Cerner announced some leadership changes promoting long-time associates Travis Dalton to Chief Client & Services Officer and Dan Devers to Chief Legal Counsel. After long, respected, meaningful careers at Cerner, John Peterzalek and Randy Sims will be departing.
Cognoa, the leading pediatric behavioral health company developing diagnostic and therapeutic solutions for children living with autism and other behavioral health conditions appoints Eric B. Mosbrooker as Chief Operations Officer. Mosbrooker will be responsible for overseeing and leading the global commercialization of the company’s product offerings, expanding Cognoa’s operational capabilities and implementing scalable business processes.
Discovery Health Partners announced that Sameer K. Mishra has joined the company as Chief Information Officer. Leveraging his significant health payer technology experience, Mishra will lead Discovery’s dedicated IT staff and evolve the company’s technology platform.
Medical Microinstruments (MMI) SpA, hires Mark Toland as Chief Executive Officer. He brings more than 25 years of experience in the medical device industry and most recently served as President and CEO of Corindus, a vascular robotics company that Siemens Healthineers acquired for $1.1 billion in 2019. Following the CE mark of MMI’s Symani Surgical System® in 2019 and successfully completing the first human use cases in 2020, Toland will drive the company’s strategic direction from the developmental stage to broad commercialization.
Dr. Marilyn Ritholz and Dr. David Horwitz will join Chairman Eric Milledge on Dario Health’s scientific advisory board. Dr. Ritholz is a psychologist at Joslin Diabetes Center, a Harvard Medical School affiliate, and Dr. Horwitz is the former Global Chief Medical Officer of Johnson and Johnson Diabetes Institute. They will work on advancing Dario’s technical leadership and help to guide the development of its technology roadmap.
DrChrono expands its senior leadership team with two new hires joining the company. Shahram Famorzadeh will be joining as Senior Vice President of Engineering, responsible for scaling DrChrono’s platform to the next level to support its growing network of physicians and practices, and Jason Rasmussen has joined as Senior Vice President of Revenue, contributing his expertise to DrChrono’s financial operations team.
Vave Health announced two additions to its executive team and advisory board to support the company’s accelerated growth in the medical imaging market. David Garner, a long-time veteran of point-of-care ultrasound and previous vice president at Butterfly Network, brings more than 22 years of experience to Vave Health, and Terri Bresenham, founder of TruNorth Health Advisors and recognized global healthcare expert, joins as a member of the company’s advisory board.
Anang Chokshi, PT, DPT, OCS, SCS joins Include Health as Chief Clinical Officer (CCO). Chokshi joins IncludeHealth’s executive team to provide clinical and technical expertise as IncludeHealth expands its portfolio of products.
Conversion Labs, Inc. appoints licensed personal care and wellness physician and psychiatrist, Dr. Anthony Puopolo, to the new position of chief medical officer. Dr. Puopolo will be responsible for overseeing the company’s rapidly expanding network of state-licensed physicians and ensuring that the company is delivering the highest quality of care.
BioCardia®, Inc. appoints Krisztina Zsebo, Ph.D., a 31-year veteran of the biotech industry, to its Board of Directors following her election at BioCardia’s 2020 Annual Meeting of Stockholders in December 2020.
Achiko AG appoints biotechnology research scientist and entrepreneur Dr. Morris S. Berrie to the position of President, and business leader in the life science industry Richard Lingard to the position of SVP Commercialization.
ApprioHealth announces the addition of Carl Swart as chief operating officer (COO). Prior to joining ApprioHealth, Swart served as the vice president for revenue cycle for Ensemble Health Partners. Additionally, he spent nearly a decade with Mercy Health as a market vice president.
The combination of Teladoc Health and Livongo creates a
global leader in consumer-centered virtual care. The combined company is
positioned to execute quantified opportunities to drive revenue synergies of
$100 million by the end of the second year following the close, reaching $500
million on a run-rate basis by 2025.
Price: $18.5B in value based on each share of Livongo
will be exchanged for 0.5920x shares of Teladoc Health plus cash consideration
of $11.33 for each Livongo share.
Siemens Healthineers Acquires Varian Medical
On August 2nd, Siemens Healthineers acquired
Varian Medical for $16.4B, with the deal expected to close in 2021. Varian is a
global specialist in the field of cancer care, providing solutions especially
in radiation oncology and related software, including technologies such as
artificial intelligence, machine learning and data analysis. In fiscal year 2019,
the company generated $3.2 billion in revenues with an adjusted operating
margin of about 17%. The company currently has about 10,000 employees
Price: $16.4 billion in an all-cash transaction.
Gainwell to Acquire HMS for $3.4B in Cash
Veritas Capital (“Veritas”)-backed Gainwell Technologies (“Gainwell”),
a leading provider of solutions that are vital to the administration and
operations of health and human services programs, today announced that they
have entered into a definitive agreement whereby Gainwell will acquire HMS, a technology, analytics and engagement
solutions provider helping organizations reduce costs and improve health
Price: $3.4 billion in cash.
Philips Acquires Remote Cardiac Monitoring BioTelemetry for $2.8B
Philips acquires BioTelemetry, a U.S. provider of remote
cardiac diagnostics and monitoring for $72.00 per share for an implied
enterprise value of $2.8 billion (approx. EUR 2.3 billion). With $439M in
revenue in 2019, BioTelemetry annually monitors over 1 million cardiac patients
remotely; its portfolio includes wearable heart monitors, AI-based data
analytics, and services.
Price: $2.8B ($72 per share), to be paid in cash upon
Hims & Hers Merges with Oaktree Acquisition Corp to Go Public on NYSE
Telehealth company Hims & Hers and Oaktree Acquisition Corp., a special purpose acquisition company (SPAC) merge to go public on the New York Stock Exchange (NYSE) under the symbol “HIMS.” The merger will enable further investment in growth and new product categories that will accelerate Hims & Hers’ plan to become the digital front door to the healthcare system
Price: The business combination values the combined
company at an enterprise value of approximately $1.6 billion and is expected to
deliver up to $280 million of cash to the combined company through the
contribution of up to $205 million of cash.
SPAC Merges with 2 Telehealth Companies to Form Public
Digital Health Company in $1.35B Deal
Blank check acquisition company GigCapital2 agreed to merge with Cloudbreak Health, LLC, a unified telemedicine and video medical interpretation solutions provider, and UpHealth Holdings, Inc., one of the largest national and international digital healthcare providers to form a combined digital health company.
Price: The merger deal is worth $1.35 billion, including
WellSky Acquires CarePort Health from Allscripts for
Price: $1.35 billion represents a multiple of greater
than 13 times CarePort’s revenue over the trailing 12 months, and approximately
21 times CarePort’s non-GAAP Adjusted EBITDA over the trailing 12 months.
