Tag Archives: Healthineers

Signify Premium Insight: Siemens Healthineers Doubles Down on Ultrasound

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In April 2021, rumours circulated that Siemens Healthineers was considering selling its ultrasound business, with reports suggesting that interest in the business from a potential buyer had prompted the German healthcare giant to consider divesting the unit in a deal reckoned to be worth around $1bn. The rumours were given some credence when group CEO, Bernd Montag said that the company “can be in the [ultrasound] business, but we don’t have to be”.

However, last month the international healthtech vendor declared its support for the ultrasound unit, with Siemens Healthineers CFO Jochen Schmitz not only stating that “there is no sale process for the ultrasound division” but also explained that Siemens Healthineers had repositioned the business and were “investing heavily in it”.

The Signify View

Even for a company the size of Siemens Healthineers, one billion dollars is a tempting amount, and given the circumstances it is easy to see how Siemens could have been forced to consider its options.

Its ultrasound unit had, after all, had several difficult years. Although it performed reasonably, it was not able to match the growth of some of Siemens’ other medical imaging units. This had the net effect of the unit softening Siemens Healthineers total group growth, which, during a time when the broader company is following strict growth targets of its own, could have put it in a difficult position. The ultrasound business was also facing challenges in its own market, and for several years saw its market share decline as it lost out to competitors in the space.

These challenges were also faced against the backdrop of slow growth in most segments of the ultrasound market. While there were some bright spots such as ICE catheters, radiology, the segment in which Siemens Healthineers ultrasound is most active, is well consolidated and (excepting a bumper year for the global market in 2021 reflecting a correction from the -13% growth seen during 2020 and the pandemic) is slow growing.

Balancing Interests

Combined, these factors could have persuaded Siemens Healthineers to take the $1bn for its ultrasound business and invest the money elsewhere. There are numerous segments across healthcare with more obvious growth prospects than ultrasound which Siemens may have been tempted to invest in, and had Siemens been struggling financially then carrying out such a plan may have been necessary, but, particularly in light of the firm’s strong run of results and the effective windfall that it has enjoyed from its Covid testing business, letting ultrasound go would have been a mistake.

While Siemens’ Ultrasound division has faced adversity in the past couple of years, it had, long before the recent announcement, begun a programme of rejuvenation. Key to these efforts was the development and release of its radiology ultrasound portfolio, with the vendor releasing new products (Bonsai, Juniper, Redwood and Sequoia) in 2018 and 2019. With the Covid pandemic stymieing the market for most of 2020, the fruits of this product investment will only now truly start to become apparent, enabling the vendor to power forward.

That isn’t to say there aren’t further opportunities for product refreshes. Siemens Healthineers’ console offering for cardiovascular echo exams for example, the Acuson SC2000 platform was first launched in 2009, and even given its 2014 ‘Prime’ refresh would benefit from rejuvenation. This cardiology side of Siemens Healthineers’ ultrasound business is one of the areas that could benefit from the investment mentioned by Schmitz, with the market offering considerable opportunity, especially given the vendor’s strength in ICE catheters.

Alternatively, Siemens Healthineers may take a more selective approach. The ultrasound business’ market position in cardiology ultrasound systems has been eroded in recent years. Such a loss in market share may be disappointing for the vendor, but it could also lead to Siemens becoming more focused, encouraging it to further prioritise the opportunities in the radiology and shared services markets. Both options – investing more in cardiology, or refocusing away from cardiology – could be successful, which option Siemens chooses depends on its broader vision for its Ultrasound strategy.

The Power of Progress

Regardless of such remaining opportunities, Siemens Healthineers’ efforts are starting to pay off. Last year, the vendor enjoyed growth in line with the broader market rather than the below market growth seen in previous years. While Siemens will be keen to increase this further and surpass the market average growth rate, this is still a result in which the German vendor can find solace, particularly given that this turnaround has been achieved during the fallout from the Covid-19 pandemic.

As a corollary to this, Siemens has also reduced the loss in market share it has endured in past years. Having defended its current market share, Siemens can once again turn to the offensive, and endeavour to win over new customers in the future.

