Image credit: screenshot of Canon Medical Systems at ECR 2019 video
Canon Inc, the Japanese originated conglomerate, published its fourth-quarter financial results yesterday which include sales figures for its medical system business, formally Toshiba Medical. This encompasses its portfolio of imaging platforms across computed tomography (CT), ultrasound, x-ray and magnetic resonance imaging (MRI) modalities. These results show that sales revenue from medical systems contracted during the fourth quarter, although this is relative to a strong comparable fourth-quarter during 2018. This pushed the 2019 calendar year cumulative sales revenue to ¥438.5 billion, compared with ¥437.6 billion in 2018, a marginal increase of +0.2% year-on-year. This result is significantly below the companies growth strategy as well as the companies previous forecast, which indicated an expectation of full-year sales growth of +3.3% for the medical systems business. Canon is pointing toward general weakness in the global economy as the driver behind these results, although they may indicate erosion of market share within specific product lines and markets.
From a geographical perspective, the lower growth during 2019 was predominately driven by weaker sales activity during the first quarter, notably from Europe, Japan and the wider Asia-Oceania region. While the demand for medical equipment recovered within Japan during the second half of 2019, demand remained lower across Europe as customers deferring capital investment decisions amid generally sluggish international trade as well as concerns over the UK leaving the EU. Similarly, sales activity across Asia remained materially weaker throughout 2019. Canon references that the ongoing trade tensions between the US and China have negatively impacted new equipment sales activity as well as being reflective of a greater-than-expected global economic slowdown.
Strengthening Sales and Distribution Network
As outlined within its corporate strategy conference during March-19, Canon is seeking to diversify its sales portfolio internationally and has ambitious plans to accelerate sales growth outside of Japan, across both developed and emerging markets. Within North America and Europe, the company has been enhancing its sales structure as well as increasing it’s marketing activities with leading academic institutions in medical research. These institutions are typically influential for capturing investment decisions into premium and technology-rich imaging platforms. This activity is accompanied by developing localised distribution networks within emerging markets in order to capture the growing demand for imaging systems as a result of improvements to medical infrastructure. For example, during July 2019, Canon entered into a strategic partnership with R-Pharm Holding in order to localise the production of its medical imaging solutions as well as deepen its distribution network within the Russian Federation. Furthermore, during October 2019, Canon announced the opening of its Middle East division to be based in Dubai which expects to begin operations at the start of 2020. This is part of Canon’s strategy to get closer to customers through a direct presence within key growth markets.
New Product Launches
Over the past few years, Canon has steadily been renewing its product portfolio with various product iterations and new imaging platform releases. The most recent of which has been the launch of ‘Vantage Orian‘, a premium MRI platform which is reportedly generating new business orders and expected to help stimulate sales activity during 2020. In addition, at the beginning of 2019, Canon launched ‘Aquilion Start’, a competitively priced CT platform which includes features typically found in premium systems, such as advanced noise reduction technology. The balance between cost and performance is expected to help drive increased orders from emerging markets which are expected to grow faster although with a higher sensitivity to price. In combination with these product launches, orders for existing premium CT systems have been strengthening within developed markets, particularly the USA and Europe, with radiation dose management and high image quality remaining key product differentiators. This has been supported by the launch of Canon’s proprietary software solutions leveraging artificial intelligence in order to optimise radiation exposure and image quality.
Realignment of X-ray business operations
On 3rd December 2019, Canon announced that the X-ray business operations within its subsidiary Virtual Imaging Inc will transfer to Canon Medical Systems USA Inc (CMSU) effective from 1st January 2020.
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