GE Healthcare CEO: Spinoff helped ‘simplify how we run the company’

GE Healthcare CEO Peter J. Arduini joins Yahoo finance Live to discuss completing GE’s spinoff, focusing on medical tech and health equipment, capital allocation, trading publicly on Nasdaq, and the outlook for international business.

Video Transcript

BRIAN SOZZI: Medical equipment maker GE Healthcare is now making its own moves. The company completed its split from parent GE with its very own public-market debut under the ticker symbol GEHC. The company immediately replaced Vornado in the S&P 500 and enters a medtech field that's increasingly crowded but could have room to grow.

Joining us now is GE Healthcare CEO Peter Arduini. Peter, good to see you, and congrats on this listing. I know a lot of work goes into this stuff, especially inside of GE when making this happen. So take us through this. Why was it so important to split off from the parent company, and what will you be able to do now?

PETER ARDUINI: Yeah, Brian, look, thanks for having me this morning. Obviously it's a big day for us here as our spin day-- we rang the bell at our facility in Wisconsin. And, you know, as an $18 billion revenue company, we've got lots of capabilities, and we have a long history of innovation.

But I think to your question about being a more focused, agile company in a world that's becoming more digital, it just really sets us up to perform, I believe, at a different level. This is my one-year anniversary with the company, and people have been super energized about our opportunity to be separate. It's brought more employees of capabilities into the company. It's enabled us to kind of simplify how we run the company, and ultimately it's about capital allocation over the long run. So we're quite excited about what we believe we can do here in the future and honestly have been able to demonstrate some of that in the second half of '22.

BRAD SMITH: Within that capital allocation, I think about the amount that's being spent on R&D, and that research and development, of course, significant for the health-care industry at large. But for GE Healthcare, when do you expect much of that R&D allocation to start to become accretive to the business as well over an extended period of time?

PETER ARDUINI: Yeah, great question. So I think one of the things that I was very fortunate to benefit from was, you know, as Larry Culp came into the organization X years back, there was definitely an increase in fusion of R&D monies that came into GE Healthcare. I mean, we grew our R&D funds from around $700 million to over a billion dollars in the last few years.

And so what's happened is in the last two years, we've been able to come out with some breakthrough leadership products, products that have really put us in number-one positions in different categories. So that's the engine we have, and it allowed me to really start on commercial execution as one of the key enablers in the near term. But obviously ongoing investments in R&D, particularly digital and our imaging platforms, is going to be important for us in the future.

JULIE HYMAN: So, Peter, you're painting a picture of the identity of GE Healthcare as a standalone, but I want to go a little bit deeper into that, especially with regard to your competition, which is pretty ample, right? You've got Johnson & Johnson. You've got Siemens. You've got Philips, Medtronic. All of these guys are also in the medtech space. So now that you're independent, how should investors think about you as distinct from some of those competitors?

PETER ARDUINI: Yeah. No, look, I think it's a great question. I think what really separates us is that we touch many of the disease states around the world, many of the oncology-based disease states, cardiology, musculoskeletal, and we generate a big portion of the data. And so understanding the care pathways that are out there and how do you convert that data into insights-- which, again, is much more than just making the best next device. We're really well positioned to do that. We actually have a digital platform called Edison which is enabler to bring multiple components of data together so the clinician can make a better decision.

So I would argue if you take a look at the class of medtech companies out there, we're one of the folks-- very few-- that really has the ability to kind of take health care to the next level with turning data into insights, and that's really what we intend to do.

BRIAN SOZZI: Peter, my sense from just following GE for a while and, of course, looking at the health-care business that more recently has been driven by the imaging business inside of North America. How is the international business, so Europe and China, doing at this point in the economic cycle?

PETER ARDUINI: Yeah, actually it's been through COVID, as you know from many different companies, there's been different lumpiness in our numbers. But our international business, which is over 58% of our business, has actually been quite strong. Coming out of the COVID window in Europe particularly and our intercontinental business, there's been increased spending in the public health-care markets to increase capabilities because many providers saw the need with centralized health systems to actually have more outpatient centers. So we're benefiting from that growth, and we expect that to continue into the future. And then markets such as China obviously have had challenges in the near term, but we see that as significant amount of pent-up demand here as we go into '23.

So internationally, OUS has been quite strong, and US this year has been a solid market. And we will expect as we turn into '23 and '24, many of these trends of chronic disease, older population, the need for follow-up procedures to deliver more precision, we're well positioned to deliver on that.

BRAD SMITH: How have the lead times been on delivering equipment in some of those orders that you are seeing come through?

PETER ARDUINI: Yeah, I think the short answer is in the first half of '22, they were longer than they were in the second half of '22, and much of that has come down to access to different parts and chips. You know, no different than what you heard in automotive industry, let alone other parts within health care.

But because of our scale and reach and our global manufacturing footprint, I think we've fared better than many other players within our direct competitive space and broader just because of the capabilities we have in our global supply chain. And look, in some cases we took the risk to say if we can acquire the right parts to be able to get the full product shipped, we actually did that this year, which meant we prioritized patients and customers first, and I think it was totally the right decision for us.