The transforming, albeit uncertain, healthcare landscape is at the root of a slew of recently announced changes by medical-products companies, industry experts said.
Suppliers shuffle, deal
Spate of restructuring, exec changes, acquisitions
In less than two weeks, medical-product manufacturers Cardinal Health, Covidien and Johnson & Johnson; drugmaker Merck & Co.; and devicemakers Medtronic and Stryker Corp. have divulged significant restructuring plans, leadership changes or business-line sales and acquisitions aimed at positioning the companies for success in the global and post healthcare-reform markets, observers said.
“We expect to see a continuance of mergers and acquisitions, and that’s a function of companies looking at what their future roles will be and where they want to be in the face of healthcare reform,” said Terry Hisey, leader of the Life Sciences group for consultancy Deloitte.
The list of announced corporate changes includes Cardinal Health’s recent spinoff of its clinical- and medical-products divisions into CareFusion Corp.; Covidien’s sale of its sleep-diagnostics and oxygen-therapy product lines; Johnson & Johnson’s elimination of its comprehensive-care business unit; Merck & Co.’s restructuring in conjunction with its acquisition of drugmaker Schering-Plough Corp.; devicemaker Medtronic’s executive changes and consolidation of its seven businesses into one of two new units; and orthopedic-device maker Stryker Corp.’s leadership changes and creation of a global quality and operations group.
Covidien spokesman Eric Kraus said that his company’s recent divestments are not indicative of a strategy change, however, and that the company is simply following through on a plan to focus on its high-growth respiratory product lines. “We do a constant review of our product lines and, when appropriate, we acquire new technologies and businesses. At the same time, we look to divest when something no longer fits our model.”
Charlie Whelan, director of healthcare and life sciences consulting for Frost & Sullivan, said the downturned economy may also be a factor in the recent spate of restructuring efforts by medical-product companies.
“I don’t think it’s coincidental,” Whelan said. “I think it’s reflective of the challenging year these companies have had. They haven’t met investors’ expectations, so they’re trying to show that they’re doing everything they can to right the ship.”
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