionary recall was announced for knees from the TC-Plus, VKS and RT-Plus knee ranges after it was deemed that a limited number of semi-finished knee implant castings had a higher-than-specified iron content due to a production error at a suppliers factory.

On first glance, very little appeared to be slowing Smith & Nephew down in 2008. The company's first quarter, ended March 29, produced revenue gains of 22% to $911 million, compared with $744 million for the first quarter of 2007. The Reconstruction segment grew a substantial 44% to $377 million, while Advanced Wound Management, Trauma and Clinical Therapies, and Endoscopy had percentage increases of 2% ($189 million), 11% ($151 million) and 10% ($194 million), respectively. New product introductions for 2008 include the Arthrogarde Hip Access Cannula, the Footprint PK Suture Anchor, the R3 Acetabular System, Vertilast Technology and the Caption Disposable Platelet Concentration System.

In spite of the slew of product launches and double-digit sales increases, management said the results for the quarter were tempered by some problematic issues related to sales practices in Europe by Plus Orthopedics--the company now is working to harmonize standards in the group with Smith & Nephew's company-wide standards. For the full year, the company expects projected revenues to be reduced by about $100 million as a result of the problems. The Trauma and Clinical Therapies segment also had disappointing US sales, which were flat at 1% growth, but Illingsworth noted that European business was strong.

With favorable global market conditions overall, Illingsworth remained optimistic regardless of the problems he has inherited. "Although this has been a challenging quarter in parts of our business in Europe, we have taken firm action and we are confident that the overall business is in a strong position for continued strong sustainable profit growth," he concluded.

19 Donaher

$3 Billion ($11B total)

KEY EXECUTIVES:

Steven M. Rales, Chairman

H. Lawrence Culp, Jr., President and CEO

Daniel L. Comas, Exec. VP and CFO

Jonathan P. Graham, Sr. VP--General Counsel

Frances B. L. Zee, VP--Regulatory Affairs/Quality Assurance

Daniel A. Raskas, VP--Corp. Development

NO. OF EMPLOYEES: 50,000

GLOBAL HEADQUARTERS: Washington, DC

As an industrial company immersed in diverse markets, Danaher's name is rooted in the Celtic word "Dana," a term dating from before 700 BC that means "swift flowing." Thus, it is fitting that the manufacturer was formed in the 1980s during a fishing trip on a river in western Montana bearing its namesake. In accordance with its concept of flow, Danaher has branded itself as a business focused on continuous improvement and customer satisfaction. And as a result, it has evolved in a multibillion-dollar, global enterprise in a relatively short period, operating more than 200 manufacturing facilities in more than 20 countries (with sales within more than 125 countries).

The proof of success is most evident in net sales figures, which totaled $11 billion for 2007. This amount marks 16.5% growth from nearly $9.5 billion recorded in 2006 and 40% growth compared with nearly $7.9 billion reported in 2005. Furthermore, free cash flow exceeded $1.5 billion and net earnings for 2007 were $1.2 billion.

Danaher categorizes its sales according to four major business segments, including Professional Instrumentation, which encompasses environmental and test and measurement products and services; Industrial Technologies, which accounts for products for motion and product identification; Tools and Components, which offers mechanical hand tools and products; and Medical Technologies, which consists of businesses that offer products and services to dentists, other doctors, hospitals and research professionals in the life sciences sector.

The latter segment, Medical Technologies, was a newer entrant into Danaher's portfolio after the company acquired Kaltenback &Voigt GmbH & Co. KG (KaVo), the Gendex business of Dentsply International Inc. and Radiometer A/S in 2004. The company has continued to strengthen this division's offerings through the acquisitions of Leica Microsystems in 2005 and Sybron Dental Specialties and Vision Systems Ltd. in 2006. Medical Technologies serves three main markets: dental products ($1.7 billion), acute care diagnostics ($400 million) and life sciences ($900 million). Total net sales for this segment in 2007 were $2.998 billion, a 35% increase from 2006 annual sales and 154% growth from 2005.

In just a few short years, Medical Technologies clearly has become a strong contributor to overall sales, given that Professional Instrumentation, Industrial Technologies, and Tools and Components reported 2007 sales of $3.5 billion, $3.2 billion and $1.3 billion, respectively, and Medical Technologies' sales contributed 27% of the company's total revenues in 2007.

More than half of Danaher's total sales come from outside the United States, and this applies to the Medical Technologies segment as well. Last year, 37% of sales came from North America, 41% from Europe, 14% from Asia and other regions accounted for the remaining portion.

Looking specifically at some of the businesses within the Medical Technologies segment, much of the growth for the overall segment came from a mid-teens increase for Leica Microsystems, driven by microscopy demand. Leica, whose operations are in Europe, Australia, Asia and the United States, is a provider of high-precision optical instruments and other products for life-sciences and medical applications such as laboratory and surgical microscopes as well as diagnostics products. Australia-based Vision Systems Ltd., a manufacturer of automated instruments, antibodies and biochemical reagents used for cancer and other disease detection, was integrated with Leica Microsystems after it was acquired, forming Leica Biosystems. Vision's revenue grew about 30% in 2007, compared with when it was a standalone company in 2006.

Dental core revenues grew at a mid-single-digit rate, with increased sales volumes coming from restorative and orthodontia products, as well as instrument and treatment products. Within the dental portfolio are products made by KaVo, a manufacturer of digital dental imaging products, precision dental hand pieces, treatment units and diagnostic systems; and Sybron Dental Specialties, a provider of dental consumables and small equipment for the professional dental market. Some of the brands under the dental umbrella include Gendex, Dexis, Pelton & Crane, Ormco, Kerr and Imaging Sciences International.

Finally, Radiometer's core sales increased at a high-single-digit rate as a result of strong instrument placements globally. Radiometer is a provider of diagnostic equipment such as blood gas analyzers, with manufacturing facilities in North America and Europe. Growth for Radiometer was fueled by increased sales of diagnostic instruments in Europe (particularly Russia) and, to a lesser extent, sales in North American and Asia-Pacific markets.

Danaher's first quarter of 2008, ended March 28, showed total revenues of $3.03 billion, 20% higher than the $2.52 billion reported for the same period in 2007. Medical Technologies revenues totaled $758 million, an 11% increase from $684 million in the first quarter of 2007.

20 Synthes

$2.8 Billion

KEY EXECUTIVES:

Hansjorg Wyss, Chairman

Michel Orsinger, President and CEO

Robert Donohue, CFO, President, Synthes Canada

NO. OF EMPLOYEES: 9,070

GLOBAL HEADQUARTERS: West Chester, PA

In yet another solid year for Synthes, the company grew sales 15.3% to $2.8 billion in 2007, up from $2.4 billion in 2006. Net income was nearly $613 million, an increase of more than 20% from $509 million recorded for 2006. The steady climber has had a compound annual net sales growth rate of 22.4% in the past 10 years and shows no signs of slowing down--especially with some key product approvals last year.

The manufacturer of instruments, implants and biomaterials for surgical fixation, correction and regeneration of bone and soft tissues capped off a successful year in December with FDA approval for its ProDisc-C Total Disc Replacement, making Synthes the first company to offer both a lumbar and a cervical disc replacement in the United States. (This approval follows Synthes' fall 2006 launch of ProDisc-L, used in more than 1,000 US surgeries in 2007.) Synthes' biomaterials offerings also were strengthened by FDA clearance in October for the chronOS Strip flexible ceramic bone substitute.

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As for many in the industry, Synthes invested in its future growth through acquisitions. In December, the company bought privately held N Spine for approximately $30 million (with additional payments of up to $45 million, depending on milestone achievements), enabling Synthes to enter the posterior spinal dynamic stabilization market to treat degenerative disc disease and stenosis. San Diego, CA-based N Spine's 6-mm diameter dynamic stabilization rod is compatible with Synthes'Pangea and Click'X pedicle screws, making the acquisition a strategic fit of the companies' products.

