GE Healthcare (NYSE:GE) CEO John Flannery, who oversaw more than $26 billion in deals during his tenure as the conglomerate’s business development leader, is reportedly looking to a different playbook for growth at the healthcare business.
“When we look at the basic position of the company, we like the portfolio,” Flannery told BloombergTechnology. “So my mandate right now is to get the earnings growth going again, and there’s a lot to just better managing the portfolio we have, align it more with customers and outcomes, for a better margin rate.”
In March, Flannery said that GE Healthcare is looking to swing an operating margin slump to a 2% increase this year, with a goal of 18% by the end of 2018. The imaging and healthcare IT business expects to post operating margins of 16.7% this year, up from 16.3% last year, Flannery said during a March 11 investor presentation.
GE Healthcare plans to triple its cost-cutting measures to fuel the gains, plus contributions from new products and digital services, he said during the presentation.
“We don’t feel the need to do a major acquisition or divestiture and I don’t want the business distracted from growing earnings,” Flannery said at the time. “We have 5-years-plus of not growing earnings. We’re not going to be a party to that anymore.”
GE Healthcare’s sales and profits slid for both the 4th quarter and full-year 2015, with profits down -8.0% to $938 million on sales of $4.97 billion during the 3 months ended Dec. 31, 2015. The top line fell by -3.1% compared with Q4 2014. Full-year profits were $2.88 billion for the healthcare business on sales of $17.64 billion, representing declines of -5.4% and -3.6%, respectively, compared with 2014.
The business will look to the digital unit for 30% to 50% growth for the GE Health Cloud offering for its imaging devices, Flannery told Bloomberg. GE Healthcare wants to integrate installed systems with high-margin software packages to fuel growth for the segment, he said.
“We are really trying to move from being just a technology provider to being a partner with our customers,” Flannery said.
And forget drug-device combinations – Flannery said he wants to ship entire drug factories like the 1 GE Healthcare sold in Wuhan, China, last year. The plant, shipped from Germany last September in 62 containers, took just 8 days to assemble, the news service reported.
Flannery said a pre-fabbed biopharm facility like the Wuhan project is likely to generate as much as $100 million in sales over its lifetime, not including the consumables GE Healthcare will sell to the plant’s operators. There are at least 2 such projects in the pipeline, he told the newswire.
“There’s a lot of potential for this in China,” Flannery said. “We have a very strong pipeline of interest.”
