On February 6th, FUJIFILM Holdings Corporation published financial results for its third fiscal quarter ending December 31st 2019. These results include reporting on its healthcare business unit which can provide some insight into the performance of its five healthcare segments: medical systems, pharmaceutical, bio CDMO, regenerative medicine and life sciences. The results show that while overall Group revenues continued to decline, sales revenue from its healthcare business continued to grow during the quarter. The total sales revenue from healthcare reached ¥120.4 billion during calendar Q4 2019, compared with ¥119.5 billion in calendar Q4 2018, an increase of +0.8% year-on-year. For the full calendar year 2019, cumulative sales revenue reached ¥492.2 billion, compared with ¥476.8 billion in 2018, an increase of +3.2% year-on-year.
The healthcare business has been becoming an increasingly important contribution to the Fujifilm Group portfolio and accounted for approximately 20% of overall revenues during the fiscal year 2019, an increase from 16% in the fiscal year 2015. This increase has been driven by a combination of weakening sales from other parts of the Group, such as its document and imaging solutions business, as well as sustained sales growth from healthcare. Fujifilm’s latest acquisition of Hitachi’s medical imaging business is expected to add additional revenues of approximately ¥145 billion per annum, taking healthcare to approximately 25% of total Group revenues. The next medium-term management plan due in 2020 is expected to be focused around the medical systems segment, the core business within healthcare, as well as how the Group will leverage the Hitachi acquisition to achieve future growth. The sales growth during the calendar year 2019 was driven predominantly by increasing sales revenue from the medical systems, bio CDMO and regenerative medicine.
Medical Systems Segment
The medical systems segment is centred around solutions for medical IT and medical imaging. This includes a market-leading medical-use PACS and a broad portfolio of medical imaging systems, including, diagnostic X-ray, digital mammography, computed tomography, ultrasound, endoscopy and IVD systems. The Fujifilm management plan has been targeting overall annualised sales growth of approximately 7% for the medical systems business. The sales growth during 2019 was predominantly driven by a combination of increasing sales from medical IT, endoscopy, diagnostic X-ray and IVD product lines.
Medical IT: the companies primary IT solution is its SYNAPSE product, a medical-use picture archive and communication system (PACS) which has historically been the global market-leading proposition, in terms of revenue market share, according to internal estimates by Fujifilm. During 2019 sales revenue from medical IT solutions has significantly increased, driven by strong sales of SYNAPSE PACS to customers based in Japan and the United States. During July 2019, domestic sales began for its SYNAPSE SAI viewer, its latest platform leveraging artificial intelligence technology to support with improving diagnostic accuracy and workflow across diagnostic imaging platforms.
Endoscopy: during 2019, the endoscopy business has experienced strong sales growth, in part, driven by its 7000 system which the company attributes to the products unique light source featuring multiple high-intensity LEDs. During May 2019, Fujifilm announced its full-scale entry into the endoscopic instruments business through the acquisition of Medwork GmbH, a company that develops, manufactures and markets instruments for therapeutic endoscopy.
Diagnostic X-ray: sales growth has been “steady” to “moderately strong” from the sale of digital radiography (DR) equipment, notably from the Calneo Smart series of DR diagnostic equipment. Sales were strong mainly from customers based within emerging regions such as the Middle East, Africa and Southeast Asia.
Ultrasound: sales were strong from customers within its core geographical markets; the United States, China and Japan. Within the U.S. sales of full-flat ultrasound devices such as the SonoSite SII were notably strong. Within China, sales of the SonoSite Edge II product were strong. Within Japan, strong sales were driven by the FC1-X product featuring a relatively new automatic blood flow measurement function for dialysis facilities.
In-vitro Diagnostics: in the field of IVD, sales were favourable for DRI-chem product series along with increased contracted examinations from the in the domestic veterinary market.
Lower sales growth projected for calendar Q1 2020
During the quarter, Fujifilm made a downward revision to the full-year sales revenue forecast for its healthcare business for the fiscal year 2020. The Group is now projecting revenues from healthcare to reach ¥505 billion, compared with ¥484.3 billion in 2019, an increase of +4.3% year-on-year. This is approximately ¥15 billion lower than the previous forecast. The earnings results reference that the economic slowdown in China, Japanese consumption tax as well as negative effects from a strengthening yen, as factors behind the downward revision in projected sales revenue.
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