Layoffs, growth and more — the biggest medtech companies in the world experienced a range of outcomes in the fourth quarter of 2022.
Over the past two months, many of the largest medtech companies across the globe reported their financial results for the three months ended Dec. 31, 2022 (with a handful of exceptions due to different operating calendars).
Some companies offered reasons to feel good about the direction of the medtech industry. Others went in the opposite direction, enforcing workforce reductions and cost-cutting efforts. MassDevice compiled a list of layoffs across the industry, which have now affected more than 19,000 workers.
As layoff news mounted across the industry over the past month, MassDevice‘s MedTech 100 Index declined 2.6%. That was slightly worse than the S&P 500, which was down 2%.
Here are some of the biggest stories from the most recent quarter, all coming from companies within the Medtech Big 100 — our list of the world’s largest medical device companies.
In its fourth-quarter results, St. Paul, Minnesota-based 3M announced plans to reduce its global manufacturing workforce by 2,500. Chair and CEO Mike Roman attributed the decision to a need to align with adjusted production volumes.
The medtech company also shared results that came up shy of the consensus earnings per share (EPS) forecast. 3M’s Health Care business — which it plans to spin off — saw revenues decrease by 6.7% in the quarter. The segment registered a 2% decrease for the entire year. Roman said the company saw “rapid declines” in consumer-facing markets and slowdowns in China due to COVID-related disruptions.
3M still expects the spin to take place by the end of 2023 or in early 2024.
In January, Baxter announced plans to spin off its renal care and acute therapies units. That includes a restructuring plan. In its fourth-quarter earnings report, the medetch company said it expects its restructuring to complete by early in the second quarter. Baxter anticipates updated reporting framework implementation during the second half of 2023.
In response to “significant macroeconomic challenges,” Baxter began to implement a cost reduction program. The program runs parallel with its operating model reshuffle. Baxter expects to complete it later this quarter with anticipated savings of more than $300 million. However, it includes a “global workforce reduction of less than 5%.” That could affect up to 3,000 employees.
“While the opportunities ahead are clear, the journey will involve some difficult decisions,” José (Joe) E. Almeida, Baxter chair, president and CEO said.
The healthcare business of General Electric completed its spinoff in January. Shortly after, it reported 7.6% revenue growth year-over-year.
As a standalone medtech company. GE HealthCare’s imaging (up 11%), ultrasound (6%) and patient care (7%) businesses all posted sales growth in the quarter.
For 2023, GE HealthCare projects organic growth between 5% and 7%. President and CEO Peter Arduini noted that, with customers investing and macroeconomic tailwinds, he feels the company is “well-positioned to deliver” on its 2023 commitments.
“Revenue growth reflects our progress to offset delivery challenges and improve product fulfillment,” Arduini said. Looking ahead, we’re confident that our accelerated investment in innovation, as well as standardization across platforms, will drive revenue and margin growth.”
All appeared relatively normal in Intuitive’s fourth-quarter financial results. The company fell just shy of Wall Street expectations but reported positive outlooks for its surgical robot. Intuitive expects da Vinci surgical robot procedures to increase by approximately 12–16% year-over-year in 2023. This comes despite fewer placements.
However, during the company’s earnings call, shortly after Intuitive released the report, shares of ISRG tanked. It happened when CEO Gary Guthart pushed back the timing of a potential next-gen surgical robotics multiport system.
“As we start this year, we do not currently expect a new multiport system launch in 2023,” Guthart said.
Analysts responded in a manner similar to shareholders. BTIG analyst Marie Thibault said the “head-fake” was something “not many wanted to hear.” Ryan Zimmerman and Sam Durno of BTIG maintained their “Buy” rating but were left wondering what happened.
“Shares tanked, and we’re scratching our heads a bit as we try to understand ISRG’s thinking,” they wrote.
Amid some questions from analysts over Medtronic’s ambitious plans, the company produced a Street-beating third quarter (on its separate fiscal calendar), perhaps allaying some concerns.
Medtronic’s launch of the next-generation Evolut FX TAVR system in September 2022 helped drive the company’s earnings beat. Its Spine business saw its second quarter in a row of double-digit implant growth, while the launch of the Micra AV in China boosted results, too.
However, question marks may linger. Medtronic said it initiated significant expense reductions due to ongoing macroeconomic pressures. Those include a strong dollar and inflation.
“As we look ahead, we are focused on delivering durable topline growth and significant expense reductions as we navigate through macro headwinds from foreign currency and inflation. And, we are committed to continued investment in our growth drivers to ensure long-term value creation,” said CFO Karen Parkhill.
