07.23.08
$8.1 Billion ($10.1B total)
Richard J. Meelia, President, CEO and Director
Charles J. Dockendorff, Exec. VP and CFO
Jose E. Almeida, Sr. VP and President, Medical Devices
Amy A. McBride-Wendell, Sr. VP, Strategy and Business Development
A year after spinning off from Tyco International, Covidien has charted an ambitious course to re-brand and position itself as a truly independent company. Once Tyco Healthcare, the medical device and pharmaceutical manufacturer became an independent publicly traded company (on the New York Stock Exchange, under the symbol “COV”) on June 2, 2007.
Making a name for itself has meant more than just a name change.
In an effort to put ties with scandal-plagued Tyco behind them, company officials have begun investing in increased R&D, new products, increased sales and marketing efforts as well as strategic acquisitions and partnerships. If you’re a baseball fan, you couldn’t help but notice part of this strategy in play on the outfield walls of Boston, MA’s Fenway Park (aka the Green Monster, home of the world champion Boston Red Sox), where Covidien’s logo is prominently displayed. The company has its roots in Massachusetts. Though headquartered in Bermuda for tax purposes, most of its corporate functions are located in Mansfield, MA.
For 2007 and the beginning of 2008, Covidien was broken into five business segments: Medical Devices, Pharmaceutical Products, Imaging Solutions, Medical Supplies (which includes the company’s contract manufacturing business) and Retail Products. In April of this year, however, the company sold its Retail Products group, which made infant care products, incontinence and feminine hygiene products as well as other retail items, to an affiliate of First Quality Enterprises, Inc. for $330 million in cash. The sale was part of Covidien’s strategy to focus its portfolio and reallocate resources to its core healthcare businesses.
“We created a comprehensive strategy centered on growth, innovation and globalization to transform our organization from a cost-cutting integrator of acquisitions into an innovative, risk-taking growth company,” wrote CEO Richard Meelia in Covidien’s annual report to shareholders. “We then reallocated financial resources to support this new strategy, which called for increasing our investment in research and development, strengthening growth functions such as strategic marketing and business development, expanding our sales and marketing workforce, realigning each of our businesses on a global basis and launching targeted initiatives to stimulate growth in the near-term as we build longer-term capabilities.”
Meelia said that while spending on R&D had doubled between 2002 and 2006, the company would aggressively expand its efforts moving forward to keep pace with its competition.
For fiscal 2007 (ended Sept. 30), Covidien posted sales of $10.1 billion, an increase of 5% compared with 2006. Subtracting pharmaceutical and retail products sales, total revenue for device-related Covidien businesses was approximately $8.1 billion (Editor’s note: This figure includes revenues from Medical Devices, Medical Supplies and Imaging Solutions. While Imaging Solutions incorporates a significant pharmaceutical element, it also includes a substantial device component as well.) Net sales in the United States across all business units were $6.1 billion (an increase of $100 million compared with 2006), while non-US business generated net sales of $4 billion (an increase of roughly $400 million).
Operating income decreased to $438 million, compared with $2.1 billion in fiscal 2006. Earnings were negatively impacted by a charge of $1.2 billion as part of a class action settlement related to Tyco International. Other factors affecting income for the year include increased marketing and branding expenses, sales force development and restructuring charges, according to the company. Covidien posted a net loss of $342 million for the year, compared with net income of $1.2 billion in 2006.
Medical Devices division sales were the largest revenue driver for Covidien at $6.2 billion. Operating income for the business unit decreased $93 million, or 5.1%, to $1.7 billion in fiscal 2007 compared with $1.8 billion in fiscal 2006. Imaging Solutions net sales increased $72 million, or 8.3%, to $942 million in fiscal 2007, while net sales for Medical Supplies increased $1 million, or 0.1%, to $993 million.
In the area of mergers and acquisitions, Covidien (then Tyco Healthcare) expanded its international presence with the acquisition of Polysuture, a Brazilian suture manufacturer in March 2007. In April that year, the company acquired the intellectual property for AbsorbaTack technology—absorbable fixation technology used in hernia repair—from Sorbx for $30 million (the company released AbsorbaTack products in the United States and Europe in January and May 2008, respectively). Following the close of the 2007 fiscal year, Covidien bought Scandius Biomedical, a developer of devices for sports-related surgeries. The purchase, according to the company, increases its reach into the growing $1 billion sports surgery market. In November, Covidien announced an agreement with Allergan, Inc. to co-promote the Lap-Band adjustable gastric banding system for the obesity surgery market.
Covidien has room to grow internationally, according to analysts. With 38% of sales overseas, it lags behind rivals such as Baxter and Becton Dickinson that have closer to 50% in international sales. However, a solid cash position and a good debt position means Covidien can afford to buy companies in faster-growing markets.
For 2008, experts expect earnings to drop slightly as Covidien continues to record some restructuring charges and ramps up its sales force. The charges eventually should yield annual savings as Covidien consolidates operations, outsources more work and divests underperforming businesses.
For the second quarter of 2008 (ended March 28), overall net sales rose 10% to $2.4 billion from $2.2 billion a year ago, fueled by strong growth in the Medical Devices and Imaging Solutions business segments, the company reported. Sales growth was driven by higher volume and new products. Operating income was $405 million, versus $484 million for 2007. Excluding restructuring and asset impairment charges and charges for Covidien's portion of a Tyco International shareholder settlement, adjusted operating income was $500 million in the second quarter, compared with $488 million in the prior year. Net income was $263 million, compared with $394 million for the same period in 2007.