The most profitable region by far was North America, which contributed $1.7 billion in sales, representing 62% of the company's total sales. Within the United States, revenues were $1.67 billion, a 12.6% increase compared with $1.48 billion in the prior year. Trauma was the biggest growth driver in North America; new introductions in this business segment included the Volar Column Distal Radius Plate System and the Expert Lateral Entry Femoral Recon Nail Systems. Within the Spine division, new product launches included Antegra (a plating system used to stabilize degenerated lumbar spine segments anteriorly) and Synapse (instruments and implants for posterior stabilization of the upper spine). Spine growth also was aided by a continued rollout of SynFix-LR. Cranio-Maxillofacial (CMF) sales were driven by the MatrixNEURO system, which should continue to be successful in 2008 as indications are expanded, as well as increased use of Synthes' sternal fixation and reconstruction system.

Europe, which contributed nearly one-quarter of total sales, produced $637.3 million in revenue for 2007. In spite of competition and pricing/reimbursement pressures--not to mention unseasonably warm weather (and thus, fewer snow- and ice-related injuries)--the company grew its business with 13.4% local currency growth compared with 2006. Trauma growth came from the completion of the Expert Nail lines, as well as introductions including the LCP DHS, LCP DHS Blade and the EPOCA shoulder prosthesis. Spine also saw introductions with In-Space and Vertecem, along with new additions to product lines launched in 2006, such as Pangea. CMF, meanwhile, had the highest growth percentage, thanks to the MatrixNEURO system, the launch of the Sternal Closure systems and improved supply chains for the Patient Specific Implant.

Net sales in Asia-Pacific, the company's third-largest market, were $248.4 million. In its annual report, Synthes noted that it achieved market leadership in the Japanese Trauma market for 2007 (though government price cuts significantly affected Trauma there by 10%-15%), and China and India have become the fastest-growing countries for the company's products in emerging Asian markets.

Other international regions contributed $153 million in net sales for 2007. Latin America, which had particularly strong spine sales, saw sales growth of approximately 19% in local currencies. The strongest markets in the region were Brazil and Columbia. Spine introductions led the division's growth there, as did Power Tools.

Overall, the year was strong in a time of transition, when Michel Orsinger took over the CEO spot from Hansjorg Wyss (who remains chairman). More than 600 additional employees (+7.3%) joined Synthes' ranks in 2007.

The first quarter of 2008 continued a strong sales showing, with an 18.7% increase in net sales over the prior year to $781 million. All divisions and major geographical regions posted double-digit gains, and the company had a new addition after it acquired Innomedic, a German software developer for med-tech applications, for an undisclosed sum. Profits should continue to be strong in 2008 given Synthes' commitment to education for its customers and markets it serves. Last year, Synthes held more than 1,600 courses globally for more than 30,000 participants.

21 Beckman Coulter

$2.8 Billion

KEY EXECUTIVES:

Scott Garrett, Chairman, President and CEO

Mike Whelan, Group VP, High Sensitivity Testing Group

Scott Atkin, Group VP, Chemistry, Discovery and Automation Business Group

Cindy Collins, Group VP, Cellular Business Group

Pam Miller, Sr. VP, Supply Chain Management

Russ Bell, Sr. VP and Chief Scientific Officer

Melina Cimler VP, Quality and Regulatory Affairs

NO. OF EMPLOYEES: 10,000

GLOBAL HEADQUARTERS: Fullterton, CA

Ever since President and CEO Scott Garrett stepped into his role in 2005, Beckman Coulter has been a company in transition as it builds on a new business structure encompassing Lean manufacturing, Six Sigma and an operating-type lease model, among other changes. Although 2006 net sales only increased 3.5% compared with 2005, the past year's improved results--9.2% growth compared with 2006--are a testament that Garrett's strategies are showing signs of paying off and securing the company's foothold as a diagnostics leader for the long term.

As part of the transition in effect, the manufacturer of biomedical testing instrument systems notably had many shifts occur within its employee ranks in 2007. Today, 80% of Beckman Coulter's top 100 executives are either new to the company or have moved into new roles in the last two years.

"Beckman Coulter has distinct advantages in the marketplace: a legacy of quality, superior brand equity, loyal customers around the world and a highly capable workforce. With our talented people and our innovative technology, we lead the industry in our ability to design, develop, manufacture, sell and support the systems that customers want for their laboratories. I am confident that we are on the threshold of great achievement as we embrace the challenge to improve patient health and reduce the cost of care," said Garrett in the company's 2007 annual report.

Revenues for the fiscal year ended Dec. 31 totaled more than $2.76 billion, compared with approximately $2.53 billion for 2006. Net earnings also improved 13% to $211 million. Operating in more than 130 countries, nearly 52% of revenues were generated within the United States ($1.4 billion total), with the remainder coming from international territories ($1.3 billion total).

One of the company's largest sales drivers has been its Immunoassay Products segment, which had 2007 revenues of $595.8 million, a 23% increase from $484.4 million in 2006--this segment has grown by double digits annually for a decade. Beckman Coulter has a share of about 7% for the $7 billion global immunoassay testing market. One of the major coups for 2007 included the commercialization of the first automated Inhibin A test, an assay used to help diagnose and monitor various reproductive diseases. Another launch included the UniCel Dxl 600, a mid-range immunoassay testing system. As the company looks to expand its presence in areas such as China and India, it has acquired NexGen Diagnositics, LLC and the research flow cytometry instrument business from Dako Denmark A/S, as well as pursued various licensing agreements for new products and technologies.

Beckman Coulter's Chemistry Products segment, consisting of systems and kits that perform various routine patient tests (eg, blood glucose and cholesterol measurements), had revenues of $749.5 million, representing approximately 11% growth from $677.1 million reported in 2006. The company's total market share in the $3 billion chemistry market is 20%.

At $575.1 million, the 2007 revenues for Beckman Coulter's Discovery and Automation Products segment was somewhat flat with only 2.6% growth compared with $560.7 million in the prior year.

The largest total revenues came from the Cellular Products segment, which reported revenues of $840.9 million for 2007. Although it's the largest revenue generator, these sales represent only a 4.3% increase from revenues of $806.3 reported in 2006.

In terms of streamlining overall operations, Lean initiatives led to consolidations and some building eliminations, freeing 100,000 square feet of space. For example, in the first quarter of 2007, Beckman Coulter relocated its centrifugation business from Palo Alto, CA to the Indianapolis, IN area as a measure to streamline the company's supply chain.

Beckman Coulter also strengthened partnerships in the past year. The company signed a three-year agreement with Premier, Inc. to enable members to purchase clinical diagnostics products, as well as an agreement with the healthcare purchasing network for Beckman Coulter's flow cytometry instruments and its core laboratory systems and supplies. An agreement with Amerinet, Inc. also allowed the company to provide core laboratory systems and supplies to Amerinet's members. Furthermore, Beckman Coulter renewed agreements of approximately $94 million annually with MedAssets Supply Chain Systems.

In terms of other alliances, Beckman Coulter received a grant from the Imperial College of London to develop a cost-effective test for monitoring CD4 lymphocytes in patients who have HIV/AIDS, which could aid poorer areas such as sub-Saharan Africa. Furthermore, the company signed agreements to provide exclusive options to license cancer genomics intellectual property that may arise from Johns Hopkins University's studies of various types of cancer. Beckman Coulter also signed on to a two-year research project pertaining to cardiovascular and obesity-related hypertension genetic markers, to be performed at Thomas Jefferson University (Philadelphia, PA) and Laboraf Diagnostica e Ricerca San Raffaele SpA (Milan, Italy). Molecular diagnostics remain a top-line focus for the company, which seeks to be among the first with a "sample-to-result" molecular diagnostics system for the hospital market.

