Siemens Healthineers’ Varian cancer treatment segment dragged in the third quarter as the failure to install equipment at customers’ facilities by the end of the period limited growth.
Varian, the radiation oncology business that Healthineers bought for $16.4 billion, suffered inbound logistics problems late last year that caused its sales to fall 4.5%. Healthineers has worked through those problems, which related to the supply of a key electronics component, but now faces a race to install Varian equipment.
“The team has [had] quite a turbulent year,” Healthineers CEO Bernd Montag said on a Wednesday third-quarter results call with investors. “Getting all the [linear accelerators] out is ... a challenge to achieve at exactly a given date. It is recovering from the kind of turbulence we had on the inbound side, and now making up for it with this huge order backlog.”
Sales at Varian increased 3.9% to 840 million euros in the quarter. Montag said orders that Varian was unable to complete in the third quarter will show up as revenue in the fourth quarter. As such, the CEO is “very optimistic that Varian will end up at the upper end of the growth guidance we have given, of 9% to 12%.”
CEO talks divestitures
Healthineers reported 11% growth at its imaging unit and a 7.6% uptick in sales of advanced therapies, enabling overall revenues to match last year’s performance despite the troubles at Varian and the collapse of the COVID-19 rapid antigen test business. The loss of COVID-19 sales caused revenues at the diagnostic business to fall 23%.
On the quarterly results conference call, an analyst asked Montag if he sees any parts of the business as “non-core” and suitable for divesting. The CEO defined “core” as a business that strongly benefits from being under the same roof as other units, or a business that benefits the other units.
“This is clearly the case when it comes to advanced therapies, imaging and Varian. This is one core,” Montag said. “Diagnostics is in a way a separate entity in this logic, which doesn't have the same strong interdependency to the other businesses.” The CEO added that the company doesn’t see a “need to streamline the portfolio within these two stories.”
Healthineers continues to expect comparable revenue growth of -1% to 1%. Excluding COVID-19 antigen tests, revenues are forecast to grow 6% to 8%. Montag expects sales to land in the “upper half” of the targeted ex-COVID revenue range.