Medtech titan St. Jude Medical (NYSE:STJ) announced a company-wide overhaul, including mass layoffs, general restructuring and an executive shake-up.
The medical device company plans to restructure its entire business from 4 divisions into 2 new operating units: the Implantable Electronic Systems Division (IESD) and the Cardiovascular and Ablation Technologies Division (CATD).
St. Jude will also centralize certain support functions, such as information technology, human resources, legal, business development, and many marketing functions, according to an SEC filing.
The changes will result in layoffs of about 300 employees, the company noted, but details were not available regarding timing of the cuts or divisions hit.
St. Jude today also unveiled new leadership for the restructured divisions, naming executive vice president & chief financial officer John Heinmiller to an expanded role as executive vice president for the centralized support functions. He ceased being CFO today, the company reported.
Heinmiller is succeeded by Donald Zurbay, former VP and corporate controller, who took on the CFO role effective this week.
The announcement came on the heels of very similar news from Boston Scientific (NYSE:BSX), which confirmed media reports that it will conduct layoffs amid a company overhaul in coming months. Boston Scientific did not reveal the number of employees it plans to terminate.
St. Jude’s realignment efforts are the company’s attempts to to reduce pre-tax operating expenses by about $50-$60 million per year beginning in 2013. The move are expected to cost about $50-$80 million, including employee termination costs, accelerated depreciation, asset impairments and other charges, according to a company report.
"The reorganization we have announced today is part of a comprehensive plan to accelerate our growth," chairman, president & CEO Daniel Starks said in prepared remarks. "We are focused on reducing costs, leveraging economies of scale, maintaining the highest level of quality, and funding our entire portfolio of new growth drivers."
St. Jude recently posted a disappointed 2nd quarter, with Starks sounding pessimistic about an uptick in the near future for the U.S. cardiac rhythm management market.
"If you ask me for a level of proof that the CRM market is near point of stabilization, I can’t give it to you. We have regularly been overly optimistic," Starks told investors in July. "Because we have not been able to predict the bottom of the market on a frequent basis, we’re determined to be conservative in outlook."
Overall, St. Jude reported net earnings of $244 million on $1.4 billion in sales for the 3 months ended June 30, up 1.2% from $241 million on sales of $1.44 billion during Q2 2011. Earnings are down nearly 4% for the first 6 months of the year.
St. Jude’s bread-and-butter cardiac rhythm management business suffered during the quarter, with global sales sliding 6% to $746 million amid an industry-wide slowdown and continuing pressure from the Riata kerfuffle, which has led to slower adoption of the company’s next-generation Durata defibrillator leads. Domestic CRM sales dropped 4% to $384 million.
Global pacemaker sales were off by 9% to $287 million, compared to $315 million from the same period last year.
St. Jude cut its earnings outlook for 2012, a move that sent STJ shares spiraling down on Wall Street. Boston Scientific, which reported its 2nd-quarter earnings on July 26, saw its CRM business drop 10% in Q1.
St. Jude representatives did not return requests for comment.
