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Know When To Go

Know When To Go

All too often we hear accounts of CEO leaders falling out of favor with their constituency, their boards and shareholders because of some wrongdoing, some transgression or poor personal or financial performance. Similarly, and all too often, these same CEOs tend to step fully into PR, crisis management mode to retain their positions as leader. They just don’t know when to go!

This article is about “knowing when to go,” but has absolutely nothing to do with wrongdoing, with transgression or with failure. It does, however, have everything to do with knowing one’s leadership skills limits. This is not about leadership style, but about leadership skills.

When I published INSTINCT, Tapping Your Entrepreneurial DNA to Achieve Your Business Goals, it was a work about and for entrepreneurs. In it, I briefly addressed the concept of the synchronized and natural evolution of corporations and their leaders. It is probably as eye opening and controversial today as it was then.

The concept falls under the banner “know when to go.” You see, as a cell biologist and physiologist by training who evolved to the CEO leadership role of the largest holding company of marketing services companies in its industry, I feel corporations—companies—have an evolutionary life cycle. They are born. They grow. They mature. They plateau. They may become irrelevant. At this point, they risk disappearing or dying, unless they are redefined, re-envisioned or re-imagined.

Let’s look at this a bit more closely. A company is born generally when an entrepreneur has a vision so large that nothing except an entirely new company can take that vision to market. David Ogilvy had an advertising vision. Steve Jobs had a technology with design vision. Mark Zuckerberg had a worldwide community platform vision. Thomas Edison had a vision that became General Electric. Sara Blakley had a vision that became Spanx. Jeff Bezos had a vision that became Amazon; his vision of dominance and immediate gratification continues to expand across markets.

Companies can often flourish under the visionary’s leadership for a long time. When entrepreneurs marry visionary skills with agility, they tend to last. But some don’t and perhaps at some point in the business cycle of the new company, the natural span of leadership of the visionary entrepreneur may no longer be sufficient to continue to lead the company’s growth. That company needs a new leader to take it to and through its “next level.” A new phase of growth usually follows until that CEO’s span of leadership is exhausted and another leader is needed to innovate, to grow, or to re-imagine the company altogether. No one has failed along the leadership continuum here; each has successfully delivered the company to its next foundation for natural and continuous growth.

Companies evolve. Market forces evolve. We leaders lead, well, the way we lead! Again, I’m not referring to style here; I refer to inherent skills. We are either entrepreneurs, turn around CEOs, change agent CEOs, maintenance CEOs or innovative, re-imagining CEOs. The skill set for one model of leadership generally does not reside in another. So, for example, you probably will not find the skills of a change agent CEO and the skills of a visionary entrepreneur CEO residing in the same person. The span of our innate, genetically inherited and developed leadership skills are a perfect fit for a company at a given, particular period in its cycle of evolution and growth. Beyond that period, the CEO might become a less effective leader. Said another way, companies tend to flourish when their specific growth and performance needs are tightly aligned with a complementary CEO’s leadership skills.

Two synchronized forces need to be at work here if you embrace this concept of leadership. First, CEO leaders who are tuned in to their personal skill zone of leadership know instinctively when they are operating solidly in control of the company for which they have been given stewardship. Skills and company needs are aligned perfectly. They also sense when the company might be evolving, getting away from their natural span of control. There is an external or internal force changing the company.

For the continued growth of the company, this is when they need to ‘know when to go’ and proactively turn the company over to a CEO embodying the skill set needed to more effectively lead the company through its next natural cycle of growth. Easy to say. Very hard to do. Sometimes we might just add a person or two around us and that fix might just work for a while. But very few leaders have remained at the helm over extended periods of time. There are some notable exceptions, among them is Jeff Bezos whose formula is more about precisely executing on vision than consistently delivering on Wall Street expectations.

Secondly, directors also need to recognize the natural business evolution of the companies they steward, the impact of new market forces and when the current CEO’s skill set, his natural span of leadership, might be desynchronized with the growth demands of the company. Directors of public and private companies are generally close enough to the business they steward to know when the CEO is the perfect fit, skills perfectly aligned with the growth needs of the business he is leading and when they are not.

Recognizing and acting on personal leadership limitations takes incredible courage. Because the board of directors and the CEO should want the absolute best for the organization they are charged with leading through the many cycles of business challenges and opportunities, leadership skills and performance needs must be aligned. Yet, a change out decision is never easy or taken lightly by the CEO or by the board of directors.

