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Jabil Launches Healthcare Group, Cites J&J as a Factor

Jabil has consolidated its entire healthcare organization under Jabil Healthcare, a move that signals the company’s strategy to remain a major medical device contract manufacturer. The new entity combines Nypro with its orthopedic, spine, trauma and associated instruments businesses.

“By harnessing the power of the Jabil and Nypro teams, we are in the unique position to accelerate technology advancements and augment the value we bring to our customers, their patients and the healthcare industry,” said Steve Borges, who was appointed Chief Executive Officer and Executive Vice President of healthcare. “With the rise of digital health and additive manufacturing, the time is right to unite our diverse capabilities and domain expertise under one strong brand.”

Jabil’s Capabilities

Jabil is an end-to-end contract manufacturer with design, engineering, manufacturing and supply chain solutions for the medical device industry. Specific to orthopedics, the company highlights industry’s move toward personalized implants and outpatient procedures and emphasizes “manufacturing alternatives,” like 3D printing, gamma sterilization, as well as less invasive instrument manufacturing.

Prominent initiatives of Jabil Healthcare are the Internet of Things and digital health platform innovations. Jabil has far ranging expertise outside of traditional orthopedic implant and instrument manufacturing, with capabilities in sensors, wireless and wearable technologies and apps.

Presumably, the consolidation of a formal healthcare unit will allow Jabil to serve orthopedic device companies’ manufacturing and growing enabling technology and digital tool needs. It’s a set of comprehensive capabilities not previously seen by contract manufacturers in orthopedics.

“As healthcare companies increasingly shift their core competencies away from manufacturing to focus on device improvements and the development of more platform-based, connected, and consumer-driven product solutions, Jabil Healthcare is the ideal partner for this transformation,” the company’s website says.

The J&J Factor

Jabil’s shift to consolidate its healthcare business is due to a strategic collaboration with Johnson & Johnson Medical Devices (JJMD), along with the company’s desire to diversify its portfolio and focus on innovation and technology within healthcare, according to Jabil’s Annual Report.

In 2018, Jabil announced that it would acquire certain JJMD facilities and take over operations, supporting JJMD in endoscopy, surgical, spine, trauma and instrument manufacturing. Leadership said that it expects the facilities will be in a semi-transition ramp mode through 2020 and into 2021.

When originally announced, Jabil said that the collaboration would net them revenue in the range of $800 million to $1 billion during its 2020 fiscal year. During the company’s 1Q20 earnings call in December, Jabil Chief Executive Officer Mark T. Mondello said that the company is projecting revenue from the collaboration “on the upper end of that and maybe slightly higher than $1 billion.”

Jabil estimates that its Healthcare & Packaging Division revenue will reach $4.2 billion in fiscal year 2020, +31% from 2019. The company as a whole estimates revenue of $26.7 billion in fiscal year 2020, +5.5% from 2019. Nearly 60% of Jabil's revenue is derived from electronics manufacturing for a diverse set of industries.

An Orthopedic Disruptor?

Jabil has over 35 sites globally and nearly 20,000 employees serving healthcare customers ranging from startups to established global companies. The size of its manufacturing footprint and the breadth of its capabilities is unrivaled by any other player. Its revenue from the J&J collaboration alone makes the company more than double the size of the next largest contract manufacturer in orthopedics.

Jabil isn’t new to orthopedics or medical device or consumer health, but its recent prioritization of the industry and its ability to be a one-stop supplier for traditional manufacturing and connected digital technologies has the potential to disrupt orthopedic contract manufacturing.

“With more than 50 years of expertise, Jabil Healthcare is well versed in integrating components and subsystems into pharmaceutical, orthopedic, diagnostic, medical and consumer healthcare devices,” Borges said. “As a united team with a clear mission, we are powerfully positioned to help our customers deliver high-quality, innovative products and services that improve patient outcomes.”