Varian acquisition buoys Siemens Healthineers to anticipate revenue jump

USA – Siemens Healthineers expects its US$16.4 billion acquisition of Varian to drive revenue growth in the coming years, with the acquired unit expected to post double-digit annual sales growth from 2023 to 2025.

The forecast supports Siemens’ prediction that sales will increase by 6% to 8% per year over those years, up from 5% to 7% in 2022, excluding the impact of COVID-19 antigen tests.

Following the completion of Siemens’ acquisition of Varian in April, leaders from both companies met to develop a strategy for the combined company through 2025.

The new strategy was unveiled to the public for the first time, when Siemens held a capital markets day to discuss what CEO Bernd Montag described as “a new chapter of accelerated growth.”

Siemens’ forecast for revenue growth of 6% to 8% per year and earnings per share growth of 12% to 15% per year is based on the company’s belief that capabilities in imaging, diagnostics, precision therapy, and digital health will enable it to capitalize on the biggest opportunities in healthcare.

Varian is critical to the growth forecast, with its annual target of 9% to 12% exceeding the mid-to-high single-digit predictions for the imaging, diagnostics, and advanced therapies divisions.

Siemens CFO Jochen Schmitz has assured investors that the Varian growth target is based on the company’s “market leadership position in radiation therapy as well as proton therapy,” as well as moves into areas like interventional oncology.

The updated synergy target, which is a split of cost and revenue opportunities, reflects the progress of the companies’ efforts to merge.

Schmitz stated that all synergies have been verified and are in the execution phase, and that cost savings from procurement, back office, and infrastructure consolidation will support investment in revenue synergies.

Montag cited Siemens’ goal of reducing treatment initiation time from two weeks to two hours as an example of how the company is investing to realize revenue synergies with Varian, explaining that achieving the goal will necessitate “a lot of integration of the imaging and digital capabilities with radiation therapy.”

Mergers and acquisitions

Siemens also discussed its future mergers and acquisition (M&A) plans. Schmitz stated that after purchasing Varian, he does not expect the company to make another large acquisition in the near future.

Siemens does have the capacity to make smaller acquisitions in the near term and wants to be able to act opportunistically, according to Schmitz. The acquisition of Varian has shifted Siemens’ M&A focus slightly.

“We became a more disease-focused and relevant company as a result of our merger with Varian. So, while technology-enabled therapy is certainly a focus, “Montag stated.

The CEO identified cardiovascular disease, cancer, and neurological disorders as untapped opportunities for Siemens.

Siemens is dealing with some of the same macro forces as other medtech companies in the short term, but it sees opportunities within the challenges.

Montag specifically mentioned healthcare staff shortages in developing countries as a potential driver of interest in Siemens’ artificial intelligence (AI) technologies, explaining that the goal is to “take over the routine tasks to make the existing staff more productive.”

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