Philips imaging equipment sales trend up, especially in U.S.

October 20, 2010

Increasing demand for imaging systems sparked a 7% jump in orders for healthcare equipment at Philips in the third quarter. Much of the gain came from customers in North America, where orders grew by 11% compared with 2% growth elsewhere in the world, leading to hopeful speculation that the extended lull in equipment purchases may finally be coming to a close.

Increasing demand for imaging systems sparked a 7% jump in orders for healthcare equipment at Philips in the third quarter. Much of the gain came from customers in North America, where orders grew by 11% compared with 2% growth elsewhere in the world, leading to hopeful speculation that the extended lull in equipment purchases may finally be coming to a close.

Pierre-Jean Sivignon, Philips chief financial officer, said the company expected and benefitted from large multiyear deals in the first half of the year. Hospitals continue to focus on lowering their operating costs and managing their return on investment capital, he said.

"[But] for those with relatively strong balance sheets, availability of credit has eased," he said.

The third quarter, for which Philips' results were released earlier this week, is the latest in a string of positive quarters for the company that began in Q1 of this year. Each successive quarter for 2010 has edged higher, according to data released by the firm. Best of all, Philips said it expects the market for U.S. imaging systems during the rest of this year and beyond to continue growing by 2% to 4%.

At this rate, however, it will take awhile for the market to rebound to the heights of a couple years ago, and there are no signs yet that demand will dramatically grow in the U.S. The problem, according to Sivignon, is the continuing uncertainty surrounding healthcare reform, particularly about possible taxes on healthcare equipment.

This year's healthcare reform legislation calls for taxes on the sale of new equipment to help fund the extra costs associated with expanded coverage. Exactly how much and who would pay these taxes remains uncertain, but current analyses indicate that manufacturers may be liable for a 2.3% excise tax on most, if not all, medical device sales beginning Jan. 1, 2013. This excise tax may be applicable to leased equipment as well as equipment acquired outright.

Philips' hopes for continuing growth in healthcare may depend on customers outside the U.S. and Europe.

"We see robust demand in the emerging markets, as more investments continue to be directed at these markets," Sivignon said.