Waystar Acquires Medicare RCM Company eSolutions
On September 13th, revenue cycle management
provider Waystar acquires eSolutions, a provider of Medicare and Multi-Payer revenue
cycle management, workflow automation, and data analytics tools. The
acquisition creates the first unified healthcare payments platform with both
commercial and government payer connectivity, resulting in greater value for
Radiology Partners (RP), a radiology practice in the U.S., announced a definitive agreement to acquire MEDNAX Radiology Solutions, a division of MEDNAX, Inc. for an enterprise value of approximately $885 million. The acquisition is expected to add more than 800 radiologists to RP’s existing practice of 1,600 radiologists. MEDNAX Radiology Solutions consists of more than 300 onsite radiologists, who primarily serve patients in Connecticut, Florida, Nevada, Tennessee, and Texas, and more than 500 teleradiologists, who serve patients in all 50 states.
PointClickCare Acquires Collective Medical
PointClickCare Technologies, a leader in senior care technology with a network of more than 21,000 skilled nursing facilities, senior living communities, and home health agencies, today announced its intent to acquireCollective Medical, a Salt Lake City, a UT-based leading network-enabled platform for real-time cross-continuum care coordination for $650M. Together, PointClickCare and Collective Medical will provide diverse care teams across the continuum of acute, ambulatory, and post-acute care with point-of-care access to deep, real-time patient insights at any stage of a patient’s healthcare journey, enabling better decision making and improved clinical outcomes at a lower cost.
Teladoc Health Acquires Virtual Care Platform InTouch
Teladoc Health acquires InTouch Health, the leading provider of enterprise telehealth solutions for hospitals and health systems for $600M. The acquisition establishes Teladoc Health as the only virtual care provider covering the full range of acuity – from critical to chronic to everyday care – through a single solution across all sites of care including home, pharmacy, retail, physician office, ambulance, and more.
Price: $600M consisting of approximately $150 million
in cash and $450 million of Teladoc Health common stock.
AMN Healthcare Acquires VRI Provider Stratus Video
AMN Healthcare Services, Inc. acquires Stratus Video, a leading provider of video remote language interpretation services for the healthcare industry. The acquisition will help AMN Healthcare expand in the virtual workforce, patient care arena, and quality medical interpretation services delivered through a secure communications platform.
CarepathRx Acquires Pharmacy Operations of Chartwell from
CarepathRx, a leader in pharmacy and medication management
solutions for vulnerable and chronically ill patients, announced today a
partnership with UPMC’s Chartwell subsidiary that will expand patient access to
innovative specialty pharmacy and home infusion services. Under the $400M
landmark agreement, CarepathRx will acquire the
management services organization responsible for the operational and strategic
management of Chartwell while UPMC becomes a strategic investor in CarepathRx.
Cerner to Acquire Health Division of Kantar for $375M in
Cerner announces it will acquire Kantar Health, a leading
data, analytics, and real-world evidence and commercial research consultancy
serving the life science and health care industry.
This acquisition is expected to allow Cerner’s Learning
Health Network client consortium and health systems with more opportunities to
directly engage with life sciences for funded research studies. The acquisition
is expected to close during the first half of 2021.
Cerner Sells Off Parts of Healthcare IT Business in
Germany and Spain
Cerner sells off parts of healthcare IT business in Germany and Spain to Germany company CompuGroup Medical, reflecting the company-wide transformation focused on improved operating efficiencies, enhanced client focus, a refined growth strategy, and a sharpened approach to portfolio management.
Price: EUR 225 million ($247.5M USD)
CompuGroup Medical Acquires eMDs for $240M
CompuGroup Medical (CGM) acquires eMDs, Inc. (eMDs), a
leading provider of healthcare IT with a focus on doctors’ practices in the US,
reaching an attractive size in the biggest healthcare market worldwide. With
this acquisition, the US subsidiary of CGM significantly broadens its position
and will become the top 4 providers in the market for Ambulatory Information
Systems in the US.
Price: $240M (equal to approx. EUR 203 million)
Change Healthcare Buys Back Pharmacy Network
back pharmacy unit eRx Network
(“eRx”), a leading provider of comprehensive, innovative, and secure
data-driven solutions for pharmacies. eRx generated approximately $67M in
annual revenue for the twelve-month period ended February 29, 2020. The
transaction supports Change Healthcare’s commitment to focus on and invest in
core aspects of the business to fuel long-term growth and advance innovation.
Walmart acquires CareZone, a San Francisco, CA-based smartphone
service for managing chronic health conditions for reportedly $200M. By
working with a network of pharmacy partners, CareZone’s concierge services
assist consumers in getting their prescription medications organized and
delivered to their doorstep, making pharmacies more accessible to individuals
and families who may be homebound or reside in rural locations.
Verisk, a data
analytics provider, announced today that it has acquiredFranco Signor, a Medicare Secondary Payer
(MSP) service provider to America’s largest insurance carriers and employers.
As part of the acquisition, Franco Signor will become part of Verisk’s Claims
Partners business, a leading provider of MSP compliance and other analytic
claim services. Claims Partners and Franco Signor will be combining forces to
provide the single best resource for Medicare compliance.
Rubicon Technology Partners Acquires Central Logic
Private equity firm Rubicon Technology Partners acquires
Central Logic, a provider of patient orchestration and tools to accelerate
access to care for healthcare organizations. Rubicon will be aggressively driving Central Logic’s
growth with additional cash investments into the business, with a focus
on product innovation, sales expansion, delivery and customer support, and
the pursuit of acquisition opportunities.
The collaboration focuses on advancing modular production in the industry. A first state-of-the-art, modular plant in the production environment is to be built at the Darmstadt site of Merck by 2022
Merck to invest ~$11.93M in the realization of the plant under the $1.1B investment program announced in Darmstadt up until 2025. It will be funded by the German Federal Ministry of Economic Affairs and Energy
The collaboration will advance the concept of flexible & simple interlinking of individual modules globally in the process development and production network of all business sectors at Merck
Click here to read full press release/ article | Ref: Merckgroup | Image: CHE Manager
CVS Health Corporation names Neela Montgomery Executive Vice President and President of CVS Pharmacy/Retail, effective November 30, 2020. Montgomery will oversee the company’s 10,000 pharmacies across the United States. Montgomery, currently a Board Partner at venture capital firm Greycroft, most recently served as chief executive officer of furniture retailer Crate & Barrel and has nearly 20 years of global retail experience.
