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Smith & Nephew Cuts About 150 Jobs in Tennessee
Smith & Nephew is cutting about 150 jobs in Memphis, TN, primarily in manufacturing, as part of an ongoing productivity improvement program. The layoffs were first reported by MassDevice and later confirmed by Medtech Dive.
During recent earnings calls, CEO Deepak Nath has talked about the company's continued turnaround plan since he took the job in 2022.
"My assessment when we began this turnaround was that Smith & Nephew was a portfolio of?fundamentally good businesses with excellent technology and the right to win in every part of the company," Nath said during the company's earnings call in August. "The diagnosis of why we want that full potential was that we had challenges around execution and culture, and we developed the 12-point plan to address those remaining issues. The progress we've made since 2022 is evidence that we had the right diagnosis, and we are now firmly on the path to the better financial outcomes that we've been aiming for."
More recently, during the company's earnings call in November, Nath mentioned that the company is "focused on operational improvements in-house" and that there had been "quite a bit of progress" on those efforts.
Nath also talked about the company's 12-point plan in February.
"We continue to transform the way we operate Smith & Nephew through our 12-point plan, which aims to drive better execution in a more focused and accountable business unit structure," Nath said during the February 27 earnings call. "Our progress against the plan has laid the groundwork for improvement in U.S. recon with better product availability and improving set deployments by the end of the year. Our innovation strategy is delivering a strong pipeline of new products to drive consistent high growth over the coming years. And our productivity is visibly improving."
The recent job cuts in Memphis are reportedly tied to the company's ongoing productivity improvement plan, according to Medtech Dive.
Getting to the Heart of the 2024 Cardiovascular Market
By Lisette Hilton, Reporter and President
Cardiovascular intervention is one of the largest and fastest-growing disease areas in medtech, Jennifer Kozak, vice president of new business development at Johnson & Johnson cardiovascular therapeutics, said in an interview for EY’s Pulse of the MedTech Industry Report 2024.
Report author John Babitt, EY Americas medtech transactions leader at Ernst & Young, reports lots of activity in cardiovascular—"so much so that we actually heard some companies mention there were capacity issues in the interventional cardiology suite.”
Spotlight on pulsed-field ablation
Medtronic and Boston Scientific were first to gain FDA approvals for pulsed-field ablation (PFA) technologies in late 2023 and early 2024, respectively.
Medtronic’s PulseSelect PFA?was the first such system to win FDA approval in late 2023, for treating paroxysmal and persistent atrial fibrillation (AF), paving the way for rapid adoption of the technology in 2024. In October 2024, Medtronic announced approval of the Affera Mapping and Ablation System with the Sphere-9 Catheter, indicated for the treatment of persistent atrial fibrillation and for RF ablation of cavotricuspid isthmus (CTI) dependent atrial flutter.
MD+DI reported in October that FDA approved Boston Scientific’s Farawave Nav Ablation Catheter, which integrates cardiac mapping and therapy delivery, reducing the need for multiple devices during procedures.
And in November, Johnson & Johnson joined the PFA race with approval of its Varipulse technology.
Experts anticipate significant growth in the PFA market, comparing it to the historical competition seen in the stent market.
Valve repair innovations
In February, Edwards’ Evoque valve replacement system was the first transcatheter therapy to earn FDA approval for tricuspid valve treatment. Abbott received FDA approval for its TriClip transcatheter edge-to-edge repair (TEER) system to repair leaky tricuspid heart valves in April 2024.
Technologies to treat other heart valves also made waves in 2024.
“There are a few products that have been approved for mitral, and more are coming in tricuspid. On top of that, you had some label indication expansion in the transcatheter aortic valve replacement (TAVR) in the aortic [stenosis] space,” Babitt said. “All three of those markets should be poised for decent growth in 2024 and continued growth in 2025.”
Babitt sums it up as: Medtronic and Edwards are big players in the aortic space. The mitral space has been about Abbott, but Edwards has a play there. And, certainly, Medtronic has some products under development. And there are a number of emerging players that are making quite a bit of progress. All those companies have tricuspid programs as well.
