Philips' HealthTech Unit Fuels Q1 Sales Growth
By Jof Enriquez,
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Royal Philips is starting to reap positive results from its strategic pivot into healthcare, with its HealthTech business expanding by 5 percent during the first quarter, helping drive comparable sales growth up 3 percent to €5.5 billion. Continued investments, deal-making, and product launches contributed to the strong performance of the unit, which will be the sole focus for the company after it sells its Lighting business.
All segments of the HealthTech portfolio posted robust growth during the first three months of the year, Philips CEO François A. van Houten said during the company’s earnings call this week.
Connected Care & Health Informatics grew 9 percent, buoyed by double-digit growth in sub-segments Patient Care & Monitoring Solutions, and in high single-digit growth in Health Informatics. Explaining the success of this segment, Van Houten highlighted a partnership with Hitachi Data Systems to introduce a next-generation Vendor Neutral Archive system, a medical imaging solution that runs on Philips’ HealthSuite cloud-based digital platform. He underscored how Philips could offer multi-layered solutions for health systems, citing the company’s recent 15-year, $90 million deal with Marin General Hospital for imaging systems, patient monitoring, and clinical informatics solutions.
Personal Health grew 6 percent, driven by double-digit growth in Health & Wellness, with continued double-digit growth in Oral Healthcare, which was driven by the recent launch of the value-category toothbrush Philips Sonicare Essence in Greater China. In other sub-segments, there was single-digit growth in Personal Care, low-single digit growth in Domestic Appliances, and mid single-digit growth in Sleep and Respiratory Care, which was achieved through the launch of the Philips Dream Family sleep therapy program for obstructive sleep apnea in Europe and in the United States.
Diagnosis & Treatment grew 5 percent, lifted by double-digit growth in orders and sales in the Image-Guided Therapy sub-segment. Van Houten credited synergies from the acquisition of Volcano, which now amounts to about €40 million, one year after the deal closed. He also reports that global CT production and shipment levels are back on track, after backlog has been cleared after remediation efforts in its Cleveland plant.
"Our HealthTech portfolio delivered another strong quarter, with 5 percent comparable sales growth overall, despite anticipated lower royalty income," van Houten said in a statement accompanying first quarter results. "We also achieved significant operational improvements, which were partly offset by ongoing investments in high-growth businesses, such as wearable patient monitoring solutions, digital pathology and health informatics."
The first quarter results included charges of €52 million — of a projected €200-225 million in total costs — related to the planned separation of the Lighting business. While Philips said it will provide an update to its plans "shortly," it's looking "more likely" that the company will opt for an initial public offering (IPO), rather than a private sale of its Lighting business, according to the New York Times. The company also is reportedly mulling a sale of its automotive and LED business, Lumileds.