Executive Summary / Key Takeaways

• Teleflex is undergoing a significant strategic transformation, including the planned acquisition of BIOTRONIK's Vascular Intervention business and a separation into two independent companies (RemainCo and NewCo), aimed at unlocking shareholder value and enhancing focus.
• Near-term financial performance is impacted by specific, largely transitory headwinds in Interventional Urology (UroLift reimbursement), OEM (customer vertical integration, inventory management), and China (volume-based procurement), contributing to a moderated 2025 revenue growth outlook of 1-2% adjusted constant currency.
• Recently enacted tariffs, particularly impacting China and Mexico, represent an estimated $55 million headwind to 2025 results, leading to a reduction in adjusted EPS guidance, although management is actively pursuing mitigation strategies.
• The company possesses differentiated technologies like the Titan SGS stapler, Barrigel rectal spacer, and the new Ringer perfusion balloon catheter, offering quantifiable clinical and operational benefits that provide competitive advantages in specific market niches.
• Strong cash flow generation and a healthy balance sheet support strategic initiatives, including M&A and a recently completed accelerated share repurchase program, positioning Teleflex to invest in future growth and return capital to shareholders despite near-term pressures.

Setting the Scene: A Medical Technology Leader in Transition

Teleflex Incorporated is a global provider of medical technologies focused on enhancing clinical benefits, improving patient and provider safety, and reducing procedural costs. The company primarily designs, develops, manufactures, and supplies single-use medical devices used by hospitals and healthcare providers across critical care and surgical applications. Over its history, Teleflex has evolved from a diversified industrial company into a focused medical device player through strategic acquisitions and divestitures, demonstrating a commitment to portfolio optimization. This journey has cultivated a presence in key hospital call points, including the intensive care unit (ICU), emergency department (ED), catheterization lab (cath lab), and operating room (OR).

The medical device industry is characterized by ongoing innovation, an aging global population driving demand, and increasing pressure on healthcare costs. Teleflex operates within this dynamic landscape, competing with larger, diversified players like Medtronic (MDT), Boston Scientific (BSX), Abbott Laboratories (ABT), and Becton, Dickinson and Company (BDX), as well as numerous smaller, specialized companies. Competition centers on product differentiation, clinical evidence, pricing, distribution channel strength, and regulatory navigation. While larger competitors often benefit from greater scale, broader portfolios, and extensive R&D budgets, Teleflex has carved out positions through targeted innovation and focus in specific niches. The global medical devices market is projected for continued growth, with segments like peripheral intervention showing rapid expansion.

Teleflex's overarching strategy is built on driving sustainable revenue growth, expanding margins, and disciplined capital allocation to enhance shareholder value. This involves investing in its core business, pursuing strategic mergers and acquisitions, optimizing its operational footprint through restructuring, and returning capital to shareholders. The company's recent actions underscore a pivotal moment in this strategy, aiming to reshape its structure and focus for the future.

Technological Edge and Innovation Pipeline

A cornerstone of Teleflex's competitive positioning lies in its differentiated technology across its portfolio. These innovations often provide tangible, quantifiable benefits to clinicians and patients, creating competitive moats in specific market segments.

In the surgical space, the Titan SGS stapler stands out as the first and only single-fire surgical stapler designed and indicated for sleeve gastrectomy pouch creation, uniquely cleared by the FDA for this specific indication. Clinical data highlights its advantages over traditional surgical staplers (like MultiFire), demonstrating potential for enhanced clinical outcomes and significant procedural efficiency. A published study showed the Titan SGS was associated with fewer 30-day readmissions (especially related to nausea and vomiting) and offered an 8-minute reduction in median operative time, a critical factor for hospitals seeking to optimize OR efficiency.

