Vincent A. Forlenza, Chairman, President & CEO
Gary M. Cohen, Exec. VP
Suketu Upadhyay, Acting CFO, Sr. VP & Controller
William A. Kozy, Exec. VP & Chief Operating Officer
John E. Gallagher, VP & Treasurer
Patti E. Russell, VP & Chief Ethics and Compliance Officer
Jeffrey S. Sherman, Sr. VP & General Counsel
Stephen Sichak Jr., Sr. VP, Integrated Supply Chain
Alexandre Conroy, President, Europe, EMA and the Americas
James Lim, President, Greater Asia
NO. OF EMPLOYEES: 29,555
GLOBAL HEADQUARTERS: Franklin Lakes, N.J.
Most of the world’s largest medtech firms are linked by the shared responsibility of healthcare reform—not the kind that divides politicians or sparks endless debate, mind you, but rather, remedies that truly make a difference to the sick and suffering.
The level of commitment varies, of course, depending on company size and resources but most firms have programs or partnerships in place to address unmet healthcare needs. Becton Dickinson and Company (BD), for instance, works with the non-profit Direct Relief International to vaccinate Haitian children against measles, rubella and polio. The firm also has lent a healing hand in the Democratic Republic of Congo, the Gulf of Mexico, and closer to home—in Paterson, N.J.
Last year, BD made a pit stop in sub-Saharan Africa to strengthen laboratory services/systems and overall healthcare in HIV/AIDS-ravaged countries. The company’s $20 million “Labs for Life” collaboration with the U.S. President’s Emergency Plan for AIDS Relief will funnel investments to Ethiopia, India, Kenya, Mozambique and Uganda; the money will be used to fund laboratory pathology and forecast training in those countries as well as curriculum development and equipment maintenance training; and development of point-of-care technologies.
“We believe the principles of shared value are fundamental to our strategy,” Chairman, President and CEO Vincent A. Forlenza told stockholders in a four-page letter within the company’s fiscal year 2012 annual report. “Helping all people live healthy lives is about shared value: creating value for our shareholders by strengthening the health of communities and addressing the healthcare challenges of societies throughout the world. These principles are a foundation for the work we do around the globe…We provide value to society by helping address unmet health needs, and this in turn, strengthens the company’s business and creates new value for our shareholders.”
Indeed, investors’ interests were well-rewarded in FY12 as the Franklin Lakes, N.J.-based firm grew total revenue 1.6 percent and increased its dividend for the 40th consecutive financial year. Growth was driven by strong performances in the Medical and Diagnostics segments as well as robust emerging market sales.
Medical segment revenue rose 2.1 percent to $4.1 billion in the year ending Sept. 30, 2012. Surgical systems sales comprised about half the unit’s total proceeds ($2.1 billion) but yielded the lowest growth rate (1.1 percent) of the three product portfolios despite solid demand for the BD PhaSeal closed-system drug transfer device the company added to its lineup through the July 2011 acquisition of Swedish company Carmel Pharma Inc. BD PhaSeal minimizes clinicians’ risk of exposure to potentially hazardous liquids and vapors from toxic drugs.
Diabetes care devices, by contrast, garnered the least revenue for the Medical segment ($911 million) but triggered a unit-high 5.2 percent increase compared with FY11’s total of $866 million. Executives attributed the growth to solid sales of BD’s Ultra-Fine Nano, a product marketed as the “world’s smallest pen needle” designed specifically for diabetics with hypodermic injection anxiety. “The Nano needle continued to find acceptance among people with diabetes looking for a better injection experience,” Forlenza noted in his stockholder letter.
BD further improved diabetics’ injection experience last year with a five-bevel tip Ultra-Fine Nano needle designed to penetrate the skin more easily. Bench tests have shown the Nano’s modified PentaPoint Comfort needle tip (which creates a flatter, thinner surface) reduces the force to penetrate the skin by 23 percent compared with three-bevel pen needles. The PentaPoint arrived too late in the fiscal year (mid-September) to affect revenue but industry analysts expect the product to impact sales in FY13.
