The Rise and Fall of the Giants of the Clinical Care Market
Published: February 20, 2023
Cranfield, UK, February 2023 – The Clinical Care market has been a hotbox of activity in recent years, with product recalls, supply constraints, increasing costs of production and growing presence of lower cost vendors all placing strain on some of its largest competitors. The economic decline has continued to affect purchasing decisions, resulting in intense competition and further pressure on profit margins. It’s no surprise to hear strategic developments from manufacturers such as Philips and Medtronic focusing on streamlining costs by either reducing their product offering through subsequent spin-offs or making significant cuts to their workforce.
The COVID-19 pandemic led to mass surges in demand for critical equipment across several of the clinical markets, including ventilators, patient monitors and infusion solutions. Many vendors had to react quickly to uplift their production facilities to tirelessly meet demand, subsequently seeing a positive boom in revenue gains. However, the mass lock downs also significantly impacted the manufacture of critical components, with some players restricted in the end solutions that they could supply, especially when timing was most crucial. Whilst these vendors suffered, others maximised on their ability to meet demand with a swift uptick in entrants in the market.
This oversupply during the pandemic and subsequent economic decline has affected several of these markets, resulting in subdued revenue projections in the coming years. Inflation has also driven vendors to reassess their profit margins, to maximise on sales they can achieve whilst budgets remain low, but demand remains high. Some vendors have taken to revolutionise their operations to ensure profitability and satisfaction from shareholders. Signify Research provides its take on these announcements and how they will affect the wider clinical care market.
Medtronic hit the headlines in October 2022 with the announcement of the major decision to aggressively streamline its product offering, by spinning off its respiratory and monitoring business lines. Despite uplift seen in demand for these solutions in 2020, the swift downward growth trajectory following the pandemic has had a subsequent effect on profit margins. This has reduced the segment’s appeal to the wider company, which is looking to maximise on its longer-term growth prospects.
Medtronic has been a firm player in both the monitoring and respiratory care segments for several years, through the acquisition of Covidien in 2014. In the monitoring division, Medtronic has faced fierce competition from fellow pulse oximetry vendor Masimo, that has been seen to lead innovation in the pulse oximetry segment and has expanded its offering significantly in the last few years.
In the respiratory segment, despite Medtronic maintaining its position in the Americas region in 2020, it saw growing pressure in the EMEA and Asia regions from domestic players who chipped away at its market ranking. However, Medtronic’s position remains strong with a well-developed broad respiratory portfolio, while it has also been driving product innovations leading toward newer technologies.
The rumour mill has already been flowing with speculation as to which vendors would be interested in the purchase of the Monitoring and Respiratory division valued at around $2.2 billion, with Siemens Healthineers and GE HealthCare’s names being added to the pot. Medtronic could pose a good fit to the latter to expand its product offering further aligning with their own strategy.
In June 2021, Philips issued a recall in addition to a safety note about a significant number of its ventilators as a consequence of the potential breakdown of the sound abatement foam used in select devices. This included the E30, the DreamStation, Trilogy 100 Ventilator, Trilogy 200, Garbin Plus, Aeris, LifeVent and A-Series BiPAP. The recall was subsequently detrimental to the vendor’s sales within its respiratory and sleep businesses. Prior to the recall, Philips was a leading supplier alongside ResMed to the sleep and home respiratory business. However, with restrictions on Philips supply, ResMed has been hot on its heels to fill the large void left by Philips to capture subsequent share and has further invested in the development of additional production facilities.
The Philips recall is ongoing. It has already required significant investment from Philips to remedy and is now a key focus for its strategy moving forward. Supply chain issues have further compounded the company and their impact was worse than anticipated in 2022. As such in its Q4 2022 financials, Philips reported on its full-year sales ‘a 3% comparable sales decline due to operational and supply challenges, lower sales in China, the consequences of the Respironics field action, and the Russia-Ukraine war’. It has subsequently taken the learnings from the recall and made significant efforts to raise patient safety and quality across its product divisions. However, it is clear that Philips’ brand will be dented for some time and significant resource be required to guarantee a high level of customer satisfaction once again. New product development has also been stifled, with budgets being diverted to ensure product safety is rectified. This will also take several years to return to the level of innovation previously seen by the company.
