FUJIFILM, Healthcare, Q3 2020, Sales Results

On November 10th, FUJIFILM Holdings Corporation published its financial results for Q3 2020. Due to the companies reporting cycle, this is its second fiscal quarter. The results show that while overall Group revenues continued to decline during the quarter, sales originating from its healthcare business continued to grow. Total sales revenue from the healthcare business reached ¥135.2 bn, compared with ¥126.3 bn in Q3 2019, an increase of +7% year-on-year. This took cumulative 2020 sales to ¥396.4 bn, compared with ¥371.8 bn in 2019, an increase of approximately +7% year-on-year. The healthcare business has five reportable segments; medical systems, pharmaceuticals, bio CDMO, regenerative medicine and life sciences. The sales growth during the quarter was predominately driven by a mixture of higher sales from bio CDMO and regenerative medicine, partially offset by lower sales from medical systems.

The healthcare business has been becoming an increasingly important contribution to the Fujifilm Group portfolio and accounted for approximately 25% of Group revenues for the first nine months of 2020. 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 circa ¥145 bn per annum, increasing this revenue contribution further. The acquisition has not yet been completed although anticipated to be concluded by the end of calendar Q1 2021. The next medium-term management plan 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.

Medical Systems Business Briefing, Slide 9, September 2020

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, mammography, ultrasound, endoscopy and IVD systems. The management report shows that the medical imaging business has achieved average sales growth of 8% between 2011 and 2019, driven predominately by M&A and the management continues to target top-line sales growth of circa 7%.

Medical Systems Q3 Result: overall sales were reported to be lower during the third quarter, relative to the prior year, driven predominately by the negative effects of the Coronavirus pandemic as well as a tougher comparable during Q3 2019 due to the “last-minute rush demand” ahead of the consumption tax increase in Japan last year.

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 the quarter, the company reported strong sales of its SYNAPSE product, particularly within Japan and the United States. During August-20 the company began sales of its SYNAPSE VINCENT v6.1 3D imaging analysis system which leverages artificial intelligence technology to automate organ and anatomical analysis from CT and MRI images.

Endoscopy: during the quarter, the company reported continued strong sales from China, particularly from the 7000 system. During May-19, 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: during the quarter, sales of mobile x-ray systems increased, driven by COVID-related demand for the diagnosis of pneumonia and respiratory disease. The management noted that sales of its DR Calneo AQRO and DR Calneo Go PLUS were particularly strong. The Q3 earnings report notes that “sales of these products remained strong in the United States, Europe, Asia, Latin America, the Middle East and Africa” i.e. everywhere globally.

Ultrasound: during the quarter, sales of portable diagnostic ultrasound systems increased, driven by COVID-related demand for the diagnosis of pneumonia and respiratory disease. During the quarter, Fujifilm SonoSite, it’s subsidiary focused on point-of-care ultrasound (POCUS) solutions, launched the Sonosite PX, its next generation POCUS system. The firm began sales of the PX within the United States during July-20 and Europe during August-20. In the prior quarter, the company reported strong sales of the SonoSite Edge II driven by COVID-related demand.

In-vitro Diagnostics: during the quarter, sales in Japan were solid for the DRI-chem product series. During May-20, the company launched a gene detection reagent that automatically detects COVID-19 genes quickly and easily, for use with its automatic gene analyser. This product launch was within Japan only.

Higher sales growth projected for calendar Q4 2020 and Q1 2021

During the quarter, Fujifilm made an upward revision to its full-year sales revenue forecast for its healthcare business. The Group is now projecting revenues from healthcare to reach ¥545 billion, compared with ¥504 bn in 2019, an increase of approximately +8% year-on-year. This is approximately ¥10 bn higher than the previous forecast. This upward revision is driven predominately by higher expected sales from the bio CDMO business. The company estimates that the total next impact of the Coronavirus pandemic on sales revenue will be circa negative ¥40 bn.

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