Medical Products Analysis
Although information on the profitability and break-even points for start-up medical device companies in the US is not publicly available, US medical device organizations overall enjoy profit margins between 20% and 30%.
- The most recent analysis (2017) by the US Medicare Payment Advisory Commission (MedPac) found that medical device companies enjoy profit margins between 20% and 30%.
- An earlier analysis (2013) by Medical Device and Diagnostic Industry news corroborated this figure, by reporting that the highest profit margins in the medical device industry were held by California-based ResMed and Intuitive Surgical, which enjoyed average profit margins of 20.3% and 30.2%, respectively.
- Meanwhile, the latest available information by Statista (2015) reported much wider ranges for gross and net margins for US medical device companies.
- Specifically for Baxter, Johnson & Johnson, Boston Scientific, Becton Dickinson, Hospira and Stryker, gross margins ranged from 39% to 69.2%.
- In parallel, the net margins for these US medical device companies ranged from 19.9% to negative 1.6%.
- A more current analysis of gross and net margins for medical equipment and supply companies by CSIMarket corroborated these statistics, by reporting similar gross and net margins for Baxter (40.8% gross, 12.1% net), Boston Scientific (70.6% gross), Becton Dickinson (46.8% gross, 6.6% net), and Stryker (65.4% gross, 17.6% net).
Break-Even Points — Helpful Findings
- According to US-based strategy consultancy McKinsey, the average cost of goods sold for medical device companies is 41%.
- Similarly, McKinsey reported that supply chain costs represent approximately 40% of corporate expenses for medical device organizations, while a separate 2017 McKinsey analysis found that the direct cost of quality (e.g., quality failures, labor remediation) represents 6.8% to 9.4% of industry sales.
- Meanwhile, Florida-based CSIMarket reported that medical equipment and supply companies currently average a 2.87% operating margin, down from 3.88% in years prior.
- Additionally, SelectUSA found that medical device companies spend approximately 7% of their annual revenue on research and development.
- Meanwhile, PMA medical devices require close to $100 million on average to market in the US, per Los Angeles publication Medical Device and Diagnostic Industry.
An extensive review of credible media resources and financial reporting by medical device startups revealed no publicly available information related to the profitability and break-even points of early-stage medical device companies in the US. This is likely due to the highly specific nature of this request.
As suggested, the research team expanded the search for profitability and break-even information to all US-based medical device companies. This more expansive search identified a variety of data points and benchmarks related to the profitability of US medical device companies overall, and was provided within the above summary.
Unfortunately, information related to the break-even points of medical device manufacturers in the US was unavailable. This is likely due to the limited available analysis of break-even points in the medical industry as a whole. While such benchmarks appeared to be available for limited sectors of the medical industry (e.g., pharmaceutical drugs), information specific to medical device companies was less common or credible (e.g., MedNexis Medical Equipment Business Plan).
Several strategies were attempted to identify this break-even information, including identifying and reviewing medical device industry reports, relevant US government reports and the annual reports of industry participants. However, the research team was unable to locate either examples or industry averages for the break-even point for US medical device companies. With that said, helpful findings related to cost and operating benchmarks for US medical device companies were identified and provided within the above summary.