$8.42 Billion
Prior Fiscal: $9.05 Billion
Percentage Change: -6.9%
R&D Expenditure: $5.4B (total)
Best FY22 Quarter: Q1 $8.8B (total)
Latest Quarter: Q1 $8.0B (total)
No. of Employees: 92,000 (total)

MPO aims to identify lofty trends for 2022’s top 30 medical device companies, and spinning off medical device/healthcare divisions into pure-play, standalone firms might fly above the rest. 3M followed this trend with the proclamation of spinning off its Health Care business last July. The new 3M will remain a global material science company for industrial and consumer end markets, and Health Care will become a global, diversified, healthcare technology company with a focus on wound care, healthcare IT, oral care, and biopharmaceutical filtration.

“Disciplined portfolio management is a hallmark of our growth strategy,” 3M chairman and CEO Mike Roman said in a press release announcing the spinoff. “Our management team and board continually evaluate the strategic options that will best drive long-term sustainable growth and value. The decision to spin off our Health Care business will result in two well-capitalized, world-class companies, well positioned to pursue their respective priorities.”

According to 3M, Health Care is expected to be spun off with net leverage of about 3.0 – 3.5x EBITDA and be positioned for rapid deleveraging. Further, “New 3M” intends to keep a stake of 19.9% in Health Care, which will be monetized over time.

3M Health Care posted $8.42 billion of revenue last fiscal year, dropping just shy of 7% from the previous year. According to 3M’s annual report, sales grew in separation and purification, health information systems, food safety, and medical solutions, while oral care proceeds were flat. COVID-related trends on elective procedure volumes and ongoing inflationary pressures also continued to impact growth. Sales were also lost year-on-year related to divestiture from the Food Safety Division split-off transaction and combination with Neogen completed in Q3 2022. Operating income margins fell due to increased raw materials and logistics costs, along with manufacturing productivity headwinds.

ANALYST INSIGHTS: When 3M Health Care is spun off from its parent 3M organization later this year, expect positive things to happen for this currently stodgy company. I expect 3M in 2024 to behave similar to GE HealthCare in 2023—engaging in new growth strategies organically and inorganically in an aggressive manner.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

3M released its latest medical adhesive, the Spunlace extended wear adhesive tape on liner, 4576, in April. The flexible, conformable acrylate-based adhesive is meant for extended wear devices needing attachment to the skin for an up to a 21-day wear time, both in and out of care facilities.

3M Health Information Systems (HIS) earned fully authorized Federal Risk and Authorization Management Program (FedRAMP) status for its 3M RevCycle health services platform (RHSP) in September. 3M RHSP hosts and supports critical operations 3M HIS offers, including natural language processing support for medical coding, clinical documentation integrity, clinician input and medical coding edits, self-service reporting, and evaluation and management. For care service providers, FedRAMP offers standardized security framework for cloud products and services recognized by executive branch federal agencies.

Also in September, 3M HIS revealed its 3M M*Modal Fluency Direct and medical necessity solutions will be available in Epic’s new Garden Plot. The software is available to independent medical groups with 40+ providers via a hosted, supported Software-as-a-Service (SaaS) model. The work will create a pathway to deliver 3M content and tech to end-users through an electronic health record.

3M finished sale of rights to its Neoplast and Neobun brands, as well as related assets in Thailand and other Southeast Asia countries, to Selic Corp. Public Company in October. These products were mainly part of 3M’s Skin Health & Wellness business: sports and medical tapes, bandages, and medicated products for the consumer and healthcare industries. According to 3M, the sale did not have a material impact on financial results but was a portfolio management move.

The company’s V.A.C. Therapy negative pressure wound therapy (NPWT) reached the clinical evidence milestone of 2,000 published, peer-reviewed studies in October as well, making it the only NPWT solution to achieve this honor. V.A.C. Therapy, according to 3M, accounts for over 75% of published NPWT clinical evidence. Last year, 3M also rolled out the first-ever silicone-acrylic hybrid drape for V.A.C. Therapy—3M Dermatac Drape—which was engineered to be gentle on skin and easy for clinicians to use.

Rounding out October was 3M Oral Care’s introduction of the 3M Filtek matrix, a restorative solution for dental composite placement. The procedure starts with a digital restoration design, then a patient-specific matrix is made to help transfer digital design to the teeth using 3M dental composites. The Filtek matrix uses additive composite techniques where little to no tooth reduction is needed. According to 3M, dentists reported using the matrix boosted confidence, delivered predictable and aesthetic results, and saved chair time.

November saw the release of 3M HIS’ Ambulatory Potentially Preventable Complications (3M AM-PPCs) software for safety and quality oversight of procedures performed in outpatient settings or ambulatory surgery centers. The software uses sophisticated grouping logic and lets providers and payers identify and analyze complications in outpatient settings by specific procedures, service lines, providers, and facilities. National benchmarks are also included. The data analysis seeks to offer insights into safety areas with the best opportunities for qualities and excess cost improvements.

Finally, around the winter holidays last year, 3M announced its pledge to cease per- and polyfluoroalkyl substance (PFAS) manufacturing and work to discontinue use of PFAS in its products by 2025’s end. The company will discontinue manufacturing all fluoropolymers, fluorinated fluids, and PFAS-based additive products. This move was made to reflect regulatory trends to reduce or eliminate presence of PFAS in the environment, as well as evolving stakeholder expectations. According to 3M, current annual net sales of manufactured PFAS are about $1.3 billion, with estimated EBITDA margins of about 16%.

$9.05 Billion ($35.4B total)
Prior Fiscal: $8.34 Billion
Percentage Change: +8.45%
R&D Expenditure: $1.99B
Best FY21 Quarter: Q2 $2.27B
Latest Quarter: Q1 $2.12B
No. of Employees: 95,000 (total)

Aberdeen, S.D., stretches for 16.6 miles in the northeastern part of the Coyote State, scattered amid the pancake-flat fields of the fertile James River valley. It’s attracted 28,495 residents at last count (2020)—a paltry sum, certainly, compared with more urbanized areas, but nevertheless substantial by local standards (it is outranked in population only by Sioux Falls and Rapid City).

Founded shortly after Independence Day 1881, Aberdeen was named after a centuries-old metropolis in northeastern Scotland but earned the nickname “Hub City of the Dakotas” for its four intersecting railroad lines.

Among its more renowned inhabitants was “The Wonderful Wizard of Oz” author L. Frank Baum, who moved there with his family in 1888 and opened a general store (Baum’s Bazaar). He also edited one of the city’s nine newspapers, and organized its first baseball club (it disbanded after one season). Baum reportedly immortalized Aberdeen in “Oz” via the Kansas setting and the Emerald City’s penchant for all things green. The Wizard’s edict, for example, that Emerald City residents wear green goggles to perpetuate the myth their burg was made of emeralds is similar (same idea) to a newspaper column Baum wrote about a farmer whose green goggle-wearing horses thought the wood chips they ate were grass.

Baum moved to Chicago in 1891 but he is still beloved in Aberdeen, which has memorialized him in both work and play. The Land of Oz amusement park (within Storybook Land) features all the hallmarks of Baum’s iconic tale (even talking trees!), while the former city logo—a wordmark with a quill pen icon—clearly was “a tip of the hat” to the famous author, according to Aberdeen Mayor Travis Schaunaman. “That logo was paired with the slogan, ‘Write Your Story,’ suggesting that people come to Aberdeen to create their own future here,” the mayor wrote in an August 2019 op-ed column in The Aberdeen News. “We should be proud of having been home to one of the greatest storytellers in history…”

Proud, indeed. But pride in the quill pen logo faded quickly after more than a decade of use, prompting city officials to adopt a new marketing slogan last summer: Changing the Game. The strong A in the logo denotes “wide-open sky, sweeping prairie grass, and agriculture,” and acknowledges Aberdeen’s “distinct geographic independence” that makes it the “Hub City,” according to rebranding information.

“We circled back to the fact that Aberdeen is always willing to change the game,” Tiffany Langer, who developed the new slogan and logo, told reporters in May 2020. “We’re always re-imagining ourselves.”

Aberdeen’s most recent re-creation came courtesy of the coronavirus pandemic, as it turned the Hub City into an epicenter of N95 respirator manufacturing. Aberdeen is home to a 3M manufacturing plant—one of numerous facilities worldwide that make the Aura flat-fold respirator.

3M’s Aberdeen plant began 24/7 respirator manufacturing operations in January 2020 and added both staff (hundreds of workers from 27 states) and production capacity as COVID-19 intensified to maximize its monthly mask output to 95 million. A U.S. Defense Department partnership and 3M investments increased the Aberdeen facility’s dimensions by 120,000 square feet.

The additional staff and space enabled plant workers to produce 1 billion N95 respirators in an extraordinarily short amount of time—just 20 months after the original ramp-up and 28 months earlier than it normally would have taken.

“I’m really proud of our team here and how they’ve been able to react and step up to the plate,” (Aberdeen) Plant Director Andy Rehder said last August. “I’m grateful for the sacrifices people made working 24/7 to help get frontline workers the PPE they use while helping care for others. It’s motivating to the team to know they’ve made a difference.”

The team made a difference in more ways than one. Besides maintaining front-line workers’ respirator supply, the Aberdeen 3M manufacturing team also helped build a solid financial foundation the company’s Health Care Business last year. Sales rose 8.6 percent to $9.05 billion, driven by higher revenue in oral care, separation and purification, food safety, health information systems, and medical solutions.

Oral care growth came from improved dental procedure volume, while separation and purification sales benefitted from high demand for biopharma filtration solutions within COVID-19-related vaccine and therapeutic development and manufacturing.

Demand for such solutions could spike considerably this year thanks to a global agreement 3M Separation and Purification Sciences forged last fall with Thermo Fisher Scientific; the pact allows biopharmaceutical manufacturers to pair the two companies’ technologies with each other.

The agreement lets manufacturers pair 3M’s Harvest RC Chromatographic Clarifier, a single-stage purification solution, with Thermo Fisher Scientific’s HyPerforma Single-Use Bioreactor systems. Combining these two technologies can bring greater efficiency and scalability to the therapeutic manufacturing process.

Released in June 2021, 3M’s Harvest RC uses proprietary fibrous chromatography media to deliver a single-stage purification solution for recombinant protein therapeutic manufacturing. It streamlines a traditionally multi-stage harvest classification process into a single stage.

Thermo Fisher’s HyPerforma Single-Use Bioreactor is available in 50L to 5,000L sizes, with the 5,000L model being the largest commercially available unit. That size enables biopharmaceutical companies to integrate single-use technologies into large-scale bioprocesses, including perfusion cell culture and cGMP manufacturing at a very high cell density.

3M’s alliance with Thermo Fisher was one of several collaborations executed by the company last year. In June, the firm teamed up with the Pandemic Action Network to improve the world’s COVID-19 mitigation plans and better prepare for future pandemics. The Network advocates for policy changes as well as increased support and resources to ensure countries are better prepared to prevent, detect, and respond to pandemic threats.

“With the mass roll-out of vaccines and the U.S. CDC’s guidance on masking, many people are understandably hopeful that the worst is behind us—but the COVID-19 pandemic is not over and now is not the time to let our guard down,” Gabrielle Fitzgerald, CEO of Panorama Global and Pandemic Action Network co-founder, said. “We must act on lessons learned and continue to promote and inspire healthy behaviors while ensuring the world is better prepared for pandemic threats. Through our partnership with 3M, we will mobilize public support and catalyze action until the world has fully crushed this pandemic.”

Roughly a week after announcing the Pandemic Action Network alliance, 3M worked with the U.S. Marshals Service in Kentucky to block the sale of more than 1 million fake N95 respirators.

Since the pandemic began, 3M has seized more than 41 million counterfeit N95 respirators in collaboration with law enforcement and customs agencies worldwide. Facemasks were among the top-selling items last year in 3M Health Care’s medical solutions franchise, which profited from rising elective procedure volumes in the H1 2021 and strong N95 respirator demand in Q1.

3M added to its medical solutions portfolio last spring with a new silicone adhesive that balances strength, flexibility, and comfort. The 2484 3M Single Coated Medical Film Tape with Hi-Tack Silicone Adhesive on Liner is breathable and comfortable, can be worn for up to seven days, and is gentle on skin (it minimizes skin cell removal). The adhesive can be sterilized with ethylene oxide and is compliant with ISO 10993 parts 5 and 10.

Around the same time 3M debuted the new adhesive, the company launched a new technology platform to help healthcare providers and payers prioritize care for high-risk populations. The Social Determinants of Health Analytics combines clinical, social, and population health data to create a complete patient health picture. The platform uses 3M’s population classification system and includes social risk intelligence to promote program design and management in tandem with community-based organizations.

3M’s population classification system—Clinical Risk Groups—helps identify medically complex individuals. The Social Determinants tool builds on this data to describe a population’s total disease burden.

“We are transforming 3M by accelerating our digital capabilities, and expanding our use of data and analytics to better serve our customers,” Chairman and CEO Michael F. Roman wrote in the company’s 2021 annual report. “The world is changing rapidly, and we will continue to capitalize on opportunities across our businesses that are sizable and significant.”

One of those opportunities occurred last December and resulted in 3M merging its food safety business with Neogen Corp. in a tax-free reverse Morris trust transaction. The deal gives the unit a $5.3 billion enterprise value (including $1 million in new debt) and funnels about $1 billion to 3M’s coffers.