Within interventional urology, the Barrigel rectal spacer, acquired with Palette Life Sciences, is the first and only hyaluronic acid rectal spacer designed to protect the rectum during prostate cancer radiation therapy. Clinical evidence indicates it significantly reduces unwanted side effects. Teleflex is actively exploring expanded indications, including a study for use in men undergoing radiation therapy post-radical prostatectomy. This represents an estimated $100 million market opportunity where Barrigel is expected to be the only applicable spacing technology, leveraging the unique properties of its NASHA compound.

The interventional portfolio is further bolstered by new technologies like the Ringer perfusion balloon catheter. This device features a unique helical balloon design that allows continuous coronary blood flow during inflation. Preliminary results from an IDE study were favorable, showing a 73% primary efficacy endpoint achievement, 87% successful delivery, and 85% control of blood leakage with perfusion. A PMA has been submitted for a coronary perforation indication, targeting an estimated global market exceeding $80 million, while the initial PTCA indication addresses a ~$40 million market. This technology complements the planned BIOTRONIK acquisition's portfolio, particularly the PK Papyrus covered stent, offering a combined solution for vessel perforations.

The planned acquisition of BIOTRONIK's Vascular Intervention business brings a suite of coronary and peripheral devices, including drug-coated balloons (like the Passeo, noted for double-digit growth) and drug-eluting stents (like Arcelor, suitable for tortuous arteries). It also includes the Freesolve resorbable metallic scaffold, which management believes shows early potential to address limitations of previous polymeric scaffolds, aligning with the trend to leave less permanent hardware behind in interventional procedures. While the European pivotal study (BIOMAG-2) is ongoing with results expected in 2027, the US market pursuit represents future optionality.

In vascular access and emergency medicine, the Arrow Chlorhexidine-Impregnated Central Venous Catheters (CVCs) are supported by new study data demonstrating reduced infection rates in ICU patients. The QuikClot Control+ hemostatic device recently received FDA clearance for expanded indications to include all grades of internal and external bleeding, adding over $150 million to its serviceable addressable market in the U.S.

These technological advancements provide Teleflex with specific advantages over competitors in targeted procedures and clinical outcomes. For instance, the efficiency gains from Titan SGS directly challenge traditional stapler providers, while the unique properties of Barrigel in post-prostatectomy radiation therapy could establish a dominant position in that niche against other spacing technologies. The Ringer catheter's ability to maintain blood flow during inflation offers a differentiated approach compared to standard balloon catheters. These innovations, coupled with ongoing R&D investment (approximately 5.2% of Q1 2025 revenue), are critical for maintaining relevance and driving growth in competitive markets.

Operational Performance and Financial Health

Teleflex's financial performance in the most recent period reflects a mix of underlying strength in certain areas and specific headwinds impacting others. For the first quarter of 2025, net revenues were $700.7 million, a decrease of 5.0% on a GAAP basis and 3.8% on an adjusted constant currency basis compared to the prior year. This performance was within the company's guidance range but impacted by anticipated challenges.

Gross profit in Q1 2025 was $389.4 million, resulting in a GAAP gross margin of 55.6% and an adjusted gross margin of 60.4%. The adjusted gross margin saw a year-over-year decrease of 70 basis points, primarily attributed to continued cost inflation (labor, raw materials) and unfavorable product mix, partially offset by improvements in quality remediation costs and inventory charges. Selling, general and administrative expenses decreased, notably benefiting from favorable foreign currency fluctuations related to hedging the BIOTRONIK acquisition consideration, though partially offset by acquisition costs and higher IT spending for ERP development. Research and development expenses also saw a slight decrease, influenced by lower EU MDR costs.

Segment performance in Q1 2025 showed varied trends. The Americas segment, the largest contributor with $475.7 million in revenue (-3.2% adj CC), was impacted by declines in the OEM business and continued pressure on the UroLift product line. EMEA revenues were $151.2 million (-2.8% adj CC), with strong performance in Surgical and Vascular Access offset by Anesthesia and some softness in orders late in the quarter (which reportedly recovered in April). Asia revenues were $73.8 million (-9.7% adj CC), primarily affected by volume-based procurement in China, though sequential improvement is expected.

