Prior Fiscal: $16.3 Billion
Percentage Change: +4.9%
No. of Employees: 80,495 (total)
Global Headquarters: Amsterdam, The Netherlands
Frans van Houten, CEO and Chairman of the Board
Abhijit Bhattacharya, Exec. VP, CFO
Sophie Bechu, Exec. VP, COO
Jeroen Tas, Exec. VP, Chief Innovation and Strategy Officer
Marnix van Ginneken, Exec. VP, Chief Legal Officer
Vitor Rocha, Exec. VP, Market Leader of Philips North America
Andy Ho, Exec. VP, Market Leader of Philips Greater China
Henk Siebren de Jong, Exec. VP, Chief of International Markets
Rob Cascella, Exec. VP, Chief Business Leader of Precision Diagnostics and jointly responsible for Diagnosis & Treatment
Roy Jakobs, Exec. VP, Chief Business Leader of Personal Health
Carla Kriwet, Exec. VP, Chief Business Leader of Connected Care
Bert van Meurs, Exec. VP, Chief Business Leader of Image Guided Therapy and jointly responsible for Diagnosis & Treatment
They seem to rise out of nowhere, towering above forests of lush green fruit trees or miles of deep blue sea, commanding attention with their blanched skin, blank stares, and perfect postures. They stand tall amid their surroundings, arms outstretched like oversized Christ the Redeemer statues preparing for salvation.
They are mostly silent, save for the faint whoosh of their pulse and despite their size, they move gracefully, sometimes in unison, though they prefer disharmony in large groups.
Thirty-four of these gentle giants rise above Lake Grevelingen in the southwest Netherlands. Long and lanky, they stand 410 feet tall (roughly the size of a 40-story building), extend 366 feet (armspan), and weigh 4,381 tons.
Individually, these sentinels are quite the spectacle. Yet comparable to their peers, they are fairly average—the largest of their kind stands 853 feet tall and boasts a 702-foot wingspan while the smallest are twice the height of a standard telephone pole (80 feet).
Nevertheless, the wind turbines comprising the Netherlands’ newest wind park (Krammer) are impressive in their own right. The park—operational since May 2019 in Bruinisse—can produce about 102 megawatts of green electricity annually (enough to power 100,000 households). The main beneficiaries of this clean energy initiative, however, are not the local residents but rather a business consortium that formed specifically to negotiate power purchase agreements for Dutch wind projects. Google, Koninklijke DSM, Nouryon, and Royal Philips bought 95 percent of the Krammer wind park’s electricity under a 15-year contract, and have a similar agreement with another area park (Bouwdokken) that began functioning in 2018.
“Krammer has emerged from a unique citizens’ initiative and Nouryon is proud to be one of their first customers,” Marcel Galjee, energy director at Nouryon, said at the park’s opening day ceremony last May (2019). “By working together in this green energy purchasing consortium with Philips, Google, and DSM, we aim to limit the risk in fluctuating energy supplies, while at the same time reducing emissions and growing our business.”
The latter two goals are equally as important to Philips—perhaps more so as the multinational firm approaches its 2020 year-end goal of carbon neutrality (an achievement, no doubt, likely delayed by the novel coronavirus). With the Krammer wind park’s opening, Philips’ Netherlands-based operations are now completely powered by renewable electricity, emulating their American counterparts, which harness Mother Nature’s fury and flutters through a south Texas wind farm situated 16 miles from the U.S.-Mexico border.
“As a purpose-led innovation company, we have made sustainability a cornerstone of the way we do business, as recognized once again in the global 2019 Dow Jones Sustainability Indices (DJSI) list,” Philips CEO Frans van Houten said in the company’s 2019 annual report. “Increasingly, our customers ask us to help them tackle their sustainability challenges; we believe that, more and more, this will become a competitive differentiator.”
ANALYST INSIGHTS: Having survived COVID with positive growth from its respiratory businesses (through Philips Acute Care and Philips Respironics), Philips is poised to continue its leadership positions in image-guided surgery. Expect continued investments in this area.
—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors
A big competitive differentiator, actually: The London-based Business & Sustainable Development Commission estimates that sustainable business models could generate up to $12 trillion in global economic opportunities and add 380 million jobs to the worldwide roster by 2030. To capitalize on these opportunities, though, companies must be willing to pursue and implement social and environmental sustainability initiatives as avidly as they hunt market share and stockholder value, the Commission suggests.
