Medtechs prioritise efficiency when it comes to hiring
Big cap medtech is hiring, largely thanks to organic growth.
All but one of the top 15 medtech companies saw sales of their medical devices rise from 2016 to 2017. But several are trimming headcounts despite their success, as they aim to improve productivity (see analyses below).
In some cases staff cuts are hangovers from large M&A activity, and in others simply divestments of business units. Staff growth, however, is largely organic; of the fastest hirers in the big-cap table, only Abbott closed major M&A deals. Align Technology, Intuitive Surgical and many others have added staff simply because they need them to keep up with demand.
Align has gone from strength to strength in recent years as demand for its invisible tooth-straightening product Invisalign has skyrocketed. The group’s share price has quadrupled across the past two years and it moved into opening bricks-and-mortar stores to lure in customers, as well as selling its products via dentist surgeries. It hired a net 2,600 employees in 2017, and its 44% staffing increase is extraordinarily high for a group that has not closed a merger.
Its sales per employee ratio, however, places it towards the bottom of the cohort. Intuitive Surgical is the winner on this metric, as it was last year, pulling in $573,155 per staff member. But it is the only one of the 15 largest groups to have seen this figure fall; last year it sold $582,530 per employee (Lack of takeovers sees medtech hiring staff again, August 2, 2017).
|Headcount changes of the top 15 medtech companies by market cap|
|Company||Market cap YE 2017 ($bn)||No of employees YE 2017||Headcount change 2012-17||Headcount change 2016-17||Medtech sales change 16-17||Sales per employee ($k)|
|* Jobs figures for 2012 and 2016 are for Siemens as a conglomerate. Source: EvaluateMedTech.|
The staffing change in Siemens Healthineers is perhaps a bit of an apples-to-oranges comparison. A year ago the company was a business unit in a vast and unwieldy conglomerate of nearly 350,000 people; it is not clear how the staff levels of the Healthineers unit itself have changed over the past year. The sales-to-worker ratio, however, is a fair comparison, and Healthineers’ figure of $429,895 is commendable.
A look at the fastest growing of all medtech companies, in terms of percentage headcount added, makes somewhat surprising reading. Reshape Lifesciences has grown faster than any other company, despite the deaths of two obesity patients implanted with its gastric balloon having been disclosed a year ago. The FDA issued a warning letter attributing one of the deaths to an oesophageal perforation during the implantation procedure (The balloon goes up for Apollo and Reshape, August 14, 2017).
Despite this, and the 98% fall in Reshape’s stock since the day before the deaths were disclosed, Reshape’s sales increased 64% from 2016 to 2017, and it has added staff accordingly.
|Top 5 headcount increases of the last year|
|By percentage of staff added||By number of staff added|
|Name||% added||2017 headcount||Name||Number added||2017 headcount|
|Reshape Lifesciences||159%||83||Abbott Laboratories||24,000||99,000|
|ICU Medical||143%||6,802||ICU Medical||3,999||6,802|
|Sientra||125%||200||B. Braun Melsungen||3,546||61,583|
In number terms the biggest expansion in headcount was Abbott’s, as it closed two multibillion-dollar acquisitions – those of St. Jude Medical and Alere.
The fastest shrinking company, meanwhile, seems to have suffered a case of overreach. In 2016 Ovascience, which aims to treat infertility with various technologies designed to improve the viability of eggs and embryos, increased its staff from 87 to 118. A the very end of 2016, however, it announced a restructuring, limiting investment in the launch of Augment, a technique whereby the mitochondria are removed from a woman’s egg precursor cells and injected into one of her egg cells, along with a sperm cell, during IVF.
The restructuring was intended to eke out the company’s cash to the beginning of 2019, and staff cuts, always a swift way of slashing costs, followed: at the end of 2017 its headcount was just 36.
|Top 5 headcount reductions of the last year|
|By percentage of staff cut||By number of staff cut|
|Name||% cut||2017 headcount||Name||Number cut||2017 headcount|
In any year there are winners and losers. Perhaps it is reassuring that the companies that are hiring are doing so because their businesses are doing well, whereas those that are shedding staff – at least the larger groups – have solid strategic reasons.