Food safety was part of 3M’s broader Health Care business. It contributed roughly 5% to Health Care sales and just 1% to 3M’s total sales in 2019. 3M plans to use its $1 billion payout from the food safety divestiture to fund its dividend and pay down debt, which fell 7.6% last year to $17.36 billion, or 49% of the company’s total 2021 sales. Revenue rose 9.8% in FY21 to $35.35 billion, driven by double-digit increases in all four business segments.

$8.34 Billion ($32.18 Billion)
Prior Fiscal: $7.43 billion
Percentage Change: +12.3%
No. of Employees: 94,987 (total)

The face mask was—and to a degree, still is—THE symbol of the COVID-19 outbreak. 3M’s healthcare unit was thrust into the spotlight to manufacture and distribute its gold-standard N95 respirator at breakneck speed to help curb the infection’s spread.

Last March, the company doubled its global output of N95 respirators to about 100 million a month—an annual rate of over 1.1 billion a year. The company also began increasing U.S. investments to expand global capacity over 30 percent over the succeeding year. 3M pledged throughout the pandemic not to change the price of its N95 respirators, but cautioned that dealers or retailers may not follow suit.

Next on the agenda came a partnership with Ford beginning last March to boost production of 3M’s powered air purifying respirators (PAPRs), which use a waist-mounted, battery-powered blower that sends filtered air into a hood that helps provide respiratory protection. The firms collaborated on specific ways to rapidly combine complementary capabilities and resources to help meet the surge in demand for personal protective equipment, aiming to increase production six-fold in two to three months. 3M launched the newly designed PAPRs in two months, shipping over 10,000 units.

The company partnered with Cummins a month later to boost production of high-efficiency particulate filters for the PAPRs. Cummins’ facility in Neillsville, Wis., began using existing diesel engine filter equipment to make the PAPR filters. After assembly and testing, the filters were sent to 3M’s plant in Valley, Neb., where the company’s PAPRs are manufactured.

At the end of March the company proclaimed the ability to double capacity again to 2 billion N95 respirators annually via investments and other actions, and pledged to manufacture them at a rate of 50 million a month by June.

Because of the explosion of N95 masks in the marketplace, price gouging, fraud, and counterfeit activity proliferated. There were reports of people fraudulently representing themselves as affiliated with 3M, selling products at grossly inflated prices, selling counterfeit products falsely claimed to be from 3M, and falsely claiming to manufacture 3M products.

The company created a hotline to call for information on identifying authentic 3M products and ensure products come from 3M authorized distributors. To help identify and avoid inflated prices, the firm also published current single-case list prices for many of the most common 3M N95 respirator models sold in the U.S.

Last April the Trump Administration invoked the Defense Production Act, requiring 3M to prioritize orders from FEMA for N95 respirators. The administration also requested 3M increase the number of respirators it imported from overseas operations into the U.S. The company was also told to cease exporting respirators currently manufactured in the U.S. to the Canadian and Latin American markets.

The company and the Trump Administration began a plan to import 166.5 million respirators primarily from its Chinese manufacturing facility over the following three months in April as well. The plan enabled 3M to continue sending U.S. produced respirators to Canada and Latin America.

A week later the company filed a lawsuit against Performance Supply alleging illegal N95 price gouging and deceptive trade practices in New York City. 3M claimed the N.J.-based defendant falsely claimed business affiliation and offered to sell $45 million N95 respirators at 400-500 percent over 3M’s list price. Lawsuits were also filed that same day in California against Community Medical Centers Inc. for falsely claiming to be a 3M distributor and offering respirators at inflated prices, and against a Dallas County John Doe defendant falsely claiming to be a “3M Company Trust Account” and able to sell millions of N95 respirators at inflated prices to New York City government officials.

“3M does not—and will not—tolerate price gouging, fraud, deception, or other activities that unlawfully exploit the demand for critical 3M products during a pandemic,” Denise Rutherford, 3M’s senior vice president, Corporate Affairs, told the press.

A few days later, the company filed another suit in Florida against Orlando-based Geftico, which it claims twice attempted to fraudulently sell tens of millions of likely nonexistent respirators at grossly inflated prices. In the Florida case, 3M was represented by a team from the law firm and MPO columnist McDermott Will & Emery LLP.

The lawsuits last April kept on coming, this time against Zhiyu Pu and Harmen Mander, directors of Canada’s Caonic Systems Inc. The defendants registered 3M-Health.com on the Canadian e-commerce platform Shopify, and starting in March, sold respirators they fraudulently claimed originated from 3M certified suppliers in Singapore and the U.K. On March 31, at 3M’s request, Shopify closed the site. Caonic Systems immediately reopened another Shopify site as www.tormenhealth.com, and continued to claim affiliation with 3M on social media. After Shopify nixed the second site, Caonic persisted, relaunching briefly on another platform. Caonic was selling the respirators for $17 each, over five times the appropriate retail price.

The beginning of May saw another flood of legal action: 3M slapped Atlanta, Ga.-based Ignite Capital; St. Petersburg, Fla-based TAC2 Global, Orlando-Fla.-based King Law Center, Indianapolis, Ind.-based Zachary Puznak, and two related entities, Zenger LLC and ZeroAqua; and Madison, Wis.-based Hulomil with lawsuits for attempting to target government officials with fraudulent offers to sell N95 respirators. This brought the number of lawsuits up to 10. Two of the Florida lawsuits—King Law Center and Ignite Capital—were settled later in May. The Indiana lawsuit was settled in July with a consent judgment, permanent injunction, and payment to 3M for donation to a COVID-19-related charity.

The firm was awarded two Department of Defense contracts last May to further expand N95 production. The contracts boosted production to another 39 million respirators a month. An additional investment by 3M to add new N95 manufacturing equipment added another 22 million to the quota, tripling production to over 95 million masks monthly in the U.S.

In June the hammer came down on California Amazon seller Mao Yu and affiliated companies for selling N95s falsely advertised as third-party sellers on Amazon under the 3M brand. 3M’s complaint alleged the defendant charged unsuspecting customers over $350,000 when customers responded to false listings, charging as much as 20 times the list price. Amazon unearthed that buyers had received non-3M respirators, fewer items than purchased, products in suspect packaging, and defective or damaged items. Amazon blocked the accounts on its platform. The lawsuit was resolved in August, with the defendant given stipulated consent judgment, permanent injunction, and payment to 3M for a COVID-19 related-charity.

By July, 3M was embroiled in 18 lawsuits in 10 U.S. states and Canada. At that point, the company won six temporary restraining orders and four preliminary injunction orders from courts that halted defendants’ unlawful actions. Online, 3M successfully secured removal of over 7,000 e-commerce listings with fraudulent or counterfeit product offerings and over 10,000 false or deceptive social media posts by last July.

The company’s next report regarding N95 fraud came in October. At that time, the company had investigated over 7,700 fraud reports globally, filed 19 lawsuits, and was granted nine temporary restraining orders and seven preliminary injunctions. Over 13,500 false or deceptive social media posts, over 11,500 fraudulent e-commerce offerings, and at least 235 deceptive domain names were removed. 3M was awarded damages or received settlement payments in seven cases, with all proceeds donated to COVID-19 related-charities.

In the firm’s 2020 annual report, 3M CEO Mike Roman proclaimed the company had helped identify over 10 million counterfeit N95 respirators, and had reached a production rate of 2.5 billion respirators per year.

“At the center of our COVID-19 response has been our people: from the 50,000 3Mers in our factories and distribution centers, to the retirees who came back to staff our fraud hotline, to those who answered the call in Valley, Nebraska,” Roman boasted. “People across 3M have stepped up to make a difference, and I cannot thank our entire team enough for their extraordinary contributions in 2020.”

The surge of N95 orders powered 3M’s healthcare unit—comprised of medical solutions, health information systems, oral care, separation & purification, food safety, and drug delivery products—into a 12.3 percent revenue boost last year, accruing $8.34 billion in proceeds. COVID-related respirator sales were estimated to have impacted year-on-year organic local-currency sales growth by about 3 percent. Some of 3M Health Care’s other units suffered as a result, however—oral care sales plummeted 19 percent from the year prior.

Last May, 3M completed the sale of substantially all of its drug delivery franchise to Altaris Capital Partner. The proceeds were $650 million, interest-bearing security, and 17 noncontrolling interest in the new company, Kindeva Drug Delivery. About 900 3M employees joined Kindeva due to the sale.

Last July the company partnered with Massachusetts Institute of Technology to develop a simple low-cost COVID-19 test that reports results in minutes and is feasible for mass manufacture. The test is in the NIH’s Rapid Acceleration of Diagnostics Tech (RADx Tech) program. The test would detect viral antigens and deliver highly accurate results within minutes via a paper-based device. The test could be administered at the point-of-care and wouldn’t need to be sent to labs for testing.

In August, 3M Health Information Systems launched 3M M*Modal virtual assistant technology with the Hey Epic! Voice Assistant in Epic Hyperspace. Built on cloud-based conversational AI and speech understanding gained from the 2019 M*Modal deal, the virtual assistant technology helps clinicians complete documentation tasks, letting healthcare professionals capture notes through free-form speech and conversationally look up information in a patient’s chart.

October saw a product launch born from a collaboration between 3M and Eko—the new 3M Littmann CORE digital stethoscope. The stethoscope connects to Eko’s FDA-cleared software that spots suspected heart murmurs, using AI algorithms to better interpret sounds and detect heart murmurs via auscultation. The stethoscope amplifies sound up to 40x and actively cancels noise, visualizes sound data, provides access to clinical decision support, and can be used remotely.

Later in the year 3M and eMurmur launched two apps for the Littmann stethoscope: the Littmann learning app and Littman university app. The Littmann learning app helps medical students and professionals teach and test heart murmur detection and classification. It lets U.S. nurses or nurse practitioners earn up to 22 continuing education credits. Littmann university is an instructor app for in-person, online, and simulation teaching. It creates a virtual classroom to facilitate auscultation training via a heart sound and murmur library. Instructors can stream recordings of real auscultation sounds in group testing with immediate results.

Also in October 3M rolled out the PREVENA RESTOR AXIO•FORM incision management system. The system manages post-op incision and surrounding tissue envelope, reducing edema and boosting recovery. Its therapy time was extended to up to two weeks (with dressing change required at one week), with expanded coverage area, and form-fitting PEEL & PLACE dressing.

At last year’s RSNA meeting, 3M and Rad AI demonstrated radiology reporting software born from a combination of 3M M*Modal Fluency for Imaging and Rad AI’s technology to generate customized radiology report impressions. Both companies’ AI exploits aim to further streamline reporting—yielding substantial time savings for radiologists, alleviating burnout, and creating more time to focus on patient care.

3M launched its new generation of Hi-Tack silicone adhesives in December. The first of its class is the 2480 3M single coated medical nonwoven tape with Hi-Tack silicone adhesive on liner, touting longer wear times, supporting heavier devices, and offering more secure adhesion. The adhesive is repositionable, flexible, and conformable to work well with continuous glucose monitoring systems, wearable monitors, sleep devices, and incontinence devices.

$7.43 Billion ($32.1B total)
Prior Fiscal: $6.82 Billion
Percentage Change: +8.9%
No. of Employees: 96,163 (total)

Kara Fan once seemed destined for a computer science career.

She was the perfect prospect: intelligent, ambitious, diligent, somewhat nerdy, and extremely disciplined, guided by parents already working in the industry.

Then Fan’s grandmother became ill, and her destiny changed in an instant.

“A few years ago, my grandmother had a UTI [urinary tract] infection and she was taken to the emergency room,” Fan told news outlets last fall. “Thankfully, antibiotics saved her life. Since then, I got interested in this.”

“This” meaning microbiology—the study of microscopic organisms such as viruses, archea, fungi, protozoa, and bacteria. The latter class of beings particularly interested Fan for their direct involvement in her grandmother’s hospital visit.

In researching the subject of microbiology online, Fan found a Scientific American article about the overuse of antibiotics and the subsequent rise in drug-resistant “superbugs.” U.S. Centers for Disease Control (CDC) data show that more than 2.8 million antibiotic-resistant infections occur annually in the United States, and over 35,000 people die from them. In addition, nearly 223,900 U.S. residents required hospital care for C. difficile and at least 12,800 people died in 2017, according to CDC statistics. If left alone, the United Nations estimates that drug-resistant disease could lead to 10 million deaths worldwide by 2050.

ANALYST INSIGHTS: We certainly heard a lot about 3M during the COVID19 pandemic, as PPE became common jargon among average Americans. With that aside, 3M continues to focus on its core Healthcare biz units, and recently reinforced this with their May 2020 sale/spinout of Kindeva Drug Delivery to Altaris ($650M deal price) into a standalone CDMO drug delivery partner. (3M is retaining a 17% stake in Kindeva.)

—Mark Bonifacio, President, BCS LLC

The data concerned Fan. She didn’t want her grandmother (or parents) to become a statistic. Fan decided to find an alternative to antibiotics, an option that preferably could curb the alarming growth of drug-resistant bacteria. Early on in her quest, Fan discovered that some ancient civilizations used tiny amounts of copper or silver to help heal wounds.

Using the ancients as her inspiration, Fan began developing a nanoparticle liquid bandage that both treats wounds and prevents bacterial infection. She first enlisted copper nitrate in her personal war against germs, but the material proved ineffective; she achieved better results with silver (nitrate), mixed with lemon leaf and a water-soluble polymer. “Thousands of years ago, ancient people would use copper and silver to eat with and they would drink water from like copper bowls to kill bacteria,” she explained to Yahoo! finance. “I found out that it didn’t work. So I used nano silver.”