Whether or not you embrace this paradigm of natural span of skills leadership and of corporate evolution, it is safe to say that companies’ fortunes rise and they fall along with their leaders. If we can recognize the need for change before company performance is stalled, we can create continuous cycles of growth for the company by being mindful of the innate leadership spans of the CEOs leading successfully, successively and naturally through the cycles of the organization’s evolution.

STORY BY: Thomas Harrison

Thomas Harrison is the Chairman Emeritus of Diversified Agency Services (DAS) and former CEO of DAS, a division of Omnicom.

SOURCE: Chief Executive

Matt is the entrepreneurial founder and director of Ortho Consulting Group. Founded in 2010, Matt has identified and grown two distinct business brands in the Group; Orthoexecutive (2010), Orthoconnections (2012).

Zimmer Biomet Recalls 1,300 Bone Growth and Spinal Fusion Stimulators

Zimmer Biomet Recalls 1,300 Bone Growth and Spinal Fusion Stimulators

Zimmer Biomet initiated the recall due to the lack of adequate validation and controls to ensure that final products were clean and free from bacteria and chemical residue.

A recall that Zimmer Biomet initiated in February has just been identified by FDA as a Class I recall, marking it the most serious type of medical device recall. The company is recalling 1,360 implantable bone growth and spinal fusion stimulators that are used to help heal bone following spinal fusion surgery or to help heal broken long bones, such as a leg or arm bone. These devices are placed during surgery and are designed to send a low-level electrical signal to encourage the body’s natural healing process.

Specifically, the recalled product is the company’s Osteogen Implantable Bone Growth Stimulator, SpF Plus-Mini Implantable Fusion Stimulator, and the SpF-XL Implantable Spinal Fusion Stimulator. All serial numbers expiring before March 31, 2019 are affected, FDA said. The affected products were distributed between April 29, 2015 and March 31, 2018.

The agency said Zimmer Biomet initiated the recall because of a lack of adequate validation and controls to ensure that final products were clean and free from bacteria and chemical residue.

The lack of adequate validation and controls may or may not cause serious side effects for the patient including infection, tissue death, additional surgery for wound treatment and/or device removal, impaired wound and bone healing, the need for long-term antibiotic therapy, the potential for secondary gastroenteritis, swelling and infection around the spinal cord (epidural abscess), paralysis, damage to other organs or death.

In addition to returning unused products that are part of the recall, the company has instructed surgeons to continue monitoring patients who have one of the affected devices already implanted.

Zimmer Biomet has struggled with quality control and supply chain problems since December 2016, which has created investor frustration that ultimately led to former CEO David Dvorak’s resignation last July. Earlier this year, MD+DI identified five reasons Zimmer Biomet could make a comeback under new CEO Bryan Hanson’s leadership.

FDA re-inspected Zimmer Biomet’s Warsaw North Campus facility in April, which resulted in a warning letter from the agency. The company said some of the agency’s recent findings might have been a byproduct of misunderstandings or disagreements between company personnel and FDA investigators.

During Zimmer Biomet’s third-quarter earnings call, Hanson said the company is making progress toward its supply recovery goals, but he is still not happy with the current state of the supply chain.

Hanson also said during the late October call that Zimmer Biomet must start reducing the size of its portfolio in order to simplify the supply chain and improve service levels to customers.

While Zimmer Biomet’s portfolio is “absolutely unmatched” in terms of scale, Hanson said the size of the portfolio creates a very complex supply chain for the company. Reductions won’t happen right away because the company still has to focus on its short-term priorities, but he said the number of stock keeping units (SKUs) attached to Zimmer Biomet’s product families is “extremely cumbersome.”

SOURCE: MDDI Online, Article by Amanda Pedersen.

Matt is the entrepreneurial founder and director of Ortho Consulting Group. Founded in 2010, Matt has identified and grown two distinct business brands in the Group; Orthoexecutive (2010), Orthoconnections (2012).