More recently, in April Beckman Coulter licensed certain rights to testing for hepatitis C virus from Siemens Healthcare Diagnostics. Per the agreement, Beckman Coulter can develop, manufacture and sell a quantitative viral load blood test for use on the company's molecular diagnostic instrument, currently in development and anticipated to launch in 2010. In addition, the company launched the UniCel DxC 880i, an integrated workcell that consolidates chemistry and immunoassay testing for high-volume laboratories.

Total first-quarter 2008 revenue of $730.5 million rose 19.1% compared with the same period in 2007. Immunoassay, Autochemistry, Cellular and Automation (the designations of which are slightly different from those used to categorize products in 2007) segments rose 23%, 16%, 19% and 28%, respectively. The company expects total 2008 revenues to rise 11% to 13% from last year's reported revenues.

22 Olympus Medical Systems

$2.6 Billion ($8.8B total)

KEY EXECUTIVES:

Tsuyoshi Kikukawa, Representative Director and President

Haruhito Marishima, President, Olympus Medical Systems Corp.

F. Mark Gumz, President, COO and CEO, Olympus Corp. of the Americas

Rick Harbuck, Group VP, Olympus Corp. of the Americas

NO. OF EMPLOYEES: 35,700

GLOBAL HEADQUARTERS: Tokyo, Japan

Olympus makes more than the digital camera you took on this summer's vacation. It also develops a wide range of endoscopes, imaging and surgical products, which helped significantly to boost the company's overall revenue for fiscal 2007 (ended March 31, 2007).

The year also marked the company's 13th consecutive year of sales growth. Total sales increased 8 % (in yen) to reach $8.8 billion. Even more impressive is operating income that jumped 57.9% ($823 million), while net income surged 67.3% ($398 million). Company management attributed the growth to double-digit expansion in the Medical Systems and Life Sciences businesses, in addition to increased domestic and overseas sales of new digital cameras, endoscopes and therapeutic products. Sales results also were helped by the year-on-year depreciation of the yen against the dollar and the euro.

For the Medical Systems division (which manufactures medical endoscopes, surgical endoscopes, endotherapy products and ultrasound endoscopes), growth was equally impressive, up 17% compared with fiscal 2006 ($2.6 billion). Operating income climbed 14.6% to $732 million. Sales of gastrointestinal endoscopes also rose--22.2%--to $1.78 billion. The company's line of minimally invasive surgery (MIS) products contributed to a healthier Medical Systems bottom line. MIS product sales increased 7.2% to $816 million, in large part due to sales of a new disposable electrosurgical knife in Japan. International sales of Olympus' new high-definition videoscopes for the abdomen and chest were "robust," according to Olympus. Global expansion of markets for endosurgery and endotherapy products also contributed to the sales increase.

A total of 34% of sales came from North America and 31.9% from Europe (both markets grew by double digits), while Japan (22.9% of sales) grew modestly.

"Developing MIS products designed to support early detection and treatment of cancer is a leading priority for the company," said Tsuyoshi "Tom" Kikukawa, president of Olympus. "We're also pushing toward increased sales in Asian countries, where the company is expecting growth."

Olympus already has wrapped up its 2008 fiscal year, and the company's growth hasn't slowed any. Net sales increased 6.3% to $9.87 billion. Operating income rose 14.1% to $986 million, while net income increased 21.3% to $507.3 million. Total medical sales increased 13.3% to $3.1 billion. Surgical endoscopes and endotherapy products increased 18.4% to $1 billion. Sales of endoscopes rose 11% to $2.1 billion. The division's operating income was up, thanks to the sales expansion of medical endoscopes and favorable performance of surgical treatment devices in markets outside of Japan. Helping to fuel an ever-increasing new product pipeline, R&D expenditures for the year jumped 18.7% to $576.9 million.

In management news, F. Mark Gumz, president and chief operating officer of the company's US operations since January 2000, added CEO to his title in April 2008. At the same time, the company was renamed Olympus Corporation of the Americas (OCA) from Olympus USA. The move was made to "better reflect its regional geographic responsibility for North and South American Olympus operations," according to a company press release.

Gumz is the highest-ranking official in the Americas and the first American to be appointed CEO of any Olympus entity. He will retain his positions as president of OCA, Olympus Canada Inc., Olympus Imaging America Inc. and Olympus Medical Equipment Services America Inc. He also will continue to oversee the operations of Olympus Latin America Inc. He began working for the company in 1977.

So far, for 2008, the company has rolled out some notable products, including the Endo Capsule for the visualization of the small-bowel mucosa--the device received FDA 510(k) clearance in September. It is a small, ingestible pill-like device that allows physicians to better diagnose and treat small-bowel abnormalities. Patients carry Endo Capsule's data recorder in a lightweight harness that records images but allows for daily activity. Also for fiscal 2008, the company released its Single Balloon Enteroscope system (SBE), another device for the examination and treatment of the small bowel. The SBE reduces average examination time compared with other small bowel enteroscopy procedures, employs the Olympus Evis Exera II platform and offers high-resolution images and improved insertion ability, the company said. The SBE can be used with a broad range of EndoTherapy devices used in tissue sampling, hemostasis and foreign object removal.

23 Fresenius Medical Care

$2.5 Billion ($9.7B total)

KEY EXECUTIVES:

Dr. Ben Lipps, Chairman and CEO

Dr. Emanuele Gatti, CEO, Europe, Latin America, Middle East and Africa

Rice Powell, President and CEO, Renal Therapy Group, Fresenius Medical Care, North America

Mats Wahlstrom, co-CEO, North America, President and CEO, Fresenius Medical Services

NO. OF EMPLOYEES: 61,406

GLOBAL HEADQUARTERS: Bad Homburg, Germany

Dialysis product and services company Fresenius has continued to build on the impressive sales gains it made in the last few years.

By Fresenius' estimates, its dialysis products accounted for a market share of around 30% in 2007, which would make the company the market leader, competing against firms such as Baxter. Management's goal is to reach $11.5 billion in sales by 2010.

And it seems as if the company's manufacturing facilities are geared up to meet the challenge.

Fresenius medical care's plant in Ogden, UT, for example, produced more than 77 million miles of hollow polysulfone fiber last year (each fiber is about as thick as a human hair), enough to wrap 3,100 times around the world or more than 160 times back and forth between the earth and the moon. The fibers are used in the manufacture of dialyzers (artificial kidneys). A patient's blood runs through the fibers, where toxins and waste elements are filtered out.

To keep up with demand, Fresenius increased its capacity for dialyzers at its St. Wendel plant in Germany by 40%. The company also began production at its first plant in China, where bloodline systems and other reusable dialysis products are manufactured in the Jiangsu province to serve the Chinese marketplace.

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Looking at fiscal 2007's results, Fresenius is well positioned to meet its 2010 target. For the year (ended Dec. 31), net revenue increased 14% to $9.7 billion overall, while net earnings climbed an impressive 34% to $717 million, or $2.43 per share, up from $1.82 in fiscal 2006. The company's key markets are North America and Europe, generating approximately 69% and 22% of sales, respectively. Revenue in North America and international regions grew by double digits to 11% and 24% respectively. (The company's North American headquarters is located in Waltham, MA.)

Dialysis care accounts for 74% of the total revenue (2006: 75%) and 26% came from dialysis products (2006: 25%). The company's worldwide dialysis care business grew by 13% to $7.21 billion in 2007. The number of dialysis clinics the company owns (2,200) increased 6%, and the number of patients treated also climbed by 6% (174,000 as of the end of the year).

The revenue achieved with dialysis products rose by 18% (12% in constant currency), totaling $2.51 billion. The company cited higher sales of hemodialysis machines, dialyzers and concentrates as revenue drivers. In North America, revenue with dialysis products grew by 18% to $661 million.

