The paragraph is about GE HealthCare's Third Quarter 2024 Earnings Conference Call. Carolynne Borders, from Investor Relations, introduces the call, mentioning both GAAP and non-GAAP financial results will be discussed. Peter Arduini, President and CEO, reports that the company achieved 1% organic revenue growth, aligning with expectations, and saw strong performance in the U.S. and growth in Pharmaceutical Diagnostics. Excluding China, reported sales grew by 5% and orders by 4%, indicating a healthy capital equipment market outside China. They also noted strong growth in backlog mainly due to multiyear service agreements, which enhance revenue predictability with high margins.

The paragraph outlines the company's strong sales driven by enterprise deals for imaging products like PET and CT systems in the U.S., essential for diagnosing chronic diseases. It highlights ongoing partnership efforts as part of their growth strategy, as well as consistent high revenue growth from PDx. In China, growth is temporarily slowed due to delayed stimulus funding and purchasing. The company focuses on cost optimization and margin expansion, achieving strong EBIT margin and EPS, and raising guidance. It emphasizes innovation, particularly in Theranostics for cancer, with advancements including a partnership in Europe with University Medicine Essen.

The paragraph discusses the company's financial performance for the third quarter of 2024. They reported revenues of $4.9 billion with 1% organic revenue growth, which aligns with their expectations. In contrast, their organic revenue growth was 6% during the same period in 2023. Market challenges in China reduced total sales growth by approximately 400 basis points, but global sales growth, excluding China, was 5%. Organic orders growth was 1%, driven by strong performance in the U.S. and emerging markets. Excluding China, this growth was approximately 4%. The company's book-to-bill ratio was 1.04x, with a backlog of $19.6 billion, showing sequential improvement. Their adjusted EBIT margin increased to 16.3%, leading to a 15% year-over-year rise in adjusted EPS to $1.14. Tax benefits from 2023 filings also positively impacted their results.

In the third quarter, the company reported a $651 million free cash flow, a $81 million increase from the previous year. The adjusted gross margin improved by 150 basis points, mainly due to initiatives in cost productivity, sales price increases, and higher margin new product introductions, specifically digitally-enabled products like AIR Recon DL and Sonic DL in MR, which contributed to higher margins. Over $300 million, accounting for about 6.5% of sales, was invested in R&D, focusing on AI and cloud technologies. The company is close to exiting most Transition Services Agreements (TSAs) and aims to optimize costs through IT initiatives, such as eliminating duplicate applications, which will save approximately $4 million annually. Despite facing volume pressures, the company is managing discretionary spending carefully.

The company has restructured its reporting segments as of July 1, with Image Guided Therapies now part of the newly named Advanced Visualization Solutions segment. This change aims to align with future clinical trends and improve business outcomes. In the Imaging segment, organic revenue fell by 1% due to challenges in the China market, partially offset by strong performance in the U.S. EBIT margin improved due to productivity and positive pricing. Advanced Visualization Solutions saw flat organic revenue, with U.S. growth offset by declines in China, and a decrease in EBIT margin due to unfavorable mix, despite productivity improvements. Patient Care Solutions experienced a 2% year-over-year organic revenue increase and a slight EBIT margin improvement, aided by productivity enhancements and reduced backlog. Overall, the company is focusing on productivity, standardization, and new products to counteract market headwinds and inflation.

In the Pharmaceutical Diagnostics segment, the company achieved 7% year-over-year organic growth, driven by strong procedure volumes and an EBIT margin of around 31%. They are optimistic about further growth and margin enhancements, boosted by a CMS reimbursement proposal that could increase patient access to diagnostic scans in the U.S. hospitals. The proposed rule may accelerate PET diagnostics utilization and enhance penetration rates. Cash flow performance was strong, with $651 million in free cash flow, an increase of $81 million from the previous year, thanks to improvements in working capital and accounts payable processes, as well as significant inventory savings through lean practices. Looking ahead, they anticipate strong free cash flow in Q4, which is typically their highest revenue and cash-generating period.

