St. Jude Medical Announces 300 Layoffs In Restructuring Plan
St. Jude Medical Inc. has announced it will fire 300 workers in a reorganization effort that will save the company $50 million to $60 million in annual pretax expenses beginning in 2013.
St. Jude, maker of heart rhythm devices, has decided to merge its four divisions into two product operating units — the implantable electronics systems division and the cardiovascular and ablation technologies division — according to Bloomberg Business Week.
The medical device company made the announcement on Friday, saying that the move will help them to bundle support and other staff, as well as improve efficiency and cut costs. Thomas Gunderson, senior analyst at Minneapolis-based Piper Jaffray & Co. stated:
“This is another piece of fallout that we can attribute at least in large part to the medical device tax. From a shareholder standpoint and Wall Street standpoint, it’s always good to cut expenses.”
The St. Jude Medical restructuring is likely an effect of the medical device makers 2.3 percent excise tax on products, which will begin next year. The excise tax levy was designed as part of the 2010 health-care reform law, and should raise $20 billion to expand coverage of uninsured Americans, reports Reuters.
Pacemaker and defibrillator sales have declined over concerns of safety and overuse. Daniel Starks, chairman, president and chief executive officer of St. Jude, stated:
“The reorganization we have announced today is part of a comprehensive plan to accelerate our growth. We are focused on reducing costs, leveraging economies of scale, maintaining the highest level of quality, and funding our entire portfolio of new growth drivers.”
St. Jude Medical’s sales are expected to decline one percent in 2012 to $5.5 billion, the first year-over-year decrease since 1990.