Management said the company experienced strong organic growth with existing business in all regions but that it also remained focused on strategic acquisitions.

One such purchase was Renal Solutions Inc. (RSI), which Fresenius bought in November. The acquisition agreement provided for total consideration of up to $190 million, consisting of $100 million at closing, $60 million after the first year and up to $30 million in milestone payments during the next three years. RSI manufactures dialysis technology that purifies tap water to dialysate (a key fluid used in the dialysis process) quality and allows dialysate to be regenerated. This reduces the water volume requirement for a typical hemodialysis treatment from 37 gallons of reverse osmosis water to just 1.5 gallons of drinking water per treatment.

The combination of the companies' technology will provide a platform for superior home products and therapies, according to Fresenius. Furthermore, the significant reduction of dialysate helps with miniaturization, a prerequisite for the "wearable kidney" concept that could benefit some patients and complement clinical-based therapy, the company said. Fresenius sees the current market size of the home therapy market (peritoneal dialysis and home hemodialysis) at about $2 billion, representing approximately 11% of the overall worldwide dialysis market. The company estimates the market has the potential to grow to $4 billion within the next 10 years.

"The acquisition of RSI is an important step to advance the technology required for strong future growth in this field. The combination offers us the long-term opportunity to extend our leadership to home and acute dialysis products," said Ben Lipps, CEO. "With this acquisition, Fresenius Medical Care expects to increase its annual R&D spending by approximately $10 million starting in 2008. Our midterm financial targets for the years 2007 through 2010 remain unchanged."

For 2008, Fresenius' management has set some lofty goals, with a plan to boost revenue by more than 7% to more than $10.4 billion and a 12%-15% increase in net income to between $805 million and $825 million.

For the first quarter of 2008 (ended March 31), overall net revenue increased 8% to $2.5 billion. Organic revenue growth worldwide was 5%. Dialysis services revenue grew by 5% to $1.8 billion, while dialysis product revenue increased by 19% to $667 million. Net income for the first quarter 2008 was $186 million, an increase of 16%.

23 Alcon

$2.5 Billion ($5.6B total)

KEY EXECUTIVES:

Cary Rayment, Chairman, President and CEO

Richard J. Croarkin, Sr. VP and CFO

Kevin Buehler, St. VP, Global Markets and Chief Marketing Officer

Gerald D. Cagle, PhD, VP of R&D and Chief Scientific Officer

Ed McGough, Global Manufacturing and Technical Operations

NO. OF EMPLOYEES: 14,500

GLOBAL HEADQUARTERS: Hunenberg, Switzerland

The eyes, like sentinels, hold the highest place in the body, said philosopher, Marcus Tullius Cicero. Given such a sentiment, it s no wonder that Alcon s success continues to impressively grow with each passing year. The ophthalmic giant, immersed in both pharmaceutical and medical devices used in eye care, has a stronghold in markets for drugs, surgical equipment/devices and consumer products.

In 2007, Alcon--a division of Nestle--increased sales 14.4% from $4.9 billion in 2006 to $5.6 billion. The company's sales are well balanced in the United States (47.7% of total revenues), where an 8% increase led to sales of nearly $2.7 billion, and abroad, where sales were especially healthy at $2.9 billion, a 20.3% increase. The company's focus on emerging markets, which represented 15.5% of global sales, grew faster than developed markets--proving the company's focus on these regions most likely will prove fruitful in years to come.

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Another double-digit gain was seen in net earnings, which were $1.59 billion, or 17.7% growth from $1.35 billion in 2006.

Looking at the company's portfolio of medical devices, the surgical products division remained strong in 2007, with sales increasing 13.4% to $2.5 billion. (A five-year compound annual growth analysis shows the rate has increased 11.7%.)

Sales of Alcon's intraocular lenses totaled $919.4 million, a 15.7% gain from 2006 sales. Within this category, AcrySof IQ lens, the company's bestselling lens, had sales growth of more than 70%; Alcon attributes the gain to physicians preferring to use aspheric optics for patients who receive monofocal lenses. Premium intraocular lenses also grew 31.4% to $136.8 million. These sales were bolstered by the July 2007 rollout of AcrySof ReSTOR Aspheric in the United States as well as a strong showing for AcrySof Toric. The latter brand benefited from approval that year by the US Centers for Medicare and Medicaid Services for dual-aspect reimbursement for toric intraocular lenses.

Sales of cataract and vitreoretinal equipment, devices and disposable products were $1.5 billion, representing a 12% increase compared with 2006. Interest in Alcon's OZil torsional hand piece created strong demand for the Infiniti vision system (OZil is only available for use with Infiniti), whose unit sales were 18% higher in 2007. Another driver was the newly launched Laureate compact phacoemulsification system with accessories that help decrease the cost of cataract removal. Sales of viscoelastics devices--used to protect tissues and cells inside the eye during cataract surgery--also were solid with a 13.4% increase, greatly aided by Alcon's newest product offering, DisCoVisc. Finally, sales of vitreoretinal products increased 14.3%.

Alcon's refractive laser product line was the company's loser for the year. Sales were a disappointing $52 million, a 0.2% decline compared with 2006, due to consistent declines in procedural revenues, market share losses and the removal of Alcon's LADAR6000 excimer lasers from the market. However, in November, Alcon purchased the majority of assets for WaveLight AG, giving it access to WaveLight's Allegretto Wave 200Hz excimer laser system and the Allegretto Wave Eye-Q 400 Hz system (which Alcon said is the fastest laser in the US market). By the end of the year, sales from WaveLight for November and December added $15.1 million to Alcon's bottom line.

Consumer products, some of which are used with Alcon's myriad contact lens offerings, achieved sales growth of 14% to $786 million. The majority of this gain was attributed to sales of contact lens disinfectants (sold under brand names such as OptiFree), which grew 18.8% to $440.2 million. Artificial tear products also grew 16.4% to $233.2 million.

In terms of pharmaceutical products, which accounted for just over 41% of Alcon's total sales in 2007, revenues were $2.3 billion, a 15% increase from 2006. Most of these sales came from glaucoma therapies.

One reason for the company's continued success has been its investments in R&D. In 2007, spending in this area increased 10.2% to $564.3 million. In the intraocular lens segment, by the end of the year Alcon had fully enrolled a clinical study of the AcrySof ReSTOR Aspheric +3.0, designed for greater functional working distance for reading and to improve immediate vision, and it has been continuing its study of AcrySof Phakic lens for patients with extreme myopia.

For the first quarter of 2008, Alcon reported global sales of $1.5 billion, with surgical sales rising more than 20% to $679.9 million. In April, Alcon's parent company, Nestle, agreed to sell 74 million of its Alcon shares of common stock to pharmaceutical heavyweight Novartis for $143.18 per share. Once completed, Novartis will own approximately 25% of Alcon, with the option to purchase another 52%.

25 Terumo Medical

$2.3 Billion

KEY EXECUTIVES:

Takashi Wachi, Chairman

Akira Takahashi, President

Takahiro Kugo, Sr. Managing Executive Officer

Hachiro Hara, Sr. Managing Executive Officer

NO. OF EMPLOYEES: 12,000

GLOBAL HEADQUARTERS: Tokyo, Japan

Part of Tokyo, Japan-based Terumo Corp.'s plan for success is to tackle the global healthcare market full force, and it seems to be succeeding.

For fiscal 2007 (ended March 31), the cardiovascular and interventional technology company reported that operations in the United States, in particular, proved to be a significant source of growth, with overall sales climbing more than 30%. Terumo's has a significant network in the United States. Its US base is in Somerset, NJ, and the Terumo Heart group is located in Ann Arbor, MI (among other subsidiaries located in the United States).

