KYOTO -- Japanese electronics manufacturer Omron has begun laying the groundwork for growth after the coronavirus as telemedicine looks poised to become part of the medical sector's "new normal."
"We're prepared to seize new growth opportunities that will accelerate after the coronavirus shock," President Yoshihito Yamada said in an earnings briefing last week conducted via teleconference.
Remote medical services are one such area that the company sees as particularly promising. Home blood pressure monitors -- for which Omron boasts a roughly 50% share of the global market -- with integrated electrocardiogram functions are at the core of its plans.
The company envisions doctors using health data collected from these devices to make diagnoses remotely, leading to prevention or earlier treatment of disease. Omron said it is considering a subscription-based service model with an eye toward global expansion.
High blood pressure, a major risk factor for strokes and heart attacks, affects more than 1 billion people globally, according to the World Health Organization. Electrocardiograms can detect abnormal heart rhythms, which can create blood clots that may lead to similar conditions.
The coronavirus shock has heightened awareness of the risk of hospital-acquired infections, particularly for people with existing conditions like high blood pressure. "This will be a catalyst for broader use of remote medical services," Yamada said.
In 2017, Omron invested in California-based AliveCor, the only company to offer a remote EKG monitoring platform approved by U.S. authorities.
AliveCor in 2019 rolled out a home blood pressure monitor and EKG device that uses a proprietary algorithm to detect irregular heart rhythms. The company sold about 8,000 units in the U.S. last year and looks to offer the device in Japan by the end of fiscal 2020.
The plan is to turn this new field into a 20 billion yen ($188 million) business by fiscal 2025, says Isao Ogino, president of Omron subsidiary Omron Healthcare.
Omron is focusing on remote health because sales of its mainstay blood pressure monitors are barely growing. Although the monitors make up more than half of health care sales, or 112 billion yen the previous fiscal year, the result marks only a slight gain over five years.
During the same period, blood pressure monitors have added more than 5 percentage points to the segment operating margin, landing at 12%.
That said, "a profit margin a little over 10% is not enough if you own a 50% global share" in blood pressure monitors, said Tomoki Komiya, analyst at Mitsubishi UFJ Morgan Stanley.
Omron executives identified other business opportunities in the wake of the global pandemic during the conference call. One is the demand for factory automation, which will benefit from new social distancing norms. The company also touched on 5G equipment that will support both automated plants and telemedicine.
"Omron's core businesses will unmistakably be deemed essential industries after the coronavirus shock," Yamada said.
But investment necessary for labor-saving tech will likely be slow to come. The market for automation will shrink 11% this year, according to Joanne Goh, analyst at British data company Omdia.
Before the pandemic, the market was set to grow by a few percentage points a year, but companies have slashed non-essential capital expenditures said Goh. Stay-at-home orders in the U.S. and Europe have factored into those decisions, she added.
Omron's sales in April are thought to have dropped 10%. If the epidemic persists, the demand for automation will inevitably slide further.
Omron has gone into crisis mode concerning its financial health, with the company bracing for sales to completely stagnate. Omron held 185.5 billion yen in cash and cash equivalents at the end of March, up 80% from a year earlier due largely to the sale of its automotive unit to Nidec in October.
At the same time, Omron cut its inventory balance 13% over the same yearlong period. The company says it will maintain enough inventory to capitalize on whatever business opportunities come its way, while striking a balance against overstocking. In addition, the company will cut fixed costs by 20 billion yen this fiscal year, or 7% of the fiscal 2019 total.
Although Omron did not present a full-year guidance for this financial year during the earnings call, the stock gained 8% the next day. The share price went on to touch a 2-month high Thursday this week.
The company's move to lay out a clear path forward in the post-coronavirus world "allows hope for a higher rate in growth," said Masayasu Noguchi, analyst at Nomura Securities.