New kid on the block: Renal denervation
Renal denervation is a minimally invasive, FDA-approved approach using technology to lower blood pressure without medication. It works by reducing activity of renal nerves in the kidneys, which, when overactive, can increase blood pressure.
Babitt predicts renal denervation will be one of the more interesting stories in 2025, when companies sort out reimbursement and introduce approved products to treat hypertension.
“I think PFA was … a ‘GLP-1ish’ billion dollar plus opportunity for the medical technology space [in 2024]. It looks like that could be the case for renal denervation,” Babitt told MD+DI.
Big players in renal denervation include Medtronic and Recor Medical’s parent company, Otsuka.
A note about Shockwave and remote care technologies
In April, J&J announced the acquisition of Shockwave Medical, known for its intravascular lithotripsy (IVL) technology, which treats atherosclerotic cardiovascular disease with sonic pressure waves that disrupt calcified plaque.
“Johnson & Johnson’s $13.1 billion acquisition of Shockwave was not only the biggest medtech M&A move since Johnson & Johnson itself acquired Abiomed in the last quarter of 2022, but also the seventh-biggest deal from a therapeutic device manufacturer in the last decade,” according to the EY report.
There also is a trend in cardiovascular medtech, Babitt said, for care to migrate into less acute settings.
“If that migration happens, there is going to be a lot of opportunity to really increase volumes. I know that a lot of companies are looking eagerly to facilitate and participate in that care migration [which includes wearables and at-home monitoring],” Babitt said.
Overcoming challenges into 2025
Increasing costs seem to have been more prevalent in medtech than in other industries, Babitt said.
“While we’ve seen revenue rebound at a nice clip, earnings have been and continue to be under pressure,” he said. “When we came into 2024 [in January], earnings were forecasted… to increase by about 8%, while revenue was forecasted to increase by about 5% to 6%. I would be surprised if we didn’t see that earnings growth number for 2024 closer to 5%.”
And while the number of deals done in 2024 was down from previous years, at around 100, the dollar volumes of those deals ticked up (as in the J&J Shockwave deal), Babitt said.
All in all, 2024 medtech was “reinvigorated with a lot of really promising technologies and a lot of robustness in the growth,” he said.
Avoid Engineering Your Product Twice: Get the Latest on FDA’s New Cybersecurity Requirements
“Cybersecurity is a really important part of your system, and you need to make sure that it's part of your thought process from day one, when you're designing and architecting your device, all the way through certification,” said Mark Omo, director of engineering at Marcus Engineering, in a recent interview with?Design News. “If you wait to do it at the end, you’re going to be very sad because you’re going to have to engineer your product twice,” he said.
领英推荐
Omo will be speaking at the upcoming MD&M West conference in Anaheim, CA, in the session, “How to Avoid Engineering Your Product Twice: Mastering the New Cybersecurity Requirements for 510(k) Submissions,” on Wednesday, February 5, from 11:15 AM to 12:00 PM, in Room 202B.
Omo’s session will focus on FDA’s new cybersecurity requirements for 510(k) medical device submissions. He explained that the agency now expects companies to evaluate and then mitigate the security risks that are identified during the product development phase. “We want to help everybody understand what they need to do when they’re designing products, what processes they need to follow,” he said.
Startups and veteran companies alike are affected by the new regulations, Omo said. Newer companies might be so focused on developing a cool new technology for which they might not prioritize or even consider cybersecurity. “Those are the ones who are not budgeting for it,” he said. “It's a big surprise when they go to certification. They think, ‘we’ve spent years on this. We’ve got all our investors, we spent all our money, and all of a sudden we have this new setback that's going to cost a lot more money and more time to get to market.’”?
But FDA expects that all on-market devices have to comply with the new regulations as well, he said.?“And so, if you go to FDA and you have an already on-market device, and you want to change it, which might require a new 510k, FDA is going to ask you for all of this documentation that you never had to have before for your device,” Omo said. “And so there may be substantial rework and redesign required of an on-market device to comply with these regulations.”
To avoid having to go back to the drawing board and re-engineer their devices, companies need to carefully understand all the requirements and be able to show FDA that they did their due diligence for their product, Omo said. He encouraged companies to think about securing their products similarly to how they might protect their homes. “We would think about it like a thief trying to get in your home,” he said.?