Stryker announces pricing of €2.25 billion senior notes offering

Stryker announces pricing of €2.25 billion senior notes offering

Kalamazoo, Michigan, Nov. 27, 2018 (GLOBE NEWSWIRE) — Stryker (NYSE:SYK) announced today that it has priced the following notes: (i) €550 million aggregate principal amount of the Company’s 1.125% Notes due 2023 (the “2023 Notes”), (ii) €750 million aggregate principal amount of the Company’s 2.125% Notes due 2027 (the “2027 Notes”), (iii) €650 million aggregate principal amount of the Company’s 2.625% Notes due 2030 (the “2030 Notes”) and (iv) €300 million aggregate principal amount of the Company’s Floating Rate Notes due 2020 (the “Floating Rate Notes” and together with the 2023 Notes, 2027 Notes and 2030 Notes, the “Notes”). Unless previously redeemed pursuant to their terms, if applicable, the 2023 Notes will mature on November 30, 2023, the 2027 Notes will mature on November 30, 2027, the 2030 Notes will mature on November 30, 2030 and the Floating Rate Notes will mature on November 30, 2020. The Notes are expected to settle on November 30, 2018, subject to the satisfaction of customary closing conditions.

The Company intends to use the net proceeds from the offering for general corporate purposes, including the repayment of all of the $500 million principal amount of outstanding 1.800% Notes due January 15, 2019 at maturity and the repayment of all of the $750 million principal amount of outstanding 2.000% Notes due March 8, 2019 at maturity, as well as the repayment of any commercial paper then outstanding.

Barclays Bank PLC, BNP Paribas, Goldman Sachs & Co. LLC and J.P. Morgan Securities plc are acting as active joint book-running managers for the offering. This offering was made pursuant to a prospectus supplement, filed today, to the Company’s prospectus, dated February 12, 2016, filed as part of the Company’s effective shelf registration statement. Copies of the preliminary prospectus supplement and accompanying prospectus relating to the notes may be obtained by contacting: (i) Barclays Bank PLC, 5 The North Colonnade, Canary Wharf, London E14 4BB, United Kingdom, or by calling 1-888-603-5847 or emailing barclaysprospectus@broadridge.com, (ii) BNP Paribas, 10 Harewood Avenue, London NW1 6AA, United Kingdom, or by calling 1-800-854-5674, (iii) Goldman Sachs & Co. LLC, Prospectus Department, 200 West Street, New York, NY 10282, or by calling (866) 471-2526, by faxing (212) 902-9316 or emailing prospectus-ny@ny.email.gs.com or (iv) J.P. Morgan Securities plc, 25 Bank Street, Canary Wharf, London E14 5JP, United Kingdom, or by calling collect on +44-207-134-2468.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor will there be any sale of these securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.

Forward-looking statements

This press release contains information that includes or is based on forward-looking statements within the meaning of the federal securities law that are subject to various risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in such statements. Such factors include, but are not limited to: weakening of economic conditions that could adversely affect the level of demand for our products; pricing pressures, including cost-containment measures that could adversely affect the price of or demand for our products; changes in foreign exchange markets; legislative and regulatory actions; unanticipated issues arising in connection with clinical studies and otherwise that affect U.S. Food and Drug Administration approval of new products; potential supply disruptions; changes in reimbursement levels from third-party payors; a significant increase in product liability claims; the ultimate total cost with respect to the Rejuvenate and ABG II recall matter; the impact of investigative and legal proceedings and compliance risks; resolution of tax audits; the impact of the federal legislation to reform the United States healthcare system; changes in financial markets; changes in the competitive environment; our ability to integrate acquisitions; and our ability to realize anticipated cost savings. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

Stryker is one of the world’s leading medical technology companies and, together with its customers, is driven to make healthcare better. The Company offers innovative products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine that help improve patient and hospital outcomes.

Contacts

For investor inquiries please contact:
Katherine A. Owen, Stryker, 269-385-2600 or katherine.owen@stryker.com

For media inquiries please contact:
Yin Becker, Stryker, 269-385-2600 or yin.becker@stryker.com

SOURCE: Stryker, Nov 27, 2018

Matt is the entrepreneurial founder and director of Ortho Consulting Group. Founded in 2010, Matt has identified and grown two distinct business brands in the Group; Orthoexecutive (2010), Orthoconnections (2012).