Richmond, Virginia-based Owens & Minor reported mixed fourth-quarter results. The company posted losses of $57.99 million and recorded an adjusted EPS that fell 12¢ behind Wall Street expectations of 40¢. Perhaps the biggest news from the company was a restructuring effort.
Owens & Minor’s new operating model realignment program includes sourcing and demand management and organization structure redesign. The medtech company also aims for network rationalization, operational excellence, commercial excellence and product profitability enhancement.
“We have initiated a company-wide operating model realignment program with a dedicated team to accelerate profit improvement and reduce costs,” President and CEO Edward Pesicka said. “We believe this program will enhance our strong quality of service to our customers, increase our margins, and allow us to more rapidly reduce debt and reinvest in higher-growth and more profitable opportunities.”
Philips’ fourth-quarter results felt the impact of its Respironics recall that continues to pile on. The recall, which began in 2021, involves millions of CPAPs and other respiratory devices. Here is a full timeline of the recall.
In addition to the recall, Philips also said it continues to deal with supply chain issues. All this culminated in Philips announcing as part of its quarterly results that it’s cutting 6,000 jobs worldwide. The layoff comes on top of a workforce reduction of 4,000 that Philips announced in October.
Half the cuts will take place this year. The remainder will be done by 2025. The layoffs represent about 13% of the medtech giant’s global workforce.
“Right now, it is very important to lead with realism. I am also a great believer in knowing where I want to go and having a clear plan to get there, a plan that people can understand and have confidence in,” CEO Roy Jakobs said during the company’s earnings call.
While Philips suffers as a result of its respiratory recall, ResMed has an opportunity to gain market share.
ResMed has faced supply chain challenges as it has sought to meet the huge demand created by its competitor’s recall. But CEO Mick Farrell told analysts that the supply environment is “improving every week, every month, every quarter.” He added that ResMed’s access to specific, necessary electronic components increased.
The company increased its sleep respiratory device production to meet the growing demand as Philips’ recall drags on. It opened a large new plant in Singapore in January. This brought ResMed closer to catching up with skyrocketing CPAP demand.
In addition to the opportunity, ResMed’s business continues to hum along. The company topped Wall Street estimates with revenues of $1.034 billion and adjusted EPS totaling $1.66.
The London-based orthopedic implant maker posted revenues of $1.37 billion for the quarter. That marks a 1.4% increase from the same three-month period in 2021. The company also recorded a 2022 operating profit of $450 million.
Smith+Nephew said spent 2022 “transforming” itself with a 12-point plan. It aims to improve execution and drive strategy for growth. That includes fixing orthopedics, improving productivity and accelerating wound management and sports medicine growth.
The company reported “good early progress” that includes reduced overdue orders and improved order fulfillment. Smith+Nephew continues to launch new products, too, contributing to growth.
CEO Deepak Nath said the plan “fundamentally” changes the way the company operates. However, Nath pointed to potential macroeconomic headwinds bringing challenges in 2023. Despite this, Smith+Nephew targets revenue growth between 5% and 6% for next year.
On top of a Street-beating fourth quarter and projected revenue growth for 2023 nearing double digits, Stryker offered exciting news on one of its most intriguing offerings.
CEO Kevin Lobo reported good progress around new Mako applications during the company’s earnings call. The company expects Mako Spine to initially launch in the second half of 2024. Stryker anticipates a Mako Shoulder launch by the end of 2024.
“What gives us confidence is our prototypes are built,” Lobo said. “We have tested it with surgeons, we have gotten feedback. We have had some meetings in one case with the agency to get an idea on the regulatory pathway.”
Analysts say they expect growing excitement around Mako this year. Zimmerman and Durno stuck with their “Buy” rating for Stryker.
The Zimmer Biomet dental and spine spinoff came up shy of Wall Street expectations and issued 2023 guidance that fell short of the consensus.
In addition to those struggles, ZimVie announced that its spine business would fully exit China. It came to this decision due to China’s government’s volume-based procurement decisions. ZimVie management is also evaluating its dental business’ position in China.
Despite the hit on its stock, ZimVie remains optimistic. It noted a new partnership and global development agreement with Brainlab. This could help the company move forward with a refresh of its spine portfolio.
“Our team has been diligently focused on accelerating independence from our prior parent, and despite a difficult macroenvironment, we launched several innovative products and drove significant operational progress in our first year as a company,” CEO Vafa Jamali said.