Even without significantly increasing its market share, however, Siemens Healthineers as a whole will benefit from the retention of its ultrasound unit. As large providers are increasingly looking to make broader, holistic managed service deals rather than simple transactional sales, a vendor having the spectrum of medical imaging will confer some advantages. If Siemens had decided to sell its ultrasound business, the German vendor would no doubt have found a preferred partner to enable it to tender for such contracts, but it would have hindered its dealmaking flexibility. As services are set to be an ever more significant component of such deals, and vendors could be willing to be accommodating to secure them, having the flexibility of an in-house ultrasound offering could prove very beneficial. This is particularly true given that Siemens Healthineers is one of only a very limited number of players that can offer such breadth.

Future Focus

The company must now look to continue to build on its momentum and success in steadying the ship, looking ahead to the opportunities that await. This leaves the vendor with several difficult choices. Among them is the question of whether it seeks to drive growth from expanding into new territories, investing in additional clinical segments, or redoubling its focus.

While there are some merits to targeting new areas, with some ultrasound segments and certain regions promising higher growth potential than its core radiology market, in the near term it would be wise to capitalise on the opportunity closer to home. Siemens Healthineers has worked hard to reduce its loss in market share and improve its growth, now is the moment when all of its labours are coming to fruition. If it were to start eagerly approaching new targets then the vendor risks spreading itself too thinly and taking a step back. New investment into the business could mitigate this possibility, and in the future, when it has solidified its foundation, it will be an option that bears consideration, but at present a continued focus on radiology and shared services, some investment in other, carefully chosen areas, and continued development of software and other digital features seems the surest way to maintain momentum.

Over the longer term, Siemens will also have to make progress with other aspects of the business. Across Siemens Healthineers as a broader group, success is often dependent on scale, and leveraging the advantages of scale to grow revenues and, crucially, grow margins. Siemens Healthineers has this advantage in other modalities such as MRI and CT, with the vendor’s scale allowing it to invest significantly more money into research and development than all but its closest rivals. This investment gap means it is harder for other rivals to compete. This could be particularly pertinent with young, voracious vendors such as United Imaging reportedly mulling entry into the ultrasound market. How Siemens will achieve similar scale in ultrasound remains to be seen, but with tough competition in the radiology and shared services markets, it may need to look to adjacent clinical segments, such as cardiology, to achieve this.

A previous Premium Insight, which discussed the rumours of a sale, concluded: “One billion dollars may be an attention-grabbing figure, but, for Siemens, it is almost certainly not enough to outweigh the value brought by the unit.” This has proven to be the case. While Siemens was right to consider its options, it was clear that the Ultrasound business brought precious value to the company. The security that the intention to invest brings means that the unit can now look ahead, focus on scaling up, and continue to demonstrate and deliver that value.

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Signify Premium Insight: Proscia Partnership Shows Siemens’ Pathology Play

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.

Last week Siemens Healthineers and Proscia announced that they had inked a multi-year partnership agreement. The deal will see Siemens continue to build out its enterprise imaging offering, using Proscia’s Concentriq Dx to fortify its digital pathology capability.

The German vendor says the partnership has been catalysed by the increasing demand for digital pathology, amid challenges to the traditional laboratory model faced during the Covid-19 pandemic. Siemens says these challenges, such as a shortage of pathologists and rising biopsy volumes have encouraged laboratories to modernise their operations, however, to do so, they require new enterprise-wide tools. This, Siemens reckons, is where the new agreement will allow it to make an impact.

The Signify View

Proscia has recently been enjoying a run of success. The firm’s focus is rooted in the digital pathology fundamentals of image viewing and management. The vendor has also developed its platform to accommodate new technologies such as AI as they become more significant, but, unlike image viewing and management, these innovations are not foundational. Despite this focus on the core competencies, however, Proscia has thrived over recent years, with the challenges of the pandemic and the subsequent waiving of the usual restrictions on digital pathology playing into the vendor’s hand. The vendor started from a relatively small base, but its revenues have leapt up dramatically, allowing it to increasingly look beyond its US focus and begin tapping into global markets.

This performance is only half the story, however, with the vendor also establishing its credentials as a technological innovator. It has developed strong connections with opinion leaders in pioneer institutions, which has helped to bolster its appeal to Siemens. Aiding the attractiveness of the vendor in particular is its scalability, which for a company like Siemens Healthineers that is looking to expand quickly within digital pathology, is crucial.

