Analysts Are Saying ‘Meh’ to a Solventum Long Range PlanAnalysts Are Saying ‘Meh’ to a Solventum Long Range Plan
Ryan Zimmerman, a BTIG analyst, cautions that a long-range plan is a losing proposition for Solventum - but noted it was absolutely necessary.
January 27, 2025
.png?width=1280&auto=webp&quality=95&format=jpg&disable=upscale)
It’s not always smooth sailing when a spinoff first separates. Sometimes there’s turbulence – as is the case with Solventum.
3M shed its healthcare unit in April of 2024 and since that time the spinoff has been experiencing growing pains, which include layoffs.
Recently, the company announced it was going to release its long-range plans during investor’s day. Some analysts, while saying the plan is necessary are still criticizing it.
The major issue with Solventum is its estimated growth. In a research note, BTIG Analyst Ryan Zimmerman noted how investors might receive Solventum’s growth rate if the plan underestimates or overestimates performance.
Zimmerman added, “As we think about the LRP, it seems to us that it's a losing proposition. Too low (flat to 3% top-line growth, which is below Solventum's market growth rates) and investors will say management is not being aggressive enough. Too high (MSD top-line growth) and we worry that investors may question how Solventum can achieve these targets rapidly given its underperformance thus far.
Zimmerman said, “Don't get us wrong, we think that providing an LRP is necessary, but it creates a precarious position either way.”
He then went on to discuss what investors might think of the LRP.
He noted, “We expect investors are looking to see longer-term targets that have Solventum growing more in line with its historical performance as a business unit within 3M in the MSD range. We would also highlight that when 3M acquired Acelity in 2019, Acelity was growing at 2.5% Investors, as outlined in a recent activist letter, believe Solventum has set too low a bar for itself.”
Solventum isn’t the only spinoff that has had a hard time finding its footing.
Becton Dickinson’s Embecta had quite a few growing pains. 2024 was a tough year for the diabetes company as it had to shed its insulin patch program and undergo a restructuring.
Zimmer Biomet’s ZimVie went through massive changes in 2024. The Westminister, CO-based company first sold its spine business to H.I.G. Capital in a deal valued at $375 million. The spine business is now called Highridge Medical.
ZimVie, which operated in the dental implant space, was rumored to be acquired by Osstem, according to a report from Bloomberg.
About the Author
You May Also Like