<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=1000083763474443&amp;ev=PageView&amp;noscript=1">

SmartTRAK Life Sciences News and Analysis Blog

5 min read

Supply Chain and Inflationary Pressures Weigh on Wound Care Companies

4/26/22 8:30 AM

Supply Chain Header V9Macroeconomic headwinds are projected to continue through the first half of 2022.

Supply chain headaches and inflationary pressures significantly impacted wound care companies in 2021. Though Advanced Wound Care revenue rebounded +11.5% in 2021 according to SmartTRAK’s Financial Dashboard, it was not without strong headwinds of higher input costs, logistical nightmares and labor shortages.

To understand how these macroeconomic trends affected wound care companies, SmartTRAK reviewed quarterly and fiscal year earnings reports from FY21 to see how various wound care companies reported the company-specific impact. From troubles sourcing materials to higher input costs and the need to raise prices, SmartTRAK uncovered a consistent trend of macroeconomic pressures affecting many global and regional wound care manufacturers.

Be The Expert in Wound Care -  Click for FREE SmartTRAK Updates for 30 Days

Smith + Nephew
Smith + Nephew’s* (SNN) global business and manufacturing footprint were not immune to headwinds. In its recent FY21 quarterly earnings call, SNN stated raw materials costs impacted profitability margins by 30 basis points. Though SNN management is interested in pursuing price increases, they don’t believe they can raise price to equal the “higher-than-normal” input cost inflation the business is experiencing. In FY22, SNN expects inflationary “headwinds” to equal 125 basis points bottom-line impact. Specifically, SNN stated electronic components for products increased by 20% in FY21. Looking forward to FY22, SNN projects revenue growth in the +4% to +5% range but expects the growth to be weighted in the second half of the year.

Integra LifeSciences
Integra* sees supply chain disruptions, production and provider staffing challenges as items of “greatest risk” in FY22. Integra’s management believes the back-order problem will persist into Q222 and like SNN, the Company forecasts greater sales growth in the second half of FY22. Management highlighted that its Q421 margin was lower than expected on account of increased freight costs, supply chain disruptions and absenteeism in their factories. Some specific types of supplies Integra is struggling to procure are electronic components, packaging materials, plastic moldings and other items used to manufacture product. To deal with the increased cost of procuring materials, manufacturing and delivering product, the Company incorporated “commensurate price increases.” Integra management stated they were “pretty aggressive” when looking at price, which included increasing list prices, adjusting discounts and upping prices for new customers.

In its recent strategic update and outlook meeting for 2022, 3M’s* leadership cited global supply chain challenges as an area of concern that will last through at least the first half of FY22. The business believes that increased raw material costs and logistics represent a $350.0MM to $450.0MM headwind for the full FY22. For Q122 alone, 3M believes these headwinds will be significant and amount to a headwind of $200.0MM to $250.0MM. As a result of the supply chain issues, 3M sees difficulty in forecasting demand and managing logistics as they have more inventory “on the water”  than ever before. Leadership highlighted that they are being good stewards of their resources but that manufacturing headwinds and supply chain woes more than offset their internal cost containment discipline and restructuring activities.

Cardinal’s* leadership highlighted in its recent earnings report that “unprecedented” inflationary and supply chain constraints impacted its medical segment in FY21. Cardinal cited these constraints as a reason for -79% decrease in profit. Specifically, domestic freight, other commodities and global supply chain issues in the volumes of its higher-margin Cardinal brands. Adding it up, Cardinal management stated the constraints and lower than expected pricing offsets will have an incremental $150.0MM to $175.0MM headwind to the Medical segment. As a result of these pressures and headwinds, the business is focused on “optimizing our global supply chain” and delivering cost savings to the bottom line.

In response to an investor question on its latest quarterly earnings call, McKesson’s* management highlighted the Company’s productivity efforts and pricing optimization to deal with macroeconomic constraints. Management stated that their business model of supply and service stability allows them to incorporate higher input costs into pricing.

In its 2021 year-end report, Essity’s* leadership stated that in response to “significant challenges in our operating environment” the Company implemented price hikes across its portfolio and will look for further price increases to continue offsetting inflation in 2022.

In its recently published 2021 annual report, Mölnlycke’s* leadership commented the business faced significant increases in the cost of goods sold because of higher raw material costs and logistics. Management stated these increased costs had a material impact on the Company’s financial performance. Despite these manufacturing and logistics constraints, Mölnlycke’s wound business delivered solid, business-leading growth in FY21.

*These links can only be viewed by SmartTRAK subscribers to this module. For more information on SmartTRAK, including how to receive a demo and subscribe, please click the button below.

SmartTRAK now offers Skin Substitutes (CTP) Site of Care. This module will make you an expert in Site of Care information for the Skin Substitutes market and includes market shares, 5-Year Growth Projections and Company & Product Performance across multiple sites of care. Download our PDF to get a preview of what's available!
Download the Skin Substitutes (CTP) PDF

Topics: Wound Care

Gary Delhougne
Written by Gary Delhougne

SmartTRAK GM, Wound. Licensed attorney with 20 years’ medical device and consulting experience in market access, health economics and policy roles at Smith & Nephew, Covidien, Avalere Health and Ernst & Young.

  • There are no suggestions because the search field is empty.

Follow Us on Social Media

Recent Articles