Medical Device Giant Announces Details of 800 Job Cuts

Recently, Solventum announced that after spinning off from 3M last year, the company implemented a major restructuring plan, cutting 800 jobs. Although the restructuring cost $120 million (approximately RMB 870 million) for layoffs and related expenses, it is expected to save the company an equivalent amount annually, with the first year's savings offsetting the incremental costs of being an independent listed company and growth investments.

Solventum stated that the company had an existing team structure when it was spun off from 3M, and the number of employees in Minnesota has been continuously growing. This restructuring aims to direct strategic investments towards further business growth.

Public information shows that on April 1, 2024, 3M Company officially spun off its Health Care division to form a new independent publicly listed company named Solventum Healthcare, focusing on four major businesses: medical and surgical, dental solutions, health information systems, and purification and filtration.

It is worth noting that less than a year after the spin-off from 3M, the company announced a restructuring and layoffs. In December 2024, Solventum CEO Bryan Hanson communicated a major decision regarding "layoffs" and "reallocation of resources" to all employees via a video message. Immediately following, the company formally confirmed the layoff news to all employees by email. Subsequently, Solventum confirmed the layoff plans to multiple media outlets and stated that it would affect several departments.

Solventum CEO Bryan Hanson said: "Solventum has tremendous potential, with attractive businesses, a large and growing market, and highly regarded brands. We have made significant changes to unlock our potential in the medical and surgical, dental solutions, and health information systems businesses, enabling the company to achieve accelerated growth and create value for shareholders."

To address the organizational situation described in the report as "centralized, inefficient, and lacking in decision-making power and accountability," the company launched a global restructuring plan to achieve decentralization and align the company internally to support a "corporate culture of enhanced autonomy, increased speed, and accountability."

This restructuring involves the company's R&D, medical affairs, and corporate marketing, aiming to improve the innovation process. Solventum stated that it has also realigned thousands of positions to drive business growth and has begun evaluating new product launch plans to decide whether to terminate or retain these products, focusing on more innovative and valuable products.

Solventum states that currently, 85% of the members in the company's leadership team are newly joined, and among the executives at the vice president level and above, more than 60% are new members. The company has also designated some positions as "critical for transformation" and stated that 40% of the personnel in these positions are new to the company.

The second phase of Solventum aims to "enhance strategic focus." The company expects 80% of its revenue growth to come from negative pressure wound therapy, intravenous infusion site management, sterilization assurance, core repair products, and revenue cycle management.

It is worth mentioning that in February of this year, Thermo Fisher Scientific announced a major acquisition plan, with the company set to acquire Solventum's purification and filtration business for $4.1 billion (approximately 29.8 billion RMB) in cash. At the time, this news sparked significant attention in the capital market.

This sale by Solventum is also a crucial part of the company's transformation plan's third phase. Through a comprehensive evaluation of business value and strategic fit, the company believes that this transaction can not only strengthen strategic focus and key indicators but also effectively reduce leverage, greatly enhancing the robustness of the balance sheet. It will provide more resources for the company in innovation, project advancement, and talent development, helping to achieve the company's mission and create greater value for shareholders.

Company management plans to discuss the sale in detail during the earnings call on February 27.

Thermo Fisher Scientific believes that Solventum's purification and filtration business is highly complementary to its own bioproduction business. President and CEO Marc Casper noted that this acquisition is an excellent strategic move, which will create significant value for customers and shareholders. Solventum's portfolio of solutions will be well-recognized by customers, further demonstrating the company's rigorous and effective capital allocation strategy, a strategy that has already delivered substantial returns to shareholders in the past.

It is reported that the transaction is expected to be completed by the end of 2025, subject to customary closing conditions and regulatory approvals. Once completed, Solventum's purification and filtration business will be integrated into Thermo Fisher Scientific's Life Sciences Solutions segment.

Public information shows that on April 1, 2024, 3M officially spun off its Health Care division, establishing it as a new independent company named Solventum Healthcare.

