Henry Schein Faces Cyberattack Impact; Recovery Underway

New York-based healthcare product distributor Henry Schein grapples with the aftermath of a cyberattack, affecting critical systems.

USA: In mid-October, Henry Schein fell victim to a cyberattack, compelling the company to take essential systems offline, including its eCommerce platform. This incident significantly disrupted its dental and medical businesses. 

The company claims to have contained the cyber threat, discovering it on Oct. 14, and has since made progress in restoring essential systems, aiming to resume normal operations.

During the 3Q23 earnings call on Nov. 13, CEO and Chairman Stanley Bergman stated that the company had reinstated most business-critical systems, with orders from distribution businesses reaching 85% to 90% of pre-incident levels. Reactivation of the eCommerce platform was anticipated within the week following the earnings call.

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Customer Instructions Amid Recovery

As of Nov. 14, customers are instructed to place orders through a Henry Schein representative or telesales rather than the website. The company assures customers that orders will still be shipped within 24 hours of placement. The incident prompted a breach where an unauthorised third party acquired a significant amount of information, including limited bank account details of suppliers.

Financial Impact and Updated Guidance

The cyberattack is estimated to have a business interruption impact of $0.55 to $0.75 per share. BlackCat, a cyberattack group, claimed responsibility, alleging the theft of 35 terabytes of sensitive data. Henry Schein updated its full-year 2023 guidance on Nov. 13, anticipating non-GAAP diluted EPS of $4.43 to $4.71. Full-year 2023 sales are now projected to be 1% to 3% lower than 2022 sales.

Despite the incident’s financial repercussions, Bergman expressed confidence in the stability of dental and medical markets. The company remains committed to its strategic priorities and long-term financial model. Officials expect to file a cyber insurance claim in 2024, with a $60 million after-tax claim limit.

The cybersecurity incident underscores the challenges faced by healthcare distributors in the evolving landscape of cyber threats, emphasizing the need for robust security measures and vigilance.

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