NEW YORK – Siemens Healthineers said on Wednesday that the firm's diagnostics business has become healthier, leaner, less complex, and more profitable due to a multi-year transformation as its Atellica instrument lineup is gaining ground in central labs.
Jochen Schmitz, Siemens Healthineers CFO, said during a conference call on Wednesday that the firm has achieved €300 million ($322.0 million) in cost savings a year ahead of schedule due to the transformation program, which the company started in 2023 to reduce the company's headcount and eliminate product lines in favor of the Atellica instrument line. The firm has invested €450 million into the program, he noted and added that the diagnostics segment's margins shifted from slightly below zero in 2023 to between 5 percent and 6 percent this year and the company sees further potential for margin expansion in 2025.
Siemens Healthineers CEO Bernd Montag said during the call that central lab customers contribute about two-thirds of the company's diagnostics revenues, which are currently about evenly split between contributions from its Atellica line and its legacy instruments. The Atellica line, though, has shown consistent growth in at least the high teens and the company expects rising revenues as customers update their instruments.
Schmitz said that that the company expects further cost savings as the installed base of legacy instruments is gradually replaced by the newer consolidated lineup. Company officials said last year that that they had stopped placing new Advia Centaur, Advia Chemistry, and Dimension instruments. Montag said that the transformation has positioned the diagnostics business for success and increased profitability.
Meanwhile, Montag expects that the legacy instrument installed base will slow the growth rate for the diagnostics business during the next two years. Schmitz said that the diagnostics business revenues are expected to grow in the low single-digits in 2025 and the company expects margin expansion within the business, despite some expected headwinds from to volume-based procurement policies in China.
Siemens said last year that it had completed its updated immunoassay and clinical chemistry testing portfolio with the launch of its Atellica CI Analyzer, which is designed for use in low- to medium-volume labs.
Siemens reported on Wednesday that revenues for its fiscal fourth quarter rose about 5 percent year over year, or 6 percent on a comparable basis.
For the three months ended Sept. 30, the Erlangen, Germany-based firm posted overall revenues of €6.33 billion compared to €6.06 billion one year earlier. Excluding its COVID-19-related business, revenues rose 7 percent year over year on a comparable basis with gains in the firm's imaging, Varian Medical Systems, and Advanced Therapies segments. The company's non-COVID-19 diagnostics business was up slightly, Siemens said.
"We achieved our targets for the fiscal year with a very good fourth quarter despite the current market weakness in China," Montag said in a statement.
Siemens' diagnostics adjusted revenues, which includes COVID-19 antigen test sales, declined 5 percent year over year to €1.15 billion from €1.21 billion one year earlier. The firm noted that it ended its COVID-19 testing line during the prior year and that it had contributed €53 million during the year-ago quarter.
Excluding COVID-19 testing revenues, Siemens reported its diagnostics revenues rose less than 1 percent year over year on a comparable basis with moderate growth in the Americas region, slight growth in China, slight declines in the Europe, Middle East, and Africa region, and sharp declines in the Asia-Pacific and Japan region. That region generated much of the revenues from COVID-19 rapid tests, and revenues were slightly below the prior-year totals once those tests were excluded.
The company noted that its multiyear transformation program, which includes the consolidation and retirement of legacy instrument lines, had helped to cut costs during the quarter as did a longer, useful life of leased laboratory analyzers.
During the quarter, Siemens also secured in July an updated US Food and Drug Administration 510(k) clearance that allows the use of its Atellica IM High-Sensitivity Troponin I (TnIH) immunoassay to aid the prognosis of major adverse cardiac events and death over periods of one, three, six, and 12 months in patients who have signs and symptoms of acute coronary syndrome. The assay, which is for the quantitative measurement of cardiac troponin, was already used to aid the diagnosis of a heart attack.
The firm said last month that the clearance for prognosis is helping healthcare providers to identify patients who have elevated risk and aid decisions on short- and long-term management to reduce the high readmission rates among patients during the first year following myocardial infarction.
Siemens said that its imaging segment adjusted revenues rose 7 percent to €3.54 billion from €3.33 billion a year ago. Growth in the firm's computed tomography and molecular imaging businesses contributed to the increase, and the firm reported significant growth in the Americas and the Asia-Pacific and Japan region.
Siemens also reported that its Varian Medical Systems adjusted revenues jumped 10 percent to €1.12 billion from €1.02 billion in the year-ago quarter with strong growth in the Asia-Pacific and Japan, the Americas, and EMEA regions. The company said that its Varian Medical Systems and Advanced Therapies revenues from China, however, declined in the low double digits because of delayed customer orders.
Overall, Advanced Therapies adjusted revenues, though, were up 5 percent year over year to €594 million from €564 million in Q4 2023 with growth in the EMEA and Americas regions and flat revenues from the Asia-Pacific and Japan region.
Siemens reported net income of €624 million, or €.55 per share, compared to net income of €540 million, or €.48 per share, one year ago. On an adjusted basis, EPS for Q4 was €.67.
The firm's R&D spending rose about 2 percent during the quarter to €496 million from €485 million in the year-ago quarter. SG&A spending also rose 2 percent to €962 million from €942 million.
The firm also recorded restructuring costs of €56 million due to the transformation of the diagnostics business compared to €32 million a year ago.
For the full fiscal year 2024, Siemens reported that its revenues rose 3 percent to €22.36 billion from €21.68 billion in fiscal 2023. The diagnostics segment's adjusted full-year revenues were down 3 percent year over year to €4.42 billion from €4.53 billion.
The imaging business' adjusted full-year revenues rose 4 percent to €12.27 billion from €11.84 billion. Varian adjusted revenues rose 9 percent to €3.87 billion from €3.56 billion. Advanced Therapies adjusted revenues rose 3 percent to €2.08 billion from €2.02 billion.
The firm reported a full-year net income of €1.96 billion, or €1.74 per share, compared to €1.53 billion, or €1.35 per share, in fiscal 2023. It also reported adjusted earnings per share of €2.23 for fiscal 2024.
The firm's R&D spending rose 3 percent for the year to €1.92 billion from €1.87 billion. SG&A expenses also rose 2 percent to €3.68 billion from €3.61 billion.
Siemens Healthineers ended fiscal 2024 with €2.68 billion in cash and cash equivalents.
Siemens officials predicted comparable revenue growth in fiscal year 2025 of between 5 percent and 6 percent year over year and adjusted EPS in the range of €2.35 to €2.50 per share.