07.26.18
$5.2 Billion ($6.7B total)
KEY EXECUTIVES:
Hiroyuki Sasa, President and Representative Director
Shiro Hiruta, Outside Director (Chairman of the Board)
Yasuo Takeuchi, Director, VP, and, CFO
Nacho Abia, President and CEO, Olympus Corporation of the Americas
Akihiro Taguchi, Head of Sales & Marketing Group/Medical Business Managing Officer
Katsuyuki Saito, Head of Gastrointestinal and Respiratory Business Unit
Tomohisa Sakurai, Head of General Surgery Business Unit
Minoru Okabe, Head of Urology/Gynecology Business Unit
Georg Schloer, Head of Ear, Nose, and Throat Business Unit
Yoshihito Shimizu, Head of Medical Service Business Unit
NO. OF EMPLOYEES: 34,687 (total)
GLOBAL HEADQUARTERS: Shinjuku-ku, Tokyo, Japan
It is often said the cover-up is worse than the lie itself.
That may be an extreme read of the 2013 Olympus scope infection outbreak, but given findings that have since emerged, it certainly could apply. In July 2017, only a few months after the close of Olympus’ 2017 fiscal year (which ran April 1, 2016 to March 31, 2017), a jury had ordered the company to pay a Seattle hospital $6.6 million in damages tied to the superbug outbreak linked to the firm’s duodenoscope. The jury also indicated the hospital was to pay $1 million to the deceased patient’s family—Richard Bigler’s widow, Theresa Bigler, and Theresa’s four children. The case was the first to go to trial involving the deadly duodenoscope-related infections. More than 25 lawsuits have been filed against Olympus due to the outbreak.
The jury in the Bigler case also indicated it did not find the scope was unsafe as designed—an important win for Olympus. That finding could be in jeopardy though.
According to a January 2018 report in The Washington Post, King County Superior Court Judge Steve Rosen (located in Seattle) said Olympus failed to properly disclose internal emails relevant to the case. The emails, which originated from as far back as 2008, raised safety concerns about a redesigned medical scope, approximately five years prior to the superbug outbreaks. Judge Rosen ordered a new trial for Theresa Bigler’s case.
While Olympus shared the relevant emails with the plaintiffs, they were not translated from Japanese, as required. Within those emails were possible indications the company was aware of potential design issues, even before the scopes entered the market in 2010.
“Olympus robbed the Bigler family of a full and fair trial. They hid the documents and hid the witnesses,” said the plaintiff’s attorney, David Beninger, whose team found the emails after an Olympus executive mentioned hospital tests during the first trial, in the Post’s report. “The family is grateful they will get another chance to hold Olympus accountable.”
ANALYST INSIGHTS: It is often that Japanese healthcare companies that do well in Japan struggle to perform in the U.S. Olympus is an exception to this rule. With strong North American leadership in place, watch Olympus continue steady growth through focus on execution and bolt-on acquisitions.
Also according to the Post article, the emails revealed the fact that Olympus gave a prototype version of the scope to several hospitals and doctors in Europe and the United States for a trial run prior to its market launch in 2010. An unidentified nurse at one of the facilities noted a potential issue with cleaning the tip of the reusable scope. The feedback resulted in further messages among Olympus employees, discussing the potential downside of adding a cleaning brush to the product. Ultimately, the brush was not included at launch; rather, following the superbug outbreak, Olympus issued a safety alert that indicated users should employ a cleaning brush.
With translation of all the emails and details still waiting to be uncovered, it is unclear where these superbug cases will end up. But from what’s already been revealed, the outcome doesn’t look good for Olympus.
Of course, these revelations came after the 2016 discovery that the company had decided against issuing a warning to U.S. hospitals in February 2013 about the scope-related infections. According to a Los Angeles Times report, a senior executive at the Olympus headquarters in Tokyo ordered U.S. managers not to inform American hospitals of infections that had occurred in Dutch, French, and other U.S. facilities. An alert was issued to European customers, but the U.S. hospitals were not alerted until the aforementioned announcement in 2015.
