A Progressive Digital Media business

COMPANY PROFILE

Philips Healthcare

REFERENCE CODE: 0205AA77-09CC-440B-924D-EA31FD87B3E9

PUBLICATION DATE: 22 Jan 2016
www.marketline.com
COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED.

Philips Healthcare
TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................3
Key Facts...............................................................................................................3
SWOT Analysis.....................................................................................................4

Philips Healthcare
MarketLine

Page 2

Philips Healthcare
Company Overview

COMPANY OVERVIEW
Philips Healthcare (or 'the company'), a business sector of Koninklijke Philips (Philips), is one of the
leading providers of medical systems for screening and diagnosis, treatment, health management
and monitoring. The company's product and service portfolio consists of home healthcare solutions,
professional healthcare systems, imaging systems and clinical care systems. Philips Healthcare
operates in more than 100 countries across the globe. It is headquartered in Andover, Massachusetts,
and employed 37,065 people as on December 31, 2014.
The company recorded revenues of E9,186 million (approximately $12,208.2 million) during the
financial year ended December 2014 (FY2014), a decrease of 4.1% compared with FY2013. The
operating profit of the company was E456 million (approximately $606 million) in FY2014, a decrease
of 65.3% compared with FY2013.

KEY FACTS
Head Office

Philips Healthcare
3000 Minuteman Road
Andover
Massachusetts 01810 1099
USA

Phone

1 978 659 3000

Fax
Web Address

http://www.healthcare.philips.com

Revenue / turnover 9,186.0

(EUR Mn)
Financial Year End

December

Employees

37,065

Philips Healthcare
MarketLine

Page 3

Philips Healthcare
SWOT Analysis

SWOT ANALYSIS
Philips Healthcare (or 'the company'), a part of Koninklijke Philips, is engaged in the manufacture
and marketing of medical systems for screening and diagnosis, treatment, health management and
monitoring. The company's acquisition of small and complementary businesses has enabled it to
expand its healthcare business portfolio. However, cost containment measures in the US Health
Care Reform Act could affect the demand for the company's healthcare products.
Strengths

Weaknesses

Small 'tuck-in' acquisitions enabling Philips

Healthcare to tap growth opportunities
Strong presence in lucrative home
healthcare market
Simplified business portfolio

Product recalls may affect the company's

brand image

Opportunities

Threats

Acquisition of Volcano may enhance the

companys customer base
Launch of new products may strengthen the
companys product portfolio
Partnership with Inspirata to advance digital
pathology in the US
Aging world population likely to spur
demand for healthcare products and
services

Healthcare reform in the US may affect the

company's business
Stringent reimbursement rules and
regulations

Strengths

Small 'tuck-in' acquisitions enabling Philips Healthcare to tap growth opportunities

In the healthcare sector, Philips' strategy of acquiring small, 'tuck-in' businesses supports its growth
initiatives. For instance, the 2009 acquisition of Canada-based Traxtal, a provider of minimally
invasive instruments and software for image-guided intervention and therapy, has helped Philips
extend its imaging business to image-guided intervention and therapy, and also bridged its care
cycle strengths in diagnosis and management. Coupled with its strong position in medical imaging,
the Traxtal acquisition has made Philips one of the leading solution providers for image-guided
procedures. Further, the acquisition of US-based InnerCool Therapies, one of the leading companies
in body temperature management, has helped the company broaden its offerings in emergency
care.