Fan tested her solutions at the University of California-San Diego, using a petri dish to measure the growth of bacterial colonies (Staphylococcus epidermidis, E. coli K12, Bacillus subtilis) against her liquid bandage. The teen’s innovation creates a thin layer of wound protection while simultaneously breaking down bacterial cell walls, killing the germs within seconds.

Fan unveiled her creation last spring at the California Science and Engineering Fair in Los Angeles. During the event, she learned about 3M’s Young Scientist Challenge, an annual competition for middle school student-created solutions to everyday problems. Fan entered the contest and won its top prize last fall, beating out hundreds of remedies.

Fan’s victory was not surprising to Sara Hemmer, a 3M advanced product development engineer who helped Fan prepare her presentation for the contest’s expert panel. “There are only a couple products on the market today that are being advertised as liquid bandage with the use of silver nanoparticles,” Hemmer told The San Diego Union-Tribune last fall. “Most of these products seem to do more preventing of infections and not necessarily treating the infection or bacteria. Kara’s solution actually reduces the growth of the bacteria. The issues she’s identified, the misuse and overuse of antibiotics, is a huge problem.”

A huge problem that, thanks to Fan, may finally have a viable solution.

Obviously, Fan’s liquid bandage is nowhere near ready for market, but her innovation is reportedly being evaluated by the Young Scientist Challenge sponsor, 3M. The multinational conglomerate manufactures several types of liquid bandages but none use silver as an antimicrobial agent.

Fan’s invention could potentially be a golden market opportunity for 3M as the company positions itself for long-term growth and value creation. In its quest to build a more customer-driven and streamlined organization, the materials science firm last year realigned its business segments, reducing its reporting groups from five to four and embarked on a five-year strategic improvement plan centered on four priorities: Portfolio, People and Culture, Innovation, and Transformation.

“In 2019 we began to take the next step in our transformation journey including a new global operating model and streamlined organizational structure. We have since reorganized the entire company around our new business groups to take full advantage of our transformation capabilities,” 3M Board Chairman and CEO Mike Roman said in the company’s 2019 annual report. “This new model will drive more accountability to our business groups to strengthen performance and serve both global and local customers, while enabling stronger customer insights and more powerful innovation. It will also allow us to leverage similarities across markets, while maintaining the robust local capabilities that differentiate 3M…Ultimately, this is a defining moment for our enterprise. We are modernizing how we run our business and building an organization for the future, and I am more confident than ever in our journey to transform into a more agile, efficient, and competitive enterprise.”

ANALYST INSIGHTS: Having received a lot of attention (positive and negative) during COVID due to its product lines, overall, 3M did receive a nice short-term reprieve for its financial performance as Q2 2020 bolstered its revenues dramatically. The question will now be if 3M can utilize that positive financial momentum to build its performance across its greater market segments in the next 12 to 24 months.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

That transformation was off to a slow start last year as 2019 total sales slipped 2.1 percent to $32.1 billion, net income tumbled 14.5 percent to $4.57 billion, and GAAP earnings per share shrank 12.1 percent to $7.81. Free cash flow rose 10 percent to $5.4 billion, and the company returned $4.7 billion to stockholders. Yet revenue rose in only half the company’s business segments—Consumer and Health Care.

The latter segment posted the largest growth rate in fiscal 2019, increasing revenue 8.9 percent to $7.43 billion. Robust health information systems, food safety, and medical solutions sales were somewhat offset by weaker separation/purification solutions proceeds. Oral care revenue remained flat, and drug delivery sales declined, impacting organic Health Care growth.

3M recapped its losses (and then some) in drug delivery sales by selling off the business (excluding its transdermal lineup) in mid-December to an Altaris Capital Partners affiliate for $650 million. The divested division generated roughly $380 million in annual global sales; its products included microneedle delivery systems, nasal devices, oral inhalers, and packaging films for drug delivery.

The business’s $650 million sale price included cash, an interest-bearing security, and a 17 percent non-controlling interest in the new company Altaris Capital created, called Kindeva Drug Delivery. 3M expected to gain 45-50 cents per share from the sale, once completed.

The drug delivery divestment was the third major sell-off for 3M last year: The firm also shed its flame and gas-detection business for $230 million, and a military armor business for roughly $100 million. The company unloaded some oral care technology as well, selling assets related to its True Definition Intraoral Scanner platform to dental equipment manufacturer/supplier Midmark Corporation.

“The ongoing review and reshaping of 3M portfolio is key to maximizing value across our company,” Roman noted in the annual report. “Since 2012 we have moved from 40 businesses to 23, while completing more than 10 divestitures and 14 acquisitions. In 2019 we continued to actively manage our portfolio, with particular progress in strengthening our Health Care business.”

That progress resulted mainly from purchasing M*Modal’s technology business and Acelity Inc. The $1 billion M*Modal deal—finalized in February 2019—excluded the company’s transcripton, medical scribing, and coding business. Franklin, Tenn.-headquartered M*Modal specializes in cloud-based conversational artificial intelligence (AI) systems used in physician documentation.

“This acquisition builds on our strategic commitment to invest in our Health Information Systems business and expands the capabilities of our revenue cycle management and population health priority growth platform,” Mike Vale, executive vice president of 3M’s Health Care Business Group, said in announcing the M*Modal purchase.

Three months after closing the M*Modal acquisition, 3M announced the year’s largest medtech deal, committing $6.7 billion to bring Acelity under its wing. Acelity’s KCI portfolio of surgical dressings, incision closures and advanced therapies are used in more than 800,000 procedures annually across 90 countries, making it one of the world’s biggest wound care companies. Its lineup includes VAC Therapy, the first negative-pressure, foam-based wound closure system, used in the United States since 1995. Newer versions automatically wash the wound with cleansers, while others are specially designed to vacuum out fluids from abdominal injuries while drawing the edges of the wound closer together.

3M acquired San Antonio, Texas-based Acelity from a consortium of funds advised by Apax Partners, the Canada Pension Plan Investment Board, and Public Sector Pension Investment Board (PSP Investments). Finalized in October, the purchase is part of 3M’s attempt to boost advanced and surgical wound care market share.

“Acelity is an excellent complement to our Health Care business,” Roman said when news of the acquisition broke. “This acquisition bolsters our Medical Solutions business and supports our growth strategy to offer comprehensive advanced and surgical wound care solutions to improve outcomes and enhance the patient and provider experience. We are excited to bring Acelity’s technologies and employees to our team. Together, we will apply 3M science to bring differentiated offerings to key wound and operative care solutions worldwide.”

Those solutions have yet to be developed, as 3M has been mostly consumed this year with pandemic relief efforts. But its union with M*Modal has already borne fruit—by way of a clinical documentation improvement tool that uses AI to boost speed and efficiency for clinicians and coders. Unveiled last September (2019), the 3M M*Modal CDI Engage One is deployed through a cloud-based platform and integrates with the 3M 360 Encompass computer-assisted coding and CDI workflow system, offering quality metrics and analytics. Together, the tools offer more efficient back-end CDI processes, helping health systems save hours of manual review with CDI worklist prioritization, streamlined queries, and clinical evidence-based documentation analysis.

The CDI Engage One was not 3M’s only new product last year. The company also expanded its wearable medical device adhesives lineup, adding the 3M Extended Wear Medical Transfer Adhesive 4075 to its offerings. Designed to laminate many substrates, the new addition features an extended wear pressure sensitive transfer adhesive and allows design engineers to use a variety of backings. It also offers excellent initial skin adhesion with up to a 14-day wear time, depending on the backing material used, according to 3M.

COVID-19 Consequences

Q1 2020 Revenue: $8.07 Billion (total); $2.1 Billion (Health Care)
Q1 2019 Revenue: $7.86 Billion (total); $1.74 Billion (Health Care)
Percentage Change: +2.6% (total); +20.8% (Health Care)

3M has helped lead the global response to COVID-19, investing more than $80 million to increase N95 face mask production since the outbreak first surfaced in China in early January. That investment, along with the addition of new manufacturing equipment, will enable 3M to nearly double its N95 production output to 2 billion masks worldwide by year’s end. The timeline below details 3M’s role in combating the virus.

January 2020
3M begins increasing its monthly U.S. production of N95 respirators from 22 million to 26 million in anticipation of higher demand. It also ramps up global mask production at its facilities around the world in order to double its global output rate to 1.1 billion annually. As the virus spreads in China, the company increases its respirator production there, running manufacturing plants 24/7, even during the Lunar New Year holiday. Additionally, 3M helps the Chinese Center for Disease Control and Prevention develop guidelines regarding the use of all forms of respiratory protection in healthcare settings.

February 2020
3M begins working with the FDA after the agency decides to provide emergency use authorization for respirators used in healthcare facilities. Its monthly U.S. production of N95 masks increases to 33 million, with the firm’s North American supply chain running operations 24/7. The company also helps the Chinese government validate and verify N95 respirator sales offers from non-Chinese entities, and identify potential fraud cases.

March 2020
3M’s monthly U.S. production of N95 masks climbs to 35 million; respirator production increases at all plants worldwide. The firm and Ford Motor Company partner to increase production of powered air-purifying respirators (PAPRs). 3M delivers a letter to several governmental agencies highlighting its efforts to curb PPE counterfeiting and price-gouging during the pandemic; by month’s end the company establishes a hotline and website to help identify and fight fraud, price gouging, and respirator counterfeiting. 3M also secures Chinese government authorization to import 10 million N95 respirators manufactured in China into the United States.

April 2020
3M works with the U.S. government to send 90 percent of the 35 million N95 respirators it is producing monthly to healthcare facilities and first responders, with the remainder dispersed to food production, pharmaceutical, and energy workers. The company and the U.S. government forge an agreement to import 166.5 million 3M respirators into America from the firm’s Asian manufacturing plants. President Trump issues an order under the Defense Production Act directing FEMA to acquire N95 respirators from 3M; monthly mask production in China, meanwhile, is expected to reach 50 million, an increase of nearly 200 percent from average 2019 levels. 3M and Columbus, Ind.-based Cummins Corporation team up to boost production of high-efficiency particulate filters for use in PAPRs. The company files multiple lawsuits against alleged price-gougers in the United States and Canada, and it partners with state and federal law enforcement authorities to stop fraud, price-gouging, and N95 counterfeiting.

May 2020
3M announces additional legal actions to help combat fraud and N95 counterfeiting. The company is awarded two U.S. Department of Defense contracts to further expand its U.S. production of N95 masks. By month’s end, the company delivers to the United States more than 90 million masks made in its Asian plants. Also, the newly designed PAPRs that 3M developed with Ford begin shipping to healthcare workers.

AT A GLANCE
$6.02 Billion ($32.8B total)
Prior Fiscal: $5.85 Billion
Percentage Change: +3%
No. of Employees: 93,516 (total)

3M Health Care enjoyed a relatively quiet year. It experienced modest sales growth over the prior year, saw a new CEO named for its 3M parent, and had a bevy of product news announcements regarding new offerings. Then, with just a few days left in the 2018 calendar year, the company made a fairly significant transaction in the artificial intelligence (AI) space.

M*Modal, a healthcare technology provider of cloud-based, conversational AI-powered systems that help physicians efficiently capture and improve the patient narrative so they can spend more time with their patients and provide higher quality of care, sold its technology business to 3M for $1 billion. Annual revenue of M*Modal’s technology business is estimated to be approximately $200 million.

“This acquisition builds on our strategic commitment to invest in our Health Information Systems business and expands the capabilities of our revenue cycle management and population health priority growth platform,” said Mike Vale, executive vice president of the 3M Health Care Business Group.

According to the company, 3M Health Information Systems (HIS) business works with more than 8,000 healthcare organizations worldwide, both providers and payers, to deliver software and services across the continuum of care. 3M HIS offerings, which include the 3M 360 Encompass software platform, combine clinical documentation systems and risk assessment methodologies to help accurately capture, analyze, and advance patient information.

3M expects to maintain a strategic business relationship with the remaining services business—transcription, scribing, and coding—of the Pittsburgh, Pa.-based vendor, which was not part of the transaction, to help ensure continuity and strong customer support.

The approximately 750 former M*Modal employees join a 3M business that has enjoyed low, but steady, single-digit gains in recent years. The 2018 $6.02 billion sales total marked a 2.9 percent increase over 2017’s $5.85 billion, which itself was a 4.4 percent rise over the previous year. The company notes that on an organic local-currency sales basis, the growth in 2018 was led by food safety, health information systems, and medical solutions. Further, oral care sales also increased, due to positive growth internationally and particularly in developing economies. On the other hand, sales declined in drug delivery systems.

ANALYST INSIGHTS: 3M’s recent acquisition of Acelity reaffirms 3M’s commitment to its wound care business. After a period of initial integration and portfolio reflection, expect 3M to continue to supplement this segment through additional M&A activities. This acquisition is just the beginning for 3M in this market area.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

The modest increases in the Health Care business’ revenue mirror the parent company’s annual total, which saw similar smaller, but steady, gains year over year. On the whole, 3M finished 2018 with $32.77 billion in net sales. Health Care’s contribution represents 18.4 percent of the firm’s total. The Industrial business’ $12.27 billion, which reflected a 3.4 percent rise over 2017, accounts for more than a third of the total company’s sales (37.4 percent). Between them in order of sales totals among the company’s businesses is Safety and Graphics, with its $6.83 billion—20.8 percent of the organization’s total and a 9.5 percent gain over 2017. Electronics and Energy suffered a 0.5 percent loss between the two years—the only one to experience negative growth of all the businesses. It brought in $5.47 billion in 2018, 16.7 percent of 3M’s total. Finally, the Consumer business—14.6 percent—rose 1.4 percent to close at $4.80 billion.

