Avanos Medical, Inc. (AVNS): 5 FORCES Analysis [Nov-2025 Updated]

You're looking at the competitive map for Avanos Medical, Inc. as we hit late 2025, and honestly, it's a mixed bag of pressures and protections that demand your attention. We've got serious rivalry where competitors average over $28.4 billion in revenue compared to AVNS's $690-$700 million guidance, plus a near-term supply chain headache with a projected $18 million P&L hit from tariffs this year. Still, the company has built solid walls around its essential Specialty Nutrition Systems (SNS) products, and recent moves like the September 2025 Nexus Medical acquisition and the H1 2025 Hyaluronic Acid divestiture show management is actively managing these forces. Let's dive into the full five-force breakdown to see exactly where you need to focus your attention on near-term risks and long-term moats.

Avanos Medical, Inc. (AVNS) - Porter's Five Forces: Bargaining power of suppliers

You're analyzing Avanos Medical, Inc.'s supplier landscape, and right now, the key issue isn't just the cost of raw materials; it's the geopolitical environment hitting their bottom line. The bargaining power of suppliers for Avanos Medical, Inc. is currently elevated, driven by concentrated manufacturing footprints and significant tariff exposure affecting their cost structure.

The exposure to trade policy is definitely a major factor influencing supplier leverage. For fiscal year 2025, Avanos Medical, Inc. has already seen tariffs directly impact its profitability outlook. The company lowered its full-year adjusted diluted Earnings Per Share (EPS) guidance by approximately 25% at the midpoint, revising the range from $1.05-$1.25 down to $0.75-$0.95 in Q1 2025, primarily due to these tariff headwinds affecting the supply chain. This tariff pressure contributed to a decrease in Gross margin, which stood at 53.1% for the first six months of 2025, down from 56.4% in the prior year period.

The supply chain structure itself concentrates risk, which can empower certain upstream partners. While specific details on the exact number of assembly plants in Mexico are not public, the reliance on international manufacturing hubs makes Avanos Medical, Inc. susceptible to trade actions like the tariffs imposed on goods from Mexico. This concentration means that suppliers feeding those specific locations hold more sway over terms and pricing.

Avanos Medical, Inc. is actively working to counter this risk, signaling a shift in strategy that will likely reduce supplier power over the medium term. Management is implementing mitigation plans that include cost containment and leveraging international agreements like the USMCA for reduced or duty-free importation. While the specific target of mid-2026 for full mitigation isn't explicitly stated in recent filings, the broader healthcare supply chain industry is making moves toward resilience by 2026, with nearly 70% of U.S. health organizations planning to adopt cloud-based supply chain management by that year. This proactive stance suggests a timeline for significant structural change is underway.

For specialized components critical to high-value product lines, supplier leverage is more pronounced. Suppliers providing specialized components for devices like Radiofrequency Ablation (RFA) solutions and Spinal Cord Stimulation (SNS) systems-segments where Avanos Medical, Inc. is focused-wield moderate power. This is because these components often require specific technical expertise or regulatory clearances, limiting the pool of qualified alternatives. Here's a look at the financial context for these key segments:

The power of these specialized suppliers is tempered by Avanos Medical, Inc.'s own scale and the potential for alternative sourcing strategies, which are a key focus area for risk mitigation in 2025. However, the immediate financial pressure from tariffs highlights a current vulnerability where suppliers can pass on increased costs, or where the lack of immediate alternatives forces acceptance of less favorable terms.

You should watch the next earnings call for specific updates on the progress of their supply chain diversification efforts. Finance: draft 13-week cash view by Friday.

Avanos Medical, Inc. (AVNS) - Porter's Five Forces: Bargaining power of customers

You're assessing the customer side of the equation for Avanos Medical, Inc. (AVNS), and it's a mixed bag, honestly. The power customers hold really depends on which product line you are looking at, which is typical for a diversified medical device company undergoing transformation.

Large Group Purchasing Organizations (GPOs) and hospital systems drive high volume purchases.

The structure of healthcare purchasing means that large entities, like Group Purchasing Organizations (GPOs) and major hospital systems, command significant attention due to the sheer volume of product they can commit to. While specific customer concentration percentages for 2025 aren't public, the company's focus on the 'Interventional Pain Admin / C-Suite' segment suggests direct engagement with the administrative and purchasing power centers within these large organizations. This high-volume purchasing capability inherently grants these buyers a baseline level of leverage in price negotiations for non-differentiated products.

Customers have strong leverage in commoditized product areas.

