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Fewer, but bigger: medtech jobs jump thanks to mergers

Original article featured on www.evaluate.com

Had it not already been obvious that 2014 was the year of the medtech megamerger, the changes in the largest companies’ workforces would make this crystal clear. Medtronic is now by far the largest medtech company in terms of headcount, with more than 90,000 on the payroll at the end of its 2014 fiscal year.

This analysis counts only those companies that obtain at least 40% of their sales from medical technologies. Johnson & Johnson met this criterion a year ago, but after the divestment of its Ortho-Clinical Diagnostics business in 2014 this is no longer the case. Thanks to its purchase of Covidien – the largest acquisition in the sector’s history – Medtronic is now the undisputed industry leader by market cap, medtech sales and staff numbers (see tables below and  click here for our free full report).

Even discounting the 39,500 jobs that the Covidien deal added, the number of Medtronic employees grew by 3,500 or 7% from 2013 to 2014. It is usual for headcount to be reduced after a merger closes, but Medtronic’s organic growth might well make up for any “rationalisation” of the Covidien workforce.

Employee numbers of the top 5 medtech companies by market cap
    No. of employees – year end    
Company Market cap YE 2014 ($bn) 2009 2010 2011 2012 2013 2014 % change 2009-14 % change 2013-14
Medtronic 102.6 43,000 45,000 45,000 46,000 49,000 92,000 114% 88%
Abbott Laboratories 67.9 73,000 90,000 91,000 91,000 69,000 77,000 5% 12%
Baxter International 39.8 49,700 48,000 48,500 51,000 61,000 66,000 33% 8%
Stryker 35.7 18,582 20,036 21,241 22,010 25,000 26,000 40% 4%
Becton Dickinson 27.1 29,116 28,803 29,369 29,555 29,979 30,619 5% 2%
Total for the top 15   338,757 364,407 380,672 388,619 391,128 458,531 41% 12%
For the full table please see the report

Another huge buy was responsible for the next greatest year-on-year increase. Smith & Nephew’s 22% expansion in its staffing levels is largely due to its $1.5bn purchase of the sports medicine specialist ArthroCare, which added around 1,800 jobs.

Acquisitions are set to have a big impact in the coming year, too. Zimmer’s purchase of Biomet and Becton Dickinson’s of CareFusion are now complete, but closed too late to be included in the 2014 analysis. Both Zimmer and BD should see a sizeable boost: in 2013, Biomet had 4,204 employees and CareFusion had 16,000.

Back to the past year, and Abbott’s 12% uptick in staffing cannot be explained by medtech acquisitions. The company’s one purchase in the period was Topera, a group developing electrophysiology technologies for atrial fibrillation, too small to account for the 8,000 more jobs added. Instead the increase is due to Abbott buying pharma companies, adding around 6,500 employees via its purchases of CFR Pharmaceuticals and Veropharm. Abbott seems to be shoring up its drugs business again as the dust settles from the separation of AbbVie.

Not one of the top 15 medtech companies by market capitalisation saw a net decrease in staff numbers last year. It could be that the economic upturn – at least in the US – is making medtech groups more confident of growing sales, and they are hiring accordingly.

Even Boston Scientific, which has been cutting jobs for some time to bolster its bottom line, brought in another 1,000 employees in 2014, and this was only partly down to the 350 workers gained through its acquisition of Bayer’s interventional cardiology business.

The only company among the top 15 not to show a net gain in jobs was St. Jude Medical, flat year-on-year. The firm has long been contending with shaky sales in its key cardiac rhythm management division, and in 2014 underwent a reorganisation that involved combining its manufacturing and supply chain operations. Although St. Jude said at the time that job cuts were not on the cards, things have, at best, merely remained steady.

Not for long, though. Assuming that the acquisition of the heart pump maker Thoratec for $3.4bn, announced in July, closes in the coming year, St. Jude will be at least 1,000 workers stronger this time next year – barring any divestments.

In percentage terms, so great was the jump in Medtronic’s headcount that it takes second place in the table of percentage increases among all companies last year. This analysis by its nature usually highlights smaller businesses, so this is an unusual finding.

Top 5 headcount increases of the last year
By percentage of staff added   By number of staff added
Company % added 2014 headcount   Company Number added 2014 heacount
Exact Sciences 131% 236   Medtronic 43,000 92,000
Medtronic 88% 92,000   Abbott Laboratories 8,000 77,000
Cogentix Medical 81% 214   Baxter International 5,000 66,000
MiMedx Group 74% 386   B. Braun Melsungen 4,128 54,017
Lombard Medical Technologies 73% 192   Essilor International 2,903 58,032
For the full table please see the report

Even Medtronic’s 88% increase is beaten, however, by the 131% boost in Exact Sciences’ employee numbers. The company is ramping up its sales force for the launch of its Cologuard colorectal cancer stool test, which got the go-ahead from the FDA and also gained US reimbursement approval last year.

This hiring trend looks set to continue. The company recently highlighted the “strong” launch of Cologuard, noting that over 21,000 tests had been carried out so far. Exact also recently raised $179m in follow-on financing, and plans to use a portion of this to expand commercialisation activities for the test.

After slow and steady growth in medtech employment in 2013, 2014 was more extreme, with big mergers and divestments leading to greater gains and losses. With industry consolidation, along with the likely continuing popularity of spinouts, the coming year could bring more of the same.

For our full report, which includes:
‚Ä¢ The sector’s biggest growers over the past five years
‚Ä¢ The sector’s biggest shrinkers over the past five years
please click here.