This is particularly important for Siemens, given its present lack of pathology capability and the increasing role that digital pathology is set to play in medical imaging IT strategy. As broader enterprise imaging offerings make their way from vendors’ roadmaps and into hospitals, the challenge of pathology will have to be countenanced. What’s more, now is the time to capitalise on this transition. Proscia has been achieved some success in the US market, but is now in a position to expand geographically, first in Europe and then more globally. Siemens, with its strength in Europe, is a good partner to have, especially given its reach and ability to leverage the capability that Proscia offers to increasingly bring digital pathology tools to its customers, deriving additional revenue from their budgets.

Punctual Progress

The timing is also apt from a market perspective. Much of the software used in digital pathology is supplied by the digital pathology scanner hardware vendors. In these purchases, the hardware has been the focus, and resultantly the software supplied by the likes of Hamamatsu and Philips has been overlooked. It has tended towards proprietary, standalone functionality, rather than the far more integrated enterprise packages that Siemens Healthineers (via its Syngo Carbon portfolio) in partnership with Proscia is looking to supply. Other vendors have already started down this route, with challenger imaging IT vendors such as Sectra having already developed their own digital pathology tools in house, incorporating them into their portfolios and even showcasing digital pathology tools within their AI marketplaces.

Another vendor which has made a concerted effort into digital pathology is Fujifilm, which last year formed a partnership with Inspirata, an agreement comparable to Siemens’ tie-in with Proscia. That connection has been an asset to Fujifilm, which has been successful leveraging it in sales within the UK, tapping into tenders that have a digital pathology component, with the vendor increasingly looking to capitalise on this capability within Europe in coming years. Siemens could make this ambition more difficult, however, with both Proscia’s capability and Siemens’ considerable ties to European providers both working against the Japanese vendor.

More broadly, the move underscores Siemens’ wider, longer-term ambition of consolidating hospitals’ imaging procurement, enabling providers to utilise Siemens alone for all of their purchasing. This wider strategy has been successful so far, allowing Siemens to sign longer, ever more holistic deals and continuing to upsell additional components and service elements to providers. By partnering with Proscia, the German vendor hopes this momentum can be expanded into another hospital department, and growth continued, despite the modest increases in the radiology market. Moreover, digital pathology has been an obvious hole in the precision medicine and digital oncology strategy pursued by Siemens in recent years, boosted by acquisition of Varian.

Difficulties in Digitalisation

Plans are never as straightforward in practice as in theory, and the Siemens Healthineers, Proscia pairing will face some challenges. One of the most acute could be the lack of digitisation of pathology labs in general. While there are some pockets of adoption or willingness to adopt, there are also a number of challenges stemming from the nascency of the digital pathology market that will need to be overcome. In many cases Siemens will not only have to convince a provider to adopt the Proscia software it can supply, but it will also have to convince a provider to digitise its pathology department in the first instance. Having a large imaging vendor such as Siemens facilitating the move will make the process easier, but there are still significant barriers inherent in the transition such as a lack of standardisation, regulatory challenges, pathologists’ reluctance and upfront cost requirements.

Siemens will also have to face challenges from other companies. In addition to challenges from the smaller, dedicated imaging IT vendors, large international imaging vendors are unlikely to stand by idly by if Fujifilm and now Siemens are able to capitalise on digital pathology. Philips, for instance is likely to redouble efforts on the market and make a concerted push to develop more integrated software that is better embedded in the vendor’s broader enterprise imaging strategy. GE Healthcare meanwhile could mount another foray into the digital pathology space after previously withdrawing, selling its Omnyx business to Inspirata in 2018.

If so, GE could look to chart a similar course to Siemens once unshackled from its corporate parent, partnering with an established digital pathology vendor. As with its German competitor, this grants the vendor access to accomplished digital pathology capability, without the associated cost of developing that capability internally or making the necessary commitment that an acquisition would require. The market is, after all, young and a difficult one in which to make headway, so being able to easily withdraw is advantageous. One difficulty with such a strategy, however, is finding a suitable partner, with the list of candidates that are qualified and available, short.

