Philips readies for mid- to high-single-digit HealthTech growth with reorg, lighting disposal

Philips' Jean Botti

It's all about execution right now at Royal Philips ($PHG). The long-standing conglomerate set its sights about a year-and-a-half ago to becoming entirely devoted to HealthTech, an all-encompassing notion bringing together healthcare and consumer technology. And it's still working to sort out the disposal of its lighting businesses, a potential source of billions in cash it could use to back its new efforts, which it expects to get sorted this year after an earlier setback.

Now, it's slated to report with a reorganized business structure that better reflects its HealthTech priorities for the first time with its first quarter earnings due at the end of April. Philips' CEO Frans van Houten said that he's looking for mid- to high-single-digit growth from each of the three new segments: Connected Care & Health Informatics; Diagnosis & Treatment; and Personal Health.

That's quite ambitious given that overall sales grew only 2% in 2015, with more than 4% growth for last year specifically in the HealthTech businesses.

As for sorting the fates of the Lighting and Lumileds businesses, Philips has committed to a couple of timelines. On Lighting, it is in the midst of reviewing all the strategic options, including an IPO or a private sale, the company said. It expects to reach a decision this half. On Lumileds, which includes LED components and automotive lighting, a previously existing deal private equity deal fell early this year through on U.S. regulatory concerns. Philips said it will provide an update on Lumileds during the second half.

Of the new business segments, van Houten said that Connected Care & Health Informatics will house patient monitoring, image archiving, digital pathology, population health and electronic ICU segments. The Diagnostics & Treatment business will include imaging and deep learning applications, as well as minimally invasive treatments so patients can go home sooner. This is expected to be the largest of these three businesses.One of the primary purposes of it is to help physicians to come to a definitive diagnosis--which van Houten sees as the holy grail here.

"With several of the leading institutions, like Stanford, we are correlating the findings of different modalities in imaging, plus pathology, plus genomics to get to a definitive diagnosis on an individual patient level and then also try to come to a predictive treatment pathway enabling personalized treatment," he told FierceMedicalDevices in an interview.

The Personal Health business will be focused on healthy lifestyles, preventative care and chronic disease management, including products such as coaching apps and its Dream respiratory products that measure sleep rhythm and respiration.

Van Houten also addressed the recent and not-obviously-intuitive appointment of aeronautics industry exec Jean Botti as chief innovation and strategy officer for Philips. He was looking for an exec who could really envision a future in which analytics and software outweigh the simple products and devices in importance--where real value comes from enabling collaboration across all participants in the healthcare continuum.

He summed up how aeronautics can be a useful model when thinking about the future of healthcare. "It is a very complicated system where all the parts collaborate as well as with humans, the pilot but also with the ground station. Think of it as a very complex cloud based systems approach where quality is of the utmost importance, where data analytics is in real time and everything works. Now I realize of course that aeronautics is not the same as healthcare but I do believe that what we need in terms of system integration, data analytics and collaboration is that we need such a systems approach."

"To make a step change versus the traditional product and device approach you need to maybe over steer a bit and look for different capabilities," continued van Houten.

"Jean is the pioneer of the electrical airplane, so he is at the forefront of innovation. He is also a pioneer of embedding sensor technology to measure everything, including the pilot's behavior in the cockpit," he concluded. "It's this type of applied technology that I think will help us support patients that are critically sick. Maybe also to remotely support doctors and taking care of more patients in real time."

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