Taking a look at 3M’s worldwide footprint, sales are broken down into four distinct regions. While the parent company’s largest area for sales (39.2 percent) and second largest increase year over year (3.8 percent) was the United States, which finished at $12.84 billion, the Health Care business remained flat there (specifically, a 0.2 percent fall). Asia Pacific (31.3 percent), on the other hand, grew sales 4.5 percent company-wide to $10.25 billion and specifically 10.2 percent for Health Care. The Europe, Middle East, and Africa region (20.3 percent) ended the 2018 fiscal year at $6.65 billion, a 3.1 percent gain; Health Care contributed 3.8 percent increased sales during the 12-month period. Finally, Latin America/Canada (9.2 percent) pulled in $3.02 billion in sales, a 0.3 percent loss compared to 2017, whereas Health Care rose 2 percent.

Perhaps in an attempt to improve upon the aforementioned performance in the coming years, just before the end of the first quarter in 2018, 3M announced it had appointed a new CEO to lead the firm. Scheduled to take the reins on July 1, Michael F. Roman—a 30-year veteran of the organization during which he held a leadership position over the Industrial business and also served as chief strategist—was promoted from serving as executive vice president and chief operating officer, which he took on in July 2017.

Roman succeeded Inge G. Thulin, who was appointed to a newly created position—executive chairman of the board—which was also made effective on July 1, 2018. In the new role, Thulin would continue to chair 3M’s Board of Directors. He was also expected to work closely with Roman on longer-term strategic initiatives for the company. The position, however, was apparently created merely as a method to facilitate a gentle transition of power in the top leadership role from Thulin to Roman as the firm announced Thulin’s retirement less than a year later, scheduled to take place on June 1, 2019.

As new products are the lifeblood of maintaining a healthy revenue stream, Roman will undoubtedly be eager to see the emergence of innovative offerings from the Health Care business. To that end, the company had a number of notable product news announcements in 2018.

As part of the industry-wide attempt to curb healthcare-associated infections (HAI) as much as possible, 3M introduced the SoluPrep Film-Forming Sterile Surgical Solution—a 2 percent chlorhexidine gluconate and 70 percent isopropyl alcohol surgical skin prep that uses the firm’s technology to help clinicians in the fight against surgical site infections (SSI). The product benefits from 3M’s expertise in polymer and adhesive technology in the form of a proprietary Prep Protection Film. When the copolymer film dries, it forms a water-insoluable film on the skin, helping the proven bacteria-killing agent chlorhexidine gluconate stay on a patient’s skin and be able to withstand the rigors of simulated surgical conditions, including repetitive wiping.

Other products intended to aid in improving patient care, Tegaderm Antimicrobial IV Advanced Securement Dressing and Antimicrobial Transparent Dressing were launched as peripheral intravenous maintenance solutions. The dressings integrate chlorhexidine gluconate transparently throughout the adhesive to suppress normal skin flora regrowth on prepped skin for up to seven days. The dressing’s transparency provides clinicians continuous site visibility, which enables early identification of complications at the insertion site.

The Health Care business also expanded its lineup of advanced adhesives for medical devices with the addition of Single Coated Medical Extended Wear Adhesive Nonwoven Tape on Liner, a pressure sensitive adhesive that offers omni-directional stretch for high levels of conformability and breathability. The thin, water-resistant tape offers excellent initial skin adhesion and a 14-day wear time, as well as improved conformability during long wear times compared to other tapes in the product line. It is EtO, E-beam, and gamma sterilization compatible.

With another product announcement tied to the fight against HAIs and specifically SSIs, 3M announced the FDA 510(k) clearance for its Attest Super Rapid Biological Indicator (BI) System for Steam, which provided BI test results in 24 minutes. The new capability was attainable for customers through a software upgrade to existing Attest Auto-reader 490 and 490H units. The upgrade enabled all customers who have existing hardware to receive the benefit of a 24-minute readout at no extra charge.

Given the recommendation that single-patient stethoscopes be used for patients in isolation to help prevent the transmission of infectious diseases, the firm offered a high-quality disposable stethoscope designed to combine excellent sound quality and comfort to help eliminate the use of personal stethoscopes in isolation environments.

$5.8 Billion ($31.7B total)
NO. OF EMPLOYEES:  91,536

Ever since CMS announced it would not reimburse hospitals or medical facilities for healthcare-associated infections, the attention being paid to their prevention has become significant. The decision has resulted in the launch of infection-control technologies such as UV sterilization robots, and an increased reliance on single-use products. Surgical instrumentation and other reusable devices, however, still require stringent sterilization processes that must eliminate any potential threat of infection.

In 2017, 3M responded to this need with the release of its new biological indicator test for vaporized hydrogen peroxide sterilization (VH2O2). The 24-minute test (approximately 10 times faster than the company’s previous four-hour test, released in 2016) offers sterility assurance to healthcare facilities attempting to eliminate containments from surgical instruments.

“We’ve seen overwhelming market excitement about this system since we announced 510(k) submission in May,” Ericka Lutz, 3M global marketing manager for sterilization, said in a company announcement noting the release of the 3M Attest Rapid Readout Biological Indicator (BI) System for VH2O2. “The common reaction we’re hearing is, ‘If our hospital is able to improve efficiencies and enhance patient safety, it’s a clear win-win decision.’”

Further, healthcare provider customers already utilizing the four-hour version of the test were granted free software upgrades to the newer system, according to an article about the technology in the Star Tribune. Lutz told the paper, “We want all customers to be able to benefit from our innovation and use the speed of our system to help increase patient safety as fast as possible.”

That message mirrors the thoughts of 3M’s Inge G. Thulin, chairman of the board, president, and CEO, in his letter to shareholders at the start of the company’s 2017 annual report. “In partnership with our customers, we use science to improve lives and help solve society’s toughest challenges—from improving air quality and worker safety, to advancing healthcare and enabling the transportation of tomorrow.”

ANALYST INSIGHTS: 3M remains a steady player in healthcare in 2018. Watch for continued, consistent organic and small, inorganic growth with no major drama. They have excellent leadership in Health Care and will continue to perform well for the short and long term.

—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors

That vision has led to the company enjoying very consistent performance over a number of years. The corporate entity saw sales near $32 billion for the second time in four years ($31.7 billion in 2017, almost exceeding 2014’s $31.8 billion), which represented a 5.1 percent bump from 2016. The company also ensured continued future success with an investment of over $5 billion toward research and development across all divisions, capital expenditure, and acquisitions. Maintaining a clear focus on that future success is also apparent in 3M’s ongoing strategy of focusing on strategic interests and streamlining operations. Since 2012, the firm has realigned from six business groups to five and from 40 businesses to 24. One such move occurred last December, when the firm sent its Communications markets division to Corning Inc. for a price of $900 million. The segment provided connectivity and cabling solutions for the telecommunications industry.

The Health Care group is the company’s third largest segment at $5.8 billion in 2017 sales [behind Industrial’s $10.9 billion and Safety and Graphics’ $6.1 billion; Electronics and Energy ($5.2 billion) and Consumer ($4.6 billion) represent the fourth and fifth segments respectively]. The segment saw a modest 4.4 percent increase over 2016, which was a result of sales across all regions, with Asia Pacific (8.6 percent) and Latin America/Canada (9.3 percent) posting the largest gains. The group’s $5.8 billion in sales represents an 18.4 percent contribution to the company’s total figure.

3M’s Health Care segment customers originate from a wide variety of medical-related markets, from medical clinics and hospitals to dental/orthodontic practitioners to health information systems, as well as others. The company’s products indicated for these sectors include medical and surgical supplies, skin health and infection prevention products, oral care solutions (dental and orthodontic products), health information systems, inhalation and transdermal drug delivery systems, and food safety products, which saw an influx of new offerings from a targeted acquisition.

The purchase of Elution Technologies by 3M was announced on Sept. 7, 2017. The firm is a manufacturer of test kits that can be used to ensure products are free of potentially harmful allergens, such as peanuts, soy, and milk. Allergic reactions can pose a significant health risk for those susceptible to a particular allergen, which according to a 2011 Journal of Clinical Immunology study, resulted in a person in the United States being rushed to the emergency room every three minutes. In some instances, it was the result of exposure to a food product that was never intended to be present.

“Elution Technologies’ test kits offer proven technology with an easy-to-use design that delivers fast and accurate results for companies offering peanut-free, gluten-free, and other specialized foods for people with certain sensitivities and allergies,” said Polly Foss, general manager of 3M Food Safety. “We are pleased to add this technology to our broader food safety offering, and extend these important solutions to food processing companies across the globe.”

In sectors slightly more affiliated with traditional healthcare, 3M’s expertise in the adhesive space has led it to offer device makers options for keeping wearable medical technologies in place. Last August, it grew this line with the addition of the ISO:10993 and ISO:10993-10 compliant 4076 Extended Wear Medical Tape, which provides medical device manufacturers a long-term wear, acrylic-based adhesive solution designed to increase patient comfort.

“Sticking to skin presents a major challenge to the medical device industry,” said Diana Eitzman, Ph.D., director of agile commercialization, 3M Critical and Chronic Care Solutions Division. “By equipping our customers with the latest adhesive technology, we’re giving them the power to solve their toughest design challenges and positively impact patients’ lives globally.”

Leveraging the aforementioned focus on reducing infections with adhesive expertise, 3M experienced a serendipitous FDA 510(k) clearance of another product. The Tegaderm CHG I.V.

Securement Dressing gained the agency’s OK to expand its indications to reduce catheter-related bloodstream infection (CRBSI). Following on the heels of the June clearance, in November, the Centers for Disease Control (CDC) updated its recommendation regarding catheter-related infections. The Center called for the use of chlorhexidine-impregnated dressings for reducing CRBSI and catheter-associated bloodstream infections. At the time, the transparent dressing was the only one of its kind indicated for such use.

“The CDC’s evidence-based recommendations elevate current best practices in reducing life-threatening and costly bloodstream infections. The revisions highlight the strong clinical data that supports use of Tegaderm CHG I.V. Securement Dressing worldwide,” explained Pat Parks, M.D., Ph.D., medical director for 3M Critical and Chronic Care Solutions Division. “At 3M, our goal is zero bloodstream infections. We’ll keep innovating and educating to make that future possible.”

The dressing wasn’t the only technology 3M offered to clinicians and healthcare providers in the fight against catheter-related infections. Earlier in 2017, the company introduced its Curos Stopper Disinfecting Cap for Open Female Luers to help clinicians ensure all intraluminal vascular access points can be protected through passive disinfection. The caps can disinfect in one minute and provide protection for up to 7 days (if not removed). Further, the cap’s bright red color helps clinicians verify a port is clean at a glance and make disinfection compliance easy to measure.

Outside of the product announcements for 3M, the company’s 2017 fiscal year was unfortunately bookended by two more somber events. First, in January, the company noted that former chairman and CEO Livio D. “Desi” DeSimone—who led the company from 1991 to 2001—had died. Having celebrated a 43-year career with 3M, DeSimone held executive positions with most of the firm’s business sectors and was also area vice president for Latin America.

“Desi was a bold leader who courageously guided 3M through the turbulent economic decade of the 1990s. During his tenure as chairman and CEO, he strengthened 3M’s portfolio through his actions including the spinoff of the imaging systems business. He made long-term investments in core technology platforms, such as microreplication, that today are used broadly across our enterprise. Desi was a champion of the environment and demonstrated an unwavering commitment to sustainable business practices for 3M and the community,” Thulin stated in a company release.

At the end of the year, in December, the company filed a patent infringement lawsuit against Kerr Corporation. The lawsuit alleged that Kerr’s SonicFill 2 and Harmonize dental composite materials infringe on patent rights directed to nanotechnology used in 3M’s Filtek Supreme universal dental restoratives. No conclusion has yet been announced regarding the legal entanglement.

$5.5 Billion ($30B total)
NUMBER OF EMPLOYEES:  91,584

As a corporate entity, 3M’s financials look favorable for shareholders. Although total sales were down in 2016 for the second year in a row—the company reported a figure of $30.1 billion (compared to $30.3 billion in 2015 and a recent high of $31.8 billion in 2014)—cash dividends were up to $4.44 in 2016 from $4.10 in 2015, continuing an ongoing, upward trend that’s occurred over the past five years. Further, the company’s earnings per share were similarly up from the prior years, posting $8.16 in 2016 versus $7.58 one year earlier, again following the upward trend of the past five years.

The company has also committed to future successes with substantial investments in research and development (R&D), recognizing future innovation as critical to the company’s continued success. On the whole, 3M invested $1.7 billion into R&D—approximately 6 percent of the total sales in 2016. Part of that investment was in a brand new, 38,000-square-foot design center located at the company’s headquarters in St. Paul, Minn. The company intends to use the new facility, for which it invested approximately $150 million, as “a central hub to enhance creativity for the award-winning 3M Design team,” according to the release announcing the center’s grand opening. Named after 3M’s “architect of innovation,” Richard P. Carlton, the facility is a shining example of the company’s dedication to its investment in R&D ($8.5 billion spent over the past five years).

“3M Design is at the forefront of creating customer-driven experiences,” said Eric Quint, vice president and chief design officer at 3M. “The new studio reflects our culture of spontaneous collaboration, creativity and translation of insightful solutions that positively impact the world. We will continue to inspire and grow our design talent across all 3M businesses, further elevating 3M as a recognized leader in design.”

