Massachusetts remains the second-largest hub nationwide for medical device companies, after California, but the state's sector is feeling the effects of a slumping economy that has resulted in fewer surgical procedures and in hospitals delaying purchases of medical gear.
Those are some of the findings in consulting firm Ernst & Young's 2009 "Pulse of the Industry" study, scheduled to be presented this morning during the annual conference of the Massachusetts Medical Device Industry Council at the John F. Kennedy Presidential Library in Boston.
"This is our 13th annual conference, and this is certainly the most challenging time in those 13 years," said Tom Sommer, president of the industry trade group, known as MassMEDIC.
Some of the challenges are detailed in the Ernst & Young report, which shows the recession cut venture capital outlays for medical equipment start-ups in Massachusetts by 74 percent in the first three months of this year, compared with the same period in 2008. Total financing, from public and private sources, fell 71 percent in the medical device sector.
Initial public stock offerings and acquisitions - two ways for venture backers of medical equipment companies to profitably recoup their investments - also tumbled dramatically over the past year.
Massachusetts medical device companies raised $65.8 million in venture funding in the first quarter, more than one-sixth of the $366 million raised by medical device companies nationally. The largest deal was a $33 million funding round in March for Still River Systems of Littleton, which makes proton beam radiotherapy systems for cancer treatment.
There were 39 publicly traded medical gear companies in Massachusetts last year, the second-largest US cluster after Southern California's 42 public companies, according to the Ernst & Young study. Although their profits and revenue climbed in 2008, their market value declined sharply with the plunge in the broader stock markets.
"The industry is getting beat up, like everyone else right now," said Jason Hillenbach, an Ernst & Young global operations director in Boston who helped to prepare the report. "But it's positioned to weather a recession better than other industries. And despite the financial turmoil and the drying up of credit, Massachusetts is still holding its own. It's got all the tools for a cluster: strong universities and hospitals, access to venture capital, and the skills needed to run businesses."
Within the equipment sector, some companies are being hurt more than others by the downturn, the report suggested. High-priced equipment, such as imaging and robotic surgical systems, are being hit harder, as are devices used in elective procedures, like hip replacements and LASIK eye surgery. Devices for cardiology and oncology procedures have been less affected.
"Hospitals are putting off their decisions on purchases for another year," Sommer said. "The medical device companies have to wait it out, knowing there will be pent-up demand at the end of the recession that will ultimately be beneficial to the industry."
At today's conference, industry leaders will discuss changes at the Food and Drug Administration, the Obama administration's plan for healthcare reform, and the state of the medical technology industry in Europe, one of the largest export markets for medical equipment suppliers in Massachusetts.
Robert Weisman can be reached at weisman@globe.com. 