While the company’s pharmaceutical systems portfolio lacked any such innovation, sales growth nonetheless landed the product division in the middle of its segment brethren, swelling 1.4 percent to $1.07 billion. The increase mostly was driven by solid demand for BD’s parenteral drug delivery systems from biopharmaceutical and heparin manufacturers.
Global sales of safety-engineered products totaled $1.98 billion, a 6 percent increase compared with the prior fiscal year, but foreign exchange rate volatility stifled growth 5 percent.
That instability also impacted Diagnostic revenue and gross profit as well as Biosciences operating income. The Diagnostics segment overcame a 2.2 percent foreign exchange rate setback to post an overall 2.3 percent sales gain, ending the fiscal year with $2.5 billion in proceeds. Growth was driven by solid increases in both preanalytical and diagnostics systems sales, which garnered $1.3 billion and $1.23 billion, respectively, for the company in FY12. Domestic demand for Vacutainer push button blood collection sets largely was responsible for the 1.8 percent boost in preanalytical systems proceeds, while international clamor for the BD ProbeTec ET, BD Viper, BD Affirm and BD Bactec systems, the BD Phoenix ID/AST platform as well as the SurePath liquid-based pap test clinched diagnostic systems revenue growth at 2.9 percent.
New product launches and the $51 million acquisition of Netherlands-based lab automation developer/manufacturer KIESTRA Lab Automation BV also added to Diagnostics systems sales growth. In the first half of BD’s fiscal year, the U.S. Food and Drug Administration approved its Veritor System for Flu A+B detection and MAX Group B Streptococcus (GBS) Assay, an in-vitro test for the detection of GBS DNA in newborns. Then, in the fourth quarter, the company received U.S. clearance for its MAX MRSA (methicillin-resistant Staphylococcus aureus) molecular test.
Product approvals/launches were just as plentiful in the Biosciences segment but failed to have the same effect on sales. Revenue slid 1.5 percent to $1.07 billion and operating income fell 5.8 percent to $261 million as biotechnology and medical device companies continued to scale back on research spending.
Still, the company did its best to boost Biosciences sales, releasing the BD Horizon PE-CF594, a bright dye that enhances instrumentation capabilities and maximizes choice for multicolor panel designs; the BD Pharmingen Transcription Factor Buffer set, a system that uses flow cytometry to detect intracellular and intranuclear proteins; the BD Stem Cell Enumeration Kit (designed specifically for use on the BD FACSCanto II and BD FACSCalibur flow cytometers); the Brilliant Violet 605 Reagents (a tandem dye); and the BD FACSJazz Cell Sorting System, a tool that can identify and isolate single or multiple cells from complex and/or extremely rare cell populations.
“This product will complement the recent and very rapid advances in genomic studies where sample integrity is critical for next-generation sequencing and sequence detection,” BD Biosciences Worldwide President Alberto Mas said upon the cell sorter’s release last June.
Though the cell sorter had little effect on Biosciences’ overall performance in FY12, its debut represents a shift in BD’s long-term growth strategy that entails improving market share and rerouting R&D investments to cell analysis and diagnostics technologies.
This new strategy perhaps was most evident in the company’s April decision to sell its Biosciences-Discovery Labware unit (excluding the Advanced Bioprocessing platform) to specialty glass and ceramics giant Corning Incorporated for $730 million.
“This sale will enable our BD Biosciences segment to focus resources and management attention on our acquisitions and our new instrumentation products, which are essential to our accelerated growth efforts,” Executive Vice President William A. Kozy noted in a news release.
More targeted R&D spending, however, is only one facet of Forlenza’s growth plan for the company. In his investor letter, the CEO also promised to increase revenue through cost reduction programs and the introduction of competitively-priced products in lower-priced emerging market segments.
While it is still evolving, Forlenza’s growth strategy already appears to be paying off. BD’s revenue rose 1.6 percent to $7.7 billion in FY12 and net income jumped 8 percent to $1.16 billion. In emerging markets like China, where research spending rose for the second consecutive year, sales skyrocketed 24.8 percent. Overall revenue in the Asia Pacific region surged 11.4 percent to $883.2 million, while non-U.S. and European sales swelled 4.1 percent to $1.1 billion.