Sean Fenske, Editor-in-Chief07.19.22
The 2022 Top Company reports offer a stark contrast to those authored just 12 months ago. While the pandemic continues, a recovery due to the return of elective healthcare procedures was well underway for many of the companies included in this year’s list. Further, those involved in the production of diagnostic technologies saw even greater gains due to ongoing demand for COVID-19 tests (as well as 3M for its masks). These firms experienced substantial growth in those specific segments of their business. (Unfortunately, what goes up…but that’s a challenge for a later date, and a future Top Company report…possibly.)
Curiously, however, not every company saw the same degree of recovery following the return of demand for healthcare products outside of the aforementioned tests and masks. There were a few firms that still faced financial difficulties. For some, the recovery simply returned them to the plateau where their growth had stalled prior to the pandemic. For others, it was another factor (e.g., recall) that created a problem. Still others saw decreased demand for a product that had been urgently needed early in the pandemic (e.g., respirators). Whatever the reason, these few exceptions saw modest gains or even a slight decline.
Unfortunately, there’s the other side of the coin with this year’s reports. For as many companies that enjoyed fantastic, double digit gains over the previous fiscal period, there were just as many that were encountering issues keeping up with demand. A number of reasons for this were provided, but one rang true with most—supply chain challenges. The pandemic has left supply chains in crisis and recovery looks like it’s going to still be a long way off. Manufacturers are having difficulty securing certain key components from their suppliers, from raw materials to electronic subassemblies.
One critical component, however, seems to be more important than all others and its absence is truly disruptive to the medtech industry. Chips (or more precisely, the lack thereof) is mentioned in more than a couple of reports as a major concern. As the industry continues to embrace the movement toward digital solutions, it needs a constant pipeline to the essential piece that drives these devices. This is such a significant problem that when asked if they had a magic wand and could solve one issue they were facing, one of the panelists from MPO’s Global Trends in Medtech webinar series responded with resolving the chip shortage. This topic emerged in several of this year’s reports.
With this in mind, I was especially intrigued by the mention of Canon’s purchase of a Canadian chip manufacturer. While the medtech segment of Canon is relatively small compared to the entire company and the firm requires chips across a variety of its businesses, the move was still interesting. Would it make sense for Medtronic, Abbott, Philips, or Siemens to have a chip maker under the same roof as their medical device manufacturing capabilities? Or is this a short-term, albeit serious, problem they simply need to wait-out until supply improves? The pandemic will result in a number of lasting changes; perhaps this shortage will result in one too.
Meanwhile, M&A remained alive and well throughout the pandemic. A variety of companies made strategic acquisitions that were announced during their latest fiscal year. We even saw one of the mega-deals in Baxter’s buy of Hillrom. Firms expanded product portfolios, broadened their reach around the globe, and expanded their coverage of the care continuum for a specific clinical area—all through their M&A transactions.
At the same time, organizations shed non-vital business units or segments not seen as fitting with the future vision of the company. Divestitures were sometimes the result of a previous acquisition and performed to address orders issued by government oversight (e.g., monopolistic concerns), but others were done as part of a larger corporate strategy.
Similarly, there’s been a few announcements of conglomerates splitting off from all or part of the medical device manufacturing arm to allow it to grow and succeed on its own. Siemens Healthineers is a recent example of this and based on annual reports since, has been successful. Will GE Healthcare, Zimvie and J&J’s medtech/pharma firm follow a similar path or will the split create new, unexpected challenges? Only time (and future Top Company reports) will tell.
With so much to review, discover, and learn in the pages ahead, I hope you’ll find time to seek out trends that most interest you. What common threads do you find throughout the 2022 Top Company reports? What will the continued impact of the pandemic be on manufacturers? How will M&A and divestitures further reshape the industry? Be sure to share your thoughts and findings with us via email and/or social media.
Sean Fenske, Editor-in-Chief
sfenske@rodmanmedia.com
Curiously, however, not every company saw the same degree of recovery following the return of demand for healthcare products outside of the aforementioned tests and masks. There were a few firms that still faced financial difficulties. For some, the recovery simply returned them to the plateau where their growth had stalled prior to the pandemic. For others, it was another factor (e.g., recall) that created a problem. Still others saw decreased demand for a product that had been urgently needed early in the pandemic (e.g., respirators). Whatever the reason, these few exceptions saw modest gains or even a slight decline.
Unfortunately, there’s the other side of the coin with this year’s reports. For as many companies that enjoyed fantastic, double digit gains over the previous fiscal period, there were just as many that were encountering issues keeping up with demand. A number of reasons for this were provided, but one rang true with most—supply chain challenges. The pandemic has left supply chains in crisis and recovery looks like it’s going to still be a long way off. Manufacturers are having difficulty securing certain key components from their suppliers, from raw materials to electronic subassemblies.
One critical component, however, seems to be more important than all others and its absence is truly disruptive to the medtech industry. Chips (or more precisely, the lack thereof) is mentioned in more than a couple of reports as a major concern. As the industry continues to embrace the movement toward digital solutions, it needs a constant pipeline to the essential piece that drives these devices. This is such a significant problem that when asked if they had a magic wand and could solve one issue they were facing, one of the panelists from MPO’s Global Trends in Medtech webinar series responded with resolving the chip shortage. This topic emerged in several of this year’s reports.
With this in mind, I was especially intrigued by the mention of Canon’s purchase of a Canadian chip manufacturer. While the medtech segment of Canon is relatively small compared to the entire company and the firm requires chips across a variety of its businesses, the move was still interesting. Would it make sense for Medtronic, Abbott, Philips, or Siemens to have a chip maker under the same roof as their medical device manufacturing capabilities? Or is this a short-term, albeit serious, problem they simply need to wait-out until supply improves? The pandemic will result in a number of lasting changes; perhaps this shortage will result in one too.
Meanwhile, M&A remained alive and well throughout the pandemic. A variety of companies made strategic acquisitions that were announced during their latest fiscal year. We even saw one of the mega-deals in Baxter’s buy of Hillrom. Firms expanded product portfolios, broadened their reach around the globe, and expanded their coverage of the care continuum for a specific clinical area—all through their M&A transactions.
At the same time, organizations shed non-vital business units or segments not seen as fitting with the future vision of the company. Divestitures were sometimes the result of a previous acquisition and performed to address orders issued by government oversight (e.g., monopolistic concerns), but others were done as part of a larger corporate strategy.
Similarly, there’s been a few announcements of conglomerates splitting off from all or part of the medical device manufacturing arm to allow it to grow and succeed on its own. Siemens Healthineers is a recent example of this and based on annual reports since, has been successful. Will GE Healthcare, Zimvie and J&J’s medtech/pharma firm follow a similar path or will the split create new, unexpected challenges? Only time (and future Top Company reports) will tell.
With so much to review, discover, and learn in the pages ahead, I hope you’ll find time to seek out trends that most interest you. What common threads do you find throughout the 2022 Top Company reports? What will the continued impact of the pandemic be on manufacturers? How will M&A and divestitures further reshape the industry? Be sure to share your thoughts and findings with us via email and/or social media.
Sean Fenske, Editor-in-Chief
sfenske@rodmanmedia.com