Terumo attributes its recent expansion to a new direct sales structure for its interventional systems and the 2006 acquisition of MicroVention Inc., a California-based manufacturer and marketer of coils for the treatment of cerebral aneurysms. In Europe and Asia, sales also showed double-digit percentage growth, with cardiac and vascular products leading the way, thanks also to the positive effects of a weak yen. Total overseas sales climbed 26.9% compared with the previous fiscal year and accounted for 44.8% of net sales, up 5.3 percentage points.

In April this year, the company unveiled a new three-year business plan called "Phoenix 2010: Challenge for Dramatic Leap." The goal is to create "a Terumo with global presence," according to a company statement. Management has initiated ambitious financial targets to achieve 400 billion yen (approximately $4 billion using the company's end of fiscal 2008 conversion of yen to dollars) in sales and 85 billion yen (approximately $850 million) in operating income by the fiscal year ending March 2011 and to grow to 500 billion yen (approximately $5 billion) in net sales within five years.

According to the company's management, another critical variable in Terumo's equation to gain market share will be a slight shift in corporate philosophy. As part of a more in-depth product development and research initiative, the company plans to maximize contact with various stakeholders throughout the healthcare value chain, including patients, nurses, pharmacologists and clinical engineers, according to President Akira Takahashi.

"By doing so, Terumo will be better positioned to extract the true needs of the medical field and glean accurate opinions about healthcare and medical devices," he wrote in Terumo's 2007 annual report. "The company will also work to enhance its medical offerings, such as Terumo product usage training for medical staff and solutions for improving hospital management practices and routines."

For fiscal 2007, the company reported a sales increase of 19% to $2.34 billion. Net income also rose by double digits--14.7%--to $315 million. General hospital products--disposable medical equipment, medical electronic products, blood transfusion products--made up 50% of total sales ($1.2 billion, 6.4% growth). Interventional systems (catheters and stents), cardiovascular systems (heart and lung machines) and vascular grafts comprised 9.6% of sales ($927 million, 23.1% increase). The Home Health division--diabetes care products, dialysis systems--contributed 10.4% to total 2007 revenue ($243 million, 1.9% increase).

For fiscal 2008 (ended March 31), net sales increased 10.8% to $3.1 billion. Net income bested 2007, with a 16.5% increase to $437 million. Sales for the company's General Hospital division grew 9.2% to produce $1.5 billion. Compared with 2007, the Home Health unit reported a significant increase of 6.5%, reaching $309 million. Catheter and cardiovascular systems, making up Terumo's Interventional group, totaled $1.3 billion, an increase of 13.9%.

Part of the Interventional group's continued solid performance in 2008 was the result of Terumo receiving CE Mark approval in Europe for its Nobori drug-eluting stent. The company got the European regulatory nod in January. As part of plans to establish long-term safety and efficacy, the company plans to enroll more than 5,000 patients in randomized trials as part of a post-marketing registry in Europe, Asia, New Zealand and Africa.

In addition, in June, Terumo Heart, Inc. received approval from the institutional review board at the University of Michigan to move forward with the DuraHeart LeftVentricular Assist System (LVAS) US pivotal trial for a bridge-to-transplant indication. The trial is a multi-center, prospective, nonrandomized study of 140 patients and will include up to 40 centers. The DuraHeart LVAS is a third-generation circulatory support device intended to provide cardiac support for patients who are at risk of death due to end-stage left ventricular failure. It currently is CE marked in Europe for other indications and is not available for sale in the United States.

26 C.R. Bard

$2.2 Billion

KEY EXECUTIVES:

Timothy M. Ring, Chairman and CEO

John H. Weiland, President and COO

Todd C. Schermerhorn, Sr. VP, CFO

Brian P. Kelly, Group VP

Amy S. Paul, Group VP

John A. DeFord, PhD, Sr. VP--Science, Technology and Clinical Affairs

NO. OF EMPLOYEES: 10,200

GLOBAL HEADQUARTERS: Murray Hill, NJ

The 100th anniversary of C.R. Bard brought with it a most welcome birthday gift: The company achieved a milestone in which it surpassed $2 billion in annual revenues for the first time. Net sales for the company were up 11% to $2.2 billion in 2007, compared with $1.98 billion in 2006. Grateful for being able to build stronger financial growth every year, the company commemorated its centennial by sharing the wealth in a most altruistic way. Employees volunteered to perform 100 "Acts of Kindness" throughout 2007, and they ended up surpassing their original goal by completing nearly 250 acts (eg, food drives, walks to raise money for cancer research, etc.) by the end of the year. It's only fitting for a company that, once again, met its stated goal of meeting or exceeding its adjusted earnings-per-share growth objective of 14% for its shareholders.

Most of the company's product groups achieved double-digit sales increases in 2007. The largest contributor was the Urology division, which had net sales of $658.9 million, a 13% increase from $582 million reported for 2006. This division, which added

30% of total net sales for the company in 2007, has had a five-year compound growth rate of 9.4%. The end of the year brought a new launch for this group in the form of infection control endotracheal tubes. Moving forward, the company is focusing heavily on its infection control products, citing the elimination of Medicare reimbursement to hospitals for the treatment of hospital-acquired infections as a strong opportunity for Bard to help customers control costs and improve patient outcomes. Toward the end of 2007, Bard initiated a clinical study of its next-generation Foley catheter and anticipates launching it in 2009.

The next most profitable unit for 2007 was the Oncology business, which added 25 % of total sales at $558.5 million, a 16% increase compared with $481.3 million in 2006. This particular division has boasted the largest five-year compound growth rate at 18.6 %. In late 2007, Bard launched its PowerPICC Solo catheter, which reduces the need for daily flushing with a saline-heparin solution to prevent clotting and thrombosis. The company's advanced catheter in specialty venous access technology only needs to be flushed once weekly with saline only. Advancements continue, with the 2008 upgrade of Bard's proprietary Sherlock catheter tip location system to facilitate use with Bard's Site-Rite bedside ultrasound guidance system. In terms of acquisitions, Bard purchased the UltraClip breast tissue marker, used in ultrasound-guided breast biopsies, from Inrad, Inc.

The Vascular division, with a healthy five-year compound growth rate of 15.7%, continued to prosper with total net sales of $539.6 million--a 13% increase compared with $479.6 million in the previous year. This business group contributed 24% of the total net sales for Bard. The G2 vena cava filter line was a key growth driver in 2007, and the product recently was cleared by the FDA as a removable filter; later this year, the company expects to follow this up with the clearance and launch of the G2 Express filter. The company also was notably pleased by the 2007 rollout of its HD mesh ablation catheter (and its clinical performance) in Europe and was looking to enter the US market in the future to position Bard as a leader in the diagnosis and treatment of electrophysiology disorders. The more recent launch of the Dorado catheter family also is a strategic move to increase the company's stance in the standard PTA catheter segment.

Accounting for 17% of all net sales, Bard's Surgical Specialties business reported flat sales in 2007, with net sales of $363.5 million--2% growth compared with $357.4 million in 2006. However, the five-year compound growth rate for this division has been 9.6%. Notably for 2007, Bard's Davol subsidiary was granted a license from Genzyme Corp. to market and manufacture its SepraMesh hernia repair product line to its offerings, giving it added ammunition to conquer the estimated $585 million soft tissue hernia repair market. The company also is looking to make inroads in the hernia fixation market with its PermaSorb resorbable fixation device, acquired in mid-2007 from A.M.I. GmbH.

Within all these units, Bard collectively generated $250 million in revenue from business development activities completed within the prior five years.

