07.29.15
$3.4 Billion
KEY EXECUTIVES:
Alex Myers, President & CEO
Heinz Jacqui, Exec. VP, Medical Systems
Joacim Lindoff, Exec. VP, Infection Control
Harald F. Stock, Exec. VP, Extended Care
Ulf Grunander, Chief Financial Officer
Raoul Quintero, President and CEO, North America, Maquet U.S.
NO. OF EMPLOYEES: 16,000
GLOBAL HEADQUARTERS: Getinge, Sweden
To say Getinge has had a hard year may be an understatement. At the end of 2013, the company’s future seemed uncertain, with former CEO Johan Malmquist setting his sights very high for fiscal 2014. His aim was to double sales, improve EBITA and grow profits 15 percent annually over the next several years in an attempt to transform the 110-year-old company into a global medtech powerhouse. Fast-forward just one year, and in January 2015, Malmquist was stepping down from his position and president and CEO. Malmquist hadn’t been a hastily appointed chief executive, either—he had helmed the company for 18 years (and was at the company for a total of 26) before things went south. “One way of taking responsibility,” Malmquist said, almost poignantly, in Getinge’s annual report, “is knowing when it is time to hand over to someone new.”
Malmquist’s replacement, Alex Myers, joined from Hilding Anders International AB, a Swedish bed and mattress company for which he was group CEO and president. But previously, Myers had served as executive vice president of extended care at Getinge between 2009 and 2013.
The Company’s Troubles
So what exactly did Malmquist “take responsibility” for? The company’s biggest stumbling block in 2014 was the culmination of several years’ worth of infractions by Getinge’s biggest business unit, Maquet Holding B.V. & Co. KG, which makes equipment for surgical workplaces, anesthesia systems, workstations for intensive care and cardiovascular devices. Between 2009 and 2013, the U.S. Food and Administration (FDA) conducted 10 inspections across the three Maquet subsidiary facilities: Atrium Medical Corporation in Hudson, N.H.; Maquet Cardiovascular LLC in Wayne, N.J.; and Maquet Cardiopulmonary AG in Rastatt and Hechingen, Germany. The U.S. Food and Drug Administration (FDA) uncovered major violations of the Quality System (QS) regulation, Medical Device Reporting (MDR) regulation, and Correction and Removal (CR) regulation.
During that timeframe, the agency issued two warning letters to the three companies. Additionally, between 2009 and 2014, there were 45 recalls of Maquet-manufactured devices, five of which were classified as Class 1—representing the most significant risk to patients. The FDA and Maquet agreed to implement immediate controls, with the goal of bringing all facilities into compliance with the Federal Food, Drug & Cosmetic Act (FD&C) and its implementing regulations, including the QS, MDR, and CR regulations.
“Patients must be assured that medical devices are safe, effective, and high quality,” said Jan Welch, acting director of the Office of Compliance in the FDA’s Center for Devices and Radiological Health. “The FDA will remain vigilant in bringing companies that do not meet our regulatory requirements back to a sustainable state of compliance.”
A consent decree was reached in February 2015, after the close of fiscal 2014. The decree stated Maquet must stop manufacturing and distributing devices from Atrium’s Hudson facility until the company makes appropriate corrections to ensure compliance with the FD&C Act. This removes five devices from Maquet/Getinge’s revenue generating streams. Maquet will be allowed to resume normal manufacturing and distribution from the Hudson facility once the FDA agrees the company has completed all of the corrective actions required—but as of publication, that still has not occurred. The agency’s actions forced Getinge to spend heavily to improve manufacturing quality controls in the Maquet facilities in question during 2014. The spending sent its stock down nearly 20 percent to an 11-month low by March last year, and the company had to issue a profit warning—its third in the space of one year.
“It is important to state that there is no indication that any of the business area’s products are unsafe,” said Malmquist in the Gettinge’s annual report. “We are taking this very seriously and have made significant investments in the quality management system. The remediation program has made considerable progress and has already led to major improvements.”
Getinge’s efforts to right its wrongs will cost the company an approximate total of $175.8 million which is also expected to impact FY2015 earnings.
But quality infractions are not where Getinge’s troubles end. Fiscal 2014 began with Getinge having to deal with accusations of insider trading carried out by a Getinge employee in Sweden. The company confirmed that an employee who worked in the IT (information technology) organization at company headquarters was under investigation by the Swedish Economic Crime Authority for the crime. The employee’s position involved responsibility for developing and managing the IT systems used by Getinge’s head office. The company launched an internal investigation and suspended the employee.
