Bryan Hanson, soon-to-be CEO of 3M’s Solventum healthcare spinoff, is no stranger to major changes in medtech.
He had direct involvement in medtech’s largest spinoff, when Covidien separated from Tyco. Hanson then led the integration of Covidien into Medtronic in medtech’s largest-ever acquisition. While at Medtronic, he also led the divestiture of its Patient Recovery business to Cardinal Health.
After several years in the corner office at orthopedic giant Zimmer Biomet, he’s now tasked with leading the planned Health Care spinoff at 3M.
“I have a lot of knowledge and experience in transformation,” Hanson said during Solventum’s inaugural Investor Day event. “[They were] all different transformations, but what you’ll find is some commonality in every transformation. There are always differences, but there’s always commonality as well. So I will bring experience to make sure that this transformation goes well.”
St. Paul, Minnesota–based 3M first announced plans to spin off its Health Care unit in June 2022. The company selected Hanson to lead the new company in August 2023. It named the standalone company “Solventum” in November 2023. led by former Zimmer Biomet CEO Bryan
Following board approval, 3M applied to list Solventum on the New York Stock Exchange under the “SOLV” ticker. It said it planned to spin Solventum into a standalone company on April 1.
The 3M board approved the spin earlier this month.
Solventum will include more than 20,000 employees. In addition to Hanson, the company landed former Insulet CFO Wayde McMillan as he takes over the same post. Carrie Cox will serve as board chair and former NuVasive CEO Christopher Barry is the new President of Medical Solutions.
Hanson kicked off the Investor Day event by highlighting his certainty in the company’s ability to create value.
“I was already a Fortune 500 medtech CEO,” Hanson explained. “You don’t leave a job like that unless you see a really good path in front of you. So I truly do believe we will create value at this organization. No question.”
The structure at Solventum
As a standalone company, Solventum will break into four units: MedSurg, Dental, Health Information Systems and Purification & Filtration.
MedSurg represents the biggest earner of those four units, with revenues of approximately $4.6 billion in 2023. It makes up more than half the sales (56%) for the company. Dental ($1.3 billion) and Health Information Systems ($1.3 billion) both make up 16%, with Purification & Filtration ($1 billion) makes up the remaining 12%.
Hanson said that MedSurg has two main pieces of the puzzle, with wound care, then infection prevention and surgical solutions comprising the unit. Wound therapy is a big part of that, while orthopedics also plays a major role. Hanson highlighted that the company already has a direct commercial channel for orthopedics as a particular bonus.
Dental is another unit supported by a direct commercial channel, which Hanson highlighted as helpful as the company attempts to scale and become a more substantial player in the “more attractive areas of dental.”
“We’re in attractive markets,” Hanson said. “We have strong sub-brand recognition that does not depend on 3M. Make no mistake, 3M is a great brand. When you hear 3M, you think quality. That’s the reason I came here. 3M calls, you pick up the phone.
“That brand is strong, but we have very strong sub-brands that will survive the spin and are meaningful to our customers, which means in these markets, we have trust.”
How Hanson plans to create value
Even with the optimism around the businesses at Solventum, Hanson says the company faces significant challenges as it spins out.
He pointed out that Solventum already has “great technologies” set for global launches and global reach. That creates a consistent business, but one at a low growth rate. He said the company remains at a good starting point with a solid financial foundation, but the aim now is to create more growth.
“I want to be clear — this is not a business that is in trouble,” Hanson said. “But, there’s an opportunity to unlock value that just isn’t there right now.”
According to Hanson, the spin can unlock value with more margin expansion in cash with a focus on innovation. He said that, as a sub-business, with a hierarchy in place, decision rights are limited, as is the ability to leverage capital. Now, the standalone company can leverage its capital in different ways.
The company does face debt as part of the spin and the prospect of disentangling the business from 3M, but Hanson sees a way through, especially with the talent recruited to the new company.
“If you think about a spin, what does it do right away?” Hanson asked. “It attracts talent. … That’s the difference. Once you spin an organization of this size, those industry experts at a high level are then attracted and once you get the right talent in that knows the space, you get the right metrics.
“Once you have that, as a decision team, you make faster, more agile decisions.”
The financial turnaround opportunity
McMillan didn’t mince words in terms of where the company stands as it nears its official starting date. There’s plenty of optimism, but also a realism with regard to Solventum’s position in the market.
“We have a really unique opportunity here,” he said. “It’s unique because we’re underperforming. So we’ve got a turnaround opportunity to really improve the business.”
The soon-to-be CFO laid out a four-pillared strategy to create that value that Hanson stressed:
- Build on a strong foundation
- Execute separation
- Reposition for growth
- Optimize to fuel growth
With brand recognition, established commercial channels, strong IP and more, McMillan is certain the company can get there.
“After being in medtech for a long time and seeing the strategies of a lot of other businesses in medtech, we have what many other tech companies are trying to do,” he explained. “They’re trying to get that talent, trying to get that capability. We’re pretty excited about this strong group and the foundation of four segments that we have to stand up this business.”
To reposition for growth, Solventum has another four-legged plan. It wants to maintain disciplined portfolio management, strengthen its commercial model and execution, improve its R&D setup and accelerate growth through M&A. Feuling growth from there includes stabilizing and expanding margins and improving free cash flow.
Paying down debt, investing for growth and returning capital to shareholders constitute the final steps in fully executing the spin.
“A lot of opportunity,” McMillan concluded. “A lot of excitement.”
Solventum provides full-year guidance for 2024
The new standalone company expects potential revenue declines for the full year as it stands up on its own. Its range includes a baseline of a 2% decrease year-over-year and a ceiling of 0% growth.
3M previously stated that its Health Care unit produced annual revenues of approximately $8 billion, so 2024 sales should land around that number.
For adjusted earnings per share, Solventum projects between $6.10 and $6.40 for the year. It anticipates free cash flow of $700 million to $800 million.
This story may be updated with additional information from Solventum’s Investor Day event.