Life Sciences Insight

Surgalign aims to slash $30M from 2023 spending with planned layoffs

Surgalign is expecting to wrangle between $30 million and $35 million in savings next year via cost-cutting moves. So far in 2022, it has racked up $74.3 million in operating expenses for a total operating loss of $30.3 million. 

As companies send out their last earnings reports before the end of the year and prepare to bid 2022 farewell, many have kicked off the fourth quarter by taking a closer look at their finances and identifying potential areas of improvement.

That’s resulted in recently announced restructuring plans—which often, unfortunately, include layoffs as a key component—for medtech giants like Philips and Siemens Healthineers. Hopping on the bandwagon this week is Surgalign, which announced Wednesday that its board of directors has already approved a corporate restructuring plan of its own.

In total, Surgalign is expecting to wrangle between $30 million and $35 million in savings next year from the cost-cutting moves. So far in 2022, it has racked up $74.3 million in operating expenses for a total operating loss of $30.3 million, according to its third-quarter earnings report last week—though that’s still an improvement over the first nine months of 2021, when Surgalign’s operating expenses had soared to nearly $100 million.

At the core of the plan is a goal to narrow the company’s product portfolio. Surgalign will redirect its focus mainly toward new products that were launched within the last year and longer-standing offerings that “hold the greatest growth prospects.” In the coming weeks through the beginning of next year, the surgical device maker plans to discontinue some of its lower-performing products then reinvest those savings into stronger areas of its portfolio.

As it whittles down its offerings, Surgalign said it plans to make other improvements across its operations and organizational structure that’ll make that product development more efficient.

Although the company didn’t provide any specifics about layoffs, it did note that it expects to incur between $3 million and $3.5 million in “employee-related severance costs” in the final quarter of 2022 and the first quarter of next year. It’s unclear how many workers that would affect; as of the end of 2021, Surgalign employed 231 people, about a third of whom were based outside the U.S., per its annual report (PDF).

In total, the restructuring is expected to cost Surgalign up to $7 million during that period. More could be on the way: On top of the already approved plan, the company said its board also signed off on “the exploration of further restructuring initiatives, which include but are not limited to, the potential paring down, selling or exiting certain aspects of its business, both domestically and abroad.”

CEO Terry Rich said in Wednesday’s release that the launch of the restructuring programs still hinges on the outcome of certain financing initiatives that are currently in the works.

“We intend to take aggressive steps to realign our business and improve our market position and value creation opportunities,” Rich said. “We believe these programs will enable us to generate growth in areas we are focused on, enhance gross margins and lower expenses, and over time, improve our financial position by freeing up resources to invest in areas we believe hold the greatest promise.”

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