Where Avanos Medical's offerings are viewed as standard or easily substitutable-the commoditized areas-customer leverage is definitely higher. This pressure was explicitly seen in the former Hyaluronic Acid (HA) portfolio, which experienced pricing pressure before its sale. However, for certain Pain Management & Recovery (PM&R) products, the regulatory environment might be shifting leverage. For instance, the ON-Q elastomeric infusion pump and the ambIT disposable electronic infusion pump now qualify for separate payment under the Non-Opioid Policy for Pain Relief (NOPAIN) Act, effective January 1, 2025. This legislative change, by securing dedicated reimbursement, can temper a customer's ability to demand deep price cuts on those specific devices, as the value proposition shifts from unit cost to secured reimbursement.

Core Specialty Nutrition Systems (SNS) products are life-sustaining, lowering customer power there.

The Specialty Nutrition Systems (SNS) segment represents the area where customer power is most constrained because the products are life-sustaining. These are not discretionary purchases; they are critical for patient care, especially in neonatal and long-term feeding. The financial performance in 2025 clearly supports this: the segment is the growth engine, indicating strong, consistent demand that resists heavy price erosion. You can see the sustained purchasing power of these customers through the segment's sales momentum.

• SNS Net Sales (Q3 2025): $114.0 million
• SNS Volume Growth (Q3 2025): 14.0%
• SNS Net Sales (Six Months Ended 6/30/2025): $203.8 million
• SNS Volume Growth (Six Months Ended 6/30/2025): 6.5%

Divestiture of the Hyaluronic Acid (HA) line removed a product with unfavorable pricing pressure in H1 2025.

Avanos Medical made a strategic move to shed a source of buyer power by divesting the HA product line. The company explicitly noted that the gross margin for the first half of 2025 was impacted by 'unfavorable pricing for our hyaluronic acid (HA) products'. The official announcement of the sale to Channel-Markers Medical, LLC (CMM) occurred on July 31, 2025. This action removes a product category where customers were clearly able to exert significant downward pricing pressure, allowing Avanos Medical to focus resources on the less price-sensitive, higher-growth SNS and PM&R segments. The transition support for this divestiture is set to run through the end of 2025.

Here's a quick look at how the core, less-negotiable business performed against the backdrop of these forces through the first three quarters of 2025:

The removal of the HA line, which was subject to pricing pressure, should structurally improve the overall pricing power dynamic for Avanos Medical moving into 2026, provided the remaining PM&R portfolio is not equally commoditized. Finance: draft 13-week cash view by Friday.

Avanos Medical, Inc. (AVNS) - Porter's Five Forces: Competitive rivalry

The competitive rivalry facing Avanos Medical, Inc. (AVNS) is intense, stemming from direct competition with much larger, highly diversified industry giants like Medtronic and Abbott Laboratories. This dynamic forces Avanos Medical to fight for every basis point of market share in its specialized niches.

The sheer scale difference is stark. For the trailing twelve months ending September 30, 2025, Abbott Laboratories reported revenue of $43.843 billion. For the trailing twelve months ending October 24, 2025, Medtronic reported revenue of $34.76 billion. The average revenue for these two competitors is approximately $39.3015 billion, dwarfing Avanos Medical's full-year 2025 revenue guidance, which management reaffirmed in the range of $690.0 million-$700.0 million. This competitive average is over $28.4 billion.

Avanos Medical's modest organic growth trajectory underscores the market share battle. For the second quarter of 2025, Avanos Medical reported a 2% organic growth in net sales. The outline suggests a 2.7% (Q2 2025 TTM) figure, which points to a highly contested market where incremental gains are hard-won.

Avanos Medical competes across two distinct, yet specialized, business segments, meaning rivalry intensity varies by product line:

• Pain Management & Recovery (PM&R)
• Specialty Nutrition Systems (SNS)

The SNS portfolio, which includes enteral feeding products, showed stronger momentum, posting a 2.8% organic growth in Q2 2025. In contrast, the PM&R segment faced headwinds.

Here is a comparison of the scale of rivalry based on recent reported figures:

The rivalry is further characterized by the differing performance within Avanos Medical's own structure:

• SNS segment Q2 2025 organic growth: 2.8%
• PM&R segment normalized organic sales growth Q2 2025: 3.4%
• Radiofrequency Ablation business growth Q2 2025: 14%

The presence of large players means they can deploy significantly greater resources toward R&D, sales force expansion, and absorbing short-term margin pressures, which directly impacts Avanos Medical's ability to grow its $665-$685 million revenue base.

Avanos Medical, Inc. (AVNS) - Porter's Five Forces: Threat of substitutes

You're looking at the competitive landscape for Avanos Medical, Inc. (AVNS) as of late 2025, and the threat of substitutes really breaks down by business line. For the essential, life-sustaining Specialty Nutrition Systems (SNS) segment, substitution risk is low because these are often critical care items.

