Konica Minolta, the Japanese originated technology company, announced it’s consolidated financial results yesterday for its second fiscal quarter 2019, which ended September 30th. These results include reporting on its healthcare business unit which shows that sales revenue continued to grow during the second fiscal quarter and accelerated dramatically. The overall healthcare sales revenue reached ¥26.4 billion during the second fiscal quarter, compared with ¥21.6 billion in 2018, an increase of +22% year-on-year (YoY). On a calendar year-to-date basis, sales revenue reached ¥74.8 billion, compared with ¥69.8 billion in 2018, an increase of +7.2% YoY.
This recent growth has been driven by higher sales from both medical imaging equipment and medical IT solutions. The medical imaging business accounted for approximately 92% of sales revenue during the first nine months of 2019 and encompasses the companies various computed tomography, digital x-ray and ultrasound imaging solutions. The remaining 8% of revenues were generated from medical IT which encompasses the firms Acies picture archiving and communication system (PACS) as well as its service and support related IT solutions. For the medical imaging business, on a calendar year-to-date basis, sales revenue reached approximately ¥68.6 billion, an increase of +8% YoY. For the medical IT solutions business, on a fiscal year-to-date basis, revenues reached approximately ¥4.1 billion, an increase of +10% YoY.
Digital Radiography Segment
Between April 1st and September 30th 2019, both the volume of unit sales as well as overall sales revenue increased from the sale of digital radiography (DR) equipment. Sales volume originating from Asia and Europe increased, while sales volume originating from the United States remained stable. The growth within Asia was predominately centred around Japan and investment into hospital infrastructure, in part, due to increased consumption before the rise in consumption taxes on 1st October 2019. While sales volume from the United States remained at the same level YoY, there was a notable shift in the mix of business, with sales into the clinic segment growing faster than the hospital segment. This resulted in a reduction in the overall average unit selling price as a result of a shift in demand for specific products.
One of the more interesting developments from Konica Minolta, in my opinion, was the announcement that its Dynamic Digital Radiography (DDR) technology received 510(k) FDA clearance earlier this year. The solution combines Konica Minolta’s advanced imaging processing capabilities with Shimadzu’s RADspeed Pro radiographic imaging system, enabling healthcare providers to enhance their X-ray suites with the ability to capture movement and static images within in a single exam. This has been one of the more significant product developments within the digital radiography space in recent times and the firm has received favourable opinions from universities and medical institutions, particularly within Japan. It will be interesting to follow how this performs in the coming periods.
Between April 1st and September 30th 2019, both the volume of unit sales as well as overall sales revenue increased from the sale of diagnostic ultrasound equipment. Growth within Aisa was again centred around Japan. The companies original ultrasound proposition, the SONIMAGE HS1, has developed a favourable reputation within obstetrics and internal medicine, despite some “teething troubles” from its product recalls. This product is likely to have been driving the growth within Japan. With the addition of its second ultrasound proposition, the SONIMAGE MX1, which originally received 510(k) FDA approval during August 2018, the companies product line-up has become increasingly focused toward point-of-care ultrasound (POCUS). Greater utilisation of ultrasound imaging as a utility within point-of-care has been a source of growth in the recent periods and has been forecasted to achieve higher growth in the coming years. This is due to a combination of increasing portability, miniaturization of imaging platforms, improved ease of use as well as greater access to training and awareness. POCUS is expected to expand primarily within maturer markets, such as the United States and Europe, and within areas of musculoskeletal, cardiac, critical care, emergency medicine and anaesthesia. The SONIMAGE MX1 expands the firm’s coverage of POCUS clinical applications with use approved for small organ, abdomen, musculoskeletal, and peripheral vascular ultrasound procedures. It’s likely that this product also materially contributed toward the recent growth within Japan.
Medical IT Segment
Between April 1st and September 30th 2019, revenues from the medical IT business increased, driven by a large-scale order of PACS in North America as well as steady sales growth from Japan.
Strong sales growth during the first-half was reported, but not forecast to continue…
Source: Konica Minolta Inc Q2 FY2019 Results, Page 14/15
Despite this recent spurt in sales growth, the companies latest revenue projections for its healthcare business indicate weakening sales activity for the remainder of the year. The company has forecast its sales revenue for FY2019 to be ¥90 billion, versus ¥90.1 billion in FY2018, a -1% contraction YoY. This forecast is signalling that the business foresees a significant reduction in sales activity and revenues within the second-half of its fiscal year. Quarterly revenues within the coming periods would need to decline by double-digits (relative to 2018) in order to reach this projected annualised growth of -1%.
At an overall Group level, revenues are weaker YoY for the current fiscal period which the company has attributed to a combination of factors including US-China trade frictions, a slowdown in the Chinese economy, continuing sense of uncertainty about the European economy as well as the strengthening of the ¥ relative to the $ and €. While these factors are clearly having a negative material impact across it’s ‘Office’ and ‘Professional Print’ portfolio, it’s healthcare business has appeared to be insulated from these macroeconomic factors so far this year. The strengthening of the yen was reported to have an approximately -2% impact on reported revenue growth for its healthcare business. This latest forecast, therefore, raises some interesting questions about its healthcare portfolio and which areas are expected to be negatively impacted in the coming periods.
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Upcoming OEM results:
- Siemens Healthineers, Imaging BU, 4th Nov-19
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- Perkin Elmer, 6th Nov-19
- Hologic, 7th Nov-19
- Shimadzu, Medical Systems BU, 8th Nov-19
- FUJIFILM, Healthcare BU, 12th Nov-19