Medical Device Daily
Medical Device Daily

Siemens (Erlangen, Germany), the international conglomerate that usually thinks big in terms of medical imaging, will now enter the smaller, but rapidly growing, healthcare world of in vitro diagnostics.

Siemens yesterday rolled out plans to acquire Diagnostic Products Corp. (DPC; Los Angeles), a force in the field of immunodiagnostics, for about $1.86 billion.

The move essentially puts it into an earlier sector of the healthcare continuum of care and serves loud competitive notice to others in that space. Additionally, it pushes the company forward into the “personalized“ medicine space that is increasingly emphasizing the ability to guide more personalized therapies.

DPC is focused on manufacturing and distributing automated body fluid analyzers and tests – such as those related to cancer and cardiac disease – as well as hormone and allergy conditions, whereas Siemens – in the U.S. through its Siemens Medical Products (Malvern, Pennsylvania) division – is focused on making the big imaging machines. With a presence in more than 100 countries, DPC offers a broad line of immunodiagnostic solutions to hospitals, clinics and laboratories across the globe.

In the merger, each shareholder of DPC will receive $58.50 in cash per share for each share of DPC stock then held.

DPC will become a wholly owned subsidiary of Siemens Medical Solutions USA (also Malvern).

The boards of both companies have approved the acquisition. Completion of the merger is subject to approval by DPC's shareholders and receipt of other regulatory and customary approvals. The companies expect the shareholders' meeting to be held in mid-2006.

Speaking during a conference call yesterday morning, Erich Reinhardt, president and CEO of Siemens Medical, said that with the acquisition, the company intends to expand its existing healthcare solutions portfolio and push forward its objective to enable early and specific diagnosis and individualized patient therapy. This is a strategy, he said, that the company had begun to pursue as early as the late '90s, when it saw that people around the world would be living longer and requiring more healthcare services.

Additionally, Reinhardt told listeners, Siemens saw that this variety of emerging healthcare services made available through proteomics and an emphasis on earlier diagnosis of disease was being delivered inefficiently. At that point, he said, the company began to ask what it could do to improve the inefficiencies while acting on its broader strategy to add value to the company. “This would be done by developing “concepts and products to identify disease earlier,“ he said.

“I think this acquisition will support our strategic vision,“ Reinhardt told listeners on the call.

That vision began to be implemented with Siemens' $1 billion acquisition in March 2005 of CTI Molecular Imaging (Knoxville, Tennessee), which announced its move into advanced imaging technologies (Medical Device Daily, March 21, 2005), and the later formation of Siemens Medical Solutions Molecular Imaging (MDD, June 14, 2005).

With that completed acquisition and the formation of a division focused on positron emission tomography- and single photon emission computed tomography (SPECT)-based molecular imaging technologies, Siemens at the time said that it “continues and strengthens its commitment to molecular imaging development, technological innovation and the creation of dynamic new technologies that will revolutionize the diagnosis and treatment of disease.“

The company's healthcare operating profits are now about one-fifth of its total, pushed by these recent acquisitions.

The goal for Siemens with the DPC acquisition is “bringing together in vivo and in vitro diagnostics,“ Reinhardt said. The merger will, Siemens said, create “a unique blend of expertise and technologies in diagnostic imaging, healthcare information technology [HIT], molecular biology and biochemistry to drive and lead the advancement of personalized healthcare across the globe.“

The HIT component is necessary, Reinhardt said, because the healthcare industry “generates a lot of data and order to use this data“ efficiently, a company must have the algorithmic systems in order to process it and analyze it.

The key for the acquisition may lie in proteomics and biomarkers, which could be used from the in vitro diagnostic stage to the in vivo imaging stage of diagnosis, Reinhardt said.

Founded in 1971, DPC's diagnostic tests supply information for the detection and management of disease, including adrenal/pituitary dysfunction, allergy, anemia, bone metabolism disturbances, cancer, cardiovascular disease, diabetes and reproductive and thyroid disorders.

Michael Ziering, CEO of DPC, termed Siemens Medical Solutions “a perfect match for DPC in terms of corporate philosophy, business practice and future direction. . . This merger will allow us to continue on our current rapid course of development while also providing DPC access to the resources and support of a recognized leader in the delivery of integrated healthcare solutions.“

In other news from Siemens, the company reported second-quarter profit increase of 14%, attributing it to a broad restructuring effort begun a year ago. The earnings report beat analysts' expectations, but with a forecast of future flattened growth, the company's share price dipped slightly.