“Timing was right for sale of Synthes” video
Michel Orsinger, head of the orthopedics business of Johnson & Johnson (DePuy Synthes), talks with FuW on the state of integration of Synthes and the culture of the U.S. parent company.
The world’s largest healthcare group Johnson & Johnson (J & J) is struggling with the integration of almost a year ago for $ 19.7 billionacquired Swiss-American orthopedic specialist Synthes. “We still have less than half of the necessary work done,” says Michel Orsinger, head of the newly created business unit DePuy Synthes, frankly. In an interview with “Finanz und Wirtschaft” he also acknowledges that DePuy Synthes lost in spinal implants business customers as well as employees in research and development. But Orsinger, who previously led the business as Chief Executive Officer of Synthes wants to look forward. He is convinced that Synthes is due to the merging better positioned with the orthopedic activities of J & J to cope with the increasing cost of healthcare.
Mr. Orsinger, the 19.7-billion – $. Purchase of Synthes was the largest ever acquisition in the nearly 130-year history of Johnson & Johnson. How are you progressing with the integration?
Bring together two industry leaders, is a big undertaking. On the one hand it is to merge with the Synthes Orthopedic J & J’s. The J & J Group Customize – On the other hand, Synthes has – almost in the vertical direction. This requires many changes, such as in the accounts.We are now tied among other things, the provisions of the Sarbanes-Oxley Act.
Synthes was strongly influenced Swiss with 12 000 employees comparatively manageable. On merging with the original American giant Johnson & Johnson, which employs 128 000 people, as a shock to the staff worked?
I would not speak of a shock, but it’s been a change. Synthes as we were smaller and more agile. Now we are part of a large conglomerate, which makes certain requirements. I think, for example, to the personnel policies including compensation. In terms of compliance, there are new rules to follow. The compliance plays a central role in J & J.
Missing because of the complex integration of resources at the customer front?
The customer should feel nothing. Here, we are not to change – at least not in the short term. But the employees have been required. You are all working overtime to promote the integration.
How much of the integration effort has been managed up to now?
Less than half, I admit. Is time consuming, especially harmonization of the different IT platforms. Before we have not been completed, we can not simplify many processes in the Umsatzrapportierung, human resources and procurement of goods. Synthes alone had almost twenty manufacturing plants.
Consulting firms are likely to rub their hands in the face of this complexity. Go to the DePuy Synthes consultant in and out?
Until recently, yes. The consultants helped us primarily in the integration of the processes. In the meantime, we have but the consultant share totally broken down and carry out the work itself continues. Consultants are helpful in the process, but we need to determine the content itself.
Last January, you said at an investor meeting, the integration course as expected. Is that finding still?
Yes, we are on schedule.
They demand from its own employees overtime in favor of integration. Employees leave the company, because they can not afford this extra effort are increasingly ready?
Staff turnover in the Swiss units that deal with 3700 around 20% of the 18 000 employees of DePuy Synthes, is only 5%. This is a below average value and also slightly less than the time that Synthes was independently compared with the industry.
How many jobs have been lost as a result of the merger with Synthes and DePuy?
The only area where we have lost staff, is in business with spinal implants, the spine segment. Only here there were overlaps. With the merger of the two U.S. sites Spine some employees were not willing to change the work and residence. We are working to replace the outlets.They relate primarily to research and development.
The Spine-business has long been considered a problem child orthopedics industry. Synthes and DePuy have additionally lost customers since the merger in an already weak market environment?
It is true that the merger has given us a certain instability at the customer front and we have easily lost some market share. We are with a share of 20% but still the second largest provider behind Medtronic with 40% of the market.
After your assessment of the spine market is likely to stagnate until 2016, or at best grow by 3% per year. Think J & J after about an exit?
No. The Spine-business is greater than the $ 5 billion in severe trauma with an industry-wide sales of around $ 9 billion. Back problems are a social phenomenon, even in emerging markets. In China, we grow in Spine-range 20 to 30% per year.
In business with products for trauma surgery, traumatology, Synthes had a market share of 50%. Is that still the case?
It could be that we now control only 40 to 45% of the market. The reason however is not that we have lost share. Lack of reliable statistics, we have estimated the market earlier than too small. The local business in Asia is growing so much that is expected of a larger total volume. We are working to bring new figures.
Many American companies are under-represented in emerging markets. What is the emerging market share in the business of DePuy Synthes?
Between 10 and 11%.
So you can not really be satisfied.
No. But the fact is that the emerging countries contribute about one-third of the growth in sales of DePuy Synthes. China, our current sixth largest market, thereby expanding the fastest – on a percentage basis and absolutely in dollar terms. In traumatology, we benefit from the growing volume of traffic. Every month get in China 1.2 million extra cars on the market. The generated – unfortunately – more accidents.
Shifts due to the increasing importance of China, the focus of the business of DePuy Synthes long away from the U.S. and Europe?
We are forced to adapt. At the product level, we must increasingly develop tools that are tailored to the anatomy of Chinese.Furthermore, we need solutions that are easy to use by the surgeon and inexpensive to manufacture. The requirements in the Chinese hinterland are different than in the cities along the coast, where only the best and most expensive is in demand as in the watch market.
Open in China, Synthes thanks to the membership of Johnson & Johnson’s new doors?
As Synthes representative I could not perform authorities ministerial talks. With J & J on the back resulting in a completely different opportunities. Besides, we also benefit in recruiting: Chinese want to work for large international corporations.
In the industrialized countries are orthopedic provider since the outbreak of the financial crisis facing stagnating or falling vermehrtem volume and price pressure. Where is the problem?
In a recession, pushing patients out operations because they do not want to be missing in the workplace and partly also find it difficult to bear the costs of participation demanded by the insurers. Thanks to the rising life expectancy and many not yet satisfiable medical needs, the volume of long-term but are likely to rise even in highly developed countries. Otherwise, the prices. They sink more than the volume increase.
Who is to blame for the pressure on prices, the purchasing managers who take over the reins in more and more hospitals?
It is a fact that our traditional contacts, doctors and patients have lost influence and increasingly people in the management of the hospitals make purchase decisions. For me personally, that means that I try to get in contact with hospital leaders – people I have not known before.
What wishes carry the hospitals closer to you?
Many hospital leaders tell me that they want to reduce the number of suppliers around the spine area from seven to two. As a large organization with a comprehensive range of orthopedic we have an advantage here. We also have the opportunity to offer additional services add value. Still, it’s the future, but we may eventually take over the entire inventory management of a hospital as J & J Group. Smaller providers can only offer discounts on their products.
Synthes has seen so just go in time under the wing of an industry heavyweight?
The sale timing was just right.