Quality, innovation and a unique business model helps an Australian company succeed in one of the world’s most advanced health markets.

People are living longer. Cutting-edge tests are helping doctors push the boundaries of medical science. Greater emphasis on preventative medicine means healthcare providers are under increasing pressure to serve an ever more demanding public. This is the brave new world facing Sonic Healthcare.

Founded in 1987 in Sydney, Sonic Healthcare is now one of the world’s largest medical diagnostics companies. It supplies laboratory and radiology services through hundreds of laboratories, clinics and primary care centres, as well as thousands of collection centres.

Each year Sonic serves more than 75 million patients through referring doctors, hospitals, and community health centres in Australia, the United States, Germany, Belgium, Switzerland, the United Kingdom, Ireland and New Zealand.

Listed on the Australian Stock Exchange, Sonic currently employs more than 25,000 people, including 500 specialist pathologists and radiologists, and hundreds of medical scientists and technicians.

Over the last 20 years Sonic Healthcare has grown significantly. Strategic acquisitions and strong organic growth have seen the company’s annual revenue rise from A$25 million to over A$3 billion. Having made the decision to enter international markets in 1999, today Sonic is Europe’s largest medical laboratory group, and joins a number of Australian healthcare companies enjoying success in Europe including Cochlear, CSL and ResMed.

Nowhere has Sonic’s growth been faster than in Germany, where in the 2011 financial year Sonic earned 18 per cent of its total revenue. Having acquired laboratory businesses in Ingelheim, Augsburg, Berlin and Hamburg, Sonic established a head office for Germany in Berlin to accelerate the company’s expansion and operational integration.

“The Australian Sonic Healthcare story has opened many hearts and minds and doors in Germany.” Evangelos Kotsopoulos, CEO of Sonic Healthcare Germany

Export success story | Sonic Healthcare May 2012

Positive prognosis for Sonic Healthcare

The appeal of GermanyAccording to Evangelos Kotsopoulos, CEO of Sonic Healthcare Germany, the German market was attractive to Sonic Healthcare for many reasons.

“Germany ticks all the boxes for us,” says Kotsopoulos. “It’s a stable, democratic, blue chip economy with reliable legal, tax, and regulatory systems and, above all, ethical market practices and high-quality medical services. Culturally, many labs in Germany operate in similar ways to Sonic labs in other countries.

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“At the time of our entry, the market was highly fragmented, with several hundred small and mid-sized, private labs competing. Germany fit Sonic’s experience of consolidating a market, as we did in Australia in the 1980s and 90s.”

The German market is also large, and growing, with total lab expenditure of more than €6 billion per annum.

Australia’s healthcare reputation wins hearts and mindsDr Colin Goldschmidt, Sonic Healthcare’s CEO says Sonic has never faced any operational or cultural difficulties in Germany because of the company’s Australian heritage.

“On the contrary,” he says. “The Australian Sonic Healthcare story has opened many hearts and minds – and doors – enabling Sonic to execute many high-profile acquisitions over the past seven years, bringing together more than 30 laboratory sites and about 4,000 staff in Germany alone.

“Our story is credible to doctors, who are our customers, and to regulators and politicians alike. Our reputation is of top-class, high-quality medical service to thousands of doctors and hundreds of hospitals every day.”

Growing the Sonic businessTo establish itself and grow in Germany, Sonic started with an initial acquisition in mid-2004, buying a majority stake in a large laboratory group. The lab’s founders remained in the business as managers and shareholders. This gave Sonic a methodical start in a new market with co-shareholders at its side.

The next large investment followed only three years later – a 100 per cent acquisition – which prompted Sonic to buy out the minority shareholders in the first group. From 2007 onwards, Sonic’s infrastructure in the country became truly national.

Sonic’s medical leadership and federation model has since attracted many high-quality, like-minded labs. Several Sonic Healthcare Board members, the group CEO and most country CEOs are medical doctors, including pathologists and other specialists in laboratory medicine.

“We ensure that the business at all levels is run by specialist doctors, scientists or managers who have deep experience of the medical laboratory industry,” says Dr Goldschmidt.

“Sonic is a medical business for medical doctors and their patients, and we believe this is the only long-term sustainable way to succeed in direct patient care.”

Dr Goldschmidt says despite the company’s size, Sonic does not have the personality of a large corporate, but rather of an alliance of local medical practices under a joint roof. This federation model ensures Sonic retains a local aspect. Entities Sonic acquires keep their name, brand, and unique market positioning. As a consequence, Sonic retains goodwill and referrers.

“This concept has great appeal to the founders or sellers of laboratories and has been a key reason for local labs selling to Sonic and then staying on board for many years after the deal,” says Kotsopoulos who has observed the same positive dynamic in other European countries Sonic has entered, such as Switzerland, Belgium, the UK and Ireland.

The Sonic Healthcare experience in GermanyKotsopoulos says Sonic has been warmly received in Germany and has established itself as the private laboratory market leader, despite fierce competition.

“Customers, rivals and regulators respect Sonic Healthcare Germany as a reliable, medically-driven, and long-term oriented participant in the German healthcare system.”

Future plansSonic plans to pursue further growth – organically and by acquisition. The company is also in the process of expanding its portfolio to ancillary medical services, such as cytology, human genetics, and molecular diagnostics.

Sonic in Germany is also the only laboratory which offers doctors an in-house IT solution for entering orders and transmitting results online and via iPhone and iPad Apps. They have become leading tools to win and retain customers and to change how doctors and laboratories work together.

The web-based applications allow direct access to Sonic’s secure database from any location. They provide prompt and reliable laboratory reports and help people to manage sensitive information.

Any company savvy enough to have developed such mobile technology is ready for whatever the future brings.

About AustradeThe Australian Trade Commission – Austrade – is the Australian Government’s trade and investment development agency. Through our global network, we assist Australian companies to grow their international business and attract productive foreign direct investment into Australia.