Other Business
But life must go on, and amidst the major hurdles faced in 2014, Getinge got busy with business as usual. Of note was its acquisition of Pulsion Medical Systems AG, a German medtech company specializing in advanced hemodynamic monitoring. The deal, valued at approximately $152.5 million, was finalized in February 2014. Via its ventilation and anesthesia franchise, Getinge had a significant stake in critical care. Pulsion allowed the company a much larger sales footprint, especially in Europe. The rationale for the acquisition was that it would offer a way into developing a broader portfolio of advanced monitoring solutions with unique, recurring revenue streams. This acquisition was handled by Getinge’s Medical Systems Unit, which also acquired Danish company Cetrea AS during FY 2014. Cetrea makes IT systems for resource planning in real time at hospitals.
Getinge’s Infection Control unit was responsible for the acquisition of British company Altrax Group Limited, a supplier of traceability and quality assurance systems for handling sterile goods; and Australian company Austmel Pty. Ltd., which provides quality assurance in the handling of sterile goods primarily within the healthcare industry. Infection Control also began the year with a new leader, Joacim Lindoff, who replaced Anders Grahn as executive vice president of the business.
Overall, acquisitions in 2014 cost the company approximately $150 million and added 215 employees to the group.
At the end of FY2013, Getinge announced a plan to enhance and restructure its critical care programs. The proposed changes were completed in 2014, and the company expects them to lead to an annual savings of $7 million a year. The critical care business also implemented a restructuring program with the aim of enhancing the production of vascular implants. Costs related to the restructuring program were expensed as early as year-end 2011. When the restructuring program is completed, all production of textile-based vascular implants will be concentrated to the production unit in the La Ciotat, France. According to Getinge’s interim report released in March 2015, the move to La Ciotat is on schedule to finish before the third quarter of 2015.
The overall numbers picture isn’t that bad for Getinge Group. Net sales came in at $3.42 billion, an increase of 5.5 percent over 2013 (ratios based on Swedish krona). After expenses, which, as noted above, were heavy in 2014, Getinge’s net profit at $170 million was down 36.9 percent from the previous year. Net sales in Getinge’s three business units, Medical Systems, Extended Care and Infection Control were up in 2014 over the previous year. Medical Systems and Infection Control showed the most growth at 5.9 percent over the previous year; Extended Care grew 4.3 percent.
Outlook for 2015
In a difficult year, Getinge regrouped and made the effort to restate and reestablish its values and goals. A total of 31 workshops were held in 12 different countries, with participant representation from three additional countries. According to the company, five core values were defined as a result of those workshops: passion, excellence, ownership, openness and collaboration. The results from this year-long effort, company officials stated, will be implemented in the company culture throughout 2015.
KEY EXECUTIVES:
Alex Myers, President & CEO
Heinz Jacqui, Exec. VP, Medical Systems
Joacim Lindoff, Exec. VP, Infection Control
Harald F. Stock, Exec. VP, Extended Care
Ulf Grunander, Chief Financial Officer
Raoul Quintero, President and CEO, North America, Maquet U.S.
NO. OF EMPLOYEES: 16,000
GLOBAL HEADQUARTERS: Getinge, Sweden
To say Getinge has had a hard year may be an understatement. At the end of 2013, the company’s future seemed uncertain, with former CEO Johan Malmquist setting his sights very high for fiscal 2014. His aim was to double sales, improve EBITA and grow profits 15 percent annually over the next several years in an attempt to transform the 110-year-old company into a global medtech powerhouse. Fast-forward just one year, and in January 2015, Malmquist was stepping down from his position and president and CEO. Malmquist hadn’t been a hastily appointed chief executive, either—he had helmed the company for 18 years (and was at the company for a total of 26) before things went south. “One way of taking responsibility,” Malmquist said, almost poignantly, in Getinge’s annual report, “is knowing when it is time to hand over to someone new.”
Malmquist’s replacement, Alex Myers, joined from Hilding Anders International AB, a Swedish bed and mattress company for which he was group CEO and president. But previously, Myers had served as executive vice president of extended care at Getinge between 2009 and 2013.
The Company’s Troubles
So what exactly did Malmquist “take responsibility” for? The company’s biggest stumbling block in 2014 was the culmination of several years’ worth of infractions by Getinge’s biggest business unit, Maquet Holding B.V. & Co. KG, which makes equipment for surgical workplaces, anesthesia systems, workstations for intensive care and cardiovascular devices. Between 2009 and 2013, the U.S. Food and Administration (FDA) conducted 10 inspections across the three Maquet subsidiary facilities: Atrium Medical Corporation in Hudson, N.H.; Maquet Cardiovascular LLC in Wayne, N.J.; and Maquet Cardiopulmonary AG in Rastatt and Hechingen, Germany. The U.S. Food and Drug Administration (FDA) uncovered major violations of the Quality System (QS) regulation, Medical Device Reporting (MDR) regulation, and Correction and Removal (CR) regulation.