Product category performance mirrored these trends. Vascular Access grew 1.9% (adj CC), driven by double-digit PICC growth and solid EZ-IO performance. Interventional grew 3.2% (adj CC), led by OnControl and complex catheters, with strong IABP demand in the Americas offset by a tough comp in Asia. Anesthesia declined 8.6% (adj CC), impacted by military order comps and airway product pressure. Surgical grew 2.0% (adj CC), with solid core trends partially offset by China VBP. Interventional Urology saw a significant decline of 10.7% (adj CC), primarily due to UroLift pressure (especially in the office setting), despite strong double-digit growth from Barrigel. OEM experienced a substantial 26.8% decline (adj CC), driven by a customer contract loss (vertical integration) and inventory management, though order rates reportedly improved through the quarter.

Adjusted earnings per share for Q1 2025 was $2.91, a decrease of 9.3% year-over-year, reflecting lower revenue, reduced operating margins, and unfavorable foreign exchange, partially offset by lower net interest expense and a reduced share count.

Despite these near-term pressures, Teleflex demonstrates solid financial health and cash flow generation. Cash flow from operating activities from continuing operations was $73.3 million in Q1 2025. While lower than the prior year period due to operating results and working capital changes (inventory, ERP spending), the company's historical performance shows strong cash generation, with over $500 million in cash flow from operations projected for full year 2024, resulting in approximately $400 million in free cash flow after capital expenditures. This robust cash flow and a healthy balance sheet, with net leverage at approximately 1.8x at the end of Q1 2025, provide significant financial flexibility.

Strategic Transformation and Future Outlook

Teleflex is actively pursuing a multi-faceted strategic transformation designed to enhance its long-term growth profile and shareholder value.

A key element is the planned acquisition of substantially all of BIOTRONIK's Vascular Intervention business for an estimated €760 million cash payment, expected to close by the end of Q3 2025. This acquisition is highly complementary to Teleflex's existing Interventional portfolio, particularly in the cath lab. It adds a broad suite of therapeutic devices (DCBs, stents, etc.) that leverage Teleflex's strong interventional access presence in the Americas and BIOTRONIK's strong channel in EMEA. Management expects this business to generate approximately €91 million in revenue in Q4 2025 and deliver constant currency revenue growth of 6% or better starting in 2026. While initially dilutive to operating margins due to planned investment in the pipeline (including Freesolve), it is expected to be approximately $0.10 accretive to adjusted EPS in the first year of ownership and increasingly accretive thereafter, targeting double-digit ROIC by year four.

In parallel, Teleflex announced its intention to separate into two independent publicly traded companies, RemainCo and NewCo, targeting completion in mid-2026 via a tax-free distribution. This separation is intended to create more focused entities with tailored strategies, simplified operating models, streamlined manufacturing footprints, and distinct capital allocation priorities.

• RemainCo will focus on Vascular Access, Interventional, and Surgical, including the acquired BIOTRONIK VI business. It is envisioned as a higher-growth business, expected to deliver 6%-plus constant currency revenue growth at separation, with a mid-60% gross margin profile and initially neutral adjusted operating margin (due to higher R&D investment), targeting double-digit adjusted EPS growth in the first full year post-separation.
• NewCo will comprise Urology, Acute Care, and OEM. It is expected to have a low single-digit constant currency revenue growth profile at separation with a mid-50% gross margin. Management sees potential for acceleration to low to mid-single digits over the medium term as UroLift stabilizes post-reimbursement changes, Barrigel continues its strong growth trajectory (potentially boosted by expanded indications), and OEM recovers from current headwinds.

Management is actively exploring all options for NewCo, including a potential sale, in parallel with the spin process, guided by the objective of maximizing shareholder value.

The outlook for 2025 reflects the impact of current headwinds and the initial phase of this transformation. Teleflex expects adjusted constant currency revenue growth of 1% to 2%. This guidance incorporates approximately $100 million in headwinds from UroLift pressure, OEM challenges (vertical integration, inventory), and China VBP, which are expected to be largely transitory with sequential improvement anticipated throughout the year.