The Cleveland Clinic and Amwell joint venture appoint Egbert van Acht as Executive Vice Chairman to the Board of Directors and Frank McGillin as CEO. Formed one year ago as a first-of-its-kind company to provide broad access to comprehensive, high-acuity care via telehealth, the company has made great progress scaling digital care through its MyConsult® offering. With an initial focus on clinical second opinions, the organization also offers health information and diagnosis on more than 2,000 different types of conditions including cancer, cardiac, and neuroscience issues.
Healthcare industry veteran Dana Gelb Safran, Sc.D. has joined Well Health Inc. as Senior Vice President, Value-Based Care, and Population Health. In her new role, Dr. Safran will expand WELL’s uses to improve healthcare quality, outcomes, and affordability through partnerships with payers and Accountable Care Organization (ACO) providers.
Talkdesk®, Inc., the cloud contact center for innovative enterprises appoints Cory Haynes to lead Talkdesk’s strategy for the financial service industry and Greg Miller to lead the strategy for healthcare and life sciences. Haynes and Miller are key members of the Talkdesk industries team led by Andrew Flynn, senior vice president of industries strategy for Talkdesk.
Imprivata appoints Mark McArdle to Senior Vice President of Products and Design. Mr. McArdle has more than two decades of experience in software development, Software-as-a-Service (Saas), in Cybersecurity, and advanced products for the enterprise, SMB, and consumer markets.
Eden Health names Jack Stoddard as executive chairman of its board of directors. Formerly serving in COO roles for Accolade and Haven, Stoddard brings two decades of healthcare innovation and operating experience to the board position, providing leadership, wisdom, and counsel during a time of monumental growth and adoption for the company.
Augmedix names Saurav Chatterjee Chief Technology Officer. Prior to joining Augmedix, he most recently served as Vice President of Engineering at Lumiata, Inc., where he led the engineering team that built a leading AI platform, focusing specifically on transforming, cleaning, enriching, featurizing, and visualizing healthcare data, and on building, deploying and operationalizing machine learning and deep-learning models at scale.
Tridiuum, the nation’s premier provider of digital behavioral health solutions names Philip Vecchiolli has joined the company as Chief Growth and Strategy Officer. Vecchiolli, who brings over 30 years of experience to the new role, has a successful track record of leading business development for large and mid-size healthcare companies.
Connect America appoints Janet Dillione as its new chief executive officer (CEO). Prior to joining Connect America, Dillione worked in the healthcare information services industry as CEO of Bernoulli Enterprise, Inc., GM of Nuance Healthcare, and CEO of Siemens Healthcare IT.
Health Catalyst, Inc. announces that current Chief Financial Officer Patrick Nelli has been named President, effective January 1, 2021. Following Nelli’s promotion to the President role, Health Catalyst has named Bryan Hunt, current Senior Vice President of Financial Planning & Analysis, Chief Financial Officer, also effective January 1, 2021.
Two additional promotions, also effective January 1, 2021, include Jason Alger, Senior Vice President of Finance, to Chief Accounting Officer, and Adam Brown, Senior Vice President of Investor Relations, to Senior Vice President of Investor Relations and Financial Planning & Analysis.
Apervita hires health IT veteran Rick Howard as Chief Product Officer. In his role, Rick will oversee product vision, innovation, design, and delivery of Apervita’s digital platform, which enables digital quality measurement, clinical intelligence, as well as value-based contract monitoring and performance measurement.
Conversion Labs, Inc. appoints Roberto Simon to its board of directors and as the chair of its audit committee. Following his appointment, the board now has eight members, with six serving as independent directors. Mr. Simon currently serves as CFO of WEX (NYSE: WEX), a $6+ billion fintech services provider.
PRA Health Sciences, Inc. appoints senior FDA official Isaac Rodriguez-Chavez, Ph.D., MHS, MS, as Senior Vice President, Scientific and Clinical Affairs. He will lead the company’s Global Center of Excellence for Decentralized Clinical Trial (DCT) Strategy. Dr. Rodriguez-Chavez’s responsibilities will involve the continued growth and development of PRA’s industry-leading decentralized clinical trial strategy, regulatory framework creation, and clinical trial modernization.
Proprio appoints three global thought leaders to its Medical Advisory Board. Dr. Sigurd Berven, Orthopedic Surgeon and Professor at the University of California, San Francisco, Dr. Charles Fisher, Professor and Head of the Combined Neurosurgical & Orthopedic Spine Program at Vancouver General Hospital and the University of British Columbia, and Dr. Ziya Gokaslan, Professor and Chair of the Department of Neurosurgery at Brown University and Neurosurgeon-in-Chief at Rhode Island Hospital and The Miriam Hospital will apply their globally respected surgical and research expertise to the development of the Proprio navigation platform.
Kaiser Permanente names Andrew Bindman, MD Executive Vice President and Chief Medical Officer. In this role, Dr. Bindman will collaborate with clinical and operational leaders throughout the enterprise to help lead the organization’s efforts to continue improving the high-quality care provided to members and patients throughout Kaiser Permanente. Dr. Bindman will report directly to Kaiser Permanente chairman and CEO Greg A. Adams.
Greenway names Dr. Michael Blackman Chief Medical Officer at Greenway. Dr. Blackman will further support the company’s ambulatory care customers, ensuring providers are equipped with the solutions and services they need to improve patient outcomes and succeed in value-based care.
Suki expands its leadership team with six key hires to support the company’s rapid commercial growth. Tracy Rentz, formerly Vice President of Implementation at Evolent Health, joins Suki as the Vice President of Customer Success and Operations to lead all customer operations, with a particular focus around deploying new Suki customers. Brian Duffy brings over 20 years of sales experience to Suki, joining the team as Director of Sales-East, after having most recently served as Regional Director at Qventus, Inc. Brent Jarkowski will also join Suki’s sales team this November as the Director of Sales-West, bringing over 15 years of experience in strategic relationship management. Brent joins Suki after serving as Senior Client Development Director at Kyyrus. Together, Brian and Brent will head the company’s efforts in building new partnerships across the country. And Josh Margulies, who previously served as the Director of Integrated Brand Marketing for the Jacksonville Jaguars, will serve as Suki’s new Senior Director of Field Marketing.
With its share price falling from more than $66 to less than $24, September was a tumultuous month for Nanox.
On August 25th, the medical imaging start-up closed its initial public offering, having raised $190m from the sale of 10,555,556 ordinary shares at a price of $18 each. Money poured in as investors were sold on Nanox’s cold cathode x-ray source and the subsequent reduction in costs that it would enable, as well as the vendor’s pay-per-scan pricing model that would let the company access new, untapped markets.
A week later the shares were being traded for almost double their opening amount, and by the 11th of September, they had reached a peak of $66.67. This meteoric rise soon came to an end though, as activist short-seller Andrew Left of Citron Research published a report comparing the Israeli start-up to disgraced medical testing firm Theranos and asserted that the company’s shares were worthless.
