Philips nabs Carestream unit to boost informatics business

Dive Brief:

Philips announced Thursday it signed an agreement to buy Carestream Health's healthcare information services unit, expanding its radiology informatics portfolio.
The deal will see Rochester, New York-based Carestream transfer 900 employees and its cloud-based enterprise imaging platform to Philips.
Philips envisages the deal augmenting its existing radiology informatics technology offering and strengthening its presence outside of North America.

Dive Insight:

Philips has made a concerted push into informatics without generating a significant near-term return. Healthcare informatics, which includes IT related to radiology, accounted for 15% of sales at Philips' flatlining connected care unit in 2018, while posting low-single-digit growth in 2017 and 2018.

That low growth has comes as Philips invests in the unit. Philips highlighted investment in healthcare informatics as a reason its headcount grew by 331 people last year, adding that it continues to make "substantial investments" in R&D at the broader connected care business. Connected care R&D spending as a percentage of unit sales was 12% last year, two points above the company average.

The acquisition of the Carestream business could improve Philips' fortunes. Notably, the takeover will give Philips a way into markets it is yet to fully penetrate. Last year, North America accounted for 58% of sales at the connected care unit. Carestream, in contrast, is strong in Latin America, Europe and Asia, according to Philips.

Philips thinks the deal will improve its portfolio, too. Carestream, which will retain its other units including medical imaging, developed its cloud-based system to enable organizations to consolidate, manage and share images. Philips offers its own imaging data management technologies but thinks the acquired assets will be complementary.

"The combination of our successful innovations in imaging system platforms, workflow optimization and artificial intelligence-enabled informatics, combined with Carestream’s cloud-based enterprise imaging informatics platform and complementary geographic footprint will provide a solid foundation to deliver on the promise of precision diagnosis," Robert Cascella, chief business leader precision diagnosis at Philips, said in a statement.

Philips expects the deal to close in the second half of the year. Neither party has disclosed the financial terms of the takeover.