“We are very troubled by the now very clear facts that Olympus in Japan knew of the infection problems with their duodenoscopes long before the outbreaks we saw in America, and chose not to warn physicians,” Dr. Andrew Ross, section chief of gastroenterology at Virginia Mason Medical Center, said in the Los Angeles Times report.
Perhaps seeing the writing on the wall, Olympus issued a voluntary recall of its TJF-Q180V duodenoscope models from U.S. hospitals. It performed a redesign and updated cleaning procedures; the new offering was cleared by the FDA in the same month.
“We have made it a top priority to improve the safety of duodenoscopes and help protect patients from bacterial infections associated with these medical devices,” William Maisel, M.D., M.P.H., deputy director for science and chief scientist in the FDA’s Center for Devices and Radiological Health, said in a Jan. 15 FDA news release announcing the clearance. “The Olympus TJF-Q180V’s new design, as well as the new annual inspection program, is intended to reduce the risk of fluid leakage into the elevator channel, which in turn can reduce patient exposure to bacteria and other potential infections.”
Unfortunately, the effort may not have been enough. In March 2017, in another Times report, it was announced that another infection outbreak may be tied to the redesigned scope. Five patients treated with the revised device all tested positive for the same bacteria. According to the newspaper’s report, Lawrence Muscarella, a medical safety expert in Montgomeryville, Pa., said the outbreak raises questions about whether Olympus’ recall and replacement of the mechanism was enough to keep patients safe. It was still uncertain if the hospital followed the updated cleaning procedures.
The entire debacle casts a significant shadow over Olympus, which saw its net sales figure decline in fiscal 2017, and the situation doesn’t appear to be one that will end soon.
The company posted 748 billion yen in its 2017 fiscal year, down 7 percent over 2016’s 805 billion yen. The figure represents the third lowest sales total in the last 10 years, only surpassing 2013 (which was only 4 billion yen less) and 2014. The company’s annual report did note, however, that if the impacts of foreign exchange influences were excluded, net sales would have risen 2 percent. Apparently, the bad press from the duodenoscopes-related infections have not scared off customers.
The overwhelming majority of the 2017 fiscal year sales resulted from Olympus’ Medical Business, which reported 575.3 billion yen (76.9 percent of total company sales). The remaining businesses—Scientific Solutions (products and services supporting scientific research, pathological diagnoses, and inspections of manufacturing and social infrastructure), Imaging (primarily mirrorless cameras), and Others—accounted for the rest of the sales total, posting a combined 172.8 billion yen.
The Medical Business had previously gone through a reorganization that transformed the company’s portfolio within the business from three divisions—Gastrointestinal/Endoscopes, Endotherapy Devices, and Surgical Devices—into five.
Representing Olympus’ core business, the Gastrointestinal and Respiratory Business Unit is credited with more than 70 percent share of the global gastrointestinal endoscope market, substantially leading competitors such as Fujifilm and Hoya. The division contributed 319.7 billion yen to the company’s total sales (55.6 percent). This performance was driven primarily by double digit sales growth of gastrointestinal endoscope products in China and other regions within Asia/Oceania. Additionally, North America produced double digit growth for endotherapy devices—an Olympus division that enjoys approximately 20 percent of the global market share.
The General Surgery Business Unit encompasses the Surgical Imaging (20 to 25 percent global market share) and Surgical Energy Devices (18 to 20 percent share) divisions. In total, the Unit accounts for 14.1 percent of the firm’s sales total, which translated to 81.3 billion yen in FY17. While sales growth in Surgical Imaging was slower than anticipated, the Energy Devices segment experienced double-digit expansion in principal regions during the 2017 fiscal year.
