Healthineers launch For Siemens' major medical IPO, lots of growth, but no adventuring

German healthcare giant, Healthineers, will launch Germany’s biggest IPO in over 20 years. CEO Bernd Montag talks about his vision, potential future acquisitions and his management style in an exclusive interview.
Quelle: Bloomberg
The future of health care: A tomography scanner at the Healthineers showroom in Germany.

A large picture of legendary US basketballer Michael Jordan hangs over the desk of Bernd Montag, chief executive of German health care giant, Healthineers. Maybe that is not surprising. Mr. Montag is extremely tall and he too used to play senior-level basketball. And it seems that now, the manager is using the same kind of athletic determination to win, that took him all the way into the national basketball league, in his business life.

Healthineers, a subsidiary of engineering conglomerate Siemens, will be listed on the stock exchange, quite possibly before Easter, and Mr. Montag, 48, plans to make it a slam dunk. In the industry, his main rivals are GE, Philips, Samsung and Canon.

“We can shape the health care system of the future better than any other company,” he told Handelsblatt in an interview. “We’re an unknown giant to the broader public, but already today, 70 percent of all medical decisions in hospitals are based on technologies we have in our portfolio.”

He likens the progress in digital medicine to the automotive sector: Digital innovators started with intelligent parking assistant systems that are now evolving into self-driving cars.

Even if Siemens floats only a minority stake in the €40 billion ($49 billion) unit, the volume of the IPO could be up to €10 billion, making it the biggest offering in Germany in over 20 years.

The company, whose products include X-ray and MRI machines, has been preparing for the big day by pumping out good news for over a year.

In 2017, it announced the setup of a digital “ecosystem” that will offer health care providers online services and advice. It announced a laboratory partnership deal with hospitals in Turkey. And it increased its sales by 3 percent to €14.2 billion in the 2017/18 fiscal year. Its operating return on sales of 18.1 percent makes it the second most profitable division within Siemens behind its Digital Factory unit.

“The health market is expanding due to a global increase in life expectancy and the growing global population. We are very well positioned and very profitable,” said Mr. Montag. “We want to expand this strong position and at the same time seize additional growth opportunities provided by digital change and by the use of artificial intelligence.”

He was set to visit London on Tuesday to convey that narrative to investors. Siemens is expected to sell 15 to 25 percent of Healthineers in March, Reuters reported last week, but in his interview with Handelsblatt Mr. Montag wouldn’t be drawn on the exact timing, merely saying preparations were underway for a listing in the first half of 2018.

16 p15 Siemens sales-01

He was also cagey about what Healthineers plans to do with the proceeds from the IPO. He called molecular diagnostics “an interesting growth area and we’re taking a close look at it.” The company announced the acquisition of Luxembourg-based Fast Track Diagnostics in December.

Asked if Dutch biotech firm Qiagen, with headquarters in Germany, might be an interesting acquisition, Mr. Montag was evasive. “You’re not going to expect me to chat about acquisition targets here and now,” he said. But when pushed, he explained that Healthineers would start slowly.

“It’s clear that we first want to justify the trust of our investors,” he noted. “That means we’ll go on building on our strengths — then we’ll see. We don’t want to be seen as adventurers, who start out by launching a giant acquisition.”

He said he respected medical specialists but he believes that size matters because customers in the health sector were consolidating and needed suppliers like Healthineers, which were capable of covering a wide range of products and services.

“The listing will make us a pure player, a purebred medical technology company,” he said. “We will have greater flexibility — and the means to reach our goals faster.”

He pledged a significant acceleration of growth in the medium term. In medical imaging, Healthineers plans to exceed the market’s projected annual growth of 3 percent, he said. In laboratory diagnostics too, the company’s new Atellica Solution platform would help beat expected market growth of 5 percent.

And with its strengths in imaging and lab diagnostics, Healthineers was well placed to tap into the growing new therapies market, a third pillar for the business which comprises precision medicine and minimally invasive surgery, he said.

Bernd Montag of Healthineers: "You can only succeed if you play as a team."

“Every hour, 240,000 patients around the world are examined with our equipment,” said Mr. Montag. “We want to be the GPS that helps to lead the patient through the medical system.”

Digital innovation and artificial intelligence are one of the five strategic areas Healthineers has defined. “We’re already in a strong position with 30 products that employ the methods of artificial intelligence at their core; we can, and want to, build on that.”

He likens the progress in digital medicine to the automotive sector: Digital innovators started with intelligent parking assistant systems that are now evolving into self-driving cars.

“With us, such assistance systems consist of, for example, software that automatically marks a slipped disc in CT scans. The doctor no longer has to count the discs himself to know where the problem is located. Later on, such a system will also deliver initial suggestions on diagnoses.”

“The aim is to arrive at the digital twin of the body. A digital image, for example, of the heart with which you can simulate what a new pacemaker should look like and what will happen when there’s surgical intervention. That will deliver significant advantages for doctors and patients, and will cost less in the end.”

But it’s not all positive reviews for Mr. Montag. He has been criticized for somewhat of a more abrasive management style. “I grew up as a basketball player and know that you can only succeed if you play as a team,” Mr. Montag replied. “Lose together, win together! Besides, our business is so complicated that no one is clever enough to be the best at everything. You need modesty.”

Some at Siemens have expressed doubt as to whether this former basketballer has what it takes to run a company that could one day join the illustrious DAX index of Germany’s 30 leading blue-chip stocks. But the CEO, who has been at Siemens since 1995 and has run the health care division since 2015, brushes those doubts aside.

“I’m passionate about this company. I joined it as a university graduate. And now I have the good fortune to run it and to be part of the team that will list it on the stock market. This is no time for sensitivities.  This is the moment to look back with pride and look forward with confidence.”

Quelle: Pressebild
Every hour, 240,000 patients around the world are examined with our equipment, the Healthineers CEO says.
(Source: Pressebild)

Axel Höpner is Handelsblatt bureau chief in Munich and Maike Telgheder covers the health care industry for Handelsblatt. To reach the authors: [email protected][email protected]