Philips Healthcare
MarketLine

Page 4

Philips Healthcare
SWOT Analysis

The acquisition of Sectra's mammography equipment line has strengthened Philips Healthcare's
women health portfolio. The company has further expanded its capabilities in imaging equipment
services through the acquisition of All Parts Medical, a provider of imaging equipment parts. Further,
the company expanded its position in the anesthesia market with the acquisition of Danish anesthesia
firm Dameca.
Strong presence in lucrative home healthcare market
Given the escalating healthcare costs in many markets and increased emphasis on both efficiency
and patient comfort, there is a gradual shift towards diagnosing, treating and monitoring patients in
their homes rather than in hospitals. The rising number of elderly people and the subsequent growth
in the incidence of chronic diseases is also driving the demand for home healthcare. The US is
expected to remain the largest market globally based on its extensive network of home health care
providers, high health care spending intensity, widespread insurance coverage, and shifting patient
care strategies toward home settings.
The acquisition of Respironics has put Philips Healthcare at the forefront of the fast-growing market
for home healthcare solutions. Respironics (now Philips Respironics) is one of the leading US-based
global providers of innovative respiratory and sleep therapy solutions for both hospital and home
use. The home healthcare solutions business of Philips Healthcare offers sleep management and
respiratory care, medical alert services, remote cardiac services and remote patient management
services.The company further solidified its presence in home healthcare solutions with the acquisition
of the aerosol therapy business of Medel in Italy.
Philips further strengthened the innovation capabilities and product portfolio of Philips' respiratory
drug delivery activities within its Home Healthcare Solutions business in 2014 by obtaining a
technology license and acquiring select assets solely related to Aerogen's home-care business.
Aerogen is a privately-owned respiratory drug delivery company headquartered in Ireland.
Simplified business portfolio
Philips has fundamentally simplified its business portfolio across its sectors including Healthcare
since 2000. It has directed its focus on six platforms including professional healthcare, home
healthcare, and healthy life/personal care. In the professional domain, Philips is engaged in the
development of solutions that help improve the way both patients and professionals experience
healthcare, improve clinical outcomes, and reduce healthcare cost. Philips focuses on the range of
medical issues associated with oncology, cardiology and women's health. At the home healthcare
front, Philips works together with its clinical provider customers to improve the quality of life for at-risk
individuals in the home through better awareness, diagnosis, treatment, monitoring and management
of their conditions. For example, the company has designed new Trilogy100 portable at-home
lifesupport ventilator to be simple to use and live with. Philips's healthy life platform addresses the
need for healthy, caring relationships. And the personal care platform focuses on consumers' need
to be fit. For instance, Philips' wearable Activity Monitor records the person's daily movements and
transfers the information to a webpage that keeps track of the person's progress against longer-term
goals.

Philips Healthcare
MarketLine

Page 5

Philips Healthcare
SWOT Analysis

Weaknesses

Product recalls may affect the company's brand image

The company has recalled several of its products in the recent past. For instance, in April 2015, it
recalled Computed Tomography Systems after finding that a software defect exists in marketed
product wherein the sign indication of the longitudinal position of some types of scan is inverted. In
May 2015, the company recalled DigitalDiagnost System XRay designed to emit a beep upon
termination of an exposure. However, if the system had been powered on for over 12 hours, the
system would no longer emit this signal.
Earlier in November 2014, the company issued a recall of all Gel-E Donut gel pillow and Squishon
2 gel cushion products due to potential mold contamination of the products. Customers were asked
to discontinue use and dispose of all Gel-E Donut gel pillow and Squishon 2 gel cushion products
in their facility, even if mold was not visible.
Such product recalls could affect the consumer confidence in the company's products and its brand
image.

Opportunities

Acquisition of Volcano may enhance the companys customer base

In February 2015, Royal Philips, the parent company of Philips Healthcare, acquired Volcano
Corporation (Volcano), a US-based company engaged in developing, manufacturing and selling
medical imaging devices for cardiovascular care and other specialties. Volcano is one of the leading
companies in intravascular imaging for coronary and peripheral applications, and physiology. It also
offers a suite of peripheral therapeutic devices. Volcano offers physicians and their patients around
the world with tools that aid diagnosis and guide and provide therapy.
As stated by the company, Volcano acquisition is an important milestone in its strategy to become
one of the leading systems integrator in the growing image-guided minimally invasive surgery market
and accelerate the growth in that market. The combination of Volcanos portfolio of imaging and
measurement catheters and Philips Healthcares interventional imaging solutions would allow the
company to provide customers with an integrated solution to improve procedural outcomes at a
decisive stage in the health continuum. This in turn would help Philips Healthcare in enhancing its
customer base.Volcanos acquisition also complements Philips Healthcares portfolio of interventional
X-ray and ultrasound imaging equipment, navigation systems, software and services. This acquisition
would create new sources of recurring revenue streams for the company.
Launch of new products may strengthen the companys product portfolio