One of the company's larger investments in the future was announced in December 2007, when Bard said it would acquire the LifeStent self-expanding, highly flexible, fracture-resistant stent system from Edwards LifeSciences Corp. Bard paid approximately $74 million at closing in January and will pay up to an additional $65 million depending on the achievement of certain milestones (such as regulatory approvals). "The acquisition of the LifeStent product family is a significant strategic addition to our portfolio of non-coronary stent and stent graft products. Pending FDA approval, the Lifestent SFA product, the Flair Arteriovenous Access Stent Graft and E-Luminexx Iliac Stent will together give Bard one of the broadest product offerings for peripheral vascular stenting," noted Chairman and CEO Timothy Ring at the time of the announcement.

Along with strategic purchases, the company continues to invest in R&D, with $136 million poured into these initiatives (note: this figure includes purchased R&D). Executives reported that 333 patentable ideas were generated, 264 patent applications were filed and 71 patents were issued in 2007.

The investments continue to pay off in 2008, if the company's first-quarter results are any indication. Net sales were $584 million, an 11% increase from the same period in 2007. The US contribution was $399.2 million (7% growth), while overseas net sales totaled $184.8 million (20% growth). Net income was down, though, at $78,000, compared with $101,600 in the first quarter of 2006. The Vascular and Oncology units posted double-digit gains at 18% and 17%, respectively, and Urology was steady with 9% growth. Surgical Specialties sales were down 4%.

"Despite a challenging quarter in our hernia fixation business, we continue to deliver healthy earnings. These results demonstrate the benefits of a diverse product portfolio and the strength of our vascular, urology and oncology franchises. Our focus remains on sustaining growth through the execution of our R&D and business development strategies," Ring said.

It appears the company is right on target with meeting this focus, given its March announcement that it would acquire Specialized Health Products International, Inc., a maker of vascular access products, for approximately $68 million.

27 Biomet

$2.1 Billion

KEY EXECUTIVES:

Jeffrey R. Binder, President and CEO

Daniel P. Florin, Sr. VP and CFO

Glen A. Kashuba, Sr. VP and President, Trauma and Spine

Gregory W. Sasso, Sr. VP and President, Biomet SBU Operations

Steven F. Schiess, Sr. VP and President, Biomet 3i

Jon C. Serbousek, Sr. VP, Orthopedics

Roger P. Van Broeck, Sr. VP and President of Biomet Europe, Middle East and Africa

NO. OF EMPLOYEES: 7,000

GLOBAL HEADQUARTERS: Warsaw. IN

The medical device sector saw merger and acquisition activity increase throughout 2007. As part of that trend, a few heavy hitters--Kodak Healthcare (now Carestream) and Bausch & Lomb, for example--went the private equity route, going from public entities to privately held companies backed by investor groups.

In one of the biggest deals of the year, Biomet followed suit. A private equity consortium, called LVB Acquisition (which includes Texas Pacific, Blackstone Group, Kohlberg Kravis Roberts & Co. and Goldman Sachs & Co.), purchased Warsaw, IN-based Biomet for approximately $11.4 billion. Company shareholders rejected an initial $10.9 billion offer that was brought to the table in late 2006. A few of Biomet's competitors had considered merger talks, but nothing came to fruition. The buyout was completed in September.

With new owners in place, the company leaves behind abrupt management shakeups and a stock option backdating scandal that had plagued the company for the past few years. So what does the future hold for the "new" Biomet? Most of that story continues to unfold. Some industry analysts have indicated that the buyout may actually mean good news for Biomet's R&D pipeline. There will be a lot of focus on the spine and trauma businesses. Company officials have said that while Biomet's products in these areas are strong, they trail competitors' growth rates.

In a letter to shareholders, the company's newly tapped CEO, Jeffrey Binder, said the new ownership provided Biomet with the "strong backing of equity sponsors who recognize our growth potential and support our dedication to providing high-quality, innovative products. As a result, we expect to be in an even stronger position to deliver on our commitment to surgeons and their patients."

Binder, a 15-year orthopedic industry veteran, joined the company in February 2007, replacing Daniel Hann, who served as interim chief executive following the abrupt departure of longtime company CEO Dane Miller in 2006. Hann later resigned following the company's stock backdating controversy.

In other management changes, in April 2007, Glen Kashuba was named senior vice president of the company and president of Biomet Trauma and Biomet Spine. He previously served as worldwide president of Cordis Endovascular, a division of Johnson & Johnson. In June 2007, the company appointed Daniel Florin as senior vice president and chief financial officer. Florin had been vice president and corporate controller for Boston Scientific for six years. He replaced Gregory Hartman, who resigned along with Hann in the wake of the stock backdating problems.

In February this year, Jon Serbousek was hired as president of Biomet Orthopedics, the company's total joint reconstruction unit. Hartman previously held various positions with Medtronic's orthopedic business.

"Biomet is focused on improving its trauma and spine operations," Binder said. "We have strengthened our senior management team with recent promotions and new additions, which, along with a robust new product pipeline, we expect will lead to improved operational performance for the company."

Improved operational performance may be the name of the game. The company's sales for fiscal 2007 (ended May 31) were relatively flat, making modest gains. Net sales increased 4% to $2.1 billion. Excluding the impact of foreign currency, which increased fiscal year 2007 revenues by $37.9 million, net sales increased 2% worldwide.

Operating income was $490 million, compared with $608 million for 2006. Adjusted operating income, excluding special charges and stock compensation expense, was $622 million, or 29.5 % of sales, compared with $627 million for the previous year. Net income fell to $336 million, compared with $406 million in 2006. Adjusted net income for the year, excluding special charges and stock compensation expense, was $420 million, roughly the same as FY06.

Reconstructive device sales increased 9% worldwide to $1.5 billion. International sales increased almost three times as much as sales did in the United States, rising 14% and 5%, respectively. Overall knee sales increased 8%. Excluding instruments, knee sales increased 12% worldwide and 11% in the United States. Hip sales increased 7% worldwide and 2% domestically. (Excluding instruments, hip sales increased 8% worldwide and 3% in the United States.) Extremity sales increased 14% worldwide and 7% in the United States. (Excluding instruments, extremity sales increased 15% worldwide and 9% domestically.) Dental reconstructive device sales increased 15% worldwide and 8% in the United States. Sales of bone cements and accessories were flat worldwide; however, US sales increased 13%.

Fixation sales decreased 11% worldwide to $225 million and decreased 17% in the United States. Craniomaxillo-facial sales increased 2% worldwide and 1% in the United States. Internal fixation sales increased 2% worldwide and decreased 5% in the United States, while external fixation sales decreased 13% worldwide and 17% in the United States. Electrical stimulation device sales decreased 25% both worldwide and domestically. Spinal product sales decreased 7% worldwide to $206 million and decreased 12% in the United States. Sales of spinal implants and orthobiologics for the spine decreased 3% worldwide and in the United States, while US and worldwide spinal stimulation sales decreased 21%.

According to analysts and industry experts, Biomet's problems in the spine sector may be due to a combination of factors. The first part of it may be internal. The company has focused on knee and hip performance for so long (and, arguably, has done it well) that until management's recent push to beef up the spine and trauma business, it was allowed to take a back seat to large-joint development. And given the market from spine in particular, the competition is intense. Medtronic is a market leader and newer companies such as NuVasive, whose sole focus is spinal devices, have made it harder to compete. Analysts also indicated that management changes at the company had an impact on performance.

On the new product front, Biomet's dental division released an implant that incorporates nanotechnology. Rolled out in March 2007, the NanoTite implant adds to Biomet 3i's Osseotite implant by adding deposits of nano-scale calcium phosphate crystals to approximately 50 % of the surface. The nano-scale deposits create a complex surface on the implant that, according to Biomet, appears to play a key role in how the implant bonds with bone because human bone recognizes calcium phosphate as biologically natural, allowing the bone and implant to bond during healing. Biomet Orthopedics launched two hip stems in December--the Taperloc Microplasty Stem and the Balance Microplasty. The devices are designed to address the demand for minimally invasive bone-conserving total hip procedures and, according to the company," offer conservative alternatives" to femoral resurfacing devices that typically cannot be implanted using minimally invasive techniques.

