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Siemens Healthineers have announced plans to reduce the size of its diagnostic testing division, which promises a “leaner organisation and footprint” by 2025 in the wake of supply chain cost increases, device shortages and rising inflation, along with revenues lost to the COVID lockdowns. Siemens has a portfolio which encompasses lab instruments and assays, as well as automation and IT services. The company has set the goal of saving €300M over the coming years, which is roughly $301M US, as well as aiming for “significant complexity reduction” within its various product lines. “In diagnostics, we have come to the conclusion that the dramatically changed macroeconomic environment demands immediate and comprehensive measures,”

CEO Bernd Montag said during the company’s fourth quarter earnings call for its 2022 fiscal year. Those “external headwinds” have “materially outweighed the significant operational improvements we have achieved,” Montag added. “The pandemic has shown that our diagnostics business can quickly adopt to unprecedented circumstances by building up an antigen test business, which delivered 1.5 billion euros of revenues in fiscal year ’22 alone,” Montag said. “Building on these successes, we will take decisive actions to compensate for the adverse external factors I mentioned.” Staff reductions will also come into effect as Siemens abandons what Montag describes as “less relevant” geographic markets, focusing instead on more strategic regions.

This was echoed in a report from a Reuters, which claimed sources close to the company had informed them of these job cuts and the abandoning of certain locations. Siemens also lowered its revenue estimates for its diagnostics division, currently forecasting between 3% and 5% growth in revenue per year until 2025, where it was previously expected to be between 4% and 6%. Despite the fact that Siemens Healthineers hoped to save €300M per annum through reductions, to achieve that goal, the medical tech giant will need to incur major one-time costs, which could total between €350M to €450M, according to Montag.

Another aspect of the company’s plan is hinged around the delay of the launch of Siemens’ Atellica C1 1900 lab testing hardware. Though still under development, it was unveiled earlier this year, aiming to serve as a more standardised replacement for a variety of instruments in the company’s portfolio. “Our portfolio complexity has been a particular burden in the current challenging supply chain environment,” Montag said. “The CI 1900 is a very important piece of the puzzle. It will help us simplify our setup and run a leaner and more clinically focused R&D operation.”

© Siemens Healthineers AG