Medical Device Daily Executive Editor

SAN FRANCISCO – Royal Philips Electronics (Best, the Netherlands) has made big strides in the medical products sector since its 2001 acquisition of Agilent Technologies' (Palo Alto, California) holdings in the sector, now operating under the Philips Medical Systems (Andover, Massachusetts) banner.

So where does Paul Smit, senior vice president for strategy and business development for Philips Medical, see the company going as it moves forward?

Smit delved into the past, present and future during a "Movers and Shakers Live!" session at last week's Frost & Sullivan Medical Devices Executive Summit, but "bigger" and "more" were a major part of his comments at the Hyatt at Fisherman's Wharf.

Responding to a question about what the future holds for Philips, Smit said, "We'll be a significantly larger company, with a much broader [product] portfolio, and will be working with more companies," the latter a reference to the company's proclivity for establishing alliances as a key part of its business strategy.

"We partner with a lot of companies," he said. "If you can work with us," he told the representatives of smaller firms in the audience, "you can advance."

Addressing global growth, he noted that while "70% of the world's healthcare spending at present is in five countries," some of those dominant positions are changing, and Philips' broad international scope is a means of being prepared for growth elsewhere.

For instance, while Japan, at present, is seen by most as the world's second-largest healthcare market, trailing only the U.S., Smit said, "by the end of this decade, China will have passed Japan." And Philips has been involved in China since the 1930s, he said, adding: "We have one of the oldest relationships with China" among "outside" companies now doing business there.

That's an example of the international reach of Philips Medical's parent company, which he said has local operations in 120 countries. For its part, Philips Medical has or-ganizations in 65 countries. "If the market is large enough," Smit said, "we tend to have a lot of people there."

Another part of the company's global strategy is to "work with governments to help build infrastructures. In Africa and India, for example, we have helped them build hospitals."

The idea is to anticipate need. "When a country is ready for the next wave [of healthcare development], we think it's important for us to be there," Smit said.

Another strategic direction for Philips is in helping move healthcare from the hospital to other settings, including physicians' offices and where possible, into the home. "We think that by extending care into the home, that will save healthcare dollars," he said.

Referring to the string of acquisitions that made Philips a major player in the imaging sector, Smit noted: "The consolidation of the imaging sector started in the mid-1990s, and we decided we wanted to be part of it."

It did so by acquiring Marconi Medical Systems (Cleveland) in the fall of 2001 after earlier nabbing ATL Ultrasound (Bothell, Washington) and ADAC Laboratories (Milpitas, California).

Even though the three biggest players in the sector – GE Healthcare (Waukesha, Wisconsin), Siemens Medical Solutions (Malvern, Pennsylvania) and Philips – do 70% of the business, Smit said "there's room for growth," adding: "We think we can gain [market share] by offering more integrated systems."

He cited cardiology and oncology as disciplines within which Philips has opportunities for growth of its imaging business.

If it is going to gain market share at the expense of other large competitors, Smit said his company would have to build on its "unique value proposition." In considerable part, he said, that is a matter of responding to its customers' needs.

"Our customers tell us we listen better," he said. "We're sort of the new kids on the block, so we have to listen better."

Smit added that Philips also is "very focused on the physician and the patient, so physicians who are focused on patients are a good fit with us." That, he said, "is part of our corporate culture."

He said the longevity of Philips' sales force is an important aspect of its value proposition. "Our sales force tends to be with our customers for a long time," Smit said, "so they build long relationships."

Another focus, he said, is that "we try to make our products easy to use." Imaging studies "produce a mind-boggling amount of data," he said, "so we concentrate on how that system is being used, [and] how that use fits into the care cycle."

In developing new imaging products, Smit said, "you need to put yourself into the shoes of the physician."

Asked about the future of molecular imaging, the newest imaging modality, he noted that a "large portion of NIH [National Institutes of Health] research spending is going toward biomarker discovery," which bodes well for molecular imaging development. However, he said Philips thinks the timing of it gaining widely accepted status "may be a little later than others think."

As part of the NIH-sponsored studies, "we're putting our equipment into those [research] centers," which Smit said is indicative of how Philips likes to "work with key academia where these innovations are being created."

As a corporate strategy, he said, "we try to be there very early, and then decide whether to get into it" once the company sees where such research is leading.

Noting that "healthcare is very slow to adopt new technologies," Smit said, "in 10 years' time, a lot of us will have a genomic fingerprint." As a society, "we'll have targeted medicine where imaging will be able to tell if medicines are working."

However, he warned that "for that to happen, we need to cut [healthcare] costs or we won't have the money to do this" kind of medicine.

Such change really is up to the people, Smit said. "The populace can force healthcare to change. Providers and even the government can't do that – only external pressure."

Such pressures "will force change," he said. "This trend will not happen overnight, but it clearly is there. It is going to happen."