Colfax To Acquire DJO Global For $3.15 Billion in Cash

Colfax To Acquire DJO Global For $3.15 Billion in Cash

November 19, 2018

DJO is Global Orthopedics Leader Strongly Positioned to Benefit from Macro Trends in $21 Billion Market

Addition of Higher Margin, Faster Growth, and Less Cyclical Business Significantly Shifts Colfax Portfolio, Consistent with Platform Strategy

Transaction Expected to Deliver Adjusted EPS Accretion in First Full Year After Closing

Colfax Expects to De-Lever, Evaluate Strategic Options for Air and Gas Handling Business

ANNAPOLIS JUNCTION, MD – November 19, 2018 – Colfax Corporation (NYSE: CFX), a leading diversified technology company, today announced it has entered into a definitive agreement to acquire DJO Global Inc. (“DJO”) from an investor group led by private equity funds managed by Blackstone for $3.15 billion in cash. DJO is a global leader in orthopedic solutions, providing orthopedic devices, software and services spanning the full continuum of patient care, from injury prevention to rehabilitation.

“The acquisition of DJO is a compelling next step in the strategic evolution of Colfax that creates a new growth platform in the high-margin orthopedic solutions market,” said Matt Trerotola, President and Chief Executive Officer of Colfax. “As a clear market leader in bracing and rehabilitation systems – with a track record of innovative new products, globally recognized brands, and a diverse product portfolio – DJO is well-positioned to benefit from secular trends driven by changing demographics and increased preventive healthcare. This transaction reflects our strategic intent to diversify our portfolio and end-market exposure, reduce cyclicality, and increase profitability. We see significant opportunities to apply our proven Colfax Business System across DJO to create a continuous improvement culture, further improve productivity and margins, and accelerate innovation and new product development.”

Mr. Trerotola continued, “We are committed to reducing leverage and restoring balance sheet flexibility near-term and will explore strategic options for our Air and Gas Handling business. Longer term, we see tremendous opportunities to build our new medical technology platform with additional investment. We are excited to welcome DJO’s strong management team and talented associates to the Colfax family.”

“Joining Colfax is a win for our customers, and all DJO stakeholders,” said Brady Shirley, DJO President and CEO. “Colfax has the financial strength, experience, and proven business system to support our operational performance and growth. Importantly, they are committed to our mission to get and keep people moving, and we are confident that the Colfax team’s operating expertise across a broad array of businesses makes them the ideal partner to help us build on our momentum, drive new levels of innovation, and continue to deliver outstanding service to our customers.”

Upon closing of the transaction, DJO Global will operate as a new segment within Colfax and be led by Mr. Shirley, who will report directly to Mr. Trerotola.

With leadership positions in most product categories, DJO provides a broad range of orthopedic care solutions including bracing, reconstructive implants, rehabilitation devices, software and services. Known for its innovative products, DJO’s portfolio of iconic brands are trusted by patients, athletes, and healthcare professionals globally. Headquartered in Vista, California, DJO has approximately 5,000 employees across 18 locations around the world. DJO’s revenue was $1.2 billion and adjusted EBITDA was $269 million for the twelve-month period ending September 2018.

Financing & Transaction Details
The transaction, which is expected to close in the first quarter of 2019, is expected to deliver adjusted EPS accretion in the first full year after closing. In addition, Colfax expects to realize future tax benefits from DJO’s approximately $800 million of net operating loss carryforwards.

Colfax expects to finance the transaction with approximately $100 million of cash from its balance sheet, proceeds from credit facilities and a contemplated debt offering, and $500 to $700 million from a contemplated offering of equity or equity-linked securities. J.P. Morgan and Credit Suisse have committed to provide bridge financing for the transaction. Colfax expects to maintain its existing debt ratings and will prioritize deleveraging to reduce its net leverage ratio to the mid-3x range by the end of calendar 2019. In connection with its deleveraging plans, Colfax is evaluating strategic options for its Air and Gas Handling business. Colfax does not intend to undertake any material acquisitions or share repurchases until its leverage metrics return to targeted levels.

The acquisition is subject to customary closing conditions, including receipt of applicable regulatory approvals.

Advisors
J.P Morgan is serving as financial advisor and Kirkland & Ellis is serving as legal advisor to Colfax. Goldman, Sachs & Co. LLC, Credit Suisse, and Wells Fargo Securities, LLC are serving as financial advisors and Simpson Thacher & Bartlett LLP is serving as legal advisor to DJO.