Other commentators added to Left’s criticism, causing investors to abandon the stock. Class action lawsuits followed, with legal firms hoping to defend shareholders against the imaging company’s alleged fabrication of commercial agreements and of misleading investors.
Nanox defended itself against the Citron attack, insisting that the allegations in the report are ‘completely without merit’, but the extra scrutiny and threat of legal repercussions have left the share price continuing to plummet, falling to $23.52 at month’s end.
– New business and payment models could capture demand from new customers in untapped and emerging markets
– Vendors should be reactive. A successful launch of Nanox’s X-ray system could channel more focus and resources on the portfolio of low-end X-ray systems
– Once established, recurring services are hard to displace
– However, brand loyalty and hard-earned reputations aren’t easily forgotten
– Potential for disruptive technology to expand access to medical imaging and provide affordable X-ray digital solutions, delivering a significant and rapid overall market expansion
– New customer bases could have less expertise and a lack of trained professionals – ease of use becomes a critical feature
– Where X-ray system price is a battleground, and a fundamental factor driving purchasing decisions, Nanox’s proposed ecosystem offers revenue-generating opportunities
The Signify View
Assessing the viability and long-term potential of any business is a dangerous game, doubly so if it depends on a closely guarded game-changing technological innovation as is the case with Nanox. Fortunes are won and lost on a daily basis by investors, speculators, and gamblers trying to get in on the ground floor of the next ground-breaking company after being convinced by slick presentations and thorough prospectuses.
There is likely merit in some of the arguments being put forward by those on either side of the Nanox debate. For example, the lack of peer-reviewed journal articles about new technology is questionable. But, the skepticism around the feasibility of Nanox’s technology seems to ignore that research into cold-cathode x-ray generation, the cornerstone of Nanox’s offering has been ongoing for numerous years, and isn’t as out of the blue as the naysayers may suggest.
Regardless of these and other specifics in the ongoing fracas between short-sellers, Nanox, investors, and lawyers, all of whom have their own agendas, the voracity with which the stocks were initially purchased shows the keen appetite investors have for a company that would bring disruption to the X-ray systems market.
When delving into Signify Research’s data on this market, it is easy to see why. Across many developed and mature regions, the market has become relatively stable. It is one of replacement and renewal rather than selling to new customers and increasing the accessibility of X-ray imaging. Developed markets do continue to drive growth for X-ray manufacturers to some extent, particularly as a result of digitalization and favored reimbursement for digital X-ray imaging. However, by and large, the market remains broadly flat, with a CAGR of just 2.7% forecast for the period 2018-2023.
Figure 1: While there are some growth areas, the X-ray market as a whole is very stable
Nanox has strong ambitions to outperform this underwhelming outlook by utilizing its unique and more affordable technology to offer a relatively feature-rich system, dubbed the Arc, at a far lower price than existing digital X-ray systems. Competing on price is only one part of the equation, however.
After all, there are countries where, despite their economies of scale, the multi-national market leaders in medical imaging are unable to compete with domestic manufacturers, which are able to produce X-ray systems locally, with lower overheads, and no importation costs. Globally, there are also a large number of smaller imaging vendors, which have limited, yet low-cost offerings at the value end of the market, with this increased competition driving down average selling prices.
To differentiate itself further, Nanox also plans to launch with a completely new business model. Instead of traditional transactional sales, which see providers simply purchase and pay the full cost of the imaging system in one installment, use the system for the entire shelf life of the product and then replace with an equivalent model, Nanox plans to retain ownership of its machines, but charge providers to use them on a pay-per-scan basis.
There are some regions and some situations where legislation and other factors make this model unfeasible, so Nanox will also make its products available to purchase outright, as well as licensing its technology to other firms. However, the start-up’s focus is on offering medical imaging as a service.
The company says that this shift from a CapEx to a managed service approach means that instead of competing with established vendors over market share, it will be able to expand the total market, enabling access to imaging systems in settings where they have been hitherto absent, with urgent care units, outpatient clinics, and nursing homes being suggested as targets.
According to the Nanox investor’s prospectus, current contracts already secured (although the legitimacy of these deals is one of the issues raised by the short-sellers) feature a $40 per scan cost, of which Nanox receives $14 – although the exact figure varies depending on regional economics. The contracts feature a minimum service fee equivalent to seven scans a day, although the target is somewhat higher, with each machine expected to be used to produce 20 scans a day, for 23 days a month.
If Nanox’s order book is as valid as the company insists, and it already has deals for 5,150 units in place, each system will consequently be bringing in a minimum of $27,048 dollars per year for a minimum total revenue of $139m. If the systems are used 20 times a day as Nanox hopes, that means almost $400m in sticky recurring revenues annually. To put that in perspective, one of the market leaders for X-ray imaging systems in 2018 was Siemens Healthineers, which turned over almost $2.8bn across its general radiography, fluoroscopy, mammography, mobile, angiography, and CT imaging divisions.
With an order book that is, on the face of it, this healthy, there have been questions as to why Nanox went public at all, but the listing may be required for this business model to work. The Israeli vendor says that the vast majority of the investment will be sunk into producing the Nanox scanners, and the associated manufacturing capacity. This is necessary because unlike other imaging companies selling systems on a CapEx basis, Nanox will receive nothing for delivering scanners to customers. Revenue is generated later as the systems are used.
This means that the company is effectively fronting the initial cost of the systems, so needs to get as many units installed and being used as quickly as possible to recoup its initial costs. Unlike other vendors, it cannot rely on sales of a first tranche to fund the second and so on, in its new managed service model, it is better to mass produce everything at once.
Open to exposure
There is, however, nothing to stop other, established players from switching to a similar model. This should be of concern to Nanox, after all, Siemens Healthineers or GE Healthcare already have the manufacturing capacity and capital ready to offer products in a similar way.
And of course, Nanox, shouldn’t underestimate the difficulty of disrupting a long-established market. Despite ample funding and solid products, other companies are still struggling to make an impact in other markets. For example, Butterfly Network, a vendor offering an affordable handheld ultrasound solution, has a valuation of over $1 billion and has received more than $350m in funding.
In 2019, the company turned over $28m, enough to make it the market leader in the nascent handheld category, but in a global ultrasound market worth almost $7bn, at present, it is little more than a drop in the ocean.
Nanox hopes that its own new business model would be disruptive by opening up the market to a far greater range of customers than are currently served. A nursing home, for example, might not be able or willing to allocate the cost of a CT machine from a single year’s budget, but spreading that cost as the scanner is used, and particularly if that cost is passed on to patients at a time of use, on-site imaging suddenly becomes a far more feasible proposition.
