If anyone can? Canon bids most for Toshiba

Toshiba’s medical technology division looks likely to fall to a Japanese conglomerate with an even smaller medtech unit than Toshiba itself. Canon has outbid the many other companies interested in purchasing Toshiba Medical Systems with an offer rumoured to be worth more than ¥700bn ($6.2bn).

Canon does not make sales of its medical devices public but it is far from a major medtech player. It has ambitions to grow its healthcare technology sector, however, and if Toshiba decides to accept the offer, Canon’s medical sales will expand hugely.

In its 2014 annual report Canon said it was focusing on the medical equipment field, which it called “one of its next generation core businesses”. It said it was aggressively promoting sales of its digital radiography systems and ophthalmic equipment. The company’s core camera business has suffered as mobile phone cameras become more advanced.

But its medical equipment makes up just a fraction of Canon’s “Industry and others” business unit, which also manufactures flat panel display lithography equipment, semiconductor lithography equipment and CCTV cameras. Sales for this business unit increased 6.4% year on year to nearly ¥400bn ($3.5bn) in 2014 – 10% of Canon’s total revenue – but exactly how much of that is medical technology remains opaque.

Whatever the figure, it will be dwarfed by Toshiba’s medtech sales: Toshiba Medical Systems booked ¥405bn of business in the last financial year.

Transformative

Another illustration of this disparity, albeit an imperfect one, is given by a comparison of the two groups’ FDA approvals. Neither has secured any premarket approvals, which is unsurprising given the highly commoditised nature of medical imaging equipment.

Instead both have used the 510(k) clearance pathway to reach the US market. Toshiba has had 232 devices cleared for sale by the FDA, almost all imaging systems. Canon’s are more mixed, with two-thirds diagnostic imaging and a decent chunk made up by ophthalmic devices.

Toshiba: five times as many 510(k)s than Canon
Company Sector Number of 510(k) clearances
Toshiba Diagnostic Imaging 230
Toshiba Cardiology 1
Toshiba Dental 1
Canon Diagnostic Imaging 33
Canon Ophthalmics 14
Total Toshiba 232
Total Canon 47

Canon’s imaging portfolio will therefore be transformed if the deal goes ahead. And it seems willing to pay for the privilege: bidding was reportedly heated and the ¥700bn price tag is far in excess of the ¥450bn figure circulating last week (Medtech for sale: Toshiba and EQT set out stalls, March 2, 2016).

The companies have until the end of next week to agree terms of the acquisition; failing that the exclusive negotiation rights Toshiba has granted Canon lapse and other bidders, believed to be led by Fujifilm, will have another chance.

If, on the other hand, its bid is successful Canon will suddenly find itself the fourth biggest seller of diagnostic imaging systems, behind Siemens, GE and Philips. Philips’ medtech unit has grown fast over the past year – a post-Toshiba Canon could end up with a fight on its hands.

To contact the writer of this story email Elizabeth Cairns in London at elizabethc@epvantage.com or follow @LizEPVantage on Twitter

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