KEY EXECUTIVES:
Richard J. Meelia, President, CEO and Director
Charles J. Dockendorff, Exec. VP and CFO
Jose E. Almeida, Sr. VP and President, Medical Devices
Amy A. McBride-Wendell, Sr. VP, Strategy and Business Development
NO. OF EMPLOYEES:
43,800GLOBAL HEADQUARTERS:
Pembroke, BermudaA year after spinning off from Tyco International, Covidien has charted an ambitious course to re-brand and position itself as a truly independent company. Once Tyco Healthcare, the medical device and pharmaceutical manufacturer became an independent publicly traded company (on the New York Stock Exchange, under the symbol “COV”) on June 2, 2007.
Making a name for itself has meant more than just a name change.
In an effort to put ties with scandal-plagued Tyco behind them, company officials have begun investing in increased R&D, new products, increased sales and marketing efforts as well as strategic acquisitions and partnerships. If you’re a baseball fan, you couldn’t help but notice part of this strategy in play on the outfield walls of Boston, MA’s Fenway Park (aka the Green Monster, home of the world champion Boston Red Sox), where Covidien’s logo is prominently displayed. The company has its roots in Massachusetts. Though headquartered in Bermuda for tax purposes, most of its corporate functions are located in Mansfield, MA.
For 2007 and the beginning of 2008, Covidien was broken into five business segments: Medical Devices, Pharmaceutical Products, Imaging Solutions, Medical Supplies (which includes the company’s contract manufacturing business) and Retail Products. In April of this year, however, the company sold its Retail Products group, which made infant care products, incontinence and feminine hygiene products as well as other retail items, to an affiliate of First Quality Enterprises, Inc. for $330 million in cash. The sale was part of Covidien’s strategy to focus its portfolio and reallocate resources to its core healthcare businesses.
“We created a comprehensive strategy centered on growth, innovation and globalization to transform our organization from a cost-cutting integrator of acquisitions into an innovative, risk-taking growth company,” wrote CEO Richard Meelia in Covidien’s annual report to shareholders. “We then reallocated financial resources to support this new strategy, which called for increasing our investment in research and development, strengthening growth functions such as strategic marketing and business development, expanding our sales and marketing workforce, realigning each of our businesses on a global basis and launching targeted initiatives to stimulate growth in the near-term as we build longer-term capabilities.”
Meelia said that while spending on R&D had doubled between 2002 and 2006, the company would aggressively expand its efforts moving forward to keep pace with its competition.
For fiscal 2007 (ended Sept. 30), Covidien posted sales of $10.1 billion, an increase of 5% compared with 2006. Subtracting pharmaceutical and retail products sales, total revenue for device-related Covidien businesses was approximately $8.1 billion (Editor’s note: This figure includes revenues from Medical Devices, Medical Supplies and Imaging Solutions. While Imaging Solutions incorporates a significant pharmaceutical element, it also includes a substantial device component as well.) Net sales in the United States across all business units were $6.1 billion (an increase of $100 million compared with 2006), while non-US business generated net sales of $4 billion (an increase of roughly $400 million).
Operating income decreased to $438 million, compared with $2.1 billion in fiscal 2006. Earnings were negatively impacted by a charge of $1.2 billion as part of a class action settlement related to Tyco International. Other factors affecting income for the year include increased marketing and branding expenses, sales force development and restructuring charges, according to the company. Covidien posted a net loss of $342 million for the year, compared with net income of $1.2 billion in 2006.
Medical Devices division sales were the largest revenue driver for Covidien at $6.2 billion. Operating income for the business unit decreased $93 million, or 5.1%, to $1.7 billion in fiscal 2007 compared with $1.8 billion in fiscal 2006. Imaging Solutions net sales increased $72 million, or 8.3%, to $942 million in fiscal 2007, while net sales for Medical Supplies increased $1 million, or 0.1%, to $993 million.
In the area of mergers and acquisitions, Covidien (then Tyco Healthcare) expanded its international presence with the acquisition of Polysuture, a Brazilian suture manufacturer in March 2007. In April that year, the company acquired the intellectual property for AbsorbaTack technology—absorbable fixation technology used in hernia repair—from Sorbx for $30 million (the company released AbsorbaTack products in the United States and Europe in January and May 2008, respectively). Following the close of the 2007 fiscal year, Covidien bought Scandius Biomedical, a developer of devices for sports-related surgeries. The purchase, according to the company, increases its reach into the growing $1 billion sports surgery market. In November, Covidien announced an agreement with Allergan, Inc. to co-promote the Lap-Band adjustable gastric banding system for the obesity surgery market.
Covidien has room to grow internationally, according to analysts. With 38% of sales overseas, it lags behind rivals such as Baxter and Becton Dickinson that have closer to 50% in international sales. However, a solid cash position and a good debt position means Covidien can afford to buy companies in faster-growing markets.
For 2008, experts expect earnings to drop slightly as Covidien continues to record some restructuring charges and ramps up its sales force. The charges eventually should yield annual savings as Covidien consolidates operations, outsources more work and divests underperforming businesses.
For the second quarter of 2008 (ended March 28), overall net sales rose 10% to $2.4 billion from $2.2 billion a year ago, fueled by strong growth in the Medical Devices and Imaging Solutions business segments, the company reported. Sales growth was driven by higher volume and new products. Operating income was $405 million, versus $484 million for 2007. Excluding restructuring and asset impairment charges and charges for Covidien's portion of a Tyco International shareholder settlement, adjusted operating income was $500 million in the second quarter, compared with $488 million in the prior year. Net income was $263 million, compared with $394 million for the same period in 2007.