The company anticipates its full-year 2024 organic revenue growth to align with the lower end of the 1% to 2% guidance due to ongoing softness in the Chinese market. As a result, the benefit from China's stimulus is expected to be limited until mid-2025. Despite this, the company has increased its adjusted EBIT margin guidance to 15.8% to 16% and expects an adjusted tax rate toward the lower end of 23% to 25%, aided by tax incentives in the third quarter. The foreign exchange impact on revenue is estimated to be minimal at less than 0.5%. The company has also raised its adjusted EPS guidance low-end by $0.05 to a range of $4.25 to $4.35 per share, indicating 8% to 11% growth. The expected free cash flow remains around $1.8 billion. Additionally, the company introduced Flyrcado (flurpiridaz), an FDA-approved F-18 PET myocardial perfusion imaging tracer for coronary artery disease, set for U.S. commercialization in early 2025. Flyrcado is noted for its improved diagnostic accuracy and longer half-life compared to existing tracers.

The paragraph highlights the company's growth strategy and future prospects. It outlines their expectations for significant revenue from myocardial perfusion imaging procedures, particularly through PET NPI, anticipating over $500 million annually once infrastructure improves. There's excitement around Flyrcado and other radiopharmaceutical advancements, which, paired with reimbursement changes, could enhance personalized care. The company is investing in AI and cloud solutions to help healthcare providers manage data overload and inefficiencies. Their new offering, CareIntellect, uses generative AI to consolidate patient data, improving care delivery. Recent announcements at a tech event in Las Vegas emphasized their commitment to innovation. They reported positive quarterly sales and order growth, especially strong in the U.S., despite a 5% sales and 4% orders growth, excluding China, indicating a strong capital equipment market.

The paragraph discusses the company's confidence in its business fundamentals, supported by innovation, pipeline, and strong backlog. The team is focused on improving customer experience and productivity, leading to strong financial results. As they approach the final quarter, they have positive expectations for 2024, considering China market dynamics and aiming for continued financial growth through operational focus. During a Q&A session, Robbie Marcus from J.P. Morgan asks about margins and their future potential. Jay Saccaro responds, highlighting the well-performing margins, with EBIT margin up 70 basis points and gross margin up 130 basis points year-to-date, despite lower-than-expected sales volumes. The focus remains on pricing as predicted.

The paragraph discusses the company's efforts to manage costs and improve margins amid a challenging revenue environment. They implemented successful variable cost productivity and general savings initiatives, aligning their cost structure to support earnings. Looking forward, they plan to discuss their long-term margin strategy at an upcoming Investor Day, emphasizing a continued focus on pricing and productivity. As they conclude a transition service agreement, they will pursue new initiatives and benefit from R&D investments, launching differentiated products that enhance both revenue and margins. Despite progress, they acknowledge there is still work to be done on achieving their desired margins.

The paragraph discusses the slow recovery of the China market, which saw a decline of over 20% in the past quarter, affecting not only the company but its competitors as well. Peter Arduini explains that the slow recovery is partly due to delayed stimulus funding coordination, leading to postponed purchasing decisions by customers. Clarity is emerging regarding program details across China's 31 provinces, and the company maintains a strong local presence to stay informed. However, the market is expected to see limited improvement through the first half of 2025. Arduini outlines their strategy for addressing these challenges, particularly in capital equipment, noting the importance of fund setup and release clarity.

The paragraph discusses the challenges in the medical product sales process, highlighting a slow recovery in sales expected by the first half of 2025. Despite current hurdles, primarily in the Chinese market, the demand remains strong. Jay Saccaro elaborates on the company's financial guidance, noting a reduction of $400 to $600 million due to decreased sales in China, with an expected year-end decline in sales by high teens percentage. Overall, the company maintains a pragmatic outlook and anticipates benefiting from future stimulus but is cautious about predicting its timing.

The paragraph discusses expectations for economic recovery in China by 2025, noting that limited benefits from stimulus are anticipated in the first half of that year. The company is closely monitoring the market and expects to be well-positioned once the stimulus impacts the market. Meanwhile, they report significant growth in the U.S. and other Southeast Asian markets and expect to continue growth in Europe. At an upcoming Investor Day, the company plans to discuss future prospects in radiopharmaceuticals, new products in new categories, and advancements in digital and AI. A question from Ryan Zimmerman shifts the focus to pricing strategies for Flyrcado compared to Rubidium 82, with an indication that Flyrcado is priced at about 2 to 3 times that of Rubidium 82.