“The business case for sustainable development is strong already: it opens up new opportunities and big efficiency gains; it drives innovation; and it enhances reputations,” the Commission noted in its 2017 report, “Better Business Better World.” “With a reputation for sustainability, companies attract and retain employees, consumers, B2B customers, and investors, and they secure their license to operate. That’s why sustainable companies around the globe are thriving and delivering attractive returns to shareholders.”
Attractively high returns, in many cases. Healthcare revenue at Philips, for example, doubled between 2011 and 2019 as the percentage of green product sales surged to 67.2 percent from 38.8 percent of total proceeds. Dividends per share also rose during that time (0.10 euros), as did net income (210 percent) and income from operations (147 percent).
Such gains continued last year—but on a proportionally smaller scale—as Philips determinedly chased its 2020 sustainability goals (now likely modified or temporarily deferred due to COVID-19). The company’s green product revenue reached a record 13.1 billion euros, driven mainly by improvements in energy efficiency, and circular product sales comprised 13 percent of total proceeds (Philips’ 2020 target is 15 percent).
“Our purpose is clear, and so is our firm belief in our potential to grow and create more value, while doing so in a sustainable manner,” van Houten told investors in a letter within the annual report. “In 2019, we continued our transformation as a focused leader in health technology, pursuing our vision of making the world healthier and more sustainable through innovation...we recorded 4.5 percent growth...[and] made good progress against our strategic imperatives—driving customer centricity and operational excellence, focusing on quality, growing our core businesses, and pivoting to becoming a solutions company.”
That laundry list of labors helped Philips achieve solid revenue hikes in all its businesses in fiscal 2019, year ended Dec. 31. The Diagnosis & Treatment businesses posted the highest growth, increasing sales 9.8 percent (10 percent nominally) to 8.48 billion euros. Excluding a 4.3 percent positive currency effect and consolidation impact, revenue climbed 5 percent with double-digit gains in Image-Guided Therapy, high single-digit growth in Ultrasound products, and low single-digit improvements in Diagnostic Imaging.
New products and a collaboration with Medtronic plc aided Diagnostic Imaging sales, beginning with the February 2019 introduction of the Incisive CT, a platform that integrates innovations in imaging, workflow, and lifecycle management to improve the overall computed tomography experience, enable smart clinical decision-making, and increase efficiency. The latter benefit is possible through Philips’ lifetime guarantee of the Incisive’s X-ray tube (the firm will replace the tube at no cost throughout its lifespan, lowering operating expenses by roughly $400,000).
Incisive CT features DoseWise Portal, a web-based dose monitoring solution that collects, measures, analyzes, and reports patient and staff radiation exposure, assisting in control of quality of care, efficiency, and patient and staff safety. In addition, the Philips iDose4 Premium Package includes two technologies that can improve image quality: iDose4 and metal artifact reduction for large orthopedic implants (O-MAR). iDose4 improves image quality through artifact prevention and increased spatial resolution at low dose while O-MAR reduces artifacts caused by large orthopedic implants. Together, they produce high image quality with reduced artifacts.
The Incisive platform premiered around the same time as Zenition, Philips’ new mobile C-arm imaging technology, one of several product introductions that helped bolster 2019 Image-Guided Therapy sales. Zenition has a tablet-like user interface and simple workflow, with features to make point-and-shoot image capture fast and intuitive during interventional or surgical procedures. Its Position Memory component and BodySmart software captures fast, consistent images even at the edge of the image intensifier or flat detector, reducing the need for C-arm repositioning by 45 percent. The system’s MetalSmart software automatically adjusts image contrast and brightness to improve overall image quality when metal objects like implants are within view.
The Zenition C-arm system shares image processing algorithms with Philips’ Azurion platform, which introduced a FlexArm model to its lineup last winter and marked its one millionth procedure late last fall. The FlexArm provides 2D and 3D visualization of patient anatomy and its image beam automatically maintains alignment with the patient.
Powered by a kinematic engine, the FlexArm system moves on eight different axes. Simulation tests showed the system can significantly save time, reduce repositioning of patients, staff, and equipment to improve access for minimally invasive procedures (including radial access), and reduce the chance of wires and tubes being unintentionally pulled. FlexArm is best suited for hybrid operating rooms that cater to multiple specialties in one room, such as a combination of surgical and endovascular procedures.