As its name indicates, the Urology/Gynecology Business is broken down into two segments. The Urology portion has a hold of approximately 30 percent of the global market, and Gynecology sees about 10 percent of the world’s share. At 61.8 billion yen, the business represents 10.7 percent of Olympus’ net 2017 sales. Exceeding the company’s own expectations, sales for the business were driven by strong performance in all regions due to demand for bipolar electrodes for benign prostatic hypertrophy and bladder tumor resection.
Reflecting 2.8 percent of the company’s overall net sales in FY17, the Ear, Nose, and Throat Business Unit posted 16.1 billion yen to the firm’s total. Composing the unit is Laryngology, which holds 50 to 60 percent global market share, and Otolaryngology, which enjoys 10 to 15 percent share. Some of the sales can be attributed to the company’s successful efforts in helping move the community from fiberscopes to videoscopes. Further, the introduction of a 4K camera system bolstered revenue from the unit.
Accounting for the remainder of the Medical Business’ 2017 fiscal year revenue is the Medical Services Business Unit. At 91.2 billion yen, the division accounts for 15.8 percent of Olympus’ overall net sales total. Its primary role is to support the other Medical Business units, accomplished through its approximately 200 medical equipment repair and service sites worldwide.
Seeking to strengthen its position in some of its key treatment areas, Olympus also extended strategic partnerships with other medtech providers. First, in April (actually announced on the first day of the 2017 fiscal year), Olympus and Hitachi renewed their alliance involving endoscopic ultrasound. The agreement was originally with Aloka Co. Ltd. before that firm was acquired by Hitachi. The arrangement pairs the endoscopic knowledge of Olympus with the ultrasound technology of Aloka. The firms will coordinate R&D activities to ensure the systems remain compatible and to maintain high endoscopic ultrasound technology standards.
About six weeks later, Olympus offered an update on its subsidiary’s (Olympus Respiratory America) partnership with VIDA Diagnostics Inc., a provider of precision pulmonary imaging. The alliance involves the treatment of acute and chronic conditions of the lung. The agreement will see both firms incorporate precision informatics into their current, as well as future, diagnostic and therapeutic procedural workflows to manage patients with pulmonary diseases.
KEY EXECUTIVES:
Hiroyuki Sasa, President and Representative Director
Shiro Hiruta, Outside Director (Chairman of the Board)
Yasuo Takeuchi, Director, VP, and, CFO
Nacho Abia, President and CEO, Olympus Corporation of the Americas
Akihiro Taguchi, Head of Sales & Marketing Group/Medical Business Managing Officer
Katsuyuki Saito, Head of Gastrointestinal and Respiratory Business Unit
Tomohisa Sakurai, Head of General Surgery Business Unit
Minoru Okabe, Head of Urology/Gynecology Business Unit
Georg Schloer, Head of Ear, Nose, and Throat Business Unit
Yoshihito Shimizu, Head of Medical Service Business Unit
NO. OF EMPLOYEES: 34,687 (total)
GLOBAL HEADQUARTERS: Shinjuku-ku, Tokyo, Japan
It is often said the cover-up is worse than the lie itself.
That may be an extreme read of the 2013 Olympus scope infection outbreak, but given findings that have since emerged, it certainly could apply. In July 2017, only a few months after the close of Olympus’ 2017 fiscal year (which ran April 1, 2016 to March 31, 2017), a jury had ordered the company to pay a Seattle hospital $6.6 million in damages tied to the superbug outbreak linked to the firm’s duodenoscope. The jury also indicated the hospital was to pay $1 million to the deceased patient’s family—Richard Bigler’s widow, Theresa Bigler, and Theresa’s four children. The case was the first to go to trial involving the deadly duodenoscope-related infections. More than 25 lawsuits have been filed against Olympus due to the outbreak.
The jury in the Bigler case also indicated it did not find the scope was unsafe as designed—an important win for Olympus. That finding could be in jeopardy though.
According to a January 2018 report in The Washington Post, King County Superior Court Judge Steve Rosen (located in Seattle) said Olympus failed to properly disclose internal emails relevant to the case. The emails, which originated from as far back as 2008, raised safety concerns about a redesigned medical scope, approximately five years prior to the superbug outbreaks. Judge Rosen ordered a new trial for Theresa Bigler’s case.