Peter Arduini discusses the potential pricing strategy for a new medical product, emphasizing its superior specificity, sensitivity, operational capabilities, and economics compared to existing PET agents like ammonia or rubidium. While specific pricing details are not yet available, he suggests the product warrants a premium and outlines ongoing efforts to secure favorable reimbursement from CMS and other payers. The product is expected to receive a multi-year pass-through status, which could enhance its financial prospects. Arduini highlights the innovation's potential impact on myocardial perfusion studies, noting that these have not seen significant advancements in some time. He points out that approximately 6 million such studies are conducted annually, requiring two doses per patient. Despite challenges, the product is viewed as a potential game-changer for patient care.

The paragraph discusses the economic value of different product doses and the progress towards launching a new product by late Q1, with clarity on reimbursement. Ryan Zimmerman asks about price assumptions and durability for 2025. Jay Saccaro responds that the company has seen positive sales pricing aligned with expectations and is optimistic due to new product development driven by significant R&D investments. These new products are expected to support customer pricing strategies and improve margins. Peter Arduini highlights the organization's efforts, particularly in the U.S., to help customers understand the return on investment as their current offerings are at full capacity.

The paragraph discusses the financial decision of purchasing a new product, which may initially cost more but offers long-term value and features beneficial for specific medical fields like cardiology and oncology. The company aims to enhance the value proposition and improve gross margins. During a Q&A session, Joanne Wuensch inquires about the infrastructure required for Flyrcado, a PET scanner agent, to reach a projected $500 million contribution, and asks for updates on Vizamyl. Peter Arduini explains that Flyrcado is used primarily in oncology and is starting to expand into cardiac centers. The infrastructure for such expansion involves more than just structural elements, possibly including human resources and other factors. Jay is expected to address the update on Vizamyl.

The paragraph discusses the company's strategic opportunities in expanding their cardiology infrastructure through the acquisition of PET systems, which could lead to additional capital equipment sales alongside their radioisotopes. The potential revenue is significant, estimated over $0.5 billion, though full conversion could yield much more. They express optimism about the economic and patient outcome benefits of their products, specifically mentioning Flyrcado and the robust growth of Vizamyl sales in the U.S., nearly doubling quarter-over-quarter. Their approach in Alzheimer's care focuses on supporting the entire treatment continuum, and they anticipate accelerated progress following a CMS ruling. The company remains excited about long-term opportunities and plans to discuss these at an upcoming Investor Day.

Jay Saccaro discusses the positive impact of upcoming reimbursement changes on innovative products in their portfolio, highlighting that these changes will allow products to be reimbursed at higher values. This could lead to a broader use of products like DaTscan for Parkinson's and Cerianna for breast cancer due to improved economics. These products have higher gross margins compared to others, which is beneficial for the company's portfolio. Joanne Wuensch thanks Jay, and then the operator introduces a question from David Roman of Goldman Sachs, who expresses gratitude for the detailed disclosures on business segmentation.

The paragraph discusses GE's pharmaceutical diagnostics business, focusing on its capability to operate across a range of products, particularly in the radiopharmaceutical sector. Peter Arduini emphasizes the complexity of this business, which involves delivering radioactive agents requiring specific infrastructure and expertise. He highlights GE's proprietary radiopharmaceutical portfolio, which includes products for oncology, neurology (such as Vizamyl for Alzheimer's and DaTscan for Parkinson's), and cardiology (like CERDAS). Arduini also mentions the challenges posed by the reimbursement environment in the U.S.

The paragraph discusses the potential for advancements in imaging equipment and technology, specifically mentioning products like PET, PET/CT, PET/MR, and the StarGuide SPECT camera, which improves study efficiency in Theranostics. It highlights the integration of digital solutions and AI capabilities via a recently acquired company, MIM, to enhance patient dose management and product effectiveness. GE HealthCare is positioned as a provider of comprehensive solutions, leveraging both commercial and technical expertise to assist customers in implementing these technologies effectively. The conversation then shifts briefly to mention future financial guidance.

