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Siemens Healthineers Fiscal Q3 Dx Revenues Drop 17 Percent; Firm to Acquire Varian for $16.4B

NEW YORK – Siemens Healthineers on Monday said that its fiscal 2020 third quarter revenues declined 7 percent year over year, while its Diagnostics revenues retreated 17 percent, driven in part by lower demand for routine testing.

On Sunday, the firm also announced that it is buying Palo Alto, California-based Varian Medical Systems for $16.4 billion in an all-cash deal that would enable the companies to address the cancer-care continuum, including screening, diagnosis, care delivery, and post-treatment activities.

For the three months ended June 30, Siemens Healthineers reported total revenues of €3.31 billion ($3.88 billion) compared to €3.57 billion in Q3 2019.

The Erlangen, Germany-based company said its Diagnostics revenues were €869 million, down 17 percent from €1.04 billion in Q3 2019. On a comparable basis, its Diagnostics segment revenues were down 16 percent, mainly due to a lower volume of testing for routine care.

"Plummeting testing for routine care activities due to COVID-19 throughout the quarter had a severe impact in all regions, which was only slightly compensated by COVID-19-related revenues," Jochen Schmitz, Siemens Healthineers CFO, said during a presentation on Monday to discuss the firm's merger and financial results.

Diagnostics segment revenues were impacted by declining reagent sales, which represent 90 percent of the company's Dx revenues, he added.

In other business segments, Siemens Healthineers' Imaging revenues were €2.11 billion, down 3 percent from €2.19 billion in the prior-year quarter, and its Advanced Therapies revenues were €372 million, down 2 percent year over year from €378 million.

The company posted a fiscal Q3 net income of €271 million, or €.27 per share, compared to €353 million, or €.35 per share, in Q3 2019. Adjusted basic EPS was €.30.

Its R&D expenses were €328 million, down 2 percent year over year from €333 million, and its SG&A expenses were €529 million, down 3 percent year over year from €547 million.

Siemens Healthineers ended the quarter with €622 million in cash and cash equivalents.

The company said that for full-year fiscal 2020, it expects flat revenue growth on a comparable basis, and it anticipates adjusted earnings per share to be between €1.54 and €1.62. The outlook is based in part on the assumption that the current business environment, including the upward trend in testing for routine care that has been observed, will not deteriorate, the firm said.

"For the fourth quarter, we are anticipating a significant improvement of our business performance compared to the third quarter," Bernd Montag, Siemens Healthineers' CEO, said in a statement.

Under the terms of a merger agreement announced on Sunday, Siemens Healthineers will acquire all outstanding shares of Varian for $177.50 per share in cash, representing an approximately 42 percent premium over Varian's 30-day volume-weighted average closing share price on Friday.

Varian is harnessing advanced technologies like artificial intelligence, machine learning, and data analytics for cancer treatment and to expand access to care. "With Varian we will be able to diagnose cancer earlier, develop more individual and effective therapies, and be in the position to offer more precise therapy and after care," Montag said on Monday during the presentation to discuss the firm's financial results.