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    Top30

    4. Royal Philips

    ...

    Related CONTENT
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    07.26.18
    $16.3 Billion ($21.3B total)

    KEY EXECUTIVES:
    Frans van Houten, CEO and Chairman of the Board
    Egbert van Acht, Exec. VP, Personal Health Businesses
    Sophie Bechu, Exec. VP, Chief of Operations
    Abhijit Bhattacharya, Exec. VP and CFO
    Rob Cascella, Exec. VP, Diagnosis & Treatment Businesses
    Marnix van Ginneken, Exec. VP, Chief Legal Officer
    Andy Ho, Exec. VP, Greater China Market
    Henk de Jong, Exec. VP, Chief of International Markets (except Greater China & North America)
    Ronald de Jong, Exec. VP, Chief Human Resources Officer and Chairman of the Philips Foundation
    Carla Kriwet, Exec. VP, Connected Care & Health Informatics Businesses
    Vitor Rocha, Exec. VP, North American Market
    Jeroen Tas, Exec. VP, Chief Innovation and Strategy Officer

    NO. OF EMPLOYEES: 73,951

    GLOBAL HEADQUARTERS: Amsterdam, the Netherlands

    Without a doubt, there’s a major trend in the medical device space (and within its supply chain as well) that has companies buying other companies to grow their product portfolio, enter new markets, and expand capabilities. Alongside that, however, on a smaller scale (but no less significant) is another trend where a number of major firms are putting forth effort to target strategic industries and shed any businesses and units that don’t fit into that vision. In 2016, the industry saw Danaher absolve itself of Fortive, which represented the firm’s professional instrumentation and industrial technologies businesses. A year earlier, Baxter was split to see Baxalta, a pharmaceutical-focused entity, emerge as an independent company. In more recent news, GE has announced it will spin out its Healthcare business to become a standalone firm. Philips decided it would venture down a similar path.

    Philips has been transitioning to be more focused exclusively as a global provider of medical technology since it made the announcement in 2014. It’s since spun out the lighting unit and by the end of 2017, was almost entirely focused on healthcare devices. The remaining exceptions live within the Personal Health segment. The non-health tech segments include its Personal Care unit, which offers male grooming and beauty products, and Domestic Appliances, which consists of kitchen appliances, coffee, air, garment care, and floor care. The remainder of Philips is dedicated to the medical device industry. Whether the company will move the two remaining non-medical units (which still account for a fair share of the firm’s net sales) in the coming years remains to be seen.

    As a result of the company’s strategic efforts, Philips announced in March 2017 that the firm’s sector classification had been changed within the STOXX Europe 600 Index from Industrial Goods & Services to Health Care. “The STOXX sector reclassification to Health Care underlines the significant steps that we have taken to transform Philips into a focused leader in health technology,” said Frans van Houten, CEO of Royal Philips. “2016 was a defining year in our transformation, and we have seen the results of our strategic focus reflected in our performance and the positive response from our stakeholders, including our employees, customers, and shareholders. This reclassification will further facilitate the comparison with sector peers and support the investment community to value Philips going forward.”

    As mentioned previously, the major move to refocus its attention on healthcare required Philips to cut ties with the lighting segment, which was almost completed by the end of the 2017 fiscal year. In fact, the company’s shareholding in Philips Lighting was decreased to 29.01 percent (compared to its 71.23 percent stake following the listing of Philips Lighting on Euronext in Amsterdam in May 2016). In addition, in June 2017, Philips further separated itself from the lighting industry as it completed the sale of an 80.1 percent interest in Lumileds, a supplier of LED components and automotive lighting, to Apollo Global Management LLC. The sale, coupled with the split from Philips Lighting (now renamed Signify), empowered the company to truly focus its attention on the medtech space. A review of the firm’s acquisitions in 2017 to expand its healthcare technology-related capabilities reveals that the company didn’t take long to get started on that focus.


    ANALYST INSIGHTS: For the most part, Philips has now made the transition from a multi-industry conglomerate to a focused healthcare company. To emphasize its focus on medical and life sciences, Philips has announced it’s moving its North American HQ to Cambridge. It’s an expensive investment that is also a statement that Philips is “here to stay” across the healthcare spectrum. Watch for Philips to continue to seek to deliver across the boundaries of both consumer and acute healthcare in a meaningful way.

