China Hinders Revenue Growth for GE HealthCare

GE HealthCare is the latest medical device company impacted by the healthcare freeze in China.

The freeze and a delay in the China 2024 stimulus hindered sales of the Chicago-based firm’s imaging and ultrasound equipment. As a result, the company cut its full-year guidance, causing shares to drop by 10% last week.  

China’s healthcare freeze stems from Beijing initiating a year-long anti-corruption campaign that targets the bribing of doctors in drugs and medical equipment.

“As it relates to China performance, we previously communicated that the region would experience negative sales growth in the first half as we face a challenging compare,” Arduini said according to a Seeking Alpha transcript. “At the time, we expected positive sales growth in the second half. Today, the prolonged timing of the rollout of the new stimulus announced earlier this year is impacting the timing of orders and sales. We expect a continued sales decline in China year-over-year in the second half, and we anticipate growth in China will be negative for the year. As a result, we're lowering our total company full-year organic revenue growth guidance.”

According to the Seeking Alpha transcript of the call, Arduini added, “Although we're disappointed with the second-half reduction in sales growth, this is a temporary challenge, and we expect to see China market orders recovery later in the year. We continue to view this market as an attractive long-term opportunity.”

GE HealthCare said its sales in China declined 18.3% to $583 million from a year prior. The company said China was roughly 14% of its business in 2023.  

And really, I would say on the growth side, we don't know what value China is going to create in 2025. Obviously, it's probably going to be more than we had previously expected. We'll have to see how that shakes out, and it's not time to give guidance on that, but that clearly will be a positive.”

Johnson & Johnson and Philips have also seen pressures from a fall in sales in China. During a recent earnings call, Philips CEO Roy Jakobs said that the decline in sales would be temporary.

“I actually just returned from China last week, where I met many of our customers and partners,” Jakobs said according to a Seeking Alpha transcript. “And it is clear that this remains an attractive healthcare market. We do not expect that the anticorruption measures impact structural demand. Our order funnel is active in the country and we expect China to gradually contribute to order growth in the coming quarters, albeit from a low base. This will be supported by the recently announced government program for renewal of aged medical equipment.”

Tim Schmid, Johnson & Johnson Executive VP, Worldwide Chairman, MedTech commented on the headwinds in China, saying the region was a “very volatile market," during an earnings call for Johnson & Johnson, according to a Seeking Alpha transcript.