Philips sees medtech sales drop, connected care demand rise in the face of COVID-19

Philips building
“We expect to return to growth and improved profitability" before the end of this year, assuming elective procedures normalize and Philips can fulfill its existing and postponed product orders, said Philips CEO Frans van Houten. (Philips)

Without a doubt, the COVID-19 pandemic has shifted the landscape for medtech companies over the past several months, and Philips’ second-quarter earnings report illustrates those changes in stark relief.

As the novel coronavirus spread through April, May and June, hospitals postponed the installation of new imaging equipment and put off many elective or less-urgent surgical procedures—leading to a 9% decline in sales compared to last year in Philips’ diagnosis and treatment businesses. Meanwhile, consumer sales for personal health products dropped 19%.

At the same time, demand exploded for ventilators and remote patient monitoring systems, leading to a 14% sales increase among the company’s Connected Care divisions—while incoming orders grew by 27%, driven in part by the need for respiratory devices and analytics offerings.

But that was not enough to make up the difference. Overall, Philips posted a comparable decrease in sales of 6%, for a total of €4.4 billion, or just over $5 billion U.S.

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“As the global societal and economic impact of the COVID-19 outbreak intensified in the second quarter of 2020, we continued to focus on our triple duty of care: meeting critical customer needs, safeguarding the health and safety of our employees, and ensuring business continuity,” said CEO Frans van Houten.

“In close collaboration with our suppliers and partners, we have steeply ramped up the production volumes of acute care products and solutions to help diagnose, treat, monitor and manage COVID-19 patients,” van Houten added. “Under the circumstances, I am pleased at the way we have performed and I am grateful and proud of how all our employees have stepped up.”

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In the past quarter, Philips tripled its production of hospital ventilators in collaboration with manufacturing partners and suppliers, with a goal of turning out 4,000 per week by the end of this month.

The company also received new 510(k) clearances from the FDA to market its portable ultrasound devices for lung and heart complications related to COVID-19, as well as emergency authorizations for its IntelliVue patient monitors and displays.

Meanwhile, Philips reported 14 new partnership agreements, including a 10-year, $100 million agreement with the U.S. Department of Veterans Affairs to expand its tele-ICU programs. 

“We expect to return to growth and improved profitability for the Group in the second half of the year, assuming we can convert our existing order book for the Diagnosis & Treatment and Connected Care businesses, elective procedures normalize, and consumer demand gradually improves,” van Houten said. “Consequently, for the full year 2020 we continue to aim for a modest comparable sales growth and Adjusted EBITA margin improvement.”