For the nine months ended September 30, 2025, the SNS segment was a clear growth anchor, delivering net sales of $520.3 million in total revenue for the company, with SNS itself hitting $114.0 million in Q3 2025 alone, reflecting 14.0% volume growth that quarter. To be fair, the enteral feeding products, like the MIC-KEY tubes, brought in $74.5 million in GAAP revenue just in Q2 2025, showing consistent demand for long-term nutrition support.

Now, let's look at the Pain Management & Recovery (PM&R) side, where the substitution threat from traditional opioids is actively being mitigated by policy. The NOPAIN Act (Non-Opioids Prevent Addiction in the Nation) is a big deal here, as it forces separate Medicare reimbursement for certain non-opioid devices, effectively reducing the financial incentive to substitute with bundled opioid treatments.

Here are the key details on that protection:

• The Avanos ON-Q and ambIT pumps qualify for separate payment starting January 1, 2025.
• The separate payment is provided in addition to the covered surgical procedure payment.
• The payment limitation set by CMS for these infusion pumps is up to $2,284.98.
• This separate payment status under the NOPAIN Act is set to remain in effect through December 31, 2027.

This legislative protection helps shield the non-opioid pain management portfolio, though other parts of PM&R face broader substitution pressures from generic pain medications or alternative therapies. You can see the divergence in performance within the segment for the nine months ended September 30, 2025:

The 8.9% drop in surgical pain and recovery sales for the nine months ended September 30, 2025, clearly shows where substitution or competitive losses are hitting Avanos Medical, Inc. hardest within the PM&R segment. Still, the RFA business, with its 10.9% growth, is successfully substituting for something, likely traditional pain interventions.

Finally, for the cold therapy line, Avanos Medical, Inc. has proactively shifted the substitution risk by divesting the US Game Ready orthopedic rental business. They finalized the agreement to sell substantially all assets and rights related to this segment to WRS Group on October 23, 2025, with the official asset transfer scheduled for December 1, 2025. As part of the deal, Avanos will continue manufacturing and supplying Game Ready systems and accessories while providing transition support through the end of 2025, which manages the immediate handoff risk. The financial terms of this divestiture were not disclosed.

Avanos Medical, Inc. (AVNS) - Porter's Five Forces: Threat of new entrants

The barrier to entry for new competitors looking to challenge Avanos Medical, Inc. in its core markets remains structurally high, largely due to the entrenched nature of medical device regulation and the capital required to compete effectively. You see this immediately in the regulatory landscape.

High regulatory barriers, including FDA and EU MDR compliance, require significant upfront investment. While specific upfront capital required for a de novo device approval isn't public for Avanos Medical, Inc., the ongoing compliance burden is quantifiable. For instance, in fiscal year 2024, selling and general expenses included compliance costs associated with the EU Medical Device Regulation (EU MDR). Furthermore, even in 2025, compliance expenses related to regulations continued to drag on profitability, as referenced in non-GAAP disclosures. This signals a continuous, non-trivial operating cost that new entrants must immediately absorb just to maintain market access.

Specialized product lines, like Radiofrequency Ablation (RFA) and advanced feeding tubes, require proprietary intellectual property and clinical data. The RFA business demonstrated this stickiness, showing 10.5% volume growth in net sales for RFA products in the third quarter of 2025. New entrants cannot simply replicate the technology; they must generate their own substantial clinical data to displace established, clinically validated systems. Avanos Medical, Inc. continues to build on this with strategic IP additions, such as the patented tri-seal silicone valve technology acquired with Nexus Medical, LLC.

Established distribution channels to hospitals and Group Purchasing Organizations (GPOs) are difficult for new players to penetrate. Consider the scale of Avanos Medical, Inc.'s existing operations. For the nine months ended September 30, 2025, total net sales reached $520.3 million. A new entrant must secure shelf space and formulary inclusion against a company with this level of established revenue and existing relationships. The Specialty Nutrition Systems (SNS) segment alone generated net sales of $114.0 million in the third quarter of 2025.

The acquisition of Nexus Medical in September 2025 strengthens the barrier in critical care connectors specifically. This move was financed with available cash, showing the financial muscle of an established player. By acquiring Nexus Medical, Avanos Medical, Inc. immediately added a complementary technology and secured access to what management expects is a $70 million market segment. This is a classic move to block a potential high-growth niche before it matures for smaller competitors.

Here's a quick look at the financial context that underpins the difficulty for a startup to match the scale of an established player like Avanos Medical, Inc. as of late 2025:

The established player can absorb costs and acquire growth vectors that would crush a startup. For you, this means new entrants face a gauntlet of:

• Significant, ongoing regulatory compliance expenditure.
• Need for proprietary clinical data to support specialized product claims.
• High hurdle to gain hospital and GPO contract access.
• Direct competition from an acquirer that can immediately integrate a patented solution.

Finance: draft a sensitivity analysis on the impact of a 15% increase in EU MDR compliance costs on 2026 SG&A by next Tuesday.