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May 11, 2023
3 Min Read
Image courtesy of Siemens Healthineers
Siemens Healthineers spent about $1.1 billion on Corindus Vascular Robotics in 2019, touting, among other things, the CorPath GRX System. CorPath was the first robotic-assisted system designed for percutaneous coronary intervention and peripheral vascular intervention procedures.
Now, Siemens is throwing in the towel, citing disappointing adoption of the cardiovascular robotics system. The company will instead focus on developing a robotic solution for neurovascular interventions. The news comes as the company's diagnostic revenue fell 39% on a comparable basis due to waning demand for the company's rapid COVID-19 antigen test.
CFO Jochen Schmitz said during the company's second-quarter earnings call Wednesday that the decision to discontinue the cardiovascular robotics system triggered €329 million in charges. However, he also noted that the endovascular robotics business has continued to weigh on margins.
"We have made a business decision to stop selling into the cardiology field and to stop developing in the cardiology field," Schmitz said.
By focusing only on developing a new robot for the neurovascular field, Schmitz said Siemens Healthineers has turned the business into an R&D project.
"And the R&D project is like every R&D project. It’s a J-curve," he said. "Whenever you start a new platform, you start with investing. And that’s what we currently do."
The CFO added that it will take several years before the company is ready to go to market with the new robot.
Can Siemens Healthineers turn the diagnostics business around?
"Diagnostics saw a sharp revenue decline as the antigen business faded almost to zero in Q2, having peaked at €680 million in Q2 last year," Schmitz said during the earnings call.
Siemens Healthineers booked €1.5 billion of antigen revenues in last fiscal year, whereas for fiscal year 2023, the company expects only around €100 million revenue from antigen.
The company is currently executing a transformation program in diagnostics to establish a leaner organization with measures to streamline the portfolio. Schmitz said the company expects severance-related charges in the second half of 2023 as it executes on that program.
CEO Bernhard Montag explained that, as part of the transformation, the company is "radically simplifying the portfolio" by migrating away from certain legacy diagnostics platforms to the newer Atellica platform.
"We are very happy with the progress on the Atellica CI1900, which is completing the portfolio," Montag said. "At the same time, this ... radically simplified portfolio based on Atellica allows us now – and this is what is triggering the transformation costs – to get rid of certain legacy platforms plus all the related efforts around them in R&D, in ... later in supply chain in certain locations and closing down certain locations where ... the instruments and the reagents are getting produced, plus a much more verticalized way of running the diagnostics business, including really pointing sales and service to where it’s making the fastest progress and contributes fastest to accelerating growth and improving margins, yes."
So, to some extent, Montag said, the deeper the cuts and the more decisive the actions taken, the more confident the management team can be about the trajectory moving forward.
"And we are confident that in ... the second half of the year, we will return to growth, and we will see the first savings kicking in," he said.
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