Tag Archives: Growth

Signify Premium Insight: Siemens Healthineers and the 5Gs of Chinese Growth

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify Research. To view other recent Premium Insights that are part of the service please click here.

Siemens Healthineers recently announced that it is partnering with Universal Medical Imaging to help primary healthcare centres in China increase the efficiency of their medical imaging procedures and improve diagnoses.

The agreement is set to use 5G networks to increase healthcare providers’ access to advanced diagnostic imaging equipment and remote scanning assistant tools from Siemens Healthineers, as well as facilitating more efficient access to Universal Medical Imaging’s medical experts.

The Signify View

The volume of medical imaging exams undertaken in China has increased dramatically over recent years. Medical imaging vendors such as Siemens Healthineers have capitalised on this growth, with China, and the significant numbers of new hospitals built in the country, providing huge swathes of new customers. However, as the number of hospitals has grown and their medical imaging hardware needs have been sated, vendors will increasingly have to identify and exploit new ways to grow within the Chinese market.

Siemens Healthineers’ partnership with Universal Medical Imaging is one such strategy for achieving this. One of the limitations preventing purchases of additional medical imaging hardware is the lack of qualified personnel to acquire and interpret the images. This barrier is particularly acute in more rural and remote parts of the country, as many physicians and aspirant physicians have migrated to the urban centres where their skillset has been most needed.

Over time this will become a greater impediment. Medical imaging volumes are forecast to continue to rise over the coming years so this issue will need to be addressed. While there are initiatives to train more radiologists and imaging technicians, this is neither a short-term solution, nor is it realistically going to solve the issue, with shortages of some medical professionals, particularly radiologists, a problem across the world. Siemens hopes its partnership is a better near-term solution.

Remote Rescue

Universal Medical Imaging is one of China’s independent medical imaging providers, employing more than 500 imaging physicians across 30 cities. Supporting these physicians with Siemens Healthineers’ remote scanning assistant tools over 5G networks, will allow them to remotely aid local, primary-care physicians across the country without relying on cabled connections which are often more expensive. By assisting local physicians and technicians with the acquisition and analysis of medical images, Siemens Healthineers will also increase the viability of medical imaging in these remote areas, in doing so creating new modality sales opportunities.

While there has been demand for some medical imaging equipment in these less densely populated areas, particularly for simpler modalities such as X-ray, this isn’t a particularly lucrative opportunity for Siemens Healthineers. These modalities are inherently lower cost and less profitable for international medical imaging vendors, while a proliferation of domestic companies offering lower-priced solutions, and government-promoted China-first procurement policies further hinder the opportunity they present. However, connecting physicians in remote primary care and imaging centres to physicians in central urban areas, with more specialist knowledge, makes it viable for these remote centres to purchase and utilise advanced imaging modalities. By partnering with Universal Medical Imaging on 5G-based remote assistance solutions, Siemens Healthineers is essentially making it possible for a greater range of providers to purchase its more profitable higher-end systems.

Future Foundations

What’s more, the fact that Siemens Healthineers’ technology could play an important role in opening up these more remote markets within China means Siemens Healthineers stands to be among the biggest beneficiaries as the market grows. A reliance on Siemens’ remote scanning assistance tools to make the acquisition of advanced modalities viable, is likely to also necessitate the use of the German vendor’s systems. As such, Siemens will be better placed to defend against advances on the space by Western competitors as well as domestic vendors such as United Imaging, that may offer equipment at a lower price, or whose use may be incentivised by the Chinese government.

In addition, such a strategy is also likely to offer benefits in the future too. In Western Europe and North America in particular, Siemens Healthineers, as well as GE Healthcare, Philips and others have enjoyed success working to forge long term partnerships with hospitals and provider networks. These extended agreements, which see the vendor supply a range of modalities, services and support to providers, elevate medical equipment sales beyond simple transactions into reliable, long-term revenues. In addition, such deals offer the opportunity to upsell additional equipment and services, further entrenching a vendor at a provider.

While the partnership between Siemens Healthineers and Universal Medical Imaging is far less integrated than these deals, it does bear some similarities. For providers in remote locations, the reliance on Siemens remote imaging assistance tools means that the purchase of an MRI or CT system, for example, is not just a simple transaction, instead, it is the acquisition of part of a wider system. As such, it confers, albeit at a much smaller scale, some of the benefits, and may be a precursor to a broader and more integrated partnership between a provider and Siemens Healthineers.