While Olympus shared the relevant emails with the plaintiffs, they were not translated from Japanese, as required. Within those emails were possible indications the company was aware of potential design issues, even before the scopes entered the market in 2010.
“Olympus robbed the Bigler family of a full and fair trial. They hid the documents and hid the witnesses,” said the plaintiff’s attorney, David Beninger, whose team found the emails after an Olympus executive mentioned hospital tests during the first trial, in the Post’s report. “The family is grateful they will get another chance to hold Olympus accountable.”
ANALYST INSIGHTS: It is often that Japanese healthcare companies that do well in Japan struggle to perform in the U.S. Olympus is an exception to this rule. With strong North American leadership in place, watch Olympus continue steady growth through focus on execution and bolt-on acquisitions.
—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors
Also according to the Post article, the emails revealed the fact that Olympus gave a prototype version of the scope to several hospitals and doctors in Europe and the United States for a trial run prior to its market launch in 2010. An unidentified nurse at one of the facilities noted a potential issue with cleaning the tip of the reusable scope. The feedback resulted in further messages among Olympus employees, discussing the potential downside of adding a cleaning brush to the product. Ultimately, the brush was not included at launch; rather, following the superbug outbreak, Olympus issued a safety alert that indicated users should employ a cleaning brush.
With translation of all the emails and details still waiting to be uncovered, it is unclear where these superbug cases will end up. But from what’s already been revealed, the outcome doesn’t look good for Olympus.
Of course, these revelations came after the 2016 discovery that the company had decided against issuing a warning to U.S. hospitals in February 2013 about the scope-related infections. According to a Los Angeles Times report, a senior executive at the Olympus headquarters in Tokyo ordered U.S. managers not to inform American hospitals of infections that had occurred in Dutch, French, and other U.S. facilities. An alert was issued to European customers, but the U.S. hospitals were not alerted until the aforementioned announcement in 2015.
“We are very troubled by the now very clear facts that Olympus in Japan knew of the infection problems with their duodenoscopes long before the outbreaks we saw in America, and chose not to warn physicians,” Dr. Andrew Ross, section chief of gastroenterology at Virginia Mason Medical Center, said in the Los Angeles Times report.
Perhaps seeing the writing on the wall, Olympus issued a voluntary recall of its TJF-Q180V duodenoscope models from U.S. hospitals. It performed a redesign and updated cleaning procedures; the new offering was cleared by the FDA in the same month.
“We have made it a top priority to improve the safety of duodenoscopes and help protect patients from bacterial infections associated with these medical devices,” William Maisel, M.D., M.P.H., deputy director for science and chief scientist in the FDA’s Center for Devices and Radiological Health, said in a Jan. 15 FDA news release announcing the clearance. “The Olympus TJF-Q180V’s new design, as well as the new annual inspection program, is intended to reduce the risk of fluid leakage into the elevator channel, which in turn can reduce patient exposure to bacteria and other potential infections.”
Unfortunately, the effort may not have been enough. In March 2017, in another Times report, it was announced that another infection outbreak may be tied to the redesigned scope. Five patients treated with the revised device all tested positive for the same bacteria. According to the newspaper’s report, Lawrence Muscarella, a medical safety expert in Montgomeryville, Pa., said the outbreak raises questions about whether Olympus’ recall and replacement of the mechanism was enough to keep patients safe. It was still uncertain if the hospital followed the updated cleaning procedures.
The entire debacle casts a significant shadow over Olympus, which saw its net sales figure decline in fiscal 2017, and the situation doesn’t appear to be one that will end soon.
The company posted 748 billion yen in its 2017 fiscal year, down 7 percent over 2016’s 805 billion yen. The figure represents the third lowest sales total in the last 10 years, only surpassing 2013 (which was only 4 billion yen less) and 2014. The company’s annual report did note, however, that if the impacts of foreign exchange influences were excluded, net sales would have risen 2 percent. Apparently, the bad press from the duodenoscopes-related infections have not scared off customers.
