Inge G. Thulin, Chairman of the Board, President, and CEO
Michael G. Vale, Exec. VP, Health Care Business Group
Nicolas C. Gangestad, Sr. VP and CFO
Ashish K. Khandpur, Sr. VP—Research and Development, and CTO
Hak Cheol Shin, Exec. VP, International Operations
Jon T. Lindekugel, Sr. VP, Business Development and Marketing—Sales
Paul A. Keel, Sr. VP, Supply Chain
Ivan K. Fong, Sr. VP, Legal Affairs and General Counsel
NUMBER OF EMPLOYEES: 91,584
GLOBAL HEADQUARTERS: St. Paul, Minn.
As a corporate entity, 3M’s financials look favorable for shareholders. Although total sales were down in 2016 for the second year in a row—the company reported a figure of $30.1 billion (compared to $30.3 billion in 2015 and a recent high of $31.8 billion in 2014)—cash dividends were up to $4.44 in 2016 from $4.10 in 2015, continuing an ongoing, upward trend that’s occurred over the past five years. Further, the company’s earnings per share were similarly up from the prior years, posting $8.16 in 2016 versus $7.58 one year earlier, again following the upward trend of the past five years.
The company has also committed to future successes with substantial investments in research and development (R&D), recognizing future innovation as critical to the company’s continued success. On the whole, 3M invested $1.7 billion into R&D—approximately 6 percent of the total sales in 2016. Part of that investment was in a brand new, 38,000-square-foot design center located at the company’s headquarters in St. Paul, Minn. The company intends to use the new facility, for which it invested approximately $150 million, as “a central hub to enhance creativity for the award-winning 3M Design team,” according to the release announcing the center’s grand opening. Named after 3M’s “architect of innovation,” Richard P. Carlton, the facility is a shining example of the company’s dedication to its investment in R&D ($8.5 billion spent over the past five years).
“3M Design is at the forefront of creating customer-driven experiences,” said Eric Quint, vice president and chief design officer at 3M. “The new studio reflects our culture of spontaneous collaboration, creativity and translation of insightful solutions that positively impact the world. We will continue to inspire and grow our design talent across all 3M businesses, further elevating 3M as a recognized leader in design.”
The company also ranked as the “Top Dream Company” among millennial students in The National Society of High School Scholars’ Millennial Career Survey. Of the respondents who selected 3M, 74 percent were in high school, while 21 percent were enrolled in college. Further, “Medicine/Health” was selected as the top field choice by 41 percent of the survey respondents.
“People want to be part of a company where they have room to grow, take on new challenges and help others by giving back,” said Marlene McGrath, senior vice president of 3M Human Resources. “One of the great aspects of 3M is that we offer people the opportunity to develop work experiences in multiple businesses and geographies around the world and improve lives through science.”
Within this same vein, in 2016, 3M was named as one of the 25 World’s Best Multinational Workplaces by Fortune magazine. The company also announced a new leadership development program in February 2016. 3M is already recognized by Chief Executive Magazine as one of its Top Companies for Leaders.
ANALYST INSIGHTS: 3M continues to be a steady player in healthcare. Its core products allow for consistent low single digit revenue growth. The company does invest significantly in R&D. It’ll be interesting to see if that investment begins to pay off. Otherwise, it will need M&A to make dramatic improvements in the healthcare business.
—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors
With all these significant investments and development of initiatives that keep the company’s future success at the forefront of any plans, it’s somewhat surprising when the company’s financial figures reflect the relative flat sales numbers year over year (down 0.5 percent from 2015 to 2016). In addition, when examining the specific figures for the Health Care division, the trend continues. In 2016, the company reported net sales for its medical sector as $5.5 billion, which reflects a modest increase of 2 percent over 2015’s figure. The division contributed 18.4 percent to the company’s overall sales total, so the fact that it mirrored the flat growth the company experienced makes sense. Given the efforts, however, it should be apparent that 3M is most certainly doing what it can to position itself for growth in the coming years. On a positive note, the Health Care division saw higher growth in emerging markets with the Asia Pacific region offering an increase of 8 percent in sales and Latin America/Canada reported a 7 percent increase.