What’s more, if a company was able to increase its product’s user base there is a strong possibility for upselling additional services, software, and tools. These could be things like AI modules that increase workflow efficiency, or, especially pertinent given the pricing model could allow machines to be installed in new settings that lack on-site expertise, tools that aid clinical decision making.
Beyond that, there is also ample scope for an imaging vendor to entice a customer into its ecosystem with a scanner that has no cost at the point of delivery, before getting it to commit to its own PACS and other IT systems. Being able to fully exploit these new customers relies, in the first instance, on being able to get a foot in the door. That is why an imaging service model could be so beneficial, even if the returns on the scans themselves aren’t especially lucrative.
While adopting a new business model and securing revenue from add-ons and upselling would help established vendors countenance the price differential Nanox proposes, if we are to take the start-up at its word, addressing its feature set might be another matter entirely.
As well as just providing imaging hardware, Nanox is offering a service that, at face value, is more complete. The Arc automatically uploads all imaging data to its cloud SaaS platform. This platform would initially use AI systems to ‘provide first response and decision assistive information’ before radiologists could provide final diagnoses that could then be shared with hospitals in real-time.
Figure 2: With teleradiology read volumes increasing, it makes sense that the necessary hardware comes baked into the Arc
There is currently limited information available about the exact nature of the so-called Nanox.CLOUD and its integration with the Arc, although several assumptions can be made:
– Firstly, although built-in connectivity is being touted as a feature with clinical benefits, its inclusion is as likely to be a necessity as a design choice, given that Nanox presumably needs to be able to communicate with the systems in order to find out scan volumes and bill accordingly. Or, more drastically, render the system inoperable if people don’t keep up with payments.
– Another assumption that can be made is that the full suite of tools wouldn’t be included in the basic pay-per-scan fee. Signify’s Teleradiology World – 2020 report found that in 2020, the average revenue per read for a teleradiology platform is, in North America for example, $24.40. As such, teleradiology services would only be able to be offered at an additional cost, creating another revenue stream for Nanox.
– Another sticking point could also be Nanox’s promise to enable the integration of its cloud into existing medical systems, via APIs. While well and good in theory, the competitiveness, complexity, and proprietary nature of many medical imaging workflows, combined with the fact that many vendors have absolutely no incentive to make integration easy for the newcomer, mean that in practice, it is likely to either be a prohibitively expensive, or frustratingly limited offering. This is one area where established vendors, which already offer comprehensive medical imaging packages, have a distinct advantage.
Back down to Earth
The short positions promoted by commentators including Citron Research and Muddy Waters Research postulate that the Nanox.ARC scanner isn’t real. There are some legitimate questions, but running through their papers is also an attitude that Nanox’s claims are simply implausible, whether that is because it has an R&D budget a fraction of the size of GE, or because anonymous radiologists unrelated to the company haven’t seen anything like it before.
It is worth remembering, though, that these short sellers will benefit financially if Nanox slumps. Nanox conversely, is obviously financially incentivized to promote its technology and its potential, and it wouldn’t be the first company, to promote the limited fruits of its start-up labor in a flattering light.
As so often happens in these he said, she said situations, the truth could well lie somewhere between the two extremes. Even in this instance, even if Nanox fails to deliver on some of its more impressive promises, the fact is, it has suggested bringing a whole new customer base into play and laid out a strategy for selling to them.
With that being the case, for a big vendor the issue of whether Nanox is legitimate almost becomes moot, their focus should be what these other customers require, how to get these customers into their product ecosystems, and what add-on products, and additional services they can feasibly sell them at a later date.
If nothing else, the entire Nanox furor shows that to achieve growth in mature markets, a vendor’s innovation needs to extend beyond its products.
About Alan Stoddart
Alan Stoddart is the Editor at Signify Research, a UK-based market research firm focusing on health IT, digital health, and medical imaging. Alan joined Signify Research in 2020, using his editorial expertise to lead on the company’s insight and analysis services.
– How the top US acute EHR vendors, namely Cerner, Epic, Allscripts, and MEDITECH (+85% share of US acute market in terms of revenues), have progressed on international expansion.
As highlighted below, there is a significant variance amongst the big four in terms of revenue and share of business outside the US. Cerner has by far the highest revenue at more than $650M in 2019, representing 12% of its business. Whilst MEDITECH has considerably lower revenue than Cerner, its international revenue is broadly similar to a share of its total revenue.
By contrast, Allscripts and MEDITECH each has international business that is comparable in terms of revenues, but as a share of overall revenues, international is much less important for Allscripts.
Allscripts’ international revenue was lower than Epic, Cerner, and Meditech in 2018, however, its growth in 2019 enabled it to overtake MEDITECH and become the third largest of the four vendors in 2019.
Cerner’s international revenues fell marginally as a proportion of its total business in 2019 (11.5%, down from 11.9% in 2018), although revenues grew in absolute terms by 3%. This growth was aided by success in Europe, particularly in the UK and Nordics where it won new contracts. Cerner’s overall revenue suffered a 3% decline in 1H 2020 (versus 1H 2019). Despite the impact of COVID-19, its international business witnessed marginal revenue growth (+1%) and rose as a share of its overall business (11.9%) during this period.
Cerner received a significant boost to its international business in 2015 when it acquired Siemens’ EHR business. This provided it with a broad footprint of deployments in DACH (Germany, Austria, Switzerland), Benelux, France, Norway, and Spain. Since this acquisition, the challenge for Cerner had been to migrate the customer base to Millennium. However, this has not happened to date, particularly in Germany and Spain.
Tough market conditions, especially in Germany which already had a highly competitive acute EHR market, was another factor impacting the market growth. The above challenges faced by Cerner were key drivers behind the deal to sell parts of Cerner’s Healthcare IT portfolio in Germany and Spain to CompuGroup Medical (CGM). Cerner will continue to maintain a presence in Spain and German acute markets via its i.s.h.med solution (originally contracted to SAP/Siemens), which was not included in the CGM agreement. i.s.h.med has also provided Cerner a footprint in several other European, African, and Asian countries such as Russia and South Africa.
In other European countries where Cerner has a Millennium footprint it has had more success, and the additional product support and development costs have been less.
Cerner has a substantial UK presence, in part owing to its legacy relationship with BT and the subsequent contracts given out under the largely failed NPfIT program. These customers do use Millennium and the company has grown this business in recent years. To date, Cerner has an installed base of 26 trusts in the UK, up from 22 in 2019, and has had success upscaling these contracts to include products such as HealtheIntent. It has also grown the number of acute trusts served. For example, in 2018 it won contracts with The Countess of Chester Hospital National Health Service Foundation Trust, previously using MEDITECH, and Sandwell and West Birmingham Hospitals. In 1Q 2020, Cerner was selected by two NHS Foundations Trusts (Ashford and St Peter’s Hospital and Royal Surrey) to implement a shared Millennium EHR system, which should support a more coordinated care approach between the two organizations.