For 2008, the changes at Biomet may be paying off. Financial results for the company's most recent quarter (ended Feb. 29), for example, showed signs that the company's restructuring and recent stability are having an impact. Third-quarter revenues were strong with a 14% sales increase to $603 million (though the company lost $88.5 million as a result of special charges related to the recent acquisition). Reconstructive device sales increased 18% to $449 million, with knee and hip sales (without instruments) increasing 21% and 12%, respectively. Spinal product sales, however, continue to plague the company, with a 2% worldwide drop to $50.1 million compared with last year's third quarter. (Year-end results, of course, would tell more of the story but were announced after press time.)

Overall financial results for fiscal 2008 will be impacted by the company's settlement with the US Department of Justice regarding an anti-kickback investigation into financial relationships with consulting surgeons. In September 2007, Biomet, Johnson & Johnson's DePuy franchise, Zimmer and Smith & Nephew agreed to pay $311 million as part of a settlement. Biomet paid $25 million, without any admission of liability or wrongdoing. A fifth company, Stryker Corp., paid no civil settlement but entered into a non-prosecution agreement with the government and agreed to reforms, including federal monitoring.

28 Dentsply International

$2 Billion

KEY EXECUTIVES:

Bret W. Wise, Chairman, CEO and President

Christopher T, Clark, Exec. VP and COO

William R. Jellison, CFO and Senior VP

James G. Mosch, Operating Sr. VP

Robert J. Size, Operating Sr. VP

Andrew M. Lichkus, PhD, VP, Chief Technology Officer

NO. OF EMPLOYEES: 9,000

GLOBAL HEADQUARTERS: York, PA

The company that strives to help keep smiles healthy had many reasons to grin in 2007--billions of them, in fact. In the past six years, Dentsply International Inc. has seen its net sales double from $1 billion to $2 billion last year. For the year, sales increased 11% compared with 2006, which had sales topping $1.8 billion. When excluding precious metal content from the figures, sales rose 12.1% to $1.8 billion in 2007. Net income was nearly $260 million, compared with approximately $224 million for 2006.

All the gains came in a time of transition for the company, which saw former Chairman and CEO Gary Kunkle Jr. retire at the end of 2006. Bret Wise, who took over the helm, knew Dentsply well, however, given that he had worked his way up from senior vice president and chief financial officer when he joined the company in 2002 and, before his most recent post, was serving under Kunkle as president and chief operating officer. Christopher Clark, formerly senior vice president, also moved up into his current position as executive vice president and chief operating officer.

Along with a new regime has come a renewed focus on strengthening organic growth and dedicated overseas resources. As part of the company's strategy, nearly 60% of Dentsply's sales came from overseas, with double-digit increases seen in areas such as Asia-Pacific, Canada, the Middle East and Australia. Europe contributed 39% of global sales. Given the international focus, the company expanded its 2,000-member global sales force during 2007. In the United States, Dentsply's Strategic Partnership Program helped foster productive and profitable relationships with dealer partners and other customers. In all six of the continents in which the company does business, Dentsply's clinical education program reached more than 160,000 dental professionals.

Dentsply poured more than $150 million into new technologies and acquisitions last year as part of its initiative to invest 75% of cash flow into organic growth and acquisitions. Particular attention has been paid toward emerging markets such as Eastern Europe, Latin America and Asia-Pacific. Five acquisitions were completed in 2007, expanding the company's reach in areas such as Spain and Turkey as well as to solidify Dentsply's presence in what it deemed previously underrepresented dentistry markets. In September, for example, Dentsply completed its acquisition of assets from Sultan Healthcare, Inc. These assets are expected to help Dentsply expand its product offerings in new categories such as infection control and add approximately $45 million to $50 million in annual sales for the company.

The largest portion of the firm's product portfolio is comprised of orthodontics, endodontics and implants, all of which collectively contributed 40% of total sales for the year. Consumables contributed 38% of sales, while prosthetics added 19% to the total.

In 2007, Dentsply launched 35 new products. Among them was the GT Series X Rotary Files With M-Wire NiTi, used for reshaping procedures during root canals. The M-Wire nickel titanium technology was gained from Dentsply's SportsWire acquisition in 2007. In this therapeutic category, VDW. Silver and VDW. Gold endodontic motors also were introduced during the year.

In terms of aesthetic treatments, Dentsply realized gains from its InOvation C ceramic, self-ligating bracket system launched in late 2006.

As with many companies seeking new material solutions for new generations of product offerings, Dentsply also went beyond the use of zirconia and titanium to fabricate DeguDent dental copings and bridge substructures fabricated from lower-cost non-precious metals using automated selective laser melting.

Looking ahead, the company already has posted growth of 18.6% in the first quarter of 2008 (compared with the same quarter a year ago), with sales at $560.8 million. Excluding precious metal content, sales were $496.2 million, a 17.6% increase from the prior year's quarter. According to Wise, who presented the results during a recent earnings call to analysts, the growth represents Dentsply's fastest quarterly expansion since the third quarter of 2002.

He acknowledged that economic conditions have slowed US sales of certain higher-end discretionary procedures but noted that overall sales in Europe and other overseas regions maintained strong growth rates in spite of the impact of currency fluctuations and other economic issues.

"Overall, we're off to a strong start in 2008 for both sales growth and earnings growth. As we entered the year, we had taken some weakness in the US market into account when we gave our guidance for all of 2008 that was back at the beginning of February," Wise said. "I think we have seen some of that weakness in the US develop, and it will probably take a few quarters for that to turn around. However, one of the key strengths of Dentsply is our diversity in both product categories and in our geographic coverage, and this quarter and throughout 2008, we expect that to be a key driver in our financial results."

The executive team also pointed to the recent approval of new indications to extend Dentsply's tissue care positioning for its Ankylos implant line in the United States; the indications, previously approved in Europe, have been "very effective" there, executives noted. In the first quarter, the company also introduced Midwest Carries ID, an updated caries detection device utilizing technology acquired last year. The orthodontic business also launched a new lingual minor tooth movement system called Innovation LMTM.

29 Drager Medical AG & Co.

$1.8 Billion ($2.7B total)

KEY EXECUTIVES:

Stefan Drager, CEO

Herbert Fehrecke, COO

Gert Hartwig Lescow, CFO

NO. OF EMPLOYEES: 6,077 (10,345)

GLOBAL HEADQUARTERS: Lubeck, Germany

Drager has been supplying ventilation, respiration and air filtration technology for more than 100 years (the company celebrated 100 years in the US market in fiscal 2007). Its healthcare subsidiary, Drager Medical AG & Co., a joint venture with Siemens started in 2003, may not have been around quite that long but already has distinguished itself as the company's largest revenue generator.

Drager Medical develops medical devices and related services for the acute point-of-care sector--from emergency, perioperative (the three phases of surgery: preoperative, intraoperative, postoperative) and critical care to perinatal care and home care. Though headquartered in Germany, the company also has development centers and production plants in the Netherlands, China, Telford, PA and Danvers, MA.

To kick off fiscal 2007 (ended Dec. 31), Drager upped its stake in the partnership with Siemens with the purchase of an additional 10%, making it a 75%/25% venture--with Drager holding the majority shares. The purchase cost was approximately $143.9 million, which the company financed.

Despite steady growth during the past few years, Drager Medical's orders were down 4% for FY07. As a result, revenues also fell short of expectations, falling 2.4% ($1.78 billion). According to the company, this mainly was due to the absence of large contracts and the failure of its US business to meet expectations. In addition, the strength of the euro, particularly against the dollar, reduced order intake and revenues.

