What are Medtech Execs Saying About Tax Reform?

The recently lowered U.S. corporate tax rate was a hot topic in San Francisco, CA where thousands of industry executives and investors convened for the 36th annual J.P. Morgan Healthcare Conference. We combed through dozens of company slideshows and tuned into live webcasts to find out what medtech is saying about tax reform.

  • Johnson & Johnson (J&J) CFO Dominic Caruso praised the recently passed tax bill during the company's presentation at the J.P. Morgan Healthcare Conference this week.

    “I do think we have a more globally competitive system that will benefit the U.S. economy and will benefit job creation in the U.S. [as a result of U.S. tax reform],” Caruso said.

    In the past, he said, corporations that may have had ample resources outside the United States have needed to borrow domestically to make investments so as to avoid what was essentially a tax penalty for accessing their global cash reserves. The new law removes that hurdle and gives companies like J&J more flexibility in terms of allocating their capital for things like mergers and acquisitions.

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  • Boston Scientific CEO Mike Mahoney told a J.P. Morgan Healthcare Conference audience this week that the new U.S. tax law is "a winner" for the company.

    “I don’t think many of you appreciate what a benefit tax reform is for Boston Scientific," Mahoney said during his presentation.

    Before the tax reform bill was passed, Boston Scientific had told investors that the company would see an annual tax rate increase for the next several years as part of the company's plan to gain access to its foreign cash in 2019 and beyond. With the new legislation, Boston Scientific will still see a slight tax increase this year, but then it will level off as the company reaches its goal of full access to cash much sooner than previously anticipated. As a result, the new law means greater financial flexibility and earnings power, Mahoney said. 

  • Medtronic CEO Omar Ishrak said the company should see a modest tax benefit from the new U.S. tax rate.

    "But more importantly, this new tax law allows us full access to almost all of our cash, from 55% to almost 100%," Ishrak said.

    To do that, however, the company also has to pay for its prior accumulated foreign profit and cash, which comes out to about $2 billion to $3 billion over the next 8 years (fiscal years 2019 through 2026).

    To offset this cash flow impact, Ishrak said Medtronic will be focused on "disciplined reinvestment of cash made free" on an ongoing basis and will invest all of that money in United States as part of the company's previous promise to invest $10 billion in U.S.-based innovation by 2025.

  • NuVasive CEO Greg Lucier said the company looks forward to reaping significant benefits from tax reform. The new law brings the company's effective tax rate down from somewhere around 40% to around 20%. As a result, he said the company will be able to grow its earnings per share at two times the rate of its revenue growth.

    “This legislative change makes a world of difference,” Lucier said.

  • Another company that stands to benefit significantly from the U.S. tax reform law is Quest Diagnostics. According to Quest CEO Stephen Rusckowski, the company is a full-pay U.S. taxpayer as it predominately operates in the United States. The new law drops the company's effective tax rate from 35% to 21%, providing an opportunity for Quest to return some of that savings to its shareholders. The company also plans to reinvest some of that money to accelerate the company's growth.

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