Elsewhere in Europe, Cerner expanded its Nordic business recently with large contracts in Region Skäne and Västra Götalandsregionen (both in Sweden) during 2018 and 2019. Cerner was chosen as the preferred EMR supplier for Central Finland (four of 19 sote-areas) and will have the opportunity to expand the contract to other surrounding regions in the mid-long term. However, it lost its Norwegian footprint to Epic when it chose not to bid when the Helse Midt-Norge (Central region) contract was renewed in 2019.
The company has also seen success in the Middle East, particularly in the UAE, Qatar, and Saudi Arabia. However, growth has been more subdued over recent years. In the UAE, it has large contracts with the Ministry of Health and Prevention (MOHAP) and Abu Dhabi department of health (HAAD). Whilst Cerner already has a significant footprint in Saudi, e.g. King Faisal Hospital, the country is still relatively untapped in terms of deployment of digital solutions and offers Cerner a good future growth opportunity.
In Asia Cerner has been successful in Australia, winning state/territory-wide EHR contracts in both Queensland and New South Wales (the only vendor to win two state/territory-wide contracts), and also had success in other states/territories where procurement is decentralized. Cerner was aiming to add a third centralized Australian contract to its customer base, namely ACT Health (Capital Territory), but was unsuccessful in a head-to-head with Epic, which was selected as the chosen partner in July 2020. Cerner aims to push its PHM solution (HealtheIntent) through its existing state-level contracts where it already has a presence with Millennium.
Most of Cerner’s non-US business in the Americas is in Canada where approximately 100 hospitals are estimated to be using its solution. Here it faces competition from the other leading US vendors such as MEDITECH, Epic, Allscripts, and also local vendor Telus.
In summary, Cerner has broadly made a success of its international business. It tops the market share table in several of its international geographies and it has done this while broadly maintaining the margins achieved with its US business. However, Cerner’s divestiture of the legacy Siemens business in Germany/Spain, and withdrawal from Norway (Central region), will reduce the size of its European business. Cerner also faces an increasing threat from EMEA competitor Dedalus, whose recent acquisitions of Agfa Health’s EHR and integrated care business, and DXC’s healthcare provider business (deal to close in March 2021), could impact Cerner’s position as acute EHR market leader in EMEA moving forwards.
Allscripts’ international revenues witnessed a substantial rise in real terms (up by 34% versus 2018) and as a share of overall business in 2019. This was partly due to a strong performance in the UK with existing customer sales, and new contract wins in New Zealand, Qatar, Philippines, and Saudi Arabia. The impact of COVID-19 on Allscripts’ total revenues was comparatively significant (versus Cerner and MEDITECH), with declines of 9% and 6% respectively in 2Q 2020 and 1H 2020. It is estimated that these declines predominantly impacted North American revenues, whereas international revenues suffered to a lesser extent.
Canada had historically been its largest market outside the US accounting for just under a third of its non-US business, however, its share fell by six percentage points from 2018 to 23% in 2019, largely owing to the growth of its business in the UK and Australia, which are estimated to now be broadly similar in size to Canada.
In Canada, it is a top-five player, but lagging someway behind MEDITECH, Cerner, and Epic in terms of hospital installations. Allscripts continues to steadily grow its Canadian business with a focus on selling added functionality/upgrades to long-standing customers in three provinces (Manitoba, Saskatchewan, and New Brunswick). It aims to expand its Canadian coverage by securing the contract with Nova Scotia province in 2H 2020.
Success in EMEA was mainly driven by wins in the UK, which included two Sunrise clinical wrap contracts along with several added-value solutions for existing client systems. In May 2019, Gloucestershire Hospitals NHS Foundation Trust selected Allscripts to provide a clinical wrap around InterSystems’ PAS. This was rolled out to the entire Trusts’ inpatient wards in March 2020 and represented the fifth clinical wrap around another vendor’s PAS in the UK. In the UK it serves 18 acute trusts (only Cerner, DXC, and SystemC are estimated to serve more).
Much of the company’s UK footprint was built from its acquisition of Oasis Medical Solutions six years ago. However, it has slowly built on this foundation adding new acute trust customers and upgrading many from the legacy Oasis PAS solution to Sunrise and other Allscripts’ solutions such as dbMotion – although perhaps at a slower rate than hoped. Besides the UK and Italy (where it has one Sunrise contract) Allscripts does not have immediate plans for Sunrise expansion in mainland Europe. However, countries that are attempting to implement integrated data-sharing programs (e.g. France, Germany, and Italy), offer Allscripts potential markets for its dbMotion solution.
Allscripts also achieved growth in the Middle East, fuelled by a contract win in March 2020 with Qatar’s Alfardan Medical / Northwestern Medicine for Sunrise. Allscripts has been working on opportunities across Saudi Arabia, UAE, Oman, Qatar, and Kuwait, with different strategies for each country. For example, Oman has a relatively low level of digital healthcare maturity and is being targeted with EMR solutions, whereas relatively mature health markets (e.g. UAE and Qatar) are being targeted with PHM/dbMotion.
Its entry into the Oceania market was also largely via acquisition (Core Medical Solutions in 2016). Core Medical Solutions was a leading player in the smaller hospital and private hospital markets in Australia. Allscripts has added to this legacy with a state-wide Sunrise EHR contract in South Australia (although deployment has not been without its challenges). Sunrise has been implemented in Royal Adelaide Hospital, South Australia Health and Medical Research Center, University of Adelaide, and the University of South Australia.
In 4Q 2019 Allscripts added South Australia’s largest regional hospital network, Mt Gambier, to its coverage. It also had success selling its Sunrise solution outside of this state-wide contract (e.g. Gippsland Health Alliance in Victoria in 2018) and in 2019 its footprint expanded into New Zealand.
In terms of its broader Asian strategy, the company recently split its Asian business into two sub-businesses, ASEAN and ANZ, indicating it sees opportunities beyond its existing Singapore footprint in South East Asia. This has been supported by 2019 wins in the Philippines. In less digitally mature countries, the BOSSNet EHR solution it obtained via the Core Medical Solutions acquisition offers a potential route to offering a more entry-level EHR solution compared to Sunrise.
At just 4.0% of revenues in 2019, international remains a relatively niche business for Allscripts. To some extent the company needs to decide where it wants to take this business. Relying on organic growth in the regions it currently serves is unlikely to move the dial far from this 4.0% figure over the next five years. A significant change is likely only via acquisition, something the company has not shied from in the past. However, should it focus on cementing its position in existing markets or expansion into new? Given it is not a top-two vendor in any of its current geographies outside the US, acquisition to cement its position in existing markets would make more sense than further expansion into new geographies.
