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Siemens Healthineers Outlines Changes to Diagnostics Business With Layoffs, Focus on Atellica


NEW YORK – Siemens Healthineers plans to shut down some of its legacy instruments and turn to its Atellica platform as it seeks to retool its diagnostics business.

In the midst of reporting a 2 percent drop in total revenues in its fiscal second quarter on Wednesday, Siemens outlined its plans for its diagnostics business, which saw a 39 percent year-over-year decline in its adjusted revenues during the quarter.

In Q2 2023, Siemens' diagnostics business recorded €22 million in severance payments and €77 million in other transformation costs as it works to become a leaner organization with plans to reduce its headcount and eliminate product lines in favor of its Atellica instrument line. The transformation is estimated to cost the company €350 million to €450 million until fiscal year 2025.

Siemens Healthineers CEO Bernd Montag said during a call to discuss the company's financial results that "the transformation will ultimately lead to a significantly streamlined portfolio as well as an organizational simplification and enhanced internal effectiveness and efficiency." He predicted the firm would see its diagnostics business return to growth in the second half of 2023 and begin benefiting from cost savings from its transformation work. The diagnostics team will not "leave a single stone unturned to transform the business to its potential," he said.

Montag said it is "radically simplifying" its instrument portfolio and accelerating its transition toward the Atellica line, and added that the firm is pleased with its progress toward commercialization of its Atellica CI 1900 instrument that will complete that platform. As a result, the firm can not only get rid of legacy platforms but also shut down related R&D, remove supply chains, and close down "certain locations where these instruments and the reagents are getting produced."

Siemens is preparing for the US launch of the Atellica CI 1900 instrument for low- and mid-volume laboratories and its Atellica CI 1900 Max system that comes with onboard track automation capabilities, pending US Food and Drug Administration regulatory authorizations for both systems. Sharon Bracken, head of diagnostics for Siemens Healthineers, said in an interview ahead of Wednesday's financial results that those instruments use the same technologies, testing menu, and workflows of the rest of the Atellica line in a flexible footprint that customers can adapt with changes in the types of testing needed.

"If a customer decides that they want to put in new infrastructure or a new workflow, we have the components that are needed to make it agile and flexible," she said.

Siemens has said its Atellica CI 1900 instrument, previously expected to launch in late 2022, would complete its portfolio for immunoassays and clinical chemistry testing. Company officials have also said the launch of that line was key to plans to simplify its product lineup and halve its diagnostic instrument offerings, which would reduce costs and supply chain difficulties.

Bracken said Siemens' legacy analyzers in its Advia Centaur, Advia Chemistry, and Dimension lines "are products that are naturally reaching their end of life" and the firm has stopped placing new instruments from those lines. The Atellica line builds on the company's previous advancements in immunoassay, chemistry, and hematology, and the firm continues offering specialty instruments such as its Immulite immunoassay platform that is used for allergen testing.

Siemens on Wednesday reported that its diagnostics revenues fell 39 percent year over year during its fiscal second quarter as its COVID-19 antigen test sales all but disappeared, while the company saw growth in its equipment, imaging, Varian, and advanced therapies businesses.

Erlangen, Germany-based Siemens reported total revenues of €5.35 billion ($5.88 billion) in the quarter ended March 31, down 2 percent from €5.46 billion in the year-ago quarter. When COVID-19 antigen test revenues were excluded, the firm said its revenue grew 11 percent year over year.

The firm posted Q2 diagnostics adjusted revenues of €1.08 billion, down from €1.77 billion posted in the year-ago quarter. Sales of the firm's rapid antigen tests for COVID-19 fell more than 99 percent year over year to €4 million from €678 million. Excluding COVID-19 testing, diagnostic revenues were down about 1 percent, the company said.

CFO Jochen Schmitz said in a conference call that the firm's COVID-19 antigen test revenues had peaked in Q2 2022, while other diagnostics revenues were muted mostly due to fading sales of other COVID-19-related PCR and antibody tests.

Meanwhile, the firm's imaging segment revenues brought in adjusted revenues of €2.92 billion, up about 13 percent from €2.59 billion in Q2 2022, with strong gains in the firm's China, Asia-Pacific and Japan, and Europe, the Middle East, and Africa regions as well as moderate growth in the Americas.

Siemens said its Varian Medical Systems business grew 28 percent to €934 million in adjusted revenues, up from €731 million a year earlier, after resolving supply chain problems that had dragged on the subsidiary's revenues since Q4 2022. The California-based subsidiary is focused on cancer diagnosis and treatment.

Siemens' advanced therapies brought in €498 million in adjusted revenues, up 9 percent from €456 million a year earlier, mostly on growth in the China and Americas regions. Montag said the firm decided in Q2 to exclusively focus its Corindus endovascular robotics business on neurovascular interventions and discontinue its CorPath GRX cardiovascular applications, whose adoption didn't meet expectations. Schmitz said that decision to eliminate the cardiology business resulted in charges of €329 million.

Siemens Healthineers reported net income of €108 million, or €.09 per share, down from €583 million, or €.52 per share, in the prior-year quarter. Adjusted EPS was €.43.

The firm ended the quarter with €1.37 billion in cash and cash equivalents.

The firm maintained its guidance that its 2023 revenues would be in the range of down 1 percent to up 1 percent from 2022. Excluding COVID-19 antigen test sales, the firm expects to deliver growth of 6 percent to 8 percent.

Montag said Siemens' abilities in precision medicine and advanced technologies position the company to develop the right partnerships to benefit from innovations by pharmaceutical developers and healthcare providers.

"One could say the world innovates for us," he said.

He also said the company's latest generation of faster and more automated instruments is helping improve customer productivity.

Bracken said Siemens is seeing near-global investment in automation from its customers and high global demand for informatics. Laboratories increasingly need agile systems to deal with shifts in testing demand, as well as automation and simplified workflows that can help them manage testing volumes despite employee shortages and high turnover rates that have been exacerbated by years of high demand for COVID-19 testing.

She said Siemens is helping provide the smarter, more efficient workflow and analyzers needed by those labs, including blood-gas and immunoassay instruments as well as point-of-care informatic tools that can be used within healthcare systems to monitor what testing is performed through physicians' offices, emergency rooms, and software-assisted at-home monitoring. She said Siemens is seeing growth in both point-of-care and central laboratory testing.