As digital pathology gains further momentum, the software segment will no doubt get more crowded.  Renewed digital efforts from digital pathology hardware vendors, AI-start-ups, Lab Information System (LIS) vendors and even regional or global EMR vendors eyeing up a slice of the growing space. Therefore, the timing of this move is also perhaps indicative that Siemens believes digital pathology is now mature enough to commit to, while still gaining some early-mover advantage versus some of its competitive peers.

Better Together

Even as other vendors intensify their focus on digital pathology, the merits of Siemens Healthineers’ partnership with Proscia are evident. These merits will begin to be realised over the coming years with Siemens able to more convincingly tender for large imaging contracts which include a digital pathology component, while also being able to more earnestly promote their enterprise imaging solutions as the vendor moves into departments beyond radiology. This move could also be bolstered by the recent success of Siemens molecular and diagnostics businesses in reagents and consumables, for example, which has already bestowed the vendor with links to some laboratories.

Ultimately though, what this partnership does is signify that Siemens sees digital pathology as an important element of the continued growth of its imaging software business. That it has partnered with one of digital pathology’s most compelling new vendors has the potential to draw a new line in the sand. Assuming the two companies are able to successfully integrate their products, and the potential that they promise is realised, then it could both catalyse the take-up of digital pathology, while positioning Siemens and Proscia right at the crest of that wave of adoption.

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Signify Premium Insight: The Enviable Problem Facing Siemens Healthineers

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 has enjoyed a run of very strong results over recent quarters, even accounting for the disruption caused by the coronavirus pandemic. The Healthineers business, a market leader in many of its core segments, has exceeded most industry expectations since it announced its IPO from Siemens AG. This however leaves Siemens with a problem, albeit a rather good one: where can it go from here?

In its recent Capital Markets Day and Shape 22 presentations, Siemens Healthineers laid out its answer to this tricky question, and emphasised the technologies and strategy that it was going to rely on to power the next phase of its growth. This plan, which it has dubbed the New Ambition will focus on three areas, Patient Twinning, Digital, Data and AI, and Precision Therapy, and is hoped to bring together the different sides of Siemens Healthineers’ business to accelerate growth.

The Signify View

Siemens Healthineers’ imaging business has been very successful of late. Its most recent results (Q4 2021) showed revenues 12.7% higher than Q4 2020, and 6.2% higher than Q4 2019, before the Covid pandemic took hold, while its steady stream of product releases highlights its technical leadership in some market segments (most notably first to market with photon counting CT – see below). These successes are predominantly found in markets where there are well established mature healthcare customer groups, both in global terms, with the vendor performing strongly in mature markets, and in clinical terms, with Siemens being one of the go-to-vendors in radiology and general imaging.

However, if Siemens is going to achieve its new growth target of 6-8% per annum in the period between 2023-25, it will have to rely on growth from other areas. It is after all, according to its own figures, the market leader in CT, MRI, X-Ray and Molecular Imaging, so establishing strong footholds in new markets will be essential to build on this position. This will involve targeting less mature geographic markets, or less premium tiers of mature markets. This shift was illustrated by some of the products announced at the Shape 22 event, including the Magnetom Free.Star. This new 60cm bore MRI scanner with a field strength of 0.55 Tesla will offer a total cost of ownership around 30 percent less than comparable scanners. The new scanner is being positioned by Siemens to make the modality more accessible to the 50 percent of the global population that currently has no access to MRI.

The Magnetom Free.Star is the second product in the Magnetom Free line-up, following the Max, which was unveiled a year ago. Siemens Healthineers expects these products to expand MRI’s reach geographically, but also in targeting new clinical segments. Instead of MRI being focused only on radiology departments, Siemens hopes to derive revenues by selling into other care settings, such as orthopaedics, paediatric and emergency medicine for example.

Expanding Imaging

In addition to seeking new customers from outside its current core markets, Siemens also hopes to be able to use its innovation to drive new sales, and more lucrative sales at existing customers. The vendor was proudly promoting its Naetom Alpha scanner at the events. This, the world’s first photon-counting CT system, is indicative of how the vendor hopes to be able to drive increased spend at providers. It is an innovative new system which offers greater capability than other top end scanners. This will encourage providers to replace older systems for the new PCCT system, which will, initially at least, be sold at a significant premium (see FDA Approval Lets Siemens Make CT Count). Furthermore, photon counting CT produces a huge volume of data, which Siemens also hopes will encourage providers to also use more of its software portfolio, founded on the new Syngo Carbon interoperability platform.

