Medtech mergers still the driving force behind jobs changes

The wave of consolidation that swept through the medtech industry over the past couple of years has largely dissipated, but its effects are still being felt in the jobs market. Megamergers and divestments announced some time ago have only closed in the past year, and the changes in staffing levels are only now emerging.

Of the top 10 companies that expanded their workforce in terms of sheer numbers, seven did so as a result of buying other groups. With M&A activity slowing in recent months, particularly at the top end, changes in the medtech jobs market might be less pronounced in future (see tables below).

The analyses consider only those companies that obtain 40% or more of their revenues from sales of medical devices.

Among the cohort of largest medtech groups, those whose headcounts have increased most in the last year are of course acquirers. Zimmer finds itself with a workforce 75% larger after the closure of its $13.4bn acquisition of Biomet; this deal, announced in April 2014, kicked off the mergermania that characterised the medtech industry over the following 18 months or so.

The two orthopaedics companies being so similar, even being headquartered in the same small Indiana town, meant that the Zimmer Biomet merger took some time to close – a year and two months – partly so divestitures required for FTC approval could be completed.

Similarly, Becton Dickinson grew 62% in 2015 after absorbing the drug delivery group CareFusion in a deal announced nearly two years ago. And St. Jude Medical gained an extra 2,000 staff after buying Thoratec, growing 22%.

Smith & Nephew, which saw the fourth-largest expansion of its workforce in percentage terms, can point to organic growth for most of its headcount increase. It added around 350 new employees thanks to its purchase of the Russian company DeOst and DC’s trauma and orthopaedics business; the other 850 new recruits did not come via a buy.

Employee numbers of the top 15 medtech companies by market cap
No. of employees at year end
Company Market cap YE 2015 ($m) 2010 2011 2012 2013 2014 2015 % change 2010-15 % change 2014-15
Medtronic 107,612 45,000 45,000 46,000 49,000 92,000 88,000 96% (4%)
Abbott Laboratories 66,137 90,000 91,000 91,000 69,000 77,000 74,000 (18%) (4%)
Stryker 34,667 20,036 21,241 22,010 25,000 26,000 27,000 35% 4%
Becton Dickinson 32,466 28,803 29,369 29,555 29,979 30,619 49,517 72% 62%
Essilor International 27,021 38,112 48,700 50,688 55,129 58,032 60,883 60% 5%
Boston Scientific 24,832 25,000 24,000 24,000 23,000 24,000 25,000 0% 4%
Baxter International 20,893 48,000 48,500 51,000 61,000 66,000 50,000 4% (24%)
Zimmer Biomet 20,795 8,800 8,700 9,300 9,500 10,000 17,500 99% 75%
Intuitive Surgical 20,426 1,660 1,924 2,362 2,792 2,978 3,211 93% 8%
Coloplast 17,716 7,284 7,372 7,875 8,563 9,250 9706 33% 5%
St. Jude Medical 17,509 15,000 16,000 15,000 16,000 16,000 18,000 20% 22%
Edwards Lifesciences 17,012 7,000 7,800 8,200 8,600 9,100 9,800 38% 8%
Smith & Nephew1 16,295 10,172 10,743 10,477 11,036 13,468 14,686 44% 9%
C. R. Bard 13,961 11,700 12,100 12,200 13,000 13,900 14,900 27% 7%
Hologic 11,303 4,220 5,019 6,157 5,615 5,351 5,290 25% (1%)
1Numbers are averages for the year

The story is mirrored among companies that saw their staff count shrink. The biggest faller was Baxter International, shedding 16,000 jobs thanks to its spin-out of Baxalta.

Things will reshape themselves again in the year to come. Abbott is to close its $25bn acquisition of St. Jude Medical – its $6bn purchase of diagnostics group Alere is looking less certain – and Stryker’s purchase of Physio-Control will also shake up staff numbers.

A look at the biggest expansion in percentage terms across all companies is, again, an acquisition. When Cyberonics bought Sorin it added nearly 4,000 workers, expanding 612%. There was an iffy moment when the deal ran into a legal challenge, but this only delayed the transaction. When the deal closed Cyberonics changed its name to LivaNova (Legal challenge to Sorin-Cyberonics deal calls for careful handling, July 27, 2015).

Top 10 headcount increases of the last year
By percentage of staff added By number of staff added
Name % added 2015 headcount Name Number added 2015 headcount
LivaNova 612% 4,700 Becton Dickinson 18,898 49,517
Exact Sciences 187% 677 Zimmer Biomet 7,500 17,500
Nevro 133% 308 Steris 6,400 14,000
Wright Medical Group 94% 2,295 LivaNova 4,040 4,700
Steris 84% 14,000 Essilor International 2,851 60,883
Zimmer Biomet 75% 17,500 Hill-Rom 2,675 10,000
Vermillion 74% 54 St. Jude Medical 2,000 18,000
Lepu Medical Technology 74% 4,321 Smith & Nephew 1,218 14,686
OvaScience 67% 87 Wright Medical Group 1,115 2,295
Becton Dickinson 62% 49,517 Straumann 1,084 3,471

Reassuringly, the two next strongest-growing companies made no acquisitions. Exact Sciences’ 131% increase in staff numbers across its financial 2014 has been overshadowed by an even faster growth rate in the past year: the company nearly trebled in size and now has 677 workers. In 2010 it had just 35.

And neurostimulation group Nevro more than doubled in size thanks to FDA approval of its Senza spinal cord stimulation system, awarded in May 2015. Reimbursement followed in December.

But after that it is back to the buyers: Wright Medical and Steris closed their acquisitions of Tournier and Synergy Health, respectively, and Zimmer Biomet and Becton Dickinson appear once more.

Top 10 headcount reductions of the last year
By percentage of staff cut By number of staff cut
Name % cut 2015 headcount  Name Number cut 2015 headcount 
GI Dynamics (48%) 36 Baxter International (16,000) 50,000
Sunshine Heart (31%) 38 Medtronic (4,000) 88,000
Baxter International (24%) 50,000 Gerresheimer (412) 10,684
Mauna Kea Technologies (24%) 91 Getinge (323) 15,424
Stentys (18%) 33 Dentsply Sirona (200) 11,400
Cogentix Medical (15%) 181 Haemonetics (128) 3,255
Derma Sciences (13%) 263 Ambu (116) 2,225
Nanosphere (12%) 148 Conmed (100) 3,400
TearLab (11%) 118 Hologic (61) 5,290
EKF Diagnostics (8%) 365 Derma Sciences (40) 263

The two companies who cut the greatest percentages of their staff have not spun out units, nor have they been buffeted by macro trends. Instead their technologies have run into trouble. GI Dynamics was forced to abandon its intestinal liner EndoBarrier after the device, designed to treat obesity, was linked with a dangerously high rate of hepatic abscess (GI Dynamics has nothing up its sleeve, July 31, 2015). Having halved its workforce last year, it would not be a surprise to see GI Dynamics shrink further in years to come.

Sunshine Heart has twice halted enrolment in the pivotal US trial of its heart failure device C-Pulse. And in March this year investors were aghast when it emerged that the product, which had previously been described as minimally invasive, in fact required a sternotomy to implant. The company has been on a costcutting drive ever since.

While the occasional technological hit or miss can lead to a medtech company adding or cutting staff the single greatest trend behind staff changes is without a doubt M&A activity – even activity first announced some years ago.

To contact the writer of this story email Elizabeth Cairns in London at elizabethc@epvantage.com or follow @LizEPVantage on Twitter

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