Four months after unveiling the Azurion FlexArm platform, Philips debuted its IntraSight interventional applications portfolio, which features a suite of clinically proven iFR (instant wave-free ratio), FFR (fractional flow reserve), IVUS (intravascular ultrasound), and co-registration modalities to simplify complex interventions and speed routine procedures. Touted as a “significant advance” in Philips’ portfolio of systems, smart devices, software, and services in image-guided therapy, the scalable IntraSight platform is based on the company’s common software and hardware architecture.
Providing seamless integration in the interventional lab, IntraSight’s SyncVision tool maps the pressure profile and IVUS measurements of whole blood vessels onto an angiogram. iFR pullback and co-registration and IVUS co-registration help physicians pinpoint areas of ischemia (inadequate blood supply), plan stent length and placement with a virtual stent, and predict physiologic improvement.
“The range and complexity of cardiovascular diseases that can be treated with minimally invasive procedures continues to expand,” Bert van Meurs, chief business leader, Image Guided Therapy, said at IntraSight’s May 2019 launch. “Correspondingly, the procedures themselves are also becoming more complex, increasing the demands on physicians to integrate different sources of information, decide on the best course of treatment for each patient, act on that decision, and confirm the treatment’s effectiveness. IntraSight is an important step forward in integrating intravascular diagnostic applications into a smart, simple, and seamless workflow in the interventional lab.”
Philips further bolstered its cardiac imaging solutions lineup by partnering with Medtronic last May to develop an image-guided treatment for paroxysmal atrial fibrillation (PAF). Under the collaboration, Philips’ KODEX-EPD dielectric imaging and navigation system, dielectric imaging sensors, clinical software, and services will be leveraged to support cryoablation procedures performed using Medtronic’s Arctic Front Advance cryoablation technology.
The KODEX-EPD system is designed to bypass X-ray imaging during cryoablation procedures. It uses dielectric imaging to generate CT-like 3D, high-definition images of cardiac structures in real-time. The system also features mapping capabilities and eliminates the need to reset a reference point when patients move during scans. In addition, the KODEX-EPD system offers enhanced visualization while simplifying navigation and improving both procedure efficiency and patient care.
Prompted by mounting evidence of a link between AFib and peripheral artery disease (PAD), Philips introduced longer versions of its Stellarex low-dose drug-coated balloons to the U.S. market upon their FDA approval in October 2019. The 150 mm and 200 mm balloons broaden treatment options for de novo and restenotic lesions in superficial femoral or popliteal arteries.
Like all Stellarex drug-coated balloons, the new longer versions incorporate Philips’ EnduraCoat technology, a layer of polyethylene glycol excipient containing amorphous and crystalline paclitaxel particles. The coating provides efficient drug transfer and effective drug residency coupled with high coating durability and minimal particulate loss, thereby enabling a low therapeutic drug dose.
Philips further strengthened its cardiac care segment last year by extending the EPIQ CVx’s advanced automation capabilities (making exams quicker, easier, and more productive). The EPIQ portfolio also ventured into new territory with the February 2019 introduction of the Elite system for both general imaging and obstetrics/gynecology.
Elite’s vascular assessment solution is designed to provide insight into vascular disease progression by combining 3D and 4D imaging; it features a simplified workflow, complementary clinical tools to assess and monitor vascular disease, and live “xPlane” imaging that reduces exam time 20 percent and improves data collection accuracy through the simultaneous acquisition of two planes.
The EPIQ Elite for Obstetrics & Gynecology involves advanced transducers and software to deliver an integrated solution for fetal assessment. An ergonomic, lightweight, high-frequency PureWave transducer delivers fine detailed images to help clinicians perform confident assessments of fetal health.
Other Ultrasound division highlights in 2019 included the completion of the 1 millionth patient scan accelerated with Compressed SENSE, an advanced solution that reduces magnetic resonance exam time by up to 50 percent, and the September unveiling of Onvision, a guidance solution for real-time needle tip tracking in regional anesthesia (available on the latest version of the B. Braun and Philips Xperius ultrasound system).
“Innovating with purpose in mind helps us to create more value for our customers and society—by developing truly relevant solutions,” van Hoten noted in Philips’ annual report. “Helping people to stay healthy and prevent disease. Giving clinicians the AI-assisted tools to make precision diagnoses and deliver personalized, minimally invasive treatment. Orchestrating and delivering care outside the hospital, in lower-cost care settings. Helping people to recover, or live with chronic disease, at home in the community. All supported by a seamless flow of data enabled by connected care and health informatics solutions.”
Indeed, Philips’ connected care solutions are proving valuable for patients. But they have yet to truly prove their worth to the company’s bottom line.