The Expansion of Imaging

In the future this partnership, and others like it, will also increasingly enable medical imaging examinations to be conducted in more non-traditional settings. In the near to mid-term, growth in medical imaging will start to come from the expansion of diagnostic imaging centres. Over the longer term, however, as demand for medical imaging increases, China could also start to see the availability of medical imaging in local pharmacies and retail environments, for example. It is unfeasible for one of these locations to hire a team of experienced technicians and radiologists. But, as long as there is 5G cellular coverage, a likelihood given that the network reaches almost 90% of China’s rural centres, less qualified and less experienced personnel will, with the support of Universal Medical Imaging’s experts, be able to conduct medical imaging exams. This is still a long way off, with the first inroads into medical imaging in retail and pharmacies only just being taken in the US, a far more developed market, but, given China’s scale and the growing need for medical imaging, and particularly advanced medical imaging, this represents a huge opportunity for the future.

Maximising this opportunity will not be straightforward, with other vendors, both Chinese and international keen to take advantage as the market opens up, but Siemens, for the time being at least, is in a strong position to capitalise. More broadly the move represents the German vendors’ acknowledgement of the change in the Chinese market. Vendors such as Siemens Healthineers are still reliant on Chinese customers to realise their growth targets, but as growth for traditional customer bases slows, and business for large urban providers transitions to predominantly replacement sales, this growth must be earned elsewhere. Utilising a partnership model to minimise risk, and taking advantage of new technology, Siemens Healthineers’ plan is sound. With the partnership, the stage is now set for Siemens Healthineers to take advantage of China’s next phase of growth.

About Signify Premium Insights

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify Research. To view other recent Premium Insights that are part of the service please click here 

Signify Premium Insight: Vendor Financials Roundup – The Health of the Imaging Sector Q3 2021

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify Research. To view other recent Premium Insights that are part of the service please click here.

The third quarter of 2021 has been impacted less by the coronavirus pandemic than any of the previous six. This is evidenced in the financial results of the major medical imaging companies which shows that vendors are, by and large, progressing steadily along the recovery curve and in many instances showing growth for the trailing 12 months in the upper single digits and beyond.

One of the vendors that did, at first glance, appear to struggle, was GE Healthcare, which posted year on year growth for the quarter of -5%. However, this negative growth figure was, in part at least, a result of a tough comparable quarter, with last year’s $300m ventilator order for its Life Care Solutions business proving hard to match. This fall, however, was at least partially offset by increased volume in Imaging and Ultrasound. Despite this, the figure still stands in sharp contrast to those of its closest competitors, Siemens Healthineers and Philips, which posted growth figures of 12.7% and 10% in their respective Imaging and Diagnosis and Treatment businesses.

Of more concern than a tough comparable quarter in 2020 are the supply chain issues that GE pinned most of the blame for the negative growth on. GE was not alone in suffering from such problems, with players in industries as diverse as carmaking and meat production all being affected. The vendor did highlight that it was working to minimise the disruption, citing the example of its CT team in Japan that has worked to reduce production lead time by 40% from when parts are received compared to a year ago, but these initiatives have so far been unable to offset the challenges being faced. Canon was another vendor that highlighted this problem. Although the Japanese firm posted a year-on-year improvement just shy of ten percent, the vendor noted that the figure was still below its expectations.

Medical imaging vendors have, for the most part, performed strongly over Q3 2021. N.b. While Fujifilm Healthcare did enjoy organic growth and saw a ‘surge’ in revenue, the acquisition of Hitachi Ltd.’s diagnostic imaging-related business also contributed to its dramatic quarter-on-quarter growth.

Order from Chaos

GE Healthcare’s decline does look set to be short-lived, however, with it, and several other vendors highlighting remarkably robust order books. GE reported year-on-year order growth of 21% globally. Philips boasted comparable order growth of 15% in its Diagnosis & Treatment business in the third quarter, Siemens Healthineers highlighted that it had booked more than Eur20bn of order intake in its FY2021, Canon’s medical segment mentioned that it was building up its order book for the coming year, while Agfa described its order book as ‘healthy’.

The strength of these vendors’ order books is a result of several factors. The aforementioned supply chain issues are among them, with providers being forced to place orders for purchases that cannot be made right away. There are also other more pervasive trends having an impact.