The company also ranked as the “Top Dream Company” among millennial students in The National Society of High School Scholars’ Millennial Career Survey. Of the respondents who selected 3M, 74 percent were in high school, while 21 percent were enrolled in college. Further, “Medicine/Health” was selected as the top field choice by 41 percent of the survey respondents.

“People want to be part of a company where they have room to grow, take on new challenges and help others by giving back,” said Marlene McGrath, senior vice president of 3M Human Resources. “One of the great aspects of 3M is that we offer people the opportunity to develop work experiences in multiple businesses and geographies around the world and improve lives through science.”

Within this same vein, in 2016, 3M was named as one of the 25 World’s Best Multinational Workplaces by Fortune magazine. The company also announced a new leadership development program in February 2016. 3M is already recognized by Chief Executive Magazine as one of its Top Companies for Leaders.

ANALYST INSIGHTS: 3M continues to be a steady player in healthcare. Its core products allow for consistent low single digit revenue growth. The company does invest significantly in R&D. It’ll be interesting to see if that investment begins to pay off. Otherwise, it will need M&A to make dramatic improvements in the healthcare business.

—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors

With all these significant investments and development of initiatives that keep the company’s future success at the forefront of any plans, it’s somewhat surprising when the company’s financial figures reflect the relative flat sales numbers year over year (down 0.5 percent from 2015 to 2016). In addition, when examining the specific figures for the Health Care division, the trend continues. In 2016, the company reported net sales for its medical sector as $5.5 billion, which reflects a modest increase of 2 percent over 2015’s figure. The division contributed 18.4 percent to the company’s overall sales total, so the fact that it mirrored the flat growth the company experienced makes sense. Given the efforts, however, it should be apparent that 3M is most certainly doing what it can to position itself for growth in the coming years. On a positive note, the Health Care division saw higher growth in emerging markets with the Asia Pacific region offering an increase of 8 percent in sales and Latin America/Canada reported a 7 percent increase.

Those international sales figures weren’t the only positives that came out of the company’s Health Care sector in 2016. The division enjoyed a number of wins that primarily originated from its products and innovations. This included an announcement early in the year in which the company reaffirmed its commitment to its Health Information Systems business. A unit under the Health Care division, 3M had announced in September 2015 that it was considering actions related to the Information Systems business, which could include spinning-off, selling, or retaining it. According to 3M, through this unit, the company “provides healthcare data aggregation, analysis, and strategic services that help clients move from volume-based to value-based healthcare, resulting in millions of dollars in savings, improved provider performance, and higher quality of care.” Given the trends in the industry toward a value-based care system, it shouldn’t be a surprise that the company would elect to retain this piece.

That decision may have already proved fruitful when the company announced in late August that it had made an agreement with Cerner, a provider of information technology for healthcare facilities, for the company to use 3M’s Patient-Focused Episodes Software with Cerner’s HealtheIntent population health management platform. According to 3M, its software “defines over 500 episodes of patient care spanning inpatient and outpatient encounters as well as chronic and acute diseases. It accounts for patients with multiple conditions and complex health histories, and produces clinically meaningful, risk-adjusted episodes for opportunity and intervention analysis.” Coupled with Cerner’s solution, which will support bundled payments and compare provider costs, the complete solution should provide healthcare professionals with a comprehensive view and information to provide an enhanced level of care to patients.

The Information Systems unit also announced a collaboration in October with Verily Life Sciences (formerly known as Google Life Sciences). The two firms were seeking to develop a population health measurement technology for managing clinical and financial performance. The goal would be to offer a system that could be used to provide sustainable improvements in healthcare quality and costs for healthcare providers and payers.

“At 3M, we are constantly evaluating how health information technology can help improve the efficiency, quality and cost of delivering care,” said JaeLynn Williams, vice president and general manager of 3M Health Information Systems. “This collaboration reflects our commitment to continued innovation in health information systems that address real-world problems facing health care today, while protecting the privacy and security of health data.”

Given the collaboration announcements the company made in 2016 between the Health Information Systems business and Cerner and Verily, it becomes clearer why executives decided to invest further into the unit. These types of initiatives along with future projects could become a substantial driver of growth for the 3M Health Care division.

Given the attention the unit was getting, in September, 3M announced that it was acquiring Semfinder, a developer of precise semantic coding of medical services. The Kreuzlingen, Switzerland-headquartered company provided 3M with new coding technology that would enable it to make its 360 Encompass System available sooner to those countries adopting electronic health records. While the division was being considered expendable and could have been sold off only a year earlier, the unit appears to be more of a growth prospect for 3M and could ultimately be a cornerstone of the Health Care division.

Addressing asthma and chronic obstructive pulmonary disease with a digital health solution, the 3M Drug Delivery Systems unit, a part of the Health Care division, introduced a “smart” inhaler in April. The device was developed to enhance adherence and resolve device misuse, while delivering an accurate dose to the patient. The user is able to review instructions for use via a screen on the actual device and, through a smartphone app that’s coupled to the device, receive feedback (or feedback can be sent to the patients’ physician). There are a number of other interesting features included with the device and accompanying app, such as dosage delivery tracking that’s recorded when the patient correctly inhales the medication (as opposed to simply actuating the device), and data tracking of the disease state to help guide treatment decisions.

“Providing an effective and intuitive delivery method for respiratory disease treatment is critical to patients, healthcare providers, and payers alike,” said Louise Righton, global marketing operations manager for 3M Drug Delivery Systems. “Poor technique in using an inhaler, coupled with the challenges of getting patients to adhere to their medication protocols, can lead to exacerbations, increased use of healthcare resources, and ultimately, a burden on healthcare systems. By increasing competence and adherence, we can realize better patient outcomes and reduce healthcare costs.”

Within the dental space, 3M launched what it states is the world’s first tablet-based mobile intraoral scanner. The device is easily transitioned from room to room without the need for a cart or power cord. The unit, which is about the size of a typical consumer tablet, enables consultations that are much more effective as the patient can visualize exactly what the dentist is explaining regarding a treatment program.

$5.4 Billion
NUMBER OF EMPLOYEES: 88,446 (total)

3M is an incredibly diversified company. Across all its businesses, 3M’s 2015 earnings rose to $7.58 per share, a 1.2 percent increase year over year. During the year, the company completed a corporate restructuring that resulted in a pre-tax charge of $114 million, and will deliver savings of $130 million in 2016, predicted President and CEO Inge G. Thulin in the company’s 2015 annual report. Excluding this charge, 3M posted earnings per share of $7.72, up 3 percent year-over-year. Net sales were $30 billion, down 5 percent versus 2014. This included the impact of the stronger U.S. dollar, which reduced sales by nearly 7 percent. According to Thulin, premium margins remain a hallmark of 3M, and the multinational delivered such margins even in low-growth economic conditions. Excluding restructuring, 3M expanded margins nearly a full percentage point to 23.3 percent, with all five business groups above 21 percent.

In fiscal 2015 (year ended Dec. 31), 3M delivered a 22.5 percent return on invested capital, coming on top of a 22 percent return in 2014. At the same time, free cash flow conversion was 103 percent, which is the company’s second consecutive year above 100 percent.

3M’s first capital deployment priority is to invest in the business. To that end, in 2015, the company invested more than $3 billion in research and development (R&D) and capital expenditure, which helped drive organic growth. Over the last five years, in fact, 3M invested $16 billion in R&D and capital expenditure. Investments in 3M’s business also include acquisitions, which complement organic growth. In 2015, the company invested nearly $4 billion through acquisitions.

“As a science company, research and development is our heartbeat, and is foundational to our success,” Thulin told investors in 3M’s 2015 annual report. “It allows us to invent and manufacture cutting-edge products—which supports organic growth—and helps drive our premium margins and return on invested capital. In 2015, we opened six customer technical centers around the world, and are opening a new research laboratory in the United States this year.”

3M’s Health Care segment serves markets that include medical clinics and hospitals, pharmaceuticals, dental and orthodontic practitioners, health information systems, and food manufacturing and testing. Products and services provided to these and other markets include medical and surgical supplies, skin health and infection prevention products, inhalation and transdermal drug delivery systems, oral care solutions (dental and orthodontic products), health information systems, and food safety products. In March 2015, 3M acquired Ivera Medical Corp., a manufacturer of healthcare products that disinfect and protect devices used for access into a patient’s bloodstream.

The company’s Health Care business represented 17.9 percent of consolidated sales in 2015.

Health Care sales totaled $5.4 billion, a decrease of 2.7 percent over the previous year. Organic local-currency sales increased 3.7 percent, acquisitions added 0.8 percent, and foreign currency translation reduced sales by 7.2 percent.

On an organic local-currency sales basis, sales growth was broad-based across much of the Health Care portfolio, including food safety, health information systems, critical and chronic care, oral care solutions, and infection prevention. Sales declined in drug delivery systems. On a geographic basis, sales increased 8 percent in Asia Pacific, 6 percent in Latin America/Canada, 4 percent in the United States, and 1 percent in Europe, the Middle East, and Africa (EMEA). In developing markets, Health Care organic local-currency sales grew 8 percent. Acquisition sales growth was an offshoot of the March 2015 purchase of Ivera. In addition, Treo Solutions LLC, acquired in April 2014, provided a year-on-year benefit.

Operating income was flat at $1.7 billion. Operating income margins were 31.8 percent in 2015, compared to 30.9 percent in 2014, helped by portfolio management actions that contributed to higher productivity and margins. Acquisition impacts reduced operating income margins by 0.2 percentage points.

The company consolidated two of its Health Care businesses—dental and orthodontics—into a single oral care solutions segment last year, enabling the firm to offer customers a full suite of oral care innovations.

In September 2015, 3M announced that it would explore strategic alternatives for its Health Information Systems (HIS) Division, which included spinning-off, selling, or retaining the business. In February 2016, following an in-depth exploration of strategic alternatives, the company announced that it made the decision to retain and further invest in the HIS Division.

Teaming Up for Growth

Part of 3M’s strategy for growth is establishing key partnerships. Last year, 3M Drug Delivery Systems and Impel NeuroPharma Inc. forged a strategic alliance aimed at advancing Impel’s Precision Olfactory Delivery (POD) technology for the enhanced central nervous system delivery of drug products.

Also in 2015, the Minnesota Department of Human Services selected 3M Health Information Systems as its analytics contractor to support the state’s Integrated Health Partnership (IHP) demonstration, an initiative that tests new approaches to healthcare delivery and payment. 3M Health Information Systems agreed to provide data management, analysis, and data access and reporting resources to help Minnesota IHP organizations analyze cost of care, utilization of services, and risk data so they can identify opportunities for cost and care transformation.

The Minnesota project is part of a $45 million State Innovation Model (SIM) cooperative agreement, awarded to the Minnesota Departments of Human Services in 2013 by the federal Center for Medicare and Medicaid Innovation to help implement the Minnesota Accountable Health Model. This model expands patient-centered, team-based care through new service delivery and payment structures, which integrate medical care, behavioral health, long-term care, and community prevention services. As part of this initiative, the SIM program tests ways to lower the costs of caring for Medicare and Medicaid beneficiaries, while improving quality of care.

“Minnesota’s participation in the SIM program is the latest example of the state’s efforts to transform healthcare,” said William Kelly, senior vice president, Population and Payment Solutions for 3M Health Information Systems. “We look forward to supporting the state’s efforts with advanced analytic tools and meaningful data that can be used to encourage preventive care and reward healthy outcomes.”

$5.5 Billion ($31.8B total)
NO. OF EMPLOYEES: 88,800 (total)

3M has a new tagline: “3M Science. Applied to Life.” The slogan is fitting for a company whose bread and butter has been everyday products that most of us don’t even consciously think about using anymore. All sticky tapes are now ubiquitously called “Scotch Tape,” even though Scotch Tape, debuted in 1925, is a brand exclusive to 3M. How about a Post-It note? Also a 3M brand name debuted in the 1980s, yet we commonly call every brand of sticky notes by that moniker. And what better market space for a company so skilled at entering our lives in a day-to-day level than the life sciences?

3M’s healthcare division grew up in the 1960s, approximately four decades after the company’s foundation (3M grew out of another company, the Minnesota Mining and Manufacturing Co.). The 1970s and 80s saw expansion from basic medical and dental products into pharmaceuticals and radiology. Today, 3M’s Health Care Business is highly diversified, serving markets that include medical clinics and hospitals, pharmaceuticals, dental and orthodontic practitioners, health information systems, and food manufacturing and testing. Products and services provided to these and other markets include medical and surgical supplies, skin health and infection prevention products, inhalation and transdermal drug delivery systems, dental and orthodontic products (oral care), health information systems, and food safety products. In the medical and surgical areas, 3M is a supplier of medical tapes, dressings, wound closure products, orthopedic casting materials, electrodes and stethoscopes. In infection prevention, the company markets a variety of surgical drapes, masks and preps, as well as sterilization assurance equipment and patient warming solutions designed to prevent hypothermia in surgical settings. Other products include drug delivery systems, such as metered-dose inhalers, transdermal skin patches and related components. Dental and orthodontic products include restoratives, adhesives, finishing and polishing products, crowns, impression materials, preventive sealants, professional tooth whiteners, prophylaxis and orthodontic appliances, as well as digital workflow solutions to transform traditional impression and analog processes. In health information systems, 3M designs computer software for hospital coding and data classification, and provides related consulting services. The company also classifies its food safety products that facilitate microbiological food testing under its Health Care Business.

