Image credit: GE Healthcare booth, RSNA 2016, Fine Design Associates
On April 27th, General Electric published its financial results for Q1 2021. These provide some insight into the sales performance of its healthcare business. These results show that both sales and profitability were lower in the quarter, although this was driven by a tough comparable due to the disposal of the BioPharma business in March-20. During the quarter, overall sales revenue from the healthcare business reached $4.3 bn, compared with $4.7 bn in Q1 2020, a decrease of approximately -9% year-on-year. Overall orders from the healthcare business were also materially lower. During the quarter, orders reached $4.5 bn, compared with $5.3 bn in Q1 2020, a decrease of approximately -15% year-on-year.
Although reported revenue was lower, on an organic basis, revenues increased $0.3 bn (+7%), driven by increased demand in Imaging, Ultrasound and Life Care Solutions for HCS products as well as a return to pre-pandemic volume in PDx. In addition, orders increased $0.2 bn (+5%) organically, due to increases in Imaging and Ultrasound in HCS, and a return to pre-pandemic volume in PDx, partially offset by lower Life Care Solutions (LCS) orders in HCS as pandemic-related demand softened.
The reportable segments for the healthcare business have recently been changed due to the disposal of the BioPharma business. The healthcare business was previously segmented into ‘healthcare systems’ (HCS) and ‘life sciences’. The life sciences segment no longer includes the BioPharma business and has been renamed ‘pharmaceutical diagnostics’ (PDx). During the quarter, the overall sales contraction was driven by the removal of revenue from the BioPharma segment (due to its sale), partially offset by higher revenues from the HCS and PDx segments. Quarterly sales originating from the HCS segment reached $3.8 bn, compared with $3.4 bn in Q1 2020, an increase of approximately +11% year-on-year. Growth was led by ultrasound with higher demand across most geographical regions and all product lines. Total sales originating from the PDx segment reached $482m, compared with $450m in Q1 2020, an increase of approximately +7% year-on-year.
Health care systems orders were up 5% with equipment and services growth. Imaging and ultrasound improved double digits, both year over year and compared to Q1 2019 CT orders grew across all regions, while Life Care Solution orders were down as pandemic-related demand softened. PDx demand continued to recover, with orders up 7%, driven by CT screening for cardiac disease and routine oncology and neurology screenings returning to pre-pandemic levels.
The company reported that overall market fundamentals improved during the quarter as spending by healthcare systems recovered and procedure volumes continued to improve. For the third consecutive quarter, global procedures volumes were up double digits. It is anticipated that these trends will continue in line with the worldwide rollout of the COVID-19 vaccine and the demand for pandemic-related products began to normalize during the quarter. Demand for non-pandemic products was solid as government stimulus drove strong order growth in China, India and Japan.
About the healthcare systems segment
The HCS segment encompasses a broad suite of products and solutions used in the diagnosis, treatment and monitoring of patients. Its primary activity is the development, manufacturing, marketing and servicing of a portfolio of medical imaging solutions. This includes magnetic resonance (MR), computed tomography (CT), molecular imaging (MI), x-ray and ultrasound imaging systems. Sales revenue originates from both the sale of hardware and software as well as complimentary services. The segment also encompasses Enterprise Software & Solutions (ESS) which includes enterprise digital, consulting and healthcare technology management as well as Life Care Solutions (LCS).
Recent partnerships and collaborations
- On January 10th, GE announced a $130m deal with GenesisCare to supply their global centres. This includes supplying them with imaging systems, including computed tomography, magnetic resonance, ultrasound, digital mammography, and other technologies and services.
Recent developments in Ultrasound
- On March 30th, GE introduced the latest member of the Venue™ point of care ultrasound family, the Venue Fit™, a streamlined and compact POCUS system.
- On Mach 16th, GE introduced Vscan Air™, a cutting edge wireless pocket-sized ultrasound device.
Recent developments in X-ray
- On March 24th, GE unveiled StarGuide, a next-generation SPECT/CT system.
- On March 23rd, GE announced FDA 510(k) clearance for its latest OEC 3D surgical C-arm system. OEC 3D sets the standard of interoperative imaging with precise 3D volumetric images for spine and orthopaedic procedures combined with 2D imaging for greater everyday efficiency.
US-China Trade Tensions
The trade tariffs between the US and China continue to result in increased product costs for GE, particularly for medical equipment and renewable energy systems. The company continues to take mitigating actions which include relocating manufacturing as well as parts of its supply chain outside of China. The US-China trade tensions and their impact on the GE business was not a talking point during the Q4 earnings call. The net impact from tariff-related actions was previously estimated to be between $400 and $500 million across the Group, with the majority of this shouldered by the healthcare and renewables businesses. Although there has been some moderation in tariffs both in the U.S. and China, they are likely to continue to have a material impact on underlying profitability.