Toshiba Could Be Pulling Out of Medtech

The troubled Japanese multinational plans to sell at least a majority stake in its profitable healthcare business.

Qmed Staff

Toshiba could be saying sayonara to part if not all of its medical device business amid a massive restructuring and layoffs meant to revitalize the Japanese multinational, which is still reeling from a major accounting scandal.

The company on Monday announced that it would sell at least a majority stake, and possibly all, of its roughly $3.5-billion-a-year healthcare business. The healthcare business--which makes diagnostic imaging equipment covering everything from MRI to CT, ultrasound and X-rays--is the only unit of the company forecast to see a profit during its present fiscal year. The move to sell a stake in Toshiba Medical Systems is part of a massive restructuring in which 10,600 workers--about a fourth of the company's global workforce--are losing their jobs.

Toshiba expects to lose a whopping 550 billion yen, the equivalent of about $4.5 billion, during its fiscal year ended March 31, 2016. Sales are expected to be down nearly 7%, to 6.2 trillion yen, or about $51 billion. Selling at least part of the healthcare business will strengthen the Toshiba's balance sheet, the company said.

"The healthcare business has achieved high profitability and a global presence in diagnostic imaging. However, securing further business growth requires the allocation of sufficient business resources for research and development and others," the company said in a news release.

Toshiba's stock by far has been the worst performing this year among major medical device industry companies, according to a recent Qmed analysis. The company's stock was down about 56% for the year, as of Tuesday.

The company is seeking to claw its way back from an accounting scandal involving nearly $2 billionin overstated profits over the past seven years. Japan's securities regulators have proposed a fine equivalent to $60 million, the largest such fine they have ever sought.  "It could take five to 10 years to regain trust from investors," Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo, told BloombergBusiness.

To raise much-needed cash, Toshiba earlier this year sold its stake in optics company Topcon, which makes everything from surgical lasers to diagnostic imaging devices as well as metrology systems. Reuters reportsthe sale was the equivalent of $413 million to $496 million.

Chris Newmarker is senior editor of Qmed and MPMN. Follow him on Twitter at @newmarker.

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