Conference Call and Webcast
Colfax will host a conference call to discuss the transaction today at 8:30 a.m. Eastern. The call will be open to the public through 877-303-7908 (U.S. callers) or +1-678-373-0875 (international callers) and referencing the conference ID number 6068397 or through webcast via Colfax’s website at www.colfaxcorp.com under the “Investors” section. Access to a supplemental slide presentation can also be found at the Colfax website under the same heading. Both the audio of this call and the slide presentation will be archived on the website later today and will be available until the next quarterly call.

About Colfax Corporation
Colfax Corporation is a leading diversified technology company that provides air & gas handling and fabrication technology products and services to customers around the world principally under the Howden and ESAB brands. Colfax believes that its brands are among the most highly recognized in each of the markets that it serves. The Company uses its Colfax Business System (CBS), a comprehensive set of tools, processes and values, to create superior value for customers, shareholders and associates. Colfax is traded on the NYSE under the ticker “CFX.” Additional information about Colfax is available at www.colfaxcorp.com.

About DJO Global
DJO Global is a leading global provider of medical technologies designed to get and keep people moving. The Company’s products address the continuum of patient care from injury prevention to rehabilitation, enabling people to regain or maintain their natural motion. Its products are used by orthopedic surgeons, primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers and other healthcare professionals. In addition, many of the Company’s medical devices and related accessories are used by athletes and patients for injury prevention and at-home physical therapy treatment. The Company’s product lines include rigid and soft orthopedic bracing, hot and cold therapy, bone growth stimulators, vascular therapy systems and compression garments, therapeutic shoes and inserts, electrical stimulators used for pain management and physical therapy products. The Company’s surgical division offers a comprehensive suite of reconstructive joint products for the hip, knee and shoulder. DJO Global’s products are marketed under a portfolio of brands including Aircast®, Chattanooga, CMF™, Compex®, DonJoy®, ProCare®, DJO® Surgical, Dr. Comfort® and Exos™.
Additional information about DJO Global is available at www.DJOglobal.com.

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements, including forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerning Colfax’s plans, objectives, expectations and intentions and other statements that are not historical or current fact. Forward-looking statements are based on Colfax’s current expectations and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. Factors that could cause Colfax’s results to differ materially from current expectations include, but are not limited to risks and uncertainties regarding Colfax and DJO’s respective businesses and the proposed acquisition, and actual results may differ materially. These risks and uncertainties include, but are not limited to, (i) the ability of the parties to successfully complete the proposed acquisition on anticipated terms and timing, including obtaining required regulatory approvals and other conditions to the completion of the acquisition, (ii) access to available financing on a timely basis and reasonable terms, (iii) the effects of the transaction on Colfax and DJO operations, including on the combined company’s future financial condition and performance, operating results, strategy and plans, including anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, losses, future prospects, business and management strategies for the management, expansion and growth of the new combined company’s operations, and (iv) other factors detailed in Colfax’s and DJO’s respective reports filed with the U.S. Securities and Exchange Commission on Form 10-K and Form 10-Q. In addition, these statements are based on a number of assumptions that are subject to change. This press release speaks only as of the date hereof. Colfax disclaims any duty to update the information herein.

The term “Colfax” in reference to the activities described in this press release may mean one or more of Colfax’s global operating subsidiaries and/or their internal business divisions and does not necessarily indicate activities engaged in by Colfax Corporation.

Non-GAAP Financial Measures and Other Adjustments
Colfax has provided in this press release financial measures for DJO Global that have not been prepared in accordance with GAAP, including Adjusted EBITDA and Leverageable Adjusted EBITDA. DJO Global provided Colfax with this information, which was derived from DJO Global’s historical unaudited financial statements for the twelve months ended September 29, 2018 and has not been audited or reviewed by Colfax’s or DJO Global’s independent public accountants. DJO Global defines Adjusted EBITDA as net income (loss) attributable to DJO Global plus interest expense, net, income tax provision (benefit), and depreciation and amortization, further adjusted for certain non-cash items, non-recurring items and other adjustment items as permitted in calculating covenant compliance and other ratios under the agreements governing the outstanding debt of DJO Global’s subsidiary DJO Finance, LLC (DJO Finance). DJO Global defines Leverageable Adjusted EBITDA as Adjusted EBITDA, as further adjusted to reflect certain additional non-cash items, non-recurring items and other adjustment items permitted in calculating covenant compliance and other ratios under the agreements governing the outstanding debt of DJO Finance. Adjusted EBITDA and Leverageable Adjusted EBITDA should not be considered as an alternative to net income (loss) attributable to DJO Global or other performance measures presented in accordance with GAAP, or as an alternative to cash flow from operations as a measure of liquidity.