Philips Healthcare
MarketLine

Page 6

Philips Healthcare
SWOT Analysis

The company has launched several new products in the recent past. For instance , in April 2015,
Philips Lifeline introduced CareSage, a new predictive analytics engine that enables health systems
to monitor and care for elderly patients by combining insights with wearable devices and monitoring.
By reviewing data from CareSages analytics and the wearable medical alert devices, health systems
can predict when their at-home patients are likely to be hospitalized and intervene in advance.
In May 2015, Philips Canada launched Philips Respironics V680 Ventilator for hospital respiratory
care, offering both invasive and noninvasive ventilation. As reported by the company, the Philips
Respironics V680 Ventilator is the first ventilator to combine the Philips gold standard single-limb
noninvasive ventilation (NIV) solution with a fully featured, dual-limb system.
In June 2015, Philips launched HeartModel, a new anatomically intelligent ultrasound (AIUS) tool
that brings advanced quantification, automated 3D views and reproducibility to cardiac ultrasound
imaging. Health systems are looking for solutions to provide an effective way to an accurate diagnosis.
By combining AIUS with the power of HeartModel, the company is using automatic quantification
and intelligence and an image quality to bring more diagnostic confidence to cardiac procedures
and to create more reproducible results.
Launch of such new products is likely to strengthen the companys product portfolio.
Partnership with Inspirata may help the company advance digital pathology in the US
In March 2015, Philips Healthcare and Inspirata, a provider of a cancer diagnostics solution that
digitizes and automates the entire pathology workflow using a unique, solution as a service delivery
model, entered into a joint development agreement to advance digital pathology through the
development of advanced image analytics and automated workflows available as a
solution-as-a-service delivery model. Focusing initially on the needs of US cancer centers, the
creation of improved insights and algorithms would help pathologists in better informed decision
making. Built on the foundation of Philips innovation and experience in clinical informatics, Inspiratas
managed service model would supply the necessary IT infrastructure, services and resources for a
digital program and eliminate capital expenditures related to the transition.
Hence, partnership with Inspirata may help the company in advancing its digital pathology business
in the US.
Aging world population likely to spur demand for healthcare products and services
The populations across the globe are aging rapidly as a result of declining fertility and increasing
longevity. Between 2005 and 2050, half of the increase in the world population will be accounted
for by a rise in the population aged 60 years or over. Furthermore, in the more developed regions,
the population aged 60 or over is expected to nearly double from 245 million in 2005 to 406 million
in 2050. As the global population ages, the demand for healthcare services and more importantly,
the demand for innovative, more sophisticated means of delivering those services increases. Philips
Healthcare, being a global leader in the areas of home healthcare, cardiac ultrasound, cardivasculor

Philips Healthcare
MarketLine

Page 7

Philips Healthcare
SWOT Analysis

X-ray and patients monitoring markets among several others, is well positioned to gain from the
increasing demand for healthcare services.

Threats

Healthcare reform in the US may affect the company's business

Government oversight of and attention to the healthcare industry in the US is significant and
increasing. In 2010, the US federal legislation was enacted to reform healthcare. For the
implementation of healthcare reform measures, various industry participants including medical
equipment companies are asked to contribute fee to the Act. In addition, one of the components of
the new law was a 2.3% excise tax on sales of most medical devices, which started in 2013. The
Congressional Budget Office estimates that the total cost to the medical devices industry could
exceed $20 billion over 10 years. This tax may put increased pressure on medical device
manufacturers and purchasers, and may lead Philips Healthcare's customers to reduce their orders
for products or they may request to reduce the prices in order to offset the tax.
Further, the legislation established the Independent Payment Advisory Board, which will be responsible
annually to submit proposals aimed at reducing Medicare cost growth while preserving quality. The
legislation also permits the establishment of accountable care organizations, a new healthcare
delivery model. Phillips Healthcare's failure to adapt to these changes can have a negative impact
on its business.
Stringent reimbursement rules and regulations
Phillips Healthcare's devices are subject to regulation regarding quality and cost by the US Department
of Health and Human Services (HHS), including the Centers for Medicare & Medicaid Services
(CMS) as well as comparable state and foreign agencies responsible for reimbursement and regulation
of healthcare goods and services. Foreign governments also impose regulations in connection with
their healthcare reimbursement programs and the delivery of healthcare goods and services. The
US federal government healthcare laws apply when the company submits a claim on behalf of a US
federal healthcare program beneficiary, or when a customer submits a claim for an item or service
that is reimbursed under a US federal government funded healthcare program, such as Medicare
or Medicaid. The principal US federal laws implicated include those that prohibit the filing of false or
improper claims for federal payment, known as false claims law, those that prohibit unlawful
inducements for the referral of business reimbursable under federally-funded healthcare programs,
known as the anti-kickback laws, and those that prohibit healthcare service providers seeking
reimbursement for providing certain services to a patient who was referred by a physician that has
certain types of direct or indirect financial relationships with the service provider, known as the Stark
law. The non-compliance of laws and regulations by the company and its officers and employees
could subject it to severe criminal and civil penalties, which in turn could adversely affect its brand
image and business operations.

Philips Healthcare
MarketLine

Page 8

Copyright of Philips Healthcare SWOT Analysis is the property of MarketLine, a Progressive

Digital Media business and its content may not be copied or emailed to multiple sites or
posted to a listserv without the copyright holder's express written permission. However, users
may print, download, or email articles for individual use.