During that timeframe, the agency issued two warning letters to the three companies. Additionally, between 2009 and 2014, there were 45 recalls of Maquet-manufactured devices, five of which were classified as Class 1—representing the most significant risk to patients. The FDA and Maquet agreed to implement immediate controls, with the goal of bringing all facilities into compliance with the Federal Food, Drug & Cosmetic Act (FD&C) and its implementing regulations, including the QS, MDR, and CR regulations.
“Patients must be assured that medical devices are safe, effective, and high quality,” said Jan Welch, acting director of the Office of Compliance in the FDA’s Center for Devices and Radiological Health. “The FDA will remain vigilant in bringing companies that do not meet our regulatory requirements back to a sustainable state of compliance.”
A consent decree was reached in February 2015, after the close of fiscal 2014. The decree stated Maquet must stop manufacturing and distributing devices from Atrium’s Hudson facility until the company makes appropriate corrections to ensure compliance with the FD&C Act. This removes five devices from Maquet/Getinge’s revenue generating streams. Maquet will be allowed to resume normal manufacturing and distribution from the Hudson facility once the FDA agrees the company has completed all of the corrective actions required—but as of publication, that still has not occurred. The agency’s actions forced Getinge to spend heavily to improve manufacturing quality controls in the Maquet facilities in question during 2014. The spending sent its stock down nearly 20 percent to an 11-month low by March last year, and the company had to issue a profit warning—its third in the space of one year.
“It is important to state that there is no indication that any of the business area’s products are unsafe,” said Malmquist in the Gettinge’s annual report. “We are taking this very seriously and have made significant investments in the quality management system. The remediation program has made considerable progress and has already led to major improvements.”
Getinge’s efforts to right its wrongs will cost the company an approximate total of $175.8 million which is also expected to impact FY2015 earnings.
But quality infractions are not where Getinge’s troubles end. Fiscal 2014 began with Getinge having to deal with accusations of insider trading carried out by a Getinge employee in Sweden. The company confirmed that an employee who worked in the IT (information technology) organization at company headquarters was under investigation by the Swedish Economic Crime Authority for the crime. The employee’s position involved responsibility for developing and managing the IT systems used by Getinge’s head office. The company launched an internal investigation and suspended the employee.
Other Business
But life must go on, and amidst the major hurdles faced in 2014, Getinge got busy with business as usual. Of note was its acquisition of Pulsion Medical Systems AG, a German medtech company specializing in advanced hemodynamic monitoring. The deal, valued at approximately $152.5 million, was finalized in February 2014. Via its ventilation and anesthesia franchise, Getinge had a significant stake in critical care. Pulsion allowed the company a much larger sales footprint, especially in Europe. The rationale for the acquisition was that it would offer a way into developing a broader portfolio of advanced monitoring solutions with unique, recurring revenue streams. This acquisition was handled by Getinge’s Medical Systems Unit, which also acquired Danish company Cetrea AS during FY 2014. Cetrea makes IT systems for resource planning in real time at hospitals.
Getinge’s Infection Control unit was responsible for the acquisition of British company Altrax Group Limited, a supplier of traceability and quality assurance systems for handling sterile goods; and Australian company Austmel Pty. Ltd., which provides quality assurance in the handling of sterile goods primarily within the healthcare industry. Infection Control also began the year with a new leader, Joacim Lindoff, who replaced Anders Grahn as executive vice president of the business.
Overall, acquisitions in 2014 cost the company approximately $150 million and added 215 employees to the group.
At the end of FY2013, Getinge announced a plan to enhance and restructure its critical care programs. The proposed changes were completed in 2014, and the company expects them to lead to an annual savings of $7 million a year. The critical care business also implemented a restructuring program with the aim of enhancing the production of vascular implants. Costs related to the restructuring program were expensed as early as year-end 2011. When the restructuring program is completed, all production of textile-based vascular implants will be concentrated to the production unit in the La Ciotat, France. According to Getinge’s interim report released in March 2015, the move to La Ciotat is on schedule to finish before the third quarter of 2015.
The overall numbers picture isn’t that bad for Getinge Group. Net sales came in at $3.42 billion, an increase of 5.5 percent over 2013 (ratios based on Swedish krona). After expenses, which, as noted above, were heavy in 2014, Getinge’s net profit at $170 million was down 36.9 percent from the previous year. Net sales in Getinge’s three business units, Medical Systems, Extended Care and Infection Control were up in 2014 over the previous year. Medical Systems and Infection Control showed the most growth at 5.9 percent over the previous year; Extended Care grew 4.3 percent.
Outlook for 2015
In a difficult year, Getinge regrouped and made the effort to restate and reestablish its values and goals. A total of 31 workshops were held in 12 different countries, with participant representation from three additional countries. According to the company, five core values were defined as a result of those workshops: passion, excellence, ownership, openness and collaboration. The results from this year-long effort, company officials stated, will be implemented in the company culture throughout 2015.