Omo said he hopes to present a good overview of the landscape of all the things that companies can do to comply with the new cybersecurity regulations. Topics include threat modeling, secure product development frameworks, and the essential role of the Software Bill of Materials (SBOM). He said that while he is not planning to go in-depth on the regulations, he hopes to provide a high-level understanding, so his attendees can then later dig into all the details.?
“We think about the safety of the product and now we need to think about the security of the product,” he said. “And the secure development life cycle is the process that teams and companies use to help make sure that that process is integrated throughout their system, throughout their life,” Omo concluded.
Omo will present, “How to Avoid Engineering Your Product Twice: Mastering the New Cybersecurity Requirements for 510(k) Submissions,” on Wednesday, February 5, from 11:15 AM to 12:00 PM, in Room 202B.
Medtech M&A Picked Up in 2024, But Belt-Tightening Continues
After a sluggish 2023, medtech M&A rallied this year to deliver a modest increase in deal activity. Inflation eased slightly, which inspired new activity. Also, the impact of GLP-1 drugs was not as dramatic as some feared, and dealmakers may have adjusted to a climate of higher-than-near-zero interest rates.
According to a report from JP Morgan, medtech M&A transactions in the first half of 2024 alone totaled 114, compared to 127 for all of 2023. M&A deal value also climbed to $40.3 billion in the first half of 2024 — not far off the $47.7 billion generated in the entire prior year.
Venture capital investments also increased this year. JP Morgan projects venture investment to reach $19.4 billion this year compared to $15.8 billion in 2023.
Those numbers align with a recent report from Zapyrus, which states total investment for Q3 reached $13.9 billion among 792 medtech companies. That’s the biggest surge since the COVID-19 peak, the report stated. About a third of these companies are planning clinical studies in 2025.
While investment is accelerating, medtech companies have also tightened their belts. Pressure to maintain or improve profit margins has led to layoffs, divestitures, and balance sheet cleanups.
Glenn Snyder, who leads Deloitte’s medical technology practice, relayed results from a poll the company conducted of life sciences and healthcare professionals. When asked if they believe margin pressure is one of the top two challenges for their business, about 9% of biopharma executives said yes, and 43% of medtech execs agreed.
Snyder said negative margins among hospitals and healthcare systems, combined with economic and geopolitical uncertainty, have added to the squeeze. “Companies tend to not want to make big plays or bets when there's a lot of uncertainty,” he said. “However, some of these factors have started moving toward a bit more certainty, which has prompted M&A activity to pick up.”
Patrick Cornelius, a partner at Barnes & Thornburg LLP who works with clients in healthcare and life sciences, said medtech start-ups have generally struggled this year. “A number of earlier-stage medtech companies have had to go through down rounds as they've gone through equity raises,” he said. “Some of them have looked for other means to bridge the gap, potentially to 2025, when valuations may go up a bit.”
Focus shifts
Joe Heanue, PhD, CEO of Silicon Valley-based Triple Ring Technologies, an investment and development company, said in an earlier interview with Snyder that corporate venture and private equity are working together in interesting ways this year.
Large medtech companies that have grown through acquisitions are starting to carve out more nimble business units, for example. In January, Montagu Private Equity carved out Cook Medical’s biotech unit and combined it with RTI Medical, a contract development and manufacturing company. Additionally, in March, Johnson Matthey announced plans to sell off its Medical Device Components business for about $700 million, transferring ownership to Montagu.
Generally, the focus this year has been on de-risking assets by way of modest investments. As Snyder explained, de-risking initiatives may include evaluating engineering, supply chain, and product development, for example, under a lens of reducing risk.
2024 medical device highlights
While 2020 was the year of diagnostics, investments in cardiovascular and surgical robotics ratcheted up funding in 2024. Johnson & Johnson’s $13.1 billion acquisition of Shockwave Medical, which developed an intravascular lithotripsy (IVL) platform for coronary artery disease (CAD) and peripheral artery disease (PAD), pointed at an active year to come. Soon after, Becton Dickinson (BD) announced that it would acquire Edwards Lifesciences’ Critical Care Business for $4.2 billion.
