3M CEO updates on healthcare spinoff amid revenue decline

3M CEO talks healthcare spinoff, revenue drop | Pharma News

In a recent company update, 3M has provided insights into the status of its long-anticipated healthcare business spinout, indicating that while the process is advancing, the timeline has been slightly adjusted.

Originally unveiled in the summer of 2022, 3M had initially projected the spinout’s completion by the end of 2023. However, during an earnings call earlier this year, Chief Financial Officer Monish Patolawala acknowledged the potential for an extension into the first quarter of 2024. This extension was attributed to the need for approvals from the IRS, various government agencies, and the board to ensure a tax-free transaction.

The most recent development, as disclosed in 3M’s third-quarter earnings report, suggests that the spinout’s culmination is now expected within the first half of the coming year.

During the earnings call, CEO Mike Roman underscored the progress being made in the spinout process. He specifically highlighted the recent appointments of former Zimmer Biomet CEO Bryan Hanson to lead the soon-to-separate segment and the appointment of Carrie Cox as the chair of its board.

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Roman expressed optimism about the spinout, stating that while there aren’t foreseen obstacles, there is still a substantial amount of work ahead. This work includes building out the executive and board teams for the separated healthcare segment, implementing system changes, establishing legal entities, and managing the required regulatory filings under the guidance of Patolawala, who is overseeing the separation process.

Roman affirmed, “The team has given us great confidence that we’re on track for the timing that we talked about in early 2024 and see ourselves getting there successfully.”

Furthermore, Roman discussed 3M’s plans for the healthcare business after the spinout’s completion. Initially, 3M will retain a stake of just under 20% in the newly created healthcare company, with intentions to divest this position over time.

3M’s strategy revolves around positioning the healthcare business as an independent, leading healthcare technology company, poised for success. The forthcoming CEO and board will shape the future strategies for value creation, growth, and portfolio management.

These updates come in the context of 3M’s overall financial performance, which has seen declining revenues. The company reported a 3.6% decrease in net sales, totaling $8.3 billion, compared to the same period last year.

While the healthcare segment showed resilience among 3M’s four core businesses, it still experienced year-over-year declines. Quarterly sales dropped 0.2% to just under $2.1 billion, with year-to-date sales falling by 3.5% to about $6.2 billion for the first nine months of the year, compared to approximately $6.4 billion in the previous year.

Additionally, 3M reported a net loss of over $2 billion for the quarter, bringing the year-to-date loss to more than $7.9 billion, a significant shift from the positive profits of $5.2 billion in the same period the previous year. This decline was largely attributed to a $4.2 billion pretax charge related to the settlement of a major class-action lawsuit regarding allegedly defective earplugs sold to the US military, leading to an overall payout of just over $6 billion in cash and stock by 2029.

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