In April 2014, 3M’s Health Care Business Acquired Troy, N.Y.-based Treo Solutions LLC, which provides data analytics and business intelligence to healthcare payers and providers. Treo, which delivers analytics on data from more than 60 health plans, uses data analytics to redesign payment structures and transition payer and provider clients to value-based care models.

According to 3M, this acquisition was aimed at extending real-time data analytics and payment redesign worldwide, jumpstarting the provider organizations that have adopted the 3M 360 Encompass System for computer-assisted coding in their transition to population health management.

“Together, 3M and Treo will offer customers access to better, more comprehensive data that gives a more complete picture of the patient across all sites of care,” said Jon T. Lindekugel, president of 3M Health Information Systems. “It’s essential information needed to manage costs and improve patient outcomes under new risk-sharing care models. The acquisition of Treo is a significant step for 3M in developing coding and analytics solutions enabling our clients to deliver healthier outcomes at lower costs. By combining Treo’s expert analytic tools and services with 3M’s deep expertise in patient classification, we can help clients benchmark performance, manage population health, and achieve a more complete picture of the patient across the continuum of care.”

In product news, 3M Critical & Chronic Care Solutions launched enhancements to its 3M Tegaderm I.V. advanced securement dressings aimed at improving securement, wear time and proper application. In clinical evaluations of the upgrades, more than nine in 10 clinicians reported overall added value as the result of the enhancements, citing specific improvements in catheter stabilization, unscheduled dressing changes and ease of dressing application.

In August, 3M Digital Oral Care released the new 3M True Definition scanner system, which provides dental scanning for use by dentists and orthodontists.  The scanner was released in tandem with the 3M True Definition scanner software 5.0 designed to support faster and easier scanning. In October, the company released another dental care product: the 3M ESPE Filtek bulk fill posterior restorative for tooth filling procedures. The product gives dentists and orthodontists the ability to place up to 5 mm of filling in one increment.

In December, 3M settled a patent infringement lawsuit in Germany involving technology that enables the coloring of ceramic-based dental restorations. As a result of the settlement, Whitepeaks Dental Solutions will license this patented technology from 3M. 3M’s patented technology enables the coloring of ceramics by color-matching dental restorations to the natural color of patients’ teeth.

Speaking of patents, 3M reached a major milestone in 2014 with it’s 100,000th patent license. Each year, about 3,000 patents are issued to 3M worldwide, more than 500 of which are granted in the United States. These patents have applications in a wide range of industries as diverse as the company itself, ranging from healthcare adhesives and sterilization products to consumer electronics to reflective traffic signs. 3M’s first patent was granted in 1924. The following year, former 3M Chairman of the Board William McKnight earned 3M’s second patent, which was issued for a handle for sandpaper. The milestone patent is USPTO No. 6,878,117, which is described as a “handheld sensor for acoustic data acquisition.”

“Patents are critical to protecting our innovation and significant investments in research and development,” said Fred Palensky, 3M executive vice president and chief technology officer. 3M invests nearly six percent of sales annually in R&D including funding for multiple technology platforms that, according to company officials, will be introduced to the market in the coming years.

Research and product development constitutes an important part of 3M’s activities and has been a major driver of 3M’s sales and profit growth. Research, development and related expenses totaled $1.770 billion in 2014 (year ended Dec. 31), $1.715 billion in 2013 and $1.634 billion in 2012. Research and development (R&D), covering basic scientific research and the application of scientific advances in the development of new and improved products and their uses, totaled $1.193 billion in 2014, $1.150 billion in 2013 and $1.079 billion in 2012. Related expenses primarily include technical support provided by 3M to customers who are using existing 3M products; internally developed patent costs, which include costs and fees incurred to prepare, file, secure and maintain patents; amortization of externally acquired patents and externally acquired in-process research and development; and gains/losses associated with certain corporate approved investments in R&D-related ventures, such as equity method effects and impairments.

Also in 2014, 3M Critical & Chronic Care Solutions entered into a group purchasing agreement with healthcare alliance company Premier Inc. for multiple catheter securement and stability products. In a move aimed at bringing greater economic efficiencies to Premier’s more than 100,000 healthcare provider members, the new agreement allowed 3M to take advantage of special pricing and terms pre-negotiated by Premier. The purchasing contract covered products including Tegaderm CHG Chlorhexidine Gluconate I.V. securement dressings and Tegaderm I.V. advanced securement dressings as well as the 3M PICC/ CVC securement Device + Tegaderm I.V. advanced securement dressing, a sutureless securement system.

“We’ve been very impressed with Premier’s work improving quality healthcare by facilitating better and more cost-effective patient outcomes,” said Brent Ashton, global business director for 3M Critical & Chronic Care Solutions. “The products covered by this purchasing agreement offer a unique mix of versatility and reliability, applying 3M’s expertise in transparent films and adhesives to improve patient care and safety, clinician confidence and overall cost of care. Collectively, they address the full securement and stability needs of providers and their patients.”

Overall, for the entire company, full-year 2014 earnings were $7.49 per share, an increase of 11.5 percent. Sales increased 3.1 percent to a record $31.8 billion with organic local-currency growth of 4.9 percent. Foreign currency translation reduced sales by 1.9 percent. Full-year operating income margins were 22.4 percent, up 0.8 percentage points versus 2013. 3M converted 104 percent of net income to free cash flow for the year and generated 22 percent return on invested capital. For the full year, 3M paid $2.2 billion in cash dividends to shareholders and repurchased $5.7 billion of its own shares.

$5.33 Billion ($30.8 B total)
NO. OF EMPLOYEES: 88,667 (total)

Few companies can match 3M’s reputation for innovation. Founded in 1902 on the shores of Lake Superior, the multinational conglomerate known best for its Post-it notes, sandpaper and adhesives established a culture of risk-taking and creativity rather early in its existence (as a startup, in fact).

3M stumbled in its first attempt at product development, ditching a poorly-received wheel-grinding abrasive for sandpaper—an area in which it had no expertise. The company’s ignorance was quite evident, too: Customers complained the abrasive fell off the sandpaper during use.

An astute factory worker helped 3M determine the source of the defect—a broken cargo of olive oil shipped in the same maritime container as the garnet abrasive. The oil coated the abrasive, making it virtually impossible to stick to paper. Resourceful researchers, however, found a way to cook the oil off the garnet, thus solving the problem and setting a precedent for future ingenuity.

That resourcefulness was fully ingrained at the firm more than two decades later as 3M researcher Dick Drew worked on an alternative to the heavy adhesive tape and butcher paper used at the time to paint two-tone cars. The tape-paper combo was an excellent protectant—so good, in fact, that it stripped newly-dried paint from vehicles, hiking expenses for customers and forcing frustrated auto body workers to touch up flaws.

Drew defied orders to abandon his quest and worked intently to find the right mix of materials that would protect surfaces without compromising fresh paint. When he hit upon the winning formula and was denied funding for his masking tape project, Drew simply applied his inventiveness to financing by writing a flurry of $99 purchase orders (he had the authority as a researcher to approve purchases up to $100).

Such enterprise and determination has only grown stronger over the last 80 years as 3M morphed into a $30 billion idea-maker, responsible for inventions like cellophane tape, pocket projectors, computer screen privacy filters, space-age rubber, clear bandages, and a bluetooth-enabled stethoscope that can transcend earthly barriers to detect heart trouble as well as harmless murmurs in astronauts. As Chairman/President/CEO Inge G. Thulin noted in his 2013 annual letter to shareholders, “Innovation is now, and always will be, the heartbeat of our company. That’s why we continue to invest in R&D and increase investments focused on long-term disruptive technologies aimed at opportunities with significant growth potential.”

Thulin kept 3M’s innovative heart beating strong last year by raising research and development expenses 5 percent to $1.7 billion, or 5.6 percent of total sales. The chief executive intends to maintain the practice through 2017, when the ratio is expected to reach 6 percent of net proceeds.

3M’s investment strategy served the company well in 2013, boosting total sales 3.2 percent to $30.8 billion and  increasing operating income 2.8 percent to $6.6 billion. Four of the company’s five business segments delivered margins of 21 percent, with Industrial and Health Care leading growth, and earnings were up 6.3 percent to $6.72 per share, according to the company’s latest annual report.

Operating margins remained strong at 21.6 percent or 21.9 percent, excluding acquisitions, and the company returned a record $6.9 billion in cash to shareholders through dividends and share repurchases.

Additionally, the company recorded positive organic growth in all geographic regions despite volatile foreign exchange rates. Latin America/Canada posted the highest gains (7 percent), followed by Asia-Pacific at 4 percent, the United States at 3 percent and Europe/Middle East/Africa at 2 percent.

“In 2013 we received good growth and solid profitability while advancing our strategic initiatives in investments,” Thulin said. “Perhaps most importantly, we came out of 2013 stronger than ever, with both sales and earnings growth accelerating in the second half of the year. This was a first.”

Another first was the sales traffic pecking order. Unlike previous years, 3M’s Industrial and Health Care segments led the charge in 2013 (year ended Dec. 31), registering 6.5 percent and 3.8 percent growth respectively. The Industrial segment posted $10.5 billion in net sales, nearly double the Health Care unit’s $5.3 billion in revenue. Safety and Graphics finished the year 3.4 percent ahead of 2012 with $5.6 billion in proceeds, while Consumer brought up the rear with 1.1 percent growth ($4.4 billion), offsetting the 1.2 percent slide in Electronics and Energy ($5.3 billion).

Executives attributed the Health Care segment’s top-notch performance last year to strong supporting roles from health information systems, food safety, critical and chronic care, infection prevention and oral care products. The unit also benefited from a 10 percent hike in Latin America/Canada sales, an 8 percent increase in Asia Pacific revenue and a 4 percent increment in Europe/Middle East/Africa and U.S. proceeds.

Infection prevention growth likely came from the early spring introduction of the SpotOn temperature monitoring system and Surgical Clipper Professional 9681. Developed by makers of 3M Bair Hugger therapy, the SpotOn system simplifies the existing temperature measurement process while delivering accurate temperature measurement typically associated with more invasive methods such as esophageal, bladder, rectal or PA catheters.

“Clinicians have a variety of tools available to obtain temperature, but are lacking a non-invasive way to consistently measure core body temperature before, during and after surgery,” 3M global marketing manager Kathy Leith said when SpotOn debuted at the Association of periOperative Registered Nurses (AORN) Congress in San Diego, Calif. “The SpotOn system helps standardize temperature monitoring by eliminating the need for multiple products.”

The Surgical Clipper, also unveiled at the AORN event, is a hair removal product that boasts a nick rate of 5 percent—well below competitor rates of 12.5 percent and 25 percent. A clinical study presented at AORN found the Clipper Professional 9681 to be significantly more comfortable and less traumatic to the skin.

Other Health Care segment sales drivers included the VFlex 1805/1805S surgical masks and Aura 1870+ Healthcare Particulate Respirator. The VFlex 1805 portfolio has a pleated design that helps increase surface area for easier breathing, an adjustable noseclip for a custom and secure seal, and an elastic headband with no rubber latex components.

The Aura 1870 respirator, meanwhile, features a flat-fold design that resists fluids. Individually packaged to guard against contamination, the device’s embossed top panel is designed to accommodate eyewear and helps reduce fogging, while a chin tab allows for easy positioning, donning and adjusting.

$5 Billion ($29.6B total)
NO. OF EMPLOYEES: 84,198 (total)

Inspiration is a fickle beast. It seldom arrives by invitation, preferring instead to surprise its hosts with intrusive entrances amid ordinary places or circumstances.

The beast certainly followed protocol when it showed up on Arthur Fry’s doorstep in 1973. The 3M scientist was singing in his church choir when he had perhaps the greatest idea of his professional life.

Frustrated by the scraps of paper he used to mark his church hymnal (the makeshift bookmarks always moved around or fell out), Fry had long been searching for a better page-marking system. On the day inspiration struck, Fry remembered a work seminar he attended on a unique adhesive developed by another 3M scientist named Spencer Silver. The adhesive was strong enough to cling to objects but weak enough to allow for a temporary bond.

If Silver’s adhesive could be coated on paper, Fry theorized, then it would certainly hold a bookmark in place without damaging the page on which it was placed.

The next day, Fry requested a sample of the adhesive. He began experimenting, coating only one edge of the paper so the portion extending from a book would not be sticky. Fry used some of his experiments to write notes to his boss, leading him to broaden his original idea into the concept that eventually became the Post-it note.

Fry came up with the now iconic product during his “15 percent time,” a 3M program that allows employees to use a portion of their paid time to chase rainbows and hatch their own ideas. While it may seem like an wasteful employee perk, the program actually has produced many of the company’s best-selling products and has set a precedent for some of the top technology companies of the day, such as Google and Hewlett-Packard.

The program also has kept the company focused on innovation, which executives believe is the path to future prosperity.

“We can neither save nor spend our way into prosperity, but we can and must imagine, innovate and invest our way there. It is the only thing which guarantees success,” 3M Chairman, President and CEO George W. Buckley told shareholders in his farewell letter included within the company’s 2011 annual report. Buckley retired in February 2012 and was succeeded by Inge G. Thulin, a 32-year 3M veteran who most recent served as executive vice president and chief operating officer.

“An innovative company cannot be built just on inanimate lab work or mathematics alone,” Buckley’s letter continued. “It is built on a belief in the power of R&D, belief in the people doing that kind of work and a deep conviction that the collective power of their imagination and creativity will generate future opportunity and financial betterment for the company.”