The company's largest market even after sluggish US performance, remains the Americas (41% of sales, down 2%), followed by Europe (except Germany), which made up 27% of sales (down 1%). Asia-Pacific represented 19% of sales in fiscal 2007, up 1%. In particular, the company reported a large volume of orders from Spain and Russia. The major markets, however, remained the driving force behind global economic activity in 2007, despite increasing fears of a recession.

For the year, Drager Medical's earnings before interest and taxes (EBIT, before non-recurring expenses) fell 7.5% to $153.5 million. The division's net profit also declined--31%--to $85.3 million. The cost of launching the new Infinity Acute Care System contributed to decreased profit, the company reported.

The Infinity Acute Care System, introduced in 2006 but rolled out in fiscal 2007, is a product that integrates monitors and medical treatment equipment to form one system. The company is betting much of its long-term success on this new product line. The system incorporates patient monitoring, anesthesia, ventilation and information management for all treatment phases, creating a cross-departmental, standardized and integrated platform.

In the field of perioperative care, the company unveiled its Fabius Plus anesthesia machine (to replace older Fabius devices) during the Medica trade show in November 2007, along with the Fabius MRI anesthesia machine designed specifically for use in strong magnetic fields. During the year, Drager Medical's Critical Care business unit launched the Carina intensive care ventilator.

Moving forward, for 2008, Drager is still betting on mature markets in the United States and Europe. The company expects a boost from population growth in the United States, despite a tightening of healthcare purse strings. Drager officials believe that increased investment in new process-supporting technologies as a means of increasing efficiency and decreasing costs in the healthcare sector will help the company's bottom line.

For the first three months of fiscal 2008, The Drager Group's overall order intake rose 11% to $779.2 million. Despite the weak performance of the US dollar against the euro, net sales grew by 3.4% to $640.6 million. Drager Medical increased its order intake by 16.1% to $505.2 million in the first quarter of 2008. Net sales of $417 million were 1.6% above the same period in 2007. The Medical division generated an above-average increase, 42.4%, in EBIT (before non-recurring expenses), taking it to $19 million. After non-recurring expenses, EBIT was $18 million.

30 Varian

$1.7 Billion ($1.8B total)

KEY EXECUTIVES:

Timothy E. Guertin, President and CEO

Elisha W. Finney, Sr. VP and CFO

Robert H. Kluge, St. VP and President, X-Ray Products

John Anderson Thorson, VP, Finance and Business Development

Dow R. Wilson, Exec. VP and President, Oncology Systems

George A. Zdasiuk, VP and Chief Technology Officer

NO. OF EMPLOYEES: 4,600

GLOBAL HEADQUARTERS: Palo Alto, CA

In early 1999, Varian Associates changed its name to Varian Medical Systems after spinning off its semiconductor manufacturing equipment and scientific instruments businesses. Today, Varian Medical Systems manufactures integrated products for treating cancer and other conditions with radiotherapy, radiosurgery, proton therapy and brachytherapy. The company has tripled in size since 1999.

The company's Oncology Systems business provides radiotherapy products for treating cancer and other conditions, as well as informatics software for managing comprehensive cancer clinics. Its products include linear accelerators, simulators, proton therapy systems and software tools for planning, verifying and delivering radiation, radiosurgical and brachytherapy treatments. The brachytherapy division manufactures products to treat cancer by temporarily inserting radiation sources within tumor sites. With its partner, BrainLAB (a provider of software for minimally invasive therapies and cancer treatment), Varian also produces technology for stereotactic radiosurgery and neurosurgery for the treatment of cancer and other disorders of the central nervous system.

Varian's X-ray products business provides X-ray tubes and flat-panel X-ray image detectors for imaging primarily used in medical diagnostics, dental procedures and veterinary care. The company's smallest division (revenues were broken out of total medical revenue) manufactures X-ray imaging products for cargo screening and industrial inspection.

Overall company revenue for fiscal 2007 (ended Sept. 30) was $1.8 billion, an increase of 11%. Net earnings were $239 million, down from $245 million in fiscal 2006. The company said costs associated with acquisitions during the fiscal year drove down earnings results. Fiscal 2007 also got off to a slow start due to customer purchasing delays and "new competitive challenges" in the first half of the year, company officials said.

Orders and revenue, however, were up across all product categories. Oncology Systems revenue increased 8% (though orders were sluggish), while X-ray product revenue increased 13%. Though not a medical-device producing division, the company's X-ray security screening group grew revenue 135%, mostly as a result of an acquisition for the division.

[ILLUSTRATION OMITTED]

Oncology Systems reported $1.4 billion in net revenue and $340 million in operating earnings, up from $319 million in 2006. X-ray revenues were $258 million, with operating earnings of $61 million, up from $44 million in 2006. "Other" revenue of $79 million primarily was the result of sales of X-rays for security screening.

For 2007, the company expanded to prepare for international growth and increases in orders, particularly for oncology products. Varian enlarged its global facilities footprint by more than 20% with a new 140,000-square-foot operation in Beijing, China that manufactures linear accelerators and new X-ray products. The company also completed a 100,000-square-foot expansion of its facility in Las Vegas, NV for an Oncology Systems customer-training center. The new center also will serve as headquarters for the company's Security and Inspection Products group.

In 2007, Varian introduced RapidArc, a device that, according to the company, delivers image-guided, intensity-modulated radiation therapy (IMRT) up to five times faster and more precisely than conventional IMRT of helical tomotherapy. For patients, it means more comfortable treatments and fewer complications. Prostate cancer patients, for example, can receive a single treatment in less than four minutes, according to Varian. The device is able to target tumors from more angles, thus saving healthy tissue in the process while making only a single revolution of the treatment machine around the patient. In January 2008, the FDA granted the RapidArc 510(k) clearance.

"RapidArc represents a major medical advance that will change the way radiation therapy is planned and delivered," said Dow Wilson, president of Varian's Oncology Systems business. "Our primary goal with this product is to improve clinical outcomes. In addition, we discovered that we could simultaneously improve treatment efficiency significantly. RapidArc should make better-quality radiotherapy a more affordable, more accessible treatment option, and enable more cancer patients to receive a higher standard of care."

The FDA's clearance for RapidArc covers the treatment hardware and the RapidArc treatment planning software module in the company's Eclipse treatment planning system. Varian began delivery to customers in spring of this year.

For fiscal 2008, management expects revenue growth in the range of 15% to 16% compared with 2007. Net orders grew double digits for the company's X-Ray Products business and its Oncology Systems business for the first half of the year.

TOP MEDICAL DEVICE
MANUFACTURERS

1. Johnson and Johnson        $21.7B
2. GE Healthcare                $17B
3. Siemens Healthcare           $14B
4. Medtronic                  $12.3B
5. Cardinal Health              $12B
6. Baxter International       $11.3B
7. Philips Healthcare          $9.5B
8. Boston Scientific           $8.4B
9. Covidien                   $$8.1B
10. Becton, Dickinson & Co.    $6.4B
11. Abbott Laboratories        $6.3B
12. Stryker                      $6B
13. B. Braun                   $5.3B
14. 3M Healthcare                $4B
15. Zimmer Holdings            $3.9B
16. St. Jude Medical           $3.8B
17. Hospira                    $3.4B
17. Smith & Nephew             $3.4B
19. Danaher                      $3B
20. Synthes                    $2.8B
20. Beckman Coulter            $2.8B
22. Olympus Medical Systems    $2.6B
23. Fresenius Medical Care     $2.5B
23. Alcon                      $2.5B
25. Terumo Medical             $2.3B
26. C. R. Bard                 $2.2B
27. Biomet                     $2.1B
28. Dentsply                     $2B
29. Drager Medical AG & Co.    $1.8B
30. Varian Medical             $1.7B