GE Healthcare supply chain issues: like “Whac-A-Mole”, to last until 2022


Dive brief:

  • GE’s care unit on Tuesday reported that third-quarter revenue of $ 4.3 billion declined 6% organically due to continuing industry-wide supply chain shortages.
  • The supply chain affected by the conglomerate’s healthcare division was the largest of all business units, GE executives told investors during Tuesday’s earnings call, adding they expected that the disruptions last at least until the first half of 2022.
  • Larry, CEO of GE Culp described the company’s supply chain challenges as the worst in the CEO’s career and said the healthcare unit will continue to proactively manage procurement and logistics. “It’s really like playing Whac-A-Mole,” Culp remarked. Supply chain issues come as GE Healthcare CEO Kieran Murphy is expected to be replaced end of 2021 by Peter Arduini, CEO of Integra LifeSciences.

Dive overview:

GE Healthcare is the latest medical technology take a hit in the supply chain, after the publication of AdvaMed at the end of last month a study showing that the current global semiconductor chip shortage is causing delays, order cancellations and other supply disruptions for medical device companies.

The medical technology lobby is pushing the Biden administration, Congress, and semiconductor manufacturers to prioritize supplying chips to medical device makers over other industries that use the same components. ResMed cited the semiconductor shortage as the reason it will not be able to meet growing demand for its sleep apnea products created by the Philips recall.

“Based on the broader industry trends, we expect the company-wide pressure to continue at least into the first half of next year,” Culp told investors. Tuesday. “I’m not sure we’re still in a place where we would say things are stable.”

GE is trying to address supply chain disruptions by “activating dual sources, qualifying alternative parts, redesigning and requalifying product configurations and increasing plant capacity,” according to Culp.

The CEO said he wanted the healthcare unit’s third-quarter earnings announcement “not to be so much of a cover-up” due to supply chain issues. However, Culp maintained that the division is a solid company and was optimistic about its long-term outlook.

Despite challenges in its supply chain, GE Chief Financial Officer Carolina Dybeck Happe told investors on the call that GE Healthcare’s organic margins are now expected to increase by nearly 100 basis points this year because the company “proactively manages supply and logistics”.

As GE’s third quarter healthcare systems (HCS) orders grew over 20% organically year-over-year, posting double-digit growth in imaging, ultrasound solutions and Life Care, HCS organic revenues decreased 8% more than offsetting 8% organic growth in pharmaceutical diagnostics. .

GE Healthcare announcement last month he will acquire BK Medical from a private equity firm Altaris Capital Partner for $ 1.45 billion to expand its $ 3 billion ultrasound business to surgical visualization, used to guide surgeons in minimally invasive and robotic surgeries.

While the acquisition of BK Medical is “admittedly small” according to Culp, the CEO said it was “a step forward as we advance our mission of precision healthcare,” GE seeking to extend its diagnostic portfolio to surgical and therapeutic interventions. The transaction is expected to be finalized in 2022.

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