Imagination and creativity certainly have been well-rewarded over the last several years: The global technological conglomerate responsible for such revolutionary inventions as masking tape, dry-silver microfilm and immune response modifier drugs increased its research and development spending by 21.4 percent since 2009. Last year, R&D funding climbed 9.5 percent to $1.57 billion, the highest total in at least six years.

Such investment in future innovation indubitably contributed to the company’s growth since the depths of the Great Recession. Net sales jumped 11.1 percent last year to $29.6 billion and operating income rose 4.4 percent to $6.1 billion, according to the firm’s 2011 annual report. Since falling off a proverbial cliff in 2009, 3M’s earnings have rebounded significantly—sales have skyrocketed 28.1 percent, operating income has swelled 28.3 percent and net income has ballooned 34.1 percent.

The company’s Health Care segment earnings have followed the same trajectory; sales have grown 17.2 percent and operating income has risen 10.3 percent over the last three years, 3M financial data indicate. The segment, which makes surgical supplies, food safety products, inhalation and transdermal drug delivery systems, and oral care products (among others), was one of three divisions to report a double-digit revenue increase in 2011 (the others were Industrial and Transportation, which posted a 19.5 percent sales hike, and Safety, Security and Protection Services, which recorded a 15.2 percent increase). Sales jumped 11.5 percent to $5 billion, due partly to foreign currency exchange rates and demand for products inherited in the 2010 acquisition of Arizant Inc., an Eden Prairie, Minn.-based manufacturer of blankets and hospital gowns that keep patients warm on the operating table and guard against hypothermia. Executives estimate the Arizant acquisition contributed 1.2 percent to the Health Care sector’s revenue growth.

Operating income in Health Care rose 9.3 percent to $1.5 billion last year but income margins were down—29.6 percent compared with 30.2 percent in 2010. Executives attributed the decrease in part to growth investments in the health information systems and infection prevention solutions.

Those investments include a collaboration with Cary, Ill.-based Sage Products Inc. to help minimize the risk of healthcare-associated infections. 3M also agreed to sell Sage products in certain international markets.

Another significant infection prevention investment that took place in 2011 (year ended Dec. 31) was the development and market release of the 3M Clean-Trace Hygiene Management System, a tool that can help hospitals assess surface cleanliness in less than a minute. The Clean-Trace System detects adenosine triphosphate, a substance in all living cells that is found on any contaminated surface.

The company’s Health Care sector also unveiled a new mobile software system for doctors that enables them to manage their daily schedule, review patient information, dictate progress notes and log charges. The 3M Mobile Physician Solution also provides instant access to patient information from any location. Upon its release in May 2011, 3M touted its physician-oriented software system as the “industry’s first mobile solution to offer comprehensive intelligent coding advice to physicians as they capture and record professional fees.”

$4.5 Billion ($26.7B total)
NO. OF EMPLOYEES: 80,057 (total)

“Any sufficiently advanced technology is indistinguishable from magic.”
— Arthur C. Clarke

The magic is back at 3M. Five years after setting out to recapture the wizardry that transformed the company from a five-man mining and manufacturing firm into a global technological conglomerate responsible for such revolutionary inventions as masking tape, dry-silver microfilm, Post-it Notes, and immune response modifier drugs, 3M has rediscovered its serendipitous formula for achieving and sustaining growth, and reincarnating stale markets.

Finding the proper ingredients for the magical potion wasn’t easy, though. It required the company’s management team to take a new approach to growth, one that included a rekindling of creativity among engineers, scientists and researchers, and the creation of a business environment that would encourage such creativity and help it to flourish. The new approach also required the firm to take more calculated risks and burst into high-growth markets and countries.

“After the high growth rates of the 1960s and 1970s, we had been stuck in a low growth mode since 1979,” George W. Buckley, 3M chairman, president and CEO told shareholders in a letter at the beginning of the company’s 2010 annual report. “We knew that achieving consistently higher rates of growth, while maintaining the premium margins and returns we’d come to expect, was not going to be easy. In fact, many onlookers thought it was an impossible task.”

It may have seemed impossible at first, but once the company reconnected with its inner mojo, the high-end growth that 3M had lost more than three decades ago bewitchingly reappeared. In 2010, growth reached record levels—organic volumes jumped 13.7 percent (compared with an estimated worldwide Industrial Production Index growth of 8 percent), and cash flow was $4.1 billion, with a conversion rate of 100 percent. Total sales and the overall annual growth rate both hit new highs ($26.7 billion and 15.3 percent, respectively), as did the company’s operating profit of $5.9 billion, which included margins of 22.2 percent, up 140 basis points compared with 2009. Earnings per share (EPS) topped out at $5.63, a 25 percent increase compared with the firm’s 2009 EPS of $4.52.

Four of the company’s six business segments turned in double-digit sales growth in 2010 (year ended Dec. 31), with the Electro and Communications sector recording the largest increase at 28.3 percent.
The Display and Graphics segment followed closely behind, posting a 24 percent surge on $3.8 billion in sales, while the firm’s Industrial and Transportation segment reported an 18.6 percent increase on $8.5 billion in sales (this segment, incidentally, was 3M’s top revenue-generator). Consumer and Office division sales climbed 11 percent; at the back of the pack was Safety, Security and Protection Services, which garnered an 8 percent sales increase, and Health Care, which experienced a 5.3 percent hike.

Sales were just as enchanting throughout the world last year, growing most significantly in the Asia Pacific region (35 percent on $8.2 billion in revenue) and Latin America/Canada (17.2 percent on $2.9 billion in sales). Domestic sales were the most lucrative for 3M, generating $9.2 billion for the company, but they experienced one of the weakest growth rates at 8.2 percent, according to the annual report. Still, U.S. sales growth was higher than the revenue increase reported in Europe, the Middle East and Africa—4.8 percent on $6.2 billion in sales.

Much of 3M’s overall sales increase directly can be linked to its longstanding commitment to research and development. Expenditures in this area jumped 10 percent last year compared with 2009 and 12.5 percent since 2005. In total, the company has spent $7 billion on R&D over the last five years—money which Buckley claims will ensure the firm’s future.

“Research and development and new business ventures are somewhat risky in that we can’t always tell which will be successful,” Buckley said in the annual report. “But the alternative of not investing in our future is far more risky. In the coming year we expect to see growing payoffs as these ventures gain traction in the marketplace.”

Such payoffs in the Health Care sector likely will be derived from last June’s release of Tegaderm foam adhesive wound dressings, which have a higher fluid handling capacity and longer wear times compared with similar products, and the September launch of the VFlex Particulate Respirators, devices featuring V-shaped pleats that expand to provide the user with a more comfortable seal and embossed front panels that help the products retain their shape.

Future growth in the Health Care sector also is expected to come from last year’s acquisition of Arizant Inc., an Eden Prairie, Minn.-based manufacturer of blankets and hospital gowns that keep patients warm on the operating table and guard against hypothermia. Executives estimate the acquisition contributed 1.2 percent to the sector’s revenue growth, though it had little effect on operating income (which remained essentially flat at $1.3 billion).

The Arizant deal was one of three that transpired over the course of a month late last summer. At the end of August, 3M purchased Cogent Inc., a maker of fingerprint-identification devices, for $943 million, and Attenti Holdings SA, a manufacturer of electronic tracking tools, including ankle bracelets, for $230 million.

Since 2005, 3M has announced a total of 67 acquisitions, according to industry data. The $1.3 billion purchase of Cuno Inc., a water filtration devices manufacturer, in 2005 was the largest, followed by a $1.2 billion deal in 2007 for Aearo Technologies, a manufacturer of ear plugs and safety goggles.

“15. 3M Healthcare

$4.3 Billion ($23.1B total)

KEY EXECUTIVES:
George W. Buckley, Chairman, President and CEO
Patrick D. Campbell, Sr. VP and CFO
Brad T. Sauer, Exec. VP, Health Care Business
John K. Woodworth, Sr. VP, Corporate Supply Chain Operations

NO. OF EMPLOYEES: 75,835 (total)

GLOBAL HEADQUARTERS: St. Paul, Minn.

The economic events of 2009 “changes your outlook and in some ways it alters you permanently,” said George Buckley, president and CEO of 3M. Buckley’s company, like many, felt the impact of the Great Recession. Buckley said part of the challenge and the balance was not merely a lack of sales, but the effort to overcome the economic challenges while preserving infrastructure and innovation for the future.

The company posted full-year 2009 sales of $23.1 billion and earnings per share of $4.52, down 8.5 percent and 7.6 percent, respectively. Excluding special items, 2009 earnings declined 9.3 percent to $4.69 per share. Net income was $3.19 billion, down from $3.46 billion.

“The key to 2009 was staying on a clear and simple plan: tight control of spending and factories while retaining a focus on generating cash…and working hard to ethically drive sales and market share everywhere,” Buckley said. “Underpinning that, we stayed the course on our R&D and new business investments. We never gave up on the future at a time when some people wondered if there would even be one.”

In addition, the company maintained R&D investments of more than a billion dollars in R&D at a time when many companies were forced to dramatically cut back. The company spent $1.3 billion in 2009, down from $1.4 billion in 2008 and 2007.

Though sales in the company’s healthcare sector were flat, officials expect the market to “remain positive.” Healthcare products generated sales of $4.3 billion, flat compared with last year, however operating income notched up to $1.37 billion from $1.23 billion in 2008.

The firm’s healthcare reach covers a number of areas. 3M is a supplier of medical tapes, dressings, wound closure products, orthopedic casting materials, electrodes and stethoscopes. In infection prevention, 3M sells a variety of surgical drapes, masks and preps, as well as sterilization assurance equipment. Other products include drug delivery systems, such as metered-dose inhalers, trans-dermal skin patches and related components. Dental and orthodontic products include restoratives, adhesives, finishing and polishing products, crowns, impression materials, preventive sealants, professional tooth whiteners, prophylaxis and orthodontic appliances. In health information systems, 3M develops computer software for hospital coding and data classification and provides related consulting services.

A number of new products released in 2009 were a testament to 3M’s focus on R&D.

Everyone’s familiar with the old-fashioned stethoscope that hangs around their doctor’s or nurse’s neck. A new product from 3M drags the stethoscope into the 21st century. The Littmann Electronic Stethoscope Model 3200 is a next-generation auscultation device featuring Bluetooth technology that wirelessly transfers heart, lung and other body sounds to software for further analysis.

The company partnered with Connecticut-based Zargis Medical to develop two companion software packages exclusively for the device. Software can guide the clinician through cardiac sites; allows clinicians to visualize the heart, lungs and other body sounds; save files for future comparison; and play slowly to hear more clearly. In addition, patient notes can be saved, added to medical records or shared with clinical colleagues for consultation. In November, the device was named as an “Innovation of the Year” by Popular Science, which is part of the publication’s annual “Best of What’s New Awards.”

Expanding its platform of rapid diagnostic testing, 3M released its Rapid Detection RSV Test. RSV, or respiratory syncytial virus, is a respiratory virus that infects the lungs and breathing passages and is a common cause of bronchitis and pneumonia in children under one year. Like influenza, RSV can be a serious respiratory illness that, if not properly diagnosed and treated, could have consequences for vulnerable populations. The test is designed to detect the presence of RSV F-protein antigens in nasopharyngeal swab, nasopharyngeal aspirate, or nasal wash/aspirate specimens in 15 minutes with a 3M rapid detection reader, manufactured by Response Biomedical.

The firm also added to its Tegaderm line of wound and surgical dressings, with the Tegaderm IV dressing for the BD Nexiva catheter system by Becton, Dickinson and Company. Specifically designed for BD’s catheter system, the dressing offers a new alternative to address catheter movement, dislodgements and fall-outs, which is better for the patient, clinician and cuts down on hospital-acquired infections.

3M certainly had strong ties to BD in fiscal 2009. In July, the company bought the ACE bandage division and the thermometer product business from Franklin Lakes, N.J.-based BD. Terms of the transaction were not disclosed. The ACE brand dates back to 1914 when BD began manufacturing elastic bandages in the United States. ACE—which is an acronym for “all cotton elastic”—products are sold broadly through consumer channels, including drug stores, mass merchandisers, grocers and sporting goods stores in North America. The brand includes bandages, braces, supports and hot-and-cold therapy products. BD-branded thermometers also are sold through consumer channels. “

$4.2 Billion ($25.3B total)
NO. OF EMPLOYEES: 75,333 (total)

The global economic crisis has left many companies struggling to survive. But at 3M Healthcare, the crisis has had a different effect on management: It has strengthened their resolve not only to survive, but to emerge from the debacle a stronger, leaner company.

“As George Bernard Shaw said, ‘The best way to predict the future is to create it.’ We can only do that by taking absolute control of our own destiny,” George W. Buckley, 3M chairman, president and CEO, told shareholders in the company’s 2008 annual report. “It means rigorous control of cash and costs…Business is still about balance and, while remaining responsive to present-day developments, we must also keep an eye on the future. We must still invest in the future if we expect to thrive later on.”
3M executives took a number of steps last year to balance the company’s cost structure with its revenue stream. They eliminated 3,500 positions throughout the year and furloughed more than 1,000 factory workers due to low production volumes. Executives also reduced the number of contract workers the company uses and deferred merit pay increases for all employees.