The paragraph discusses financial considerations for the upcoming year, including the impact of China's economic stimulus, increased R&D expenses, and the management of Selling, General, and Administrative (SG&A) expenses. It is noted that R&D spending has been growing faster than sales but is expected to align more closely with sales growth in the future. SG&A expenses, specifically incentive compensation, are variable and impacted by sales performance. The expectation is that there won't be a substantial one-time increase in expenses next year due to this year's reductions. The discussion is part of a dialogue between Jay Saccaro and David Roman, with the anticipation of more comprehensive financial guidance being provided in February. Larry Biegelsen from Wells Fargo is also involved in the conversation, looking to follow up on these points.

The paragraph discusses the outlook for GE HealthCare in China and the broader market in 2025. Jay Saccaro stresses the uncertainty and volatility in the Chinese market, which makes it difficult to provide specific guidance for 2025 at the moment. Despite the current challenges, the company maintains confidence in achieving mid-single-digit organic revenue growth in the midterm. GE HealthCare reports strong margin performance in 2024 and expects positive trends to continue into 2025. While short-term predictions are tough, the long-term view of China as an attractive market remains positive due to the company's longstanding presence and manufacturing history in the region.

The paragraph discusses a company's conservative approach to guidance, focusing on margin expansion despite varying revenue outcomes. Peter Arduini mentions an upcoming Investor Day in November, where they will outline three-year growth plans, driven by the NPI pipeline, digital and AI advancements, and radiopharmaceuticals. These initiatives aim to enhance their global market presence, particularly in Western markets where precision medicine is growing. Jay Saccaro confirms that Q4 organic growth is projected to slightly exceed 2%, following a third quarter that met expectations at around 1%.

In the fourth quarter, the company expects a similar or slightly higher increase in revenue compared to last year's $400 million increase from the third to the fourth quarter. This growth is anticipated due to the continued strength in their PDx and service businesses, particularly in the U.S. market. The company analyzes conversion of backlog and recurring revenue to estimate required sales and installations. About half of their revenue is from recurring sources, with a strong line of sight in this area. The remaining revenue is equipment-related, with over 75% secured from backlog. The company expects similar conversion rates from orders to sales as in the past, projecting roughly 2% revenue growth for the fourth quarter.

Vijay Kumar asks Peter Arduini about the potential for Flyrcado to significantly increase the number of NPI procedures utilizing flurpiridaz, noting its benefits for patients, hospitals, and the supply chain. Peter agrees that the necessary components are in place but points out that the availability of PET systems in the right locations is the major hurdle. Even if customers order these systems soon, it could take six to twelve months for installation. Over a three to five-year horizon, a higher conversion rate is possible, but cautious optimism is warranted. Vijay also inquires if Flyrcado could drive demand for PET systems and if GE HealthCare, particularly with its new AI product for MRI systems, could gain a stronger position in the market. Peter agrees, suggesting that Flyrcado could indeed drive growth in the PET system market and potentially strengthen GE HealthCare's overall market position.

The paragraph discusses advancements in PET imaging, highlighting a shift from the generic FDG tracer to more personalized, disease-specific tracers. This innovation is expanding PET applications beyond broad oncology to targeted neuro and cardiovascular procedures. The speaker expresses excitement about the potential impact of new diagnostic and therapeutic agents on the field, mentioning an upcoming discussion about their molecular imaging pipeline. They credit their scalable and distinctive platform, capable of early evaluations, which sets them apart in the market. The conversation is interrupted by technical issues during a Q&A session, with Sezgi Ozener attempting to ask a question but not being heard clearly, leading the moderator to move on due to time constraints.

During a conference call, Navann Ty from BNP Paribas asked about the progress of operations in China and the preparation for launching Flyrcado in the U.S. markets. Peter Arduini responded that in China, they are in the initial stage where activity is beginning, but funds and tenders have not yet been released. Regarding Flyrcado, they have received FDA approval and are working on reimbursement processes in the U.S. and other countries, with plans to commercialize by late Q1 if things proceed as expected. The call concluded with a reminder of the upcoming Investor Day at NASDAQ in New York on November 21st.

This summary was generated with AI and may contain some inaccuracies.