Siemens Healthineers completes Varian acquisition

Siemens Healthineers officially completed the acquisition of Varian Medical Systems on April 15th 2021. The two companies constitute a combined annual revenue of around $20bn, and there’s little doubt that this decision will have raised eyebrows amongst competitors in the Oncology segment when it was announced back in August 2020.

With the process now complete, in this article we explore how this move will shape the Oncology IT landscape going forward and our expectations for the new expanded Siemens Healthineers.

Key Takeaways:

• Together Siemens-Varian have arguably the broadest in-house product portfolio focused on oncology precision medicine of the major health technology incumbents. Looking ahead, we expect the firm will focus on the use of AI-enabled and digital offerings to guide individualised patients throughout the cancer journey.
• The acquisition is unlikely to signal a wider move in the market towards “closed” or proprietary software provision as providers and regulators increasingly champion the need for interoperability. However, vendors in the market will see increased competition as the newly formed company leverages its formidable sales channels across hardware, software and services.
• Siemens existing relationships with leading healthcare providers for long-term contracting across multiple product sectors should open up C-suite discussions and deals for the Varian Oncology IT portfolio, a route typically harder for a vendor with a singular clinical focus. This may also enable the company to reclaim some of its lost market share in medical oncology information systems from EMR vendors. 
  

Building Better
Siemens and Varian have been working together since 2012, when the “EnVision” partnership was first established between the two vendors. Solutions such as ARIA® connectivity, which enabled Varian’s IT networks to integrate seamlessly with Siemens discontinued linear accelerators, were co-developed. The partnership initially positioned both companies positively, by providing enhanced sales opportunities for new Varian hardware and software deals once linear accelerator replacements were due. This past familiarity should also translate to a relatively smooth transition going forward, though as ever with large corporate mergers of this scale, it will take time for the two firms to realise the benefits of the deal.

Both vendors will be keen to exploit the merger allowing Varian access to Siemens’ much larger operational and sale networks particularly a broader reach across emerging markets where Siemens already has an established presence, especially in emerging Eastern Europe, Middle East, Africa and Asia Pacific markets. In more established markets, the firms are also complementary, with little overlap of Siemens’ own installed base of established customers across Europe and Varian’s strong customer base in the US.

Homing in on Emerging Markets
Integration across workflows also leads the way towards clinical pathways and tumour board development, and the company would be very well positioned to integrate information from across products. Competitors in this space are currently immature and often struggle to provide the use-case for their technology. The key challenge in this market therefore, would be replacing existing teleconferencing platforms like Microsoft and Zoom, which have no specialist capabilities but seem to have been adopted widely throughout last year as a COVID-19 solution to continuation of services. These platforms however do not offer benefits to workflow, nor do they facilitate access to a wide range data required for oncology care. Siemens-Varian would therefore be much better positioned to integrate and curate this information easily for providers compared to start-up vendors.

However, we do not think this focus on end-to-end oncology management signals a wider move in the market towards “closed” proprietary software provision. Providers themselves see the benefit in interoperability and vendor neutrality and are increasingly frustrated by complex integrations. Oncology sits at the convergence of many major departmental and enterprise IT systems and historically seen a healthy demand for neutral best-of-breed solutions, such as those provided by vendors like RaySearch Laboratories. RaySearch Laboratories itself has begun some progress in larger academic and cancer centers, through focusing on the provision of AI-enabled software to improve provision across a range of parameters. Navigating this balance between best-of-breed capability and singular platform interoperability and customer retention will be a challenging tightrope to navigate for the firm in Oncology, let along across broader acute provider diagnostics. However, expertise and a strong position in many of the core product segments should provide the firm with an advantage in terms of navigating core customer transition from standalone point solutions towards broader integrated platforms.
MB Bureau