Data will also form a key part of Siemens Healthineers’ New Ambition in other ways too. AI will play a major part in this strategy, and Siemens, arguably has the upper hand compared to some of its key competitors, which are increasingly looking to partner with third parties to add AI capabilities to their ecosystems. Siemens has instead predominantly been focused internally. The vendor now claims to have more than 60 AI enriched offerings, 1.3bn curated data sets and aims to provide solutions for anatomies covering 85% of imaging procedures by 2025, up from 35% today. This could be a real differentiator in supporting providers in tackling the challenges of today, with imaging volumes continuing to increase and a dwindling pool of clinician resource to interpret scans. Additionally, Siemens advances in AI are also set to help facilitate the targeting of new customers, who may not have the same training and experience as those in established imaging departments. Advanced clinical decision support tools will somewhat offset that lack of expertise and should smooth the transition of imaging modalities to new areas and new markets.

New Challenges Will Come

It won’t all be plain sailing for Siemens Healthineers, however. The vendor has been very successful in many markets, but it has really made its name in premium segments. Striving to deliver growth in value-orientated segments and a greater focus on emerging markets will provide several stern challenges. One of these will be selling the systems. While the product might be attractive, if Siemens doesn’t have the right operational sales and service support, it could still flounder. Other vendors have better established sales channels in emerging markets today, with sales teams and distributor networks better connected to providers and teams more experienced in selling value-focused products. In these markets, loyalty to other lower-cost brands will also play a part, as too will aggressive price competition.

Siemens could also find itself increasingly competing with Chinese vendors, which are becoming increasingly capable despite being more affordable than their western counterparts. This is evident in the growing presence of vendors such as United Imaging, both in the Chinese market but also in mature markets where Siemens holds a leadership position. China is also becoming more focused on AI, with multiple vendors having secured sizeable funding rounds and many solutions already deployed for clinical use in the domestic Chinese market. Despite Siemens’ best effort, the value proposition provided by these vendors could prove too appealing for less premium customer tiers and the German vendor could miss out.

Siemens may also face competition from vendors willing to adopt innovative business models. In emerging markets, smaller challenger vendors which are looking to offer their products on pay-per-scan basis, or in other innovative ways, could grant cash-strapped providers additional imaging capability for a lower upfront cost than Siemens. This alone could be enough to tempt providers away.

A Problem that Must be Solved

While these obstacles are tangible, they are not insurmountable. What’s more, regardless of the challenges they offer, if Siemens is to achieve its growth target laid out in its New Ambition, they must be faced. Siemens Healthineers is uniquely placed to achieve this though, with the vendor’s scale bringing with it opportunities that would be out of reach for almost all other vendors.

Siemens can afford to invest heavily in technologies like CT, MRI and AI, it should also invest in the growing service side of the business which will help grow stable revenues in markets where it is strong, and it can invest in market education and sales in new markets. Further, we expect Siemens to continue to leverage its new market positions in Oncology (via the Varian acquisition) to support cross-sell of imaging competency into Oncology, while also moving the needle further towards more personalised, precise care provision in mature markets.

The business does have areas where it is less strong such as Ultrasound, in which it is according to Siemens, ranked fifth, and in some specialities. But on balance these gaps are relatively few and far between. Digital competence will also play an increasingly important part in the future success of the business. While the firm has a legacy of technical hardware innovation, its digital record in imaging has been patchier. To address this the firm has clearly laid out its roadmap plans in imaging for improved interoperability between its portfolio, under the Syngo Carbon brand. As deals with providers increasingly focus on digital assets as well as hardware assets, the success of Carbon will become more and more important to underpin its New Ambition strategy. Mid-term, Carbon is also expected to play a central role in underpinning Siemens’ broader digital precision medicine play too, especially in bringing data from its Imaging, Oncology and Diagnostics divisions more closely together.

Siemens Healthineers’ recent events detail how the vendor will combine strengths from across its business to solve its enviable problem and indicates where its growth will come from next. Now all that remains for the firm is the hard yards – the realisation of this ambition.

 

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