The overwhelming majority of the 2017 fiscal year sales resulted from Olympus’ Medical Business, which reported 575.3 billion yen (76.9 percent of total company sales). The remaining businesses—Scientific Solutions (products and services supporting scientific research, pathological diagnoses, and inspections of manufacturing and social infrastructure), Imaging (primarily mirrorless cameras), and Others—accounted for the rest of the sales total, posting a combined 172.8 billion yen.
The Medical Business had previously gone through a reorganization that transformed the company’s portfolio within the business from three divisions—Gastrointestinal/Endoscopes, Endotherapy Devices, and Surgical Devices—into five.
Representing Olympus’ core business, the Gastrointestinal and Respiratory Business Unit is credited with more than 70 percent share of the global gastrointestinal endoscope market, substantially leading competitors such as Fujifilm and Hoya. The division contributed 319.7 billion yen to the company’s total sales (55.6 percent). This performance was driven primarily by double digit sales growth of gastrointestinal endoscope products in China and other regions within Asia/Oceania. Additionally, North America produced double digit growth for endotherapy devices—an Olympus division that enjoys approximately 20 percent of the global market share.
The General Surgery Business Unit encompasses the Surgical Imaging (20 to 25 percent global market share) and Surgical Energy Devices (18 to 20 percent share) divisions. In total, the Unit accounts for 14.1 percent of the firm’s sales total, which translated to 81.3 billion yen in FY17. While sales growth in Surgical Imaging was slower than anticipated, the Energy Devices segment experienced double-digit expansion in principal regions during the 2017 fiscal year.
As its name indicates, the Urology/Gynecology Business is broken down into two segments. The Urology portion has a hold of approximately 30 percent of the global market, and Gynecology sees about 10 percent of the world’s share. At 61.8 billion yen, the business represents 10.7 percent of Olympus’ net 2017 sales. Exceeding the company’s own expectations, sales for the business were driven by strong performance in all regions due to demand for bipolar electrodes for benign prostatic hypertrophy and bladder tumor resection.
Reflecting 2.8 percent of the company’s overall net sales in FY17, the Ear, Nose, and Throat Business Unit posted 16.1 billion yen to the firm’s total. Composing the unit is Laryngology, which holds 50 to 60 percent global market share, and Otolaryngology, which enjoys 10 to 15 percent share. Some of the sales can be attributed to the company’s successful efforts in helping move the community from fiberscopes to videoscopes. Further, the introduction of a 4K camera system bolstered revenue from the unit.
Accounting for the remainder of the Medical Business’ 2017 fiscal year revenue is the Medical Services Business Unit. At 91.2 billion yen, the division accounts for 15.8 percent of Olympus’ overall net sales total. Its primary role is to support the other Medical Business units, accomplished through its approximately 200 medical equipment repair and service sites worldwide.
Seeking to strengthen its position in some of its key treatment areas, Olympus also extended strategic partnerships with other medtech providers. First, in April (actually announced on the first day of the 2017 fiscal year), Olympus and Hitachi renewed their alliance involving endoscopic ultrasound. The agreement was originally with Aloka Co. Ltd. before that firm was acquired by Hitachi. The arrangement pairs the endoscopic knowledge of Olympus with the ultrasound technology of Aloka. The firms will coordinate R&D activities to ensure the systems remain compatible and to maintain high endoscopic ultrasound technology standards.
About six weeks later, Olympus offered an update on its subsidiary’s (Olympus Respiratory America) partnership with VIDA Diagnostics Inc., a provider of precision pulmonary imaging. The alliance involves the treatment of acute and chronic conditions of the lung. The agreement will see both firms incorporate precision informatics into their current, as well as future, diagnostic and therapeutic procedural workflows to manage patients with pulmonary diseases.
