A Diagnostics & Imaging Week

Respironics (Murrysville, Pennsylvania) reported that it will be acquired by Royal Philips Electronics (Amsterdam, the Netherlands), with Philips commencing a tender offer to acquire all of the outstanding shares of the company for $66 a share in cash, or about $5.1 billion.

That price represents a premium of about 31% over Respironics’ average closing share price for the 30 trading days ended Dec 20.

Respironics said that its board has unanimously approved the deal and recommends that Respironics shareholders accept and tender their shares into the offer. The tender offer is expected to commence by Jan. 8 and is subject to customary conditions, including U.S. and European regulatory approvals.

Respironics said that the transaction is expected to be completed in 1Q08.

Respironics develops systems to treat obstructive sleep apnea (OSA), characterized by the repeated cessation of breathing during sleep. The company estimates 18 million to 20 million sufferers of moderate or severe OSA in the U.S., but only 15% to 20% of these diagnosed. It also cites research demonstrating a link between OSA, heart disease, stroke and diabetes.

The company says it has a leading position in non-invasive ventilation and has recently introduced new home oxygen technologies to treat respiratory-impaired patients in the home. The remainder of the company’s business is focused on the hospital channel, including noninvasive and invasive ventilation, respiratory monitoring, neonatal products and respiratory drug delivery technologies.

Respironics will become the headquarters for Philips Home Healthcare Solutions group within Philips Healthcare, and Respironics’ senior operating leadership is expected to remain with the organization.

Philips has made a number of recent acquisitions in the home healthcare sector, including Lifeline Systems, Health Watch and Raytel Cardiac Services.

The company said that as Philips Home Healthcare Solutions will be supporting almost 1 million at-risk seniors, either in their own homes or in senior living facilities throughout the U.S. and Canada.

“A core part of Philips’ healthcare strategy is to achieve a leading position in the high growth sector of home healthcare,” said Steve Rusckowski, CEO of Philips Healthcare and member of the board of management of Philips Electronics.

Philips said that Respironics will become the centerpiece of Home Healthcare Solutions, which will form part of Philips Healthcare as of Jan. 1.

Respironics markets its products in 141 countries and employs more than 5,300 associates worldwide.

In other dealmaking activity:

• Inverness Medical Innovations (IMI; Waltham, Massachusetts) rolled on with its acquisitive ways last week, purchasing all of the capital stock of Redwood Toxicology Laboratory (Santa Rosa, California), a private drugs-of-abuse testing company, for $99 million in cash.

Redwood distributes rapid drugs-of-abuse diagnostic products used in the workplace, criminal justice and other testing markets, and operates a toxicology laboratory used for drugs-of-abuse testing and confirmation. Redwood’s 2007 revenues for the 12 months ended Sept. 30 were about $44 million; it is operating profitably.

Redwood was a portfolio company of American Capital Strategies.

Ron Zwanziger, CEO of IMI, said, “The drugs-of-abuse testing market has exhibited rapid rates of growth, and we believe this area continues to have strong potential. In addition, the availability of a confirmation testing service will further help in the growth of the FirstCheck home drug testing business which we acquired earlier this year.”

Robert Mount, CEO of Redwood said that it is company has been a partner of Inverness “for quite some time. Our solid relationship and shared vision for the future make this a positive step for both companies.”

• Innovacon, an IMI subsidiary, manufactures virtually all of the products sold by Redwood. IMI said it plans to integrate certain of its existing drugs-of-abuse functions with those of Redwood and will to maintain existing relationships with its other distributors in this area.

Redwood describes itself as one of the nation’s premier forensic drug testing facilities.

American Capital and its affiliates invest from $5 million to $800 million per company in North America and EUR 5 million to 500 million per company in Europe.

• Volcano (San Diego) said it has completed its $25 million acquisition of CardioSpectra (San Antonio). The deal was first disclosed earlier this month.

Volcano paid $25 million in cash at closing to CardioSpectra’s shareholders and warrant holders. In addition, Volcano may make additional payments upon the achievement of certain product development, regulatory and revenue milestones. Any future payment may be made in cash or stock, or a combination of both at Volcano’s discretion, the company said.

CardioSpectra is a private company developing optical coherence tomography (OCT) technology. Volcano said that CardioSpectra’s IOCT imaging system is expected to complement its own existing product offerings and further enhance Volcano’s position in the field of interventional medicine.

Volcano provides intravascular ultrasound (IVUS) and functional measurement (FM) products designed to enhance the diagnosis and treatment of vascular and structural heart disease.

• PerkinElmer (Waltham, Massachusetts) reported signing a definitive agreement with Pediatrix Medical Group (Fort Lauderdale, Florida) to acquire the newborn metabolic screening business of Pediatrix in a cash transaction.

Financial terms of the deal were not disclosed. However, the company said that the acquisition is not expected to have any material effect on PerkinElmer’s adjusted earnings per share in 2008 and will be slightly accretive in 2009.

PerkinElmer will acquire Pediatrix’s metabolic screening laboratory and its StepOne newborn screening product that is capable of analyzing more than 50 inherited disorders in newborns, according to the company. Pediatrix’s screening laboratory provides neonatal screening and consultative services to hospitals, medical groups, and the states of Maryland, Mississippi, Louisiana, Nebraska and Pennsylvania, as well as the District of Columbia.

Pediatrix said that the laboratory has screened more than 3 million babies since 1994 and is anticipated to generate revenues of about $15 million in 2007.

PerkinElmer and Pediatrix said they intend to collaborate on future research to identify possible applications for tandem mass spectrometry technology in prenatal and neonatal testing and diagnostics that might improve patient care. Pediatrix said it would continue to operate its separate, internally developed newborn hearing screen program, a hospital-based service that screens for possible hearing loss, usually prior to a newborn’s discharge.

• Decision Resources (Waltham, Massachusetts) reported that it acquired Arlington Medical Resources (AMR; Malvern, Pennsylvania).

AMR offers clinical databases designed to directly monitor the usage of antibiotics and antifungals within the hospital setting, and that of contrast media within various imaging market segments. Terms were not disclosed.

Decision’s current business units include HealthLeaders-InterStudy, which provides managed care insight, Millennium Research Group, which provides medical device market research, and Decision Resources, which provides drug market analysis.