In addition to the reduction of 4,000 roles announced in October 2022, In January 2023, Philips announced further reductions to its workforce. Philips stated that it will reduce its workforce by an additional 6,000 roles globally by 2025, of which 3,000 will be implemented in 2023. The main aim is to create a leaner and more focused organisation and ultimately reduce costs.
Signify Research has provided its insight into the recent spin off of GE HealthCare on the Nasdaq stock exchange in its recent Signify Premium Insight To Dream and to Do – GE Stands Alone. In the build up to its launch as an independent company, GE HealthCare had been developing its digital offering across the healthcare segments including its Patient Care Solutions division, by not only advancing its device offering, but also associated IT solutions.
Within the clinical care segments, GE HealthCare had been making inroads into the critical care ventilator market and saw increased demand for its ventilator offering during the peak of the pandemic. Signify Research’s report Ventilators – World – 2021, also showed that GE HealthCare made significant gains in its respiratory segment in 2020 (increased global share from 2% of the ventilator market 2019 to 8% in 2020). However, back in 2014, GE HealthCare decided to spin-off home ventilator manufacturer Breas AG after only four years of ownership. The recent turmoil seen by Philips may have presented a future opportunity for GE HealthCare had it only kept on to the company.
The appeal of Medtronic’s reputable respiratory portfolio and pulse oximetry offering may trigger GE HealthCare’s interest to maximise on its current success within the respiratory field and expand its offering in additional segments across the care settings, allowing it to go head-to-head with Philips in even more clinical segments. The recent partnership between GE HealthCare and Medtronic allows the companies to collaborate on the specific requirements and needs of Ambulatory Surgery Centres (ASC) and Office Based Labs (OBL), tipping the hat to what may be coming. Expansion of GE HealthCare’s offering into these settings has already been seen in the monitoring space, with GE HealthCare’s recent launch of its portrait wearable monitoring solution which was discussed in our roundup of the ESICM event in October 2022. A category in which Philips is dominant, with many other vendors pushing to capture a piece of the pie.
Despite the turbulent market, Signify Research reported in its Patient Monitor – World – 2022 report that GE HealthCare maintained share (17% of the global patient monitors market in 2021) in the patient monitoring market in 2021. With investment into this segment, GE HealthCare is expected to continue to remain dominant in its current categories, with expansion into newer developing segments. The breakout from the wider GE conglomerate, will allow GE HealthCare greater freedom to decide where to innovate. As such, GE HealthCare will make additional strategic decisions and acquisitions to maximise its position as a leading powerhouse in several clinical care markets and strengthen its market ranking. In its preliminary Q4 results GE HealthCare stated 4% revenue growth and has forecast additional revenue growth in 2023 of 5-7%, with margins of 15-15.5%, 50 basis points higher than the previous year.
The clinical care competitive environment is expected to continue to see swings and roundabouts in the coming year. The pandemic bought with it the impetus for product innovation, to ensure technology keeps up with the growing demand for healthcare not only in well-established settings, but in new, emerging categories. This has created opportunity for those vendors that have the capability and capacity to develop new solutions. However, with the highs, the market is also expected to see the lows, with budgets becoming increasingly restricted and customers requiring additional evidence to support clinical benefit for new purchasers. This will result in some vendors exiting where they no longer see opportunity to maximise profit margins. The streamlining of operations is also likely to see additional job cuts in the coming months. Turbulent times are difficult to navigate, but for those vendors that have laid solid foundations they also breed opportunity, it is now up to GE, Medtronic and Philips to seize it.
About the Clinical Care Team
The clinical care team provides market intelligence and detailed insights on the clinical care equipment and IT markets. Our areas of coverage include patient monitoring, diagnostic cardiology, infusion pumps, ventilators, anaesthesia and high-acuity IT. Our reports provide a data-centric and global outlook of each market with granular country-level insights. Our research process blends primary data collected from in-depth interviews with healthcare professionals and technology vendors, to provide a balanced and objective view of the market.
About Signify Research
Signify Research is an independent supplier of market intelligence and consultancy to the global healthcare technology industry. Our major coverage areas are Healthcare IT, Medical Imaging and Digital Health. Our clients include technology vendors, healthcare providers and payers, management consultants and investors. Signify Research is headquartered in Cranfield, UK. To find out more: firstname.lastname@example.org, T: +44 (0) 1234 436 150, www.signifyresearch.net
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