Those international sales figures weren’t the only positives that came out of the company’s Health Care sector in 2016. The division enjoyed a number of wins that primarily originated from its products and innovations. This included an announcement early in the year in which the company reaffirmed its commitment to its Health Information Systems business. A unit under the Health Care division, 3M had announced in September 2015 that it was considering actions related to the Information Systems business, which could include spinning-off, selling, or retaining it. According to 3M, through this unit, the company “provides healthcare data aggregation, analysis, and strategic services that help clients move from volume-based to value-based healthcare, resulting in millions of dollars in savings, improved provider performance, and higher quality of care.” Given the trends in the industry toward a value-based care system, it shouldn’t be a surprise that the company would elect to retain this piece.
That decision may have already proved fruitful when the company announced in late August that it had made an agreement with Cerner, a provider of information technology for healthcare facilities, for the company to use 3M’s Patient-Focused Episodes Software with Cerner’s HealtheIntent population health management platform. According to 3M, its software “defines over 500 episodes of patient care spanning inpatient and outpatient encounters as well as chronic and acute diseases. It accounts for patients with multiple conditions and complex health histories, and produces clinically meaningful, risk-adjusted episodes for opportunity and intervention analysis.” Coupled with Cerner’s solution, which will support bundled payments and compare provider costs, the complete solution should provide healthcare professionals with a comprehensive view and information to provide an enhanced level of care to patients.
The Information Systems unit also announced a collaboration in October with Verily Life Sciences (formerly known as Google Life Sciences). The two firms were seeking to develop a population health measurement technology for managing clinical and financial performance. The goal would be to offer a system that could be used to provide sustainable improvements in healthcare quality and costs for healthcare providers and payers.
“At 3M, we are constantly evaluating how health information technology can help improve the efficiency, quality and cost of delivering care,” said JaeLynn Williams, vice president and general manager of 3M Health Information Systems. “This collaboration reflects our commitment to continued innovation in health information systems that address real-world problems facing health care today, while protecting the privacy and security of health data.”
Given the collaboration announcements the company made in 2016 between the Health Information Systems business and Cerner and Verily, it becomes clearer why executives decided to invest further into the unit. These types of initiatives along with future projects could become a substantial driver of growth for the 3M Health Care division.
Given the attention the unit was getting, in September, 3M announced that it was acquiring Semfinder, a developer of precise semantic coding of medical services. The Kreuzlingen, Switzerland-headquartered company provided 3M with new coding technology that would enable it to make its 360 Encompass System available sooner to those countries adopting electronic health records. While the division was being considered expendable and could have been sold off only a year earlier, the unit appears to be more of a growth prospect for 3M and could ultimately be a cornerstone of the Health Care division.
Addressing asthma and chronic obstructive pulmonary disease with a digital health solution, the 3M Drug Delivery Systems unit, a part of the Health Care division, introduced a “smart” inhaler in April. The device was developed to enhance adherence and resolve device misuse, while delivering an accurate dose to the patient. The user is able to review instructions for use via a screen on the actual device and, through a smartphone app that’s coupled to the device, receive feedback (or feedback can be sent to the patients’ physician). There are a number of other interesting features included with the device and accompanying app, such as dosage delivery tracking that’s recorded when the patient correctly inhales the medication (as opposed to simply actuating the device), and data tracking of the disease state to help guide treatment decisions.
“Providing an effective and intuitive delivery method for respiratory disease treatment is critical to patients, healthcare providers, and payers alike,” said Louise Righton, global marketing operations manager for 3M Drug Delivery Systems. “Poor technique in using an inhaler, coupled with the challenges of getting patients to adhere to their medication protocols, can lead to exacerbations, increased use of healthcare resources, and ultimately, a burden on healthcare systems. By increasing competence and adherence, we can realize better patient outcomes and reduce healthcare costs.”
Within the dental space, 3M launched what it states is the world’s first tablet-based mobile intraoral scanner. The device is easily transitioned from room to room without the need for a cart or power cord. The unit, which is about the size of a typical consumer tablet, enables consultations that are much more effective as the patient can visualize exactly what the dentist is explaining regarding a treatment program.