    —Dave Sheppard, Co-Founder and Principal, MedWorld Advisors



    Most notable during the 2017 fiscal year was the purchase of The Spectranetics Corporation. Announced at the end of June and completed by the second week of August, the $2.16 billion (1.9 billion euro) price tag reflected the 27 percent premium Philips offered to shareholders for the vascular intervention and lead management business. Spectranetics was positioned within Philips’ Image-Guided Therapy Business Group, which serves a market valued at over 6 billion euro.

    “The completion of this acquisition will accelerate the realization of our strategic expansion into therapy devices. The combination of Spectranetics’ highly competitive product range and our portfolio of interventional imaging systems, devices, software, and services will deliver enhanced care for patients by enabling clinicians to decide, guide, treat, and confirm the appropriate cardiac and peripheral vascular treatment,” van Houten said in a company statement.

    That “highly competitive product range” includes catheters to treat coronary and peripheral artery disease, and remove implanted pacemaker and implantable cardioverter defibrillator leads. One of the portfolio’s leading products was the Stellarex drug-coated balloon, which provides peripheral artery disease treatment and is backed by robust clinical evidence. At the time the acquisition closed, Stellarex had a CE mark and had also gained PMA approval from the U.S. Food and Drug Administration (FDA).

    While representing a substantial price tag, the Spectranetics acquisition was just one of several transactions Philips conducted in 2017 in its quest to reshape the company into a focused healthcare technology giant. In March, the organization bought Australian Pharmacy Sleep Services (APSS), a provider of pharmacy sleep testing. The buy was a complementary piece to Philips’ sleep and respiratory care offering. It was also an attractive target as it was believed the company would help accelerate Philips’ home sleep testing offering through the pharmacy channel in Australia. The primary offering of APSS was a sleep apnea program for pharmacies that included screening, home-based sleep studies based on continuous positive airway pressure therapy, training, and services.

    The summer of 2017 heated up for Philips as a result of its strong M&A activity from June through August. The company made an additional three purchases beyond the aforementioned Spectranetics deal and closed the sale of one of its businesses for a stake in the acquiring company. The first buy, announced in June, was Electrical Geodesics Inc. (EGI)—a U.S.-based company that designed, developed, and commercialized a range of non-invasive technologies used to monitor and interpret brain activity—for 32.9 million euro. EGI’s technologies were viewed as logical expansion of Philips’ own similar product portfolio. Combined, the company could use the innovations to address neurological disorders such as stroke, epilepsy, traumatic brain injury, and Parkinson’s disease.

    “In order to improve the treatment for some of the most complicated, life-altering neurological disorders, we need more personalized and adaptive guidance tools to plan each individual patient’s therapeutic options,” said Joe Burnett, business leader, Neuro Diagnostics at Philips. “This acquisition will enable Philips to provide an integrated neurology solution comprising diagnostic imaging and clinical informatics to assess brain anatomy and physiological processes, and EEG mapping tools from EGI to measure electrical brain activity. By fusing these different tools together, we will create a more comprehensive map of the brain, and unlock new computational algorithms which will help to shorten the path to a definitive diagnosis and guide some of the most complex therapeutic strategies.”

    Setting off some fireworks of its own, Philips announced on July 4 that it was acquiring Health & Parenting Ltd., a London-based developer of healthcare and family-related mobile applications for expectant and new parents. The firm’s top app, Pregnancy+, had been downloaded more than 12 million times. Health & Parenting’s apps would join the Philips uGrow digital parenting platform.

    Seeking to enhance its ultrasound business, it was announced in mid-July that TomTec Imaging Systems GmbH would become a part of Philips. TomTec was a provider of intelligent image analysis software, especially for diagnostic ultrasound. The buy would positively impact Philips’ cardiac ultrasound, obstetrics, and gynecology offerings. The TomTec software was being used by more than 20,000 physicians and 600 healthcare facilities around the world.

    At the start of August, Philips announced another transaction that, while technically saw it selling a business, ultimately resulted in the acquisition of a stake in the purchasing company. The Canadian-based Profound Medical Corp. bought Philips’ Magnetic Resonance-Guided High Intensity Focused Ultrasound business in exchange for 7.4  million Profound common shares, approximately 13 percent of the firm’s issued and outstanding common shares. The company’s primary product, TULSA-PRO, combines real-time magnetic resonance imaging with transurethral, robotically-driven therapeutic ultrasound and closed-loop thermal feedback control designed to provide precise ablation of the prostate while simultaneously protecting critical surrounding anatomy from potential side effects.