Looking back at the development history of Solventum, in June 2022, industry giant 3M first signaled its intention to spin off its healthcare business, a piece of news that was like a stone thrown into a calm lake, causing widespread attention and discussion both within and outside the industry. On July 26 of the same year, 3M officially announced the split of its healthcare sector, aiming for long-term sustainable growth and meeting the development needs of different businesses, laying the groundwork for the birth of Solventum.

In November 2023, 3M announced that the independent healthcare company after the spin-off would be named Solventum, a naming that marks the new company's official entry into the public eye and also fills the industry with anticipation for its future development.

2024 is a crucial year for the development of Solventum. On February 21, 3M filed a statement with the U.S. Securities and Exchange Commission, planning to spin off its healthcare business into Solventum on April 1 and list it on the New York Stock Exchange, which further propelled Solventum's independence process. In March, the 3M board approved the spin-off plan, giving the "green light" for the birth of Solventum.

The data shows that in terms of business layout, Solventum continues the business of 3M's medical sector, covering four major segments: medical surgery, dental, health information systems, and filtration products.

Medical surgery is the largest business unit of Solventum, even larger than the sum of the other three units. This unit focuses on providing a wide range and innovative advanced wound care and surgical solutions, with products ranging from stethoscopes to surgical equipment. Sales methods include both direct sales and distribution. In the advanced wound care market, 3M was once the undisputed leader, launching well-known brands such as negative pressure wound therapy and transparent film dressings, like Tegaderm and Prevena. Previously, Solventum stated that these devices still have significant market expansion potential.

Following medical surgery is the dental business. Dental solutions provide comprehensive restorative, preventive, and orthodontic solutions. In terms of sales channels, Solventum not only has a direct sales group including dentists, orthodontists, group practices, universities, etc., but also cooperates with distributors to further expand market coverage. In terms of products, Solventum is a leader in dental and orthodontic bonding solutions, launching the first tooth restoration composite material on the market, and building well-known brands such as Filtek and Clarity.

Health information systems are Solventum's third largest business unit, providing software solutions through clinical intelligence to create more time for clinicians to provide care to patients and improve the accuracy of healthcare reimbursement. This business is mainly divided into three major segments: clinician productivity solutions, revenue cycle management, and performance management solutions, with the revenue cycle management segment contributing the most to sales. Solventum states that it is a leader in computer-aided medical coding technology in the US market, with over 75% of US hospitals using at least one of its software solutions.

And the filtration business announced for sale last month is the smallest contributor to Solventum's performance (accounting for 12%), with revenues of $1 billion (approximately 7.2 billion RMB) in 2023. This business mainly provides filters and membranes used in the production of biopharmaceuticals, medical technology, microelectronics, food and beverage products, as well as for filtering cleaner drinking water. It is reported that through innovative technology, Solventum has simplified the originally cumbersome 3-step operation into a single step and increased the process yield from 85% to 95%.

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It is worth mentioning that after the independent spin-off and listing, Solventum's development has not been smooth. As an independent multinational company, it faces new market competition and challenges. In addition to facing huge debts, its cost control capability seems to have declined. In the latest financial quarter announced at the end of last year, its operating profit margin decreased by more than 10% compared to the same period of the previous year.

For the quarter ending September 30 of last year, Solventum's adjusted net profit was $285 million, with sales at $2 billion. Compared to its performance as one of 3M's four major divisions, its adjusted profit fell by more than 40%. In the face of severe development conditions, Solventum announced a restructuring and officially began layoffs in December of last year.

Recently, Solventum stated that although the restructuring cost 120 million US dollars for layoffs and related expenses, it is expected to save the company an equivalent amount of money annually, with the savings in the first year offsetting the incremental costs as an independent listed company and growth investments. So, after undergoing a series of actions including restructuring, layoffs, and business divestitures, how will Solventum develop in the future? Medical Device Home will continue to follow and report on this.