Colfax believes this presentation of DJO Global’s Adjusted EBITDA and Leverageable Adjusted EBITDA is useful and helps management, investors and rating agencies enhance their understanding of the impact of the DJO Global acquisition on Colfax’s financial performance. However, Adjusted EBITDA and Leverageable Adjusted EBITDA do not have a standardized meaning, and different companies may use different Adjusted EBITDA definitions. Therefore, DJO Global’s definition of Adjusted EBITDA and Leverageable Adjusted EBITDA may not be comparable to the definitions used by other companies.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of Adjusted EBITDA and Leverageable Adjusted EBITDA to the most directly comparable GAAP financial measure. A reconciliation of Adjusted EBITDA and Leverageable Adjusted EBITDA to GAAP net income has been provided below.

Colfax Contacts:
Investors: Media:
Kevin Johnson, Vice President Jim Barron or Jenny Gore
Colfax Corporation Sard Verbinnen & Co.
+1-301-323-9090 +1-212-687-8080
investorrelations@colfaxcorp.com

DJO Contacts:
Investors: Media:
David Smith, SVP and Treasurer Katie Sweet, Director Communications
DJO Global, Inc. DJO Global, Inc.
760-734-3075 760-734-3141
ir@djoglobal.com katie.sweet@djoglobal.com

DJO Global, Inc.
Adjusted EBITDA Reconciliation of GAAP
Dollars in thousands
(Unaudited)

(1) Consists of costs related to the company’s business transformation projects to improve the company’s operational profitability and liquidity.

NO OFFER OR SOLICITATION
This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended or via an exemption from the requirements of the Securities Act.

SOURCE: DJO Global, Nov 19, 2018 – https://www.djoglobal.com/investors/press-releases/colfax-acquire-djo-global-315-billion-cash

Matt is the entrepreneurial founder and director of Ortho Consulting Group. Founded in 2010, Matt has identified and grown two distinct business brands in the Group; Orthoexecutive (2010), Orthoconnections (2012).

Healthcare will spend the most on R&D of any industry by 2020, says PwC

Healthcare will spend the most on R&D of any industry by 2020, says PwC

Written by Jeff Lagasse, Associate Editor of Healthcare Finance.

Healthcare currently ranks below the computing and electronics industry worldwide, but that’s likely to change over the next couple of years.

Right now, the healthcare industry ranks second among all industries when it comes to the amount it spends on research and development, but it likely won’t stay that way for long. New research from PricewaterhouseCoopers projects healthcare will take the top spot by 2020.

Healthcare currently ranks below the computing and electronics industry worldwide, based on figures culled from 1,000 publicly listed R&D spenders.

IMPACT

Among all industries, $782 billion was spent on R&D in 2018, 11.4 percent more than last year. The bulk of that spending is concentrated in a handful of industries, including healthcare, electronics, auto, software and the internet.

In all, those industries represent about 76 percent of the total R&D spend this year.

As R&D spending has increased, so do revenues in those industries, which rose by 11.4 percent to match the initial investment. Spending on innovation stayed at 4.5 percent, the same as last year.

Both of the top industries, electronics and healthcare, saw a rise in their R&D spend from 2017 to 2018. Healthcare leapt from $159 billion to $169.5 billion over that time, while R&D investments in the computing and electronics industry climbed from $161.8 billion to $175.7 billion.

THE TREND

PwC singled out 88 companies as “high leverage innovators” for 2017. In other words, they financially outperformed the rest of their industry as a whole for five years while spending less on R&D as a percentage of sales.

Healthcare boasted 23 such companies, including Hologic, Mylan, Medtronic and Fresenius Medical Care.

A 2017 report found that total investment in medical and health research and development in the U.S. grew by 20.6 percent from 2013 to 2016, led by industry and the federal government.

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com

SOURCE: Healthcare Finance News, Nov 12, 2018 – https://www.healthcarefinancenews.com

Matt is the entrepreneurial founder and director of Ortho Consulting Group. Founded in 2010, Matt has identified and grown two distinct business brands in the Group; Orthoexecutive (2010), Orthoconnections (2012).