The company's adjusted earnings per share guidance for 2025 is $13.20 to $13.60, a reduction from prior expectations. This revision is primarily attributed to an estimated $55 million headwind from tariffs enacted since previous guidance, impacting imports related to China and non-USMCA compliant products from Mexico. Without this tariff impact, management projects results would have fallen within prior guidance ranges. The 2025 guidance also assumes adjusted gross margins of 58.25% to 59% (with ~180 bps of reduction related to tariffs), adjusted operating margins of 24.6% to 25%, net interest expense of approximately $75 million, and a tax rate of approximately 13.5%. Management is pursuing mitigation strategies for the tariff impact, including supply chain optimization, increasing USMCA compliance, expense control, and opportunistic pricing.

Risks and Challenges

Despite the strategic vision and technological strengths, Teleflex faces several risks and challenges that could impact its performance and the successful execution of its strategy.

• Tariff Exposure: The recently enacted tariffs, particularly on imports from China and Mexico, pose a significant near-term financial risk, with an estimated $55 million impact in 2025. While mitigation strategies are being pursued, their effectiveness and timing are uncertain, and further tariff changes could exacerbate this risk.
• Headwinds in Key Businesses: Continued pressure on UroLift, especially in the office setting, and the duration of OEM customer inventory management and the impact of vertical integration could weigh on revenue growth longer than anticipated. Similarly, the impact of volume-based procurement in China and the influence of GLP-1 drugs on bariatric surgery demand (impacting Titan SGS) are ongoing challenges.
• Impairment Risk: The Interventional Urology North America reporting unit and the Titan SGS asset group have been identified as being at risk for future impairment charges, which could be material if market conditions or forecasts deteriorate further. The carrying value of Titan SGS intangible assets was $130 million as of March 30, 2025.
• Execution Risk of Strategic Initiatives: The successful integration of the BIOTRONIK VI business and the complex separation into two public companies are subject to various conditions, regulatory approvals, and execution risks. There is no guarantee the separation will be completed on the announced terms or timeframe, or at all.
• Competitive Intensity: Teleflex operates in highly competitive markets. Larger competitors with greater resources could intensify pricing pressure or accelerate innovation, potentially impacting Teleflex's market share and margins. The emergence of new technologies or alternative treatment modalities (like GLP-1s) also poses a competitive threat.
• Regulatory and Legal Risks: Environmental liabilities, ongoing legal proceedings, and potential challenges from tax authorities (such as the situation related to the Palette acquisition's foreign tax liabilities, with a $3.5 million liability accrued as of March 30, 2025) represent potential financial exposures. The Italian payback measure, recently upheld by the Constitutional Court, also remains a contingency.

Conclusion

Teleflex is navigating a period of significant strategic change and near-term operational headwinds. While the first quarter of 2025 reflected the impact of anticipated challenges in UroLift, OEM, and China, the company's underlying core businesses continue to demonstrate resilience and growth potential in key areas like Vascular Access and Interventional. The planned acquisition of BIOTRONIK's Vascular Intervention business and the intention to separate into two focused entities represent bold moves aimed at unlocking long-term shareholder value by creating more agile and strategically aligned companies.

The investment thesis for Teleflex hinges on the successful execution of this transformation, the ability to navigate current headwinds (including the newly impactful tariffs), and the continued leverage of its differentiated technology portfolio to drive growth in targeted niches. The company's strong cash flow generation and balance sheet provide a solid foundation to support these initiatives and return capital to shareholders. While risks related to execution, market dynamics, and external factors like tariffs warrant careful monitoring, the strategic reshaping positions Teleflex for a potentially stronger competitive stance and accelerated growth profile in the years ahead, particularly for the planned RemainCo business focused on high-acuity hospital markets. Investors should weigh the near-term pressures against the long-term potential of a more focused and strategically empowered Teleflex.