While those corrective cost actions could not fully offset the impact from the flat-lining economy in the second half of 2008, Buckley said they helped 3M make the “best of a very tough situation.”
3M’s situation eventually turned out better than executives had expected. The company delivered a Return on Invested Capital of 19.7 percent (20.8 percent excluding special items) in 2008. It also paid out $1.4 billion in dividends and increased its 2009 quarterly dividend to 51 cents per share. The increase is the 51st consecutive raise to be applied to 3M’s dividend since 1958.

The company also posted record sales figures for 2008, despite the challenges posed by the economy and the secular transition of its Optical Systems division. Overall sales totaled $25.3 billion, a 3.3 percent increase compared with the $24.4 billion 3M reported in 2007. Net income was $3.46 billion, or $4.89 per diluted share, versus $4.1 billion, or $5.60 per diluted share in 2007. Excluding special items, 2008 earnings were $5.17 per share, versus $4.98 per share in 2007.

3M garnered the bulk of its sales overseas last year, reporting $16 billion in international revenue. Foreign sales were split almost evenly between Asia Pacific and Europe, the Middle East and Africa—according to the annual report, the Asia Pacific region garnered $6.42 billion in sales for the company, while Europe, the Middle East and Africa generated $6.9 billion in revenue last year. Sales to customers in Latin America and Canada totaled $2.7 billion, and U.S. sales amounted to $9.1 billion.
Sales growth was broad-based last year, with five of the company’s six business segments experiencing increases. The Health Care segment posted $4.2 billion in sales last year, an 8.2 percent increase compared with the $3.9 billion in revenue generated in 2007. 3M’s Health Care division markets and sells medical tapes, dressings, wound closure products, orthopedic casting materials, electrodes and stethoscopes as well as sterilization assurance equipment, surgical drapes, and masks and preps. It also is a leading supplier to the dental industry.

The United States and Asia Pacific region led sales growth last year in the Health Care segment. Operating income margins of 24 percent in the fourth quarter were the highest in the company in spite of $50 million in restructuring and “exit activity” charges that reduced operating income margins by 4.9 percent. For the year ended Dec. 31, 3M’s operating income increased 8 percent, an impressive figure considering the state of the economy throughout 2008. Still, the growth was a significant drop from the 34.6 percent increase in operating income the company reported in 2007, when 3M sold the last chunk of its pharmaceutical business.

While no major sales took place in 2008 within the Health Care sector, 3M acquired several companies that contributed 1.7 percent to local-currency sales. In April 2008, 3M Canada acquired Solumed Inc., a Quebec, Canada-based developer and marketer of products designed to prevent infections in operating rooms and hospitals. The move added a chlorhexidine gluconate and alcohol-based line of products for infection prevention to 3M’s merchandise lineup.
One month later, 3M snatched up Imtec Corp., a dental implant manufacturer based in Ardmore, Okla. The acquisition gives 3M access to the fast-growing dental implant and cone beam computed tomography equipment markets.

3M picked up its final company in mid-June 2008. Its merger with TOP-Service fur Lingaultechnik GmbH, a German manufacturer of orthodontic technology and services, bolsters 3M’s existing products portfolio and has helped the company expand its orthodontic products offering into Europe and Asia.

$4 Billion ($24.5B total)
NO. OF EMPLOYEES: 76,239

Just after World War II, in 1948, the story of 3M Healthcare began with just one product—a surgical drape. The company still makes drapes and dressings, and much more.

In the medical and surgical areas, 3M manufactures medical tapes, dressings, wound closure products, orthopedic casting materials, electrodes and stethoscopes. In infection prevention, 3M produces surgical drapes, masks and preps, as well as sterilization assurance equipment. Other products include drug delivery systems such as inhalers, transdermal skin patches as well as dental and orthodontic products. In health information systems, the company produces computer software for hospital coding and data classification, as well as provides related consulting services.

In April 2007, 3M announced the creation of a new Medical Diagnostics business unit that is focused on developing and commercializing rapid diagnostic products for the detection of infectious pathogens, including methicillin-resistant Staphylococcus aureus and other treatment-resistant microbes.

“We see many market trends pointing to the need for rapid, easy-to-use microbial diagnostics that will aid in the prevention and control of infections in hospitals in the United States and abroad,” Angela Dillow, global business manager of 3M Medical Diagnostics, said in a news release at the time.

The company steadily has been building the base of its diagnostic capabilities. In February 2007, it acquired Acolyte Biomedica Ltd., a United Kingdom-based company that manufactures automated microbial screening technology for the rapid detection, diagnosis and treatment of infectious disease. In April 2008, the company rolled out its first US product based on its Medical Diagnostics platform, the Rapid Detection Flu A+B Test. It is expected to be available prior to the 2008-2009 flu season.

“This is the first of several rapid diagnostic solutions we plan to bring to the marketplace that help hospitals improve patient outcomes, reduce costs and reduce the impact of resistant microbes,” said Chuck Kummeth, vice president and general manager, 3M Medical Division.

The company’s growth strategy seems to be working. 3M Healthcare is the second-largest revenue driver for its parent company, behind the conglomerate’s Industrial and Transportation division ($7.27 billion). Healthcare led all segments with local-currency sales growth of 18.3% (excluding divestitures). This includes a 4.4% benefit from acquisitions and 4.5% benefit due to the pharmaceuticals supply agreements. The sale of 3M’s global branded pharmaceuticals business reduced the Healthcare division’s sales growth by 23.7%, the company said.

Year-end revenue inched down negligibly, primarily due to the sale of the company’s pharmaceutical businesses. Sales for the fiscal year (ended Dec. 31) were $3.97 billion, compared with $4 billion in 2006, a decrease of 1.1%. Income increased slightly to $1.88 billion in 2007 from $1.85 billion in 2007, roughly 2%.

In 2007, sales growth was broad-based across all platforms, led by infection prevention solutions and skin and wound care therapy products in medical, inhalers in drug delivery as well as healthcare funding and performance management solutions for the hospital market in health information systems, company officials said.

Growth also was the result of strategic purchases by the company, including:

• Lingualcare Inc., a Dallas, TX-based orthodontic technology and services company that offers the iBraces system, a customized, “invisible” lingual orthodontic solution

• Abzil Industria e Comercio Ltda., a manufacturer of orthodontic products based in Sao Jose do Rio Preto, Sao Paulo, Brazil

• Neoplast Co. Ltd., a manufacturer and distributor of surgical tapes and dressings and first-aid bandages for both the professional and consumer markets across the Asia Pacific region

• Articulos de Papel DMS Chile, a Santiago, Chile-based manufacturer of disposable surgical packs, drapes, gowns and kits

Terms of the deals were not disclosed.

Getting off to a good start in 2008, 3M Healthcare posted double-digit profit growth for the first quarter (ended March 31). Sales rose 12% to $1.1 billion. The strongest sales growth came from the medical, dental and orthodontics businesses, the company reported. Operating income increased 19.6% to $321 million, with margins of nearly 30%, excluding special items in the first quarter of 2007. During the quarter, the Medical division launched its Tegaderm infection prevention product for intravenous sites.

“$4 Billion ($22.9B Total)

Key Executives:
George W. Buckley, Chairman, President and CEO
Patrick D. Campbell, Sr. VP and CFO
Robert D. MacDonald, Sr. VP, Marketing and Sales
Brad T. Sauer, Exec. VP, Healthcare Business

No. of Employees: 75,000

World Headquarters: St. Paul, MN

3M’s commercials say: “We don’t make the products you buy; we make the products you buy better. Actually, in the case of its healthcare division, 3M did, in fact, make quite a few products—and then turned around and sold them for $4 billion (net sales for the 2006 fiscal year, ended Dec. 31).

Net sales for the healthcare division marked an increase of 6.7% ($3.76 billion for fiscal 2005) and were the second-largest contributor (17.5%) to 3M’s bottom line behind the company’s Industrial and Transportation division. The company’s total revenue for 2006 was $22.9 billion, an increase of 8.3%. 3M’s net income for the year was $3.9 billion, up from $3.2 billion in 2005.

For the healthcare division, 3M reported operating income for 2006 of $1.8 billion, a significant 65% increase from $1.1 billion in 2005. The large jump was due to the company’s sale of its pharmaceutical business at the end of 2006, according to 3M. The company said growth in its healthcare division was driven by steady sales from core medical and dental businesses.

While most people may think of 3M as an industrial supplier or, at the very least, the company that brought mankind the Post-it note or Scotch tape—the company supplies a wide range of medical products.

In the medical and surgical areas, 3M manufactures medical tapes, dressings, wound closure products, orthopedic casting materials, electrodes and stethoscopes. In infection prevention, 3M produces surgical drapes, masks and preps, as well as sterilization assurance equipment. Other products include drug delivery systems, such as inhalers, transdermal skin patches, as well as dental and orthodontic products. In health information systems, the company produces computer software for hospital coding and data classification, as well as provides related consulting services.

As mentioned earlier, the company sold its pharmaceutical operations in the Americas, Asia-Pacific and Europe to different buyers for each region. The deals for Asia-Pacific and the Americas closed in the fourth quarter of 2006 (for which the company realized a net gain of a little more than $1 billion), while Europe wrapped up in January (netting the company $422 million). Sales prices for all three units totaled $2 billion. As part of the deal, 3M’s Drug Delivery Systems division will continue to supply its technology to the divisions’ new owners. The company said the divestiture of its branded pharmaceutical business would allow it to focus on its core medical products business.

As part of the expansion of its medical products line, 3M announced in April the creation of a new Medical Diagnostics business unit that will focus on developing and commercializing rapid diagnostic products for the detection of infectious pathogens, including methicillin-resistant Staphylococcus aureus and other treatment-resistant microbes.

“We see many market trends pointing to the need for rapid, easy-to-use microbial diagnostics that will aid in the prevention and control of infections in hospitals in the United States and abroad,” said Angela Dillow, global business manager, 3M Medical Diagnostics.

The company steadily has been building the base of its diagnostic capabilities. In February, it acquired Acolyte Biomedica Ltd., a UK-based company that manufactures automated microbial screening technology for the rapid detection, diagnosis and treatment of infectious disease.

For fiscal 2007, CEO George Buckley called results for the company’s first quarter “an exceptionally strong start,” and the numbers seem to prove him correct. Overall earnings for the quarter were $1.4 billion, up 52% from the first quarter of 2006. The sale of the company’s European pharmaceutical operations helped facilitate the impressive results. Revenues were $5.9 billion, up 6.1% from 2006. Excluding the impact of divested branded pharmaceuticals business, sales increased nearly 10%. The healthcare business reported sales of $962 million, up 24.4%. The company said all healthcare businesses generated significant growth, though drug delivery systems had the most significant impact. “

$3.5 Billion
No. of Employees: 69,315

3M Healthcare was relatively down in 2005, with only a 3% jump in sales because of competitive price pressures and raw material price increases, after experiencing double-digit jumps in revenues for the medical arm of the St. Paul, MN-based conglomerate during the previous couple of years.

While its net sales increased 3% to $3.5 billion, its operating income grew by 8% and operating profit margin jumped by 28%.

The strongest areas, wound care products and the dental products segment, continued to get stronger in fiscal 2005. In the wound care products division, the Tegaderm brand was a major driver. In the dental segment, the ESPE Lava crown and bridges system helped to maintain 3M Healthcare’s honor of being the second largest supplier to the dental industry.

Last year, the company was going through a transition at the top of the executive wing. In December, the company named George W. Buckley as the new CEO; he succeeded interim CEO Robert S. Morrison, who had been at the job since July 2005. Morrison was called in to fill the top spot at 3M after former CEO W. James McNerney, Jr. left the company in June 2005 to take the top post at aerospace giant Boeing.

Buckley came to 3M from Brunswick Corporation, where he had served as CEO and chairman since June 2000. “George Buckley is a proven CEO with a terrific blend of strategic, business and analytical skills and an excellent record of driving both sales growth and operational efficiency in a wide range of global businesses,” said then-interim CEO Morrison. “His strengths complement perfectly 3M’s culture of innovation and operating effectiveness.”

In the first full quarter of his tenure, the Healthcare business remained steady with a 2% increase to $966 million. At that time, the company introduced its Littmann Electronic Stethoscope Model 3000, which reduces ambient noise—allowing healthcare professionals to pick up sounds that other stethoscopes miss. Regionally, the healthcare portion of 3M expanded in many high-growth emerging markets, including China and India.

Overall, the Healthcare division (which includes pharmaceuticals) also rose 3% to $4.4 billion. All seven businesses as a whole rose grew by 6% to $21.2 billion in revenue. The corporation’s profit was a healthy 7%, to $3.2 billion, in 2005.

The healthcare business is 21% of combined sales, the largest of the seven businesses and consistent with 2004 fiscal ratios with the other 3M businesses. Healthcare was just one of seven businesses in 2005; the remaining include Industrial; Display and Graphics; Consumer and Office; Electronics and Communications; Safety, Security and Protection Services; and Transportation.

In the dental area, 3M’s resin and filter technology produced an advanced ESPE Filtek Supreme Plus Universal Restorative product. The nanocomposite enables dentists to restore teeth to their natural shape and function while matching existing tooth color so closely that the restoration is virtually undetectable to the naked eye.

Starting in the first quarter of 2006, 3M combined the Industrial and Transportation segments.

In April and May 2006, respectively, 3M added to its Healthcare business with a pair of acquisitions in the West Palm Beach, FL-based OMNII Oral Phar-maceuticals, a manufacturer of differentiated preventative dental products, and the SBG GmbH, a Berlin, Germany-based developer of diagnosis related groups software for hospitals.