Historically, there have been two major points of entry into new geography for EHR vendors; either through a partnership to gain expertise and ‘localize’ a solution or through the acquisition of a local vendor (as with Cerner and Allscripts earlier). Both have their challenges, with partnerships often being slow to progress and acquisition resulting in the long-term support, and in some instances a significant burden of a legacy solution (e.g. Cerner is still supporting several legacy Siemens EHR solutions nearly six years after announcing its acquisition plans and most of Allscripts’ UK customers are not using Sunrise).
Examples where vendors have taken on large regional projects without sufficient ‘localization’, have often resulted in projects not meeting expectations and negatively affecting both vendors and providers alike. To some extent, Epic has suffered from this with several of its non-US deployments, in particular in the UK (e.g. Cambridge University Hospitals in 2015) and more recently in Denmark (regional contracts in the Zealand region and Capital Region) and Finland (regional contract in the Apotti Region).
Epic has not made acquisitions to enter its international markets and in all these examples EHR implementations have not met expectations and have either had to be scaled back, delayed, or required a significant amount of remedial action. The main criticism is often not enough ‘localization’ before deployment. That said Epic has had success elsewhere internationally, with less controversy surrounding its deployments in DACH, Netherlands, Middle East, and Singapore. In Canada, it is estimated to be the market leader in terms of revenues and second only to MEDITECH in terms of hospital deployments.
Epic has increased its focus on international expansion in recent years with incremental increases in revenue. However, it needs to improve on implementation/execution or future opportunities may be limited. The fact it was the only vendor to hit the preselection criteria in Norway for the Helse Midt-Norge contract which it won in 1Q 2019 (replacing Cerner) suggests that progress has perhaps been made on this front.
Historically Epic has struggled to win any Australian state/territory-wide deployments where Cerner, Allscripts, and InterSystems have been successful. However, Epic strengthened its position by winning its first state contract in July 2020 – a $151m deal for the Australian Capital Territory (ACT Health). This was also significant due to it being the first time the Capital Territory had centralized contracting.
At 12% of 2019 revenue, MEDITECH had the highest proportion of non-US sales of all the vendors analyzed in this insight. However, the overwhelming majority of this was from Canada, where it is estimated to be the market leader in terms of the number of hospital installations (although in terms of revenues it is smaller than Epic, Cerner, and Allscripts). Of approximately $60M in non-US sales in 2019, nearly $50M is estimated to have been from Canada. Non-US revenue share was down marginally from 13% in 2018 and in absolute revenues (-7%) due to a fall in Canadian revenues (-8%), whereas revenue from other international markets was marginally up (+1%).
In early 2018 MEDITECH announced the release of its cloud-based EHR, Expanse. MEDITECH has since been rolling out its cloud-based EHR to new customers and replacing its legacy hosted Magic solution for existing customers. This will ease some of the costs and time associated with implementing the solution, which should make it more competitive. In addition, the data hosted on the cloud will make it easier to drive interoperability through a Health Information Exchange, further increasing its attractiveness for provider networks.
Implementation delays caused by COVID-19 contributed toward MEDITECH’s total revenue declining by 3% in 2Q 2020 (versus 2Q 2019). However, a strong international performance in 1Q 2020 (estimated revenue up by c.25%) was driven by new Expanse installations in Canada (including Ontario Mental Health Hospital), leading to 1H 2020 revenues rising by almost 10% (versus 1H 2019).
Approximately 2% of MEDITECH’s business comes from outside North America, a trend that has remained relatively unchanged for several years. As with Epic, Cerner and Allscripts, a significant proportion of its non-American business is in other English-speaking countries, such as the UK/Ireland (22 customers in the UK and 3 in Ireland – mainly public/private sector hospitals), South Africa (24 hospitals) and Australia (72 private hospitals). In the UK it is a second-tier vendor providing EHR solutions to a small number of NHS trusts (low double-digit). Despite a concerted push into the UK, with the acquisition of Centennial (its UK distributor and system integrator) and the official formation of MEDITECH UK in 2018, the number of trusts served decreased with Cerner taking Chester NHS Trust from MEDITECH in 2018.
The company has had considerable success in Africa, selling solutions in 12 countries including Botswana, Namibia, South Africa, Kenya, Nigeria, and Uganda. In September 2019, it partnered with Aga Khan University for a new 2020 deployment of Expanse in South African and Kenya, and subsequent deployment in Pakistan. Contracts in Kuwait and the UAE result in the whole MEA region accounting for a sizable share of its non-North American business.
MEDITECH’s international business mirrors its US business to some extent. It has one of the largest installed bases of hospitals worldwide, but predominantly small hospitals, and often in countries where spend per bed is low; it is also typically not upselling beyond core EHR, meaning that its international revenues, particularly when Canada is excluded, remain small.
In Signify Research’s latest global EHR analysis, it was estimated that the US accounted for nearly two-thirds of global EHR sales in 2019, so for these four vendors it must remain the key priority. However, the US is forecast to be one of the slowest growing EHR markets over the next five years as it approaches saturation, particularly for core-EHR products in the acute market. Further, the acute market in the US has now broadly consolidated around these four vendors meaning opportunities for gains in share through replacement is increasingly rare – the long tail has gone.
The geographic expansion offers a potential avenue to drive growth. However, it is not easy and there are plenty of pitfalls. Localizing solutions, acquiring local vendors, displacing local incumbents, aligning products to match government requirements and projects, and putting in place local implementation, project management, and support teams all require significant time and investment. Because of this, the global market remains highly fragmented and market share change is slow. However, for the big four discussed in this insight, ignoring the international opportunity will significantly limit long-term growth; so despite slow and sometimes painful progress, we expect it to remain a priority.
About Arun Gill, Senior Analyst at Signify View
Arun Gil is a Senior Market Analyst at Signify Research, a UK-based market research firm focusing on health IT, digital health, and medical imaging. Arun joined Signify Research in 2019 as part of the Digital Health team focusing on EHR/EMR, integrated care technology, and telehealth. He brings with him 10 years’ experience as a Senior Market Analyst covering the consumer tech and imaging industry with Futuresource Consulting and NetGrowth Consultants.
– Siemens Healthineers and Varian Medical announce a $16.4B deal in an all-cash transaction on 2nd August 2020.
– Deal expected to close in 1H 2021.
– Varian Medical will maintain its brand name and operate “independently”
– Siemens AG will drop holding in Siemens Healthineers from 85% to 72% as part of the transaction.