In the annual report, van Houten describes 2019 as a “challenging year” for Philips’ Connected Care businesses, but the branding is odd considering the segment retained market share, posted gains in all geographies, and increased sales 7.67 percent compared with fiscal 2018 (4.67 billion euros total). Nevertheless, van Houten hired a new leader (Roy Jakobs) in January (2020), orchestrated the purchase of Carestream Health Inc.’s Healthcare Information Systems business, and realigned its reporting segments to help improve Connected Care’s future finances (though a turnaround is unlikely amid the global pandemic).
van Hoten also is counting on new innovations to boost Connected Care sales, too, particularly the next-generation Intellivue MX750 and MX850 bedside patient platforms, expanded SmartSleep solutions, and the latest iteration of the company’s IntelliSpace Enterprise Edition healthcare informatics platform, among others.
The IntelliVue MX750 and MX850 monitoring technologies feature an extensive range of measurements and analytics, as well as new cybersecurity capabilities. Another potential revenue-bolster is the EarlyVue VS30, a new vital signs monitoring system that launched in the United States in November 2019. EarlyVue uses automated Early Warning Scoring to collect critical vital signs and calculate risk-based alerts that help clinicians identify declining patient health and facilitate timely intervention and treatment.
Philips’ union with Humana is likely to help the company’s bottom line as well. The pair joined forces in early December to offer the insurer’s at-risk members Philips’ Lifeline medical alert service, and provide a suite of remote monitoring tools to select Humana Medicare Advantage members suffering from severe congestive heart failure. ““Our goal is to continue to find ways to help our Medicare Advantage members stay longer and safer in their homes,” Susan Diamond, Humana’s home business segment president, said in a statement announcing the collaboration. “We believe our work with Philips will help offer our members and their caregivers more in-home support and help them to stay engaged and focused on prevention.”
Additional in-home support last year came via the springtime rollout of the DreamWisp, a first-of-its-kind over-the-nose nasal mask that allows sleep apnea patients to rest in any position they want.
The less-than-stellar performance of Philips’ Connected Care businesses last year (in van Houten’s view, at least) was offset by a solid 5.97 percent rise in Personal Health business sales (5.85 billion euros). However, healthcare-related revenue in the segment (Oral Care, Mother & Child Care) plummeted 32.5 percent to 1.64 billion euros, most likely due to the company’s business reporting realignment. The most notable reporting changes were the shift of Sleep & Respiratory Care from Personal Health to Connected Care, and the shift of Healthcare Informatics from Connected Care to the Diagnosis & Treatment segment.
Q1 2020 Revenue: 4.15 Billion Euros
Q1 2019 Revenue: 4.15 Billion Euros
Percentage Change: +0.2%
March 22: Philips ramps up production of hospital ventilators.
April 8: Philips, U.S. government team up to increase hospital ventilator production at American manufacturing sites. Company plans to double production by May, and achieve a four-fold increase by Q3.
April 14: Announces plan to quickly scale production (15,000 units/week) of the Philips Respironics E30 ventilator as an alternative in situations where critical care ventilators are unavailable.
Partners with Flex and Jabil to further expand hospital ventilator assembly lines and strengthen its global supply chain.
April 15: Creates an online portal allowing Dutch hospitals to seamlessly share COVID-19 patient information.
April 20: Releases first-quarter 2020 earnings; sales remain flat at 4.159 billion euros, adjusted EBITA falls by 120 million euros, net income plummets 75 percent, and the margin tumbles 290 basis points.
April 24: The FDA lifts a 2017 injunction prohibiting Philips’ Emergency Care and Resuscitation business from manufacturing and shipping external defibrillators from specific U.S. sites. Defibrillator manufacturing at these locations resumes.
May 1: Philips Foundation delivers two mobile isolation care units to the Italian Red Cross.
May 13: Receives FDA 510(k) clearance to market various ultrasound solutions for managing coronavirus-related lung and cardiac complications. The regulatory clearance includes the EPIQ series, Affiniti series, Lumify, CX50, and Sparq diagnostic ultrasound systems, and off-cart solutions like QLAB Advanced Quantification Software.
May 26: Philips’ wearable biosensor (BX100) receives FDA 510(k) clearance to help manage confirmed and suspected COVID-19 patients in the hospital.
June 2: FDA issues Emergency Use Authorization for Philips’ IntelliVue Patient Monitors MX750/MX850 and IntelliVue Active Displays AD75/AD85 for use in the United States during the pandemic.