Olympus to reorganize for growth

Recently, Olympus Corporation is about to undergo a comprehensive restructuring of its business operations. Company representative executive officer and former CEO Yasuo Takeuchi announced the changes during the release of fiscal 2025 third-quarter results. Takeuchi took over on an interim basis after Stefan Kaufmann pleaded guilty to drug charges in December. The reorganization is designed to improve the company's operational efficiency and further focus on patients and customers.

Transformation is imminent

In a recent webcast, Olympus Group shared its insights on global economic trends and the latest progress of the company's business transformation. According to Olympus analysis, in the nine months ending on December 31, 2024, the global economy is continuing to recover. This positive trend reflects that the world's major economies are gradually returning to normal after experiencing a period of challenges. However, Olympus also reminded that despite the obvious signs of recovery, the global economy still faces multiple risks.

In Europe and the United States, the high interest rate environment has become a major challenge for business operations, increasing financing costs and possibly inhibiting investment and consumption. At the same time, the continued downturn in China's real estate market has raised concerns about its economic stability, while the uncertainty of U.S. policy trends and the turmoil in the Middle East have also added uncertainty to the global economic outlook. In addition, the Japanese economy is also facing considerable pressure under the impact of exchange rate fluctuations. As a result, Olympus stressed that although the business environment has improved, the global economic outlook still requires close attention.

Against this backdrop, Olympus Group is accelerating its transformation into a global medical technology company. Since announcing its corporate strategy in May 2023, Olympus has identified three major priorities: "Patient Safety and Sustainability," "Innovation for Growth," and "Productivity Improvement." The setting of these strategic goals aims to ensure that the company remains competitive in a complex and ever-changing market environment while achieving sustainable development.

In a webcast, Mr. Takeuchi, head of Olympus Group, announced a series of changes aimed at improving the company's operational efficiency and organizational flexibility. "Today, I want to announce some changes to achieve a more efficient, patient- and customer-centric structure," he said. To achieve this goal, Olympus will increase its focus on each business unit and establish direct links between global management and local sales teams to promote collaboration and strengthen the alignment of global and regional strategies.

As a key part of the restructuring plan, Olympus merged the Endoscopic Solutions Division (ESD) and Therapeutic Solutions Division (TSD) into the Gastrointestinal Solutions Division (GIS) and the Surgical and Interventional Solutions Division (SIS). The new GIS division will focus on gastrointestinal endoscopy, gastrointestinal endoscopic treatment and medical services, while the SIS division will cover areas such as urology, respiratory surgery and surgery. This realignment is designed to break down departmental silos, accelerate operations, ensure business consistency across regions, and further reinforce Olympus’ commitment to patient- and customer-centric growth.

Mr. Takeuchi added: "Through this reorganization, we look forward to responding more quickly to market changes, improving customer satisfaction, and promoting the company's long-term stable development." This series of change measures by Olympus not only reflects its strategic adjustment in the context of global economic recovery, but also demonstrates its forward-looking and innovative spirit as a leader in medical technology. In the future, as the transformation deepens, Olympus is expected to achieve more brilliant achievements in the field of medical technology.

02

Highlights of the third quarter financial report and future outlook

In its latest financial report, Olympus Corporation demonstrated the steady growth of its global business. According to Takeuchi, in the third quarter, thanks to the strong promotion of the North American gastrointestinal endoscopy market, the company's business continued to expand, and consolidated revenue increased by 9% year-on-year. The depreciation of the Japanese yen also contributed to this growth to a certain extent. In the North American market, Olympus achieved a year-on-year growth of 22%, with its three core business segments of gastrointestinal tract, urology and respiratory systems all achieving double-digit growth. Demand from core customers in the US market was particularly strong, successfully offsetting the impact of anti-corruption campaigns, volume-based procurement strategies and increased competition in the local market. However, delays in business negotiations in Japan and budget cuts in the UK have also put some pressure on the company's performance.