One of the key reasons is the continuing Covid support packages from many governments. In countries with publicly-funded healthcare systems, providers are still benefitting from additional funding that has been allocated over the last 18 months. These providers have already spent heavily on equipment such as ventilators and patient monitors that was urgently needed during the worst of the pandemic, now their focus has turned to the enormous backlog of patients waiting for postponed elective procedures. To address this backlog many providers are investing heavily in imaging equipment, seeking to take advantage of both additional systems, as well as the efficiency improvements that newer equipment can offer.

This glut of orders is also present in privately-funded markets, although here providers are spending to take advantage of the backlog, which represents a significant revenue opportunity, much needed for many following the difficulties of the past 18 months.

Maintain the Chain

This increase in demand was noted by many different vendors. Fujifilm mentioned the demand of its ultra-lightweight mobile digital x-ray systems and ultrasound devices, both Philips and Siemens called out the popularity of their CT systems, Agfa mentioned the demand for its healthcare IT solutions and Konica Minolta highlighted the success of digital radiography and diagnostic ultrasound, among others. This, almost universal demand for medical imaging devices is obviously good news for medical imaging vendors, although there are also some risks.

Supply chain issues could continue to blight performances, and if one vendor is particularly struggling to supply equipment, then orders could leak away to competitors, similar to providers’ prioritisation of availability above all else in the digital radiography market during the height of the pandemic (a trend discussed in more detail here). Essentially, supply chain management and logistics is, in many ways, set to be the most crucial factor over the coming 12 months.

There are other clouds on the horizon too. While many governments have prioritised investment in new medical imaging systems, few seem able to address the shortage of radiologists. Longer-term this shortage could increasingly bite, with the purchasing of additional systems coming to an end when there is a lack of radiologists, technicians and other imaging professionals to use them. This shortage means that over time vendors will have to focus on other factors peripheral to the imaging systems themselves in order to boost their revenues. Improving efficiency and workflow, offering AI capability that will assist in some of the less complex and time-consuming tasks, and increasingly offering services as part of deals, are factors that could make a significant difference in coming years, given that the rapid rise in equipment demand can only last so long.

The worst of the pandemic’s volatility appears to be over, with vendors squarely into recovery.

Major Market Focus

One feature of this quarter’s results was that much of the commentary and discussion was centred around developed markets, with little attention directed elsewhere. Emerging markets often provide palpable growth when there is a lack of opportunity in more established markets. At present, however, many healthcare providers in emerging markets are particularly stretched financially. This combined with the more volatile nature of these markets, and the simple fact that vendors’ largest markets are enjoying unrivalled demand, means that the focus is elsewhere.

One market that is growing is China, but this has been more beneficial for some vendors than others. The two Chinese vendors tracked for this Premium Insight, Beijing Wandong and Shenzen Mindray both enjoyed year-on-year growth in the quarter above 20%. According to the latter this was a result of predominantly domestic growth, stemming from China’s ‘unprecedented’ medical investment in the wake of the coronavirus pandemic and a large expansion of public hospitals. Given China’s strategy of favouring local vendors, domestic companies have been the main beneficiaries of this investment. However other international vendors also performed strongly in the country, with Philips, for example acknowledging revenue delays, but touting mid-single digit order growth for the quarter. The vendor also said it expected prospects to improve further as regulatory guidelines in the country ‘become clearer’.

Time to Eat

Despite this nuance, when all is said and done, it has been a lucrative quarter to be a medical imaging vendor. While there have been weaker spots, AGFA noted a ‘softer’ quarter, for example, and Sectra saw revenues dip compared to the previous quarter as it experienced its usual quarter-to quarter variability, but these are minor hiccoughs in what is currently a booming market. The challenge for vendors will be how they can continue to capitalise on this very strong demand and ensure that nothing prevents them turning this demand into revenue. This will mean ruthless supply chain management and ensuring that there are no hurdles in producing and delivering medical imaging systems.

Vendors will be keen to make the most of this demand, which appears robust enough to support strong performances for the coming quarters. However, in servicing this demand they should maintain an eye on the future. The time will come when government spending boosts end, hospitals are left with more restricted budgets, providers have purchased all the medical imaging equipment their staff is able to utilise, and vendors will have to find more creative ways to grow.

Until then, the famine of the pandemic’s peak is past. Now is the time to feast.

 

About Signify Premium Insights

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify Research. To view other recent Premium Insights that are part of the service please click here