News of the deal between Siemens Healthineers and Varian Medical will have caught many industry onlookers off guard on Sunday evening. Flotation of the Healthineers business segment on the German stock market raised a few eyebrows back in 2017, but with Siemens AG retaining 85% of the stock, many observers postulated little change to the fortunes of the well-known business; an unwieldy technical hardware leader facing an uphill battle in an increasingly digital market.
However, the Varian deal has just made it very clear that Siemens Healthineers has emerged from the IPO with big ambitions and firepower to match. So, what does this mean for the future?
Three benefits of the deal are clear at first glance. Firstly, Siemens Healthineers will be adding an additional mature product set to its already strong modality hardware line-up. Radiation Therapy hardware (linear accelerators, or linac), is the lion’s share of Varian’s business, for which it is market leader holding over 55% of the global installed base in 2019. Combining this with Siemens’ extensive business in diagnostic imaging and diagnostics will create a product line-up that no major peer can today match. It also opens up opportunities for providing “end-to-end” oncology solutions (imaging, diagnostics, and therapy) under one vendor, a strong play in a market where health providers are increasingly looking to limit supply chain complexity and explore long-term managed service deals with fewer vendors.
Secondly, Varian is operating in a relatively exclusive market, with its only main competition coming from market peers Elekta and Accuray Inc. Demand for linacs has been consistently improving in recent years, with Varian suggesting only two-thirds of the Total Addressable Market (TAM) for Radiation Therapy has been catered for so far. The acquisition, therefore, opens a new growth market for Siemens Healthineers to offset the gradual slowing demand for its advanced imaging modality (MRI, CT) business, a more competitive and mature segment. The adoption of Radiation Therapy in emerging markets such as China and India is also well behind advanced imaging modalities, offering new greenfield opportunities near term, a rarity in most of Siemens Healthineers’ core markets.
Thirdly, Varian has grown to a size where progressing to the next level of growth will require substantial investment in operations and new market channels. Revenue growth over the last five years has been patchy, though gross margin remains strong for this sector. If Siemens can leverage its far larger operational and sales network and apply it to Varian’s product segments, none of Varian’s current main competitors will have the resources to compete, unless acquired by another major healthcare technology vendor.
The Digital Gem
While the Radiation Therapy hardware business has gained the most attention for its potential impact on Siemens Healthineers’ business, Varian’s software business is arguably its most valuable jewel, hitting almost $600m and 18% YoY growth in FY19.
Many healthcare providers have become increasingly beleaguered by the challenges of digitalization today, especially in terms of complex integration of diagnostic and clinical applications across the healthcare system. This frustration is especially common in Oncology, which sits at the convergence of major departmental and enterprise IT systems, including the EMR, laboratory, radiology, and surgical segments.
Changing models of care provision towards multidisciplinary collaboration for diagnosis and care have only intensified focus on fixing this issue, with some preferring single-vendor offerings for major clinical or diagnostic departments. The Varian software suite is one of the few premium full-featured oncology IT portfolios available today, competing mostly against main rival Elekta, generalist oncology information system modules from EMR vendors (few of which have the same capability) and a host of smaller standalone specialist IT vendors.
For Siemens Healthineers, the Varian software asset is a great fit. Siemens has for some time been gradually changing direction in its digital strategy, away from large enterprise data management segments towards more targeted diagnostic and operational products. This process began with the sale of its EMR business to Cerner for $1.3B back in 2015, with notably reduced marketing focus and bidding or deal activity on big imaging management deals (PACS, VNA etc.) in North America in recent years.
Instead, Siemens Healthineers has channeled its digital efforts on three main areas where it has specialist capabilities: advanced visualization and access to artificial intelligence for image analysis; digitalization of advanced imaging hardware modalities, including driving efficiency for fleet management and radiology operations; and lab diagnostics automation. While still early in this transformation, this approach is tapping into the main challenges facing most healthcare providers today; improving clinical outcomes at a net neutral or reduced cost, better managing and reducing Total Cost of Ownership (TCO), and implementing autonomous technology to augment clinical and diagnostic practice.
Assuming integration with Siemens’ broader portfolio is not too bumpy, it is already clear how the different software assets of the Varian business sit well with Siemens’ digital strategy. The Aria Oncology Information System platform will provide an entry point for Siemens to build on clinical outcome improvement in Oncology (along with Noona/360 Oncology) while also integrating diagnostic content from the Siemens syngo imaging and AI-radiology applications. Further, with growing attention on operational software to support modality fleet services and radiology operations, Siemens could translate this business into RT linac fleet management, an area currently underserved.
With no competing vendor today able to match this capability in Oncology IT, the potential long-term benefits for Siemens’ digital strategy with Varian far outweigh the risks of integration.
From Morph Suits to Moon-shots
As alluded to in our introduction, perhaps most intriguing is the bullish signal Siemens Healthineers has made to its customers and the wider market about its future.
The Healthineers 2025 strategy identified three clear stages of transformation, with “reinforcing the core portfolio” the key aspect of the 2017-2019 post IPO. In the second phase “upgrading” the business focused on pushing up growth targets and earnings per share across all segments while adding capabilities in allied markets.
Judged against the criteria for the “upgrading” phase, the Varian deal has ticked all the boxes, perhaps clarifying why Siemens was willing to pay a premium:
The scale of the deal has also reinforced that the gradual untethering of Siemens Healthineers from its corporate parent Siemens AG is bearing fruit, both in terms of flexibility to deal-make and the ability to use the financial firepower of its majority shareholder for competitive gain.
The deal, once completed in 1H 2021, also now puts Siemens Healthineers in an exclusive club of medical technology companies with annual revenues above $20B, with a potential position as the third-largest public firm globally (based on 2019 revenues, behind Medtronic and Johnson and Johnson).
It is therefore hard to argue that the Varian acquisition can be viewed as anything but positive for Siemens Healthineers. Given the current impact of the COVID-19 pandemic and expected challenging economic legacy, the growth potential of Varian will help to smooth the expected mid-term dip in some core business over the next few years.
Yet it is the intention and message that Siemens Healthineers is sending with the Varian acquisition that has is perhaps most impressive; despite the turmoil and challenges facing markets today, it fundamentally believes in its strategy to reinvent its healthcare business and target precision medicine long term.
Its major competitors should sit up and take note; Siemens Healthineers is fast re-establishing itself as a leading force within healthcare technology. The morph suits of the “Healthineers” brand launch was just one small step on this journey; the Varian acquisition is going to be one great leap.
About Steve Holloway
Steve Holloway is the Director at Signify Research, an independent supplier of market intelligence and consultancy to the global healthcare technology industry. Steve has 9 years of experience in healthcare technology market intelligence, having served as Senior Analyst at InMedica (part of IMS Research) and Associate Director for IHS Inc.’s Healthcare Technology practice. Steve’s areas of expertise include healthcare IT and medical Imaging.