June 12 (Reuters) - When John Flannery was chosen to head GE Healthcare in 2014, his background as chief dealmaker for the industrial conglomerate led to speculation GE might consider spinning off its somewhat sickly health business.
In fact, he has nursed it back to improving sales and profits by focusing primarily on organic growth opportunities, and the business remains core to GE.
Flannery will take over General Electric Co from Jeff Immelt, who is stepping aside after 16 years as head of the conglomerate he helped steer through the financial crisis but which is now worth a third less than when he took over.
On Flannery's watch, the healthcare unit - best-known for imaging and diagnostics - has also expanded into life sciences, offering a range of services to pharmaceutical and biotech companies.
GE faces tough competition for its medical imaging machines, which include MRI scanners and ultrasound devices, from rivals including Philips and Siemens, as well as younger Asian upstarts.
But a focus on expansion into new markets has helped lift sales at GE Healthcare to $18.3 billion last year, with organic revenue increasing by 5 percent and margins by 100 basis points.
Flannery has worked hard to move GE into newer areas of healthcare like life sciences, where GE has emerged as a significant player in helping with the production of biological drugs and cell therapies.
Such drugs, given by injection or infusion, are a pivotal driver of innovation in the drugs industry, being used to treat complex diseases from rheumatoid arthritis to cancer.
Flannery told Reuters last year he aimed to "double down on life sciences", given this business's large and high-margin opportunities.
One of the more innovative ideas launched by GE recently is the design of prefabricated drug factories for making complex biotech medicines, an idea it is pioneering in both China and Ireland.
GE reckons its "off-the-shelf" modular factories are 25 to 50 percent cheaper than the traditional plants and can be constructed in just 18 months rather than the typical three years.
Some analysts continue to question whether healthcare truly fits with mainstay GE industries like power generation and jet engines, but Flannery's elevation suggests the group is not contemplating ditching healthcare any time soon.
In a sign of continuity, GE said Kieran Murphy, who currently heads life sciences, would lead the wider GE Healthcare division - and the company stated bluntly: "Healthcare is a key GE business now and in the future."
Editing by Nick Zieminski