Canon Medical
Q1 2020 Revenues vs. Q1 2019 Revenues
-3.0%
Q1 2020 Orders vs. Q1 2019 Orders
+23%
– First quarter decline indicative of drop in imaging modality demand
– Large system installs progress slow due to limited access to hospitals
– Stagnant business negotiations in Europe and U.S. due to restrictions cited as main concern
– Company expects near-term decline on account of COVID-19 will be tough to offset over course of CY2020 so expecting substantial impact
Canon Medical has perhaps the least diverse healthcare technology business of those reviewed, with medical imaging equipment dominating its product portfolio. Moreover, it also has a relatively small informatics business, viewed initially as a more robust segment in comparison to imaging equipment. The firm also has limited exposure to China in comparison to its peers, suggesting that its initial revenue drop last quarter was mostly driven by its leading markets of Japan, North America, and Western Europe. The firm has also retracted full calendar year guidance, with a substantial impact to its business expected.
Three key takeaways: The Signify View
It is very clear from both the financial guidance of leading healthcare technology vendors and our recent discussions with the industry that the market outlook is shrouded in uncertainty.
Moreover, the spread and impact of the COVID-19 pandemic is highly regional, with differing rates of recovery and variance in the severity and scale of social distancing restrictions imposed. For healthcare technology vendors, navigating the coming months will be a continual re-evaluation and re-forecasting exercise. However, based on our research with vendors and observations of the market dynamics so far, we believe the following three broad trends will be evident in 2020 and 2021.
Diversity of portfolio will limit business impact, imaging modality pain likely short and sharp
While demand for some COVID-19 related products such as ventilators and patient monitoring equipment offers an obvious upside for some of the largest vendors, we believe overall portfolio diversity will be a key differentiator in the impact of the pandemic on each vendor.
Businesses with a dominant proportion of revenue generated from large capital expenditure deals for big-iron imaging modalities or diagnostics equipment (e.g., in vitro diagnostics) will more acutely feel a near-term drop in revenues in Q2 and Q3. Initial research on the U.S. market has suggested imaging procedural volumes have dropped between 40% and 80% (
1,
2) as patients stay away from attending more routine imaging exams such as mammography for breast cancer screening.