    Right about the time the United States was feeling the effects of its annual turkey dinner celebration, Philips announced it was a buying a U.S.-based startup. Founded in 2011 with technology licensed from the University of Maryland School of Medicine, Analytical Informatics brought a suite of workflow improvement applications to Philips to enhance the company’s PerformanceBridge portfolio of operational performance improvement tools and services, which addresses the needs of radiology departments.

    “Integrating Analytical Informatics’ software tools and applications into our current offerings will enable us to accelerate the delivery of next-generation technology, software, and services, to bring the power of operational intelligence and decision support to radiology,” said Sham Sokka, general manager of Radiology Solutions at Philips.

    Finally, rounding out the 2017 fiscal, the company brought aboard Forcare, an innovator in open-standards-based interoperability software solutions for fast and flawless data flows between medical systems and information sources at the departmental and enterprise levels, as well as health information exchanges across health systems. The technology addresses the needs of healthcare systems that are being consolidated to enable seamless enterprise integration.

    “We have a leading position in building bridges between information systems, so that care providers can instantly share clinical results, images, and letters,” said Harm-Jan Wessels, CEO of Forcare.

    Bringing these new capabilities into Philips will only help the firm better serve the strategic markets it has selected to focus on. All of the acquired firms join a company that is well established with a solid financial record. In 2017, Philips boasted total company sales of 17.8 billion euros, which represented a 4 percent increase over 2016 in comparable sales growth. Pulling out the two non-medical device segments results in 2017 sales of 13.6 billion euros.

    Personal Health is Philips’ largest segment in terms of sales (among the three primary businesses) and home to two medical device units—Health & Wellness and Sleep & Respiratory Care—alongside the two “other” aforementioned units—Personal Care and Domestic Appliances. The segment enjoyed a 3 percent increase in nominal sales growth over 2016, reaching 7.3 billion euros. The successes were primarily driven by an increase in sales in growth geographies (7 percent), but the business saw successes in its digital health and dental products.

    Comprising the Diagnosis & Treatment segment are Diagnostic Imaging, Image-Guided Therapy, and Ultrasound. The unit’s performance was bolstered by the global launch of Azurion, an image-guided therapy platform that enables clinicians to perform a wide range of routine and complex procedures. Further, a strategic alliance with B. Braun to innovate and accelerate growth in ultrasound-guided regional anesthesia and vascular access resulted in the launch of Xperius. The co-branded mobile ultrasound system was developed specifically to support current and future solutions in the market. As a result, the business saw a 3 percent growth in nominal sales over 2016 to achieve 6.9 billion euros.

    The Connected Care & Health Informatics business houses the Patient Care & Monitoring Solutions, Healthcare Informatics, and Population Health Management units. New hospital agreements for data analytics solutions, clinical informatics and services, clinical IT, and patient monitoring capabilities highlighted the sales in this business, but ultimately, the division experienced no sales growth over the prior year, finishing 2017 with 3.2 billion euros in sales.

    Not satisfied with the status quo (as witnessed from the aggressive M&A activity), the company also announced a host of products that will likely be instrumental in its growth going forward.
    Following are several highlighted technologies that could make a splash in the coming years for Philips’ sales figures.

    IntelliSpace Enterprise Edition for Radiology—A comprehensive managed solution for enterprise imaging.

    Technology Maximizer—A cross-modality program designed to boost the clinical capabilities and performance of imaging equipment through proactive upgrades.

    IntelliSpace Portal 10—The latest edition of Philips’ comprehensive, advanced visualization and quantification platform.

    IQon Elite Spectral CT—Provides clinicians with increased diagnostic certainty in every scan.

    eL18-4 transducer—A full solution for small parts imaging, which is used to assess diseases and disorders of small organs, such as breasts, testicles, and thyroid, as well as musculoskeletal injuries like sprains and tears.

    Philips BlueControl wearable light therapy device—Treats mild psoriasis.

    IntelliVue X3—Provides an intuitive smartphone-style operation that quickly and easily enables continuous monitoring during transport for the most critical patients.

    IntelliSite Pathology Solution—A comprehensive digital pathology system designed to meet the challenges of today’s pathology lab.

    ElastQ Imaging—Enables simultaneous imaging of tissue and assessment of its stiffness, which is essential for the diagnosis of various liver conditions.

    IntelliVue Guardian Solution—Designed to aid clinicians in the early detection of subtle signs of patient deterioration in the general care ward.
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