Boston Scientific also had an active M&A year The company announced it would buy Cortex, which develops diagnostic mapping technology to detect potential signs of atrial defibrillation outside pulmonary veins and is also waiting to close a $3.7 billion acquisition of Axonics, a company that develops products designed to treat urinary and bowel dysfunction. As part of the Axonics deal, Boston Scientific stopped offering Coaptite, a product intended to treat stress urinary incontinence in women, as of Nov. 1. Additionally, the company also acquired Silk Road Medical and its platform of transcarotid artery revascularization (TCAR) system this year for $1.16 billion.
Activity in surgical robotics and instruments centered on Stryker’s string of tuck-in acquisitions. In August, Stryker announced it would acquire Vertos Medical, developer of the minimially invasive mild procedure for spinal stenosis, as well as Care.ai, an artificial intelligence-based solution for hospital settings. Other 2024 deals include an acquisition of Artelon, which specializes in soft tissue fixation products, and NICO, which developed an approach to minimally invasive surgery for tumor and intracerebral hemorrhage (ICH) procedures.
Also of note was the ventures of Corza Medical. The surgical technology company, a portfolio company of private equity firm GTCR, closed its?acquisition?of the?TachoSil?manufacturing operations?in Linz, Austria, which is part of Takeda’s global production network. The?acquisition, completed in July,?will enable Corza Medical to control manufacturing priorities directly.
Women’s health OEMs also received substantial investment in 2024. Zapier reported that funding for this historically overlooked research area surpassed even cardiovascular devices in Q3 2024 (47.8% of Q3 funding vs 43.1% for cardiovascular).
Other areas to watch include electrophysiology and neurostimulators developed to treat chronic, neurologic, and psychiatric conditions and disorders. Devices that both meet an unmet need and help streamline hospital operations may be a good bet.
“What I hear from my healthcare colleagues is that labor costs are the biggest pressure on hospitals,” Snyder said. “A device that helps streamline labor requirements in a hospital — possibly cutting labor costs or making it easier for a lower-skilled individual to do a higher-skilled job — becomes an attractive investment for the hospital environment. Requiring more labor is going to be an impediment to getting an innovation launched.”
Looking ahead
Executives polled by McKinsey view the overall economy with cautious optimism. The same could be said for medtech.
Pitchbook analysts said they, “expect nominal revenue growth in the mid-single digits for 2025 across most medtech segments, with an exception for high-growth diagnostics companies such as Natera and Exact Sciences,” according to a Q3 2024 report. Analysts also anticipate strong free cash flow (FCF) generation for most public medtech firms.
“I don’t expect a significant difference in 2025,” Cornelius said. “We’ll likely see a continued focus on tuck-in transactions to build out a product suite or help tell the story of a product line that companies can bring to market.”
The ongoing challenges associated with CE Marking under MDR and IVDR in the EU may also lead to increased activity in the US.
“The FDA’s approval speed has improved, which will help US companies get their products to market more quickly, and given the challenges in the EU, will bring more European source capital to the US market,” Cornelius said. “That may provide an uplift in valuation, as there will be more capital competing for those deals.”
Medtech companies planning to launch new products in the coming year may want to consider ways to de-risk their product in the eyes of investors while providing clear value to physicians, patients, healthcare executives, and investors.
“Align your ideas with what the market wants to invest in,” Snyder said. “A lot of corporates are looking for a highly specific investment. If you know what they're looking for, and your innovation aligns, you’re more likely to get your company funded.”
Recommended Reads ??
?? The Biggest Winners in the Medical Device Industry: A look at the companies, policies, and medical device segments that had the biggest gains in 2024.
?? 2024’s Biggest Medtech Losers: From an uptick in recalls and layoffs to proxy fights and company closures, some in the industry are ready to say sayonara to 2024.
?? Top 10 Medtech News Stories of 2024: MD+DI has rounded up the top 10 news stories of the year to show what mattered most to our readers in 2024.
?? Top Medical Device Deals of the Year: A look at the mergers and acquisitions that are changing and shaping the industry for the coming year.
?? Boston Sci Slapped with Safety Communication for Accolade Pacemakers: FDA is working with Boston Sci to evaluate whether all Accolade pacemakers have the risk of permanently entering safety mode, thus meaning they would need to be removed.
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