Becton, Dickinson and Company (BDX)

TOP CONTRIBUTORS

Krishna K

Izaz Ali

Becton, Dickinson and Company(NYSE:BDX) is a leading hospital supply company with 2007 revenues of $6,360 million. BDX generates revenues through three business divisions: Medical (54%), Diagnostics (30%) and Biosciences (16%). ^[1] Through its Medical divison, BDX is the world's largest manufacturer and distributor of products such as needles and syringes. In fact, BDX built the first factory in the U.S. specifically for producing needles, syringes, and thermometers. ^[2]The disagnostic division deals with safely collecting and analyzing various specimens to detect diseases and the Biosciences division sells research and clinical tools which are used in the study of cells. ^[3]

Although BDX built its business manufacturing basic instruments such as needles and scalpels, the company has grown in recent years by introducting safety engineered products. ^[4] For example, the company introduced the auto-disable injection device, which is a syringe that locks in automatically once used and cannot be reused. BDX's technological improvements also make their products safer for the staff that uses them. For example, BDX's safety-guarded sharps prevent needlestick injuries for doctors and nurses, and are now mandatory in most of the hospitals across the U.S. ^[5] One further benefit is that safety engineered products also carry higher margins than traditional products. ^[6]

Business Overview

BD has three main operating segments: BD Medical, BD Diagnostics and BD Biosciences.

• BD Medical: is the largest and most profitable division of the company. It produces a broad array of medical devices such as needles, syringes, surgical blades & scalpels, IV catheters, and syringes and pen needles for the self-injection of insulin and other drugs used in the treatment of diabetes. The primary markets served by BD Medical are hospitals, clinics, physician offices, and retail pharmacies.^[7]

• BD Diagnostics: provides systems used to collect medical samples and diagnostic systems for testing the samples. This includes products such as safety-engineered blood collection systems, cervical cancer screening systems, and others. The primary markets served by BD Diagnostics include hospitals, laboratories, blood banks, and physician offices. ^[8]

• BD Biosciences: produces research and clinical tools for the study of cells, which is used to treat patients, develop new drugs, vaccines, etc. Products include devices which sort and analyze cells, cell imaging systems, and other products. The primary markets served by BD Biosciences include research and clinical laboratories, biotechnology and pharmaceutical companies, and hospitals.^[9]

BD got its start through syringes and other basic products, and to this day, BD Medical division remains the core of the company, contributing 54% of revenue in 2007. Diagnostics (30%) and Biosciences (16%) constituted the remaining 46% of revenues. ^[10]

BDX 2007 Annual Report^[11]

In 2007, BDX had revenue of $6,360 million, an increase of 11% from the prior year.^[12] Medical revenues increased 10% to $3.4 billion, Biosciences revenues increased 13% to $1.0 billion, and Diagnostics revenue increased 11% to $1.9 billion.^[13]

BDX 2007 Annual Report^[14]

International revenues accounted for 52% of the company's business, with Europe being the largest international market. US sales accounted for the remaining 48% of business. Both international and US sales grew by 11% in 2007. ^[15]

BDX 2007 Annual Report^[16]

Key Trends and Forces

Medicare coverage patterns

Health coverage is an important determining factor when patients and doctors choose among various treatment options and medical products. Medicare coverage is particularly significant in that it directly affects over forty million Americans, how much patients have to pay for BDX products (primarily BD Medical products), and how much BDX will receive in payments from Medicare. Currently, Medicare and other third party payors are emphasizing more cost-effective products, by limiting the reimbursement they will cover. Furthermore, even if a new BDX product is cleared by the FDA, BDX faces limited demand until Medicare and other payors approve it for reimbursement. Both of these factors can affect BDX's sales.

Government Regulation

BDX and its competitors are all heavily affected by government regulation, especially by the FDA, which is responsible for regulating food, dietary supplements, drugs, medical devices, and other products in the United States. Without FDA approval, BDX cannot sell any of its medical products to the public. If any of BDX's devices fail FDA approval, it can adversely affect the company's sales.

Diabetes

Diabetes currently affects around 200 million people worldwide, including 21 million people in the U.S. It is estimated that more than $132 billion is spent annually on diabetes and its complications. BDX currently has several products such as syringes and pen needles for the injection of insulin, which is essential for the treatment of diabetes. In 2007, Diabetes Care products generated nearly $700 M in revenue for the firm. These and future diabetes related products represent an opportunity for BDX to generate additional revenue in this large and expanding market.

Competition

BDX faces tough competition in all of its business divisions. It competes with Covidien in the Medical division, Gen-Probe (GPRO) in Diagnostics division, and Beckman Coulter (BEC) in its Biosciences division.

References

1. ↑ BDX 2007 10k, Ex 13
2. ↑ Company Website
3. ↑ BDX 2007 10k, Item 1
4. ↑ BDX 2007 10k, Item 1
5. ↑ Needlestick.org
6. ↑ BDX 2007 10k, Ex 13, Pg 21
7. ↑ BDX 2007 10k, Pg 1
8. ↑ BDX 2007 10k, Pg 1
9. ↑ BDX 2007 10k, Pg 1
10. ↑ BDX 2007 10k, Ex 13
11. ↑ BDX 2007 10k, Ex 13
12. ↑ BDX 2007 10k, Ex 13, Pg 20
13. ↑ BDX 2007 10k, Ex 13, Pgs 21-22
14. ↑ BDX 2007 10k, Ex 13
15. ↑ BDX 2007 10k, Ex 13
16. ↑ BDX 2007 10k, II-3
17. ↑ BDX 2007 10k, Ex 13
18. ↑ BDX 2007 10k, Ex 13
19. ↑ COV 2007 10k
20. ↑ COV 2007 10k
21. ↑ GPRO 2006 10k
22. ↑ GPRO 2006 10k
23. ↑ BEC 2006 10k
24. ↑ BEC 2006 10k