In terms of emerging markets, Olympus continued to maintain strong growth momentum, especially in the field of endoscope solutions, with year-on-year growth of more than 20%. In addition, the company's ongoing "Elevate" quality and regulatory transformation project has also made significant progress, which will help the company better fulfill its commitments to the U.S. Food and Drug Administration (FDA).

Based on the performance in the third quarter and the current external environment, especially changes in the Chinese market, Olympus has adjusted its performance forecast for fiscal year 2025.

Chief Financial Officer Tatsuya Izumi pointed out that consolidated revenue increased by 9% year-on-year, and the depreciation of the yen played a positive role in promoting this. The strong growth of the North American market is the main driving force for revenue growth. The three core business segments of gastrointestinal tract, urology and respiratory system all achieved double-digit growth, especially the sales performance of EVIS X1 gastrointestinal endoscope system. Revenue in both the third quarter and the first nine months hit record highs.

In terms of operating profit, the company achieved 186% year-over-year growth, mainly due to lower losses related to Veran Medical Technologies in the previous fiscal year and the positive impact of currency exchange rates. After adjustment, operating profit increased by 16% year-on-year, and the adjusted operating profit margin also increased by 1.2 percentage points to 17.7%. In view of the performance in the third quarter and the current external environment, especially changes in the Chinese market, Olympus has revised its full-year performance forecast accordingly.

Overall, Olympus demonstrated solid growth and excellent financial performance in the third quarter. In the future, with the continued expansion of emerging markets and the in-depth advancement of the "Elevate" project, the company is expected to achieve more sustainable development.

03

Business segments grow steadily

In the latest financial report, Olympus Corporation's Endoscopic Solutions Division and Therapeutic Solutions Division both demonstrated solid performance growth, while medical services also achieved steady growth globally.

In terms of the endoscope solutions division, revenue of this division increased by 10% year-on-year, showing strong market demand. Adjusted operating margin reached 23.2%, an improvement from the same period in the previous fiscal year, indicating that the company has made positive progress in cost control and operating efficiency. Among specific product lines, the EVIS X1 gastrointestinal endoscopy system performed particularly well in the North American market, with sales increasing by 39%, mainly due to the product's advantages in technological innovation and market recognition. However, in the Chinese market, EVIS X1 sales have declined due to factors such as the anti-corruption campaign, which also reminds the company that it needs to be more flexible and agile in response to market changes.

The surgical endoscope business faced challenges in the Chinese market and sales declined. But in North America, Europe and the Asia-Pacific region (APAC), the business is showing growth. Especially in the Asia-Pacific region, the solid performance of the VISERA ELITE III surgical endoscope system has become a key factor driving overall growth. This shows Olympus' differentiated competitive strategy in different regions and market segments.

In the field of medical services, Olympus Corporation has achieved steady growth globally, especially in Europe and North America. This is mainly due to the company's stable revenue stream based on service contracts (including maintenance services) and the increasing number of new customers. This shows that Olympus's layout and strategy in the medical services market are gradually showing results, bringing a sustained and stable source of income to the company.

The Therapeutic Solutions segment also performed well, with revenue up 7% year over year.

Adjusted operating profit margin also increased compared with the same period last year, reaching 18.8%. In each of its three focus areas of Gastroenterology, Urology and Respiratory Systems, the division achieved growth, particularly in the North American and European markets. Among them, sales of hepatopancreatobiliary (HPB)-related products increased, reflecting the company's professional strength and market demand in this field.In urology, SOLTIVE SuperPulsed laser systems and benign prostatic hyperplasia (BPH) treatment electrodes are driving growth. In the respiratory field, EBUS endoscopes and treatment equipment, which are mainly used for endobronchial ultrasound-guided transbronchial needle aspiration, also performed well, winning market share and customer recognition for the company.

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In the current field of medical technology, market competition is becoming increasingly fierce, and rising stars are rising rapidly, posing huge challenges to traditional medical equipment manufacturers. Olympus, a leader in endoscopy and medical solutions, is also feeling this pressure. Especially in the low-end market, Olympus's advantages are no longer obvious, which forces the company to re-examine its market positioning and strategic direction, and restructure.